Page 1

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[ Vol. VIII No. 2

ISSUES

March-

ISSN 0115-9097

]

AND INITIATIVES

IN HEALTH Oscar

A

April 1990

],,i'::_¢health,,,:,iiarehave, of ia'!e:",,"under-

CARE

II ",;the: country .s rnajorpohcy

F. Picazo

number of Philippines recent developments in the indicate the emergence of health

DEMAND Health

care

ASPECTS ' . is a complex "good"

care as a major policy area. Health has been enshrined as a fight in the Philippine Constitution, new health care delivery institutions are emerging, a na-

and this is one reason why health delivery is a complex policy Abroad, much research has been ducted to understand health as a

tional drug policy is in place, and international donor agencies are providing

but similar efforts have been scarce in the Philippines. The University of the

increasing support to the health sector. Ranged against these positive develop-

Philippines Heal.thmade

ments are the negative impact of the debt crisis on social services, medic_ cost escalation, and the unabated out-

holdhealth-seekingbehaviorintheearly 1980s while Ching (1989) provided a review of the literature on the demand

llow of health manpower. Changes in demographic and disease patterns are expected to complicate health service

for health in the Philippines. The recent National Health Survey should provide basis for new.estimates of demand for

delivery. It is therefore opportune to review developments in health care. This article provides a brief introduction into the major research results, issues and initiatives ira health care in the Philippines. It covers three major

health service.

aspects: demand, organization and input supply. Health care financing is not included since it is one broad and complex policy area and will be treated separately in another article.

ol

areas. As'. , the'le gislati_ hhd exec'u.tiv_:'b'ranches':'." focus thetr attenuon.on .thts" sector ....'_." ' " '" '" ':'" '-::'"" new,'_ssues wdl.keep c'ropptng.'up, necessitating' answers, that,,can be met only' lhrough !.h_ combined efforts of

care area. congood

(UP) Institute of Public aseries o:fstudies onhouse-

(Please turn to page 2)

'tratorsand"heahhpractitioners_ ' . ,..,.:,. ..... . ... ,..,._, ... researchers,po!icymakers, adminis' i guest.writer ,', , . ':,.,, In thisi ",,, issue,,,.:.our: Oscar F...Picazo,'. do.es...'s&heimporiant: groandwo_k }0 help'meet these emergingdemand._SYreviewing the 'issuesandihi_iative_alreadytakenin :...... . ..... 'health car e_.... provision..'. ,.. Picazo. was .formerly a.Research .Associate at the .PIDS W'here.heWorke_twithDr. Edna .A I ,Reyes:,.in' a nwnber 'of resear,:h projects/related to health issues and -authoredsome ' ,' i ', ,,' ,, , PIDS ' i', wtthwh°mheC°s."r eicazo::is nOW Working._PaFie u'orking'at'!he USAID:'.'.':'=.." , ..:(,',",'.."_":','. :' " i

r

..:..,..'..,.", :AlsO'..ih....'this,. .issue.,a' e.!ttle......, ...,high:..." ..; ' " se' rmnar:workl_ghts 'of so.m'eof.the shops conducted.br jbinily sponsored .. ........_ ... . ..... • ,. by the..!nstitu'te'.'i'n,recent months '. .. ' L .:.:,.7 .' ...'.".""".... _ : ". i.=,_,,,,,',,,,,,',:,;;,, :::":.,'.'r; _.,'' ' .... --_

Export-Ortented Proposed to Ease DebtPolicy Burden ................................................... 5 Economic Policies for Sustainable Developrnem Under Study .......................................... 7 PIDS-NEDA Macroeconometric Model Completed, Version J989 Reflects Currem Realities in Developing Countries ..............................8 World DeveloprruentReport 1989 Tells Developing Countries," Be Self-Reliant ......................9 Seminar TacldesStudy on Fisheries and Aquatic Resources .............................. 10


Development

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_

ISSUES AND INITIATIVES. (From page

. .

1)

U_llike ordinary commodities or services, the demand for health care is uncertain since the occurrence of disease cannot be adequately predicted. Also, health care is characterized by low degree of substitutability and is not wanted for its own sake but is sought as an alternative to the discomforts of illness. Patients are generally unaware of treatment alternatives and even if they do, they are frequently incapable of evaluating them. Hence, consumer sovereignty --, the key assumption in the consumption of ordinary commodities --- cannot be readily invoked. The virtual "medical ignorance" of patients and their frightened mental condition at the point they are seeking care, as well as the monopoly on infonnation held by doctors often result in the phenomenon of supplier-induced demand. Critics of this view, however, argue that the prosonce of many providers and the patient's ability to choose significantly reduces the occurrence of doctor-determined demand, The case of public health services is vastly different from curative services, Public health activities (e.g., immunization) have substantial externalities and arc considered merit goods. However, consumers by themselves arc not wellinformed about their social benefits and generallymanifest individualvaluation (and consumption) lower than the socially-desirable levels. For instance, a case of measles can turn into an epidemicw.hichaffcctsnotonlyone'schild but the whole community as well. The social value of government programs like mass immunization for communicable diseases, therefore, far outweighs individuN valuations,

......

March - April 1990

For public health services, government intervention is imperative and demand-inducement is necessary. The Department of Health (DOH) recognizes the necessity of demand-inducement and has thereby placed emphasis on the development ofcommunicati.ons materials foritspublichealthprograms, Recent surveys by Consumer Pulse (1990) showdramaticincreasesinmothers' awareness of the government immunization program and oral rehydration therapy (ORT)as treatment of infant diarrhea after being exposed to television commercials and posters, .............

