Tuesday, September 14, 2010

What's wrong with the conditional cash transfer program?

Or three reasons to do it differently

The Asian Development Bank is loaning the Philippine government $400,000 million to implement it’s conditional cash transfer program, known as the Pantawid Pamilyang Pilipino Program (4Ps). The conditional health and education cash grants will be provided to poor households by the DSWD, to mothers and/orpregnant women of eligible households, who will receive the cash grants for up to 5 years subject to the eligibility criteria and compliance. Transfers are paid quarterly, directly into women beneficiaries' accounts established in the Land Bank of the Philippines. The 4Ps includes two types of transfers: one related to health and one to education.

Poor households with children 0–14 years old and/or pregnant women are eligible for a health grant currently set at P500 per household per month (for 12 months per year). The conditionalities are: (i) all children 0–5 years old attend the health center to obtain services established by the Department of Health (DOH) according to their age, including immunizations; (ii) pregnant women attend the health center according to DOH protocol, including delivery by skilled personnel and postnatal care; (iii) children 6–14 years old comply with deworming protocol at schools; and (iv) the household grantee (mother) and/or spouse attend family development sessions at least once a month.

Poor households with children 6–14 years old are eligible for the education grant. The education transfer is P300 ($7) per child per month (for 10 months per year), for up to a maximum of three children. Beneficiary households will receive the education transfer for each child from 6 to 14 years of age as long as they are enrolled in primary or secondary school and maintain a class attendance rate of at least 85% every month.

Eligible households can receive both the health and education grants. The average transfer per household is estimated at 23% of the average annual household income.

So far it sounds so good. But let’s analyze the package and the conditional cash transfer instrument further.

Firstly, this is a loan being borrowed by the government to be repaid over a twenty five year period, i.e. a debt that burdens future generations. Furthermore, this is a high interest ADB loan, a part of the ordinary capital resources loans, which charges near market interest rates. The ADB also provides Asian development fund loans, on concessional rates and grants (as opposed to loans) to developing countries. The government and it’s negotiating team should not borrow loans at market rates for such a program, but demand that the ADB provides the government with grant funding instead. If the ADB wants to assist us with our social programs and wants to strengthen the country’s social protection system, let it provide us grant funding – ‘free’ money – instead of loans, especially non-concessional loans, that only serve to increase this country’s debt burden.

The government negotiators should stand firm on this. If the Philippines does not qualify for grants, then insist on changing the terms with the ADB and other international finance institutions.

The country’s historic national debt and the automatic debt appropriation law that sacrifices the budget to loan repayments, should make the government more circumspect. The government should apply the utmost caution in negotiating more burdensome loans.

Secondly, even the ADB admits that the “ Key causes of poverty in the Philippines include high inequality and chronic underinvestment in physical and human capital, especially health and education. As a result, the Philippines is lagging on progress in non-income MDG targets for universal primary education, maternal mortality, and access to reproductive health services.” International donor agencies are in a mild panic as they face the prospect of countries not being able to achieve the less-than-minimum millennium development goals or MDGs. They will pressure us to recklessly get into debt to borrow to try and meet these targets. But this also provides us with an opportunity – to be firm and negotiate conditions that benefit the country in the short and long run. Also, if the new President and government has political capital in the eyes of the international community, why not use this to extract grants, rather than loans.

Thirdly, these conditional cash transfers are short-term measures – essentially anti-crisis measures – to mitigate risks and negative impacts. Therefore borrowing and getting into debt for short-term impacts is short-sighted and even reckless. We need long-term solutions. This means we must increase investments, starting with the national budget, on health and education.

The government should immediately double the national budget on health and education. The Philippines spends only around 6.4% on health as a percentage of total government expenditure, compared to our neighbour Thailand, for example, that spends 11.3%, or China with 9.9%. (UNDP 2009)

A longer-term measure is to provide universal health care and education. The problem with the poverty targeting instruments of the ADB and other IFIs is that in the name of targeting the ‘poorest of the poor’ it effectively excludes large sections of the poor (also referred to as ‘low-income’) thus depriving them of their fundamental and inalienable human right to a decent education and healthcare. Several countries in our region provide universal healthcare, such as Vietnam, which is already ahead of several of its MDG targets, Malaysia, Thailand and the two countries with the largest populations in the world, India and China. So why not us? Let us once again place this issue on the agenda – universal health care for all.

Finally, we need to once again raise the issue of repealing the automatic debt appropriation law. This is fundamental to increasing social investments and addressing structural inequalities that prevent the poor from accessing affordable and quality health care and education.

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