SERD spread final tyl2.indd 1 11/23/09 12:10 PM POVERTY IN THE PHILIPPINES CAUSES, CONSTRAINTS, AND OPPORTUNITIES © 2009 Asian Development Bank All rights reserved. Published 2009. Printed in the Philippines. ISBN 978-971-561-857-1 Publication Stock No. RPT090621 Cataloging-In-Publication Data Asian Development Bank. Poverty in the Philippines: causes, constraints, and opportunities. Mandaluyong City, Philippines: Asian Development Bank, 2009. 1. Poverty. 2. Philippines. I. Asian Development Bank. The views expressed in this book are those of the authors and do not necessarily reflect the views and 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 publication and accepts no responsibility for any consequence of their use. 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Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Tel +63 2 632 4444 Fax +63 2 636 2444 www.adb.org For orders, contact Department of External Relations Fax +63 2 636 2648 [email protected] CONTENTS LIST OF TABLES, FIGURES, BOXES, AND APPENDIXES ............................................ iv ACKNOWLEDGMENTS .......................................................................................... vii ABBREVIATIONS .................................................................................................... viii PART 1 Executive Summary ................................................................................ 1 PART 2 Introduction ........................................................................................... 7 PART 3 Poverty Profile ........................................................................................ 9 PART 4 Causes of Poverty ................................................................................... 39 PART 5 Impacts of Poverty on Economic Growth and Development .................. 53 PART 6 Institutions and Governance in the Poverty Response ............................ 61 PART 7 Summary of Key Findings and Recommendations .................................. 79 REFERENCES ......................................................................................................... 87 APPENDIXES ......................................................................................................... 95 Contents iii LIST OF TABLES, FIGURES, BOXES, AND APPENDIXES TABLES 1 Official Sources of Poverty-Related Data 11 2 Poverty Incidence and Gini Coefficient, 1985–2000 13 3 Magnitude of Poverty in the Philippines Population, 1985–2000 13 4 Annual Per Capita Poverty Thresholds, Poverty Incidence, and Magnitude of Poor 14 Families: 2000, 2003, and 2006 5 Annual Per Capita Poverty Thresholds, Poverty Incidence, and Magnitude of Poor 15 Population: 2000, 2003, and 2006 6 Ranking of Poorest Provinces in the Philippines, 2003 and 2006 16 7 Poorest 20 Municipalities in the Philippines, 2003 17 8 Poverty Incidence and Magnitude by Island Grouping 17 9 Provinces with the Largest Numbers of Poor People 17 10 Annual Per Capita Food Thresholds, Subsistence Incidence, and Magnitude of 18 Subsistence of Poor Families: 2000, 2003, and 2006 11 Distribution of Poor and Nonpoor Households in Urban and Rural Areas, 2006 20 12 Income Gap, Poverty Gap, and Severity by Regions 21 13 Poverty Incidence and Magnitude of Poor Population by Sector, 2000 and 2003 22 14 Distribution of Poor and Nonpoor Households by Family Size 23 15 Distribution of Poor and Nonpoor Households by Sector of Work 23 of Household Head 16 Distribution of Poor and Nonpoor Households by Occupation of Household Head 24 17 Components of Per Capita Income of Households, 1997–2006 24 18 Percentage of Families with Access to Minimum Basic Needs, by Income Strata, 26 2002 and 2004 19 Income Inequality, 1985–2006 (Gini Ratio) 27 20 Comparative Inequality Indicators, Latin America versus Association 28 of Southeast Asian Nations 21 Chronic Poverty Among Poor Filipino Households: Perceived Length of Poverty 29 22 Survey Data on Chronic Poverty: Recency of Poverty 29 23 Distribution of Households by Poverty and Vulnerability Status 30 24 Average Household Size by Poverty and Vulnerability Status, 1997 Philippines 30 Family Income and Expenditure Survey 25 Philippine Ranking Comparison with Other Countries—Human Development 31 Index 2005 26 Selected Indicators of Human Poverty for the Philippines, 2004 32 27 Millennium Development Goals and Targets 34 28 Status by Millennium Development Goals and Regions 36 iv Poverty