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No. 6







ASEANcountries aimincreased participation in international banking Can ASEAN banking systems compete and increase their share of international trade in banking services? In a joint PtDS-Central Bank Policy Dialogue held on 6 September 1990 at theCenVral Bank Multi-Storey Building, Dr.MarioB.Lamberte, PIDS

activities in theregion, the structures of markets and competition of the ASEAN banking system, and the benefits and costs of a more liberal regime for international trade. It also discusses the implications of the key concepts and principles in the multilateral

Development/Economic Social Cornmission for Asia and the Pacific (UNCTAD/ESCAP) RegionalSeminar on Services held in Bangkok, Thailand on 6-9 August 1990. •

Vice-President, discussed these possibilities and offered some possible measures. Presenting the highlights of hisstudy"TradeinBankingServicesin ASEAN Countries," Dr. Lamberte said that possible measures would be regional cooperation among ASEAN countries and a favorable outcome of tl_e Uruguay Round of trade negotia-

negotiations on trade in services to the banking sector in the ASEAN countries. The paper ends by discussing the possibility of increasing the competitiveness of banks in the region and their share in international banking services, Mr. Victor Valdepe_as, VicePresident of Citibank N.A., and Mr.

tions on services. The policy

Victor Garlitos, Assistant Director of the Department of Economic Research-

We are devoting this year's Final issue to updating Our readers with the Institute's recent activities, somethingwemissedinthelasttwo issues due to space constraints. Manyissues otnationalinterest were discussed in past PIDS seminars, conferences and policy dialogmcs and these we would like to share with our readers. Thcse include: Dr. Mario Lambertc's studyon"TradeinBankingSe_wices in ASEAN Countries," and how ASEAN countries are aspiring to in. crease their share in international banking; Dr. Roefie tlueting's time. lystudy onthe nationalincome and how they should be corrected to reflect losses in the environment; Project LINKand the forum held in Manila to discuss Asian and world economic outlook in the next cen,




generate comments on the Philippine position on this matter and to discuss the critical issues in the present

International at Central Bank, were invited to comment on the study. Mr. RobertoGarcia, Managing Director of

Uruguay Round of trade negotiations on banking services, using the Lamberte study as discussion point, The issues in the negotiations revolve around the gradual dismantling of barriers to trade in services that would ultimately benefit both developed and developing countries. Dr. Lamberte's paper, published as PIDS Working Paper Series No. 90-

Current Imports and Commodity Classification at Central Bank was the moderator, Joining the policy discussions were representatives from theDepartment of Trade and Industry (DTI), Department of Finance (DOF), Department of Environment and Natural Resources (DENR), National Economic and Development Author-

22,analyzesvariousaspectsrelevantto the negotiations. It also explores the possibility of expanding trade in banking services as a means to achieve higher and sustainable growth in ASEAN countries. Point by point, the paper examines the scope of banking







Board of Investments of the Philippines' School of Economics (UPSE) and Asian Institute of Management (AIM). Dr. Lamberte's study was earlier presented at the United Nations Conference on Trade and

(BOI), University


m i


Hm _


tury; internationally economist Professor


noted Arnold C.

Harberger's visit to Manila to dis. cuss economic policies and growth, in the process, comparing the solutions of developing countries to the debt crisis; PIDS. 13Oii's plan to do research with f To Page 8 == I




November- December 1990


Onthesuccessof policyreform indeveloping countries q

What features of a developing country hinder or facilitate its reform process? What makes it difficult for a developing country to shift policies

How then can a country successfully institute policy reforms in its economy? Political thinkers believe that it must develop its State to be

access to farm inputs and services, providing them with a decent living and, thus, diverting their attention from politicalissues.Thecommercialization

that would eventually affect its development process? These are some of the questions raised and discussed by Dr. Jose Edgardo L. Campos, Professor at the Wharton School, University of Pennsylvania and Visiting fellow at tile Ateneo de Manila University, in his paper, "On the Political Economy of Policy Reform: From Import Substitu-

strong to sufficiently insulate itself from pressure groups; and in trying to build a strong State, a country oftentimes pursues a development path that is influenced by its colonizers. Such is the case of Taiwan where the role of Japanese colonizers in improving its economy was substantial and farreaching, With the guidance of its colo-

of agriculture brought a relatively rapid development of the economy which further dissipated potential pressure from the peasants. In the process, the Taiwanese government was able to build a strong State, thereby, facilitating the shift of policies from importsubstitufion to export-oriented industrialization. The case of Taiwan illustrates

