Finally, it may be useful to devote a moment on what do not appear to be critical constraints on growth at this time

20. 
    Finally, it may be useful to devote a moment on what do not appear to be critical constraints on growth at this time. The Krugman et al (1992) report noted that, as of mid-1990, the trade policy regime remained highly biased against trade, and accordingly it recommended that ‘the nation should pursue a strategy of export-led recovery driven by a depreciation of the exchange rate, complemented by trade liberalization.’ In view of the serious trade deficit and modest export growth that prevailed at the end of the 1980s, the challenging part of such a strategy was how to introduce trade liberalization without immediately generating unsustainable trade deficits. The situation in the late 2000s is significantly different in at least two respects: namely, trade barriers are significantly lower than in the early 1990s and the current account balance is in surplus. The main factor responsible for this difference is the tremendous growth in workers’ remittances. The presence of a current account surplus driven by remittances growth means that the Philippines is exporting capital and labor, which raises questions about the country’s long-run growth prospects. The binding constraint on growth does not appear to be the availability of capital or labor, however, but the lack of adequate domestic incentives to employ that capital and labor at home, rather than abroad. It is not evident, therefore, that a more depreciated exchange rate coupled with trade liberalization – as recommended by Krugman et al (1992) – would make much difference as long as the key constraints described earlier that depress the investment climate continue to persist.¹³
    

21. 
    It is difficult to envision a sustained resumption of economic growth in the Philippines without major improvements in the tax collection effort, infrastructure investment and governance.¹⁴ Correcting these shortcomings, therefore, is bound to rank high on the agenda of policymakers intent on implementing “sound fundamentals” to restore faster growth in the Philippines. Specific measures and options for achieving these corrections are discussed in greater detail in separate Discussion Notes.¹⁵ The main channel through which these measures affect growth is through improvements in the investment climate and in public finances, which together help to close the gap in physical capital accumulation that separates the Philippines from the faster growing countries in the region.
    

22. 
    What can be done beyond the implementation of “sound fundamentals” to accelerate the structural transformation of the Philippines? The elimination of barriers to factor mobility may play an important role in this regard, especially in regard to labor. Barriers to financial capital mobility do not appear to constitute a critical bottleneck at this time, except for small and medium enterprises. Although the amount of domestic credit to the private sector, as a share of GDP, has continued to decline gradually since the late 1990s, the share of liquid reserves in the total assets of the banking system has been rising since 2005, and real interest rates have been reasonably low. This suggests that the decline in credit is mainly due to limited demand by borrowers, rather than supply constraints. On the other hand, various elements of the Philippine labor market legislation appear extremely rigid by regional and world standards.¹⁶ Questions remain about the extent to which these elements are binding, but policy reforms in this area deserve further study and may need to be complemented with additional reforms in social safety net legislation to compensate for any declines in social protection that could ensue from the relaxation of certain labor market restrictions.
    

23. 
    Another area that deserves further attention is the barriers to competition in Philippine manufacturing, or modern technology sectors more generally. While the level of protection provided through trade policies has gone down since the time that Krugman et al (1992) prepared their report, there are still signs of significant market distortions (e.g., the non-convergence of marginal labor productivity across manufacturing sub-sectors) that contribute, among other, to the adoption of overly capital-intensive production techniques. As judged by the latest MFN Tariff Trade Restrictiveness Index for overall trade, the Philippines remains a relatively open economy and compares well to the average East Asian & Pacific and lower-middle-income countries. However, the Philippines continues to exhibit significant domestic constraints that protect existing businesses: it ranks 141^st out of 181 countries in the Ease of Doing Business index for 2009, reflecting a cumbersome business environment.¹⁷ These “behind the border constraints” to doing business are most effective in protecting businesses engaged in non-tradables production, since competing tradables are produced abroad and not subject to those constraints.¹⁸ The removal of domestic barriers to competition, be it by introducing a more modern legal framework or application of a more effective competition policy and strengthened regulatory framework, deserves careful consideration.
    