"Health improvement can

also be treated

as an investment human capital folrmatioli which

in

yields an incremental flow

of future

income

Or output." - ....................... : .... '...... '" Another feature of health is that it is both. a consumption and ,an investment good. As a consumption commodity, health makes people feel better. Health improvement can also be treated as an investment in human capital formation which yields an incremental :flow of futureincomeoroutput. Assuch, health improvement exerts both quantity and. quality effects on labor supply. Alternativcly, consumersdemandgoodhcalth because a decrease in the number of sick days will determine the amount of time for leisure and work.

_.......

Finally, the demand Ibr health care does not necessarily depend on its money price nor on household income. This suggests that poverty and health care costs have very little to do with services. Research studies in the Philippines and in other countries show that there are other probably more important variables that affect consumption of health services including waiting time; socioeconomic, demographic and educational characteristics of patients or their families; knowl.edge, attitudes and practicesofconsumers; andavailability and distance of health service. Demand studies are immensely important in the formulation of health policies (e.g., el.aslicity estimates indicate whether it is prudent to impose user fees on a health service). Much more remains to be known about the economic and non-economic factors in health service utilization. What are the individual, or household's knowledge, attitudes and practices with respect to hcalth and disease? What arc the underlying motivations for such attitudes and practices? How is health knowledge communicated and diffused? What social engineering strategies are necessary to induce demand for health and improve health status? There is great scope forthe interaction of health economists, medical anthropologists, and development communication expertsin providing answers to these questions. One last aspect has to be clarified: the distinction between demand and need. Some experts believe that under conditions of pervasive poverty and supply constraints, demand studies do not suffice and need may be the more appropriate concept. A sick man is medically in need but may not seek medical care an_dutilize a service for one reason or _inothcr. On the other

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Development

Research News

March - April 1990

"Greater

urban-

hand, theremaybemedicaldemandand actual utilization but no justifiable medical need. In the West, a body of

As a consequence of grcater industrialization, thedemandforoccupational health services is ,also expected to rise.

ization

literature has been written on the distinctions among "wants", "demands"

Unfortunately, very little attention has been devoted to this area. A Japanese

industrialization

and"needs", A practicable definition of need is rcquired as it has immediate resourceallocation implications. Operations research efforts in the Philippines that

grantcnabledtheconstmctionofacenter . engender on occupational health _md this should " °

defineneed (e.g.,for nursing and physician hours required different levels of care) have been scarce. In 1974, the results of the WHO-supported study on the operations of rural health units in two municipalities in Rizal became the basis of health manpower-to-population ratios. A time-and-motion study being undertaken by DOH will provide critical inputs into the determination of health manpower needs, Anissuethatcntailslong-termplanningis the impact of changes in population structure on the country's disease pattern and ultimately on the pattern of health demand and need. The Philippine population is aging, albeit slowly, Projections made by the U.P. Populalion Institute show that the proportion of the population 15 years and above will increase from 60.8 percent in 1990 to 66.4 percent in the year 2000. The demographic transition will inevitably alter the morbidity and mortality pattem as it gives rise to degenerative diseases even as the country continues to grapplcwithinfectiousdiseases. Greater urbanization and industrialization, on the other hand, engender ailments associated with congestion, pollution ,and modem-day stress. Since degenerative diseases and stress-related ailments are more expensive to treat, there would be greater demands on the health system which necessitate creative approaches for delivering and financing care.

........................

provide impetus for more related research activities.

()R(;ANIZAT.[()NA/,

ASPECTS

The health system is characterized by a network of providers and inputsuppliers. Health services are organized according to the course of disease and, therefore, into the lbllowing types: promotive, preventive, curative/therapeutic, and rehabilitative. The hierarchy reflects increasing cost, a reflection of the homespun wisdom that an ounce of prevention is better than apound of cure. A consideration of the structure of health services spawns a number of issues: What types of health services should be provided and at what level of care? What population groups and hcalth problems should get priority in the provision of these services? What should be the natnre of these services-hospital-based, ambulatory, domiciliary, maternity clinics or trauma centers? Where should these services be located and at what scale of operation? An Asian Development Bank-funded study on the National Hospital Services DevelopmentPlantacklessomeofthese. issues, Alternatively, health services can be analyzed in terms of who provides them -- the government or the private sector. Studies on health services in the Philippines are limited to the govemment sector and are invariably writ, en from the perspective of public adminis-

ments

and aft-

associated

with eongesuon, .,,,¢'

41.._ °

pollution

and

modern-day stress.

'_

tration. A review of. these studies reveals the existence of a pluralistic approach in the provision of health services, the competing tendencies towards centralization and decentralization in the planning and implementation of government programs, the impetus given to participatory strategies propelled by the launching of the primary health care (PHC) approach, the predominance of curative over promotive/ preventive expenditures, and the coexistence of Westernized, traditional and PHC health approaches (Bautista 1989). The issues raised by these features of the government health delivery system continue to occupy the policy agenda. For instance, the policy implementation matrix of the USAID-funded ChildSurvivalProgramcallslbr, among other things: DOH budget allocations linked to program and geographic targetting, the decentralization of health pl.anning to the regional and provincial levels, ,and the integrated delivery of child survival services at the provincial level. (Pleaseturntopage4)

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Development

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Research News

issues

been ral.sed coneernxng

March - _ ril 1990

have

ISSUES

the

(From page

AND INITIATIVES.. 3)

role of government in health care, the appropriate publicprivate sector mix, and possible areas of cooperation

between

the two.

