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Poverty in the Philippines Essay

This article needs more links to other articles to help integrate it into the encyclopedia. Please help improve this article by adding links that are relevant to the context within the existing text. (April 2013)

This article’s factual accuracy may be compromised due to out-of-date information. Please update this article to reflect recent events or newly available information. (August 2012)

The estimates of poverty incidence in the Philippines per province as of 2012. The national average is 22.3%, virtually unchanged from 2006’s 23.4%. Poverty remains a critical social problem that needs to be addressed. Philippines’ poverty line marks a per capita income of 16,841 pesos a year.[1] According to the data from the National Statistical Coordination Board, more than one-quarter (27.9%) of the population fell below the poverty line the first semester of 2012, an approximate 1 per cent increase since 2009.[2] This figure is a much lower figure as compared to the 33.1% in 1991.[3] The decline in poverty has been slow and uneven, much slower than neighboring countries who experienced broadly similar numbers in the 1980s,[4] such as People’s Republic of China (PRC), Thailand, Indonesia (where the poverty level lies at 8.5%) or Vietnam (13.5%).

This shows that the incidence of poverty has remained significantly high as compared to other countries for almost a decade. The unevenness of the decline has been attributed to a large range of income brackets across regions and sectors, and unmanaged population growth. The Philippines poverty rate is roughly the same level as Haiti.[4] The government planned to eradicate poverty as stated in the Philippines Development Plan 2011-2016 (PDP). The PDP for those six years are an annual economic growth of 7-8% and the achievement of the Millennium Development Goals (MDGs). Under the MDGs, Philippines committed itself to having extreme poverty from a 33.1% in 1991 to 16.6% by 2015.

This article’s factual accuracy may be compromised due to out-of-date information. Please update this article to reflect recent events or newly available information. (August 2012) Rapid population growth[edit]

Given that the population of the Philippines is increasing at a rapid rate of 2.36% per year, this can be translated as an increase of more than 5,000 people daily in a country that already has an increase of more than four million poor people since 1985.[5] In 1985, the absolute number of people living in poverty was 26.5 million. This increased to 30.4 million in 2000 and from 2006 to 2009, increased by almost 970,000 Filipinos from 22.2 million to 23.1 million.[4] As the Philippines has financially limited resources and a high poverty rate, the rapid increase in population has become a problem because there is insufficient resources to support the population, which leaves much fewer resources to improve the economy. From 2003 to 2006, even though the Philippines experienced above-average economic growth, the poverty incidence increased as a result of its population growth rate.[6]


Poverty reduction has not kept up with GDP growth rates, largely due to the high unemployment rate, high inflation rate and wide income inequality. The official rate of unemployment for 2012 in the Philippines was 6.8 per cent.[7] This was an increase of joblessness even though in 2012, the GDP grew at 6.6 percent. From 2000 to 2009, the economy of Philippines grew by 3.2% on average annually, which was on par with the economic performance of its neighbors.[8] However, this recent growth did not translate into more jobs. Unemployment in the Philippines has been high in comparison to its neighbors, at around 7.5% to 8.0% since 2006.[9]

The Philippines has faced difficulty in job creation due to its inability to attract more foreign, direct investments. Diwa Guinigundo, who is the Central Bank Deputy Governor, mentioned that while capital flows are turning to the emerging markets,[10] foreign, direct investments to the Philippines remain relatively low due to the weak investment climate. The Philippines has hefty business procedures, poor tax and customs administration, weak protection against expropriation and high-energy cost. Therefore, the poverty rate remains constant over the years.


Philippines: A Strategy to Fight Poverty

Poverty Profile

The Philippines has achieved only modest reductions in poverty at a national level since the economic and political collapse of the mid-1980s. In addition, severe regional disparities remain. The proportion of households living below the official poverty line has declined slowly and unevenly from 59 percent in 1961 to below 39 percent in 1991 and around 36 percent in 1994. Urban poverty stood at around 23 percent in 1991 and rural poverty at 53 percent (by World Bank staff calculations).

Food poverty (or those living below subsistence) was around 20 percent of households in 1991, but 32 percent of rural households while only 12 percent of urban households. Two-thirds of the poor are engaged in the agriculture, fishery, and forestry sectors and have an elementary school education or less. However, the depth of poverty is relatively small (with the poverty gap index only 17 percent in 1991, having fallen by 40 percent since 1961), and income disparities among the poor have declined noticeably.

Since 1971, the urban poor have become a rising share of the total poor population, but still two-thirds of the poor live in rural areas. The depth of poverty is nearly 2 1/2 times larger in rural areas than in urban areas. The urban poor are concentrated in Luzon, while the rural poor live predominantly in Mindanao and the Visayas. Poor households in the Philippines tend to combine into extended families to conserve household assets. Thus, larger households are observed as having greater poverty than smaller households: households of 8 or more members represent nearly a third of all the poor.

