Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Pro-Poor Funding of Social Service (Part 1)

           How does the Government make sure that its spending on public services and infrastructures are biased in favor of the poor and do not just make the rich richer in the Philippines?  This is a question that  thirteen think tanks from thirteen countries tried to answer in partnership with the Global Development Network (GDN) under the project "Strengthening Institutions to improve Public Expenditure Accountability," fully funded by the Department of International Development (DFID), United Kingdom through its Governance and Transparency Fund (GTF).   Among the thirteen countries were the emerging markets of India, Indonesia, the Philippines, Nigeria, Mexico and Bangladesh that have been identified by Goldman Sachs as among the countries that will dominate the global economy in the coming decades.  These countries, however, still have high rates of poverty incidence and have to make sure that the State is able to really target the poor in its public spending activities.  As market-oriented economies, their relatively high growth rates will not trickle down to the poor if the State is not able to directly assist the poor through programs in education, health services, water and socialized housing, among others.

          The  objectives of the five-year GDN Global Research Project were:  a) build and strengthen institutional capacity for public expenditure analysis; b) explore the effectiveness of public service delivery in health, education and water; c) emphasize rigorous analysis, produce reliable public expenditure reform proposals and, thus, aim to shape policy debates;  d) develop policy alternatives and tailor research communication and outreach in a peer-learning environment; and e) produce internationally comparable information on public expenditure.    The project activities over the period 2008 to 2013 included:  a) rigorous research and analysis--program budgeting analysis, benefit incidence analysis, cost effectiveness analysis, policy simulation; b) technical training through global and regional workshops, technical advisers and sector experts;  c) peer-learning and cross-country comparisons to support research and analysis, and strengthen global interconnectedness; and d) constructive engagement and outreach through dissemination of reports and policy options with policy makers and multiple stakeholders at country, regional and global levels.  In the Philippines, the partner institution was the Center for Research and Communication, the think tank of the University of Asia and the Pacific.  The CRC economists focused on health, education and water. On health expenditures, the data used were for the year 2008.  They found out that in absolute terms, the benefit incidence of total public spending on health by the Government was pro-poor in 2008.  This means that spending on government hospitals, rural health units and barangay health stations, and other health services benefitted poor individuals more than the non-poor.  Furthermore, relative to income distribution, the benefit incidence of public spending on these same items was progressive (pro-poor) which means that the share of the poorest 20% in the benefits of public spending on health was greater than the share of the same group in the distribution of income.  They also found out that subsidy rates show that public spending on government hospitals as well as rural health units and barangay health stations was advantageous to the poor.  In particular, public spending on rural health units and barangay health stations were most advantageous to the poor.

          As regards education, the economists were able to use data for 2008 and 2010.   In both 2008 and 2010, public spending on elementary and secondary education was pro-poor in absolute terms.  Public spending on post-secondary (vocational) education, however, was poorly targeted in 2008 but became pro-poor in absolute terms in 2010.  Public spending on tertiary (university) education was poorly targeted in both 2008 and 2010.  My own interpretation of this finding is that the funds spent for our numerous state universities and colleges can be better utilized in combatting poverty if they are spent on improving the quality of public education at the elementary and secondary levels as well as in technical or vocational schools.  With the exception of a few institutions like the University of the Philippines, the Government should let the private sector invest in tertiary education.  Especially with the onset of the K + 12 curriculum, public funds for education are better spent to prepare the students in public school for such occupations as mechanics, electricians, plumbers, carpenters and especially farm entrepreneurs as they enter the last two years of high school, i.e. Grades 11 and 12. (To be continued)