Professional Documents
Culture Documents
ii
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Copyright 2019
The views expressed in this volume are those of the authors and do not necessarily reflect the views of any
individual or organization.
This volume is under the Creative Commons Attribution Noncommercial License. It shall not be used
for commercial purposes. Anyone can use, reuse, distribute, build upon this material as long as proper
attribution is made.
ISSN 2546-1761
RP 04-19-600
Photo credits:
Chapter 1, page 1, https://commons.wikimedia.org/wiki/File:Ayalatriangle.jpg
Chapter 2, page 19, https://tl.wikipedia.org/wiki/Talaksan:Manila_Philippines.jpg
Chapter 3, page 63, https://www.pids.gov.ph/press-releases/404
v
Table of Contents
The Authors............................................................................................................97
vi
Table
1.1 Baseline assumptions on the international economy..................................................3
1.2 Selected macroeconomic indicators, Philippines, 2010–2017....................................6
1.3 Forecasts of Philippine gross domestic product growth rate....................................17
2.1 Annual physical target, actual served, budget allocation,
and actual budget stipend for Social Pension program: 2011–2018.........................24
2.2 DSWD number of target beneficiaries for Social Pension (SocPen) program
and estimated number of senior citizens within age coverage of SocPen
across bottom deciles of income distribution............................................................25
2.3 Funding for the BALAI program (in PHP million)...................................................30
2.4 Sin tax incremental revenue to 2016 DOH budget (in PHP billion).........................33
2.5 Comparison of petroleum excise tax rates................................................................50
2.6 Exports of services (at 2000 constant prices)............................................................52
Figure
1.1 GDP growth rates of ASEAN countries, 2008–2017..................................................5
1.2 Investment-to-GDP ratio (percentage terms)..............................................................7
1.3 Oil prices (USD per barrel).........................................................................................8
1.4 Average exchange rate................................................................................................8
1.5 Net foreign investments (BPM6 format), in USD million, 2008–2017......................8
1.6 Inflation.......................................................................................................................9
1.7 Employment statistics...............................................................................................10
1.8 Banking indicators....................................................................................................10
1.9 Bank loans.................................................................................................................11
1.10 Ratio of credit to gross domestic product.................................................................11
1.11 Domestic credit as percent of gross domestic product..............................................12
1.12 Budget deficit as percent of gross domestic product.................................................14
1.13 Selected interest rates................................................................................................17
2.1 Proportion of population 25 years and over with tertiary degree
and real gross domestic product per capita, 2010.....................................................37
2.2 Philippine government infrastructure expenditures, as percent of GDP,
1998–2018.................................................................................................................55
3.1 21st-century skills.....................................................................................................71
3.2 Determinants of technology upgrading in developing countries..............................73
3.3 Gardening innovation................................................................................................74
3.4 The Philippine Qualifications Framework................................................................88
Box
1.1 The interest rate corridor framework........................................................................13
1.2 The Budget Reform Bill............................................................................................15
vii
Foreword
W
e are experiencing a technological revolution that is altering the way we
live. While it presents opportunities for growth, the true extent to which
the benefits of today’s revolution can be reaped depends largely on our
ability to adapt to the global disruptions. This cannot be done overnight
obviously, as it requires careful consideration of the multifaceted reality of the Fourth
Industrial Revolution (FIRe).
This has inspired the Philippine Institute for Development Studies to make FIRe the
theme of its 2017–2018 Economic Policy Monitor (EPM). In this issue, we gathered the
insights of PIDS senior researchers and outside experts on matters relating to FIRe, such as
its potential socioeconomic impacts and the transformations it brings, covering the entire
systems of production, management, and governance.
Moreover, serving as a background is a chapter that analyzes the country’s macroeconomic
scenario in the past year and the economy’s outlook in the coming year. Another chapter
also reviews the policies adopted by the government during the period and assesses their
merits and limitations.
We hope this EPM issue will contribute to a better understanding not only of the emerging
technologies of FIRe and the opportunities and challenges that arise from their adoption in
the country, but also of the macroeconomic performance of the Philippine economy and the
effects of public policies.
CELIA M. REYES
President
ix
Acknowledgment
T
he Economic Policy Monitor (EPM) is an annual publication of the Philippine
Institute for Development Studies. The 2017–2018 issue highlights the
complexity of the fourth industrial revolution (FIRe) and its impact on the
country’s economic development. This issue is made possible through the joint
effort of several people.
Chapter 1 was written by Josef T. Yap, Nicoli Arthur B. Borromeo, and Gabriel
Iñigo M. Hernandez. It assesses the country’s economic progress in 2017 vis-à-vis the
implementation of the Tax Reform for Acceleration and Inclusion Law and looks at
prospects for 2018–2019 at a macroeconomic perspective.
Chapter 2 provides policy updates on key sectors of the economy. It contains
contributions from Aubrey D. Tabuga on poverty reduction; Jose Ramon Albert on
social protection for the elderly; Connie B. Dacuycuy on women and energy; Marife M.
Ballesteros on housing; Michael R.M. Abrigo and Danica Aisa P. Ortiz on health; Aniceto
C. Orbeta Jr. on education; Sonny N. Domingo on environment and natural resources;
Francis Mark A. Quimba on industry; Ramonette B. Serafica on trade; and Charlotte
Justine D. Sicat on fiscal policy.
Chapter 3, the theme chapter of this issue, on “Preparing the Philippines for the Fourth
Industrial Revolution: A Scoping Study” was written by Elmer P. Dadios, Alvin B. Culaba,
Jose Ramon G. Albert, Aniceto C. Orbeta Jr., Vicente B. Paqueo, Ramonette B. Serafica,
Argel A. Bandala, and Jose Carlos Alexis C. Bairan. It focuses on emerging technologies
associated with FIRe and the opportunities and possible threats in the adoption of said
technologies, specifically their impacts on the labor market, education and human capital,
social protection, trade and investment, and sustainable development.
Acknowledgments go to the Research Information Department, particularly Sheila V.
Siar for editing this volume and Maria Judith L. Sablan, Jane C. Alcantara, Carla P. San
Diego, and Rejinel G. Valencia for coordination and editorial support.
xi
Executive Summary
T
he world is once again experiencing another industrial revolution. However,
while the three earlier revolutions have generally revolved around physical
production and its advancement, the Fourth Industrial Revolution (FIRe) has
blurred the lines among the physical, digital, and biological spheres. It has
disrupted almost all industries across the globe, covering the entire systems of production,
management, and governance.
The pace at which the technologies are emerging, however, has already made the
existing regulatory models antiquated in the face of innovation. Despite this scenario, many
governments, including that of the Philippines, are still using these models in crafting their
governance approaches with respect to FIRe. The problem resulting from this is the possible
slowdown, if not the killing, of innovation.
The Philippine Institute for Development Studies (PIDS) has long recognized this
gap between technology and regulation. To this end, it held the Fourth Annual Public
Policy Conference in September 2018 with the theme, “Harnessing the Fourth Industrial
Revolution: Creating Our Future Today”. During the said event, experts advised the
Philippine government to adopt an innovation principle, not a precautionary principle. This
principle shifts the burden to the government and regulators to show that a new technology
or new business model will cause potential harm to society or consumer. The adoption of
the innovation principle is seen to promote the growth and emergence of FIRe technologies.
To have a better grasp of FIRe and its impacts, the 2017–2018 PIDS Economic Policy
Monitor (EPM) looks at the emerging FIRe technologies, alongside their latest trends and
commercial applications in the Philippines. Its Chapter III specifically covers internet of
things (IoT), artificial intelligence (AI), blockchain, big data, robotics, neurotechnology,
nanomaterials, additive manufacturing, cloud computing, energy storage, and synthetic
biology. Most of these FIRe technologies are already present in the Philippines, such as
AI, blockchain, big data, and synthetic biology. Some of them, however, are considered
to be in the preliminary adoption stage, as in the case of energy storage, additive
manufacturing, and IoT.
The chapter also assesses the possible impacts of these FIRe technologies on labor
market, education and human capital, social protection, trade and investment, and
sustainable development.
In terms of the labor market, it notes that 56 percent of all employment within the
Association of Southeast Asian Nations (ASEAN) is at high risk of displacement due to
technology. The high-risk occupations include sewing machine operators (Cambodia
and Viet Nam), shop and sales persons and demonstrators (the Philippines), office clerks
(Indonesia), and food service counter attendants (Thailand). In each of the countries
comprising the ASEAN-5, women are also more likely than men to be employed in an
occupation at high risk of automation. Moreover, less educated workers and employees
earning lower wages face higher automation risk.
xii
Given that production systems are evolving with technologies, a key characteristic of
education and human capital development in the future is continuous learning. With this,
this EPM advances the idea that the system should produce students who embrace lifelong
learning, continuous training, and retraining.
On trade and investments, the application of new technologies to production and
distribution has resulted in selective reshoring, nearshoring, and other structural changes to
global value chains. For example, rapid improvements in automation in developed economies
has led to a reversal in offshoring practices. There has been an increase in reshoring or the
transfer of production activities back to the home country in labor-intensive manufacturing,
such as garment and footwear, electronics, and automotive production.
Meanwhile, the emergence of these technologies is seen as an opportunity to advance
sustainable development. New technologies are developing at an exponential pace. By 2030,
the current nascent or immature technologies will reach the commercialization stage that
could help achieve some of the sustainable development goals, especially in the Philippines.
Nonetheless, it is clear that the Philippines first needs to embrace several measures
relating to technology adoption and innovation to fully reap the fruits of FIRe. According
to Readiness for the Future of Production Report 2018 of the World Economic Forum, the
Philippines is the archetype of a legacy country. This means that the country has a strong
production base today, but at risk for the future due to weak performance across drivers
of production, which include technology and innovation, human capital, global trade and
investment, institutional framework, sustainable resources, and the demand environment.
This weak performance, per findings of this EPM, can be address through the adoption
of policies on science and technology, information and communications technology, and
industry, among other complementary measures.
Aside from policy recommendations related to FIRe, the 2017–2018 EPM also revisits
the country’s policy on poverty reduction, education, social protection for elderly, women,
housing, agriculture, environment and natural resources, health, energy, industry, trade in
services, and fiscal policy. In Chapter II of this EPM, for instance, the Institute recognizes
the continuing effort of the government to reduce poverty through several antipoverty and
other related initiatives, such as the Pantawid Pamilyang Pilipino Program and subsidized
crop insurance. The government has likewise been able to start the implementation of new
antipoverty initiatives, which include the social mitigation programs of the Tax Reform for
Acceleration and Inclusion Act, the Free Irrigation Service to Small Farmers Act, initiatives
toward rice tarrification, and policy against contractualization.
In the education sector, PIDS researchers raised concerns regarding the possible
unintended consequences of the untargeted free tuition policy in state universities and colleges
(SUCs). First, they argued that the policy was based on hypothesis not supported by data.
Given that roughly 88 percent of the student population in SUCs in 2014 may be considered
as nonpoor, any untargeted subsidy will mostly benefit students from richer households.
Second, instead of encouraging more private investments in human capital development, the
legislation proposes to replace with general taxes the tuition and other fees that households
have already willingly decided to contribute for the education of their children.
xiii
In terms of health, the Philippines has made great strides in improving health outcomes
in the past half century. The country’s infant mortality rate, for instance, has been slashed
significantly from about 67 deaths per 1,000 live births in 1960s to only 22 deaths per 1,000
live births in 2016. Over the same period, life expectancy at birth has increased from 58 years
in the 1960s to about 69 years in 2015. Nonetheless, challenges and threats in improving
the country’s health outcomes persist, such as the growing burden of noncommunicable
diseases including injuries and the continuing inequities in health, that call for concerted
response measures.
Aside from these successes, this EPM also identifies several policy gaps, such as in the
case of women and electric cooperatives. These issues will be illustrated in the following
pages of this publication.
Completing this EPM is a macroeconomic outlook for 2018–2019. Among others, PIDS
expects that the higher inflation experienced in 2018 will dampen consumer spending during
the said period. Meanwhile, monetary policy will tighten and put a crimp on investment
expenditure. An accommodative fiscal policy, however, will put a floor to the adverse impact
of inflation. It likewise predicts that the growth of the gross domestic product in 2018 will
average just slightly above the first half growth of 6.3 percent.
Meanwhile, large public infrastructure projects initiated by the government are
scheduled to come on stream leading to significant crowding-in effects. These projects
include national and provincial roads, railways, airports, and the Philippines’ first mass
transit subway. Elections will also be held in 2019 and this will provide the usual economic
stimulus. The Philippine economy should finally breach the 7.0-percent threshold in 2019,
which is the lower boundary of the National Economic and Development Authority’s target.
xv
List of Acronyms
RE – renewable energy
RP – repurchase
RPS – renewable portfolio standards
RRP – reverse repurchase
RSEs – researchers, scientists, and engineers
R&D – research and development
SaaS – software as a service
SB – Senate Bill
SDA – Special Deposit Account
SDG – Sustainable Development Goal
SETUP – Small Enterprise Technology and Upgrading Program
SGP-PA – Students Grants-in-Aid Program
SHFC – Socialized Housing Finance Corporation
SHS – senior high school
SIAD – Sustainable Integrated Area Development
SME – small and medium enterprise
SocPen – Social Pension
SSB – sugar-sweetened beverages
STEM – science, technology, engineering, and mathematics
STI – science, technology, and innovation
StuFAP – Student Financial Assistance Program
SUCs – state universities and colleges
S4CP – Science for Change Program
S&T – science and technology
TB – tuberculosis
TDF – term deposit facility
TES – tertiary education subsidy
TESDA – Technical Education and Skills Development Authority
TNC – transport network company
TRAIN – Tax Reform for Acceleration and Inclusion
TVET – Technical and Vocational Education and Training
TVI – technical-vocational institution
TVL – technical-vocational-livelihood track
UCT – unconditional cash transfer
UHC – Universal Health Coverage
UNESCO – United Nations Educational, Scientific and Cultural Organization
UniFAST – Unified Student Financial Assistance System for Tertiary Education
US – United States
VAT – value-added tax
VAWC – violence against women and children
WEF – World Economic Forum
WESM – Wholesale Electricity Spot Market
WTO – World Trade Organization
CHAPTER 1
Table 1.1.
Baseline assumptions on the international economy
2016 2017 2018 2019
Actual ADB (2018) Projection
GDP growth (%)
Major industrial economies 1.5 2.3 2.3 2.0
United States (US) 1.5 2.3 2.7 2.3
Euro area 1.8 2.5 2.2 1.9
Japan 0.9 1.7 1.4 1.0
Newly industrialized economies
China 6.7 6.9 6.6 6.4
India 7.1 6.6 7.3 7.6
Interest rates
US fed funds rate 0.4 1.0 1.8 2.7
ECB refinancing rate 0.0 0.0 0.0 0.0
Bank of Japan overnight call rate 0.0 0.0 0.0 0.0
$ Libor 0.5 1.1 1.8 2.7
GDP = gross domestic product; ADB = Asian Development Bank; ECB = European Central Bank
Source: ADB (2018)
Both economies have seen services and, together with Thailand, pulled down
become important contributors to growth. the regional average. Public infrastructure
In China, the services sector remained the spending has been a key factor in
main driver of growth in 2017 from the maintaining steady growth in Indonesia for
supply side, accelerating to 8.0 percent the past five years. Malaysia and Singapore
from 7.7 percent in 2016 and contributing followed Brunei Darussalam in terms of
4.0-percentage points to growth. growth acceleration. Both economies relied
Nonetheless, services comprise just over heavily on export growth in 2017.
