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Vol. XVI No. 5

September - October 1998

ISSN 0115-9097

The Philippine Economy in the First Quarter Period of the Estrada Administration: Mixed Reviews


ounded by controversies from almost Day 1, the newly-installed Estrada presidency hardly experienced the so-called traditional “100 day-honeymoon” with the media as it hurdled criticisms during its first quarter of “minding the store” of the country. While most of the attacks were directed against political decisions and actions taken by the fledgling administration, other aspects were similarly scrutinized closely. Under strict examination, for instance, especially in light of the financial crisis being experienced in the Asian region, has been the

EDITOR'S NOTES Each year, the third week of September is celebrated by the PIDS as its anniversary week. The week is normally punctuated by a number of activities highlighted by one major symposium. Noted personalities from the academe, government, and private sectors are invited to the symposium to present their individual papers or share their views on a selected topic. For this year, the major event of the week was the conduct of a panel discussion where some notables gave their assessment and review of the economic performance of the fledgling Estrada administration during its first quarter of governance.

set of economic policies and measures espoused by President Estrada’s economic advisers. How has the economy fared so far under the Estrada administration? What is its blueprint for addressing the effects of the regional crisis? What is its economic agenda for a long-term and sustained growth and development? In a panel discussion hosted by the Philippine Institute for Development Studies (PIDS) as part of its 21st founding anniversary activities on September 22, guests from the government, academe, banking community,

media and labor sector had a lively and stimulating discussion trying to answer these questions. Addressing the concerns of economic plans, fiscal issues and financial and monetary policies, Secretary of Socioeconomic Planning and NEDA Director-General Felipe Medalla, Secretary of Finance Edgardo Espiritu and Monetary Board member Vicente Valdepeñas, Jr. gave an account of the administration’s accomplishments during the period while Profes-



How is the new government facing the financial crisis that is rocking the whole Asian region? What is its economic agenda? These and other questions were tackled by Secretary of Socioeconomic Planning and NEDA Director-General Felipe Medalla, Secretary of Finance Edgardo Espiritu, Monetary Board Member Vicente Valdepeñas, Jr., Economics Professor Solita Monsod, newspaper columnist Calixto Chikiamco, labor leader Vladimir Tupaz, and Union Bank President Victor Valdepeñas. The highlights of this discussion are contained in this issue’s feature story.

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Philippine R&D at the Tailend in Global Competitiveness Inter-LGU Cooperation, not Renationalization, is the Answer to Health Service Delivery List of Discussion Papers Following the Freedom Trail Hasta la Vista, PSI! Helping Others Achieve their Goals Staff Outreach Activities



he Philippines is lagging behind its neighboring countries in the area of science and technological research and development. Unless appropriate and immediate action is done to reverse the trend, the country may find more difficulty in snatching a place in the increasingly competitive world, especially in the advent of the new world order of globalization. This conclusion was implied in a research study on the new technological landscape in the Asia-Pacific presented at the Philippine Institute for Development Studies (PIDS) by Dr. Jon Sigurdson, professor of Research Policy at the Stockholm School of Economics. In comparison with the other countries in the Asia-Pacific region, Dr. Sigurdson presented a bleak picture of the Philippines’ research and development (R&D) strategies in the area of science and technology. Most notable is the measly 0.2 percent share of R&D from the total of Philippine expenditure. “With the current financial crisis affecting the region, it is expected that

"A big portion of the Philippine expenditure alloted to R&D actually comes from the government with other smaller portions coming from the business sector, academe and nongovernment entities."

this amount would even go lower since many think that research is expendable and should be the first to go in cases of costcutting measures,” Sigurdson intimated.


A big portion of the Philippine expenditure alloted to R&D actually comes from the government with other smaller portions coming from the business sector, academe and nongovernment entities. This is shown in the shares of these sectors to the country’s total R&D expenditures—60 percent from the government, 21 percent from the business sector, 15 percent from the academe, and 4 percent from nongovernment entities. From the point of view of Sigurdson’s study, this is not a healthy

September - October 1998

Following the Japanese example in R&D efforts in Asia are Korea and Taiwan. Both countries showed considerable and sustained growth in gross expenditures on R&D, from 1.7 to 2.5 percent of their respective gross domestic product (GDP), between 1990 and 1995. Recent developments likewise demonstrate similar moves in countries like Singapore, Malaysia and China. Singapore with its ambition to establish a wired and interactive society has alloted 1.2 percent of its GDP to R&D studies. In Malaysia, Dr.

Philippine R&D at theTailend in Global Competitiveness sign. His data show how R&D in more economically progressive countries has largely become a turf of the business sector than that of the government. Relating the experiences of other countries in Asia-Pacific to the concerns of R&D, Sigurdson illustrated how these countries put emphasis on scientific research and technological development to gain a competitive edge in the fast changing world of globalization. For instance, between 1982 and 1996, Japan’s output in R&D studies surpassed all European countries including France, United Kingdom, and Germany. Thus, Japan has a good reason to claim supremacy, next only to the United States, in technological advancement not only in the Asia-Pacific region but also in the rest of the world. “Although the U.S. has, in recent decades, been the global technological leader, in certain areas [it has been] replaced by Japan,” Sigurdson said.