in the Philippines: Causes, Constraints, and Opportunities 29 Average Gross Domestic Product Growth Rates, 1960–2007 39 30 Comparative Headcount Index and Number of Poor in the Association 40 of Southeast Asian Nations 31 Changes in Poverty Incidence for Selected Countries, 1960–1990 41 32 Growth Elasticity of Poverty Reduction 41 33 ADB Projections for Poverty Incidence by 2020 42 34 Philippines Growth Forecast for 2009 (as of April) 43 35 Unemployment Rates in East Asia, 2003–2007 43 36 Sector Employment Shares 44 37 Population Growth Rates in the Association of Southeast Asian Nations Countries 45 38 Percentage Point Change in Income Share, 2003–2006 46 39 Gini Ratio of Landholdings 47 40 Inequality in Labor Market Indicators 48 41 Explaining Inequality in Per Capita Labor Income (Theil Index) 49 42 Distribution of Poor and Nonpoor Households by Access to Financial Markets 55 43 Infrastructure Indicators in the Philippines, by Region, 1988 and 2004 or 2005 56 44 Pattern of Expenditures by Income Decile, Annual Poverty Indicators Survey, 57 2002 and 2004 45 Pattern of Expenditures by Income Decile, Family Income and Expenditures Survey, 57 2006 46 Current Government Poverty-Related Programs 63 47 Major Government Institutions Involved in Poverty Reduction 68 48 National Government Expenditures as a Percentage of Gross Domestic Product, 72 1990–2006 49 Real Per Capita National Government Expenditures in 1985 Prices, 1990–2006 72 50 Access to Selected Programs by Quintile 73 51 Corruption Perception Index, 1998–2008 74 52 Summary of Action Points for Government and Possible Options for Support 83 Immediate and Short Term: Enhance Poverty Framework and Strategy 53 Summary of Action Points for Government and Possible Options for Support 85 Medium and Long Term: Sustain Efforts for Economic and Institutional Reforms FIGURES 1 Poverty Incidence in Southeast Asia 19 2 Educational Attainment of Heads of Poor Households 22 3 Trends in Human Development Index, 1975–2005 31 4 Trend in Underemployment Rate, January 1995–2009 44 List of Tables, Figures, Boxes, and Appendixes v BOXES 1 Millennium Development Goals—Midterm Review from a Civil Society 33 Perspective 2 Critique of a Long-Term Government Subsidy Program 52 3 PhilDHRRA Asset Reform Report Card 77 APPENDIXES 1 Framework for Assessing Poverty in the Philippines 95 2 Poverty Incidence Among Population: Balisacan Estimates vis-a-vis National 98 Statistical Coordination Board 3 Annual Per Capita Food Thresholds, Subsistence Incidence, and Magnitude 99 of Subsistence of Poor Population: 2000, 2003, and 2006 4 List of Variables for Regression on Poverty Correlates 100 5 Top and Bottom 10 Provinces, Human Development Index 2003 101 6 Self-Rated Poverty: Households Who Are Poor (Mahirap): Philippines 102 7 Degree of Hunger in Households, Philippines: July 1998 to December 2008 103 8 Headcount Indexes: Percentage of Population Living Below the Asian Poverty Line 104 versus $1.08 a Day and $1.25 a Day 9 Poverty Incidence by Highest Educational Attainment of Household Head 105 10 Impediments to Investments in Agriculture and Agribusiness 106 11 Gini Coefficients and Ratio of Expenditures to Incomes 107 of Top 20% to Bottom 20% of Income Group 12 Current Government Poverty and Poverty-Related Programs 108 13 Overview of Previous Poverty Assessments: 1990–2007 120 14 Resource Gaps: Medium-Term Philippine Development Plan Growth Rates 124 15 Resource Gaps: Low Growth Rates 124 vi Poverty in the Philippines: Causes, Constraints, and Opportunities ACKNOWLEDGMENTS This report was prepared by Fernando Aldaba, consultant, in close dialogue with the Government of the Philippines and under the guidance and supervision of Camilla Holmemo, poverty reduction specialist, Southeast Asia Department (SERD) and the overall leadership of Neeraj Jain, country director, Philippines Country Office, SERD, and Shireen Lateef, director, Social Sectors Division, SERD. Many colleagues provided helpful comments on drafts and during presentations of findings, including Secretary of the National Anti-Poverty Commission Domingo Panganiban, Alice Bala, Leonor Briones, Dante Canlas, Erlinda Capones, Ramon Falcon, Francis Lucas, Austere Panadero, and participants in the consultation forum held on 7 May 2009 in Manila. In addition, ADB staff members from many divisions provided invaluable comments to complete the report, including Joven Balbosa, Armin Bauer, Claudia Buentjen,