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Document of The World Bank Group
FOR OFFICIAL USE ONLY
Report No. 78286-PH
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT,
INTERNATIONAL FINANCE CORPORATION,
AND
MULTILATERAL INVESTMENT GUARANTEE AGENCY
COUNTRY PARTNERSHIP STRATEGY
FOR
THE REPUBLIC OF THE PHILIPPINES
FOR THE PERIOD FY2015-2018
May 14, 2014
Philippines Country Team, World Bank
East Asia and Pacific Region International Finance Corporation
East Asia and Pacific Department Multilateral Investment Guarantee
Agency
This document has a restricted distribution and may be used by
recipients only in the performance of their official duties. Its
contents may not otherwise be disclosed without World Bank
authorization.
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The Last Country Assistance
Strategy (CAS) for the Republic
of the Philippines was
discussed with
the Executive Board on April 30, 2009 (Report No. 479216‐PH), and the CAS Progress Report was distributed to the Executive Board on April 20, 2011 (Report No. 61274‐PH).
CURRENCY EQUIVALENTS (Exchange rate effective as of May 1, 2014)
Currency unit: Philippine peso (PHP)
US$1 = 44.46
FISCAL YEAR
July 1 – June 30 ACRONYMS AND ABBREVIATIONS AAA
Analytical and Advisory Activities ADB
Asian Development Bank APIS
Annual Poverty Indicator Survey ARMM
Autonomous Region in Muslim Mindanao ASEAN
Association of Southeast Asian Nations AUD
Australian Dollar BPLS
Business Process and Licensing Simplification BUB
Bottom‐Up Budgeting CAS
Country Assistance Strategy CAT DDO
Catastrophe ‐ Deferred Drawdown Option CCT
Conditional Cash Transfer CDD
Community Driven Development CPS
Country Partnership Strategy CSOs
Civil Society Organizations DPL
Development Policy Loan DPO
Development Policy Operation DRM
Disaster Risk Management DSWD
Department of Social Welfare and Development EA
Engagement Area EITI
Extractive Industries Transparency Initiative FDI
Foreign Direct Investment FIES
Family and Income Expenditure Survey GDP
Gross Domestic Product GEF
Global Environment Facility GFMIS
Government Integrated Financial Management System GHG
Greenhouse Gas GOCCs
Government‐Owned and Controlled Corporation IBRD
International Bank for Reconstruction and Development ICT
Information and Communication Technology IFC
International Finance Corporation IP
Indigenous Peoples JICA
Japan International Cooperation Agency KALAHI‐CIDSS
Kapit Bisig Laban sa Kahirapan‐Comprehensive Integrated Delivery of Social Services
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iv
LEAPS
Learning, Equity and Accountability Program Support LGU
Local Government Units LISCOP
Laguna de Bay Institutional Strengthening and Community Participation Project LNG
Liquefied Natural Gas MDGs
Millennium Development Goals MIGA
Multilateral Investment Guarantee Agency MILF
Moro Islamic Liberation Front MSME
Micro, Small and Medium Sized Enterprises NAIA
Ninoy Aquino International Airport NCDDP
National Community Driven Development Program NDHS
National Demographic and Health Surveys NEDA
National Economic and Development Authority NHTS‐PR
National Household Targeting System for Poverty Reduction NGO
Nongovernmental Organization NRIMP‐2
National Roads Improvement and Management (APL) Phase 2 NSCB
National Statistical Coordination Board OBA
Output‐Based Aid PBR
Philippine Business Registry PDP
Philippine Development Plan PDR
Philippine Development Report PEFA
Public Expenditure and Financial Accountability PhRED
Philippines Renewal Energy Development PIDP
Participatory Irrigation Development Project PPP
Public‐Private Partnership PRDP
Philippine Rural Development Program PSA
Philippines Statistics Authority RAS
Reimbursable Advisory Services RIGP
Regional Infrastructure for Growth project SWDRP
Social Welfare and Development Reform Program SME
Small and Medium Enterprise TES
Tax Expenditure Statement TF
Trust Fund UACS
Unified Account Control Structure UHC
Universal Health Coverage USD
US Dollar WBG
World Bank Group WBI
World Bank Institute WDI
World Development Indicators WDR
World Development Report
World Bank IFC
MIGA Vice President
Axel van Trotsenburg Karin Finkelston
Michel WormserCountry Director/Resident Representative
Motoo Konishi Jesse Ang
‐ Task Team Leader
Kathryn Hollifield Catherine Martin
Paul Barbour
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Table of Contents Executive Summary ...................................................................................................................................... vi
Part I ‐ Introduction ....................................................................................................................................... 1
Part II ‐ Country Context and Challenges ...................................................................................................... 1 A.
Poverty .............................................................................................................................................. 1 B.
Other Social Indicators ...................................................................................................................... 7 C.
Economic Context ............................................................................................................................. 8 D.
Political Context .............................................................................................................................. 12 E.
The Government’s Development Vision ......................................................................................... 13
Part III ‐ Lessons from the Current CAS, Client Survey and Multi‐stakeholder Consultations .................... 14 A.
Country Assistance Strategy (CAS) Completion Report .................................................................. 14 B.
Feedback and Dialogue Mechanisms .............................................................................................. 15
Part IV ‐ The New World Bank Group Country Partnership Strategy FY15‐FY18 ........................................ 15 A.
CPS Goals, Analytic Underpinning and Structure ............................................................................ 15 B.
Criteria for Selectivity of Bank Group Intervention ........................................................................ 16 C.
Other Key Principles of WBG Engagement ..................................................................................... 19 D.
Engagement Areas and Strategic Outcomes................................................................................... 21 E.
Program Implementation and Management .................................................................................. 32 F.
Monitoring Results .......................................................................................................................... 36 G.
