ASEAN Assessment on the Social Impact of the Global Financial Crisis

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COUNTRY REPORT OF THE ASEAN ASSESSMENT ON THE SOCIAL IMPACT OF THE GLOBAL FINANCIAL CRISIS: THE PHILIPPINES

with the support of:

This volume is a product resulting from a project jointly implemented by the staff of the International Bank for Reconstruction and Development/ the World Bank and the ASEAN Secretariat, with financial support of the Australian Government. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank, the governments they represent, the ASEAN Secretariat, the Australian Government and/or ASEAN Member States. The World Bank, the ASEAN Secretariat and the Australian Government do not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

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I. The Impact of the Crisis and the Government’s Response

After posting strong economic growth for several years, the Philippines is currently experiencing an economic slowdown as a result of the global economic crisis. The Philippine economy grew at an annual average rate of 5.6 percent between 2003 and 2006 and reached 7.3 percent in 2007, the highest growth in three decades. However, this strong economic performance was not sustained as the country has not been spared the effects of the global economic crisis. In 2008, domestic industrial production, particularly the export-oriented manufacturing industries, began to slow down due to the reduction in global demand (Figure 1) (NSO, 2009a and 2009b). Exports, which account for nearly half of GDP, declined towards the end of 2008 and eventually contracted. As a result, GDP grew at a slower pace in 2008 at 3.8 percent than in previous years, and it decelerated even further in the first half of 2009 (NSCB, 2009a) (Figure 2).

The global economic crisis came at a time when the Philippines was still struggling with the lingering effects of the food and fuel crisis in 2008. Considered to be the single largest rice importer in the world, the Philippines was badly hit by the sharp increases in international rice prices in mid-2008, which translated into an 18 percent increase in domestic food inflation in July 2008 and a 57 percent increase in the retail price of rice. Fuel prices also peaked in October 2008 at 10.7 percent (NSO, 2009c). These price increases were considered to be significant especially if compared to the average inflation rate of 2.8 percent in 2007. Simulations using data on the income and spending patterns of households from the 2006 Family Income and Expenditures Survey show that the combined effects of the food and fuel inflation in July 2008 may have increased the incidence of poverty in the Philippines by 3.9 percentage points, causing an additional 3.3 million people to fall into poverty.1 In the months after the peak of the food and fuel crisis, the impact of the global economic crisis began to be seen, exposing even more Filipinos to economic shocks.

1 World Bank staff estimates using the 2006 Family Income and Expenditures Survey (NSO, 2006)

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5++=! 1)=! 53$'! */&@&@?! 2#$! &,(1*2! +5! 2#$! .'+91'! $*+)+,&*! */&@&@! 9$.1)! 2+! 9$! @$$)?! ! $D(+@&).! $4$)! ,+/$! G&'&(&)+@!2+!$*+)+,&*!@#+*V@7! ! Households have felt the impact of the global economic crisis through a combination of reduced earnings and P(7)$0(39)& 021$& "$3#& #0$& #0$& ,3(:23&rate $-(+(.*-& -%*)*)& 2&in-(.:*+2#*(+& %$97-$9& reduced employment. The *.'2-#& national ("& unemployment increased from #0%(7,0& 6.8 percent October 2008 ("& to 7.6 percent $2%+*+,)& 2+9& %$97-$9& $.'3(4.$+#;& "#$! )12&+)1'& 3)$,('+-,$)2! /12$! &)*/$1@$=! 5/+,! 87C! ($/*$)2! &)! in July 2009 (NSO, 2009d). The government reported that as many as 208,128 domestic workers and 6,951 overseas L*2+9$/! :;;C! 2+! >78! ($/*$)2! &)! U3'-! :;;M! FJKL?! :;;M=I7! "#$! .+4$/),$)2! /$(+/2$=! 2#12! 1@! ,1)-! 1@! Filipino workers (OFWs) temporarily or permanently lost their jobs between October 2008 and August 2009 due :;C?H:C!=+,$@2&*!0+/V$/@!1)=!8?M6H!+4$/@$1@!G&'&(&)+!0+/V$/@!FLGW@I!2$,(+/1/&'-!+/!($/,1)$)2'-!'+@2! the global economic crisis:;;C! (DOLE, 2009). A crisis assessment survey commissioned the World Bank in May 2#$&/!to\+9@! 9$20$$)! L*2+9$/! 1)=! Q3.3@2! :;;M! =3$! 2+! 2#$! .'+91'! $*+)+,&*!by */&@&@! FPL]N?! :;;MI7! Q! */&@&@!1@@$@@,$)2!@3/4$-!*+,,&@@&+)$=!9-!2#$!W+/'=!S1)V!&)!Y1-!:;;M!#1@!1'@+!@#+0)!2#12!1/+3)=!<>! 2009 has also shown that around 37 percent of working adults had their work hours or days shortened or their ($/*$)2!+5!0+/V&).!1=3'2@!#1=!2#$&/!0+/V!#+3/@!+/!=1-@!@#+/2$)$=!+/!2#$&/!@1'1/-!+/!&)*+,$!/$=3*$=!+/! salary or income reduced or had lost a job between February and April 2009 (World Bank, 2009a).2 The increasing #1=! '+@2! 1! \+9! 9$20$$)! G$9/31/-! 1)=! Q(/&'! :;;M! FW+/'=! S1)V?! :;;M1I7:! "#$! &)*/$1@&).! )3,9$/! +5! number of retrenchments at the height of the crisis was reflected in another household survey, which showed the /$2/$)*#,$)2@&12!2#$!#$&.#2!+5!2#$!*/&@&@!01@!/$5'$*2$=!&)!1)+2#$/!#+3@$#+'=!@3/4$-?!0#&*#!@#+0$=!2#$! unemployment rate reaching 34.2 percent in February 2009, up from 30.9 percent in September 2008 (SWS, 2009).3 3)$,('+-,$)2!/12$!/$1*#&).!<X7:!($/*$)2!&)!G$9/31/-!:;;M?!3(!5/+,!<;7M!($/*$)2!&)!K$(2$,9$/!:;;C! Moreover, rates (in other words, the number people2#$! who)3,9$/! would like work longer in FKWK?! :;;MI7<!underemployment ! Y+/$+4$/?! 3)=$/$,('+-,$)2! /12$@! F&)! +2#$/!of0+/=@?! +5!to($+('$! 0#+! hours 0+3'=! '&V$! their 2+! 0+/V! '+).$/! #+3/@! (/$@$)2! +/! 1! )$0! +/! 0#+! #14$! 1==&2&+)1'! \+9! +)! 2+(! 2#$&/! present or a new job&)! or2#$&/! who have an additional job\+9! on top of their main1)! job) also increased from 17.5+5!percent ,1&)! \+9I! 1'@+! &)*/$1@$=! 5/+,! H>76! ($/*$)2! &)! L*2+9$/! :;;C! 2+! HM7C! ($/*$)2! &)! U3'-! :;;M7! Y$1)0#&'$?! in October 2008 to 19.8 percent in July 2009. Meanwhile, visible underemployment (in other words, the number of 4&@&9'$!3)=$/$,('+-,$)2!F&)!+2#$/!0+/=@?!2#$!)3,9$/!+5!($+('$!0#+!0+/V!5+/!5$0$/!2#1)!X;!#+3/@!1! people who work for fewer than 40 hours a week) remained high at 11.1 percent (NSO, 2009d) (Figure 3). 0$$VI!/$,1&)$=!#&.#!12!HH7H!($/*$)2!FJKL?!:;;M=I!FG&.3/$!<I7! & <*,7%$&Q>&R+9$%$.'3(4.$+#&B2#$)&FG&("&#(#23&$.'3(4$9H! :67;! :;7;! H67;! H;7;! 67;! ;7;! `U1)E:;;>! Q(/!

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& Evidence suggests#02#& that there been a shift informal#(& employment that the sectoral D1*9$+-$& )7,,$)#)& #0$%$&has 02)& :$$+& 2& from )0*"#&formal "%(.&to"(%.23& *+"(%.23&and $.'3(4.$+#& 2+9&distribution #02#& #0$& of labor has changed. The economic crisis seems to have put particular pressure on formal employment, )$-#(%23&9*)#%*:7#*(+&("&32:(%&02)&-02+,$97!"#$!$*+)+,&*!*/&@&@!@$$,@!2+!#14$!(32!(1/2&*3'1/!(/$@@3/$!+)! 5+/,1'! $,('+-,$)2?! (1/2&*3'1/'-! &)! 2#$! ,1)351*23/&).! @$*2+/7! B)! Q(/&'! :;;M?! 0#$)! /$2/$)*#,$)2@! particularly in the manufacturing sector. In April 2009, when retrenchments of workers were at their peak, +5! the 0+/V$/@! 0$/$! 12! 2#$&/! ($1V?! 2#$! )3,9$/! +5! 01.$! 1)=! @1'1/-! 0+/V$/@! F*+)@&=$/$=! 1@! 5+/,1'! @$*2+/! number of wage and salary workers (considered as formal sector workers) grew only by 2.5 percent, while the 0+/V$/@I! ./$0! +)'-! 9-! :76! ($/*$)2?! 0#&'$! 2#$! )3,9$/! +5! ($+('$! 0+/V&).! 1@! 3)(1&=! 51,&'-! 0+/V$/@! number of people working as unpaid family workers increased by 9.4 percent compared with April 2008. As export&)*/$1@$=! 9-! M7X! ($/*$)2! *+,(1/$=! 0&2#! Q(/&'! :;;C7! Q@! $D(+/2E+/&$)2$=! ,1)351*23/&).! (/+=3*2&+)! oriented manufacturing production slowed down, the number of workers in the manufacturing sector declined

by 1.5 percent in April 2009, while the number of workers in construction and mining increased by 1.5 percent ! "#$! (/$4&+3@! 2#/$$! ,+)2#@! 0$/$! 3@$=! 1@! 1! /$5$/$)*$! ($/&+=7! "#$! #+3@$#+'=! @3/4$-! #1=! 1! 2+21'! +5! H?8;;! /$@(+)=$)2@T!]3^+)!F<;;I?!_&@1-1@!F<;;I?!1)=!Y&)=1)1+!F<;;I?!1)=!1==&2&+)1'!@1,('$@!&)!]1.3)1!F:;;I!1)=!R14&2$! 2 The previous three months were used as a reference period. The household survey had a total of 1,600 respondents: Luzon (300), Visayas (300), and Mindanao F:;;I7!"#$!@3/4$-!01@!*1//&$=!+32!9-!1)!&)=$($)=$)2!@3/4$-!5&/,?!%3'@$!Q@&1?!B)*7! < (300), and additional samples in Laguna (200) and Cavite (200). The survey was carried out by an independent survey firm, Pulse Asia, Inc. ! "#&@! #+3@$#+'=! @3/4$-! 01@! 3)=$/21V$)! 9-! K+*&1'! W$12#$/! K212&+)@! FKWKI?! 1)! &)=$($)=$)2! @+*&1'! /$@$1/*#! 3 This household survey was undertaken by Social Weather Stations (SWS), an independent social research institute, which conducts perception surveys on &)@2&232$?!0#&*#!*+)=3*2@!($/*$(2&+)!@3/4$-@!+)!(+4$/2-?!#3).$/?!3)$,('+-,$)2?!1,+).!+2#$/!&@@3$@7! poverty, hunger, unemployment, among other issues. :