,,

In the wake of the budget crunch, issues have been raised concerning the role of the government in health care, the appropriate public-private sector mix, and possible areas of cooperation between the two. Ithas been suggested that punic intervention in the delivery of health services should be undertaken only (a) where market imperfections yield inefficient outcomes and where the cost of public intervention is less than the benefit of correcting such imperfections; and (b) where the equity result of the market operating freely is undesirable and can be improved by public intervention at socially acceptable costs, Putting these principles into operational terms, however, is difficult because of the scarcity of studies about how the various markets in the heal.th care system operate, the inefficiencies and inequities in the syslem (e.g., monopolies in the drug industry and medical special.ties), and the impact of possible options on efficiency and equity. There are also various i.nstitutional and political forces that come into play i.nthe feasibility assessment of various options, 4

Even in the absence of macro stud-

3. HospitalNetworking-

A number

ies on health organization, however, there have been recent initiatives which

ofresourcc-sharingacfivitiesinvolving manpower, equipment and supplies are

will inevitably have an impact on heal[h service delivery:

being established between government and private hospitals. The concept is robust and also applies to purchasing, manpower training, research and other hospital activities. As far as can be asce],ained, no study has been made to document this process, assess its scope, and identify problem areas.

1. Privatization - Four specialty hospitals (Heart, Kidney, Lung, and Children's) are included in the government's overall privatization program, J. Cunanan & Co. (1989) has completed a "privatization study" on these hospitals. The study, however, fails to consider how the physician specialty cornmunity would view the sale or lease of these institutions. It also fa!ls to provide proper valuation of the intangible benefits that these hospitals offer (indigent care, referral system for difficult cases, training, research, punic health programs, among others) and compare this "value" with the cost of maintaining them (i.e., annual. DOH subsidy). A study which views the problem in a broader perspective is called for. USAID has also fimded technical assistance :forconsidering pfivatization options for the government's Alabang Complex which produces biologicals and other medicai supplies for DOH. 2. DOH-NGO Community Partnerships - Under the World Bank-financedPhilippincHealthDevel째pmem Project (PHDP III), DOH is extending financial support to non-government organizations (NGOs) which will provide health services in pilot areas in the country. An evaluation study of such schemes Should provide information on their replicability.

4. HMOs - In the 1980s, health maintenance organizations (HMOs) evolved as alternative sources of health care especially among middle and upper-income families in urban areas. In 1989, enmlees were estimated to total 400,000 (less than 1 percent of the population), but industry experts believe the potential is large. By combining health care delivery and tin,racing, HMOs could generate social benefits in te]ms of cost containment and productivity. However, the legislative and regulatory basis for their operation has to be established to protect "allparties (Alfiler 1989). Also, HMOs should be challenged to develop new offerings that address the needs and income capacity o1:non-affluent families. SUPPLY ASPECTS Health cam is one of the most complicated services to produce. It involves medical, and allied personnel, drugs and other health products, equipment and other capital investments, utilities and other intermediate goods. (Pleaseturn topage 11)


!iI_II 7_:i_i i-(iii(:L_;i:i<: _I_ :7)I_!/:I i_i:::i ing countries in the 1980si He broadly :i iii: categorized the:devel0ping countries : as either hig[>.tmck (HT) or low,track:: : (LT)countries in tern'is:of growth and

....c:::>:::,

.............

......./'[2L L存:ii: :. i H

_H

_H _ _

z_ _

_

_

_

H

:():7:11:i:i::?/!74(ii:i:::! 147!1:7_2 _71.......... i::::: <<<<<_77::+ :i::_: << :::::::::,: :..... :: (i(i::!i)C::7CZ?L:I/7 _:ii::::::: :i: :T_011:mS:0urce::spe:ake_:f_om::the

: efly:

:to::

Dii_eet6rl 0::17:: the intemati0nal Ec0n0t ::::: c0unt:fieis:bec:au:se:it can::then:break the: n_ic-s_:_Deparim:enti:and:_::Mr_::::_shrat::_::::_viei:_u:s:_ye._e::_f_:singdebt_and poorer

Capkainc0metennsandaremostlylo:: i ca{ed in Asia, wt_ile theLT group would consist of countries mostly found in: Latin America and Africa which expe-:

:Husalnlchief of: tine:!Debt:::aid::Inter: : ::pr0spects::ifor::gmwth::::Moreover, the:: rienced adeclining per capita income na:fion:iil:Fin:aneeDivisi0n_ p:tesented i :faCtthat it:iS a t_l:arket_0:fienledsolution at the rate:o f 0ne pe}Cent per year in the ::::W0_!i!: :Deb:_::Tab/es:i 198 1990i : :creates c0nfidence: imong foreign md i: eighties;::i::i: ::: : ::::: :::: ....... B u!!:get: :::::d0mestie invest0fs Di0kno;:hOWEVEr; : Tlie :[.actorS:Which acdoUnted for PES:

pri:nciplcs must be era::::

:Diokn:00pened :

tlie::need: :[0 s eriousiy:i

:

: m

Fii.

