UP School of Economics Discussion Papers

Discussion Paper No. 2011-11 November 2011

The Economic Legacy of Marcos

by Gerardo P. Sicat
*

Professor Emeritus, University of the Philippines School of Economics

UPSE Discussion Papers are preliminary versions circulated privately to elicit critical comments. They are protected by Republic Act No. 8293 and are not for quotation or reprinting without prior approval.

THE ECONOMIC LEGACY OF MARCOS

BY

GERARDO P. SICAT
Abstract FerdinandE.MarcoswasthePhilippinepresidentfrom1966to1986,aperiodexceedingtwentyyears.After servingasatwotermpresidentofthePhilippinesfrom19661972,hedeclaredmartiallawundertheconstitution toassumedictatorialpowerstotamethepoliticalchaosthatwasthenengulfingthenation.In1981,heendedthe martiallawperiod.Thepoliticalframeworkthatheadoptedwaspatternedafterthe1973Constitutionwith amendmentsintroducedandacceptedbypopularreferendumconcerninganelectedparliament.Hewasdriven frompowerin1986.Thispaperreviewstheeconomicandsocialcontributionsthathisyearsinofficebroughtto thecountry.Duringhisperiodofrule,thereweremajorreformsingovernmentorganization,intheprovisionof publicinfrastructure,andinsocialandeconomicdevelopment.InmakingthefinalaccountingforMarcos,the paperconcludesthatthebalancesheetisverypositive.Manyoftheproblemsthatcontinuetohoundthenation todayaretheresultofdecisionstakenduringthetransitionfromMarcosbythesuccessorgovernment.These mistakesarediscussed.Thispapercontributestotheproperassessmentofthecountryslongtermeconomicand socialproblems.Naturally,thejudgmentofhistorywillbemadethroughthefutureassessmentsofsocial historians,economists,andothersocialscientists.Thispaperrepresentsonesuchanalysis.

Topics:Philippineeconomichistory;economicdevelopment;FerdinandMarcos;politicaleconomy, economicpolicy.

ProfessorofEconomicsEmeritus,UniversityofthePhilippines.

THE ECONOMIC LEGACY OF MARCOS

BY

GERARDO P. SICAT

Abstract I. Introduction ................................................................................................................ 2 II. The Marcos presidency and martial law dictatorship in historical context ............... 3 III. Economic accomplishments...................................................................................... 11
A. Government reform ...................................................................................................................... 11 B. Infrastructure ................................................................................................................................ 15 C. Social and People Oriented reform.............................................................................................. 17 D. Economic and Industrial reform.................................................................................................. 19 Shadow of parity rights: A conflicted ideology of nationalism and development ...................... 19 Industrial and trade reforms........................................................................................................... 20 Tariff reforms.................................................................................................................................. 24 Banking and financial reforms........................................................................................................ 25 Financing the development plan..................................................................................................... 27 Agricultural and rural development reforms .................................................................................. 28 Sugar and coconut issues........................................................................................................... 28 Other sector reforms....................................................................................................................... 34 Overseas employment program ...................................................................................................... 36 E. Foreign economic relations........................................................................................................... 37

IV. Controversial issues ................................................................................................... 38

A. A dynastic attempt......................................................................................................................... 38 B. Roots of the debt crisis and industrial collapse........................................................................... 40 C. Errors of the post-Marcos transition ........................................................................................... 44

V. Legacy: Summary........................................................................................................ 47 Bibliography ..................................................................................................................... 47

ProfessorofEconomicsEmeritus,UniversityofthePhilippines,formermemberoftheCabinetofMarcosas Chairman,NationalEconomicCouncil(19701972)andDirectorGeneral,NationalEconomicandDevelopment AuthorityandconcurrentlyMinisterofEconomicPlanning(1973to1981).FormanyyearssinceIlefttheeconomic policymakingendinJune,1981,Idirectlyavoidedcommentingonthetopicathand.In1984[Sicat,1984]however,I deliveredatalkonmyassessmentofthePhilippineeconomybeforethePhilippineEconomicSociety.Iwrotethatasa kindofvaledictoryassessmentofmyyearsinthegovernment,priortomydepartureforworkattheWorldBank beginningin1985.ThiswasmanymonthsbeforetheEDSArevolt.TheoccasiontodiscussMarcosslegacyarosefrom atalkdeliveredpubliclyattheUniversityofAsiaandthePacificinApril,2008onthetopicTheEconomicLegacyof Marcos:MythorReality?.ProfessorJoseRomero,ofU.A.&P,organizedthatseminar,forwhichIamgrateful.Atthe time,IusedaPowerPointpresentationwhichImadeavailablepubliclytosomeoftheparticipantsinthatforum.At thesameoccasion,formerPrimeMinisterCesarVirataservedasthediscussantofmypaper.Unfortunately,the transcriptionsofthatpublicforumwasunusable.Thecurrentstageofthispaperisarevisionofthatpresentationand includeselaborationofimportantissues.Thisthenistheproperessaybasedonthattalk.Ikeptthefinishedpaperfor almostfouryearsinmyfilesandreviseditagainforthispresentation.Itistimetomakeitpublic.

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I.

INTRODUCTION

IthasbeenaquartercenturysincethefallofFerdinandMarcosinFebruary,1986.Hewas electedfortwosuccessivetermsasthesixthpresidentoftheRepublicduring196619731.On September21,1972,threemonthsandaweekbeforethecompletionofhissecondterm,he declaredmartiallawtoassumedictatorialpowers.Basinghisactionsontheprovisionsofthe ConstitutionoftheRepublic,hecalledthissystemofgovernmentconstitutional authoritarianism.OnJanuary17,1981heliftedmartiallawandinauguratedanewsystemof governmentbasedonthenew1973PhilippineConstitutionwhichhadrevisedtheprevious politicalconstitutionandrefittedthroughreferendaofpoliticalquestionsthatheintroduced. Theseamendmentsincorporatedapresidentialparliamentarysystemthathadastrong presidencypatternedaftertheFrenchpoliticalsystemafter1958thatCharlesdeGaulle adoptedtostabilizeit:agovernmentwithastrongPresidentandaParliamentheadedbya PrimeMinisterthatpassesthelaws.TheFrenchsystemstillworkstothisday. MarcoshadconsciouslyfollowedtheFrenchexamplealbeitwithsomevariationscarrying his own imprint. In the current reckoning of these changes, the last period under the parliamentaryformtheBatasangPambansawasstillseenasanextensionofthemartiallaw period,notanendtoit.Infact,in1981,theadoptionofthosechangesmarkedthetermination of martial law. The 1987 Constitution of Corazon Aquino reversed all these political changes essentiallyrestoringmostoftheinstitutionsbeforemartiallaw. Marcosstwentyyearrulewaslong.Becausehewasdriventoexile,ithadacatastrophic endingforhim.Politically,hisbiggestfailurewastoinstituteanorderlyprocessofsuccession withinthepoliticalsystem.Judgingfromwhathadbeenwrittenabouteventsafterhisfall,a backlashintheinterpretationofhistoricaleventshaddiminishedmanyofhispositive contributions.Thiswastobeexpected.Hewassucceededbyembitteredpoliticalenemieswho wereexcludedfromparticipatingdirectlyinthenationspoliticsduringthedictatorialphaseof hisreigninpower.Whentheyhadtriumphantlyremovedhim,itwasnaturalforthemtoband togethertodevalueifnotdemonize,mostofwhathehaddone. Inpoliticsasinwar,thevictorswritethehistory.Marcoslosthisvoiceindefeat,inexile, andindeath.Thesignificantthingsthatheaccomplishedhadbeensweptasidebythetideof revengeandrecriminations.Historywrittenfromtheviewpointofthevictorsreinforcedinthe publicmindthebadandthedifficultiesunderhisregime.Thepassageoftimefurtherbolstered thatprevailingwindandfosteredtheessentialamnesiathatnationalrejuvenationhadseemed torequire. Theturbulenthistoryofthecountrytothisdayisareminderthattheinheritorsofthe mantleofleadershiphavenotbeensucceedingeitherinplottingasuccessfulcourseforthe country.Historyhasitsdayofreckoning.Basedonthelevelofpublicdissatisfactionwiththe

Hewaselectedpresidentin1965beatingDiosdadoMacapagal,thentheincumbent,andin1969beatingSergio OsmenaJr.,thechallenger.

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currentdirectionsofthecountry,politicalandeconomicprogramsrequireabetterroadmapfor thefuture. Itisfurtherremarkablethat,atpresentandforsomeyearsnow,thecountryisagain witnessingsomeclamorforconstitutionalchange.Politiciansareseekingtheamendmentofthe constitutionsothataparliamentarysystemcouldbeadopted.Otherswantchangeintermsof politicalstructurefavoringafederalframeworkwhichdepartsfromthecentralizedformof government.Theissueofconstitutionalchangeishoweveranintricateaffair.Thenatureofthe corechangestobemadeinregardtotheconstitutionisoneinwhichtheeconomicprovisions needgreaterrethinkingandchange.2 ThisessayexaminestheeconomiclegacyofFerdinandMarcos.Thefirstpartdiscussesthe presidencyofMarcosinhistoricalcontext.Thesecondpartreviewstheeconomic accomplishmentsduringhistime.Theseaccomplishmentscovertheareasofgovernmentand administrativereform,infrastructureconstructionandpublicinvestmentprograms,socialand peopleorientedreforms,andeconomicandindustrialreforms.Thethirdpartscrutinizesbriefly somecontroversialaspectsaboutMarcossrule.Theseaspectsincludeadiscussionofthe qualityofthepostMarcostransitionthathadreducedthepublicperceptionofhiseconomic contributionstonationbuilding.Finally,asummaryoftheeconomiclegacyismade.