tion to Export-Oriented Industrialization (A Historical Approach)" which was presented during a seminar held on 7 September 1990 at the Operations Room of the NEDA sa Makati Building. In his paper, Dr. Campos looked into the characteristics of two development strategies: import substitution and export-oriented industrialization, According to him, despite the disenchanment over import substitution strategy, many countries such as Argentina, Brazil, India and the Philippines have not heeded the call of economists to eliminate protectionist policies, liberalize trade and promote exports because a shift from import substitution to export-oriented indus-

nizers, Taiwan instituted an extensive land reform program, introduced a systemofagriculturalassociationsand commercialized its production. Land reform reduced the political influence of the powerful landlords who were perhaps the most capable of organizing opposition to the Japanese rule. The system of agricultural associations, meanwhile, helped the peasants'

the relevance of colonization exPerience to the development process of a country, and of being a strong State before a country can successfully shift its policies from import substitution to export-oriented indus[rialization. Corollarily, a similar framework can be applied in analyzing the clevelopment problems of the Philippines. []

trialization can derail the existing economic equilibrium and, therefore, may do more harm than good. Since a shift in regimes is analogous to a change in the production sphere, it invites pressures from affected groups. From the analysis of Dr. Campos, it was suggested that policy reforms can only be achieved if the behavior of pressure groups is checked. A country that shifts from, say, an import substitution to export-oriented indus-


trialization will be plagued by oscillations in policy regimes-enough reason for an economy to stand still. =





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. _ :; _°



November- December 1990

Shouldnationalincomebecorrected forenvironment losses? Governments around the world are becoming aware of the adverse effects of pollution in the environment. In measuring the country's economic growth, however, the costs of development to the environment are often ignored, In a seminar on "Natural_ Resource and Environmental Accounting" held on 11 September 1990 at the Operations Room of the NEDA sa Makati Building, Dr. Roefie Hueting of the Department of Environmental Statistics, Central Bureau of Statistics of The Netherlands, presented "Should National

a paper Incomeentitled be

Corrected for Environmental Losses? A Theoretical Dilemma, But a Practical Solution." This paper looks at the possibility of accounting the environrnental lossesin the computation of the national

income, The terms growth and welfare are referred to when things go well, economically speaking, solely on the basis of the production, as measured in terms of the GNP. This belief, however, fails to recognize that environmental deterioration is, to a large extent, a consequence of production growth. With this problem, Dr. Hueting recommends a shift in production and consumer activities towards an environmentally-acceptable direction in order to arrive at a sustainable economic development, This approachisfavoredbecauseit:(1) prevents both risks and financiallosses; (2) assures protection of the environment which is usually more manageable than the restoration of environmental losses; and (3) stimu-

lates the search for and application of environment-friendly technologies more strongly than the current policy. A correction of national income for environmental losses is highly recommended. However, this solution is theoretically impossible because it is difficult to construct shadow prices that are direK-tlycomparable with market prices-a prerequisite for a sound correction of national income,

ia the measur-no country's economic "In

growth, ... the costs --OJ"'''aevetopment to the environment are flrr_ vj_ e_

1"_" tr_ nored


In constructing shadow prices, it is very seldom that the individual preferences for environmental functions or uses are entirely expressed in market behavior which can be translated into money terms. For example, a chemically-polluted water is compensated by provisions such as waterpurification. Likewise, financial damage through noise nuisance and air pollution is not completely reflected on the depreciation of the house, as a result of the tightness of the housing market and the immo-

bilization caused the neighborhood.

by ties to work and

Development is not without its costs, according to the study. Degrading, polluting and depleting the environment are bitter consequences of production. Preventing these processes requires a lot of labor input, reduces labor productivity and consequently checks production growth. Avoiding environmental losses without sacrificing production growth is only possible if the technology invented is very clean, uses space productively, leaves the soil intact, does not deplete energy resources and is cheaper than the present technology Ulffortunately, for the people's

this is impossible whole range of



Dr. Hueting suggested reports on the national income should indicate the changes in the level which are over- and understated. He also proposed a correction of national income figures for environmental losses on the basis of standards for a sustainable use of the enviro_unent in order to arrive at a figure for national income alongside the current one.