24. 
    More controversially, some economists also advocate the adoption of “activist” policies to promote faster industrialization. As discussed in Rodrik (2009), these policies basically aim to enhance the profitability of modern industrial activities and thereby induce a faster movement of resources toward these activities. Options to achieve this objective range from the maintenance of an undervalued exchange rate, to the introduction of explicit ‘industrial policies’, which may include raising import barriers, export promotion measures and production subsidies. Among these options, the introduction of industrial production subsidies or an exchange rate undervaluation appear most promising, in principle. That is because raising import barriers entails pursuit on an inward-oriented industrialization strategy for which the domestic market is simply too small to achieve the economies of scale required to develop robust industries, while export incentives run afoul of World Trade Organization (WTO) agreements.
    

25. 
    The maintenance of an undervalued exchange rate offers the possibility of raising the relative price of tradables versus non-tradables, but also has the consequence of generating trade surpluses. In a post-crisis world trade environment that is less hospitable to export-led growth strategies than in earlier decades, application of this strategy also may run into opposition from trading partners, even if it does not contravene WTO agreements. The application of targeted production subsidies, on the other hand, may pose less of a problem in this regard.¹⁹ As argued in Rodrik (2009), the application of production subsidies, coupled with a compensating appreciation of the exchange rate could raise the relative price of tradables facing domestic producers, motivating an increase in the production of tradables without resulting in a larger trade surplus and, therefore, without creating the same political anti-bodies associated with exchange rate undervaluation or export promotion policies. However, such a strategy is much more fiscally expensive than the other alternatives and requires considerably better public sector management. Therefore, if attempted, such a policy would need to be preceded by measures to strengthen the tax effort and improve governance. Far from constituting an alternative, resorting to such a policy reinforces the need for reforms described earlier in the context of establishing ‘sound fundamentals.’
    

26. 
    A number of policy actions deserve consideration in view of the constraints on economic growth discussed above. These are outlined below and discussed in greater depth in other accompanying Discussion Notes:
    

• 
  Strengthen the government’s revenue collection efforts, both on the tax policy side and on the tax administration side, aiming to reestablish the tax ratio prevailing before the East Asian financial crisis (17 percent). Specific measures in this area are discussed in the Philippines Discussion Notes No. 3 (Tax Policy and Administration) and No. 4 (Public Spending).
  
• 
  Significantly raise the public investment effort in the economy; for further detail, see the Philippines Discussion Note No. 4 (Public Spending). At the same time, set up a high level commission to review the effectiveness of existing PPP arrangements and consider ways of strengthening them; for further detail see the Philippines Discussion Note No. 5 (Fiscal Risk).
  
• 
  Improve the investment climate by reducing the ‘behind the border constraints’ that inhibit business development. For further details, see the Philippines Discussion Note No. 6 (Competitiveness).
  
• 
  Strengthen public expenditure and financial management systems, both at the national and sub-national levels, with the aim of developing a well-planned public investment pipeline that complements private sector activities along lines of revealed comparative advantage and of improving budget execution performance. These measures could build on ongoing efforts discussed in the Philippines Discussion Note No. 23 (Public Financial Management).
  
• 
  Improve the transparency of the public sector budget and in public financial management, to improve governance and the public’s perceptions of governance. For further detail see the Philippines Discussion Notes No. 22 (Governance), No. 23 (Public Financial Management), No. 24 (Decentralization) and No. 25 (Statistics).
  
• 
  Study potential constraints on labor mobility, including the level of minimum wages.
  