II.THEMARCOSPRESIDENCYANDMARTIALLAWDICTATORSHIPIN HISTORICALCONTEXT
WhenMarcosbecamepresidentofthecountryin1966,twentyyearsofpoliticalindependence hadalreadypassed.FivepresidentsoftheRepublichadprecededhiminthejob.Beforethat, tenyearsasaCommonwealthundertheUnitedStateswouldguidethenationpeacefully towardthattransitiontoindependence.TheGreatDepressionintheUnitedStateswhichalso hadaprofoundimpactonthePhilippineeconomycoincidedwiththetimewhenthe

Thereareseveralschoolsofthoughtonconstitutionalrevisions.Therearethosewhowanttocontinuetheeffortto installaparliamentarysysteminparttoreplacethecurrentcongressandtheprincipleofchecksandbalance betweentheExecutiveandtheParliament.Someseeadefectinthissystem,andthatwasinpartthereasonforthe adoptionofaparliamentaryrecommendationinthe1973Constitution.Therearethosewhowanttoreplacethe centralandunitarysystemofgovernmentinfavorofafederalsystemofgovernmentpartlytoseerealtransferof powerfromthenationalgovernmenttothelocalgovernments.Thereareenoughdisaffectedlocalpoliticiansabout theslownessoflocalprogressarisingfromthecurrentstateofnationalprogress.Infact,thereareenough disgruntledbelieversthatthecountrysrelativelyslowprogressrequiressomekindofconstitutionalrevision. However,iftherewerenotermslimitstothecurrentconstitutionwhichisthe1987Constitution,thereprobably wouldbelittledemandforconstitutionalchange.Inshort,itmaybethatthegreatdemandforchangeismainlythe needofmajorpoliticianstogetridofthetermlimitprovisionsofthepresentconstitution.Suchlimithadimposed beenagainsttheholdingofelectiveofficebeyondthreetermsformembersofCongressandlocalexecutivesandone termforthePresident.Ibelievethatmostoftheproposedconstitutionalchangesproposedabovewillnothelpto curethemainissueaboutPhilippineeconomicperformance.Mostofthedemandforconstitutionalchangeisonthe wrongtrackunlessitdealtsquarelywiththeissuesofeconomicrestrictionstoforeigncapitalparticipationinthe Philippineeconomy.Themostimportantissueforconstitutionalchangerequiresaremovaloraliberalizationofthe economicrestrictionsinthe1935Constitution.Thesearethecriticalissuesthatneedtochange.Otherwise,no constitutionalamendmentswouldbeeffectiveinbringingagreaterinflowofforeigncapitalintothecountryinthe magnitudesthathavebeenexperiencedbyothercountriesthathavegrownsteadilyintohighgrowtheconomiesin EastAsia.
2

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CommonwealthConstitutionwasbeingframedbyFilipinoindependenceleaders.Theywere infusedwithgreatideasofnationaldevelopment,stateinterventionintheeconomyandstrong nationalisticsentiments. ThesesentimentsfoundexpressionintheeconomicrestrictionsintheConstitutionof1935 whichconfinedtoFilipinocitizenstheownershipoflandandprovidedonlyminority participationtoforeignersinthebusinessofpublicutilitiesandtheexploitationofthenations naturalresources.ThePhilippineConstitutionwasmainlyacopyanamalgamofUSstate commonwealthconstitutionsbutthisprovisionwasuniquelyFilipino.Infact,itwouldbe uniquelyFilipinoinrelationtomanypoliticalconstitutionsintheworld. TheSecondWorldWarwhichlastedfrom1941to1945interruptedwhatcouldhavebeen agracefulcontinuitytowardindependenceunderAmericansponsorship.Itdestroyedstructural linksalongsocial,political,andeconomicrelationships.3Thefirstfewyearsofindependence werefocusedonrecoveryandrehabilitationthatrequiredenormousresourcesbecauseofthe severewardestruction.ThisbroughtupthefirstseriousnationalissuetofaceFilipinosparity rightsforAmericans.Theparityissuearosebecauseoftheeconomicrestrictionsplacedon foreignersinthe1935Constitution.ThesubstantialforeigninterestsweremainlyAmerican investmentsinthePhilippines.So,thewordforeigninthoseprovisionsreadasAmericanto theAmericancitizenswhowereprospectivelyaffectedbythoseprovisions. Landownershipwasprohibitedtononcitizens.Participationinindustriesthatexploited naturalresourceswaslimitedto40percentminorityinterest.Thesamewastrueofpublic utilities.Butinallthesesectors,therewassubstantialAmericanownership.Inshort,uponthe dawningofindependenceandpriortothegrantofanybenefitsfromthewardamage compensationissuebeingdiscussed,Americancitizensaffectedwantedtheirrightstobeatpar withthoseofFilipinos,hencetheissueoftheparityrightsamendmenttothe1935 Constitution.Evenwithwardestruction,therewererightsthatexistedwhichwouldbe recognizedbytimelywardamagepayments.Andthesecouldnotbeignoredbysubsequent politicalandeconomicevents.

ThehistorianTeodoroAgoncillohasattributedtheextremecorruptionofthedaysoftheJapaneseoccupation duringtheperiodofextremewartimeeconomicdeprivationofmanyFilipinoswhohadtosurvivethewaryears.This ledtoacultureofdomesticcorruption.This,however,isprobablyanincorrectassessmentinthatitascribestothis phenomenontheprimaryreasonfortodayscorruptionculture.Thecostlyelectoralcontestisalegacyfromthe tutelageinelectoralpoliticsfromAmericanelectoralpractices.Thehighcostofelectoralcontestsformajorpositions createsademandtoamasslargesumsofmoneyfortheelectoralcampaigntobesuccessful.Theprocessof extractingpoliticalcontributionsforelectoralcontestscreatesitsownquidproquoafterelectoralvictory.The successfulcandidatehastohaveaperiodofpayofftothosewhohadcontributedtotheelectoralvictory.Moreover, thevariousrentseekingpracticesassociatedwithmanyeconomicpoliciesthatdeviatedawayfrommarketsolutions toeconomicissuescontributesaswelltotheproblemsofcorruptionthattodayexplainsthestateofplayinthe countryscultureofcorruption.

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ThefirstpresidentoftheRepublicwasManuelA.Roxaswhohadashortlivedpresidency.4 RoxasoftheLiberalPartywassweptintoelectionvictoryoverthePhilippineCommonwealth presidentSergioOsmenaontheissueofparityrightsforAmericancitizens.Hearguedthatan amendmentoftherestrictiveconstitutionstogiveAmericansequalrightstothoseofFilipinosas providedbytherestrictiveprovisionsagainstforeignersofthe1935Constitutionwouldbringin AmericanwardamagepaymentsandAmericaninvestmentsintheeconomy.TheAmerican governmenthadpremisedtheinflowofwardamagepaymentsandtradeadjustmentona favorableresolutionofthisissueforAmericancitizens.ThatwouldprotecttheirPhilippineasset holdingsintheseaffectedsectorsfromforcedsaleorpossiblelossofvalues. ThemainissueofRoxasstimewastheproblemofrehabilitationofabadlydestroyed Philippineeconomy.5Suchindependenceandpostwareconomicadjustmentwerelinkedwith thequidproquooftheparityamendmenttotheconstitution.ItwouldgiveAmericancitizens thesamerightsasFilipinosinthematteroftheeconomicrestrictionsintheConstitution,hence thenameparityrights.Withtheparityamendmentwouldcomethewardamagepaymentsto bepassedbytheUSgovernmentandtheapprovalofthetradeadjustmentactdetailingthe processoftradeadjustment(whichwouldcometobecoveredbythePhilippineTradeAct). TheseprovisionswouldplayanoverpoweringsetofhistoricalforcesoverPhilippineeconomic policiesofthepostindependenceyears.Thisessaywilldelveonitsimportantroleinthe contextofthedirectionofindustrialpolicy.6 ElpidioQuirinosucceededRoxaswhenthelatterunexpectedlydiedofnaturalcausein 1947,beforehalfhistermwasover.Quirinopresidedoverthecountrywhensocialunrestthe communistpeasantrebellionortheHukbalahaprebellionbecameveryseriousandthe countryslargedollarreservesarisingfromtheearlyrehabilitationdwindledasaresultof

ManuelRoxaswaspartofthefirstgenerationofpoliticalindependencefighterswhowasalliedwithSergioOsmena whenthefirstPhilippineindependencebill(theHareHawesCuttingbill)waspassedintheUSCongress.Thisbillwas promotedbyandwasassociatedmostlywiththesetwoleaders(theOsRoxmission,forOsmenaandRoxas)who triedtopromoteitspassagewhentheyledamissionofpoliticianswhowantedindependenceinWashingtonD.C.The wilyManuelQuezonledanopposinggroupofpoliticalalliesandobjectedtothisbillsothatCongresshadtopassa newPhilippineindependencetheTydingsMcDuffieLawin1934thatwasfinallysignedintolawbyPresident FranklinD.Roosevelt.Priortotheactofindependence,thePhilippineAssemblyhadtoenactaConstitutionthatwas againtobeapprovedbytheUSPresident.TheConstitutionalConventionof1935wasconvenedandtogetherwith enactingthepoliticalorgansofthestatewhichwassimilartomanyofthestateconstitutionsoftheUnitedStates,it containedprovisionsforrestrictingtheparticipationofforeignersinthreemajorareasoftheeconomyland ownership,publicutilitiesandtheexploitationofnaturalresources.Atthetime,theseissueswerenotallowedto interferewiththegrantofindependenceasPresidentRooseveltoftheUSsignedtheindependencebillfosteredby TydingsMcDuffieintolaw.BecausehewascreditedwiththewinningcoalitionthatgotthemovementforPhilippine independenceintoforwardmotion,QuezonbecamethedominantleaderofthenewPhilippineCommonwealthwith SergioOsmenaservingonlyasvicepresident. ToappreciatefullytheproblemsoftheeconomyattheendoftheSecondWorldWar,therequiredreadingswould betheanalysisoftheeconomywiththeBellEconomicReport(1950),whichassessedtheaidprogramthatwas neededtopropupandrehabilitatetheeconomy.Thiswasaninfluentialeconomicreportthatledtovarious developments.Theothereconomicstudyof1960svintagewasthatofFrankGolay(1960)whichassessedthe economicproblemsofthisearlyindependenceperiod.Themostintensivestatisticaldiscussionoftheeconomic damageineconomicoutputduringthewarwashoweveronlyrecentlyanalyzedinSicat(2003). Seethediscussionofcontroversialissues,therootcauseofthedebtcrisisandindustrialcollapse.