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@'+0$=!=+0)?!2#$!)3,9$/!+5!0+/V$/@!&)!2#$!,1)351*23/&).!@$*2+/!=$*'&)$=!9-!H76!($/*$)2!&)!Q(/&'!:;;M?! 0#&'$!2#$!)3,9$/!+5!0+/V$/@!&)!*+)@2/3*2&+)!1)=!,&)&).!&)*/$1@$=!9-!H76!($/*$)2!*+,(1/$=!0&2#!Q(/&'! :;;C?! 1@! 2#$! .+4$/),$)2! &)2/+=3*$=! $,$/.$)*-! ,$1@3/$@! 2+! ,&2&.12$! 2#$! $,('+-,$)2! $55$*2@! +5! 2#$! compared with April 2008, as the government introduced emergency measures to mitigate the employment effects */&@&@!FJKL?!:;;M=I7!!!!!!& of the crisis (NSO, 2009d). ! M0$&S(%39&T2+UV)&-%*)*)&2))$)).$+#&)7%1$4&23)(&*+9*-2#$9&#02#&'((%&0(7)$0(39)&021$&:$$+&0*#&02%9$%& The World Bank’s crisis assessment survey2#12?! also indicated poor households have been hitF1@! harder than:;;MI?! richer 8;! #02+& %*-0$%& (+$);! "#$! @3/4$-! 5+3)=! +5! 2#+@$!that 0#+! 0$/$! *3//$)2'-! 0+/V&).! +5! Y1-! ($/*$)2!+5!1''!0+/V$/@!&)!2#$!9+22+,!@+*&+$*+)+,&*!*'1@@!@355$/$=!5/+,!$&2#$/!\+9!'+@@?!/$=3*$=!@1'1/-?! ones. The survey found that, of those who were currently working (as of May 2009), 60 percent of all workers in the +/!=$*/$1@$=!0+/V!#+3/@!&)!2#$!(/$4&+3@!2#/$$!,+)2#@?!0#$/$1@!+5!2#+@$!&)!2#$!#&.#$@2!@+*&+$*+)+,&*! bottom socioeconomic class suffered from either job loss, reduced salary, or decreased work hours in the previous *'1@@?! +)'-! H<! ($/*$)2! #1=! 9$$)! 155$*2$=7! "#$! @3/4$-! /$@3'2@! 1'@+! @3..$@2! 2#12! ,+/$! 2#1)! #1'5! +5! 2#$! three months, whereas of those in the highest socioeconomic class, only 13 percent had been affected. The survey (+(3'12&+)!F6<!($/*$)2I!2#&)V!2#12!2#$-!1/$!0+/@$!+55!2#1)!2#$-!0$/$!1!-$1/!$1/'&$/!FHH!($/*$)2!@1-!2#$-! results also suggest that than #14$! half of$D($/&$)*$=! the population)+! (53 *#1).$I7! percent) think that they areF>;! worse off than9'1,$! they were 1/$! 9$22$/! +55! 1)=! <H!more ($/*$)2! Y+@2! G&'&(&)+@! ($/*$)2I! #&.#$/! a*+,,+=&2-!(/&*$@!5+/!2#$!=$2$/&+/12&+)!&)!2#$&/!c31'&2-!+5!'&5$?!0#&*#!,1-!9$!122/&93219'$!2+!2#$!/$*$)2! year earlier (11 percent say they are better off and 31 percent have experienced no change). Most Filipinos (70 5++=! */&@&@7! B)=&*12&+)@! 2#12! 2#$! .'+91'! */&@&@!in#1@! 155$*2$=! #+3@$#+'=@! 0$/$! 9-! 2#$! percent) blame higher commodity prices for $*+)+,&*! the deterioration their quality of life, which may be@#+0)! attributable to HH! ($/*$)2!+5!/$@(+)=$)2@!0#+! the recent food crisis. Indications2#12!*&2$=!\+9!'+@@!&)!2#$!51,&'-!1)=!2#$!M!($/*$)2!2#12!/$(+/2$=!/$=3*$=! that the global economic crisis has affected households were shown by the &)*+,$d! $1/)&).@! 1@! 2#$! (/&,$! /$1@+)@! 5+/! 2#$&/! /$=3*$=! c31'&2-! +5! '&5$7! Q9+32! C<! ($/*$)2! +5! G&'&(&)+! 11 percent of respondents who that cited job loss in the family and the 9 percent that reported reduced income/ 1=3'2@!2#&)V!2#12!2#$!*3//$)2!$*+)+,&*!*/&@&@!&@!#14&).!1!@39@21)2&1'!&,(1*2!+)!2#$&/!*+,,3)&2-!FW+/'=! earnings as the prime reasons for their reduced quality of life. About 83 percent of Filipino adults think that the S1)V?!:;;M1I7!! current economic crisis is having a substantial impact on their community (World Bank, 2009a). ! W$2+/0*3$5& 2)& #0$& +7.:$%& ("& (1$%)$2)& $.'3(4.$+#& (''(%#7+*#*$)& 9$-3*+$95& )(& 9*9& #0$& 2.(7+#& ("& X %$.*##2+-$)&)$+#&:4&$.*,%2+#&/(%U$%)&#(&#0$*%&"2.*3*$); Meanwhile, as the number of overseas employment opportunities!b$,&221)*$@!5/+,!+4$/@$1@!0+/V$/@!1)=!5/+,! declined, so did the amount of remittances sent =+,$@2&*!,&./1)2!0+/V$/@!1**+3)2!5+/!HX7C!($/*$)2!+5!2+21'!#+3@$#+'=!&)*+,$!1)=!9$)$5&2!2#/$$!+32!+5! 4 by emigrant workers to their families. Remittances from overseas workers and from domestic migrant workers 5&4$!#+3@$#+'=@!&)!2#$!%#&'&((&)$@7!L5!2#+@$!#+3@$#+'=@!2#12!/$*$&4$!/$,&221)*$@?!+)$Ec31/2$/!'&4$!9$'+0! 6 account for 14.8 percent of total household income and benefit three out of five households in the Philippines. Of 2#$!(+4$/2-!'&)$7 !B)!:;;C?!/$,&221)*$@!5/+,!19/+1=!./$0!9-!H<7C!($/*$)2?!932!2#$-!./$0!+)'-!,+=$@2'-! those households that receive remittances, one-quarter live below the poverty line.5 In 2008, remittances from 9$20$$)!U1)31/-!1)=!Q3.3@2!:;;M!*+,(1/$=!0&2#!@1,$!($/&+=!&)!:;;C!FSK%?!:;;MI7!B)!(1/2&*3'1/?!+55&*&1'! =121!@#+0!2#12!/$,&221)*$@!5/+,!2#$!Q,$/&*1@!=$*/$1@$=!+4$/!2#$!+)$!1)=!1!#1'5!-$1/@!9$20$$)!$1/'-! abroad grew by 13.8 percent, but they grew only modestly between January and August 2009 compared with same :;;C!1)=!,&=E:;;M!F"19'$!HI7!"#$!*/&@&@!1@@$@@,$)2!@3/4$-!#1@!@#+0)!2#12!2#$!/$=3*2&+)!&)!.'+91'!OP%! period in 2008 (BSP, 2009). In particular, official data show that remittances from the Americas decreased over the #1@!155$*2$=!)+2!+)'-!2#$!/$,&221)*$@!+5!+4$/@$1@!0+/V$/@!932!1'@+!2#$!)3,9$/!+5!0+/V$/@!.+&).!19/+1=7! one and a half years between early 2008 and mid-2009 (Table 1). The crisis assessment survey has shown that the "#$! (1/2&*&(1)2@! &)! 2#$! 5+*3@! ./+3(! =&@*3@@&+)@! 2#12! 0$/$! #$'=! 1@! (1/2! +5! 2#$! */&@&@! 1@@$@@,$)2! @212$=! reduction in global GDP has affected not only the remittances of overseas workers but also the number of workers 2#12!/$,&221)*$@!,1V$!3(!1!'1/.$!@#1/$!+5!2#$&/!#+3@$#+'=!&)*+,$!1)=!2#12!1''!#1=!$D($/&$)*$=!@$4$/$! going abroad. The participants in the focus group discussions that were held as part of the crisis assessment =$*/$1@$@!&)!2#$!1,+3)2!@$)2!#+,$!9-!2#$&/!,&./1)2!51,&'-!,$,9$/@7!! stated that remittances make up a large share of their household income and that all had experienced severe

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!L4$/@$1@!0+/V$/@!1**+3)2!5+/!19+32!:>!($/*$)2!+5!2#$!'19+/!5+/*$!1)=!HH!($/*$)2!+5!2#$!(+(3'12&+)7!b$,&221)*$@! 5/+,!19/+1=!1**+3)2$=!5+/!1/+3)=!H;!($/*$)2!+5!OP%!&)!:;;C7 4 Overseas workers account for about 27 percent of the labor force and 11 percent of the population. Remittances from abroad accounted for around 10 percent 6 !W+/'=!S1)V!@2155!$@2&,12$@!3@&).!2#$!:;;8!G1,&'-!B)*+,$!1)=!ND($)=&23/$!K3/4$-!FJKL?!:;;8I7! of GDP in 2008. 5 World Bank staff estimates using the 2006 Family Income and Expenditure Survey (NSO, 2006).

