Social Welfare Programs and

Social Safety Nets in the

Philippines:
In Times of Crisis and Beyond
Rosario G. Manasan
Philippine Institute for Development Studies
22 April 2010

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

‰Background

‰Objective of paper

‰Assessment of selected social

assistance programs

‰Summary/ Recommendations
Table 1. Growth rate of GDP and its components, 2004-2009
GNP g.r. GDP g.r. PCE g.r. GC g.r. CF g.r. X g.r. M g.r. NFIA g.r. Inflation * UnE rate UnderE rate
2004 6.9 6.4 5.9 1.4 7.2 15.0 5.8 13.5 6.0 10.9 16.9
2005 5.4 5.0 4.8 2.3 -8.8 4.8 2.4 10.7 7.6 7.4 21.2
2006 5.4 5.3 5.5 10.4 5.1 13.4 1.8 6.1 6.2 7.3 20.4
2007 7.5 7.1 5.8 6.6 12.4 5.4 -4.1 12.1 2.8 6.3 19.1
Q1 6.4 6.9 5.9 12.1 18.1 10.5 -1.8 1.4 2.2
Q2 9.1 8.3 5.6 8.9 17.4 4.2 -10.2 20.1 2.3
Q3 8.6 6.8 5.7 -2.6 5.3 3.3 -4.7 29.5 2.7
Q4 5.8 6.3 6.2 8.0 7.1 4.5 0.7 -0.2 3.9
2008 6.2 3.8 4.7 3.2 1.7 -1.9 2.4 30.8 9.3 6.8 17.5
Q1 6.4 3.9 5.1 -0.3 -1.7 -7.7 -2.6 36.2 6.4
Q2 5.6 4.2 4.1 0.0 13.6 6.1 0.0 15.8 11.4
Q3 6.2 4.6 4.4 11.8 9.4 3.3 6.7 22.6 11.2
Q4 6.7 2.9 5.0 2.5 -11.7 -11.5 5.0 51.2 8.0
2009 3.3 0.9 3.8 8.5 -9.9 -14.2 -5.8 23.3 3.3 7.1 19.4
Q1 4.4 0.4 1.3 4.5 -15.1 -14.7 -20.6 40.8 6.9
Q2 3.2 0.8 5.4 9.7 -10.3 -18.1 -2.2 23.9 3.2
Q3 3.1 0.4 3.2 8.1 -12.1 -13.0 0.1 26.1 0.3
Q4 2.4 1.8 5.1 12.1 -0.8 -10.0 -2.5 7.5 3.0
PCE - personal consumption expenditures; GC- government consumption,
CF - capital formaiton, X- exports, M- imports, NFIA - net factor income from abroad
UnE rate - unemployment rate, UnderE rate (based on October Labor Force Surveys)
* based on CPI

• Impact of 2008/2009 global financial/ economic crisis on the

Philippines milder
– relative to other countries
– relative to that of 1997/1998 Asian financial crisis
Background

‰Even before being buffeted by external

shocks in 2008 and 2009, overall poverty
incidence went up from 24.4% in 2003 to
26.9% in 2006 after declining continuously in
1991-2003

‰Situation exacerbated by rapid rise in food

and fuel prices in 2008
ƒ Inflation surged from 2.8% in 2007 to 9.3% in 2008
ƒ While inflation has abated in 2009, inflation in price
of fuel, light and water on the rise again in Q1 of
2010
For example, in 2004, a year where there is no external shock …

Table 2. Distribution of Households Reporting Being Worse Off as to the Sources of Vulnerability, 2004 APIS
(in percent)
Reason for being worse off
Lost Natural Increased Reduced Loss of Gov't
Income Decile Job/Work Disaster, Dr Food Price Poor Health Income No Savings Assist Others Total

Across deciles:

