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



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Poverty Targeting

           Thanks to one of the best central banks in Asia, the Philippines has already mastered the art of inflation targeting.  We can be sure that we won't fall victim to hyperinflation as we did in the 1980s and 1990s.  I can safely forecast that our inflation in the coming years will range between 2 to 4 percent on the average year in and year out. Among others, we should thank the late Rafael Buenaventura who was the one who, as Governor of the Central Bank, asked the experts from New Zealand to help us develop an effective approach to inflation targeting.  Now, what we need is for the entire Philippine society to focus on "poverty targeting."  We should start with the most important assumption that no one sector can singlehandedly address the problem of mass poverty.

          Let us begin with some obvious facts.  Under alternative measures of poverty, some 20 to 25 percent of our population have incomes below the poverty line of approximately $1.5 per person per day or roughly 66 pesos per person per day.  Seventy five per cent of these households are in the rural areas:  fisherfolks, coconut farmers, landless farmers.  Why they are poor is obvious.  They have not been endowed by the State with the infrastructures they need to make a decent living:  farm-to-market roads, irrigation systems, post-harvest facilities, etc.  They have also been generally denied such public services as quality primary and secondary education; rural health clinics; access to potable water and electricity.  Therefore, the first responsibility of the State in poverty targeting is to devote more public funds that will be honestly spent on rural infrastructures, better public schools in the rural areas, more rural health clinics and access to potable water and electricity for rural households.  In addition, a larger portion of the Conditional Cash Transfer should be made available to rural households, especially to motivate the parents to send their children to school and to participate in supplementary feeding programs for their children with ages from zero to six when they are most in need of protein and other nutrients for brain development.

          As the State endows the rural areas with better infrastructures and social services, market forces will work to attract businesses to locate outside Metro Manila and other urban areas. It will now be the turn of business to help address the problem of poverty.  There will be big-time investors in tourism facilities such as beach and mountain resorts.  There will be smaller investors in bed-and-breakfast facilities in the various tourism corridors like the famous "Viaje del Sol" in the CALABARZON area and the Philippine Nautical Highway.  Some 40 million domestic travelers and 5 million foreign tourists today can create job opportunities for both middle-income and poor households in the countryside.  Tourism is one of the most job-generating sectors that can benefit, not only the educated labor force, but also the lowest-skilled workers in the rural areas.  The next sector with the highest multiplier effect in the countryside is high-value agribusiness such as pineapple, bananas, cacao, coffee, palm oil, rubber and other plantation crops.  In palm oil plantations, for example, workers with very little education can already be employed in picking the nuts.  The same can be said of bananas and pineapples.  This is one reason why allowing more consolidation of lands for these high-value crops can be an effective means of combating rural poverty.  The other market-oriented business that is necessarily in the "boondocks" is mining.  The State should do everything possible to remove the unreasonable obstacles that have accumulated during the present Administration in the implementation of responsible mining.  Mining can do much to create job opportunities for some of the poorest of the poor.  I am glad to note that Vice President Binay, one of the strongest contenders for the presidency in 2016, has the wisdom of seeing mining in a positive light.

          What about the urban poor, the 25 percent of those falling below the poverty line? Here, it must stressed the urban poor are far fewer in relation to the total urban population.  For example, in the Metro Manila area, only 4 percent of the population fall below the poverty line as contrasted with 50 percent in some rural areas in Muslim Mindanao, Bicol and Eastern Visayas.  The material deprivation one sees in the slum areas of Metro Manila is nothing compared to inhuman conditions prevailing in the poorest rural areas.  Paradoxically, the increasing urbanization of the total Philippine population is actually a blessing in disguise.  The greatest need of the poor in urban areas, beside fuller employment, is decent socialized housing.  In combatting this plague of poverty, the State, business and civil society should cooperate in the manner of Gawad Kalinga.  Housing in humane conditions should ordinarily be made available not in far away relocation sites, but right in the middle of the urban centers where jobs are available.  This means that market rules about the prices of urban land should be set aside to allow socialized housing projects to co-exist with expensive housing in such urbanized communities as Manila, Quezon City, San Juan, Cavite, Laguna, Cebu and other non-rural communities.

          Finally, in addition to cooperating with the State and civil society in these pro-poor programs described above, business enterprises can help those in their employ who belong to the vulnerable low middle-income households (those earning from $2 to $10 a day) to avoid falling into poverty as a result of the sickness of a member of the household, natural calamities and other emergencies.  This can be achieved by starting their so-called CSR programs with their very own low-income employees. The CEO, helped by his or her People Management staff, should be constantly racking his or her brains asking what more can be done for the lowest-paid workers in the organization.  For example, many business firms may discover that their janitors, clerks, sales people, kitchen staff, and other manual workers may still be living in slums.  These employers should not rest until they can provide these employees with more decent housing by putting together their resources, together with some real estate developers and government housing agencies, in a socialized housing program.  The same can be said about helping their lowest-paid employees to send their children to quality schools, especially with technical training courses such as those of Dualtech and Meralco Foundation, through scholarship programs.  As always, the greatest service you can render to poor or near-poor households is to give their children access to quality basic and technical education.  For comments, my email address is bernardo.villegas@uap.asia.