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Vol.Xl No.5

September-October1993

ISSN 0115-9097 I

/Owninga HouseintheMetropolis:' Lands,Incomes, MobilityandHousing: 6Health Brings TheCaseof MetroManila* Econom=c Growth 8Talking Issues Out and Sharing the Bounty

AlistairC. Blunt

9Export Finance Paves the Way to NIChood 2000

ThePresentSituation

Furthermore, over 40percent of urban households (2.35 million) have In 1990, 48.6 percent of the inadequate water supplyand a similar population lived in areas classified as number also lack adequate sani tation urban. In terms of households, the facilities. Discounting those relocated figure was 49.1 percent. In 1998, under RA 7279, this will still leave assuming similarhousehold sizesand a steady increase in population at the samerateasinthepreviousdecadein

almost

eachofthemajorsub-groupings(Box 1), the proportion of households in these urban areas will make up 50.4

households with 'vulnerable' tenurial arrangements, approximately 171,000 of which will be subject to demolition

percent of the total. According to the Census of Population and Housing, approximately 1.8 million urban

and relocation. Access to water and sanitation facilitiesismuchbetter. Only about 18 percent of the households do

households

not have safe water and sanitation

have

tenurial

1.9 million NCR

has

636,000

facilities.

Philippine Women's University (PWU)

making the households highly vulnerable _toremovalordemolition. TheHousingand Urban Development

1991 household survey findings which found that 32.4 percent of the households can be considered to have

Coordinating

vulnerable

tenure under

the UrbanDevelopment and Housing Act

(RA

7279)

at

0.42

Fourteen not have

figures

are,close

to the

tenurial arrangements.

percent of the households do access to clean water while 23

percent donothave adequate sanitation,

million. IIIIIIIIIml

are hard on the pockets. Present salaries are simply not enough to buy a house. Alistair C. Blunt, Chief Technical hdviser for a United Nations Development Programme (UNDP) projecton housing, presented during a Pulong Saliksikan the highlights of a studywhichheco-authoredwithProfessorPaul St,_ssman_ofMichiganStateUniversity. Their study, which isdue to appe_ ina forthcoming Urban Studie_journal issue, points to the poor land distribution as the main culprit. Meanwhile, thisyear'stopicforthe World Developnuent Reportis"lnvesting in Heal th." Khis was presented during a Seminar-Discussion held on August 30 at the Manila Hotel. The main points raised during such discussion, i.e., the relationship between health, policy and economicdevelopmentaswellasthecurrentpolities and programs of the Philippine Department of Health are hereby discussed. Still on development, one way to attain. NIChoodbytheyear2000istoaddresstheissue ofmakingcreditfacilitiesandguaranteeinstitutions available to the marginalized exporters. A recent Pulong-Saliksikantackledthe secrets of success of the so-called high

(37.2%)

theylive. This might be considered as

Council (HUDCC)

Having a house thatone can callhisown remains tobeelusiveformost Filipinos. Even the lowest-cost, mass-based housing projects

such households,

arrangementsoverthelandonwhich

estimates those without legal whoare notpresentlyprotected

These

___¢_;_;_;_;_;_;_ iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii

_Topage2 Ill

III I I II I

performing Asian economies (HPAEs). These, and more, when you read on. II III

I III

II

•


DRNSeptember-Oct0ber1993

Box 1

Estimates of Housing Need from May 1993-May 1998 Total

MajorUrbanSub-Groupings Rural NCF/ LargeCiffes Ofhe¢Urban .a.raas

Lands,Incomes... (From page 1) 1990 Population GrowthRate_

60,559 2.33%

7,906 2.92%

4,043 3.12%

17,491 2.44%

31,119 2.01%

households without internal piped water supply and water sealed toilet.

1993 1998

64,891 72,811

8,619 9,953

4,433 5,169

18,803 21,212

33,036 36,477

Based on the Census figures, the average annual need for new houses to accommodate the growth of urban households will be 171,000 new units.

AverageHousehold Size2(Actual) 5.31 1990 Households 11,407

5.04 1,570

5.29 764

5.35 3,269

5.36 5,804

Failure to provide for this need will lead to more households entering the 'vulnerable' category described. It can be said that the performance during the last year of the Aquino administration

1993 1998

1,710 1,975

838 977

3,515 3,965

6,163 6,805

13.8%

6.7%

28.7%

50.9%

14.4%

7.1%

28.9%

49.6%

Individual access is even lower, with approximately 33 percent of the

12,224 13,722

Distribution of Households

is in line with this need on the assumption that its efforts are focused on the lowest 50 percent of the households. However, the government's efforts are not solely

1993 Distribution of Households 1998

concerned with the demand for new housing units to meet urban growth. It is also concerned with relocating those

HouseholdGrowth 1993-98

1,498

265

139

450

642

identified under RA 7279 as well as assisting the residents with "vulnerable'

Homeles_ Relocation

7

2

1

3

1

tenurial arrangements to legalize their tenure through the CMP. This concern also ignores any effort to decongest housing units which contain more than one household.

(RA 7279)' D0ubled-up Households_ Upgrading (On-site)'

422

171

75

176

444

161

32

134

117

1,355

291

178

886

(2,763)

Running After Time Bearing all these needs in mind, the past efforts are clearly inadequate. Based on the national urban requirements for 'upgrading '2 and

NCR, ratvofothercha_eredcities(forflu;otheruCoan areas). Isrgecitics(withpopulationsofmorethan200,000)andthegmwth The growth for the rural areas is based on the balance of the national growth l¢_,sthe three urben cet_gofies, projections assumethst growth rates will remain steady from 1990.

relocation,

_en

and

on

the

present

i.

Population growth rites are based on the Census of Population and Housing for 1980 to 1990 for the nation,

2. urban areas isThehouseh_ldsizeisbased_the_99_Cens_sf_r_l_ti_andH_using.Theh_useh_ldsize_fa_the_ 5.34. However, as evidence suggests that the household size of the larger cities is smaller than the smaller areas, the average household size of the other areas was incrcasaed

to 5.35 which brought down the average

programmed 40,000 household beneficiaries annually, the programs will need to run for more than 40 years

householdsizeoflargeciticstoS.29, Itisessumcdthstthesizesofthehouseholdsforeachoftheca_tcgork_donotchenge from 1990 to 1998,

to accommodate all those presently needing relocation or improved tenure!

4.

All these assume that government's efforts are not aimed at those with incomes above the 50th percentile because they can be completely satisfied by the formal

The

3.

