Philippines Trails Neighbors in Fight Against Poverty

06-Jul-11, 6:42 PM | Cristine Ubalde,

MANILA, Philippines – The Philippines has among the worst cases of poverty in the region, a World Bank report said on Wednesday, sounding the alarm despite the massive outlays by the Aquino government for the controversial conditional cash transfer (CCT) program for the poor.

The struggle against poverty is so uphill, the World Bank said, that when the Philippines is compared to other countries in the East Asia and the Pacific region, with the international poverty line of $1.25 per day as yardstick, the Philippines only rates better than Cambodia.

Using the $2-a-day poverty line, the Philippines is only better off than Vietnam and Cambodia, the Bank said in its report.

“The Philippines fares lower than Malaysia, Thailand, and China. China‘s $1.25/day poverty had declined dramatically over two decades to a third of what it was in 1993,” the bank observed.

Poverty in the Philippines is concentrated in rural areas, where incidence is about double that of the national average and more than thrice that in urban areas, the report said.

The World Bank estimated poverty incidence in rural areas as affecting an alarming 39.4 percent of the population in 2009, versus the 13.2 percent recorded in urban areas.

The Bank’s Philippine Quarterly Update (PQU), meanwhile, also noted that while poverty remains concentrated in rural areas, poverty in urban areas is “worsening rapidly.” It blamed this on rising population and lower incomes.

“Poverty, and especially poverty dynamics, in the Philippines remains worse than its neighbors. Spatially, poverty remains highly concentrated in rural areas and in terms of sectors, households that rely on agricultural income are significantly more likely to be poor than other households,” the bank said.

It said poverty in urban areas increased more rapidly from 2006 to 2009; that it “became more severe, and contributed more to the continuous increase in poverty.” It added that, across regions, “10 of the 17 administrative regions experienced an increase in poverty incidence.”

The country has been credited with having a resilient economy that emerged relatively unhurt by the 2008-2009 world financial crisis, and with posting among the highest economic growths in its history in the past few years. Still, said the Bank, 2.4 million Filipinos became poor from 2003 to 2006 and another 1 million from 2006 to 2009.

In 2006, poverty incidence in rural areas was at 39.5 percent of the population; in and 2003, it was 38.1 percent of the population. Poverty incidence in urban areas was at 12.9 percent and 11.3 percent in those years, respectively.

While poverty gap and the severity of poverty in the Philippines declined over the years in rural areas, they worsened in the urban areas, noted the Bank’s report.

Developing the services sector is one way by which the Philippines can address poverty, the bank said, citing its potential to become a key player in jobs generation and increasing incomes of Filipinos.

To unleash such full potential, the Bank said the government must first address the constraints to the sector by adopting broad-based policies that, among others: help provide higher quality education for all to meet the demand for skills of the sector; improve infrastructure; and remove investment climate distortions that prevent firms from investing and innovating.

“The services sector has the potential to play an important role in promoting inclusive growth in the Philippines. The sector is already large and has been an important driver of employment and GDP growth,” the Bank said.

WB maintains growth forecast

Meanwhile, the World Bank said it is maintaining its growth forecast for the Philippines at 5 percent this year and 5.4 percent for 2012 on the back of expectations that investments, private consumption and the services sector will strengthen.

The report, however, said economic growth could be higher, since the strong focus and early gains of the Aquino administration in licking corruption and improving the investment climate could encourage domestic investment.

It projected a recovery in net exports owing to a combination of a technical rebound in exports that were affected by Japan’s quake-tsunami tragedy, and a potential boost in exports of goods, services and labor as Philippine companies and workers are given a role in the reconstruction of affected areas.

“Prospects on the supply side remain favorable with manufacturing and construction projected to benefit from the end of the trade disruption linked to Japan’s post-disaster reconstruction, as well as the solid growth forecast for the business process outsourcing,” World Bank Philippines Senior Economist Eric Le Borgne said in a statement.

The World Bank credited the Aquino government with taking important reforms to attain inclusive growth, such as: improving the transparency of the public sector budget and of public financial management to improve governance; and launching the public-private partnership program to address infrastructure bottlenecks.

The regional airport development combined with partial ‘open sky’ agreements will boost tourism, thus generating jobs for the poor and business opportunities for micro and small enterprises, the Bank said.



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