Philippines Discussion Notes

1. 
   The Philippines Today: Progress and Challenges
   

1. 
   Advanced skills are essential for improving long term innovation potential and competitiveness. As the Philippines moves up the value-added chain, the types of skills demanded will change towards a greater focus on more sophisticated technical and high-level generic skills. While the tertiary sector is not the only determinant, it is clearly the main source of academic and technical skills. Higher education in the Philippines today consists of 2,060 public and private higher education institutions, enrolling about 2.5 million students (in 2007) with about 380,000 graduates annually. The majority of these higher learning institutions (about two-thirds) are privately owned and managed without subsidies from the Government.
   

2. 
   The Philippine system of higher education faces important obstacles that hamper its capacity to fulfill its mission of contributing to the country’s future economic and social development.¹⁰ These obstacles include barriers to equitable access, problems of quality, a lack of accountability and an inadequate financing framework.
   

3. 
   Enrolment in higher education has been stagnant in recent years. In the 1960s and 1970s, the Philippines had one of the highest rates of tertiary education enrolment in East Asia and the Pacific. Since then, enrolment growth in the other countries has outpaced the Philippines, the regional average enrolment rate to catch up. At about 28 percent, tertiary enrolment rate to catch up. At about 28
   

Figure 1: Tertiary Gross Enrolment Rates

Source: World Bank Development Indicators

4. 
   The demand for workers with higher education in the Philippines appears to be outpacing the supply of skilled workers. One sign of the high demand for skilled labor relative to their supply is that the rates of return to education since the 1990s have been highest for workers that completed a college degree or have a post-graduate education (Figure 2). Furthermore, the rate of return for college graduates has been rising over time, which suggests that the supply of workers with a college or post-graduate degree is not keeping up with demand.
   

Source : World Bank (2009, “Philippines Skills Report.”

5. 
   In general, the poor have less access to higher education. There is also a significant gender dimension among the poorer deciles of the population, with poor males faring the worst (Figure 3). Since tertiary education is largely provided by private institutions that charge tuition fees, the average cost tends to be beyond the means of most Filipino families. Studies have found that only the richest 30 percent of families can afford higher education for their children when choosing public institutions and only 10 percent can afford private higher education. While the CHED administers the Private Education Student Financial Assistance (PESFA) scheme, even the maximum subsidy fails to cover the full cost of tuition, let alone living expenses. Moreover, coverage of this financial assistance scheme is limited: in 2005-2006 it covered less than 3 percent of the tertiary student population.
   

Figure 3: Tertiary Attendance by Gender

Source: Family Income and Expenditure Survey

6. 
   Philippine universities do not rank high in world comparisons. The US News and World Report ranked two top Philippine universities – Ateneo de Manila University and the University of the Philippines – only as 234^th and 202^nd respectively. None of the Philippine universities or colleges was included in the 2010 World University Ranking produced by Shanghai Jiaotong University. (In contrast, Thailand has four universities rated among the top 200, and Indonesia has one.)
   

7. 
   There is a general lack of international benchmarking on higher education institutions and graduates. Several proxy indicators of quality of higher education suggest that there is much room for quality improvement in higher education. In particular,
   

• 
  Low quality secondary education. Results from the 2003 TIMSS assessment indicate that Filipino students have serious weakness in academic subjects of mathematics and science. In mathematics, its 8^th graders (average score of 378) perform well below the international average of 467, and also below that of Indonesia (411) and Morocco (387). The same is true with science.
  
• 
  Short cycle of secondary education. Secondary education in the Philippines has only 4 years. Thus, students entering the higher education system only have 10 years of basic education, compared to 12 years of basic education in most other countries. This means that the average student entering higher education in the Philippines is (16 years) and less educated students than the average student elsewhere in the world.
  
• 
  Sixty percent of faculty in higher education only has a bachelor degree. Students in the Philippines enjoy a relatively comfortable student-teacher ratio of about 20 to 1. However, only 31 percent of the teaching faculty have a master’s degree and 9 percent have a PhD degree. The remaining 60 percent only have a bachelor’s degree. The prevalence of bachelor’s degrees among the faculty tends to be even higher in private institutions.
  
• 
  Passing rates for professional licensure exams are low. A high proportion of students in the Philippines are enrolled in professional fields that are intended to lead directly to employment.¹¹ The average passing rate for the 2005 professional licensure examination is only 39 percent. Moreover, the overall trend indicates that the passing rate has been decreasing in the past few years.
  

8. 
   The indicators of internal efficiency for the Philippine higher education system are similar to those of Malaysia and the worldwide average. The proportion of students who reach the final years of tertiary education is about 66 percent, while the proportion of college entrants who graduate rose from 46 percent (mid-1990s) to 61 percent (2003/2004). Using UNESCO’s gross graduation rate¹², 20 percent of the tertiary age range manage to graduate from higher education in the Philippines.
   

9. 
   Many of the skills required in today’s economy are in short supply. The Philippines Skills Report (2009) documents skill gaps that manifest themselves by the difficulty in finding the right skills to fill vacancies. Such gaps are evident in the service and manufacturing sectors, and particularly in the export sectors and in sub-sectors such as chemicals, trade and finance. Detailed surveys of firms and employee skills reveal skill gaps both in academic subjects as well as in generic life skills, including problem-solving, leadership and communication skills. The Report further concludes that though there are multiple causes for emerging skill gaps, including those related to overall skill supply (quantity-quality) and the labor market, the most prominent constraints are the quality and relevance of education and training.
   

