Tuesday, September 30, 2008
Asia Foundation on the Philippines, March 14, 2001
Political Economy in the Philippines: New Directions
by Dr. Florian Alburo
University of the Philippines, Diliman, Quezon City
Excerpts
I would like to highlight
what I see as the elusive nature of sustained economic growth in the
Philippines. I will address the country’s long term economic
performance and the cumulative nature of the economic problems
inherited by President Gloria Macapagal-Arroyo. Finally, I will turn
to our globalizing world and then, briefly, to the economic
relationship between the Philippines and the United States.
In the period right after World War II, the Philippines’ growth
rate was comparable to that of the so-called Asian Tigers. Back in
the 1950s, the Philippines even bested countries like Malaysia,
Singapore, and South Korea. But by the 1980s, the Philippine
growth rate had deteriorated to an annual 1.2 percent per capita.
Meanwhile, other countries in the
region were achieving growth rates of
nearly 10 percent.
The growth rate is only one part
of the story. The Philippines’ vast
natural resources and our educated
labor force are reflected in our
exports, and that’s another point of
comparison. Even as late as the
1970s, Philippine exports were
besting the Tigers’ exports. We
exported $1.1 billion in merchandise
compared to only $800 million in
exports each for South Korea and
Singapore.
Then the gap began to widen in favor of the Tigers. By 1980,
the Philippines was exporting $5.7 billion in goods, compared with
South Korean exports of $17.5 billion and Taiwanese exports of
$20 billion. The most recent figures show that in 1998, the
Philippines exported $29 billion in goods and services while South
Korean exports jumped to $132.3 billion and Singapore’s to $110
billion.
Again, during the Asian financial crisis in 1997, the Philippines
was actually poised to turn the corner sooner and faster. But again,
a sustained economic recovery proved elusive, and our recovery path
fell far short compared to our neighbors.
The circumstances we are seeing do not represent isolated
instances. To the contrary, they fit in with a 40- year trend of lower
than potential growth rates and an expanding population. It seems
we are never quite able to push ourselves into the next orbit, where
faster economic growth is possible. This is partly due to a habit of
new regimes reversing whatever economic policies are in place when
they take over. Another explanation is related to the Philippines’
inability to successfully withstand either external or internal shocks.
Take, for example, the government of Diosdado Macapagal, the
father of President Arroyo. Macapagal was the first Philippine
president to systematically carry out structural reform. By the way,
he held a PhD in economics. Unfortunately, after Macapagal,
Ferdinand Marcos refused to build on these reforms. In fact, slowly
but surely, he reversed them. Yes, the Marcos era did realize growth
spurts, but the growth was not the result of true structural reform.
It was the result of a debt-driven bubble, and eventually, the bubble
burst. When it burst, it spared only those who had already benefited
from the bubble.
Then, the government of Corazon Aquino had a rare
opportunity to again pursue reforms. Instead, President Aquino
focused on restoring democracy. That was an important choice, but
it meant that the next administration—that of Fidel Ramos—had to
start at virtually ground zero with the economy. The Aquino
administration had pursued economic reforms but in piecemeal
fashion. Ultimately time ran out.
When the Estrada regime took over in 1998, at first President
Estrada made sensible pronouncements and advocated very worthy
causes. The regime made a credible start. But then, when the
government started to pursue reforms in a collective fashion, Estrada
personally reversed the reforms!
It seems new presidents rarely, if ever, build on what has gone
before, particularly when we look back over the last 40 years in the
Philippines. Each administration seems to prefer to make highly
selective decisions about what it likes as opposed to what the
country actually needs. In almost every case, new administrations
that began with a bang, ended in despair and crisis. In the process,
the institutions of government also suffered.
Let me go back to the 40-year time span. Every president in the
Philippines, starting with Diosdado Macapagal, began his or her
administration at ground zero. Macapagal came into office
following a crisis in 1960. Marcos began his term at about the time
the economy was poised to reverse itself and climb out of the dip.
But what was the first thing he did in 1970 after his election in
1969? He raised the value of the peso.
When Aquino took over, she inherited an economy that was
again headed into the pits. Both Ramos and Estrada began their
tenures in office when the economy actually was in the pits. In each
and every case, the new administration started with a bang but
ended up in crisis.