3

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The slower growth of remittances from abroad may not increase poverty since richer household tend to benefit

M0$&)3(/$%&,%(/#0&("&%$.*##2+-$)&"%(.&2:%(29&.24&+(#&*+-%$2)$&&'(1$%#4&)*+-$&%*-0$%&0(7)$0(39&#$+9& more from overseas while poorer /0*3$& households tend to benefit more domestic.(%$& remittances. #(& :$+$"*#& .(%$& "%(.&remittances (1$%)$2)& %$.*##2+-$)& '((%$%& 0(7)$0(39)& #$+9&from #(& :$+$"*#& "%(.& Figure %$.*##2+-$);! 4 shows the share of remittances from@#1/$! both domestic and overseas to total household income 9(.$)#*-& G&.3/$! X! @#+0@! 2#$! +5! /$,&221)*$@! 5/+,!workers 9+2#! =+,$@2&*! 1)=! +4$/@$1@! 0+/V$/@!2+!2+21'!#+3@$#+'=!&)*+,$!=&@1../$.12$=!9-!&)*+,$!=$*&'$@7!B2!*+)5&/,@!2#12!(++/$/!#+3@$#+'=@! disaggregated by income deciles. It confirms that poorer households receive a larger share of domestic remittances /$*$&4$! '1/.$/! @#1/$! +5!while =+,$@2&*! 2#1)!remittances /&*#$/! #+3@$#+'=@! 0#&'$!This /&*#$/! +)$@! /$*$&4$! ,+/$! than1! richer households richer/$,&221)*$@! ones receive more from overseas. suggests that a reduction /$,&221)*$@!5/+,!+4$/@$1@7!"#&@!@3..$@2@!2#12!1!/$=3*2&+)!&)!/$,&221)*$@!5/+,!19/+1=!&@!'&V$'-!2+!155$*2! in remittances from abroad is likely to affect rich rather than poor households. Simulations of the impact of a /&*#!/12#$/!2#1)!(++/!#+3@$#+'=@7!K&,3'12&+)@!+5!2#$!&,(1*2!+5!1!/$=3*2&+)!&)!2+21'!/$,&221)*$@!@3..$@2! in total remittances suggest that a decrease in remittances from and domestic sources by 10 2#12!reduction 1! =$*/$1@$! &)! /$,&221)*$@! 5/+,! 19/+1=! 1)=! =+,$@2&*! @+3/*$@! 9-!abroad H;! ($/*$)2! &)*/$1@$@! (+4$/2-! percent9-! increases incidence by(+&)2@7! about 0.5 percentage points. the domestic market &)*&=$)*$! 19+32!poverty ;76! ($/*$)21.$! Y$1)0#&'$?! 1@! 2#$!Meanwhile, =+,$@2&*!as'19+/! ,1/V$2!labor @'1*V$)@?! /$,&221)*$@!5/+,!=+,$@2&*!@+3/*$@!1/$!1'@+!$D($*2$=!2+!51''7!"#$!*/&@&@!1@@$@@,$)2!@3/4$-!@#+0$=!2#12?! slackens, remittances from domestic sources are also expected to fall. The crisis assessment survey showed that, +5!2#$!#+3@$#+'=@!2#12!/$*$&4$!/$,&221)*$@!5/+,!=+,$@2&*!,&./1)2!0+/V$/@?!19+32!<;!($/*$)2!/$(+/2$=! of the households that receive remittances from domestic migrant workers, about 30 percent reported that their 2#12!2#$&/!*1@#!/$,&221)*$@!#1=!=$*/$1@$=!FW+/'=!S1)V?!:;;M1I7!!!!! cash remittances had decreased (World Bank, 2009a).

& <*,7%$&X>&Y02%$&("&B$.*##2+-$)&*+&M(#23&P(7)$0(39&E+-(.$&FGH5&:4&E+-(.$&L$-*3$&

"#$%&'T!W+/'=!S1)V!@2155!*1'*3'12&+)@!91@$=!+)!:;;8!GBNK!FJKL?!:;;8I7!

! M0$& '%(#%2-#$9& $""$-#)& ("& #0$& ,3(:23& $-(+(.*-& -%*)*)& -(739& 3$29& #(& 2& 0*,0$%& 9(.$)#*-& 7+$.'3(4.$+#& The protracted effects of the global economic crisis could lead to a higher domestic unemployment push 2+9& '7)0& 173+$%2:3$& 0(7)$0(39)& *+#(& '(1$%#4;& "#$! 3)$,('+-,$)2! $55$*2@! +5! 2#$! */&@&@! =3$!and 2+! '+0! vulnerable households poverty. The unemployment effects*+3'=! of the$4$)231''-! crisis due to&)*/$1@$! low export demand and +5! the $D(+/2! =$,1)=! 1)=! 2#$!into /$=3*2&+)! &)! #+3@$#+'=! &)*+,$! 2#$! )3,9$/! G&'&(&)+@! '&4&).! 2#$!income (+4$/2-! '&)$7!eventually Q'/$1=-?! increase )$1/'-! #1'5! 1''! G&'&(&)+! #+3@$#+'=@! 1/$!the 43')$/19'$! 2+! reduction in9$'+0! household could the +5! number of Filipinos living below poverty line. &)*+,$! @#+*V@7! "#$! .+4$/),$)2! #1@! $@2&,12$=! 2#12! X6! ($/*$)2! +5! G&'&(&)+! #+3@$#+'=@! 51*$! 2#$! /&@V! +5! Already, nearly half of all Filipino households are vulnerable to income shocks. The government has estimated 51''&).! &)2+! (+4$/2-! 1)=! 2#12! 2#$! (/+(+/2&+)! +5! 43')$/19'$! #+3@$#+'=@! &@! #&.#$/! 1,+).! 2#$! (++/! FMH78! that 45 percent of Filipino households face the risk of falling into poverty and that the proportion of vulnerable ($/*$)2I! 2#1)! 2#$! )+)E(++/! F:>7;! ($/*$)2I! FJQ%R! 1)=! JKRS?! :;;8I78! W#12! #1@! 9$$)! '$1/)$=! 5/+,! 2#$! households is higher among the poor (91.6 percent) than the non-poor (27.0 percent) (NAPC and NSCB, 2006).6 What $D($/&$)*$! +5! (/$4&+3@! $*+)+,&*! */&@$@?! @3*#! 1@! 2#$! HMM>! Q@&1)! 5&)1)*&1'! */&@&@! 1)=! 2#$! N'! J&)+! has been learned from the experience of previous economic crises, such as the 1997 Asian financial crisis and the (#$)+,$)+)?!&@!2#12!1!@39@21)2&1'!(/+(+/2&+)!+5!(++/!#+3@$#+'=@!1/$!3)19'$!2+!(/+2$*2!2#$,@$'4$@!5/+,! El Nino phenomenon, is that a substantial proportion of poor households are unable to protect themselves from &)*+,$!@#+*V@!1)=!$4$)!)+)E(++/!#+3@$#+'=@!*1)!@3**3,9!&,,$=&12$'-!2+!2#$!$55$*2@!+5!*/&@$@!Fb$-$@?! :;;:I7! income shocks and even non-poor households can succumb immediately to the effects of crises (Reyes, 2002). & <2-$9& /*#0& )0%*+U*+,& *+-(.$5& 0(7)$0(39)& #2U$& 2& 12%*$#4& ("& 2-#*(+)& #(& -('$& /*#0& #0$& $-(+(.*-& -%*)*);! "#$!*/&@&@!1@@$@@,$)2!@3/4$-!@#+0$=!2#12!,+@2!#+3@$#+'=@!1/$!5&)=&).!01-@!2+!*+($!0&2#!2#$!$*+)+,&*! 6 The estimates in NAPC and NSCB (2006) are based on 1997 Family Income and Expenditure Survey. 8

!"#$!$@2&,12$@!&)!JQ%R!1)=!JKRS!F:;;8I!1/$!91@$=!+)!HMM>!G1,&'-!B)*+,$!1)=!ND($)=&23/$!K3/4$-7! 4

4

Faced with shrinking income, households take a variety of actions to cope with the economic crisis. The crisis assessment survey showed that most households are finding ways to cope with the economic crisis and a majority is choosing to reduce their household expenditures by reducing their food consumption or by replacing certain