Managing Risks ............................................................................................................................... 37
Attachments ................................................................................................................................................ 39 Attachment 1: Indicative IBRD AAA and IFC Advisory Services Program FY15‐FY18 .............................. 39 Attachment 2: The Repulic of the Philippines Country Partnership Strategy Results Matrix ................. 45
Annexes ....................................................................................................................................................... 55 Annex 1: Mapping for Results in the Philippines .................................................................................... 56 Annex 2: The Republic of the Philippines ‐ Progress towards the MDGs ............................................... 61 Annex 3: The Republic of the Philippines CAS FY10‐13 Completion Report ........................................... 64 Annex 4: World Bank FY13 Client Survey and CPS Multi‐Stakeholder Consultations........................... 118 Annex 5: IFC‐IBRD Collaboration in the Philippines .............................................................................. 125 Annex 6: The World Bank Institute Contribution to Philippines CPS: FY15‐FY18 ................................. 127 Annex 7: Partnership ............................................................................................................................. 128 Annex 8: Country Gender Plan – Mainstreaming Gender .................................................................... 133 Annex 9: Country at a Glance................................................................................................................ 135 Annex 10: Philippines Social Indicators ................................................................................................ 137 Annex 11: Philippines Key Economic Indicators................................................................................... 138 Annex 12: Philippines Operations Portfolio (IBRD/IDA and Grants) ..................................................... 139 Annex 13: IFC: Committed and Disbursed Outstanding Investment Portfolio ..................................... 140 Annex 14: Map of the Philippines ......................................................................................................... 141
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Boxes
Box 1: One World Bank Group in Action ..................................................................................................... 20 Box 2: World Bank Group Support in the Wake of Typhoon Yolanda ........................................................ 21 Box 3: Australia‐World Bank Philippines Development Trust Fund ........................................................... 34
Tables
Table 1: Philippine Poverty Rates ‐ National Poverty Line ............................................................................ 2 Table 2: Philippine Poverty Rates ‐ International Poverty Lines ................................................................... 2 Table 3: IBRD Lending ................................................................................................................................. 33 Figures Figure 1: Poverty Rates ................................................................................................................................. 3 Figure 2: Poverty Density .............................................................................................................................. 3 Figure 3: Poverty Status 2003, 2006, and 2009 ............................................................................................ 4 Figure 4: Mean Income Relative to Poverty Line 2003‐2009 ........................................................................ 4 Figure 5: Number of People Affected by Natural Disasters 2012 ................................................................. 4 Figure 6: Top Five Disasters in the Philippines in 2012 ................................................................................. 4 Figure 7: National return period losses normalized by percentage of GDP, for all modelled disasters ....... 5 Figure 8: Poverty Rates (%) in Ten Poorest Provinces vs. National Average 2009 ....................................... 5 Figure 9: GDP Growth (%) ............................................................................................................................. 8 Figure 10: East Asia Pacific and Philippine Growth ...................................................................................... 8 Figure 11: Sector Growth .............................................................................................................................. 9 Figure 12: Sector Labor Productivity ............................................................................................................. 9 Figure 13: Sector share to GDP ................................................................................................................... 10 Figure 14: Employment share by sector ..................................................................................................... 10 Figure 15: Gross Fixed Capital Formation ................................................................................................... 11 Figure 16: FDI Flows as a Percent of GDP ................................................................................................... 11 Figure 17: The Philippines CPS Results Chain ............................................................................................. 17 Figure 18: IBRD Portfolio ............................................................................................................................. 35
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The Republic of the Philippines COUNTRY PARTNERSHIP STRATEGY (FY15‐18)
Executive Summary
Since taking office in 2010,
the Government of
the Philippines has embarked on an ambitious plan
to bring down poverty and improve
the lives of
the poorest segments of
the population. The Philippines Country
Partnership Strategy (CPS) FY15‐18
supports the government’s plan to
promote inclusive economic growth that
creates more and better jobs and
reduces poverty. As such, the
CPS is
fully aligned with the World Bank Group (WBG) goals of ending poverty and boosting shared prosperity. The CPS
includes an analysis of how growth patterns and underlying government policies have shaped the country’s
development record, notably the
limited poverty reduction despite
significant
economic growth. This CPS will
support structural reforms needed to
reverse
long‐standing policy distortions – food
security, land reform, competition,
labor market and business climate
‐ which have undermined the
creation of more and better jobs
and the translation of growth
into poverty reduction.
High economic growth rates and a government committed to inclusive growth present a valuable opportunity for a new growth path. The WBG will deliver a
results‐based program with a selective and
integrated package of strategic, analytical, diagnostic and technical assistance services, programs and
investment lending.
Country Context and Challenges
According to the national poverty line, poverty affects roughly 25% of the population. Many Filipinos live just above the poverty
line, cycling
in and out of poverty due to high vulnerability to climatic, disaster, financial
and price shocks. Last year
alone, a magnitude 7.2 earthquake
and a devastating
Typhoon (international name Typhoon Haiyan) caused major damage and a significant
increase in poverty levels in
affected areas. Three out of
four poor Filipinos live in
rural areas and most of them
depend on agriculture. Poor Filipinos
belong to households with larger
families, have more young‐ and
old‐age dependents, and have less
access to basic infrastructure and
services. Also, there is a
strong nexus between poverty and
violent conflict: the
conflict‐affected Autonomous Region
in Muslim Mindanao (ARMM) is the poorest region with a poverty incidence of 52.9%.
Strong fundamentals have enabled the Philippines to record respectable growth in recent years, despite the global slowdown. The rapid growth of remittances has also contributed to the economy’s stability. The country has a strong export sector, a more
liberal
investment regime, growing transportation and communication
infrastructure, and globally competitive
entrepreneurial and managerial talents.
The country can sustain high growth
in globally dynamic sectors, such as electronics and business process outsourcing.
Despite high economic growth, extreme poverty did not significantly decline over
the decade
through 2012. Extreme poverty, measured as the share of population living under $1.25‐a‐day, was estimated at 19.2% in 2012 compared to 21.6% in 2003. At the same time, while the mean per capita consumption of the bottom 40% grew faster than the total population (between 2006 and 2009), this segment still lives below
$2‐a‐day. Data and methodological
issues raise questions about the
reliability of
poverty statistics. Beyond data issues,
the
limited poverty reduction experienced over
the past decade can be explained by high population growth among the poor; low factor productivity (particularly in agriculture and services); frequent and severe natural disasters; and persistent conflicts in parts of the country.
Recent preliminary data for the
first semester of 2013 shows a
3 percentage points decline in
the national poverty rate compared to the same period in 2012, which may well reflect the positive impact of
scaled up
social protection programs. Under
the CPS, the Bank will undertake
further analytic and methodological work to better understand poverty trends and their determinants.
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The Philippine Development Report
2013 (PDR): Creating More and
Better Jobs concluded
that longstanding policy distortions (i.e. in labor markets, land, agriculture) have slowed long term growth in agriculture
and manufacturing. Instead of rising
agricultural productivity paving the
way for the development of
a manufacturing sector, the converse
has taken place. Agricultural
productivity has remained
depressed, manufacturing has failed to
grow sustainably, and a
low‐productivity,
low‐skill services sector has emerged as the dominant sector of the economy. This growth pattern has failed to provide good jobs to majority of Filipinos, has led to a substantial outmigration of many of the country’s best and brightest people, and has failed to turn strong growth into poverty reduction.
In the coming years the jobs challenge facing the Philippines will remain formidable. Good jobs ‐ jobs (or economic opportunities) that raise real wages and bring people out of poverty ‐ need to be provided to about 10 million Filipinos who were either unemployed (3 million) or underemployed (7 million) in 2012, and to about 1.15 million potential entrants to the
labor force every year from 2013 to 2016.
In total, approximately 14.6 million jobs will need to be created through 2016.
Government’s Development Vision
President Benigno S. Aquino came into power in June 2010, winning with a large margin, on a platform focusing on
good governance, anti‐corruption
and poverty reduction. He then
entered into a
“Social Contract with the Filipino People” based on: transformational leadership, economy, government service, gender
equality, peace and order, and
the environment. After nearly four
years in office, the government
has made progress on the
reallocation of resources to reform
programs in health, education and
social protection and increase budget
transparency. Prospects are improving
for sustained peace and development in Mindanao.
The Social Contract is reflected
in the 2011‐2016 Philippine Development Plan (PDP) with
its theme of inclusive growth. In
April 2014, the government issued
the 2011‐2016 PDP Midterm Update.
The midterm highlights the country’s robust economic performance, strong fiscal space and unprecedented level of international confidence. It also outlines remaining challenges, including slow implementation of vital
infrastructure projects, continued high
cost of doing business, and evidence
that
the benefits of growth have not turned into greater poverty reduction.
WBG Program and Development Solutions
In support of the PDP, and consistent with the WBG twin goals, the CPS
for FY15‐18 aims to promote inclusive growth, reduce poverty and support shared prosperity.