51 percent of GDP in China, which is
low by international standards. In India,
services also grew by a healthy 8.3 percent, Economic performance in 2017
notably, passenger and cargo transport
services. Services, particularly business Production
service exports, remain a mainstay of the Services continued to be the main driver
Indian economy. of economic growth in the Philippines,
contributing the largest share of GDP
(57.5%) and posting a relatively high
Regional trends growth rate (6.8%) (Table 1.2). However,
the services sector slowed down in 2017—
Aggregate GDP growth in Southeast Asia from 7.5 percent in 2016—particularly
(Figure 1.1) rose slightly to 5.2 percent in real estate, renting, and business
in 2017 from 4.7 percent in 2016 (IMF activities, which comprised 11.5 percent
2017a). The improvement was underpinned of output, and decelerated from 8.5 percent
by strong global economic growth, and in in the previous year to 7.5 percent. The
some cases, the rebound in international deceleration in the real estate sector is
fuel prices. The latter was the reason a cause for concern given its history of
Brunei Darussalam had the highest growth bubble formation and overheating. This
acceleration in the region. The CLM makes the sector vulnerable to asset
countries—Cambodia, Lao PDR, and price revaluations. The Bangko Sentral
Myanmar— grew between 6.8 percent and ng Pilipinas (BSP) is closely monitoring
7.0 percent in 2017 on the back of new the market and is actively trying to limit
investment opportunities, steady gains in the exposure of financial institutions to
poverty reduction, and spillovers from the real estate market. Nevertheless, the
the tourism surge in the region. Viet Nam rise of shadow banking activities through
continued to benefit from foreign direct subsidiaries makes the task of monitoring
investment, strong exports, and a robust more difficult (IMF 2017a). In line with
agriculture sector, growing by 6.8 percent the slowdown in real estate and related
in 2017. Meanwhile, Thailand enjoyed activities, construction also weakened,
its highest economic growth in five years posting a growth of 5.3 percent in 2017 as
at 3.9 percent owing largely to stronger against 12.1 percent in 2016.
consumption. Indonesia and Singapore Meanwhile, for the first time in more
both grew by less than 5.2 percent in 2017 than two decades, the manufacturing sector
Yap, Borromeo, and Hernandez 5
Figure 1.1
GDP growth rates of ASEAN countries, 2008–2017
had the highest growth rate at 8.4 percent The brightest spot in 2017 was
compared with 7.1 percent in 2016. The the agriculture sector, which grew by
manufacturing subsector with a relatively 4.0 percent, the highest rate in a decade.
high growth rate and high share was The crop subsector posted an output growth
“radio, television, and communication rate of 8.3 percent, which can be attributed
equipment and apparatus” at 13 percent to the recovery from the El Niño-induced
and 16.9 percent, respectively. This is an drought in 2016 and the government’s free
indication that the Philippine economy irrigation program for farmers enacted
is benefiting not only from strong global into law with the Free Irrigation Act.
demand but also from the rebalancing However, uncertainty remains with regard
in the Chinese economy. The latter has to the proposal to eliminate quantitative
shifted the center of gravity of regional restrictions on rice imports and impose
production networks. Rapid growth in tariffs instead. The “tarrification” of rice
manufacturing underpinned the 7.2-percent importation will certainly cause disruptions
expansion in the industry sector. But this but many agree that this is the better policy
was lower than the 8.0 percent in 2016 in the medium to long term.
owing to the aforementioned deceleration
in construction activity and a fall in the Expenditure
growth of value added in electricity, gas, The investment-GDP ratio continued its
and water. upward trajectory that began in 2012 with
Table 1.2
Selected macroeconomic indicators, Philippines, 2010–2017
2010 2011 2012 2013 2014 2015 2016 2017
Gross national product 7.0 3.0 7.1 7.8 6.0 5.8 6.7 6.6
Gross domestic product (GDP) 7.6 3.7 6.7 7.1 6.1 6.1 6.9 6.7
Agriculture, fishery, and forestry -0.2 2.6 2.8 1.1 1.7 0.1 -1.2 4.0
Percent share to GDP 11.6 11.5 11.1 10.5 10.0 9.5 8.8 8.5
Industry sector 11.6 1.9 7.3 9.2 7.8 6.4 8.0 7.2
Percent share to GDP 32.6 32.0 32.2 32.9 33.4 33.5 33.9 34.0
Mining and quarrying 11.4 7.0 2.2 1.2 12.1 -1.5 3.2 3.7
Percent share to GDP 1.2 1.2 1.0 0.8 0.9 0.7 0.7 0.7
Electricity, gas, and water 9.9 0.6 5.3 4.7 3.7 5.7 9.0 3.4
Percent share to GDP 3.0 2.8 2.9 2.8 2.8 2.7 2.6 2.6
Service sector 7.2 4.9 7.1 7.0 6.0 6.9 7.5 6.8
Percent share to GDP 55.8 56.5 56.7 56.7 56.6 57.0 57.4 57.5
Transport, storage, and communication 1.0 4.3 6.9 6.0 6.5 8.0 5.3 4.0
Percent share to GDP 5.4 5.4 5.3 5.2 5.1 5.3 5.2 5.1
Finance and real estate 8.5 7.2 7.1 10.3 7.7 6.7 8.5 7.5
Percent share to GDP 14.7 15.4 15.6 16.1 16.6 17.1 17.6 17.8
Personal consumption expenditure 3.4 5.6 6.6 5.6 5.6 6.3 7.1 5.9
Percent share to GDP 69.2 70.5 70.5 69.5 69.1 69.3 69.5 68.9
Government consumption 4.0 2.1 15.5 5.0 3.3 7.6 9.0 7.0
Percent share to GDP 10.0 9.8 10.7 10.5 10.2 10.3 10.5 10.5
Capital formation 31.6 2.8 -4.3 27.9 4.2 18.4 24.5 9.4
Percent share to GDP 20.8 20.6 18.5 22.1 21.7 24.2 28.2 28.9
an upward inflection in 2015 (Figure 1.2). employment rate has also contributed to
At 28.7 percent in 2017, the ratio is at growth in consumption.
its closest to the 30-percent threshold in
the years when data are available. A high Trade and balance of payments
investment-to-GDP ratio is an important Both exports and imports measured in
ingredient for sustaining rapid economic constant pesos have been rising fast since
growth for a relatively long period. 2014. This reflects strong global demand
However, investment growth fell to and the import requirements of investment.
only 9.5 percent in 2017 after increasing Higher international fuel prices added to
by a hefty 26.1 percent in 2016. The the import bill (Figure 1.3). In terms of
deceleration can be attributed to a high USD, merchandise exports increased by
base resulting from the election spending 12.8 percent compared with 14.2 percent
in 2016 and constraints to government for merchandise imports. The result was
infrastructure spending. a trade deficit of USD 41.2 billion, equal
Meanwhile, growth in personal to 13.1 percent of GDP, widening from
consumption expenditure moderated to 11.7 percent in 2016. This has contributed
5.9 percent from 7.1 percent in 2016 due to the recent depreciation of the peso vis-à-
to the base effect of the election (Table vis the US dollar (Figure 1.4).
1.2). Consistent with the rising share of The trade deficit was partially offset
investment is the decline in the share of by remittances from overseas Filipinos,
personal consumption expenditure to revenue from the information technology–
GDP, which stood at 68.9 percent in 2017. business process outsourcing industry, and
The most recent peak was 74.4 percent in tourism receipts. The current account deficit
2003. Personal consumption expenditure in 2017 was USD 2.5 billion equivalent
continues to be driven largely by overseas to 0.8 percent of GDP, higher than the
remittances. The recent improvement in the 0.4 percent in the previous year. Foreign
Figure 1.2
Investment-to-GDP ratio (percentage terms)
Figure 1.3
Oil prices (USD per barrel)
Figure 1.5
Net foreign investments (BPM6 format), in USD million, 2008–2017
direct investment inflows reached in the unemployment rate from 7.0 percent
USD 10.0 billion in 2017, a 21.4-percent in 2012 to 5.7 percent in 2017 (Figure 1.7).
increase over 2016 (Figure 1.5). But this was This is equivalent to 2.7 million jobs created
offset by higher portfolio capital outflows in five years as against the 2.4 million
yielding a balance-of-payments deficit of increase in the labor force. However, the
0.3 percent of GDP, up from 0.1 percent underemployment rate was recorded at
in 2016. Gross international reserves rose 16.1 percent in 2017. While the figure is
to USD 81.6 billion in 2017, providing lower than the 20 percent in October 2012,
8.0 months of cover for imports of goods this indicates that the economy is performing
and services. below potential. The Philippines is no
exception to the emerging phenomenon of
Inflation and unemployment relatively few high-skill workers and not
Stronger domestic demand, higher fuel enough low-skill jobs.
prices, and the depreciation of the peso
led to an inflation rate of 3.2 percent in
2017 from 1.8 percent in the previous year Macroeconomic policy
(Figure 1.6). This was within the BSP target
of 2–4 percent. Core inflation also rose from Monetary policy
1.9 percent to 2.9 percent during the same
period owing mainly to faster increases The relatively high GDP growth and
in the cost of food. Inflationary pressure rising inflation have raised concerns that
increased sharply in the first half of 2018 the economy is overheating. Data show
following the implementation of TRAIN that there has been an uptick in borrowing
and the increase in global crude oil prices. activity (Figure 1.8). The report of the
Economic growth during the period ASEAN+3 Macroeconomic Research
2012–2017 averaged 6.6 percent compared Office or AMRO (2018) shows that bank
with 4.9 percent in the preceding decade, lending further gained pace in 2017,
2002–2011. The faster growth led to a fall especially in the first three quarters.
Figure 1.6
Inflation
Figure 1.7
Employment statistics
Figure 1.8
Banking indicators (PHP billion)
Bank credit growth declined in the fourth expansion and the robust growth of the
quarter, but the rate was still more than real estate sector since 2010 may signal the
two times the expansion of GDP. Loans formation of an asset bubble.
were channeled to productive sectors such The amount of credit, however, has to
as manufacturing but other sectors like be put in proper context. The amount of
household consumption, particularly motor borrowing and bank loans is expected to rise
vehicle purchases, and real estate received with increased economic activity. The ratio
significant amounts (Figure 1.9). Credit of domestic credit to GDP indicates a more
Yap, Borromeo, and Hernandez 11
Figure 1.9
Bank loans
Figure 1.10
Ratio of credit to gross domestic product
modest expansion (Figure 1.10). Moreover, that asset quality has remained stable.
a cross-country comparison reveals a Nevertheless, rapid credit growth should
relatively underdeveloped financial sector be subject to close monitoring especially
(Figure 1.11). Nomura Research Institute, in certain segments. For example, while
in its Asian Economic Outlook, identifies they have eased in more recent periods,
being underleveraged as one of the strengths nonperforming loan ratios in the real estate
of the Philippine economy. and auto loan segments remain relatively
Moreover, despite this rapid credit elevated, a warning sign given their
expansion, AMRO (2018) reports continued rapid pace of credit expansion
12 The Philippines in 2017: Recent Developments and Macroeconomic Outlook for 2018–2019
Figure 1.11
Domestic credit as percent of gross domestic product
despite having eased over the preceding GDP in 2013–2015, the budget deficit rose
one to two years. This may be indicative to 2.4 percent in 2016 and 2.2 percent in
of risk pockets. 2017 as expenditures, particularly capital
The main consideration of monetary outlays, grew faster than revenues (Figure
policy is the transmission between BSP’s 1.12). However, there are still concerns
instruments and the target, which is usually about implementation capacity. It has
the level of interest rate, money supply, or been observed that the fiscal disbursement
amount of credit, and between the target and rate in 2017 is about the same as the
the objective, which is usually inflation. The previous year and could remain well below
AMRO report concludes that the BSP has 100 percent for another year (AMRO 2018).
made progress in improving the monetary Weak implementation capacity among line
policy transmission since the adoption of agencies is one of the downside risks that is
the interest rate corridor framework for the discussed in a later section.
setting of monetary policy (Box 1.1). Fiscal revenue collection gained pace
in 2017 resulting in a revenue-to-GDP
Fiscal policy ratio of 15.7 percent, which exceeded
To support higher output expansion, the the government target and is higher than
Duterte administration adopted a higher the 15.2 percent in the previous year. Tax
budget deficit ceiling, consistent with collection, providing 91 percent of revenue,
a more expansionary fiscal policy. As a rose by 13.6 percent to equal 14.2 percent
result, from an average of 1.0 percent of of GDP, improving from 13.7 percent in
Yap, Borromeo, and Hernandez 13
Box 1.1
The interest rate corridor framework
T he interest rate corridor (IRC) system consists of the following instruments: standing liquidity facilities, namely,
overnight lending facility (OLF) and overnight deposit facility (ODF); overnight reverse repurchase (RRP) facility;
and term deposit auction facility. The interest rates for the standing liquidity facilities form the upper and lower
bound of the corridor while the overnight RRP rate is set at the middle of the corridor. The repurchase (RP) and
Special Deposit Account (SDA) windows were replaced by standing OLF and ODF, respectively. Meanwhile, the
RRP facility was modified to a purely overnight RRP. In addition, the term deposit facility (TDF) will serve as the
main tool for absorbing liquidity.
The interest rates for these facilities were set, starting June 3, 2016, as follows:
• 3.5 percent in the OLF (a reduction of the interest rate for the upper bound of the corridor from the
current overnight RP rate of 6.0%)
• 3.0 percent in the overnight RRP rate (an adjustment from the current 4.0%)
• 2.5 percent in the ODF (no change from the current SDA rate)
The shift to the IRC system does not represent a change in the Bangko Sentral ng Pilipinas’ (BSP) stance
of monetary policy. The IRC reforms are primarily operational in nature and will not materially affect prevailing
monetary policy settings upon implementation. In particular, the new Term Deposit Auction Facility is expected to
have a rate between that of the RRP and the ODF such that the weighted rate for monetary operations will remain
broadly the same. Moreover, the interest rate at the floor of the corridor, where the bulk of the BSP’s liquidity
absorption with the market currently takes place, is being kept steady at the launch of the IRC system. At the
same time, short-term liquidity conditions are expected to remain broadly unchanged as funds will continue to be
absorbed through monetary operations under the new IRC system. In conducting monetary operations, the BSP
will calibrate carefully the volume of the TDF offerings to achieve a smooth transition to the new system.
Meanwhile the AMRO (2018, pp. 18–19) report states: “The BSP shifted its monetary operations to an IRC
system in June 2016 in an effort to improve the transmission of monetary policy amid excess liquidity in the
financial system. Since the IRC adoption, the transaction volumes of the term deposit auction facility (TDF) have
increased with TDF rates moving towards the upper end of the corridor. Short-term rates such as the 3-month
Treasury bill yields have crept up closer to the lower bound of the corridor, although the upward moves were also
likely facilitated by capital outflows resulting from policy rate hikes by the United States (US) Federal Reserve and
the spike in long-term yields following the US elections. Since the introduction of the IRC, the yield curve has seen
an upward shift across bond tenors. Meanwhile, interbank call loan rates had been settling at the low end of the
corridor until they inched higher in the final quarter of 2017 through January 2018.”
2016. The other components of the TRAIN improve the government’s budget process
are expected to be enacted into law in by facilitating a more efficient budget and
2018. While the revenue impact will not more effective project (Box 1.2).
be immediate, the fiscal deficit is expected
to remain below 3 percent. The Budget Exchange rate policy
Reform Bill is also expected to be enacted The recent peso depreciation (Figure 1.4)
into law in the latter part of 2018. This will has raised concerns about an inflation
14 The Philippines in 2017: Recent Developments and Macroeconomic Outlook for 2018–2019
Figure 1.12
Budget deficit as percent of gross domestic product
spiral. However, the analysis of BSP and In terms of inflationary effects, the
other experts should assuage these fears implementation of the inflation-targeting
(e.g., Habito 2018). The peso depreciation framework has reduced the pass-through
is driven by foreign exchange outflows. from exchange rate movements to
But the latter actually are largely related to domestic prices. Hence, the benefits of a
positive trends. First, the faster economic peso depreciation to exporters, families
growth has been fueled by higher imports dependent on overseas remittances,
of raw materials, equipment, and capital and domestic manufacturers will not be
goods. Second, there has been an increase overcome by the costs to importers, those
in foreign investment abroad, e.g., Jollibee with foreign currency denominated debt,
franchises in Singapore and Viet Nam. and consumers in general.
And third, the Philippine government The BSP has continued to adopt
has been prepaying international debt to measures to liberalize the foreign exchange
take advantage of the current low level of market. The AMRO report states that “the
interest rates. latest reforms, issued in December 2017,
Meanwhile, adopting a longer-term focus primarily on the following objectives,
time frame shows that the peso depreciation namely, (a) further ease of access to the
is in tandem with the movement of other banking system’s FX resources for legitimate
regional currencies. The real effective transactions to help sustain the economy’s
exchange rate, which adjusts the peso’s growth trajectory; (b) encourage the shift
movement relative to a basket of currencies of more FX transactions from the informal
of the most important trading partners of market to the banking system; and (c)
the Philippines and adjusted for inflation maintain the BSP’s ability to capture current,
differentials, has also been broadly stable. reliable, and important data or information
This means that the competitiveness of for policy review and formulation, analysis
local firms has been maintained. and monitoring” (AMRO 2018, p. 24).