*/&@&@! ,1\+/&2-! *#++@&).! (Table 2+! /$=3*$! 2#$&/! #+3@$#+'=! 9-! /$=3*&).! 2#$&/! 5++=! food 1)=! items1!with cheaper&@!alternatives 2). This coping strategy is$D($)=&23/$@! particularly evident in poor households *+)@3,(2&+)!+/!9-!/$('1*&).!*$/21&)!5++=!&2$,@!0&2#!*#$1($/!1'2$/)12&4$@!F"19'$!:I7!"#&@!*+(&).!@2/12$.-! as food accounts for as much as 90 percent of the total expenditures of these households.7 Other households &@! (1/2&*3'1/'-! $4&=$)2! &)! (++/! #+3@$#+'=@! 1@! 5++=! 1**+3)2@! 5+/! 1@! ,3*#! 1@! M;! ($/*$)2! +5! 2#$! 2+21'! cope by seeking additional jobs or finding other sources of income to meet their basic needs, usually having to > $D($)=&23/$@!+5!2#$@$!#+3@$#+'=@7 !L2#$/!#+3@$#+'=@!*+($!9-!@$$V&).!1==&2&+)1'!\+9@!+/!5&)=&).!+2#$/! take jobs that offer no labor protection. Households in urban and rural areas adopt similar coping strategies, but @+3/*$@!+5!&)*+,$!2+!,$$2!2#$&/!91@&*!)$$=@?!3@31''-!#14&).!2+!21V$!\+9@!2#12!+55$/!)+!'19+/!(/+2$*2&+)7! urban dwellers more frequently resort to reducing their expenditure on transportation, gas, light, and water. Some A+3@$#+'=@!&)!3/91)!1)=!/3/1'!1/$1@!1=+(2!@&,&'1/!*+(&).!@2/12$.&$@?!932!3/91)!=0$''$/@!,+/$!5/$c3$)2'-! /$@+/2! 2+!workers /$=3*&).! 2#$&/! $D($)=&23/$! '&.#2?! 1)=!own 012$/7! K+,$! ,&./1)2! 0+/V$/@! migrant consider going back to +)! their2/1)@(+/212&+)?! home provinces .1@?! to start up their businesses or seeking work *+)@&=$/!.+&).!91*V!2+!2#$&/!#+,$!(/+4&)*$@!2+!@21/2!3(!2#$&/!+0)!93@&)$@@$@!+/!@$$V&).!0+/V!+4$/@$$@?! oversees, although some have reported finding it difficult to find jobs abroad because of the global recession. Other 1'2#+3.#! @+,$! #14$! /$(+/2$=! 5&)=&).! &2! =&55&*3'2! 2+! 5&)=! \+9@! 19/+1=! 9$*13@$! +5! 2#$! .'+91'! /$*$@@&+)7! ways to cope include borrowing money from informal lenders (friends and relatives) and formal institutions, selling L2#$/!01-@!2+!*+($!&)*'3=$!9+//+0&).!,+)$-!5/+,!&)5+/,1'!'$)=$/@!F5/&$)=@!1)=!/$'12&4$@I!1)=!5+/,1'! assets, and reducing household expenditures on health and medical care as well as on children’s education (World &)@2&232&+)@?!@$''&).!1@@$2@?!1)=!/$=3*&).!#+3@$#+'=!$D($)=&23/$@!+)!#$1'2#!1)=!,$=&*1'!*1/$!1@!0$''!1@! Bank, 2009a). For young workers, overseas migration is still an attractive option, but most agree that investing in +)!*#&'=/$)f@!$=3*12&+)!FW+/'=!S1)V?!:;;M1I7!G+/!-+3).!0+/V$/@?!+4$/@$1@!,&./12&+)!&@!@2&''!1)!122/1*2&4$! +(2&+)?!932!,+@2!1./$$!2#12!&)4$@2&).!&)!$=3*12&+)!&@!1!,+/$!1((/+(/&12$!'+).E2$/,!@2/12$.-7!& education is a more appropriate long-term strategy. & M2:3$&I>&P(7)$0(39)V&Z('*+,&Y#%2#$,*$)&FGH& K2/12$.&$@! b$=3*$!1,+3)2!+5!5++=!*+)@3,(2&+)! b$('1*$!*+)@3,(2&+)!+5!5++=!&2$,@!0&2#!*#$1($/!1'2$/)12&4$! K$$V!1==&2&+)1'!\+9@!+/!+2#$/!@+3/*$@!+5!&)*+,$! b$=3*$!$D($)@$@!+)!2/1)@(+/212&+)?!.1@?!'&.#2?!1)=!012$/! S+//+0!,+)$-!5/+,!/$'12&4$@!1)=!5/&$)=@! b$=3*$!$D($)@$@!+)!#$1'2#!1)=!,$=&*1'!*1/$! S+//+0!,+)$-!5/+,!5&)1)*&1'!&)@2&232&+)@! K$''!+/!(10)!1@@$2@! W&2#=/10!*#&'=/$)!5/+,!@*#++'!+/!(+@2(+)$!$)/+'',$)2! "/1)@5$/!*#&'=/$)!2+!1)+2#$/!@*#++'!0&2#!'+0$/!5$$@!! K$)=!)+)E0+/V&).!51,&'-!,$,9$/@!+32!2+!0+/V! b$=3*$!+/!3@$!3(!@14&).@! Q''!#+3@$#+'=@!2#12!/$(+/2$=!*+(&).!@2/12$.&$@! "#$%&'T!W+/'=!S1)V!F:;;M1I!!

Q''! A+3@$#+'=@!&)! A+3@$#+'=@!&)! A+3@$#+'=@! a/91)!Q/$1@! b3/1'!Q/$1@! :C7;! :C7H! :C7;! :<7:! :<7C! ::7>! HH7C! HH7:! H:7X! HH78! H878! >76! 876! 67M! >7;! X7H! <7<! X7C! <7M! :7C! X7M! :7>! H7>! <76! :78! H7<! <78! :7:! ;7M! <7X! H7M! :7:! H78! H7X! :7:! ;7>! H;;7;! H;;7;! H;;7;!

&

The employment effects of the global economic crisis are having a particularly harmful impact on female workers.

M0$& $.'3(4.$+#& $""$-#)& ("& #0$& ,3(:23& $-(+(.*-& -%*)*)& 2%$& 021*+,& 2& '2%#*-732%34& 02%."73& *.'2-#& (+& Export-oriented manufacturing industries in the Philippines such as electronics, garments, textiles, and$'$*2/+)&*@?! footwear, "$.23$& /(%U$%);! ND(+/2E+/&$)2$=! ,1)351*23/&).! &)=3@2/&$@! &)! 2#$! %#&'&((&)$@! @3*#! 1@! have a higher concentration of female workers than male workers, whereas male0+/V$/@! workers 2#1)! predominate in auto .1/,$)2@?! 2$D2&'$@?! 1)=! 5++20$1/?! #14$! 1! #&.#$/! *+)*$)2/12&+)! +5! 5$,1'$! ,1'$! 0+/V$/@?! 0#$/$1@! ,1'$! 0+/V$/@! (/$=+,&)12$! &)! 132+! ,1)351*23/&).! FP$\1/=&)! 1)=! L0$)@?! :;;MI7! "#$! manufacturing (Dejardin and Owens, 2009). The disproportionate share of female workers in these export-oriented =&@(/+(+/2&+)12$! +5!contraction 5$,1'$! 0+/V$/@! &)! 2#$@$! $D(+/2E+/&$)2$=! &)=3@2/&$@! @3..$@2@! 2#12! 2#$! industries suggests@#1/$! that the of global markets in these sectors will negatively affect female workers. *+)2/1*2&+)! +5! .'+91'! ,1/V$2@! &)! 2#$@$! @$*2+/@! 0&''! )$.12&4$'-! 155$*2! 5$,1'$! 0+/V$/@7! "#&@! @$$,@! 2+! 9$! This seems to be borne out by the fact that unemployment rates for women workers increased from 6.6 percent in 9+/)$! +32! 9-! 2#$! 51*2! 2#12! 3)$,('+-,$)2! /12$@! 5+/! 0+,$)! 0+/V$/@! &)*/$1@$=! 5/+,! 878! ($/*$)2! &)! October:;;C! 2008 to2+! 7.6>78! in July 2009, :;;M?! while unemployment rates for male workers increased only by 0.6 percentage L*2+9$/! &)! U3'-! 0#&'$! 3)$,('+-,$)2! /12$@! 5+/! ,1'$! 0+/V$/@! &)*/$1@$=! +)'-!points 9-! ;78! ($/*$)21.$! (+&)2@! =3/&).! 2#$! @1,$! ($/&+=! FJKL?! :;;M=I7! Q@! ,+@2! =&@('1*$=! 0+/V$/@! *1))+2! 155+/=! 2+! @21-!3)$,('+-$=?!$@($*&1''-!2#+@$!5/+,!(++/$/!#+3@$#+'=@?!5$,1'$!0+/V$/@!,1-!/$@+/2!2+!&)5+/,1'!(1&=! 7 World Bank staff estimates using the 2006 Family Income and Expenditures Survey (NSO, 2006) +/!3)(1&=!0+/V!1)=!,1-!9$!0&''&).!2+!1**$(2!\+9@!2#12!+55$/!'+0$/!(1-!1)=!5$0$/!$,('+-$$@f!9$)$5&2@7! & &

5

during the same period (NSO, 2009d). As most displaced workers cannot afford to stay unemployed, especially those from poorer households, female workers may resort to informal paid or unpaid work and may be willing to accept jobs that offer lower pay and fewer employees’ benefits.

Government’s Response

To respond to the crisis, in February 2009, the government introduced a P330 billion (US$6.9 billion) stimulus package, which is equivalent to around 4 percent of GDP.8 The Economic Resiliency Plan (ERP) is the country’s response to the global economic crisis. Almost half of the package (P160 billion) is accounted for by the nominal increase in the government’s budget for 2009 over that of 2008. This amount is indicatively allocated for small infrastructure projects and the expansion of selected social protection programmes (Figure 5). Another P40 billion consists of tax adjustments, including a scheduled reduction of corporate income taxes from 35 to 30 percent that will allow firms to spend about P20 billion more in investments and an increased exemption in personal income tax that will empower individuals to the tune of an estimated P20 billion. Around P100 billion will be invested in large infrastructure projects by the Government Service Insurance System (GSIS), the Social Security System (SSS), and government-owned and controlled corporations. The remaining P30 billion will come from the additional social security benefits provided by the GSIS, the SSS, and the Philippine Health Insurance Corporation (PhilHealth) (NEDA, 2009a). However, the government created no special crisis institution to coordinate the implementation of the stimulus package.

To provide immediate jobs for displaced workers, the government frontloaded the spending on infrastructure projects in the first half of 2009. In early 2009, the government agencies that implement infrastructure projects such as the Department of Public Works and Highways, the Department of Transportation and Communication, the Department of Agriculture, and the Department of Education committed to frontload the spending of around

8 This report uses a currency conversion rate of US$1 = 48 Philippine pesos.

6

P95 billion (US$2 billion) worth of projects, which is equivalent to around 60 percent of the P160 billion (US$3.3 billion) component of the ERP. The construction of infrastructure projects was fast-tracked primarily to create jobs for workers who were displaced as a result of the global economic crisis. These jobs include the construction, repair, and rehabilitation of transport infrastructure such as highways and farm-to-market roads as well as school buildings, including classrooms and school toilet facilities. By September 2009, 89 percent of the P95 billion had been obligated, but only 46 percent has been disbursed.9

The government also allocated more funds for the expansion and strengthening of social protection programmes. The P160 billion (US$3.3 billion) component of the ERP also included increases in the budget for some of the country’s social protection programmes, including the conditional cash transfer programme, the conditional commoditybased transfer programme, the insurance subsidy for the poor, and training and scholarships. The government also allocated more funds to improve the delivery of social services by, for example, hiring nurses to work in rural areas and to improve the facilities and increase the manpower of primary and secondary hospitals. Moreover, to improve the targeting of poor households, the government increased the budget for implementing a national household targeting system.