Selectivity. In line with these
goals, the CPS establishes three
criteria for selectivity of
WBG interventions: Focus on Poverty
and Shared Prosperity; Transformative
Engagements; and Convergence/Multi‐Sector
Solutions. The WBG will assess
all activities through the lens
of inclusive growth, poverty reduction
and shared prosperity, utilizing
diagnostics to assess the impact
of interventions on the poor and
on the bottom 40%. The WBG
will evaluate all activities for
a transformational value such as changing behavior and
incentives that alter outcomes, a demonstration effect, and/or a comparative advantage for the WBG. The WBG will support the government’s strategy of
convergence, bringing together teams
to break down sector silos. In
this context, the
Bank will continue to move away from a sector focus with standalone projects/programs, to programmatic/multi‐sectoral approaches.
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viii
Engagement areas. The CPS is organized in five engagement areas:
1. Transparent and accountable governance:
strengthen public finances, fiscal
transparency and financial accountability;
strengthen public sector institutions;
and strengthen
demand‐side pressure for government accountability.
2.
Empowerment of the poor and vulnerable: improve poverty measurement and socio‐economic data systems;
improve health outcomes;
improve quality of basic education and access for the vulnerable; and strengthen social safety nets.
3. Rapid, inclusive and sustained
economic growth:
strengthen economic policy,
support private sector development,
improve the investment climate,
including greater access to
finance; and increase economic growth, productivity, and jobs in rural areas.
4.
Resilience to climate change, environment, and disaster risk management: increase physical and financial resilience to natural disaster and climate change impacts and improve natural resource management and sustainable development.
5. Peace, institution building, and
social and economic opportunity: The
WBG recognizes
the window of opportunity
afforded by recent progress with
the peace process and will
support social and economic development
in conflict‐affected regions. The WBG will scale up efforts to increase
trust within communities and between
citizens and the state in
conflict areas
and develop and implement a “Peace Dividend” program for Mindanao/Bangsamoro.
Working as
“One WBG”. The CPS program aims
to fully leverage the resources
and expertise of the whole WBG
(IBRD, IFC and MIGA), particularly
to mobilize private sector
investment and support
job creation. The WBG will
focus on opportunities for
transformational engagements, with
joint activities planned
in agri‐business, trade
logistics, financial sector, and
infrastructure/Public Private Partnerships (PPPs).
The WBG will deliver a focused, selective and integrated package of support, involving analytic/advisory and financial services.
In non‐lending support, the WBG will support
integrated analytical and advisory assistance (AAA) for each engagement area. The majority of new IBRD financing will be for development policy
operations (DPO) and Program‐for‐Results
financing. The Bank will no
longer support
single agency/single sector
investment projects, unless as part of an
integrated, multi‐sectoral program. The indicative lending program for FY15‐FY18 is expected to fall within the range of $600 million to $1 billion per year, averaging approximately $800 million per year, with
firm commitments through
the end of President Aquino’s term (to 2016). Trust funds (about 5% of the total portfolio) will continue to be fully integrated into the Bank program, with a sharper focus on high priority, strategic areas.
The IFC will continue to
support private sector development,
access to finance, rural and
“green” investment, and promote
inclusive urban growth. The IFC is
targeting to commit $250‐300 million
in investments in the next
couple of years. MIGA
currently has no exposure in
the Philippines, but will continue to explore possibilities for engagement in infrastructure.
Risks and Mitigating Factors
The proposed CPS will face
several risks that will need
to be mitigated. With presidential elections
in 2016, the government will
need to navigate between concrete
results on the ground and
steady implementation of the
longer‐term reform agenda. The Bank
will use the opportunity of the
CPS Progress Report (summer 2016) to review and adjust the CPS program. The government’s
institutional and governance reform objectives are complex and require a medium‐ to
longer‐term implementation horizon. The
WBG will place a strong
emphasis on building constituencies
for reform, supporting
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ix
stronger client participation, “learning
by doing,” and developing
institutional capacity. Despite
the encouraging progress on
the peace process
in Mindanao, political challenges
remain and the
security environment remains volatile. As requested by the Government, the WBG will continue to accompany this process, providing basic social services, livelihood and local institution building, and will be ready to scale‐up support as the peace process progresses.
To address program delivery risks, the Bank will support better alignment of projects and programs with government priorities. The Bank has
fully mainstreamed all decision making
relative to the trust
fund portfolio into the overall
IBRD work program decision making
process. The recent introduction
of Reimbursable Advisory Services (RAS) will also help to reduce reliance on trust funds and augment the amount of AAA that can be funded through internal Bank resources.
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The Republic of the Philippines
COUNTRY PARTNERSHIP STRATEGY (FY15‐18) Part I ‐ Introduction
1. High economic growth rates and
a government committed to inclusive
growth provide
the Philippines with a valuable opportunity
for a new growth path
that creates more and better
jobs and reduces poverty. The
government is looking to the
World Bank Group (WBG) to help
meet its development challenges by
sharing international experience to
effect lasting improvements.
In response, the WBG will deliver
a focused, selective and integrated
package of strategic,
analytical, diagnostic and technical assistance services, programs and investment lending.
2.
The Philippines Country Partnership Strategy (CPS) covers FY15‐18 and
is fully aligned with the goals
of the Government’s
Philippine Development Plan (2011‐2016;
PDP) and
the Midterm Update (2014). Accordingly, the overarching goals of the CPS are to promote inclusive growth, reduce poverty, and
support shared prosperity, which
are directly linked to the WBG’s
twin
goals of ending extreme poverty and
promoting shared prosperity. The new
CPS is a joint World Bank,
International
Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) strategy.
3. The analytical underpinning of
the CPS is the Philippine
Development Report 2013
(PDR): Creating More and Better
Jobs,1 which is based on
findings from prior PDRs, notably
the PDR 2011: Generating Inclusive
Growth to Uplift the Poor. The
2013 PDR analyzes how growth
patterns
and underlying government policies
in the Philippines have shaped the country’s development record. The new
CPS is aligned with the report’s
conclusions and will support the
structural reforms needed
to reverse the decades of policies that have undermined the creation of more and better jobs and facilitate the transformation of growth into poverty reduction.
4. This CPS has four main
parts. After the introduction (Part
I), Part II summarizes the
country context and constraints
related to poverty and income
distribution patterns, progress on
social indicators,
the economic and political
context, and
the government’s development vision of
inclusive growth. Part III presents
an evaluation of the effectiveness
and lessons from the current
Country Assistance Strategy FY10‐13
and describes the inputs into
the preparation of the new CPS.
The new partnership strategy is presented with program selectivity criteria and engagement areas. Finally, Part IV presents the approach for implementing the CPS with arrangements for monitoring results and risk.
Part II ‐ Country Context and Challenges
A. Poverty
5. High economic growth in the
Philippines over the last decade
has not yet translated
into notable poverty
reduction. According to
the official poverty estimates, which use a national poverty line
as a benchmark, income poverty
has remained almost unchanged since
2003 at around
25% (equivalent to about 24 million Filipinos).. Similar to the overall poverty, the food poverty is high and has
1
The Philippine Development Report 2013 (PDR): Creating More and Better Jobs is a consensus report reflecting the collective wisdom of the country’s stakeholders based on extensive consultations that shaped the report’s analysis and recommendations with
over 300 people from government,
business, labor, informal sector,
academe, and civil society. All
WBG sectors contributed, with IFC
providing vital inputs in the
area of investment climate. The
report also leveraged a number
of international experiences to show that reforms, while difficult, are needed before a country can make growth more inclusive. The PDR is available at: http://www.worldbank.org/en/country/philippines/publication/philippine‐development‐report‐2013‐creating‐more‐and‐better‐jobs.
