The first Millennium Development Goal (MDG) is to halve poverty incidence by 2015. For the Philippines this means reducing poverty incidence from 34.4 percent in 1991 to 17.2% in 2015.
Now, it can be told: The Philippines will miss this MDG goal, despite the above normal economic growth during the last four years. By contrast, the same goal has been reached globally in 2000, five years ahead of schedule.
Closer to home, our Asean-6 neighbors — Indonesia, Malaysia, Singapore, Thailand and Vietnam — have met this lofty goal many years ago. Table 1: After 10 years, poverty incidence is unchanged
As of March 19, 2016
Source of basic data: Philippine Statistical Authority
a. Based on the triennial Family Income and Expenditures Survey (FIES)
b. Based on the Annual Poverty Indicators Survey (APIS)
c. Based on the official poverty statistics for the first semester of 2015, given that 2015 is FIES year.
d. Based on a hypothetical drop in poverty incidence by 0.72, computed as 17.2/24, with the divisor being the number of years to halve poverty (2015-1991).
During the last 10 years, nothing much has changed: more than one in four Filipinos is poor. In 2006, the proportion of poor people was 26.6percent; it barely improved to 26.3 percent in 2009.
Assuming steady improvement in the war against poverty, poverty incidence should shrink by 0.72 percent annually. Using the 26.3 percent in 2009 as a starting point for the Aquino III administration, the proportion of poor people should be 24.1 percent in 2012 and 22.0 percent in 2015.
Yet, official Family Income and Expenditures Survey results show that poverty incidence was much higher than target: it was 25.2 percent in 2012 and 26.3 percent in 2015. But given that population continues to grow rapidly, with the proportion of poor people basically unchanged, more Filipinos are poorer now than before!
It is tempting to blame the Asian financial crisis and the recent Global Recession for missing the target. But our Asean-6 neighbors went through the same crises, some even worse than what the Philippines had experienced, yet they managed to halve poverty incidence many years ahead of schedule.
The only reasonable conclusion is that our neighboring countries must be doing something right while we continue to muddle through.
And here’s another twist: when the Philippines committed to halving poverty by 2015, the massive spending for the conditional cash transfer (CCT) program was not even in realm realm of policy options.
But from 2011 to 2015, the Aquino government has flooded the urban and rural communities with some P229 billion worth of cash transfers. So, naturally, more is expected from it. Hence, it is a major disappointment that despite the massive infusion of cash into the pockets of the poor, poverty has remained stubbornly unchanged.
How did our Asean-6 neighbors manage to cut poverty by half without resorting to the foreign debt-financed CCT program?
Lesson: while strong, sustained growth is a necessary condition for poverty reduction, it is not a sufficient one. It matters where growth is coming from, and whether it is inclusive.
FIVE YEARS OF UNDERSPENDING: WHEN WILL THEY EVER LEARN?
A related issue to the persistent poverty is the matter of underspending. One would think that this slow, indecisive, and inept administration would be responsive, to the constant criticism that it has failed to disburse the limited budgets approved by Congress.
Yet, instead of improving, the gravity of underspending has worsened. In 2011, the level of underspending of the Aquino administration was P76 billion net of savings from interest payments, but in 2015, it reached P276 billion. From 2011 to 2015, the total underspending net of interest payments was a whopping P705 billion.
Given the enormity of the expenditure needs owing to the Global Recession, the past neglect of public infrastructures, and the swelling population, the Aquino III administration should have disbursed fully what Congress has authorized it to spend. There is no reason why the President cannot spend the budget fully and promptly because it originated from him and Congress has, by and large, approved it with little alterations.
But sadly, he failed to spend some P705 billion of public funds, net of interest payments, which could have made a difference in making economic growth faster, sustained, and more inclusive.
Table 2: Actual Government Spending Net of Interest Payments: From Bad to Worse
In billion pesos
Source: Department of Budget and Management; Bureau of Treasury
Based on sketchy information from the Bureau of Treasury, the Aquino III administration missed the opportunity to disburse some P276 billion, net of interest payments, in 2015, including some vital public infrastructure projects, making the underspending the worst in five years. This is the opposite of learning-by-doing.
The economic costs of underspending and indecisiveness are enormous. There are the missed opportunities in terms of benefits that should have been derived from completed programs and projects of the government (classrooms for public school students, farm-to-market roads and irrigation facilities for farmers and so on). And there is the loss in potential strong and sustainable future growth because of the lack of necessary public infrastructure.