As the crisis necessitated an increase in government spending, the government decided to forego its plan to close the national government budget deficit by 2010. While the significant fiscal consolidation and the fiscal reform undertaken by the government between 2003 and 2007 had produced positive results, the gains were not sustained over time due to the rise in spending pressures since 2008. For the first half of 2009, the national government has recorded a deficit of 4.3 percent of GDP, which is higher than the average deficit-to-GDP ratio of 2.2 percent that prevailed between 2003 and 2008. The slowing economy along with the sharp contraction in collections of import taxes by the Bureau of Customs, the recent cuts in personal income tax in July 2008 and in corporate income tax in January 2009 are all among the factors that have contributed to the slowdown in revenue generation (World Bank, 2009b).

Monitoring

Monitoring the impact of the crisis has been a challenge because of a lack of up-to-date household survey data. The National Statistics Office (NSO) conducts household surveys but only at long intervals, and the surveys do not collect information on some of the best variables for evaluating the impact of the crisis.10 For instance, the NSO conducts a quarterly Labor Force Survey (LFS), the preliminary aggregated results of which are published online 45 days after the data have been enumerated. The results of the LFS are generally not disaggregated by gender, which makes it difficult to conduct deep analysis of the gender effects of the crisis. Data on unemployment are also collected by several private companies such as Social Weather Stations (SWS) and Pulse Asia on a quarterly basis. However, these numbers are only of limited use since they are not directly comparable with the official LFS results for several reasons, among the most important of which is their limited sample sizes. Moreover, just

9 Calculated based on figures contained in NEDA (2009b). 10 Other data sources on employment other than the LFS include the following: (a) Survey on Overseas Filipinos, done every year (b) Labor Turnover Survey, every quarter and (c) Bureau of Labor Employment Statistics Integrated Survey, every two years.

7

as in other countries, there is no single government agency that observes and monitors the social impact of the economic and financial crisis, but the government is taking steps to strengthen this capacity. II. Social Protection Programmes at the Onset of the Crisis

The Philippine government is implementing 66 different social protection programmes that exist to protect Filipinos against lifecycle, economic, social, and environmental risks. The government’s social protection programmes aim to reduce poverty and vulnerability to risks and to enhance the social status and rights of the marginalized by promoting and protecting their livelihoods, by protecting them against hazards and sudden losses of income, and by increasing their capacity to manage risks.11 Since July 2009, the government has been implementing social protection programmes that address four types of risk: (i) lifecycle risks, which include hunger and malnutrition, illness, injury, disability, old age, and death; (ii) economic risks, which include the lack of a source of livelihood, low income, unemployment, underemployment, economic crises or transitions, and the high prices of basic goods; (iii) social risks arising from exclusion or marginalization, a lack of social investments, the loss of family care, homelessness, and manmade disasters; and (iv) environmental risks, which pertain to natural calamities (DAP, 2009).12

The social protection programmes are integrated into various sectors and are being implemented by 21 different government agencies. However, as most social protection programmes are cross-sectoral (in other words, cover, for example, labor, education, and health issues), several departments are involved in implementing those programmes that address various types of risks. The 21 government agencies implement from as few as one to as many as 15 social protection programmes, either alone or in partnership with other government agencies. While most of the programmes are directly relevant to the agency’s mandate (core programmes), several are considered as support (in that they complement or augment existing programmes) or peripheral (they make a minor contribution to the agency’s mandate). Among these agencies, the Department of Social Welfare and Development (DSWD) implements the highest number of social protection programmes (15 out of the 66). There are cases when several agencies address one type of risk, which can result in an overlap of beneficiaries and a duplication of provision of social protection services. For instance, there are about 12 agencies that implement programmes that address the risks associated with the lack of a source of livelihood, low income, unemployment, and underemployment (DAP, 2009).

Social insurance programmes, which are meant to mitigate income shocks by pooling resources and spreading risks across time and socioeconomic groups do not reach the majority of Filipinos. The Social Security System (SSS) and Government Service Insurance System (GSIS) are the two main agencies providing social insurance in the Philippines. In addition, there are five other agencies implementing social insurance programmes covering three major areas: (i) social security benefits and employees’ compensation (mainly provided for private and public

11 The official definition of social protection was adopted in 2007 by the National Economic and Development Authority’s Social Development Committee in Resolution No. 1 Series of 2007. 12 Based on the Review and Strengthening of the National Social Protection and Welfare Programme, which is the government’s quick assessment of social protection programmes in the Philippines undertaken by the Development Academy of the Philippines in collaboration with the National Economic and Development Authority, the Department of Social Welfare and Development, and the National Social Welfare Programme.

8

sector workers by the SSS and the GSIS respectively); (ii) health insurance (mainly provided by PhilHealth); and (iii) agricultural insurance (mainly provided by the Philippine Crop Insurance Corporation). Currently, there are over 20 social insurance programmes, all of which are designed in such a way that beneficiaries pay a premium over a given period of time to cover or protect themselves from loss of income due to health and employment or livelihood-related hazards.13 Nevertheless, the coverage rate of these programmes is low. In 2008 the contributing members of the SSS and the GSIS accounted for only 32.1 percent of the employed population while PhilHealth’s contributory programmes covered only 40 percent of the total number of employed population (Manasan, 2009a). Informal sector workers, who account for about one-third of the labor force, have little or no access to social insurance programmes as most of them are excluded from many provisions (DAP, 2009).

Social protection programmes in the Philippines are inadequately funded, especially compared with other

developing countries. Government on social protection accounted for 0.4 percent of GDP in 2007 and Y(-*23& '%(#$-#*(+& '%(,%2.)& *+& #0$&spending 60*3*''*+$)& 2%$& *+29$^72#$34& "7+9$95& $)'$-*2334& -(.'2%$9& /*#0& (#0$%& 9$1$3('*+,& -(7+#%*$);& O+4$/),$)2! @($)=&).! +)! @+*&1'! (/+2$*2&+)! 1**+3)2$=! 5+/! ;7X! ($/*$)2! +5! went up to 1.1 percent of GDP in 2008 in response to food and fuel crisis. However, a large share of this spending OP%!&)!:;;>!1)=!0$)2!3(!2+!H7H!($/*$)2!+5!OP%!&)!:;;C!&)!/$@(+)@$!2+!5++=!1)=!53$'!*/&@&@7!A+0$4$/?!1! was allocated to the operation of the rice price subsidy programme of the National Food Authority (NFA), which '1/.$! @#1/$! +5! 2#&@! @($)=&).! 01@! 1''+*12$=! 2+! 2#$! +($/12&+)! +5! 2#$! /&*$! (/&*$! @39@&=-! (/+./1,! +5! 2#$! accounted for 50 percent and 73 percent of government spending on social protection in 2007 and 2008 respectively J12&+)1'!G++=!Q32#+/&2-!FJGQI?!0#&*#!1**+3)2$=!5+/!6;!($/*$)2!1)=!><!($/*$)2!+5!.+4$/),$)2!@($)=&).! (Manasan, 2009b). In a non-crisis year such as 2007, government spending of 0.4 percent of GDP on social protection +)!@+*&1'!(/+2$*2&+)!&)!:;;>!1)=!:;;C!/$@($*2&4$'-!FY1)1@1)?!:;;M9I7!B)!1!)+)E*/&@&@!-$1/!@3*#!1@!:;;>?! is low compared with what is spent in other developing countries. Some Southeast Asian countries are estimated .+4$/),$)2!@($)=&).!+5!;7X!($/*$)2!+5!OP%!+)!@+*&1'!(/+2$*2&+)!&@!'+0!*+,(1/$=!0&2#!0#12!&@!@($)2!&)! +2#$/! =$4$'+(&).! *+3)2/&$@7! K+,$! K+32#$1@2! *+3)2/&$@! 2+! @($)=! 19+32! ;76!countries 2+! H7:! to spend about 0.5 to 1.2 percent of GDP on socialQ@&1)! protection, while 1/$! many$@2&,12$=! Latin American and South Asian ($/*$)2! +5! OP%!to+)! @+*&1'! (/+2$*2&+)?! Q,$/&*1)! (Besley 1)=! K+32#! Q@&1)! *+3)2/&$@! 1/$! are estimated spend 2.9 percent and 1.50#&'$! percent,1)-! of their]12&)! GDP respectively et al, 2003) (Figure 6).14 Another $@2&,12$=! 2+! @($)=! :7M! ($/*$)2! 1)=! H76! ($/*$)2! +5! 2#$&/! OP%! /$@($*2&4$'-! FS$@'$-! $2! 1'?! :;;<I! FG&.3/$! study has shown that mean spending on safety nets in 87 developing and transition countries is 1.9 percent of GDP 8I7HX! Q)+2#$/! @23=-! #1@! @#+0)! 2#12! ,$1)! @($)=&).! +)! @15$2-! )$2@! &)! C>! =$4$'+(&).! 1)=! 2/1)@&2&+)! (Weigand and Grosh, 2008). *+3)2/&$@!&@!H7M!($/*$)2!+5!OP%!FW$&.1)=!1)=!O/+@#?!:;;CI7!!!!! ! <*,7%$&]>&D)#*.2#$)&("&A(1$%+.$+#&Y'$+9*+,&(+&Y(-*23&6%(#$-#*(+&FG&("&AL6H& <7;! :7;! H7;! ;7;! K+32#!Q@&1)! Y1'1-@&1! B)=+)$@&1! "#1&'1)=! K&).1(+/$! %#&'&((&)$@k! ]1Z)! R+3)2/&$@! Q,$/&*1)! R+3)2/&$@! "#$%&',T!S$@'$-!$2!1'!F:;;<I!5+/!1''!*+3)2/&$@!$D*$(2!%#&'&((&)$@?!0#&*#!&@!$@2&,12$=!5/+,!Y1)1@1)! F:;;M9I7!