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excessiveimportdemandattheendofthewarandthepesoovervaluationofthetime.Bythen, thecountrysnewinstitutionsofcentralbankingandcommercialbankingwereinplaceand,in succession,importandforeignexchangecontrolswereundertaken.Electedonhisownin1949, hisopponentwasSenatorJoseP.Laurel,whowasaneminentjuristandwasthewartime presidentunderthewartimeOccupation.Theelectoralcontestwasmarredwithfraudthatput inquestionthehonestyoftheoutcome. RamonMagsaysaycametothepresidencyin1953whenhedefeatedQuirinointhe electoralcontest.MagsaysayschiefachievementbeforehisrisetopowerwasasQuirinos DefenseSecretary.Hemademajortriumphsagainstthecommunistinsurgencyandhelditat bay.Thesegainsplushissimpledowntoearthcharmtransformedhispersonaintoelectoral charismathatgaveagreatpromiseofagoodpoliticalfutureforthecountry.Histimeinoffice washowevercutshortbyaplanecrashthatkilledhim.IfMagsaysayhadastrongvisionofthe Philippinefuture,itwasnotyettransparentandwellarticulatedintermsofsocialandeconomic reformsthatonecouldassociatewithhim.Hewasconsideredthechampionofthecommon manbutduringhisshorttimeaspresident,majoreconomicrestrictivepolicieswerecontinued. Importandexchangecontrolsremained.Itwasduringthispresidencywhenthelawonretail tradenationalizationwaspassed.Butlandreformlegislationthatheproposeddidnotprosper underaCongresscontrolledbylandedinterests.Balancedagainstthesefailures,hiseconomic programsdesignedtoaddresspovertydirectlyinthecountrysidewereeffectiveandbuiltfor himastrongfollowing.Thesewerecommunitydevelopmentprograms,thebuildingofartesian wellsfortheruralfolks,andtheimprovementofjusticedispensationaffectingthepoor. CarlosP.Garcia,whosucceededMagsaysay,wasatraditionalpoliticianschooledintheold ways.HewasmadeMagsaysaysrunningmateinordertogivepoliticalbalancetotheticket.He wasschooledinthenationalisticrestrictivetraditionsoftherecentpast.Inhistime,hewould furtheraddtoeconomicrestrictionsandprotectionandwouldespouseslogansthatfurtherfed onthoserestrictions,FilipinoFirst.Hesponsoredthedemandsofdomesticbusinessmenwhose industrialendeavorsweremainlytoreplaceimportsandtocontrolthedomesticmarketsfor themselvesagainstforeigncompetition.Theresultofthesemeasureswastotightenforeign exchangecontrolsthathadtheeffectofencouragingnotonlyeconomicwastebutalso corruptionandrentseekingintheeconomy. Intheelectionof1961,DiosdadoMacapagalwouldassumepowerbydefeatingthe reelectionistGarciamainlywiththepromisetoremoveexchangeandimportcontrolsandto rootoutcorruption.MacapagalwaselectedtobecomethevicepresidentduringGarcias NacionalistaPartyrule,benefitingfromtheruleofallowingsplitticketvotingforpresidentand vicepresident.Macapagalsearlyyearswerepromisingbuthehadatendencyofrotatinghis chiefofficialsamongjobswithinthecabinettoooften.Perhapsthiswashiswayofkeeping politicalcontrolandbalance.Butthisapproachaddedtohisunevenperformanceaspresident andmadehimsusceptibletostrongchallengeinthenextelection.Thatchallengecamefrom anotherpoliticianfromhisownparty,FerdinandMarcos,whohadtochangehispolitical affiliationsinordertoreceivethepresidentialnominationoftheNacionalistaParty. Macapagalselectionwasarejectionoftheextremesofeventsbroughtaboutbythe restrictiveeconomicpoliciesthatheinherited.Macapagalhadcampaignedagainstcorruption andtheexchangerateregimes.Hisfirststepsinvolvedtheremovalofimportandexchange controlsandtheinstitutionofafloatofthecurrencytoseekitslevel.Thiswasdoneinaonce

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andforallfashion.Then,heinstitutedatariffsystemthatwashighlyprotectiveessentially restoredtheindustrialinwardlookingapproachtowardindustrializationwithhightariffs.Thus whileheabolishedtheexchangecontrols,herescuedtheprotectionsystemwithother measures.Essentially,thesamepoliciesofrestrictivenationalisminindustrycontinuedunder anothername. LikeRoxas,QuirinoandMagsaysay,bothDiosdadoMacapagalandMarcosweremembers oftheLiberalParty.Infact,MacapagalandMarcosweretheoutstandingyoungpoliticiansof theirpartyataboutthetimeofGarciaspresidency.ItwasMacapagalwhofirstrosetohigh officewhentheelectoratesplitthepresidentialticket,votingGarciaaspresidentand Macapagal,fromtheoppositionticket,waselectedvicepresident.ThestatureofMacapagal andMarcosgrewasGarciaspoliciesbecameunsustainableandthereforeunpopular.To challengePresidentMacapagal,MarcosswitchedtotheNacionalistaPartytobecome presidentialstandardbearer. WhenMarcosbecametriumphantoverMacapagalin1965,theelectoralbattlewasmainly foughtonissuestoimprovethegovernanceandtobuilduptheeconomy.Theelectionwasa battlebetweentwoyoungpoliticianswhowereformerpoliticalallieswithinthesamepartybut nonethelessleadershiprivalsfromearlytimesinthesameparty.Inthepoliticsofthisperiod, thestrengthofthecandidatesrestedmoreontheirvotegettingpowerasaresultoftheir personalappealandlesssoonhowtheystoodonspecificissues.Therewasadelineationof partyaffiliationsofthemajorcandidatesbuttherewashardlyanysubstantialdifferenceintheir standonthemajorissuesofdevelopment.Someofthedetailsofpoliciescoulddifferfor instanceontheissueofexchangeandimportcontrolsandtheirsubsequentimpacton industrializationbutessentiallythecandidatesremainedbehindthedictaoftheeconomic restrictionsoftheConstitution. Philippinepresidentialpoliticsastheseexamplesshowweremainlybasedonthe strengthofthepersonalitiesofthecontendingcandidatesandnotonthepowerofissues.Itwas theirpersonalorindividualcharismasthatshonemost,asinthecaseofMagsaysayandMarcos. Ingeneral,therhetoricoftheelectionsinvolvedemphasisontheperformanceoftheincumbent andthechallengeoftheoppositiontouprootcorruptionandimproveperformance. Duringthe20yearsbeforeMarcos,thecountrysdevelopmentwasgenerallygoodon paper.Butwithahighpopulationgrowth,thegrowthofoutputperheadwasmuchlower. Duringtheseyearsofdependenceonindustrialgrowthwithhighlevelsofprotection,the countrywasfacedwithperiodicbalanceofpaymentscrises.Suchcrisesbroughtinboutsof boomstotheclassofindustrialistsandbusinessmenwhowerethelargestbeneficiariesofhigh protection.Butbecauseoftheirinnatelackofcompetitivestrength,theseverysameindustries wouldendangerthewellbeingofallthoseemployedbythemthelargerpopulationandthe nationfortheywouldeventuallysufferthefatesofuncompetitiveindustries.Theywere dependentonsubsidiesandprotectionandtheirlowcapitalizationmadethemrelymainlyon highdebttoruntheiroperations. Thus,thepotentialforeconomicbustswasintheirfuture.Moreover,theyhelpedto weakenthegovernment:theirdemandforsubsidiesandindirectbudgetarysupporteventually helpedtocreaterisingfiscaldeficits.Thosefiscaldeficitshelpedtoweakenthevalueofthepeso andraisedinflation.Theprotectedimportsubstitutingindustriesconsumedquiterapidlythe

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foreignexchangeearningsthatwereearnedbythetraditionalexportsectorfromthe agriculturalandnaturalresourcessectors.Whileinitiallyextractinghighprofitsfromtheir operations,theyusedspecialaccesstoforeignexchangeresourcestobuytheirimportsof machineryandrawmaterialstosustaintheiroperations. Tensionsovertheserestrictivepracticesmeantseriousdebatesovereconomicpolicy.The exportsector,basedonagricultureandnaturalresources,clamoredformoreopenuseoftheir earnings,butthegovernmentundertookatradeandpaymentssystemthatrequiredthesaleof thesedollarstothecentralbankattheofficialrate.Thescarcedollarswererationedtosupport thedomesticimportsubstitutingindustriesfortheirimportneeds.Thus,thecountrysforeign exchangeresourcesandcreditresourcesgraduallydissipated.Butnopoliticalfigurewoulddare gototheextentofdealingwiththeeconomicrestrictionsonforeigncapitalaswritteninthe Constitution.Itmeantthekissofpoliticaldeath.(AsprovidedintheLaurelLangleyAgreement, allthoseeconomicrestrictionswouldbefullyeffectiveonallforeigners.) DuringtheMarcospresidency,theLaurelLangleyAgreementwouldceasetofunctionby 1973.ThissignaledtheendoftheperiodofspecialrelationswiththeUnitedStates.Thelast vestigeofthosespecialrelationswasconnectedwiththemilitarybases.Thebasesleasewasto beunderthecontroloftheUSgovernmentfor99yearsfrompoliticalindependencein1946. ThedecisivedefeatoftheFrenchbytheVietnameseinDienbienphuin1954openedthewayfor AmericandirectentryintotheVietnameseconflict.Thebasesthenbecameakeyelementofthe geopoliticalstrategyofcontainingtheadvanceofcommunisminAsia.Fromaneconomic perspective,themilitarybaseswereamajorsourceofsupporttothePhilippineeconomy.They providedenormousexpendituresofdollarsthatwerefedintothelocaleconomy. Marcossawthemilitarybasesasaverysensitiveissueinvolvingdiplomacyandshrewd tactics.AsaUSally,hesupportedtheVietnamwar.ButMarcosmadesureoftwothings:that thePhilippinebaseswerenottobeusedasastagingplaceforthebombingofVietnamandthat hewouldsendinsupportofthewar,notamilitarycontingent,butanengineeringbattalionto beengagedincivicactionwork.Marcosdrewontheleverageofhissupportofthewartoput intoeffectareductionofthemilitarybasesagreementsothatthe99yearperiodofleaseofthe basescouldbereduced.HeextractedthisreductionofthebasesagreementwithUSPresident LyndonJohnsonin1966byshorteningtheremainingperiodtoonly25moreyearsafterwhich timemutualrenegotiationcouldbeundertakenonthefateofthebases.Thisgavethecountry theoptiontorethinkthebasesagreementby1992.7 Thehistoryofpresidentialpoliticswashighlyrelatedtothepoliticsoftherulingoligarchy. Theeconomicrestrictionsplacedagainstforeigncapitalinkeyareasoftheeconomymadethese powerfulgroupsevenmoreentrenchedinamonopolypositionoverthecountrysresources. Thisassuredthemofaprominentvoiceinthedecisionsconcerningpolitical,economic,and

Marcosssuccessinreducingthemilitarybasesleasemadeitpossibleforthegovernmenttoterminatethemilitary basesagreementby1992ratherthanin2045.Withouthavingundertakenthismajorforeignpolicyachievement, therewasnoterminationoftheleaseagreementpossible.Thus,theactual99yearperiodofleaseofmilitarybasesin thePhilippineslastedonlyfor45years,cuttingbyhalfmilitarybasespresenceoftheUnitedStates.Otherwise,the ClarkandSubicmilitarybaseswouldstillbeunderAmericancontroltodayratherthantheeconomichubsforexport growthhubsthattheyhavebecome.