H_mel_s_gure_refe_toth_se_iterallyh_meless_suchasth_seslec_ing_nsidewa_ks_rin_a_ks_r_ushcarta

_d have no other home, [Census figures collected by the Department 1990].

of Social Welfare and Development

0DSWD),

R©_cetiunn_`_arebas_d_th_crit_ria_rovidnd_ytheUr_anD_vel_mentendH_usin_A_rUDHA

(RA 7279) based un estimstes. The p'mpoaion used here is the same as the une used in the same Draft National Shelter Repoa. More detailed figures should be svsilable once the cities and urban municipalities have carded o ,,t the inventory of those households living in hazardous or other areas required for government pmje_;. 5. Thod_ubl__uph_useh__d_gureispmvidedbytheCPH_99__Thenumberofh_useh_ldssha_ngwith_th_r houschelds are" Nationsl Cspital Region (NCR), 9.4%; large cities and other urban areas, 3,8%; and mml awa_, 1.9%. 6. Based on those households who live on land over which they or the house owner has no sag:tzretenure. For thiscal_ul_tiun_variabl_stendafdis_pplied_F_rth_NCR_the_vu_nembl_h_usch_dsinclud_th_sewhoan_livin_un rentedland_landwhi_hiI_c_cupiednmt_frecwith_utthecousent_fthe_wnef_Fo_tba_aqIe¢itiesand_theruzben ,r_, sameannts, groups included withallhalf of the living land t_at*fme with the owner. For thethemrei the sre figure includes those whohouseholds live on land rentonfree even with the _t the comumt of the ofowner. The

private sector. However, evidence from

underlying tenure statm_of those who rent their hous_ are at,started to be the seme se umtme matus of thrt© who own their dwelling. The households zabject to relocation have been deducted from the total to avoid double counting. The figure

the survey carried outby PWU suggests that for the National Capital Region

forthemrelareahasnosimilar deduction astbaUDHAdoesnotp¢l_ain tomrelaWlS.


DEVELOPMENTRESEARCHNEWS

3

September- October 1993

Table 1 Income of Occupants and Prices of Housing by the Type of Tenure in Metropolitan Manila, 1991 Monthly income ($) Number

Mean

Std. Error

Price of House and Lot ($) Median

Mean

(Std.deviation)

1. Clearowners ofhouseandlot

971

407.3

2. Renters ol housing unitandlot

1,186

287.6

3.Rent-lree occupants

299

224.6

4.Irregular owners

547

225.3

a. Rentlandonly

130

236.8

b. Rent-lree land

174

241.1

c.Regularized

84

255.7

d.Squatting

139

174.5

e.Others

20

238.8

3,003

309

5.Totalsampb

12.3 (384.3) 5.9 (2O2.8)

Std. Error

Median

(Std. deviation)

296.3

20,882.7

248.1

10,351.9

166.7

9,926.7

7.4 (172.1) 15.1 (1712) 13.6 (180.2) 20.1 (1842) 122 (143.4) 40.3 (181.9)

181.5

8,0062

185.2

10,873.2

1852

9,804.9

206.5

6,223.4

111.1

3,593.9

190.4

10,464.5

52 (280)

237

13,313.6

1,196.8 (37,126.6) 383.3 (13,168.7) 676.5 (11,593.7) 565 (13,034.8) 1,898.8 (21,593.8) 7902 (10,403.4) 742.7 (6,330.6) 390.5 (4,565.4) 1,917.4 (8,646.3)

12,963

451.5 (23,954)

7,407.4

6296.35,925.9 5,000 6,481.5 7,407.4 4,814.8 2,333.3 5,555.6

Note: Pesoswe_ convertedtoUS dollarswith the exchangerate of I>27,,,$I. Source: Surveyof 3,003householdsof MetropolitanMan/l=,carried out by a team frclmthe PhilippineWomen',=Un/veraity (PWU), May 14 - July7,1991.

(NCR), case.

at least, this may not be the

16.4percentfor50citiesincludedinthe World Bank/United Nations Centre for Human Settlements (UNCHS or

reached P15,000 per square meter (Table 2).

Comparing the price of dwellings with income, Table I shows that the market value of housing occupied by clear ownersis not unusual, CiearownershavedweUingsaveraging $20,900 (median $13,000) which amounts to 4.3 (median 3.6) times their

Habitat) Housing Indicators Program.

However, thereisevidencethat a high premium is paid for land developed for housing. Raw agricultural land in the outskirts of the NCR is approximately P60 per square meter, lf zoned for urban use, theprice rises to 2.5-3 times. The developed land

annual incomes ($4,888 or $407.3 monthly). This compares with 4.1 for an international sample of 15 large or primate cities in the same number of different countries. This international comparison also holds up when the percentage of income spent by those who rent is analyzed. The mean percentage of income spent on renting was 15.5 percent for Metro Manila and

suggested by Orville Grimes in the price is found to be 5.3-6.7 times as 1970s was that 100 square meters of expensive as the zoned land. This land land will cost asmuch as the GNP per developmentmultipliercompareswith capita _. In 1990, the price of a new site the findings of the Housing Indicators in the outskirts of Manila (at Pl000/_er Program suwey in 45 countries which square meter) wasS.2 the national GNP "_ suggested a horm of 4.4'. per capita or 3.65 the Metro Manila grosscityproductperperson.Thisland _"Topa_4 price compares with prices in the more exclusiveareasofPasigorMakati which

Our Monoy'sWodh Thehouseownerpaysnotonly for the structure but for the land as well A common international norm


DEVELOPMENTRE_EARCH NEWS

lands, Incomes... (From page 3)

Over-Priced

l_ond

Regular housing produced by the formal private sector is not easily affordable to those below the median income.WithamedianincomeofP6,700 and the lowest cost mass-produced housing unit available in themarketof P250,000, the cost is 3.1 times annual income. This is just about affordable using finance packages presently available which work on a 30 to 40 times monthly income multiplier. In Bangkok, this ratio is 1.7 times the annual income. Commercially constructed houses are affordable to households in the 30th percentile income group. Mobility is much lower than might be expected. While mobility is culturally biased, data from six other Southeast Asian countries included in the Housing Indicators Program showed a mobility of 13.3 percent

4

Sc )tember- October 1993

compared with an average of about six percent for Metro Manila s. This means that during an average life span of 70 years, a person is likely to move about four times. Lower mobility rates were only found in countries where interference by the State in housing distribution, such as in the Eastern European countries surveyed before theendofcommunism, hasbeengreat _. Interestingly, the PWU survey reveals that the most frequent reason for movingwasnot'toownahouse'but'to pay less' (55.3 .percent of all respondents). Only 15.3 percent gave the opportunity for house ownership as the primary reason. This suggests a low level of expectation that house ownership can be afforded, Escalating

Land Prices

The relatively high price of the lowest costmassproduced commercial dwelling unit can be attributed to a numberoffactorssuchasmaterialcost, labor cost and the inefficiency of the construction industry, among others, However, the evidence suggests that these do not apply in the Philippines.

