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  • PHILIPPINESFostering More Inclusive Growth

    Human Development Sector Unit East Asia and Pacific Region

    Poverty Reduction and Economic Management Unit East Asia and Pacific Region

    MAIN REPORT

  • REPUBLIC OF THE PHILIPPINES

    FISCAL YEARJanuary 1 December 31

    CURRENCY EQUIVALENTS(Exchange Rate Effective May 10, 2010)Currency Unit = Philippine Peso (PhP)PhP1.00 = US$0.022US$1.00 = PhP45.045

  • P H I L I P P I N E SFostering

    More Inclusive Growth

    Human Development Sector Unit East Asia and Pacific Region

    Poverty Reduction and Economic Management Unit East Asia and Pacific Region

    MAIN REPORT

    Document of the World Bank

  • PHILIPPINESFostering More Inclusive GrowthHuman Development Sector Unit East Asia and Pacific Region

    Poverty Reduction and Economic Management Unit East Asia and Pacific Region

    MAIN REPORT

  • 4Ps Pantawid Pamilyang Pilipino Program

    ADB Asian Development Bank

    ARMM Autonomous Region of Muslim Mindanao

    APIS Annual Poverty Indicators Survey

    ASEAN Association of Southeast Asian Nations

    BCG Bacillus Calmette-Guerin

    BPO Business Process Outsourcing

    BTr Bureau of Treasury

    CALABARZON Cavite, Laguna, Batangas, Rizal, and Quezon

    CAR Cordillera Autonomous Region

    CCT Conditional Cash Transfer

    DepED Department of Education

    DOH Department of Health

    DOLE Department of Labor and Employment

    DPT3 Diptheria-Pertussis-Tetanus Vaccine 3

    DSWD Department of Social Welfare and Development

    FAOSTAT Food and Agriculture Organization Statistics

    FIES Family Income and Expenditure Survey

    GDP Gross Domestic Product

    GNP Gross National Product

    ILO International Labor Organization

    IMF International Monetary Fund

    LGU Local Government Unit

    LFS Labor Force Survey

    M3 Domestic Liquidity

    MDGs Millennium Development Goals

    MFN Most Favoured Nation

    MI Macro International

    MIMAROPA Mindoro Oriental, Mindoro Occidental,

    Marinduque, Romblon, and Palawan

    MOOE Maintenance and Other Operating Expenses

    MTPDP Medium-Term Philippine Development Plan

    NA National Accounts

    NAPC National Anti-Poverty Commission

    NCR National Capital Region

    NEDA National Economic and Development Authority

    NDHS National Demographic and Health Survey

    NFA National Food Authority

    NHIP National Health Insurance Program

    NHTSPR National Household Targeting System for

    Poverty Reduction

    NRA Nominal Rates of Assistance

    NSCB National Statistical Coordination Board

    NSO National Statistics Office

    OECD Organization for Economic Cooperation and

    Development

    OFWs Overseas Filipino Workers

    OOP Out-of-Pocket

    PAP Program/ Activity/ Project

    PESFA Private Education Student Financial

    Assistance

    PHILHEALTH Philippine Health Insurance Corporation

    PMT Proxy Means Test

    PPP Purchasing Power Parity

    RRA Relative Rate of Assistance

    SBM School-Based Management

    SMEs Small and Medium Enterprises

    SNPLP Study Now Pay Later Plan

    SOCCSKSARGEN South Cotabato, Cotabato, Sultan Kudarat,

    Sarangani and General Santos City

    SY School Year

    TESDA Technical Education and Skills Development

    Authority

    TFP Total Factor Productivity

    TVET Technical and Vocational Education and

    Training

    UNDP United Nations Development Program

    USAID United States Agency for International

    Development

    WB The World Bank

    WDR World Development Report

    WHO World Health Organization

    WTO World Trade Organization

    ACRONYMS AND ABBREVIATIONS

  • ACRONYMS AND ABBREVIATIONS ACKNOWLEDGMENTS

    This report was prepared by a team led by Jehan Arulpragasam (EASHD) and Ulrich Lchler (EASPR) with the much appreciated contribution of Minna Hahn Tong (Consultant) in drafting and editing. The team also comprised, Eduardo Banzon, Fabrizio Bresciani, Karl Chua, Lynnette Dela Cruz Perez, Swati Ghosh, Timothy Johnston, Aart Kraay, Xubei Luo, Laura Pabon, Claudio Raddatz, Silvia Redaelli, Jamele Rigolini, Rashiel Velarde, Soonhwa Yi, Michael Alba (Consultant), Tomoki Fujii (Consultant), Nobuhiko Fuwa (Consultant) and Rosechin Olfindo (Consultant). Able team assistance was provided by Kristine San Juan-Ante and Melanie Esteban. The peer reviewers are Elizabeth King, Humberto Lopez, and Pierella Paci.

