The economy of the Philippines, as it is currently reported, continues performing well in comparison to peers in the region. Precisely, the economy grew faster than countries such as Vietnam, Malaysia, Thailand, and Indonesia in 2017, which set it at a pace that only China surpassed (The World Bank, 2017). This paper analyzes the economic policy of the Philippines and reports that while the country could be experiencing high performance rates presently, the efforts to attain the reported results date back to the early 1970s when the leadership regimes of the nation prioritized the growth of the private sector.
Traditionally, the Philippines’ economy was a private enterprise one both in practice and policy. During that time, the government intervened primarily through monetary and fiscal policies as well as through the exercise of its regulatory power. As much as the expansion of enterprises in the public sector was realized, especially during the reign of President Marcos, the direct engagement of the state in economic activities of the nation has remained limited. The Aquino regime established a major policy initiative that would privatize and consolidate government-controlled and government-owned businesses. Economic planning of the country was limited primarily to the setting economic growth targets as well as other macroeconomic objectives, participation in project planning and implementations and offering advice to the government concerning the use of capital funds for developing projects.
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Established in 1973, the National Economic and Development Authority was tasked with economic planning responsibilities in the Philippines (Jayasuriya, 2017). According to the cited literature, the authority’s responsibilities concerned both macroeconomics and project planning and implementation. The calling by the authority for the expansion of employment rates, maximization of economic growth, the attainment of monetary stability and fiscal responsibility, provision of social services, and an equitable income distribution happened during the President Marcos regime for the 1974-1977, 1978-1982, and 1993-1988 as well as under the President Aquino reign for 1978-1992 (Jayasuriya, 2017). During the identified regimes, economic growth was encouraged by the provision of incentives and infrastructure that would be invested in private capital. Furthermore, which is a derivative objective, was to be attained through dynamic expansion of the economy within a suitable policy environment that stressed labor-intensive methods of production.
The authority’s medium-term plan for economic development between 1987 and 1992 was a reflection of President Aquino’s campaign themes, which included the removal of structures of privilege as well as the monopolization of the economy, the decentralization of decision-making and power, and the reduction of mass poverty and unemployment mostly in the rural regions (Tinbergen, 2015). During that time, the private sector of the economy was perceived both as the initiator and mover of the development process of the nation. Consequently, the government was urged to support the private approach to economic growth. Furthermore, the participation of the state in the economy as reduced and decentralized. The objectives of the time included the promotion of equality and social justice, the creation of more productive employment, alleviation of poverty, and the attainment of sustainable economic growth. The set goals of the time were to be attained through reforms in agriculture, the creation of rural labor-intensive projects, bolstering the collective bargaining process, the provision of social services, as well as the expansion of skill training and education. However, the objectives that the authority set were to be attained in a trickle-down manner since most of the efforts focused on the nation’s agricultural sector.
The plan further included the need to implement more suitable market-oriented monetary and fiscal policies, the attainment of more liberal policy on trade that would be founded on the nation’s comparative advantage, the improvement of effectiveness and efficiency of the civil services, and the improvement of enforcement of governmental laws and regulations. The reforms also focused on a proper management of the nation’s external debt that would allow an acceptable growth rate and the creation of a pragmatic foreign policy that would be development-oriented (Tinbergen, 2015).
Much as the nation has adopted targets that would improve its economy, the performance fell short of he set objectives. For instance, the growth rate of the country’s Gross Domestic Product, GDP, averaged only twenty-five percent less than what was targeted between 1987 and 1980 (Gerson, 2017). As the cited literature reports, the nation also fell short of its targeted real export rate by one third, and it realized a double import rate, which was not according to the plan. Much as the targets exceeded the performance of the nation’s economy, they did not provide the foundation for the discussion of the consistency of official statements and the suitability of the plan to the external debt repayment obligations. The plan further established priorities. Precisely, both of President Aquino’s election campaigns and policies stressed economic policies that favored the reduction of poverty and development of rural areas. Nevertheless, because of dissension in the cabinet, several Congressional conflicts, and the indecisiveness of the President, some policies, such as tax and land reform were either unimplemented or they actualized in an impaired approach. Furthermore, the country curtailed the available resources for development initiatives as well as the provision of government services as a way of maintaining health relationships with international creditors.
The government of the Philippines has also undertaken to ensure the provision of incentives to firms both foreign and domestic to invest in areas of priority for the economy since the 50s. The Investment Incentives Act of 1967 that the Board of Investments administered purposed to encourage and direct investment in a more systematic manner. Furthermore, the government passed the Export Incentives Act three years later with the objective of furthering the efforts to move the economy of the state beyond import substitution manufacturing. Critics of the incentive structure that was adopted suggested that the primary weakness of the initiative was that fact that it favored capital-intensive methods of investment at the expense of investing in export and agricultural industries in addition to not being sufficient enough. For example, it was found that the export incentives were not sufficient enough to overcome other forms of biases against exports that were embodied in the structure of tariff protection as well as the overvaluation of the peso (Jayasuriya, 2017).
The incentive for investment in the economy of the Philippines was revised twice; first in 1983 and again in 1987 with the objective of rewarding performance, especially labor-intensive production and exporting (Gerson, 2017). Because of the objections of the US and other industrialized countries, the export subsidy provisions that were contained in the Investment Code of 1983, most of the provisions on export subsidy were removed in the newest versions of the law (Jayasuriya, 2017). The delegates of the 1987 Investment Code delegated considerable amounts of the discretionary power on foreign investment to the Board of Investments that was governmentally managed when foreign engagement in any enterprise surpassed forty percent. Notably, the legislations passed by the Philippines Congress during the early part of 1991 limited this authority. The new proposal, which is currently under use, suggested that foreign participation in the economy of the country that went beyond forty percent would be permitted in any area of the economy that was not covered by a particular negative list.
While there could be other reforms to the economic policy of the Philippines, the identified approach resulted in sustainable economic development for the country. It is reported that sustained economic growth raises the chances that poverty reduction has continued since the initiation of the economic development projects. Applying the international poverty line of $3.20-a-day that the World Bank has set for lower middle income nations, the poverty rate of the country is approximated to have fallen from twenty-seven percent to 24.2 percent from 2015 to 2017 respectively (The World Bank, 2017). Furthermore, the latter cited literature indicates that more than a million Filipinos have been exiting poverty every year starting from 2015. Literature also reports higher income wage, especially for households contained in the bottom forty percent of the distribution of income, and they constituted the primary driver of poverty alleviation in the recent time.
Conclusively, the Philippines may not be the most developed country in Southeast Asia, but it is one with sustainable economic development. The country now ranks second in terms of its economic growth in the region with massive reductions in the poverty rates of its citizenry. The path to the attainment of the reported outcomes in this paper has been long, and it started in the early 70s under the leadership of President Marcos’s regime. The country set economic priorities to alleviate poverty, privatize the economy, and increase its agricultural potential, which explains the recently reported economic performance outcomes.
References
Gerson, M. P. R. (2017). Poverty, income distribution, and economic policy in the Philippines . International Monetary Fund.
Jayasuriya, K. (2017). The politics of economic policy in the Philippines during the Marcos era. Allen and Unwin.
The World Bank. (2017). Philippines Economic Update: Preserving Consistency and Policy Commitment . World Bank . Retrieved 19 February 2019, from https://www.worldbank.org/en/country/philippines/publication/philippines-economic-update-october-2017
Tinbergen, J. J. (2015). Shaping the world economy; suggestions for an international economic policy.