Sigurdson noted that “it has, during the 1990s, taken a move forward in its position in scientific research but [focused] primarily in industrial research and technological development.” Meanwhile, “China is modifying its R&D structure today with the objective to create a new management system that can integrate R&D for development, production and marketing,” he added. In his recommendation for the Philippines, Sigurdson expressed the need for the private sector to participate more in R&D efforts, especially in priority areas like agriculture, in order to deload the government’s burden on R&D spending. He concluded that the move “entails clearer and more structured alignment of government policies to motivate private sector involvement in less immediately rewarding concerns of R&D.” DRN



Inter-LGU Cooperation, not Renationalization, is the Answer to Health Service Delivery


enationalization of health service delivery is not the answer. This was the consensus among majority of the participants in a recent roundtable discussion held in Cebu City which was jointly sponsored by the Philippine Institute for Development Studies (PIDS), the Department of Health (DOH) Regional Office in Cebu and the Health Policy and Development Staff of the DOH. The participants tackled some of the problems brought about by the devolution to local government units (LGUs) of health care service. Renationalization means returning to the former system of having the national government or the DOH take command and control of the country’s health program, including budget and facilities of local health programs. Devolution, as mandated in the 1991 Local Government Code, effectively transferred the command and control of local health service delivery to the LGUs. However, the path towards devolution has not been totally smooth and some problems have emerged during the process. Such problems have in fact caused some to reflect on going back to the old system. For the speakers and participants in the discussion, however, there’s no turning back. What is needed is “more interLGU cooperation in the cost-sharing of health service delivery,” said Dr.

Orville Solon, Professor at the UP School of Economics and Director of the completed PIDS-DOH Baseline Research on Health Care Financing Reforms Project, to be able to address many of these problems. He added that “renationalization is more like a step backwards and will not help in empowering LGUs and local communities in coming up with their own planning scheme for development, including programs for health care delivery and financing.” Supporting this assessment were the various case examples presented during the discussion which showcased different schemes in raising funds by the LGUs to finance the delivery of health services to their constituents. Vice-Governor Edgardo Teves of Negros Oriental cited the cost-sharing scheme among barangays in the muDr. Lakshmi Legaspi, chief of DOH Region VII's Local Government Monitoring Services, introduces participants to the roundtable discussion on health. Present in the panel are (from left) Dr. Orville Solon, director of the completed PIDS–DOH project; Vice-Governor Edgardo Teves of Negros Oriental; and Dr. Charito Awiten, regional director of DOH-RHO VII.

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nicipality of Valencia, a project which he conceptualized while he was still mayor of the municipality and whose framework is now being experimented among different municipalities and cities in Negros Oriental. Under the Valencia scheme, the municipal government appropriates a portion of its calamity fund savings while the barangays put up their counterpart contributions taken from their Internal Revenue Allotments (IRA). The amount raised constitutes a fund from where qualified beneficiaries may draw a maximum of P2000 per member to defray their medical and hospital care expenses when needed. The first of its kind in the province or even in the country that was initiated by a local government, the program has a certain private hospital designated by the Valencia municipal government as the “official” hospital where members can go and avail of medical care. Another case study presented was a novel scheme called “Peso for Health” program in Guihulngan, Negros Oriental where people’s participation is the key element. As presented by Dr. Fidencio Aurelia, Chief of Guihulngan District Hospital, the program requires a collection of a membership fee for six months from households who wish

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Philippine Economy... From page 1

sor Solita Monsod, newspaper columnist Calixto Chikiamco, labor leader Vladimir Tupaz, and Union Bank President Victor Valdepeñas aired their assessments of the administration’s first quarter performance.

The Accounting: Economic decline but with optimistic indicators

First semester figures provided by Medalla indicate that the economy carried on a downward trend as the country continues to be affected by the Asian currency crisis and the El Niño weather phenomenon. Since the outbreak of the currency crisis in July 1997, the peso has plunged by 65 percent, just a little less than the Thai baht which dropped by 66.7 percent. Inflation remained barely in single-digit at 9.4 percent. Productivity declined, with GNP posting a growth of only 0.6 percent in the first semester of the year and GDP suffering a big blow with the agriculture sector’s negative growth of 11.5 percent in the first quarter—the worst contraction in 31 years. Agricultural growth settled on a negative 7.5 percent mark at the end of the first semester. The rate of unemployment also went up slightly from 8.7 percent last year to 8.9 percent in the first semester of 1998 as more than 1,700 establishments closed shop, forcing a total of 83,000 workers either out of jobs or with less working time. The poverty incidence in the rural areas also rose with 44 percent of residents now below the poverty threshold as opposed to 18.5 percent in the urban areas. On the positive side, exports grew by 18 percent and interest rates, while considered high, have steadily declined since January. The inflation rate is also considered manageable and even as the peso’s rate of depreciation was dras-


tic, it nevertheless did much better compared to the Indonesian rupiah which dropped 358 percent to the dollar. Considering the continuing regional economic crisis, consumer confidence remains strong which Medalla attributes to the Filipinos’ penchant for shopping. Figures show that personal consumption just went down slightly to 4.4 percent during the first semester as compared to 5 percent last year before the currency crisis started. Medalla is optimistic that the economy will achieve modest growth in GNP (1.5 percent in 1998 and 1.4 percent in 1999) and GDP (1 percent in 1998 and 3.5 percent in 1999). These figures will be attained, he said, “if the weather cooperates.”