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otherwiderangingissuesaffectingthenationsfuture.Overtime,therefore,domesticinterests strengthenedtheirgriponthecountrysmajorpublicutilities,onthepotentialsforfurther naturalresourcesexploitation,andontheownershipofland.Theresultofthiswas underinvestmentinpublicutilities,onnaturalresourcesexploitation,andthelackofland improvementsthatwereneededtomakeagriculturehigheryielding. Moreover,landvalueswouldrisemainlywheretherewasdevelopmentandurbanization. Aroundthecountry,enormouspovertywouldcontinuetoprevailbecausethosewhoownedthe landdidnotinvestonittomakeitproductive.Theypreferredtoliveinthecityandtousethe landaspropertythatwouldintimeriseinvalue.Thosewhoinvestedinagriculturesuchasin thesugarareasofthecountrywallowedinprotectedwealthandincomeastheylivedoffthe specialtraderelationswiththeUSthatassuredthemofhighvaluesfortheirproduct.This sectoroftheeconomyalsohadgreatpoliticalinfluence.Theywerethekingmakersinthe politicallifeofthenation.Theydidnotfeelthepressuretoimprovetheirinvestmentsaswas thecaseincountriesthathadtofightfortheirshareofthesugarmarketfromthevolatileworld sugarmarket.Aslongastheycontrolledthepoliticalleversofpower,theywereassuredforthe future. Likeleadersofhisowngeneration,Marcoshimselffeltcompelledbythenationalistic impulsesthattheseissuesprovoked.Therewasalsopoliticalexpediencyonthepartofthe risingpoliticiantousethemeansavailabletorisetoleadershipofthenation.Marcoswonthe presidencybyseekingpoliticalallianceswithpowerfulpoliticalblocs.In1965,hisvice presidentialmatewasFernandoLopez,whowaspartoftheeconomicallypowerfulsugarbloc. TheLopezgrouphadinadditionsizableeconomicpowerandpoliticalinfluencethrougha nationalnewspaper,amediaempirethatcontrolledthetelevisionandradioairwaves. Bythetimethathewasleaderforalmosteightyears,Marcoshadexperiencedthefull rangeoftheexerciseofpresidentialinfluenceinthenationspolitics.Hesawhowdifficultitwas togetreformsdonebecauseofthemanystumblingblocksalongtheway.Hesawhowthose economicpowerwasutilizedinparttoamassfurthereconomicpowerthroughthepolitical controlofthoseintheexecutives.Hebegantoanalyzethepicturefromhisstandpoint.Hesaw thedefectsofPhilippinepoliticaldemocracyasonecontrolledbyvariousalliancesofoligarchic interests.Herealizedthatthedemandsfortheirinitialpoliticalsupportmeantthatthepayup periodwouldmeanentrenchingfurthertheseinterests.Hethereforebegantodevelopan alternativeplan. Usingabaseballfigureofspeech,thefirsteightyearsofthehispresidencyinvolvedefforts toseizeonareformagendathatcouldnotreachhomebaseandscore.Itwasoftencalledout bythesecondbaseoramendedbeyondrecognitionbythethirdbase.Thosewhoheldthe leversofpowerfilteredthereformprocesstotheirownagenda,meaningthatonlyminor reformscouldmoveforward.Marcoswasevidentlyfrustratedbythis,forhecouldnotadvance onanyfrontwithoutresistancetosubstantialreformsthathewanted.Hewaseffectively blockedfromfurtherprogressbytheverynatureofthepoliticalprocessandthecorruptwaysof thesystem. InSeptember1971,inhisseventhyearofthetwotermpresidency,heexpressedhis frustrationsatinstitutingreformsinthePhilippinepoliticalsystembypublishingTodays Revolution:Democracy.Now,anactivelyengagedpresidentwasoneofthebusiestpersonsin thegovernment.Writingabookwashardlytheendeavorexpectedfromsuchapresidentbut

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indeedhedid.Thepoliticaltraditionwasthatthepresidentwroteabookafterhisterminoffice. Withtimeandleisureathiscommand,hewroteamemoir.Inthatliteraryform,themain weaponofexpositionwasnotthedesireforreformbutthatofrecallofeventsandtherolethat heplayedinthem.Thiswastherewardofoldageandexperienceinhighofficeinwhich expositionwasmainlytheelaborationofthegoldenfruitofachievementandcontributionto thenation. Inthisbook,hedidnotwriteamemoirbutabookthatanalyzedthefaultydemocracythat wasinplaceinthecountry.Theinfluencesinthisbookweremany.Heborrowedfromthe languageofthestudentdemonstratorswhoweredenouncingthegovernmentandthesystem. Hewasanavidreaderofpoliticaltheoryjudgingfromthemanyreferencesinthebook.During hispresidency,hecouldengagethebestmindsinthecountryandseektheirviews.Healso harnessedwriters,mainlyjournalists,inwhomhereliedforpolishingtheproseofhisofficial speeches.Hewasalsoanavidlearnerfromnewwritingsaswellasthepoliticalclassics.8But essentially,hewashimself,lookingforwaystoexplaintheproblemsofhispresidency. MarcosbewailedtheproblemsofthePhilippinepoliticalsystem:corrupt,unwieldyto changeandcontrolledbyaninvisiblerulingclass.Inseveralquotesbelow,9hewouldsummarize thestumblingblockstoeconomicandsocialreformthatlayaheadofademocracythatwas controlledbyanoligarchicfew. Ours tends to be an oligarchic society. This simply means that the economic gap between the rich and the poor provides the wealthy few the opportunity of exercising undue influence on the political authority. But it does not mean that all the rich and all the privilegesconstituteanoligarchicclass,formanyofthemingovernment,inbusinessand even the clergy are socially conscious enough to acknowledge the necessity of revolutionizingthesocialorder.WhenIspeak,therefore,oftheoligarchy,Irefertothefew whowouldpromotetheirselfishintereststhroughindirectorirresponsibleexerciseofpublic and private power. [GPS emphasis]. The concentration of a communitys wealth in the handsofasmallminoritymustresultinanoligarchicsociety.Whenthissocietyexistsside by side with a democratic political authority, as in the case of the Philippines, the consequenceisanoligarchicorder,oranoligarchicdemocracy.Inourcase,everycitizen enjoys political rights, which, however, are not effectively exercised because of economic and social inequalities. Now we realize that this condition can also promote a political culturewhichequatesfreedomwithselfaggrandizement,andthepoliticsofparticipation,

Earlyinhispresidency,hehadengagedRafaelSalaswhohelpedtoharnessforhimtheintellectualresourcesofthe University of the Philippines. Onofre D. Corpuz, well known political scientist and economic historian served at the beginningofthepresidencyintheEducationdepartment.Thepragmatictechnocraticcorpstobebroughtinwould include Alejandro Melchor from the military and later on Cesar Virata and others. Two exceptional writers who helpedhimfromthebeginningwereBlasOpleandAdrianCristobal,whoformedthetandemofwriterswhoassisted inthepolishingofpresidentialprose.Thesetwowereinsynchwiththepulseofthelaborgroupswithwhomthey workedmorecloselyandtheyunderstoodwellthelanguageofthepoliticalLeft.FranciscoTatadwhowouldbecome presssecretarywouldbemoreengagedinthepracticaldealingswiththeworkingpress.
9 8

Thedirectpagesofthequotesaretakenfromtherevisedversiontheoriginalbook,whichisintheeditedversionby IleanaMaramag.SeeMarcos(1985),TheDemocraticRevolution,editedwithanIntroductionbyIleanaMaramag, 1985(Thisisareissueofabookpublishedoriginallyin1971and1973),OfficeofMediaAffairs,Republicofthe Philippines.

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so essential in a democracy, with the pursuit of this privilege. . Corruption at the top is matched by social corruption below. The oligarchic elite manipulate the political authority andintimidatethepoliticalleaders;themasses,inturn,perpetuateapopulist,personalist, andindividualistkindofpolitics.[pp.4849.]

III.ECONOMICACCOMPLISHMENTS
TheeconomicaccomplishmentsofMarcosduringhispresidencyandmartialrulewere phenomenaluntiltheeconomiccrisisof1983broughttheengineofaccomplishmentstoahalt. Thedebacletowardstheendhadmanycausesandcannotsimplybecharacterizedwith simplisticconclusions.10Later,thetopicaboutthefallandcollapseisdiscussed,fortherewere alsogoodreasonswhyhelostthesupportofthepeopletowardtheclosingyearsofhisrule. Marcossachievementswerestellaronmanyfronts.Hadheremainedsimplyatwoterm president,hewouldhavecomeoutasoneofthemosteffectiveleadersofthecountryinthe postwarera.Aspresident,hewasabletoexecuteatahigherlevelofachievementinuplifting thenationseconomicconditiondespitethevarioussocialandpoliticalchallenges,including thatoftheNPArebellion,andlater,abrewingrebellionintheSouth. Theeconomiclegacyisorganizedalongfourmajorlines:governmentreform;infrastructure investment;socialandpeopleorientedreform;andfinally,economicandindustrialreform.At times,somedistinctionismadeabouttheperiodinwhichthesereformswereundertaken. Manyofthemweremadeduringthetwopresidentialterms.Butasubstantialamountofthem becamepossibleduringmartiallawwhenallthepowersofgovernmentinrelationtothe executionandpassageoflawsfellinhishands.

A.

GOVERNMENTREFORM

Fromthestart,Marcospaidgreatattentiontothereformofthegovernmentmachinery.Todo this,hesurroundedhimselfwithcompetentofficialswhowouldhelphimexecutehisprogram. Amongthefirststepsthathetookwastoappointthebestavailableandplacetheminchargeof majorduties.Heidentifiedthedepartmentsandagenciesofthegovernmentthatdealtwith economicmattersandthosethatimplementedmajorgovernmentprogramstothesegroupsof officials.Byandlargeandwithfewexceptions,theleadersofvariousdepartmentsofthe governmentwerechosenfromwellqualifiedprofessionalsandtestedadministrators.This coveredtheareasoffinance,budget,planning,financialinstitutions,andtheprincipal departmentsofthegovernmentthatimplementedmajorgovernmentprogramseducation, health,publicworks,infrastructure,andagriculture.

