By Rose de la Cruz
Indisputably the Philippine economy has grown to enviable international reputability. Yet, the gap between the rich and poor has become more pronounced both in the rural and urban centers, making planners and various stakeholders question whether the growth has failed to impact the marginalized sectors of society.
Since the oppressive Martial Law era was aborted with the exile of the dictator to Hawaii 30 years ago, the Philippines was reported to have transformed dramatically from the ‘sick man of Asia’ to one of the fastest growing economies in the region.
From a very strong agricultural and industrial push during the Marcos years, the economy took a complete turn to services (both here and abroad) and electronics manufacturing (for exports) to compensate for the revenues lost in agriculture (that now shifted to importing food products).
What propelled the economy in recent years—despite the Asian financial crisis of 1997-1998 and the recent global recession—were domestic construction and consumer demand; a robust labor export (and remittances) plus the location of business process outsourcing companies in the country.
Tourism, though strong, was not even enough to compensate for the lost values in agriculture and the disappearance of manufacturing. Economic managers—and the strong will to put in place bitter financial reforms (like the value added tax during Gloria Macapagal-Arroyo’s time)—also cushioned the impact of the Asian crisis on the economy.
Were it not for the prudence on housing investments and the cap on loan exposures to the property sector, the country could have gone the way of Thailand and other Southeast Asian economies which tumbled when the (housing) bubble burst in the late nineties. Previous reforms beginning with the political reform initiated by Corazon Aquino—from Marcos’ martial rule to a revolutionary government— plunged the country into literal darkness when, after closing down the Bataan nuclear plant no investment was made in the energy sector except to allow business to get into generator sets instead of real power systems.
Fidel Ramos solved the power crisis by liberalizing the power sector and allowing new players to get in. He also tried to liberalize the telecommunications sector. He institutionalized the build operate transfer (BOT) scheme in areas where government could least afford to invest in.
When Arroyo took over, economic globalization (which she started as a senator with the entry of the country into the World Trade Organization and the trade liberalization era) forced industries to compete with foreign peers. During GMA’s term, the Asian crisis tested the grit of financial and structural reforms that her economic team put in place. Luckily, these reforms helped the Philippines weather those rough times.
Benigno C. Aquino was lucky to inherit the positive effects of such economic growths arising from these reforms, which continued until after his term—since he maintained the same economic team (led by Bangko Sentral Gov. Amando Tetangco Jr.) in steering the economy.
His staunch advocacy against corruption attracted foreign investors in the country.
Rodrigo Duterte’s first six months showed the growth tract being maintained but doubts are now being raised about its sustainability considering his ambivalent pronouncements and apparent distaste for an old ally, the U.S. and the country pivoting towards China (with whom it has a territorial spat in the West Philippine Sea) and Russia.
Interestingly, a report on the “State of Fragmentation” published by Focus on the Global South and Friedrich Ebert Siftung in 2014 showed that the fixation (part of structural reforms imposed by multilateral funders) towards debt servicing and Aquino’s prudence in spending in infrastructure for fear of crowding out private investors proved fallacious and worsened the growth fallout.
The Philippines continued to lag behind its dynamic neighbors in foreign investment inflows well into the recent Aquino period, despite positive commentary in the foreign press about the president’s anti- corruption reforms.
At $1 billion, foreign direct investment in 2012 was half its level in 2007 and was well below the $1.5 billion in remittances that flowed in every month, it added.
This country is now one of the great labor exporters of the world with 11 percent of its total population and 22 percent of its working age population now migrant workers in other countries, remitting $20 billion a year.
The Philippines ranks fourth as recipient of remittances after China, India and Mexico, it noted. Even as the Philippine lower classes have adapted to becoming a labor force for the world, the Philippine economic elites have transformed their sources of capital accumulation from agriculture and manufacturing to urban real estate, made very profitable by demand coming from foreign investment and by the massive remittances to the families of migrant workers.
Sadly, urban and rural centers are thickly populated by informal settlers that have occupied roads, bridges and danger zones of the cities in search of the elusive greener pastures which they hardly feel in the provinces and remote coastal communities, despite palliatives like conditional cash transfer and other pro-poor initiatives.
Thus, the economic divide, though unmentioned in official pronouncements, continues to hound the economy.