FINANCING SOCIAL PROGRAMS IN

THE PHILIPPINES:
PUBLIC POLICY AND BUDGET
RESTRUCTURING

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

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

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

All foreign loan-assisted projects must pass

the evaluation of the Investment Coordination
Committee (ICC), a subcommittee of the
cabinet-level NEDA Board.
 Performance, Public
Expenditures and Challenges in
the Health and-Nutrition Sector
• Mortality
• infant mortality rate (IMR} stagnated between 1976 and 1985 such that its
level may even have been higher in 1985 than in 1980.
• It has been noted that the trend in IMR over time appears to coincide with
the trend in macroec0nomic indicators like per capita GNP
• Mortality
Nutritional Status
• Malnutrition among Filipinos is caused by three factors:
1. chronic dietary energy deficiency which is common
among young children and pregnant and lactating
women
2. protein energy undernutrition as manifested by
growth deficits among preschool and school children
3. micronutrient deficiencies particularly in Vitamin A,
iron and iodine among a large group of the population
from all ages (Herrin et al, 1993).
• HEALTH EXPENDITURES
• Government expenditures in health nutrition and population sectors were
fairly stable at 0.6 percent 0fGNP in the period 1975-1982.
• During the crisis years of 1983-1985, health sector expenditure was deeply
cut relative to that of other sectors and averaged 0.5 percent only of GNP.
• Starting in 1986, the health sector started to recover and reached a peak
expenditure level of 0.7 percent of GNP, equal to the 1990 level.
By Economic Categories
• The DOH budget into economic categories, it was observed that the bulk
of government expenditure on health consistently went to maintenance
and operations -- 51.4 percent on the average in 1980-1991.
• Personal service expenditure accounted for another 40.7 percent while
capital outlay captured the remaining 7.9 percent
• By Program 1. Control of Diarrheal Diseases
1. National Family Planning Program Program
2. Tuberculosis control Program 2. Maternal Health Program
3. Environmental Health Program 3. Under 5 Care program
1. Water Supply and Sanitation 4. Cardiovascular Disease Program
2. Proper Excreta and Sewage Program 5. Cancer Control Program
3. Food Sanitation Program
4. Public Sanitation Program 6. Schistosomiasis Control Program
5. Environmental Sanitation Program 7. STD Control Program
4. Expanded Program of Immunization 8. Leprosy Program
5. Malaria Control Program 9. Dental Health Program
6. Acute Respiratory Infection
• On the whole, "DOH's choice of
public health programs for funding
and expansion, in both preventive
and curative dimensions, has been
sound (but not complete) in terms
of disease and mortality patterns"
(World Bank 1993a).

• However, the very high share of

curative care services (relative to
preventive care services) in total
government expenditures on health
suggests that the government is
over-investing in the former and
under-investing in the latter.
• DOH is now actively promoting comprehensive health care
agreements with LGUs in support of common priorities and public
health programs.