The incidence and severity of poverty is significantly lower among elderly and female headed households in the Philippines, in striking contrast to the evidence from other developing countries, again because these households tend to be absorbed into others. It also reflects women’s strong position in the labor market in terms of relative pay and attachment compared with many other Asian countries and even relative to many OECD countries.

Incentive and Regulatory Framework

Philippine performance on poverty reduction has been disappointing compared with the rest of East Asia, but the Philippines has not been able to sustain growth long enough to reduce its incidence of poverty to the levels attained by its neighbors. GDP growth averaged only 1.1 percent per annum in the 1980s. Further, the pattern of growth in the past tended to accentuate rather than reduce income disparities. Slow growth of higher productivity sectors resulted in absorption of labor in low productivity employment in the 1970s and 1980s. The industrial sector shrank over this period, and agricultural growth slowed dramatically. More importantly, poverty declines were modest even when the economy was growing rapidly in the 1960s and 1970s because of the distorted structure of the economy. Policies discriminated against labor, subsidized capital-intensive methods of production, and gave low priority to agriculture and exports.

This resulted in growth that was narrowly based and inequitable, trapping many people in marginal, low paying occupations such as upland agriculture, rural wage labor, and informal employment in cities. Infrastructure was highly concentrated in Metro Manila. Government interventions, especially in the 1970s and early 1980s, tended to diminish the role of market mechanisms in favor of regulation by parastatals and promoted oligopolisitic control in important sectors of the economy. This inward-looking strategy was inherently unstable, and so the economy lurched from balance of payments crisis to crisis.

In the wake of across-the board structural reforms of the financial sector, agricultural pricing and marketing, the tax system, the foreign trade and investment regimes, and government corporations, the experience of the Philippines in the late 1980s showed that accelerated growth in a more liberalized economy has a positive impact on incomes of the poor and that poverty declines during periods of rapid growth. Between 1985 and 1988, when GDP growth averaged 4.8 percent, the poverty headcount fell by 1.3 percentage points each year, an achievement equivalent to Thailand’s long-term rate of poverty reduction. Analysis of the economic growth of 1985 to 1988 concludes that deregulation in agriculture and greater control over inflation were likely the key factors that improved the lot of the poor. Labor market performance has also shown signs of improvement.

Public Expenditures

Public expenditures on education in 1994 were less than 3 percent of GDP compared with 4 percent in Indonesia or 7 percent in Malaysia, despite inching upwards since the late 1980s, after over almost two decades of limited investment through the 1970s and early 1980s. Public primary education remains relatively under-financed, and funding is based on pupil headcount without any compensatory mechanisms to assist the most “at-risk” areas, schools, or ethnic groups. Thus, in the Philippines, poor youth are much more likely to drop out of school or get a poor quality education. The Philippines spends comparatively less of its resources on health than several other East Asian nations, both publicly and privately (spending 0.6 percent on GDP on health publicly and 2.4 percent of GDP on health overall).

In addition, public health gains are not as great as they should be because of the poor distribution of health facilities and personnel over the country. The poor would benefit from more emphasis on primary care and the reduction of environmental risk factors (which induce disease disproportionately among the poor). In many cases, the improvement of other infrastructure such as rural roads will allow existing health facilities to be used more intensively. As a result of the fiscal decentralization enacted in 1991, most traditional poverty alleviation programs except education have become the responsibility of local governments, limiting the ability of the central authorities to implement programs of national priority.

At the same time, the current revenue sharing arrangements with local governments (set by a legal formula) do not redistribute resources towards poorer provinces. Also, by devolving functions and whole institutions to local government, expertise and efficiency in many areas has been (at least temporarily) lost and likely is weakest in poorer provinces. The variation in capacity and resources calls for continued attention by central authorities–for technical assistance, capacity building, and incentives to raise revenues locally.

Safety Net

The Philippine Government has implemented a number of safety net programs, ranging from cash and in-kind income transfers (such as food subsidies and nutrition interventions) to wage employment programs and livelihood creation programs. In response to natural disasters, the National Food Authority distributes assistance to affected areas in the form of subsidized rice. In addition, the private sector, NGOs, and foreign donors have been actively assisting in the planning, financing and execution of many of these programs. However, the government’s set of programs do not constitute an efficient and equitable social safety net: (i) they are fragmented and not a consistent or adequate response to the problem; (ii) they have generally failed to mobilize communities to help themselves; and (iii) recent changes of institutions and strategies are creating problems of transition that tend to obscure priorities in the government’s delivery of social services or make additional demands on an ill-equipped bureaucracy and cadre of field workers.