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balance between reasonable pump priming and macroeconomic stability through judicious budget management. Medalla said that the formula consists of a pro-poor program and at the same time pro-market policies that oppose capital controls and tariff cuts and seek to improve revenue-raising measures. Secretary Espiritu supported this line by saying that the fiscal policy of the administration supports macroeconomic stability by maintaining stable prices and affordable interest rates to create an environment conducive to economic development. Bringing down the budget deficit from P40 billion to P18 billion by next year is also

"...The administration’s “don’t-do-anything-stupid” dictum translates to the policy of maintaining the liberalization program initiated by the Ramos administration, strengthening the banking system and striking a balance between reasonable pump priming and macroeconomic stability through judicious budget management."

Aside from casting its lot on the weather, however, what else is the administration doing? Or not doing?

“Don’t do anything stupid.”

In a nutshell, this is the administration’s response with regard to economic policies, as bared by Medalla. In these trying times, he said, “there are so many calls for magic bullets ...(which may only) fire backwards.” There have been suggestions to follow the Malaysian example of currency controls, do more pump priming and institute protectionist measures. In rejecting these moves, the administration’s “don’t-do-anything-stupid” dictum translates to the policy of maintaining the liberalization program initiated by the Ramos administration, strengthening the banking system and striking a

a major thrust. In fact, he revealed that the government already has a P1.3 billion surplus after only two months in office. The infusion of some $1.7 billion in foreign loans over the next three years is aimed to bolster economic activity and further reduce interest rates by not pressuring the domestic credit market. Negotiations with Japan for project loans amounting to almost $1 billion and another $1 billion pledged by the Overseas Economic Cooperation Fund next year will satisfy the clamor for pump priming as these project loans are earmarked for various infrastructure projects, Espiritu said. Revenue collection and tax programs are being enhanced through better systems and computerization as well as the passage of tax laws.


For his part, Monetary Board member Dr. Vicente Valdepeñas, Jr. stressed the objective of monetary policy which is to keep domestic liquidity at a level that will make it possible for real GDP to grow by one percent this year and keep inflation rate at 9.5 percent. This is in order for the exchange rate to adjust and keep external account deficit to 1.5 percent of GNP and get the net international reserves to $7.8 billion by end-December 1998. As a measure to “make the banks more safe and sound,” the Monetary Board has required them to have a loan loss provision of one percent by October 1 which will be increased by two percent next year. The minimum capital for expanded commercial banks have been raised to P4.5 billion, regular commercial banks to P2 billion, Metro Manila thrift banks to P250 mil-


"One good news was the “cooperative equilibrium” that was achieved between fiscal and monetary authorities that eschewed high interest rates and allowed for the budget deficit as a tool to achieve macroeconomic objectives." is most crucial since it is in the private sector where jobs and new businesses are generated. The exchange rate continues to change and “sink” at the rate of P1 a month over the last 14 months.

The Assessment: A grade of “four”

Conditional—that is the descriptive equivalent of “four” in the University of the Philippines' (UP) grading system that Professor Monsod gave the Estrada administration for its first quarter performance. Using the criterion of the President’s “Erap para sa

Secretary of Finance Edgardo Espiritu discusses the new administration's economic policies along with Monetary Board member Vicente Valdepeñas. Present to give their respective assessments are (background, right) PIDS Vice-President Dr. Mario Lamberte, (foreground, from left) Economics Professor Solita Monsod, newspaper columnist Calixto Chikiamco and labor leader Vladimir Tupaz.

lion, other thrift banks, P40 million, and rural banks, P2 to P5 million depending on the classification of their host communities. Valdepeñas also indicated that net domestic credit has been increasing since the start of the year for the public sector but decreasing for the private sector. This, he said,

September - October 1998

Mahirap” (Erap for the Poor) campaign slogan, Monsod said that, to be fair, there were some good and bad news. One good news was the “cooperative equilibrium” that was achieved between fiscal and monetary authorities that eschewed high interest rates and allowed for the budget deficit as a

tool to achieve macroeconomic objectives. This should slow down contraction in the industrial sector and may even push for slight positive growth in other industries. Monsod also credits the administration for preventing attempts to raise tariffs and institute other requirements for certain imports. However, she regrets the “overreaction” to the Malaysian solution of currency controls as there may be room for imposing controls on volatile capital flows like what Chile did. The third positive move made by the Estrada administration, according to Monsod, was the issuing of a “blow in favor of equity” when Army men and tanks accompanied farmers who occupied the land awarded to them through the Agrarian Reform law. But on to the bad news: Monsod decried the controversial policies adopted by fiscal and monetary authorities to generate revenues. At the same time, she observed that measures to overhaul the Bureau of Internal Revenue (BIR), which is perceived to be incompetent and corrupt, must immediately be put into action since any further delay in the plans and programs being established towards its improvement will only translate to more revenue losses for the government. She also took exception to the remarks of Secretary Medalla on “protecting the vulnerable” which she said does not show—in the budget, in the institution of safety nets and in terms of higher expenditures and investments on human development. Monsod also la-



