Social protection policies on spotlight as Manila hosts 14th GDN meet

Philippine Institute for Development Studies

DEVELOPMENTRESEARCH NEWS

Editor’s Notes

July – September 2013 ISSN 0115-9097Vol. XXXI No. 3

Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas

Social protection policieson spotlight as Manilahosts 14th GDN meet

FOR THREE DAYS in June, Manila became the venue for some of the world’s top development thinkers to discuss how social protection policies could help ease the global problem of inequality, and how economic growth could become more inclusive.

Around 400 policymakers, development practitioners, academics, and researchers gathered for the first time in Manila for the 14th Global Development Conference organized by the Global Development Network (GDN), an international organization dedicated to building research capacity in development, in partnership with the Philippine Institute for Development Studies (PIDS), the East Asian Development Network (EADN), and the Asian Development Bank (ADB). The conference, held at the ADB Headquarters on June 19-21, showcased the latest development research and more importantly became an opportunity for delegates to dig deeper into the reasons why the global growth phenomenon has not made life easier for more than one billion people in extreme poverty. While inclusive growth has become the buzzword in development circles, the Manila conference also became an occasion to ponder anew on what the concept really means.

Addressing the theme “Inequality, Social Protection, and Inclusive Growth”, President Benigno S. Aquino III spoke about the Philippine experience in solving problems in pursuit of inclusive growth, in his keynote speech for the formal opening ceremonies The Philippines: A

‘development puzzle’Heads of regional research networks revisit concepts of inequality, inclusivity EADN, PIDS, GDN Japan hold joint session Plenary sessions tackle ways to address inequalities Senior Research Fellow Gilberto M. Llanto takes office as 5th President of PIDSJTY: Leader, mentor, true friend

THE MONTH of June was a busy but momentous one for the Institute, with research and support staff pulling off a successful hosting of the 14th Global Development Conference at the headquarters of the Asian Development Bank in Ortigas. It was the first time for a Southeast Asian country to play host to the world’s premiere forum for capacity building in development research under the auspices of the Global Development Network (GDN).

The prestigious conference, which gathered around 400 researchers and development practitioners, was held in the Philippines at the juncture of high economic growth and persistent social inequality—precisely the challenge that GDN seeks to address.

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Development Research News July – September 2013

on June 19. “The difficulty is that while the problems may be universal, the solutions are not. Each region, each country, each city and town has its own reality, and the solutions they come up with must be tailored-fit to local conditions,” he said.

The President stressed the need to achieve inclusive growth. “We cannot have a society where a few flourish and the rest must make do with crumbs. We must have inclusive growth. This is nothing less than a fair deal, a running start for all, with interventions by the government where it matters and will do the most good,” Aquino said.

Solving the right problems,identifying the correct solutions

The process starts with “identifying the correct problem, otherwise any solution would be directionless and therefore

ineffective.” For instance, the Philippines has turned two erstwhile waste products into “vibrant” industries. Coconut farmers have found markets abroad for coco water as well as coconut coir—a material that can help strengthen roads and prevent soil erosion. “The result: from 2009 to 2010, the value of our coco water exports increased from USD370,000 to USD15.1 million, an increase of almost 4,000 percent,” Aquino said.

The President noted that the GDN conference opened on the 152nd birth anniversary of the country’s national hero, who became a community builder in his own time when he put up a school and a medical practice in southern Philippines. “The problems that confront us have changed since Rizal’s era. Countries the world over have found themselves beset by social unrest, unrest that roots from a prevalent public perception that the people’s voice is not being heard,” he said.

“For most of the developing world, overarching problems can be summed up in a few words: poverty, hunger, unemployment, lack of education, corruption. These are not unique to any one country or people. Each of us has seen or experienced them,” he said.

Aquino said his government invested significant resources on conditional cash transfers, known locally as the “Pantawid Pamilyang Pilipino Program” or 4Ps, in the first three years of his term as part of a commitment to achieve inclusive growth. “Stay in school, see the doctor, be our partners in health and learning, and we will lend you a helping hand. We closed the gap in classrooms and raised the budget for education, from the primary all the way to the tertiary level,” he said. “The next three years will see continued interventions in the poorest of the poor, but also, a focus on the vulnerable … sectors of society.”

Some 400 delegates gathered at the ADB headquarters for the 14th Global Development Conference co-sponsored by PIDS.

(Photo by: Gizelle Manuel, PIDS)

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His Excellency, President Benigno Aquino III; Secretary Arsenio Balisacan; Mr. Takehiko Nakao; Professor Pierre Jacquet; Professor Alan Winters; Ambassador János Terenyi; partners in development; distinguished guests; ladies and gentlemen.

Good morning, and to our friends from abroad, a warm welcome to the Philippines. I join President Aquino and Secretary Balisacan in greeting everyone Mabuhay!

It is indeed an honor for the Philippines to be the first Southeast Asian country to host the Global Development Network (GDN) Annual Conference. We are grateful to GDN for this opportunity and the Philippine Institute for Development Studies (PIDS)and the East Asian Development Network (EADN) are pleased to collaborate with the Asian Development Bank (ADB) as the local hosts of this event.

The Philippines has often been described as a development puzzle. Despite relatively abundant natural and human resources and favorable initial conditions compared with other newly independent states and some developing countries, the economic progress of the Philippines has lagged that of its neighbors. The more recent aspect of this puzzle is the surprising emergence of the Philippine economy as a service economy without having gone through a period of extensive industrialization. We know that leapfrogging may not necessarily be a good thing and this is one reason why growth in the Philippines has not been inclusive.

In a 2007 study, the ADB identified critical development constraints that are relevant for the Philippines. One of them is, to quote, “weak investor confidence due to governance concerns, in particular, corruption and political instability.” My colleagues at PIDS therefore join other sectors of Philippine society in lauding the efforts of President Aquino’s administration in promoting its Daang Matuwid program, which is literally translated as “straight path”.

The program of good governance has already yielded favorable outcomes. gross domestic product (GDP) growth last year was 6.8 percent, and in the first quarter of 2013, it jumped to 7.8 percent. Meanwhile, the manufacturing sector grew by an average of 7.1 percent in the past three years after expanding by only 3 percent during the period 2001-2009. In the first quarter of this year, value-added in manufacturing grew by 9.7 percent. We anticipate that this uptick will be sustained by foreign direct investment particularly after the formal establishment of the ASEAN Economic Community in 2015.

