‘PHL must spend more for social protection’

By Cai Ordinario, Business Mirror, Feb 14, 2019

THE Philippines needs to spend an average of 3.48 to 5.58 percent of its GDP to fill its social protection gaps up to 2030, according to estimates by the Asian Development Bank (ADB).

In a report, titled “Asia’s Fiscal Challenge: Financing the Social Protection Agenda of the Sustainable Development Goals [SDGs],” the ADB said addressing the fiscal challenges in providing social protection is key to achieving Agenda 2030.

“Many countries still face considerable challenges in creating the sustainable financing needed for their social-welfare program, the bedrock for the success of the social protection agenda under the SDGs,” said Woochong Um, director general of the ADB’s Sustainable Development and Climate Change Department.

The ADB made estimates based on low and high assumptions. The low estimate assumes the filling of the protection gaps through a perfectly targeted social assistance scheme.

The high estimate means addressing the gap through universal transfers to children and elderly, as well as an employment guarantee scheme for the population in active age.

Based on the ADB’s low estimates, the fiscal requirements could reach 0.6 percent of GDP by 2020; 5.77 percent of GDP by 2025; and 5.94 percent of GDP by 2030.

As a percentage of government revenues, the government needs to spend as much as 4.32 percent of its budget in 2020; 41.53 percent in 2025; and 42.7 percent in 2030.

For the high estimates, the ADB estimated that the government needs to spend 0.91 percent of GDP by 2020; 9.28 percent by 2025; and 9.59 percent by 2030.

In terms of revenues, the Philippines needs to spend 6.51 percent of total government earnings in 2020; 66.75 percent in 2025; and 69.02 percent in 2030.

“The majority of the countries in the study will have to revamp their policies and open new fiscal space, while some exhibit capability in using existing resources to increase their revenues without dramatically increasing tax rates or introducing new taxes,” said ADB Principal Social Development Specialist Sri Wening Handayani.

Addressing the social protection gaps will bring in significant benefits. The ADB said that, for one, increasing social insurance coverage to 55 percent, from 32 percent in 2015, will lead to significant poverty reduction.

Poverty incidence could be cut by 23 percentage points by 2030 if social insurance will cover all employees with a full range of short-term social insurance benefits by 2030.

Further, if the government will cover all employees with social insurance pensions, this will lead to a reduction of 2.3 percentage points in poverty incidence in 2030.

“We assume that, as part of achieving decent work, countries will make efforts to cover with social insurance all those with employee status in the labor market. Most countries with low employee coverage rates will find this challenging, sometimes due to institutional and administrative problems, and so our assumption may lead to overestimating possible coverage and poverty-reduction effects,” the report stated.

The social protection agenda under the SDGs has four dimensions—the provision of cash transfers for income security, health services, education services, and other essential goods and services.

Some of the potential sources of revenue mobilization for these countries, according to the study, include increasing tax efforts, reallocating energy subsidies and reallocating natural resource taxes.

The report suggests that governments, civil society and other development partners immediately start long-term fiscal and financial planning for implementing the social protection agenda. Countries should also create national policy dialogues in designing national social protection systems; conduct budget and revenue reviews; and support capacity building for social protection planning, administration and implementation.