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Philippines- Country Analysis Essay Sample

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Philippines- Country Analysis Essay Sample


Nacionalista Party leader Ferdinand Marcos dominated the political scene of Philippines for two decades after his election to presidency in 1965.

In 1967, Philippines became a founding member of ASEAN (Association of Southeast Asian Nations). He became the first President to be re-elected in 1969.

In 1972 Marcos declared the tyrannical Martial Law i.e. the imposition of military rule.

The opposition leader Benigno (Ninoy) Aquino, Jr.(Vice president) after a long period of exile was assassinated after his return in the year 1983. This led to dissatisfaction with Marcos and led to succession of events that culminated in a presidential election in February 1986.

Marcos fled the Philippines in the face of EDSA and installed Corazon Aquino as president on February 25, 1986. 25th February, 1986 , EDSA People Power Revolution marked a significant national event. True empowerment of democracy was exhibited by its successful efforts to oust a tyrant by a demonstration without tolerance for violence and bloodshed. This signifies their freedom from the governance of President Marcos.

Fidel Ramos was elected president in 1992. Early in his administration, Ramos declared “national reconciliation” his highest priority.

Popular actor Joseph Ejercito Estrada’s election as president in May 1998 marked the Philippines’ third democratic succession since the ouster of Marcos. Estrada was elected with overwhelming mass support on a platform promising poverty alleviation and an anti-crime crackdown. During his first 2 years in office, President Estrada was charged with allegations of corruption. Estrada vacated his office in 2001. In 2007, an anti-graft court convicted Estrada of plunder or corruption charges. He received a presidential pardon soon after the conviction.

Gloria Macapagal-Arroyo, elected vice president in 1998, took over the presidency in January 2001 after demonstrations that followed Estrada’s impeachment trial.

Arroyo was eligible for another term as president for a full 6 years, and she won a hard-fought campaign against her primary challenger, movie actor Fernando Poe, Jr., in elections held May 10, 2004.

Impeachment charges were brought against Arroyo in June 2005 for tampering with the results of the 2004 elections. Congress rejected the charges in September 2005. In November 2011, Arroyo was arrested and charged for her role in electoral fraud during the 2007 congressional election.

In 2010 elections, Liberal Party Senator Benigno S. Aquino III (son of Ninoy and Corazon Aquino) won the presidency by campaigning against corruption. His agenda included job creation, provision of health care, education, and tackling other domestic issues.

1. First Republic (Revolutionary Government/ The Philippines under Spanish rule)
2. The Second Republic, 1943
3. Restoration of the Philippine Commonwealth, 1945 – 1946
4. The Third Republic, 1946 – 1972: The independent Republic of the Philippines was finally proclaimed on July 4, 1946 with Manuel Roxas as President.
5. The Fourth Republic, 1972-1986 (Martial Law and the Fourth Republic, 1972-1986): On September 23, 1972 President Ferdinand E. Marcos placed the entire country under Martial Law. Under martial rule, Marcos created the Batasang Bayan in 1976 to serve as a legislative advisory council – a quasi-legislative machinery to normalize the legislative process for the eventual actualization of the 1973 Constitution
6. The Fifth Republic, 1987 – present: The 1987 Constitution finally came into full force and effect on February 11, 1987. It re-established a bicameral legislature, composed of the House of Representatives and the Senate, much like the way it was before Martial Law.

Political parties in the Philippines (Present Scenario)
Political parties in the Philippines are of diverse ideologies and are plentiful in number. The Philippines has a multi party system wherein number of political parties have to come together to form coalition governments. The Commission of Elections (COMELEC) is responsible for running the elections.

The Republic government can be divided into following divisions:
1. Executive Branch – It is headed by President who appoints the cabinet.
2. Legislative Branch – Congress of the Philippines comprising of the Senate (upper house) is presided by the President of the Senate and the House of Representatives (lower house) is presided by the Speaker of the House of representatives.
3. Judicial Branch – Supreme Court of the Philippines comprising the Chief Justice and 14 Associate Justices, the Court of Appeals, Sandiganbayan, and the lower courts. Independent Agencies include Securities and Exchange Commission.


We have divided economy of the Philippines according to the timeline from 1950 to 2000. We will concentrate mainly on the different reforms that happened in Philippines and will check its effect on GDP. In Philippines there was lot of corruption due to which economy saw lots of up and down. External factors such as Asia Financial Crisis also affected the economy adversely.

After Independence, to gain access to reconstruction assistance from the United States, the Philippines agreed to maintain its prewar exchange rate with the United States dollar and not to restrict imports from the United States. For a while the aid inflow from the United States offset the negative balance of trade, but by 1949, the economy had entered a crisis. The Philippine government responded by instituting import and foreign-exchange controls that lasted until the early 1960s. Import restriction built an opportunity for the domestic manufacturers. Manufacturing net domestic product (NDP) at first grew rapidly, averaging 12 percent growth per annum in real terms during the first half of the 1950s, contributing to an average 7.7 percent growth in the GNP, a higher rate than in any subsequent five-year period. The Philippines had entered an import-substitution stage of industrialization mainly due to balance-of-payments pressures.