However, these are developments only at the macroeconomic level. Relatively high poverty incidence and persistent inequality remain important concerns. Interventions at the micro level must accompany the improvement in the macroeconomic environment. Hence, the government has expanded the conditional cash transfer program which is dubbed as 4Ps in the Philippines, the literal translation of which is “bridge for Filipino families.”

Message of Dr. Josef T. Yap, Head of the East Asian Development Network and President of the Philippine Institute for Development Studies for the GDN 14th Global Development Conference, June 19, 2013

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Moving from endless debatesand recommendations to action

Josef T. Yap, head of EADN and PIDS president, said one reason Philippine growth has not been inclusive is that the country had leapfrogged into a service economy without going through extensive industrialization. Positive developments are only at the macro level, and “relatively high poverty incidence and persistent inequality remain important concerns.”

“Addressing rising inequality and persistent inequality is important because of its threat to long-term economic growth. Persistent inequality erodes the middle class, which is the backbone of society; it adversely affects incentives and motivation of workers in sectors that fall behind, thereby lowering labor productivity. Persistent inequality hampers investment in human capital because lower income classes do not have access to credit. Persistent inequality, in general, undermines social cohesion,” he said in his welcome remarks.

For Pierre Jaquet, GDN president, it is time to “move from endless and ineffective recommendations (e.g. ‘one should reduce income, gender, and other forms of inequalities’) to evidence-based and operational discussions.”

Aside from operationalizing past recommendations, the conference was also meant to give a voice to researchers from developing countries and build research capacity that would result in better policies. “Insofar as inequality concerns loom large in developing countries, the agenda needs to be driven by them, and not by international experts or aid agencies, however well-intentioned and knowledgeable they might be,” he said in an op-ed piece released ahead of the annual conference. FFS

The Philippines:A ‘development puzzle’

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PIDS President and EADN Head Josef Yap joins heads of GDN’s regional network partners in the concluding roundtable. (Photo by: Gizelle Manuel, PIDS)

WHAT CAME OUT of the 14th Global Development Conference is this: inclusive growth remains the goal, but the scope is still very wide on how best to achieve it. The world’s top development researchers will continue to grapple with this critical question and how inclusivity should dovetail with inequality and social protection beyond the Manila conference.

The closing roundtable last June 21 was an occasion for the leadership of the Global Development Network (GDN), and indeed the rest of the delegates, to reflect on these very issues. Tasked to set things in perspective were L. Alan Winters, GDN chairman; GDN President Pierre Jacquet; and regional network heads Randall Filer, Ahmed Galal, Mustafa Mujeri, Biman Prasad, Roberto Rigobon, Lemma Senbet, Pavlo Sheremeta, and Josef Yap.

Solving inequality may not be the same as development. Filer, eastern European coordinator of GDN, said that they might be making normative judgments in their approach to inequality, and people might really be after relative, rather than absolute, inequalities. He asked: “How do we distinguish policies based on policies on love and charity from policies based on envy? How do we raise the bottom without handicapping the top?” If people put equality ahead of freedom, they might end up getting neither, he said.

One way of approaching the problem is by engaging other disciplines such as sociology, highlighting the multidisciplinary nature of GDN. After all, inequality is a political economy question, said Galal, who represents

Heads of regional research networksrevisit concepts of inequality, inclusivity

Middle East and North Africa. It is an imperative to look at institutions and governance structures, said Mujeri of the South Asia Network of Economic Research Institutes.

There is some urgency as the world tries to arrive at a consensus on a post-2015 development agenda. With Africa experiencing a “growth renaissance”, Senbet of the African Economic Research Consortium said one pressing issue is financial inclusion. Prasad of the Oceania Development Network highlighted the importance of climate change adaptation and addressing vulnerabilities, which will allow Pacific island countries to focus on inclusivity and social protection.

A key challenge for Southeast Asia, said Josef Yap of PIDS and the East Asian

Development Network, is expanding the role of small and medium enterprises (SMEs). SMEs need to latch on to regional production networks, which should be consolidated to address spatial inequality.

Sheremeta made an important point in saying that researchers must connect to the youth, who will ultimately benefit from their outputs. One way is by taking advantage of social media.

Clearly, more research is needed, said Jacquet. He reminded everyone that the mission of GDN is to build research capacity and produce scientific research. GDN, a global network of networks, would do well to enhance global partnerships and harness synergies and complementarities among development researchers across the globe, he said. FFS

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EADN, PIDS, GDN Japan hold joint sessionALL TOO OFTEN, the burden of ensuring that growth is inclusive falls on the shoulders of the government. But it is also possible to involve private sector players in the effort, which, at the same time, will make them ethical and responsible corporate citizens.

Ethical trade was the focus of the East Asia Development Network (EADN), the Philippine Institute for Development Studies (PIDS), and the Global Development Network (GDN) Japan Joint Session on “Fostering Inclusive Growth in East Asia: The Role of Various Sectors in Society” last June 20, which was chaired by PIDS President Josef Yap. Inclusive business is becoming increasingly popular as consumers become aware of the need for businesses to become more ethical and to get rid of the so-called “sweatshops”.

Sato Kan Hiroshi, director-general of the Research Planning Department at the Institute of Developing Economies,

called for the “marriage of development and business”, which is a way of poverty reduction through consumption. Hiroshi, in his presentation titled “Ethical Trade as a tool for Inclusive Development”, noted that businesses have acknowledged the risk of product boycotts as consumers become more socially aware. Businesses also want to be ethical to increase profits and ensure a stable supply chain. Business with ethics and development with efficiency will overlap, he told GDN conference delegates, and a widening overlapping may lead to more inclusive development. “Business is egoistic and effective but consumers demand social responsibility from it,” he said.

Ethical business, though, has various meanings. Ethics in business encompasses being environmentally friendly, having a good workplace condition, providing a living wage, nondiscrimination, and making philanthropic investments.

Hiroshi presented three viable strategies: “bottom of the pyramid” or BOP business schemes, cause-related marketing, and social business. He enumerated BOP business examples cutting across the health, electricity, security, nutrition, transport, and communication sectors.

