CCTs: Expensive, short-sighted and artificial

The Aquino administration seeks a bigger budget for a program that is criticized as a poor cornerstone in the drive against poverty.

IBON research head
IBON Features/ September 2011

IBON Features— The Aquino administration is currently seeking an 86%-budget increase for its multi-billion peso conditional cash transfer (CCT) program. But while the program admittedly has a feel-good factor, it is a problematic approach to reducing poverty in the country.

The administration itself sets a high standard for the CCT program. Its economic blueprint, the Philippine Development Plan (PDP) 2011-2016, declares: “Direct CCTs to the poor through the Pantawid Pamilyang Pilipino Program shall be the cornerstone of the government’s strategy to fight poverty and attain the MDGs.” Unfortunately this is a poor cornerstone and the program is a weak foundation in the drive against poverty in the country. Five major concerns can be raised.

First, the program is a one-shot affair that peaks in 2013 and is virtually over after 2018. The 320,411 household beneficiaries in the first year of formal implementation in 2008 rises to 4 million in 2014 and then falls just as quickly to some 350,000 in 2018. Households can only be enrolled in the program for up to five years and it is expected that a total of 4.6 million beneficiary families will have been reached over the entire program. Perhaps not coincidentally, the peak of program implementation in 2014 happens right before assessment of the country’s Millennium Development Goal (MDG) performance in 2015.

The CCT program’s logic appears to be that these 4.6 million families will be permanently lifted out of poverty once they get an additional Php15,000 a year, enroll their children in school, and avail of basic health services for these five years. But it is difficult to see how this can happen. For instance there are already millions of other Filipinos who have income levels at least at the resulting higher levels, who school their children and who use health services – but still remain jobless, have insecure livelihoods and are poor. This includes the 2.7 million Filipinos who have graduated from grade school and have reached or completed high school and college but remain unemployed.

Any supposed ‘convergence’ with two other government programs will unlikely change this situation. The Self-Employment Assistance-Kaunlaran (SEA-K) will reach just some 62,000 families with its livelihood projects. To date, the Department of Social Welfare and Development (DSWD) reports providing capital seed funds to 9,543 families including 5,838 CCT beneficiaries. Meanwhile, the Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services (Kalahi-CIDSS) basic community infrastructure was reported to reach 1.35 million households with 5,876 community projects but the actual contribution to sustained incomes is unclear.

This leads to a second concern: the CCT program does not address entrenched economy-wide problems of joblessness and low incomes that cause poverty in the country. The unemployment rate has basically stayed at record high levels for the last decade. Adjusting for the revised government definition in 2005 that statistically reduced unemployment without creating jobs, the average unemployment rate over the period 2001-2010 was 11.2 percent. This is aside from 16.5 million other Filipinos in insecure, low-paying and even hazardous work.

It is likewise with poverty where real poverty incidence appears more or less unchanged since the 1990s. Adjusting for revised government definitions of poverty in 2003 and 2011 tends to indicate hardly any improvement in poverty incidence since 1997. Lower reported poverty appears to have been mainly due to changes in methodology rather than higher incomes for the poor. As it is, some 65 million Filipinos or some 70% of the population try to live off Php104 or even as little as P20-40 per day.

The CCT intervention certainly has powerful intuitive appeal. At the core is the idea that families are poor because they do not have enough money; if they have more money, even if only temporarily, then they will be less poor. This basic idea is wrapped in a social development package – it is not a dole-out because conditions are attached, complying with health and education conditions improves ‘human capital’ which gives beneficiaries long- term benefits, and the cash transfers are integrated with community livelihood and infrastructure projects in a ‘convergent’ development initiative.

The CCT program however is just a micro household level intervention that does not contribute to resolving the roots of the economy’s agricultural and industrial backwardness. The government itself backhandedly implies that the problem is intractable. Despite a wide range of supposed development measures – including the multi-billion peso CCT program – the PDP 2011-2016 targets an insignificant 0.3-0.5% improvement in the unemployment rate over the entire plan period. If anything, all the CCT program may do is just give a temporary income, health and education edge to its recipients in the scramble for finite work in the country. It would even be redundant to the extent that beneficiaries would have done the conditions even without the program.

Third, various implementation problems are already emerging at every stage of the CCT process. Accounts are streaming in from areas as dispersed as the Cordillera, Central Luzon, Bicol, Southern Tagalog, Eastern Visayas, Western Visayas and Mindanao .

Various administrative problems include non-deserving beneficiaries (ex. non-poor with well-built homes, assets, tricycles and stores), deserving non-beneficiaries (ex. living in remote areas or not having fixed households), confusing disbursements (ex. irregular releases of inconsistent amounts), lax implementation (ex. unmet conditions or falsified compliance) and the lack of health and education services. Unintended outcomes include implementers imposing manipulative or extraneous conditions (ex. tied to patronage politics or discouraging activism), community frictions (ex. jealousy) and misspent cash transfers (ex. on gambling or alcohol).

The predicament of course is the sheer size of the CCT program which literally involves millions of individuals as beneficiaries and as implementers. For every hundred instances of problems cited, proponents can counter with another hundred instances of showcase beneficiaries, for which another hundred problems can be shown, and so on. Anecdotal evidence is illustrative and colorful but unfortunately far from enough to assess a program of this size and indeed can even be misleading.

