Princess Loirenne Adao

PITRELA

Industrialization the Philippine setting: An illusion?

According to this http://www.economywatch.com/world_economy/philippines/,

"The Philippines has undergone a transformation from being an agriculture based
country to that of a newly industrialized country. The economy is now vastly
dependent on the services and manufacturing sector. " From this, we can say that
the LFR model can actually be applied in the Philippine setting. Recent data shows
that Philippines is increasing its exports on electronics and other high-tech
components which are acutally coming from the foreign direct investments of MNCs.
But how truly could we say that Philippines is already a newly industrialized
economy, given the fact that until now, several issues concerning agriculture such as
land reform has not yet been properly addressed by the government? And
personally, I think that the idea of an industrialized Phlippines especially during the
Marcos era was only an illusion created in our minds by US and the foreign
multinationals. This will be further discussed in the succeeding paragraphs.

These only tells us that much must be improved in the Philippines' agricultural
sector. Besides, before modernization and technology dominated world economy,
agriculture was the only thing Philippines had in the first place. Even Philippines
developed an International Rice Institute which actually yielded higher productivity
and variety on rice. This leads us back to the times wherein our natives had dry and
wet rice agriculture for a living whose surplus paved the way for trade with
neighboring lands in Southeast Asia. Now, let's fastforward to the 17th and 18th
centuries wherein feudalism became widespread, thus, having agriculture still as a
means to earn for a living especially for the masses.

According to http://countrystudies.us/philippines/55.htm, In the 1970s, the

country began to export manufactured commodities, especially garments
and electronic components, and the prices of some traditional exports
declined. During the mid ninteenth century, Philippine export were mainly
agricultural or mineral products such as abaca (Manila hemp), sugar, and others. But
everything changed after World War II. The Americans came to "rescue" us from the
devastation brought by World War II. United States was very much willing to help
under certain conditions. In order to continuously receive aids for reconstruction,
Philippines was required to maintain its prewar exchange rate with the US dollar and
at the same time allowed imports from the US. This "open economy policy"
eventually led to a balance of payment crisis for the Philippines. The government
responded through laying down of import restrictions and controlled foreign
exchange rates(a full scale import substitution policy), stimulating the growth of the
manufacturing sector through FDIs especially from the US. But this did not last long,
it eventually declined which resulted in again, another shift of policy regime from
import substitution to export oriented economy. Marcos' regime introduced the "New
Society" which was greatly supported at first. It was actually "anti-industrialist"
because in the first place, US told Marcos to develop the rural sector which led to
land reform promises and redistribution policies which were never implemented. On a
positive note, this would be the perfect description of the situation during Marcos'
time. "http://countrystudies.us/philippines/57.htm Foreign investment was
encouraged: an export-processing zone was opened; a range of additional
investment incentives was created, and the Philippines projected itself onto the world
economy as a country of low wages and industrial peace. The inflow of
international capital increased dramatically." But in order to sustain the sudden
"boom" or expanision in the manufacturing sector, the Philippine government needed
to borrow from financial institutions such as the World Bank and IMF. This was also
one of the "exploitation" by TNCs, through their loans and direct ivestments, in
order to fuel the manufacturing industries by importing materials and electronics.
Imagine in 1981, Philippines earned $313 million for electronic reexports but acutally
paid $ 287.7 million for import costs, excluding the several payments Philippines had
to make to foreign multinationals. Where is industrialization in that? That's why, such
act started the economic turmoil that was brought by the Marcos' "debt driven"
regime, which until now, are still shouldered by us, Filipinos. It led to
underdevelopment and not industrialization per se. When Marcos was overthrown,
Corazon Aquino's government shouldered the burden brought by the Marcos' regime
especially in times of coup attempts.

According to http://countrystudies.us/philippines/55.htm, its structure

evolved slowly over time. The agricultural sector in 1990 accounted for 23
percent of GNP and slightly more than 45 percent of the work force. About
33 percent of output came from industry, which employed about 15 percent
of the work force. The manufacturing subsector had developed rapidly
during the 1950s, but then it leveled off and did not increase its share of
either output or employment. In 1990, 24 percent of GNP and 12 percent of
employment were derived from manufacturing. The services sector, a
residual employer, increased its share of the work force from about 25
percent in 1960 to 40 percent in 1990. In 1990 services accounted for 44
percent of GNP. From the data presented, we can visibly see the shift on the
structure of the Philippine economy, with the rise of the services and manufacturing
sector in terms of percentage in GDP.