Poverty and development are good topics for marketing. An example is the “fair trade” movement, which tells consumers that some of the payments for the products will be for the benefit of communities producing them. This could even lead to a different kind of rivalry among corporations—a competition for goodwill. For instance, when chocolate maker Cadbury announced that it would use 100% fair trade cacao in its products, rival Nestlé followed suit. In social business, profits are plowed back to the enterprise, not to shareholders. An example is the Grameen Bank, Hiroshi said.

“The concept of BoP business is poverty reduction through consumption. If a good is made available easier and cheaper, life will be more stable. If a good becomes more durable and has better quality and the price remains the same, the standard of living will be uplifted, he explained.

The session’s discussant, Roland Mendoza of the Asian Institute of Management, said efforts to promote ethical businesses may be imperfect solutions, but still, they are laudable innovations.

Talking about “Development Inclusiveness in the Greater Mekong Subregion (GMS)”, Srinivasa Madhur, director of research at the Cambodia Development Research Institute, said most countries in the region have already become middle-income countries, but they have a “large and

Sato Kan Hiroshi of EADN Japan (left) and AIM Policy Center Executive Director Roland Mendoza at the joint session of PIDS, EADN, and GDN Japan.


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unfinished agenda”, such as improving health and education services.

GMS countries, which include Cambodia, Laos, Myanmar, Vietnam, Thailand, and two Chinese provinces, (Yunnan Province and Guangxi Zhuang Autonomous Region) are no exception to the “impossible trinity of inclusiveness”. Citing the economist John Maynard Keynes, Madhur said the political problem of mankind is to combine three things: economic efficiency, social justice, and individual liberty.

On income, there has been strong growth, dynamic structural changes, and modest economic convergence in GMS countries. Average per capita income is about USD1,500 at current exchange rates. Thailand is still the richest country while Cambodia remains the poorest. However, the former’s income is now 3.7 times that of Cambodia as opposed to 7 times in 1995. Moreover, in 1995, Thailand was thrice as rich as Yunan Province and Guangxi Zhuang. Today they have similar incomes.

Poverty reduction was impressive, particularly in Vietnam with its pro-poor growth. Laos experienced the least poverty reduction.

“GMS people lead healthier lives now. There have been big strides in mortality (life expectancy, maternal, infant), large declines in undernourishment, and modest containment of contagious diseases,” Madhur noted.

Also, there have been huge developments in education: increased literacy rate, a rise in the number of primary and secondary enrollees, and longer years of staying in school. Social protection, gender equity, and women empowerment have progressed.

Still, Madhur pointed out that “despite the long distance travelled by GMS countries in human development, the distance to destination is equally large. That is true in many spheres of human development and social inclusion, but especially in health and education, as also in managing severe vulnerabilities.”

Making social protection more effective

PIDS Senior Research Fellow Celia Reyes called for a “deepening” of the Pantawid Pamilyang Pilipino Program (4Ps), already the biggest social protection program ever conceived by the Philippines with a budget of PHP39.5 billion and three million beneficiary-families in 2012. It is estimated that up to this year, the program has received a total of PHP120 billion from the government.

The objective of 4Ps is two-fold: social assistance through cash assistance and social development through investments in human capital, particularly in health and education. The program, however, was “scaled up too fast”, and there are non-poor beneficiaries. “The year 2013 marks the fifth year of 4Ps since it started in 2008. We will see the first batch of its beneficiaries this year. However, it is also fitting to ask, in the light of many poverty reduction schemes of the government, if expanding 4Ps would yield better results or not,” said Reyes during her presentation on “Promoting Inclusive Growth through 4Ps”.

The program provides through conditional cash transfers PHP6,000 a year to each beneficiary-family for their health and nutrition expenses. PHP3,000 is given per child for one school year for educational expenses. Up to a maximum of three children can receive an educational grant for each family.

Eligible 4Ps beneficiaries are from the poorest municipalities, and their condition should be equal to or below the poverty threshold. Households should have children aged 0-14, or the mother is pregnant at the time of assessment. Beneficiaries must also agree to meet the programs’ conditionalities. In identifying the poorest households, the National Household Targeting System for Poverty Reduction was tapped by the Department of Social Welfare and Development.

Reyes told GDN delegates that the existing social protection program was effective in improving school attendance for elementary children aged 6-14 and below that are covered by the scheme, but did not influence school participation for higher age groups. To make 4Ps more effective, coverage must be extended to high school students, who have a better earning potential than elementary undergraduates, Reyes said. Other recommendations include reducing leakage, the exclusion rate, and administrative costs, as well as a focus on the chronic poor.

“The current coverage of 4Ps to 6-14 old children is intended to enable the child to finish elementary. However, the maximum five years support may mean that the child who was six years old that time the family first received the benefit may only complete Grade 5 at the time the family exits the program,” she said.

“The program should extend assistance to beneficiary-families to ensure that the children of 4Ps families finish high school. The average daily wage of someone who has finished high school is 40 percent higher than that of someone who only finished elementary. A high school graduate will have more employment opportunity and higher pay,” Reyes added. Janet Cuenca, Claudette Malana, and Aubrey Tabuga

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“When I look around me, everything is out of reach,” says the slum girl in the GDN pre-conference video, in a stark reminder that while the statistics are staggering, there is a human face to grinding poverty and persistent inequality that should move everyone to action.

The plenary sessions of the 14th Global Development Conference focused on the theme “Inequality, Social Protection, and Inclusive Growth” amid growing recognition that social protection policies are needed not just to ensure the inclusivity of growth but also social cohesion, among other positive spillovers.

Inequality in Asia, MENA

The former governor of the Central Bank of Tunisia, Mustapha Nabli, discussed the nature of inequality and its implications in the Middle East and North Africa (MENA) region and Arab countries. He noted the strong progress in measuring and characterizing inequality in terms of

expenditures and income, educational, and health inequality.

But much remains to be done in understanding the basic economic and social factors behind the levels and changes in inequality, he said. Moreover, the implications of inequality, such as political change, are a concern.

He asked: What role does inequality play in explaining political change? Is it about perceptions of actual inequality, and is there a gap between perceptions and empirical measures? Is it about inequality of opportunity rather than total inequality? During political upheavals in Egypt and Tunisia, where measured inequality was not very high, the elites did not fight back unlike in Yemen and Libya, countries with higher inequalities, he said.

