FINANCING SOCIAL PROGRAMS IN

THE PHILIPPINES:
PUBLIC POLICY AND BUDGET
RESTRUCTURING

Dennis N. Muñoz, RN, RM, LPT, MN (candidate)

Master in Nursing Level II
• economic growth rate of 5.6 percent during the 1975-1982 period,
the Philippines faced its worst economic crisis in 1984-1985 when
Gross Dgmestic Product (GDP) shrunk by 7.3 percent yearly.
•Per capita income was only $805 in 1992,
lower than most countries in the region.
Even more worrisome, the incidence of
poverty had not significantly declined in
the last 20 years.
•In fact, it deteriorated slightly from 45.5
percent in 1988 to 44.5 percent in 1991.
•At the same time, unemployment and
underemployment rates remained high
at 11.3 and 22.2 percent, respectively in
1993.
• Improvement in the population's overall health status decelerated- in the
period between the mid-1970s and the mid-1980s as indicated by the
stagnation in the infant mortality rate (59 per 1,000 live births in 1980 to 57
in 1990).
• the leading causes of death among children are highly preventable, namely:
respiratory diseases, diarrhea and measles.
• In turn, the prevalence of these diseases may be traced to the slow decline
of the fertility rate, poor environmental sanitation, and infant and child
malnutrition.
• Meanwhile, more than a quarter of the population were found to be
functional illiterates as of 1989 although the 1990 census reported a 93.5
percent literacy rate.
• Although some 85 percent of children aged 7-12 years are enrolled, there
is a high dropout rate in the primary grades (30 percent in 1991). Thus,
Some 1.5 million children are out of school.
Mid-decade goals (MDGs) for Filipino children and mothers were
1. eradication of polio
2. elimination of neonatal tetanus
3. reduction of measles cases by 90 percent and measles death by 95
percent
4. achievement and maintenance of at least 90 percent immunization
Coverage of one-year old children and at least 80 percent, tetanus
immunization coverage of pregnant women
5. virtual elimination of vitamin A deficiency;
6. universal iodization of salt;
7. certification of all hospital s .as baby-friendly;
8. achievement of 80 percent use of oral rehydration therapy;
9. adequate management of pneumonia and respiratory infections among
children under five years 01d in at least 50 percent of all government
health facilities
In the field of education, the mid-decade goals
are:
1. increase elementary school participation
rate to 92 percent
2. increase elementary school cohort survival
rate to 76.5 percent
3. increase literacy rate to 96.5.percent.
In water and sanitation, the goals are:
1. increase access to safe water from 73 to 84
percent of all households
2. increase access tosanitary toilets from 68 to 81
percent of all households.
• In 1984, the Philippines faced the worst economic crisis in its post-war
history. This was brought about by unfavorable developments at home
and abroad. The Philippines was able to weather the two oil price shocks
and the worsening terms of trade situation in the 1970s via a counter
cycle expansionary expenditure program that was supported by external
financing.
• First, the world economic recession lasted longer than
expected.
• Second, foreign capital was not as accessible during the
period (compared to the 1970s) so that the government did
not have the wherewithal to finance the external imbalance.
• Third, political difficulties in the domestic front in 1983 led to
massive capital flight that exacerbated the situation.
• Fourth, the government delayed the conduct of structural
reform measures that would have improved the overall
economic efficiency and implied greater returns to the
massive investments that were put in place.
• Pante and Medalla (1990) pointed out that the growth of direct
and indirect government interventions in the economy during
the 1970s and early 1980s grossly undermined the market
mechanism, and discouraged private sector initiative.
• Given this setting, the Aquino administration had no choice
but to embark on a structural reform program, when it
assumed power in 1986
The major elements of this program are:

