Social Welfare Programs and Social Safety Nets in the Philippines: In Times of Crisis and Beyond

Rosario G. Manasan Philippine Institute for Development Studies 22 April 2010
Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

Overview of presentation Background Objective of paper Assessment of selected social assistance programs Summary/ Recommendations

Table 1. Growth rate of GDP and its components, 2004-2009 GNP g.r. GDP g.r. PCE g.r. GC g.r. CF g.r. 2004 6.9 6.4 5.9 1.4 7.2 2005 5.4 5.0 4.8 2.3 -8.8 2006 5.4 5.3 5.5 10.4 5.1 2007 7.5 7.1 5.8 6.6 12.4 Q1 6.4 6.9 5.9 12.1 18.1 Q2 9.1 8.3 5.6 8.9 17.4 Q3 8.6 6.8 5.7 -2.6 5.3 Q4 5.8 6.3 6.2 8.0 7.1 2008 6.2 3.8 4.7 3.2 1.7 Q1 6.4 3.9 5.1 -0.3 -1.7 Q2 5.6 4.2 4.1 0.0 13.6 Q3 6.2 4.6 4.4 11.8 9.4 Q4 6.7 2.9 5.0 2.5 -11.7 2009 3.3 0.9 3.8 8.5 -9.9 Q1 4.4 0.4 1.3 4.5 -15.1 Q2 3.2 0.8 5.4 9.7 -10.3 Q3 3.1 0.4 3.2 8.1 -12.1 Q4 2.4 1.8 5.1 12.1 -0.8
PCE - personal consumption expenditures; GC- government consumption,

X g.r. 15.0 4.8 13.4 5.4 10.5 4.2 3.3 4.5 -1.9 -7.7 6.1 3.3 -11.5 -14.2 -14.7 -18.1 -13.0 -10.0

M g.r. 5.8 2.4 1.8 -4.1 -1.8 -10.2 -4.7 0.7 2.4 -2.6 0.0 6.7 5.0 -5.8 -20.6 -2.2 0.1 -2.5

NFIA g.r. Inflation * UnE rate UnderE rate 10.9 16.9 13.5 6.0 7.4 21.2 10.7 7.6 7.3 20.4 6.1 6.2 6.3 19.1 12.1 2.8 1.4 2.2 20.1 2.3 29.5 2.7 -0.2 3.9 6.8 17.5 30.8 9.3 36.2 6.4 15.8 11.4 22.6 11.2 51.2 8.0 7.1 19.4 23.3 3.3 40.8 6.9 23.9 3.2 26.1 0.3 7.5 3.0

CF - capital formaiton, X- exports, M- imports, NFIA - net factor income from abroad

UnE rate - unemployment rate, UnderE rate (based on October Labor Force Surveys)
* based on CPI

Impact of 2008/2009 global financial/ economic crisis on the Philippines milder
– relative to other countries – relative to that of 1997/1998 Asian financial crisis

Background
Even before being buffeted by external shocks in 2008 and 2009, overall poverty incidence went up from 24.4% in 2003 to 26.9% in 2006 after declining continuously in 1991-2003 Situation exacerbated by rapid rise in food and fuel prices in 2008
Inflation surged from 2.8% in 2007 to 9.3% in 2008 While inflation has abated in 2009, inflation in price of fuel, light and water on the rise again in Q1 of 2010

For example, in 2004, a year where there is no external shock …
Table 2. Distribution of Households Reporting Being Worse Off as to the Sources of Vulnerability, 2004 APIS (in percent) Reason for being worse off Lost Natural Increased Reduced Loss of Gov't Income Decile Job/Work Disaster, Dr Food Price Poor Health Income No Savings Assist Across deciles: 1 (poorest) 2 3 4 5 6 7 8 9 10 (richest) All deciles 10.3 10.5 10.5 10.4 13.6 12.0 12.0 8.9 7.2 4.5 100.0 28.5 15.4 12.6 8.7 10.1 7.3 4.9 4.7 5.3 2.6 100.0 10.7 10.3 10.6 10.6 10.4 10.0 10.4 10.0 9.3 7.8 100.0 8.4 10.8 12.2 11.5 12.9 10.2 8.2 9.3 9.6 6.9 100.0 16.2 14.8 12.4 11.1 10.0 8.9 8.2 8.0 6.0 4.4 100.0 12.8 12.3 13.5 9.1 10.6 9.0 11.7 8.6 7.3 5.1 100.0 8.0 5.9 11.5 2.9 13.5 12.6 9.3 11.7 12.6 11.9 100.0 10.0 9.9 8.9 9.8 8.4 9.6 10.3 11.6 10.9 10.4 100.0 12.2 11.4 11.1 10.5 10.6 9.8 9.8 9.4 8.4 6.8 100.0