Philippine Socioeconomic Planning Secretary Arsenio Balisacan argued that although comparatively rapid economic growth and structural transformation in

developing countries signify declining poverty incidence, this may not be necessarily true for countries in the region. He suggested that the relation between economic growth and increased gross domestic product (GDP) varies.

The Philippine economy has continued to expand rapidly, and he attributed this to the shift to a higher growth path, which is a priority in the development agenda of the country, along with health, education, infrastructure, and good governance. Sound macroeconomic policies and financial stability have also contributed to increased GDP growth in the Philippines. Despite the good economic performance of the country, much can still be done to improve the quality of growth. Specifically, the Philippines needs to address the challenges of high poverty incidence and inequality.

Still, the lingering effects of the global financial crisis, lack of fiscal space, the crisis of confidence in public institutions,

Plenary sessions tackle waysto address inequalities

Developing country researchers at one of the plenary sessions of the 14th Global Development Conference. At left is PIDS Senior Research Fellow Celia Reyes. Incoming PIDS President Gilberto Llanto (fifth from left) presides. (Photo by: Gizelle Manuel, PIDS)

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and low competitiveness especially in the labor market should be taken into account.

Amid these challenges, positive steps are being taken. The vision to improve the Philippine economy is articulated in the Philippine Development Plan 2011-2016. These measures have begun to take effect as shown by improved competitiveness rankings and the 7.8-percent GDP expansion in the first quarter of 2013. This has enabled the country to catch up with the GDP growth pace of its neighbors, Balisacan said.

He also presented the lessons learned by the country in confronting inequality. Good governance, for instance, is an effective platform in building a better economy.

Balisacan emphasized that inclusive growth is not only about higher GDP growth, but also requires positive action in spatial and sectoral growth. “Economic growth is necessary but not sufficient for poverty reduction,” he said.

Likewise, Vinod Thomas of Independent Evaluation at the Asian Development Bank (ADB) said “economic growth is indeed important but it is not an automatic driver of inclusive growth.”

He explained the difference between inequality of outcome and inequality of opportunity, wherein the former refers to equality in terms of tangible/material wealth, e.g., income and consumption, while the latter talks about equal access to opportunities like education and employment, regardless of gender, race, ethnicity, or location. The more essential matter is for people to find ways to increase the productivity of the poor, which can decrease the rate of inequality in Asia, he said.

Doing so is important because, first, it “diminishes the poverty impact of economic growth”; second, social cohesion and mobility has been undermined; and third, “inequality may constrain growth” if it remains unchecked.

According to Thomas, the main drivers of inequality in the region are as follows: (1) globalization; (2) technological process; (3) shifting opportunities across people, sectors, and spatial location; (4) persistence of skill bias in education and labor markets (e.g., there is greater demand for skilled workers, thereby increasing their income premium); (5) persistence of capital bias as seen in policies and subsidies; and (6) persistence of spatial bias (e.g., there is a preference for location with superior infrastructure).

Thomas made a number of recommendations to address these issues. First, there must be sound fiscal policies that can translate into good policies for

redistribution. Second, governments must address problems on education and skills bias, and spatial bias. Third, governments must also explore the potential impacts of conditional cash transfer (CCT) schemes on their respective territories. Thomas noted that there are strong research findings that show that countries with such programs are now performing better in the sectors of education and health care.

Talking about inclusive finance, Pia Bernadette Roman Tayag, head of the Inclusive Finance Advocacy Staff of the Bangko Sentral ng Pilipinas (BSP), said 37 percent of the Philippine population does not have access to banks due to various limitations and variations.

Most banking services are concentrated in high-income and urbanized areas, Tayag said. Although market-based solutions pose risks, they are manageable and feasible and should be encouraged. She proposed a strategy that would focus

Delegates from different nations listen closely to the presentations as they gathered at the 14th Global Development Conference held at the Asian Development Bank headquarters in Manila. (Photo by: Gizelle Manuel, PIDS)

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specifically on policy, regulation, and supervision, involving a wider range of products as well as expanded physical network and virtual reach, lower barriers to customer acquisition, and enhanced capacity of the BSP.

Latin America’s success stories

Luis Felipe Lopez-Calva, lead economist at the World Bank, started his presentation by deconstructing the decline in inequality in Latin America. Inequality in Latin America is high, but has been declining since around 2000. This decline is considered to be pervasive and significant, even statistically significant. Today, 16 out of 17 countries have seen a decline in inequality.

He noted that the decline in inequality was evident in the decline in both nonlabor income inequality and labor income inequality. The determinants of nonlabor income inequality are expressed through returns to capital, remittances, and public transfers.

Latin American governments are deemed as redistributive. This is explained by the decomposition of changes in inequality, the incidence of taxation, public transfers, analysis in terms of incidence, and others. Redistribution in the fiscal system explains the change in inequality. The components are public transfers and the capacity of the system to redistribute.

Hugo Ñopo, lead research economist in education at the Inter-American Development Bank, talked about how the United States delved into gender and ethnic earning disparities in the period 1992-2007. His main findings showed that ethnic gaps are greater than gender gaps; schooling substantially explains ethnic gaps; and gender gaps dropped during the period.

Moreover, gender gaps were seen higher in part-time work, self-employment, and small firms. Stereotypes as well as prediscrimination were shaped during schooling.

Rafael Ribas looked into the effect of direct and indirect cash transfer on entrepreneurship in Brazil. His paper investigated the causal relationship between CCTs and the probability of new entrepreneurs to start their own businesses. Results showed that entrepreneurship in Brazil has grown 10 percent because of the CCT program.

Andrea Bentancor, senior economist at Chile’s ComunidadMujer, said that among Latin American countries, Chile has the lowest female labor force participation, prompting the promotion of part-time jobs.

However, while there is positive correlation between part-time jobs and hourly earnings, results showed that whenever women held part-time positions with contract and social benefits, they were penalized in terms of gender equality and labor market incentives such as training and future pensions.

Operationalizing inclusive growth

It can be said that inclusiveness goes beyond income, and that it addresses the concerns of the vulnerable in terms of health, education, and income.

Employment, social protection, and regional cooperation are considered important elements in operationalizing inclusive growth.