! & L$)'*#$& #0$& +7.$%(7)& '%(,%2.)& #02#& 2%$& *+& '32-$& *+& #0$& 60*3*''*+$)5& #0$*%& $""$-#*1$+$))& *)& -(.'%(.*)$9& :4& '((%& #2%,$#*+,5& /0*-0& %$)73#)& *+& 0*,0& 3$2U2,$& %2#$);! Q! )3,9$/! +5! @+*&1'! (/+2$*2&+)! (/+./1,@?! (1/2&*3'1/'-! 2#+@$! 2#12! *+,(/&@$! 2#$! '1/.$@2! (+/2&+)! +5! .+4$/),$)2! @($)=&).?! 1/$! 13 All are contributory programmes except for the health insurance subsidy for the poor operated by PhilHealth in which premiums are jointly paid for the *#1/1*2$/&^$=!9-!#&.#!'$1V1.$!/12$@!F2#$!(/+(+/2&+)!+5!(/+./1,!9$)$5&*&1/&$@!2#12!1/$!*'1@@&5&$=!1@!)+)E national government (through PhilHealth) and sponsors (such as local governments, private individuals, or private corporations). (++/I7!"#$!JGQ!/&*$!(/&*$!@39@&=-?!0#&*#!&@!@2&''!2#$!(/+./1,!0&2#!2#$!#&.#$@2!$@2&,12$=!*+@2@!$4$)!152$/! 14 Social protection spending in Besley et al (2003) covers social security and welfare, while Manasan (2009b) covers the key non-contributory social protection including labor market*+)@3,$/! programmes and(/&*$! community-driven Besley et al (2003) contains2#$! no estimates of spending for 2#$!programmes, 5++=! */&@&@?! &@!active 1! 3)&4$/@1'! @39@&=-!development 2#12?! 9-!projects. =$@&.)?! 1'@+! 9$)$5&2@! )+)E(++/7! B2! &@! social security and welfare for the Philippines. $@2&,12$=!2#12!XH!($/*$)2!+5!2#$!2+21'!JGQ!/&*$!@39@&=-!.+$@!2+!)+)E(++/!1)=?!1*/+@@!&)*+,$!=$*&'$@?!2#$! (++/$@2! #+3@$#+'=@! *+)@3,$! +)'-! HX! ($/*$)2! 0#&'$! 2#$! 0$1'2#&$@2! #+3@$#+'=@! *+)@3,$! 1/+3)=! :! ($/*$)2!+5!JGQ!/&*$!FG&.3/$!>I7H6!%/+./1,@!@3*#!1@!2#$!40.205)6!7$%+'.2'3!1!+)$E2&,$!*1@#!2/1)@5$/!5+/! 9 '&5$'&)$! (+0$/! *+)@3,$/@! =3/&).! 2#$! 53$'! */&@&@?! 2#$! G++=E5+/EK*#++'! %/+./1,! FGK%I?! 1! *+)=&2&+)1'!

Despite the numerous programmes that are in place in the Philippines, their effectiveness is compromised by poor targeting, which results in high leakage rates. A number of social protection programmes, particularly those that comprise the largest portion of government spending, are characterized by high leakage rates (the proportion of programme beneficiaries that are classified as non-poor). The NFA rice price subsidy, which is still the programme with the highest estimated costs even after the food crisis, is a universal consumer price subsidy that, by design, also benefits the non-poor. It is estimated that 41 percent of the total NFA rice subsidy goes to non-poor and, across income deciles, the poorest households consume only 14 percent while the wealthiest households consume around 2 percent of NFA rice (Figure 7).15 Programmes such as the Pantawid Kuryente, a one-time cash transfer for lifeline power consumers during the fuel crisis, the Food-for-School Program (FSP), a conditional commodity-based transfer, and the insurance subsidy for the poor under the PhilHealth’s National Health Insurance Programme (NHIP) also suffer from high leakage rates due to weaknesses in their targeting methodologies. However, recent attempts to improve the targeting system have produced positive results. Reflecting the government’s commitment to strengthening its social protection system, the Operational Guidelines for the FSP were revised in 2008 to improve its geographic targeting of the poor. In the case of the conditional cash transfer programme, the Pantawid Pamilyang Pilipino Programme (4Ps), a proxy means test (PMT) targeting methodology is now being used to select its beneficiaries. From international experience, the PMT methodology has the benefits of being objectively based and of having low inclusion error rates (in other words, the inclusion of the non-poor). Meanwhile, the government has indicated that it plans to adopt the PMT-based targeting system to select the beneficiaries of the NHIP’s insurance subsidy for the poor.

Recently, there has been a gradual shift in the focus of social protection programmes – from subsidies and commodity-based transfers to cash-based transfer programmes. For several decades, the NFA rice price

15 World Bank staff estimates based on the 2006 Family Income and Expenditure Survey (NSO, 2006).

10

subsidy has been the mainstay of the government’s portfolio of social protection interventions and has been used to respond to crises such as the food price shock in 2008. Likewise, commodity-based transfers such as the FSP have been used to mitigate the negative impact on welfare of the food crisis, particularly for the poor. Recently, however, there has been an evident shift in focus in the range of social protection programmes – from subsidies and commodity-based transfer programmes to cash-based transfers such as the 4Ps (Figure 8). While the NFA rice price subsidy remains significant in terms of government spending, the conditional cash transfer programme has gained dramatic recognition as an effective mechanism to supplement the income of the poorest households while also supporting their human capital development. Even at the height of the food crisis, the government already recognized the cost-effectiveness and flexibility of cash for the quick delivery of assistance to poorer households to cope with economic shocks. In addition to the 4Ps, the government introduced several cash transfers during the food crisis including Pantawid Kuryente (the one-time cash transfer for lifeline power consumers) and Tulong Para Kay Lolo and Lola (a P500 cash transfer for people aged 60 years or older who do not receive old age benefits). Cash transfers are the most direct type of intervention designed to support the poor and offer more advantages than food transfers. In particular, providing cash transfers is a much less costly operation once the administrative system is in place than providing assistance in kind (Grosh et al, 2008).

III. Adjustments Made to Social Protection Programmes in Response to the Crisis

The government has increased its budget for social protection programmes to cushion the effects of the global economic crisis. Recognizing the need to protect the poor and the most vulnerable from the adverse effects of the crisis, the government has made significant adjustments to its social protection programmes, particularly in terms of budget. Funding support for the conditional cash transfer programme (the 4Ps) was significantly increased from

11

P1.3 billion in 2008 to P15 billion in 2009.16 Likewise, funding support for the conditional commodity-based transfer (the FSP) was increased from P3.3 billion in 2008 to P4.8 billion in 2009.17 Among other increases in funding support included the premium subsidy for the poor under the NHIP and the enhancement of health facilities programme being undertaken by the Department of Health (DOH) (Figure 9).18 The allocated funds for NFA operations were also increased from P2 billion in 2008 to P4 billion in 2009, but off-budget releases for the NFA to account for the implicit &

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& M0$&-(1$%2,$&("&#0$&-(+9*#*(+23&-2)0&#%2+)"$%&'%(,%2.&/2)&)*,+*"*-2+#34&$8'2+9$9&#(&-(1$%&.(%$&'((%& The coverage of the conditional cash transfer programme was significantly expanded to cover more poor 0(7)$0(39);! Q@! =&@*3@@$=! &)! 2#$! (/$4&+3@! @$*2&+)?! 2#$! X%@! #1@! 9$$)! @&.)&5&*1)2'-! $D(1)=$=! 2+! ,&2&.12$! households. discussed the previous section, the*/&@&@7! 4Ps has"#$! beenX%@! significantly expanded the#+3@$#+'=! negative 2#$! )$.12&4$!As&,(1*2! +5!in2#$! .'+91'! $*+)+,&*! (/+4&=$@! ./1)2@! to 2+!mitigate $'&.&9'$! impact of the global economic crisis. The 4Ps provides grants to eligible household beneficiaries to improve their 9$)$5&*&1/&$@!2+!&,(/+4$!2#$&/!#$1'2#?!)32/&2&+)?!1)=!$=3*12&+)?!(1/2&*3'1/'-!+5!*#&'=/$)!1.$=!;!2+!HX!-$1/@! +'=?!1@!'+).!1@!2#$!#+3@$#+'=@!*+,('-!0&2#!*$/21&)!*+)=&2&+)@7!"#$!(/+./1,!@21/2$=!&)!:;;>!0&2#!:;?;;;! health, nutrition, and education, particularly of children aged 0 to 14 years old, as long as the households comply #+3@$#+'=!9$)$5&*&1/&$@!1)=!93=.$21/-!@3((+/2!+5!%6;!,&''&+)7!B)!/$@(+)@$!2+!2#$!5++=!1)=!53$'!*/&@&@!&)! with certain conditions. The programme started in 2007 with 20,000 household beneficiaries and budgetary support ,&=E:;;C! 1)=! 2#$! .'+91'! $*+)+,&*! */&@&@! 2#12! 155$*2$=! 2#$! =+,$@2&*! $*+)+,-! 2+01/=@! 2#$! $)=! +5! 2#$! of P50 million. In response to the food and fuel crisis in mid-2008 and the global economic crisis that affected -$1/?! 2#$! .+4$/),$)2! @&.)&5&*1)2'-! $D(1)=$=! 2#$! (/+./1,! 2+! *+4$/! <>8?;;;! #+3@$#+'=@! 1)=! (/+4&=$=! the domestic economy towards the end of the year, the government significantly expanded the programme to %H7<! 9&''&+)! 2+! 2#$! (/+./1,7! B)! :;;M?! 2#$! .+4$/),$)2! =$*&=$=! 2+! &)*/$1@$! 2#$! )3,9$/! +5! #+3@$#+'=! cover 376,000 households and provided P1.3 billion to the programme. In 2009, the government decided to increase 9$)$5&*&1/&$@!2+!H!,&''&+)!#+3@$#+'=@!2+!*+4$/!1/+3)=!:;!($/*$)2!+5!2#$!*+3)2/-f@!(++/!(+(3'12&+)!1)=! the number of household beneficiaries to 1 million households to cover around 20 percent of the country’s poor &)*/$1@$=!2#$!93=.$2!2+!%H6!9&''&+)!FG&.3/$!H;I7!!! & population and increased the budget to P15 billion (Figure 10). <*,7%$&=N>&D8'2+)*(+&("&#0$&Z(+9*#*(+23&Z2)0&M%2+)"$%&6%(,%2.5&INNa@INN[&&

87;!!Act (GAA), the government allocated P298.6 million for the 4Ps in 2008 and P5 billion in 2009. In addition, the government 16 Under the General Appropriations X;;?;;;!! provided an additional P998.6 X7;!! million for the expansion of the programme in 2008, and P10 billion additional funds are expected to be provided to the programme to cover 1 million households in 2009. :;;?;;;!! 17 The allocated amount for the :7;!! FSP in 2008 was P766 million for the DSWD component and P2.5 billion for the DepEd component under the GAA. In 2009, it was increased to P1.8 billion for the DSWD component and P3 billion for the DepEd component (which refers to the rice component of the Malusog na Simula ;7;!! ;!! Yaman ng Bansa Programme under the National Nutrition Council). K+3/*$T!PKWP! :;;>! Act of 2008 and :;;C! :;;M! 18 As reflected in the budgets in the General Appropriations 2009 for the NHIP, the DOH,, and the Department of Budget and Management (DBM) (DBM, 2009).