The cumulative effect of this penchant to reverse whatever
policies preceded a president in office has held back the Philippine
economy.
A colleague at the University of the Philippines says that
the individuals who have dominated the Philippine economy have
been engaged in value extraction and not value creation. Saying
these people are all guilty of being rent seekers, or looking for a fast
buck, is another way to put it.
In the Philippines, the richest families represent 20 percent of
the population and account for more than 55 percent of the overall
income. That means that the remaining 80 percent of families
receives 45 percent of the overall income. This is a case of
deteriorating income distribution and was most noticeable from
1991 to 1997. This is not a recipe for alleviating poverty. To the
contrary! It is a recipe for accelerating poverty. It means that our
country is sitting on top of a social volcano.
Our unemployment rate is another cause for concern. The
overall picture shows unemployment increasing—not decreasing. It
also highlights a classic difference between the Philippines and other
countries in the region. When quarterly rates are compared, the
Tiger countries have actually reduced unemployment, and have
begun their climb out of poverty and away from a widening
inequality gap. The Philippines, on the other hand, is experiencing
rising unemployment and greater inequality.
The problems are inter-related. A country manages to lift itself
out of poverty if it is able to increase employment. In turn, social
inequality is reduced when employment opportunities grow. The
solution is painful reform, not economic palliatives.
It took the Asian Tigers a decade to build up their economies to
where they are now. The same is roughly true for Japan. If reforms
can take hold in the Philippines and be nurtured over a period of
time, they will go a long way toward positioning the country to
become a more effective and influential global player. We ignore the
globalizing world at our own peril. We need structural reforms to
get our economy into the shape it has to be in order to compete
internationally. The returns on that investment will facilitate our
recovery, boost employment growth, and help improve income
distribution.
To be sure, trade is the Philippines’ largest growth sector—and
has been ever since the Asian crisis. Currently, we are experiencing a
slowdown, but it’s possible the slowdown is in part a reflection of a
structural change resulting in the favored trade of services over
goods.
In the meantime, the United States continues to be an
important trading partner for us. Some 20 percent of our exports
are earmarked for the United States. In return, the United States
accounts for more than 20 percent of Philippine imports.
Americans also are a source of capital and know-how.
by Dr. Florian Alburo
University of the Philippines, Diliman, Quezon City
Excerpts
I would like to highlight
what I see as the elusive nature of sustained economic growth in the
Philippines. I will address the country’s long term economic
performance and the cumulative nature of the economic problems
inherited by President Gloria Macapagal-Arroyo. Finally, I will turn
to our globalizing world and then, briefly, to the economic
relationship between the Philippines and the United States.
In the period right after World War II, the Philippines’ growth
rate was comparable to that of the so-called Asian Tigers. Back in
the 1950s, the Philippines even bested countries like Malaysia,
Singapore, and South Korea. But by the 1980s, the Philippine
growth rate had deteriorated to an annual 1.2 percent per capita.
Meanwhile, other countries in the
region were achieving growth rates of
nearly 10 percent.
The growth rate is only one part
of the story. The Philippines’ vast
natural resources and our educated
labor force are reflected in our
exports, and that’s another point of
comparison. Even as late as the
1970s, Philippine exports were
besting the Tigers’ exports. We
exported $1.1 billion in merchandise
compared to only $800 million in
exports each for South Korea and
Singapore.
Then the gap began to widen in favor of the Tigers. By 1980,
the Philippines was exporting $5.7 billion in goods, compared with
South Korean exports of $17.5 billion and Taiwanese exports of
$20 billion. The most recent figures show that in 1998, the
Philippines exported $29 billion in goods and services while South
Korean exports jumped to $132.3 billion and Singapore’s to $110
billion.
Again, during the Asian financial crisis in 1997, the Philippines
was actually poised to turn the corner sooner and faster. But again,
a sustained economic recovery proved elusive, and our recovery path
fell far short compared to our neighbors.