Philippine Economy... From page 5

mented the inability of government to translate low interest rates into greater access to credit. The proliferation of interest groups around the President does not help either. This only leads to turf and credit-grabbing. The feeling of “rudderlessness” or lack of leadership, Monsod said, as shown by the government’s indecisiveness on a number of issues can only lead to a waitand-see attitude and contribute to economic slowdown.

Too many speakers but not one voice

Columnist Chikiamco, meanwhile, pointed out certain significant inconsistencies in the administration’s moves which support Monsod’s assertion of a leadership crisis. For instance, he noted that while Medalla took pride in claiming that the Philippine economy is in better shape in terms of the rate of currency depreciation, it should be stressed that except for the Indonesian rupiah, the peso dropped greater than the rest of the Asian currencies. Another example of discrepancy was the rejection of tariffs by Medalla while other sectors in the administration’s economic group say that there should be increased tariffs. The Department of Finance also declared that there are plans to rationalize the BIR incentives but the Department of Trade denied it. Chikiamco also noted that past due loan ratios at nine percent may not be as good an indicator that the Central Bank portrays it to be. He said that the mere fact that banks are no longer lending indicates their eroded capital. Chikiamco fears that such inconsistencies in action may give rise to confusion and further weaken the confidence on the economy.


Generally, Chikiamco does not believe that “not doing anything stupid” is enough to turn the tide for the economy in this era of globalization. The government must do something to accelerate economic reforms. These reforms refer to the elimination of rigidities in the form of agricultural protection, power subsidy to consumers, and monopolies, among others. He asserts that these rigidities prevent companies from keeping up with competition and global trade. He also doubts that any pump priming will succeed unless the banking system is strengthened. The President’s much-publicized scrapping of the pork barrel may have also been ill-conceived as the administration cannot count on Congress now to pass needed legislation. On the labor front, labor leader Vladimir Tupaz emphasized that the bottomline concerns of all workers are security of employment and living wage. He regrets what he sees as the ill-effects of the World Trade Organization (WTO) agreement which did not solve unemployment and poverty as was previously promised. The minimum wage of P198 per day is not enough to support a family, he said, and should thus be reviewed. Tupaz also suggested that the administration define and identify the poor population and update its data on the level of unemployment which he said is already 13.3 percent as opposed to less than 10 percent mentioned earlier by Secretary Medalla.

“Do something smart.”

“Don’t do anything stupid” is fine but according to Union Bank chief Victor Valdepeñas, it should end with another dictum: “do something smart.” Data from the banking industry revealed that while the administration may gloss over the condition of the banking system, the numbers reflected in their balance sheets are alarming. Valdepeñas said that in the first half of

September - October 1998

"Any solution to pump prime the economy should come from domestic sources." 1998, the banking system contracted by 4.5 percent while total loans fell by 67 percent if FCDU loans are to be considered. The result is that the banks are now afraid to lend and have in fact stopped lending as the borrowers themselves are no longer creditworthy. He also said that the contagion effect of the Asian currency crisis was rapid because beneath the robust picture depicted by sound macroeconomic programs, the corporate sector has incurred hidden foreign exchange risks with the liberalization of the banking sector. With the dissipation of the banks’ capital, Valdepeñas said that the economy is now in a bind. It is now very difficult to get out of the condition it is in since both the international and domestic sources of funds are no longer enough. Any solution to pump prime the economy should come from domestic sources. The private sector, he said, is either very wary and cautious or can no longer initiate another round of investment. In fact, he said, many private companies need to be recapitalized.

Open Forum: Use crisis as a tool for reform

PIDS founding father Dr. Gerardo Sicat vigorously endorsed all the comments and consolidated both strategies of “Don’ts” and “Dos” into suggesting that government should use this crisis as an instrument to adopt and accelerate economic reforms. In terms of grading the administration’s performance, he gave it a passing grade of three and, in some cases, even a grade of 2.5.


