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Summary of the Systematic Country Diagnostic of the Philippines

Core Content

The Systematic Country Diagnostic (SCD) of the Philippines outlines the country's challenges and opportunities in achieving its vision of a prosperous middle-class society by 2040, known as Ambisyon Natin 2040. The report identifies four key areas of focus: Inclusive Growth and Jobs, Human Capital, Resilience, and Governance.

Main Points

1. Inclusive Growth and Jobs

• Growth Inequality: While GDP per capita has grown rapidly, median incomes have not kept pace, and the wealthiest Filipinos have seen faster income growth. This indicates that growth has not been inclusive.
• Job Quality: Most workers are in low-productivity jobs, and fewer than half of wage jobs offer basic benefits.
• Market Concentration: The Philippines has the highest level of market concentration and oligopoly power in the region, which limits competition and stifles small business growth.
• Policy Reforms: Recent steps like the establishment of the Philippine Competition Commission (2016) and the Ease of Doing Business Law (2018) aim to improve competition and reduce barriers to entrepreneurship.

2. Human Capital

• Human Capital Index (HCI): The Philippines' HCI score of 0.55 suggests that children born today will have 45% lower productivity than their potential due to deficiencies in education, health, and nutrition.
• Child Malnutrition: One in three children under five is stunted, and half of those in the poorest fifth of households are affected. Stunting leads to learning difficulties, early dropout, and reduced chances of formal employment.
• Education Quality: Despite expansion in access (e.g., universal kindergarten, senior high school), the quality of education remains low. A child in the Philippine system learns as much as one in a high-performing system in 8.4 years of schooling.
• Health Access: Public insurance expansion has improved healthcare access, but service quality remains a challenge.

3. Resilience

• Natural Disasters and Climate Risks: The Philippines is highly vulnerable to typhoons and earthquakes, and climate change threatens long-term prosperity by increasing disaster frequency, reducing agricultural yields, and harming ecosystems.
• Conflict Risks: Mindanao faces ongoing armed conflicts, which have hindered development and poverty reduction. The Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) was established to address these issues, but challenges like terrorist threats from more radical groups remain.
• Resilience Measures: The Risk Resiliency Program (RRP) has been launched, but its effectiveness is still under evaluation. The country also has potential in renewable energy, which could help mitigate climate risks.

4. Governance

• Rule of Law: The judiciary is inefficient, with significant backlogs and a poor reputation for enforcing contracts. The Philippines ranks 152 out of 190 countries in the "Enforcing Contracts" subindex of the Worldwide Governance Indicators (WGI).
• Corruption and Political Dynasties: Corruption is widespread, and political dynasties dominate the political landscape, reducing accountability and stifling political participation among the less wealthy.
• Public Financial Management (PFM): Weak PFM and inefficient public procurement are key challenges in implementing policies effectively.
• Policy Implementation: While many programs and laws exist to address these challenges, their implementation and follow-through remain the primary obstacles.

Key Information

• Economic Growth: The Philippines has experienced high growth rates, averaging 6.3% annually from 2010 to 2018, driven by FDI, remittances, and structural reforms.
• Poverty: Despite recent declines, about 20 million Filipinos remain poor, with the highest poverty rates in conflict-affected areas of Mindanao and typhoon-prone regions.
• Human Capital Development: Improving education and health outcomes is essential for long-term growth and poverty reduction.
• Private Sector and Competition: Enhancing competition and reducing barriers to entry can drive economic growth and job creation.
• Infrastructure Gaps: The country lags in digital infrastructure, ports, rural roads, and urban public transport, particularly in Mindanao.
• Agricultural Policy: The focus on rice has limited agricultural potential. Recent policy changes aim to shift to tariffs instead of quotas.
• Social Protection: Programs like the 4Ps ( Pantawid Pamilya Pledge) have had a measurable impact on poverty reduction.

Conclusion

To realize Ambisyon Natin 2040, the Philippines must address governance, human capital, resilience, and inclusive growth. While the country has made progress in recent years, the implementation of policies and programs remains the critical factor in achieving long-term development goals.