1 (poorest) 10.3 28.5 10.7 8.4 16.2 12.8 8.0 10.0 12.2
2 10.5 15.4 10.3 10.8 14.8 12.3 5.9 9.9 11.4
3 10.5 12.6 10.6 12.2 12.4 13.5 11.5 8.9 11.1
4 10.4 8.7 10.6 11.5 11.1 9.1 2.9 9.8 10.5
5 13.6 10.1 10.4 12.9 10.0 10.6 13.5 8.4 10.6
6 12.0 7.3 10.0 10.2 8.9 9.0 12.6 9.6 9.8
7 12.0 4.9 10.4 8.2 8.2 11.7 9.3 10.3 9.8
8 8.9 4.7 10.0 9.3 8.0 8.6 11.7 11.6 9.4
9 7.2 5.3 9.3 9.6 6.0 7.3 12.6 10.9 8.4
10 (richest) 4.5 2.6 7.8 6.9 4.4 5.1 11.9 10.4 6.8

All deciles 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Across reasons for being worse off:

All deciles 8.2 3.0 53.9 5.8 19.2 3.8 0.4 5.4 100.0

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

‰ Present situation highlights importance of SP

Objective of study

‰review and assess major non-contributory

social assistance programs in Philippines
ƒ Important given limited coverage of pension
system (32%) and social health insurance (38%)
ƒ Basis of assessment – appropriateness, cost-
effectiveness, adequacy of benefits

‰Focus:
ƒ Rice subsidy program
ƒ Food for School Program (FSP)
ƒ Pantawid Pamilyang Pilipino Program (4Ps) - CCT
ƒ Tulong para sa Kuryente
ƒ Tulong para kay Lolo at Lola
SOCIAL SAFETY NETS
& SOCIAL ASSISTANCE

NFA rice price subsidy

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

‰71% leakage from the NFA rice subsidy

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

‰18% - coverage of NFA rice subsidy

 Attempts at improving NFA rice subsidy

‰Tindahan Natin Program

‰Family Access Cards (FACs)

‰Both not successful

TNP and FACs targeting: “much ado about
nothing”

‰Result illustrates how the decentralization

of targeting decisions tends to lead to
sub-optimal results as incentives arising
from local rent-seeking behavior tempt
local officials to manipulate and exploit
local information.

‰Result (for FACs) also underscores how

unverified means tests do not make the
cut at all.
 NFA rice subsidy – size of transfer

‰ benefit to consumer under regular program

ƒ PhP 234 per HH per mo. = 3.7% of poverty threshold
in 2007
ƒ PhP 477 per HH per mo. = 7.0% of poverty threshold
in 2008

‰ effectiveness of rice price subsidy to reach

the poor is limited by the fact that eligible
beneficiaries are required to have the cash to
pay for the food items, albeit at a subsidized
price
ƒ may deter the very poor from accessing the
program
 Fiscal cost of NFA subsidy
Table 5. Fiscal cost of NFA operations, 2007-2008 (in million pesos)
2006 2007 2008

Net loss before gov't subsidy 15,788 a/ 5,000 a/ 43,095 b/

of w/c: operating expense 3,581 a/ 3,717 a/ 3,717

Sources of finance
Operational subsidies from NG 4811 2,100 2,000
Other sources 10,977 2,900 41,095

Net loss before gov/t subsidy as % of GDP 0.26 0.08 0.58

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

‰ NG subsidy to NFA underestimates total cost of NFA

interventions
‰ Total cost of NFA intervention
‰ PhP 15.8 billion in 2006 (or 0.3% of GDP)
‰ PhP 5 billion in 2007 (or 0.08% of GDP)
‰ PhP 43.1 billion in 2008 (or 0.6% of GDP)
SOCIAL SAFETY NETS
& SOCIAL ASSISTANCE

Food-for-School Program
 Food-for-School Program
‰Launched in Nov 2005 to mitigate hunger and
to improve school attendance

