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PHILIPPINES POLITICAL

ECONOMY ASSESSMENT REPORT


An assessment of the political economy factors that shape
the prioritisation and allocation of resources for essential
health services for women and children
Ian Anderson and David Hipgrave
February 2015

unite for
children
PHILIPPINES
POLITICAL ECONOMY ASSESSMENT REPORT

PHILIPPINES POLITICAL
ECONOMY ASSESSMENT REPORT
An assessment of the political economy factors that shape
the prioritisation and allocation of resources for essential
health services for women and children.

Ian Anderson and David Hipgrave


February 2015

Acknowledgements

Contents

Special thanks go to Drs Willibald Zeck and Raoul Bermejo III in the UNICEF office, Manila
for their assistance in the conduct of the field work and preparation of this report.

Acknowledgements
Acronyms
Currencies and exchange rates

1 Executive Summary
2. Background
2.1 Background and purpose of this report
2.2 Methodology, frameworks used, and report structure

3. The RMNCH situation of the Philippines


3.1 RMNCH achievements and ongoing challenges
3.2 Political, economic and development context
3.2.1 Where the Philippines is now: recent changes in the strategic landscape

4 Structure and function of the health sector and RMNCH at national and
sub-national levels, and related analysis



4.1 Health system structure, governance and stewardship


4.2 Health financing
4.3 Health and RMNCH priority-setting at national and sub-national levels
4.4 Procurement and logistics

5. Recommendations
References
Annex 1 Definitions of political economy
Annex 2 Approach and methodology
Annex 3 Inception Report for the Philippines
Annex 4 List of people interviewed in the Philippines
Annex 5 Strengths and weaknesses of the Philippines system of priority setting, planning and budgeting
Annex 6 Explanation of priority setting and planning by the National Economic and Development
Authority (NEDA) of the Philippines
Annex 7: Evidence based planning and budgeting in Davao City

Cover Picture
UNICEF/NYHQ2012-1684/xxxxxxx

Acronyms

1 Executive summary

AHA
Aquino Health Agenda
AIP
Annual Investment Plans
AOP
Annual Operational Plans
barangays village
BuB
Bottom up budgeting
CIPH
City-wide Investment Plan for Health
CPR
Contraceptive Prevalence Rate
Dependency ratio
The ratio of people below 15 and above 65 years of age to the

total population
DBM
Department of Budget and Management
DILG
Department of Interior and Local Government
DOH
Department of Health
EBaP
Evidence-based planning
Gini coefficient
A statistical estimate of inequality ranging from zero

(no inequality) to 1 (all wealth captured by one person).
LGUs
Local Government Units
LPRAP
Local Poverty Reduction Action Plans
MDGs
Millennium Development Goals
NEDA
National Economic Development Authority
NHA
National Health Accounts
NHIP
National Health Insurance Program
PPP
Public Private Partnership
PPP
Purchasing Power Parity
PhilHealth
Philippines Health Insurance Corporation
RMNCH
Reproductive, Maternal, Newborn and Child Health
SAM
Severe Acute Malnutrition (weight for height below 3 z scores

of the median WHO growth standard for age)
SBA
Skilled Birth Attendant
TFR
Total Fertility Rate
UHC
Universal Health Coverage

Background and methodology

Currencies and exchange rates


100 Philippine Pesos (PHP) = $US 2.27
$US 1 = 44.1 Philippine Pesos (PHP)
All $ are current United States dollars unless otherwise shown

Decisions on the allocation of scarce resources are rarely


made purely on the basis of technical criteria: political and
other factors also shape decision-makers choices. It is
therefore important to understand how and why governments
in developing countries - as well as development partners
- prioritise and allocate their resources. Decisions that are
broadly compatible between technical criteria and political
economy needs are then more likely to achieve outcomes
that are financially, politically and institutionally sustainable, as
well as equitable and of broad public benefit.
Since 2011, the Australian Government has been providing
development assistance to improve reproductive,
maternal, newborn and child health (RRMNCH) outcomes
in Bangladesh, Indonesia, the Philippines and Nepal. The
approach focuses on improved use of local data in the
prioritisation, planning and allocation of resources at district
level. The main objective has been to develop, through districtlevel pilots, an investment case to encourage sub-national
governments to fund RRMNCH as a key area of human
development. Australian aid funding was channelled through
UNICEF and other partners working with governments at
national and district level in each country.
To deepen its understanding of the political economy of health
and RRMNCH in those four countries, UNICEF undertook
an analysis during July-September 2014. Field visits were
conducted in the Philippines over 14-26 July 2014. A mixed
methodology was used, drawing on recommendations from
academia and development experts. A questionnaire was
developed based on a review of the relevant peer-reviewed
and grey literature. Local data was gathered and interviews
conducted in-country. This report provides the findings for the
Philippines.

The Philippines has a mixed record in terms of the health


sector, and RMNCH. On the one hand the under-five and
infant mortality rates have fallen from 80 and 57 per 1000
live births respectively in 1990 to 30 and 22 per 1000 live
births in 2011. The Philippines is therefore likely to meet the
fourth Millennium Development Goal (MDG) target on young
child mortality. Universal Health Coverage (UHC) is being
scaled up rapidly, partly funded by a politically astute move
by the nations President to increase taxes on tobacco and
alcohol and use the additional funds to expand UHC. On
the other hand, it appears that the maternal mortality ratio
(MMR) has worsened from 209 per 100,000 live births in
the early 1990s to around 221. Whether this is due to better
recording or deterioration in the situation is unclear. What is
clear is that the Philippines is a long way from achieving the
MDG5 target on reducing maternal mortality. In a related
point, the contraceptive prevalence rate is still only around
50%, with little sign of improvement. Neonatal mortality is
14 per 1000 live births with little progress. Inequity in access
to and outcomes of essential health services also remains a
major challenge. For example, around 94% of women with
a secondary education or higher use a skilled birth attendant
(SBA) compared to only 26% of those with no education.

The political economy of the health


sector and RMNCH

Situation analysis

Recent announcements have given very clear and explicit


political commitment to the social sector in the Philippines,
and are reflected in the 2013 national budget. The health
sector has attracted a particularly rapid and sustained increase
in budgetary resources, albeit off a small base. Importantly,
the Department (or Ministry) of Health (DOH) also attracts
an important share of total Government expenditure. The
Administration is also achieving initial successes with a propoor conditional cash transfer scheme. However, despite
budget increases, increased public expenditure is still needed,
especially to address the needs of the poor and vulnerable.

Much of the Philippines historically disappointing record


of development can be explained by five Ps of political
economy: politics; political patronage; policies; population
and problems specific to the country. More specifically,
a political system of checks and balances, means that
politically difficult but substantial reforms that affect poverty
and inequity levels can easily be blocked. Political patronage,
occurring at national, regional and local levels, intertwined
with money politics contributes to poor outcomes. Policy
distortions are a third factor explaining the poor record to date.
Population growth itself a reflection of political economy
factors has made the task of socio-economic development
harder and more expensive. Problems particular to the
Philippines including conflict and natural disasters also explain
its disappointing development progress.

Devolution of planning, resourcing, and service delivery


has been a major consequence, and driver, of the political
economy of RMNCH in the Philippines. The 1991 Philippines
Local Government Code involved sudden, major, devolution
of functions to subnational institutions, especially small
local government units (LGUs). It was an urgent exercise
to redistribute political and economic power in the final
months of the Cory Aquino administration which feared a
return to dictatorship in the coming elections. Devolution
involved major structural changes to personnel and budgets,
especially at the DOH. However, in the years since 1991,
subnational priority setting (deciding what is important),
planning (how implementation will take place, when and by
whom), budgeting (determining the costs and sources of
financial and other resources) and implementation, all key

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

The field visits undertaken during this analysis identified


several issues. First, decentralisation and increased autonomy
for LGUs can benefit public health, but such autonomy can
also lead to patronage. Decentralised autonomy has also had
unintended negative consequences, for example blocking of
access to modern contraception. Champions were noted
to be important advocates, but not always in the direction
intended. Development partners have their own political
economy incentives and can also skew planning and funding
priorities and outcomes, including during natural disasters.
More generally, he likelihood that evidence will influence
local authorities priorities, plans and budgets depends on
what evidence, whose evidence, when does it arrive
and how is it presented. Evidence-based planning (EBaP)
and allocation of funds, a focus of UNICEF since 2012, are
irrelevant if implementation and procurement are ill-suited to
increased resources. As with much of South East Asia, the
for-profit private sector whether qualified or not is a major
source of health service delivery, especially for the poor.
Yet the coverage and quality of the private sector is often
overlooked in planning and prioritising new investments in the
health sector.
There are other related challenges. The capacity of smaller and
resource-poor LGUs to prioritise, plan, budget and implement
programs when they have hitherto managed small resources
is a key bottleneck to effective, efficient and equitable health
service provision. A recent Public Expenditure Review
concluded that the distribution of revenues, expenditures
and some key development outcomes across regions in
the Philippines is becoming more unequal. There is inequity
in financing between, and within, provinces. The ability of
national agencies to influence subnational outcomes is mixed
as devolution disperses political and economic power. For
example, procurement and logistics are challenges under
decentralisation, due to issues of quality of commodities and
corruption.

to achieving government objectives, have been weak and


constrained by the five Ps. There are signs that LGUs are
now gaining in professionalism and that accountability to
national level, including in the health sector, is improving. For
example there are strengths in the newly revised processes
of priority setting, planning and budgeting, both at national
and increasingly at sub-national levels. There is also evidence
that the current Philippines Administration wants to make
planning and budgeting more transparent and participatory.
Bottom-up budgeting is an effort to systematically facilitate
and institutionalise the local needs of poorer communities
into planning and resource allocation at the national level. A
scorecard system has also introduced an evidence-based,
systematic and easily used driver and monitor of health
planning and resource allocation and usage.
Another major indicator of the Philippines government
commitment to the health sector is its scaling up of UHC.
In the Philippines health insurance institutions are arguably

now as important as the DOH in determining health access


and outcomes, including for the poorest sectors of society.
Development partners accustomed to working solely through
the DOH must now also engage with health insurers and,
in turn, private sector providers as insurance coverage
expands. The Philippines government is determined to scale
up coverage by the national insurer, PhilHealth, beyond
the 82% of the population now covered, and to redesign
the benefit package. But the challenges should not be
underestimated. Expenditure levels and incentives to
implement the benefit package will change under UHC.
For example, curative treatment or end of life care in tertiary
hospitals, or diagnostic tests by private doctors have a very
different cost and socio-economic impact than expenditure
on promotive and preventive health in primary and secondary
care settings. Developments at PhilHealth provide a major
opportunity for international agencies to influence major
decisions on health financing at the national level.

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

The Philippines provides two particularly rich political economy


case studies of reforms that have benefited the health of
the poor: the Reproductive Health Bill and the Sin Tax on
tobacco and alcohol that is used to fund UHC. In both cases,
at least at national level, major challenges raised by religious or
business interests were shrewdly overcome in the interests
of public health.

Analysis and recommendations


Several practical lessons were identified about current and
future approaches for UNICEF and other development
partners in the political economy context of the Philippines,
as follow:
Development partners must understand Philippines
politics, but at the same time stay distant from it. The
worst outcome would be for a bilateral, United Nations
or multilateral agency to have its evidence captured by a
political process or be seen to be partisan.

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

Upstream planning and prioritising is important, but so


too is downstream implementation. Well-intentioned
development partners often invest heavily in upstream
strategies and planning approaches, but those investments
will not yield results if there is neglected capacity for
implementation, including procurement.
Good data is more important than a new planning tool
but the data must be appropriate. Many of the existing
planning processes in the Philippines are good enough
to generate sound public policy decisions. The Philippines
does not generally need new planning tools: what it does
need is more accurate and timely data that can be fed into
existing planning processes. Having good data from wellconducted impact and program evaluations is a particularly
valuable but often neglected investment.
Increases in the funding of health benefits covered by
PhilHealth will potentially have a major influence on nationwide access to health care benefits for the poor, including
women and their children. There is an opportunity for
development partners to work closely to further influence
this in the interests of pro-poor outcomes.
Mayors are particularly powerful in the Philippines, but
medium and longer term health issues may not align with
their short terms of office. UNICEF support for capacity
building for Mayors on the benefits of local investment
in pro-poor health outcomes, particularly RMNCH, is
important. Related workshops for the media, politicians and
civil society can also be effective in raising the priority of
health issues. Well informed media coverage is a key factor
in shaping public opinion.
The National Health Accounts (NHAs) of a country are a
strategic but often under-utilised source of evidence for
policy dialogue. Well-done accounts can provide a clear
and easily accessible overview of the entire health system
including sources and uses of funds by public and private
sectors. Interviews confirmed that the evidence contained
in NHAs are rarely used by public health advocates in the
Philippines or most development partners. This is a lost
opportunity for engaging in more evidence-based policy
dialogue.
Conditionality alone rarely works in social sector financing.
This partly because external concessional financing is now
a relatively small part of the total public health budget. What
does make a difference is the provision of accurate, timely,
useful, usable insights into the how of reform.
The unplanned and unexpected can completely overwhelm
all planning: development partners need to be realistic
about how effective and durable planning processes are,
and retain flexibility.
In summary the Philippines is at an important stage in terms
of its political economy. It has a reforming President, a
growing economy and an Administration committed to UHC.
There are opportunities for development partners to assist
the health system so that it increasingly benefits the poor,
including women and their children, using data, advocacy and
existing lines of influence.

2. Background
2.1 Background and purpose
of this report
Social and economic development processes involve
much more than technocratic approaches: political
economy1 factors usually determine the fate of
reforms. This finding is clear from the international
literature (1-12). More specifically, how - and why governments make and implement decisions; prioritise
the allocation of scarce financial and human resources;
resolve trade-offs; regulate the private sector; achieve
accountability; and interact with civil society and
development partners is an essential key to understanding
the process of international development. Understanding
how governments use or dont use evidence to
shape policies and prioritise the use of their own scarce
resources is also increasingly important. That is particularly
true as more and more countries achieve middle income
status2, albeit with large burdens of poverty (13) and aid
programs become progressively smaller.
Development partners need to increasingly
understand the political economy of decision making
and resource allocation if they are to have impact.
Traditional forms of Overseas Development Assistance
(ODA) have become relatively less important in much of
Asia as those economies expand and some development
partners withdraw. For example, total ODA in all sectors
now constitutes less than one per cent of government
expenditure in Indonesia. While ODA can be helpful and
catalytic in supporting reforms, the key to improved
outcomes will be how countries prioritise and use their
own resources. The country-driven development vision
of the Paris Declaration and Accra Agenda for Action
further point unmistakably to the importance of national
planning and budgeting, however uncomfortable that may
be for development partners increasingly seeking visibility,
quick wins and avoidance of corruption from their own
aid dollar. Development partners have their own political
economy incentives and drivers. Those partners wishing
to support more evidence-based priorities and resource
allocation decisions by developing country governments
must identify more sophisticated but legitimate entry
points of influence.

remains a large but preventable RMNCH burden globally,


including in Asia and the Pacific: 2.5 million children under
five died in this region in 2013, 41% of the global burden
(14). Understanding the political economy of RMNCH is
also important because proven, affordable, interventions
that dramatically improve RMNCH outcomes have been
successfully implemented at scale in some low income
Asian countries decades ago (15). Yet if the scientific
evidence base, cost-effectiveness and affordability for
improving RMNCH have been so clear, for so long, why
have so many countries failed to invest accordingly? Why,
despite the political commitments and rhetoric, do several
countries in Asia have the lowest absolute and relative
levels of government expenditure going to health, and
especially RMNCH? How can RMNCH be prioritised and
resourced in countries which are rapidly decentralising
political and economic decision making to sub-national
districts and even to villages? Political economy analysis
can help provide insights into these issues for the benefit
of governments and their development partners.
This report builds on recent collaborative work
between Australia and UNICEF aimed at improving the
evidence base for investment decisions for RMNCH
in Asia. More specifically, the Australian Governments
aid program3 funded an initiative the Investment Case
Approach - in Bangladesh, Indonesia, Philippines and
Nepal since June 2011. Led by UNICEF and its partners,
the goal was to demonstrate a new and systematic
way of producing evidence that enables policymakers
and planners to: 1) assess the extent to which RMNCH
services are equitably distributed, using locally gathered
data; 2) identify the constraints hampering the scale-up
of cost-effective interventions that affect RMNCH; 3)
design realistic strategies to address those constraints
and 4) estimate the expected mortality and morbidity
impact and costs associated with implementing the
strategies proposed. The approach sought to influence
national policymakers and other stakeholders, including
development partners, by highlighting financing gaps
within national health systems and in specific geographic
areas, as well as gaps in governance of the health sector.
But the approach also focuses on improving the evidence
base for sub-national planning and budgeting. That is
because some of the greatest RMNCH needs occur in
geographically and economically disadvantaged areas,
where the evidence and capacity for good decision making
is weakest.

Some useful definitions of political economy as they apply to international development are set out in Annex One.
The World Bank classifies countries as middle income if they had a GNI per capita of more than $1045 but less than $12,746 in 2013. Within
the middle income category, those countries with a GNI per capita of less than $4125 are classified as lower middle income, while those
above are classified as upper middle income.
3
Originally AusAID and from 2013 the Department of Foreign Affairs and Trade (DFAT).

