JEFRAN FERNANDEZ BARAQUIO

The failure of the Philippine economy to achieve a full industrialized state is a confluence and a result of political and economic policies that can be traced back to as far as the post war period.

The Philippine post war economic policy is said to have taken the trajectory of Import Substitution Industrialization (ISI) —which puts premium in strengthening the locally owned industries catering to a huge domestic market to contain dollar outflow and encourage domestic entrepreneurship (Kuruvilla, 1996). This strategy saw the rise of a new domestic-industrial capital elite; and expanded manufacturing sector which registered growth rates of between 11% to 14% from the late 1940’s to early 1960’s (Toussaint, 2006). On the downside, the dependence from imported capital and technology to sustain this strategy had a negative impact on the balance of payments (BOP) in the 1960’s and onwards (Ofreneo as cited by Kuruvilla, 1996). The IMF-WB provided a short-lived solution (and imposition) to this dilemma by extending “stabilization loan” on condition that the Philippine government adopts an export- oriented industrialization (EOI) by deregulating and opening its economy to unrestricted foreign investments (Bello, et. al. as cited by Kuruvalla, 1996).

The export oriented industrialization (EOI) is an imposition of the IMF-World Bank to the Philippines. It is wedded in the antiquated Ricardian notion of industrialization based from the “comparative advantage of cheap labor”. Under this scheme, the country became the agro export base of Western democracies while suppressing the creation of industries of steel and machine tools—which are necessary for self sustaining economy (Bello, 1981). This strategy further pushed back the Philippine financial status under the Marcos dictatorship. Foreign borrowings ballooned to unimaginable proportion just to keep the economy afloat, without really contributing substantially to the vision of industrialization.

Nothing much had improved from the changes in administration from Marcos to Aquino to Ramos. The share of the Indusry and Manufacturing Sector to the GDP has continuously declined, if not stagnated from the 80’s to the early 2000, and so as the employment from these said sectors. Imports remain high, and this is not accompanied by strong figures in exports —thus resulting to imbalance in trade. The country’s savings rate remains weak and can not support infrastructure requirement of the growing economy. And all these compounded by rampant bureaucrat capitalism in all levels of government (Diokno, 1988).

The question remains – what does it take for the Philippines to achieve an industrialize state. The basic fundamentals should be strong for the “leapfrogging” to happen. The Medium Term Development Plan pegged that the Philippines should register at least 8.0% to 8.5% annual GDP/GNP (MTDP Report at http://www.NEDA.org.ph). The Asian Development Bank (ADB) reinforced this sentiment by saying that the Philippine economy should grow continuously by 8% for two decades to achieve ICT status. Central to this proposition is modernizing agriculture and service sectors AND simultaneously upgrading homegrown but globally competitive industries (housing, coco chemical); and finding niche opportunities in biotech, maritime, pharmaceuticals industries among others. Equally important is the upgrading of technological capabilities on a sustained basis (The Blueprint @ http://www.pcij.org.ph). This is to support and/or prime modernization efforts in agriculture and industry sectors.

The Agriculture Sector has remained in the feudal age. It is necessary that meaningful agrarian reform should take place. In addition, resources should be mobilized to pump in technologies in terms of irrigation system, post harvest facilities, and support infrastructure. The peasants should have access to credit and financing institutions to increase productivity and to encourage small to medium capital formation. As for the industries, direct investments both local and foreign are still needed to spur industrial activity. These however, should have “strong linkages to existing domestic industries (The Blueprint 2 http://www.pcij.org.ph). Another significant point is to close in trade deficits. Diokno asserted that this simply increasing export output vis-à-vis import (Diokno, 1998). Import dependency should be minimized specially for consumer goods that can be substituted by domestic industries.

In terms of labor and employment creation, the economy must have the capacity to create high quality sustainable jobs in all sectors. In addition, the government should promote industrial harmony for two reasons —1. regular dialogues between labor and management to encourage long term investment and increased productivity; and 2. it promotes settlement of disputes thru arbitration and conciliation (The Blueprint @ http://www.pcij.org.ph).

On top of all of these is the key role of Government and its institutions in ensuring better governance. Better governance where people has the capacity to enjoy life and “government output of Public Goods” which include economic sustainability, law and order, public infrastructure, and basic services (Diokno, 1998).

Bibliography

1. Bello, Walden, Building on Martial Law, 1981.

2. Bello, Walden, et.al. Development Debacle. IMF-WB in the Philippines, 1988.

3. Diokno, Benjamin, Macroeconomic Challenges Facing the Philippines’ Industrialization Drive. Development Research News, Philippine Institute for Development Studies, 1998.

4. Kuruvilla, Sarush, Linkages Between Industrialization Strategies and Industrial Relations/Human Resource Policies: Singapore, Malaysia, Philippines, & India. Collective Bargaining, Labor Law, & Labor History, Cornell University, 1996.

5. MTDP @ http://www.neda.org.ph

6. Project Blueprint for a Viable Philippine Situation. http://www.pcij.org

7. Toussaint, Eric, The World Bank and the Philippines @ http://www.cadtm.org. 15 January 2006.

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