Round and round we go

Prof Solita Monsod in her weekly column for The BusinessWorld quotes a paper authored by Ms Rosario Manasan of the Philippine Institute for Development Studies or PIDS a government think tank which estimates that based on its current trajectory, the Philippines will meet the Millennium Development Goal (MDG) target of achieving universal primary education by (brace yourself) 2079(!) sixty four years behind the 2015 deadline.

That is unless the government changes its course and raises education expenditures in the near term. Currently there is a mere 65% completion rate of students that enter primary school. Many factors contribute to the high attrition rate, most of which we are all too familiar with: large class sizes, poor teachers, a backlog of classrooms, materials and clean drinking water, improper access for disabled and indigenous children.

To bring the current attainment rates up to 90% by 2016 (the end of President Aquino’s term) would require a near-doubling of the current education spending in the next year according to the paper. Manasan provides forward budget estimates of P382 billion (3.8% of GDP) for 2012, P308 billion for 2013 (2.3%), P325 billion for 2014 (2.8%), P341 billion for 2015 (2.7%), and P355 billion for 2016 (2.6%). The spending “surge” in 2012 includes provisions to bridge the capital spending backlog accumulated over recent years. The likelihood of this happening is very low considering the fiscal consolidation being undertaken to contain public deficits and debt.

Given its inability to raise and sustain a tax collection rate above 15% of GDP (Manasan says it should be around 18%), the government has resorted to expenditure contraction as a means of keeping its deficits in check. To raise its tax take to the prescribed level while sticking to its “no new taxes” pledge, the Aquino administration would have to pull a few policy levers at its disposal. What are these? Well, they’re the usual suspects: rationalizing tax exemptions to investors, restructuring excise taxes on sin products, and reforming the road users tax.

These are all familiar prognostications. After all the animosity the government has recently faced over reducing subsidies for commuter trains, highways and utilities, the politics of increasing rates on alchohol, tobacco and automobiles would make the enactment of two out of the three proposed measures unlikely.

Improving Retention

In this year’s budget the Aquino administration has tried to improve retention in schools via the demand-side of the equation by placing more money in the conditional cash transfers (CCT) program. This is a recognition that apart from inadequate inputs from the public sector, it is the lack of family income that drags attainment levels down. The problem of course is that once demand for education on the part of families is stimulated, supply on the part of the government will have to surge to meet it.

So round and round we go, locked in the policy/spin cycle until the year 2079…unless of course we introduce some kind of structural “break” in the process. That could come in the form of a reproductive health act that would allow parents to make informed decisions about the number and spacing of their children. By all accounts, that would mean lowering the average size of each household if the true wishes of parents were fulfilled. If this were introduced this year, its effects would be felt in the kindergarten enrollment levels of 2016. While current enrollment growth rates are already declining, the reform would slow them down even more. This would allow the government some breathing room to catch-up with the demand for schooling.

Many players on both sides of the debate do not seem to appreciate just how close their positions are.

Of course the reason why past incarnations of the RH Bill have failed to make it through Congress is the opposition faced from the powerful Catholic bishops. From watching the panel discussion on Al Jazeera TV (see video clip embedded below), the main stumbling block in this Congress has been what an abortifacient consists of. Bishop Ted Bacani seems to accede to other forms of man-made contraceptives that prevent conception. Perhaps this is in part due to the Pope’s own statement regarding the acceptability of condoms in preventing the spread of HIV and AIDS.

Many players on both sides of the debate do not seem to appreciate just how close their positions are. While the current RH Bill does not explicitly enumerate the different forms of legal and safe methods of birth control that would be offered; by the same token, it does not seek to legalize abortion either. The position of the clergy seems to be that under the bill, substances, both herbal and synthetic, that induce termination of pregnancy (abortifacients) could be construed as legal forms of contraception. An example of this the morning after pill, that in some countries has been offered to victims of rape, might form part of the mix unless explicitly prohibited.

As presidential spokesman Edwin Lacierda pointed out, that was an issue up for debate. The disengagement of the bishops from the process is the reason for the current impasse. It is quite unfortunate that Ms Beth Angsioco an advocate of the RH Bill was not asked to clarify her position on the matter. It would have been enlightening to hear it rather than the toing and froing over rights that occurred. It should be noted that even in countries where abortion is legal, the use of such morning after pills is tightly controlled. For the sake of guaranteeing its passage through Congress, it would be best for advocates of the bill to compromise and  leave the debate over whether or not to legalize abortifacients for another day.



Untangling the Complex Policy Web

Returning to the issue of how to finance education. It is quite clear that in the near term, the bridging of the education gap will be difficult particularly because the government is hoping for a credit upgrade from the various rating agencies. This would mean reducing the fiscal deficit to within 1-2% of GDP. One cannot discount the benefits a one or two notch upgrade would bring about. You cannot get there without fiscal consolidation or controlling cost pressures in the budget, improved collection by the government revenue agencies recently reported notwithstanding.

The basic source of this gap is the sheer size of our population. Reducing its growth rate even fractionally would have huge benefits down the track in terms of education, health and employment outcomes. The government may not be able to attain the MDG target by its deadline, but it can lay the groundwork towards balancing the conflicting policy goals it has to contend with at the moment.

Consumer info not commandos needed

It was reported a while back that the Commission on Higher Education (CHED) would go “commando” on institutions producing sub-standard outcomes for their students. The newly appointed CHED Chairwoman Patricia Licuanan was quoted as saying

(w)hen I [was] appointed to the CHEd, he (referring to President Aquino) said, ‘Dr. Licuanan, close down all these substandard nursing schools,’ …So, how clear can you get, right?

Of particular concern to the chairperson are institutions “that were very, very strong with the previous administration.” As graduation season approaches, many programs that are poorly performing (i.e. have failed to bring at least 30% of their graduating class above the line in board exams) particularly in the nursing field, will be targeted by a “crack team” to be formed by the Commission.

While the operators of such schools are liable for their poor performing students, the Commission by implication is also at fault for issuing permits to them to begin with. Either their criteria for approving these programs must be re-examined or somewhere in the organization, some form of graft and corruption exists and needs to be dealt with.

Which makes the fulfillment of this ‘mandate’ quite doubtful. Promises to close down opportunistic higher education providers have been made in the past. Cases tend to get tied up with the courts as temporary restraining orders (TROs) are issued that maintain the status quo. Operators find their way of ingratiating themselves with the authorities and the powers that be in the mean time. In the end it is a losing battle as agencies suffer more losses than wins.

Rather than waging a costly war in the courts with school operators, why not allow public access to information to bring about informed choice?

As an alternative, it would be more cost-effective and constructive for the CHED to publish information regarding the performance of schools in print and on the internet. Such information is already available, but not readily accessible. Empowering the public with information to make an informed choice would enforce a kind of market discipline.

While they are at it, the CHED should also take the lead role in publishing career information regarding future labor demand for various professions. For this it might have to team up with the Department of Labor and Employment (DOLE). The information should cover occupational and industry data and the qualifications both in higher education and vocational training that will be required to meet the prospective demand. Certain vocations or occupations that are expected to be of high demand among employers should be promoted, while those of low demand should be discouraged. To do this quantitative economic modeling of labor markets as well as consultations with industry and employer groups must first take place.

The CHED could easily get side-tracked with the issue of closing down schools when it should be more focused on the larger picture of matching skills with demand. Rather than waging a costly war in the courts with school operators, why not allow public access to information to bring about informed choice? The tools and information are already at their finger tips.

Rather than taking a ‘shot-gun’ approach to employment, training and higher education policy, the relevant agencies need to work together to work out a long-term, comprehensive solution to our labor market requirements.