UNICEF commissioned this report to better


understand the political economy of decision making
in the Philippines, with particular reference to RMNCH.
This report responds to UNICEFs and DFATs wish to
better understand the overarching strategic factors that
drive priority setting and resource allocations for RMNCH
and the health sector more broadly at both the national
and sub-national levels in the Philippines. This can, in
turn, then inform UNICEF and other stakeholders how
they might need to recalibrate their approaches so as to

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PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

Understanding the political economy of Reproductive,


Maternal, Newborn and Child Health (RMNCH) is a
particularly important issue. That is partly because there

1
2

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

increase their impact on RMNCH and the health sector


more broadly. Similar reports are being prepared for three
other countries Bangladesh, Indonesia, and Nepal
where UNICEF and DFAT have been supporting evidencebased planning in support of women and their children.
The original Terms of Reference for this report are available
on request. The political economy reports are in addition to
a quite separate exercise that evaluates the outputs and
outcomes of the Investment Case approach.

11

2.2 Methodology, frameworks


used, and report structure
There are numerous analytical tools and approaches
that could be drawn on to examine the political
economy of health and RMNCH in developing
countries, as they are reflected in priority setting,
planning and budgeting by Governments. These
include a how to note on political economy analysis
by the UK Department for International Development
(DFID) (16) and the World Bank (17); the approach by
the Overseas Development Institute (18); and the
World Banks problem driven governance framework
presented by Fritz et al. (19). There are also numerous
tools and approaches that can be applied to political
economy analysis including Theory of Change; Drivers
of Change Most Significant Change. All of these tools
and approaches have something to offer, but because
there is great variety between, and within, the four
countries captured in this study, we have not adhered to
one in particular. Indeed, it would be remarkable if any
one analytical approach could be applied coherently and
comprehensively to all four countries, especially given
the focus of the work on sub-national level, which has
not been analysed very widely, especially in Asia (20).
However, this analysis of the political economy of RMNCH
in the Philippines and the other three countries drew on
the methodological framework employed by DFIDs How
to note, and Fritzs problem driven governance, as they
were most applicable to the social sectors. A definition of
political economy is at Annex 1. Further details, including
a schematic overview of the approaches used by DFID, as
well as Fritz et al, are in Annex 2.
The specific methodology used for each of the four
countries was as follows. The lead author first reviewed
different approaches to political economy analysis,
especially as it applies to the health and social sectors, in
peer-reviewed and/or grey literature. He then searched the
peer-reviewed and grey literature and open access data
bases to identify the main political economy characteristics
of each countrys health and development sectors. The
literature review and data base analyses were then used to
develop an inception report summarising the key political
economy characteristics and RMNCH status of each
country. The Inception Report also set out the proposed
methodology and analytical approach, including ethical
issues; a proposed standard questionnaire for interviews,
and a recommended program of field level interviews,
decided in collaboration with the UNICEF Country Office.
The Inception Report for the Philippines is available at
Annex 3.

July September 2014. Interviews in the Philippines


occurred over the period 14-26 July in Manila as well
as a field visit to Davao to interview stakeholders in the
UNICEF-supported evidence-based planning program.
In total 28 stakeholders from government, civil society
(research and academic institutions) and development
partners were interviewed (Annex 4). It is worth
mentioning that more than two thirds of those senior
interviewees were female: a welcome reflection of the
womens status in positions of authority in the Philippines.
Unfortunately, requests for interviews with the national
Department of Health, Department of Budget and
Management, and the Australian Department of Foreign
Affairs and Trade in Manila could not be accommodated
in the time available. The lead analyst (Ian Anderson) was
accompanied and actively supported in all interviews by Dr
Raoul Bermejo III, Health Specialist, UNICEF Philippines.
The questionnaire used as the basis for interviews is
available on request. Conceptualisation, oversight of the
design and implementation of the work was provided by
the second author of this report (David Hipgrave).
The country level visits and interviews involved a
mixed method approach. This involved:
a. Discussions with local staff on the findings of the desk
review and exploring its implications for their local
activities in health and other sectors.
b. Interviewing wherever possible experts from
government in the finance, planning, health and other
social sectors.
c. Discussions with the major development partners and
academics who have previously assessed the political
economy of social sector issues
d. Gathering and analysing quantitative data on social
sector spending, disbursement and sub-sectoral
allocations (infrastructure, human resources, advocacy
/communications), as well as local analysis on related
policy direction
This report is structured as follows. Section 3 provides
a summary and analysis of the RMNCH situation and
development context of the Philippines. Section 4
summarises the structure and function of the health
sector and RMNCH at the national and sub-national level,
and provides an appraisal of its performance. Section 5
provides recommendations based on the foregoing.

3. The RMNCH situation of the Philippines


3.1 RMNCH achievements
and ongoing challenges
The Philippines has made strong and steady progress
at least at a national level in reducing child and
infant mortality. As seen in Chart 1 below, the latest
Government report (21) states that under-five mortality
rate at the national level fell from 80/1000 live births in
1990 to 30/1000 live births in 2011 (the latest year available
in this series). The infant mortality rate has fallen from
57/1000 to 22/1000 over the same period. The neonatal
mortality rate was 14/1000 in 2012. That Government
report further states that the Philippines has a high

probability to achieve the MDG 4 target on reducing child


and infant mortality by two thirds between 1990 and 2015
(22). That report further states that the Philippines also has
a high probability to provide universal access to primary
education; provide educational opportunities for girls;
reverse the incidence of malaria; increase tuberculosis
detection and cure rates; and increase the proportion of
households with access to safe water supply. The MDG
target of halving the proportion of people with no access
to basic sanitation has already been achieved. Each of
these developments is valuable and worthwhile in their
own right. Each will also contribute directly or indirectly to
improved health for women and children.

Chart 1. Progress on under-five, infant, and neonatal mortality in the Philippines


100
90
80

80

70
60

57

54.2
48.4

50

40

40
33.6

35.1

32

34
30

29

30

24

25

22

20
17.7

17.8

17

13

10
0

1990

1993

1998
Infant Mortalitiy

2003
Under Five Mortality

2006

16

2008

14

2011

2015

Neonatal Mortality

Source: Government of the Philippines / UNDP (2014)

Once UNICEF had reviewed and approved the


Inception Reports and methodology, field level
interviews were conducted involving one or two week
visits to each of the four countries over 7 weeks during

12

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

13

quarters and so reach the Philippines MDG 5 MMR


target of 52/100,000. Similarly, the Philippines has a poor
record in terms of increasing coverage of modern family
planning (MDG target 5b). Government reports state that
the Contraceptive Prevalence Rate (CPR) was essentially
stagnant at around 50% of currently married women4
between 1998 and 2006, and may have slipped further to
just less than half (48.9%) by 2011 (21). Uptake of safe and
effective modern family planning is disproportionately low
among the poor. A 2014 UNFPA report (23) cites evidence
from 2007 that unplanned and unwanted births are higher
among the poor in the Philippines than the average in
41 comparable countries, and significantly higher than in
neighbouring Indonesia (Chart 2).

than comparable countries in the region or at its level


of income over the decades (26). While other countries

Figure 3.1 Poverty reduction is slowest in


the Philippines

Chart 3. Slower rate of reducing poverty in the Philippines than comparable countries.

Chart 2. Unplanned / unwanted pregnancies in the Philippines, Indonesia and 39 other countries

Philippines

Percent of population

Unwanted births per woman

100
2

Average
41 countries

Indonesia

between 1990 and 2015.

Figure 3.2
Indonesia,

Poverty headcount ratio


at USD 1.25 a day
15

80

Ave
as pe
at

12

60

Percent

However there has been little progress and even


reversal in terms of maternal health and modern
family planning. The Philippines has a Total Fertility
Rate (TFR) of 3.1 per woman (23). The latest Government
report (21) confirms that the maternal mortality ratio
(MMR) was an estimated 209/100,000 live births in 1990,
falling to 162/100,000 by 2006. However the 2014 Family
Health Survey report estimated the MMR at 221/100,000:
higher even than the starting point in 1990. Measuring
MMR is difficult, so such variations are not particularly
surprising. Indeed, the apparent increase may reflect
better statistical reporting rather than an actual increase.
Whatever the explanation, it is clear that the Philippines
will not be able to reduce maternal deaths by three

60.
Moreover, the Philippines still has one of the h
countries in the region, with a Gini coefficient of around
the region have
had higherfrom
initial rates
of poverty, Gini leve
countries
in and
the
region ineither
started
lower
3.2 Political,
economic
they have been able to reduce poverty rates faster than
development
the Philippines. This
is apparent fromor
Chart
3 below.
income context
growth (e.g., Cambodia,
Vietnam),
managed
to lo
The latest Government report states that the incidence
Despite its potential,
the Philippines
has had a
of poverty
has reduced
over one third (34.4%)
Malaysia,
Thailand)
(Figure
3.3).
The from
countrys
high inlevel of
disappointing record of economic growth and
1991 to just over one quarter (25.2%) in 2012 (21). While
social development
since
Independence
in 1946.
welcome, this reduction
still well above
17.2%
high
ratio
of Filipino
billionaires
netisworth
totheGDP,
which
The Philippines has had, on average, lower economic
poverty rate that would have enabled the Philippines
growth, lower income
poverty reduction,
and higher inequity
to reach the MDG
1 target3.1).
on reducing poverty by half
countries
in the region
(Table

40

9
6
3

20

0
1

Philippines
China
Lao PDR
Thailand

Wealth quintile. poorest (1) to richest (5)


Source: UNFPA (2014)
Inequity remains a major challenge in the Philippines.
The World Bank estimates that the Gini Index of
inequality5 for the Philippines is 43.0 (24). While not as high
as Colombia (Gini coefficient of 53.5) and several other Latin
American countries, the Philippines has a higher inequality
score than Indonesia (Gini coefficient 38.1) and many
other countries in Asia. Even more worrying is the fact that
income inequality has remained virtually the same for more
than 20 of the last years in the Philippines. Using slightly
different data sets and approaches the latest Government of
Philippines reports (21) state that the Gini index of inequality
in the Philippines was 0.47 in 2012, barely different from the
estimate of 0.48 of 1991. There are significant inequalities in
the use of important health services. For example significant

inequalities occur in terms of access to and use of skilled


birth attendants (SBA) in the Philippines across a range of
socio-economic criteria: education, income, or geography.
More specifically, latest WHO statistics (25) show that
73% of women with a secondary education or higher, 94%
of the women in the highest wealth quintile and 78% of
women in urban areas use a SBA, compared to only 11%
of those with no education; 26% of those in the lowest
quintile and 48% of those in rural areas. Interestingly, there
are significant inequalities in the contraceptive prevalence
rate based on education women with secondary or higher
levels of education are four times more likely to use modern
contraception than those with no education but there is
virtually no rural/urban difference (25).

It could be assumed that the CPR among women who are not married, including adolescents, is higher.
The Gini coefficient estimates the extent of inequality of income and wealth in a country. More formally, the World Bank states that the Gini
index measures the extent to which the distribution of income or consumption expenditure among individuals or households within an
economy deviates from a perfectly equal distribution. A score of one means one individual hypothetically owns all the wealth in the country.
A score of zero means there is no inequality in the dispersal of income and wealth in the country.

4
5

14

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

Cambodia
Indonesia
Malaysia
EAP (developing only)

Source: WDI
Note: EAP stands for East Asia and Pacific countries. Some
countries have missing values during certain years.

Source: WDI
Note: Some co
years.

Source: World Bank (26)

Political economy factors explain much of the


disappointing record of economic growth and poverty
reduction. The Philippines has been subject to some
particularly severe natural disasters including typhoons,
earthquakes and volcanoes over the decades. Indeed,
the Philippines is ranked as the third most disaster prone
country in the world
54 after Tonga and Vanuatu, based on
the number of events (21). Nevertheless, much of the
explanation for the Philippines disappointing record can
be explained by five Ps of political economy: politics;
political patronage; policies; population, and problems
specific to the Philippines.

Politics is one factor explaining the poor record to


date. The Philippines is a democratic republic with a
particularly vibrant and free press. However it also has
several political characteristics that have impeded broad
based socio-economic growth. As a former colony of
the USA, the Philippines inherited the US system of
checks and balances between legislature (Congress),
Executive (the President and the administration) and
an independent judiciary. In principle, this should have
prevented concentration of power in the hands of one
arm of Government. However, the longstanding Marcos
dictatorship, a period of martial law, corruption and

Problems with the household surveys, such as high rate of non-respon


could actually be higher in the Philippines. If the imputed income of the
household survey, the Gini coefficient increases by 2.8 points.

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

15

Political patronage, occurring at national, regional


and local levels, intertwined with money politics is
a second factor that explains poor development and
health outcomes. Political parties are generally weak in
the Philippines. However, family political dynasties can
be very strong and durable at the national (Marcos and
Aquino families), regional (Osmena and other families)
and local levels. Vote buying and political patronage is
common, often to the detriment of public policy or public
health. A recent analysis on vote-buying in the Philippines
found that: In places where households report more
vote buying, government records show that municipalities
invest less in basic health services for mothers and

emerged as the dominant sector of the economy. Lack


of competition in key sectors, insecurity of property rights,
complex regulations, and severe underinvestment by the
government and the private sector has led to this growth
pattern, which is not the norm in the East Asia region. This
anomalous growth pattern has failed to provide good jobs
to the majority of Filipinos and has led to a substantial
outmigration of many of the countrys best and brightest
people. (26)
Population growth itself a reflection of political
economy factors has made the task of socioeconomic growth harder and more expensive. The
Philippines Commission on Population estimated that the
Philippines population reached 100 million on 26 July 2004,
almost 4 times larger than the population in 1960 (33). An
estimated babies are born every day in the Philippines,

Philippine dependency ratio is among the


highest in the region

Philippine population is still growing fast.


Population and poppulation growth

Age dependency ratio of selected East Asian countries

100

2.7

60
40

76.5
60.7

60

50

40

Growth rate (rhs)

Philippines
Indonesia

20
11

09
20

07
20

05
20

03
20

01
20

9
19
9

20
10

00
20

0
19
9

0
19
8

0
19
7

Population

38.7

0
0

92.3

48.1

19
6

70

2.4
1.9

27.1

3.1
2.4

20

80

19
9

2.9

Per cent

80

Policy distortions are a third factor explaining the poor


record to date. In any country, policies are essentially
a reflection of the interests/visions of the political elite,
and political economy factors. In some cases, it is the
absence of good policies including family planning
and/or sustained programs to address under-nutrition in
mothers and children that helps to explain persistently
high levels of poverty in the Philippines.6 In other cases it
is the policies chosen. The World Bank latest Development
Report for the Philippines summarises the historical
situation as follows:
The countrys long history of policy distortions slowed
the growth of agriculture and manufacturing in the last
six decades. Instead of rising agricultural productivity
paving the way for the development of a vibrant labourintensive manufacturing sector and subsequently of a
high-skill services sector, the converse has taken place
in the Philippines. Agricultural productivity has remained
depressed, manufacturing has failed to grow sustainably,
and a low-productivity, low-skill services sector has

whose crude birth rate (25/1000 people) is 1.66 times


that of other developing countries in east Asia and the
Pacific. This reflects the influence of the Roman Catholic
churchs opposition to modern family planning, as well as
national poverty levels. A rapidly increasing population puts
additional demands on RMNCH services in the short term,
education facilities in the medium term, and job creation in
the longer term. Moreover, the latest World Bank analysis
suggests that structural factors in the Philippines have
traditionally resulted in high levels of unemployment,
under-employment, and low productivity informal
employment (26). This means the Philippines could miss
the opportunity of a demographic dividend7 and instead
face a demographic burden. High total fertility means
that the Philippines still has a high (albeit declining)
dependency ratio8 of around 63% of the population: one of
the highest in the region (Chart 4).

Chart 4: Philippines population growth and dependency ratios

Per cent

The system of checks and balances, means that


politically difficult but substantial reforms that affect
poverty and inequity levels can be easily blocked.
This is particularly the case given weak party discipline
and frequent powerful family dynasties in Congress.
Lack of even modest agrarian reform in the Philippines
- often blocked by landowning Congress members or
their representatives has substantial consequences for
poverty and inequity in a country where most of the poor
are based in rural areas (27, 28). Congress, which approves
budget measures, has also been historically reluctant to
raise income (and other) taxes in the Philippines, which
has one of the lowest tax revenue ratios in the region, at
just 12% of GDP in 2012, virtually unchanged from 2001.
Congressional reluctance to raise taxes even during spurts
of economic growth has the direct effect of reducing the
revenue (fiscal space) that would otherwise be available
to provide government services. Importantly, taxation is
not just a means of financing government services. It can
also be shown that, globally and historically, low overall
taxes weakens the demand by the governed for improved
services and the overall accountability of government (1,
29-31).

children, and quite strikingly, as a summary measure of


weak service delivery performance, a higher per centage
of children are severely underweight (32). Political
patronage is also intertwined with money politics.
Another recent analysis concluded that:
The patronage nature of Philippine politics makes
politicians reliance on money crucial to their political
survival. An important way to increase a politicians
chances of re-election is to influence public spending via a
politically targeted provision of public goods and services
through the pork barrel (which includes the Priority
Development Assistance Fund various congressional
allocations and congressional insertions). However, this
is often not enough, given the perennially tight fiscal
situation of the Philippines. As a result, politicians
aspiring to remain in power must increase their chances
of re-election by other means, such as raising money
from outside the purview of the government. This very
high reliance on money for political survival has often
resulted in the entrenchment of money politics and hence
corruption in various government agencies. In some
agencies, rent-seeking, patronage, and politicization
of various functions of the government have become
standard ways to raise money and to ensure the political
survival or advancement of many politicians. For the same
reason, politicians are also very susceptible to vested
interests when deciding on new laws. Even the most
reform-minded politician requires money, as his capacity to
govern and enact reform s crucially depends on how well
he garners political support, which is often gained through
money.(26)

Millions

crony capitalism favouring the elite proves that did not


occur in practice. Political assassinations and numerous
coup attempts over the decades have generated political
instability. Experiences in the 1986 EDSA revolution
and afterwards means political leaders must ultimately be
sensitive to the interests of the armed forces, and the ability
of the church to mobilise street protests, to stay in power.
There continue to be allegations in the media that some
Mayors aligned to national party leaders get preferential
access to resources. Political controversy can escalate
quickly and from unexpected quarters. For example,
opponents of President Aquino are now seeking his formal
impeachment over the reallocation of undisbursed funds
from the well-intentioned and developmentally oriented
Disbursement Acceleration Program).