• A key element in these agreements is DOH's commitment to support

LGUs in implementing the programs. In 1994, DOH will spend some
P2.6 billion on national health programs.
• This amount is less than half of projected LGU expenditures on health
of around P5.3 billion in the same year.
• Thus, DOH allocation for national health programs needs to be
increased to enable it ta better influence LGU budget allocation in
support of national health programs.
• Use of Less Cost-effective Interventions
• recent DOH initiatives are geared toward increasing efficiency in health
service production by focusing on more cost effective interventions. These
initiatives include:
1. universal immunization coverage
2. adoption of low-cost ORT as opposed to the relatively expensive
intravenous-cum-antibiotic therapy in the control of diarrheal diseases;
3. the shift to BHS based treatment and the use of simple diagnostic
procedures (like detection of rapid breathing and chest in-drawing) in lieu
of hospital-based therapy and sophisticated diagnostic tests (X- rays) in the
treatment of acute respiratory infections
4. cost reduction through the use of generic terminology in drug dispensing
thereby giving consumers greater choice in the purchase of drugs and
promoting greater competition.
• Devolution of Health Services
• In those years, per capita government health expenditure was higher in
regions with lower per capita income
• The distribution of government health facilities was also progressive.
The population-to-government hospital bed ratio {as well as the
population-to-rural health unit ratio and population-to-barangay health
station ratio) was higher in regions with higher per capita income
The devolution of health services involved the transfer to LGUs7 of the records, equipment, and other assets and
personnel of the DOH, corresponding to the devolved powers, functions, and responsibilities (Section 17.i). Figure 1
shows in detail the devolved personnel, budget, and facilities from the DOH. More than half, i.e., about 46,080 of the
78,080 health personnel were devolved. In terms of health facilities, about 595 hospitals and 12,580 rural health
units/municipal health centers/barangay health stations were devolved.
 Performance, Expenditures and
Challenges in the Education Sector
The performance of primary and secondary
education in terms of the gross enrolment and
key efficiency indicators, namely:
1. participation rate
2. cohort survival rate
3. cohort completion rate
4. dropout rate
5. graduation rate to the extent that available
data would allow.
Participation rate is
defined as the
proportion of the
relevant school-age
population enrolled
in schools.
Survival rate is
defined as the
proportion of
students
enrolled in the
beginning grade
or year who
reach the final
grade or year at
the end of the
required number
of years.
Completion rate is
defined as the
percentage of a
cohort of students
in Grade I or first
year high school
who completed the
sixth grade of
elementary or the
fourth year of high
school in exactly the
required number of
years for that level
of education.
Dropout rate
is defined as
the
proportion of
pupils to
total
enrolment
who left
school during
a given
school year
The participation,
survival, completion
and graduation rates
would have been
higher if the education
sector was not
constrained by the
relative scarcity of
funds for the
construction of new
school buildings and
maintenance of existing
educational facilities,
the hiring
addition of new
teachers and the-
retention of the
teaching force
• Tertiary
Education
Public
Expenditure on
Education
 ISSUES, CHALLENGES AND
Several major problems PROBLEMS
beset basic education: low
quality, inefficiencies,
inadequate resources and
disparity in access.

• Enrolment rates tend to

hide the problem
because ,of the
impressive number of
pupils enrolling every
schoolyear.
• There is a large variance in the quality of public elementary and
secondary schools. Local government units finance the public
secondary schools but they have different financing capacities.

• There is also a large difference in the quality of public and

private schools as shown by average scores in Mathematics,
English and Filipino.

• Paderanga (1990) pointed out that private schools, as compared

to public schools, have larger expenditures for desks, textbooks,
reference books and other material inputs than on persormel
salaries.
Private elementary schools scored 1.3 to 1.6 times better
than public schools, and urban schools scored 15 to 22
percent higher than rural schools. Schools in regions with
high per capita income (eg., National Capital Region,
Central Luzon and Southern Luzon) performed much better
than those in regions with low per capita income.
Rural high schools are inadequately equipped and lack
competent teachers. In some public high schools, class
sizes can be as large as 60 to 70 students.
The significant dropout rates and failure to complete
primary or secondary education reveal the inefficiencies in
the educational system. There is a huge problem of
retaining students until completion of the required, number
of years. While socioeconomic constraints affect demand,
for education, and the subsequent decision to complete the
required, number Of schooling, school-related constraints
are also important. Incomplete schools, inadequate
facilities, ill-trained teachers and staff all contribute to the
inefficiencies in production of quality graduates.
Disparity in access to elementary and secondary education is a major problem.
Participation rates across educational levels and regions differ significantly. At the
primary level, school participation rate was about 91 percent in 1987-1992 with a cohort
survival rate of 68 percent. But this is the national average. Poorer regions (and poorer
households) such as the Autonomous Region in Muslim Mindanao registered the lowest
cohort survival rate during this period. Participation rate at the secondary level was 55
percent from 1987-1992 with a cohort survival rate of 76 percent.
Tertiary Education

The main issues here concern the unequal access to tertiary

education, the quality and relevance of college courses, and
the role of state colleges and universities in tertiary
education. The private sector provides the greater proportion
of tertiary education but the recent proliferation of state
colleges and universities (SUCs) have eroded the share of
private schools. While there is open access to all levels of
education, including tertiary education, the
socioeconomically disadvantaged group finds it difficult to
have a college education.
SOLUTION TO THE PROBLEM
(a)upgrading of the quality of education
(b)democratizing access to education
(c)rationalization of tertiary education
(d)improving the internal efficiency of schools
(e)addressing the mismatch between supply of
education and training skills and the demand by
agriculture and industry for educated and trained
manpower.