The circumstances we are seeing do not represent isolated
instances. To the contrary, they fit in with a 40- year trend of lower
than potential growth rates and an expanding population. It seems
we are never quite able to push ourselves into the next orbit, where
faster economic growth is possible. This is partly due to a habit of
new regimes reversing whatever economic policies are in place when
they take over. Another explanation is related to the Philippines’
inability to successfully withstand either external or internal shocks.
Take, for example, the government of Diosdado Macapagal, the
father of President Arroyo. Macapagal was the first Philippine
president to systematically carry out structural reform. By the way,
he held a PhD in economics. Unfortunately, after Macapagal,
Ferdinand Marcos refused to build on these reforms. In fact, slowly
but surely, he reversed them. Yes, the Marcos era did realize growth
spurts, but the growth was not the result of true structural reform.
It was the result of a debt-driven bubble, and eventually, the bubble
burst. When it burst, it spared only those who had already benefited
from the bubble.
Then, the government of Corazon Aquino had a rare
opportunity to again pursue reforms. Instead, President Aquino
focused on restoring democracy. That was an important choice, but
it meant that the next administration—that of Fidel Ramos—had to
start at virtually ground zero with the economy. The Aquino
administration had pursued economic reforms but in piecemeal
fashion. Ultimately time ran out.
When the Estrada regime took over in 1998, at first President
Estrada made sensible pronouncements and advocated very worthy
causes. The regime made a credible start. But then, when the
government started to pursue reforms in a collective fashion, Estrada
personally reversed the reforms!
It seems new presidents rarely, if ever, build on what has gone
before, particularly when we look back over the last 40 years in the
Philippines. Each administration seems to prefer to make highly
selective decisions about what it likes as opposed to what the
country actually needs. In almost every case, new administrations
that began with a bang, ended in despair and crisis. In the process,
the institutions of government also suffered.
Let me go back to the 40-year time span. Every president in the
Philippines, starting with Diosdado Macapagal, began his or her
administration at ground zero. Macapagal came into office
following a crisis in 1960. Marcos began his term at about the time
the economy was poised to reverse itself and climb out of the dip.
But what was the first thing he did in 1970 after his election in
1969? He raised the value of the peso.
When Aquino took over, she inherited an economy that was
again headed into the pits. Both Ramos and Estrada began their
tenures in office when the economy actually was in the pits. In each
and every case, the new administration started with a bang but
ended up in crisis.
The cumulative effect of this penchant to reverse whatever
policies preceded a president in office has held back the Philippine
economy.
A colleague at the University of the Philippines says that
the individuals who have dominated the Philippine economy have
been engaged in value extraction and not value creation. Saying
these people are all guilty of being rent seekers, or looking for a fast
buck, is another way to put it.
In the Philippines, the richest families represent 20 percent of
the population and account for more than 55 percent of the overall
income. That means that the remaining 80 percent of families
receives 45 percent of the overall income. This is a case of
deteriorating income distribution and was most noticeable from
1991 to 1997. This is not a recipe for alleviating poverty. To the
contrary! It is a recipe for accelerating poverty. It means that our
country is sitting on top of a social volcano.
Our unemployment rate is another cause for concern. The
overall picture shows unemployment increasing—not decreasing. It
also highlights a classic difference between the Philippines and other
countries in the region. When quarterly rates are compared, the
Tiger countries have actually reduced unemployment, and have
begun their climb out of poverty and away from a widening
inequality gap. The Philippines, on the other hand, is experiencing
rising unemployment and greater inequality.
The problems are inter-related. A country manages to lift itself
out of poverty if it is able to increase employment. In turn, social
inequality is reduced when employment opportunities grow. The
solution is painful reform, not economic palliatives.
It took the Asian Tigers a decade to build up their economies to
where they are now. The same is roughly true for Japan. If reforms
can take hold in the Philippines and be nurtured over a period of
time, they will go a long way toward positioning the country to
become a more effective and influential global player. We ignore the
globalizing world at our own peril. We need structural reforms to
get our economy into the shape it has to be in order to compete
internationally. The returns on that investment will facilitate our
recovery, boost employment growth, and help improve income
distribution.
To be sure, trade is the Philippines’ largest growth sector—and
has been ever since the Asian crisis. Currently, we are experiencing a
slowdown, but it’s possible the slowdown is in part a reflection of a
structural change resulting in the favored trade of services over
goods.