Malasia
Thailand

Source: World Bank (2013) (26)

Large numbers of unplanned children add to household costs among the poor, exacerbating household poverty. Under-nutrition in mothers,
infants, and children directly increases the susceptibility to disease and indirectly reduces income earning potential, thereby
exacerbating poverty.

In essence, a demographic dividend occurs when a large youth bulge finds good well-paying jobs in the formal sector that then generates
income, taxes and wealth that can be invested by the country for longer term social benefit. A demographic burden occurs when that youth
bulge is not able to be fully employed and so creates an additional burden on welfare and other services.
8
Those aged less than 15 years, and those aged older than 64 years (i.e. dependents) as a ratio of the total population. A higher per centage

means more people are dependent on the working age population to support them

16

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

17

Problems particular to the Philippines also explain


the disappointing record on socio-economic growth.
The Philippines has had decades-long insurgencies and
conflicts with the communist New Peoples Army in
several provinces, and Islamist separatists in parts of
Mindanao. Poverty incidence is higher in conflict provinces
(42%) than in non-conflict provinces (22%). Around 36%
of poor Filipinos, or 8.4 million, reside in conflict provinces
(26). As noted earlier, the Philippines is particularly prone
to natural disasters including typhoons, earthquakes and
volcanoes. The widely dispersed, multiple island nature of
the Philippines creates challenges and additional costs in
delivering basic social services.
These five Ps are particularly relevant to explaining
relatively poor and inequitable RMNCH outcomes.
Low economic growth and tax collection has meant
limited fiscal space for investing in health and RMNCH,
particularly in the face of a growing population. Political
factors and policies have outlawed and/or financially
starved family planning programs. Political patronage and
lack of voice of the poor means what little has been
invested in health and RMNCH is often skewed in favour
of the rich. Latest research from the World Bank (34) finds
that the Philippines is one of only 20 countries in the world
(among 69 assessed) where government expenditure
on health is significantly pro-rich. Problems specific to
the Philippines often disproportionately affect women
and children: UNICEF reports that super typhoon Haiyan/
Yolanda hit Tacloban and surrounding areas where 40% of
children were already living in poverty.

3.2.1 Where the Philippines is now: recent


changes in the strategic landscape
Recent policy pronouncements and allocation of
resources to the social sectors imply a very explicit
political commitment to the social sectors. The
Constitution of the Philippines has enshrined funding
for education as the first priority on budget resources
since 1986. However recent policy announcements have
also given a stronger commitment to health as well.
Public statements from President Aquino have been very
strong and refreshingly direct and candid suggesting a
change in substance and style in favour of the majority of
Filipinos. As just one example amongst many, President
Aquinos Social Contract with the Filipino people
prominently pledges a change From treating health as
just another area for political patronage to recognizing
the advancement and protection of public health, which
includes responsible parenthood, as key measures of good
governance. (35) The Aquino Health Agenda (AHA) also
seeks to put substance into the rhetoric by achieving UHC
for all Filipinos. The three strategic thrusts of the Aquino
Health Agenda and UHC involve:

18

Financial risk protection through expansion in


National Health Insurance Program (NHIP) enrolment
and benefit delivery - the poor are to be protected from
the financial impacts of health care use by improving the
benefit: delivery ratio of the NHIP;
Improved access to quality hospitals and health care
facilities government owned and operated hospitals
and health facilities will be upgraded to expand capacity
and provide quality services to help attain MDGs, attend
to traumatic injuries and other types of emergencies,
and manage non-communicable diseases and their
complications; and
Attainment of the health-related MDGs public
health programs shall be focused on reducing maternal
and child mortality, morbidity and mortality from
TB and malaria, and the prevalence of HIV/AIDS, in
addition to being prepared for emerging disease trends,
and prevention and control of non-communicable
diseases.(36)
The Administration is achieving some important
successes, including keeping poor children healthy,
through a large scale conditional cash transfer
program. The program, known as 4P (Pantawid Pamilyang
Pilipino Program or Improving the Human Capital of the
Poor) combines social welfare objectives in the form of
cash grants to poor households with social development
objectives (payment is conditional upon investing in the
health of infants, children and adolescents). To be eligible,
households must meet the following conditions:
Pregnant women must participate in pre- and post-natal
care and be attended during childbirth by a trained health
professional;
Parents must attend Family Development Sessions ;
0-5 year old children must receive regular preventive
health check-ups and vaccines;
6-14 years old children must receive deworming pills
twice a year.
All child beneficiaries (0-18 years old) must enrol in
school and maintain a class attendance of at least 85%
per month
The program had 4,090,667 registered households as of
25 June 2014 and operates in 79 provinces covering 1484
municipalities and 143 cities in all 17 regions nationwide
(37). An independent evaluation, partly funded by AusAID,
concluded that the program appears to be effective on a
range of criteria, in terms of directing scarce resources
to the poor and vulnerable, helping to keep poor children
healthy, well nourished (a 10 per centage point reduction
in severe stunting compared to barangays that did not
receive the program, where 24% of children aged 6-36
months were severely stunted); enabling poor households
to increase their investments in meeting the health and
education needs of their children; PhilHealth coverage
without impacting decisions to seek work or fertility rates.

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

19

4 Structure and function of the health sector and


RMNCH at national and sub-national levels, and
related analysis
4.1 Health system structure,
governance and stewardship
The Philippines exhibits many characteristics common
to other South East Asian health systems. While there
are some first class facilities and personnel in the major
cities, the overall density of trained health workers is
low, especially in rural areas. Latest available figures
from WHO, which unfortunately relate to 2004, suggest
only 1.153 doctors, and 6 nurses / midwives, per 1000
population (38). Simultaneously however, many Filipino
doctors and nurses successfully migrate to the United
States and other OECD countries. As with many countries
in Asia, there is also a vibrant if often poorly regulated
private sector, including pharmacies. In 2011 (latest
year available) private expenditure on health represented
nearly two thirds (63%) of total health expenditure; 83%
of private expenditure was directly out of pocket; and only
11.7 % of that was in the form of private prepaid plans
(25). External resources for health, including ODA, account
for just 1% of total health expenditure. As with many
countries in Asia, the Philippines is also investing political
capital and financing into expanding UHC.
A key feature of the Philippines health system is
devolution: the 1991 Local Government Code involved
sudden, major, devolution of functions to subnational
units, especially small local government units.
Devolution was an urgent and rapid political exercise
to distribute political and economic power in the final
months of the Cory Aquino administration which feared a
possible return to Marcos style dictatorship in the coming
elections. Most agency functions were devolved, although
the Department of Education successfully resisted
this. Devolution was intended to create three broad
administrative levels for health services: a central DOH
in charge of regulation and tertiary care through hospitals
that it kept control over; provincial governments would
be responsible for provincial and district hospitals and
secondary care; and LGUs would be in charge of primary
care. Prior to decentralisation, LGUs were responsible
for minor activities such as administration of garbage
collection. Decentralisation gave them significantly
expanded functions including principal responsibility for
the delivery of basic services and the operation of facilities
in: (i) agricultural extension and research, (ii) social forestry,
(iii) environmental management and pollution control,
(iv) primary health and hospital care, (v) social welfare
services, (v) repair and maintenance of infrastructure, (vi)
water supply and communal irrigation, and (vi) land use
planning. (39)

20

Devolution also involved major structural changes


to personnel and budgets, especially at the DOH.
National level agencies lost staff and budgets to LGUs.
More than 60% of DOHs 74,896 staff, and more than
60% of its nearly P10 billion budget, was devolved to
LGUs (39). This clearly created sudden, major, disruption
to the planning and operation of health services at both
the national and decentralised levels. The situation was
further complicated by the fact that responsibility for
several health services (immunization, communicable
disease control, provision of drugs and medicines to
devolved facilities, and the operation of Manila hospitals)
was retained by the national DOH.
The situation has become clearer over time, but there
remains major disparity in the financial, human resource,
procurement and management capacity between and
within the LGU health departments across the Philippines.
This vertical and horizontal inequity of resources has
direct implications for the political economy of priority
setting, planning and resource allocation, and has a
potentially corrosive effect on accountability. Wealthier
provinces and cities (many of which have large slums)
with their own sources of tax revenue can fund activities
that are only weakly aligned to national priorities and
DOH. They can ignore development partners. The financial
incentives offered by development partners and even
the DOH - are now so small compared to the budget of
the big cities that it is hard to engage them. A World Bank
study on service delivery found that the most common
approach to mitigate the limitations in local resource
bases was to lobby the national government either
directly through national sectoral agencies or indirectly
through the local congressmen to allocate discretionary
national funds to finance devolved infrastructure and
services (40).
Clearly, such lobbying for resources occurs in all
societies, but it is not as rational, systematic, efficient
or equitable as evidence-based priority setting and
planning. Moreover, an environment that requires/
facilitates extensive lobbying can have a corrosive
effect on local accountability. The same World Bank
study also noted that LGUs with limited capacity to raise
local revenues lobbied central government for additional
national resources. This is understandable. But additional
national resources allocated to poorer sub national units
often come with political strings attached. Local politicians
who focus too much on pleasing political patrons in
Manila can also become less attuned to the needs of local
communities. As the World Bank study said:

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

Reliance on national resources is a pragmatic solution


to resource constraints, but it also raises questions
of accountability and efficiency. The availability of
discretionary funding has commonly been politically
conditioned, potentially weakening LGUs accountability
to their local constituencies. This also dampens LGUs
incentives to raise their own revenues, which again
requires a degree of accountability for the use of the
revenues raised locally. Finally, opportunistic accessing of
national resources in the context of weak local planning
can create problems of poor expenditure coordination and
reduced efficiency in resource allocation (40).
A recent Public Expenditure Review in the Philippines
concluded that the distribution of revenues,
expenditures and some key development outcomes
across regions is becoming more unequal. More
specifically, it concluded that:
Since 2000, per capita incomes, wage levels and poverty
rates in the different regions have been evolving along
diverging paths. Only household expenditures exhibit
some modest convergence. Basic education and access
to basic infrastructure indicators are also diverging across
regions. Health indicators that can be directly attributed
to the health sector, such as immunization rates, have
not been converging. The only case of clear and strong
convergence can be found in infant and child mortality
rates (41)
The political economy implications of this are clear.
Once again, a strong, centralised, authoritarian state
would have more capacity to reallocate resources to
poorly performing sub-national provinces and districts than
a highly devolved state. But devolution, different resource
endowments/economic opportunities between different
provinces, seems to contribute to unequal access and
outcomes, at least in the short to medium term.
The ability of national level agencies to achieve
national outcomes is mixed. On the one hand, national
level agencies, including DOH, can be quite powerful.
Interviews in Davao revealed that national agencies
financed only 40% of all programs approved by the
regional NEDA office as meeting local priorities. When over
half (60%) of approved projects are unfunded, there would
seem to be systematic inefficiency. Despite questioning,
the criteria upon which projects are eventually funded
is not clear. On the other hand, the DOH has ongoing
challenges with respect to national leadership of health.
A recent World Bank review of the health sector in the
Philippines concluded that:

While the DOH has been given the mandate for


stewardship and oversight of the health sector, it has not
been adequately empowered to enforce this mandate.
For example, the stewardship of the DOH over LGUs is
loosely defined and the DOH cannot require LGUs and the
private sector to submit health sector data. This creates
a huge challenge for the DOH to exercise its stewardship
function. Despite these limitations, the DOH has done a
remarkable job in taking forward stewardship of the sector
especially vis--vis LGUs. The DOH has adopted innovative
institutional mechanisms such as LGU scorecards,
Centres for Health Development, and the Province Wide
Investment Plans to enhance LGU accountability for health
sector goals (42).

4.2 Health financing


The 2013 national budget reconfirms the governments
commitment to the social sector. Social services
especially education but also health were easily
the largest component of the 2013 national budget in
absolute and relative terms, being allocated 698 billion or
34.8% of the total budget. Economic services (physical
infrastructure etc.) were next at P510 billion (25.5%). Debt
servicing was allocated P333 billion (16%). Defence was
allocated just P89 billion (4.5%).
The health sector has attracted a particularly rapid
and sustained increase in budgetary resources.
This is clear from Chart 5 below. In essence, total DOH
expenditure was just P7.1 billion in 1991, and rarely
exceeded P10 billion for almost two decades, despite rapid
population growth in the Philippines. DOH expenditure
increased to P18.9 billion in 2008 (under the Arroyo
Administration)9 but increased even more from 2010
under the Aquino Administration, reaching P83.7 billion in
2014; it is projected to increase to P86.5 billion in 2015.
What is particularly noticeable is that the prime almost
sole driver of the increase is increased expenditure
on maintenance and other operating expenses shown
in the red line. This includes the very large amount the
Government is paying in health premiums for the poor
under its scaling up of UHC. Also noticeable is the fact
that the allocation to salaries (green line) has remained
relatively flat over the last quarter of a century, raising
concerns about out of pocket payments or reliance of
providers on other sources of income.

It is unclear why the Arroyo administration increased health expenditure. All key stakeholders were asked during the field visits. Most were
unaware/surprised that budget expenditure rose so quickly under that administration. The UNICEF office in Manila is continuing research on
this question.
9

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

21

This chart needs to be interpreted with caution, as the


budget allocation going to health is a nationally retained
program with little LGU counterpart financing, whereas
national DOH expenditure on health is also supplemented
by counterpart financing by LGUs (although the total
quantum is difficult to estimate).

Chart 5. DOH expenditure.

100
90
80
70

DOH expenditure
program, billions of
Philippines pesos
(current)

60
50
40
30
20
10

Total Doh

Maintenance and Other Operating Expenses

Salaries

2015

2014

2013

2011

2012

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

Capital outlay

Source: Department of Budget and Management


Importantly, the DOH also attracts an important
share of total government expenditure. Securing
and sustaining an absolute increase in the budget, as
evidenced in Chart 3 above, is good evidence of a renewed
political commitment to the health sector. But it is also

important to assess the relative amounts of Government


resources going to the health sector compared to other
(competing) sectors, as this reflects governments overall
priorities. Chart 6 below shows that the health sector
ranks fifth in terms of budget allocations.

Despite budget increases, increased public expenditure


is needed, especially to address the needs of the
poor and vulnerable. The welcome increase in the DOH
budget allocation to P83.7 billion in 2014 needs to be put
in perspective, especially in a country like the Philippines
with its 100 million population. It averages only P830, or
around $18.75 per person per year, much lower than the
(now dated) $34 suggested by the 2001 Commission on
Macroeconomics and Health as the minimum per capita
public expenditure on health . It is also lower than the
updated estimate of $54 per person per year estimated
by the high profile Taskforce on Innovative Financing in
Health (43), and less than a quarter of the $86 per capita
that the recently released Chatham House report on health
financing recommended all governments in developing
countries should be spending on health (44).
Improving the quality of expenditure is as important
as the quantity of expenditure. A recent World Bank
Public Expenditure Review examined both the quantum
and efficiency of public expenditure in the Philippines, and
concluded that:
shortfalls in the size of public spending generally
appear to be more important than shortfalls in the

Chart 6. Largest recipients of national budget allocations (billion pesos)

2012
Education

quality or efficiency of public spending in explaining


performance gaps. In certain critical sectors, however,
the Philippines also exhibits shortfalls in the efficiency
of public spending, defined broadly as the performance
outcomes achieved per unit of public spending per annum.
An important factor contributing to a lower efficiency in
public spending are the disparities in the distribution of
public expenditures, observed both across income groups
and across geographic regions. That is, public expenditures
that are concentrated on fewer needy beneficiaries tend
to generate weaker development impacts. These findings
suggest that the Philippines cannot hope to achieve
the same development outcomes as the betterperforming countries in the region through efficiency
improvements alone, but will have to make a greater
effort in stepping up the quantity of public spending
in priority areas. Improvements in the efficiency of public
spending can, of course, help in reducing the performance
gaps, and this can be achieved by ensuring that the
benefits of public spending are distributed more equitably
across regions and income group. (41)
It is clear that the Philippines administration is
determined to scale up UHC quickly, but the challenges
should not be underestimated. Out of pocket expenditure
is still the largest source of health expenditure in the
Philippines, and rising rapidly (Chart 7). Furthermore, in
Indonesia a form of UHC induced an increase in out of pocket
expenditures amongst the second and third lowest quintiles
because increased financial means to access health care
resulted in patients being prescribed drugs not covered by
the UHC and for which they must then pay out of pocket (45).

