Executive Legislative Coaching

Cong Manny, Gov Steve Solon, Vice Gov. Jinkee, Mayors and Board Members of Sarangani

Mayor Ronnel Rivera, Vice Mayor Banas, and Councilors of General Santos City

PROVINCES WITH HIGHEST ARMED CONFLICTS

MILF/MNLF/ASG POVERTY INDEX RATE (2010) POOREST PROVINCE RANK

Maguindanao North Cotobato Basilan Lanao del Norte Lanao del Sur South Cotabato Sultan Kudarat Sulu Zamboanga del Sur

60.4
26.1 33.5 46.5

2
55 40 10

37.6
26.4 41.5 45.1 34.4

24
54 17 13 36

PROVINCES WITH HIGHEST ARMED CONFLICTS

CPP-NPA
Quezon

POVERTY INDEX RATE (2010)

32.8

POOREST PROVINCE RANK

42

Davao del Norte

Albay Cagayan Metro Manila Davao Oriental Isabela Davao del Sur Camarines Sur Agusan del Sur Surigao del Sur Kalinga Apayao

30.3
34.4 16.5 4.8 37.2 23.9 24.2 40.1 52.8 48.6 46.1 16.8

49
34 68 75 26 61 59 21 5 6 12 67

Breaking the Poverty Trap

DEVELOPMENT Concepts
A multifaceted process whereby the quality of life and the humanity of individuals and groups improves (Simon, 1990) The creation of wealth and value for the community and for individuals (Mier, 2006) The satisfaction of human needs and aspirations in the major objective of development. (Brundtland Report, UNDP, 1987)

Possible definitions of development

Alteration of the structure of production and employment so that the share of agriculture declines and industry/services share increases (measured by economic output or GDP growth) Enhancement of human life and the freedoms people enjoy (measured by, among others, human development indicators) Sustainable use of natural and other resources; care for the welfare of future generations Not just material wealth, but human satisfaction, welfare and happiness 7

Development is also a process of improving the quality of human lives

It encompasses the three facets of the development process as follows: 1. Raising peoples living levels their incomes and consumption levels of food, medical services, education, etc. through relevant economic growth processes;

2. Creating and managing conditions that are conducive to the growth of peoples self-esteem through the establishment of social, political, and economic systems and institutions that promote human dignity and respect
3. Increasing peoples freedom by enlarging the range of their choice variables, as by increasing varieties of consumer goods and services

SUSTAINABLE DEVELOPMENT
Sustainable development is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but in the indefinite future. The term was used by the Brundtland Commission, which coined what has become the most often-quoted definition of sustainable development as development that "meets the needs of the present without compromising the ability of future generations to meet their own needs. (Based on UNDP Definition)

Snapshot of Global Poverty

11

Source: http://go.worldbank.org/WE8P1I8250

Can we eradicate extreme poverty worldwide?

Inequality matters World Bank: a 1% increase in incomes cut poverty by 0.6% in the most unequal countries but by 4.3% in the most equal ones.

12

Source: The Economist (2013).

24

Poverty: Deep and Deepening

Poverty incidence will get worse before it gets better

Property of Benjamin Diokno

Why is poverty persistent?

Poverty in the Philippines

24.5 24.0 23.5 23.0 22.5 Millions 22.0 21.5 21.0 20.5

40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 1991 1994 1997 2000 2003 % of poor
15

20.0
19.5 19.0 2006 2009 No. of poor

Source: Balisacan (2011) drawing on data from the FIES (various years).

Percent

TERRACES OF POVERTY: ANNUAL AVERAGE SELF-RATED POOR

74
70

67 55

66

62

68 67 66

65

68 63 59 59 61 61 57 62 63 60 51 53 54 50 53 49 48 49 52

50

47

30 % of families

10
'83 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Self-Rated Poverty Question: Where would you place your family in this card? (Not poor, On the line, Poor) *Note: The NSCB figures, which compare income of the year to the official poverty line, are plotted in June of the year.

A HUNGER PLATEAU: ANNUAL AVERAGE HUNGER, PHILIPPINES

% of households
20

16.7
15

17.9

Total 19.9 19.9 Hunger 18.5 19.1 19.1

14.3 11.0 10.8 11.4 10.1 8.3 7.0 11.8 12.6 14.4 7.0 7.6 11.0 8.7
3.0 3.0 4.0 3.4 4.0 4.0
3.3 3.7 4.3 Hunger

10

16.1 15.6 14.6 15.115.8

Moderate Hunger

6.2 7.3
5.8
4.6 4.2

5 4.1 0

5.5
2.5
1.5

Severe

2.6

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Note: Dont Know and Refused responses are not shown. Q: Nitong nakaraang 3 buwan, nangyari po ba kahit minsan na ang inyong pamilya ay nakaranas ng gutom at wala kayong makain? KUNG OO: Nangyari po ba yan ng MINSAN LAMANG, MGA ILANG BESES, MADALAS, o PALAGI?