(EASPR)

1. 
   The Philippines had been making progress in the fight against poverty during the 1980s and 1990s, but relatively slowly. Using the $1.25-a-day income threshold measure of poverty, it succeeded in reducing poverty from around 30 percent in the early 1980s to just over 22 percent at the end of the 1990s. Though significant, the decline of poverty in the Philippines over this period was quite weak compared to the performance of other countries in the region. As a result, the poverty rate for the East Asia and Pacific region as a whole is now below the Philippine rate, even though it was nearly twice as high just two decades ago. This notable difference in the pace of poverty reduction was mainly due to an equally notable difference in the pace of per capita economic growth, which averaged 0.1 percent in the Philippines over this period, compared to 6.5 percent in the rest of the region.²⁰
   

2. 
   Progress in poverty reduction was interrupted by the East Asia financial crisis in 1997-98. Although the Philippine economy recovered after the crisis, with GDP growth reaching a high of 7.1 percent in 2007, its poverty indicators remained unchanged or even worsened. The poverty headcount ratio, or proportion of the population with incomes below the national poverty line, remained about the same between 2000 and 2003, and then increased between 2003 and 2006.²¹ The increase in poverty indicators over this period has been confirmed by different sources, utilizing different methodologies. This apparent combination of economic expansion and rising poverty flies in the face of the strong empirical regularity that has been observed worldwide between falling poverty and positive economic growth.²²
   

3. 
   The absence of more dynamic economic growth, coupled with high degrees of income inequality, partly explains why poverty failed to decline since 2000. As noted at the beginning, low economic growth has a long-standing history in the Philippines and the growth episode since 2000 has been modest by regional standards. Furthermore, once the data biases discussed below are accounted for, economic growth in the Philippines is likely to have been even more modest than is indicated by the National Accounts. At the same time, the relatively high degree of income inequality exhibited by the Philippines reduces the income elasticity of poverty,²³ posing a further barrier to faster poverty reduction. Finally, it is also important to mention the increase in the relative prices of food during 2003-06, as food price inflation grew faster than the Consumer Price Index, having an adverse impact on the real consumption of poor households.
   

4. 
   The Philippines exhibits a very unequal, and possibly worsening, distribution of income and consumption. The World Bank’s Development Indicators currently identifies the Philippines as having the most unequally distributed income (or consumption) among the East Asian middle-income countries, whether measured by the Gini coefficient or the relative shares earned by the richest and lowest quintiles of the population. The evidence on the evolution of income distribution is less clear. The attached table indicates no change in the Gini coefficient for the Philippines since the early 1990s and a modest increase in the relative quintile share, while the rest of the region exhibits declines in both. Meanwhile, the Family Income and Expenditure Surveys (FIES) data indicates that overall income inequality has been declining since 2000. However, as mentioned below, the national income accounts and associated circumstantial evidence suggest that the distribution of aggregate income has worsened over the last decade once the richest households, which are usually under-represented in household surveys, are accounted for.
   

5. 
   Even though the National Accounts point to a significant improvement in GDP growth over 2000-06, the Philippines household surveys indicate that average real household income and consumption have been steadily declining during this period. The FIES household survey data, from which the poverty indicators are drawn, indicate that average per capita consumption declined annually by 1.5 percent. This eliminates the mystery from the observed increase in poverty, confirming the commonly observed negative relationship between poverty and growth. What remains puzzling instead is that the National Accounts-based data indicate a rise in annual per capita growth to well over 2 percent in 2000-06, while the FIES surveys show the onset of negative growth.
   

6. 
   The divergence between survey-based and National Accounts-based growth data is not unique to the Philippines. As noted by Angus Deaton (2006) in a comprehensive cross-country review,²⁴ National Accounts-based estimates of GDP are typically, though not always, larger than survey-based estimates, and there is a tendency for the National Accounts-based estimates of GDP to grow more rapidly than the survey-based estimates. He also notes that the household survey data generally underestimates real consumption and income growth, mainly because the more affluent households are generally under-represented in the survey samples, while the National Accounts tend to over-estimate growth, primarily on account of measurement conventions in the compilation of GDP.²⁵
   