Representatives from the Department of Environment and Natural Resources (DENR), Department of Agriculture (DA),National Economic and Development Authority (NEDA), University of the Philippines at Los Bafibs (UPLB), National Statistical Coordination Board (NSCB), Bureau of Agricultural Statistics (BAS), Social Weather Stations, Inc. (SWS), Ateneo de Manila University (AdMU) and PIDS attended the seminar. III ii




November- December 1990

Forumassesses worldeconomy forthe nextcentury The Asian Economic Outlook/ World Project LINK Conference was held in Manila from 5-9 November 1990 at the Asian Development Bank (ADB) Auditorium and Philippine Plaza Hotel. Sponsored by the ADB and participated in by the PIDS, the conference discussed various global

economic issues, the world economic outlook, the developed economies, the outlook for Asia, Latin America and Africa, current developments in Europe, issues in international trade and modelling, country reports of newly industrializing countries (NICs)-HongKong, Republic of Korea, Singapore and Taipei; Southeast

Asia -- Indonesia, Laos, Malaysia, Thailand, Vietnam and the Philippines; South AsiaBangladesh, Burma, India, Nepal, Pakistan and Sri Lanka; China; and the South Pacific--Papua New Guinea. Round table discussions onpolicyreforms, inflation, savingand investmentia_Asiawerealsoheldduring the five-day conference. •

WhatisprojectLINK? Project LINK is a cooperative and nongovernment international research activity which was initiated by Nobel Laureate Professor Lawrence R. Klein and the University of Pennsylvannia, together with colleagues from Stanford, the University of California and the International Monetary Fund (IMbO in 1968. The IMF and the US Nalional Science Foundation granted seedmoney tofinanceProjectLINK, The World Bank, United Nations, Federal Reserve System and the Bank of Japan and several other central banks and research foundations have regularly contributed funds,

ante forecasts of both the level and c6mposition of world production and trade, and of inflation and unemployment rates. Numerous applications have also been made of international multipliers and of policy simulations and scenarios of theeffectsofinternational disturbances. The Project focuses on the international transmission problem, in the form of short-run cyclical fluctuations in the main industrial countries. However, the importance of the developing and centrally-planned economies in the world system has never been overlooked. Over the years, there has been increasing attention to extend the economic horizon and give more explicit treatment to

economic country.



their particular

Other participants in Project [,INK are all major international organizations, in particular, theUnited Nations and numerous national research institutions. The LINK system is one of the most ambitious modelling systems ever constructed in economics. It is now operational and makes up about 20,000 simultaneous equations. The LINK also serves as an excellent training vehicle for economists all over the world teaching them how to manage data and put themtousein a systematic way to analyze their countries' problems in an international environment. The institutional nature

TheProjectaimstoincrease basic understanding of the nature and strength of economic relationships that bind individual countries into a world economy. Structural

developing and centrally-planned economies, The Project uses intellectual resources and national expertise from around the world by integrating inde-

of the projec! gives economists in each country, especially in developing countries, a chance to do their own analyses and learn from group interaction. Since 1969, semi-annual meet-

econometric models of the various countries and regions included in the system are linked (thus, LINK) through a eentral world trade matrix of commodity flows and prices, and of exchange rates and capital flows,

pendently-developed national economic models into a world system. These mathematical economic models for each country are built and maintained by resident economists who know local institutional and behavioral character-

ings have been held by Project LINK as a forum for appraising and mod!fyingforecasts, presenting papers on new national models, the modelling of specific aspects of the int6rnational economic transmission mechanism,

The LINK system is global in scope and has beenused for ex-

istics and are well-informed about the economic outlook and the evolution of

simulation studies with the complete system, and other relevant subjects.


s{vle: :of

p:o :,,i>. .... _,,..... }<ol Id..\" i_i_-c_"it=-,:tU-l-iv'-' e._ t :ia vo's


November. December 1990


DOH-PIDStie-up eyes anexpandedhealthcare â&#x20AC;˘ . nanc_n,, f_


One major area of concern in the national health policy reform plan of the government is the development of a national health care financing system which will give the people easy access to health care services, This concern is the focus of a technical workshop on "Health Care Financing Sy_'.em" organized by the FIDS for the Department of Health (DOH) on 15-1.6 November 1990 at the City of Springs Resort Hotel in Los Ba_os, Laguna. The workshop was a venue to review, criticize and evaluate series of studies for baseline informa- a the Terms of Reference (TOR)for tion prepared by a team of researchers School of Economics and from the University of the (UPSE) Philippines' College of Public Administration

currently confronting the implementation of Medicare I call for a careful review of the overall program and an exhaustive study to see how the people's clamor for access to health care services could be properly addressed. There is aneed to see how Medicare can cover a wider portion of the population, how support value of the costs of health services can be increased,




can be

are to be tackled in the baseline sustained overtime. These concerns studies commisioned by the DOH to be The byPIDS. technical workshop was undertaken attended by representatives from the (PMCC), Government Service insurPhilippine Medical Care Cornmission ance System (GSIS), National Kidney Institute (NKI), Philippine Congress, American Life and Care Insurances, University of the Philippines" College of Public Health and Philippine GeneralHospital(PGH),Sycip, Gorres and Velayo, Inc. (SGV), United States Agency for International Development(USAiD), LormaHospitalinSan Fernando, (La Union) and Health, Education and Welfare Specialists, Inc. (HEWSPECS), among others, mH