This leads to a fourth concern: the program has been and is being rapidly expanded without benefit of any major study on its implementation and impact. The CCT program started with an initial 4,600 pilot household beneficiaries in 2007. It has grown quickly over the last four years with 320,411 beneficiaries in 2008, 734,691 beneficiaries in 2009, one million in 2010 and a targeted 2.4 million in 2011. It is being implemented in 75 cities and 950 towns nationwide as of mid-August 2011. The cost has correspondingly grown and, by initial IBON estimates, around Php44.4 billion will have been spent by the end of 2011. The DSWD reported during the 2012 budget hearings that Php25.7 billion has been spent on the CCT program since implementation in 2007 until July 2011. However it is unclear how to reconcile this considering that the CCT budget has already doubled from Php10 billion in 2010 to Php21.2 billion in 2011 – or Php31.2 billion already in just two years.

This rapid expansion has taken place without benefit of any correspondingly expansive studies on implementation or impact. The DSWD only had two studies at hand last year when it requested the huge increase in its budget for 2011 – a report by the Ateneo de Manila Institute of Philippine Culture (IPC) and another by the Social Weather Stations (SWS).

The IPC was a qualitative study conducted in January-May 2010 covering just 297 respondents selected from a mere 18 barangays in three provinces (Nueva Ecija, Northern Samar and Agusan del Sur). The SWS in turn conducted pilot spot checks in January 2010 of just 760 households, 57 schools and 16 health facilities selected from 33 barangays in only one province (Northern Samar). The two studies have rich qualitative data but are very small compared to the ambition of the CCT program which aims to reach 4.6 million households in 79 provinces nationwide. Many of the implementation problems arising today were also already identified by these studies.

The DSWD also commissioned SWS to conduct two more program spot checks in November 2010 and then February 2011 – conducted in eight towns of Saranggani, Masbate, Antique and Misamis Occidental.

The World Bank came out with a policy note in July 2011 that speculated about the impact on poverty of the country’s World Bank-supported CCT program. Using an approach that it admitted had “important shortcomings” and “[without] data on compliance at the household level”, it hypothesized that the program “could increase annual incomes of beneficiaries by 12.6 percent, resulting in the reduction of poverty incidence among them by 6.2 percentage points”. On the eve of the DSWD budget hearings in Congress, the World Bank released a statement reiterating these projections but noted that these were merely based on “simulations” and that an “in-depth evaluation” was still on-going. This only underscores the lack of comprehensive studies of the program.

Finally, as a “cornerstone” anti-poverty strategy, it is an expensive, unsustainable, short-sighted and artificial trickle-down mechanism. The DSWD has reported that the CCT program will cost Php306.6 billion just from 2012-2016 with some Php30.6 billion could be for various administrative expenses if past spending patterns continue. The proposed Php39.5 billion CCT budget for 2012 alone is, for example, almost as much as the entire health department budget (Php43.4 billion) and over four times the budget for the 68 public hospitals nationwide (Php9.8 billion).

This is a lot of money for a program whose actual net benefits are still uncertain after four years. But even without a formal assessment there is strong reason to believe that the program’s benefits will be short-lived. The most certain anti-poverty impact of the program is the immediate income relief but this is fleeting in nature and only lasts as long as beneficiaries are enrolled and as long as there is a program in place. It also seems overly optimistic to think that a five-year window of support – even assuming the maximum income, health and education benefits possible – is enough to permanently lift a family out of poverty.

The economics of the household are moreover very different from the economics of the country. Beneficiary households will momentarily see their incomes increase from 25% to over 50% upon receiving cash transfers. But assessing a “cornerstone” anti-poverty strategy demands more than this. Is the economy as a whole creating jobs? Have the prospects for decent work and incomes for everyone in the country improved? Is agriculture modernizing and are local industries being built?

Progress against poverty will be far-reaching and sustainable only if the economy itself has been improved. Yet the CCT program does not address this. Instead, it implicitly acknowledges the failure of the economy in trickling down gains to the poor. Then, it creates an artificial mechanism for this through the national budget – a mechanism which is literally a pantawid (temporary) welfare scheme at best.

So we have a multi-billion peso program that is rapidly expanding but not because of any proven effectiveness. Despite the hype, the program does not address the roots of poverty in the country, is short-lived by design and due to wind-up soon after the global MDG review in 2015. Thousands of people within government and outside are working hard to implement the program. Unfortunately they may just be unwittingly part an enormously expensive scheme to momentarily reduce poverty for narrow political or propaganda purposes. IBON Features

IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.

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  1. This is a very good wrecking job…but offers no hints at what should actually be done. Is it really better for the poor to remain uneducated and without health cares? And critisizers are saying in one side of their mouths that CCTs makes people beggars with just handouts and the other side of the mouth saying “its only for 5 years…what goods that going to do?’ even makingit sound like its just for reaching some MDGs.

    Jobs are not provided by the government. That would be even worse. Jobs have to come from businesses to pay for them…if the young people are uneducated and unhealthy, whos going to employ them anyway even if there are jobs? I think its better to have the CCTs so people send their children to school and health cares.

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