(Excerpts from an article of the same title that first appears in the Yellow Pad column, BusinessWorld, 26 May 2008, pages S1/4-S1/5)

by Rene Raya*

How does one cope when income drops, when food and fuel prices go up, and when there is no money left to send the children to school? The latest Family Income and Expenditure Survey (FIES 2006) suggests that for poor Filipino households, coping meant spending more on alcohol and tobacco. Well, at least the poor were creative enough to find happy moments amidst difficult times. In comparison, the non-poor were more prudent but maybe less happy, although the FIES does not come out with any index on happiness or misery.

But seriously, when families experience a drop in real income, spend less on education and health care, but increase spending on alcohol and tobacco, then one can say that times are indeed harsh.

Hardly anyone was actually surprised when the National Statistics Office (NSO) announced that average family income in real terms declined in 2006 compared to three years before then. Following this report, the government admitted that poverty incidence increased in 2006.

Perhaps more disturbing are the observed changes in the expenditure pattern of Filipino families.

Over the years, the share of education in the family budget has been generally increasing. In 2003, Filipino families spent an average of P5,580 annually on education, representing 4.5% of total family expenditure. The spending share increased to 4.7% in 2006. However, when spending pattern is examined across income groups, a different picture emerges. NSO data show a decrease in the spending share of education among poor families (those belonging to the bottom 30% income group) – from 2.9% of total family expenditure in 2003 to only 1.3% in 2006.

This means that in 2006, the poor spent just half of what they spent for education in 2003. The same trend was observed for medical care, with poor families spending only 1.7% for health in 2006 compared to 2.1% in 2003. This pattern of expenditure will have long-term implications on human capital and poverty reduction in the country.

Reduced spending of the poor on education confirms what has been reflected in the data of the Department of Education (DepEd) and the Education Network (E-Net), a civil society network working for key reforms in the education sector. Parents are cutting on cost, specifically on tuition fees, books, school supplies, educational materials and allowances, but with consequent impact on learning achievement. Children are migrating from private to public schools, which are generally more affordable. More students are working—and for longer hours—thus affecting learning outcome. Worse, a huge number of children from poor families drop out and stay out of school due to financial difficulties and the high opportunity cost of keeping children in school.

What accounted for this fall in education spending? NSO data show that the poor had to spend more on food, fuel and utilities in 2006, which took away 66.4% of the family budget. Given the worsening food and energy crisis in the last two years, expect the poor to dig deeper into their pockets to cover food essentials, leaving very little for education and health.

NSO data further reveal that the poor have less access to education, have shorter school life expectancy and have lower learning achievement. The children from the poorest 20% income group are four times more likely to drop out of school compared to the richest 20%. Such disparities in education access and outcome perpetuate poverty and intensify inequity in society.

Government's role becomes especially important during difficult times and crisis events. When families go hungry and reduce their spending on education, and when children drop out of school to work, then government must act to cover the financing gap and provide safety nets to help the poor and disadvantaged. But this is not happening in the case of the Philippines.

In fact, the Philippines has been under-investing in basic education, as shown by the study done by Rosario Manasan of the Philippine Institute of Development Studies (PIDS). In 1997, national expenditure on basic education was 3.2% of gross domestic product (GDP). This went down to 2.5% in 2001 and to 2.1% in 2005. Similarly, the share of basic education in the national budget has been shrinking over the years. By 2007, the allocation for basic education was down to only 11.9% of the national budget from a high of 16% in the late 1990s. International benchmarks set the desirable level of education expenditure at 6% of GDP and 20% of total public expenditure.

Indeed, the current level of expenditure is low and falls short of the requirements for quality education. It places the Philippines among the lowest spenders on education in Asia and the rest of the world. Thailand spends over six times what the Philippine government spends for educating its citizens, while Malaysia spends over ten times more. India spends nearly 4% of GDP on education while Sri Lanka allots about 3% of GDP.

The trouble with the country's public financing of education is that the government thinks it is richer, talks as though it is performing better, but acts and spends on the same scale as those countries that are much poorer and with far lower educational achievement. The Philippines' spending level at 2.5% of GDP is about the same as Bangladesh, Laos and Pakistan. But we are doing better (well, at least for now) than Burma, Indonesia and Cambodia, which spend only between 1% and 2% of GDP.

UNESCO's global monitoring of education performance shows that spending shares tend to increase with income, suggesting that, over the long term, countries with bigger economies tend to allocate a larger share of their GDP on education. When countries were classified into four groups based on income, the spending level of the Philippines (a middle income country) on education at 2.5% of GDP was even lower than the median (3.9% of GDP) expenditure of countries belonging to the lowest income group.

There was a time when the Philippines ranked next only to Japan in education. That was in the 1920s. By the 1940s, Sri Lanka, Thailand and South Korea joined the Philippines in the lead pack. By the first half of the 1970s, the Philippines was still in the lead pack. But this was the time when the country started to lose steam. Today, the country is among the bottom performers in Asia and the rest of the developing world. UNESCO's Education Development Index ranked the Philippines 75th among 125 countries, falling behind most Asian countries like China, Malaysia, Indonesia and Vietnam.

Many Asian countries are now taking concrete steps to increase real spending on education in comparison to the size of their economies. Not a few countries have achieved significant headway in literacy, net enrolment, cohort survival and teaching quality. Sadly, the Philippines appears to be stalling and moving in the other direction. Unless education expenditure is increased to a more respectable level and unless governance of the school system is improved, the country may end up as the education waste bin in the Asian region.

*Raya is a trustee of Action for Economic Reforms and a convener of Social Watch Philippines.