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been slow to decline. In 2012, the incidence of food poverty was estimated at 10.4% of the population, suggesting
that about 10 million people did
not to have sufficient income
to meet their basic
food requirements.2
6.
Recent preliminary data shows that poverty declined in the first half of 2013. The latest official poverty
statistics show a 3 percentage
point decline in the national
poverty rate between the
first semesters of 2012 and
2013, from 27.9 % to
24.9 %. The percentage
of food poor Filipinos
also declined from 13.4% to 10.7% in the same period. This decline may well reflect the impact of significant recent Government efforts to expand economic opportunities and social programs.3
Table 1: Philippine Poverty Rates ‐ National Poverty Line (% of population) 1991
2003 2006 2009 2012 2013
Poverty rate full year
34.4 24.9 26.6 26.3 25.2
‐ 1st semester
‐ ‐ 28.8 28.6 27.9
24.9 Food poverty full year
17.6 11.1 12.0 10.9 10.4
‐ 1st semester
‐ ‐ 14.2 12.3 13.4 10.7
7.
The poverty estimates at the international poverty lines show a modest decline between 2003 and
2012. The share of
Filipinos with per capita consumption
expenditure below the
international poverty
line of PPP $1.25/day, declined modestly
from 22.6% in 2006 to 19.2%
in 2012. The share of Filipinos who
lived below PPP $2.00/day also declined from 45%
in 2006 to 42.2% in 2012.
While the mean per‐capita consumption of the bottom 40% grew faster than the total population between 2006 and 2009 (3.2% versus 1.5 % annually), this group is still very poor living below PPP $2/day.4
Table 2: Philippine Poverty Rates ‐ International Poverty Lines 2003
2006 2009 2012
$1.25 a day poverty5 Headcount (%)
21.6 22.6 18.4
19.2 Poverty gap (%)
5.4 5.5 3.7 4.1
$2 a day poverty Headcount (%)
43.4 45.0 41.5
42.2 Poverty gap (%)
15.8 16.3 13.8 14.4
Gini index (%) ‐ consumption
44.0 44.1 43.0 43.0
8. Inequality has
also declined modestly over
the past decade and remains
relatively high.
In 2012, inequality in income distribution as measured by Gini coefficient was 47.3, only slightly lower than in 2003 when it was 48.9. Inequality in consumption expenditure distribution is somewhat lower – the Gini index was 43 in 2012, versus 44 in 2003. Both Gini indices put the Philippines among the countries with the highest inequality in the region.
9. Three out of
four poor Filipinos live
in rural areas and most of them depend on agriculture. Poverty
in rural areas (39.4%)
is significantly higher than
the national average
(26.5%) and more than
2 Unless otherwise indicated, poverty estimates presented here are based on the Family Income and Expenditure Survey (FIES) 2009.
Source: Philippine National
Statistics Authority, National
Statistical Coordination Board, 2014
(www.nscb.gov.ph).
The official poverty estimates in the Philippines use income as welfare aggregate. Preliminary estimates of poverty at international poverty lines are based on FIES 2012 and were calculated by the World Bank staff. 3 The 2012 FIES was released by the Philippine Statistics Authority in late March 2014. A full year of APIS 2013 data is expected to be released later this year. The Bank will use these date sets for the analysis of poverty and shared prosperity. 4 Both have increased at $1.25 to 19.23 and at $2.00 to 42.2%, but these changes are not statistically significant. 5 Preliminary estimates based on 2003‐2012 FIES and using the World Bank povcal method and PPP conversion factor. These estimates use consumption expenditure as welfare aggregate.
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3
three times that in urban areas (13.2%). The poverty gap and severity in rural areas (11.2%) is also four times higher than in urban areas (3.1%). While less than a quarter of the population derive most of their income
from agriculture, agricultural
households—those who depend mainly on
income from agricultural‐related
activities—account for half of the
country’s poor. Annex 1 provides
additional poverty maps, overlaid with selected Bank beneficiary and/or project data.
Figure 1: Poverty Rates Figure 2:
Poverty Density – 000’s of People
10. Poor Filipinos belong
to households with larger
families, have more young‐ and old‐age dependents, and have less access to basic infrastructure:
Out of 100 Filipinos…
Out of 100 POOR Filipinos…
Out of 100 Filipino’s in the bottom 40%
51 live in rural areas 75 74 40
belong to households whose head works in
agriculture 66 62
51
belong to a household with more than five members
73 66
5 average household size 6 6 28
dependency ratio (> 15 only) 43
39 14
do not have access to electricity 37
31 47
do not have their own water source 77
73 8
do not have any toilet facility 20
17
Source of basic data: Family Income and Expenditure Survey (FIES) 2009.
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11. At the same time, urban
poverty has been increasing in
recent years. The urban
poverty incidence increased from 11.3% in 2003 to 13.2% in 2009. With no or low paying jobs, migrants are not able
to afford decent housing and
Philippine cities have one of
the highest proportions of
informal settlers (about 30 percent reside in Metro Manila).
12. Many Filipinos live just above
the poverty line, cycling in
and out of poverty due to
high vulnerability to climatic,
disaster, financial and price shocks.
A 20% increase in the poverty
line following a major food
shock would increase the poverty
incidence by over 9%. Between
2003
and 2009, 44% of the population was poor at
least once, one
in three Filipinos were persistently poor, and two
out of three households moved in
and out of poverty. About 90%
of the transitory poor
have incomes hovering near the poverty line.
Figure 3: Poverty Status 2003, 2006, and 2009
Figure 4: Mean
Income Relative to Poverty Line 2003‐2009
13. As a means of coping
with such shocks, the poor are
plunged into deeper levels
of indebtedness to make up for lost livelihoods and income. They reduce spending for health, education and other basic needs, including decreased food intake. The limited resources that are left are diverted to meet
the most basic needs, constraining
the ability to restore pre‐shock
incomes and sources
of livelihood. These events also push victims, who previously were not poor, into poverty. Disaster impacts also tend to differ between men and women: the mortality rates for women are generally higher than those for men as women are less likely to know how to swim and tend to step in to protect children and the elderly.6 Figure 5: Number of People Affected by
Natural Disasters 2012 (million) Figure 6:
Top Five Disasters in the Philippines in 2012
(by no. of affected population)
Source: Citizens’ Disaster Response Center , 2012 Philippine Disaster
Report
6
WB Working Report No 65833: “Making women's voices count addressing gender issues in disaster risk management in East Asia and the Pacific”, November 28, 2011.
NEVER POOR56%
Transitory poor66%
Chronic poor34%
POOR AT
LEAST ONCE44%
34.0
54.1
9.21.9 0.5 0.2 0.1 0.2
0102030405060
Share (%
)
2.233.33.344.35.1712.5
43.1
ChadSomaliaSudan
Korea Dem RepKenyaIndia
PakistanNigeria
PhilippinesChina
FLOOD, 7,827,951
TROPICAL CYCLONE, 3,847,929
EARTH QUAKE, 292,637
ARMED CONFLICT, 118,314 FIRE, 52,349
-
5
14.
