P.173 how decontrol program favored foreign investors. Planned accelerated industrialization was left to private free enterprise. P. 177 WHY?
p. 219, 225 list
p. 219, Burdened with 296 public sector enterprises, plus 399 other nonperforming assets transferred to the government by the Philippine National Bank and the Development Bank of the Philippines, the Aquino administration established the Asset Privatization Trust in 1986 to dispose of government-owned and government-controlled properties. By early 1991, the Asset Privatization Trust had sold 230 assets with net proceeds of P14.3 billion.
Philippine Economy (Post-war to post-Cold war)
The Philippine Economy
(POST-WAR TO POST-COLD WAR)
Kristine Angeli S. Sabillo
Philippine Studies 201, U.P. Diliman
Aftermath of World War II (1946-1949)
• Struggle to rebuild. Approx P40 billion invested to re-construct physical
• Foreign aid flowing, $803 million from the US (= debt).
• Rehabilitation funds from the US through the Tydings Rehabilitation Act
• Bell Trade Act
- prohibited Philippines from protecting new industries, manufacturing or selling
products that may be in competition with US goods.
- no import duties for US products.
- pegging of peso to dollar at P2:$1 rate.
- quotas on PH export to US and free trade.
- Parity Clause allowing US citizens and corporations
access to natural resources and operation of public utilities.
Aftermath of World War II (1946-1949)
• Heavy importation. American goods flooded the country, draining
Philippine dollar reserves and causing local prices to depress by 50
percent = large accumulated balance of payments deficit
• Pre-control era (before import and foreign exchange restrictions)
• With peso overvalued, trade deficit rose (averaging around $300
million for each of the four pre-control years).
• Dollars from aid were lost on imported goods instead
of developmental purposes.
• Controls were then activated by the newly-established Central Bank and
Congress to save Philippine economy
• There was an exchange control system
- peso was depreciated from P2:$1 to P2.40:$1.
- quantitative limitation
- gov’t channeled the dollars into dev’t projects.
• Import substitution industries prospered, created jobs, taught skills.
• Manufacturing output grew and by 1959 its share in
national output doubled. Filipino businessmen
demanded dollar priority = Filipino First
Decontrol Program (1962 onwards)
• Lifting of controls, devaluation of peso (from P2:$1 to P3.90:$1).
- Wider field of financial business opportunities. (Financial institutions
multiplied. There were 22 new banks with 111 branches from 1960 to 1967
compared to 7 new banks in the 1950s.)
- Evolution of a Philippine money and capital market.
- Improvement in climate of foreign investment.
- Slow down in the industrial sector.
- Cost of imports increased which resulted in industrial weakening.
- Economy was flooded w/ imports even as prices soared
• Resulted in trade deficit again.
Decontrol Program (1960s)
• In exchange of letting go of the foreign exchange control system,
IMF lent us a $300M stabilization loan. From a natl debt of $150M,
we had a $600M debt by 1965.
• Even as author of import control law, Marcos thought decontrol was
inseparable from free enterprise. Congress thought otherwise.
• After his re-election in 1969, Marcos attested to the ills of
devaluation. But in 1970, the peso was devalued from P3.90:$1 to
P5.50 to P6:$1.
• In 1970, the Philippine peso was subjected to a floating rate,
meaning its value will be determined by market
Floating Rate (1970s)
• Finance Secretary Cesar Virata admitted that the floating rate was
among the conditions of the IMF for new loans.
• Debt reached $1 billion. Unpaid loans had to be paid at much higher
• Some industrial projects (Iligan Steel, Elizalde Steel Rolling Mills) had to
• Far Eastern Economic Review: « When a country is in the throes of a political crisis as the
Philippines is today, a floating exchange rate makes no sense. »
• In 1973, the Bureau of Investments
removed heavy industries from the Priorities Plan and
gave emphasis on labor-intensive, export-oriented
Industrialization plans (1970s to 80s)
• By 1979, while almost every country in Asia had developed its basic
industries, Philippines had none.
• Marcos’ 11 major projects (1979): integrated steel mill, petrochemical complex,
copper smelter, phosphate fertilizers, aluminum smelter, diesel engine manufacturing,
integrated pulp and paper, cement industry, expansion and rationalization of coconut
industry and dev’t of non-conventional sources of energy. But the World Bank
recommended caution in launching large-scale projects, substantial investments from
• In 1983, Ninoy Aquino was assassinated. People Power.
• From 1973-1986, importation of luxuries reached a level 10x higher than South Korea’s
• Led by NEDA (under Solita Monsod) and DOF (Jaime Ongpin),
import liberalization was intensified. LIEO thrust
Free trade, free reign (Post-EDSA)
• AQUINO administration: $26 or 28 billion external debt was a pressing
problem, honored instead of repudiated.
• Progress was hampered by Pinatubo , coup attempts, and daily
• Industrial growth fell from 6.9 percent in 1989 to 1.9 percent in 1990.
• Amid stagnation of industrialization, growth rate increased from 1.9
percent in 1986 to 6.7 percent in 1988. As growth increased, so did
• Privatization of crony and bad assets. Sold hundreds of
said assets. Build-Operate-Transfer Law was enacted.
• 10% value-added tax imposed (EO 273, 1987)
Free trade, free reign (1990s to present)
• RAMOS administration: Philippines 2000. Further privatization of
public utilities such as electricity, telecommunications, banking,
domestic shipping and oil.
• World Trade Organization membership.
• PROS: Helps in handling disputes. Creates trade rules. Free trade makes products
cheaper. Working with other countries provides more product choices and export
• CONS: Erosion of national sovereignty. More beneficial to developed than developing
countries. Damaging to local agriculture.
• Asian Financial crisis. Why did the Philippines fare
better than the other countries amid hitting 0.6%
growth in 1998?
Where are we going?
• ESTRADA administration: deficit increased , though GDP and GNP
rose (from almost 0% during the Asian crisis).
• ARROYO administration: fastest growth in three decades (2007),
fared relatively well in the 2008 global financial crisis. However, it has
been criticized for a jobless growth and a stagnant poverty rate.
• Japan-Philippines Economic Partnership Agreement (2006).
• AQUINO administration: Philippine Development Plan of 2011 –
targets globally competitive industries and services (foreign tourism,
BPOs, electronics, extractive mining, ship building),
public-private partnerships (PPP), conditional cash
transfer program (CCT)
Where are we going?
• OFW Remittance.
• Inflation. Price increase of basic commodities.
• Issue of stagnant wages.
• Debt management
as small as in
smallest in history
Source: IBON estimates on
data from NSCB
• Constantino, Renato, The Philippines: The Continuing Past
• David, Fernando, Economic Perspective 1945-1968
• IBON Foundation, “Midyear 2011”
• Lichauco, Alejandro, Nationalist Economics
• Lichauco, Alejandro, The Financial Crisis in Asia
• NEDA Report on the Economy 1975
• Noland, Marcus, “Philippines in the Asian Financial Crisis: How the Sick Man Avoided
• Padilla, Arnold, “EDSA 25”,
• Philippine Development Plan 2011-2016
• Rivera, Temario, Landlords and Capitalists
• Sicat, Gerardo, The Philippine Economy in the 1960s