7. 
   Even though the National Accounts tend to over-estimate growth, circumstantial evidence (e.g., export growth, corporate profits) indicates that, on balance, economic growth has been positive during 2000-06. Also, the Social Weather Station reports corroborate the increase in poverty since the early 2000s, as observed from the household survey data. This suggests that the growth that did take place during that period must also have been associated with an overall deterioration in the distribution of income, contrary to what is indicated by the household surveys. That is, increases in poverty must either be due to declines in average real income (or consumption), a worsening distribution of income or a shift of the poverty line. Since the poverty line is not being shifted and total per capita GDP growth is positive, the increase in poverty observed between 2003 and 2006 would have to be due to a worsening of the distribution of income. This is clearly a matter of concern, as the Philippines already exhibits among the highest degrees of income inequality in the region.
   

8. 
   Several factors have contributed to the apparent deterioration in the distribution of income and consumption. These include (i) an unequal sector distribution of growth, (ii) an unequal pattern of regional development, and (iii) intense demographic pressures. Before addressing each of these in turn, however, it may be useful to briefly review some of the key characteristics of the poor. Poor Filipinos differ from the rest of the population along various dimensions. In particular, they tend to live in rural areas and work in agriculture, though urban poverty is becoming increasingly important. They also tend to have less access to basic services, lower levels of education, and larger families. Like the non-poor, they derive most of their income from wages, but unlike the non-poor, rely mostly on domestic remittances with little access to foreign remittances.
   

9. 
   Sector dimensions of growth. Since the poor are largely engaged in agricultural activities and least endowed with skills, their fortunes are closely linked to agriculture sector performance and the evolution of real wages for unskilled labor. The sector pattern of growth observed since 2000 has not been favorable to agriculture and largely benefited other sectors that tended to be less intensive in the use of labor. Manufacturing, in particular, was among the largest contributors to growth during 2001-07, but among those that least contributed to job creation; see Figure 2. Agriculture, on the other hand, made a large contribution to job creation, simply by virtue of being a very labor intensive sector, but its contribution to GDP growth was limited. Furthermore, the limited employment growth that has taken place overall during this period mainly has favored the more educated workers, contributing even less to poverty reduction. As a result, the economy has not created enough jobs to keep up with the country’s rapid population growth. Whereas the working-age population grew by 17.6 percent between 2001 and 2007, employment only grew by 13 percent.
   

Figure 2: Sector Contribution to Growth and Employment

Source: World Bank calculations based on data from the Philippines Statistical Yearbook.

10. 
    Demographic dimensions of growth. The Philippine labor market faces difficult demographic challenges. Population growth is among the highest in the region and, given that the Philippines is still in the early stages of demographic transition, dependency ratios are high.²⁶ These factors strain the economy’s capacity to maintain full employment and generate adequate real wage growth. Moreover, labor supply pressures have only been partly mitigated by a surge of international migration and decline in labor force participation. So, in spite of more rapid economic growth since 2000, real wages have been falling and unemployment levels have been inching upwards.
    

11. 
    Regional dimensions of growth. There are significant differences in income and poverty levels across regions in the Philippines, with some regions exhibiting increased per capita income growth since 2000, while others have reported declines. In that context, it is conceivable that the overall poverty rate stopped declining during 2000-06 due to an uneven regional pattern of growth. When aggregate GDP growth is positive, this can only happen if the overall income distribution across regions worsens; see Technical Annex. That is, the pattern of growth would have to be such that the rich regions are becoming richer on average, while the poor regions are becoming poorer. Such a pattern has indeed been observed, as regions with a higher per capita GDP in 2000 tended to exhibit faster GDP growth during 2000-06; Figure 3.
    