Regional development planning: perspectives

sity (AdMU) and PIDS. It also Universerved (UPCPA),Ateneo de Manila as the first meeting of a select group of experts in the fields of finance, actuarial sciences, marketing services, health economics, hospital operations and medicare administration, At present, the Philippines is implementing tlle Medicare Law which servesas the national health insurance program. The program is supposed to cover two sectors, namely: (a) those employed in the formal sectors earning wages and salaries under Medicare I; and (b) the self-employed and unemployed sectors of society under Medicare II. However, because of financing and administrative problems, only Medicare I is currently

Three perspectives on regional development planning in the Philippines were presented during a seminar held on 20 November 1990 at the Operations Room-of the NEDA sa Makati Building. The seminar on "Regional Development Planning System in the Philippines" highlighted the findings of the studies conducted by Dr. Manuel S. Alba of the University of the Philippines' College of Business Administration (UPCBA); Dr. Jose M. Lewes, formerly with the National

planning in the Philippines from 1972 to 1987. He also traced the evolvement of the key factors that supported the transition of the regional planning process as viewed, within the planning and policy coordination framework of NEDA.Forhispart, Dr.Albadi_ussed the evolution of regional development planning system from the Cabinet-level perspective. According to him, regional development planning is crucial in the country's national developmentpolicy and strategy. For instance, the basic natural and other economic resources

implemented. Medicare II has yet to take off the ground, While there is a desire to extend the coverage of the Medicare program to include the self-employed and the unemployed, the problems

Economic and Development Authority (NEDA); and Director Joseph Alabanza of the NEDA-Cordillera Autonomous Region (CAR). Dr. Lewes described the evolution of regional development

of the country are regionally-dispersed resulting in some loss of economies in their use and of comparative advantages in the international trade of the









To Page 8 i






November- December 1990

Studysaystotallogban noteconomically justifiable A study argued that a total log ban is not justifiable on economic grounds. The basic issue on forestry

PIDS and Eugenia Bennagen of the DepartmentofEnvironmentandNatural Resources (DENR). It assessed the

suggested NRBIs.


that needs to be addressed is the optimum allocation of forest land into various uses. The above findings came from the "Natural Resource-Based Industries in the Philippines: Issues in Growth and Development Strategies," a joint study of the PIDS-NEDA Training, and Development Issues (TDI) and were discussed during a seminar held on 31 October 1990 at the Operations Room of the NEDA sa Makati Building. The study was done by Dr. Marian Delos Angeles and Noela Lasmarias, Research Fellow and Research Associate, respectively, of

issues in growth and development strategies which are relevant to natural resource-based industries (NRBIs) and examined the national and local concerns of NRBIs and how they are affected by economic and resource policies on natural resource-based development, Based on the findings of the study, it could be argued that a total log ban policy does not address the more important factors that have led to destructive forest uses---poverty and population pressure, imperfect property rights and faulty pricing mechanisms. The study instead

international market against woodbased products as a result of the need to preserve ta-opical forest ecosystems, the government should have definite programs to reverse forest decimation without displacing those dependent on wood-based industries, the study suggested. To achieve this goal, agroforestry schemes should be provided to upland communities living in subsistence levels. Raising the quality of their lives necessitates production surpluses from other types of incomegenerating industries aside from the traditional wood-based processing. "fhis entails determining which upland



the recent


bias in the

farming systems feasible andand advantageous to theareecosystem of industries compatible to these systems. With regard to fishery-based industries, commercial fishermen

should be encouraged to discover nontraditional marine areasby providing information on such areas. -Aquaculture could also be improved through correct land pricing and environmental effects while the fish processing industry should be enhanced since it employs more peopl e . The mineral-based industry, meanwhile, needs government support to improve its contribution to the

,_ ]

country's growth and development. Assistance is most crucial in exploration activities, .mechanisms for improving income disiTibuti0n such as reid: capture and minimization of pollution effects. The seminar was attended by _,_ representatives from, among others,

___=_ •


the Department

of Agriculture

= ...... J

,r .