    The principal authors responsible for each chapter in the report are as follows:

    Chapter I Chapter IIChapter IIIChapter IVChapter VChapter VIChapter VIIChapter VIII Chapter IX

    Karl Chua, Ulrich Lchler Rashiel Velarde, Tomoki Fujii, Ulrich LchlerClaudio Raddatz, Jamele Rigolini, Karl Chua, Ulrich LchlerFabrizio Bresciani, Nobuhiko FuwaAart Kraay, Swati Ghosh, Soonhwa Yi, Ulrich LchlerSilvia Redaelli, Xubei Luo, Laura PabonTimothy Johnston, Eduardo BanzonLynnette Dela Cruz Perez, Michael AlbaJehan Arulpragasam, Rosechin Olfindo, Rashiel Velarde

    The preparation team would like to thank the Philippine authorities for their support in providing logistical assistance and for facilitating timely access to data and information. A draft report was submitted to the government for review in early February 2010, and the comments subsequently received from the Department of Social Welfare and Development and from the National Economic and Development Agency have been incorporated into the final version

  • BACKGROUND PAPERS

    Chapter I: Introduction and Macroeconomic Overview

    Chapter II: Poverty in the Philippines

    Chapter II - Annex I: Measuring Poverty in the Philippines

    Chapter II - Annex II: Simulating the Impact of Inflation on Poverty

    Chapter III: The Sectoral and Regional Patterns of Growth in the Philippines

    Chapter IV: Revisiting Agricultural Growth as a Pathway out of Rural Poverty

    Chapter V: Enhancing the Contribution of Manufacturing to Growth and Employment

    Chapter V - Annex: Methodology for calculating potential distortions that affect the relative price of labor

    Chapter VI: Poverty and the Labor Market

    Chapter VII: Health, Nutrition, and Population

    Chapter VIII: Education and Inclusive Growth

    Chapter IX: Social Protection and Inclusive Growth

  • Executive Summary ......................................................................................................................... i

    Main Report

    Introduction ..................................................................................................................................... 1

    Part I: Understanding Poverty and Inequality ......................................................... 5A. Recent Trends in Poverty .................................................................................................................. 5

    B. Why Has Poverty Not Been Declining in Recent Years? .................................................................... 7

    C. The Puzzle of Diverging Per Capita Income Measures in the Philippines ......................................... 8

    D. Profile of the Poor ...........................................................................................................................10

    Part II: Enhancing Income Opportunities ...................................................................19A. The Key Constraints on Growth ......................................................................................................19

    B. The Sectoral, Regional and Demographic Dimensions of Growth and Employment......................25

    C. Generating Productive Employment Opportunities .......................................................................30

    D. Ensuring Adequate Labor Mobility .................................................................................................37

    E. Policy Implications.. ...........................................................................................................39

    Part III: Assisting Households to Participate in Markets.................................43A. Improving Health Service Delivery ..................................................................................................43

    B. Improving Education and Skills .......................................................................................................48

    C. Strengthening Social Protection......................................................................................................53

    Technical Annex I: ............................................................................................................................58Technical Annex II: ...........................................................................................................................59References: ..........................................................................................................................................60

    TABLE OF CONTENTS

  • Growth that is inclusive, or growth that works for the poor, provides a stronger platform for future expansion and competitiveness.

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  • i EXECUTIVE SUMMARY1. Slow economic growth has been a long-standing problem in the Philippines. During 1980-99, per capita growth of gross domestic product (GDP) averaged close to zero percent, far below the 6.5 percent average per capita growth recorded for the East Asia and Pacific region as a whole. This lackluster performance largely explains why the rate of poverty reduction was so mu