Others

Total

Across reasons for being worse off: All deciles 8.2 3.0 53.9 5.8 19.2 3.8 0.4 5.4 100.0

54% of HHs worsed off because of increased food prices; 19% because of reduced income; 8% because of lost of job; 6% because of poor health; 3% because of natural disaster Poorer HHs more vulnerable to risks and shocks Present situation highlights importance of SP

Objective of study
review and assess major non-contributory social assistance programs in Philippines
Important given limited coverage of pension system (32%) and social health insurance (38%) Basis of assessment – appropriateness, costeffectiveness, adequacy of benefits

Focus:
Rice subsidy program Food for School Program (FSP) Pantawid Pamilyang Pilipino Program (4Ps) - CCT Tulong para sa Kuryente Tulong para kay Lolo at Lola

SOCIAL SAFETY NETS & SOCIAL ASSISTANCE NFA rice price subsidy

NFA subsidy – targeting, leakage & coverage
Untargeted consumer rice price subsidy Program leakage influenced by distribution of NFA rice releases across geographic locations
Actual distribution of NFA rice is not sensitive to poverty incidence

71% leakage from the NFA rice subsidy
estimate assume that beneficiaries of NFA rice subsidy are randomly distributed within each province Leakage would have been lower at 67% if NFA rice is randomly distributed all over country

18% - coverage of NFA rice subsidy

Attempts at improving NFA rice subsidy

Tindahan Natin Program Family Access Cards (FACs) Both not successful

TNP and FACs targeting: “much ado about nothing”

Result illustrates how the decentralization of targeting decisions tends to lead to sub-optimal results as incentives arising from local rent-seeking behavior tempt local officials to manipulate and exploit local information. Result (for FACs) also underscores how unverified means tests do not make the cut at all.

NFA rice subsidy – size of transfer
benefit to consumer under regular program
PhP 234 per HH per mo. = 3.7% of poverty threshold in 2007 PhP 477 per HH per mo. = 7.0% of poverty threshold in 2008

effectiveness of rice price subsidy to reach the poor is limited by the fact that eligible beneficiaries are required to have the cash to pay for the food items, albeit at a subsidized price
may deter the very poor from accessing the program

Fiscal cost of NFA subsidy
Table 5. Fiscal cost of NFA operations, 2007-2008 (in million pesos) 2006 2007 Net loss before gov't subsidy of w/c: operating expense Sources of finance Operational subsidies from NG Other sources Net loss before gov/t subsidy as % of GDP 15,788 a/ 3,581 a/ 5,000 a/ 3,717 a/ 2008 43,095 b/ 3,717

4811 10,977 0.26

2,100 2,900 0.08

2,000 41,095 0.58

a/ based on NFA financial statement for 2007 b/ based on difference between cost of rice imports and proceeds of rice sales in local market

NG subsidy to NFA underestimates total cost of NFA interventions Total cost of NFA intervention
PhP 15.8 billion in 2006 (or 0.3% of GDP) PhP 5 billion in 2007 (or 0.08% of GDP) PhP 43.1 billion in 2008 (or 0.6% of GDP)

SOCIAL SAFETY NETS & SOCIAL ASSISTANCE Food-for-School Program

Food-for-School Program
Launched in Nov 2005 to mitigate hunger and to improve school attendance Provides one (1) kilo of rice to eligible families for every day that their children continue to attend school Combines geographic targeting with institutional targeting at the level of the public school or day care center

FSP: targeting, leakage & coverage
Selection of beneficiaries and the eligibility rules for the program have been changed twice
first in SY 2007-2008 and second in SY 2008-2009

In 1st and 2nd cycles of implementation, poorest provinces were first selected then munis were selected based on their income class; all LGUs in NCR were included Leakage rate in DepEd component - 59% in SY 2006-2007

FSP: targeting, leakage & coverage In 3rd cycle, all munis in 20 poorest provinces and 100 SAE poorest munis were included; in NCR, only “hotspots” were included Leakage rate in DepEd component reduced to 32% in SY 2008-2009

FSP: size of the transfer
If rice transfer were converted to cash PhP 402 if valued at subsidized price of rice in 2008 (or 6% of overall poverty threshold) PhP 675 if valued at market price of rice (or 10% of overall poverty threshold) FSP is not implemented all throughout the year – actual impact more limited There are indications that the transfer is not large enough. Informal survey in February-March 2006 found that: 80% of HHs reported that 1 kilo of rice is not enough to provide their family with three meals a day. Only 33% of HHs reported not having missed a meal in the last 3 months. These numbers consistent with the fact that the FSP’s daily rice ration during school days is just enough to cover about 63% of the average rice consumption of a family with 5 members.