Chart 7. Health expenditure by source of funds, 2009-2011 (in millions of pesos)11

2011

Health Expenditure by Source of Funds, 2009 to 2011


(in Million Pesos)

2012

Public Works and Highways

2009
250,000

2009

Social Welfare and Development

2010

2011

200,000

Agriculture

150,000

Health

100,000

50,000

Agraian Reform

Environment and Natural


Resources

NG

LGU

NHIP

EC

OOP

Pvt Insurance

HMO

Pvt
Pvt Schools
Estabilshments

Grants

Source: National Health Accounts 2009


to 2011, NSCB

Trad and Industry

Secondary source (with permission): Dr Aldaba, University of Philippines.

50

100

150

200

250
NG National government; LGU Local Government Unit; NHIP National Health Insurance Program; EC Employees Compensation; OOP
out of pocket
11

Source Department of Budget and Management

22

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

23

A relevant issue from a political economy perspective


is also to understand both the sources, and the uses,
of increased government expenditure on health. The
sources of increased expenditure are important because
the raising of additional revenues can be progressive (that
is, additional revenue is raised disproportionately from the
wealthier quintiles) or regressive (additional revenue is
raised disproportionately from the poorer quintiles). It is
not exactly clear what the situation is in the Philippines.
However the fact that Value Added Tax, which is applied
on most goods and services, is the major source of
national government revenue means that it is likely to be
regressive12 to the extent that the poor do purchase items
subject to VAT (46). The recently released Chatham House
Report on health financing identifies other pro-poor, prohealth options for government revenue:
Every government should consider improved and
innovative taxation as a means to raise funds for health.
Promising policies include the introduction or strengthening
of excise taxes related to tobacco, alcohol, sugar and
carbon emissions, and these should be combined with

measures to increase tax compliance, reduce illicit flows


and curb tax competition among countries. Other sources
of government revenue, particularly in countries rich in
natural resources, should also be explored .(44)
Furthermore, the uses of government expenditure
where, on what, why and how that expenditure will occur
are relevant to assessing priority settings and impacts.
Government expenditure on curative treatment or end of
life care in tertiary hospitals, or on fee for service diagnostic
tests by private doctors, are likely to have a very different
socio-economic impact than expenditure on promotive and
preventive health in primary and secondary care settings.
An example of good use of government revenue is the
shrewd use of political capital by President Aquino to use
increased taxation on tobacco and alcohol as a means of
simultaneously increasing revenue for the expansion of
UHC, while reducing the burden of non-communicable
diseases. This was particularly noteworthy from a political
economy perspective (Box 1).

A win-win for public health and public finance for the poor where the evidence base shifted from public
health to public economics The Philippines has traditionally had one of the lowest rates of tobacco taxation
and consequently one of the highest rates of tobacco use in the region. This is the result of strong lobbying by
international tobacco companies and member of Congress representing tobacco growing districts. The scientific
evidence that tobacco is a major cause of premature death and disability is well beyond dispute. The tobacco
industry therefore shifted ground away from the public health arguments across to public economic arguments.
They argued smuggling would increase; jobs and revenue would be lost; and the poor would suffer the most from
increased taxes on tobacco and alcohol. All such claims by the tobacco industry have been shown to be myths
(47, 48). President Aquino astutely steered a Sin Tax Law through Congress that shrewdly allocated additional
revenues from tobacco and alcohol to financing the Universal Health Care scale up. In a politically astute move,
President Aquino also ensured that the increased public revenue from the increased taxes was also used to
compensate tobacco farmers who may have lost production. The law eventually passed Congress by only one
vote and the original proposal to raise PHP 60 billion was halved to reduce political resistance.

It now provides health insurance for 82% of the


Philippines population: around 81.5 million

40000

%INC/(DEC)
33.95

35000

Lifetime Member

29%

Indigent 16%

30000

Informal 72%

26.19

25000

Formal 16%

20000
15000
10000
5000
0

2013

2014

Source: PhilHealth (49)

Box 1: The sin tax on tobacco and alcohol to fund UHC

The Philippines Administrations plans for UHC also


provides important context for health financing in the
country. The Philippines is rapidly scaling up UHC,
particularly through PhilHealth. Development partners
familiar with the DOH as their main counterpart must
now engage strategically with social health insurance
institutions as UHC expands. PhilHealth is clearly a key
and strategic stakeholder in the overall health system of
the Philippines, particularly with respect to the poor. As of
June 2014 PhilHealth (49) reported that:

Chart 8: Benefit Payments by PhilHealth (in billion pesos), June 2014

Almost half (46%) of PhilHealth beneficiaries are the


very poor (indigent in PhilHealth terminology) and a
further 10% are from the informal sector.13
90% of DOH-licensed hospitals are accredited with
PhilHealth, as are 1060 private institutional health providers
and 705 government-owned institutional providers.
Several benefit packages are of direct relevance to RRMNCH
including the primary care package and the maternal care
package. Revision of these packages is in progress.
Benefit payments from PhilHealth totalled P34 billion
($755 million) as of June 2014. Benefit payments are
increasing over the previous year and are paid reasonably
equally between contributing groups (Chart 8).

Scaling up health insurance has major implications


for government and household budgets. A recent
UHC costing exercise estimated that the total costs
of expanding effective universal coverage (adequate
financial protection) will be approximately P 408.6 billion
($908 million) over the medium-term (2012-16). This could
result in a doubling of public spending on health as a
share of GDP by 2016 (Baseline: 1.3% of GDP in 2009).
This would not only expand coverage among the poorest
households in the Philippines (5.2 million households
targeted under the National Household Targeting System),
but expand the depth and height of PhilHealth coverage
to provide better financial protection (42). However,
expanding coverage may not improve health access and
outcomes. Much depends upon the depth, and breadth, of
coverage and what services are included. A bias towards
curative, hospital based treatment rather than primary
and preventive care would not help the poor. Under
UHC, private providers have an incentive fee for service
payment. But supplier induced demand for unnecessary
Caesarean Sections and the like would likely create budget
blowouts for government and households, often for little
increase in health outcomes.(50)

The private sector is a dominant part of the Philippines


health financing system, but is often overlooked in
priority setting, planning and budgeting. As seen in
Chart 9 the private sector, including private out of pocket
payments for health care, is the dominant part of the
health care financing system in the Philippines. Private
sources account for 69% of all health financing in the
Philippines, growing at 12.4% a year. The private sector,
including the for-profit and the not-for-profit sectors
as well as pharmacies, are also important providers
of services. Interviews during the field visits confirmed
that quality of private sector services varies greatly in the
Philippine from world class private hospitals in Makati and
Manila, through to unregulated and unqualified providers.
Importantly, the normally well-respected NGO sector in
the Philippines has experienced corruption scandals with
front NGOs that have led to the arrest of Senators.

A person from the lowest quintile paying P50 VAT on any item will lose significantly more relative disposable income than a person from the
highest quintile paying the same P50 VAT on the same item.
13
The formal sector constitutes 40% of beneficiaries and special categories.
12

24

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

25

Chart 9: Sources of health care financing in the Philippines

SOURCE OF FUNDS

AMOUNT (in million pesos, at current prices)

Growth Rate

20111/

2012

84,139

86,423

2.7

National Government

51,940

53,176

2.4

Local Government

32,199

33,247

3.3

SOCIAL INSURANCE

39,209

51,863

32.3

National Health Insurance


Program

39,104

51,750

32.3

Employees' Compensation

104

112

8.0

289,655

325,526

12.4

240,485

269,419

12.0

7,222

7,086

(1.9)

Health Maintenance
Organizations

28,944

33,181

14.6

Private Establishments

9,297

11,603

24.8

Private Schools

3,707

4,236

14.3

3,478

3,987

14.6

3,478

3,987

14.6

416,480

467,798

12.3

GOVERNMENT

PRIVATE SOURCES
Private Out-of-Pocket
Private Insurance

REST OF THE WORLD


Grants
ALL SOURCES

Source: Philippines National Health Accounts (51)

4.3 Health and RMNCH priority-



setting at national and

sub-national levels
National planning and budgeting in the Philippines
health sector is relatively strong. It is guided by planning
documents and guidelines that have been strengthened
recently and are still in the process of redevelopment and
improvement, including with UNICEF support. This has
been reported on extensively in Professor Don Mathesons
Inception Report for the Philippines Investment Case,
which concluded that:
The government has well developed planning and
investment processes at the national and subnational
levels. Provincial and city investment plans for health
translate national health goals into specific concrete
actions at the local level. They become the basis for
mobilizing and allotting resources from the national
government and development partners to the LGUs. As
an investment planning tool for local health development,
a step-by-step Guide has been developed to provide
pointers, tools, materials and references that can be used

26

during the process of sub national planning and budgeting.


The DOH also has a prioritisation process for allocating
resources, based on issues such as health impact, equity,
political commitments, and correcting variation in health
performance levels.
Subnational planning, budgeting and program
implementation have, however, been weak. A
comprehensive Asian Development and World Bank
Study found several weaknesses 10 years after the
Local Government Code was implemented: only 3050% of LGUs had local development councils in place;
the Development Plan formulated by the Regional
Development Council was seldom, if ever, taken into
consideration by the LGUs (they tend to focus on interprovincial projects rather than on local development plans);
there was a disconnect between national and regional/
provincial planning; LGU budget formulation and execution
was weak due to poor income estimates used by LGUs
for budget formulation; over-expenditure on salaries; little
community participation in prioritising and monitoring
projects; mis-procurement and poor financial controls. (39)
Political economy challenges explain much of the
acknowledged weaknesses in planning, budgeting

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

and implementation. The same joint study (39) identified


several political economy challenges that had weakened
planning and priority setting. More specifically, the
report found:
Formidable political economy challenges to
efforts for more transparent and accountable local
government functioning, and a recommendation to not
underestimate such obstacles, and to keep expectations
realistic. While the Local Government Code established
secondary regulations, institutions and linkages between
them, and coherent rules of procedure, enforcement has
been weak due to capture by dominant groups.
Either because of weak evolution over the last decade
or persistent capacity challenges, some aspects of
LGU operations remain underdeveloped and exhibit
vulnerabilities in transparency, accountability, efficiency
and effectiveness.
The workings of intergovernmental (fiscal,
administrative, and political) relations are
particularly vulnerable to the instability induced
by an excessively politicized system of rewards
and allocations, and by uneven institutional strength
and resourcefulness among national executive,
congressional, provincial, and city or municipal actors.
Cumulatively, however, there is evidence that some
executives have tried to break from the dominant
pattern of politics and taken risks outside the certainty
of machine politics. More importantly, these executives
have been rewarded by clear support from communities
and interest groups, and especially by re-election.(39)
A summary of these strengths and weaknesses is
included as Annex 5.
The Philippines National Economic and Development
Agency (NEDA) also provided a detailed, written, response
to questions on priority setting raised in the UNICEF
Questionnaire developed for this analysis. NEDAs
response is at Annex 6. It is clear that NEDA has, at least
on paper, a systematic and well organised approach to
priority setting and planning, with clear links between
medium term strategic goals (including MDG goals)
and individual projects and activities on an annual basis.
NEDA also uses a transparent, systematic, approach14
to screening investment projects using five rational
and relevant technical criteria: relevance and alignment
to national priorities; severity of need; efficiency;
effectiveness and impact; and sustainability.
There is also evidence that the Philippines wants to
make planning and budgeting more transparent, and
participatory. For example, the Department of Budget
and Management (DBM) introduced Performance
Informed Budgets during 2014. The aim is to more clearly

14

present and show the links between the purpose, outputs,


outcomes and costs of different activities. Part of the aim
is to increase the effectiveness and efficiency of resource
allocation. DBM states that performance information
can be used as a signalling device. Low performance or
a decline in performance can serve as an alarm bell that
ought to trigger a closer look into the reasons behind low
performance (52). But it is also clear that Government,
through DBM, intended to send a strong political
economy message through these reforms: that old style
patronage and back room deals were being replaced
with new, publicly stated standards of transparency and
accountability in priority setting, planning and budgeting.
The public signalling of a more reformist approach is clear
in DBMs refreshingly candid claim that:
The new face of the Budget therefore represents
the continuing shift away from the dominance of
patronage politics and clientelistic relationships towards
a more responsive, transparent and accountable public
expenditure management system. With the adoption
of performance informed budgets , the government
is changing the face of the budget. Previously a mass of
numbers and line items without a clear story on where
funds are going, the National Expenditure Plan and the
General Appropriations Act beginning in FY2014 will show
the link between the funds allocated for government
programs and the projected results and outcomes of
these. (52)
Bottom-up budgeting (BuB) also known as
Grassroots Participatory Budgeting Process
is also an effort to systematically facilitate and
institutionalise local needs of poorer communities
into planning and resource allocation. In essence, the
Bottom up Budgeting (BuB) approach requires all National
Government Agencies not just the Department of Health
to formally allocate from 2013 onwards a per centage
of their budget to meet the priorities of local, poorer,
communities, and respond positively to local community
needs (53).
Importantly, the political objective of BuB is to
encourage / empower local communities to influence
national level programs, including health, rather than
focusing on planning and budgeting at the subnational and local level alone. Civil society organisations
(especially NGOs) assist local government units and
municipalities in poorer areas to develop Local Poverty
Reduction Action Plans in any sector that are then
presented to national agencies in time for those plans to
be integrated into the regular budget preparation cycle.
The BuB approach was developed following consultations
with 609 of the poorest municipalities of the country. A
trial involving P8.4 billion ($220 million) was conducted

The screening criteria, including the sub-questions and weightings, is available on request.

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

27

in 2013, of which health related activities amounted to


P706 million ($17.5 million). Other community-determined
projects included agriculture and fisheries support, potable
water supply, and basic education (53). The BuB approach
does not just give poorer communities a more formal say
in planning priorities, it is also an opportunity for them
to generate additional revenue. That is because BuB
resources is additional to the normal allocation they would
receive from the Internal Revenue Allotment. For example,
Quezon City (where UNICEF is working with informal
settlers) had an approved Local Poverty Reduction Action
Plan allocation worth around P50 million.
The LGU health scorecard system is also evidence
based, systematic, and easily used as a driver of
improved priority setting, planning and resource
allocation. DOH has developed a scorecard system for

LGUs that enables national and local planners to track


progress on a range of strategically important outcome,
output and process indicators. Table 1 below highlights the
main features of the scorecard approach, and the evidence
base used. It could be argued that 37 separate indicators
are too much for LGUs to track, and that there are often
severe problems in the accuracy of the data collected.
Nevertheless, the approach is clearly systematic and asks
the right questions at the outcome, output and process
levels, and integrates indicators of inequity into the
system. An important feature of the LGU Health Scorecard
system is also its user-friendly and intuitive approach. The
use of traffic light colours alerts Mayors and policy makers
to priority issues. For example a change from green to red
or orange colouring for childhood immunisation coverage
in a particular district or municipality alerts decision makers
to a priority need.

Table 1: Key features of the LGU Health Scorecard system

Strategic planning issue

Number of
indicators

Typical example of indicator used as part of the


evidence base

Financial risk protection

Increased numbers of enrolment in PhilHealth and the


uptake rate amongst the poorest 20% and 40% of
the population

Efficiency of health sector spending

LGU budget allocated to health (%) and maintenance and


operating expenses (MOOE) (%) allocated to health.

Health facility enhancement program

Bed numbers per population; Client satisfaction


survey results

Internal management and support

Nurse to population ratio; Midwife to population ratio.

15

Contraceptive Prevalence Rate; full immunisation rate (%);


skilled birth attendance (%); TB case detection rate; health
workers receiving the full amount of allowances they are
entitled to receive (%).

Policy standards development and


regulations. Scale up of public health
interventions for the MDGs

UNICEF is also supporting a training program for mayors


that will give them exposure to thinking more systematically
about meeting essential health needs for women and
children using their local budgets and resources. While too
early to gauge its impact, this program of support has the
potential to sensitise mayors and decision makers to the
need for health investments.
But autonomy can lead to patronage. The Mayor of
Davao has made Davao city entirely tobacco free. Davaos
mayor allocates around P100 million (40% of the total health
budget) to the Linggap emergency health care fund
and then personally dispenses funding to individuals who
attend the Mayors office every Monday morning. The policy
problem here is that such financing is entirely reactive to
individual claims (not strategic, forward looking or evidence
based); is essentially focused on curative measures (not
preventive or public health) and, by design or by implication,
clearly involves patronage and clientism. Mayors in general
may have a political incentive to retain such a hand out
facility to the detriment of more institutional approaches.
The World Bank study on local service delivery made the
interesting finding that:
One reason for the LGUs lack of interest in expanding
PhilHealth coverage is political. From local politicians
perspective, funding the enrolment of indigents to the
national health insurance program ran counter to the
pervasive local political culture where local politician extend
direct assistance to poor constituents who seek assistance
for emergencies. Simply put, local officials would much
rather reserve discretionary funds to provide personalized,
direct assistance to their poor constituents rather than
allocate these to support the full coverage of indigents
under a national program (40).