‰Provides one (1) kilo of rice to eligible families

for every day that their children continue to
attend school

‰Combines geographic targeting with

institutional targeting at the level of the public
school or day care center
 FSP: targeting, leakage & coverage

‰Selection of beneficiaries and the eligibility

rules for the program have been changed
twice
ƒ first in SY 2007-2008 and second in SY 2008-2009

‰In 1st and 2nd cycles of implementation,

poorest provinces were first selected then
munis were selected based on their income
class; all LGUs in NCR were included

‰Leakage rate in DepEd component - 59% in

SY 2006-2007
 FSP: targeting, leakage & coverage

‰In 3rd cycle, all munis in 20 poorest

provinces and 100 SAE poorest munis
were included; in NCR, only “hotspots”
were included

‰Leakage rate in DepEd component

reduced to 32% in SY 2008-2009
 FSP: size of the transfer
‰ If rice transfer were converted to cash
ƒ PhP 402 if valued at subsidized price of rice in 2008 (or 6% of
overall poverty threshold)
ƒ PhP 675 if valued at market price of rice (or 10% of overall
poverty threshold)

‰ FSP is not implemented all throughout the year – actual impact

more limited

‰ There are indications that the transfer is not large enough.

Informal survey in February-March 2006 found that:
ƒ 80% of HHs reported that 1 kilo of rice is not enough to provide
their family with three meals a day.
ƒ Only 33% of HHs reported not having missed a meal in the last
3 months.

‰ These numbers consistent with the fact that the FSP’s daily rice
ration during school days is just enough to cover about 63% of
the average rice consumption of a family with 5 members.
 SOCIAL SAFETY NETS
& SOCIAL ASSISTANCE

Pantawid Pamilyang Pilipino

Program
 Pantawid Pamilyang Pilipino Program (4Ps)

‰Aims to improve living conditions and human

capital investments of poor HHs
ƒ Covers 300,000 HHs in poorest 20 provinces

‰Provides an education grant equal to PhP300

per child per month during the school year
(up to a maximum of 3 children) provided they
comply with the following conditions:
ƒ Children 6-14 years of age attend school at least
85% of the time;
ƒ Children aged 5 attend school at least 85% of the
time
Pantawid Pamilyang Pilipino Program (4Ps)

‰Provides a health grant of PhP500 per

month to targeted poor HHs provided they
comply with the following conditions:
ƒ Pregnant women get pre-natal and post-natal
care; attend breast-feeding counseling and
family planning counseling sessions;
ƒ Child birth must be in a health facility and must
be assisted by a health professional;
ƒ Parents/guardians attend family planning
sessions, mother’s classes and parent
effectiveness seminars;
ƒ Children 0-5 years of age get regular preventive
check-ups and immunization and micronutrient
supplementation; and
ƒ Children 0-2 years of age have monthly weight
monitoring and nutrition counseling
 4Ps: targeting
‰Proxy means test (PMT) is used to select
beneficiaries in the 4Ps
ƒ In pilot areas, reported number of cases of
inclusion error was less than 10% of the selected
number of beneficiaries.

‰Use of PMT enforces the credibility of the

program and reduces risks associated with
political interference in selection of
beneficiaries
4Ps: Impact on school attendance
Table 10. Probability of children aged 6-14 attend school (based on 2004 APIS)
With 4Ps
Income education grant total grants; education grant
Without 4Ps
quintile only; without without only; with
conditionality conditionality conditionality

1 85.0 85.2 85.4 86.4

2 90.9 90.9 90.9 90.9
3 94.5 94.5 94.5 94.5
4 96.7 96.7 96.7 96.7
5 98.5 98.5 98.5 98.5

Total 92.0 92.1 92.1 92.4

‰ 2004 APIS shows 92% of all 6-15 year old children

attend school
‰ Only 85.0% of children aged 6-15 in the poorest
quintile attend school as compared to 98.5% of those
in the richest quintile
 4Ps: impact on school attendance
‰Potential impact on school attendance
simulated using results of Orbeta (2005)
ƒ 1% increase in income lead to 0.13% increase in
probability of attending school