With over 800 million Asians living below USD1.25 a day and 1.7 billion below USD2 a day, there is no doubt that these elements of inclusive growth play a crucial

role in connecting localities and regions in order to reduce poverty.

According to Juzhong Zhuang of the ADB, inclusive growth can be translated as equality of opportunities in the forms of education, social protection, environmental protection, infrastructure, and more.

The key elements of promoting inclusive growth include high sustained growth and social inclusion enforced by good governance and institutions.

Access to opportunities is often reflected in the labor market. Employment plays a critical role in operationalizing inclusive growth. Employment brings about political stability, creates social benefits, and generates high purchasing power.

To date, many Asian countries are growing economically at record rates. Among the key growth areas is the Greater Mekong Subregion (GMS). The economic growth however would have been even faster had the expansion happened equitably. This is noted by Srinivasa Madhur, Director of Research at the Cambodia Development Resource Institute. Madhur explained that amidst fast economic progress, impressive poverty reduction performance, the sub-region is beset with problems in terms of improving its education and health services. Inequality, therefore, becomes a key issue of concern.

Similarly, the business sector can play a key role through ethical social responsibility whether in terms of work safety, minimizing stress on the environment or employing those in lower income groups. Sato Kan Hiroshi, the Director General of Research Planning Department at the Institute of Developing Economies talked about how ethical

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trade can be an important instrument for achieving inclusive growth. He noted that businesses can benefit from engaging in ethical business operations because these minimize risks of consumer criticisms thereby preventing boycott. These enterprises can make profits while ensuring that they exercise fair businesses. Aside from social responsibility, efficiency is a great tool for uplifting the poor. When good quality products can be more easily accessed by the lower income strata and at cheaper price, this improves

the purchasing power of the poor. The promotion of fair trade/business also hinges upon the notion that the poor are sleeping consumers. When uplifted, they can be empowered to increase their consumption which businesses can benefit from.

In a broader perspective, more research, dialogues, and debates are needed in reducing inequality. Undeniably, for Asia, it is rapidly moving toward regional economic integration alongside

the fast-paced growth of many of the countries within the region. Coupled with regional integration is the demand for the reduction of inequality, increase in social protection, and improvements in connectivity to achieve inclusive growth which are all included in the long-term strategic agenda to reduce poverty within the region. Winona Rei Bolislis, Nina Ashley Dela Cruz, Ivory Myka Galang, Claudette Malana, Ma. Kristina Ortiz, Kristine Carla Oteyza, Christine Grace Salinas, and Aubrey Tabuga

The staff of Philippine Institute for Development Studies as secretariat of the GDN 14th Annual Global Development Conference.

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PIDS at WorkPromoting Inclusive Growth through the Pantawid Pamilyang Pilipino ProgramNEDA sa Makati Building, May 29, 2013In a forum co-organized by the Congressional Policy and Budget Research Department (CPBRD) and the Philippine Institute for Development Studies (PIDS), PIDS Senior Research Fellow Celia Reyes and Supervising Research Specialist Aubrey Tabuga recommended the deepening of the Pantawid Pamilyang Pilipino Program or 4Ps to achieve better human development outcomes. They called for a longer period of coverage to allow beneficiaries to finish high school. Reyes pointed out that high school graduates have 40 percent higher income than those who finished elementary.

Assessment of the Efficiency and Effectiveness of the Reforestation Program of DENRHouse of Representatives, July 3, 2013In the first of the series of seminars presenting studies on zero-based budgeting (ZBB) organized by the CPBRD and the Institute, PIDS Senior Research Fellow Danilo Israel noted the very high target of the National Greening Program of the Department of Environment and Natural Resources (DENR), which is about 1.5 billion trees for a period of six years (2011-2016). This is too far from the 1990 and 2003 Master Plan for Forestry Development’s 1.3 million hectares within 10 years and 38,000 hectares annually within 12 years, respectively. Dr. Israel recommended a strong information, education, and communication mechanism and credible systems of monitoring and evaluation for the program to become successful.

National Consultation on Strengthening Social Protection in the PhilippinesNEDA sa Makati Building, July 8, 2013Jobless growth continues despite the rise in employment in the services sector, particularly business process outsourcing (BPO ). Well-planned and well-designed social protection programs provide increased opportunities, better welfare, and enhanced productivity for individuals and the society as a whole. The Department of

Social Welfare and Development explained that effective social protection safeguards the welfare of every Filipino from risks or shocks that would cause them to slide back to poverty. The Philippines is included along with five other countries in the United Nations Economic and Social Commission for Asia and the Pacific’s (UNESCAP) inter-regional project on strengthening social protection.

The Urgent Need to Increase Baseload Generating Capacity in Mindanao Zamboanga City, July 9, 2013The vulnerability of Mindanao to a power crisis stems largely from the region’s high dependency on hydroelectric power plants. PIDS Senior Research Fellow Adoracion Navarro proposed the rehabilitation of the Agus and Pulangui hydroelectric power plants and emphasized the need to increase baseload capacity in the region. This is in relation to the unbalanced power generation capacity mix in the region, where 51 percent of the supply comes from hydropower plants.

Efficiency and Effectiveness of the National Housing Authority’s Resettlement ProgramHouse of Representatives, July 17, 2013The second of the series of ZBB seminars tackled resettlement, the main program of the National Housing and Authority from 2003-2011. In terms of resettlement expenditure share in the period 2007-2011, the Greater Manila Area (GMA) cornered the biggest chunk at 93.51 percent. This was divided between the National Capital Region which got 16.23 percent, and the rest of GMA which got 77.29 percent. Majority of finished projects were categorized as completed housing and located in-city. Welfare issues in off-city resettlement programs included lack of employment programs, higher transport costs, and lack of facilities. Households had no choice but to reduce expenses on food, water, and electricity because of a significant reduction in household income. The study recommended a focus on in-city resettlement.