In the second half of the 1950s, the growth rate of manufacturing fell by about a third to an average of 7.7 percent, and real GNP growth was down to 4.9 percent. Philippines economy was ranked as 2nd most progressive economy of Asia after Japan. Import demand outpaced exports, and the allocation of foreign exchange was subject to corruption. Pressure mounted for a change of policy. To increase the production and growth rate of the economy incentives were given to the firms, domestic and foreign. This led to increase in GDP growth of the economy.

In 1962, government devalued the peso and abolished import controls and exchange licensing. The peso fell by half to P3.90 to the dollar. Exports of agricultural and mineral products increased; however, the growth rate of manufacturing declined even further. Substantial tariffs had been put in place in the late 1950s, but they apparently provided insufficient protection. After 1965, when Ferdinand E. Marcos became president, the nation experienced economic problems and social unrest, especially from the 1970s, when corruption and cronyism (the practice of appointing friends to well-paid posts regardless of their qualifications) took hold. In 1967 an Investment Incentives Act, administered by a Board of Investments (BOI), was formed to encourage and direct investment more systematically.

Three years later, an Export Incentives Act was passed, furthering the effort to move the economy beyond import substitution manufacturing. The incentive structure in the late 1960s and 1970s was criticized for favoring capital-intensive investment as against investments in agriculture and export industries, as well as not being sufficiently large. Export incentives were insufficient to overcome other biases against exports embodied in the structure of tariff protection and the overvaluation of the peso.

In 1968, pressure from industrialists, combined with renewed balance of payments problems, resulted in the reimposition of exchange controls. Manufacturing recovered slightly, growing an average of 6.1 percent per year in the second half of the decade. Overall real GNP growth was mediocre, averaging somewhat under 5 percent in the second half of decade. The limited impact of manufacturing also affected employment. It led massive unemployment. The economy had grown at a relatively high average annual rate of 6.4 percent during the 1970s, financed in large part by foreign-currency borrowing. External indebtedness grew from $2.3 billion in 1970 to $24.4 billion in 1983, much of which was owed to transnational commercial banks.

In early 1970, the Philippines experienced economic crisis caused mainly due to profligate spending of government funds by President Marcos in his reelection bid. Increase in national government expenditure. Philippines had US$2.3 billion international debt. IMF agreed to work out for US$27.5 million but on conditions such as renegotiation the country’s external debt and devaluing the Philippines currency to P6.40 to the United States dollar.

In September 1972, 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.” 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. 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.

There was decline in the export demand. And due to huge expenditure by the President Marco foreign debt ballooned. Philippines was known as “Sick man of Asia”. A financial scandal in January 1981 in which a businessman fled the country with debts of an estimated P700 million required massive amounts of emergency loans from the Central Bank of the Philippines and other government-owned financial institutions to some eighty firms. The growth rate of GNP fell dramatically, and in 1980 there was an abrupt change in economic policy, related to the changing world economy and deteriorating internal conditions. Philippine government agreed to reduce the average level and dispersion of tariff rates and to eliminate most quantitative restrictions on trade, in exchange for a US$200 million structural adjustment loan from the World Bank. Whatever the merits of the policy shift, the timing was miserable. Exports did not increase substantially, while imports increased dramatically. The result was growing debt-service payments; emergency loans were forthcoming, but the hemorrhaging did not cease. Debt repayment had ceased after the assassination. Real GNP fell more than 11 percent before turning back up in 1986, and real GNP per capita fell 17 percent from its high point in 1981.

In 1990 per capita real GNP was still 7 percent below the 1981 level. In 1983 the country descended into a political and economic crisis in the aftermath of the assassination of Marcos’s chief rival, former Senator Benigno Aquino, and circumstances had not improved when Marcos fled the country in February 1986.

Aquino’s wife- Marcos became president. The most pressing problem in the Philippine international political economy at the time Aquino took office was the country’s US$28 billion external debt. Economists within the economic planning agency, the National Economic and Development Authority (NEDA), argued that economic recovery would be difficult, if not impossible, to achieve in a relatively short period if the country did not reduce the size of the resource outflows associated with its external debt. Large debt-service payments and moderate growth (on the order of 6.5 percent per year) were thought to be incompatible. New tax reforms were introduced by the new president. Export taxes were eliminated to increase the export productions. Income tax was simplified since it was seen that very few people were paying taxes. Most of the high class people were evading taxes in the form of indirect taxes. So the main goal of the government was to simplify the tax system in order to increase the revenue generated by the tax. Collection was one of the main problems of the Philippines tax system.

Estimates of individual income tax compliance in the late 1980s ranged between 13 and 27 percent. Assessments of the magnitude of tax evasion by corporate income tax payers in 1984 and 1985 varied from as low as P1.7 billion to as high as P13 billion. The latter figure was based on the fact that only 38 percent of registered firms in the country actually filed a tax return in 1985. Although collections in 1989 were P10.1 billion, a 70 percent increase over 1988, they remained P1.4 billion below expectations. Tax evasion was compounded by mismanagement and corruption. A 1987 government study determined that 25 percent of the national budget was lost to graft and corruption. New tax was introduced known as luxury tax and 10% VAT was also introduced.