To Page 8 i

i •



November- December 1990

Regionaldevelopment... (From Page 6)

Department of Agriculture (DA.), Department of Agrarian Reform (DAR), Department of Environment and

Editor's Note .... (From Page 1)

country. These issues have to be recognized and the strategies must become integral to the development policy of the country. Director Alabalaza, meanwhile, talked on

Natural Resources (DENR), Department of Finance (DOF), Department of Local Government (DLG), NEDA, Philippine Chamber of Commerce and lndustry(PCCI), United States Agency

the view ofexpandinghealth care financing; Dr. Marian delos Angeles' study on natural resourcebased industries and how they should be supported by the govern.

regional development planning in ti_e Philippines from a region's perspective. He explained the functionof the NEDA Regional Office (NRO) and its

for International Development (USAID) and East-West Center (EWC), Hawaii attended the seminar. []

role in policy processes of the national and local institutions. He likewise analyzed the management strategies employed to meet the changing missions of the NRO and the effects of a regional planning system on the capability of local agencies and governmentunits. Dr. ManoB. Lamberte, PIDS Vice President, was the moderator during the seminar. Representatives from the University of the Philippines' School of Urban and Regional Planning (UPSURP) and College of Public

Study says 10g ban ... (From Page 7)

Administration (UPCPA), Institute of Philippine Cu.lture(IPC)oftheAteneo de Manila University (AdMU),

Development(USAlD), University the Philippines and the Ateneo Manila University (AdMU). []

ment to preserve the environment; and lastly, the seminar on regional development i)lanning lately an issue of national interest due to the continuing debates on local government autonomy. Three perspectives on regional development planning were presented during this forum by known experts on this field namely, Dr. Manuel Alba, Dr_ .lose Lawas and Director Joseph Alabanza of the National Economic and Development Authority. Also in this issue a_sa sup. plement is the Research Folio Series, featuring two PIDS studies namely: "Linkages inDevelopment: A Philippine Case Study," and "Health Manpower Employment and Productivity in the Philip-

Bureau of Fisheries and Aquatic Resources (BFAR), Philippine Council for Agricultural Resources Researda and Development (PCARRD), Center for Research and Communication (CRC), Board of hwestments (BOI), National Mapping and Resource Information Authority (NAMRIA), Laguna Lake Development Aufl_ority (LLDA), Asian 'institute of Management(AIM), Unite_t States Agency for International of de


DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS) it highlights findings and recommendations culled from PID$-sponsored research pr related studies done by other institutions. PIDS seminars, publications, and ongoing and forthcoming projects wl-_h are of interest to policymakers, planners, administrators, and researchers are also announced. PIDS is a nonstock and nonprofit government research institutionengaged in long-term policy-oriented'research. This publication is part of the Institute's program to disseminate information in order to promote the use of research findings. 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 pulication, or any of the PIDS papers, as well as any suggestions or comments on the publication are welcome. Please address all related correspondence and inquiries to: Research Information Staff (RIS) Philippine Institute for Development Studies (PIDS) Room 307, NEDA sa Makati Building 106 Amorsolo Street, Legaspi Village Makati 1200, Metro Manila Re-entered as second class mail at the Makati Central Post Offiice on April 27, 1987. Private firms and individuals are charged at an annual rate of Pg0.00. Students, libraries, academic and research institutionsare 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.













A summary of a research study conductcd by the: Philippine I,_stiLutc _'c,rDcvciopmel-xt Studie:_

Finding links bet ween a g r icu Itura, 1 an di n d ustr ial sectors Linkages in Development : A Philippine Case Study, Working 89-02 by Gustav Ranis, Frances Stewart and Edna A. Reyes

incomes generated by activities in one sector lead to demand for outputs of

found tobevident: another

Paper Series N6.