Impact Assessment of the Agricultural Production Support Services of the Department of Agriculture on the Income of Poor Farmers and FisherfolkHouse of Representatives, July 24, 2013In the third of the series of ZBB seminars, PIDS Senior Research Fellow Roehlano Briones attributed high poverty incidence among agricultural households partly to faulty design and execution of government agricultural support programs. Dr. Briones recommended that production support be limited to public goods like infrastructure, and should veer away from private goods such as fertilizers. The Challenges of Designing Competition Reforms in Developing EconomiesNEDA sa Makati Building, July 29, 2013During the forum organized by PIDS, India’s Consumer Unity and Trust Society International, and the Action for Economic Reforms, Assistant Secretary and Office for Competition Head Geronimo Sy of the Department of Justice said anticompetitive behavior continue to be practiced by powerful businessmen. PIDS Vice-President and Senior Research Fellow Rafaelita Aldaba pointed to “exclusive dealing” by a giant canned tuna company to restrict the availability of competing tuna products in selected dealers and retailers. Both agreed that there should be competition policy reforms in place to prevent powerful interest groups and individuals from controlling the market.

Launch of the UNESCAP study on ‘Building Resilience to Natural Disasters and Major Economic Crises’NEDA sa Makati Building, August 14, 2013Dr. Shamika Sirimanne, director of the Information and Communication Technology and Disaster Risk Reduction Division of UNESCAP, said multiple shocks in Asia and the Pacific are converging in new ways that demand more comprehensive and systematic approaches to building resilience. She urged the Philippine government to invest in disaster prevention and preparedness, especially for the poor and vulnerable groups. — CSM, PMGV

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STATE THINK TANK Philippine Institute for Development Studies (PIDS) has a new president. Dr. Gilberto M. Llanto officially took his oath of office on July 4 at the National Economic and Development Authority (NEDA), Pasig City, with Socioeconomic Planning Secretary and NEDA Director-General Arsenio Balisacan administering the oath.

Dr. Llanto takes over from Dr. Josef T. Yap, who served PIDS for two consecutive terms from 2005 to 2013. Dr. Llanto was a senior research fellow of PIDS and also served as its vice-president.

Dr. Llanto served as NEDA deputy director-general and executive director of the Agricultural Credit Policy Council. He chaired the Technical Board of the Investment Coordination Committee during his stint at the NEDA, which gave him first-hand insights into factors constraining infrastructure development. He was president of the Philippine Economic Society from 2003 to 2004.

As a public finance expert, Dr. Llanto holds important positions in different local financial institutions. He is a member of the Governing Board of the Agricultural Guarantee Fund Pool. He also serves as an independent director of the CARD Bank, a leading microfinance institution in the country.

Dr. Llanto is also a member of the Konrad Adenauer Medal of Excellence Committee, which gives awards to outstanding local government units in the Philippines.

Senior Research Fellow Gilberto M. Llanto takes office as 5th President of PIDS

Dr. Llanto has a Ph.D. in Economics from the UP School of Economics. He has researched and published extensively on financial markets, public economics, local governance, institutional economics, and infrastructure regulation.

He authored several books and research papers, including Policy and Regulatory Issues and Challenges in Microinsurance: a Philippine Case (2008); The Impact of the Global Financial Crisis on Rural and Microfinance in Asia (2009); A Review of Build-Operate-Transfer for Infrastructure Development (2010);

Make ‘Deliberate’ Haste in Rolling Out the 4Ps (2010); Does Poor Rural Infrastructure Constrain Agricultural Productivity? (2011); The Assignment of Functions and Intergovernmental Fiscal Relations in the Philippines 20 years after Decentralization (2012); The Philippines: Recent Developments in the Subnational Government Debt Markets (co-authored); and Water Financing Programs in the Philippines: Are We Making Progress? (2013).

Dr. Llanto is an associate editor of the Philippine Review of Economics. PMGV

PIDS Senior Research Fellow Gilberto M. Llanto takes his oath of office before Socioeconomic Planning Secretary Arsenio M. Balisacan, director-general of the National Economic and Development Authority (NEDA) and chairman of the PIDS Board of Trustees, last July 4. (Photo by: Gizelle Manuel, PIDS)

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Research DigestsDiscussion Paper No. 2013-43Feasibility of Mortgage-Backed Securitization for the Underserved Housing Market in the Philippinesby Marife M. Ballesteros and Daisy DulayThis paper draws lessons from international best practices to determine the feasibility of developing mortgage-backed securitization (MBS) to expand housing finance to the underserved market in the country. Despite the risks of securitization, as evidenced by the recent US subprime crisis, the huge beneficial effects of opening up the capital market to individual investors and to borrowers that were previously out of reach is well-acknowledged in the literature.

Discussion Paper No. 2013-42Buying or Leasing of Election Machines by COMELECby Francis Mark A. QuimbaThe paper looks into the automated election experiences of different countries and compares them with the Philippine case. It also attempts to provide an economic basis for the Philippines’ choice between purchasing precinct count optical scan (PCOS) machines or leasing them from the service provider, SMARTMATIC-TIM. Leasing is a more viable option considering the fast turnover of technology resulting in a high possibility of obsolescence. This passes the burden of obsolescence to the leasing company and reduces the risk of owning electoral machines that do not work as anticipated or expected.

Discussion Paper No. 2013-41After Five Years of Pantawid, What Next?by Vicente Paqueo, Aniceto Orbeta, Jr., Tarsicio Castaneda, and Chris SpohrWhen the Pantawid Pamilyang Pilipino Program was designed, the government publicly promised to limit to five years the giving of education and health grants. This five-year limit is almost over for the first set of beneficiaries. The natural policy question then is: Would it be wise to keep the promise or would an extension be better? This paper presents five arguments and evidence why extension is better than keeping the promise to limit it to five years.

Discussion Paper No. 2013-40Multisector Strategy in Addressing Noncommunicable Diseases in the Philippinesby Valerie Gilbert T. Ulep, Melanie P. Aldeon, and Nina Ashley O. dela CruzThis report is a continuation of the PIDS discussion paper titled “Inequalities in Noncommunicable Diseases in the Philippines”. It focuses on strategies for prevention and control of potential noncommunicable diseases (NCD) of the Department of Health (DOH), with wider multisector involvement.

Policy Notes No. 2013-09Opportunities for Making Health Financing and Services More Inclusive in the Philippinesby Oscar F. Picazo, Valerie Gilbert T. Ulep, Danica Aisa P. Ortiz, Melanie P. Aldeon, and Nina Ashley O. dela CruzMany opportunities exist today to make growth more inclusive through improved health financing, regulation and planning, and service delivery. The key is to capitalize on these opportunities while addressing attendant challenges and issues. Economic growth makes it possible for the health budget to increase. The Department of Health is keen on expanding services to address the significant deficits in the number of health facilities and reach of health programs. The Aquino II administration’s health financing reforms (such as the Universal Health Care program) is deliberately designed to focus on the poorest of the poor. There are also promising health market innovations that can significantly improve supply-side response.