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12

receipts, the program was implemented nationwide to meet the needs of poor senior citizens and to recognize their

contribution to the country. The programme initially targeted 1 million beneficiaries but was expanded to reach as many as 1.37 million senior citizens by the end of 2009. Some of the funding support to expand the programme was taken from the excess funds allotted for the Pantawid Kuryente, which ended in December 2008.

Expanding the social protection system also involved introducing interventions to mitigate the employment effects of the global economic crisis. To create more jobs and, at the same time, to improve the delivery of health care services, in February 2009, the government launched the Nurses Assigned in Rural Service (NARS) Programme to create jobs for unemployed nurses and improve health service delivery in rural areas. The NARS Programme, which employs about 10 registered nurses to be deployed in each of the 1,000 poorest municipalities for a period of six months, is estimated to cost P480 million.19 By June 2009, the government had deployed 4,046 registered nurses in the selected municipalities. The programme, while creating jobs for a large number of unemployed nurses, also aims to accelerate progress towards meeting the Millennium Development Goals, which has been slow so far given the high maternal mortality rate in the country and the low proportion of births that are attended by skilled health personnel.20

In addition, the government has coordinated all emergency employment and livelihood programmes that would generate jobs for displaced workers. Recognizing the need to generate emergency employment, in October

19 World Bank staff estimates based on the P8,000 per nurse per month honorarium provided by the government. 20 The number of maternal deaths per 100,000 live births was 162 in 2006, while the proportion of births attended by skilled health personnel was 72.9 percent in 2007. Both of these statistics are behind the MDG targets of 52.3 maternal deaths per 100,000 live births and 100 percent respectively (NSCB, 2009b).

13

2008 the government launched the Comprehensive Livelihood and Emergency Employment Programme (CLEEP), which consolidated about 35 existing government programmes and projects that required immediate manpower. The agencies involved in the implementation of the CLEEP allocated a total of about P13.7 billion (US$285 million), of which 59 percent had been obligated by September 2009. The jobs generated under the CLEEP include the construction and maintenance of farm-to-market roads and the repair and rehabilitation of irrigation facilities, among others. In 2009, CLEEP is expected to generate as many as 251,017 jobs and employ as many as 465,945 individuals. By September 2009, the programme had already created 197,435 jobs and employed 328,262 individuals (NAPC, 2009).

CLEEP also includes some of the government’s pre-existing social protection programmes, particularly those that generate employment and provide livelihoods. For instance, the Self-Employment Assistance - Kaunlaran (SEA-K) Programme, a community-based microfinance project aimed at building the capacity of community level organizations to self-administer the provision of socialized credit, which is an existing social protection programme, is also one the programmes under CLEEP. Another is the Out-of-School Youth Serving towards Economic Recovery (OYSTER) project, which aims to provide employment to young people who are both out of school and out of work to work on the maintenance of roadsides and carriageways of national roads and highways, bridges, and other transport infrastructure projects.

IV. Policy Issues

For several years, the government has put a high priority on protecting the poor but the recent crises have compelled it to accelerate its efforts to strengthen the social protection system. Even before the onset of the recent crises, pro-poor programmes have been deeply embedded in the administration’s development plans. The Philippines has succeeded in reducing poverty from almost half of the population in 1991 (45.3 percent) to about one-third in 2006 (32.9 percent), although this performance is quite weak compared to other countries in the region (NSCB, 2009b and Balisacan, 2009). In recent years, the government has given increased attention to reforming the social protection system. In 2007, the government, through the DSWD, put in place the four main building blocks for developing a sound social protection programme in the Philippines: (i) develop a social protection strategy; (ii) develop an accurate mechanism for targeting the poor; (iii) pilot a strategy for conditional cash transfer programmes; and (iv) ensure the systems and infrastructure have the capacity and flexibility to respond quickly to disasters. Just when the government was initiating these reforms, the food and fuel crisis and the global economic crisis hit the Philippines, which made it imperative for the government to re-double its efforts and accelerate its reforms. In 2008, the government created the inter-agency National Social Welfare and Protection Cluster to consolidate programmes of various government agencies into a single, national social welfare strategy.21 Over the longer term, this inter-agency programme is expected to reallocate resources from less effective programmes to more effective social protection programmes.

21 The Administrative Order (AO) No. 232 was issued by the President on July 8, 2008, which brought together the government agencies dealing with social welfare into a National Social Welfare Programme. The President later issued another AO on July 28, 2008 (AO No. 232-A), which strengthened the cluster by including more agencies and assigning the responsibility for coordination to the DSWD.

14

One of the key issues that the government plans to address in its reform is the fragmented and uncoordinated delivery of social protection programmes. The various reviews and assessments of social protection programmes in the Philippines have highlighted the lack of policy and institutional coordination in the broad area of social protection. Because each government ministry operates under its own mandate, social protection programmes tend to be uncoordinated and are often implemented in an ad hoc manner. Some social protection programmes are short-lived as they are contingent on the priorities of whatever administration happens to be in office. As there are several interventions that address the same risks, it is very likely that there is some overlapping of benefits and double-counting of beneficiaries (DAP, 2009 and ADB, 2007). With a view to improving the delivery of social protection services, the government has now created a social protection framework that lays out the strategies for enhancing coordination among programmes and improving the delivery of social protection services. In addition, it has conducted an assessment of its existing social protection programmes with a view to scaling up and reallocating resources to the most effective and efficient ones. It is crucial that the government follow through with the implementation of this effort.

The government recognizes that the benefits from social protection programmes are not being fully realized because of the absence of a legitimate and functional system for targeting the poorest households. As discussed in Section II, some of the country’s major social protection programmes suffer from high leakage rates. In recognition of this issue, the government has established a National Household Targeting System for Poverty Reduction (NHTS-PR), which is a systematic and objective targeting system (using the PMT methodology) that includes a standardized database of poor households. The NHTS-PR is expected to target only poor households, thus enhancing the poverty-reducing impact of its social protection programmes. In the case of the NFA rice price subsidy, estimates have shown that the poverty reduction impact of this programme during the food crisis could have been more significant if the rice had been made available only to poor households (targeted) rather than to all households (untargeted). Given the same programme budget, the NFA rice price subsidy would reduced poverty incidence by 4.7 percentage points, the income gap by 3.1 percentage points, and poverty severity by 1.3 percentage points if only poor households benefitted from the programme (Figure 11). It would be beneficial if all government agencies that implement social protection programmes use the targeting database to select their beneficiaries. In July 2009, the DSWD endorsed a draft Executive Order to the Office of the President asking for the NHTS-PR to be adopted as a mechanism for identifying those eligible to benefit from government programmes and services to reduce leakages. Currently, the Department of Health is considering using the NHTS-PR poverty database to target its health insurance programme for the poor. This would be an important positive step forward in improving the targeting of national programmes.