The poor get hit harder by crises and shocks

Example: Food price shocks hit the poor harder because it constitutes a large share of their spending
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

East Asia and the Pacific

Cambodia

Indonesia

Lao PDR

Philippines

Thailand

Vietnam

Population Average

Among extreme poor

18

Source: Data adapted from De Joyos and Lessem (2011).

Economic growth is weakly translated into poverty reduction

Percent change in poverty incidence arising from 1% change in mean income

0

World Bank (2009), East Asia 1990-2006

Balisacan and Fuwa (2004), Philippines 19881997

World Bank (2009), Thailand 1990-2006

World Bank (2009), Indonesia 1990-2006

World Bank (2009), Vietnam 1990-2006

World Bank (2009), Philippines 1990-2006

-0.5 -1 -1.5 -2 -2.5 -3 -3.5 -4 -4.5 -5

At 3% growth, and at 1.5% poverty elasticity of growth, it will take the Philippines 360 years to At 10% growth (approximating Chinas) and 5% eliminate poverty.of growth (approximating poverty elasticity Thailands), it will take 24 years to eliminate At 8% growth, and at 1.5% poverty elasticity of poverty in the Philippines. growth, it will still take the Philippines 130 years to eliminate poverty.
20

Source: Figure adapted from Balisacan (2011). Scenarios based on authors calculations.

Balisacan (2007), Philippines 1988-2003

Ravallion (2001), 41 Developing Countries

Rising prices of basic commodities and the gradual erosion of purchasing power
90

80
70 60 50 40 30 20 10 0 1990

Average prices (before 2003): Galunggong Php31 Rice Php 16 Diesel Php 9

Average prices (after 2003): Galunggong Php57 Rice Php 27 Diesel Php31

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Galunggong (per kg)

Well Milled Rice (per kg)

Diesel (per liter) 21

Source: Bureau of Agricultural Statistics, Department of Energy

2011

The Basic Sectors

Farmers and Landless Rural Workers Fisherfolk Indigenous Peoples Urban Poor Workers in the Informal Sector Disadvantaged Groups (who also cut across all sectors: - Women - Youth and Disadvantaged Students - Persons with Disabilities - Senior Citizens and Veterans - Victims of Disasters and Calamities

POVERTY PROJECTIONS, 2006- 2016

Magnitude of Individuals (millions)
35.0

30.0

25.0

MDG Target MDG Target

4.5% growth

20.0

15.0

6.0% growth

10.0

5.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

PROGRAM THRUSTS: Focus on the Poorest of the Poor

Anti-poverty programs designed to build capacity and create opportunity among the poor; Focus on the poorest regions/provinces. Anti-poverty programs will have a clear-cut people empowerment thrust Design programs emphasizing community-driven development

Schizoprenic economy?
25

Philippines is ranked 138 out of 185 economies in ease of doing business.

1
12 18

79 99 128 133

138

163

C
Y C

BEP = Y = C

Poor governance turned off investors

FDIs were low compared to its ASEAN neighbors, hit rock bottom in 2001

Poor governance turned off investors

FDIs were low compared to its ASEAN neighbors, hit rock bottom in 2001

It requires 10 procedures, takes 34 days, and costs 8.7 % GNI per capita to start a business in Vietnam.
Starting a Business
DB 2013 Rank

99

DB 2012 Rank 99

Change in Rank

Indicator Procedures (number) Time (days)

Vietnam 10 34

East Asia & Pacific 7 36

OECD 5 12

Cost (% of income per capita)

Paid-in Min. Capital (% of income per capita)

8.7
0.0

22.4
13.4

4.5
13.3

In the Philippines, it takes 16 procedures, 36 days, and 18.1 % GNI per capita to start a business. In Thailand, it takes 4 procedures,29 days, 6.7% GNI per capita to start a business.

VOICE AND ACCOUNTABILITY

POLITICAL STABILITY

GOVERNMENT EFFECTIVENESS

REGULATORY QUALITY

RULE OF LAW

CONTROL OF CORRUPTION

Corruption prior to 2010

Improvement from 129th in the Transparency Internationals Corruption Index to 105th (out of 176) in 2012.