Policy Notes No. 2013-08Explaining the Large Disparities in Health in the Philippinesby Oscar F. Picazo, Valerie Gilbert T. Ulep, Danica Aisa P. Ortiz, Melanie P. Aldeon, and Nina Ashley O. dela CruzThe large disparities in health status between the poor and the nonpoor in the Philippines may be explained by several factors, such as: (1) the persistently large social inequity and chronic poverty; (2)

severe underinvestment of the government in health facilities, services, and manpower since the 1970s despite the ballooning population; (3) political instability due to the insurgency problem which has further reduced access to care among households in areas of civil unrest; (4) the character of jobless growth of Philippine development; (5) the archipelagic nature of the country which impinges adversely on the delivery of health resources and households’ access to health care; and (6) the frequent disasters in the country and environmental risks, heightened by climate change, which further contribute to health inequity. These are aggravated by long-term perceptible changes in the country’s demography and epidemiology. Inefficiency and governance problems exacerbate the situation.

Policy Notes No. 2013-07The Puzzle of Economic Growth and Stalled Health Improvement in the Philippinesby Oscar F. Picazo, Valerie Gilbert T. Ulep, Danica Aisa P. Ortiz, Melanie P. Aldeon, and Nina Ashley O. dela CruzThe Philippine economy has grown respectably in the past few years, but the overall health status indicators have not markedly improved commensurate with that growth. It is important to mull over the puzzle of economic growth and health inequity for several reasons. First, macroeconomic growth, international competitiveness, and financial stability are necessary conditions for development but they are not sufficient. The goal of a country’s growth efforts should be human development in a sustainable environment. Second, persistent social inequity within an improving economic environment breeds political instability, exclusion, and disenchantment among the poor, as well as crime and other social pathologies. Third, the lynchpin to any vibrant economy and polity is social participation, and more active social participation can only be achieved under a regime of more inclusive growth and reduced social inequity. And fourth, equity has become a global benchmark, especially in health. — JCA

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Dr. Josef T. Yap receives a plaque of recognition from the PIDS Board of Trustees for his notable achievements as PIDS president. With him are (L-R) incoming PIDS president Dr. Gilberto Llanto, NEDA Secretary Arsenio Balisacan, Dr. Cynthia Rose B. Bautista, Dr. William G. Padolina, and Atty. Romeo L. Bernardo.


JTY: Leader, mentor, true friend

HONEST AND CANDID— these are the words that immediately come to mind when you meet him and talk to him. If you know him or have been his colleague, you will always know where you stand with him. If you do not hear it from his own words, you will definitely know it from his actions, and almost always, there is no middle ground or gray area when it comes to Dr. Josef T. Yap, or “Jop” to his friends and colleagues. As Dr. Gilbert Llanto aptly said, one could never be ambivalent in his feelings and attitudes toward Jop. Not always given to doublespeak and fake pleasantries, Jop has a “what-you-see-is-what-you-get” persona. This “take-it-or-leave-it” attitude may have annoyed some and pleased many. It had served him well as President of the Philippine Institute for Development Studies (PIDS), the country’s foremost policy think tank.

He pressed and pushed, and tried hard to draw the best from each one. His deep familiarity with and profound belief in the strength and capability of each PIDS employee was such that he knew immediately what to expect and whom to assign to which project. He tried, to the extent possible, to enjoin everyone to participate in research activities and projects.

Jop devoted so much of himself, his time, and effort to the service of the Institute with vigor and unwavering passion. His eight-year stint as PIDS president was most productive. In terms of research activities, a total of 302 new projects were initiated. These include those that were externally funded, those contracted to other research networks, and in-house studies. A total of

295 studies were successfully completed. Jop was also at his most productive, having authored or co-authored three books and completed 18 Discussion Papers, 11 Policy Notes, and an edition each of the Philippine Journal of Development and the Economic Issue of the Day. He also wrote the lead article in nine issues of Development Research News.

In his pursuit to bring greater glory and recognition to the country and to the Institute, Jop worked to further expand PIDS research and outreach programs. He encouraged partnerships with different national, regional, and global entities. To this end, institutional tie-ups with the Department of Trade and Industry, the

Fatima Lourdes E. del Prado

Board of Investments, the Department of Science and Technology, the Department of Foreign Affairs, the Commission on Higher Education, and the Department of Budget and Management were established.

Collaborative undertakings with regional bodies, in particular the Economic Research Institute for East Asia and the Pacific, the Global Development Network, and the East Asian Development Network, were sought. The number of PIDS Corners also doubled, which more than ensured PIDS’s presence in various parts of the country.

With his uncanny ability to spot and recruit true “talents”, he brought on board


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The government is constantly monitoring and evaluating this program for its effectiveness and possible leakages. My colleagues at PIDS have provided research support in this area.

Addressing rising inequality and persistent inequality is important because of its threat to long-term economic growth. Persistent inequality erodes the middle class, which is the backbone of society; it adversely affects incentives and motivation of workers in sectors that fall behind, thereby lowering labor productivity. Persistent inequality hampers investment in human capital because lower income classes do not have access to credit. Persistent inequality, in general, undermines social cohesion.

The 14th GDN annual conference — with its theme of Inequality, Social Protection, and Inclusive Growth — will provide a forum to discuss and learn new things about these issues, particularly in the area of evidence-based policy. We therefore look forward to the various plenary and parallel sessions.

On behalf of PIDS and EADN, I would like to take this opportunity to express our sincere appreciation to AusAID and the Bangko Sentral ng Pilipinas, for providing assistance in order for PIDS to provide logistical support for this conference. Among the participants from EADN, I would like to make special mention of Professor Ragayah Binti Haji Mat Zin, who until last year was the EADN country coordinator of Malaysia. Professor Ragayah was the one who proposed the theme for this year’s conference. Finally, I would like to acknowledge the presence of the volunteers and participants from the Philippine Institute for Development Studies. My friends and colleagues, it was a great and wonderful ride. I will miss you dearly.

