Understanding Philippine Poverty

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MANILA, Philippines - There have literally been dozens of studies on Philippine poverty over the last decade or so, by economists in Philippine universities, the World Bank, the Asian Development Bank and other international agencies. The latest one is entitled "Examining recent trends in poverty, inequality, and vulnerability" written by Dr. Jose Ramon Albert and Mr. Andre Philippe Ramos of the Philippine Institute for Development Studies (PIDS) which has produced over the years some very useful policy-oriented studies that can guide decision making in both the government and the private sector. The conclusion of the study is not a very happy one.As based on statistics released by the National Statistical Coordination Board (NSCB) for 2000, 2003, and 2006, poverty in the Philippines is seen not to have substantially changed since the start of the millennium. Although there was a reduction of the proportion of the population who were considered poor from 33.6 percent in 2000 to 30 percent in 2003, the poverty rate in 2006 increased to practically where it was at the beginning of the millennium at 32.9 percent. Poverty has remained mostly unchanged and has also continued to be a predominantly rural phenomenon, with three out of every four persons found in the rural areas. The outlook looks even bleaker if the Philippine economy continues to grow at the same pace as it did in the last decade or so. It will take more than 17 years for half of the poor to exit poverty even if the per capita incomes of all persons in the country were to increase uniformly by 2 percent annually (adjusted for inflation). It will take an average time of 40 years for the poor to exit poverty if annual growth per capita is at 1 percent.It is quite evident from these projections that the Philippine economy must grow at 7 percent or more annually for the next ten or more years for there to be a significant reduction in poverty. A 7 percent growth in GDP would mean about 5 percent annual growth in per capita income since population growth is a little under 2 percent per annum. The experiences of the East Asian countries over the last twenty years (especially China) is that a growth of at least 7 percent in GDP annually for 20 years or more can make a significant dent on mass poverty. The Philippines has not attained this sustained growth of 7 percent or more over the last two decades mainly because of flawed economic policies based on import-substitution industrialization and an utter neglect of countryside and agricultural development. We can be optimistic that the 7 percent or more growth is attainable in the next decade or so because lessons have been learned from the past errors. Today, there is greater emphasis on export-oriented industrialization and more importantly, there is keener focus on rural and agricultural development. A greater portion of the capital budget of the Government is being spent on farm-to-market roads, irrigation systems, and post-harvest facilities. No longer is agriculture considered as the Cinderella of development.The study of Dr. Albert and Mr. Ramos also showed that in the rural areas, those at the lower and middle portions of the income distribution benefited less from growth during the period studied than those at the upper end of the distribution. They found out that while inequality went down as a whole for the country and urban areas for the period 2000 to 2006, the rural areas suffered from increased inequality largely brought about by differences in the top of the income distribution ladder. In view of these changes in income distribution, headcount poverty in the country decreased only by 0.7 percent. Had there been no worsening of the inequality seen in the rural areas where the upper-income groups were the ones who benefited more from growth, headcount poverty would have fallen from 33.6 percent to 22.6 percent.The very modest gains in the fight against poverty can be attributed to improper targeting mechanisms for propoor projects and the absence of monitoring and evaluation systems for program implementation. …