ARCHITECT, NOT JUST FINANCIER: More money will not fix PHL education and health – PIDS study

By Francis Allan L. Angelo

The Philippines has undertaken major reforms and increased investments in education, health, social protection, and skills development, but stronger institutions are needed to ensure that these investments translate into sustained productivity and economic transformation, according to a new Philippine Institute for Development Studies discussion paper.

The paper, “Reshaping Economic Institutions for Transformational Partnerships in Human Capital Development,” argues that while the country has strengthened its macroeconomic fundamentals and reached upper-middle-income status, persistent gaps in learning, health-system integration, skills matching, enterprise participation, and productivity point to deeper institutional constraints.

It was written by PIDS senior research fellows John Paolo R. Rivera, Michael Ralph M. Abrigo, and Valerie Gilbert T. Ulep, and released as Discussion Paper Series No. 2026-16 on Aug. 24.

The World Bank assigns upper-middle-income status to economies with annual per capita gross national income ranging from USD 4,636.00 to USD 14,375.00.

“The Philippine development challenge is not the absence of reform,” the authors wrote. The constraint, they argued, lies in how investments are “coordinated, implemented, sustained, and evaluated.” 

Four constraints holding back returns

The paper identifies four interrelated institutional constraints: fragmentation and coordination failures; uneven implementation capacity; short policy horizons and weak credible commitment; and learning and incentive failures.

Fragmentation arises because human capital development spans health, nutrition, social protection, sanitation, education, skills development, and employment, distributing responsibilities across multiple agencies, financing mechanisms, and levels of government.

Horizontal fragmentation occurs when national government agencies pursue related goals through separate mandates and implementation systems.

Within the health sector, the paper notes that overlapping functions among the Department of Health, the Philippine Health Insurance Corporation, and local government units can weaken strategic purchasing and integrated care.

Enterprise-based training likewise remains modest because responsibilities for training, financing, certification, and employment are distributed among firms, training institutions, government agencies, and local government units with limited coordination mechanisms.

The second constraint concerns implementation. Even well-designed reforms fail when bureaucratic and administrative systems are weak.

The authors cite the Universal Health Care Act, or Republic Act 11223, which requires strategic purchasing, provider payment reform, integrated healthcare networks, information systems, and national-local coordination, and therefore demands substantial organizational change across multiple institutions.

The third constraint is temporal. Human capital investments in early childhood care and development, preventive health, and workforce skills require years before their full economic and social benefits become evident.

Philippine political cycles, by contrast, run every three to six years, which creates incentives for governments to prioritize investments that deliver immediate and visible political returns.

In the health sector, the paper notes, this dynamic has historically led to greater emphasis on hospitalization and curative care, while primary health care, disease prevention, and health promotion received less attention despite their high long-term returns.

The institutional issue, the authors clarified, is not political turnover itself, which is inherent in democratic governments, but whether institutions can maintain credible long-term commitments despite leadership changes.

The fourth constraint involves incentives and learning. Firms may hesitate to absorb the cost of employee training because of the transferability of skills when workers move.

Weak institutional learning compounds the problem, with fragmented administrative databases constraining provider monitoring and strategic purchasing in health financing, and limited labor market intelligence contributing to persistent mismatches between training provision and employer demand.

Effective institutions, the paper argues, are not those that avoid policy change but those that create systematic mechanisms to generate evidence, distinguish implementation failures from policy failures, and adapt reforms as new information becomes available. 

An ecosystem, not a set of silos

These constraints matter because human capital is developed and used through an interconnected ecosystem.

Educational outcomes, for example, are affected by health, nutrition, household conditions, and labor market opportunities.

Skills generate greater economic value when firms can use them productively, while innovation depends on both capable workers and firms that invest in technology and organizational upgrading.

“Human capital is produced and utilized through an interconnected ecosystem and not through isolated sectoral interventions,” the authors wrote.

As a result, investments in individual sectors may generate lower returns when complementary investments elsewhere do not keep pace.

The paper notes that fragmented investments can prevent actors from realizing the full collective benefits of their individual efforts. 

Government as institutional architect

The paper, therefore, calls for a shift from a program-centered to an institution-centered approach.

Rather than focusing solely on increasing spending or expanding individual programs, policymakers need to strengthen the institutional architecture that enables investments across education, health, labor markets, innovation, and productive sectors to reinforce one another.