_ ......... ..........

eepi:i_gi :

to and tWO;: fl_aitlae: : them-LT sound: : : i:: 2 : .............

d:eb:t:ed

:b_i rei ::.tiie:i i_gi

: COun:t:r g,

:::mea

:ice:::;

,,DBM:

the dit'ference maybe:tnacedto the:a) level of investment relatiVe to GDP : w}l}eh:registered at 32 percent in the: HI countries versus 17 percent: in the : c0untries; as Weii aSthe investment efficiency Whiehmeasured ff24 forthe HT groui):as agaiiist 0.08 for lhe LT coUntriesi b) population growth which: managed:t0 go down:fl'om 2.5 percent ...... in the 1.960_70sto in the: for the HT c0untnes but which got:Stuck at about 2.6 .[or tlhe LT group; C'_measure oli ....openness: of; the i ec0iiomies wherein tlie HT countries had i_26 percent Export>: :to-GDP:ratio as i: against 17 percent in tile LT countries; d) deb! to GDP; and e) i debt to exports, :..... Linn observed thai t!_eprOSpECtSof thedeveloping coum future are;related: to three


Development

Research News

major variables namely: a) the extemal environment in which the developing countries have to operate; b) the individual country's policies; and c) the progress in resolving the individual country's external debt problem, With regard to the extemal environmcnt in which the developing countries will have to operate in the 1990s, Linn noted that while there would be significant risks and a not very rosy picrare, the expectation nonetheless, in some ways, is not too bad. Interms of individual countrypolicies, the fact that there is a lot of agreement on the general direction of reâ&#x20AC;˘forms is reassuring and promises progtess in the right direction. However, what seems to remain as the disagreement is the degree, timing and sequenc_ ing of reforms/structural adjustments, and the social and political costs of the reforms, Husain, meanwhile, focused his discussion on the issue of external debt. He noted that since 1988, the total debt of the developing countries in terms o:f stocks has been declining, primarily due to the appreciation ofthe dollar, the significant voluntary debt reduction in the Latin American countries (the HICs), and the gradual increase in the share of the offical creditors in the total debt stocks of the developing countries. Husain also pointed OUtthe decline in the debt-export ratio of developing countries in view of the relatively faster increase in their exports vis-a-vis their debt. Husain noted that it may not be very productive to look at the developing countries as an aggregate group, Hence, there is a need to differentiate those developing countries which experienced difficulties in servicing their debts from those which did not. The Worm Debt Tables Report, according to Husain, hypothesized that the countries which were spared of the difficulties were : a) Those which pursued outwardoriented policies. By expanding their exports, they were able to raise their

_

March -4_i11990

J

paying capacity and therefore found the debt burden relatively manageable; b) Those which undertook adjustment measures very promptly in the face of exogenous shocks through a curtailment of consumption in the public sector; and c) Those which made judicious use of external funds either through the expansion oftheir productive sectors or through an investment in infrastructure and human resources. Citing the Philippine case, Husain said that based on the performance of the Philippines for the past two years, in terms of the various indicators used in classifying countries on the severity of their debt burden, he foresees that it may not be long before the Philippines is taken out of the severely-indebted middle-income countries-category, Moreover, he noted that by pursuing the same kind of economic policies, e.g., liberalization of the economy and openness to foreign investments, as adopted by countries like Thailand, Malaysia, Korea and Taiwan, the Philippines can eventually join their ranks, Husain enumerated some of the lessons learned by the indebted coun-

tries, especially those in the severelyindebtedmiddle-incomecountries-category, with regard to the Brady initiative, Foremost ofthese refer to the fact that countries which have seriously pursued adjustments in their economies were able to reap some rewards from the Brady initiative--and that the most workable solution to the debt problem is to approach each country's problem on a case-to-case basis. Finally, Husain offered some suggestions with regard to thedebt strategy. First, the industrial countries should help create a favorable external environment for indebted countries by providing market access to their exports, pursue monetary and fiscal policies that will not put pressure on the interest rate and try to put some resources into the collateral funds for the debt support. Second, there should be new marketable instruments created. Third, indebted countries should make sure that their domestic economic policies are sound andinthe rightdirection. Fourth, there should be a differentiation in the tax and regulatory measures applied to commercialbanksinthesensethatthose who are willing to help developing

'_

INITIATIVE-

THE

BRADY

-,

TheBrady initiative was proposed by Nieholas Brady, USSecretary of Treasury, beforetheBrettonWoodsCommitteeinMarch1989. Theinitiative calls_r different creditor countries such as Japan, US and France, among others, to help.strengthen the current strategyfor severely indebted middle-income countries (SIMICs) which include the Philippines. The strategy is to be done in the context of the generally accepted principles of sound growth and reform-orientedpolicies. The strategy involves debt and debt service reduction, on a voluntary and caseby-case basis asidefrom rescheduling of prineipal and new moneypackages. The WorldBank(WB)andthelnternationaiMonetaryFund(iMF)wereaskedtoprovide funds for debt and debt service reduction operationsfor countries with high external debt burdens and strong adjustment programs. Btady recommended that both the IMF and the WB offer new, additional financial support to collateralize a portion of interest payments for debt or debt service reduction transactions. HealsosuggestedthatwhilethelMFandWBshould set guidelineson how theirfunds are used, the negotiation of transactionswill remain in the marketplace. Source: The World Bank. WorldDebt Tables 1989-90: External Debt of Developing Countries, Volume 1. Analysis of Summary Tables,_ pp. 21-4. _-. ,.,_

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ECONOMIC

March -April

POLICIES

SUSTAINABLE

FOR

study closely examines

STUDY

the policies interaction and naturalbetween resourceeconomic and environmental quality with the final objective of identifying areas for policy reform.