Yap, Borromeo, and Hernandez 15
Box 1.2
The Budget Reform Bill
I n line with the government’s thrust for more efficient, transparent, and accountable delivery of
public services, the Department of Budget and Management is pushing for the passage of the
Budget Reform Bill, a measure that seeks to modernize budgetary practices in the Philippines. It is an
encompassing reform initiative covering the entire budget process—from budget planning, to budget
execution, tracking, and so forth.
The said bill will change the budgeting process as it will address age-old problems like
underspending and the usurpation of Congress’ power of the purse. This is especially important in view
of the government’s expansionary fiscal policy, where spending for infrastructure and social services is
projected to increase significantly.
Among the pertinent features of the reform bill is the shift from a multiyear obligation budget to an
annual cash-based budget. The common budgetary practice in the Philippines is to allow appropriations
and obligations until the next fiscal year, extending the validity of funds to two years. This has led to slow
budget utilization on the part of line agencies.
A reform that will be institutionalized by the Budget Reform Bill is the comprehensive release of
funds to line agencies with the passage of the General Appropriations Act (previously called WYSIWYG—
What You See Is What You Get – and later on, GAARD—General Appropriations Act as Release
Document). Early procurement activities short of award, meaning preprocurement conference until
postqualification, will also be authorized to speed up project implementation for line agencies.
As for technology, an integrated financial management information system will be adopted by the
bureaucracy. It will serve as a single portal for all financial transactions of the government which will
provide real-time information on the budget and the country’s finances.
Beyond efficiency measures, the Budget Reform Bill will also ensure that future national budgets
will be fully compliant with the laws governing public finance, especially the landmark Supreme Court
decisions on the Disbursement Acceleration Program and the Priority Development Assistance Fund.
The bill has been approved in the House of Representatives on March 28, 2018.
At the Senate, Senate Bill (SB) 1450 was filed by Senator Loren Legarda, the chairman of the
Senate Committee on Finance, on May 11, 2017. A committee hearing was also conducted under the
Committee on Finance last August 7, 2017. A technical working group meeting was tentatively set on
September 25, 2017 to iron out the provisions of SB 1450.
Balance sheet normalization would further raising interest rates in the region,
lead to a reduction of the Fed’s portfolio thereby posing a challenge to financial
holdings and this, along with policy rate stability. Consequently, the countries like
hikes, would have a positive impact on the Philippines would face higher financing
interest rates in the US. This implies a costs of investment and higher effective
stronger US dollar—which has mixed discount rates, which would lower asset
effects—and a potential drain of capital valuation and weaken the corporate balance
flows to emerging markets. Net portfolio sheets of firms in the country.
flows in the Philippines have already turned Meanwhile, the AMRO (2018) report
negative in 2015 (Figure 1.5). and the most recent Asian Development
The speed of monetary policy Outlook (ADB 2018) both highlighted the
normalization largely depends on the urgent need to augment technical capacity
country’s economic performance. In the within government agencies. It has been
case of the US, economic growth is robust observed that they “lack sufficient skilled
and unemployment rate is the lowest since manpower and have poor institutional
2000. Inflation has also been picking memory to effectively implement the
up and there are signs that the economy growing number of complex projects
may be overheating. This may spur the such as urban subways, complicated road
US Fed to accelerate its monetary policy networks, and flood control and urban water
normalization through faster-than-expected systems, which would require international
interest rate hikes and a faster pace of its expertise. Similarly, not enough domestic
balance sheet normalization. private contractors have the technical
Meanwhile, the possibility of a global competence, experience, and financial
trade situation similar to the one in the capacity to handle large-scale projects”
aftermath of the Asian financial crisis (AMRO 2018, p. 21). Capacity building
(AFC) is quite remote. The recent growth in takes time but is essential. As many
the global trade volume is much lower than infrastructure projects are already being
the post-AFC period. This is not to mention prepared and implemented, the government
the emerging protectionist sentiments may facilitate on-the-job training and
across the world that has introduced a new transfer of knowledge and best practices
dimension of uncertainty. from experts. Public-private partnership
arrangements are definitely a viable option.
Despite the Philippines’ abundant
Domestic risks labor supply and high unemployment
rate, the Project JobsFit DOLE 2020
Based on earlier discussion, the downside Vision: Summary of Findings and
risks center on inflation and possible Recommendations, sponsored by the
overheating. Monetary policy has already Department of Labor and Employment
been tightening as evidenced by the (DOLE) and published in 2010, had
behavior of interest rates (Figure 1.13). already indicated labor shortages in specific
However, the higher US interest rates occupations and industries (AMRO 2018).
could spill over into emerging Asia by The deficiency is a result of both quantity
Yap, Borromeo, and Hernandez 17
Figure 1.13
Selected interest rates
Table 1.3
Forecasts of Philippine gross domestic product growth rate
2018 2019
National Economic and Development Authority (NEDA) 7–8 7–8
Asian Development Bank (ADB) 6.8 6.9
International Monetary Fund (IMF) 6.7 6.7
Philippine Institute for Development Studies (PIDS) 6.4 7.0
Meanwhile, large public infrastructure first mass transit subway. Elections will also
projects initiated by the government are be held in 2019 and this will provide the
scheduled to come onstream leading to usual economic stimulus. The Philippine
significant crowding-in effects. These economy should finally breach the
projects include national and provincial 7.0-percent threshold in 2019, which is the
roads, railways, airports, and the Philippines’ lower boundary of NEDA’s target.
References
Asian Development Bank (ADB). 2018. Asian Development Outlook 2018: How technology affects jobs.
Mandaluyong City, Philippines: ADB.
ASEAN+3 Macroeconomic Research Office (AMRO). 2018. AMRO Annual Consultation Report Philippines –
2017 (March). Singapore: AMRO. https://www.amro-asia.org/amros-2017-annual-consultation-report-on
-the-philippines/ (accessed on August 31, 2018).
Bangko Sentral ng Pilipinas (BSP). 2016. BSP implements interest rate corridor (IRC) system in Q2 2016. Media
release. Manila, Philippines: BSP. http://www.bsp.gov.ph/publications/media.asp?id=4063 (accessed on
November 12, 2018).
———. 2017a. Selected Philippine economic indicators. Manila, Philippines: BSP.
———. 2017b. Philippine peso per US dollar exchange rate. Manila, Philippines: BSP.
———. 2017c. Foreign direct investments. Manila, Philippines: BSP.
———. 2017d. Consumer price index, inflation, and purchasing power of the peso. Manila, Philippines: BSP.
———. 2017e. Financial system accounts. Manila, Philippines: BSP.
———. 2017f. National government cash operations. Manila, Philippines: BSP.
———. n.d. BSP online statistical database on income and expenditure accounts. Manila, Philippines: BSP.
http://www.bsp.gov.ph/PXWeb2007/database/SPEI/inc_exp_accts/inc_exp_accts_en.asp (accessed on
November 12, 2018).
Department of Budget and Management (DBM). 2017. Budget Reform Bill seen to modernize PH budgetary
system. Breakfast with Ben. September 20. Manila, Philippines: DBM.
Guinigundo, D.C. 2017. Sustaining the lead, beating the heat. BusinessMirror. December 11. https://
businessmirror.com.ph/sustaining-the-lead-beating-the-heat/ (accessed on November 12, 2018).
Habito, C.F. 2018. Falling peso, rising economy? Philippine Daily Inquirer. June 19. http://opinion.inquirer.net
/114021/falling-peso-rising-economy (accessed on November 12, 2018).
International Monetary Fund (IMF). 2017a. World Economic Outlook: Gaining momentum? Washington,
D.C.: IMF.
———. 2017b. Primary commodity prices. Washington, D.C.: IMF.
Philippine Statistics Authority (PSA). 2017a. National income accounts. Quezon City, Philippines: PSA.
———. 2017b. 2017 Labor Force Survey. Quezon City, Philippines: PSA.
CHAPTER 2
Policy Updates
Aubrey D. Tabuga
Jose Ramon G. Albert
Connie B. Dacuycuy
Marife M. Ballesteros
Michael R.M. Abrigo
Danica Aisa P. Ortiz
Aniceto C. Orbeta Jr.
Roehlano M. Briones
Sonny N. Domingo
Francis Mark A. Quimba
Ramonette B. Serafica
Charlotte Justine D. Sicat
20 Policy Updates
https://www.flickr.com/photos/fmsc/6190145802/in/album-72157627486635853/
senior citizens from poor households in year and likewise considers the latest
2011. However, only about 150,000 senior available data on the number of wait-listed
citizens aged 77 years and above were applicants from the 17 DSWD field offices
targeted for SocPen during its first year (typically every October). To be included as
of implementation in 2011 due to budget a wait-listed applicant, the local government
limitations. Funding for SocPen is derived unit (LGU) and DSWD conduct a series of
from the government’s GAA as part of the evaluation activities to validate whether
social protection programs implemented by the senior citizen is indeed eligible to be a
the DSWD. recipient of government assistance or not.
Thus, the DSWD then was expected Since 2014, the listing of senior citizens in
to serve the remaining indigent seniors Listahanan is no longer used for targeting
the following year. The age coverage of social pensioners because LGUs have
77 years and above continued until 2014 taken full responsibility for identifying
(though the target number of beneficiaries beneficiaries of the SocPen program.
nearly doubled in 2014 compared to the Independent estimates of the number of
previous year). In 2015, the minimum age of senior citizens from poor households suggest
target beneficiaries was reduced to 65 years that the current program coverage, which is
and since 2016, it was further reduced to supposed to target elderly indigents, appears
60 years with a corresponding increase in to be more than sufficient. From 2011 to 2013,
program budget and coverage (Table 2.1). the number of physical targets of the SocPen
From 2011 to 2013, the actual number program (based on Listahanan data) has been
of beneficiaries served under the program within the number of estimated persons aged
surpassed the target number; however, this 77 years and above of the bottom 20 or
number slightly declined starting 2014. The bottom 30 percent of income distribution,
DSWD develops the physical targets for which means that physical target is within
the succeeding year based on the number the bounds of the first two and three income
of existing social pensioners for the current deciles (Table 2.2). The latter estimates were
Table 2.1
Annual physical target, actual served, budget allocation, and actual budget stipend
for Social Pension program: 2011–2018
Year Physical Target Age Coverage Actual Served Budget Allocation Actual Budget Stipend
(in PHP million) (in PHP million)
2011 138,960 77 years and above 138,960 871 843.47
2012 185,194 77 years and above 211,657 1,227.46 1,231.70
2013 232,868 77 years and above 255,763 1,532.95 1,553.65
2014 479,080 77 years and above 481,603 3,108.91 2,934.42
2015 939,609 65 years and above 930,222 5,962.63 5,946.97
2016 1,368,944 60 years and above 1,343,943 8,711.20 8,593.53
2017 2,809,542 60 years and above 2,559,20 17,940.26 14,978.25
2018* 3,000,000 60 years and above Not yet available 19,282.86 Not yet available
Table 2.2
DSWD number of target beneficiaries for Social Pension (SocPen) program and estimated number
of senior citizens within age coverage of SocPen across bottom deciles of income distribution
DSWD = Department of Social Welfare and Development; APIS = Annual Poverty Indicators Survey
Source: DSWD, email message to author in 2017; Author’s estimates from microdata of APIS (PSA 2011, 2013, 2014, 2016)
sourced from the results of waves of the of the elderly generated from the results of
Annual Poverty Indicators Survey (APIS) the 2016 APIS. It is very much likely that
conducted by the Philippine Statistics as early as 2014, the maximum physical
Authority (PSA). targets for elderly indigents have actually
During the first year when Listahanan been reached.
was no longer used as basis for beneficiary SocPen evaluation reports (DSWD
identification in 2014, the physical target 2012; COSE/HelpAge International 2016)
for SocPen was 75 percent more than the revealed that beneficiaries spend their cash
independent estimates of the number of assistance on food (including milk), health
senior citizens (aged 77 and above) from the (such as medicine, checkups), or repayment
bottom 30 percent of income distribution. of debts. Further, reports likewise
The much bigger physical target for SocPen mentioned that while social pensioners
in 2014 may have allowed assistance to find the cash assistance helpful, as much as
be given to those outside the age cutoff 4 out of 5 SocPen beneficiaries also consider
of 77 years but who belong to the bottom the amount to be inadequate. With the recent
20 percent of the income distribution. passage of TRAIN law, social pensioners as
However, the huge targets could have also well as beneficiaries of the 4Ps and other
been due to other inaccuracies in targeting low-income families identified through
beneficiaries, especially with the lack of Listahanan are expected to be provided
clear guidelines followed by LGUs in with PHP 200 monthly assistance for 2018
determining exactly the elderly indigents as part of the government’s cash assistance
from among all senior citizens within the to cushion the effects of indirect taxes to
area. A similar observation can be made poor families as a result of the TRAIN. The
about the 2017 physical target that was cash assistance is expected to be increased
based on the population growth projections to PHP 300 per month in 2019 and 2020.
26 Policy Updates
The extra cash assistance in 2018 provides programs (conditional cash transfer and the
a 40-percent increase from their regular sustainable livelihood program) as well as
stipend. In 2019 and 2020, the TRAIN selected social protection programs outside
subsidies will increase (from PHP 2,400) of DSWD (e.g., provision of PhilHealth
to PHP 3,600 annually, bringing the total cards to indigents). DSWD implements a
assistance to PHP 9,600 for each of the convergence strategy (Albert and Dacuycuy
3 million senior beneficiaries in 2019 and 2017) focused on harmonizing three social
2020. In total, the subsidies from the tax protection programs of the department such
reform law will effectively bring the total as the conditional cash transfer, a livelihood
SocPen program budget to PHP 25.2 billion support, and a community support program.
in 2018 and PHP 28.8 billion annually Under the DSWD convergence strategy,
in 2019 and 2020. The increase in cash there is an opportunity to include SocPen
assistance for poor seniors is welcome to especially with reference to targeting
beneficiaries, especially since it cushions systems, information systems, payment
the impact of higher prices on seniors’ daily systems, and monitoring and evaluation
cost of living. But this rapid increase in cash processes. Attention is needed to ensure
assistance needs proper safeguarding. SocPen’s poverty focus and to maintain its
The DSWD, nonetheless, needs to social protection objectives.
evaluate the possibility of adjusting the
current amount of benefits provided to
pensioners, which is getting less adequate Women
due to rising prices as a result of the TRAIN
implementation. Over time, the SocPen The Philippine Development Plan (PDP)
program may turn out being less impactful 2017–2022 outlines the socioeconomic
in reducing poverty rates. Rather than agenda toward AmBisyon Natin 2040
continuously expand program coverage, (EO 5, series of 2016) and takes into
the government should consider providing
bigger pensions to some of the current
beneficiaries based on their increased needs
to further reduce the poverty gap of those
below the poverty line.
Harmonization of social protection
programs within DSWD and across the
entire government is important to ensure
greater coherence in building risk resiliency
among the poor and vulnerable sectors
including the elderly indigents. Currently,
the information systems of SocPen
are not systematically linked to other
DSWD information systems, particularly
Listahanan, which is being used as basis in https://www.tesda.gov.ph/Uploads/File/
Resources/2017%20TESDA%20Annual%20Report.pdf
identifying beneficiaries of other DSWD
Tabuga et al. 27
account the country’s commitment to the One, the female labor force participation
Sustainable Development Goals (SDGs). rate (LFPR) percentage of population ages
To achieve these development plans, 15–64 is at 51 percent in 2017, which is just
commitments, and aspirations, the country a 2-percentage point improvement from the
has to harness the productive capacity of its 1990 female’s LFPR. Labor market returns
widely available resource—labor. are lower for female than male (ADB 2013;
Women have an equal role as men in UNDP 2015). Two, 4 out of 10 females
steering the country toward sustainable are own-account workers and contributing
growth not only because they comprise family workers. Among member-countries
50 percent of the country’s population of the Association of Southeast Asian
but also because women significantly Nations (ASEAN), the Philippines, together
contribute in achieving development with Viet Nam and Laos, has one of the
outcomes. Studies showed that women’s highest vulnerable employments. Three,
education positively affects food security the share of women in wage employment in
(Smith and Haddad 2000) and children’s the nonagricultural sector barely improved
health, nutrition status, and educational (from 40% in 1990 to 41% in 2017).
attainment (Duflo 2005). In addition, women are still
In the Philippines, substantial progress underrepresented in national parliaments.
has been achieved toward women In 1990, the percentage of women
empowerment and gender equality. Efforts holding a seat in national parliament is
to make governance gender responsive around 10 percent. While this improved
are promoted through legislation, such as in 2017 at around 30 percent, this is still
the Magna Carta of Women (MCW). MCW 21-percentage points lower than the MDG
mandates nondiscriminatory and progender target. Women in the Philippines, however,
equality and equity measures to enable have a higher proportion of representation
women’s participation in the formulation, in the national parliament compared to
implementation, and evaluation of policies, its ASEAN neighbors. While the law on
plans, and programs for national, regional, violence against women and children
and local development. In line with this, all (VAWC) is in place, the incidence of
government agencies are mandated to allot VAWC reporting did not improve. Around
a minimum of 5 percent of their budget to 20.1 percent of women aged 15–49 years
gender and development. Further, based on have reported having experienced violence
PSA (2016), the Millennium Development in 2008 and around 19.6 percent in 2013
Goals (MDG) target ratios of girls to boys in (David et al. 2017).
primary, secondary, and tertiary education Based on data from the World Health
have been achieved. Male and female’s Organization (2015), maternal mortality
basic literacy rate is similar although rate (MMR), or maternal deaths per
female’s functional literacy rate is higher. 100,000 live births, is declining, from 152
Despite these advancements, much in 1990 to 114 in 2015. However, these
remains to be hurdled. Based on the World rates, alongside with that of Indonesia’s, are
Bank’s World Development Indicators one of the highest in the region and are still
(n.d.), the following observations are noted. below the SDG target of 70/100,000 MMR.
