Poverty in the Philippines

Causes, Constraints and Opportunities

• Publisher: Asian Development Bank
• Year: 2015
• ISBN:
  9789292547417
• Edition: 1
• Topic: Sozialwissenschaften
• Subtopic: Armut in der Soziologie

Against the backdrop of the global financial crisis and rising food, fuel, and commodity prices, addressing poverty and inequality in the Philippines remains a challenge. The proportion of households living below the official poverty line has declined slowly and unevenly in the past four decades, and poverty reduction has been much slower than in neighboring countries such as the People's Republic of China, Indonesia, Thailand, and Viet Nam. Economic growth has gone through boom and bust cycles, and recent episodes of moderate economic expansion have had limited impact on the poor. Great inequality across income brackets, regions, and sectors, as well as unmanaged population growth, are considered some of the key factors constraining poverty reduction efforts. This publication analyzes the causes of poverty and recommends ways to accelerate poverty reduction and achieve more inclusive growth. it also provides an overview of current government responses, strategies, and achievements in the fight against poverty and identifies and prioritizes future needs and interventions. The analysis is based on current literature and the latest available data, including the 2006 Family Income and Expenditure Survey.

PART I

EXECUTIVE SUMMARY

Background

Poverty and inequality have been recurrent challenges in the Philippines and have again come to the fore in the wake of the current global financial crisis and rising food, fuel, and commodity prices experienced in 2008. The proportion of households living below the official poverty line has declined very slowly and unevenly in the past four decades, and poverty reduction has been much slower than in neighboring countries such as the People’s Republic of China (PRC), Indonesia, Thailand, and Viet Nam. The growth of the economy has been characterized by boom and bust cycles and current episodes of moderate economic expansion have had limited impact on poverty reduction. Other reasons for the relatively moderate poverty decline include the high rate of inequality across income brackets, regions, and sectors; and unmanaged population growth.

This study aims to provide a comprehensive analysis of the causes of poverty in the Philippines and give recommendations for accelerating poverty reduction through sustained and more inclusive growth. The study will provide an overview of the current status of government responses, strategies, and achievements and will identify and prioritize future needs and interventions. Millennium Development Goal (MDG) accomplishments to date will also be assessed. It will examine implications of the current financial crisis on poverty and recommend ways to move forward. The study is based on analytical work using current literature and the latest available data, including the 2006 Family Income and Expenditure Survey (FIES).

Current Profile of Poverty in the Country

Poverty incidence among households increased from 24.4% in 2003 to 26.9% in 2006 and the number of poor families increased from 4.0 million in 2003 to 4.7 million in 2006. The headcount index increased from 30.0% in 2003 to 32.9% in 2006 and the number of poor people increased from 23.8 million in 2003 to 27.6 million in 2006. It should also be noted that poverty incidence and magnitude do not necessarily coincide. According to the 2006 poverty data, Mindanao has the highest poverty incidence at 38.8% but Luzon has the highest number of poor families, with almost 2 million families (42.4% of the total).

Self-rated poverty¹ has ranged from 50% to 52% for most of 2008, peaking at 59% (an estimated 10.6 million people) in the second quarter. Inequality has also been persistent over the years. Although the Gini coefficient² improved to 0.4580 in 2006 from 0.4605 in 2003 and 0.4872 in 2000, the level of inequality remains high compared with other countries in Asia and has hardly changed for more than 20 years. High inequality has limited the impact of economic growth on poverty reduction.

The Philippines’ midterm progress report on the MDGs shows that the following gains have been made: (i) decrease in the proportion of people living in extreme poverty; (ii) visible improvements in household and population poverty indicators; (iii) maintained net enrollment rates by sex at both elementary and primary education levels; (iv) reduction in infant deaths per 1,000 live births; (v) prevalence of HIV/AIDS below the national target of 1% of the population; (vi) improvements in environmental protection; and (vii) active participation in the World Trade Organization.

However, the Philippines is still lagging behind in meeting the targets on access to primary education, maternal mortality rates, and access to reproductive health care. Because of the current global economic crisis and recent increases in poverty incidence, the goal of reducing the proportion of people living in extreme poverty may not be achieved. In all goals and targets, existing indicators exhibit significant disparity by region. In terms of gender, the Philippines has made substantial progress in enhancing the opportunities and welfare of its women and men (ADB et al. 2008); however, challenges remain in implementing key policies and improving maternal health and reproductive health care.

The main characteristics of the poor include the following:

• The majority live in rural areas and work in the agriculture sector, mostly as farmers and fishers.

• In the urban areas, such as Metro Manila, they are found in slums and the informal sector.

• They have large families (six members or more).

• In two-thirds of poor families, the head of household has only an elementary education or below.

• They have no or few assets and minimal access to credit.

• A major income source of the poor is from enterprise income (informal sector activities).

• A significant segment of the poor households are “chronically poor.”³

Causes of Poverty

The main causes of poverty in the country are

• low to moderate economic growth for the past 40 years;

• low growth elasticity of poverty reduction;

• weakness in employment generation and the quality of jobs generated;

• failure to fully develop the agriculture sector;

• high inflation during crisis periods;

• high levels of population growth;

• high and persistent levels of inequality (incomes and assets), which dampen the positive impacts of economic expansion; and

• recurrent shocks and exposure to risks such as economic crisis, conflicts, natural disasters, and “environmental poverty.”