The year 2013 was a devastating year for the Philippines: a significant earthquake then super‐Typhoon
Yolanda (international name Typhoon
Haiyan) caused major damage and
a significant increase in poverty
levels in affected areas. On
October 15, 2013, the Central
Visayas region experienced a magnitude
7.2 earthquake that affected 3.2
million people, caused 223
casualties, displaced over 355,000
people, and damaged over 69,000
homes. In November 2013, Yolanda,
a category 5 typhoon with winds speeds over 300 km per hour, struck central Philippines, displacing over four million people, with over 6,200 reported fatalities and almost 1,800 people still missing.7 Over 1.1 million
houses were damaged and half of
these were totally destroyed. The
immediate impact
of Yolanda on poverty was severe. Estimates are that in the Western, Central, and Eastern Visayas regions, where
the pre‐typhoon poverty
rates were significantly above
the national average, an additional 2.3 million people (half a million households) were pushed into poverty in the worst affected areas.
15. Increased vulnerability to
natural disasters has become “the
new normal”. The Philippines is
expected to incur (on a
long‐term average basis) about $4.6
billion per year in damage to
assets due to earthquake
ground shaking, tropical cyclone‐induced
wind and precipitation, and
non‐tropical cyclone‐induced precipitation.
In the next 25 years, the Philippines has a 40%
chance of experiencing a
loss of more than $18.8 billion
and casualties greater
than 70,000 people, and a 10% chance of experiencing a
loss of more than $44.8 billion
and
casualties greater than 95,000 people.8
Figure 7:
National return period losses normalized by percentage of GDP, for all modelled disasters
16. There is also a strong
nexus between poverty and violent
conflict in the Philippines.
In parts of the country where levels of conflict are high, poverty
is severe. The conflict‐affected Autonomous Region
in Muslim Mindanao (ARMM) is
the poorest region in the
country, with a poverty incidence
of 52.9% against the national average of 25.2%. The ten poorest
provinces in the country are
considered either conflict‐affected or vulnerable to conflict.
Figure 8: Poverty Rates (%) in Ten Poorest Provinces vs. National Average 2009
17. There is some
improvement evident in other
indicators of poverty. Between 2003 and 2009, the
bottom 40% became more educated
as reflected by the gradually
increasing share of
their household heads entering and graduating from high school. The share of those in the bottom 40% who are employed in the industry and services sectors also increased, moving away from the seasonality of agricultural employment. Consequently, they have become less dependent on agricultural incomes and
7 Source: Government of the Philippines, May 5, 2014. www.gov.ph/crisis‐response/updates‐typhoon‐yolanda/. 8 Source: The Philippines Catastrophe Risk Profile; AIR/ADPC on behalf of DOF‐IFG, 2014. This analysis
takes
into account a 10,000‐year catalogue of possible events to provide a more robust quantification of disaster risks in comparisons to short term historical records.
0.010.020.030.040.050.060.070.080.0
-
6
informal work, as also reflected by a declining share of households who obtain majority of their incomes from
agriculture‐related activities and the
increasing share of households who
shift from informal employment
towards wage employment. Some changes
are also seen in the living
conditions of
the bottom 40% as more of them now build their homes using strong materials and have direct access to clean water and
sanitation. The National Demographic and Health Surveys
(NDHS) of 2003 and 2008 also
show that health indicators of
those at the Bottom 40 improved
together with the rest of
the population. 18.
The government has revised the original target to halve the official poverty rate from 34.4% in 1991 to 17.2% by 2015, to between 18% and 20% by 2016. This change
takes into consideration
the slow response of poverty to economic growth and the setbacks in 2013 due to the impact of disasters. With 25.2% of the population in poverty in 2012, achieving this goal would require reducing poverty by 5 to 7 percentage points in the next three years. To achieve poverty reduction from 19.23% in 2012 to 15.4% by 2015, based on the rate of extreme poverty measured by using the poverty line of PPP$1.25‐a‐day, will require an average annual 1.3 percentage point decline. While the latest poverty statistics for the first semester of 2013 looks promising, achieving either target (national poverty rate or the poverty line of PPP$1.25‐a‐day) will require additional efforts, particularly in areas with high poverty incidence.
19. Relative to other countries in
the Region, the Philippines has
lagged behind in
poverty reduction. In terms of achieving the Millennium Development Goal (MDG) of halving the poverty rate at PPP$1.25 a day between 1990 and 2015, the extreme poverty rate has declined in the Philippines from 30.7% in 1991 to 19.2% in 2012 or by about 38%. In contrast, in China, this rate has declined from 60.2 to 11.8 (by 80%); in Indonesia from 54.3 to 18.1 (by 66%) and in Vietnam from 63.7 to 16.9% (by 73%). 20.
Stubbornly high poverty and
inequality in the Philippines over
the last decade can be explained
by several factors, including: high
population growth, particularly at
the bottom of the distribution;9
low productivity in agriculture,
which prevents the poor most of
whom are (self)‐employed in
agriculture to earn more and get
themselves out of poverty; slow
creation of higher productivity jobs
in manufacturing; low human capital
formation among the poor; frequent
natural disasters that tend to affect the poorest most severely and push significant numbers of households into poverty;
and persistent conflicts in parts
of the country. The pro‐poor
policies that have
been implemented by the government such as conditional cash transfers and universal health coverage of the bottom 40% of the population were fully rolled out
in 2013 and their potential
impact could not have been reflected in the 2012 household survey data. Other policies implemented by the government, such as expansion of basic education services, might take even longer to show any impact on poverty.
21. Despite the analysis completed
to date,
the Philippine poverty story
remains a puzzle. Why has there been some decrease in poverty based on the international poverty lines (at least from 2003 to 2009) and based on non‐income measures of poverty, while poverty based on the national poverty line does not seem to have changed through 2012? There are methodological issues:
Questions have been raised whether the Philippine Family Income and Expenditure Survey (FIES), on which
all poverty estimates are calculated,
accurately captures income and
expenditures of the Philippine
households. For example, the
consumption expenditures reported by
FIES and those reported by
the national accounts have diverged significantly during
the last decade. In 2000,
the FIES reported consumption
expenditures accounted for 70% of
the final household consumption
9 The population
in the Philippines has increased
from 77.7 million in 2000
to 96.7 million
in 2012 or by about 19.0 million people. According to DHS, the fertility rate in the bottom quintile of the income distribution is 5, while in the top quintile it is 1.8 births per woman in reproductive age.
-
7
expenditures reported by the national accounts. In 2012, this ratio dropped to only 49%.
There are
issues on the sampling frame which is still based on 2000 Population Census, although a population census was conducted in 2010 and could have been used for sampling of the 2013 FIES.
The poverty line calculation methodology and method for indexing it over time raises questions. For instance, there is a question regarding the accuracy of prices which are used to calculate and index provincial poverty lines. A quick look at the provincial poverty lines in 2009 and 2012 suggests that the poverty line in the National Capital Region (greater Metro Manila) recorded one of the smallest changes
in the nominal poverty
line between 2009 and 2012: well below the national average. At the same time, some provinces for the same basket of goods have recorded an increase of 20% or even 30% (two‐three times the national average).
Finally, the share of non‐food expenditures in the poverty line is constant, fixed at about 30% across all
provinces. In reality, this share
is not constant but varies with
the level of
provincial mean income. Keeping the share of non‐food expenditures fixed also
implies that non‐food expenditures are
indexed at the food prices and
introduces an element of a
relative poverty line
into poverty comparisons over time.
22.
Preliminary World Bank staff estimates show that using more consistent alternative poverty lines
yield somewhat greater declines in
poverty incidence, gap, and severity
especially in recent years. At
the Government’s request,
the World Bank will work with
the newly established Philippine Statistical Authority to examine these issues and their impact on the poverty statistics as a priority in the early part of the CPS implementation period.