28

The Philippines has long had one of the highest total fertility rates in the region, and highest levels of unmet
contraceptive need. The powerful Roman Catholic church consistently and vigorously opposed modern family
planning. Their power to affect politics was clear given that the Church had demonstrably been a critical player
in mobilising the overthrow of President Marcos in 1986. It could and would also specifically mobilise voters
to vote against candidates standing for Congress. Various Reproductive Health Bills have been languishing in
Congress for over 13 years. Although the scientific evidence about the health benefits of family planning never
changed, the political environment did. President Aquino used his political capital to strongly and astutely advocate
passage of Reproductive Health Bill (58). This was widely supported by the general public, and academics
including from the Roman Catholic Ateneo University. The Philippines now has a law funding the distribution
of free contraceptives, requiring government hospitals to provide reproductive health services, and mandating
public schools to teach sex education. Its not a perfect law. The delivery of RH services remains the primary
responsibility of the national government - not local government units - and optional for most private hospitals.
Except in special cases, minors need parental consent to access family planning methods. Sex education is also
optional for private schools. (58) Nevertheless this is a major change in the political and public health landscape
of the Philippines

centralised, and authoritarian state would be in a position


to pool and reallocate resources from richer to poorer
provinces to some degree through a process known as
fiscal equalisation. However strong devolution of political
and economic power to provinces, districts and cities as
has occurred in the Philippines reduces the institutional
mechanisms to do that reallocation, even if there was
widespread consensus to do so.
The field visits confirmed that decentralisation and
increased autonomy for LGUs can benefit public health.
The Mayor of Davao City had decided on his own accord
to make Davao City virtually tobacco free for public health
reasons. This he has done via a strictly enforced City
Ordinance. In two full days in densely crowded Davao we
saw only one person (surreptitiously) smoking a cigarette:
a remarkable outcome for any city, let alone one in Asia.

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

Champions can be important advocates, or not.


Much of the international literature on reforms in health
refers to the need for leadership and champions (15,
54-56). Local political analysis in the Philippines points to
the critical role that President Aquino played in steering
through the sin tax on tobacco and alcohol to fund
UHC, and to allow modern family planning to occur in the
Philippines (Box2) (57). On the other hand, well-intentioned
champions can also generate priorities and resource
allocation decisions that are not evidence-based and are
not in the best interests of public health or the poor. For
example, a Champion in the Philippines Senate advocated
for nation-wide screening of all newborns within three days
of birth to screen for certain inherited diseases.15 The policy
problem that arises is that each of the six diseases are rare;
it is not-cost effective to screen all newborns, and there is
a high opportunity cost in terms of how resources used for
screening could have achieved higher, pro-poor, impacts if
using evidence-based criteria for resource use.

Box 2: The Reproductive Health Bill: the scientific evidence remained the same, but the political
environment changed dramatically.

Source: authors summary from official documents


However there are clearly still ongoing challenges
in terms of priority setting, planning and budgeting,
including issues of inequity. The Philippines has wealthier
provinces, districts and cities and poorer ones. Devolution
has tended to highlight the difference in economic, fiscal,
and managerial resources between the richer and poorer
areas. A World Bank study found significant horizontal
inequity (inequity between different regions) as well as
vertical inequity (inequity within the same region). More
specifically: the richest LGU in its sample (a city in
Visayas) collected P442 revenue per capita (in constant
1985 Pesos) over 2003-07 whereas the poorest LGU (a
province in Visayas) collected only P81 revenue per capita.
The data also highlighted horizontal inequity across the
same level of LGUs. Among the three municipalities in the
sample, one municipality in Visayas collected nearly twice
as much (P205) as another in Luzon (P117). A strong, highly

Autonomy has also led to the blocking of modern family


planning. Manila Mayor Lito Atienza successfully issued
an Administrative Order that stopped all modern family
planning in the city of Manila: a population of well over 3
million people. Importantly the abolition of the logistics
system for purchasing family planning commodities, and
cessation of training for midwives and nurses, meant that
it took many years to return to a critical mass of capacity
to provide modern family planning services even after he
was replaced. There was, in effect, systems inertia and
constraints that restricted rapid scale up of services.

The six disorders tested for newborn screening are: congenital hypothyroidism; Congenital Adrenal Hyperplasia; Galactosemia;
Phenylketonuria; Glucose-6-phospate-dehydrogenase deficiency; Maple Syrup Urine Disease.
15

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

29

Development partners can skew planning and


funding priorities. In 2011 development partners
contributed around 1% of total health expenditure in the
Philippines (25). Despite this low share of expenditure,
and despite the rhetoric and commitment to the Paris
Declaration and its successor agreements, it is clear that
development partners can skew priorities. There was
strong criticism from NEDA during interviews in Manila
that development partners particularly ignored national
and regional priorities in disaster emergencies including
the recent Typhoon Haiyan. There is also a risk that the
focus on results by development partners will lead to
short termism and funding activities that the Philippines
can do well already, including vaccinations, rather than
focus on the more difficult, essential, but less appealing
issues of procurement reform. Professor Stephen
Howes, previously the Chief Economist in AusAID,
makes the important point that efforts to improve
donor quality by strengthening performance feedback
can undermine efforts to improve recipient quality.
Former USAID Administrator Andrew Natsios writes
those development programs that are most precisely
and easily measured are the least transformational, and
those programs that are most transformational are the
least measurable. (59) Having said this, expenditure on
development programs is a major arena for corruption
and politicking, and it is imperative for partner funds to be
overseen carefully. For example, there are allegations that
Mayors aligned to national party leaders get preferential
access to development resources. Political controversy
can escalate quickly and from unexpected quarters.
Opponents of President Aquino are now seeking his
formal impeachment over the reallocation of undisbursed
funds from the well-intentioned and developmentally
oriented Disbursement Acceleration Program.
Upstream EBaP becomes irrelevant if downstream
implementation and procurement are ill-suited to
increased resources. Several senior and well-educated
officials from a wide spectrum said during the field visits
that the biggest challenge they faced was no longer a
shortage of funds. Rather, the binding constraint for
them was that financing was now increasing rapidly,
yet the systems they had for procurement and financial
management were still tailored to a period of austerity and
small scale purchases. Several officials said independently
that they needed training in consultancy management for
outsourcing and procurement management, rather than
training on planning itself.
Implementation is arguably more important than
planning. The increasing availability of financial resources
flowing through to LGUs in the Philippines has put
increased and changing demands on capacity and
skills. Historically, LGUs were used to small grants and
so had little experience or incentive to improve their
capacity for implementation or finance, procurement or
contract management. Yet In such situations, officials must

30

spend undisbursed funds on big ticket items (vehicles


or overseas training courses) in order to fully disburse
time-restricted funds and not jeopardise future funding.
Philippines authorities, particularly those in poorer LGUs
at sub-national level, will benefit as much from support to
improve administrative and financial accountability as they
will from having more resources allocated.
The new and innovative can often displace the
proven and essential. Interviews confirmed that
LGUs were under pressure to adopt new and innovative
initiatives from the DOH and/or local Mayors. Experienced
officials noted that internal bureaucratic incentives meant
it was difficult to resist pressures to adopt the new.
Yet they also noticed that the new could displace
the funding for basic operational budgets including the
per diems and fuel budget to allow nurses to vaccinate
children in remote areas. There was also little bureaucratic
incentive to fund ongoing training of past yet strongly
evidence based programs. For example, retirements and
a low level of ongoing training meant that there was a low
level of workers in Davao now trained in the Integrated
Management of Childhood Illnesses (IMCI). UNICEF
bottleneck analysis found that only 26.3% public nurses
and midwives in Davao, and only 9.1% in Quezon City
were currently trained in IMCI: a strongly evidence-based
and cost-effective approach for reducing child death and
disease.
UNICEFs investment case work has focused on the use
of evidence in planning, prioritisation and budgeting.
Interviews in Manila, and field visits to Davao and Quezon
City, confirmed that evidence does not exist in a vacuum:
what evidence; whose evidence; when does the evidence
arrive; and how is it presented are all key political
economy factors in determining if it can be used by
policy makers, as exemplified in some of the responses
provided:
What evidence?
o Regions and even LGUs focus on the top 10 causes
of mortality as the evidence base for setting priorities.
However, even if the mortality data was accurate (see
below) this overlooks morbidity, disability, and health
promotion.
o Progress against the MDGs is frequently and
consistently cited as the explicit targets to reach, even
at an LGU level. However, MDG targets are distal
indicators for small LGUs, and do not address noncommunicable diseases (NCDs) or inequity.
o There are important data gaps. The United Nations
classifies Philippines as one of 67 countries with civil
registration data characterized as complete, with good
attribution of cause of death data. Nevertheless the poor
and vulnerable may not be included, and household
survey data from such communities are not usually
available to compare.
o Data is often out of date. NEDA officials noted they are

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

developing plans based on data that is already 2 years


out of date. As one senior official said forward planning
is, in effect, occurring by looking in a rear view mirror.
o Progress can be suppressed if it is perceived to lead
to fewer resources. One official speculated that, for
example, significantly reducing the incidence of malaria
might result in funds for malaria control being reduced in
subsequent budget years.
Whose evidence?
o PhilHealth asked a paediatrician to design the premature
newborn benefits package. Although well intentioned,
the result was that the benefits package was inevitably
curative and hospital focused. UNICEF was able to open
a policy dialogue about more feasible and equitable
primary health care prevention and treatment.
o NEDA commented that they rely on DOH statistics
for maternal mortality, but that the DOH itself uses
only maternal deaths occurring in hospitals. This
would obviously under-estimate the number of deaths
occurring in remote and rural non-hospital settings, or
urban slums, usually among poorer and more
vulnerable women.
When?
o There are clear and precise windows of opportunity
within the political cycles when the tabling of evidence
will have a greater effect.
NEDA advised that at the national level there are
some opportunities to shape policies in the period
before the Presidential and Congressional elections,
when candidates are looking for measures that
can be implemented in their term of office.
However, they also advised that personalities were
as or more important than the policies themselves.
However at the local level the opportunities to
shape policies occur more after the elections are
over. (Elections at the local level are based more on
personalities: they then need to decide what to do.)
Budget cycles are also important: advocates for
funding must start dialogue with officials in March
and April, in order to meet the call for proposals in
July. It is also critical to support officials during
the July period and afterwards, building political/
bureaucratic capital and familiarity on their part.

The analysis also found that civil society activists were


also important in building coalitions and coordinating
political inputs. The Asia Foundation and Overseas
Development Institute recently used two case studies
in the Philippines to explore the political economy of
institutional reform. Both case studies one dealing with
land registration reform and the other with tobacco control
involved active and astute advocacy by local Filipino
NGOs. In the case of the successful tobacco control
reform, the study concludes:
There was a multimedia information campaign and some
civil society mobilisation of a classic sort, especially around
the public health dimensions. But what tipped the balance
in the end was the work of a dedicated core of individuals
in a couple of organisations . This core group was able
to address the severe coordination problems that normally
afflict broad-based campaigns. It was also in a position to
make tactical decisions about how to divide the opposition
and make alliances, without the need for consensus other
than on the reform objective itself (7).
Annex 7 provides further details about sub-national EBaP
arising from the site visits to Davao.
Finally, despite being the major focus for health
expenditure, the private sector is not systematically
taken into account in priority setting, planning and
budgeting. Interviewees confirmed that there is some
formal engagement with the private sector medical
associations at the national level, but little engagement
at local levels. Interviewees in both the public and private
sector said that part of the difficulty in engaging with the
private sector was the absence of formal structure of
the private sector. Individual specialities had associations
that pursued their own agendas, but there was not an
overarching, cohesive, framework for engaging with the
private sector on policy matters. Some interviewees noted
that many NGOs, and some in the media, tended to have
an ideological bias against the private sector, especially
what was seen as big pharma. This, in turn, may have
coloured politicians and officials appetite for engaging
publicly with the private sector.

How it is presented?
o The EBaP graphs prepared by UNICEF during the
investment case work gave local stakeholders
confidence to communicate and advocate with
a wider and non-technical audience. Some local
mayors or politicians may only have a primary school
education. Complicated statistics and dense reports are
intimidating.

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

31

5. Recommendations
The preceding section analysed the current situation.
This Section makes observations and recommendations
about how the Philippines and its development partners
can build on the preceding analysis to further improve
development effectiveness. The aim of this Section is to
offer practical, actionable recommendations.
Development partners should understand the politics
of the Philippines but stay distant from it. Expenditure
on development programs can be a major arena for
corruption and politicking. The worst case outcome for
UNICEF or another development partner would be to cross
the line and have its evidence or approach captured by a
political process or be seen to be partisan, especially by
beneficiaries or other partners attempting to rise above
partisanship.

4.4 Procurement and logistics


Procurement and logistics have been challenging
under decentralisation, raising issues of priority
setting, quality of services, and corruption. International
research finds that government and development partners
tend to focus on upstream planning, but fail to followup on downstream implementation (10). An evaluation
conducted in 2011 found that very strong, evidencebased, subnational plans for RRMNCH in the Philippines
were abandoned part way through the financial year
because procurement delays and sluggish financial flows
overtook events. As mentioned already, mis-procurement
or delayed procurement often has a dramatic effect on
overall budget disbursement rates. Good plans that have
involved extensive analysis and consultations have been
abandoned part way through the year as a result of misprocurement or slow release of funds.
A study of the decentralisation experience in Indonesia,
Philippines and Vietnam found that:

32

In the Philippines, each local government similarly


manages its own system of drug procurement, inventory,
dispensing, and financing. The quality of locally procured
drugs is generally poor, the purchase price is often higher
than in private pharmacies, stock shortages are frequent,
and irrational drug use occurs. A principal reason is
that local therapeutic committees are not constituted,
not functioning, or not well trained in modern drug
management. Local drug procurement is also corrupt
in many places: bids are rigged, qualified bidders are
pre-identified, and bidders connive. Moreover, the
supply chain extends only to urban centers; poor outlying
municipalities rely on itinerant drug peddlers who arrive
infrequently (60).
Chinas national government has also moved to regulate
pharmaceutical procurement in its decentralised
health sector, for similar reasons (61). Efficiency and
accountability in the areas of procurement and logistics
are important priorities for improvement in the Philippines.

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

Like most LMICs, the Philippines needs better quality


data to inform planning, monitoring and regulation
of programs. Data is more important than tools, but
the data needs to be appropriate. Virtually all officials
interviewed during the field visits said that the system for
prioritising and planning were satisfactory or at least good
enough. However many officials said that a key problem
was lack of reliable and regular data. Several stressed
that household expenditure data would be a particularly
valuable source of evidence to help shape priorities,
planning and resource allocation. On the other hand,
some officials during field visits suggested they needed
better estimates of the maternal mortality ratio in their
LGU, which is unlikely to be feasible or accurate enough
to guide related programs. Many nations are starting to
pay attention to the value of data, especially those whose
decentralisation demands local information. This is a
highly appropriate area of focus for the government and
development partners alike.
Effective implementation of well-designed17 regulation
can generate social benefits and fiscal resources far
in excess of the associated costs. A recent study in
India found that almost one quarter of school teachers
are absent without approval at an estimated cost to
government of around $1.5 billion/year. However it also
found that investing in better governance by hiring
more inspectors to increase the frequency of monitoring
could be over ten times more cost effective at increasing
teacher-student contact time (net of teacher absence)
than hiring more teachers.(62) Interestingly, top down
(i.e. government) monitoring was found to be more

effective than grass roots community-based monitoring


of attendance in reducing absenteeism and corruption,
a finding shared by Olkens research in Indonesia
(63). Political economy issues will still arise of course:
inspectors may seek bribes and public sector unions may
resist inspection. But an estimated cost: benefit ratio of
1018 is a strong incentive for government to resolve the
political economy challenges.
PhilHealth is a major strategic opportunity to influence
nation-wide access to health care that can benefit the
poor, including women and their children. As noted,
PhilHealth covers 82% of the population of the Philippines,
or 81.5 million people. While the benefits package is
currently limited in size and scope, it is developing and
growing over time. The future design of the premiums,
benefits package and the payments schedule will change
the incentives for poor people to access essential health
care. UNICEF has already been influential in making
the benefits package for newborn care more focused
on primary and preventive health care, thereby making
the program more evidence based, affordable and costeffective for society and for individual households. There
are ongoing opportunities for development partners
including UNICEF, the World Bank, ADB, WHO and others
to assist PhilHealth to scale up and redesign its health
insurance program in ways that are evidence-based and
serve the interests of the poor.
Mayors are particularly powerful in the Philippines,
and should be engaged for local support of development
initiatives. However, medium and longer term health
issues may not align with their short terms of office. On
the other hand, many will rotate within the civil service,
taking their knowledge and experience with them as they
move on. UNICEF support for capacity building for Mayors
on the benefits of EBaP and local investment in pro-poor
health outcomes, particularly RMNCH, is important.
Well informed media coverage, including radio
and social media, is often a key factor in shaping
public opinion. In an increasingly connected world,
even in nations whose governments attempt to control
social and mass media, it is increasingly important to
acknowledge access to and the content of information that
is disseminated. Journalists may not have the technical
expertise/time to analyse plans and budgets. Journalist
training is an effective means of reducing the risk of
misinforming the public, or of influencing the media in

Regulation has both costs (compliance costs, red tape and opportunities for corruption) and benefits (quality assurance, protection against
exploitation). Costs can exceed benefits.
18
Muralidharan et al (2014) state that in India the cost of hiring enough inspectors to increase the probability of a school being inspected by 10
per centage points is Rs.448 million/year. However, the reduction in wasted salary from this investment in terms of reduced teacher absence
amounts to Rs.4.5 billion/year, suggesting that the returns to investing in better governance are ten times greater than the cost.
17

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

33

References

desired directions. Moreover, UNICEFs Child Friendly


Budgeting approach gives a useful perspective on what to
look for in a national and sub-national budget. UNICEF and
other development partners could analyse budgets and
provide briefing notes/points to look for in a budget. The
current initiative of training Mayors about the importance
of including health priorities in the local budgets could also
be augmented by workshops for politicians, media, and
NGOs on key things to look for in a budget that affects
RMNCH.
The NHAs of a country are a strategic but often underutilised source of evidence for policy dialogue. They
set out the sources of health financing: government,
private, social insurance, development partner etc. NHAs
also set out the uses to which those funds are then put:
tertiary level hospitals, secondary level hospitals, private
practitioners etc. Done well, NHAs therefore provide a
clear and easily accessible overview of the whole health
system. Despite NHAs being a particularly powerful and
strategic evidence base for policy, interviews confirmed
that they are rarely used by public health advocates. This
is a lost opportunity for engaging in more evidence-based
policy dialogue. Philippines development partners and
government should both attempt to improve the content
of the NHAs and more use of them in health program
planning and monitoring.
The unplanned and unexpected can completely
overwhelms all planning: development partners
need to be realistic about how effective and durable
planning processes are, and retain flexibility.
Super Typhoon Haiyan / Yolanda devastated lives and
infrastructure in the central Philippines in November 2013.