The premium on skilled construction workers is only higher by 40 to 60 percent on the unskilled worker. Housing cost of $100 to $200 per square meter (low to mid cost housing) is built faster in Manila than in six other East Asian capitalsT which suggests that the construction industryisnotinefficient. The cost of some building materials have recently risen sharply due to the prospect of a total commercial logging ban. However, the survey was carried out well before that period. The main problem is the price of land. The PWU survey results suggest that land costs make up on the average 50 percent of the total cost of thehouse.InsomeareassuchasMakati, it reaches as high as 62.5 percent. In nine other middle income countries, the ratioisonethirdthetotalcostS.The reason for this could be the problem of supply, specifically, the real physical shortage of suitable land. However, unpublished figures from a 1986 mappingexerciseidentified49.5square kilometersofopenlandand54.tsquare kilometers of land still in agricultural use 9. In addition, there are large areas

Table 2 Ratios of Housing Prices to Incomes of Occupants by Type of Tenure in Metropolitan Manila, 1991 1. Clearownersof houseand lot

32.33

4.27

3.65

5.13

2. Rentersof housingunit and lot

39.49

3.

2.11

3.54

3. Rent-treeoccupants

9.96

3.68

2.96

4.61

4. Irregularowners

18.22

2.96

2.3

3.52

a. Rent land only

4.33

3.83

2.92

4.27

b. Rent-freeland

5.79

3.39

3.33

4.20

c. Regularized

2.80

2.03

! .94

2.65

d. Squatting

4.63

1.72

1.75

2.22

0.21 (6:4O) 0.13 (4.56) 0.33 (5.67) 0.2 (4.S0) 0.50 (5.14) 0.39 (3.30) 0.39 (3.30) 0.22

3.37 2.22 3.03 2.22 2.98 2.56 1.75 1.34

(2g) e. Others

0.67

3.65

2.43

100

3.59

2.60

4.68

0.93 (4.21)

5. Totalsample

2.64 ,

Source: Storeyof3,000households atMetroooitan Manilacarded outbya teamfromtheRlll_plneWomen's Unlvmky,May14-July 7, 1991. wl

i

..

,,

i.

,=,11i

i


DEVEL()PMENTRESEARCHNEWS

of partially developed subdivision properties still available. The same unpublished source suggests that 65 percent of all land use in the NCR is residential. However, if the average lot size identified in the PWU survey is compared and if circulation and open space is allowed, the total area developed for housing should be approximately half the area classified for residential purposes in the same unpublished survey. This suggests that a very large proportion of this area remains vacant, being used either as an investment or inheritance for future off-spring.

Therefore,

the supply crisis

is not one of physical shortage but the failure of the delivery system to properly distribute land. 1°

Se Hember- October 1993

Box 2 Permit Delay, Land Conversion Multiplierand Land Development Multiplier A comparisonis made of the relationshipbetween the "permitdelay" def'medas the median length in months to get approvals, permits and titles for a new medium-sized residentialsubdivision in an areawhere residential development is permitted, and the "land conversionmultiplier"(the ratio of theprice per squaremeter of agriculturalzoned land to residentia_z__ed_and_ntheurbanfringe)andthe___anddeve__pmentmu_tip_ier"(incr_ase in price of undeveloped residential land to developed land) and the composite of these tw0. ¢/_

P_fmitOatay

Land Omvorsion Land Oevolopm_t Multiplier - Idultiplier

Composite Idultiplier

Manila Bangkok

36 11

2.2 1.8

6.7 2.6

14.74 4.68

Kuala Lumput Singapore Jakarta Tokyo

18 2 28 8

5.5 6.0

4.3 1.3 2.2 2.0

23.65 7.80

10.4

20.80

Source: Housing Indicators Program, 1993.

A Good Investment

Potential Note: There is a correlation between the "permit delay" and the "land development multiplier," but not the "land conversion multiplier" which is a better indicator of real

Anumberofreasonshavebeen given tO explain the supply shortage: from the cumbersome bureaucracy (Box 2) to the cultural link between people and the land. However, while these may be contributory, it is also clear from the analysis that land is widely used asa safe investment. The investment potential for land as a speculative commodity has greatly contributed toland price inflation. Land will continue to play this role while the cost of holding land including actual costs and loss of potential income can more than be made up by the capital gains achieved when it is ultimately soldorismortgaged.Itisbelievedthat land price inflation can best be brought down by an efficiently administered land tax."

supply shortage. A comparison of the effective real property tax rate in countries with similarGNPpercapitalikeWashington, Paris and Tokyo, shows that the price of l00 square meters ofland in Tokyo is in a ratio of 12.5 the GNP per capita, whileinParisitis0.6andinWashington, DC, a little over 0.3. The effective propertytaxrateis0.4percentinTokyo and4.0percentinParisandl.3percent in Washington?3These figures indicate the relationship between effective property tax and land prices.

Efforts to impose suitable and efficient land tax met with little success in the Philippines. The idle land tax, now five percent, hasbeenrarelyifever imposed.RealPropertyTax(RPT) rates are lowest for residential land, being based on 20 percent of assessed market values which should all have been reassessed within two years of the effectivity of the Local Government

started this process. According to U.P. School of Economics' Dr. Edita Tan, thereisnostandardsystemforassessing the market value. Instead, "the most important obstacle to effective implementation of the RPT is the caseto-case method of valuation, which makes it physically impossible for local governments to achieve a fair and accuratevaluation.Themethodisprone to corruption..(and) the problem, combined with power politics at the local level, works against the implementation of the RPT. ''2 Consequenfly, because of the system used and the time delay in the applicationof the assessment, assessed market pricescanlagbehind real market prices by 200 to 600 percent or more. Hence the actual cost of holding land which is assessed at 20 percent its real market price is approximately 0.08 percentthevalueoftheland.Even with the five percent idle land tax, thecostis still only 0.28 percent of the market value. With land prices rising at 20 to 100 percent per year, it is hardly surprising that the tax offers little

Code

disincentive.

people

(RA 7160). However,

very

few

local government units (LGC) have .completed , and many have not yet

However,

weretheactual

market valuesapplicable, the tax would increase to l.4 percent the market value. , nl ,.

On Equal

Footing

Metro Manila households pay a shareof theirincometowardshousing that is not noticeably different from that found in other countries with similar levels of development and economic growth. But, it is clear that the people tend to enjoy less adequate housingthanmightbeexpected.Thisis largely due to the price of land which resultsinanatypicalshareofthecostof housing goinginto that element.Thls, in turn, has hindered the movementof at different

periods

of their

_To page 10 .