lollowing: The project aims to accomplish the a) Review the Philippine developmcnt experience in the context of the country's natural resources and environmental systems, and come up with inlbnnation on major indicators of the macroeconomy, poverty, resource availability and environmental quality; b) Examine the economic, resource and environmental policy frameworks in te_rns of their consistency with sustainable development; and c) Identify directions for reforming economic policies towards enhancing environmental quality and resource availability. The study was undertaken in respouse to the growing concern on sustainable development as expressed in the Philippine Development Plan and in President CorazonAquino's recentpronouncements on general policy objec-

basis .for operationalizing the relevant Likewise, this study provides a major recommendations of the World Cornmission on Environment and Development Report (Brundtland Report). Representatives from the World Bank,AsianDevelopmentBank(ADB), Department of Environment and Natural Resources (DENR), National Economic and Development Authority (NEDA), CenterforResearch and Cornmunications (CRC), University of the Philippines' College of Public Administration and School of Economics, UPLos Bafios, Dela Salle University and the Ateneo de Manila University (AdMU) participated in the seminar. Two more discussions are to be held on March 10 and 26, 1990 to cornplete the series ofroundtabletalks aimed at generating comments, insights, suggestions and recommendations from all concerned sectors. •

nomic policies but would suddenly be facing some shortfalls brought about by external factors, may approach for nnancing help.

World Development

Nevex_helesS, he commended the Philippines for being able to build back, evenif gradually, the economic stabil-

The seminar was attended by representatives from the Department of Fi-

(From page 9)

UNDER

was held in February 1990 to series ofroundtable discussions look into the initial findings of the Philippine country report of the AsianDevelopmentBank-assistedprojectentitled"EconomicPolicicsforSustainable Development: Implementing the Brundtland Recommendations for Selected Developing Member Countries (DMCs)." This Philippine country report component began in October 1989 and was expected to be completed in March 1990, with PIDS Research Fellow, Dr. Marian S. Delos Angeles, as the main proponent. It examines the country's economic growth and development in terms of impacts on natural resources andtheenvironment, and idcntifies areas for economic policy reform, A

countries meet their debt strategy needs should be rewarded. And lastly, there is a need to provide for a contingency facility mechanism whereby countries, which have been pursuing sound eco-

nance (DOF), Department of Budget and Management (DBM), National Economic _d Development Authority (NEDA), Central Bank (CB), PES, World Bank, Center ibr Research and Communications (CRC), Australian Embassy, Citibank,PhilippineNational Bank (PNB), Far East Bank and Trust Company (FEBTC), lnterbank, Ibon Databank, University ofthePhilippines' School of.Economics (UPSE), Ateneo de Manila, PIDS and media people from the BusinessWorId, Manila Bulletin, Philippine Star, and Manila Chronicle. •

DEVELOPMENT

tires.Thus, the

1990

Report

1989 Tells...

10-14 percent inflation rates madthe 2024 percent interest rates which are quite high and should be examined by the government in relation to its budget del_cit. Lawsandregulationsneedtobe strictly enforced. The govemment should also find out why the size of the Philippine financial system is small-whether it is due to people's attitude towards saving or because they just want to deposit their money abroad. In addition, he also urged the government to give incentives to the private sector because, as has been noted, theprivate sector has a significant role in spearheading the development process,

i ty which was absent in the past 20 years. The discussants for the seminar were Director Amando Tetangco of the Department of Economic ResearchCentral Bank and Dr. Edita Tan of the University ofthe Philippines' School of Economics (UPSE). Representatives from the Departments of Finance (DOF), Budget and Management (DBM), and Trade and lndustry(DTl),NationalEconomicand Development Authority (NEDA), Board of Investments (BOI), San Miguel Corporation (SMC), Interbank, Citibank, and media people from BusinessWorld and Philippine News and Features (PNF) attended the seminar. • 7


Development

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March - April 1990 ]

PIDS-NEDA

MACROECONOMETRIC

MODEL COMPLETED; VERSION 1989 REFLECTS CURRENT REALITIES •IN DEVELOPING COUNTRIES titled _'The PIDS-NEDA Anseminar based on the study ennual Macroeconometric Model, Version 1989: A Summary" was held on 12January 1990 at the Operations Room of the NEDA sa Makati Building. The study was a joint effort ofMs. WinifridaM. Constantino, Visiting Research Fellow at PIDS; Dr. Roberto S. Mariano, Professor of.Economics at the University of Pennsylvannia; and Dr. JosefT. Yap, Research fellow at PI.DS. The seminar aimed to update pollcymakers, academicians and other concerned parties on the progress related to the expansion of the PIDSNEDA Macroeconometric Model whichwas firstdeveloped in 1985. The m aJn objective was to come up with a model thatgovemmenteconomicplanners could use in arriving at annual and medium-term economic forecasts or targets and in assessing the implications of various policy options, The firstversion of the model, consisting of 73 equatiolas, was used in 1.986 toanalyzetheimpacto.fthecountry's economic adjustm.ent program, an exercise usually done in connection with the country's availment of funding facility from the international MonetaD, Fund (IMF). Modifications and improvements have been made since then, in response to new demands by government policymakers, The second version of the model, which is considered as its first major revision, .fln_her disaggregated the production sectors of the economy, thereby strengthening the feedback