12. 
    Barriers to labor mobility. As argued in the 2009 World Development Report, spatial disparities in income and production are inevitable, being driven largely by economies of scale and agglomeration effects. The same can be said of disparities in sector growth. Such disparities across sectors and regions need not result in higher poverty rates, however, provided that there is adequate labor mobility across sectors and regions. Unfortunately, various signs point toward the presence of barriers to factor mobility in the Philippines, resulting in market segmentation. To begin, the marginal product of labor varies widely across manufacturing sub-sectors without a tendency to converge over time. The manufacturing sector also appears to be extremely capital-intensive, which further impairs the already limited labor absorption capacity of that sector. Finally, there are significant differences in real wages across different geographic areas, suggesting a regional segmentation of the labor market.²⁷ Another sign of possible labor market segmentation is given by the increase in the unemployment rate of skilled labor over 2003-07. This suggests that there is an excess supply of skilled labor in the market, especially for younger cohorts, which would be expected to depress their real wages. Instead, skill premiums have been increasing, possibly pointing toward the presence of job rationing.²⁸
    

13. 
    Significant disparities in the marginal products of labor across sub-sectors in manufacturing would normally not be allowed to persist in the presence of vigorous competition. The persistence of such disparities, therefore, provides prima facie evidence of an absence of competition. This absence of competition appears to be mostly due to domestic anti-competitive practices (or “behind the border constraints”) in many sectors.²⁹ According to the latest MFN Tariff Trade Restrictiveness Index, the Philippines remains a relatively open economy (except in some agricultural commodities), comparing well to the average East Asian & Pacific and lower middle-income countries. However, the Philippines exhibits significant domestic constraints that protect existing businesses: it ranks 141^st out of 181 countries in the Ease of Doing Business index for 2009, reflecting a cumbersome business environment. Particularly burdensome are restrictions on foreign ownership of Philippine assets, coupled with a weak judiciary system and the prevalence of regulatory capture.³⁰ These constraints reduce the contestability of markets, limiting the incentive to innovate and raise productivity.
    

14. 
    The maintenance of protectionist policies in key agricultural sectors also exacerbated the low productivity growth in agriculture, limiting further the sector’s capacity to employ labor. Another factor contributing to the low productivity in agriculture is the growing scarcity of land and reduction in the amount of land per worker. This has been aggravated by agrarian reform policies that interfere with the effective functioning of land markets. These factors have tended to accelerate the decline in agriculture’s employment share, pushing workers into the unproductive informal sectors, given the absence of sufficient labor demand from the manufacturing and high productivity service sectors.³¹
    

15. 
    On paper at least, the Philippine labor market regulations are among the most rigid in the region. These regulations were designed to protect workers, but end up interfering with the labor market clearing process and artificially raising the cost of labor. The extremely high minimum wage levels are particularly worrisome in this regard.³² Though it is not fully clear to what extent these labor market regulations are binding, some empirical evidence (reported in World Bank, 2005) indicates that labor market regulations are a significant determinant of employment growth in the Philippines, and a significant number of firms (25 percent) cite labor regulations as a severe constraint on their operations. The recent debate in OECD countries about the optimal configuration of flexible labor legislation and secure social protection provides useful insights for potentially new approaches to tackling the problems of the Philippine labor market. The international evidence suggests that efficiency gains might be achieved by strengthening social protection – e.g., unemployment insurance or safety nets – in a way that is inclusive and mobility-friendly.
    

16. 
    To reduce poverty and build a broader base for future economic prosperity, fostering more inclusive growth is a priority. The first step in this direction is to accelerate overall growth, which will not be easy in the short run, while the global financial and economic crisis continues to play out. This requires eliminating the main constraints on growth in the Philippines, which have been identified in previous diagnostic studies as (i) a very vulnerable fiscal situation, (ii) inadequate public infrastructure, especially in transport and electricity, and (iii) a weak investment climate due largely to governance concerns.³³ Eliminating these constraints is essential for restoring growth, but may not be enough for accelerating poverty reduction. As pointed out in the preceding discussion, policymakers also need to be concerned about the distributional consequences of growth and ensuring that it is sufficiently broad-based.
    

