Gov’t urged to set up a more ambitious welfare program

A recipient of relief goods shows off the contents of the package she received from her local government in this photo taken last year in Manila in August 2020.

A civil society organization urged government to set up a more ambitious social protection program to provide more aid to more people affected by the pandemic, especially after authorities vowed to distribute aid to the most vulnerable sectors following another strict lockdown in the National Capital Region.

Instead of a one-off approach to providing assistance, the government should come up with a more substantive and inclusive mechanism that will provide meaningful aid to all those who need it, especially in times of disaster, according to Social Watch Philippines.

“This continuing pandemic is a wake-up call for the government to strengthen its technical capacity and administrative competence in providing social protection schemes,” Ma. Victoria Raquiza, Social Watch Philippines co-convenor, said in a statement issued a few days after another enhanced community quarantine was imposed in Metro Manila and nearby regions.

Raquiza once more issued the call for a more universal approach to social protection after Social Watch Philippines held a roundtable meeting that discussed findings of studies on government’s health, economic relief, and social protection programs.

The outputs of these welfare schemes were set by the COVID-19 Active Response and Expenditure Support (CARES) program loan that was implemented during the first year of the pandemic. CARES is co-financed by the Asian Infrastructure Investment Bank through a $750-million loan, together with other loans from the Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA). [See: AIIB COVID-19 Loan Project Brief]

During the roundtable discussion, the studies revealed that while the government managed to meet the programs’ goals — increasing testing capacity to 8,000 per day by May 2020, providing wage subsidies to those temporarily unable to work during the lockdown by December 2020, and distributing cash to vulnerable households by July 2020 — the demands for these subsidies were so huge that provisions were insufficient.

All told, the case studies’ findings showed that once more, the informal and vulnerable sectors — the very same sectors that need the most help during a disaster such as a pandemic — were not adequately provided for. [See: Case Study presentation for COVID-19 Testing and Wage Subsidies, Case Study presentation about the Social Amelioration Program]

Among the findings include:

Informal workers and disadvantaged sectors found it difficult to access COVID-19 testing, risking the possibility that they may contract, and even spread, infection.

Wage subsidies under the Department of Labor and Employment’s (DoLE) COVID-19 Adjustment Measures Program (CAMP) and the Department of Finance’s (DoF) Small Business Wage Subsidy program fell below the prevailing minimum wage and only benefitted one-third (or 658,886) of the 2.3 million workers who were temporarily dislocated during the lockdown. What is perplexing is that in spite of the urgent need to increase subsidies for workers and distribute them to as many workers as possible, the SBWS program returned P5 billion of unused funds to the national treasury in July 2020.

Households that had members who were considered vulnerable — or those families which had seniors, persons with disabilities, solo parents, and pregnant and lactating mothers, among others — only received one tranche of Social Amelioration Program (SAP) funds, even if they were entitled to receive more than one by virtue of having more than one member who was considered vulnerable. Moreover, the civil society organization said that the urgency to provide SAP assistance at the soonest possible time during the strict lockdown period could have justified an expedited validation process. The protracted validation process of beneficiaries delayed the SAP distribution. In the case of the distribution of the second tranche, the delay was about five months, which, in turn, further prolonged the agony of recipients.

The case studies have been unable to determine whether the economic relief and the wage subsidy programs helped uplift the welfare of women owing to the lack of additional gender-disaggregated data such as in the case of micro, small, and medium enterprises (MSMEs) (of which 58% were registered by women) and their workers. [See: Case Study presentation for COVID-19 Testing and Wage Subsidies, Case Study presentation about the Social Amelioration Program]

According to Social Watch Philippines, these findings show that the beneficiary targeting system employed by the government’s welfare programs risked being too narrow.

The lack of data about MSMEs, their workers, and 4Ps beneficiaries only emphasize what has been confirmed all along: that women continue to bear most of the brunt of hardship, especially during times of crisis and disaster.