:: : ...... :

i :: :

: cussion featured the highlightS: World: Bank-published Report,

ofthe:::developing

countries like the Philippines,

: World Bank Senior Economist : : ......: ........ : ii I:and:WDR:1993 Team Member Robert will enable households to improve their : protection againstabuseshould always i Hecht:presented the three-pronged:il own health. Second, redirect govern' be upheld. ii approach to government policies for:: ment spending to more cost-effective improving health. On the Philippine programs. Thlrd, promote greater diThere have _n strong arguside;: Health Undersecretary and Chief versity and competition in the financmentsto increase total health spending of Staff jaime Galvez-Tan talked about: ing and delivery of health services, as a percentage of GNP. In the Philip-

:i

the issues and current policies Invited:ill: of the . health programin the country. .......: to comment on theReport were formeriiiiii: Thei:goVernmentlcan help Health: Undersecretary: and Chief by: pursuing economic staffMari0Taguiwalowhoiscurrently: i growth policies that will benefit the i i Project Director of the Health Policy: ii poor. Investing in basic education, esDevelopment Program, and Dr. Orville pecially for girls, has a very substantial : :i i i Solon, Associate Professor at the Uni, i impact on health, Likewise, the rights: .....versity: of: the Philippines, School of and status of wOmen through political

pines, however, question is more of allocation. How the much is allocated to promotive, preventive and curative care? i :: _revei._iiv_ Vi_:.. G_:_<:_iv_i ..... ......... ........ : i : Spending for preventive care does not always mean cost-effectiveness. For instance, environmental con-

: : RepresentativeOheneO.Nyaninintro:duCed theguest speaker for the WDR 1993i::Dr; Ponciano S. Intal, Jr:, PIDS

.......

President,: welcomed: the participants l : and introduced the guest speaker for the Philippine Health Pr0gram while DriMarioK Lamber re; PIDS Vice,Presi -I dent_ served as themod erat orandg the closi ng statement.

: : ...... i ......... i i:: : .... :i: ::i i i : ::.........

ave ......

i nomic development. In essence, :the :: :Report: claims tha t although there have : beengreat::.advances in healthworld_ : wide;: the fact remains that developing:i: countries_especially thepoor,-continue i:i to::suffer::a heavy:burden 0f disease, much of which:can be inexpensively iI ipreVented:or:cured;: Hence:, the:.Report :: :: ..... advocatesa three-pronged approach: to :: WDR'93 Team Member Robert Hecht (third from left) clarifies the issues on health movernment ooliCies in developinl_ as World Bank Deputy Resident Representative Obene O- Nyanin; DOH Undersecretary : countries for i'm,_rovin_Galvez,Tan; PIDS ......... President Ponciano S. Intal, Jr.; UPSE's Dr. Orville Solon; and 1" b health " I:irst. _ Jaime .... .....: .roster _ .... ............. envlronmem wrucn Health Develovment (HPDP) Prolect Director Mano Tagulwalo, hsten. an economic ...... Pohcv ................ . .....: Prozram o

i:


DEVELOPMENTRESEARCHNEWS

Se3tember- October 1993

trol of dengue is preventive but it is not cost-effective. On the other hand, drug

BOX 1

BenefitsandCostsof HealthInterventions

therapy for tuberculosis is curativebut it is cost-effective (Box 1). Cost-effectiveness depends

on the interplay

of

Ir,c_e.s_in DALYs flogscale)

many factors

100 _

Hecht identified the cost-effecfive essential services as immunization

_ 10 _

"_" x,,,#,,_ " _

with vitamin supplement; health pro-

i_

marion and education programs on nutrition, health and family planning;

_ \ ._

.r=,,,o. pre. e.ss., .oo, a.yon, 0_

tion; and vigorous AIDS prevention program. On the other hand, the clinical package includes drug therapy for

0.0_

tuberculosis; management of child'sillnesses including malaria and controlofalcoholandtobaccoconsumpschistosomiasis;pre-natal and delivery care; reproductive health needs of women; planning services and inferma tion; and iTeatment of sexually-trans-

0.001

mired

diseases

(STDs).

Diversify and Compete The government can promote diversity and competition in the provision of health services by adopting policies that encourage social or private insurance for clinical services. Both public and private suppliers should be encouraged to deliver clinical services, Domestic suppliers should compete

_

Chemotherapy fortuberculosis _, ..... _

_

_

.

%..

_

VitaminA

x._

_.

"

supple_nen!ation

".':'.1 ,,...._l/_Y ".b "_

x_

- 4, G_=t_, r

_ 0+0not____ele_mi_ _0,0o0 1,000

e___$111iiii _,_ w0

co_t per intervention

_

10

or per intervention-year

1 (dollars,

010

_ YI

log scale)

Note: DALY (disability-adjusted life year). Interventions are specific activities intended to reduce disease risks, treat illness, or pallia te the consequences of disease and disability; anintervention-yearisanintervenfionrepeated throughout theyearrather than provided only once. Source: World Development Report 1993, Figure 3,2, page 62.

with their foreign counterparts. Infermation on provider performance, essential equipment and drugs, effectiveness of intervention and on accreditalion status of institutions

ing equityin health. In partnership with the people, the DOH will aim to guarantee quality of, equityin, an d access to basic health services.

and providers should always be made available to the consumers,

The 10 policy statements of the DOH, according to Galvez-Tan, reflect the equity thrust of the DOH (Box 2).

Overall, Hecht stressed the need to formulate well conceived strategies that will serve as the backbone of the policy reform efforts of the government.

The DOH's focus on equity in health has resulted in an increasing share of government expenditures for preventive and promotive health, in 1992, P600,000 had been allocated to the anti-smoking drive, in 1993, the amount rose to P11 million. In 1992, P600,O00 went to preventive ,cardiology. The following year, the amount was increasedto P76 million. In 1992, P34 million w,_sspent on the immunization program. In 1993, this amount rose to P272 million. In 1992, P164

Box 2: The 10 Ps (The10 PolicyStatements oftheDepartment of Health)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

_

Primary health care Preventiveand promotivehealthcare Peopleempowermentand participation Populationmanagement Peripheralbias Philippinemedicine Partnershipwith NGOs,POs, LGUs,privatesector Pesos for health Peace-building Positioningfor performance

Equity in Heollh _, On the Philippine government side, GalvezTan underscored the importancenotonlyofinvestinginhealthbutinpromot-

_"

To page 12


DEVELOPMENTRESEARCHNEWS

September- October 1993

High PerformingAsian Economies:

TalkingIssuesOutandSharingtheBounty accompanied by improved income distribution, goes one of the economic credos oftheWorld and former visitingthat many have exhorted time and again. research fellowBank of the PIDS, reiterated O

n 13 August 1993, Dr. Jose Edgardo Campos, an economistatthePolicyResearchDepartment

Growth

the advice during the Pulong-Saliksikan sa PIDS as he took a look at the growth miracles attained by High Performing Asian Economies (HPAEs) in recent decades,

Convincing

the Elites andNon-Elites

••••••••••••••••••••• • •• What

tiently make sacrifices during the initial stages of growth before benefits will finally trickle down to them. The HPAEs' Lessons TheHPAEshadlonginstituted certain mechanisms to coordinate the actions and expectations of both the elite and the non-elite. Communication, thus, is their key factor.