The authors wrote that “the government acts not only as a financier or service provider but also as an institutional architect who establishes the rules, incentives, information systems, and coordination mechanisms that make decentralized investments mutually reinforcing.”

In that role, the state designs the rules under which households, firms, schools, and healthcare providers make decentralized decisions, rather than managing isolated programs.

It also creates the predictability that long-horizon investments require, through stable regulatory frameworks, durable financing arrangements, and consistent reform directions that survive changes in leadership.

The paper adds that credible and predictable institutions can strengthen trust, lower transaction costs, improve tax compliance, build the legitimacy of public expenditure, and create a more conducive environment for long-term private investment.

Stronger fiscal and implementation capacity, in turn, allows the government to provide better services and sustain investments in education, health, skills, and innovation, producing feedback that reinforces the institutional foundations of development.

Beyond conventional PPPs

The paper also proposes transformational partnerships as institutional arrangements through which multiple stakeholders can coordinate long-term investments in human capital and productivity.

The objective, however, is not simply to create more partnerships.

Unlike conventional public-private partnerships, which are often focused on infrastructure and service delivery, transformational partnerships emphasize sustained collaboration on complex development challenges that no single institution can address alone.

The authors cite universal health care and agricultural value chains as examples of such challenges.

They characterize transformational partnerships through five interrelated features.

These partnerships are outcome-oriented, focusing on long-term improvements in human capital, productivity, and societal well-being rather than the delivery of discrete projects.

They are multi-stakeholder, converging national and local government agencies, private enterprises, educational institutions, healthcare providers, civil society, development partners, and local communities.

They are incentive-aligned, ensuring that participating organizations perceive shared value from continued collaboration.

They are institution-building, strengthening governance systems, coordination mechanisms, and organizational capabilities beyond individual programs.

They are also adaptive, allowing institutions to respond collectively to technological change and other disruptions.

“The policy objective is not more partnerships per se, but better institutions that enable productive partnerships,” the authors wrote.

Five priorities

The discussion paper identifies five priorities: improving coordination around shared human capital outcomes; establishing credible long-term commitments; strengthening institutional learning and information systems; aligning incentives for public and private investments; and building the capacity to implement and sustain complex reforms.

On coordination, the paper says government must improve mechanisms for joint planning, budgeting, implementation, and accountability across agencies and levels of government, and extend coordination beyond government to actors whose investments are mutually dependent.

On commitment, it calls for sufficient predictability on regulatory frameworks, financing arrangements, and major reform directions, while retaining mechanisms for evidence-based adaptation when circumstances change.

On learning, it recommends integrating administrative data, monitoring and evaluation, labor-market information, and feedback mechanisms more systematically into policy implementation, so that policymakers can distinguish policy-design problems from implementation failures and adjust programs without repeatedly resetting reform trajectories.

On incentives, it calls for designing financing, regulation, contracting, provider-payment systems, and training arrangements so that individual actors have reasons to undertake investments that also generate broader social returns.

The paper points to the Enterprise-Based Education and Training Framework Act, or Republic Act 12063, which supports a demand-driven approach to technical and vocational education and training where learning takes place partially or mostly inside actual companies, industrial work settings, or partnered enterprises rather than just classrooms.

Enterprise-based training, it says, depends on institutional arrangements that enable firms to recover costs and realize returns from investing in workers’ skills.

On capacity, the paper calls for investment in technical capability, regulatory expertise, digital systems, public financial management, coordination capacity, and implementation skills.

The paper’s central message is that the Philippines needs continued investment in its people, but investment alone is not enough. Institutions must enable these investments to reinforce one another and produce lasting gains in human capital, productivity, and economic transformation.

As the authors put it, “Institutional reform is itself a prerequisite for making human capital investment effective, sustained, and productive.”

Launch of DPRM 2026

The findings will be presented during the 2026 Development Policy Research Month Kick-off Press Conference and Media Awards on Sept. 1 at the Novotel Cubao in Quezon City.

The Scientific Committee will present the discussion paper, followed by a press conference and open forum with experts from government, academe, and public health.

The event will formally launch this year’s DPRM theme, “Building Strong Institutions, Unlocking Human Capital Potential,” and open a month-long national conversation on how institutions can better support the development and productive use of Filipino human capital.

The afternoon program will feature Saliksik at Balita: PIDS Media Awards 2026, which recognizes media organizations and journalists for bringing development research and evidence-based perspectives into public discourse.