10

Invariably,thechargesthatwereoftenmentionedagainstMarcoswerecronycapitalism,corruption,greed,and excessivegovernmentwasteresultingfromthese.TheperiodofMarcossleadershiphoweverhadtodealwithmany majorandturbulentchallengesthateffectivelyreducedmanyothegovernmentsoptionstoperformwellunderthe circumstances.Thesewerethechallengesarisingfromtheseriousenergyshocksofthe1970s,theunravelingofthe worldexchangeratesystems,theinterestrateshocksthataffectedtheworldscapitalmarketsthathadandserious complicationstotheperiodoggovernance.Manyoftheeconomicpoliciesthatresultedhadbeeninpartresponses tothemajorproblemsthataroseduringthisperiod.

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Atthebeginning,hemovedcautiously.Heappointedolderandtestedpublicservantsand politiciansinkeyareasofthegovernment.Buthemadesurethathebackstoppedthesesenior publicservantswithdeputieswhowereyoungerandwellqualified.Thismeantthathis immediateoutreachwastogetyoungtalentsfromtheprivatesector,fromtheuniversities, fromtheactivemilitary,andfromwithinthegovernmentwhocouldgivehimknowledgeable support. Whenitwastimetomoveon,hepromotedhisyoungerrecruitswhowereoftenexpertsin theirfieldofassignmentoratleasthighlyqualifiedbyexperienceandtrainingtoheadthe departmentsandbureausofthenationalgovernmentandthesensitiveautonomousagencies. Unlikehispredecessorwhokeptchangingthelineupofhisdepartmentswithmanypoliticiansto keepthematbay,Marcosrelishedinrelyingonhisofficialstoremainintheirpostsaslongashe neededthem.Hegavethemleadershipthroughclearguidelinesduringcabinetmeetingsand consultationswiththeminthepresidentialoffice.Buthealsogavethemleewaytoexercise theirjudgmentsandsupportedthemwhentheymadedifficultdecisions. Thispracticeledtoasecondarywaveofentryofwellqualifiedpeoplewithinthe governmentmachinery.Sincehegavehisfrontlineofficialsconfidenceandsupportintheir work,heaskedthemtorecommendqualifiedcandidateswhennewvacanciesarose.Often,the gemsinofficialdomcouldbefoundfromwithinthecadresofthegovernment.Theywerepicked fromtheircurrentpostsandthenbroughttowardthecenterofaction(forinstance,initially withinthepresidentialstaffoffice)andthengivengreaterresponsibility.Suchofficialscouldbe identifiedbytheseniorsthroughtheworkprocessinthegovernmentandthrough demonstratedperformancewithinthebureaucracy.Frontlineofficialswhodealtwith operationalworkoftendiscoveredwhoamongtheirstaffdeliveredwellintheirwork. Inshort,thecropofqualifiedpeoplecameheavilyfromwithinthegovernment.Theresult ofthispracticeoveraprolongedperiodledtoariseofskillsandimprovedcoordinationof peopleatthetechnicallevelandatthehighofficiallevel.Intime,thiswouldleadtotheincrease ofgovernmentshorttermtrainingprogramswhereparticularskillsofgoverningand bureaucraticpracticeswouldberefinedandthecoordinationoftheexecutivesofthe governmentcouldbefosteredattheworkinglevel.Theneedtodevelopastrongcadreof governmentexecutivesledtothedevelopmentoftrainingprogramsforparticularskills.One suchoutletwasthetrainingprogramindevelopmenteconomicsinitiatedattheUniversityof thePhilippinesSchoolofEconomics.11Formanytrainingsessions,upperleveleconomics personnelfromcriticalgovernmentagencieswereputtogetherunderintenseprogramsof learningdevelopmentprojectmanagement. Theideathatcontinuousaswellassimultaneoustrainingofcohortsofadministrators withinacommonenvironmentwasbehindproposalsthatthegovernmentdevelopsystematic trainingforgovernmentexecutivesandmiddleservants.Infact,thenewlyestablishedU.P. InstituteofPublicAdministrationinthelate1950shadespousedsuchaneed.Duringthe Marcospresidency,theneedforsuchatrainingprogrammanifesteditselfasnewprogramsand

SeeG.P.Sicat(2001),ontheeconomistandthegovernment,amongotherthings,describesthetrainingprogram indevelopmenteconomicsattheUPSchoolofEconomics,amongothers.
11

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commonapproachestoproblemsbecamedesiderataofsuccessfulgovernmentprograms.In thisspirit,theDevelopmentAcademyofthePhilippines(DAP)wasestablishedwiththefinancial backingoftheDevelopmentBankofthePhilippinesandthegovernmentfinancialinstitutions andbythenewlycreatedNEDA(NationalEconomicandDevelopmentAuthority).Acoreof trainingprogramswasstructuredsothatspecificproblemscouldbeunderstoodunderwhichan ongoingsetofpublicseniorofficialsunderwentsimultaneousinstructionsandproblemsolving discussions.Eventually,differentgroupsofgovernmentseniorofficialsweretrained periodically,creatingacorpsofgovernmentofficialsthathadundergonesimilartrainingon commonissues. Onemajorimpactofsuchprogramswasthatmanygovernmentofficialsgottoknoweach otherundersimilarproblemsolvingsituations.Someofthemcamefromdifferentofficesand thetrainingprogramsprovidedacampusforlearningnewapproachestosimilarissues.There wasanotherimportantsideeffectofsuchalearningprocess.Asinuniversityclassrooms,the trainingsessionswereoftenasourceofcreatinggreaterparticipationfromvariouscivilservants tooffertheirpointsofviewinunderstandingspecificissuesthatwerebroughtintodiscussion. Perhapsjustasimportant,suchsessionsalsoshowcasedthetalentsandpossibilitiesofdifferent publicofficialssothatthemostarticulateandpromisingamongthembecamemorewidely knowntoalargeraudience.Intheend,itwasitselfanadvancedrecruitingprocessfortalent withinthegovernment. ThedevelopmentofaCareerExecutiveService(CES)wasthenaturaloutcomeofthis effort,althoughtherewerequiteanumberoftrainingprogramsatthelocallevelthatwerealso encouragedtohelptrainseniorandjuniorpublicservants.TheCESwasdesignedtotrain governmentexecutiveswhocouldbetransferredtoanyhighpostinthegovernmentmachinery withouttheneedforalongretoolingprocess.BythetimeofthefallofMarcosfrompower, mostofthedeputyandassistantsecretarylevelsaswellasbureauheadsofthegovernment werealreadypartoftheCEScadre. Ofcourse,Marcosalsoreservedforhimselfmajorpoststhatheconsideredpoliticalin nature.Heappointedhisclosestpoliticalalliesandfollowerstopoststhatperformedpolitical tasksforhim.Hekeptthisgroupessentiallywithinthosedepartmentsandorgansofthe governmentthathadmajorpoliticalobjectivessuchasinlandreform,somebureausof agriculture,localgovernment,police,anddefense.Heisolatedcertainsectorsinwhichhehad politicalobjectivesunderthecommandofhispoliticallieutenants.Itwasonlylaterduringthe martiallawyearswhensomeofthebureausanddepartmentsofgovernmentwithpolitical objectivesincreasedincoverage.12Thatcouldnotbesaidabouthimduringhistwotermsas

Inthecaseoftwomajorsectorsoftheeconomyinwhichhehadmajorpoliticalobjectives,hemadesurethatonly his trusted political operators would be directly in charge. Such was the case with the sugar industry and with the coconutindustry.Thesetwosectorsoftheeconomywouldbefilledwithcontroversialdecisionsinpartbecausehis trustedpoliticaloperatorsinthesetwosectorsweregivenmajorresponsibilityinguidingdevelopmentpoliciesand politicalpatronage..
12

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presidentandtheearlypartofmartiallawwhenmostofthemajorofficestendedtobeheldby technocraticofficialdom. Thiseffortinimprovinggovernanceandcoordinationwithinthegovernmentthroughthe appointmentofwellqualifiedpeoplewasinnosmallpartresponsibleformanyofthe achievementsofMarcosinmanyareastobedescribedbelow.Becausetheofficialsstayedin theirjobswithsomeamountofcontinuity,programscouldbesustained,institutionalmemory retained,andstandardsofreviewandmonitoringcouldbemaintained.Underlesscarefulwatch orfrequentlychangingofficials,someprogramsandprojectscouldsufferfrominattentiondue tochangeinprioritiesandthereforecontinuitycouldbecompromised. MuchoftheoverhauloftheexecutiveofficehappenedafterMarcoshadimposedmartial lawwhenthepoliticalobstaclestowardreorganizationwereremoved.Hehadpreparedforthis majorpartofhisagendawhileworkingwithCongresswhenhebecamePresident.Aspecial governmentreorganizationcommissionwassetupandCongresswenttoworkonmostofthe changesthatwereneededthroughpublichearings.Afteryearsofefforts,however,theworking plansweremanybutpoliticalwillwasabsentfromCongress.Whenhedeclaredmartiallaw,he tooktheinitiativeofreorganizingtheexecutivebranchonthebasisoftheseplans.Execution wasswift. HebeganwiththecreationoftheNationalEconomicandDevelopmentAuthority(NEDA) thatmergedthePresidentialEconomicStaff(astaffthatheinheritedessentiallyfrom MacapagalastheProgramImplementationAgency)withtheNationalEconomicCouncil,the countrysnationalplanningbodythatperformedtheconsultativeagencyforeconomicpolicies withintheexecutivebranch.WiththeNEDA,anintegratedplanningmachinerywasputinplace. Themajorcommitteesoftheeconomicdepartmentsbecameanimprovedsetofcoordinated agencies.NEDAsBoardconsistedofthemajoreconomicdepartmentsofgovernment,chaired bythePresident. Moreimportantly,Marcostookanactiveroleinsteeringthemajoreconomicthrustsofthe government.HepresidedoverthisBoardperiodicallyand,byhisstronginterestinwhatmajor departmentsweredoing,hewasabletodrawattentiontocoordinatedaction.Thepursuitof governmentinvestmentsinpublicfacilitiesbecamemorefocused.Thisfurtherpavedtheway forreorganizationsattheworkinglevelsofvariousinteragencycommitteesandforthe concretediscussionofplansforthestreamliningofsomemajordepartmentsandgovernment serviceagencies. Thusverylargedepartmentswerebrokenupintonewindependentandoperatingunits. (e.g.,theDepartmentofAgricultureandNaturalResourceswasbrokenupintotheDepartment ofAgricultureandtheDepartmentofNaturalResources;thepublicworksandcommunications departmentswasbrokenupintotheDepartmentofPublicWorksandtheDepartmentof TransportationandTelecommunications.)NewdepartmentswerealsocreatedLandReform, Tourism,andEnergy. Publicagenciesandcorporationswereoverhauledandstrengthenedtoenhancetheir performance.Thepubliccorporationswerethosecriticaltotheprovisionofinfrastructure constructionorpublicservicesthatthegovernmentsoldtothegeneralpublicforafee.Old corporationsfromtheCommonwealthperiodwerereinforcedsothattheycouldperformtheir