SOCIAL SAFETY NETS & SOCIAL ASSISTANCE Pantawid Pamilyang Pilipino Program

Pantawid Pamilyang Pilipino Program (4Ps)
Aims to improve living conditions and human capital investments of poor HHs
Covers 300,000 HHs in poorest 20 provinces

Provides an education grant equal to PhP300 per child per month during the school year (up to a maximum of 3 children) provided they comply with the following conditions:
Children 6-14 years of age attend school at least 85% of the time; Children aged 5 attend school at least 85% of the time

Pantawid Pamilyang Pilipino Program (4Ps)
Provides a health grant of PhP500 per month to targeted poor HHs provided they comply with the following conditions:
Pregnant women get pre-natal and post-natal care; attend breast-feeding counseling and family planning counseling sessions; Child birth must be in a health facility and must be assisted by a health professional; Parents/guardians attend family planning sessions, mother’s classes and parent effectiveness seminars; Children 0-5 years of age get regular preventive check-ups and immunization and micronutrient supplementation; and Children 0-2 years of age have monthly weight monitoring and nutrition counseling

4Ps: targeting
Proxy means test (PMT) is used to select beneficiaries in the 4Ps
In pilot areas, reported number of cases of inclusion error was less than 10% of the selected number of beneficiaries.

Use of PMT enforces the credibility of the program and reduces risks associated with political interference in selection of beneficiaries

4Ps: Impact on school attendance
Table 10. Probability of children aged 6-14 attend school (based on 2004 APIS) With 4Ps Income education grant total grants; education grant Without 4Ps quintile only; with without only; without conditionality conditionality conditionality 1 2 3 4 5 Total 85.0 90.9 94.5 96.7 98.5 92.0 85.2 90.9 94.5 96.7 98.5 92.1 85.4 90.9 94.5 96.7 98.5 92.1 86.4 90.9 94.5 96.7 98.5 92.4

2004 APIS shows 92% of all 6-15 year old children attend school Only 85.0% of children aged 6-15 in the poorest quintile attend school as compared to 98.5% of those in the richest quintile

4Ps: impact on school attendance
Potential impact on school attendance simulated using results of Orbeta (2005)
1% increase in income lead to 0.13% increase in probability of attending school

Education grant = 14% of the average per capita income of beneficiaries in the 4Ps
estimated to increase probability of school attendance among children aged 6-14 from 85.0% without the 4Ps to 86.4% with the 4Ps.

4Ps: impact on school attendance
overall impact on school attendance rate appears to be low largely because the coverage of the 4Ps at present is low
7% of total number of poor households nationwide or 18% of total number of poor households in the target provinces.

if the beneficiaries of 4Ps were to be increased from current level of 300,000 HH to 1 million HHs
program is estimated to increase the school attendance rate of the poorest quintile from 85.0% to 89.8%.

To appreciate potential impact on health service utilization …
Table 5. Selected health indicators by wealth quintiles, 2003 NDHS FIC a/ % TT 2 b/ % % facility-based child delivery % child delivery by health professional % of children given micro nutrient supplement 64.4 73.3 79.5 83.7 87.3 76.0 % of % of postunder-5 partum given women given iron Vitamin A 47.3 58.5 68.3 74.8 80.1 63.3 37.4 42.5 45.9 47.0 54.2 44.6

Poorest Lower middle Middle Upper middle Richest ALL

55.5 69.3 77.8 72.4 83.0 69.8

31.9 42.3 38.6 39.3 34.5 37.3

10.4 24.8 43.3 59.8 77.0 37.9

25.1 51.4 72.4 84.4 76.2 59.8

a/ fully immunized child b/ at least two doses of tetanus toxoid vaccination for pregnant women

Demand for health services inversely related to “wealth” of HHs

4Ps: impact on hunger
Total cash transfers under 4Ps estimated
Transfers estimated to increase average per capita income of beneficiaries by 29%
estimated to result in a 19% increase in their spending on food => expected to result in a 3.2% increase in household calorie intake

CONCLUSIONS AND RECOMMENDATIONS

government spending on SP lower than that of other countries 0.3% of GDP in 2007 and 0.8% of GDP in 2008 Compared to 1.9% average spending of 87 countries in 1996-2006