• _

eration

Campos cited the role of delibcouncils--- consultative com-

• •

Decisionsmadewithinthecoundlmust be based on some rule of consensus; (3)

has not been ==fully appreciated about -= mitteeswithrepresentativesfromgovernment, labor, private sector, academe 1m these countries' perform- -" andthepress--inthegrowthofHPAEs. • ante is that their growth •• • has been accompanied by • To be effective as a coordina: significant, evendramati¢, • tionmechanism, a council must ideally • embody four important features: (1) It : improvements in poverty : must include as member all the impor_m reduction and income • tantplayersinanindustryorsector;(2)

TheAsionMirocle A cursory look at the record of the East Asian economies-the first tier NICs such as japan, Taiwan, South Korea, HongkongandSingaporeaswell as the second tier NICs such as Thailand, Malaysia and Indonesia---shows that starting 1965, the NICs already achieved rosy growth.

" •

By the 1980s, the HPAEs, including Thailand, Malaysia and Indonesia, fared better than other countries in terms of average GDP growth rates and average gini coefficient (a measure of income distribution),

distribution.

• [] • • w• • • • • • • • • • • • • • • • • •

Toward these ends, government has to grapple over the problem of how to solicit the cooperation of the elites and the non-elites. That is, (1) how private sector is to be induced to generate growth-promoting activities; and (2) how the benefits generated are tobe shared widely and not limited to monopolistic structures only. These requireconvincingtheelitetoinveston a long-term basis, and the non-elite, to understand that they will have to pa-

What has not been fully appredated about these countries" performance is that their growth has been accompanied by significant, even dramatic, improvements in poverty reduction and income distribution. Their stories suggest that growth may not be (politically) sustainableunlessdistributive issues are addressed, i

be

Though policies to promote growth are generally well known, they tend to be difficult to initiate or sustain over time. Growth creates uncertainties on two fronts: among the elites, over the future of their wealth; among the non-elites, over the recovery from their plight as low wage earners,

Shared growth of these I-IPAEs, according to Campos, derived part of its strength from the coordinated work of each nation's key players. He cited two mechanisms that will coordinate thework toward growth and equal income distribution. These are: (1) cammunication channels called deliberation councils and (2) wealth-sharing schemes.

i in

should

l

Government representatives must be competent and relatively incorruptible and possess both the authority and the instruments with Which to bargain; and (4) The policies recommended by the council must be adopted by the government with no major amendments. This council differs from the typical consultative coundls in other countries because the former's representatives have to be individuals in authority who actually possess the instruments to deliver what they say. _" To page 11


i

abound. Butaretheyavailabletothose: : :: inneed? Only the large exporters who : :: : can provide:physical collateral have::: access to financing. A good credit track

:: :: : :

: :

_: :

_:

::

......

: i _

I_,t !

....

::

.: i

:

: :

..... :

:

: : : :

....

In line with: government efforts toward attain, :: :_ :--_:: :-- _ ...... have:that :track record if it were .or :::lng NIChood bythe year 2000, policymakers have : : given:accesst째 f째rmal credit* ..... : targetted an ambitious annual export growth of 15 : :percent:,: Without::adequate access to financing, this ::::::::::: ::_sisa fact thata largenumber : : target willbe quite hard if not impossible to achieve. recordls also essential in being able to: :: securecredit_: Ironically, a firm cannot:

: :of:small and::medium-sized to deal:with:_ ::

exporters,

exporters, have :

: ::: : :

:: .....

:

: :

: ::_! ....

:

......

.....: :

:

:

::

:

:: ::implemented to:put the:marginalized tion thr0u consenSUs-building and :::: : ::AS:a:result, small and medium : exporters:at par with their counter-advocacy. . :i:: exporters depend on self-financing and::i : parts: in terms of credit at in terna tion' : .... .... informal sector loans which limit the : ally-c0mpetitive rates: : ........ii Astudyteamwassetupjointly capacity to grow. :They tend:to accept i by Andersen Consulting, thePolicyand limited export Orders that willlead to :i i::: ::iCommiSsionedbytheConfed _ Development FoundatiOn, Inc.(PDFI), slow export: growth :While our :eration of:::Philippine: Exporters, Inc: andFirstWashingtonAssociates(FWA) i neighborshaVe sustained their:export (PHILEXPORT) through the policy reto assist PHILEXPORT/PITO-P in this i groWthiourexporterscontinuetostrug-search and advocacy component of the area. Members of the study team were i gle in the world markets. : Private Investments and Trade OpporDr. Gilberto Llan'to, Team Leader and iii ...... tunities - Philippines (PITO-P), the PIDS Research Fellow; Dr. Mario ::

pr0jecton:"ImprovingAccess

of Phil,

: gent:action.: :Policy measures andsup: i the export finance Systemof the PhilipportProgra_ to ensure an immediate :pines. It looks into:the: current export ii: andundisrupted flow of: funds to the: finance situation, determines strengths export sector have to be identified and :: and weaknesses, proposes corrective ............. measures, and:initiates implementa-i ...... .....

Lamberte, Economic Specialist and PIDS Vice=President;Mr. Derek Hill, Technical Specialist (foreign); and Mr. Daniel Samson Flores, Technical Specialist (local). : : ....... AresourcepanelwOrkshopwas held on 12 August 1993 at the Westin Philippine Plaza to gather the views and comments from the export sector, the banking community, and government agen= .... cies onthe results of the study. : i

i credit:has

been found

to be an

important issue where expor ters have to be provided credit at internafionally-competi tive rates. I Otherwise, exporters find them, ........ ....... selve_ losing to foreign competi..... .......... ..... ........ tors.. : : CMA SDr.CayetanoW.Paderanga, Jr. stressesapointas(l-r):PIDS Dr:Ponciano S.intal, : i ........ :i : First washington Associates Derek Hill; PHILEX_PORT:President Sergio Ortiz-Luis, Jr.;: : ........ i _.:_,.:i To page 15 1 i PIDS' Dr. Gilberto Mi Llanto; and PiDS':Dr. Mario B: Lamt_rte, listen : Not in picture" Study .... : :--_ : Team mem_r Daniel Samson A; HOres and Project DireCtor Catalino Y, Buktaw ...... ..... .........

....


DEVELOPMENTRESEARCHNEWS

Se )tember- October 1993

Lands,Incomes... (From page 5)

investment available industrial development,

locally

for

goes beyond housing and is important to the future economic development of the country as well as the potential success of the aims of the Local Government Code (LGC).