Source: Transparency International, Global Corruption Baromete (2010) 37

Where are the worlds youth?

About 1.2 million young workers will join the labor force each year from 2010 to 2040
160

140

120

100

80

60

40

20

0 2010 2015 2020 2025 Total Population Working Age 2030 2035 2040

Source: Mahurkar and Mendoza (Forthcoming) using data from BLES.DOLE.GOV

39

BPO: Bright spot, but with some challenges

First calls were taken in 1997; today the sector employs 638,000 people and enjoys revenues of $11 billion, about 5% of the country's GDP. Philippines now employs about 400,000 people at call centres, vs Indias 350,000. BPO industry could add another 700,000 or so jobs by 2016 and generate revenues of $25 billion. At that point, the industry would make up nearly a tenth of GDP and be bigger in value than the remittances from the 10m Filipinos working overseas. Indian companies Infosys and Wipro, as well as scores of other Indian firms, operate in the Philippines not because of cheap labour, but because a Filipino accent commands a premium.

Challenge: To move up the value chain (more sophisticated back-office jobs, such as knowledg process outsourcing and legal-process outsourcing, where India still leads.

11

Overseas Remittances
For the Philippines, the contribution of exports labor to the economy is more significant than that of merchandise exports. Despite the global crisis, the growth of OFW remittances remained positive but growth slowed sharply. From a growth rate of 25% in 2005, its growth slowed drastically to 4.1% in 2009. Its growth will likely slow to single digit levels in the next three years.

Property of Benjamin Diokno

11/09/10

OFW Remittances (US$B)

2004-2012

Why is growth not inclusive?

43

REPRODUCTIVE HEALTH POLICY

PUBLIC GOODS

POVERTY REDUCTION POLICIES (POLICIES TO EMPOWER)

INFRA AND PPPs

SOCIAL SAFETY NET (POLICIES TO PROTECT)

Rural Areas

Rural Areas

CITIES

Rural Areas

Rural Areas

Industrial Location Theory: Firms locate/relocate where profits are maximized and cost are minimized P = f ( L, L, K, e .. )

URBAN ECONOMIC
REGIONAL GROWTH CENTERS OF THE PHILIPPINES

FDI: Improving but still not catching up

INTERNATIONAL ECONOMICS
RP Merchandise Export Structure 2012
US$32.2B; % share

other electronic8 43%

coconut, petroleum, chemicals, tobacco, minerals, machineries, etc. 12%

Source: National Statistics Office

10 revenue streams
45%

RP Country Markets 2012

US$32.2B; % share

Increase penetration; expand product range

Source: http://tradelinephil.dti.gov.ph

Imbalanced Foreign investments

Arsi Balisacan: 60% of the countrys GDP is concentrated in three regions in Luzon.

PPPs biased towards Luzon

The Economy on the Supply Side

The economy grew a bit faster during election years (2010 and 2013) The impact of the Great Recession was broad-based: all sectors contracted, with the industrial sector sharply down.

Property of Benjamin Diokno

The Industrial Sector

Manufacturing has lost steam

Manufacturing, the source of many decent jobs, contracted the most. Electricity, power and gas declined. Bad omen for future growth, though it provides opportunities for future investment. Mining grew the fastest, but its contribution to output is the lowest. It could be a growth industry in the future.

Property of Benjamin Diokno

The Services Sector

The real estate sector was the worst hit during the recent global crisis, due to depressed demand for housing. Banking and finance has been the fastest growing sector in the past; it slowed drastically in 2008 (Legacy and other problems), recovered mildly, but not fully.
Property of Benjamin Diokno

Demand side: most spending items down

The economy is largely consumer-led. Personal consumption expenditures grew, on average, by 5% in the past, though it slowed slightly in 2012. Capital formation peaked in 2010 and 2013both election years. Largely negative in other years. High and consistent investment, say at 25% of GDP, is needed for faster growth.
Property of Benjamin Diokno

Medium-Term Fiscal Path 2010-2016 (as of July 9, 2010)

Revenues 25.0 Disbursements Deficit 22.2 20.2

Percent of GDP

20.0 15.0 10.0 5.0 0.0

19.5

19.4 16.1

19.5 16.9

19.6 17.6

20.5 18.5

21.4 19.4

15.6 3.9

3.3

2.6

2.0 2013

2.0 2014

2.0 2015

2.0 2016

2010

2011

2012

Fiscal Position

56
56

30

Fiscal house in disarray

GMA run large deficits from 2001-04; huge deficits have reemerged in recent years