In the meantime, the United States continues to be an
important trading partner for us. Some 20 percent of our exports
are earmarked for the United States. In return, the United States
accounts for more than 20 percent of Philippine imports.
Americans also are a source of capital and know-how.
$840Billion - U.S. Department of State's estimated untapped mineral wealth of the Philippines
Library of Congress – Federal Research Division Country Profile: Philippines, March 2006
Mining and Minerals: The Philippines has substantial copper, chromite, and gold deposits, and the country also is rich in many other minerals, including coal, cobalt, gypsum, iron, nickel, silver, and sulfur. There are also lesser deposits, not currently being mined, of bauxite, lead, mercury, molybdenum, and zinc. The latest exploration by the Minerals and Geosciences Bureau in 1996 estimated that the Philippines had 7.1 billion tons of metallic mineral reserves and 51 billion tons of nonmetallic mineral reserves. Of the metallic reserves, copper accounted for 4.8 billion tons, and gold accounted for 110,000 tons. Of the nonmetallic mineral reserves, limestone accounted for 29 billion tons and marble for 8.5 billion tons. The U.S. Department of State estimates that the Philippines possesses untapped mineral wealth of US$840 billion.
Mining and Minerals: The Philippines has substantial copper, chromite, and gold deposits, and the country also is rich in many other minerals, including coal, cobalt, gypsum, iron, nickel, silver, and sulfur. There are also lesser deposits, not currently being mined, of bauxite, lead, mercury, molybdenum, and zinc. The latest exploration by the Minerals and Geosciences Bureau in 1996 estimated that the Philippines had 7.1 billion tons of metallic mineral reserves and 51 billion tons of nonmetallic mineral reserves. Of the metallic reserves, copper accounted for 4.8 billion tons, and gold accounted for 110,000 tons. Of the nonmetallic mineral reserves, limestone accounted for 29 billion tons and marble for 8.5 billion tons. The U.S. Department of State estimates that the Philippines possesses untapped mineral wealth of US$840 billion.
Economic Crisis and Policy Choice
The Politics of Adjustment in the Third World
http://books.google.com/books?id=A_isdFOxOuIC&pg=PA251&lpg=PA251&dq=National+Economy+and+Patrimony+comparison+%2B+world+constitution&source=web&ots=Afm9f09MeV&sig=TIfjObjjQWWJ7JUPHTJ4ehNt3EM&hl=en&sa=X&oi=book_result&resnum=3&ct=result#PPP1,M1
The acute economic pressures of the 1980s have forced virtually all of Latin America and Africa and some countries in Asia into painful austerity programs and difficult economic reforms. Scholars have intensively analyzed the economics of this situation, but they have given much less attention to the political forces involved. In this volume a number of eminent contributors analyze the politics of adjustment in thirteen countries and nineteen governments, drawing comparisons not only across the full set of cases but also within clusters selected to clarify specific issues. Why do some governments respond promptly to signs of economic trouble, while others muddle indecisively for years? Why do some confine their response to temporary macroeconomic measures, while others adopt broader, even sweeping, programs of reform? What leads some countries to experiment with heterodox approaches, while most, however reluctantly, pursue orthodox courses? Why, confronted with intense political protest, have some governments persisted while others have altered or abandoned course? The answers to these questions are political, not economic, and they are examined here by Thomas M. Callaghy, Stephan Haggard, Miles Kahler, Robert R. Kauman, Joan M. Nelson, and Barbara Stallings.