34

Although typhoons and other natural disasters (including


volcanoes) are common in the Philippines, the scale and
destructive force of Haiyan / Yolanda was unprecedented.
UNICEF Manila dramatically scaled up expenditure from
$6 million to $36 million within two years. That then
completely and quite appropriately given the scale of the
problem overturned the then current country assistance
strategy, priorities, planning and budgets. The same
principle applies to other development partners. The main
factors that drove Australian expenditure over the last few
years were all exogenous, completely unexpected, and
overwhelmed past plans and priorities. These included
the Indonesia tsunami; the emergence of Timor Leste as
a nation; 9/11; programs in the Solomon Islands and even
the integration of AusAID into DFAT.
Conditionality rarely works. The World Bank states
it has learnt this lesson and has moved from lender
with conditions to facilitator with influence(11). For
example Official Development Assistance can provide
the financial breathing space to allow governments to
implement and sequence reforms; but it rarely, if ever,
results in a sustained change in policies or programs if this
conflicts with the political economy incentives of the host
government. (5, 64, 65)
In summary the Philippines is at a particularly important
stage in terms of its political economy. It has a reforming
President, the economy is growing, and the government is
rapidly scaling up UHC. There are opportunities for UNICEF
and development partners to assist the rapid evolution of
the health system so that it increasingly benefits the poor,
including women and their children.

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Annex one: definitions of political economy

Annex two: approach and methodology

There is no single, agreed definition of the term political


economy. The OECD concisely says that: Political
economy analysis is concerned with the interaction
of political and economic processes in a society: the
distribution of power and wealth between different groups
and individuals, and the processes that create, sustain
and transform these relationships over time.(16) Bueuran
says In its modern form, political economy studies
refer to the study of the relations between political and
economic processes which involve several factors such
as incentives, relationships, and the distribution of power
between various interest groups in society, all of whom
have an impact on development outcomes(66).

are to advance challenging agendas around governance,


economic growth and service delivery, which experience
has shown do not lend themselves to technical solutions
alone. It can also contribute to better results by
identifying where the main opportunities and barriers
for policy reform exist and how donors can use their
programming and influencing tools to promote positive
change. This understanding is particularly relevant in fragile
and conflict-affected environments where the challenge
of building peaceful states and societies is fundamentally
political.(16)

The following is an extract on initial thinking about


methodology and approaches written by Dr Midori
Sato. The full text is available on request.

DFID has a more expansive description, which highlights


how political economy analysis can improve development
effectiveness:

What is political economy? Political economy (PE) is the


study of both politics and economics, and specifically
the interactions between them. It focuses on power
and resources, how they are distributed and contested
in different country and sector contexts, and the
resulting implications for development outcomes. PE
analysis involves more than a review of institutional and
governance arrangements: it also considers the underlying
interests, incentives, rents/rent distribution, historical
legacies, prior experiences with reforms, social trends,
and how all of these factors effect or impede change

Political economy analysis is a powerful tool for improving


the effectiveness of aid. Bridging the traditional concerns
of politics and economics, it focuses on how power
and resources are distributed and contested in different
contexts, and the implications for development outcomes.
It gets beneath the formal structures to reveal the
underlying interests, incentives and institutions that enable
or frustrate change. Such insights are important if we

The World Bank (17) says:

There are numerous analytical tools and approaches


that could be used to examine governance and political
economy of priority setting, planning and budgeting in the
social sectors of developing countries. According to DFIDs
how to note on political economy analysis19,
these tools are broadly divided into three types: 1) Macrolevel country analysis (understanding how political and
economic systems of a country enable or hold back
overall development, and to identify strategic entry points
for programming in a country); 2) Analysis focused on
particular sectors (understanding the interests, incentives
and institutions operating within a particular sector,
to inform the design of a sector programme)20; and 3)
Problem-focused analysis (understanding and resolving a
specific problem that may be encountered in a particular
donor programme)21.
For example, the analytical process proposed by DFID/ODI
(Figure 1) broadly follows these three stages (including
the above two levels of analysis at both country-level and
sector/intra-sector-level) and supports DFIDs Drivers of
Change22.
Another option is a problem-driven framework for political
economy analysis (Figure 2)23 which was informed by a
review by Wild et al., (2012),24 on governance and political
factors affecting weak service delivery in three social
sectors (education, health and water and sanitation) in
multiple countries.

Mcloughlin (2012) maps technical characteristics of


service provision in particular sectors and sub-sectors
and identifies the political and governance implications of
these characteristics for provision.
These papers facilitate our understanding by providing an
analytical toolbox to give shape to the complex web of
incentive structures that affect sector performance. The
problem-driven analysis framework (Figure 2) presents a
way of thinking about governance and political economy
and the interaction between the three sets of
variables/factors and corresponding steps to analyse
those variables:
(i) Identifying the problem, opportunity or vulnerability to

be addressed,
(ii) Mapping out the institutional and governance

arrangements and weaknesses, and
(iii) Drilling down to the political economy drivers, both

to identify obstacles to successful and progressive

change and to understand where a drive for positive

change could emerge from and likelihood is of

stakeholder support for various change options.
The second and third layers are differentiated in order to
emphasize that institutional and governance dimensions
as well as stakeholders and their interests, motivations,
power and behavior will be explicitly considered in the
second layer. The framework is useful in framing the
concrete, problem-focused analysis and for structuring
the inquiry process, yet it has limitation, such as difficulty
in understanding linkages between wider country-level
dynamics and specific problem analyzed within specific
sector (Fritz et al., 2009).

DFID. (2009) Political economy analysis: how to note. London: United Kingdom Department for International Development.
Moncrieffe J, Luttrell C. (2005) An analytical framework for understanding the political economy of sectors and policy areas. London: Overseas
Development Institute.
21
Fritz V, Kaiser K, Levy B.(2009) Problem-driven governance and political economy framework: good practice framework. Washington DC: The
World Bank
22
A conceptual model that seeks to explain how pro-poor change arises as a result of the interaction between structures, institutions and
agents; useful to identify drivers for change, but less useful for understanding how political systems operate in practice.
23
Harris D. Applied political economy analysis: a problem-driven framework. London: Overseas Development Institute, 2013.
24
Wild, L., Chambers, V., King, M. and Harris, D. (2012) Common Constraints and Incentive Problems in Service Delivery. Working
Paper 351. London: ODI.
19
20

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Figure 1: Stages in political economy analysis (taken from Moncrieffe and Luttrell, 2005)

Other tools and approaches that can also be applied for


political economy analysis include: Power Analysis25 by
SIDA (Swedish), which focuses on the nature of power
relations, distribution of power, and incentives for pro-poor
reforms; Strategic Governance and Corruption Analysis
(SGACA)26 developed by the Netherlands Ministry
of Foreign Affairs, which is very similar to Drivers of
Change, but with a more tightly structured process and
heavily relying on secondary sources of data conducted

STAGE 1
BASIC COUNTRY ANALYSIS
HISTOROCAL / FOUNDATIONAL COUNTRY ANALYSIS

within a short timeframe; other tools include, but are


not limited to Politics of Development by DFID and
Addressing Governance in Sector Operations by the
European Commission (EC).
All of the tools and approaches described above have
strengths and weaknesses. Considering that there is
great variety between, and within, the four assessment

Figure 2: Problem-driven framework for applied political economy analysis (taken from Harris, D. 2013)

STAGE 2

Problem-driven framework for applied political economy analysis

UNDERSTANDING ORGANISATIONS, INSTITUTIONS AND ACTOR


*HISTORY *CHANGE PROCESSES *STRUCTURAL FEATURES *POWER *IDEOLOGIES

1
STAGE 2B

STAGE 2C

DEFINING
THE SECTOR

INTRO-SECTOR
ANALYSIS

RELATIONSHIP
BETWEEN PLAYERS

DETERMINING SECTOR
BOUNDARIES
MAPPING THE PLAYERS
IN THE SECTOR

ROLE &
RESPONSIBILITIES
ORGANISATIONAL
STRUCTURE
MANAGEMENT &
LEADERSHIP
FINANCING & SPENDING
INCENTIVES &
MOTIVATION
CAPACITY

NATURE OR THE
RELATIONSHIP
BETWEEN PLAYERS
HOW PLAYER
INFLUENCE THE
POLICY PROCESS
POLICY FORMULATION,

Key question: What are the systemic features in place


that are relevant to the problem?

& CHANNELS OF
ACCOUNTABILITY

3
STAGE 3
OPERATIONAL IMPLICATIONS
STAGE 3C

DEFINING
OBJECTIVES
AND
EXPECTATIONS

DETERMINING
ENTRY POINTS

IDENTIFYING
MODE OF
SUPPORT

Analysis of:
1. Relevant structural features, including demography,
geography (e.g. natural resource endowment),
geopolitics, culture and social structure, historical
legacies, climate change and technological progress.
2. The rules of the game: Relevant institutions,
including formal laws and regulations and
informal social political and cultural norms,
that shape power relations and, ultimately,
economic and political outcomes.

RESPONSIVENESS

STAGE 3B

Identification of:
1. Poor outcomes to which PE issues appear to
contribute (for example, persistently poor development
outcomes, repeated failure to adopt sector reforms);
2. Theory of change underpinning previous interventions
(if any) and their effectiveness.

2a: Structural Diagnosis: Context and Institutions

NEGOTIATION &
IMPLEMENTATION

STAGE 3A

Key question: What is the specific


problem to be addressed?
If there is more than one problem, can they
be clearly distinguished (e.g. operational
and developmental)?

Reflection
What can be
done?

2b: Agency Diagnosis: Power, Incentives and behaviour

I n t e r a c i o n

STAGE 2A

Reflection
Problem
identification

Key question: What combination of perceived


incentives influences the behaviour that leads to
this problem?

Analysis of:
1. The motivations (financial, political, personal,
ideational, etc.) of relevant individuals and
organisations that shape their behaviour in ways
relevant to the problem and potential reform.
2. The types of relationships and balance of power
between those actors.
3. Relevant analytical concepts that provide some
insight into actors incentives and decision logics:
including credible commitment problems,
collective action problems, information asymmetries,
principal agent relationships, heuristics and blases, etc.

Key question:

Analysis of:

1. What is a plausible
pathway of change?
2. What actions can be
proposed that support that
pathway of change?

1. Potential Change processes; and


2. The realism of proposed
change processes given the
constraints and opportunities
identified in the analysis

Assessment of the range of


potentially viable entry points, if
any, for external actors seeking
to facilitate this change. If viable
entry points exist:
1. Selection of appropriate
inventions and modalities
2. Timing, tailoring and
sequencing of selected
intervention

Swedish International Development Agency. (2006) Power Analysis Experience and Challenges
Clingendael Institute for the Netherlands Ministry of Foreign Affairs. (2007) Framework for Strategic Governance and Corruption Analysis
(SGACA): Designing strategic responses towards good governance

25
26

40

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

41

Annex three: Inception Report for the Philippines


Country Political Economy Profile: The Philippines
Key messages
The Philippines has a large (96.7 million) and fast growing population. Poverty rates are still high: almost three
quarters of the population live below $2 a day. There is inequity in access and outcomes.
The Philippines has had a turbulent political history (including coups, and assassinations) and, until recently, a
sluggish economy. Fiscal decentralisation in 1991 reflects political pressures at the time and decentralisation is
yet to be fully worked through
Expenditure on health is increasing in absolute and relative terms, albeit from a low base.
There is a history of Government launching of health sector reforms, but arguably less commitment to
sustained implementation. Government does appear strongly committed to scaling up UHC.
Private expenditure and private providers are important components of the health system.

The political environment


The Philippines has had a turbulent political history since
gaining independence from the United States (and prior
to that Spain) in 1946. The Philippines has experienced
martial law during President Marcos long reign (196586); a people power revolution backed by the military,
churches, and civil society in 1986; a military supported
removal of President Estrada; corruption claims against
three Presidents (Marcos, Estrada, and Arroyo); the
assassination of a potential Presidential candidate (Ninoy
Aquino) and of numerous journalists; and a longstanding
military conflict with Islamic separatists in Mindanao
and, until recently, communist insurgents. Attempted
coups and rumours of coups have been a feature of the
Philippines political history. Decentralisation of political
power (and service delivery of health etc) was rushed out
in the early 1990s to forestall what was then feared to be
a return to highly centralised, authoritarian, rule replacing
President Corazon Aquinos rule. One encouraging sign
of political adroitness and success against powerful
entrenched domestic vested interests was the ability of
the Philippines Government to recently raise taxes on
tobacco, shrewdly allocating the increased revenue to
expand Universal Health Coverage for the population.
The Philippines has inherited a formal political structure
similar to that of the then colonial power USA. This has
the benefit of a clear separation and balance of power
between the Executive, legislature, and judiciary. But it

has the same weaknesses as seen recently in the USA:


the potential for political logjams that prevent reform. The
informal political system is strongly influenced by family
political dynasties (Marcos family, Aquino family etc); the
military; the Roman Catholic church; wealthy landowners
and business elites; and strong, articulate, NGOs.
Benigno Aquino (son of previous President Corazon
Aquino) became President in June 2010 based partly on
his commitment to inclusive growth and anti-corruption.
President Aquinos Liberal Party became the largest
party in the lower chamber of Congress during the May
2013 mid-term elections. However, lacking an outright
majority it was forced to form alliances (and therefore
compromises) with other parties. President Aquinos term
finishes in June 2016 and, under the Constitution, he is not
eligible for re-election. Main parties and political groupings
in the Philippines are the Liberal Party; Lakas-Kabalikat
ng Malayang Pilipino-Christian Muslim Democrat (LakasKampi-CMD); Nacionalista Party; Nationalist Peoples
Coalition (NPC); Pwersa ng Masang Pilipino (PMP);
Partido Demokratiko Pilipino-Lakas ng Bayan (PDP-Laban);
Communist Party of the Philippines (CPP); Moro National
Liberation Front (MNLF); Moro Islamic Liberation Front
(MILF)(67)

The socio-economic environment


The Philippines has a Gross National Income27 (GNI
per capita) of $ 3270 in 2013(68) making it a lower
middle income country. With generally good literacy and

education levels, the Philippines is ranked 114 on the latest


UNDP Human Development Index, ahead of Indonesia
(121) that has a slightly higher GNI per capita, Bangladesh
(146) and Nepal (157). The per centage of those living in
absolute poverty (< $ 1.25 a day PPP) in the Philippines
has fallen only slowly from nearly two thirds (64.9%)
in 1991 to almost half (48.2%) in 2010, the latest year
available.(68) Similarly, the per centage of Filipinos living
below $2 a day (and therefore vulnerable to falling into
absolute poverty) has moved very slowly over the last
20 years from 84.9% of the population in 1991 to almost
three quarters (74.26%) of the population in the latest year
available, 2010.(68)
This slow reduction in absolute poverty the lowest rate
of any East Asia economy - is attributed to dismal (69)
economic growth over the decades; limited employment
intensive manufactured exports; high population growth;
low agricultural productivity; fragmented markets due to
the island geography; and lack of economic and political
competition that could provide open opportunities for
wealth creation and better service delivery.(4, 27, 70-74)
The Philippines is also characterised by high rates of
income and asset (especially land) inequality and inequity.
The latest Gini index28 for the Philippines is 44.4 in 2006,
little changed from 43.4 in 1991, and higher than the
latest Gini index for Indonesia (38.1), Nepal (32.8) and
Bangladesh (32.12). The latest available figures for the
under-five mortality rate in the Philippines is 59/1000
live births in the lowest wealth quintile compared to
17/1000 in the highest; 46/1000 in rural areas compared
to 28/1000 in urban; and 41/1000 for boys compared to
34/1000 for girls. (75) There is a large disparity in DPT 3
immunisation among 1 year olds based on the education
level of the mother (90 % immunisation coverage if the
mother had secondary or higher education compared

to 36% coverage if the mother had no education). This


disparity is, intriguingly, as it is much larger than wealth
differences (94% immunisation coverage amongst the
wealthiest, compared to 72% coverage amongst the
poorest) or geography (88% coverage in urban areas and
83% coverage in rural areas). Womens access to essential
services is also demonstrably inequitable on several
criteria. For example, 94% of women in the highest wealth
quintile, 78% of urban women, and 73% of women with
a secondary education or more have births attended by
skilled health professionals compared to just 26% of the
poorest wealth quintile, 48% of rural women, and 11%
of women with no education. Inequity of access and
outcomes has been a longstanding, stubborn, challenge in
the Philippines for decades, with multiple complex causes
some of which overlap with the persistently high levels of
poverty (76-79) (80)

The resource allocation environment: proxy


evidence of political priorities
and commitment.
Total health expenditure (THE) which includes public as
well as private expenditure on health was the equivalent
of 4.5% of GDP in 2012, around the average for lower
middle income countries (LMICs) globally.(68) As in much
of Asia with poorly developed health insurance or pooling
mechanisms, much of the total health expenditure in the
Philippines is financed privately (ie not by government).
Furthermore, the vast bulk of private expenditure on
health is then financed directly out of pocket (ie without
insurance). This is shown in Table 1 below. High levels of
direct out of pocket payments for health care are often a
barrier to seeking essential care amongst the poor and / or a
cause of financial distress and poverty: one reason why the
Philippines is scaling up Universal Health Coverage.(81, 82)

Table 1: Levels of private, and out of pocket, expenditure on health care


Country or grouping

Private expenditure on health as %


Total Health Expenditure
in 2011 (per cent)

Out of Pocket Expenditure on


Health as % private expenditure
on health (per cent)

Bangladesh

61.8

96.6

Indonesia

62.1

76.3

Philippines

63.1

83.5

Low Income Countries globally

61.1

76.2

Lower Middle Income Countries globally

63.4

87.1

Source: World Health Statistics 2014

GNI is a better measure of economic wealth as, unlike Gross Domestic Product, GNI captures the effect of overseas remittances: key
issues in Asia.