17. 
    Because the poor predominantly work in sectors and regions that are growing less rapidly, generating better income-earning opportunities for the poor is critical for poverty reduction. As described earlier, the poor work mainly in the low-growth, low-productivity agricultural sector, while the capital-intensive and skills-intensive nature of more dynamic sectors makes it difficult for them to gain entry. Meanwhile, demographic pressures are pushing real wages down in the absence of more dynamic growth in labor absorbing activities. This leaves policymakers with two broad alternatives for generating better income-earning opportunities for the poor. The traditional approach has been to seek for ways to promote faster growth in the poorer regions and low skill-intensive sectors in the hope of catching up to the other, faster growing regions and sectors of the economy. An alternative approach is to allow the marketplace to take the lead in determining the most dynamic sectors with the greatest growth potential, while focusing government efforts on providing a growth-friendly macro-environment, eliminating barriers and distortions that prevent a faster labor absorption into the most dynamic sectors, facilitating greater labor mobility across regions and sectors, and promoting human capital development.
    

18. 
    The key to generating better income-earning opportunities is the integration of lagging with leading regions and sectors of the economy. The 2009 World Development Report argued that spatial disparities in income and production are inevitable, as they are driven by economies of scale and agglomeration effects, and that government efforts to spread out economic activity equally across the board have generally proven to be futile. The same can be said about government efforts to “pick winners” among different economic sectors. The more promising approach, therefore, is to seek the integration of lagging and leading regions and sectors of the economy. This approach begins with the application of ‘spatially blind’ policies (such as the definition and enforcement of property rights and the removal of distortions that interfere with the functioning of markets), investment in social services and maintenance of sound macroeconomic policies. Where there is limited labor or population mobility, the spatially blind policies need to be complemented with spatially connective infrastructure and social investments, to enable people and workers in the lagging regions and sectors to integrate more easily with the leading regions.
    

19. 
    A common question facing policymakers in countries with very disparate levels of development across regions and sectors is whether to invest the limited public resources in places (physical infrastructure) to promote faster growth or in people (human capital) to promote faster poverty reduction. The general answer is that countries should invest in activities that produce the highest economic and social returns nationally. This means emphasizing durable infrastructure investments that increase national economic growth in the leading places with a revealed capacity to grow, and emphasizing human capital investments in lagging places; that is, providing portable investments that stimulate mobility and accelerate poverty reduction.³⁴
    

20. 
    In agriculture, the application of this approach points toward a need to review and revise the existing sector policy framework in the Philippines, with particular attention to the strategy to achieve self-sufficiency in the production of rice and other basic commodities, and with respect to the agrarian reform. The rice subsidy, in particular, is keeping significant amount of resources tied up in a low value-added activity, instead of allowing them to shift to higher value-added activities. Reforms in this sector should mainly look toward (i) reducing the high tariff and non-tariff barriers to trade that continue to be applied for certain commodities, (ii) revising the agrarian reform to permit better functioning land markets, while (iii) considering agriculture-specific public infrastructure investments on a very selective basis in areas with revealed growth potential. Even with such reforms, however, agriculture will not become the main pathway out of poverty in the Philippines except possibly in certain rural provinces with strong geo-physical endowments.³⁵ Moreover, the sector’s growth outlook is clouded by the detrimental implications of prospective climate change.
    

21. 
    In manufacturing, this approach argues for the need to enhance competition, remove key investment constraints, and eliminate distortions in factor markets as key priorities for improving productivity and employment generation. While manufacturing has been a relatively dynamic sector of the economy, it is not living up to its full potential in terms of its contribution to overall growth and job creation. Generating a better sector performance will require (i) removing domestic barriers to competition (“behind the border constraints”), while establishing a ‘competition authority’ and facilitating better access to financing by small and medium-sized enterprises, (ii) addressing the most important shortcomings in the investment climate (namely, poor governance and the low quality of public infrastructure), and (iii) modernizing the country’s labor market regulations.³⁶ It is also necessary to review the import tariff and tax structure, as well as the investment code, with a view to eliminating any exemptions or fiscal incentives that are keeping the cost of capital artificially low.
    

