Martinez, Josephine Christian M.

BPA 2-3
FERDINAND MARCOS ADMINISTRATION
Marcos declared martial law, claiming that the country was faced with revolutions from
both the left and the right. He gathered around him a group of businessmen, used presidential
decrees and letters of instruction to provide them with monopoly positions within the
economy, and began channeling resources to himself and his associates, instituting what came
to be called "crony capitalism." By the time Marcos fled the Philippines in February 1986,
monopolization and corruption had severely crippled the economy. * In the beginning, this
tendency was not so obvious.
Marcos's efforts to create a "New Society" were supported widely by the business
community, both Filipino and foreign, by Washington, and, de facto, by the multilateral
institutions. 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. A general rise in world raw material prices in the early 1970s
helped boost the performance of the economy; real GNP grew at an average of almost 7
percent per year in the five years after the declaration of martial law, as compared with
approximately 5 percent annually in the five preceding years. Agriculture performed better that
it did in the 1960s.
New rice technologies introduced in the late 1960s were widely adopted. Manufacturing
was able to maintain the 6 percent growth rate it achieved in the late 1960s, a rate, however,
that was below that of the economy as a whole. Manufactured exports, on the other hand, did
quite well, growing at a rate twice that of the country's traditional agricultural exports. The
public sector played a much larger role in the 1970s, with the extent of government
expenditures in GNP rising by 40 percent in the decade after 1972. To finance the boom, the
government extensively resorted to international debt, hence the characterization of the
economy of the Marcos era as "debt driven." After martial law was declared Marcos's cronies
amassed huge fortunes while the Philippines ran up a huge national that brought the economy
to edge of collapse. Real incomes declined by half between 1956 and 1985 as the wealth of
richest 10 percent rose from 27 percent to 37 percent. In the latter half of the 1970s, heavy
borrowing from transnational commercial banks, multilateral organizations, and the United
States and other countries masked problems that had begun to appear on the economic
horizon with the slowdown of the world economy. By 1976 the Philippines was among the top
100 recipients of loans from the World Bank and was considered a "country of concentration."
Its balance of payments problem was solved and growth facilitated, at least temporarily, but at
the cost of having to service an external debt that rose from US$2.3 billion in 1970 to more
than US$17.2 billion in 1980.
CORAZON AQUINO ADMINISTRATION
The economic correctives that she proposed emphasized a central role for private
enterprise and the moral imperative of reaching out to the poor and meeting their needs.
Reducing unemployment, encouraging small-scale enterprise, and developing the neglected
rural areas were the themes. Economic growth revived in 1986 under Aquino, reaching 6.7
percent in 1988. But in 1988 the economy once again began to encounter difficulties. The trade
deficit and the government budget deficit were of particular concern. In 1990 the economy
continued to experience difficulties, a situation exacerbated by several natural disasters, and
growth declined to 3 percent. Domestically, land reform was a highly contentious issue,
involving economics as well as equity. NEDA economists argued that broad-based spending
increases were necessary to get the economy going again; more purchasing power had to be
put in the hands of the masses. Achieving this objective required a redistribution of wealth
downward, primarily through land reform. Given Aquino's campaign promises, there were high
expectations that a meaningful program would be implemented. Prior to the opening session of
the first Congress under the country's 1987 constitution, the president had the power and the
opportunity to proclaim a substantive land reform program. Waiting until the last moment
before making an announcement, she chose to provide only a broad framework. Specifics were
left to the new Congress, which she knew was heavily represented by landowning interests. The
result--a foregone conclusion--was the enactment of a weak, loophole-ridden piece of
legislation. The Philippine economy experienced considerable difficulty in the 1980s. Real gross
national product (GNP) grew at an annual average of only 1.8 percent, less than the 2.5 percent
rate of population increase. The US$668 GNP per capita income in 1990 was below the 1978
level, and approximately 50 percent of the population lived below the poverty line. The 1988
unemployment rate of 8.3 percent (12.3 percent in urban areas) peaked at 11.4 percent in early
1989, and the underemployment rate, particularly acute for poor, less-educated, and elderly
people, was approximately twice that of unemployment. In 1988, about 470,000 Filipinos left
the country to work abroad in contract jobs or as merchant seamen. One of the four principles
of her "Policy Agenda for People-Powered Development," was promotion of social justice and
poverty alleviation. Government programs launched in 1986 and 1987 to generate employment
met with some success, reversing the decline of the first half of the decade, but these efforts
did little to alleviate the more chronic aspects of Philippine poverty. Aquino entered the
presidency with a mandate to undertake a new direction in economic policy. Her initial cabinet
contained individuals from across the political spectrum. Over time, however, the cabinet
became increasingly homogeneous, particularly with respect to economic perspective,
reflecting the strong influence of the powerful business community and international creditors.