New constitution formed. GDP increased from 3.5% in 1986 to 4.3% in 1987 and 6.6% in 1988. Earthquakes, natural disasters and power shortage caused economic activities. Investment incentives system was revised.

In 1988 GNP grew 6.7 percent, slightly more than the government plan target. In 1989, the growth fell off to 5.7 percent and then fell down in 1990 to just over 3 percent. Many factors contributed to the 1990 decline. The country was subjected to a prolonged drought, which resulted in the increased need to import rice. In July a major earthquake hit Northern Luzon, causing extensive destruction, and in November a typhoon did considerable damage in the Visayas. There were other, more human, troubles also. The country was attempting to regain a semblance of order in the aftermath of the December 1989 coup attempt.

43.9% of budget went debt servicing.
The National Economic and Development Authority Medium-Term Development Plan, 1987-92 Goals included alleviation of poverty, generation of more productive employment, promotion of equity and social justice, and attainment of sustainable economic growth. Goals were to be achieved through agrarian reforms; strengthening the collective bargaining process; undertaking rural, labor-intensive infrastructure projects; providing social services; and expanding education and skill training. In 1989 the largest portion of the national government budget (43.9 percent) went for debt servicing. Most of the rest covered economic services and social services, including education. Only 9.1 percent of the budget was allocated for defense.

Privatization of electricity, telecommunication and banking industry. 1990-91 Persian Gulf crisis, petroleum prices increased. The Oil Price Stabilization Fund put an additional strain on the budget. The trade deficit rose rapidly, as both consumers and investors attempted to regain what had been lost in the depressed atmosphere of the 1983-85 periods. Although debt-service payments on external debt were declining as a proportion of the country’s exports, they remained above 25 percent. And the government budget deficit ballooned, hitting 5.2 percent of GNP in 1990. As a result of the 1990-91 Persian Gulf crisis, petroleum prices increased and the Oil Price Stabilization Fund put an additional strain on the budget. The sudden cessation of dollar remittances from contract workers in Kuwait and Iraq and increased interest rates on domestic debt of the government also contributed to the deficit.

In 1996-
GNP grew at 7.2% and GDP by 5.2%. The economy was doing well and inflation rate drop from 5.9% from 9.1% in 1995. 1998-
Philippine was greatly impacted by Asian financial crisis. Fiscal deficit reached P49.981 billion from surplus of P1.564billion in 1997. All the Asian countries open the economy to attract the foreign investment. But due to large investment the economies of these countries become destabilized which led to Asian Crisis. Peso depreciated from P29.47 to P40.89 a dollar.

GNP fell from 5.3% to 0.1%.
Fiscal Deficit doubled from P49 billion to P100 billion.

Exports = 4314 Million USD in June of 2012.
Historically, from 2002 until 2012, Exports averaged 3681.10 Million USD reaching an all time high of 5325 Million USD in September of 2010 & a record low of 3506 Million USD in February of 2009.

Electronic products like processors, chips & hard drives (more than 50% of total exports revenues). Garments
Coconut oil
Transport Equipments
Copper Products

PHILIPPINES IMPORTS MOSTLY: mineral fuels, lubricants, transport equipment, industrial machinery and equipment, iron and steel. Main imports partners are Japan, United States, China, South Korea and Singapore.


International Relations of Phillipines
US- Phillipines Relationship:
Strong Bilateral ties
Exports to US: Semiconductor parts, peripherals, automobile parts, electric machinery, textiles and garments, wheat and coconut oil Imports from US: Semi processed automobile parts, electric machinery, semiconductor parts US has invested in Power sector and Financial services sector in Phillipines UK-Phillipines Relationship:

UK has invested in Banking and Portfolio management
BEA planning to startup an aircraft manufacturing unit in Phillipines UK hospitals recruit nurses from Phillipines
International Agencies:
Founder member of UN, has been a member of Security Council once Founder member of ASEAN, which when combined will be the 9th largest economy in the world Reasons for doing Business in Phillipines:

Member of Next 11 (Beyond BRICS), touted to become the 14th largest economy of the world by 2050 Also featured in 3G countries (Global Growth Generator)
Ability to quickly bounce back from economic crisis.

http://www.nationsencyclopedia.com/economies/asia-and-the-pacific/philippines-overview-of-economy.html http://www.eadn.org/The%20Effects%20of%20the%20Asian%20Financial%20Crisis%20on%20the%20Philippines.pdf- Asia crisis.
http://www.mongabay.com/reference/country_studies/philippines/ECONOMY.html http://beta.usc.edu.ph/research/index.php/theses/757-openness-of-the-philippine-economy-1950-1992-a-time-series-analysis
http://www.ers.usda.gov/data-products/international-macroeconomic-data-set.aspx http://getrealphilippines.com/legacy/aboutus5.html
http://www.indexmundi.com/philippines/gdp_real_growth_rate.html http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS
http://library.northsouth.edu/Upload/The%20Philippines.pdf- Different cases- Figures. http://www.indexmundi.com/philippines/unemployment_rate.html- Unemployment data

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