28 Policy Updates
that there are 30 percent more females than housing strategy intended to accelerate
males engaged in running an enterprise housing production especially for families
(GERA 2017). There is, therefore, a displaced by the government’s infrastructure
need to strengthen (1) micro, small, and program as well as other households living
medium enterprises (MSMEs) as well as in unacceptable housing conditions. Unlike
access to credit and technical skills, and the Oplan Likas program implemented
sustaining and upscaling of enterprises and during the previous administration which
(2) provision of infrastructure support like specifically targeted informal settlers in
fast and affordable access to information Metro Manila and in danger areas, the
technology that will aid the entrepreneur’s BALAI program is nationwide in scope.
visibility in the local and global markets. The BALAI program has a total
While policies are already in place funding of PHP 1.15 trillion from 2017
to support women’s participation in to 2022 (Table 2.3). This budget is
economically productive endeavors, much estimated to result in the production of
remains to be done. Bayudan-Dacuycuy 1.45 million socialized and low-income
and Dacuycuy (2017) identified two housing units. About PHP 170 billion
areas where policies can be improved: (1) will come from government-appropriated
provision of strong child-care systems and budget while end-user financing generated
(2) strengthening of social protection of from loanable funds of the Socialized
workers in the informal sector. Housing Finance Corporation (SHFC)
In the VAWC sphere, David et al. and the Home Development Mutual
(2017) recommend some measures, such as Fund (HDMF) amounts to a total of
(1) review of implementation experiences PHP 976.7 billion. The total government
to analyze needs for procedural changes and appropriated budget is earmarked as
additional information that can facilitate National Housing Authority (NHA)
the effective enforcement of existing laws, budget for the period in review. In 2017,
(2) assessment of available resources to the NHA approved budget amount to
inform budgeting decisions at all levels PHP 40.9 billion or 1.64 percent of the total
of government to ensure that enforcement national government expenditure program
and support obligations spelled out in the for the year.
laws are funded, and (3) improvement of The BALAI program follows the
programs aimed at VAWC prevention. traditional strategy of direct housing
provision through the NHA resettlement
program and the end-user financing program
Housing through government-controlled corporations
such as SHFC and HDMF. However, the
In support of President Duterte’s Build, program expanded the activities to increase
Build, Build program, the government private sector participation in housing
launched on October 18, 2017, the BALAI development for low-income families
Filipino (Building Adequate, Livable, through joint projects with the private sector,
Affordable, and Inclusive Filipino streamlined processes, financing incentives,
Communities) program, a 10-year national and regulation.
Table 2.3
Funding for the BALAI program (in PHP million)
Summary Agency 2017 2018 2019 2020 2021 2022 Total
Direct housing provision
1. NHA housing production NHA 40,923.864 22,836.207 19,983.902 28,229.470 28,855.380 29,413.037 170,241.860
Resettlement 36,815.365 19,150.207 16,153.615 25,577.220 25,577.220 25,577.220 148,850.847
Settlement upgrading 38.920 2,250.000 2,357.207 2,652.250 3,278.160 3,835.817 14,412.354
Vertical development 1,498.000 1,236.000 1,273.080 4,006.659
Housing Assistance Program for Calamity
1,572.000 200.000 200.000 1,972.000
Victims
Capital expenditure 1,000.000 1,000.000
2. Community Mortgage Program SHFC 9,149.13 11,479.88 15,383.17 17,979.31 20,575.45 23,171.59 97,738.52
- Community Mortgage Program 3,584.87 4,498.12 6,983.91 8,162.55 9,341.19 10,519.83 43,090.48
- High Density Housing Program 5,564.26 6,981.76 8,399.26 9,816.75 11,234.26 12,651.76 54,648.04
3. Retail and development financing (total) HDMF 125,622.583 138,188.442 145,057.336 149,754.162 156,573.838 163,749.361 878,945.722
a. Socialized housing 65,123.627 71,094.217 74,382.204 78,226.881 81,582.977 85,074.412 455,484.318
- % to total HDMF housing portfolio 51.8 51.4 51.3 52.2 52.1 52.0 51.8
b. Low-cost housing 55,123.627 61,094.217 64,382.204 68,226.881 71,582.977 75,074.412 395,484.318
- % to total HDMF housing portfolio 43.9 44.2 44.4 45.6 45.7 45.8 45.0
c. Medium cost 3,468.568 4,000.005 4,195.285 2,200.267 2,307.751 2,421.586 18,593.462
- % to total HDMF housing portfolio 2.8 2.9 2.9 1.5 1.5 1.5 2.1
d. Open market 1,906.761 2,000.003 2,907.643 1,100.133 1,100.133 1,178.951 9,383.624
- % to total HDMF housing portfolio 1.5 1.4 1.4 0.7 0.7 0.7 1.1
Total direct housing provision 175,695.57 172,504.53 180,424.41 195,962.94 206,004.67 216,333.99 1,146,926.10
BALAI = Building Adequate, Livable, Affordable, and Inclusive Filipino Communities; NHA = National Housing Authority; SHFC = Socialized Housing Finance Corporation;
HDMF = Home Development Mutual Fund
Source: Author’s representation of table from Philippine Development Plan 2017–2022 targets (NEDA 2017a)
Tabuga et al. 31
implementation of all government housing continuing inequities in health that call for
programs. Under the proposed new concerted response measures.
department, the HUDCC and the Housing Government spending on health has
and Land Use Regulatory Board (HLURB) significantly increased over the second half
will be merged while the NHA, HGC, of the last decade. In 2016, it is estimated
NHMFC, HDMF, and SHFC will be attached that the government spent PHP 233 billion
to the DHUD for easier coordination but on health care (PSA 2017) compared to only
they will continue to function according PHP 64 billion in 2005 (NSCB 2013). Part
to their respective charters. Through the of this rise in government health spending
merger, HB 6775 envisions to harmonize may be attributed to the expanded programs
and provide a holistic approach to dealing by the Department of Health (DOH), which
with problems in housing, human settlement, include the Health Facilities Enhancement
and urban development. Program, the Medical Assistance Program,
Over the years, the governance of the and the Human Resource for Health
housing sector has been highly politicized. Deployment Program. The Sin Tax Law
Efforts to reform the sector are confined to enacted in 2012, to a larger extent, resulted
program policies. The creation of a housing in greater tax collections and subsequent
department could provide the needed holistic increase in the share of health services.
approach. However, this requires more than The law paved way for the increase in
just a merger of HUDCC and HLURB. The public sector’s involvement in raising
roles of the national and local government and in financing the country’s total health
units in housing and urban development expenditures (Table 2.4). Still, it cannot
must be redefined clearly. be overemphasized that more than half of
health-care spending remains to be paid
out of pocket by households, exposing
Health families to potentially great risks of falling
into poverty.
The Philippines has made great strides in
improving health outcomes in the past half
century. The country’s infant mortality rate,
for instance, has been slashed significantly
from about 67 deaths per 1,000 live births
in 1960s to only 22 deaths per 1,000 live
births in 2016. Over the same period, life
expectancy at birth has increased from
58 years in the 1960s to about 69 years in
2015, although this is still below the global
average of 71 years (WB 2017a). Challenges
and threats in improving the country’s
health outcomes persist, however, such as
the growing burden of noncommunicable
https://www.flickr.com/photos/dfid/11352296333
diseases including injuries, and the
Tabuga et al. 33
More recent reforms are expected to medicines and other products that are used
improve the government’s engagement to treat these rare diseases. RA 10767,
concerning health. In 2016, the DOH issued on the other hand, mandates increased
AO 2016-0038 introducing the Philippines government investments for tuberculosis
Health Agenda 2016–2022 (PHA) anchored (TB) prevention, treatment and control,
on three goals: financial protection, better including the strengthening of the National
health outcomes, and responsiveness of TB Control Program, and the creation of
health services. The PHA sets the direction a review and monitoring system that will
of government interventions related to aid in tracking the country’s progress in
health and provides specific and general eliminating TB. Also under this law, the
guidelines to achieve its goals. Philippine Health Insurance Corporation
Also in 2016, the government enacted (PhilHealth) is mandated to expand its
landmark legislations related to health such benefit packages for TB patients such that
as the Rare Disease Act of the Philippines new, relapse, and return-after-default cases
(RA 10747) and the Comprehensive are now covered, as well as the extension
Tuberculosis Elimination Plan Act (RA of treatment.
10767). RA 10747 provides a mechanism to In 2017, Congress amended the
increase the health-care access of persons country’s Anti-Hospital Deposit Law
afflicted with rare diseases, including (RA 10932) by increasing the sanctioned
providing them with the same benefits as penalties for the refusal of health facilities
persons with disabilities under the Magna to administer initial medical treatment and
Carta for Disabled Persons (RA 7277). support in emergency or serious cases.
The law also mandates the creation of a Similar to the law’s predecessor, Batas
Rare Disease Registry that shall include Pambansa 702, the amendment prohibits
information on the covered diseases, medical facilities from demanding deposits
list of persons with such diagnosis, and or any advance payment from patients
Table 2.4
Sin tax incremental revenue to 2016 DOH budget (in PHP billion)
Particulars FY 2013 DOH Budget FY 2016 DOH Budget
(baseline budget
without sin tax)
Total DOH Budget Of which from
incremental revenues
from Sin Taxes
PhilHealth* 12.63 43.89 31.26
Millennium Development Goals and others 24.16 41.10 16.94
Health Facilities Enhancement Program 13.56 21.01 7.45
Deployment of Human Resources 2.88 7.04 4.16
Medical Assistance Program 0 9.59 9.59
Total 53.23 122.63 69.40
run technical-vocational institutions (TVIs); the majority of which come from poorer
(2) tertiary education subsidy (TES) in households, will expectedly lose. This
private higher education institutions (HEIs) is clearly demonstrated by data from
and private-run TVIs; and (3) a student loan an existing targeted program called the
program. Will these instruments deliver the Students Grants-in-Aid Program for
legislation’s stated objectives? Poverty Alleviation (SGP-PA) that directly
Before analyzing the proposed targets 4Ps families with college-ready
measure, it is worth mentioning that RA high school graduates. Based on entrance
10687 or the Unified Student Financial examination scores, the SGP-PA grantees
Assistance System for Tertiary Education have inferior academic preparation
(UniFAST) was signed in October 2015. compared with other students and thus will
This law rationalizes the Student Financial lose in open competition (Silfverberg and
Assistance Programs (StuFAPs). Orbeta 2016). Only by explicit targeting
While well-intentioned, the untargeted of the poor like what is done in the SGP-
free tuition in SUCs, LUCs, and state- PA will assure them of places in public
run TVIs will likely lead to unintended tertiary institutions. Hence, it is doubtful
consequences for at least three reasons. that the proposed legislation will help
First, it is based on a hypothesis that achieve the objective of increasing access
appears to be not supported by data. The for all socioeconomic classes. Instead, it
often-used justification for this proposal will promote an even greater proportion
is that most students in SUCs, LUCs, and of students from higher socioeconomic
state-run TVIs are poor, hence, public classes in public tertiary institutions than
tertiary education institutions need even what already prevails.
greater government subsidy. Second, instead of encouraging more
However, an examination of the private investments in human capital
composition of students attending public development, the legislation proposes to
HEIs in 2014 shows that only 12 percent of replace with general taxes the tuition and
the student population may be considered other fees that households have willingly
poor, i.e., those from the bottom 20 percent decided to contribute for the education of
of the income classes (Orbeta and Paqueo their children. These private investments
2017). With this enrollment structure, any are motivated by the well-accepted
untargeted subsidy will mostly benefit hypothesis that, unlike basic education
students from richer households. The where most of the returns accrue to society,
proposed legislation is like asking a farmer returns to tertiary education mostly benefit
whose child did not qualify to attend a public the students. In addition, providing free
tertiary education institution to contribute tuition and other fees is not a one-time
to the education of a car-driving child of budget allocation but a recurring one. How
a doctor who qualified primarily because long and how capable is the government
of better basic education preparation. In in replacing this lost private contribution
the competition for free spaces in public to tertiary education remains to be seen. If
tertiary education institutions, those who this cannot be sustained or is replaced only
have poorer basic education background, partially moving forward, a deterioration
Tabuga et al. 37
of the quality of publicly funded tertiary and Paqueo (2017), simple analysis of
education can be expected. The economic the relationship between the presence of
managers in their memorandum to SUCs in the locality and enrollment shows
the president are justified in being this hypothesis is not supported by data
apprehensive that financing this substantial in general and much less among the poor.
recurring allocation may not be sustainable This is easy to explain by pointing out that
(NEDA 2017b). These arguments show that tuition is not the biggest component of the
providing free tuition and other fees does total cost of tertiary education but living
not contribute to fulfilling the objective of allowance. In addition, there is no real
optimizing the use of government resources urgency of aiming for higher attendance in
in education. tertiary education given that the Philippines
Third, the other hypothesis underlying has still many tertiary education graduates
the move to provide free tuition and other compared with other countries in a similar
fees in SUCs, LUCs, and state-run TVIs level of development (Figure 2.1). The
is the expectation that this will encourage figure shows that the Philippines has a
attendance in tertiary education, in higher proportion of people 25 years and
general, and the attendance of the poor, above who have tertiary degrees relative to
in particular. The latter is desirable from an average country of similar development
the equity objective. Unfortunately, there status. Moreover, poorly educated workers
appears to be no real empirical basis for are the second to the last obstacle among
this hypothesis. Again, as shown in Orbeta the biggest challenges mentioned by firms
Figure 2.1
Proportion of population 25 years and over with tertiary degree and real gross domestic
product per capita, 2010
Sources of basic data: Barro and Lee (2013); World Bank (n.d.)