The businesspeople and technocrats who directed the Central Bank and headed the
departments of finance and trade and industry became the decisive voices in economic decision
making. Foreign policy also reflected this power relationship, focusing on attracting more
foreign loans, aid, trade, investment, and tourists.
FIDEL RAMOS ADMINISTRATION
President Fidel Ramos (1992-1998) was given high marks for handling the economy. By
breaking apart monopolies, liberalizing foreign investment laws and privatizing business and
industries by controlled powerful families, Ramos was crediting with transforming the
Philippines from a country with a history of poverty, corruption, rebellion, foreign ineptness
and tax evasion into an economic powerhouse that was not yet an Asian tiger but was
sometimes referred to as Asian tiger cub. Early 1992, spurred by increases in agricultural
production and in consumer and government spending. Budget deficits were well within IMF
guidelines--P3.2 billion in the first two months. At the end of April, the treasury posted a P5.5
billion surplus as a result of higher than programmed revenue receipts, mainly from the sale of
Philippine Airlines. The increased revenue permitted the early repeal of the 5 percent import
surcharge, stimulating both import spending and export growth. The money supply grew more
rapidly than desired, but was kept under control. Treasury bill rates fell to 17.3 percent in
March 1992 from 23 percent in November 1991, and inflation was down to 9.4 percent for the
first quarter of 1992, from 18.7 percent in 1991. To get the Philippines economy going, Ramos
and the Philippine Congress abolished tariffs and preferential terms that enriched the rich
families. He reformed the banking system and drove down interest rates. He overhauled the
electricity infrastructure so that energy shortages and brown outs became a thing of the past.
The growth rate during the Ramos years was a robust 5 percent a year and inflation was in the
single digits, down from 25 percent in 1990. Under his leadership, fiber optic lines were
installed, property values soared, five star hotels and condominiums were built, the stock
market showed big gains, overseas workers began returning home and the former American
military bases at Subic and Clark became thriving trade and industrial centers. Foreign
investment increased. Companies like Acer (a Taiwanese company) and Intel moved into the
Philippines Much of the prosperity was linked to investments from Hong Kong by tycoons like
Gordon Wu, who shipped their money to Manila before the reunification with China. In the
early 1990s, the Philippines was regarded as an economic rival of Thailand and Malaysia now it
lags far behind them.
JOSEPH ESTRADA ADMINISTRATION
Estrada moved to tighten securities regulations, liberalize the trade of grains and
privatize the electricity industry. His effort to change laws limiting foreign ownership of
businesses to 40 percent was halted by his impeachment trial. In the end Estrada proved to be
a friend of big business. He revived the culture of corruption and was plagued by charges of
cronyism. This was on top of inconsistent monetary policy, slow economic growth, and
uncertainty brought about by terrorists and insurgencies. He said he was a friend of the poor
yet he failed to launch one meaningful anti-poverty program. Most of his efforts consisted of
parading around with movie stars that were reminiscent of what Imelda Marcos did here also
wasn’t much of an effort to pave roads, set up irrigations projects or build school or collect
taxes to pay for them.
GLORIA MACAPAGAL ARROYO ADMINISTRATION
Growth was 3.4 percent in 2001, 4.3 percent in 2002 and 4.5 percent in 2003. In 2004
the economy was hurt by high oil prices. Still more growth was needed just to keep pace with
2.36 percent population growth rate. Inflation was less than 6 percent but the deficit grew at an
alarming rate as the government spending increased and tax revenues fell. Raising revenues
became one of the main problems. In 2003, the deficit reached $3.6 billion and debt was
estimated to be over $100 billion. The government’s debt burden reached its peak in 2004
when it settled at 74 percent of GDP. Arroyo began her second term in 2004 with promises of
“austerity and simplicity” and the announcement of a reform package to fight corruption,
attract foreign investment, and make the Philippines less dependent on foreign energy.
She promised to create 10 million jobs by 2010 and announced that power rates would
be doubled to avert an energy crisis, She also promised to provide clean water and electricity to
every village in the Philippines and build 3,000 schools. The plan called for the seemingly
impossible combination of increased spending, higher taxes and a balanced budget in five
years. Arroyo’s economic drive quickly lost momentum. She was unable to overcome political
opposition to privatizing companies like the National Power Corporation, which lost $1.8 billion
in 2003. Instead an effort was made to make them efficient. By the end of her term much of her
time was spent responding to charges that she rigged the 2004 elections and he was husband
was involved in kickback scheme with a Chinese company involving millions of dollars.
Growth in 2003 and 2004 was around 5 percent due in part to rising demand for
Philippines electronic exports. Growth occurred despite continued hikes in oil and consumer
prices on top of typhoons and floods. Growth was 4.7 percent in 2005. That year exports
amounted to 40 percent of GDP. Many of the export items were electronics. Two-thirds of
Philippine imports are used to build exported computer parts, disks and other electronic
products made by local units of companies such as Texas Instruments Inc. and Toshiba Corp.