Property of Benjamin Diokno

11/24/10

31

High and rising public debt

As the world economy recovers, interest rates would rise, leading to higher debt service

Property of Benjamin Diokno

11/24/10

World Competitiveness Scoreboard 2010

Lagging behind its ASEAN-5 neighboring countries

Rank 1

Country Singapore

Score 100.00

10
26 35 39

Malaysia
Thailand Indonesia Philippines

87.228
72.233 60.745 56.526

POVERTY ALLEVIATION MODEL

Food

Health

Y + E = TY

derived from govt, NGO & business

Household Decision

Education

Housing

Those who have less income should have more entitlements. Use of total income to purchase entitlements is a function of household decision

Improved Quality of Life

Other Entitlements

Recreation

GOAL

Eliminate poverty within the decade and bring prosperity within reach of every Filipino

Institutionalize Good Governance

Pursue Comprehensive Development

Achieve Macroeconomic Stability

A FRAMEWORK FOR STRATEGIC INTERVENTION

Integrated Strategy Development Model
SOCIO-POLITICAL OR PEOPLE DEVELOPMENT

Ideology Maturity & Unity Values Orgn

Values

Orgn

IAD

Area

Industry

Prosperity & Equity Markets

ECONOMIC DEVELOPMENT

Productivity & Quality Agency

ENVIRONMENTAL DEVELOPMENT

Policies and Reforms to Promote High and Inclusive Growth

Habito (2010):

1.

Quality appointments to government posts and zero tolerance for corruption;

2. Strong and credible transparency and accountability systems; and intensified decentralization; 3. Wider and deeper public participation in governance; and streamlined government procedures to lower cost of business and speed up public services; 4. Democratization of the economy through asset reforms and competition policies;

5. Boost tax revenues by improving ICT systems in BIR, prosecuting tax evaders and reformin excise taxes on alcohol and other products; 6. 7. Narrow the infrastructure gap; Enterprise development with a focus on MSMEs.

Policies and Reforms to Promote High and Inclusive Growth

Balisacan (2011):

1. Create productive employment opportunities, including through Infrastructure to promote connectivity, especially between leading/urbanizing & lagging/rural areas; and Institution facilitating transactions in the marketplace (in order to lower the cost of doing business)

2. Reduce the high inequity in access to opportunities (i.e. High priority on education, health including family planning services) 3. Rebuilding institutions, including civil service, & good governance in pursuit of inclusive growth

Selected References

Balisacan, A. 2011. What does it really take to move the Philippines out of poverty? Presentation to the Mindanao Bridging Leaders Program, 21 July 2011. Collier, P. 2007. The bottom billion: Why the poorest countries are failing and what can be done about it. Oxfo Oxford University Press. De Joyos, R and R Lessem. 2011. Food shares in consumption: New evidence using Engel curves in the developing world. Mimeo. *Available at: https://mywebspace.wisc.edu/rlessem/web/engel.pdf+. Economist. Poverty: Not always with us. June 2013. *Available at: http://www.economist.com/news/briefing/21578643-world-has-astonishing-chance-take-billion-people-outextreme-poverty-2030-not]. Habito, C. 2010. An Agenda for High and Inclusive Growth in the Philippines. Manila: ADB. *Available at: http://www.adb.org/documents/reports/agenda-high-inclusive-growth/agenda-high-inclusive-growth.pdf]. Mahurkar, P and RU Mendoza. 2012. Anatomy of Anti-Poor Growth: Insights from Recent Employment Trend Mimeo. AIM Policy Center. Mendoza, R.U. 2011. Why do the poor pay more? Exploring the poverty penalty concept. Journal of International Development 23(1):1-28. Mendoza, R.U. 2013. Why PH competitiveness is improving. Rappler. Mendoza, R.U. 2013. Does investment grade matter for inclusive growth? Rappler. Sen, A. 1999. Development as Freedom. New York: Knopf. Virola, Romulo, et. al. 2010. The Pinoy Middle-Income Class is Shrinking: Its Impact on Income and Expenditure. Paper presented during the 11th National Convention on Statistics (NCS), EDSA Shangri-La Hotel, October 4-5, 2010.

Food for Thought We can't solve problems by using the same kind of thinking we used when we created them.

Albert Einstein (1879-1955)

The task of government is to harness the energies the people into a material force for growth and development. What is required is a partnership among communities, government and the private sector. Nelson Mandela

We will not suffer the future. We will shape it. We will not simply grow. We will manage our growth. We Will make change. But to shape our future, we need a new vision of government