1.Privatization
2.trade liberalization
3.financial market liberalization
4.foreign exchange deregulation
5.fiscal policy reform
6.investment policy reform.
• The fiscal deficit of the central government was
large (5.2 % of GNP) in 1986 because of:
1. huge election-related expenditures
2. the transfer of the liabilities of the
government financial institutions to the
central government as part of the former's
rehabilitation program
3. the expansionary expenditure program that
was undertaken to pump prime the economy
However, the national government
deficit surged to 3.5 percent of GNP in
1990 because of an unprecedented
rise in interest payments and increased
outlays for salary adjustments of
government personnel.
After declining from 5.2 percent of GNP in
1986 to 1.9 percent in 1987, the
consolidated public sector deficit surged
once again to 5.0 percent in 1990 because
of huge Central Bank losses and large
subsidies arising from the failure to adjust
petroleum product prices to reflect the
higher prices during the Gulf war.
Unsustainable growth in 1986-1989 may be explained by a
confluence of external and internal factors:
1. First, the anemic growth in the developed countries
lowered demand for the country's exports during the
period.
2. Second, the country was badly hit by a number of
calamities that had deleterious effects on the overall
output growth and devastated huge amounts of
government infrastructure.
3. Third, incessant political instability led to a crisis in
investor confidence.
4. Fourth, part of the deterioration was policy-induced.
 GOVERNMENT REVENUES
• Government revenues may come from tax and nontax sources.
• Taxes remain the principal source of income for the central
government, accounting for 86 percent of national government
revenues (or 15.2 % of GNP in 1992).
• Nontax revenues which consist of grants, user charges; income from
public sector enterprises, and proceeds from the privatization
contributed 14 percent of national government revenues (or 2.5
percent of GNP) in the same year
 GOVERNMENT REVENUES
Nontax revenues which consist of:
1. grants, user charges
2. income from public sector enterprises
3. proceeds from the privatization contributed 14 percent of national
government revenues (or 2.5 percent of GNP) in the same year
• In order to address the present
weaknesses of the tax administration
system, Manasan (1994) identified the
need for the:
1. decentralization of the tax collection
agencies
2. improvements in systems and
procedures governing assessment
and collection enforcement
3. increased computerization
4. restructuring of the compensation
scheme and the rules on hiring and
firing of personnel in the Bureau of
Internal revenue, and the Bureau of
Customs.
Privatization
The privatization program has considerably
slowed down since 1991 because of:
1. legal impediments arising from the fact
that the majority of nonperforming
assets up for sale are not in physical
form but in financial form and as Such
are not conveyable
2. government bidding procedures
3. poor marketability of the assets because
of their inferior physical and financial
state
4. disagreement within government about
the privatization of certain corporations
5. unfavorable macroeconomic and
political environment
6. constraints arising from Republic Act (RA)
7181
• Finally, the turnaround in the economy in the first half of 1994 provides a
conducive environment for the program. To further sustain the
privatization process, the following are recommended:
1. the centralization of the disposal function in the APT
2. minimal involvement of GOCC managers in the disposition activities to
avoid conflicts of interest
3. differential treatment of the privatization activity by Commission on
Audit.
• In 1992, the Philippines received $1.738 billion worth of OFFICIAL
DEVELOPMENT ASSISTANCE (ODA)or 3.7 percent of its GNP.
• The major sources of ODA and Other official flows to the Philippines are
Japan, World Bank (WB), Asian Development Bank (ADB), United States,
Germany, Canada, Australia, and Netherlands. Their global strategies
influence their country programs and the size and allocation of their
assistance.
As of 1991, their priority areas of
assistance are:
1. economic and infrastructure
development
2. Poverty alleviation
3. environmental protection
4. structural adjustment
5. population planning
6. promotion of democracy
7. protection of human rights
8. improved administration.
• In 1989-1991, external assistance disbursements went mainly to
agriculture, energy, transport, communications, natural
resources, local area development and industry.
• In 1991, the Philippines disbursed 9.9 percent of ODA for social
sectors, of which 45 percent went to human priority services.
The low aid social allocation and aid social
priority ratios for the country are due to two
major reasons:
1. The Government of the Philippines (GOP)
has not pushed hard enough for donors
and creditors to allocate more for social
and human services in its negotiations
either as a matter of practice or policy
2. Some donors and creditors such as Japan
and the multilaterals (e.g., ADB and WB)
prefer other areas of assistance.

All foreign loan-assisted projects must pass

the evaluation of the Investment Coordination
Committee (ICC), a subcommittee of the
cabinet-level NEDA Board.