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mandatesbetter.Inthisway,theNationalPowerCorporationand,later,theNational DevelopmentCompanywerestrengthenedtosupportpowergenerationandinvestmentsin variousdevelopmentprojects. TheManilaWaterServicesandSewerageCorporation(MWSS)andtheLocalWaterUtilities Administration(LWUA)werecorporatestructurescarvedoutofthenationalwatersystem agencyinthepublicworksdepartmenttocreatefocusontheirrespectivemandatesof providingwaterservicesintheirdistricts.Theagenciesdesignedtohelpinthestabilizationof grainandfoodpriceswerestructuredundertheNationalFoodAuthority(NFA).Certainagencies ofthepublicworksdepartmentbecomecapableofundertakingmajordevelopmentprojects. Theywerespunoffintoautonomouscorporateagencies.Inthisway,theNationalIrrigation Administration(NIA)andthePhilippinePortsAuthority(PPA)weregivencorporatepowers. Theseagenciesweremajorprovidersofservicesinagriculture,waterservices,andin transportation. ThePhilippineNationalOilCorporationwasestablishedasaresponsetotheenergyshock ofthe1970s.Thiscorporationgavethegovernmentamuchneededwindowintotheenergy sectoratatimeofgreatuncertainty.Eventually,thegovernmentsinterventionwithinthe energysectorledtothecreationofaDepartmentofEnergythatgavethegovernmentasingular responsetoproblemsrelatedtowardtheplanningandresponsetothedemandsoftheenergy crisisofthattime. Thesewereimportantexamplesoftheextensiveoverhauloftheexecutivebranchthat Marcosundertook.Togetherwiththereorganizationacrossthegovernmentcametheeffortsto puttheseagenciesundermorecapablehandstoleadthem.Ingeneral,Marcosappointedwell chosenprofessionalstoleadtheagenciesthatwerealsorestructured.Forthemostimportant jobswithintheexecutivebranch,hedidnotrequireapoliticaltest.Hewasinterestedin whetherthemenandwomenthatheputwerecapableintheperformanceoftheirtasks.He gotgoodresultsintermsofjobperformanceinthemajorprogramsintheeconomyandinthe socialsectorasaresult.

B.

INFRASTRUCTURE

Ofallthepresidentsofthecountry(tothistime),Marcosbuiltthemostextensive infrastructure.Theprojectswereinterrelatedandcomplementedsectordevelopment objectives.Heputinthemajortrunklineroadnetworkswithinthecountry,linkingthemfrom LuzontotheVisayasandthentoMindanao.Thesenetworkswereessentialinbringingdownthe costoftransportation,therebyraisingtheprospectsofcommercethroughouttheaffected regionsofthecountry.Inhistwotermsinoffice,heconcentratedonanetworkofroads,simply designedandinexpensiveschoolbuildings,andirrigationsystemsthatalsobuiltfarmtomarket roads. InLuzon,majorirrigationsystemsandhydroelectricpowerplantswerebuilt.Thesewere theUpperPampangaRiverProject,theAngatmultipurposepowerandirrigationproject,and theMagatRiverProject.TheseprojectsfirmeduptheroleofCentralLuzonandtheCagayan ValleyintheGreenRevolutionofthe1970s.Inaddition,communityirrigationsystemswere builtinmanyotherprovinceswhereagriculturalactivitiesthrived,especiallyacrossthenation andinthebigislands.ThisincreasedagriculturalactivitiesinthebigVisayanislandsandin Mindanaoandhelpedcoverawideareaofthericeandfoodproducingregion.Theresultof

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theseinvestmentscouldbeseenintheriseofagriculturaloutput,especiallytheincreasetoward greatersufficiencyinpalayproduction.Irrigationhelpedtoraisefarmerproductivity. Heimprovedtheoldernetworksofnationalroadsthatconnectedprovincesand rehabilitatedthemwithdurableconstruction.Alotoftheseprojectseasedthetransport bottleneckswithinprovincesandacrossprovincesandimprovedintraislandtravelswithinthe bigislands.Helinkedthesewithairportconstructions.IfMarcosweretobejudgedonlyonhis infrastructureconstructionprogramduringhisfirsttwotermsalone,hewouldhavebeen consideredanoutstandingpresident.Butactually,heundertookalotmoreespeciallyduringthe martiallawperiod.Thebuildingprogramfortheimprovementofpublicschoolbuildings especiallyattheelementarylevelwasoneoftheearliestprogramsofMarcos.Infact,hismotto duringhisfirsttermwasrice,roads,andschoolbuildings.[thethreeRsforrice,roadsand rithmetic(thatis,schoolbuildingswherearithmeticislearned). Astudyofinfrastructureconstructionbyvariouspresidents13showsthatMarcoswasthe presidentwhomadethelargestinfrastructureinvestment.Thisisnotbecausehewasthe longestservingleaderofthecountryalone.Onaperyearbasisheledallthepresidents.Only FidelRamoshadbestedhiminroadbuildingforaperiodofoneyear.Butoverallintermsof quantityofinfrastructureinvestments,theirimpactontherestoftheeconomyandonthe breadthanddepthoftheinvestments,Marcoswasbyfarthemostprolific,undertakenonaper yearbasisandcumulativelyovertheyearsthatheheldoffice. ThegovernmentsshareofpublicinvestmenttoGDProseto6%fromthemeageramount of2%ofGDPbeforehetookoffice.Thiswasnomeanfeat.Thelevelofeconomicactivityrose overallandinthecaseofthetransportinvestmentstheyincreasedtheefficiencyofthe economy.Agreatpartoftheseinvestmentsinroadswasinthecountrysidesothatagricultural outputanddomesticcommerceincreased. Thevarietyofpublicinvestmentsundertakenwasmadepossiblebyvariousmethodsof mobilizingfinancingforthem.Althoughsomeofthemajorroadprojectsandotherpublicworks wereplacedunderthedirectprogramsofsomemajordepartmentsofthegovernment,alarge partwereundertakenundertheauspicesofmanyrestructuredgovernmententitiesthattook onacorporateform.Soingreatmeasure,thereorganizationofthepublicagencieshelpedin strengtheningthecapacitytoundertaketheprojects. Majorprojectsdealingwithexpansionoftheirrigation,waterservices,andpowerprojects werepursuedbyentitiesunderthecorporatestructure.Theyhadmorefiscalautonomyandthe programsweresubjecttoasystemofaccountability.Thecorporateframeworkforthese agenciesenabledthemtoincurdebtfinancingfrommajormultilateralandbilateral developmentagenciesthatledtotheconstructionofmajordevelopmentprojects.

13

Llanto(2002)studiedinfrastructureinvestmentsoveratwentyfiveyearperiodfromthe1960s.Thefirstdraftof thisgavemajorstatisticsoninfrastructureinvestmentsaccomplishmentsofrecentpresidenciesprecedingand succeedingMarcos.TheachievementslinkedtoMarcoswerethemostrobustandsignificantonaperyearbasisand overtime.SeeSicat(2003),whichelaboratedfurtherontheLlantostudy.

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Acombinationofdifferentapproachesenabledimplementationofpublicinvestments.The publiccorporationsweregivenspecificmandatestoundertakeanexpansionoftheirservices whichcouldonlybeachievedbyraisingtheirinvestmentsinnewfacilities.Thusirrigation systemswerebuiltundertheNationalIrrigationAdministration(NIA).Theexpansionof waterworkswasmadebytheinvestmentsmadebyMetropolitanWaterworksandSewerage System(MWSS)andtheLocalWaterUtilitiesAdministration(LWUA).Andpowergenerating machinerybytheNationalPowerCorporation(NPC). RoadsandportworkswerefortheaccountoftheDepartmentofPublicWorksandlater Highwayswiththegovernmentassumingfullaccountingforthem.Furtherexpansionofthese programsforinvestmentswasmadepossiblebyaccesstoforeigndevelopmentassistance, althoughthatwasdonewiththehelpofstatefundingofthesame.Thegovernmenthadtoraise budgetaryresourcesthroughtaxationtofundthecounterpartfundingthatthegovernment contributed.Theimprovementofthepubliccofferswasessentialandfiscalreformsmadeit possibletoraisetaxresourcesofthegovernmentduringthisperiod.(Morediscussiononthisis madeinthediscussionofmacroeconomicreform;seebelow.)

C.

SOCIALANDPEOPLEORIENTEDREFORM

Countrysidedevelopmenteffortsweredesignedtoraiseagriculturalproductionthrougha numberofinterrelatedmeasures.Incomegrowthandproductivityatthefarmandhousehold wasagooddoseofadvancingthesocialagenda.Investmentstoimproveschoolbuildingsinthe publicschoolsystemwereanimportantcomponentoftheprogramstoraiseeducational opportunitiesintheruralareas.OneoftheearlyprogramsofMarcoswastosimplifythedesign ofschoolbuildingsandtobreakupproductionoftheircomponentstoenabletheirlargescale production.Thismadepossiblethereductioninthebuildingofthebacklogsthathad accumulatedintheschoolsystem. Inagriculture,theMasagana99programwasamassiveprogramforriceandcorn productionthatraisedproductivitylinkedwiththenewhighyieldingricevarietiespropagated duringtheseyears.Thiswasaconcertedprogramthatinvolvedtheimprovementoftheroad networks,irrigationsystemexpansionsatthecommunitylevel,availableagriculturalcreditfor fertilizersandforplantingthatwereallgearedtowardraisingriceandcornproduction. Agriculturalextensionworkwasintensifiedatthefarmlevelfromthegovernmentside. Agriculturalcreditwasexpandedandmademoreeasilyavailablefromthegovernmentfinancial institutions(notablythePhilippineNationalBank).Thesupportoftheruralbankingsystemto funnelruralcreditwasalsointensified. Theresultoftheseeffortshelpedtoreversetherelativedeclineofricefarmingoutputthat wasfeltduringpreviouspresidencies.Neverinthehistoryofthecountrywasitnearesttoward foodselfsufficiencythanduringthisperiod.Countrysidedevelopmentwashelpedbythepublic investmentsthatdirectlybenefitedagriculture,notablyirrigationinvestments,farmtomarket roads,andmostofall,effortstoprovidedagriculturalextensionwork.Duringthisperiod,there remainedcontinuouschallengestotheagriculturalactivitiespromotedbygovernment.Forthe weatherdidnotcooperatefullyduringsomeyearsandcropdiseasesalsopresentednew horticulturalchallenges.Butingeneral,riceandcornproductionrosetothepointthatthere wasnoneedtoimportgrainduringsomeyears.Thiscompareswiththecurrentproblemswhen