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and production sides, mechanism expenditure For the between third andthe latest version, also called Version 1.989,structural revisions as well as disaggregation and updating of data were done. While the first and second versions of the model were estimated using historical data from 1967-1985, data uscd in this third version have been extended to 1987. In the production side, the crops and manufacturing subsectors were further disaggregated and behavioral equations for the country's four major crops as well as for food, garment, semiconductor and other manufacturingweremadepartofthemodel. These modifications allowed for a more direct linkage with the trade sector which was, in turn, also disaggmgated further. The structural revisions brought significantresults_ First, theycorrected a previous shortcoming in the model, which was considered unrealistic, where demandandsupplycomponents of the production sectors were determined separately and all markets were assumed to clear through the automatic adjustment of prices. Second, the ft.nancial sector now boasts of an endogenous money multiplier and interest rate. Third, the dual role of capita/ fol_nation --demand generation in the sho_x run and capacity creation for increased supply in the long run _is captured more fully in this latest version, with the inclusion of capital cost in sectoral prices as dovetailed with the change in the theoretical base o.f the

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before, an aggregate price equation was production Andfourth, determined sector. by excess demand,whereas wages and price of imports, these determinants now enter directly into the specifications of the sectoral prices and arc used in the construction of maequation tor wholesale prices, thereby yielding a ficherdescriptionofinflationarytrends in the country. Recognizing the need to reflect current realities in developing courttries, particularly Philippine realities, Version 1989 of the model offers a combination of classical, Keynesian, stmcturalist and monetarist concepts. It is classical in the sense that the supply factors determine aggregate output; it is considered Keynesian since aggregate dem and also plays an im potrant role in dete_rninhag output; structuralist ir_.the sense that it takes into accoun.t supply bottlenecks as affecting certain sectors of the economy; and monctarist because money plays a prominent role in determining prices. The preliminary forecasts, estimates oftheequations and model validations were presented to representafives from the Department of Finance (DOF), Department of Budget and Management (DBM), Department of Trade and Industry (DTI), CentralBank, Agricultural. Credit Policy Council. (ACPC), National Statistical and Coordination Board (NSCB),Nati.onal Statistics Office (NSO), Philippine National Bank(PNB), SanMiguel Corporation (SMC), the National Economic and Development Authority (NEDA) and PIDS.I

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::::i: i: : ::: PiDS;:inc011ab0ration with:: :i : ::: t!!e:Pll!!!I_pit!egC0rl0rll!OSoci*:: : systems: :: :I.N.I:::}e[y(:PES) and;theWo:rldBanki: : :and::inStitUfi0nS in:deVelOping coun-: :i

SponSo:red:iiSeminar:tMt preSei_ted tl_e i::i989iaSii:_:6Jariuary 1990:ai:the Mayon: F; i.}ori g; team

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.i989;:ipreserited cu S_ng°n

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i: :i and wiiat will: we And:while Dr.: Panle reminded everyone that eacli : Country:_'orks: within a unique: set of :: socio wu:iabl.es;: : this dec! not prcclude it. fi'om arriving at and benefitting: from certain general: eoriclusions about the global experi-

pla role: ::: ences on: nnancial:l!beralizafion: and: in::tile deveilopm:ent. He oiTered the hope)h}}tl scarce::resonrceS:: to :procluctive activi-these experiences would inspire t.h(,dec .... veloping Counlries Io mob lize savings ::in::iiis:: opetiil:l:g:i'emarks; Dr.: File: : : for investments in ::order to: improve: timeliness i:: theirfinancia! System. :: .:: ....... i:!!!ieR:iTi6ri in iil_e ::of:a new:: FOr

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in the:::

focused 0n:

the financial system, nalnely: a) devel: oping countries nc{id tOmobilize inter21 Fil0i0:g,-ol::'antei::Jr/operled:th:e:sesSion.: i fin{=,iqcial:measurds;:and:b)ther_eed lbr: i nal resources for investme.nis in the : :::AccoiXding:to tt_e ReT)0,it;::l'eCent: : ti_e::con nucot l]netuning: of the coun-i: face of the growingfo reign befro wings : :trend si n iiie we rid ie e0nora y she w a: try IS:isa ckage ::o f:fin anciai instil.utionS whic}T tiaVe acCum_.flated and have be:: : :ca:)it.'-[l: :infl0w:into the:decade o1 the: Corr]eve_y dilTicult; [:0 repay; b)the: it _edeV esi :suggestlng :::: 90sente,:S:i:Tile WDRi:tie Said, proVides :: :: p,-i,,ate Sector Inas bee,i:round tolna_e: : :1.1i eveloping c0untries Sii0uld now: :i: richinSights on.What:tin1 be done, Inow:: the capability: to initiate changes in the: y }i{!!iingS:: :sl-_0uid:bc:d0nei:what to avoid, developing economicls; and c)a need : ......... ..... ............... ..... : for finance arises when the role ofixi* vate: sector is emphasized. ....... : ..... : : : :He then proceeded:t0 describctlne: I : Phil iPl)ine Pinanciaisystem in the Con_ {ext 0.f the: 1970s aiid 1980s ScenarioS: and:offered some lessons:learned I-toni ::t.he preViOUScxperiences of other third :: wofl{tcountries:;ni:mely ..... : a)Emar_cial liberalization should :::be accompanied by a stable mac;/ : : :;;):} roccon0mic: Situation and rcla.... }rive price:clianges; : ...... ....: b) Refomls:st_ould be:gradual to : :ii have enougli time to CoiTectmis a .... takes.::: ..... ....... i :::: :: c)i Some::0t 1/he ruleS:should be: ::iCl-ianged:ratlaer than t0tally di> .....1Iega_dcd. .... ...................... :Lorl.Semen, observecl - ilmi _probleins