Poverty Strategy

Policymakers must not waver in keeping the economy outward-oriented and geared towards competition, because an East Asian-style economy is far more likely to be able to sustain the rapid and smooth rate of growth that is fundamental to improving the welfare of the poor. To reach the government’s target of reducing the number of families living below the poverty line from 39 percent in 1991 (by official measures) to 30 percent by 1998, it is estimated that GNP will need to grow by about 6.5 percent annually for 1996 to 1998. Many of the urban poor will be helped directly by growth, as employment opportunities respond to increased demand. Even a good number of the rural poor will find their incomes rising, as demand for agriculture-based products, especially exports, expands. However, significant reduction of rural poverty will require improvements in health and education and infrastructure (especially roads, markets, and agricultural extension).

Access to the means of production by the rural poor is crucial. It is time to revisit how to accomplish the goals of rural land reform so that the intended beneficiaries–the poorest of farmers and landless agricultural workers–can benefit. The Comprehensive Agrarian Reform Program, which has accomplished a number of its original goals, is getting too expensive and complicated. Tenancy should be allowed once again, as a useful interim state between landless labor and owner-cultivator status. A market-assisted land reform program should be studied to explore options for reducing costs. Investments with the greatest impact on the poor, e.g., rural infrastructure, should be a priority for use of scarce public funds In urban areas, the scarcity of affordable housing (a problem aggravated by skyrocketing land prices) and threats to environmental health must be addressed.

It is now urban, rather than rural, land reform that should be a priority for government action. Tax and regulations on land ownership and development need to be revised. A commission should consider options to balance the rights of dwellers in irregular settlements with the legal owners of urban properties. Water and sanitation services must be extended to poor urban areas. The government should hesitate to spend more money on housing since little of it helps the truly poor. Investment in human capital must be increased by improving the quantity and the quality of primary education and access to primary education in rural areas.

Primary health services must be strengthened, especially immunization and prevention of water-borne and respiratory diseases. The social safety net must be consolidated and targeted. General food price subsidies should be stopped, in favor of targeted income subsidies or food stamps and supplementary feeding programs. The National Government should redirect resources formerly used for government livelihood programs towards creating an enabling environment for private institutions to provide credit to the poor successfully. To foster the growth of a healthy microfinance sector, government financial institutions should focus on wholesale lending, ensuring adequate capital is available to reach the poor.

Statistical System

The key survey for poverty data in the Philippines is the Family Income and Expenditure Survey, conducted every three years. The survey questionnaire is of standard form, more or less comparable to an LSMS format. An important limitation on the relevance of these data for policy purposes has been the long delays for processing, e.g., the 1991 results became available only in early 1995. Also, the household survey sample is not large enough to allow provincial indicators to be calculated for the smaller provinces. This basic dataset is not integrated with the social sector and other data (surveys on health, demographics., labor force and occasional censuses of population and housing) or with government expenditure information. Monitoring of poverty and the relative performance of the provinces and cities is an important continuing role for the National Government, even after fiscal decentralization.

The report recommends that the government expand the household survey and integrate and improve existing statistics and program information so as to provide crucial assistance to the provinces in setting priorities and in raising awareness down to the community level of how well the government is meeting the minimum basic needs of the people. The World Bank has provided technical assistance and grant funding for training and equipment for the government agencies involved (as well as generating interest by other donors) and will continue to do so.


Poverty in the Philippines: Causes, Constraints and Opportunities Description

New ADB Report: “Taking the Right Road to Inclusive Growth”

Poverty and inequality in the Philippines remains a challenge. In the past four decades, the proportion of households living below the official poverty line has declined slowly and unevenly and poverty reduction has been much slower than in neighboring countries such as the People’s Republic of China, Indonesia, Thailand, and Viet Nam. Economic growth has gone through boom and bust cycles, and recent episodes of moderate economic expansion have had limited impact on the poor. Great inequality across income brackets, regions, and sectors, as well as unmanaged population growth, are considered some of the key factors constraining poverty reduction efforts.

Causes of Poverty

The main causes of poverty in the country include the following: low to moderate economic growth for the past 40 years;
low growth elasticity of poverty reduction;
weakness in employment generation and the quality of jobs generated; failure to fully develop the agriculture sector;
high inflation during crisis periods;
high levels of population growth;
high and persistent levels of inequality (incomes and assets), which dampen the positive impacts of economic expansion; and recurrent shocks and exposure to risks such as economic crisis, conflicts, natural disasters,and “environmental poverty.”