It is possible to go on speculating as measures are taken to encourage foreign investment including the rights of foreign companies to take long leases on land. However, it is already sufficiently clear that the present land market situation is a real threat to many of the objectives of the present Administration.

family life cycle, thereby resulting in an under-utilizationoftheexistinghousing stock. This is reflected in the low level of mobility, Furthermore, the escalating costoflandhasjustifieddemandsfrom developers that the present ceilings on subsidized loan packages be regularly raised. Likewise, packages designed to assist the urban poor regularize their tenurial arrangements have become ineffective because the poor either requires more than the maximum provided to purchase theland or that theland, evenwiththegenerousinterest subsidies, exceeds the poet's capacity

• • • • • • • • • • • • • • • • • • • • • • • • • • The need for a rea] • • commitment to urban • • is more Jllrl- ••• • land reform • portant than simply en• _ sur[ng that the urban •

to pay. An analysis

of the distribution

of the Unified Home Lending Program (UHLP) loans shows that a very small proportion of the loans are being received by the lowest 30 percent income groups.14This suggests that the effective interest subsidy is being enjoyed more by the middle income than by the poorest groups. In effect, the subsidies provided are subsidizing the market distortion,

poor

have

access

to bet-

• ter housing conditions. • • • • • • • • • • • • • • • • • • • • • •

The recommended action, therefore, is to increase the rate of tax on the speculative investment in real property and to improve the collection rates. However, urbanlandreformgoes beyond simply increasing collection rates. It also involves improved land use planning and a review of the tax rates used for various actual types of land use. Furthermore, any program launched needs to be carefully monitored to ensure sensitive adjustments distortions. to avoid undesirable Note are usually

• • • •

therefore, have a better chance of workingifthepeoplewhomustpaysee thebenefitofdoingso.Astheimrnediate impact of increased land taxes will not only be felt by the land speculator and traditional land holder, but also by many middle class citizens who feel they are often made to pay while seeing little benefit to themselves, it is necessary that they themselves feel the benefits. For the traditional land owning and new investing classes, the advantage is seen in terms of a diminishing number of extra-legal developments. For the middleincome groups, it should be seen in improved levelofbasicservices, parlicularlyroad access, drainage and ultimately, lower cost of land and the opportunity for their children to majoy improved housing.Forthesquatterandtheurban poor, it is the increased opportunity to have a lot of their own and for the government to concentrate the limited resources it has for subsidies on those

This study argues that the main cause of the present distortion is the negligible property tax. The effects of the low level of real property tax and thepoorcollectionperformancearenot only felt in the direct impact it has on the price of land and the other consequences already identified, but also on the availability of financial resources available to local govemments16.ThepotentiMadditional revenue could be used to extend essential infrastructure, in particular local roads which, in their turn would helpfacilitatetheincreaseinthesupply of land going onto the market,

Moreover, the present distortion in the land market has an impactonthewholedomesticeconomy, First, efforts to use the housing sector as a means of stimulating the local

more

tax rates

Land Taxes: The Answer?

One consequence of this will be the growing demand for land accessed informally. This, in its turn, hasfosteredthegrowthofinformalreal estate agents and the squatter syndicates.Thegrowingpowerofthese groups attests to the depth of demand there is for their services,

that increased

further

acceptable

and,

economy are likely to be less effective than they can be because a smaller

Policy Implicolions

who are in greatest

proportionoftheinvestrnentinhousing is spent on the actual constructionY Likewise, the preference for investment in land has possibly been one cause for the low domestic savings rate hence diminishing the potential domestic

The implications for policyare clear. The need for a real commitment tourbanlandreformismoreimportant than simply ensuring that the urban poor have access to better housing conditions. Resolving this problem

Finally, the relationships between supply, demand and other, externalities are not simple. The most productiveanalysisis tolookatabasket offactors, specifically those thatdistort theprice.(Eonsidernotonlytheeffective

III

III

I

I

III

III

II

I

I

III

llll

III

II

I

need.

ii

i iii

ii


DEVELOPMENT RE_;EARCH NEWS

property tax rate, but also the improvement of the legal processing

Se 3tember - October 1993

time, review of local land use plans to ensure they reflect present and future demand for land and the need to look

Makati:PhilippineinstituteforDevelopment Studies (PIDS), 1993. 12. Ibid., page 169. 13. "ÂŁhe Housing Indicators Program: Volume 1" The Report of the Executive Director, United Nations Centre for Human

more closely at the alternative investment opportunities and how these can be made more productive for the mass of potential middle class

Settlements(UNCHSorHabitat).WorldBank, 1993. 14. An analysis of the distribution of theUnifiedHomeLendingProgram(UHLP) loans as of 1991 suggests that while about

There are still other schemes that draw in the elite's participation in actual investment activities.

investors. By monitoring all the factors againstlandprice, moreeffectiveaction canbe taken. Otherwise, thedetrimental

24.5 percent were for P80,000 or less, the total value of these loans made up less than nine percentofthe total loaned. (Analysis ofExhibit

Among the different economic eli tes, Campos suggested that certain performance criteria, such as in the use

effects of the present situation will continue not only to threaten efforts at

5 of Public Lecture given by Housing and Urban Development Coordinating Council (HUDCC) Chairman Teodoro K. Katigha k to theUniversity of thePhilippines on theRecord and Legacy of the Aquino Administration, February 1992. 15. A comparison between the ratio of

of directed up. Korea

investment in housing and the gross city product suggests that the level of investment

On the otherhand, the coopera tion of the non-eli te can be solic-

"Talk presented during a PulongSaliksikansaPIDSonJtme21,1993. Thetalkis hasedonanearlierstudyjointlywrittenbyMr. Alistair Blunt and Professor Paul Strassmann, with the assistance of Raul Thomas.

is more than twice as high in Bangkok than it is in Manila. (Housing Indicators Program, Volume ll: Indicator Tables. World Bank/ UNCHS, 1993). Furthermore, Strassmann claims that in Metro Manila, had the land price been nearer a third of the total house/

ited by first creating

1. This is assumed to vary from area to area but includes all those living on land who rent the land or live on land rent free without the consent of the owner. 2. Upgrading refers to assisting those with 'vulnerable' tenurial arrangements

lot price, an additional P190 billion could theoretically have gone into the construction sector. ("Factors Affecting the Supply and Demand for Housing in the Philippines." National Workshop on Shelter Indicators. Unpublished paper, Manila, May 18, 1993).

redistributing land from traditional

purchase the title to the land on which they live with the assistance of the CMP. 3. Grimes, Orville F., Housing for Low Income Families. Baltimore: John Hopkins University, 1976. 4. World Bank. Housing Indicators Program: Extensive Survey- Preliminary Results. Washington, 5. Ibid. DC, June 1992.

16. Professor Tan cla ires that the real property tax (RPT) contribution to local government revenue fell from 27 percent in the period 1978-1983 to 15 percent in 1990 (Tan 1993).

support

resolving the housing crisis but also the whole economic development of the country as well. o:.

Notes

The Journal of Philippine Devel-

programs formance.