Much has been written about the relationship between agricultural and industrial development. Agricultural development, as they say; should precede industrial development because there should be a strong agricultural base to boost industrial growth. This pattern of development, some argue, also ensures that agriculture is not neglected in the industrialization process. From the Philippine experience, how does agricultural development affect industrial development?

the Philippines has been spatially concentrated in the metropolis, Since 1947, development in particularly the National Capital Region (NCR) where the major industries are concentrated. This is both a manifestation and a cause for the weak linkages in the rural sector which is associated with three mutually reinforcing factorsthe unequal distribution of income and land, the import substitution mode of development and associated industrial policies, and the regional imbalances in the provision of infrastructure. RURAL MODES



Rural linkages may either be initiated by agricultural growth (i.e., agriculture-to-industry) or by nonagricultural development (i.e., industry-to-agriculture), There are three kinds of linkage involved in the direction of development from agriculture to industry: consumption, forward and backward linkages,

*Linkagesis a termused to describe the interactions between agricultureand rural nonagricultural activities in a developing economy. The term descTibesthe connectionsbetween sectors and to wha t extent these "connections" affect tim rate of growth of each sector individually, and that of the economyas a whole. I






a) the ofmoreincome unequal among the distTibution agricultural households is, the more agricultural income is likely to leak out of the local economy; b)

analysis of how linkages between the agricultural and he study provides a thorough industrial sectors affect patterns of development. It identifies the development strategies which are conducive to rural linkages and balanced growth and reviews the spatial dimensions of development patterns, The study also explores how rural linkages operate, with emphasis on the two-way direction of the process-from agriculture to industTy and from industry to agriculture,





income is, the lower is the extra demand for locally-produced goods; distributed any additional agricultural c) the more equally distributed income is, the greater is the tendency for local linkages with nonagricultural sectors since the tendency for low-income households to spend more proportionately on food is offset by the tendency for hJgher income households to save more and spend more on goods produced outside the rural area; and d) as average farm household incomes rise, local linkages rise in absolute amounts. In addition, .the distribution of agricultural income is influenced by land size and land use which, in turn, determine the share of labor in agriculture income. Meanwhile, labor absorption in agriculture is affected by the degree and nature of farm mechanization and crop composition. Studies have shown that farm mechanization in the Philippines tend todisplace workers-a negative effect on linkages.


Alfllough backward



relatively small in productioll linkages




j DEVELOPMENTRESEARCHNEWS II II or those that occur where productive activity in one sector requires inputs from another such as machinery or fertilizer, are increasing rapidly. For both urban and rural Philippines, these linkages are substantially greater for power-tillers than for tractors, Rural production occurs only for the small machines (e.g., power tillers and portable threshers). Thus, smalland medi_m-sized farms which use small rnachines cause greater backward linkages than farms which use fourwheel tractors, Rural linkages can also occur where production of a commodity provides Supplies for productive activities in other sectors. This type of linkage, that is, forward production linkage has been evident especially in rice production. This includes threshing, drying, handling and milling, Studies have shown that in thepremilling (threshing, drying and handling) stage, a combination of hand-threshing or the use of low-cost portable machines and sun-drying methods involves more employment than mechanized techniques.Therefore, it isthemostappropriatechoicefor small farmers, On the other hand, for milling activities, it is important to encourage decentralized small-scale processing using Steel huller/rubber roll type mills which are prevalent in the Philippines. Unfortunately, the Asian Development Bank-supported government policy is to promote mechanization of rice processing which is concentrated in a few large-scale centers. Apparently, the major objective of this policy is to maximize fl_e supplies of high quality rice to the urban areas and eventually for export, This policy, however, would displace rural farm workers causing inequality in income distribution, Apart from the favorable demand factors Which lead to high local linkages, infrastructure facilities I



November-December I IIII II 1990


such as roads and electricity are also necessary to enhance rural linkages, Meanwhile, studies in industry-to-agriculture linkage effects are relatively fewer. In order to evaluate their effects on agricultural productivity, it is important to segregate the traditional from modem technologies. Results of some of the traditional nonagricultural activities do not have significant linkage effects on agricultural productivity as compared to modern farm technologies. Further, the impact of cities on nearby agriculture and of good roadsare associated with increases in agricultural productivity, CONCLUSIONS AND RECOMMENDATIONS The effects of rural linkages from agriculture to industry and conversely are ascribed to the quantity of employment and production in each sector and the nature of sectoral output. Rural infrastructure development, astrategywhichimproves the contact of farm households withlocal market places, has been empirically proven to promote linkages in both directions, Meanwhile, the concentration of development in urban centers due to weak rural linkages has, in fact, stunted the growth of both agriculture and industry.


* revise the tax system towards a more progressive taxation on incomes and assets by way of indirect taxes to discourage consumption of elite products; * revise taxes and tariffs (e.g., electricity) which currently discriminate against rural areas; * reaUocate expenditures on infrastructure towards the rural areas, especially in the form of roads and electricity to promote links between farm households and local market towns; _* decentralize decisions on economic planning and infrastructure prioritiestolocalgovernmentunits; * instituteatechnologypolicy to assist the development of efficient small- and medium-sized enterprises. Here, an information network and technical assistance is needed to help inform the people about the many efficient smalland medium-scale technologies already existing in the Philippines and elsewhere; and * improve the credit institutions which finance small-scale activities in the smaller towns and rural areas. Rural linkages are significant to economic growth. In the Philippines, increasing agricultural output increases rural nonagricultural employment; on the other hand, increasing the extent and technology of rural nonagricultural activity increases agricultural productivity.