Figure 4: Difficulty Finding Right Skills - Sector		Figure 5: Time to Fill Professional Vacancies (weeks)
Source: World Bank (2009), “Philippines Skills Report.”		Source: World Bank (2009), “Philippines Skills Report.”

10. 
    A related challenge is the country’s ability to innovate and the need to improve the quality and quantity of scientific research and development. The Philippines spent about 0.11 percent of its GDP on research and development compared to an average of 1.61 percent for East Asia. (China currently spends about 1 percent of GDP on research and development.) The capacity for research in Philippine higher education institutes (HEI) is notably weak, with virtually no research activity taking place in the HEIs except for that associated with the pursuit of graduate degrees.¹³ Using a composite index taking into account basic requirements including infrastructure and human capital, efficiency enhancers, and innovation factors, the Global Competitiveness Report 2010 ranks Philippines the 87^th out of 133 countries, well behind China (29), Indonesia (54), Malaysia (24), Thailand (36), and Vietnam (75). The Philippines also tends to lag behind the other comparator countries in two pertinent sub-indicators that make up the Global Competitiveness Index, namely the quality of Higher Education & Training and Technological Readiness.
    

Figure 6: Share of GDP Spent on Education (%)

Source: UNESCO Institute of Statistics (2009)

11. 
    The Philippines is one of the 10 countries worldwide with the lowest amount of public spending per tertiary student.¹⁴ Between 2005 and 2007, public expenditure for higher education per capita only amounted to 11 percent of GDP per capita, compared to almost 60 percent in Malaysia, 18 percent in Thailand, and 24 percent in East Asia on average. This low level of tertiary education financing largely reflects a low amount of public spending on education in general. In recent years, total public spending on education in the Philippines has been only 2.6 percent of GDP, which is significantly lower than in other countries, both in the region and outside; the world average is 4 percent of GDP. (See Philippines Discussion Note No. 4 on Public Expenditures.)
    

Average

28.6

40.2

268.2

Median

24.2

30.1

203.1

Maximum

62.1

79.8

1142

8.5

10.5

39.9

8
Source: Global Education Digest 2009, UNESCO Institute of Statistics (2009)

12. 
    Proliferation of low quality public higher education institutions. On average, 14 percent of the total government education budget goes to supporting public State Universities and Colleges (SUCs). While a moratorium on the establishment of SUCs was issued in October 1999 as part of the government’s policy to rationalize higher education financing, a number of proposals/bills for the creation and/or conversion to SUCs have been received by Congress during the current administration, with a few actually being created in the last several years. A number of Local Universities and Colleges (LUCs) have also increased by 191 percent i.e. from 28 in 1994-95 to 42 in 2002 to 70 by end December 2007. These LUCs were established and are financially supported by local governments through mere resolutions and ordinances and are not subject to CHED supervision. More importantly, many of these LUCs do not appear to be very effective in generating basic outcomes in quality, access, and equity.
    

13. 
    Accreditation remains voluntary and the extent of accreditation is low. A consortium of accrediting agencies is organized into the Federation of Accrediting Agencies of the Philippines (FAAP) for private institutions and the National Network of Quality Assurance Agencies. As of 2007, fewer than 20 percent of higher education institutions had at least one program accredited and more than 65 percent of the accredited programs were at most Level 2.¹⁵ In a country with a multiplicity of institutions, establishing a proper accountability framework is critical for ensuring quality. CHED could provide incentives for gaining accredited status by giving accredited schools priority in the provision of grants and financial assistance, as well as administrative autonomy and financial deregulation.
    

2. 
   Where the Philippines Could Be: Policy Options
   

14. 
    The Philippines is due to update its Medium Term Development Plan for Higher Education (2002-2010). In that context, the administration could consider the following set of policy actions.
    

15. 
    The overall expenditure on education as a percentage of GDP is low compared to the world average of 4 percent and there is room to further increase allocations. As the overall education budget is increased, the authorities could consider increasing expenditures on higher education proportionately, without changing the intra-sectoral shares. Any increase in public resources devoted to higher education should target critical areas of quality and equity, and promote increased institutional accountability.
    

16. 
    In the medium and long term, CHED could consider phasing out the historically-based financing practices and link the amount of government subsidy to institutional performance through formula-based funding, unit cost-based funding, or performance-based agreements. To prepare for that, it is necessary that CHED update its information on unit costs in higher education institutions by programs.
    

17. 
    The government could also consider directing a portion of the budget expenditures on higher education to competition-based financing of innovation and strategic projects. Many countries have introduced competitive funding mechanisms in the financing of higher education. A prominent example is Chile (Box 1). The competitive funds can be used both for boosting the quality of teaching and learning, and for research.
    

18. 
    The institutionalization and systemization of the accreditation system would promote the quality assurance framework for institutions and programs, and help to link accreditation with financing instruments. Publication and dissemination of higher education institution performance indicators, including accreditation status, would help students and families make informed choices about universities and would contribute to overall improvement in quality over time.
    

19. 
    CHED could close several failing and/or non-performing institutions. This, together with regular publication and dissemination of outcomes (e.g., board examination results) and accreditation results, would signal a commitment to improved quality. Such signals would guide and influence the behavior of tertiary education institutions. Weeding out non-performing programs and institutions is one of the more effective ways of improving the quality of tertiary education output. Recent closures of law departments of some higher education institutions for consistently not producing graduates able to pass the bar examination is encouraging and a good policy to build on.