http://books.google.com/books?id=A_isdFOxOuIC&pg=PA251&lpg=PA251&dq=National+Economy+and+Patrimony+comparison+%2B+world+constitution&source=web&ots=Afm9f09MeV&sig=TIfjObjjQWWJ7JUPHTJ4ehNt3EM&hl=en&sa=X&oi=book_result&resnum=3&ct=result#PPP1,M1
The acute economic pressures of the 1980s have forced virtually all of Latin America and Africa and some countries in Asia into painful austerity programs and difficult economic reforms. Scholars have intensively analyzed the economics of this situation, but they have given much less attention to the political forces involved. In this volume a number of eminent contributors analyze the politics of adjustment in thirteen countries and nineteen governments, drawing comparisons not only across the full set of cases but also within clusters selected to clarify specific issues. Why do some governments respond promptly to signs of economic trouble, while others muddle indecisively for years? Why do some confine their response to temporary macroeconomic measures, while others adopt broader, even sweeping, programs of reform? What leads some countries to experiment with heterodox approaches, while most, however reluctantly, pursue orthodox courses? Why, confronted with intense political protest, have some governments persisted while others have altered or abandoned course? The answers to these questions are political, not economic, and they are examined here by Thomas M. Callaghy, Stephan Haggard, Miles Kahler, Robert R. Kauman, Joan M. Nelson, and Barbara Stallings.
TUCP: 1987 Constitution a roadblock to full industrialization
TUCP: 1987 Constitution a roadblock to full industrialization
http://pia.gov.ph/?m=12&sec=reader&rp=6&fi=p060907.htm&no=56&date=
Quezon City (7 September) -- The country’s biggest labor organization said Wednesday the 1987 Constitution is a roadblock to the full industrialization of the country because it restricts, more than promotes, economic development through foreign capital inflow.
The Trade Union Congress of the Philippines ((TUCP), through its spokesman Alex Aguilar, said the one-million strong labor bloc, as intervenor, is also supporting the joint petition filed by the Sigaw ng Bayan and the Union of Local Authorities of the Philippines (ULAP) with the Commission on Elections (Comelec) for a people’s initiative to amend the Constitution.
As intervenor, the TUCP is supporting the petition, endorsed by 6.3 million Filipino voters, seeking to shift the country’s political structure from the failed US-style bicameral presidential system to a parliamentary system with a unicameral legislature.
“The Constitution restricts the full flowering of all segments of the domestic economy because it limits industrialization only to agriculture and agrarian reform,” said Aguilar.
The TUCP favors lifting the constitutional economic restrictions, Aguilar said, to allow the entry of foreign capital and generate foreign investments that will energize the economy and create quality, decent-paying jobs.
The bulk of foreign investments in Asia have been flowing into China, Vietnam, Thailand and Malaysia, leading to their growth as economic powerhouses in the world’s fastest-growing region.
Aguilar said amendments to the Charter’s economic provisions “should promptly come next after the current efforts to first overhaul the country’s political structure.”
Once the shift to a parliamentary system is accomplished, the Interim Parliament could start working on amendments that will open the country’s inward-looking economy to overseas investments, Aguilar said.
“Despite our strong macro-economic fundamentals as attested by foreign credit rating institutions, Government cannot stimulate the economy to the point of creating the jobs we need to keep the unemployment rate down and significantly reduce it,” he said.
“This is because of a restrictive Constitution. We are losing by default to the rest of Asia simply by not acting on these Charter reforms,” he added.
Among these outmoded constitutional provisions is Article XII, Section 1, which states that: “The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.”
Aguilar said this provision limits industrialization only to the agricultural and agrarian sectors, and prevents the government from venturing into other fields not related to these two areas because it could be deemed unconstitutional.
As a result, he said, the Philippines has no choice but to stick to agriculture-related and agrarian-reform based industries like rice milling, fertilizer-making, forestry, and food canning, instead of entering into more lucrative fields like steel-making and machinery manufacturing.
Because many of our Asian neighbors are free from these restrictions in their respective Constitutions, they have long been into major industrialization ventures that helped to jump-start their respective economies, Aguilar said.
Compared with the Philippines that has discouraged the entry of foreign capital as mandated under the Constitution, Thailand, Malaysia and Singapore have opened up their economies to foreigners by making investments viable and profitable under their laws.
Citing official data, Aguilar said foreign investments had, over the 1993-2002 period, totaled $37.34 billion in Malaysia; $34.94 billion in Singapore; and $33.09 billion in Thailand.
In contrast, similar investments in the Philippines totaled less than half at just $15.18 billion during the same period, according to a study done by the Asian Development Bank.
Therefore, to bring in billions of dollars of capital into the economy, he said constitutional restrictions limiting foreign ownership in key segments of the economy should be removed.