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Development

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Research News

he findings of a study oil the "Economics of Philippine Fish-

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eries and Aquatic Resources: A Literature Survey" were presented and discussed in a seminar on 5 January 1990 at the NEDA sa Makati Builcling. The study, jointly authored by Dr. Marian S. Delos Angeles, Research Fellow, Ramyleo Pelayo ,and Emesto Gonzales, Research Associates, ,and Lota A. Ygrubay,Research Assistant /I ,all of PIDS, was conducted to help PIDS come up with asubsectoron:fisheri.esand aquatic resources for its Natural Resources Environmental Poilicy Research Program.The study also tried to come up.with a general framework to serve as a basis for the review of litersture on the subsector, and to incorporate peculiarcharacteristics of the sector arising from the geographical and physical, conditions of the archipelago, In reviewing the literature, the study's aim wasnotto criticize existing studies but to determine where these studies can help and provide directions for future research, During the seminar, Dr. Delos Angeles presented the study's major findings, namely: 1) In implementing a study which tries to factor in the future and environmental costs, it is important to account for all factors of production; 2) In measuring the costs of using the resource, the incidence of the costs should be looked into since many of these are not directly borne by the user (fishermen) but by other members of the society; 3) It is important to identify the key parties involved in resource use; 4) The effects of some fishery managementpoliciesneedtobelooked into while considering the characteristics of the country; 5) There are a number o fpotential answers that can respond to the issue of overexploitation such as the favoring of small-scale fishermen over the commercial, fishermen; the encourage-

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March - April 1990__J

SEMINAR

TACKLES

FISHERIES

STUDY

ON

AND AQUATIC

RESOURCES ment to commercial fishermen to go out to deeper seas; the promotion of localized decisionmaking through community-based organizations to effect reductions in the transaction costs; and the need to base licensing upon resource pricing concepts. Among the topics suggested by the study :for furflaer research include: a) the special, characteristics of fishemaen which affect technology choice and how such characteristics can be incorporatcd into certain policies; b) the policy variables and factors that matter among a group of fishermen to whom certain teclmologies have been produced; c) comparison among different sites; and d) the linking of policies which, even if not necessarily present or specific to the sector, have a bearing to the sector, The panel of reactors/commentatots during the seminar included Dr. Rafael Guerrero III, Executive Directoro.fthePhilippineCouncilforAquatic and Marine Research and Development (PCAMARD), Dr. V.Bruce J. Tolentino, Undersecretary o.f the Department of Agriculture, and Ms. Florentina Tart, President of the Bondoc Peninsu.la Community Outreach Foundation. Dr. Guerrero cited some of the current problems in the fisheries sector like the inadequacy and inaccuracy of fishcrystatistics, thelackofanalysisof mm_y stock assessment studies, the ineffective surveillance management of coastal zones, ttie lack ofsocioeconomic ,and site studies, _mdthe failure of the govermnent to respond to researchers' recommendations, Undersecretary Tolentino, meanwhile, summarized what the Depart-

rnent of Agriculture already knows regarding the sector and what it still needs" to know. What the Department knows: 1. Artisanal and coastal fishing are poor; 2. There is a need to limit coastal fishing; 3. Aquaculture majoying a high level of government support is profitable; 4. Marine and deep sea fishing is still feasibIe; 5. There is a 1_eedto push fishermen outward to the sea or inward to land -from capture to culture ; ,and 6. There is a need to provide alternative sources of livelihood or non-fishing occupations to lcssenthepressureinthesector. What the Department needs to know: 1. Will aquaculture still be profitable even without govemment support? 2. How can onelimit coastal fishing? If through licenses, how manylicenses/year, whatlevels of fishing effort and scope -national, municipal or pmvincial? 3. How feasible is marine and deep-sea fishing? 4. What is the most efficient mad effectivewaytoenforcethelaw? 5. How do we reform data and economic growth statistics? Ms. Tan, on the other hand, suggested some improvements in the classification of the studies surveyed. She also observed that the bulk of studies in aquacul.turewasdonebefore1980while those of marine fishing were done after

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I Development

Research News

March - April 1990

1980. Shcfurthernotedthatmostofthe ISSUES AND INITIATIVES... studies lacked continuity with socioeconomic conditionsand anddealt market-

(From page

ing systems rather than with technology. An participants active discussion the seminar ensued,,among with some

Since the production of health services depends on these factors of production, it is necessary to inquire into the prob-

DOH is also supporting efforts to achieve self-reliance in the production of health products such as phannaceu-

important questions raised. Among these were: Should we continue fish capture or fish culture? Who will alJocatc the resources--the.market or the nonmarkct mechanisms? What are the roles of the government and community organizations in the allocation of this common resource? What. are the alternative sources of livelihood tbr coastal areas? Can.a common policy be initiated entire archipelagic country, considering the forthe Philippines' set-

lcms and policyinitiatives in these factor markets, 1. Manpower - Every year, the Philippines produces a Considerable number of medical and allied health manpower. However, the country is ,also a major exporter of physicians, nurses and dentists causing shortages of these professionals in many areas in the country. Health manpower plan-

ticals, diagnostic reagents and supporfive medical supplies. The Health Product Development Group (HPDG) was organized in August 1989 to review consumption practices of these products and see the possibility of local commercial production. Among others, the purpose of the I-IPDG is to obtaiT_ilafonnation on the feasibility and cost-effectiveness of the local manufacture of specific health prod-