Key Findings

The report’s key findings include the following:
Economic growth did not translate into poverty reduction in recent years;

Poverty levels vary greatly by regions;
Poverty remains a mainly rural phenomenon though urban poverty is on the rise; Poverty levels are strongly linked to educational attainment; The poor have large families, with six or more members;

Many Filipino households remain vulnerable to shocks and risks; Governance and institutional constraints remain in the poverty response; There is weak local government capacity for implementing poverty reduction programs; Deficient targeting in various poverty programs;

There are serious resource gaps for poverty reduction and the attainment of the MDGs by 2015; Multidimensional responses to poverty reduction are needed; and Further research on chronic poverty is needed.

The report comprehensively analyzes the causes of poverty and recommends ways to accelerate poverty reduction and achieve more inclusive growth. In the immediate and short term there is a need to enhance government’s poverty reduction strategy and involve key sectors for a collective and coordinated response to the problem. In the medium and long term the government should continue to pursue key economic reforms for sustained and inclusive growth.

Poorest Country in the World: Democratic Republic of Congo

You might be surprised to find that the United States isn’t the richest country in the world. Actually, that crown goes to Qatar who has recently jumped ranks to take first place. But what about the other side of the spectrum, the parts of the world struggling with devastating poverty? Well, on that end the Democratic Republic of Congo comes in first – or last, to be more accurate – with the lowest GDP per capita than any other country. Determining a country’s rank in wealth isn’t the easiest of tasks when you sit down and think about the data and economics involved. However, a good indicator of a nation’s standard of living is the assessment of its GDP (gross domestic product) per capita, which is defined as the total value of all domestic goods and services that country produces annually, times its PPP or purchasing power parity. GDP per capita (PPP) isn’t a perfect shot because its purpose isn’t to calculate that kind of economic rank but it’s measured frequently, widely and consistently, allowing trends to become visible.

In 2010, GNI (gross national income) per capita replaced GDP in the calculation, but the list is the same between the two. Qatar was still first with about $100,000 GDP per capita (PPP) in 2012 just as it was on the GNI list and the Democratic Republic of Congo came in last at around $370 GDP per capita (PPP). The gap is massive. Of the 40 poorest countries in the world, a solid 33 are in Sub-Saharan Africa. They include Zimbabwe, Burundi, Liberia, and Niger. Other parts of the world notoriously infamous for high poverty rates include Afghanistan, Haiti, and Nepal. But none of these places takes it quite as harshly as the Democratic Republic of Congo (not to be confused with the Republic of Congo) whose turbulent past and bloody wars have eclipsed the nation’s potential to thrive. Since its independence in 1960 and once the most industrialized country in Africa, Congo has bled onto the ground because of its lack of infrastructure and the brutal impact of civil war.

Disputes between Congo’s prominent rival groups, the Hutu and Tutsi, erupted after the Rwandan Genocide in which 500,000 people, mostly Tutsi, were victims of mass slaughter by the Hulus in the East African state of Rwanda. The result was an exodus of over 2 million Rwandans fleeing to neighboring countries like the Democratic Republic of Congo, known in that time as Zaire. Most of the refugees were Hulus attempting to escape the Tutsi who had climbed to dominance at the end of the genocide. The Hulu refugee camps in Zaire, however, became politicized and militarized and when Tutsi rebels invaded Zaire to repatriate the refugees, the conflict escalated into the First Congo War in 1996. The situation only grew worse and by 1998, the Second Congo War, which was sometimes called the “African world war” because it involved a total of nine African countries and twenty armed groups, devastated Zaire and laid waste to her population and economy.

The political turmoil continues today despite intervention and peace attempts and is one of the world’s deadliest conflicts with a death toll of 5.4 million people. More than almost 90 percent of the conflict’s victims, however, died due a lack of access to shelter, water, food and medicine – all severely aggravated by displaced and overcrowded populations living in unsanitary conditions. Not to mention, 47 percent of deaths were children under 5 and some 45,000 children continue to die each month. The nation also faces the problem of human rights and the countless crimes against humanity because while many have returned home, an estimated 1.5 million are still displaced. DR Congo is also infamous and heavily criticized for its treatment of women.

The east of the country has been described as the “rape capital of the world” and rates of sexual violence has been described as the worst in the world. It doesn’t help that DR Congo is consistently poisoned by corruption and greed. While mining growth has somewhat boosted the country’s economy, the elite are said to syphon off revenue for their own personal gain due to the nation’s lack of strong central government. Conflicts over basic resources, access and control over rich minerals and oil, and political agendas are some of the many complex causes behind the Democratic Republic of Congo’s inability to rise among the ranks and take the title of the poorest country in the world.

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