38 Policy Updates
in the 2015 round of the Enterprise Surveys the UniFAST, this is clearly a step in the
of the World Bank (2017b). right direction. The remaining issue is how
The legislation stipulates that students the prioritization of students in the lower
with financial capacity can volunteer to socioeconomic classes will be implemented.
not receive the subsidy or contribute to the Finally, the features of the student
school. One wonders how many will be civic- loan program introduced in the proposed
minded enough to volunteer to contribute legislation address the problem of poor
when one can get tertiary education for repayment rates faced by existing loan
free. It is important to recall that public programs such as the Study-Now-Pay-Later,
finance textbooks point to the “free earning for it the moniker “Study-Now-Pay-
riding” issue as the primary reason for the Never”. The last known study that looked
underprovision of public goods if financed at the program (Kitaev et al. 2003) puts the
by voluntary individual contribution. There repayment rate at 2 percent. The legislation
is no compelling encouragement for those proposes to incorporate repayment into the
with financial capacity to contribute the collection system of the Social Security
appropriate amount commensurate to the System and the Government Service
benefits they receive. Insurance System rather than through
Nevertheless, it is notable that the the Commission on Higher Education
proposed legislation attempted to level the (CHED), which is not equipped to collect
playing field between private and public loan repayments. In addition, the legislation
tertiary institutions recognizing their mentions a laudable provision that requires
complementary rule in tertiary education. beneficiaries to pay their student loans only
This is done by providing for a TES program when their income is above the compulsory
for students in private HEIs and private- repayment threshold (CRT), making
run TVIs to be managed by the UniFAST their loans income contingent. Income-
Board. Furthermore, unlike the program for contingent loans eliminate the beneficiaries’
students in public tertiary institutions, this ordeal of paying their loan when their
explicitly provides for prioritization based on income is below the CRT, which may be
income using either the NHTS-PR or other due not to their fault alone but partly to
proof of income. In addition, the TES may the quality of education they got. To lower
cover room and board allowance, additional the likelihood that beneficiaries will earn
allowance for disability, and cost of getting below the CRT, the UniFAST law stipulates
professional license or certification. No that authorization from CHED is required
such similar explicit provision is proposed in the determination of tertiary institutions
for students in public tertiary institutions. and programs eligible for publicly funded
Covering the other costs, particularly StuFAPs. The results of professional
room and board, besides tuition and other board examinations showing the average
fees, is critical if participation of students passing rate at around 40 percent and the
from lower socioeconomic classes is being small proportion of faculty members with
encouraged. While this is somewhat inferior graduate degrees indicate that many of the
to an identical program for both public and tertiary education institutions and programs
private tertiary institutions proposed in in the country are not performing well
Tabuga et al. 39
Agriculture
19.5 percent over the first three quarters
The output performance of agriculture has of 2017, compared to only 0.1 percent
rebounded from years of meager growth. In over the same period in 2016. The biggest
2017, the growth rate of gross value added increase in exports was seen in rubber at
(GVA) of agriculture, fishery, and forestry 160 percent, but large increases were also
hit 3.9 percent, coming off a contraction observed in coconut, tuna, tobacco, and raw
(and low base) of -1.3 percent in 2016, and sugar (NEDA 2018b).
in contrast to the 0.9-percent average in In 2017, the average annual inflation
2011–2016. was 2.9 percent. Farmers have benefited
This growth was led by the rebound of from the price escalation since farm
the crops sector, with the highest growth gate prices grew by much more than the
contributed by sugarcane (14.4%) and inflation rate. Farm gate prices grew fastest
rubber (8.9%). Above-average growth was in livestock (12.3%), poultry (10.0%), and
also observed for most of the largest crops, fisheries (9.1%). This growth was also
namely, palay (4.37%), coconut (3.5%), observed in crops, averaging 4.3 percent,
and banana (3.15%) (PSA 2018b). Supply with palay registering the fastest increase
recovery was boosted by strong demand at 6.1 percent. The rise in farm gate prices
for agricultural exports from both the local led to a surge in food and nonalcoholic
and foreign markets. This demand grew by beverage prices to 3.0 percent, which was
40 Policy Updates
slightly above the overall growth of the systems while irrigators’ associations are in
consumer price index. charge of communal systems.
Nonetheless, the OECD (2017)
Tax policy assessment that the DA budget remains
In December 2017, the TRAIN was signed strongly oriented toward production
and enacted into law. Although the TRAIN support in the form of input subsidies
had overall little impact on agriculture, remains valid. While emphasis is given
increases in petroleum prices will tend on fertilizers and seeds in the early 2000s,
to impact on the agricultural sector, agricultural mechanization is now strongly
particularly capture fisheries, where fuel being pushed.
can account for as much as 60 percent of Research and development is a
the production cost (DA-PCAF 2017). productivity-oriented strategy with
PHP 2.8 billion in the DA budget. This
Expenditure policy amount, however, remains a dismal
For 2018, the budget allocation for the 0.002 ratio to the 2017 agricultural GVA.
Department of Agriculture (DA) was DA is not the only source of the agricultural
PHP 43.9 billion, an increase of 23 percent research and development budget. There are
from the previous year’s budget. However, also sizable allocations to the Department
as a ratio to agricultural GVA for 2017, of Science and Technology (DOST) as well
the DA budget was only 0.023 percent, far as to SUCs. However, the country remains
lower than the ratio in the Organisation for far from achieving the 0.01 ratio-to-GVA
Economic Co-operation and Development mandated by the Agriculture and Fisheries
(OECD) countries, which averaged Modernization Act (AFMA) of 1997.
0.23 percent in 2012–2014 and comparable
to Indonesia’s 0.03 percent (OECD 2017). Agricultural finance
The DA budget reflected the continuing
high priority for basic rural infrastructure. Subsidized credit thrust of DA
As much as PHP 9.9 billion was allocated The sector outcome (under the Ensuring
for farm-to-market roads in 2017. Irrigation Sound Macroeconomic Policy chapter)
alone was allotted PHP 41.7 billion through of the PDP 2017–2022 is resilient and
the National Irrigation Administration inclusive monetary and financial sectors.
(NIA), an 8.5-percent increase compared to Financial inclusion is consistent with
its PHP 38.4 billion budget in 2017. the market orientation of agricultural
Further, the national government credit policy as set forth in the AFMA.
provided PHP 2 billion in 2018 for irrigation To expand financial inclusion, the DA has
operations and maintenance. Under the launched the Production Loan Easy Access
Free Irrigation Act of 2017 (RA 10969), (PLEA) under the Agricultural Credit
which covers both national and communal Policy Council. PLEA aims to provide
irrigation systems, irrigation service is affordable and noncollateral loans to small
now free for farmers with landholdings farmers and fisherfolk through cooperative
of 8 ha and below. NIA is responsible for banks, cooperatives, and nongovernment
the operations and maintenance of national organizations. Interest rates are at 6 percent
Tabuga et al. 41
per annum. In contrast, the Land Bank of instruments, as the more convenient
the Philippines commercial rates are at collateral for obtaining credit financing
8 percent. This program, which received a (Briones and Tolin 2016).
budget of about PHP 1 billion in 2018, should
be closely monitored before upscaling to Trade policy
ensure that it is financially sustainable and
reaching its target beneficiaries. Sugar
In February 2017, the government issued
Abolition of QUEDANCOR Sugar Order 3 putting the importation of
In 2017, based on the recommendation of the high fructose corn syrup (HFCS) under
Governance Commission for Government- the ambit of the classification scheme
owned and Controlled Corporations, of the Sugar Regulatory Administration.
the president ordered the abolition of Importers of HFCS are now required to
the Quedan and Rural Credit Guarantee obtain a classification of their product prior
Corporation (QUEDANCOR) through to clearance from the Bureau of Customs.
Memorandum Order 13. QUEDANCOR The classification follows the standard sugar
was created in 1978 to accelerate growth categories, namely, B for domestic market,
and development, particularly in the C for reserved, and D for world market.
rural areas, through credit resources and The Sugar Order was primarily issued
sustainable guarantee system in agriculture. to protect the domestic sugar industry
The Governance Commission cited the from the threat of entry of HFCS, a
following reasons in its recommendation cheaper substitute for sugar. However, the
for the abolition of QUEDANCOR: order prevented the food and beverage
• It is nonfunctional, as it has exceeded its industry (the primary users of HFCS)
charter limit for extending guarantees. from realizing lower costs, ultimately
• It performs functions or purposes raising the prices of food and beverage
that duplicate functions, programs, products paid by consumers. Rather than
activities, or projects already extending the scope of the antiquated and
provided by the Philippine Export- highly distortionary regulatory regime in
Import Agency, the Small Business sugar and related products, it is high time
Corporation, and the Agricultural to adopt reforms toward a more market-
Guarantee Fund Pool. oriented system.
• It is not achieving the objectives and
purposes for which it was originally Rice and related trade measures
designed. On June 30, 2017, the waiver of the
Philippine government to continue
The order opened the possibility exempting rice from treaty obligations
for other government agencies, such under the World Trade Organization (WTO)
as the DA, to perform the unfulfilled had lapsed. Previously, the Philippines
mandate of QUEDANCOR, which is was granted special privilege by the WTO
the institutionalization of the quedan or to apply QRs on rice, as mandated by the
warehouse receipt, and other negotiable Agricultural Tariffication Act of 1996
42 Policy Updates
(RA 8178). QR limits the amount of changing market conditions, to one that is
imported commodity, such as rice, into the focused on managing the country’s food
country. Prior to its termination, this special security rice stocks. It must be divested of
privilege had been extended three times its regulatory function and, instead, focus
since 1995. entirely on buffer stocking to ensure food
Currently, the Philippine legislature security both at the local and national levels.
is in the process of amending RA 8178 to
ensure consistency with international law,
after proper notification to the WTO. As Environment and natural
of March 2018, versions of the amended resources
bills in both houses of Congress are in
the process of being consolidated toward Forestry, sustainability, and greening
presentation to the plenary. Meanwhile, programs
the president, in April 2017, issued EO 23 In line with the country’s initiatives
retaining the minimum access volume to toward climate change adaptation
805,200 metric tons and extending lower and sustainability, the Department of
tariff rates on some commodities for three Environment and Natural Resources
years or until RA 8178 is amended. (DENR) released AO 2017-08, specifying
Supposing the amendment also the guidelines in implementing the
applies reasonable tariffs (i.e., about transition of the department’s programs
35%, consistent with the rate used by the and projects into green economy models
ASEAN) to continue protecting farmers (GEMs). The order is in pursuit of inclusive
while opening up the rice market, the development in accordance with the PDP
impact on domestic rice prices could be 2017–2022 (RA 10771), which is anchored
profound. Domestic prices will eventually on Ambisyon Natin 2040: Matatag,
converge with world prices plus tariff Maginhawa, at Panatag na Buhay, and
(under the status quo, the difference is a the United Nations’ SDGs. GEMs will
whopping 66% at the wholesale level). cover all development and rehabilitation
Given that rice is the country’s dominant programs in forest, mining, and coastal
crop, millions of farmers will be affected. areas. At the same time, it will provide
All amended versions of the bills therefore employment in the agriculture, industry,
provide for funds earmarked for enhancing and services sectors and contribute to
the competitiveness of the rice industry, to environmental preservation, protection,
be financed by rice tariff collections. and production of an environmental
Once the rice market is opened, the product or service that will serve as a
remaining concern is the continuing cornerstone for a community enterprise.
relevance of the National Food Authority A relevant policy is DENR AO 2017-02
(NFA). The NFA, established in 1981, is which contains the guidelines in
the government agency responsible for implementing the Sustainable Integrated
ensuring food security, particularly the Area Development (SIAD) strategy where
stability of supply and price of rice. Its watersheds are identified as platforms for
mission should evolve, in line with the planning appropriate actions pertaining
Tabuga et al. 43
https://e360.yale.edu/features/how-an-activist-minister-in-the-philippines-took-on-the-mining-barons-gina-lopez
44 Policy Updates
of the Philippines the stewardship of the the Philippine Energy Plan (PEP)
Nationwide Operational Assessment of 2017–2040, a comprehensive roadmap
Hazards, its flagship program that provided or programs and projects of the energy
real-time satellite data to empower sector to ensure sustainable, stable, secure,
communities and manage disaster risks. sufficient, accessible, and reasonably
The Department of Education, in the priced energy (DOE 2016).
same year, issued Department Order 65 In 2001, RA 9136, otherwise known
strengthening the Comprehensive DRRM as the Electric Power Industry Reform
in Basic Education Framework under Act (EPIRA), was enacted to promote
Department Order 37 issued in 2015 competition in the electric power industry.
and ensuring the continued provision of EPIRA aims to dismantle monopolies
quality education through the conduct of through the privatization of the National
postdisaster needs assessment. Further, the Power Corporation (NAPOCOR) and to
Climate Change Commission held the First foster competition in the industry to effect the
National Convention on Climate Change lowering of electricity prices. Sixteen years
and Disaster Risk Reduction in December after its legislation, however, the country
2017. This convention discussed, among still has the highest electricity tariff among
other topics, the science, resiliency, and Southeast Asian countries. This heavily
preparations for the ‘Big One’, a term used to affects the cost of doing business in the
refer to an earthquake with strong intensity country and impinges on household welfare,
that could hit Metro Manila. It was attended among other things. Based on the 30th
by provincial, municipal, and city officials, Status Report on EPIRA Implementation
health officers, NDRRMC and Local DRRM (DOE 2017), power generation accounts
Council members, scientists, academics, for 50, 58, and 65 percent of residential,
and other stakeholders. Lastly, the Master commercial, and industrial unbundled
of Crisis and Disaster Risk Management power rates, respectively. Increases in the
program offered by the Department of the electricity prices are largely attributed to
Interior and Local Government through the the creation of the Wholesale Electricity
Philippine Public Safety College had its Spot Market (WESM) established as part
first batch of graduates in 2017. of EPIRA where trading of electricity is
made but can be a venue of collusion for
generation companies to prop up prices.
Energy Early this year, there are efforts in
the Senate to review and amend some
Although energy agenda is not included in of EPIRA’s provisions on market power
the MDGs, it is relevant to the achievement abuse and anticompetitive behavior.
of the major targets like poverty, education, However, DOE officials maintained that
and global partnership and development. only a review of the law is necessary,
To achieve the Philippines’ long-term acknowledging the delays that are yet to
vision (AmBisyon Natin 2040) of being be addressed, such as the transformation
a globally competitive economy, the of the Philippine Electricity Market
Department of Energy (DOE) has crafted Corporation, the operator of WESM, into
Tabuga et al. 47
https://www.doe.gov.ph/sites/default/files/pdf/e_ipo/leif_2014_2.pdf
grid, microgrids can be powered by solar to help the DOE achieve the target RE
panel or other local energy sources, and can share in the national energy mix (35%) by
therefore help in ensuring steady stream 2030. The GEOP is a mechanism providing
of electric supply and in bringing down its customers the options to choose RE sources
costs. This is considered a good alternative through DUs or electric cooperatives (ECs).
in light of potential increases in electricity During late 2017, the National
demand brought by climate change. Renewable Energy Board, an advisory body
The Biofuels Act of 2006 (RA 9367) tasked with the effective implementation of
and the Renewable Energy Act of 2008 (RA RE projects in the country, endorsed the rules
9513) are legislations issued to mitigate on RPS to DOE. Consequently, Circular
the adverse effects of climate change and 2017-12-0015 was issued providing the
minimize the country’s risks from energy rules and guidelines on the establishment of
price shocks. The former promotes the use the RPS for on-grid areas. It also mandates
of locally sourced biofuels while the latter DUs and retail electricity suppliers to
provides fiscal and nonfiscal incentives to source or produce a certain percentage
accelerate the exploration and development of their electricity requirements from RE
of renewable energy (RE) sources, such resources listed in RA 9513. DOE plans to
as biomass, geothermal resources, solar undertake holistic information, education,
energy, hydropower, ocean energy, and and communication campaign and training
wind resources. Among the fiscal incentives to all players involved. Similarly, circulars
provided under the Biofuels Act are income on the rules and guidelines of the RPS for
tax holiday for seven years, duty-free off-grid areas and GEOP have been drafted.
importation, net operating loss carryover, The DOE moves to transform the
accelerated depreciation, zero-percent VAT country as the liquefied natural gas trading
on RE sales and purchases, and tax credit and transhipment hub in the Asia-Pacific
on domestic capital equipment and services. with the issuance of Department Circular
In 2016, RE utilization in the country 2017-11-0012 (Rules and Regulations
registered the highest in the Southeast Governing the Philippine Downstream
Asian region at around 40 percent while RE Natural Gas Industry). This is an initiative
sources accounted for as much as 24 percent that can help in the diversification of the
of the country’s total power generation. country’s energy portfolio and in meeting
Nonfiscal incentives for RE developers the country’s energy needs. In 2016,
include the renewable portfolio standards natural gas accounted for 22 percent of the
(RPS) and feed-in tariff (FIT) while country’s total power generation.
consumers, on the other hand, benefit from
the Green Energy Option Program (GEOP). Policy gaps
FIT is a scheme to attract investments in ECs are the major players in the NEA’s
the development of RE sources to provide rural electrification program and have
additional energy power supply. The RPS been identified as one of the RE providers
mandates that energy distribution utilities in the GEOP. Hence, a legislative
(DUs) source a portion of their energy from framework is needed that will provide the
eligible renewable sources and is designed legal basis for the participation of ECs
Tabuga et al. 49
by beverage manufacturers. These would the higher petroleum taxes would increase
include sweetened juice drinks, sweetened the transport cost of products which would
tea, carbonated beverages, flavored water, subsequently increase the cost of products
energy and sports drinks, powdered drinks in the market. The price of petroleum,
not classified as milk, juice, tea and coffee, as per DTI data, is only 5 percent of the
cereal and grain beverages, and other total transportation cost (Canivel 2018).
nonalcoholic beverages that contain sugar. Nonetheless, the long-term impact of the
Milk and instant coffee products, however, TRAIN Law to the manufacturing and the
are exempted from these taxes. distribution and logistics sectors is yet to
The TRAIN Law also indirectly affects be determined. Further monitoring and
other businesses through the increase in tax analysis of prices is warranted.
rates for industrial inputs like fuel or coal. In his veto message on TRAIN, the
Prior to the passage of the TRAIN Law, president stated that the zero-rating of sales
petroleum products like diesel, fuel oils, of goods and services to separate customs
liquefied petroleum gas, and kerosene had territory and tourism enterprise zones was
zero excise tax. In 2018, the excise taxes vetoed because the provisions go against
on these products have been increased the principle of limiting the VAT zero-
to PHP 2.50, PHP 2.50, PHP 1.00, and rating to direct exporters (OP Philippines
PHP 4.00 per liter, respectively. The excise 2017). He cited the proliferation of
taxes for these petroleum products will separate customs territories, which even
increase further to as much as PHP 10.00 include buildings, creates significant
per liter (for unleaded gasoline) in 2019 and leakages in the tax system, making it highly
2020 (Table 2.5). In addition, a provision in inequitable and significantly reducing
Section 48 of the TRAIN Law states that the revenues that could be better used for
mineral products including coal will be the poor. This development has resulted
imposed excise tax of as much as PHP 150 in some confusion on the treatment of
in 2020 from PHP 50.00 in 2018. indirect exports of firms to firms located
The Department of Trade and Industry in enterprise zones, most of which are
(DTI), however, dispels public concern that manufacturing firms.