Table 18. Government Spending (Allotments) on Social Protection 2007 in mill % distn Price and income shocks NFA rice price subsidy (net of tax expd) 5,000 29.4 Food-for-School Program 3,750 22.0 DepEd 3,000 17.6 DSWD 750 4.4 School-based feeding 348 2.0 DepEd 79 0.5 DSWD 270 1.6 Pantawid Pamilyang Pilipino Program 50 0.3 Pantawid Kuryente 0.0 KALAHI-CIDSS 1,481 8.7 Tindahan Natin 188 1.1 SEA-K & livelihood assistance 63 0.4 Natural disaster Disaster relief Disaster rehabilitation (CARE/ GK/ Guimaras) Crisis situations Assistance to individuals and and HHs in crisis situations, incl PDAF Disability, old age and special vulnerabilities Assistance to disabled persons, senior citizens and children in conflict w/ law Center-based/ community-based assistance Tulong para kay Lolo at Lola Health shocks PhilHealth - NG only PhilHealth - NG+LGU Labor market shocks TESDA scholarship DOLE programs CB for students, youth and disabled workers CB for rural workers Emergency employment for displaced worker Local employment facilitation Protection/ welfare services and reintegration TOTAL w/ PHIC-NG only % to GDP TOTAL w/ PHIC-NG/ LGU % to GDP 1,265 263 1,002 7.4 1.5 5.9

2008 in mill 43,095 3,266 2,500 1,266 581 581 1,297 4,400 1,629 160 % distn 69.4 5.3 4.0 2.0 0.9 0.9 0.0 2.1 7.1 2.6 0.3 0.0 1.6 0.5 1.1

986 326 660

1,037

6.1

889

1.4

61 481

0.4 2.8 0.0

11 719 500

0.0 1.2 0.8

2,100 3,300

12.3

2,200 3,500

3.5

510 678 149 65 18 56 388 17,014 0.26 18,214 0.27

3.0 4.0 0.9 0.4 0.1 0.3 2.3 100.0

1,350 1,051 416 69 41 56 469 62,134 0.83 63,434 0.85

2.2 1.7 0.7 0.1 0.1 0.1 0.8 100.0

Conclusion
attempts to provide additional funding for SP through “overall savings” and Katas ng VAT is laudable
Ad hoc financing not always effective (e.g., FSP)
Delays in release of allotment Poor utilization

Hurriedly designed programs even if made operational successfully (e.g., Pantawid Kuryente and Tulong para kay Lola at Lola)
Not always effective in reaching target beneficiaries

Conclusion
Program-wise, problematic that bulk of NG spending on SP went to NFA rice subsidy program which has been shown to be the least effective in reaching the poor
NFA subsidy accounts for 29% and 69% of total gov’t spending on SP in 2007 and 2008, respectively NFA subsidy has high leakage rate (71%) and low coverage rate (18%) attempts to improve targeting of NFA subsidy have not been successful
Tindahan Natin Program Family Access Cards (FACs)

Conclusion
Country has incidence of chronic poverty
71% of poor HHs (or 22%-25% of all HHs) are chronically poor Underscores need for SP program that will allow them to escape poverty trap
Poverty relief Incentive to invest in education & health of their children

For such program to be effective
should be implemented consistently over an extended period of time Budget predictability

Conclusion
There is scope for consolidating some programs
Objectives and beneficiaries of some programs overlap; e.g., FSP, Malusog na Simula and 4Ps
4Ps superior in terms of incentives to HHs to invest in education & health of their children Weak element of conditionality in FSP children can move in and out of program 4Ps which uses proxy means test is superior in reducing leakage from the program Despite recent improvements in targeting of FSP

Conclusion
Other issues in implementing 4Ps vis FSP
Cash versus in-kind (food) transfers
Gives HHs discretion how to use assistance in a manner that is more responsive to their specific needs (e.g., transport to schools) Empowers mothers Administrative cost of non-cash transfers is high (e.g., transport, storage, etc.) Non-cash transfers cause distortions in commodity market

Issues with use of school as distribution point Stigma to children High leakage within school because of high participation rate

Conclusion
Additional suggestion for improving 4Ps implementation
Increase grant to children entering HS and staying in HS particularly from age 14-16
Large drop out after completion of elementary level Large drop out at age 15 or so and around third year HS

Conclusion
Workfare program to provide emergency employment – most useful in times of crisis
Key to successful implementation
Set wage below market wage Selection of projects; those that build productive assets

Use part of funds allocated to infrastructure in fiscal stimulus package

Conclusion
Coordination between SP programs with other programs and overall economic policy
Use of fiscal stimulus for workfare program Demand side interventions puts pressure on supply and delivery of basic social services

Conclusion
Need to improve targeting
Use proxy means test (NHTS) for PhilHealth sponsored program
Long term gains from PhilHealth sponsored program alone justifies short-term investment in proxy means test Additional gains forthcoming from use in other programs

Thank you.

Thank you.

Thank you.