Social Weather Stations President Dr. Mahar Mangahas agreed with the administration’s commitment towards liberalization but warned that the Central Bank is “planning for failure” with its 9.5 percent inflation rate goal. With it, he said that the Bangko Sentral ng Pilipinas (BSP) or the Central Bank is not aiming for price stability when in fact that should be its prime objective. The BSP can help the poor by keeping inflation down as much as it can—at zero, if possible, or at two percent like the Americans, for instance. Ms. Diana Santos of PhilExport aired her concerns over the lack of


scrutinized by banking officials. Dr. Cristina David, Research Fellow at PIDS, also aired key concerns pertaining to the agriculture sector which she hopes that the administration will look into. One of the issues she raised is the protection being provided for commodities such as sugar, corn and cattle industries. These, to her, do not promote said industries and are even disadvantageous and antipoor. According to David, in spite of the passage of the General Agreement on Tariffs and Trade (GATT), the agriculture sector is back to quantitative trade restrictions where only a certain

September - October 1998

warning on not tolerating cronyism and behest loans is a clear instruction for the dismantling of cartels and monopolies. Finally, former NEDA chief Dr. Cielito Habito raised his concern on the rising number of small and medium enterprises folding up. He said that government must institute policies that will “make an affirmative action for those who will be left with an uneven field when you just leave everybody alone.” Such affirmative actions are needed especially with regard to the vulnerability of small and medium enterprises. While liberalization policies may indeed provide a level playing field for everyone, this is certainly not enough. Habito also expressed what he believes to be the primary reason for the Asian currency crisis—too many irresponsible investments and too many loans lent out by banks to undeserving borrowers.


Former NEDA Director-General Cielito F. Habito shares a few insights on the previous administration's economic policies.

credit for small export companies contrary to the government’s claim. With the banks now wary of lending, these small companies have no way to expand their businesses and are poised to fold up. To which Professor Monsod sympathized and took the BSP to task for apparently not putting mechanisms for government banks to lend to these companies instead of private banks. Monetary Board member Dr. Valdepeñas responded by saying that the Monetary Board has already increased the export facility from $500 to $750 million. This fund, however, still has to be coursed through the banking system where the creditworthiness of any borrower shall inevitably be

amount of such commodities may be imported. For his part, Commissioner Antonio Abad of the Tariff Commission asked for a policy guidance on how the government should go in dismantling and preventing the existence of monopolies since monopolies pose a moral hazard: consumers and small companies actually subsidize big corporations that monopolize certain industries. In fact, he said that some sectors are already pushing for selective tariff increases and the Tariff Commission wishes to obtain a clearer signal from the executive branch. To this, Secretary Espiritu responded that the President’s

A former actor, President Joseph Estrada is undoubtedly essaying the most important role in his life. The mixed reviews to the first quarter economic performance of his administration should perhaps be expected. The bad reviews may have been brought about perhaps by the very high expectations that the President himself has unwittingly encouraged through his rather ambitious promises of food on every table and work for the jobless. “Erap para sa Mahirap” worked wonders during the campaign; it may, however, well cast its doom in the coming months and years if no stronger efforts and measures are made and consolidated to translate promises into reality. But the judgement may be too premature. After all, as Secretary Espiritu said, it takes another semester to complete a conditional grade. President Estrada’s administration still has six years to merit a final one. DRN



September - October 1998

List of Discussion Papers 98-01 Strengthening Credit Institutions for Rural Poverty Alleviation Gilberto M. Llanto and Ma. Teresa C. Sanchez 98-02 Financial Reform and Development in the Philippines, 1980-1997: Imperatives, Performance and Challenges Ponciano S. Intal, Jr. and Gilberto M. Llanto 98-03 Macroeconomic Policy Change and Household Health Outcomes: A Simulation of the Impact of the 1988-1992 Tariff Reform Program on the Demand for Outpatient Care in the Philippines Aniceto C. Orbeta, Jr. and Michael M. Alba 98-04 The East Asian Crisis and Philippine Sustainable Development Ponciano S. Intal, Jr. and Erlinda M. Medalla 98-05 Trade and Industrial Policy Beyond 2000: An Assessment of the Philippine Economy Erlinda M. Medalla 98-06 Poverty Alleviation and Equity Promotion (Revised) Celia M. Reyes and Edwin A. del Valle 98-07 Beyond 2000: An Assessment of Infrastructure Policies Ramonette B. Serafica


n the morning of September 26, the PIDS staff made a pilgrimage to various historic sites in commemoration of the Philippine centennial celebration. The trip was also deemed as a fitting way to cap the series of activities held in observance of the annual PIDS Week. First stop for the PIDS group was the G. B. delos Reyes Museum at the Gateway Industrial Complex in General Trias, Cavite where the staff were exposed to a world-class collection of Phil-

98-08 Beyond 2000: Assessment of the Economy and Policy Recommendations – Dealing with Technology Policy Jose A. Magpantay 98-09 Beyond 2000: Assessment of the Economy and Policy Recommendations – Dealing with Agrarian Reform Marideth R. Bravo and Blanquita R. Pantoja 98-10 Philippine Employment and Industrial Relations Policies: An Assessment Gonzalo M. Jurado and Ma. Teresa C. Sanchez 98-11 Fiscal Adjustment in the Context of Growth and Equity, 1986-1996 Rosario G. Manasan 98-12 Metro Iloilo: A Struggle for Acceptance and Organization (Revised) Ruben G. Mercado and Raul S. Anlocotan 98-13 Metropolitan Naga: A Continuing Challenge of Local Autonomy and Sustainability (Revised) Ruben G. Mercado and Victor B. Ubaldo 98-14 Providing a Metropolitan Perspective to Development