27

42

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

28

A standard measure of inequality where 0 equals total equality and 100 is total inequality, with one person owning all income

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

43

Per capita expenditure on health is rising off a low base in


the Philippines. As shown in Chart 1 below, real (adjusted
for inflation) per capita expenditure on health in Purchasing
Power Parity29 terms in the Philippines was generally low
($ International 70 per person per year) and flat from 1995
to 2003. It then rose steadily (purple line, at the top of
Chart 2) since then, reaching $ International 202.50 per
capita in 2012, higher than the LMIC global average of $
International 177.(68)
Virtually all countries make bold political commitments to
improving health outcomes for the poor and vulnerable,

including especially women and children. But resources


(money, health personnel, political capital) are always
scarce, especially in developing countries. Where, why,
and how the political / bureaucratic system allocates its
scarce resources is therefore the true litmus test of what is
actually a priority to the decision makers. As seen in Chart
2, the Government of the Philippines has allocated (purple
line) only around 8% of total government expenditure to
the health sector for more than a decade prior to 2008. The
share of government expenditure allocated to health has
risen since then to 10.3% by 2012 (68) partly reflecting the
commitment to Universal Health Coverage.

Chart 1: Real per capita expenditure on health

The environment for RMNCH and the health


sector more broadly.
Life expectancy at birth (both sexes) had improved from
60.8 in 1990 to 68.5 years in 2012. (83) However, like
other countries in the region, the Philippines, is facing a
double burden of communicable and non-communicable
diseases. More specifically, communicable, maternal,
perinatal and nutritional conditions still constitute 30%
of all deaths for all ages; NCDs (especially cardiovascular
disease) constitute 62% of deaths, and injuries constitute
8%.(84) An estimated 44% of male and 35% of female
NCD related deaths are premature.(84)
Reproductive, maternal newborn and child health show
mixed progress. On the positive side, UNICEF statistics
show that the under-five mortality rate, and infant mortality
rate, have both steadily fallen by more than half since
1990: the U5MR falling steadily from 60/1000 live births
in 1990 to 29/1000 in 2010, and the IMR falling steadily

250.0

from 42.5/1000 to 23 / 1000 over the same period. (85)


The Philippines has moved from having the 59th worse
rate for U5MR in 1990 to 30th in 2012.As noted above,
there are substantial and persistent inequalities of
access and outcomes based on wealth, education levels
and geography, but these are nevertheless substantial
achievements at a national level.
Less promising is the situation for reproductive health,
maternal health, and nutrition. The contraceptive
prevalence rate is less than half (48.9%) and the
Total Fertility Rate is 3.1 (83) : higher amongst poorer
communities. Over one fifth (21%) of babies are low birth
weight.(83) The prevalence of moderate to severe stunting
is 32%. (83) Overweight and obesity rates are increasing.
The adjusted maternal mortality ratio is 99 /100,000 live
births.(83) As seen in Chart 3, the MMR in the Philippines
(bottom line) is lower than other comparable countries, but
there has also been much less progress over the years in
reducing the ratio of deaths.

200.0
Chart 2 Share of government expenditure allocated to the health sector
150.0
150.0
100.0

14.0
12.0

50.0

Bangladesh

Indonesia

Nepal

Philippines

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2012

0.0

Source: World Development Indicators 2014

2002

2.0

2001

LMICs globally

2000

LICs globally

4.0

1999

Philippines

6.0

1998

Nepal

8.0

1997

Indonesia

10.0

1996

Bangladesh

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

0.0

Health
expenditure
(public) as%
total government
expenditure

1995

Health
expenditure per
capita, PPP 2005,
International
dollars

LMICs globally

Source: World Development Indicators 2014.

In essence, Purchasing Power Parity (PPP) is an estimate that seeks to avoid market exchange rate movements and takes into account the
fact that prices of goods and services may well be lower in developing countries. It expresses figures in notional International dollars or $ I
to distinguish the estimates from $US.
29

44

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

45

References

Chart 3: Maternal mortality ratio

900

Maternal mortality ratio(MMR) - Deaths per 100,000 live births

800
700

Bangladesh
Indonesia

600

Nepal

500

Philippines

400
300
200
100
0

1990

1995

2000

2005

2010

Source: DevInfo 2014

The institutional and bureaucratic environment


A sudden and rapid process of political and fiscal
decentralisation occurred in 1991 via the Local
Government Code (Republic Act 7160), largely in response
to fears that an authoritarian, centralised political regime
would take power after President Corazon Aquinos
terms of office ended. The speed of decentralisation
led to fragmentation of policy, planning, budgeting, and
implementation of services between central authorities,
provinces and districts in the health sector and other
sectors. Government of Philippines has since launched
several major reform programs involving the Department
of Health. These have included, for example:
the Health Sector Reform Agenda (HSRA) in 2000
as an overarching framework for health policies and
investments between government and development
partners;
providing fiscal autonomy and retention of hospital
income to 68 DOH hospitals in 2003;
the launch in 2005 of the FOURmula ONE for Health(F1)
focusing on a more responsive health system, more
equitable health financing, and better health outcomes,
reduced fragmentation of the Philippine health system
and reduced inequity in health care.

46

Launch of the Sector-wide Development Approach


for Health in 2007 to integrate development partners
support with the F1 program.
Launch in 2008 of the Maternal, Neonatal, and Child
Health and Nutrition Strategy (MNCHN) nationally. Pilot
implementation of the Investment Case for maternal
newborn and child health with support from UNICEF and
Australia.
Launch in 2010 of Universal Health Care (UHC) known as
PhilHealth Sabado.
These developments demonstrate a political appetite
amongst politicians and bureaucrats for reform in the
health sector (or at least an appetite for launching
reform initiatives). Field evaluations in 2012 of the
Investment Case approach suggest, however, that the
initial enthusiasm for reform is not always sustained.
Local political priorities, bureaucratic inertia, and an
understandable focus on crisis management (including
disbursement and procurement delays) can drain political
and bureaucratic commitment and capital.

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21st Century. 2007:202-21.
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Asia: Emerging issues in growth, targeting, and measurement. 2003:197-219.
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Development and Change. 2003;34(2):215-42.
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77. Balisacan AM. What Do We Really Knowor Dont Knowabout Economic Inequality and Poverty in the
Philippines?. Causes of Poverty: Myths, Facts and PoliciesA Philippine Study, University of the Philippines Press:
Quezon City, in co-operation with the Institute of Developing Economies: Tokyo. 1999.
78. Mesa EP. Measuring education inequality in the Philippines. Discussion paper//School of Economics, University of the
Philippines, 2007.
79. Hill H. Globalization, Inequality, and Local-level Dynamics: Indonesia and the Philippines*. Asian Economic Policy
Review. 2008;3(1):42-61.
80. Mangahas M. Income inequality in the Philippines; a decomposition analysis. International Labour Organization,
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81. WHO. World Health Report: health systems financing: the path to Universal Coverage. Geneva: World Health
Organization, 2010.
82. Yates R. Universal health care and the removal of user fees. The Lancet. 2009;373(9680):2078-81.
83. UNICEF. Statistics at a glance: Philippines. 2014; Available from: http://www.unicef.org/infobycountry/philippines_
statistics.html.
84. World Health Organization. Noncommunicable Diseases Country Profiles. . Geneva: 2011.
85. UNICEF. DevInfo. New York2014; Available from: http://www.devinfo.org/libraries/aspx/Home.aspx.
86. UNICEF. Integrated Management of Acute Malnutrition: Davao City Philippines. Manila: 2014.

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Annex four: List of people interviewed in the


Philippines
The following is the list of those people interviewed
in the Philippines during the period 14-25 July 2014.
Organisations, and names of individuals, are listed in
alphabetical order. Interviews were requested with the

Organisation/ individuals
name (in alphabetical order)

Department of Health, Manila; Department of Budget and


Management; Australian Department of Foreign Affairs
and Trade (DFAT) and the World Bank but could not be
accommodated in the time available.

Title of individual

Organisation/ individuals
name (in alphabetical order)

Title of individual

Email

PhilHealth
Leizel P. Lagrada

Email

OIC- Vice President, Quality Assurance Group


Health Insurance Products -PCB and MDG
Philippine Health Insurance Corporation. Also
Head Executive Staff Office of the Chairman
of the Board Philippine Health Insurance
Corporation.

UNICEF

Civil Society Organisations


Maria Calimag

President, Philippine Medical Association

erviecalimag@gmail.com

May-I Fabros

Executive member, Womanhealth Philippines Inc

Junice Melgar

Executive Director, Likhan Centre for Womens


Health, Quezon City

Junice@likhaan.org

Ana Maria Nemenzo

National Coordinator, Womanhealth


Philippines Inc

ananemenzo@yahoo.com

Regina Ingente

Executive Director, Development of Peoples


Foundation, Davao

Davao City officials


Florencia Cayon
Project Monitoring and Evaluation Division Chief,
City Planning and Development Office, Davao
Alice Crumb

Planning Officer, Department of Health Regional


Office, Region XI.

Floremae Lofranco

Budget Officer 11

Melchor V. Quitain

City Administrator, Davao City

Joy Josephine Villafuerte

City Health Officer, Davao City

alicerhodora@yahoo.com

Raoul Bermejo 111

Health Specialist, Health and Nutrition Section.


Manila

rbermejo@unicef.org

Augusto Rodriquez

Chief, Social Policy Section, Manila.

arodriguez@unicef.org

Pura Angela Wee

Health Specialist, Manila

pwee@unicef.org

Willibald Zeck

Chief, Health and Nutrition, Manila

Wzweck@unicef.org

Bernardino Aldaba

Economist. Consultant

dinoaldaba@gmail.com

Ernesto Domingo

Professor, Universal Health Coverage Study


Group, University of the Philippines, Manila

eochoadomingo@yahoo.com

Aleli Kraft

Associate Professor, School of Economics

adpkraft@econ.upd.edu.ph

Marilyn Lorenzo

Professor, Universal Health Coverage Study


Group, University of the Philippines,

rppaterno@up.edu.ph

Carlo Panelo

Associate Professor, Social Medicine Unit,


Department of Clinical Epidemiology

capanelo@yahoo.com

Ramon Paterno

Universal Health Coverage Study Group,


University of the Philippines, Manila

rppaterno@up.edu.ph

Orville Solon

Professor, University of Philippines School


of Economics. Chief of Party, Health Policy
Development Program

Orville.solon@gmail.com

University of the Philippines

National Economic and Devt


Authority (NEDA) in Davao
Janice Cerezo

Senior Economic Development Specialist,


National Economic and Development Agency,
Region XI

Janice_cerezo38@yahoo.com

Mae Ester Guiamadel

Chief Economic and Development Specialist,


National Economic and Development Agency,
Region XI

metguiamadel@gmail.com

Fely Rabe

Senior Economic Development Specialist,


National Economic and Development Agency,
Region XI

felyrabe@yahoo.com

Roma Atabug

UNICEF Program Coordinator

rmatabug@neda.gov.ph

Erlinda Capones

Director IV, Social Development Staff

emcapones@neda.gov.ph

Tom Javate

Social Development Group

tpjavate@neda.gov.ph

National Economic and Devt


Authority (NEDA) in Manila

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Annex five: Strengths and weaknesses of the


Philippines system of priority setting, planning
and budgeting
Priority setting,
planning and
budgeting issue

Strengths of the Philippine system


from a political economy perspective

Evidence and data base Increasingly output / outcome oriented.


Philhealth benefit package for NCDs
screening is based on WHO evidence based
and cost-effective Package of Essential
NCD (PEN) approach

Priority setting,
planning and
budgeting issue

Strengths of the Philippine system


from a political economy perspective

Weaknesses of the Philippines system


from a political economy perspective

Budget allocation and


budget execution

Social sectors attract the majority of public


resources at the national level.

Highly politicised. Congressional and local


mayors have high degree of discretion that
breeds a reactive (not strategic) and patronage
based approach to expenditure.

DBM has a task force that reviews budget


releases and reviews projects at that time

Weaknesses of the Philippines system


from a political economy perspective
MDG and other distal outcomes are far
removed from the political cycle.
Lack of data, or capacity to interpret data
strategically, at the LGU level.

Very hard to get data about, let alone from,


the private sector even though they are
prominent in health (especially hospitals) and
education.

Mayors can basically overrule previous


evidence based plans
Sources and uses of
funds in the health
sector

The Performance Informed Budgeting


moves to program based budgeting e.g.
Previously a mass of numbers and line
items without a clear story on where funds
are going, the National Expenditure Plan and
the General Appropriations Act beginning in
FY2014 will show the link between the funds
allocated for government programs and the
projected results and outcomes of these.30

Trialling of new program budgeting approach


by DBM links budget lines to outputs and
outcomes.

Implementation is weak (see below).

Expenditure is pro poor for primary level


education but pro rich for tertiary.
National Government spending on public health
has been progressive, while spending on
hospital services is regressive.
In the aggregate, National Government health
spending is regressive, since hospital services
Between 2003-2007, total spending on the
account for over three-quarters of total NG
health sector became less regressive because health spending.
of the increase in the share of public health
expenditures in the overall DOH sector budget.

Very strong and unanimously held view that


decisions are actually made on the basis of
who you know and informal advisers.

Implementation

Scale up of PhilHealth while not perfect indicates substantial scale up is possible

There is a high level of formal transparency.


Participation in priority
setting and planning

Generally very strong at the national level.

Sources of funds tend to be from VAT which is


regressive compared to income tax. Uses of
funds hard to determine but much appears to
be going to tertiary level, private hospitals.

Efficiency, effectiveness Public Expenditure Report (PER) finds that


and equity of public
efficiency of public expenditure in social sectors
expenditure
is in line with comparator countries. However
the quantum of public expenditure is low.

The poor and vulnerable not included in vital


registration statistics
Planning process overall The formal system, and the criteria used,
are generally of very high standard, are
rational, and strategic. NEDA Investment
Coordinating Committee uses cost benefit
and cost-effectiveness.

Excise duties on tobacco and alcohol then


used for expanding UHC is a world class
example of a win win for public health
and fiscal space, as well as making financial
resources more predictable, sustainable, and
less amenable to political diverting for pet
projects

Private sector is large but is rarely consulted


in a meaningful or at least transparent way.

DOH rationalisation is seeing a reduction in


program managers and focal points at the
same time public expenditure is increasing.

Bottom up budgeting is a serious effort.


Very strong and well informed NGO
community (Alternative Budget Initiative)
has been producing its own very credible
Alternative Budget for many years.

Variable but generally very weak. Provinces


and LGUs have planning, budgeting,
contracting and procurement processes that
are still suited to an era of scarce resources,
not large increases.

Monitoring and
evaluation

LGU Scorecard system is clear and intuitive

Some indicators are too distal (eg MDG


indicators) to be relevant to LGUs.
Operational monitoring is adequate but there
is insufficient impact evaluation: a key gap
when funding is increasing rapidly.

http://www1.dbm.gov.ph/?reform=performance-informed-budget

30

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53

Annex six: Explanation of priority setting and


planning by the National Economic and Development
Authority (NEDA) of the Philippines
1. How are national priorities set in your country? What
is the process? To what extent does evidence based
planning play in the setting of priorities? Do you ever
use formal criteria for including or excluding a program eg
cost effectiveness analysis? Which are the most powerful
agencies inside and outside of government that help make
those decisions? How do budgets and staffing levels get
changed to reflect those priorities? What happens if there
is a disagreement between the national level view of
priorities and a strong sub-national view of priorities?

The PDP Process


The Philippine Development Plan (PDP) which
embodies the countrys national priorities, serves as
the governments guide in formulating policies and
implementing development programs. The PDP is
produced every six years which coincides with the election
of the new president. It translates the new administrations
vision and development agenda into strategies, policies,
programs and activities for the plan period.
In the deliberation phase of the PDP, the administrations
development agenda are converted into actual plans. The
NEDA issues the planning guidelines and spearheads the
convening of working committees and sub-committees
composed of various government agencies in-charge
of the various sectors/chapters that compose the Plan.
In the current PDP, a Plan Steering Committee (PSC)
and Planning Committees (PCs) were created. The
PCs, through NEDA, conducted national and regional
consultations among the various stakeholders
legislature, executive agencies, local government units,
private sector, and other stakeholders to generate inputs
for the Plan and the Investment Program. The PCs then
drafted the Plan chapters based on the inputs during
the consultations and submitted it to the PSC. The PSC
harmonized the submissions of the PCs into an initial draft
Plan and presented it to the NEDA Board and the LEDAC.
After incorporating the comments of the NEDA Board and
the LEDAC, the PSC submitted the Plan to the President
for final approval.