To achieve a more equitable and balanced growth, the study recommends the following: * distribute agr_iculturalassets equally to provide more jobs both in the farm and in nonfarm enterprises and increase the consumption of appropriate products; * revise the import-substituti0n strategy to reduce the protection

There has been considerable work done to understand the agriculture-to-industry type of linkage. Perhaps, similar attention could be given to that of the industry-to-agriculture linkage in order to fully analyze the sources of agricultural growth in the early and intermediate stages of development. A better understanding of this linkage may help explain the problem of stagnant agriculture, as in some sub-Saharan African coun-

for the production of elite products; â&#x20AC;˘ revise the credit allocation system of financial institutions which currently favors large-scale and capital-intensive industries;

tries to support the hypothesis that the one way direction of agricultureto-industry linkages has contributed to the slow economic growth of some of those countries_l







â&#x20AC;˘ ii i

A suminary of a research

study conducted

by the Philippine Institu!:e for Develop.mcnt

The need to upgrade the incentive system for local nttn-ea'-kers WO



thro.ghoutthe However. ooy dispersion of these schools does i_ot seem to help at all, for a considerable numberother from of regions medical

students the outside stillschool. come

may h vo been U ough

about by the quota system imposed by the Board of Medical Education as well as the preference

of medical


Health Manpower Employment and Productivity in the Philippines, Working Paper Series No. 90-19 by Edna A. Reyes and Oscar Picazo

to seek admission in already lished schools. The dramatic increase

major issues ill health manpower: employment and he study analyzes two productivity, The first includes supply and needs, and requirements for specific categories of health manpower, their employment settings and some issues onproduction and migration. It also attempts to forecast supply and demand up to the year 2000 and compares these data to estimate possible surpluses or shortages, Four categories of health manpower are included in the study, namely, physicians, nurses, dentists, and midwives, The second issue regarding productivity focuses on conceptual and methodological levels,

Manila lost a substantial number of nurses between the 1970s and 1980s midwives is, however, different. Metro because of the massive outflow of nurses to the United States and the Middle East. Midwives are more or less dispersed outside Metro Manila. Physicians and dentists seem to prefer areas where there are more hospital beds (for physicians), higher urbanization rate, and greater prospeers for higher income. This suggests the persistently strong bias, parficularly of physicians, for curative care. Physicians and dentists are also mostly in the private sector, moreso with dentists who oftentimes engage in private practice. The immediate concern seems tobe the return of the huge investment expenditures incurred in the medical school,

country especially throughout the 1970s and 1980s seems to have been mainly supply of health manpower in the facilitated by the opening of new schools. Medical schools, for example, increased from seven in 1957 to 27 in 1985. Nursing and dental schools likewise increased significantly from 88 in 1971 to 129 in 1984 and from seven in 1975 to 16 in 1987, respec_dvely. Cohort survival rates ofmedical and nursing students were found tobe high (i.e., on the average, 98.4 % and 94%, respectively) but for dental students, it was found to be relatively lower at 53.4 percent. These results are due to the high expenses involved in acquiring dental equipment and the difficulty in fulfilling patient care requirements especially during the final years of dental proper.


Corollarily, a good number of medical positions in the Department of Health (DOH) remain unfilled for years because the government does not offer reasonable compensation schemes to justify the huge investments made on medical education. Nurses and midwives, on the other hand, end up mostly in the government sector, with about 73 percent of the latter employedin the Department of Health. In an effort to solve maldistribution of health manpower, the government allowed the establishment of more medical and allied schools

Performances in the licensure examinations have bean deteriorating. From 1974-1988, the passing rate averaged 75.6 percent for medicine, 70.5 percent for nursing, 65.3 percent for midwifery and 54.9 percent for dentistry. Ttie proliferation of schools appears to have resulted in lower quality education as indicated by the lower passing rates at the onset of the 1980s and throughout the decade. This is clearly manifested by the dramatic decline of the national passing average in the medical board examination in the 1980s despite the