Market." Monograph presented at National LandAccessWorksbop, ManilaMidtownHotel, 28-29 May 1993. ll."Ofallforrnsoftaxation, itisgenerally known thata tax on land has the most desirable effect on equity and efficiency....The tax lowers the capitalized value Of land and therefore discourages wealth holding in this idle form/' From Tan, F__itaA., "Real Property Taxation and Its Potential as a Major Source of Local Revenue" from Emmanuel S. de Digs and

Amongthe papercontributorswillbe: Dr. Arsenio Balisacan Dr. Cynthia Bautista

Dr.RomeoBautista Dr.LedivinaCarifi0 -

Dr.Mercedes Concepcion Dr.Cristina David Dr.EditsTan

given

on the basis

credible

of per-

wealth

The HPAEs mechanisms.

Taiwan, Japan and Korea initiated extensive

land reform

programs

by

landlords to peasants. In exchange for the land, landlords were given shares in state enterprises. The reform was also backed by necessary institutions.

Singapore

i

and Indonesia,

too, encouraged the creation of, and provided seed money to workers' cooperatives as a means to alleviate urban poverty. An example of successful cooperatives is Singapore's NTUCCOMFORTTaxiCooperative, which was created to give members opportunities to purchase and own taxis. Finally,

theBoardofTrusteesof thePhilippine InstituteforDevelopmentStudies(PIDS).

credit, should be drawn and Japan, for example,

shaxing mechanisms. fiavea variety of such

opment (JPD) issues for 1994 will come Outin one volume in honor of Dr. Celia T. Castillo,aninternationally-respected social scientist and a former member of

Cooperation

already have effective directed credit

I

9. Metro Manila Authority Land Use Survey carried out with assistancefrom Japan International Cooperation Agency (JICA).Land 10. Blunt, Alistair C. "The Informal

Associates, Poverty, Growth and the Fiscal Crisis.

Soliciting

Announcement

6.Strassmann,W. Paul. "Housing Market Interventions and Mobility: An International Comparison," UrbanStudiesVol.28,No.5(1991), pp. 759-771. 7. World Bank, June 1992. 8. World Bank, June 1992.

Talking Issues Out... (From page 8)

although

there

are

no strategies for resolving the clear-cut coordination problem, the fact remains thataddressing the problem is critical, especially in the Philippines. After all, reasonable growth rates cannot be sustained under conditions of conflict and uncertainty.

(SADT)


DEVEU)PMENTREIEARCHNEW_

HealthBrings... (.Frompage7)

million went to drugs for tuberculosis, The followingyear, theallocation went up to P209 million. For 1994, the DOH projected an increase to P300 million, The government did not allocate anything from its own coffers to the prevention of diarrhea. All the funds for the prevention of this disease came from foreign sources, in 1993, however, the government allocated P48 million for the prevention of diarrhea (Box 3). Rationale for Government

Action

The access to basic health care is regarded as a human right. And since privately-operated services are inaccessible to the poor, government normally provides for their heal th services. Forinstance, of the people belonging to the bottom 30 percent of the income bracket, 77 percent visited a public facility, 70 percent consulted a government health worker, 81 percent of the women got pre-natal care from government health centers and 81 percent of the children were immunized in government facilities, Problernsrelatedtouncertainty of the health insurance market calls for governmentaction. Large variationsin â&#x20AC;˘ health risks and probability of illnes give rise to these uncertainties. Likewise, problems related to adverse stlection in the health insurance market call for government action. Thosewho tend to be more sick are shut-off from insurance.Governmentinterventionin regulations, mandated socialinsurance or other public finance mechanism can ensure wide coverage, contain cost and achieve equitable yet efficient health financing,

12

awidespreadenjoymentofbetterhealth andnutrition. This canbe done through increased household incomes, better education, peaceandorder, peopleempowermentofthepoorandthewomen, and protected environment, Government spending on healthtoadequatelyaddresstheagenda of the unfinished and emerging health interventionneedsshouldbeimproved, This can be done by increasing public spending as well as improving the managementofpublicexpenditureand investments. Galvez-Tan added that the adoption of the Ten-year Public Investment Plan for the â&#x20AC;˘health sector which the DOH hopes to unravel in the next few months will be a very viable instrument in this task. Atechnological, regulatoryand public finance framework should be established to achieve coherent integration of public health and clinical intervention. Cost-sharing between the government and the households is encouraged as well as the promotion of efficiency in public and private health care services, delivery and production, The scope and coverage of private voluntary and charitable workin the field of health can ease the widespread development and adoption of appropriate instruments in achieving the following: a) adoption of the national health insurance scheme; b) implementationofanessential national health research program; c) reform and rationalization of professionalandfacilityregulation;and d) continued implementation of the national drug policy program, A Three-Fold Strategy

The government should create

The three major intervention points in the Philippine health strategy are also three-fold. First, economic intervention by improving access to economic activities and development as well as addressing the social issues that

the general macroeconomic and intersectoralenvironmentconduciv.eto

cause inequity. A national health insurance should also be develo .pe.dto

The Government's

Role

Se)tember-October 1993

fosterresharingandpersonalresponsibilityforhealthcara, Second, empowerment, by improving access to basic preventive, protective and promotive health care especially those that deal with information, education and cammunication for health. Resources should be mobilized to implement basic health -- immunization, tuberculosis control, safe water, safe motherhood and nutrition. Third, environmental concerns, by improving the livingand working conditions to contain diarrhea and other infections. From the NGOs For his part, Taguiwalo noted thatthe WDRunderemphasizestherole of intersectoral reallocation of public expenditures towards health which is moreimportantthanalltheintrasectoral allocation that is made. In a health sector that utilizes two percent of GNI" and a DOH that utilizes six percent of the total government expenditure, the opportunities for 98 percent of GNP and the opportunities for 94 percent of the general appropriation is simply too large to ignore as against focusing on the meager portions that are allocated to health. Alternative sources of funds for health, he said, may come from the potential peace dividends which will result in the postponement of the modernization of the Armed Forces of the Philippines (AFP) and lesser allocation for Civilian Armed Forces Geographic Units (CAFGUs). On Public health, Taguiwalo pointed out that family planning and nutrition programs have been taken over by the DOH. Unfortunately, the resources for these programs have not followed accordingly. To augment this in theimmediateterm, thereisaneedto redefine the im,estment and public expenditure cer'lings of the DOH to accomodate spending for family planning and nutrition. _" Topage14 ii

i

!


DEVELOPMENT RESEARCH NEWS

13

Se)tember- October1993

Cure for Diarrhea (In Million Pesos)

/

_]" -

Increasing Government Expenditures Box3 forPreventive andPromotive Health

.

20-

10-

11_82

1993

Immunization (In MillionPesos) 300

Drugs for Tuberculosis (In MillionPesos)

/

260,

/

160 I(XI'

........

od

-il ........

1992

Anti-Smoking Drive (In MillionPesos)

10,

o,_

1903

1992

1903

Preventive Cardiology (In MillionPesos)

"

"-

' ...........................