Table 2.5
Comparison of petroleum excise tax rates
Type of Fuel Demand Current Tax Excise Tax Proposal
2015 (Liters) 2018 2019 2020
To date, the TRAIN Law has received the means to contain the rising inflation.
mixed reaction from the industry sector. As businesses tend to be risk averse, such
Businesses have expressed support to the uncertainties might put investors in a wait-
law mainly because it is aimed at supporting and-see attitude.
the country’s infrastructure program. Small Related to uncertainty, it is also
businesses are also seen to benefit from the important to mention the second round of
increase in the VAT exemption threshold tax reform package, or TRAIN2. TRAIN2
from PHP 1.5 million to PHP 3.0 million covers corporate income tax reform and
(Jiao 2018). For large manufacturing the streamlining of fiscal incentives by
companies, the reduction in income tax rationalizing or removing certain tax
for those earning PHP 250,000 and below, incentives of companies and reduce the
including minimum wage earners, is corporate income tax from 30 percent to
seen as a boost to the overall income of 25 percent. The discussion on TRAIN2
employees without any additional burden again adds uncertainty to the incentive
to the company owners. structure of the country.
On the other hand, the inflationary
impact and the uncertainties about the VAT
exemption treatment have created some Trade in services
unease in the course of doing business.
Despite assurances from the country’s The services sector grew at 6.82 percent in
economic managers that the inflationary 2017, lower than the 7.54 percent growth
impact of the TRAIN Law would be rate in 2016. However, it remains the
minimal, a resolution still has been filed at top driver of GDP growth, contributing
the Senate (Senate Resolution 642, 2018) to 3.9 percentage points in 2017 when GDP
look into the macroeconomic fundamentals expanded by 6.7 percent. The growth
of the country, particularly focusing on rate of services exports was also slightly
52 Policy Updates
Table 2.6
Exports of services (at 2000 constant prices)
2016 2017
Percent Growth Rate Percent Growth Rate
Distribution Distribution
Total services 100.0 15.28 100.0 14.53
1. Transportation 4.6 1.39 5.0 23.77
2. Insurance 0.1 1.83 0.1 14.64
3. Travel 14.7 1.37 17.4 35.50
4. Government 1.2 44.39 0.8 -16.00
5. Miscellaneous services 79.5 18.91 76.7 10.57
Figure 2.2
Philippine government infrastructure expenditures, as percent of GDP, 1998–2018
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internal and external convergence as operationalized by the Regional, Provincial, and City/Municipality
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on January 22, 2018).
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House Bill 5633. An act promoting universal access to quality tertiary education by providing for free tuition
and other school fees in state universities and colleges and state-run technical-vocational institutions,
strengthening the Unified Student Financial Assistance System for Tertiary Education, and appropriating
funds therefor. Quezon City, Philippines: Congress of the Philippines.
House Bill 5784. An act providing universal health care for all Filipinos, and appropriating funds therefor,
amending for the purpose Republic Act No. 7875, as amended, otherwise known as the “National Health
Insurance Act of 1995”. Quezon City, Philippines: Congress of the Philippines.
House Bill 5811. An act providing for a Magna Carta of the poor. Quezon City, Philippines: Congress of
the Philippines.
House Bill 6775. An act creating the Department of Human Settlements and Urban Development, defining its
mandate, powers and functions, and appropriating funds therefor. Quezon City, Philippines: Congress of
the Philippines.
House Bill 6908. An act strengthening the security of tenure of workers, amending for the purpose Presidential
Decree No. 442, as amended, otherwise known as the “Labor Code of the Philippines”. Quezon City,
Philippines: Congress of the Philippines.
House Bill 7773. An act institutionalizing the Pantawid Pamilyang Pilipino Program (4Ps) to reduce poverty and
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Program (4Ps) Act. Quezon City, Philippines: Congress of the Philippines.
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60 Policy Updates
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———. 2016. Annual Poverty Indicators Survey 2016. Quezon City, Philippines: PSA.
Republic Act 7277. An act providing for the rehabilitation, self-development and self-reliance of disabled
person and their integration into the mainstream of society and for other purposes. Manila, Philippines:
Congress of the Philippines.
Republic Act 8178. An act replacing quantitative import restrictions on agricultural products, except rice, with
tariffs, creating the Agricultural Competitiveness Enhancement Fund, and for other purposes. Manila,
Philippines: Congress of the Philippines.
Republic Act 9136. An act ordaining reforms in the electric power industry, amending for the purpose certain
laws and for other purposes. Manila, Philippines: Congress of the Philippines.
Republic Act 9367. An act to direct the use of biofuels, establishing for this purpose the Biofuel Program,
appropriating funds therefor, and for other purposes. Manila, Philippines: Congress of the Philippines.
Republic Act 9513. An act promoting the development, utilization and commercialization of renewable energy
resources and for other purposes. Manila, Philippines: Congress of the Philippines.
Republic Act 9994. An act granting additional benefits and privileges to senior citizens, further amending
Tabuga et al. 61
Republic Act No. 7432, as amended, otherwise known as “An act to maximize the contribution of
senior citizens to nation building, grant benefits and special privileges and for other purposes. Manila,
Philippines: Congress of the Philippines.
Republic Act 10121. An act strengthening the Philippine Disaster Risk Reduction and Management System,
providing for the National Disaster Risk Reduction and Management Framework and institutionalizing
the National Disaster Risk Reduction and Management Plan, appropriating funds therefor and for other
purposes. Manila, Philippines: Congress of the Philippines.
Republic Act 10351. An act restructuring the excise tax on alcohol and tobacco products by amending Sections
141, 142, 143, 144, 145, 8, 131 and 288 of Republic Act No. 8424, otherwise known as the National
Internal Revenue Code of 1997, as amended by Republic Act No. 9334, and for other purposes. Manila,
Philippines: Congress of the Philippines.
Republic Act 10354. An act providing for a national policy on responsible parenthood and reproductive health.
Manila, Philippines: Congress of the Philippines.
Republic Act 10687. An act providing for a comprehensive and Unified Student Financial Assistance System for
Tertiary Education (UniFAST), thereby rationalizing access thereto, appropriating funds therefor and for
other purposes. Manila, Philippines: Congress of the Philippines.
Republic Act 10747. An act promulgating a comprehensive policy in addressing the needs of persons with rare
disease. Manila, Philippines: Congress of the Philippines.
Republic Act 10767. An act establishing a comprehensive Philippine plan of action to eliminate tuberculosis as a
public health problem and appropriating funds therefor. Manila, Philippines: Congress of the Philippines.
Republic Act 10771. An act promoting the creation of green jobs, granting incentives and appropriating funds
therefor. Manila, Philippines: Congress of the Philippines.
Republic Act 10931. An act promoting universal access to quality tertiary education by providing for free
tuition and other school fees in state universities and colleges, local universities and colleges and state-
run technical-vocational institutions, establishing the tertiary education subsidy and student loan program,
strengthening the Unified Student Financial Assistance System for Tertiary Education, and appropriating
funds therefor. Manila, Philippines: Congress of the Philippines.
Republic Act 10932. An act strengthening the Anti-Hospital Deposit Law by increasing the penalties for the
refusal of hospitals and medical clinics to administer appropriate initial medical treatment and support
in emergency, or serious cases, amending for the purpose Batas Pambansa Bilang 702, otherwise known
as “An act prohibiting the demand of deposits or advance payments for the confinement or treatment of
patients in hospitals and medical clinics in certain cases”, as amended by Republic Act No. 8344, and for
other purposes. Manila, Philippines: Congress of the Philippines.
Republic Act 10963. An act amending Sections 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84,
86, 90, 91, 97, 99, 100, 101, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151,
155, 171, 174, 175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193, 194, 195, 196,
197, 232, 236, 237, 249, 254, 264, 269, and 288; creating new Sections 51-A, 148-A, 150-A, 150-B, 237-
A, 264-A, 264-B, and 265-A; and repealing Sections 35, 62, and 89; all under Republic Act No. 8424,
otherwise known as the National Internal Revenue Code of 1997, as amended, and for other purposes.
Manila, Philippines: Congress of the Philippines.
Republic Act 10969. An act providing free irrigation service, amending for the purpose Republic Act No.
3601, as amended, appropriating funds therefor and for other purposes. Manila, Philippines: Congress
of the Philippines.
Republic Act 11036. An act establishing a National Mental Health Policy for the purpose of enhancing the
delivery of integrated mental health services, promoting and protecting the rights of persons utilizing
psychiatric, neurologic and psychosocial health services, appropriating funds therefor, and for other
purposes. Manila, Philippines: Congress of the Philippines.
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policy. PIDS Discussion Paper No. 2017-48. Quezon City, Philippines: Philippine Institute for
62 Policy Updates
blocks. Every block is linked to other media, search engines, as well as sensors
blocks with hash pointers that contain and tracking devices (including climate
information of the next block, time stamp, sensors and GPS) (Albert et al. 2017;
and the data itself. Sriramoju 2017).
Blockchain in the Philippines is While the current industry use of big
purely used in cryptocurrency trading and data in the Philippines is relatively small
exchange. Most of blockchain users in the compared to other countries, a handful
country see the technology for earning of companies and industry leaders have
profits through exchanging pesos to bitcoins already started embracing this technology.
and converting back to the local currency In fact, the country is projected to be a
when the value of bitcoin increases. big player in big data analytics, especially
with the increasing use of the internet and
social media.
Robotics
Robotics is a multidisciplinary area
involving the fields of mechanical,
electrical, computer science, and other
engineering-based fields. It refers to the
science of design, construction, operation,
and implementation of robots, as well as
computer systems for control, feedback,
and information processing.
The number of robotics applications in
businesses increased considerably in recent
years primarily to enhance productivity.
The International Federation of Robotics
(2017) reported that in 2016, the average
https://www.maxpixel.net/Datacenter-Computer-Bigdata-2803200
global robot density is about 74 industrial
robots installed per 10,000 employees
across the manufacturing industry. The
Big data Republic of Korea, Singapore, Germany,
Although there is no universal consensus and Japan are the most automated countries
on what big data means, most would refer in the world. The Philippines is among
to it as digital data sets so large (either in the lowest in the region for automation
terms of scale, i.e., “volume”, or streams adoption with a robot density of 3 industrial
across time, i.e., “velocity”) or complex robots installed per 10,000 employees in
(in terms of variety). This data deluge is a 2016. It is behind Singapore, Thailand, and
by-product or “exhaust” from making use Malaysia, which has a robot density of 488
of electronic devices (smart phones, tablets, units, 45 units, and 34 units, respectively
laptops, biomedical equipment), social (Reyes 2018).
Dadios
et al. 67
Nanomaterials
Nanomaterial refers to the materials
in nanoscale. Research activities in
nanomaterials are focused on the field
of materials science. With support of
microfabrication research, researchers
continuously develop and come up with
advances in materials metrology and synthesis.
Nanotechnology is involved in energy
storage, lighting, and photovoltaics required
in the popularly growing applications such
lppicture/Pixabay.com
as smart cities, electric cars, and smart
68 Preparing the Philippines for the Fourth Industrial Revolution: A Scoping Study
On labor market
The impact of technology on the labor
market is complex, evolving, and perhaps
unpredictable but there are illuminating
conceptual and empirical patterns
emerging. Conceptually, three impacts can
be thought of: (1) it substitutes for labor, (2)
it complements labor, or (3) it creates new
jobs. It therefore can have mixed net effects
on the labor market depending on which
skeeze/Pixabay.com
effect is dominant.
The empirical estimates are
facilitated by characterizing labor
Synthetic biology markets in specific ways to explain
Synthetic biology is the union of biology emerging trends depicted by data. One
and engineering disciplines. It includes such characterization is dividing jobs
the areas of biophysics, biology, electrical into routine or codifiable and nonroutine
engineering, evolutionary biology, and or noncodifiable. Computers or robots
molecular biology. are expected to replace routine jobs and
The field is relatively new but complement nonroutine ones. With the
has many potential applications. One advancement in AI, what is noncodifiable
significant example is the production of today may become codifiable in the future
synthetic organisms with the capability to (Autor et al. 2003; Autor and Dorn 2009;
produce a medicinal compound. Another Acemoglu and Autor 2011; Autor 2015;
is engineering a synthetic microorganism Acemoglu and Restrepo 2017). In terms of
70 Preparing the Philippines for the Fourth Industrial Revolution: A Scoping Study
prognosis, some are more optimistic than On education and human capital
others. Autor (2015) and Acemoglu and Given that production systems are evolving
Restrepo (2017), for instance, emphasize with technologies, a key characteristic of
the job creation aspect of technology. education and human capital development
Although there appears more unanimity in the future is continuous learning. Toffler
in the prognosis that technology will (1970) defines illiteracy in the 21st century
replace routine or codifiable jobs, what as no longer those who cannot read and
remains uncertain is the timing. There write but those “who cannot learn, unlearn,
are also those who emphasize the point and relearn.” A key skill that needs to be
that technological feasibility does not developed among learners is “learning
mean outright adoption. They argued that how to learn”. The system should produce
there are many filters before technology students who embrace lifelong learning,
is deployed in production (Meyer 2017; continuous training, and retraining (Brown-
ADB 2018). Stiglitz (2017) is more Martin 2017).
pessimistic that markets can adjust The World Economic Forum (WEF)
fast enough to reallocate resources and (2015) lists and describes 21st-century
restore full employment without massive skills and clusters them into three groups,
displacements. namely, (1) foundational literacies, (2)
Applying the methodology of Frey and competencies, and (3) character qualities
Osborne (2013), Chang and Huynh (2016) (Figure 3.1). The foundational literacies are
estimate that over the next decades, around the basis on which students will build their
56 percent of all employment within the competencies and character qualities. The
Association of Southeast Asian Nations competencies are what is needed to face
(ASEAN) is at high risk of displacement due complex challenges. Finally, the character
to technology. The high-risk occupations qualities are what students need to navigate
in each country are as follows: Cambodia changing environments.