There exists an unequal distribution Of health manpower in the country anditsmagnitudeis alarming, The scarcity of health manpower, especially physicians, is pronounced in relatively backward and poor regionsof the country. Health professionals, particularly physicians and dentists, are mostly found in the Metro Manila and Southern Tagalog area. The case with nurses and

estabin the



relatively high performance of graduates from leading medical schools in the country like the University of the Philippines, University of the East and Unii?ersity of Sto. Tomas. The surplus of physicians and the shortage of dentists do not appear to be severe. However, the continued and expanding number of nurses in excess of what is needed is quite disturbing. This observation lends credence to the popular observation that the Philippines today is actually training nurses not for domestic employment but for the market abroad, On the issue of productivity of health manpower, it has been found out that consumers find it difficult to evaluate medical services. Thus, physicians are said to control demand and patients are simply passive inputs into the production of their own health. Another argument, however, contends that the consumer plays a central role since he decides on the purchase of intermediary products (physician and hospital services, and drugs) and combines these with other inputs in the production of health. Another issue is whether to consider health output as health outcome. In practice, this is difficult

can indicate an artificial increase in need to reorient training to highlight produclivity. Intermediate output varicommunity-based practice. Relatedly, ables also represent a highlyheterogethere is also a need to upgrade the neous mix of services and hence quality of graduates especially from complicate the analysis of aggregate medical schools. The decline productivity of the health sector or of observed in their performances in the its components, board examination reflects the The third issue concerns analyzdeteriorating quality of either the ing the quality of health manpower students admitted in medical schools productivity. It has often been assumed or the educa tion they get in these schools. that price of health care could indicate Evaluation of these schools, especially quality in health service.F or example, the new ones and those located in a high-priced medical care must be of various regions of the country, should higher quality. Unfortunately, the lack be made on a regular basis. A more of adequate competitive structure in stringent standard imposed on these the health sector makes this assumpschools is also in line with the decision tion hard to maintain. Many health to temporarily stop the establishment services are priced at cost rather than of more medical schools in other parts their relative values tOpatients; profitof the country. able services are frequently overpriced The increase in enrolment in to cross-subsidize unprofitable ones. nursing schools hinges on the expand: For these reasons, price may not be a ingjob market in the United States and good quality and productivity -the Middle East. To attract more nurses indicator in health care. to the domestic workforce, the incentive scheme especially in the POLICY DIRECTIONS TO government sector should be upgraded, UPGRADE HEALTH MANPOWER and the requirement to work in the government before they can be From these preceding obser-allowed to work abroad should be vations, the study points to some very strictly implemented. With these critical suggestions to improve the measures, the need for nurses supply, distribution and productivity especially in the rural areas will be

because a vast array of nonmedical inputslikehousing, nutrition, personal hygiene, emotional state and environmental sanitation affect the health level. The alternative approach is to focus on medical services as an intermediaryinputandconstructsome index on the volume of services rendered per period. The assumption here is that increased quantities of health services improve health. In the nonhospital setting, physician visit is a

of health manpower in the country, A more serious effort to solve the maldistribution problem should be instituted. Since the dispersal of medical schools and training facilities did not improve the distribution of health personnel, a more potent policy is to upgrade the incentive scheme for those who may be willing to practice in poor, underserved and sparsely populated areas. A rural post salary differential or additional

adequately met. The government should continue to give more responsibility to midwives especially in rural areas where the delivery of health care is insufficient. What is needed, however, is to continue to upgrade the midwives' skills and to improve their pay and other benefits. Finally, a further study on the productivity of health manpower which has been found to be a key element in the current rise of medical costs is

convenient indicator of output in the hospital setting, patient

while days,

allowances can be offered to those in government. For private practitioners,

needed. Some of the questions which should be considered are the follow-

services, treatment of an illness episode and composite units are used. There are, however, limitations in the use of this approach because each variablehasdifferentimplications and

tax deductions can be considered, The Senate bill proposing a Magna Carta for health workers is a good step towards distributing manpower, The kind of training or

ing:Aretheincreasesincostsjustified by increases in health outcomes? Is there a wider access to medical care by the people today? Is the delivery of medical care more efficient with the

provides different effects and incentires for behavior. For example, reimbursement made on the basis of patient visits rather than illness episodes can result to "fractionation" which

orientation in medical schools which is clinic-based and curative in nature has influenced the preference by physicians and dentists to practice in I_ighly urbanized areas. Therefore, there is a

use of modern technology? A comprehensive system of collecting and monitoring data to construct productivity indices would be useful in this area. ZI

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DOH-PIDS Tie-up Eyes an Expanded Health Care Financing