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thericeandcornsectorhasbecomedeficientinoutputnecessitatinglargeimportationsof grain. Marcosfailedtoenactmeaningfullandreformlegislationduringhisearlytermsas presidentbecauseCongressdidnotcooperate.Butundermartiallaw,landreformwasthefirst majormeasurethatheundertook.Thelandreformlawthatheadoptedwasthemostfar reachinguptothattimeinthecountry.Itwasabreakfromthelandlordorientedlandreform laws.Itprovidedalandtransferschemethatwasrelativelyspeedycomparedtooldreform measures.Heconfinedthecoverageofthelandreformlawtothericeandcornsector, historicallythemostseriousaspectoftheagrarianreformissue.Theprogramcalledforland transferthroughthedeclarationofspecificlargelandedestatesintolandreformareas.The upperlimittolandownershipinthesectorwas7hectares.Thevaluationofthelandassetwas linkedtotheproductivityofland,afeaturecopiedinpartfromthevaluationmethodsusedin Taiwanslandreformprogram.Thelandreformwasspecificandprospectiveand,forthese reasons,wasfeasibletoaccomplish. 14 Inaddition,underMarcos,theLandBank,aninstitutioncreatedbeforehim,wasmadeto functioneffectively.Itwasrecapitalizedanditbecamenotonlythemajorinstitutionofthe governmenttofacilitatethelandtransferbutalsotoprovidecreditanddepositfunctions, initiallytohelptheagriculturalsectorbuteventuallytoundertakeuniversalbankingfunctions. RuralelectrificationasamajorprogramofgovernmentbeganwithMarcos.TheNational ElectrificationAdministrationwascreatedandthisinstitutionbecamethevehicleforpromoting theruralelectrificationofthecountry.Thisitundertookthroughtheencouragementof electrificationcooperativesinlocalcommunitieswhichpurchasedthepowerandinturn distributedittothemembers.Thesystemwasorganizedunderaruralfranchiseareaforthe electrificationcooperative.Theprogramwassupportedbyaccesstoforeigndevelopmentaid forinvestmentstobemadeinthedistributionnetworkstobeusedbytheruralelectric cooperatives.Throughavigorousprogramofpromotingthismodel,thewholecountrybeganto becoveredbyavastnetworkofruralelectrificationservices. Theruralelectrificationprogramwasimportantinhelpingtobringelectricenergytoa varietyofruralindustries.Thishadaneffectinraisingproductivityatthecommunitylevel.It wasdeemedimportantasacomplementtothefamilyplanningprogram. Marcoswasthefirstpresidenttorecognizefamilyplanningasanationalpolicytohelp reducethehighpopulationgrowthrateofthecountry.Inhisfirstterminoffice,hecreatedthe PopulationCommission.Itfunctionedasaninteragencycommitteeofthegovernmentthat coordinatedprogramsonfamilyissuesinvolvingthesecretariesoftheDepartmentsof Education,ofSocialWelfare,ofHealth,andsomemembersfromtheprivatesectorappointed bythePresident.Theprivatemembersofthecommissioncamefromnongovernmental

14

ThedifferenceoftheMarcoslandreformprogramfromtheonesthatsucceededitwasthatitwasdirectedtoward specificsectorssothattheycouldbetargetedforquickerimplementation.Succeedinglandreformlegislationmade thecoveragenationwide.Asaresult,thelandreformprogrambecamemoreunwieldy.Therewereseveralland reformoptions.Anothermajordifferencewasthehigherlevelofcompensationforlandsbroughtunderlandreform. Theformulaforvaluationfavoredthelandlordssothatlandreformrecipientshadtopayhigheramortizationrates forthelandbeingtransferred.

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organizations(NGOs)activeinplannedparenthood,healthdeliveryformaternalandchildcare, andeducationalsectors. TheprogramoffamilyplanningwasvigorousforalongtimeduringMarcosstenure.It consistedofsupportingfamilyplanninginformation,educationandsupportofmaternaland childcareatthecommunitylevel.Assistancetowomenseekingfamilyplanningadvicewas providedusingpublicandprivatechannels.Unfortunately,theprogramwasreversedbyhis successoringovernment.15Theresultofthisfailuretosustaintheprogramisthattodaythe countryhasahighpopulationlevel,ahighbirthrateofpopulation,alargeproblemof unemploymentstill,andaseriousproblemofpoverty. Marcospaidcarefulattentiontotheissueoflaborwelfare.Hemademajoreffortsto protectworkerswelfareduringtheturbulentperiodofthe1970sthatbroughtenergyshocks andcostpressuresthathadaseriousimpactonthedomesticeconomy.Althoughhe discouragedlaborstrikesandotherdisruptivemethodsinindustry,heusedthemechanismof tripartiteconferencestomakeadjustmentsofwages,incomes,andlaborstandards.He consolidatedallthelaborlawsintoaLaborCode.Heinitiatedthemeasuresthatpromotedthe deploymentofFilipinostoworkabroad,firstthroughtheencouragementofseamentoseek employmentintheworldsmerchantmarines,thenthroughvariousmeasuresdesignedtomake Filipinolaborworkintheplacesofhighdemand.Initiallyduringthe1970s,ahugebulgeof demandforFilipinolaborcamefromtheMiddleEastwhererisingdemandforoilmadetheoil exportingcountriesveryprosperous.TheprogramthathasledtomassiveflowsofFilipino workersabroadtoothercountriestothisdayhasbecomeamajorsourceofforeignexchange incometothenation.

D.

ECONOMICANDINDUSTRIALREFORM

SHADOWOFPARITYRIGHTS:ACONFLICTEDIDEOLOGYOFNATIONALISMANDDEVELOPMENT

Thenationalisticspiritbehindthelegalfightforindependenceledtotherestrictive provisionsofthe1935Constitution.Thepoliticalprocessbroughttheparityrightsamendment of1946sothatAmericansamongthebeneficiariesofthewardamagepaymentsandthetrade adjustmentwouldmakerehabilitationfromthewarandeconomicdevelopmentfora devastatedeconomylesspainful.Marcosspresidencycoincidedwiththehistoricaljuncture markingtheterminationofspecialrelationswiththeUnitedStatesandwithittheendofparity rightsforAmericanscitizens.Thishistoricaltimingmadeitdifficulttodealwiththeserestrictive economicprovisionsintheconstitution.Marcoshimselfwouldnottouchtheseprovisions.That wouldhavelookedoddasitwouldhavereversedhistoricalreckoningandmadeallthe nationalisticendeavorsofpreviousleadersoflittlevalue.Hewantedtopursuereformsinthe economythatcouldbeaccomplished. Therewasstrongbeliefthattheeconomycouldmoveforward,despitetherestrictive provisionsinsomesectorsoftheeconomywhichwereguidedbytheConstitutionalframework. Marcosembracedthesamenationalisticviewsofthepastitwaspossibletoachieveprogress

15

Today,theneedforadirectlyfundedgovernmentprogramonfamilyplanningisbeingdebatedhotlyinabillon reproductivehealthproposedinCongresswhichwillmakepopulationplanningamajorprogram.TheCatholicChurch isagainstitwhilethereisawidespreadsupportforit.

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iftherestofthepoliticalsystemcouldundertaketheremovalofbottlenecksthatkept developmentofthecountryfrommovingspeedilyforward. WhenMarcosshuntedasidetheoldpoliticalsystemandinstalledmartiallawdictatorship, theoptimismthathehadovercomethegridlockofthepastwouldnowbringmajorchangesin progressivedirections.Beforemartiallaw,hecouldaccomplishonlymarginalchangestochange policiesrequiringoverhaul.Butnowhecoulddoenormousgoodbypassingthemajorreforms thathecouldnotpursueeffectivelywithalessthancooperativeCongress.Whathe accomplishedintermsofeconomicprojectsinpublicinvestmentsandinsocialactionprograms duringthattimecouldnowbeexpandedinotherdirections. Inthecaseofindustrialpolicy,hewasfacedwithaconflictedideologyofpursuing industrialprogressinwhichforeigninvestmentswouldplayanimportantroleasagentsof changeinadditiontodomesticinvestmentsthatwouldhelptoexpandthewholeeconomy. Theeconomicreformsthatheundertookatthestartofthemartiallawperiodwerewide ranging.Someofthesecanonlybetreatedhereinoutlineform.Theydealtwiththereformof theindustrialandtradepolicies,theimprovementofthefiscalmanagementofthegovernment, theimprovementofthemacroeconomicfundamentalsoftheeconomy,andwithspecificsocial, economic,andfinancialreformsthatraisedthecapacityofthenationforchange.Manyofthe socialandpeopleorientedreformswerealreadymentioned.Thisbeganwiththeeconomic reorganizationofthegovernment,thenwithspecificsocialreformsdealingwithagriculturaland industrialsectorsoftheeconomy.Theycoveredindustrialandtradereforms,improvementsin investmentpromotionlaws,includingthosedealingwiththeimprovementsofspecificlawsto encourageforeigninvestmentseveninthefaceofconstitutionalrestrictions.Infact,hehad coveredtheentirerangeofmeasuresthatwerethenconsideredwantingintermsofnew changesinlaws.
INDUSTRIALANDTRADEREFORMS

Whenheassumedthepresidency,Marcoswantedtoexpandindustryandtrade.He inheritedtheenormouslyprotectionistframeworkofindustrialdevelopment.Thisframework shieldeddomesticindustriesfromcompetingimportsthroughhightariffsandothertrade barriers.Thismeantthatthestatusquoofimportsubstitutingindustrieswaswellentrenched withinthebodypolitic.Domesticindustrywassupportedbyhighlyprotectedtariffbarriers,by exchangecontrolsforlettersofcredittoimportrawmaterials,andbyhighlyfavoredaccessof industrialentrepreneurstothegovernmentsfinancialinstitutions,notablytheDevelopment BankofthePhilippinesandthePhilippineNationalBank.Allthecountrysprivatefinancial institutionsweregearedtobeinthesamemouldastheindustrialregime.16Smallcommercial banksandinsurancecompaniesthatwereundercapitalizedandwhichhadlittleknowledgeof bankingandinsurancetechnologyweregrantedlicensesbecausetheinfluentialandpolitically connectedbackedthemup.Thus,thefinancialsystemcomplementedthelimitedresourcesthat

16

Theanalysisoftheindustrialregimewasfullyarticulatedinmajorworksofthetimes,especiallybyJohnPowerand G.P.Sicat(1971)andbyG.P.Sicat(1972).Furtherworkonhowdifficultareformoflongstandingdevelopmentcould bewasfurtherpioneeredbysuchworksofPower,Bautista,andothers(1978)andbyErlindaMedallaandothers (1984).