How Poverty Impacts Economic Growth

The difficulties of the Philippines to transition to a higher and sustained level of growth have been explained to be due to a sustained decline in domestic investments (Bocci 2008),weaknesses in institutions and social infrastructure (Alba 2007), institutional uncertainty (Pritchett 2003), and a history and culture that have impeded growth (Nelson 2007). However, it is also possible that poverty itself is constraining economic expansion. The channels through which poverty may impact on economic growth include

• investment capacity constraints (lack of access to credit aggravated by the underdevelopment of the financial markets);

• human capital constraints (lack of education, health care, and nutrition);

• regular doses of risks and shocks, causing poverty traps; and

• conflicts and disorder resulting from inequality, which hamper investments and destroy social capital.

Key Findings

1. Economic growth did not translate into poverty reduction in recent years. While the country has experienced moderate economic growth in recent years, poverty reduction has been slow. Inequality has remained high, which mitigates the positive impact of growth on poverty reduction. Chronic poverty has become a major constraint in attaining high levels of sustained growth and the country’s overall development. Finding a solution to poverty is thus of public interest; benefits will accrue not only to the poor, but also to society as a whole.

2. Poverty levels vary greatly by region. Poverty incidence has been persistently high in some regions (Autonomous Region in Muslim Mindanao, Caraga, Region IV-B, Region V, and Region IX). Regions with the most number of poor people are regions IV-A, V, VI, and VII.

3. Poverty remains a mainly rural phenomenon, though urban poverty is on the rise. The majority of the poor are still found in rural areas and in the agriculture sector, primarily as farmers and fishers. However, there is an increasing number of poor households in urban areas, typically found in the informal sector.

4. Poverty levels are strongly linked to educational attainment. Two-thirds of poor households are headed by people with only an elementary school education or below. Access to quality education is identified as a key pathway out of poverty.

5. The poor have large families, with six or more members. Population management will be critical for an effective poverty reduction strategy.

6. Many Filipino households remain vulnerable to shocks and risks. This is highlighted by the escalating conflict in Mindanao and the current global financial crisis. An effective poverty strategy must incorporate social protection.

7. Governance and institutional constraints remain. Measures to address such constraints must be an important focus in formulating a revised government strategy for poverty reduction.

8. Local government capacity for implementing poverty programs is weak. Effective delivery of basic social services and poverty-related programs at the local level will improve poverty reduction programs.

9. Deficient targeting in poverty programs. This is related to unreliable, inaccurate, and untimely poverty information, especially at the local level, and to governance challenges in program design and implementation.

10. There are serious resource gaps for poverty reduction activities and attainment of the MDGs by 2015. Resource mobilization and protection of budgets for social sector and poverty reduction programs is needed.

11. Multidimensional responses to poverty reduction are needed. The poverty problem is multidimensional, and thus the response should involve multiple agencies, sectors, and stakeholders. Convergence has been the right approach and should be scaled up and practiced more extensively.

12. Further research on chronic poverty is needed. There are very few micro studies on chronic poverty and how the poor escape poverty traps. This type of research is important for formulating more effective policies and programs.

Key Recommendations

Immediate and Short Term: Enhance Poverty Framework and Strategy

There is a need to enhance government’s strategy and to involve key sectors for a collective and coordinated response to poverty. This would entail the following:

1. Revisiting the poverty framework to address vulnerability to poverty and shocks. This should be formulated in a national social protection strategy. The framework and strategy should also tackle chronic poverty and pathways out of a poverty trap, and give serious attention to population management.

2. Reforming institutions that coordinate poverty policy and implement poverty programs to enhance coordination, improve efficiency, and reduce corruption; for example

a. revising the memorandum of agreement between the National Anti-Poverty Commission (NAPC) and the National Economic and Development Authority (NEDA) to clarify the coordination roles of each agency;

b. incorporating the specific roles of agencies and key stakeholders at various levels of intervention into a new poverty framework and plan of action;

c. continuing to reform the educational system (through the Basic Education Sector Reform Agenda), the health system (through Fourmula One) and the social welfare system;

d. engaging nongovernment organizations and civil society sectors to monitor the delivery of poverty programs and social services;

e. mapping key stakeholders and their roles in poverty alleviation at all levels of governance;

f. examining the political economy of poverty programs before implementation; and

g. strengthening safeguards and mechanisms against leakage and corruption in large poverty programs (such as, for example, the Department of Education’s textbook watch and other civil society watchdogs).

3. Considering specific regional and local characteristics (e.g., risks for disaster or conflict) in poverty program interventions. Interventions should also take into account factors affecting intraregional inequality, which would imply equalizing access to quality health, education, and infrastructure services within regions (Balisacan 2003).

4. Facilitating better coordination among government agencies and key stakeholders (e.g., nongovernment organizations and corporations) to promote complementary action in specific localities and communities—from targeting to program implementation to monitoring and evaluation.

5. Allocating from the budget and raising more funds from civil society, religious organizations, business, and bilateral and multilateral agencies to address poverty, vulnerabil...