– 447,000 sewing machine operators; Viet
Nam – 769,000 sewing machine operators; On social protection
Philippines – 2.2 million shop and sales The social protection system of the future
persons and demonstrators; Indonesia – must recognize two challenges that the FIRe
1.7 million other office clerks; and brings, namely, (1) the various forms of
Thailand – 634,000 food service counter existing and emerging work engagements—
attendants. Jobs resistant to computerization regular employment, gig economy, and
involve extensive, nonroutine, abstract independent consulting—as well as the
tasks that require judgment, problem more frequent turnovers and (2) the threat
solving, intuition, persuasion, and creativity. of a widening inequality. Addressing
In each of the countries comprising the the challenges requires social protection
ASEAN-5, women are more likely than systems to (1) reexamine eligibility criteria
men to be employed in an occupation at such as minimum earnings thresholds and
high risk of automation. Moreover, less duration of employment, (2) be flexible
educated workers and employees earning with interrupted contribution periods, and
lower wages face higher automation risk. (3) enhance portability of benefits across
Dadios
et al. 71
Figure 3.1
21st-century skills
and low-value packages of physical goods, science, and many more, impacting all
as well as digital services that are crossing disciplines, industries, and the world’s
borders, goods that are increasingly bundled economy. New technologies are developing
with services, and new and previously at an exponential pace and it is expected
nontradable services that are being traded that by 2030, many new technologies
across borders. New technologies and will emerge, while current nascent or
digitalization are also giving rise to new immature technologies will reach the
information industries, such as big data commercialization stage that could help
analytics, cybersecurity solutions, or at-a- achieve some of the SDGs.
distance quantum computing services across
borders. What underpins the digital trade
environment is the movement of data, or Drivers and constraints
information, across borders. This movement to technology adoption
is at the core of new and rapidly growing and innovation
service supply models such as cloud
computing, IoT, and additive manufacturing. According to WEF’s Readiness for the
As a result of the application of new Future of Production Report 2018, the
technologies to production and distribution Philippines is the archetype of a legacy
methods, the FIRe is resulting in selective country. This means that the country has
reshoring, nearshoring, and other structural a strong production base today, but at risk
changes to global value chains (Chang and for the future due to weak performance
Huynh 2016; WEF 2018). For example, across drivers of production, which include
rapid improvements in automation in technology and innovation, human capital,
developed economies have led to a reversal global trade and investment, institutional
in offshoring practices. There has been framework, sustainable resources, and the
an increase in reshoring or the transfer of demand environment.
production activities back to the home For a developing country such as the
country in labor-intensive manufacturing, Philippines, the diffusion of technology
such as garment and footwear, electronics, depends both on access to foreign
and automotive production (Chang and technology and on the ability to absorb
Huynh 2016). technology (WB 2008). Trade, foreign
direct investments (FDIs), international
On sustainable development migration, and other networks act as
Special attention is being given to the role important transmission channels while
of technology in achieving the Sustainable factors, such as the quality of government
Development Goals (SDGs) that 193 policy and institutions, the stock of human
United Nations member-states, including capital, R&D efforts, and the financial
the Philippines, committed to attain by system, among others, determine a
2030 (UN 2016). It is recognized that the country’s absorptive capacity for new
FIRe is fundamentally different from the technologies. The extent of technology
three previous revolutions in that it fuses upgrading then depends on the interaction
the fields of physics, biology, computer of these factors (Figure 3.2).
Dadios
et al. 73
Figure 3.2
Determinants of technology upgrading in developing countries
Figure 3.3
Gardening innovation
Source: WB (2010)
the GII shows that although the Philippines As regards basic research, a component
tops ICT services exports in ASEAN, it of the HRNDA is the National Integrated
has limited human capital in science and Basic Research Agenda, which prioritizes
technology (S&T), low levels of R&D six programs for 2017–2022, namely,
expenditures, and weak linkages of actors in (1) water security, (2) food and nutrition
the innovation ecosystem. security, (3) health sufficiency, (4) clean
energy, (5) sustainable community, and (6)
Advancing R&D inclusive nation building. Among these six,
The DOST, the national government the top three priority areas for 2017–2019
agency responsible for the coordination are sustainable community, inclusive nation
and formulation of policies, projects, and building, and health sufficiency.
programs in S&T in support of national
development, has been undertaking or Building pool of researchers
supporting a considerable share of R&D and innovators
activities in the country, even with the The Science and Technology Scholarship
rather limited resources available for STI. Act of 1994 has been the basis for the
In the Harmonized National R&D Agenda provision of scholarships in science,
(HNRDA) 2017–2022, DOST identified technology, engineering, and mathematics
thrusts for R&D across five domains, (STEM), including science and mathematics
namely, (1) basic research, (2) agriculture, teaching. Unfortunately, this legislation,
aquatic, and natural resources, (3) health, (4) together with other efforts to promote
industry, energy and emerging technology, STEM, has not still yielded a sufficient pool
and (5) disaster risk reduction and climate of researchers, scientists, and engineers
change adaptation. Unfortunately, the (RSEs) in the country. While the number of
HNRDA still needs to improve its focus and RSEs in the Philippines has increased from
has yet to articulate how the country will 180 in 2009 to 270 in 2013, this is still below
harness AI, IoT, and data analytics. the United Nations Educational, Scientific
Dadios
et al. 75
related and scientific project expenses, and The DOST’s regional offices implement
even exemption from renouncing their oath SETUP and are primarily responsible
of allegiance to the country where they took for selecting client MSMEs. They also
the oath. manage the interventions for the clients,
including innovation system support,
Technology application, transfer, technology needs assessment, technology
and promotion and equipment acquisition, technical
Government has recognized the importance training of the MSME workforce, technical
of having in place the proper mechanisms for consultancy services, product improvement
the diffusion of innovation. The Technology and development, packaging and labeling,
Transfer Act of 2009 defines ownership of database information systems development,
technologies, as well as provides means of and support in the establishment of product
managing and commercializing the results standards, including testing and calibration
of government-funded research. It makes of equipment (Quimba et al. 2017).
R&D institutions the owner of intellectual
property rights (IPRs) arising from the ICT policies
outputs of government-funded research. The ICT sector has become an integral
The legislation also allows scientists to part of business processes of various
create, manage, or serve as consultants to industries through the application of
companies that can commercially exploit new technologies. By merging FIRe
technology arising from their government- technologies with existing production
funded research. Thus, it provides a methods, the ICT sector has not only
financially rewarding environment for optimized business processes but has
research institutions and scientists. To also enabled machines to perform
safeguard against possibilities of developing complex tasks even with minimal human
innovations that are not accessible to the interaction and supervision (WFEO 2017).
poor, the law provides government the right New applications and functions of ICT are
to take control of technologies or IPRs if being discovered by the minute. Given the
national interest is at stake, thus ensuring comparative advantage of the Philippines
inclusive innovation. in ICT-related services and the growth
The DOST has also spearheaded several performance of its IT-related services,
programs geared toward technology transfer, the FIRe presents a huge opportunity for
including the Small Enterprise Technology the country to improve its standing in
and Upgrading Program (SETUP), which this time of digitization. Fortunately, the
has aimed to improve productivity and Philippine government has formulated and
efficiency of micro, small, and medium implemented several policies, plans, and
enterprises (MSMEs) by addressing the initiatives to prepare and encourage the
firms’ technological needs and constraints. development of the ICT sector as well as
The program’s innovation support system other industries connected to it.
allowed MSMEs to acquire industry- In 2016, RA 10844 was passed
standard equipment, thereby upgrading into law, establishing the DICT as the
their facility and production efficiency. government arm in advancing the ICT
Dadios
et al. 77
Although initiatives and plans for 52.5 points out of the possible 100
the future of the Philippine ICT sector points, which is the second lowest in a
are already in place, there are a number group of seven ASEAN member-states.
of roadblocks and bottlenecks that The Philippines is weakest in terms of
impede the development of the sector. regulatory regime (e.g., quality of service
Most of these take root from decades- is not monitored, interconnection prices
old laws and regulation that need to be are not made public) but strong, based on
updated. The National Broadband Plan a review of the formal environment, in
(DICT 2017), for instance, lists down terms of the competition framework. This
priority policy and regulatory reforms can be attributed to major reforms earlier
that would promote the development undertaken, specifically, the creation
in the telecommunications and ICT of the PCC through the approval of RA
sector. Included among these are the 10667 in 2015.
amendment of the penal provision of While there are many gaps that need
the Public Service Act and exemption to be addressed, the study found that the
of telecommunications and value-added regulatory regime (or specific rules) and
services from the sectors covered by the the competition framework will only work
definition of “public utilities” in this if an effective regulatory authority with
law. This would result in the relaxation the right mandate is in place. Thus, they
of foreign ownership restriction for the recommend the strengthening of the NTC
aforementioned sectors and removal of as a matter of priority.
the requirement to secure a franchise from
the Congress before a service provider Industrial and related policies
could establish a network (DICT 2017). In line with the Philippine Development
Plan (PDP), a new industrial policy is being
Regulation of ICT pursued where the private sector takes the
The poor regulatory environment for ICT lead while the government’s main task is
in the Philippines is a major impediment to to create the right policy framework that
creating a digitally connected and inclusive would encourage the development of the
economy. Using a scoring system developed private sector along the lines of the country’s
by the International Telecommunications comparative advantage. The government
Union called the ICT Regulatory Tracker, acts as an enabler and facilitator in crafting
Ortiz et al. (2017) found that the quality of and implementing policies and regulations
the Philippine ICT regulatory environment that will provide an environment conducive
is significantly below what is considered to growth. Additionally, it plays an important
international best practice. Based on inputs role in terms of coordinating policies
from the National Telecommunications and necessary support measures. Close
Commission (NTC) as well as the coordination among government agencies
Philippine Competition Commission and effective policy implementation are
(PCC) and a review of existing regulations, seen as the most crucial factors for industry
Ortiz et al. (2017) scored the Philippines development (DTI 2017).
Dadios
et al. 79
Development of roadmaps and strategies (1) manufacturing; (2) agribusiness; (3) IT-
under the new industrial policy business process management, particularly
Recognizing the pressing need for a knowledge process outsourcing; (4)
new industrial policy, the Philippine tourism; and (5) infrastructure and logistics.
government, through the Department of The CNIS sought to address supply chain
Trade and Industry (DTI), collaborated gaps, capacity building via HRD, SME
with the private sector to undertake a development, innovation and R&D, and
sectoral roadmap project. Called the deepening the participation of domestic
Manufacturing Industry Roadmap markets in global value chains. The overall
(MIR), the MIR uses the cluster-based goal was to produce more and higher
development approach to take into account quality jobs and attain sustainable and
the varying resources, needs, and issues inclusive growth, through a new industrial
of regions and industries. The roadmaps policy, bolder trade policy, intense
formulated from the project were used as investment promotion, skills training and
inputs to the Manufacturing Resurgence HRD, enhance innovation and R&D, and a
Program, which aims to rebuild the existing modern policy for MSMEs.
capacity of industries, strengthen new In 2017, the government upgraded the
ones, and maintain the competitiveness of CNIS framework and released the Inclusive,
industries with comparative advantage to Innovation-led Industrial Strategy (i3S).
enhance the competitiveness of domestic While the upgraded industrial strategy has a
manufacturing industries so they can be similar underlying framework as the CNIS,
integrated in higher value-added, ASEAN- anchored on competition, innovation,
based production networks, and global productivity, the latest strategy puts greater
value chains (Rosellon and Medalla 2017). emphasis on innovation. Recognizing
Building on the industry roadmaps, that the FIRe or Industry 4.0 poses new
the DTI formulated the Comprehensive challenges and opportunities, building an
National Industrial Strategy (CNIS) with inclusive innovation ecosystem is listed as
the general objective of creating higher an additional goal.
quality jobs and attaining sustainable The i3S is based on five major
and inclusive growth by upgrading pillars: (1) building new industries,
manufacturing and integrating it with clusters, and agglomeration; (2) capacity
the agriculture and services sectors. The building and HRD; (3) MSME growth
idea was to encourage industries to shift and development; (4) innovation and
to high value-added activities, link small entrepreneurship; and (5) ease of doing
and medium enterprises (SMEs) and large business and investment environment. The
enterprises, foster an innovation-centered government recognizes the importance
ecosystem, invest in upstream industries, of developing human capital with skills
promote upgrading, and position Philippine in science, technology, engineering, and
industries into the regional production mathematics, and employing innovation-
networks and global value chains. This led technologies to improve productivity.
employment and entrepreneurship strategy Entrepreneurship is added to the framework
focused on five priority industries, namely, as it is also envisioned that the innovation
80 Preparing the Philippines for the Fourth Industrial Revolution: A Scoping Study
as business permits, local taxes, zoning schedule for the second reading in Congress
and building clearances, and fire safety is pending.
clearance, will be streamlined.
Fostering competition
Establishing the National Quality Without the pursuit of competitive
Infrastructure advantage over their rivals, firms will
Standards and metrology are key not be driven to create new goods and
components of the specialized service services (product innovation) or to employ
infrastructure needed by businesses to new ways to produce and compete in the
innovate and export (WB 2010). A number market (through process, marketing, and
of different government agencies are organizational innovation).
responsible for setting standards, testing, RA 10667 or the Philippine
and certifying. Nevertheless, there is a Competition Act of 2015 was a significant
need to coordinate activities involving step in ensuring that competitive
metrology, standardization, testing, and advantage is sustained through constant
accreditation and certification under an improvement and upgrading rather than
integrated framework to enhance the through market power and its abuse via
country’s ability to meet international anticompetitive practices. With the law
standards for export readiness. and the PCC in place, the focus for 2018
One of the legislative priorities according to the Socioeconomic Report
identified in the PDP 2017–2022 is the (NEDA 2018) is the formulation of a
establishment of the National Quality National Competition Policy (NCP). It
Infrastructure (NQI). The critical role of the aims to complement the PCC and provide
NQI in achieving industry competitiveness a holistic and comprehensive framework
was first recognized in the PDP 2011– for competition. This is to ensure that the
2016 Midterm Update that came out in public and private sectors are working
2014. The NQI will be key to improving closely to boost market competition
access to technology and innovation as it by addressing issues on competitive
will harmonize the country’s strategies on neutrality, anticompetitive behaviors,
metrology, standards, and accreditation, and unnecessary regulatory burdens.
where accreditation includes certification, In addition, the Implementation Plan/
inspection, and testing. Moreover, a unified Strategy of the NCP will also be crafted.
NQI system will especially benefit MSMEs
and cooperatives as it will enhance access Removing barriers to trade and investment
to quality testing, calibration, and quality An open trading environment promotes
assurance services needed to produce competition and innovation. Thus, the
safe and quality goods for the local and PDP 2017–2022 underscores the need to
international markets (NEDA 2017). A bill liberalize trade and investment by relaxing
establishing the NQI was filed in the Senate restrictions on foreign investment and
in 2016 (Senate Bill 707 or the National simplifying complex business procedures
Quality Infrastructure Act). To date, its first to avoid unnecessary and burdensome steps
reading was held in August 2016 but the in doing business.
Dadios
et al. 83
revolutionizing the landscape of certain hand, puts the country at par with other
sectors, requiring a more thoughtful and countries in terms of number of years of
adaptive regulatory approach to encourage pre-university education and is designed
the introduction of new technologies, to better prepare students for college or
products, and business models. the world of work. It was also designed to
Tiopiangco (2015) identified some decongest the junior high school (Grades
of the regulatory gaps in dealing with 7–10) curriculum. These are profound
new services. One is the identification changes that if our assumptions are
of the authority responsible for new-age correct and are implemented well will
technologies such as transport network set the Philippine education system into
companies (TNCs). TNCs’ classification a better path. However, we will still need
falls under a legal grey area as they could to understand how it is working out. We
be regulated either by the NTC in charge need to measure and know whether we are
of value-added services or the Land implementing these as planned and we need
Transportation Franchising and Regulatory to know whether these are producing the
Board (LTFRB) in charge of transportation results we expected them to produce.
services. The same goes with which The assessment done for basic education
authority has jurisdiction over the TNCs’ in the PDP 2017–2022 made the following
price surge issue, whether the LTFRB or observations: (1) while the enrollment
the PCC. Tiopiangco (2015) also identifies rate increased the targets were missed;
liability allocation as one of the gaps as (2) raising quality remains a challenge;
TNCs have minimal liability in case of acts (3) efficiency improved at the elementary
and negligence of partner drivers. level but the results in the secondary level
is mixed; and (4) disparities within the
Education and human capital development sector and among regions persist. It also
envisions the following for basic education:
Basic education (1) strengthen Early Childhood Care and
The introduction of the Enhanced Basic Development programs; (2) fully implement
Education Act of 2013 (RA 10533) is the the K to 12 program; (3) strengthen
most radical change to basic education in inclusion programs; (4) keep children in
recent years. It introduced mother tongue- school; (5) continue curricular reforms; and
based multilingual education (MTB- (5) enhance teacher competencies.