‰Education grant = 14% of the average per

capita income of beneficiaries in the 4Ps
ƒ estimated to increase probability of school
attendance among children aged 6-14 from 85.0%
without the 4Ps to 86.4% with the 4Ps.
 4Ps: impact on school attendance
‰overall impact on school attendance rate
appears to be low largely because the
coverage of the 4Ps at present is low
ƒ 7% of total number of poor households nationwide
or 18% of total number of poor households in the
target provinces.

‰if the beneficiaries of 4Ps were to be increased

from current level of 300,000 HH to 1 million
HHs
ƒ program is estimated to increase the school
attendance rate of the poorest quintile from 85.0%
to 89.8%.
To appreciate potential impact on health service utilization …
Table 5. Selected health indicators by wealth quintiles, 2003 NDHS

FIC a/ TT 2 b/ % child delivery % of children % of % of post-

% facility-based by health given micro under-5 partum
% % child delivery professional nutrient given women given
supplement iron Vitamin A

Poorest 55.5 31.9 10.4 25.1 64.4 47.3 37.4

Lower middle 69.3 42.3 24.8 51.4 73.3 58.5 42.5
Middle 77.8 38.6 43.3 72.4 79.5 68.3 45.9
Upper middle 72.4 39.3 59.8 84.4 83.7 74.8 47.0
Richest 83.0 34.5 77.0 76.2 87.3 80.1 54.2

ALL 69.8 37.3 37.9 59.8 76.0 63.3 44.6

a/ fully immunized child

b/ at least two doses of tetanus toxoid vaccination for pregnant women

ƒ Demand for health services inversely related to

“wealth” of HHs
 4Ps: impact on hunger

‰Total cash transfers under 4Ps estimated

ƒ Transfers estimated to increase average per
capita income of beneficiaries by 29%
¾estimated to result in a 19% increase in their
spending on food => expected to result in a 3.2%
increase in household calorie intake
CONCLUSIONS AND
RECOMMENDATIONS
 Table 18. Government Spending (Allotments) on Social Protection
2007 2008
in mill % distn in mill % distn
Price and income shocks
NFA rice price subsidy (net of tax expd) 5,000 29.4 43,095 69.4
Food-for-School Program 3,750 22.0 3,266 5.3

‰government DepEd
DSWD
3,000
750
17.6
4.4
2,500
1,266
4.0
2.0
School-based feeding 348 2.0 581 0.9
spending on DepEd
DSWD
79
270
0.5
1.6
581 0.9
0.0
SP lower Pantawid Pamilyang Pilipino Program
Pantawid Kuryente
50 0.3
0.0
1,297
4,400
2.1
7.1

than that of KALAHI-CIDSS

Tindahan Natin
1,481
188
8.7
1.1
1,629
160
2.6
0.3
SEA-K & livelihood assistance 63 0.4 0.0
other
Natural disaster 1,265 7.4 986 1.6
countries Disaster relief
Disaster rehabilitation (CARE/ GK/ Guimaras)
263
1,002
1.5
5.9
326
660
0.5
1.1

Crisis situations

‰0.3% of GDP Assistance to individuals and

and HHs in crisis situations, incl PDAF 1,037 6.1 889 1.4

in 2007 and Disability, old age and special vulnerabilities

Assistance to disabled persons, senior
0.8% of GDP citizens and children in conflict w/ law
Center-based/ community-based assistance
61
481
0.4
2.8
11
719
0.0
1.2
in 2008 Tulong para kay Lolo at Lola 0.0 500 0.8