The PIP contains the priority programs and projects to


be carried out by the national government in support of
the Plan. It is an instrument to target and monitor NG
commitments and resources over the medium-term in
support of the PDP. It is intended to tighten the link among
planning, programming, budgeting and monitoring and
evaluation. The PIP is prioritized through the Sectoral
Efficiency and Effectiveness Review (SEER) criteria.
The formulation of the PDP 2011-2016 marks the first
time that the government is utilizing the RMs an
indicator framework that identifies the results chain
from the subsector/intermediate outcomes to sector
outcomes, and finally to the societal goal of poverty
in multiple dimensions reduced and massive quality
employment created. The RMs contain statements of
results to be achieved, corresponding links to specific
items of the governments five major Guide Posts (based
on the Presidents 16-Point Agenda), indicators, baseline
information, end-of-Plan targets and responsible agencies.
Each chapter of the PDP has a corresponding chapter in
the RMs. The RMs replaced Strategy Planning Matrices
(SPMs) which was used in the previous national plan
(MTPDP 2004-2010).

The NEDA Board


The powers and functions of the NEDA reside in the NEDA
Board. It is the countrys premier social and economic
development planning and policy coordinating body.
The Board is composed of the President as chairman,
the Secretary of Socio-Economic Planning and NEDA
Director-General as vice-chairman, and the following as
members: the Executive Secretary and the Secretaries
of Finance, Trade and Industry, Agriculture, Environment
and Natural Resources, Public Works and Highways,
Budget and Management, Labor and Employment, Interior
and Local Government, Health, Foreign Affairs, Agrarian
Reform, Science and Technology, Transportation and
Communications, Energy, and the Deputy Governor of the
Central Bank of the Philippines.

PDP accompanying documents

1. Development Budget Coordination Committee


(DBCC)
The DBCC is composed of the Secretary of Budget and
Management, as chairman; the Director-General of the
NEDA Secretariat, as co-chairman; and the Executive
Secretary, Secretary of Finance and the Governor of the
Central Bank of the Philippines, as members. The DBCC
recommends to the President the following:
Level of annual government expenditures and the
ceiling of government spending for economic and social
development, national defence, and government debt
service;
Proper allocation of expenditures for each development
activity between current operating expenditures and
capital outlays; and;
Amount set to be allocated for capital outlays broken
down into the various capital or infrastructure projects.
2. Infrastructure Committee (InfraCom)
The InfraCom is composed of the Director-General
of the NEDA Secretariat, as chairman; Secretary of
Public Works and Highways, as co-chairman; and the
Executive Secretary and Secretaries of Transportation
and Communications, Finance, and Budget and
Management, as members. The InfraCom does the
following:
Advises the President and the NEDA Board on
matters concerning infrastructure development,
including highways, airports, seaports and shore
protection; railways; power generation, transmission
and distribution; telecommunications; irrigation, flood
control and drainage, water supply and sanitation;
national buildings for government offices; hospitals
and related buildings; state colleges and universities
elementary and secondary school buildings; and other
public works;

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

3. Investment Coordination Committee (ICC)


The ICC consists of the Secretary of Finance, as
chairman; the NEDA Director-General, as co-chairman;
and the Executive Secretary, the Secretaries
of Agriculture, Trade and Industry, Budget and
Management and the Governor of the Central Bank of
the Philippines, as members. The ICC has the following
functions:
Evaluates the fiscal, monetary and balance of
payments implications of major national projects, and
recommends to the President the timetable of their
implementation on a regular basis;
Advises the President on matters related to the
domestic and foreign borrowings program; and
Submits a status of the fiscal, monetary and balance
of payments implications of major national projects.
4. Social Development Committee (SDC)
The Committee is composed of the Secretary of Labor
and Employment, as chairman; the Director-General of
the NEDA Secretariat as co-chairman; and the Executive
Secretary, and the Secretaries of Education, Culture and
Sports, Health, Interior and Local Government, Agrarian
Reform, Agriculture, Social Welfare and Development,
and Budget and Management, as members.
The SDC performs the following functions:
Advises the President and the NEDA Board on matters
concerning social development, including education,
manpower, health and nutrition, population and family
planning, housing, human settlements, and the delivery
of other social services.
Coordinates the activities of government agencies
concerned with social development; and
Recommends appropriate policies, programs and
projects consistent with the national development
objectives.
5. Committee on Tariff and Related Matters (CTRM)

Coordinates the activities of agencies, including


government-owned or controlled corporations involved
in infrastructure development; and
Recommends to the President government policies,
programs and projects concerning infrastructure
development consistent with national development
objectives and priorities.

The PDP formulation is accompanied by the preparation of


the Public Investment Program (PIP), the Results Matrices
(RMs), and the Regional Development Plans/Investment
Program.

54

Assisting the NEDA Board in the performance of its


functions are seven cabinet-level interagency committees,
as follows:

PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

The CTRM is composed of the Secretary of Trade and


Industry, as chairman, with the Director-General of the
NEDA, as co-chairman. Its members are the Executive
Secretary, the Secretaries of Foreign Affairs, Agriculture,
Transportation and Communications, Environment and
Natural Resources, Budget and Management, and
Finance, the Governor of the Central Bank, and the
Chairman of the Tariff Commission.

55

The CTRM does the following:


Advises the President and the NEDA Board on Tariff and
related matters and on the effects on the country of
various international developments;
Coordinates agency positions and recommends national
positions for international economic negotiations; and
Recommends to the President a continuous
rationalization program for the countrys tariff structure.
6. Regional Development Committee (RDCom)
The RDCom was created by virtue of EO 257
issued on 15 December 2003. It is composed of the
NEDA Director-General , as Chair. Its member are
the Secretaries of the Department of Budget and
Management and of the interior and Local Government,
RDC Chair or Co-chair each coming from Luzon, Visayas,
and Mindanao and four (4) regional development expert
from the private sector and academe.
The RDCom performs the following functions:
Formulates and monitors the implementation of
policies that reduce regional growth disparities,
and promote rational allocation of resources among
regions;
Serve as clearing house for key regional development
policy/programs proposals which impact on two or
more regions;
Formulates and monitor implementation of the
framework for regional development of the Medium
Term Philippine Development Plan;
Directs the formulation and review guidelines for the
regional allocation of agency budgetary resources;
Periodically reviews the viability of the regional
configuration of the country and recommend to the
President the re-delineation of regions, as may be
necessary; and
Periodically reviews the composition, structure and
operating mechanism of the Regional Development
Councils and recommend to the President changes
as may be necessary.
7. National Land Use Committee (NLUC)
The NLUC was created by virtue of Executive Order
Nos. 770 and 770-A on 01 December 2008 and 30
September 2009, respectively.
Composed of NEDA (Chair), DENR, DA, DAR, DTI,
DPWH, DOTC, DOT, DILG, DOJ, DOST, DOE, HUDCC/

56

HLURB, NCIP, LPP, LCP, LMP and two private sector


representatives, the Committee is primary tasked to:
Advise the President on matters concerning land use
and physical planning;
Formulate a national physical framework plan and other
inter-sectoral policies and programs that guide the
rational utilization and management of the countrys
land and other physical resources, and the preparation
of sub-national physical framework plans;
Promote the integration of land use and physical
planning policies, plans and programs, including disaster
risk management , into national socio-economic plans
and programs;
Decide and resolve land use policy conflicts among
agencies of the national government;
Establish and maintain, in conjunction with various
appropriate government agencies, a database system
which would identify and classify the present and
possible uses of specific land areas, public and private,
comprising the total land resource of the nation; and
Provide policy directions to the Regional Land Use
Committee in the performance of their physical planning
functions.

Question: How are priorities for maternal,


newborn and child health set in your country?
Does that apply to family planning as well?
Or is family planning treated a little differently
if that is seen as sensitive subject?
Priorities for maternal, newborn and child health, including
that of reproductive health, are in line with the countrys
commitment to achieve the Millennium Development
Goals (MDGs), particularly Goals 4 and 5. These goals
are embodied in the PDP 2011-2016 which guides the
governments formulation of policies and implementation
of development programs and projects. It should be noted
that even before the MDGs, the government has already
identified the need to address maternal, newborn and child
health as priority health objectives.

access to quality care delivery system and improve health


governance.

Filipino People on poverty reduction and empowerment


of the poor and vulnerable. Some programs supported
include provision of basic education (elimination of all
resource gaps), Universal Healthcare Program, provision of
decent and affordable housing and the Pantawid Pamilyang
Pilipino Program, among others.

The planning and prioritization of programs and projects for


maternal, newborn and child health is spearheaded by the
Department of Health (DOH). Key policies and programs
on these concerns requiring inter-agency inputs or action
are discussed in the Social Development Committee
(SDC).

Public spending on social services is programmed to


increase at least in the medium-term. The share of social
services to total budget increased from 28.2 per cent in
2010 to 34.5 per cent in 2011 in line with the governments
commitment to enhance the capabilities of the poor to
participate in the growth process. From 32.4 per cent in
2012, the share of social services expenditures to total
budget (net of debt amortization) reached 34.9 per cent in
2013 and is programmed at 37.2 per cent in 2014.

While family planning is sometimes seen as a sensitive


subject, the passage of Republic Act 10354 known as the
Responsible Parenthood and Reproductive Health Act
of 2012 laid down the governments policy to promote
and provide information and access, without bias, to all
methods of family planning, including effective natural and
modern methods.

In addition, the government also prioritizes increasing


public expenditure on infrastructure to boost economic
services in the country through public construction and
capital outlay with projects consisting of rehabilitation/
construction of roads and bridges, enhancement of
tourism access, and irrigation to support the agriculture
sector. Expenditure policy seeks to substantially increase
public infrastructure spending from 2.5 per cent of GDP in
2013 to at least 5.0 per cent by 2016.

Question: What is the fastest growing part of


the national budget now and over the coming
3 to 5 years?
In line with the governments priority agenda of reducing
poverty incidence, the social services sector receives the
largest budget among the other sector allocations from
the period 2010 to 2014 (See Table 1). The budget supports
the key result area (KRA) of the Social Contract with the

Table 1. Allocation of National Government Expenditures (Obligation Basis), By Sector 2010-2014


PARTICULARS

Actual

Actual

Actual

Adjusted

Program

2010

2011

2012

2013

2014

ECONOMIC SERVICES

25.88

23.17

26.80

25.38

26.02

SOCIAL SERVICES

28.23

34.48

32.38

34.87

37.16

DEFENSE

6.22

4.49

4.07

4.46

4.09

GENERAL PUBLIC SERVICES

19.06

19.05

18.15

17.32

16.07

NET LENDING

0.63

1.14

1.50

1.32

1.10

DEBT SERVICE

19.98

17.66

17.10

16.65

15.55

TOTAL (Net of Debt


Amortization)

100.00

100.00

100.00

100.00

100.00

Source: Budget of Expenditures and Sources of Financing, various years


Department of Budget and Management

The PDP and the National Objectives for Health sets


all the health program goals which operational strategy
for improving the countrys health status is called the
Kalusugang Pangkalahatan (KP) or Universal Health Care.
KP seeks to ensure equitable access to quality health
care by all Filipinos beginning with those in the lowest
income quintiles. Its strategic thrusts are: (1) achieve
health-related Millennium Development Goals (MDGs);
(2) improve financial risk protection by expanding national
health insurance coverage and benefits, and; (3) ensure

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57

Question: What has been the trend in


generating government revenue over
the last 5 years? What is the forecast for
government revenue generation over the
coming years?
From a contraction of 6.6 per cent in 2009, to a single-digit
growth of 7.5 per cent in 2010, total revenues rose by 12.6
per cent, 12.9 per cent and 11.8 per cent in 2011, 2012 and
2013, respectively. Growth of revenue collections by the
Bureau of Internal Revenue (BIR) was particularly robust,
owing mostly to better implementation of administrative
measures, including the Run After Tax Evaders (RATE)
program. Collection effort of BIR recorded 9.3 per cent
in 2009 and registered a decline to 9.1 per cent in 2010.
BIR collection effort, however, picked up to 9.5 per cent
in 2011, 10.0 per cent in 2012, and 10.5 in 2013. Growth
in the BIR collection was relative to favourable economic
conditions and administrative and legislative reforms,
particularly the implementation of Republic Act (RA) 10351
or the Sin Tax Reform Law of 2012.

To achieve the medium-term targets, revenue-enhancing


measures will focus on heightened collection efforts of the
BIR in tandem with anti-smuggling strategies of the BOC
in coordination with relevant government agencies. In the
case of the BIR, enhanced tax collection will be supported
by increased collection efficiency from the self-employed
business and professionals, better assessment of estate
taxes, and strengthened Fiscal Unit/Revenue Intelligence
Unit. On the other hand, BOCs comprehensive antismuggling strategies will include port accreditation,
import mapping, fuel marking alongside the conduct of
audit on oil companies, trade statistics reconciliation, and
the requirement to submit a rolling import plan from all
importers of sensitive commodities.
Other policy and legislative initiatives that will be pursued
to support the expansion of fiscal space and to get on
a sustainable revenue-and-spending path for the fiscal
sector include (a) Customs Modernization and Tariff Act
(CMTA); (b) rationalization of the mining fiscal regime; and
(c) transparency and accountability in the administration
and rationalization of fiscal incentives.

Non-tax revenue collection was also recorded at 1.8 per


cent of gross domestic product (GDP) in 2009 and slowed
down to 1.3 per cent in 2010, and reached 1.6 per cent for
the years 2011, 2012 and 2013.

Annex seven: Evidence based planning and


budgeting in Davao City
The problem of malnutrition, as well as practical costeffective solutions, both rest on a solid evidence base
already. UNICEF documents state that the Philippines
has one of the highest under-five mortality rates in the
East Asia and Pacific region. An estimated 195 children die
per day in the Philippines, and 35% of those deaths are
malnutrition related. The Philippines ranks 9th in the world
for stunting and 10th for wasting. Nearly 5 million children
suffer from malnutrition in the Philippines including an
estimated 300,000 cases of Severe Acute Malnutrition
(SAM: see abbreviations and glossary for definition).
Over 2000 children have SAM in Davao, a city of over
1.5 million with 182 barangays, in Mindanao. Community
Management of Acute Malnutrition (CMAM) and ready to
use therapeutic foods are also evidence based approaches
that, properly implemented, allow SAM children to be
treated effectively at home rather than families having
to incur the cash and time expense of accessing health
centres and / or ultimately requiring intensive care
hospitalisation due to delayed treatment (86).
The UNICEF supported Evidence Based Planning and
Budgeting (EBaP) approach has been instrumental in
mobilising additional and better targeted resources
to address acute malnutrition at a city-wide level in
Davao. The Mayor of Davao and his city government
already had a commitment to public health (see the case
study on banning tobacco). They also state they have
a commitment to the least, last, and lost and other
marginalised groups. The administration recognised that
malnutrition was a particular challenge. UNICEF selected
Davao as one of its 3 partner cities32 to address SAM in
Davao, using EBaP approaches. While too early to see
impact and outcomes, the EBaP approach was critical
to achieving much better input and process indicators.
More specifically the 2013 City budget for health was P 6
million, of which P 5 million was allocated to personnel
costs, leaving just P 1 million for programs. However
largely as a result of presentations of EBaP findings, the
operations budget for addressing malnutrition increased
by P 5.5 million, around half of the total increase
allocated to the City health budget.

The overall strategy in the fiscal sector is to increase the


revenue effort to 17.1 per cent of GDP by 2016. This is
to be achieved through an annual rise in tax revenues to
reach 16.1 per cent of GDP at the end of the Plan period in
2016. Correspondingly, non-tax revenue collection is set to
increase to about 1.0 per cent of GDP.

Furthermore, the nutrition interventions are now


institutionalised as an ongoing program. Executive
Order 26/2014 of the Office of the City Mayor of Davao
formally and permanently integrated the Integrated
Management of Acute Malnutrition into the local health
system. The approach in Davao to identifying children at risk
of SAM, and using community based interventions such
as supplementary feeding, is now considered by health
workers as a more effective approach than the previous
DOH nation-wide approach that had tended to focus just
on weighing infants and children. Identifying children with
SAM, and the underlying causes on the demand and supply
side of health care, was now starting to open a broader
policy discussion about upstream prevention of SAM.
The EBaP principles are starting to be applied in
other contexts circumstances. The process of looking
systematically at the demand side, as well as the supply
side of health care, and using local evidence to identify
the most critical gaps, is being applied in other contexts.
Early examples include using EBaP principles to disaster
preparedness and resilience planning: a contrast to a
simplistic shopping list approach whereby a Mayor had
recently asked UNICEF to fund a fire truck as that LGUs
approach to disaster preparedness. EBaP was about to be
applied in Davos city to HIV and AIDS programs.

In Quezon City UNICEF the EBaP approach focuses more on informal settlers, and in Puerto Princesa the EBaP focuses
more on reproductive, maternal, newborn and child health services.
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PHILIPPINES POLITICAL ECONOMY ASSESSMENT REPORT

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United Nations Childrens Fund (UNICEF)


Three United Nations Plaza
New York, NY 10017 USA
www.unicef.org