(Excerpts from Walden Bello's speech delivered during the Development RoundTable Series Forum on Oil and Electric Power held at the Sulo Hotel on 17 June 2008; tables generated by Joy Chavez)

Our dependency on oil has never been more excruciating than it is today. The price of fuel has reached unheard of heights. The price of crude went above $139 a barrel in the second week of June, before easing. At the pump, the price of unleaded gasoline has gone beyond P56 and diesel above P49. We are now consuming over 120 million barrels a year, and 90 per cent of that is sourced outside the country.

What is causing this unprecedented rise in global oil prices? The key factor seems to be that the demand for oil is rising much faster than its supply, and this is due fundamentally to the fact that the few old oilfields on which the world relies for most of its oil are being depleted and no new fields have been discovered that can match their production and reserves. Peak oil, which was viewed just a few years ago as a outlandish theory, is now being treated as fact.The second factor pushing up prices is the rush to buy oil futures contracts, a development that is partly determined by the fear that available oil will increasingly become scarce, partly by the desire of investors to park their wealth in oil instead of the declining dollar.

Our capacity to influence developments in oil has deteriorated from 25 years ago. Then we had a proactive energy strategy, we had a government energy complex working to diversify our energy sources, and we had mechanisms to influence the domestic price of oil. Today, in the era of oil deregulation, we are 100 per cent at the mercy of Chevron-Caltex, Shell, and Aramco, which controls Petron. The OPEC countries that dominate the production of crude are often cast as the villains of the piece, yet the last few years have been years of record profits for the oil majors. In the Philippines, the subsidiaries of the majors have been doing very well. In 2007, Shell’s net profit rose 54 per cent over 2006, from P4.12 billion to P6.36 billion. Petron’s net profits rose 6.3 per cent, from P6.02 billion to P6.4 billion.

In the US, it takes 4 to 6 weeks before a rise in the price of crude is reflected in the pump price. In the Philippines, with the rapid succession of pump price rises, the truth is we no longer know how prices are being determined. We don’t know if prices are being determined in response to actual past rises in crude prices or in anticipation of future price rises. Non-transparency is the rule in the oil industry.

Congress has been debating the future of the Comprehensive Agrarian Reform Program (CARP) since last year, with particular focus on the extension of funding for its key component -- land acquisition and distribution (LAD), which expired last June 10.

Created by the Comprehensive Agrarian Reform Law (RA 6657) in 1988, CARP was given a 10-year extension in 1998 by RA 8532. Considered the most comprehensive agrarian reform initiative in the country, CARP is supposed to distribute 8 million hectares of agricultural lands to more than five million landless men and women farmers and farmworkers. Crafted within a democracy, the CARP is a product of a compromise to accommodate competing interest, resulting in tensions and inconsistencies in its implementation. The Department of Agrarian Reform (DAR) has the primary task of distributing all private agricultural lands, while the Department of Environment and Natural Resources (DENR) has the responsibility for all public lands. The government allotted a total of 130 billion pesos to the program since its inception. Based on its 2007 accomplishment report, CARP distributed nearly six million hectares of land and 1 million hectares in leasehold areas to around three million peasant households. This outcome, though partial and the accuracy of which continues to be questioned, can be deemed significant given the political difficulty in implementation.

Official statistics claim that one million hectares of land have yet to be distributed. Bulk of the land still up for redistribution are private agricultural lands in Negros Occidental, Leyte, Negros Oriental, Maguindanao, and North Cotabato where large landholdings are located. DAR estimates that they need an additional 160 million pesos to complete the LAD. According to civil society groups, the completion gap in land redistribution and support services is larger than what official data suggest, making the extension of the CARP funding even more urgent.

Despite President Gloria Macapagal-Arroyo’s certification of the extension bill as urgent, Congress failed to pass a law to extend CARP before it went on recess on June 12. The House of Representatives deferred action on House Bill 4077, the consolidated bill which represents the outcome of the Committee on Agrarian Reform hearings, local public consultations, and deliberations on a number of CARP extension bills. Instead, the House passed Resolution No. 21 which seeks to extend LAD until December 31, 2008. However, the same resolution failed to pass in the Senate.

During the lower house floor debates on June 10, Speaker Prospero Nograles called for a closed-door all-members executive caucus to tackle HB 4077. Ninety-seven (97) representatives voted for the passing of HB 4077, 82 voted against it, and five abstained. However, the House leadership decided to postpone the plenary votes citing that the “votes are not yet in the bag”. The Senate, on the other hand, has yet to produce both its committee report and its own version of the bill, insisting that CARP still has a budget until December 31 and that its extension does not hinge on the June 10 expiry date.

The possibility of termination of the CARP raises a lot of uncertainties, prompting agrarian reform beneficiaries, farmers and farmworkers still seeking to be covered by the program, and wider civil society including pro-CARP reform forces from the farmers’ groups, academics, NGOs, and even the influential Catholic Bishops Conference of the Philippines (CBCP) to step up their campaigns and lobby work. On July 7-8, the CBCP will convene the Second National Rural Congress, a gathering of the rural poor from around the country, with agrarian reform taking a big space on the agenda.

Clearly, the landed bloc has consolidated its forces in Congress, and more importantly, President Arroyo has failed to exercise leadership and political will to see the program through. The battle over the extension and reform of CARP, however, is far from over.

What's Inside FOP?
PERSPECTIVE:Filipino Families and Government Spending Less on Education

by Rene Raya

PHOTO OF THE MONTH: Protest Against EU-ASEAN FTA

by Sammy Gamboa

DEVELOPMENT BRIEF: Notes on Oil Crisis

by Walden Bello

SOCIO ECONOMIC MONITOR: Education

by Julie de los Reyes

POLITICAL ROUND UP: Future of Agrarian Reform Hangs in Balance

by Mary Ann Manahan

UPCOMING EVENTS