MLE) into kindergarten3 to Grade 3 and The importance of a solid basic
added two years to secondary education, education cannot be over emphasized. It
making the total mandatory basic education makes learning in subsequent levels easier
a total of 13 years. The MTB-MLE is and cheaper because there is no need to
designed to improve learning outcomes, spend resources to recover learning missed
access, and equity. The additional two in earlier years. In addition, it also makes
years of secondary education, on the other graduates trainable, which is key in rapidly
changing labor markets for the future.
3
This has been made part of basic education and compulsory The question of low quality has been
requirement for entrance to Grade 1 a year earlier (2012)
through RA 10157. hounding the Philippines for a while now.
Dadios
et al. 85
The solutions cannot be done without is laudable and (2) inclusive access,
the Department of Education (DepED) desirability, and quality remain a challenge.
becoming a learning institution. The It envisions to (1) design TVET trainings to
department is implementing some of enhance equity and (2) ensure that TVET
the most profound changes in the basic programs are globally competitive.
education sector in recent history. These There is the seemingly unresolved
constitute important learning opportunities problem of how the Technical Education and
for the sector to know what works and Skills Development Authority (TESDA)
what does not in the Philippine context. should reconfigure its training system in
Even though these initiatives are backed the light of the introduction of the senior
up by research done in other countries, high school (SHS) program. It may be
it does not automatically follow that this noted that some of the training it provides
will work as well in Philippine society. are already incorporated in the technical-
DepED has to increase its monitoring and vocational-livelihood (TVL) track of the
evaluation capacity. SHS. In fact, SHS is using the training
The importance of raising quality regulations of TESDA and, in addition,
is even heightened by the FIRe. Higher many SHS TVL track students are passing
quality means flexibility and trainability the national certifications (NC) I and II.
for the country’s basic education graduates. Moving forward, TESDA must think how it
Flexibility and trainability is key in the will complement rather than compete with
ability to respond to changing labor markets. the training already provided in SHS. The
joint delivery with DepED of the TVL track
Technical and Vocational Education is an important example of collaboration.
and Training Orbeta and Esguerra (2016) made
Orbeta and Esguerra (2016) recently several recommendations on moving
reviewed the Technical and Vocational forward. One, TESDA should focus on its
Education and Training (TVET) system. regulatory and information dissemination
Again, like basic education, it was found functions and continuously build its capacity
that the system is doing well in enrollment to do these primary public good functions
and producing graduates. There are well. Two, the government should build and
indications that it is also doing very well manage a TVET regulatory and financing
even in certification rates. But what remains system that generates graduates that are
is that employment rates are still low and responsive to changing industry needs.
there is an apparent lack of appreciation In FIRe, enterprise-based training
by domestic employers4 of the certification will be critical. However, Orbeta and
they provide. Esguerra (2016) pointed out that it is the
These assessments are echoed in the smallest (3% in 2014) among the modes
PDP 2017–2022 that have the following of delivery. There is a need to build an
observations: (1) overall performance incentive and financing system that will
expand this mode of providing training.
4
There are some indications that the national certifications There are serious incentives issues in
have enabled overseas Filipino workers to land in good
jobs abroad. enterprise-based training. On the one
86 Preparing the Philippines for the Fourth Industrial Revolution: A Scoping Study
hand, workers want to be fully paid while to do it well will be important for the future
on training, which makes it unattractive to of TESDA’s training programs.
the enterprises that will spend resources
and downtime to conduct the training. Higher education
On the other hand, enterprises need to Before the enactment of the free tuition law
recoup the resources spent on training to in state universities and colleges (SUCs) and
encourage them to conduct more training. local universities and colleges (LUCs), the
There is also a real possibility of poaching single biggest intervention of government in
by competitors of trained workers. higher education is direct provision through
Government spends a lot of resources the SUCs. In 2017, the Universal Access to
on many supply-driven training that has Quality Tertiary Education Act (RA 10931)
low employment probabilities. It would was signed into law, providing free tuition
be much better to use more resources to for all students admitted to SUCs and
finance more enterprise-based training LUCs. It also provides tertiary education
that has better employment prospects. subsidies (TES) to poor students attending
Enterprise-based training should be treated private higher education institutions
as training and financed like one. Workers (HEIs). The subsidies under the TES can go
need to contribute because they share in beyond tuition to include living allowance
the benefits of training through better and other education costs. This can be
chances of employability and promotion the precursor of a grants-in-aid program.
and higher wages in the future. The firm Finally, the law also provides a student loan
benefits from higher productivity of program. Two years prior, in October 2015,
trained workers. Government and society the Unified Student Financial Assistance
benefit from lowering unemployment for Tertiary Education (UniFAST) Law
and greater productivity overall. To have (RA 10687) was signed. It rationalizes
more enterprise-based training, financing the student financial assistance system
then should be shared by workers, firms, programs of the government by clarifying
and government. the rationale, targeting, and requirements
The case of community-based training of an effective student financing system
needs to be assessed. While this may (Orbeta and Paqueo 2017). Funding free
promote access, there is a need to assess it tuition for everyone admitted in SUCs,
for quality and relevance. LUCs, and technical vocational institutions
TESDA has also embarked on was deemed to be a better alternative to
blended learning using online learning the targeted programs envisioned in the
to complement teacher-led training and, UniFAST law. It remains to be seen how
in some instances, in collaboration with the free tuition law will affect the structure
known providers such as Microsoft of enrollment in tertiary education and
(Manmodiong 2017). This is an important whether it will deliver on the promise of
learning experience both for TESDA and greater access particularly for the poor. It
the trainees. Delivering training online will also remains to be seen whether the level
be an important mode of delivery in the of subsidy required from government can
future. Every opportunity for learning how be sustained. During the initial year of its
Dadios
et al. 87
Figure 3.4
The Philippine Qualifications Framework
expected to become important in the future from relevant work. This order covers
where flexibility and modularity in gaining high school graduates who have worked
qualifications will be needed to respond to at least five years in the field or industry
changing labor market requirements. related to the academic program they are
seeking equivalency.
Ladderized education The HEIs that can be deputized for
Ladderized education has been the ETEEAP have stringent requirements,
institutionalized by the Ladderized including (1) being a COE or a COD in
Education Act of 2014 (RA 10647). Even the program applied for, (2) should have
before the passage of this law, EO 358, autonomous or deregulated status, (3) level
series of 2004 and EO 694, series of 2008 II accreditation, and (4) category A under
already mandated the establishment of the CHED-Institutional Quality Assurance
equivalency pathways to allow transition to through Monitoring and Evaluation. As
either TVET or higher education. of the last count available, the CHED
While the mandate has been around for has deputized 96 HEIs that can award
more than two decades, there is no readily appropriate college degree. From academic
available inventory of how many programs years 1999–2000 to 2015–2016, the
and courses have defined pathways that program has accredited 17,361 graduates or
allow crediting of training between TVET a little over 1,000 graduates per year.
and higher education programs even though Accrediting competencies gained
there are CHED Memorandum Orders outside the classroom will be an important
(CMOs) specifying model ladderized way of gaining qualifications in the future.
curricula for several programs.6 Neither is Improving systems of doing this will be an
there available record on how many have important part of education and training
benefited from the ladderized program systems in the future.
mandated by the law. Given this, it is not
clear how easy or difficult it is to avail of Alternative Learning Systems
the program. The establishment of the Alternative
Learning System (ALS) is provided in the
Expanded Tertiary Education Equivalency Governance Act for Basic Education (RA
and Accreditation 9155) signed into law in August 2001.
The Expanded Tertiary Education Implemented by DepED, ALS has two
Equivalency and Accreditation (ETEEAP) components. One is the Basic Literacy
was introduced through EO 330 issued on Program targeted toward illiterates. The
May 10, 1996. The EO empowered CHED other is the Continuing Education Program
to deputize HEIs to recognize, accredit, - Accreditation and Equivalency (A&E)
and give equivalence to knowledge, skills, targeted to those who dropped out of formal
attitudes, and values gained by individuals elementary schools. Those who complete
the A&E can take appropriate elementary
6
These include CMO 30 s2013 (Radiologic Technology), or secondary ALS A&E test, a paper-and-
CMO 05 s2013 (Midwifery), CMO 01 s2012 (Mechanical pen test designed to measure competencies.
Engineering), and CMO 56 s2007 (Technical Teacher
Education), among others. Passers are given a certificate/diploma
90 Preparing the Philippines for the Fourth Industrial Revolution: A Scoping Study
that certifies they have the competencies targets. There is a continuing challenge to
comparable to graduates of formal school provide opportunities for the unemployed
systems. They are qualified to enroll in youth particularly those who are neither
secondary and postsecondary schools. studying nor employed.
The ALS has three modes of delivery: There is also an intense pressure from
(1) DepED-delivered, (2) DepED-procured, many sectors to ban contractualization.
and (3) DepED partners-delivered. As the Paqueo and Orbeta (2017) argued that
name implies, DepED-delivered are those there is an important role that temporary
that use DepED teachers and coordinators, employment contracts play in efficient labor
while DepED-procured are those markets. These give firms the flexibility
programs delivered by nongovernmental needed to efficiently deal with economic
organizations (NGOs) and other entities shocks and uncertainty in demand. It is
contracted by DepED. The DepED also a device for screening or filtering work
partners-delivered are those delivered by applicants to ensure quality worker-job
NGOs, donor agencies, and church-based matches. In addition, temporary work gives
organizations using their own resources. workers an opportunity to demonstrate
A recent World Bank report estimated not easily observable and measurable
the target population of ALS at about characteristics to employers. Consequently,
5–6 million of aged 12–26 years using even though well intentioned, it has
the 2013 Functional Literacy, Education been argued that a total prohibition can
and Mass Media Survey data (WB 2016). undermine the goal of achieving rapid,
Furthermore, it also estimated that the inclusive, and sustained economic growth.
program only serves less than 10 percent of Another favorite labor market policy
this target population. is imposing legal minimum wage (LMW).
The ALS offers a second chance to This policy is supposed to (1) let workers
those who were not able to enter school or earn income that would allow them to
have not completed their schooling. World maintain healthy and dignified life, (2)
Bank (2016) pointed out a downside of protect workers from exploitation, and (3)
expanding the ALS such as weakening the motivate workers and firms to increase
motivation of those who are currently in productivity. But it is also well known
school and enticing them to drop out and that huge increases in LMW unrelated to
not to complete their formal schooling. productivity can have boomerang effect.
Paqueo et al. (2017) argued that this could
Labor market and social protection significantly hurt disadvantaged groups that
policies and programs are the very people the policy intends to
protect. It was pointed out that studies show
On labor market that higher LMW has (1) adverse impact
The assessment provided in the PDP 2017– on employment, income, and poverty; (2)
2022 argues that while employment targets discriminatory impact against the poor,
were achieved, the underemployment women, young, inexperienced, and less
target was not. In addition, while labor educated workers; and (3) reduced the labor
productivity improved, it remained below demand of SMEs. Thus, big increases in
Dadios
et al. 91
LMWs can make achievement of inclusive those in the Pantawid Pamilyang Pilipino
growth difficult. Program (4Ps) funded through earmarked
earnings from sin taxes. There is also the
On social protection social pension program for the indigent
Orbeta (2010) reviewed the social elderly although threats of leakages have
protection system in the Philippines. The been pointed out due to the decision to
study points out that the primary problem let local government units identify the
of social protection in the Philippines is low indigent elderly rather than using the
coverage (below 40% in 2014) of the main Listahanan (Velarde and Albert 2018).
bulk of formal private sector workers. Even With the country deploying more than
if, by law, voluntary coverage for own- a million workers annually since 2005,
account, overseas workers, housewives, protecting OFWs is an important policy
and domestic workers are provided, the concern. The social protection for OFWs
actual coverage is low because a large consists of the unilateral and bilateral
proportion of the main statutorily covered programs. Unilateral programs include (1)
population—the formal private sector the voluntary membership of the OFWs and
workers—is not contributing even if its their dependents in the Philippine Health
contribution is supposed to be through Insurance Corporation, (2) the voluntary
mandatory salary deductions. The viability membership of OFWs in the Social Security
of the fund is also threatened by the System, and (3) the mandatory membership
continuing pressure of political leaders in the Overseas Workers Welfare
to increase the benefits despite not being Administration that administers several
accompanied by commensurate increases social protection programs (Orbeta 2017).
in contribution. The fund has also been Bilateral programs consist of bilateral
called upon to respond to social financing social security and labor agreements forged
needs, such as housing programs and with destination countries of OFWs.
disaster relief, which may not be the best Paqueo and Orbeta (2016)
investment opportunities available to it. recommended the avoidance of regulations
The PDP 2017–2022 states that the that make employment costly and the labor
primary strategy for reducing vulnerability market inflexible. For one, it may just
is to focus on job creation and employment- hasten the substitution of machines for
centered growth and asset reforms. It also workers. There is a need to keep the labor
wants to prioritize the most vulnerable market flexible given the uncertainties
members of the community. rapid changes in technology brings to the
Protection for the vulnerable has shop floor.
improved in recent years with the Rapid technological changes also call
investment in building the Listahanan— for creating a chain of value-adding high-
the government database of poor quality lifelong learning opportunities for
households—to improve targeting all. Investment in human capital is still the
effectiveness (Orbeta 2018). The health best protection against skill obsolescence
insurance coverage of the poor has also and finding good jobs. Solutions need to be
improved with the mandatory coverage of found for the low uptake of enterprise-based
92 Preparing the Philippines for the Fourth Industrial Revolution: A Scoping Study
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The Authors
Michael R.M. Abrigo is a research fellow at the Philippine Institute for Development
Studies (PIDS). He obtained his PhD in Economics from the University of Hawaii at Manoa.
He was a postdoctoral fellow at the East-West Center in Honolulu, Hawaii. His areas of
specialization are in health, labor, and population economics.
Jose Ramon G. Albert is a senior research fellow at PIDS. He is former chief
statistician of the Philippines as the secretary-general of the defunct National Statistical
Coordination Board. He earned his PhD in Statistics from the State University of New
York at Stony Brook. His areas of specialization include statistical analysis especially on
poverty measurement and diagnostics, agricultural statistics, survey design, data mining,
and statistical analysis of missing data.
Jose Carlos Alexis C. Bairan was a research analyst at PIDS. He has a Bachelor’s
Degree in Interdisciplinary Studies from the Ateneo de Manila University. He was involved
in studies on innovation, telecommunications, and the regulatory environment.
Marife M. Ballesteros is the vice president of PIDS. She has a PhD in Social Sciences
from the University of Nijmegen, Netherlands. Her areas of specialization are development
economics and housing and urban development issues.
Argel A. Bandala is an associate professor and research faculty at the Electronics and
Communications Engineering Department of the Gokongwei College of Engineering of
De La Salle University (DLSU). He obtained his PhD in Electronics and Communications
Engineering from DLSU. His research interests include artificial intelligence, swarm
intelligence, bio inspired robotics, soft robotics, and swarm robotics.
Nicoli Arthur B. Borromeo is a supervising research specialist at PIDS, where he
currently handles the Annual Macroeconometric Model project. He obtained his Master
of Arts degree in Economics from the University of the Philippines School of Economics
(UPSE). His research specialization and interests include monetary policy, health economics,
macroeconomics, and energy economics.
Roehlano M. Briones is a senior research fellow at PIDS. He has a PhD in Economics
from the University of the Philippines. His areas of specialization are in agriculture, CGE
modeling, and rural development.
Alvin B. Culaba is a university fellow and full professor at the Department of
Mechanical Engineering of DLSU. He is also an academician and focal person on energy
and environment of the National Academy of Science and Technology. He has studied and
developed streamlined life cycle assessment approaches to different industry and energy
applications. He holds a PhD in Mechanical Engineering from the University of Portsmouth,
United Kingdom.
Connie B. Dacuycuy is a senior research fellow at PIDS. She has a PhD in Economics
from Kyoto University, Japan. Her areas of specialization include household, family, and
gender issues, poverty analysis, and applied economic modeling.
98
Aubrey D. Tabuga is a research fellow at PIDS. She obtained her PhD in Public Policy
at the Lee Kuan Yew School of Public Policy, National University of Singapore. Her research
interests are in labor migration, network analysis, and evidence-based policymaking.
Josef T. Yap worked with PIDS for 26 years, eight of which as PIDS president (2005–
2013). He has a PhD in Economics from UPSE and a postdoctoral degree from the University of
Pennsylvania. In 2010, he was honored as one of the 100 outstanding alumni of the University
of the Philippines College of Engineering as part of its centennial celebration. His areas of
specialization are econometric modeling and macroeconomic policy.