Growth versus equity

Published by rudy Date posted on January 26, 2011

It was pretty disappointing that Economic Secretary Dondon Paderanga was not able to give a more spirited defense of the administration’s conditional cash transfer program when it was attacked, ever so gently, by Sen. Bongbong Marcos during the FOCAP forum last week. Sen. Marcos raised the growth versus equity thing… that P-Noy is sacrificing growth with this program.

It is a pity, the old dictator’s son intoned, that government will not spend more on things that lead to the economy’s growth like infrastructure. Apparently, the young Marcos has no imagination and would want to do the old tired things like “farm-to-pocket” roads that enrich the corrupt but do little for the poor.

Mr. Marcos did concede that the cash transfer program had been proven to work in countries like Brazil but he said, the Brazilians are funding it with taxes on the rich rather than with borrowings, as in our case. It is thus unlikely, the senator said, that we will be able to attain the ambitious GDP growth target needed to create jobs.

Dondon was his usual gentle self, made worse by his usual technocratic babble. In his characteristic soft spoken voice, Dondon said something unconvincing about how these two goals of growth and equity can be attained at the same time. One thing I am sure of, he did not fully banish the element of doubt Mr. Marcos planted on the minds of people listening to him about the wisdom of putting a lot of eggs in the CCT basket.

Indeed, people need a lot of convincing about this program. I googled it and came across blog comments about it being a dole-out. I know it isn’t a dole-out but then again, I too, have serious doubts about the ability of government to push a program that juicy without politicians demanding and getting their share of the largesse at the local level.

It is comforting to know that our trial implementation of the program under the supervision of then DSWD Secretary Esperanza Cabral had been exceptionally good. Of course it was then just a pilot program and politicians were being fed by Ate Glue in other troughs. The large amount to be given out this time is going to be tempting for the usual suspects.

But P-Noy decided to stake his reputation on this program. I would presume he will not be just monitoring its progress closely but would even be hands-on. He may fully trust Dinky but there is so much at stake on this program he can’t afford even a hint of impropriety or incompetence.

The fact that Congress didn’t touch this allocation at his request means that even the opposition elements are giving P-Noy enough rope to hang himself. He must make absolutely sure that P21-billion budget is spent judiciously, effectively and transparently. More than that, he must make sure it will really work as programmed or he will lose so much credibility so early in his term it would be difficult to go on.

Former Budget Secretary Ben Diokno has one more admonition: That P-Noy keeps the administrative costs of implementing the cash transfer program to the minimum. This will ensure the bulk of the P21-billion allocation goes to its intended beneficiaries. The former Budget Chief thinks the plan to spend P4 billion to run the entire program is wasteful and has to be drastically reduced. “Spending one peso for every four pesos of cash transfer is excessive and extravagant.”

What is conditional cash transfer anyway?

It is a safety net program that aims to provide social assistance for short-term poverty reduction. But, and this is what Dondon should have told Mr. Marcos during the FOCAP forum, it eradicates poverty in the long run by building the capacity of children of poor families to complete schooling and improve health conditions. This is called investing in human capital.

By improving their access to education and health services, the poor are being given the tools by which they can contribute to future growth. Unless this happens, the country is doomed to the kind of performance our economy has shown through the years… growth that does not eradicate poverty because it is a kind of non inclusive growth.

In specific terms, it is a poverty reduction and social development strategy by providing conditional cash grants to extremely poor households to improve their health, nutrition and education particularly of children aged 0-14. The Aquino administration is targeting at least 1.3 million household beneficiaries nationwide with budget allocation of P2.1 billion for 2011.

It is not a dole-out in the sense that its beneficiaries are carefully selected and are required to perform certain tasks to maintain eligibility in the program. According to its website, the program implementers select the poorest households in the municipalities through the National Household Targeting System for Poverty Reduction (NHTS-PR) implemented by the DSWD.

The DSWD uses a test that determines the socio-economic category of the families by looking at certain proxy variables such as ownership of assets, type of housing, education of the household head, livelihood of the family and access to water and sanitation facilities. The process does not involve local politicians.

To avail of the cash grants beneficiaries should comply with the following conditions: 1) Pregnant women must avail pre- and post-natal care and be attended during childbirth by a trained health professional; 2) Parents must attend Family Development Sessions (FDS); 3) 0-5 year old children must receive regular preventive health check-ups and vaccines; 4) 3-5 year old children must attend day care or pre-school classes at least 85 percent of the time; 5) 6-14 year old children must enroll in elementary or high school and must attend at least 85 percet of the time and 6) 6-14 years old children must receive deworming pills twice a year.

The program provides beneficiaries P6,000 a year or P500 per month per household for health and nutrition expenses; and P3000 for one school year or 10 months or P300/month per child for educational expenses. A maximum of three children per household is allowed.

A household with three qualified children receives a subsidy of P1,400/month during the school year or P15,000 annually as long as they comply with the conditions. The cash grants shall be received by the most responsible person in the household, usually the mother, through a Land Bank cash card.

The World Bank is generally supportive of the measure. But it cautioned that CCT programs perform best only where the supply of health and education services is extensive and of reasonable quality. That was why Ate Glue pointed out her reservations on scaling up the program this quickly without adequate assurance that there will be schools and health centers in the areas where the program will be rolled out.

In Latin America where it had been implemented for a number of years now, there are heartwarming stories of lives being actually changed for the better. Here are two such stories related by Tina Rosenberg in a recent article for the New York Times.

“When I traveled in Mexico in 2008 to report on Oportunidades, I met family after family with a distinct before and after story. Parents whose work consisted of using a machete to cut grass had children who, thanks to Oportunidades, had finished high school and were now studying accounting or nursing. Some families had older children who were malnourished as youngsters, but younger children who had always been healthy because Oportunidades had arrived in time to help them eat better.

“In the city of Venustiano Carranza, in Mexico’s Puebla state, I met Hortensia Alvarez Montes, a 54-year-old widow whose only income came from taking in laundry. Her education stopped in sixth grade, as did that of her first three children. But then came Oportunidades, which kept her two youngest children in school. They were both finishing high school when I visited her. One of them told me she planned to attend college.”

In response to Bongbong, it doesn’t really matter if we borrowed the money for the program. The important thing is to make it work. If that happens, we won’t have to choose between growth or equity. Both will happen. –Boo Chanco (The Philippine Star)

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