22. 
    In services, this approach argues in favor of building on some of the revealed comparative advantages exhibited by the Philippines. Certain leading sectors, notably the Business Process Outsourcing industry, have grown rapidly in recent years, taking advantage of the country’s English language skills and improved informational connectivity from earlier telecom reforms. The main challenge for policymakers is to facilitate further growth in these sectors through appropriate investments in public infrastructure and expansion of complementary education services. In these cases, the private market already has ‘picked the winners’, while the public sector would be playing a facilitating role. Another sector with apparent comparative advantages that have not yet been revealed is tourism. It also has the potential to become a major source of employment for low-skill labor and directly contribute to poverty reduction. To realize that potential, however, it will be necessary the address various key constraints discussed earlier, including inadequate transport and energy infrastructure, which currently render the sector uncompetitive vis-à-vis other providers in the region.³⁷
    

23. 
    The other critical element of this approach is the facilitation of greater labor mobility across sectors and regions, accompanied by measures to provide adequate social protection and improved social services. To facilitate greater labor mobility, policymakers could consider a substantial relaxation of the most notable labor market rigidities, particularly those related to high minimum wages and strict limitations on temporary contractual arrangements, all of which limit the creation of jobs. In parallel, it is necessary to introduce better, well-targeted social protection mechanisms that address the concerns that gave rise to the existing legislation, but generate fewer distortions in the labor market. The expansion of well-targeted social safety net mechanisms, such as the government’s conditional cash transfer program (Pantawid Pamilyang Pilipino Program, 4Ps), would provide a modest redistributive impact that could help reduce the degree of income and consumption inequality prevailing in the Philippines, and which was shown earlier to contribute to the persistence of poverty.³⁸ More importantly, however, it would help poor households to avoid having to engage in coping strategies that perpetuate poverty (such as pulling children out of school during economic downturns) and would encourage greater labor mobility by reducing risk aversion, permitting workers to seek out more productive income-earning opportunities.
    

24. 
    Finally, from a longer term perspective, it is also critical to improve the quality and access to health and education services. In the final analysis, workers must be healthy and well-educated to take full advantage of new income-earning opportunities that open up in different regions and sectors with the recovery of economic growth.³⁹
    

25. 
    The preceding discussion points toward a number of policy actions that could help to accelerate poverty reduction. These actions are outlined below and summarized in greater depth in the other accompanying Discussion Notes:
    

• 
  Implement policy actions to accelerate economic growth (as outlined in the Philippines Discussion Note No.1 (Growth), with a focus on removing the main constraints on growth. These actions focus on strengthening the tax policy and administration effort, raising the public investment effort over the next five years, and improving governance to create a better investment climate for the private sector.
  

• 
  Take actions to improve the quality of statistics to permit further analysis of growth-poverty linkages; as discussed in the Philippines Discussion Note No. 25 (Statistics).
  
• 
  Set up a working group to review potential bottlenecks in the financial system that inhibit access to financing by small and medium enterprises; for further detail see the Philippines Discussion Note No. 6 (Competitiveness).
  
• 
  Set up a working group to review labor market legislation and institutions with the aim of removing barriers to labor mobility.
  
• 
  Take measures to improve productivity in the agriculture sector, which remains an important source of low-skill employment, and review the competition framework in manufacturing with the aim of enhancing job creation. For further details see the Philippines Discussion Note No. 10 (Agribusiness) and No. 6 (Competitiveness).
  
• 
  Take steps to consolidate and expand the coverage of social protection system, giving special attention to the government’s conditional cash transfer (4Ps) program, while phasing out other, less effective social transfers. Specific measures in this area are discussed in the Philippines Discussion Note No. 17 (Social Protection).
  
• 
  Take measures to improve the coverage and quality of basic education; for further details see the Philippines Discussion Note No. 12 (Basic Education).
  

http://www.nscb.gov.ph/announce/ForTheRecord/16Dec2009_PhilippineGDPEstimates.asp

The World Bank