This can only be done, Aguilar said, by amending provisions in Articles XII (National Economy and Patrimony) and XVI (General Provisions), which restrict foreign investments in the exploration, development and utilization of natural resources; operation of public utilities; and ownership of educational institutions and mass media facilities. (PIA)
http://pia.gov.ph/?m=12&sec=reader&rp=6&fi=p060907.htm&no=56&date=
Quezon City (7 September) -- The country’s biggest labor organization said Wednesday the 1987 Constitution is a roadblock to the full industrialization of the country because it restricts, more than promotes, economic development through foreign capital inflow.
The Trade Union Congress of the Philippines ((TUCP), through its spokesman Alex Aguilar, said the one-million strong labor bloc, as intervenor, is also supporting the joint petition filed by the Sigaw ng Bayan and the Union of Local Authorities of the Philippines (ULAP) with the Commission on Elections (Comelec) for a people’s initiative to amend the Constitution.
As intervenor, the TUCP is supporting the petition, endorsed by 6.3 million Filipino voters, seeking to shift the country’s political structure from the failed US-style bicameral presidential system to a parliamentary system with a unicameral legislature.
“The Constitution restricts the full flowering of all segments of the domestic economy because it limits industrialization only to agriculture and agrarian reform,” said Aguilar.
The TUCP favors lifting the constitutional economic restrictions, Aguilar said, to allow the entry of foreign capital and generate foreign investments that will energize the economy and create quality, decent-paying jobs.
The bulk of foreign investments in Asia have been flowing into China, Vietnam, Thailand and Malaysia, leading to their growth as economic powerhouses in the world’s fastest-growing region.
Aguilar said amendments to the Charter’s economic provisions “should promptly come next after the current efforts to first overhaul the country’s political structure.”
Once the shift to a parliamentary system is accomplished, the Interim Parliament could start working on amendments that will open the country’s inward-looking economy to overseas investments, Aguilar said.
“Despite our strong macro-economic fundamentals as attested by foreign credit rating institutions, Government cannot stimulate the economy to the point of creating the jobs we need to keep the unemployment rate down and significantly reduce it,” he said.
“This is because of a restrictive Constitution. We are losing by default to the rest of Asia simply by not acting on these Charter reforms,” he added.
Among these outmoded constitutional provisions is Article XII, Section 1, which states that: “The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.”
Aguilar said this provision limits industrialization only to the agricultural and agrarian sectors, and prevents the government from venturing into other fields not related to these two areas because it could be deemed unconstitutional.
As a result, he said, the Philippines has no choice but to stick to agriculture-related and agrarian-reform based industries like rice milling, fertilizer-making, forestry, and food canning, instead of entering into more lucrative fields like steel-making and machinery manufacturing.
Because many of our Asian neighbors are free from these restrictions in their respective Constitutions, they have long been into major industrialization ventures that helped to jump-start their respective economies, Aguilar said.
Compared with the Philippines that has discouraged the entry of foreign capital as mandated under the Constitution, Thailand, Malaysia and Singapore have opened up their economies to foreigners by making investments viable and profitable under their laws.
Citing official data, Aguilar said foreign investments had, over the 1993-2002 period, totaled $37.34 billion in Malaysia; $34.94 billion in Singapore; and $33.09 billion in Thailand.
In contrast, similar investments in the Philippines totaled less than half at just $15.18 billion during the same period, according to a study done by the Asian Development Bank.
Therefore, to bring in billions of dollars of capital into the economy, he said constitutional restrictions limiting foreign ownership in key segments of the economy should be removed.
This can only be done, Aguilar said, by amending provisions in Articles XII (National Economy and Patrimony) and XVI (General Provisions), which restrict foreign investments in the exploration, development and utilization of natural resources; operation of public utilities; and ownership of educational institutions and mass media facilities. (PIA)
Why National Progress is at Stake
Reform of the Economic Provisions of the Constitution
Why National Progress is at Stake
by Gerardo P. Sicat
http://www.aim.edu.ph/media/Economic%20provisions%20of%20Constitution.pdf
Why National Progress is at Stake
by Gerardo P. Sicat
http://www.aim.edu.ph/media/Economic%20provisions%20of%20Constitution.pdf
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