Here are some more receent data from (SITE) on Philippine exports and
imports of agricultural products. According to
http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Philippines-
AGRICULTURE.html, The Philippines exports its agricultural products around
the world, including the United States, Japan, Europe, and ASEAN countries
(members of the Association of Southeast Asian Nations). Major export
products are coconut oil and other coconut products, fruits and vegetables,
bananas, and prawns. Other exports include the Cavendish banana,
Cayenne pineapple, tuna, seaweed, and carrageenan. The value of coconut-
product exports amounted to US$989 million in 1995 but declined to
US$569 million by 2000. Imported agricultural products include unmilled
wheat and meslin, oilcake and other soybean residues, malt and malt flour,
urea, flour, meals and pellets of fish, soybeans and whey. We can see that
there had been a decine in traditional exports. During 1988 nontraditional
exports comprised 75 percent of the total value of goods shipped abroad.
http://countrystudies.us/philippines/55.htm

Based from the statistics given, we can summarize that Philippines

experienced a gradual decline in the share of its agricultural sector compared to the
rising industrial sector which focuses on manufacturing. Yes, there is growth in the
Philippine economy especially in the manufacturing sector, but the question here is,
who is actually benefiting from these? Our GDP numbers show how we benefit from
this industrialization phase, thanks to those foreign multinationals. But do the
Filipinos actually feel those benefits? Or is it the foreign multinationals who actually
creates a scheme for them to penetrate the local markets with the guise of helping
Philippine economy industrialize? As of 21st century, the country is member in
several international trade organizations including the APEC, ASEAN and
WTO. As of U.S. Department of Commerce data, in 2008, two-way U.S.
merchandise trade with the Philippines stood at $17 billion. (
http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Philippines-
AGRICULTURE.html)

In terms of FDI, it did not really contributed for the technological development
of the Philippines for foreign multinationals actually implemented "simple production
processes with little scope for technological diffusion for the firms.(PDF FILE)" From
the beginning, Philippines is an agricultural country. But Philippines kept on catching
with the industrialization trend, leading to the detriment of the Filipinos especially the
farmers. For until now, the land reform programs such as CARP never gave the
Filipino farmers what they deserve. This led to a lot of civil protests which actually
affected the business of investing here in the Philippines. Another reason why
Philippines wasn't able to benefit from FDI was because it created an unstable
atmosphere for investors. Political instability caused by several coup attempts,
inefficient Philippine bureaucracy and existing social inequalities hampered the
economic growth of the country.

But if we're gonna look at the current situation of the Philippines in terms of
FDI, I would like to use the special case of Japan and Philippines and reiterate some of
statements in the previous academic paper. Last March 2010, Japan being the top
ODA donor to the Philippines, pledged Php 13.5 billion financial assistance and
technology transfer to Philippines in terms of policy reforms, climate change and
health. Several projects under the "Hatoyama Initiative" such as the Project for
Introduction of Clean Energy by Solar Electricity Generation System will serve as aid
projects by Japan. Through all of these, Philippines actually benefited from Japan's
technological superiority through FDIs.

SOURCES:

Bjorvatn, Kjetil, Kind, Hans Jarle & Nordas, Hildegunn Kyvik. (2001). The role of FDI in
economic development. Bergen.

Canlas, Dante, & Fujisaki, Shigeaki. (Ed.). (2001). The phlippine economy:
alternatives for the 21st centry. Diliman, Quezon City: University of the Philippines
Press.

Japan External Trade Organization. Retrieved February 2, 2011 from JETRO:

http://www.jetro.go.jp/philippines.tt.jexsa

Philippines Agriculture, Information about Agriculture in Philippines. Retrieved Feb.

27, 2011:

http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Philippines-
AGRICULTURE.html#ixzz1FQbSVcmk

Sison, Jose Ma., & De Lima, Julieta. (1998). Philippine economy and politics.
Philippines: Aklat ng Bayan, Inc.

That's why we can say that history and economy can never be studied separately, for
one change in economy shapes history and vice versa. Now, let's trace back the
economic conditions back after the Spanish era.

The country began exporting traditional agricultural and mineral products, reducing
tariffs in aim of industrialization. But government's effort to liberalize the economy
met a lot of resistance from technocrats. Despite such resistance,

Historically, the Philippines have been an important centre for commerce for
centuries for its ethnic minority, namely, the Chinese who were also its first
occupants. The archipelago has also been visited by Arabs and Indians for the
purpose of trading in the first and early second millennium.