Health shocks
PhilHealth - NG only 2,100 12.3 2,200 3.5

‰Compared to
PhilHealth - NG+LGU 3,300 3,500

Labor market shocks

1.9% average TESDA scholarship
DOLE programs
510
678
3.0
4.0
1,350
1,051
2.2
1.7
spending of CB for students, youth and disabled workers
CB for rural workers
149
65
0.9
0.4
416
69
0.7
0.1
Emergency employment for displaced worker 18 0.1 41 0.1
87 countries Local employment facilitation 56 0.3 56 0.1
Protection/ welfare services and reintegration 388 2.3 469 0.8
in 1996-2006 TOTAL w/ PHIC-NG only 17,014 100.0 62,134 100.0
% to GDP 0.26 0.83

TOTAL w/ PHIC-NG/ LGU 18,214 63,434

% to GDP 0.27 0.85
 Conclusion

‰attempts to provide additional funding

for SP through “overall savings” and
Katas ng VAT is laudable
ƒ Ad hoc financing not always effective (e.g.,
FSP)
¾Delays in release of allotment
¾Poor utilization

‰Hurriedly designed programs even if

made operational successfully (e.g.,
Pantawid Kuryente and Tulong para kay
Lola at Lola)
¾ Not always effective in reaching target
beneficiaries
 Conclusion
‰Program-wise, problematic that bulk of NG
spending on SP went to NFA rice subsidy
program which has been shown to be the
least effective in reaching the poor
ƒ NFA subsidy accounts for 29% and 69% of total
gov’t spending on SP in 2007 and 2008,
respectively
ƒ NFA subsidy has high leakage rate (71%) and low
coverage rate (18%)
ƒ attempts to improve targeting of NFA subsidy have
not been successful
¾ Tindahan Natin Program
¾ Family Access Cards (FACs)
 Conclusion
‰Country has incidence of chronic poverty
ƒ 71% of poor HHs (or 22%-25% of all HHs) are
chronically poor
ƒ Underscores need for SP program that will allow
them to escape poverty trap
¾ Poverty relief
¾ Incentive to invest in education & health of their children

‰For such program to be effective

ƒ should be implemented consistently over an
extended period of time
ƒ Budget predictability
 Conclusion
‰There is scope for consolidating some
programs
ƒ Objectives and beneficiaries of some programs
overlap; e.g., FSP, Malusog na Simula and 4Ps
¾ 4Ps superior in terms of incentives to HHs to invest in
education & health of their children
™ Weak element of conditionality in FSP
™ children can move in and out of program
¾ 4Ps which uses proxy means test is superior in reducing
leakage from the program
™ Despite recent improvements in targeting of FSP
 Conclusion
‰Other issues in implementing 4Ps vis FSP
ƒ Cash versus in-kind (food) transfers
¾ Gives HHs discretion how to use assistance in a manner
that is more responsive to their specific needs (e.g.,
transport to schools)
¾ Empowers mothers
¾ Administrative cost of non-cash transfers is high (e.g.,
transport, storage, etc.)
¾ Non-cash transfers cause distortions in commodity market
ƒ Issues with use of school as distribution point
¾Stigma to children
¾High leakage within school because of high
participation rate
 Conclusion

‰Additional suggestion for improving 4Ps

implementation
ƒ Increase grant to children entering HS and
staying in HS particularly from age 14-16
¾Large drop out after completion of elementary level
¾Large drop out at age 15 or so and around third year
HS
 Conclusion

‰Workfare program to provide emergency

employment – most useful in times of
crisis
ƒ Key to successful implementation
¾Set wage below market wage
¾Selection of projects; those that build productive
assets
ƒ Use part of funds allocated to infrastructure in
fiscal stimulus package
 Conclusion

‰Coordination between SP programs with

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

‰Need to improve targeting

ƒ Use proxy means test (NHTS) for PhilHealth
sponsored program
¾Long term gains from PhilHealth sponsored
program alone justifies short-term investment in
proxy means test
¾Additional gains forthcoming from use in other
programs
Thank you.

Thank you.

Thank you.