up and sectors' heterogeneous residence? Can the problem be approached in general equilibrium terms? Has the country really reached the maximum sustainable yield in terms ofthe marine resources? Can we examine exactly what the structures really are in the :fishery sector so that we have a clear idea on what should be done? What are the research priorities in this sector and who conduct them? Can we identify policy options which are effective,the adaptive to our environment and

ning has been placed in the back-burner for so long. The data base on the health

ucts that will encourage the scientific and business communities into devel-

professions (production, employment, migration, career shifls, etc.) is in such a sorry state that it is virtually impossine to conduct projections for planning purposes, Studies must also be made to address issues on the correspondence between inedical and nursing curricula with the requirements of the health care delivery system, the legal aspects o.f

oping plans .fortheir m_mufacture_ Technological innovations, whether impmted or indigenous, are associated with serious scientific, economic, legal and ethical questions. This necessitates collaboration in epidemiological, biomedical and social researches. These e.f:fox,s should provide guidance on how health care technologies c,'m be .developed, selected and

tufty implementable? Instead o.f the socioeconomic studies on the profile of households, why not analyze the factots which in.fluence the movement in and out of the industry? Representatives from the International Center for Living Aquatic Resources Management (ICLARM), US Agency for international Development (USAID), Southeast Asian Fisheries Development Center (SEAFDEC), Philippine Council for Agriculture and

professional practice and possibilities of task delegation, the development of

rationally allocated to improve quality of care.

Resources Research Development (PCARRD), Agricultural Credit Po.licy Council (ACPC), National. Economic and Development Authority (NEDA), and the College of Economics and Management (CEM) of the University of the Philippines at Los Bafios participated in the seminar. â&#x20AC;˘

n|n

4)

career paths, appropriate incentives to attractmanpowerin rural areas, and the optimum number of health manpower exports taking into consideration the country's needs, 2. Drugs and Other Health Products - A major breakthrough.has been made with the implementation of the national drag policy which requires the use of genetic names in the prescription, sale and dispensation of drugs. Studies on consumer and prescriber behavior after program implementation can provide information on how the program c:m be further strengt hened.

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3. Medical Equipment - All sophisticated medical, equipment in the Philippines are imported. At present, no policy governs their importation, distribution and use. Because of their high cost, the country should establish acapacityforthedetenninationofneeds as well as for teclmology assessment, allocation, monitoring and operation of these capital resources. Torationalizeacquisitionandutilization, studies are required to develop criteria on the appropriateness oftechnology, the needed level of care, the volume of demand for a particular (Please turn to page 12)

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Development

ISSUES

Research News

d

INITIATIVES. (From

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March - A_i,11990

,I',.". ..... .' hN1) N( :'i :: _ ,!:;_,i,iii: " "

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equipment, the availability of maintenance and other support facilities, economic viability and accessibility. A mapping of "a11high-technology diagnostic equipment is called for. The legal aspects ofrequiring"certificateofneed" :fromhospitals must be studied. Analyses must also be made on impact of such heavy capitalization on medical cost. Business entities have shown interest in providing medical equipment to government and private hospitals through a variety of new arrangements,

eg, capital lease, operating lease and "per use" basis. Schemes such as these present a number of positive features, Leasing reduces the immediate drain on funds associated with a majorpurchase, provides a hedge against technological obsolescence, and results in shorter downtimeandlowermaintenancecosts. On the other hand, lease payments are frequently larger than the combined principal and interest payments on debt necessary to buy equipment and they may include hidden charges such as late payment penalties. Thus, there is a need to carefially review the financial implications of alternative financing options.i

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There have been fresh initiatives in health care delivery in the country but aspart of the developmentprocess, new issues keep cropping up. This review has just scratched the surface of issues in a sector that is highly complicated. While identifying macro issues is easy, "hands-on" experience is necessary to craft practicable solutions. The cornbinedefforts ofresearchers,policymakers, administrators and practitioners, therefore, are required. More importantly, consensus must be achieved on the nature, etiology and urgencyofthese issues and the course of action needed to address them.

DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTI_TE FOR DEVELOPMENT STUDIES (PIDS). It highlights findings and recommendations culled from PiDSsponsored research or related studies done by other institutions. PIDS seminars, publications, and ongoing and forthcoming projects which are of interest to policymakers, planners, administrators, and researchers are also announced. PIDS is a nonstock ,and nonprofit government research institution engaged in long-term policy-oriented â&#x20AC;˘ research. This publication is part of the lnstitute'sprogram to disseminate information in order to promote the use of research fndings. _4, ;/ ),

The views and opinions published 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 pap_. sl as well as any suggestions or comments on the publication arc welcome. Please address all related correspondence or inquiries to: Research Information Staff (RIS) Philippine Institute for Development Studies (PIDS) Room 307, NEDA sa Makati Building 1.06 Amorsolo Street, Legaspi Village Makatl 1200, Metro Manila Re-entered as second class mailâ&#x20AC;˘ at the Makati Central Post Office on April 27, 1987. Private firms and individuals arc charged at an annual rate of P90.00. Students, libraries, academic and research institutions are charged at an annual rate of P80.00. For foreign subscribers, the annual rate is $16.00. All rates are inclusive of mailing and handling costs.

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World Development Report 1989 Tells Developing Countries: Be Self-reliant  

eicazo::is nOW i cost escalation, and the unabated out- review of the literature on the demand u'orking'at'!he USAID:'.'.':'=.." ,..:(,',",'...

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