B. Other Social Indicators 23.
Progress towards the MDGs in the Philippines is mixed. The country is on track to meet many MDGs:
promoting gender equality and
empowering women, reducing infant and
child
mortality, combatting malaria and tuberculosis, and improved access to safe water.10 However, a number of MDGs are
at risk, including school retention
to grade 6, primary education
completion, maternal mortality, births attended by a skilled health professional, and contraceptive prevalence. Annex 2 provides a full assessment of progress towards the MDG targets.
Table 3 – Progress on MDGs MGD Indicators
Baseline Current Level
Target
Probability of meeting Target by 2015
Education
Net enrollment in primary education (%)
84.6 91.2 100
medium Proportion of pupils starting grade 1 who reach grade 6 (%)
69.7 73.8 100
low Primary education completion rate
64.2 71.0 100 low
Health
Infant mortality (deaths per 1,000 live births)
57.0 22.0 19.0
high Under‐five mortality rate (deaths per 1,000 live births)
80.0 30.0 26.7
high Proportion of 1 year‐old immunized against measles
77.9 90.6 100
high Maternal mortality ratio (per 100,000 live births)
209 221 52.2
low Proportion of births attended by skilled health professional
58.8 72.2 100
low Contraceptive prevalence rate (% of married women aged 15‐49)
40. 48.9 100 low
Source: National Statistical Coordination Board (NSCB): NSCB MDG Watch.
10 Despite the projection of meeting the MDG target for water and sanitation in 2015, universal access for rural sanitation will not be attained until 2035. Further the disparity between urban and rural coverage remains to be sharp. The practice of open defecation is largely a phenomenon among the poor rural households (NDHS 2008).
-
8
24.
Overall, the Philippines fares well on gender equality and has recorded gains
in the political participation of women; however, challenges remain related to the attainment of key MDGs affecting women (as above) and women’s participation in the labor market.11 The Philippines ranked 5th out of 135
countries on the 2013 Global Gender
Index, an improvement of its
ranking of 8th place
in 2012. School enrollment rates for girls and other education indicators surpass those of boys.12 Despite the fact that the structures and systems of political parties tend to be male dominated, there has been a marked increase in the number of women elected to the House of Representatives and in the number of female mayors. While
the judiciary is male dominated
(over 60% of justices and judges
across all levels are men), the
country marked a
significant breakthrough with the
appointment of the first
female Chief Justice of
the Supreme Court
in 2012. Yet, while employment and unemployment
rates for men and women are
roughly the
same, only about half of women participate
in the labor force, compared
to almost 80% of men. Further,
women dominate in traditional,
socially ascribed
careers—household work, education and health care.
C. Economic Context
25. Strong fundamentals have enabled
the Philippines to record respectable
growth in recent years, despite
the global slowdown. The Philippines
benefits from strong
macroeconomic fundamentals, manifested by
low and stable inflation, falling
debt ratios, healthy current
account surpluses, high
international reserves, and a stable banking sector. While performance has historically lagged behind its neighbors, it is now considered a high performer in the region.
Figure 9: GDP Growth (%)
Figure 10: East Asia Pacific and Philippine Growth %
26. The rapid growth of
remittances has also contributed to
the economy’s stability; even if
it reflects a huge outmigration
of many of the country’s best
and brightest. The growing supply
of foreign exchange has reversed
the country’s past record of
recurring current account deficits, and
is now a major support
to growth by helping to
shore up consumer
spending. On average,
remittances account for about 18%
of household earned income (i.e.,
wages and entrepreneurial income,
as opposed to passive income such as remittances and interest from savings) rising to 24% for the top two income deciles, which
account for most overseas
Filipino workers. Of the 500,000
college
graduates every year, about 200,000
find
jobs abroad. About 10 million Filipinos and their
families have left the country for
better opportunities, reflecting both
the lack of adequate employment
opportunities
at home and the global competitiveness of Filipinos.
11 Source: 2012 Philippines Country Gender Assessment, March 2014. 12 The gender parity index for elementary school was 1.03 in 2009. Combined gross enrollment for girls 83 percent versus 79 percent for boys; cohort survival at the secondary level is 68 percent for girls, versus 57 percent for boys.
3.14.4
2.93.65
6.74.85.2
6.64.2
1.1
7.6
3.6
6.87.2
0
3
6
9
12
15
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
GDP Grow
th (p
ercent)
Asian Financial CrisisFood and Fuel Crisis
Global Financial
0.0
3.0
6.0
9.0
PHL
Source: WDI and
various government statistics. Source: Philippine Statistics Authority (PSA)
5%
-
9
27.
A vibrant private sector benefits from structural reforms that the government has embarked on
since the 1980s. These
reforms underpin current growth and
continued macroeconomic
stability despite weaknesses in
the global economy. The reforms
include liberalization of key sectors,
such as airlines, telecommunications, and power
in the 1990s, followed by financial and regulatory reforms
in the wake of the Asian Financial Crisis
in 1997 and fiscal consolidation
in 2005. The country now has a strong
export sector, a more liberal
investment regime, growing transportation
and
communication infrastructure, and globally competitive entrepreneurial and managerial talents. The country can sustain high growth
in globally dynamic sectors, such as electronics and business process outsourcing. Prior to the recent global economic slowdown, electronics, consisting mainly of semiconductors and electronic data
processors, accounted for over 50%
of merchandise exports. The business
process outsourcing industry is also
growing exponentially. The Philippines
now ranks as the top
destination for
voice support/call centers and has a strong potential to compete in knowledge‐based products in the coming years.
28. Despite these strengths, the
Philippines has yet to reach
its potential due to the lack
of growth in labor‐intensive manufacturing and agriculture sectors. Despite a head start in manufacturing compared
to its neighbors, the
country did not
industrialize and agriculture failed to
reduce poverty substantially. This
situation was the result of low
public investment in infrastructure,
protectionist policies
(such as a rice
import quota that did not stimulate rice production, but did substantially raise consumer prices), and
land reform and administration policies that failed to provide broad and secure access to
land for smallholders and small businesses. Private
investment
incentives were undermined, which reduced productivity growth. High food and agriculture input costs contributed to high real wages and production costs
in downstream agribusiness, manufacturing, and services. As a result, the cost of living increased and employment and real income growth slowed.
29.
Agricultural productivity remained depressed, manufacturing failed to grow sustainably, and a low‐productivity,
low‐skill service sector emerged as
the dominant sector of
the economy. Modest agricultural growth was not accompanied by increases in labor productivity. Manufacturing growth was not
impressive, manufacturing
labor productivity was
stagnant, while key labor‐intensive
sub‐sectors, such as garments, were
shedding jobs. Without a rapidly
growing manufacturing sector, the
service sector absorbed the excess
labor from agriculture. However, more
than three‐quarters of the
service sector is composed of low‐wage and low‐skilled jobs, and there has been no increase in productivity in the service sector.