Planning: Cagayan de Oro (Revised) Ruben G. Mercado and Casimira Balandra Metropolitan Cebu: The Challenge of Definition and Management (Revised) Ruben G. Mercado Owning the Metropolitan Vision: The Case of BLIST (Revised) Ruben G. Mercado and Carmel P. Chammag Financing and Delivery of Health and Sanitation Services through Effective Resource Mobilization and Inter-governmental Coordination: A Case Study of Cotabato City (Revised) Virginia S. Pineda and Ma. Lourdes Lim People Power at Work: The Case of the Surigao City Primary Health Care (PHC) Federated Women's Club (Revised) Virginia S. Pineda and Johnny Lim Emergency Rescue Naga: An LGUManaged Emergency Rescue Project (Revised) Virginia S. Pineda and Rose Buan Puerto Princesa City's Satellite Clinics: A Curative Rural Network (Revised) Virginia S. Pineda Reaching Out: Gingoog City's Total Integrated Development Approach (G-TIDA) (Revised) Virginia S. Pineda and Clark Clarete

Following the Freedom Trail ippine artifacts kept in a highly technological environment. Most of the staff were particularly impressed with the photos in exhibit, detailing memories of Old Manila and other historically-significant events. They were likewise pleased with the measures taken by the museum authorities in preserv-

ing and protecting the museum's rare collections. From the Gateway Complex, the group proceeded to the Aguinaldo Shrine in Kawit, Cavite and relived the events that led to the proclamation of the Philippine independence on June


98-22 The Low-Cost Housing Program of Puerto Princesa City, Palawan Anicia C. Sayos and Antonio C. Fernandez 98-23 The "Lote Para sa Mahihirap" Housing Program of San Carlos City, Negros Occidental Anicia C. Sayos and Estela F. Paredes 98-24 "Kaantabay sa Kauswagan" (Partners in Development) Mass Housing Strategy: The Case of Naga City Anicia C. Sayos 98-25 The International Economic Environment and the Philippine Economy Ponciano S. Intal, Jr. and Leilanie Q. Basilio 98-26 Productivity Growth in the Philippines After the Industrial Reforms Myrna S. Austria 98-27 The Emerging Philippine Investment Environment Myrna S. Austria 98-28 Beyond 2000: Assessment of Economic Performance and an Agenda for Sustainable Growth Josef T. Yap 98-29 In Search of Metropolitan Definitions: Lessons from Metro Davao Ruben G. Mercado 98-30 Megalopolitan Manila: Striving Towards a Humane and World




98-34 98-35 98-36 98-37




Class Megacity Ruben G. Mercado Metropolitan Arrangements in the Philippines: Passing Fancy or the Future Megatrend? Ruben G. Mercado and Rosario G. Manasan Environment and Natural Resources Management: Lessons from City Program Innovations Ruben G. Mercado The Case of Butuan City: A Consistent Regional Outstanding Winner in Nutrition (CROWN) Virginia S. Pineda and Jazmin D. Berido Olongapo: A Healthy City Virginia S. Pineda and Aurora Joson Partnership for Health: A Case Study of Lapu-lapu City Virginia S. Pineda Health Management: Strategies from Selected Cities Virginia S. Pineda Financing and Delivery of Urban Services in the Philippines: An Overview Rosario G. Manasan Water in Metro Cebu: The Case for Policy and Institutional Reforms Cristina C. David, Arlene B. Inocencio, Francisco M. Largo and Ed L. Walag Towards an Efficient Path to Food Security: The Philippine Case Cristina C. David

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Vol. XVI No. 5

September - October 1998

Editorial Board Dr. Ponciano S. Intal, Jr. President Dr. Mario B. Lamberte Vice-President Mr. Mario C. Feranil Director for Project Services and Development Ms. Jennifer P.T. Liguton Director for Research Information Ms. Andrea S. Agcaoili Director for Operations and Finance Atty. Roque A. Sorioso Legal Consultant

Staff Jennifer P.T. Liguton Editor-in-Chief Genna J. Estrabon Issue Editor Corazon P. Desuasido, Joel C. Cruz Barbara F. Gualvez, Edwin S. Martin and Liza P. Sonico Contributing Editors Valentina V. Tolentino and Rossana P. Cleofas Exchange Delia S. Romero, Galicano A. Godes, Necita Z. Aquino, Lilet L. Lamayo and Federico D. Ulzame Circulation and Subscription Jane C. Alcantara Lay-out and Design

The renovated Aguinaldo Shrine in Kawit, Cavite, site of the first proclamation of Philippine Independence in 1898, with the monument of General Emilio Aguinaldo on horseback in the foreground.

