40% of funds for 2 subsidy programs did not reach poor: WB report

By LALA RIMANDO, abs-cbnNEWS.com/Newsbreak

Posted at Nov 14 2008 08:36 PM | Updated as of Nov 15 2008 05:49 PM

More than 40 percent of the funds intended for two existing subsidy programs of the government did not reach the poor, a World Bank report showed.

In its first quarterly update on the Philippines released recently, the multilateral lender noted that there are weaknesses and leakage in two pro-poor programs, namely, the Food-for-School program of the social welfare department, and the rice subsidy by the National Food Authority (NFA).
"Leakage of the Food-for-School program and the NFA subsidized rice...were estimated at about 40 percent," the report said.

The report was produced by a team from the Manila office with support from the Philippines country team as part of World Bank's updates on the country's economic and social development and policies.

It explained that the leakage was due to "design weaknesses, mis-targeting, and significant leakage to the non-poor."

It said these "compromised" the efforts of the government to protect the poor through social protection schemes.

Still, it noted that the government is addressing these weaknesses and that it hopes "to improve targeting to minimize leakage and maximize the impact of transfers on poverty reduction."

Rice subsidy

Government’s intervention programs have been funded by windfall from VAT revenues from higher oil prices.

To help low-income consumers cope with the global spike in rice prices then, the government distributed state-subsidized rice through NFA.

World Bank estimated that the cost of this subsidy program could possibly be as high as P60.9 billion in 2008.

“Evidence shows that it is not well-targeted to the poor,” the World Bank report said.

Citing the 2006 Family Income and Expenditure Survey, it stressed that the poorest quintile (lowest 20 percent) in the country only spent 13 percent of their total rice spending on NFA-subsidized rice.

It added that only 31 percent of the NFA-subsidized rice reached the targeted lowest 20 percent, while as much as 41 percent leaked to non-poor households.

Likewise, it noted that in 2006, about 16 percent of the NFA rice was consumed by the richest who belong to the top two quintiles of the population.

Higher than Brazil

At the height of soaring food and fuel prices in the second and third quarter of 2008, World Bank had advocated for government intervention programs that directly target and benefit the “poorest of the poor.”

World Bank’s country director Bert Hoffman cited the success story of Bolsa Familia in Brazil. Referred to as “conditional cash transfers,” Bolsa Familia seeks to reduce poverty through cash transfers schemes to the poor based on factors such as regular school attendance or the regular use of preventive health care services.

However, according to the World Bank-funded discussion paper, “The Nuts and Bolts of Brazil’s Bolsa Familia Program: Implementing Conditional Cash Transfers in a Decentralized Context,” Bolsa Familia is ‘extremely well-targeted.’ It said that the poorest quartile of Brazil’s population enjoyed 80 percent of the benefits.

This means only 20 percent of the program’s budget was leaked to beneficiaries who are not the being targeted. Yet, of these leakages, the paper said 85 percent included the next poorest quartile. The paper concluded that Bolsa Familia money did not find its way into the pockets of the wealthy.

The 40 percent estimated leakage in the Philippines is higher than Brazil’s 20 percent.

Food for school

The Department of Social Welfare and Development (DSWD) patterned their own subsidy program, called "Pantawid Pamilyang Pilipino Program" (4P), on Bolsa Familia.

4P, launced in February 2008, is an expansion of an existing subsidy program called “Ahon Pamilyang Pilipino,” which aims to arrest the decreasing participation rate of Filipino students aged 6-14. With its additional P5 billion funds from the government, it aimed to provide cash grants to 321,000 poorest households in 2008.

One of the major components of 4P is the Food-for-School program, where P500 is given monthly to households for health and nutrition while P300 is allotted for each child who is studying, with a maximum number of three students in each family.  Mothers usually have access to the money, which they get from the bank through ATM cards. 

Government’s efforts

The report also acknowledged the government’s efforts to address these leakages.

For the NFA rice distribution, it cited that selling has been limited to Tindahan Natin outlets where only those with Family Access Cards (FAC) could avail of the subsidized rice.

“Though this approach is more desirable, it nevertheless suffers from some leakages as some FAC beneficiaries are determined by local government officials without the benefit of hard data, such as local household census.”

It suggested a better approach: design and implement a national targeting system to identify the deserving beneficiaries.

For the Food-for-School program, it noted that the government would soon implement the Proxy-Means Test, a computerized ranking system to assess socio-economic characteristics such as ownership of assets (including appliances), type of housing unit, and access to water and sanitation facilities.

Similar efforts would ensure that the funds are received by the intended beneficiaries, the World Bank said.