Figure 11: Sector Growth
Figure 12: Sector Labor Productivity
0
1
2
3
4
5
6
1980s 1990s 2000s
Percen
t
Agriculture Industry
ServicesSource: Philippines Statistics Authority (PSA)
0
50
100
150
200
250
300
350
1980s 1990s 2000sPHP thou
sand
/worker (2000
prices)
Agriculture Industry ServicesSource: PSA
-
10
Figure 13: Sector share to GDP (percent)
Figure 14: Employment share by sector (percent)
30. Decades of underinvestment in
physical infrastructure accompanied the
slow growth of agriculture
and manufacturing. From close to
30% of gross domestic product
(GDP) in the
1970s, investment in physical capital declined to about 20% of GDP in the last decade. In the public sector, low tax effort and weak public
investment management limited public
infrastructure spending to
less than 2.5% of GDP annually. Maintenance of existing
infrastructure was
likewise constrained. The
relatively long foreign investment
negative list has limited foreign
direct investment (FDI) growth and
the country’s public education
and health
systems have been underfunded (until
recently), holding back labor force development.
31. Economic growth and poverty
reduction in the Philippines has
not benefited
from urbanization gains as much as other neighboring countries.
In the last
five decades, Philippine cities and
large municipalities have absorbed more
than 50 million people. Philippine
cities currently share more
than 70% of
the country’s GDP. However, other countries
in Asia experienced higher growth
in economic output as they
become increasingly urbanized. From
1970 to 2006, China and
India demonstrated an average 6% increase in per capita GDP for every 1% increase in urban population while Vietnam and Thailand exhibited 8% and 10%, respectively. The Philippines, however, showed
less than 2% increase per 1% change in population. The country’s urbanization trajectory is uniquely affected by, among other
factors, the archipelagic geography,
leapfrogging the industrialization process
(i.e.,
from agriculture to service sector dominance), and highly fragmented structure for spatial and infrastructure planning
and poor metropolitan governance.
Philippine cities have not been
able to keep pace with explosive
urban population growth as evidenced
in infrastructure and housing
deficiencies,
traffic congestion and environmental pollution.
32.
The private sector’s reluctance to invest and create more and better quality jobs reflects the country’s weak investment climate for firms of all sizes. Investment levels in the Philippines have been the lowest among the Association of Southeast Asian Nations (ASEAN‐5) members,13 and foreign direct investment
flows have also lagged behind.
Among the investment climate
constraints, corruption is viewed as
the biggest concern, followed by
infrastructure deficiencies and inefficient
government bureaucracy. Costly business and
labor regulations have also contributed
to weak investment and
job creation.
13 ASEAN‐5 refers to Indonesia, Malaysia, Philippines, Thailand, and Vietnam.
0
10
20
30
40
50
60
70
Argiculture Industry Service
Source: PSA
010203040506070
Agriculture IndustryServices Manufacturing
Source: PSA
-
11
Figure 15: Gross Fixed Capital Formation
Figure 16: FDI Flows as a Percent of GDP
33.
This pattern of growth has resulted in a much lower pace and quality of job creation relative to
the country’s potential and other
similar countries. Unemployment and
underemployment
rates have remained stubbornly high at about 8 and 20%, respectively. Men, workers with higher educational attainment,
and the youth have the highest
incidences of unemployment, while the
poor have
the highest incidence of underemployment. Average real household income in 2009 was lower than in 1997. Informality
is also very high. About 75% of workers do not have written contracts, social
insurance, or access to severance pay. These
informally employed workers face varying degrees of vulnerabilities to income and price shocks.
34. The lack of good jobs
among low‐income earners has
contributed to slower progress
in reducing poverty and inequality. The middle class14 is relatively small at around 15% of the population, of which about a third resides or works abroad. This slow progress
in reducing poverty, despite higher growth
in the same period, points to
deeper structural problems,
which manifest themselves in
a pattern of economic growth that makes poverty reduction stubbornly difficult. Moreover, inequality has worsened in the last three decades, indicating a growth pattern that does not benefit the poor as much as it benefits the rich.
35. In the coming years, the
jobs challenge facing
the Philippines will remain
formidable. Good jobs—economic opportunities
that raise real wages and bring
people out of poverty—need to
be provided
to about 10 million Filipinos who were either unemployed
(3 million) or underemployed
(7 million) in 2012, and to about 1.15 million potential entrants to the labor force every year from 2013 to 2016. In total, approximately 14.6 million jobs will need to be created through 2016. In addition, better jobs need to be provided to another 21 million Filipinos who are informally employed.15 The majority of the
population who are underemployed are
rural and in the agriculture
sector; the majority of
the unemployed are urban and better educated, including college graduates.
36. The context and
challenges noted above are laid out
in
the Philippine Development Report 2013
(PDR): Creating More and Better
Jobs. In summary, the report
concludes the country’s long history
of policy distortions has slowed
the growth of agriculture and
manufacturing. Lack of competition in
key sectors, insecurity of property
rights, complex regulations (related
to the labor
14 Households with incomes at or above $700 per month after tax are considered to be middle class. 15 Source: The Philippine Development Report 2013 (PDR): Creating More and Better Jobs, Op. Cit.
15
20
25
30
35
40
45
Percen
t
Indonesia PhilippinesMalaysia Thailand
Source: World Development Indicators (WDIs), various countries' official
statistics
-4
-2
0
2
4
6
8
10
12
Per
cent
FDI inflows as percent to GDP
Indonesia Philippines MalaysiaThailand Vietnam
Source: WDI, UNCTAD, various countries' official statistics
-
12
market, business environment, etc.), and severe underinvestment by
the government and
the private sector in infrastructure have led to this growth pattern. This growth pattern has failed to provide good jobs to the majority of Filipinos, and has led to a substantial outmigration of many of skilled people.
D. Political Context
37.
President Benigno S. Aquino III came into power in June 2010, winning with a large margin as candidate
of the Liberal Party on a
platform focusing on good governance,
anti‐corruption and poverty
reduction.16 The president’s election
slogan Kung Walang Corrupt, Walang Mahirap
(without corruption there is no poverty) is the focus of his presidency. As part of his electoral campaign, President Aquino entered
into a 16 point
“Social Contract with
the Filipino People” based on:
transformational leadership (good
governance, empowering people, and
delivery of health and education
services), economy (inclusive growth, competitiveness and jobs), government service, gender equality, peace and order, and the environment.
38.
After nearly four years in office, there is a general perception that the president has done well in
implementing the country’s development
agenda. He has appointed
officials with credible
track records to head key government entities, such as the Supreme Court Justice, the Ombudsman’s Office, the Commission on Audit and the Bureau of Internal Revenue (all women). Several of the government’s flagship
programs—conditional cash transfers (CCTs),
community‐driven development,
grassroots participatory budgeting and Open Data—are promoting good governance by reaching out directly to the citizens through transparent and accountability‐improving processes.
39.
The government has made considerable progress
implementing the Social Contract with
the reallocation of resources to reform programs
in health, education and social protection and
increased transparency in budget
preparation and implementation, including
engagement with civil
society organizations
(CSOs) and publication of national government data on a website
to promote efficiency and transparency.
In addition,
a highly‐controversial Reproductive Health
Law and the “Sin Tax”
Law were signed into law
in December 2012. There is
significant opportunity for further
reform, notably through accelerating
the pace of reforms in
improving the investment climate,
building
key infrastructure for growth, and tackling the strong vested interests that impede inclusive growth.
40.
Prospects are improving for sustained peace and development in Mindanao. In October 2012, the
government signed a
Framework Agreement with the Moro
Islamic Liberation Front (MILF).