12, 1898. After a sumptuous lunch at the Island Cove Resort and Leisure Park in Binakayan, Cavite, the staff then went to the National Historical Institute (NHI) in Manila where an NHI personnel introduced the staff to murals and artifacts depicting important phases in Philippine history. DRN



September - October 1998

Hasta la Vista, PSI!


dmittedly, one year may not seem to be very long. After all, the days and months seem to simply breeze through that before one realizes it, one year is almost over. Still, when PIDS President Dr. Ponciano S. Intal, Jr. made known his plan to go on a one-year leave from the Institute, not a few of the staff expressed sadness since Dr. Intal is well-respected as an economist and professional and well-loved as a person and president. Thus, on September 30, the eve of the start of his leave, the officers and staff of the PIDS took time off from their heavy load of commitments to bid their president “good luck” and wish him well while he is away. Hasta la vista, Pons! ———————— During his absence, the acting president of the Institute is Dr. Mario B. Lamberte.


here is truth to the saying that behind every succesful man is a supportive woman. This was once again confirmed during the 21st PIDS Loyalty Awards ceremony when exceptional individuals were recognized for their loyal service to the Institute. Miss Emma Cinco, Senior Clerk III, was one of those given said recognition. Along with Mr. Mario Feranil, Director for Project Services, and Ms.

Helping Others Achieve their Goals Andrea Agcaoili, Director for Operations and Finance, she was given the PIDS Pioneer Award. In her acceptance speech, Ms. Cinco said that behind the success and recognition accorded to

Ms. Emma Cinco's heartwarming acceptance speech brings smiles to PIDS President Dr. Ponciano Intal, Jr. and former PIDS President Dr. Filologo Pante, Jr., who was invited as guest speaker and presentor.

PIDS Research Fellows is one supportive secretary who has made sacrifices on her own for the fulfillment of her superiors’ goals. Ms. Cinco’s speech was met with approval by the audience who shared in her personal victory. To many, her words were clearly a reminder that the tasks of secretaries are more than simply clerical in nature. As Ms. Cinco, for instance, continued to lend her assistance to many of the senior staff, she also had to forego some of her personal ambitions. Her award therefore is a testimony to a true public servant whose recognition has come at last. “Recognition is unmatched by money.” – Luis Nuguid Management Information Staff–PIDS



Staff Outreach Activities

July–October 1998

September - October 1998



The Staff Outreach Activities features activities of the senior research and management staff of the Institute which are beyond their core tasks but which nevertheless contribute to the fulfillment of the PIDS' mission, vision and goal of helping in the overall development of the country's economy.

Dr. Mario B. Lamberte

Dr. Gilberto M. Llanto

k Participated in the following meetings:

k Participated in the following meetings:





As resource person, "Children and Public Policy Workshop" sponsored by the United Nations Children’s Fund, Tagaytay City, 8 July; Asia Partnerships Roundtable sponsored by the World Bank, Hanoi, Vietnam, 2-3 September; and As PASCN representative, APEC Ministerial Meeting on Women sponsored by APEC, Makati City, 15-16 October.

k Presented/wrote the paper entitled “Assessment of the Performance of GFIs and GOCCs/NBFIs in Implementing Credit Programs” with Magdalena Casuga and Doreen Erfe, submitted to the Credit Policy Improvement Program, July 1998.

(Research Fellow, on leave)





k Provided consultation and advice to: l

l l

Senator Raul Roco, Chairman of the Committee on Banks, Financial Institutions and Currencies, on three separate bills—amendments to the revised Securities Act, amendments to the General Banking Act, and the New Central Bank Act—which aim to accelerate the development and modernization of the Philippine financial market (since June 1998); Credit Policy Improvement Program of the USAID; and Barents Group, LLC, a USAID project.

k Member, NEDA Planning Committee for Macroeconomy and Development Financing (since September 1998).



As resource person, Symposium on Managing Exponential Growth for Microfinance Institutions, sponsored by the NGO Coalition for Microfinance Standards, Makati City, 13 July; As resource person, Seminar on the Rationalization of Directed Credit Programs, sponsored by the Land Bank of the Philippines, Makati City, 11 August; As lecturer, Training Course on Rural Credit and Finance: Current Issues and Best Practice, sponsored by the Asian Development Bank and the Department of Agriculture, Mandaluyong City, 2 July; As lecturer, Seminar on Policy and Regulatory Framework for Philippine Microfinance Institutions for Officials of the Central Bank of Cambodia, sponsored by the Alliance of Philippine Partners for Enterprise Development (APPEND), Quezon City, 3 July; and Consultative Conference on the Cooperative Sector and the Role of the Cooperative Development Authority, sponsored by the Philippine Cooperative Center, Quezon City, 19 August.

k Presented/wrote the following papers: l

“Policy and Regulatory Issues Facing Microfinance in the Philippines,” Coalition for Microfinance Standards Summit, sponsored by the Asian Development Bank, Mandaluyong City, 20-21 August;


“On Risk Management in Philippine Microfinance Institutions and Programs,” Second Annual Seminar on the New Development Finance, sponsored by the Goethe University of Frankfurt, Germany, September; “The Philippines: Recent Reforms, Surges in Foreign Capital and the Government’s Response,” with Mario B. Lamberte, Chapter 10 of EDAP Financial Deregulation, to be published by the Australian National University in 1998; “Handbook on the Informal Sector,” editor and co-author, published by the Bishops-Businessmen Conference and the Department of Labor and Employment, Manila; and “Framework for Rationalizing Directed Credit Programs,” with Ma. Piedad Geron, for the National Credit Council of the Department of Finance, September.