Maraming Salamat po sa inyong lahat! Thank you ladies and gentlemen for your kind attention.


new staff and was able to marshal and assemble a brilliant set of people to work on critical research areas.

Despite these accomplishments, comments assailing PIDS’s independence persisted. But the naysayers were no match to Jop’s fiery determination. Unafraid to swim against the tide, Jop did not hesitate to speak up and take positions not exactly shared by his powerful critics.

He has backbone and he takes the heat. These qualities, along with his genuine concern for the welfare of PIDS and PIDS staff, were clearly reflected in many of his actions, including his decision to provide health insurance to employees. Jop consistently and earnestly espoused the welfare of PIDS employees.

Under his watch, the Rationalization Plan was approved and the Collective

Message. . . from p. 3Negotiating Agreement (CNA) was signed. During Christmas time, he almost always made sure that employees were rewarded, and those who worked doubly hard were given the rightful incentives. He treated his staff like family and his generosity was such that he never forgot to give each one a token every time he returned from his travels.

Jop’s keen eye and attention to details is also legendary. Woe to anyone who had planned a PIDS activity without consulting him about the side trips and the menu. PIDS celebrations were not complete without his donated “lechon” and the customary “after-party” drinks.

Unwilling to take all the credit for himself, Jop often said he was just a “poster boy” and that everyone had contributed to these monumental accomplishments. But one should not underrate the value of supervision and leadership. The Institute would not have survived the many challenges and threats (which an astute former PIDS colleague coined as ABCs: abolition, budget constraints, and crises) without his able leadership and genuine love and concern for PIDS.

While Jop’s own research contributions have been notable, especially in the field of macroeconomics and global trade, his legacy is much larger and perhaps more enduring than the books, discussion papers, and articles that bear his name. His chief legacy is the PIDS that is a stronger, more exemplary, well-respected, and much-admired policy think tank. It is a fitting testament to his talent and ability.

Even as the Institute thanks and bids him good luck, it would be very difficult to think of PIDS and PIDS celebrations without Jop’s cool and spunky presence. To Sir Jop, we wish you all the best and success in all your endeavors. Soar high, JTY!

Dr. Josef T. Yap, or “Jop” to his friends and colleagues, produced valuable research studies in the field of macroeconomics and global trade.

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DEVELOPMENT RESEARCH NEWS is a quarterly publication of

the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It

highlights the findings and recommendations of PIDS research

projects and important policy issues discussed during PIDS seminars.

PIDS is a nonstock, nonprofit government research institution

engaged in long-term, policy-oriented research. This publication is part of the Institute's program to

disseminate information to promote the use of research findings. The views and opinions expressed here

are those of the authors and do not necessarily reflect those of the Institute. Inquiries regarding any of

the studies contained in this publication, or any of the PIDS papers, as well as suggestions or comments

are welcome. Please address all correspondence and inquiries to:

Research Information Staff Philippine Institute for Development Studies

Fifth floor, NEDA sa Makati Bldg., 106 Amorsolo Street, Legaspi Village1229 Makati City, Philippines

Telephone numbers 894-2584 and 893-9585 up to 893-9592Telefax numbers (632) 893-9589 and 816-1091

E-mail address: [email protected]

Reentered as second class mail at the Makati Central Post Office under Permit No. PS-570-04 NCR. Valid until

December 31, 2013. Annual subscription rates are: P200.00 for local subscribers and US$20.00 for foreign

subscribers. All rates are inclusive of mailing and handling costs. Prices may change without prior notice.

This edition of Development Research News covers the highlights of those three days in which experts discussed, debated, and disseminated leading-edge research in the field. The cover story provides an overview of the conference and highlights main points of the well-received keynote speech of President Benigno S. Aquino III, accompanied by the full text of the message of PIDS President Josef Yap.

Other stories discuss some of the plenary sessions, including the closing roundtable in which the GDN leadership, composed of heads of regional network partners, dwelt on what the concept of inclusive growth should really mean. There is also a story on important sessions participated in by PIDS officials and research fellows.

We also mark an important transition in the institutional life of the country’s top development policy think tank, with Josef Yap, one of the country’s top economists, leaving the Institute after a remarkable eight-year tenure as president during which PIDS reached new milestones and even greater heights.

It was a productive period for PIDS in terms of research output as well as extension and partnerships, as recalled in the special tribute to “Sir Jop” written by a close collaborator, Senior Research Specialist Fatima Lourdes del Prado. The staff wishes Dr. Yap continued success.

We thus welcome Gilberto M. Llanto as the new president of PIDS. Dr. Llanto, formerly

DEVELOPMENTRESEARCH NEWS

Vol. XXXI No. 3

Jul - Sept 2013

ISSN 0115-9097

Editorial Board: Dr. Gilberto M. Llanto, President; Dr. Rafaelita M. Aldaba, Vice-President; Sonny N. Domingo, Officer-in-Charge for Project Services and Development; Dr. Sheila V. Siar, Director for Research Information; Ms. Andrea S. Agcaoili, Director for Operations and Finance; Atty. Roque A. Sorioso, Legal Consultant.

Staff: Sheila V. Siar, Editor-in-Chief; Felipe F. Salvosa II, Issue Editor; Claudette S. Malana, Jose Ignacio O. Tenorio, Jane C. Alcantara, Writers; Felipe F. Salvosa II, Layout; Romero F. Lopez, Ma. Gizelle G. Manuel, and Phidel Marion G. Vineles, Contributors; Valentina V. Tolentino and Rossana P. Cleofas, Exchange; Delia S. Romero, Gerald Jay S. Libiran, Necita Z. Aquino, and Michael A. Caturan, Circulation and Subscription.

The Staff

Editor’s. . . from p. 1

a senior research fellow who had served as deputy director-general of the National Economic and Development Authority and executive director of the Agricultural Credit Policy Council, is a steady hand and the logical choice to take the helm of the Institute.

This edition of Development Research News also contains a recap of the Institute’s significant activities for the quarter, as well as our usual digest of latest PIDS research and publications.

On its 36th year, the Institute turns over a new leaf as it continues to improve and build upon the successes of the past in its advocacy for evidence-based policymaking.

Documents

Social protection policies on spotlight as Manila hosts 14th GDN meet