The Agreement lays out a process
to establish "the Bangsamoro", a
new autonomous political entity
to replace the Autonomous Region in Muslim Mindanao and finalize a peace agreement with the MILF. It is hoped
the Agreement will meet the
demands of the Muslim population
for genuine autonomy
and contribute to improved security. Key technical annexes to the framework agreement were completed in January 2014, paving
the way for the
signing on March 27 of
the Comprehensive Agreement on
the Bangsamoro. Two critical steps
remain: the passing of the new
Bangsamoro law by the
Philippine Congress and its
ratification in a plebiscite. If
ratified, a Bangsamoro Transition
Authority will be appointed
to govern ahead of elections in
line with the national schedule
in May 2016. As
the peace process continues to progress, the development community has begun to respond to government and MILF requests to scale up donor support to build capable and accountable institutions that can improve security and provide jobs. The peace process continues to face some challenges, including threats from other
groups that may feel left out
of the consultation process. Other
implementation
challenges include strengthening the political leadership when the Bangsamoro Government is created.
16
President Aquino was elected with
a strong plurality of 42%, 16
points ahead of the second‐placed
candidate.
The Constitution imposes a single‐term limit of six years for the President.
-
13
41. The May 2013 midterm elections
confirmed strong support for
President Aquino’s reform agenda and
established an environment for
continued reforms through 2016. The
elections were relatively peaceful,
orderly and credible. Voter turnout
was estimated at 70% of the
52
million registered voters. President Aquino’s coalition won 9 of 12 Senate seats, while many of the winning local chief executives are also aligned with his coalition. Barring exceptional political controversies, President Aquino
is considered well placed to continue to
leverage his popularity to
implement reforms through the
end of his term. However,
the next two
years will bring political positioning
for
the presidential elections in 2016.
42.
Development in the Philippines is enriched by an active civil society. The Philippine civil society community, especially nongovernmental organizations (NGOs), is known to be one of the world’s more vibrant and sophisticated. Many of these organizations are involved in diverse development work at the operational or advocacy
levels and have organized themselves
into networks or large coalitions.
It is estimated there are over
95,000 NGOs.17 There are
even more civil society
groups, mainly peoples’ organizations,
operating informally at the local
level. Approximately 7,000 groups are
doing development work, either on
their own, or in partnership with
the government and/or
international development partners. Despite these strengths, the country’s CSOs are largely spread over many issues and
sectors, giving an impression of
fragmentation. Recent events that
involved channeling
of government funds to non‐existent NGOs have also affected public trust towards CSOs in general, to the detriment of those that are legitimately working on development programs and issues. The Government is now working on streamlining the registration process for CSOs to address fraud among CSOs.
E. The Government’s Development Vision
43.
President Aquino’s Social Contract is reflected in the 2011‐2016 Philippine Development Plan (PDP) with its overarching theme of inclusive growth. The PDP develops the vision of inclusive growth and poverty reduction through concrete actions that focus on three strategic objectives: (i) attaining a sustained and high
rate of economic growth
that provides productive employment opportunities,
(ii) equalizing access
to development opportunities
for all Filipinos, and (iii)
implementing effective social safety nets to protect and enable those who do not have the capability to participate
in the economic growth process. To
achieve sustained and high growth,
the PDP calls for a
stable macroeconomic environment, increased
infrastructure
investment and competitiveness, and
improved governance. To enable
broad‐based access to development
opportunities, the PDP calls for
increased investment in human capital
(education and health) and
improved access to infrastructure,
finance, land, and other assets.
For effective social protection, the
plan lays out the needs for
developing effective
and responsive safety nets.
44. In January 2013, the government
issued a Socioeconomic Report: The First Two Years of the Aquino Administration 2010‐2012, which provides an assessment of progress on the PDP’s strategies and
targets.18 The report concludes
that macro‐economic performance is on
track, and progress had been made
across a broad range of
areas—competitiveness, infrastructure (access
to electricity and water,
increased mobile phone access and
increased number of schools
and public health facilities), access
to finance, protection of
the environment and natural
resources. The report finds
that better governance is reshaping
the landscape of public institutions.
In mid‐2013, the Cabinet undertook
a critical internal midterm
review, which found
that government actions and programs will need more focus and convergence. 17 Based on the number registered with the Philippine Securities and Exchange Commission. 18 The Socioeconomic Report 2010‐2012 is available on the National Economic and Development Authority (NEDA) website at: www.neda.gov.ph/econreports_dbs/SER/SER2010‐2012new.pdf.
-
14
45. In April 2014, the Government
issued the Philippine Development
Plan (PDP)
2011‐2016 Midterm Update.19 The Midterm Updates highlights the country’s robust economic performance, strong fiscal space and unprecedented
level of
international confidence. It also outlines remaining challenges, including
slow implementation of vital
infrastructure projects, continued high
cost of doing business, and most
fundamentally, evidence that the
benefits of growth have not yet
turned into
poverty reduction. “The challenge for the remainder of the plan period … is to ensure that economic growth will be sustained, … is inclusive; that it will result job creation of the productive and remunerative kind and lead to the reduction of poverty in its multiple dimensions.”20 The Midterm Update revises the poverty target based on the national poverty line to between 18 and 20% by 2016 to take into consideration the slow response of poverty to economic growth and the setbacks in 2013 due to the impact of disasters. It
also highlights the spatial dimension
of poverty, focusing government
interventions on provinces chosen by:
the number or magnitude of poverty,
the provincial poverty incidence and
the province’s vulnerability
to natural disasters, with the
type of intervention determined by
the
type of poverty or vulnerability.
Part III ‐ Lessons from the Current CAS, Client Survey and Multi‐stakeholder Consultations
A.
Country Assistance Strategy (CAS) Completion Report
46. An evaluation of
the effectiveness of
the WBG’s current CAS in achieving
its objectives was completed to
inform preparation of the CPS
(Annex 3). The last CAS, a
joint
IBRD/IFC/MIGA strategy (FY10‐13), carried the theme of Making Growth Work for the Poor.21 The CAS supported country‐level development goals
through five
strategic objectives: maintaining a
stable macro‐economy, improving the
investment climate, better public
service delivery, reduced vulnerabilities,
and good
governance. Overall, progress towards achieving the CAS outcomes was rated as satisfactory, and WBG performance was
rated as
satisfactory. The enabling environment
for WBG engagement transformed over
the CAS period, benefitting from strong government leadership and the capacities, programs, and reforms put in place during
the CAS period. The evaluation
concludes that the WBG should
continue to address
the reforms initiated during the CAS period.
47.
The key lessons from the FY10‐13 CAS include:
Improvements in governance require
concerted efforts to build
constituencies for
continued reforms. The government’s flagship programs, such as the conditional cash transfer (CCT) program, the community driven development program, and Bottom‐Up Budgeting, have attempted to break the nexus of local patronage politics, replacing them with more transparent and accountable public service delivery. The Bank should continue assisting the government in designing and monitoring the impact of these programs. It is also important to help build a broad base of constituents inside and outside
the government who demand a
continuation of reforms beyond the
end of the
current administration in 2016.
Analytical and Advisory Services
(AAA) should remain at
the heart of
the WBG program. WBG financing
is useful to the extent to which
it can consolidate policy reform, provide funding for the delivery
of important programs, or experiment
and generate learning that can
inform better planning and
decision‐making. As the country's
economy has grown and the WBG
financing has
19 The Philippine Development Plan 2011‐2016 Midterm Update with Revalidated Results Matrices is available on the National Economic and Development Authority (NEDA) website at http://plans.neda.gov.ph/pdp/. 20 Op, cit. page 3. 21 The CAS was extended by a year (from FY12 to FY13) in the CAS Progress Report, shared with the Board in May 2010.
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