With these findings, the group emphasized the need for welfare schemes to cast wider nets so that they can help more people, not only in terms of providing for their daily needs but to assist them in leading more productive and fulfilling lives, during and after the pandemic.

How the pandemic doubled the budget deficit

Major thoroughfares in Metro Manila, usually packed with vehicles day and night, are empty during the tight lockdown imposed by authorities in March 2020. The quarantine restricted trade, which cut taxes, and reduced government revenues.

Running a budget deficit is nothing new to the Philippine government. 

It has become something of a tradition that a June 2020 study said that the Philippine government ran a deficit in 17 of the last 21 years since the start of the millennium. [See: Towards sustainable tax policies]

But based on this metric alone, the Philippines is hardly an outlier — it shares the same ranking with Cambodia. 

Of nine economies examined by the study, Vietnam incurred deficits for two decades while it was 18 years for Indonesia, 21 for Malaysia, Myanmar, and Laos, 10 for Thailand, and only two for Singapore. 

In 2019, even without a pandemic, the Philippines spent more than it collected in taxes, resulting in a budget gap that reached P660 billion or 3.4% of its gross domestic product (GDP). 

That figure more than doubled in 2020, the year when the novel coronavirus disease (COVID-19) forced the country to impose what is considered as the strictest and the longest lockdowns in the world. 

In 2020, the Philippines’ budget gap reached P1.36 trillion or 7.5% of GDP, according to a BusinessWorld report dated January 21. 

Citing preliminary data announced by Department of Finance Secretary Carlos G. Dominguez in a virtual meeting, the report said that overall spending reached P4.205 trillion last year, up 11% from P3.797 trillion in 2019. The total expenditures were 0.66% below the P4.233-trillion goal.

The Finance chief said total revenues reached P2.842 trillion, down by 9.5% from P3.138 trillion a year earlier, and 0.39% short of the P2.853-trillion target. Tax collections accounted for 87.6% of the total.

Last year’s P1.36 trillion deficit was brought about by two factors: increased public spending to address COVID-19 on one hand, and lower tax collections brought about by slowing trade and reduced incomes on the other. 

In short, during 2020, overall spending went up and revenues from tax collections went down. 

Government spending increased because, among others, it “added new or expanded existing programs as part of its pandemic response,” according to a Social Watch Philippines report entitled “A Scoping Study on the Asian Infrastructure Investment Bank’s COVID-19 Loan to the Philippines.” [See: AIIB scoping study

Meanwhile, revenues — primarily from tax collections — went down because “the economy suffered due to disruptions in production, reduced incomes, and lower than expected trade and investments brought about by the pandemic,” said the study. “All these contribute to the erosion of tax base: lower GDP, higher unemployment, business closures.” 

As a result of increased spending and decreased revenues, the government had to seek fresh funding to cover the shortfall. 

In early 2020, the government was able to secure a loan package called the COVID-19 Active Response and Expenditure Support (CARES) program that was funded by the Asian Development Bank (USD1.5 billion), the Japan International Cooperation Agency (USD459 million), and the Asian Infrastructure Investment Bank (USD 750 million). 

Worth a total of USD2.71 billion, the CARES program’s expected outputs includes measures taken to combat the spread of COVID-19, distribution of funds for social protection and relief for affected people, and delivery of economic stimulus programs. 

Proceeds of the CARES loan package have already been received by the government, a Finance Department official has confirmed. 

But now, the challenge for civil society groups is to make sure that the funds from all loans — including the ones borrowed for the CARES program — are spent efficiently and effectively. 

“It is also essential to monitor the impacts of servicing these debts in tax and budget policies in the long term and to engage government into taking fiscal measures that will promote sustainable, equitable, and adequate financing for development,” the study said. 

The study added: “While borrowings are not necessarily detrimental and may even be necessary in some situations, prudent debt management is important to ensure that the people most affected by the pandemic will not bear the burden of servicing these debts.”