15

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! ! !3#0(7,0& )7:)*9*$)& #%2+)"$%)& 2& )*,+*"*-2+#& -(.'(+$+#& ("& #0$& )(-*23& Although subsidies2+9& and-(..(9*#4@:2)$9& commodity-based transfers are2%$& still )#*33& a significant component of the social protection '%(#$-#*(+& )4)#$.5& #0$& ,(1$%+.$+#& :$,7+& #(& '7#&on.(%$& $.'02)*)& -(+9*#*(+23& -2)0& #%2+)"$%)& system, the government has begun to 02)& put more emphasis conditional cash (+& transfers than in previous years. In #02+&*+&'%$1*(7)&4$2%);!B)!.$)$/1'?!@39@&=&^&).!*+,,+=&2&$@!=&@2+/2!,1/V$2&).!1)=!(/+=3*2&+)!&)*$)2&4$@! general, subsidizing commodities distort marketing and production incentives as this creates a parallel infrastructure 1@! 2#&@! */$12$@! 1! (1/1''$'! &)5/1@2/3*23/$! 2#12! */+0=@! +32! (/&412$! 2/1=$! +/! (/$$,(2@! &2@! =$4$'+(,$)27! B)! that crowds out private trade or preempts its development. In addition, the costs required to administer price 1==&2&+)?! 2#$! *+@2@! /$c3&/$=! 2+! 1=,&)&@2$/! (/&*$! @219&'&^12&+)! (/+./1,@! 1/$! #&.#! 1@! 2#$-! &)4+'4$! '1/.$! stabilization programmes as they involve1/$! large#1/=! administrative structures budgets are&)! hard to 1=,&)&@2/12&4$! @2/3*23/$@! are 1)=!high 2#$&/! 93=.$2@! 2+! *+)2/+'! .&4$)! and 2#$!their 5'3*2312&+)@! 2#$! :: &)2$/)12&+)1'!(/&*$!+5!2#$!*+,,+=&2-7 !"#$!1'2$/)12&4$!l!(/+4&=&).!*+,,+=&2-E91@$=!2/1)@5$/@!l!&@!1'@+! control given the fluctuations in the international price of the commodity.22 The alternative – providing commodity(/+9'$,12&*! 9$*13@$! 2#$! =&55&*3'2-!because &)! 21/.$2&).! 2#$!in&)2$)=$=! 0#&*#! *1)! /$@3'2! &)! based transfers – is+5! also problematic of the+)'-! difficulty targeting 9$)$5&*&1/&$@?! only the intended beneficiaries, which #&.#!can '$1V1.$! /12$@7! Q)+2#$/! 1'2$/)12&4$! l! (/+4&=&).! 2#$! *+,,+=&2-! =&/$*2'-! 2+! 2#$! *+)@3,$/! l! '&,&2@! result in high leakage rates. Another alternative – providing the commodity directly to the consumer – limits *+)@3,$/@f!&,,$=&12$!*#+&*$@?!1)=!2#$!(/+*3/$,$)2?!2/1)@(+/2?!1)=!=&@2/&932&+)!+5!5++=!*1)!(+2$)2&1''-! consumers’ immediate choices, and the procurement, transport, and distribution of food can potentially create */$12$! =&@2+/2&+)@! &)! 5++=! ,1/V$2@7! "#$! 1*2&+)! 2#12! 2#$! .+4$/),$)2! /$*$)2'-! 2++V! 2+! @&.)&5&*1)2'-! distortions in food markets. The action that the government recently took to significantly increase the budget and &)*/$1@$!2#$!93=.$2!1)=!*+4$/1.$!+5!X%@!#1@!&)=&*12$=!1!@#&52!+5!(/$5$/$)*$!2+01/=@!*1@#E91@$=!2/1)@5$/! coverage of 4Ps shift of preference towards cash-based transfer The 4Ps is a0&2#! basic (/+./1,@7! "#$! X%@!has &@!indicated 1! 91@&*! a)$$=@E91@$=! @+*&1'! 1@@&@21)*$! (/+./1,! 5+/!programmes. 2#$! *#/+)&*1''-! (++/! *#&'=/$)!1)=!$)*+3/1.$@!2#$!5+/,12&+)!+5!#3,1)!*1(&21'!1,+).!2#$!-+3).!1@!1!,$1)@!+5!9/$1V&).!2#$! needs-based social assistance programme for the chronically poor with children and encourages the formation of &)2$/E.$)$/12&+)1'!*-*'$!+5!(+4$/2-7!!!!!!!&& human capital among the young as a means of breaking the inter-generational cycle of poverty. & M0$&,(1$%+.$+#&02)&23)(&%$-(,+*e$9&#0$&+$$9&"(%&2&7+*"*$9&.(+*#(%*+,&2+9&$12372#*(+&)4)#$.&"(%&*#)& The government has also recognized the need for a unified monitoring and evaluation system for its social )(-*23&'%(#$-#*(+&'%(,%2.);&Q@!&)!+2#$/!=$4$'+(&).!*+3)2/&$@?!@$4$/1'!@+*&1'!(/+2$*2&+)!(/+./1,@!&)!2#$! protection programmes. As in other developing countries, several social0#&*#! protection programmes in the %#&'&((&)$@! '1*V! 93&'2E&)! ,+)&2+/&).! 1)=! $41'312&+)! *+,(+)$)2@?! ,1V$@! &2! =&55&*3'2! 2+! Philippines $41'312$! lack built-in monitoring and evaluation components, which makes it difficult to evaluate whether they have achieved !N@2&,12$@!@#+0!2#12!&2!*+@2@!2#$!JGQ!%<!2+!%C78!5+/!$4$/-!($@+E$c3&41'$)2!.&4$)!2+!2#$!(++/!2#/+3.#!2#$!/&*$! their objectives and intended outcomes. Impact evaluation can be used to improve the programme and enhance @39@&=-!(/+./1,!FW+/'=!S1)V?!:;;M*I7! its performance. It also helps the government to be able to devise future programme budgets based on empirical

::

15 evidence. The government has taken a positive step in the direction of adopting monitoring and evaluation systems for it SP programmes. The DSWD is planning to undertake a rigorous impact evaluation of the 4Ps, which could usefully be replicated for more of the government’s social protection programmes.

22 Estimates show that it costs the NFA P3 to P8.6 for every peso-equivalent given to the poor through the rice subsidy programme (World Bank, 2009c).

16

The government is also addressing the limited implementation capacity of its agencies. In particular, the DSWD’s reform programme focuses on increasing its effectiveness in delivering social welfare programmes and on strengthening its leadership role in social protection. This is particularly important at this stage given the considerable administrative capacity that is required of the agency to roll out the 4Ps. International experience suggests that implementing a conditional cash transfer programme requires extensive training of the agency’s staff at both the central and the local level in all of the operational steps of the programme, while long-term sustainability of the programme is contingent on the credibility and quality of the programme and its results.

Enhancing the social protection system not only requires increased spending, but also more budget transparency and greater budget efficiency. Inadequate funding has been among the key factors that have limited the development impact of social protection programmes. The coverage rates and benefit levels of these programmes are low, and some programmes have not been sustainable over time due to a lack of funding. Recently the government has increased its spending for major social protection programmes. There is scope for further reallocation to such programmes to bring spending in line with that of other middle-income countries, along with improving the targeting and increasing the efficiency of these programmes. In addition, there is also a need to make budgeting more transparent and efficient. In particular, over the course of a year, the actual allocations to programmes across agencies can differ markedly from the initial budget allocation, as set by the General Appropriations Act (GAA). This can result in shortfalls because the budget is not released as planned. Moreover, there are often unpredictable reallocations during the year, with some agencies getting less money and others more than they were budgeted to receive.23 Also, significant off-budget expenditures can sometimes be necessary, which further complicates actual expenditure patterns. During the food crisis, for example, the government was estimated to have spent P60.9 billion (US$1.3 billion) for the NFA rice price subsidy through its Government Owned and Controlled Corporation (GOCC), even though only P2 billion was allocated to the NFA under the 2008 GAA. Recognizing these issues, Congress and the Senate are considering legislation to increase the transparency and efficiency of the budgeting process. Civil society organizations have also played a significant role in advocating for more transparency and accountability in the budgeting system.

Another constraint, that has also made it difficult to assess the welfare impact of crises, has been the lack of regularly collected, up-to-date household-level data. The government conducts several household surveys including the Labor Force Survey (LFS), the Family Income and Expenditure Survey (FIES), and the Annual Poverty Indicator Survey (APIS), but the current design of these surveys and the long intervals between the times when they are fielded has constrained their usefulness in monitoring the effects of the crisis.24 Surveys that collect indicators on education and health outcomes also suffer from long time lags. The two key factors that are currently standing in the way of improving the statistical system in the Philippines are a lack of budgetary support and inadequate

23 Aside from their budget allocations, the agencies get additional funding for certain programmes or projects (from the pooled savings or unreleased appropriations of other agencies) or additional releases from the Special Purpose Fund (such as the unprogrammed fund, the miscellaneous personnel and benefits fund, the contingent fund, the priority development assistance fund, the general fund adjustment, or the economic stimulus fund, among others), which are lump sum funds in the GAA that are handled and managed by the Department of Budget and Management. 24 The LFS is conducted quarterly (the most recent was fielded in July 2009), and preliminary results are available 45 days after enumeration. The FIES is conducted every three years (the most recent was fielded in 2006), but results are released with about 18 months lag. Meanwhile, the APIS is conducted irregularly (the most recent was fielded in 2008), and results are also released with long time lag.

17

manpower and capacity. In the 2005-2010 Philippine Statistical Development Programme, the government laid out the medium-term directions, strategies, and priorities of the Philippine Statistical System (PSS) as well as the indicative budgets for the most important statistical programmes and activities. This is a window of opportunity for the PSS to seek international funding to underwrite the strengthening of the country’s data collection activities.

While the Government of the Philippines faces numerous challenges in administering its social protection programmes, it is taking important steps to improve the delivery of social protection services to address its lagging poverty and human development outcomes. Since 2007, the government has taken several steps in this direction. It has issued an operational definition of social protection. It has initiated the sector reform in the DSWD. It has increased the funds available for social protection following the recent crises enabling the introduction of cash transfer programmes and the establishment of a national household targeting system. At the same time, the government has created the inter-agency body (the National Social Welfare and Protection Cluster) to coordinate efforts to improve the social protection system. It is vital that the government sustains these efforts and continues to implement further reforms to make the social protection system more effective and transparent.

Acknowledgements This report was prepared by Rosechin Olfindo as an input to the ASEAN regional review of the social impact of and policy responses to the global financial crisis, with the financial support of the World Bank. The author benefited greatly from the comments and guidance received from Jehan Arulpragasam of the World Bank Office in Manila and the ongoing work of the Bank’s Human Development team in assessing the impact of the global financial crisis. Sincere thanks are due to Secretary Domingo Panganiban of the National Anti-Poverty Commission of the Philippines and Rashiel Velarde of the World Bank.

18

References

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National Statistics Office (2009a), “Index of Foreign Trade Statistics,” http://www.census.gov.ph/data/sectordata/datafts.html National Statistics Office (2009b), “Index of Manufacturing Statistics”, http://www.census.gov.ph/data/sectordata/datamfg.html National Statistics Office (2009c), “Index of Price/Inflation Statistics,” http://www.census.gov.ph/data/sectordata/datacpi.html National Statistics Office (2009d), “Labor Force Statistics,” http://www.census.gov.ph/data/pressrelease/2009/lf0902tx.html Philippine Overseas Employment Administration (2007), “2007 Overseas Employment Statistics”, http://www.poea.gov.ph/stats/ stats2007.pdf Philippine Overseas Employment Administration (2008), “Compendium of OFW Statistics”, http://www.poea.gov.ph/stats/2008_ stats.pdf Reyes, C. (2002), “The Poverty Fight: Have We Made an Impact?,” PIDS Discussion Paper 2000-20. Social Weather Station (2009), “Second Quarter 2009 Social Weather Survey: Adult unemployment eases to 25.9%: 10% lost their jobs involuntarily, 9% resigned”, SWS Media Release: 8 September 2009. Weigand, C. and Grosh, M. (2008), “Levels and Patterns of Safety Net Spending in Developing and Transition Countries”, Social Protection Discussion Paper No. 0817. World Bank (2009a), “Crisis Monitoring Survey”, datafile. World Bank (2009b), “Philippines Development Report 2009: Battling the Global Recession”, forthcoming. World Bank (2009c), “Philippines Quarterly Economic Update – November 2009”, forthcoming. World Bank (2009d), “Global Crises and Household Vulnerability in the Philippines: Social Impacts and Policy Responses,” unpublished manuscript, 10 August 2009.

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