2'7(I ........

e, _'' 40

,

4,

2,

O,e

O,

O: 1992

lg_GI

Z7

0' /-

â&#x20AC;˘ 1(i(12

|9e3

:


DEVEb)PMENTRESEARCH NEWS

HealthBrings... (Frompage12)

The WDR has emphasized the organizational, managementandstructure of public finance to support the health sector. However, the Report has notdweltmuch ondevolution, anissue in which the Philippines has an edge over many other countries,

14

tries usually receive lesser amounts than what was originally disbursed by donor countries. Second, prudentdebt management is worth examining espedally its implications on reallocating the debt payments to health services,

Se_tember - October 1993

or cost-effectiveness in public sector encourage or diminish private sector participation? Will DALYs help carrect imperfections in the private health care markets? These are important considerationsin designingpolicies for health, Solon added.

From Ihe Academe Political Will

On clinical services, he noted the many complex reforms needed because of varied interests among the professionals and government ageno des as well as the lack of consensus among key stakeholders in the allocation of resources. In addition, a forum formakingdedsionsinallocatinghealth inputs should be set up.

For his part, Solon focused on the usefulness of cost-effectiveness ratie as an allocation criteria. For costeffectiveness to be useful, according to Solon, the disability-adjusted life years (DALYs) will have to be computed for everydollarthatisspentondebtreduction, national police, electrical projects and reforestation, among others. In other words, the DALY has to become the numeraire for calculating the intersectoral resource allocation. Obviously, this is going to be very difficult.

Among the issues raised in the open forum were the brain drain of health wol_kers, equityin health rationing specifically the sociopolitical factars that go with it, medicare reforms and healthmaintenanceorganizations (HMOs) regulation, improvement in theeconomicconditionofpublichealth workers, the need for reliable statistics and other data relevant to devolution, reallocation of debt-service payments as well as a portion of taxes that will go to health care.

For Taguiwalo, there are two important items in the agenda for act'ion. First, correction should be made in themisconception thatallintermediate costs that occur between the disbursements made by donor countries, on the one hand, and the exact amount received by developing counbries, on theother, arenothing.Developingcoun-

In developing countries, public and private providers coexist. In caseswherethereareservicesnotbeing offered by private agencies, resource allocation through DALYs may not be thatdifficult. Butwhen thetwoproviders overlap, the overall impact of these two needs to be carefully examined, WillresourceallocationthroughDALY

Finally, former Health Secretary Alfredo R.A. Bengzon encouraged the participants to look at policy at a bigger picture. He noted that much of what is being suggested in the discussions boil down to one agenda - challenging the establishment- which, unfortunately, has not been addressed by the Report. (ADL)


DEVELOPMENT RESEARCH NEWS

ExportFinance.. (Frompage9)

Guaranteeschemesdonothelp the export sector and are ineffective and inadequate. Financinginstruments are traditional. More sophisticated financing ones such as factoring and forfaiting are hard to come by because of lack of credible information system on exporters and on the export market. Though automatically-administered and can provide exporters access to funds at lower than domestic commercial rates, the rediscounting facility of the Central Bank cannot assume exports of internationally-competitive rates on export loans, The Team also noted that monetary and credit policies should be relaxed to ease the pressure on interest rates, 1he Challenge The Study Team recommends that monetary policy be relaxed by accelerating the reduction of the reserve requirementtoalevelcomparablewith thoseofotherASEANcountries(3-7%) within the next two years. A rediscounting facility for exportsattheDevelopmentBankofthe Philippines(DBP) shouldbecreatedby securing external funding at concessional rates so that it can offer rediscounting at internationally-competitive rates. Likewise, a strong and credibleexportcreditguaranteeagency which will provide a risk-reducing mechanism for exports should be created. Specifically, the Philippine Export and Foreign Loan Guarantee Corporation (Philguarantee) should be prioritized in terms.of rehabilitation and strengthening,

15

An information system on exporters especially indirect ones and on foreign markets within PHILEXPORT should be institutionalized to provide hanks and other lending institutions with critical information, Finally, a training and technical assistance facility for the export sector in PHILEXPORT with funding from the private sector, government and donor agencies should be created, A Pockog速 of Reforms Once again, the need for information on exporters and their operations cropped up during the open forum. Banks should handle credit informarion while exporters should be responsible for market researchinformaLion, pricing of goods in the market, distribution system and competitive approaches, Both hanks and guarantee institutions are suggested to agree on a beneficial evaluation criteria so that banks will save time in reevaluating accounts submitted for guarantee. For theirpart, guaranteeinstitutionsshould be less stringent in their evaluation, Meanwhile, the recommendation to transfer the rediscounting facility to the Development Bank of the Philippines (DBP) drew strong reacLions from the participants. Accordingly, such move will result in higher interestrates. To a certain degree, DBP is-still beholden to other banks which helped it develop its facilities. In contrast, the Central Bank exercises a certain degree of moral hold over commercial banks. Moreover, the Central Bank, which is currently handling rediscounting, hasthemoralobligation tobring down rediscounting rate. The DBP should instead concentrate on developmentbankingwhereithasdone very well especially in financing major agribusiness diversification, research and development ventures and highly industrial manufacturing.

September-October1993

Inthe meantime, Philguarantee does not yet have the institutional network, manpower sufficiency and expertise to become a major guarantee institution for all exporters. Hence, it is suggested that Philguarantee limit its scope to exporters of industrial goods, the typical export that guarano tee corporations in the US, from which Philguarantee was patterned, assist. Interestingly, the Guarantee for Small and Medium Enterprises (GFSME) welcomes the proposal to be an alternative credit organization for exporters. On the alternative sources of financing, the banking sector has responded by setting up the BAP Credit Guarantee Corporation. Other sources which can be tapped to provide funding are home mortgage loan development institutions similar to the US, coconutlevy or the Oil Stabilization Fund. Both exporters and importers, indirect beneficiaries of a guarantee agency, should also be financially involved in someway. Inaddition, the experiences of other countries in financing _hould alsobeexamined. Ultimately, thequestion of funding boils down to three factors: source, accessand pricing.What is important is to make sure that the alternative sources for financing do not hurt other programs. In his closing remarks, Dr. Cayetano Paderanga of the Central Monetary Authority (CMA) said that thefocusoftheworkshopjibeswiththe long-term plan of thegovernment. The importance of enhandng global competitiveness and of increasing exports for the country's economic development has always been the goal. While disagreements and adjustment problems are inevitable, the government will always be committed to the longrun sustainable development of the country. This commibment will help pave the way to NIChood by the year 2000. (ADL)


DEVELOPMENT RE: EARCH NEWS

16

September- October

1993

Ph ppn. n.,tute,orOev S,u,e.Iiitiiii Iifi NEDA sa Makati Building 106 Amorsolo Street, Legaspi Village 1229 Makati, Metro Manila, Philippines

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Export Finance Paves Way to NIChood 2000