Dr. Arlene B. Inocencio (Research Fellow)

k Participated in the following meetings: l Social Investigation Through Surveys conducted by the ASSIST Foundation of Statistical Association, Quezon City, 14-17 July; l Workshop on the Formulation of a Watershed Strategy and Programme for the Philippines, sponsored by the Forest Management Bureau, Department of Environment and Natural Resources and Danida, Quezon City, 30 July; l Training on Statistical Forecasting conducted by the ASSIST Foundation of Statistical Association, Quezon City, 4-7 August; l Workshop on Small Area Estimation of Socioeconomic Indictaors, sponsored by the Micro Impacts of Macro Adjustment Policies (MIMAP), Makati City, 27 August; l Seminar on Selected Econometric Tests in Eviews 3, sponsored by the University of the Philippines School of Economics, Quezon City, 28 August;

= 12



September - October 1998

Editor's Notes

Inter-LGU Cooperation...

From page 1

From page 3

Another article (page 2) dwells on the state of the country’s science and technology (S&T) programs especially with regard to research and development (R&D). The Philippines is at the tailend of the ladder vis-à-vis its neighboring countries in terms of S&T status. As such, some upgrading needs to be done. Dr. Jon Sigurdson, professor of Research Policy at the Stockholm School of Economics, confirms this as he presented his study on the new technological landscape in the Asia-Pacific during a recent PIDS Pulong Saliksikan. Sigurdson emphasizes the need for the Philippine government to give more attention to this.

DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights the findings and recommendations of PIDS research projects and important policy issues discussed during PIDS seminars. PIDS is a nonstock, nonprofit government research institution engaged in long-term, policyoriented research. This publication is part of the Institute's program to disseminate information to promote the use of research findings. The views and opinions expressed here are those of the authors and do not necessarily reflect those of the Institute. Inquiries regarding any of the studies contained in this publication, or any of the PIDS papers, as well as suggestions or comments are welcome. Please address all correspondence and inquiries to: Research Information Staff Philippine Institute for Development Studies Room 304, NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, 1229 Makati City, Philippines Telephone numbers 892-4059 and 893-5705 Telefax numbers (632) 893-9589 and 816-1091 E-mail address: Re-entered as second class mail at the Makati Central Post Office on April 27, 1987. Annual subscription rates are: P150.00 for local subscribers; and US$20.00 for foreign subscribers. All rates are inclusive of mailing and handling costs. Prices may change without prior notice.

In this issue, too, is an article on the importance of institutionalizing inter-LGU cooperation toward a better system of health care delivery in the country (page 3). Instead of going back to the old system of nationalization in the face of certain problems being encountered by the devolved health care system, the article shows how inter-LGU cooperation is the answer by citing three cases of cost-sharing health insurance schemes that provide accessible and affordable services for the people in their respective communities. This article offers a preliminary glimpse into the country’s health system since more articles on health will be featured in the forthcoming NovemberDecember 1998 issue of the DRN. DRN

Staff Outreach... From page 11




Workshop on Monitoring and Control of Land and Groundwater Contamination from Hazardous Wastes, sponsored by the Department of Environment and Natural Resources, ENRAP and USAID, Mandaluyong City, 5-9 October; Booklaunching of Philippine Asset Accounts: Forest, Land/Soil, Fishery, Mineral, and Water Resources, published by the National Statistical Coordination Board, Makati City, 6 October; and Workshop on Environmental ReVision and Vision: Learning from the Past and Looking to the future, sponsored by the Environmental Education Network of the Philippines, Quezon City, 21-23 October.

k Member, NEDA Planning Committee on Agriculture, Agrarian Reform and Natural Resources (1988 to present). DRN

to join. At the end of the period, members are eligible for P200 worth of medicines and a percentage discount in laboratory and diagnostic services during hospitalization. What makes the program unique is the initiating force of the households’ involvement. The role of district hospitals and regional health units is simply to provide technical assistance while that of the LGUs is to provide administrative and logistical support. This participative approach of the program fosters a sense of belonging and ownership among the local constituents. Finally, in another example of cost-sharing, Dr. Antonio Sumbalan, planning officer of the Bukidnon Health Insurance Project described their program as a combination of the two earlier schemes. While the province of Bukidnon allots a certain amount for the people’s health and hospitalization expenses, premium payments are annually collected from members to augment the provincial government’s contribution. This set-up guarantees bigger and broader health benefits to members like higher hospitalization and medicine subsidies and wider health coverage that includes dental services and outpatient consultation with preferred family physicians. In closing, Dr. Sumbalan explained, “One dimension of advocacy in the project is its impact to liberate the people from (health service) mendicancy. The program could inspire them with a sense of pride and self respect to benefit from the advances in modern medical and health care (minus political patronage usually involved).” DRN

The Philippine Economy in the First Quarter Period of the Estrada Administration: Mixed Reviews