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wereavailabletoindustry.Thefinancialsystemwasitselfsimilartotheinwardlookingindustrial framework. ThiswasthedomesticeconomicenvironmentthatMarcosinheritedfromfivepresidents whohadprecededhim.Theeconomicpolicieshadremainedbasicallyprotectionistthroughout thepostindependenceera.EvenwhenhispredecessorMacapagalhadcleanedtheexchange ratecontrolsbyremovingthem,induetime,alltheingredientsofoldpolicyofcreditpriority, tariffratehikes,andimportprioritiesreenteredtheirswayintheeconomy.Thiswasfurther helpedbythehighlyrestrictedretailindustrycontrolbynationals,where,through nationalization,noforeignparticipationwasfeasiblebeyondminorityposition.Therewas essentialcontinuityofthiseconomicpolicydespitetheeffortstomoveoutoftherestrictive cocoonofpoliciesthattheyembodied,withmanyeffortstoliberalizearoundtheexisting policies. Havinginheritedthesepolicies,Marcostriedtoreformthemeventhoughhehimself sharedthesefeelingsofinherentlyprotectionisteconomicpolicies.Hehadtheconflicted economicideologyofaleaderwhowantedtoraisehiscountryseconomicconditionstowarda highlevelofgrowthbuthewasheldbackbyexistingrestrictionsthathehimselfwasnotready tofullydiscard.Theywouldhavemarkedhimasturningbacktheessentialguidanceprovidedby thecountrysfoundingfathers.Thesewerethemarksoftheeconomicnationalismofabygone era(the1930s)carriedovertothepostindependenceyearsofthecountrysdevelopmentpath. Earlyinhissecondterm,Marcossucceededinhavinganinvestmentincentiveslawenacted toattractinvestmentsintheeconomy.Twoyearslater,acompanionbill,theexportincentives lawwasrevisedfurther.Asaresult,theBoardofInvestmentswasestablishedtooverseethe industrialdevelopmentpromotioninthecountry.Thesetwolawsconsolidatedtheinvestment promotionworkintheeconomy.However,theyessentiallyextendedthehighlyprotectionist frameworkunderwhichindustrialdevelopmentwastotakeplace.AsChairmanofthe CommitteeonIndustryandTradeintheSenate,JoseW.Diokno,theinheritorofnationalist leadershipfromClaroM.Recto,steeredboththeselandmarklawsonindustrialpromotion. Fromthatposition,heintroducedtheindustrialandinvestmentincentivesactthatwoulddefine thefuturetoneofinvestmentpromotioninthecountry.Byintroducingsomanyrestrictiveand proceduralprovisionsonthequalificationsofthosewhocouldseekinvestmentandexport incentives,amajoropportunityofattractingthemassiveflowsofinvestmentstoSoutheastAsia duringthe1970sandthe1980swaslost. TheselawsmadetheBOIapowerfulpromoterofindustryinattractingdomesticcapitalto investinindustry.Butitwashamperedinattractingforeigncapitalbecauseofmanyrestrictions inherentlyplacedinthelawwhichputpreferencetodomesticindustry.Therestrictive provisionsoftheconstitutionalframeworkweretheguidingprinciplesofthisindustrial developmentapproach,andDioknobelievedinthesetenets.Theassumptionwasthatthere wasenoughdomesticcapitalthatwouldcometotakeadvantageoftheinvestmentincentives. Foreigncapitalreciprocatedthesebeliefsbyshowingmoreinterestinothercountrieswhen consideringinvestmentprospectsintheregion.Othercountriesthatdidnothavethe constitutionalrestrictionsalsohadmuchbetterincentivesavailable.Intheend,insteadof cominginlargequantitiestothePhilippines,thesamecapitalwenttothecountrysneighbors Singapore,Thailand,Malaysia,Indonesia,and,earlier,toHongKongand,SouthKorea,and

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Taiwan).TheindustriesthattheseinvestmentattractionlawspromotedthroughtheBOIwere domesticinvestmentsdesignedinitiallytobecomeimportsubstitutingandlater,hopefully,to becomeexportpossibilities. Inturn,alotofdomesticindustriesacrosstheeconomyweresetupandmostofthem dependedondomesticcreditfinancedsubstantiallyfromgovernmentfinancialinstitutions. Theythrivedessentiallyonthebasisofcreditsupportbygovernmentfinancialinstitutionsand thehighprotectionprovidedbytariffsandothergovernmentsupport.Theindustriesbeganto demandmoreandmoretheuseofthecountrysforeignexchangeresourceswhichtheydidnot earnthroughexports.Eventheimportsubstitutionindustriesoftendidnottrulyresultinthe savingofforeignexchangebecausemanyofthemcostmoreinresourcesthanthealternative importsthattheywerereplacing.Asaresult,theindustrialsectorcontinuedtobedependent onprotectionandfailedtoraisetheircapacitytoearnsufficientlylargeamountsofexport revenues,andwhateverimportsubstitutionthatwasgettingachievedwasofdoubtful economicefficiency.17Thereasonwasthatitencourageddomesticcapitaltogetinvolvedin industryandgaveexportincentivestodomesticindustrybutexcludedthesameincentivesto foreigninvestmentsuntilmuchlaterintheprocesswhentheflawwasdiscoveredandamended. Inanycasethesecameonlyaftermartiallawhadalreadybeeninplace. Marcosdidnotdirectlytrytoremoveoramendtheconstitutionalrestrictions.Asthe presidentiinwhosewatchtheterminationoftheparityagreementcoincided,itwasoutof charactertoundertakethoseamendments.Atheart,hewassympatheticwiththereasonsthat ledtotheirbeingwrittenintheconstitution.Hethereforeavoideddealingdirectlywiththem. Hadhewantedtodoso,hecouldhavedonethisundermartiallaw.Buthewasnotreadyto turnhisbackonwhatappearedtohimtobealongstandingphilosophyofdevelopmentamong manyFilipinoleaders.Hewantedmoreforeigndirectinvestmentsinalargerareaofthe economybyimprovingthevariousregulationsandinvestmentpromotionsthatcouldbefurther refined.Hethereforeworkedtofindothermeansofattractingforeigncapitalwithouttouching theconstitutionalprovisions. Inthisregard,Marcoswascarefultogethislegalteamtoworksothathecouldabideby thespiritoftheconstitutionalprovisionsandstillpromoteforeigninvestmentsincritical sectors.Thus,hebelievedthattherewasagreatdealofleverageavailabletoimproveeconomic policybyopeningtheeconomytogreatercompetitionandbyimprovingthetermsbywhich foreigninvestmentswouldcomeinandparticipateinPhilippineprogress.Thiswaswhathis economicteamwastryingtodotoimproveallaspectsofeconomicpolicytoimprovethe termsofentryandparticipationofforeigncapitalintheeconomysworkings. Theprovisionregardingtheexploitationofnaturalresourcesagainstforeigncapital participationexceptinaminorityof40percentinequitytermsreareditsuglyconsequencein practicaltermsduringtheenergycrisisoftheearly1970s.Philippinedomesticcapitalwas

17

Referencetoefficientimportsubstitutionimpliedthattheindustriescreatedathomesavedimportsfrombeing madeatacostthatwasfarsuperiortotheimportationofthesamegoodsfromothercountries.Thecalculusof economicefficiencymeansthatimportsubstitutesoughttobeproducedathomeatcoststhatarenotmore expensivethanimportingthesamefromabroad.Ifitturnedouttobetheopposite,itwouldhavebeenusefultouse theresourcesinindustryintosomeotherindustriesthateitherearnedexportsorwereefficientdisplacersofimports.

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inadequateindealingwithlargescaleexplorationandminingwork.Marcostriedtopushfora lawthatwouldrecognizeservicecontractsof100percentforeignownedcompanieswiththe government.Thiscouldbeavehicleofescapefromthedirectrestrictionstominority participationofforeigninvestmentsintheenergysector.Otherwise,itwasimpossibleto undertakeexplorationandexploitationofdiscoveriesinthefield.Explorationforpetroleumand geothermalresourcesandtheconcomitantexploitationwouldbeimpossiblewithoutaccessto massivecapitalandtechnologicalrequirements.Aproductionsharingframeworkalongthese lineshowevercouldnotpassCongress. Whenheinstitutedmartiallaw,Marcossignedapresidentialdecreethatallowedtheuse oftheservicecontractagreementasavehicleformeetingtheconstitutionalrestrictions,but notwithouthislegalexpertssignoffonitsadherencetoconstitutionalprovisions.Becauseof thisdecree,thegovernmentsnewenergyagenciescouldundertakemajorexplorationworkin cooperationwithwellcapitalizedandspecializedforeignenergycompanies.Thisledto discoveryofpetroleumandgasinthePalawanoffshoreareaandconstitutesanopeningtoward greaterexplorationwork. However,shortlyafterthefallofMarcos,thegovernmentstoppedallworkalongthis frameworkwhenthesecontractarrangementswerechallengedonconstitutionalgrounds.It tookaSupremeCourtdecisionin2004toaccepttheconstitutionalityofservicecontractsfor explorationworkandproductionsharingcontractsinnaturalresourcesexploitation.18Aperiod ofabouttwentyyearshaselapsedsincesuchaprinciplehadbeenallowedbyhimaslegally feasibleundertheconstitution. Marcossoughttheliberalizationoftheprovisionsoftheinvestmentincentiveslawandthe exportincentiveslaw.ProceduralrestrictionsintheBOIlawwereremovedandeventually, foreigncompaniesengagedinexportswereallowedaccesstotheincentives.Undertheearly Dioknoversionsoftheexportinvestmentincentiveslaw,foreigncompaniescouldnotenjoythe fullbenefitsoftheexportincentiveslaw.Supplementarylawsundermartiallawrelaxedmanyof theserestrictionseventhoughthespiritoftherestrictionsstillcontinuedwithintheBOIlaw. Hemadeiteasierforcompaniesthatcouldexportasizableamountoftheiroutputsupto 70percenttoparticipatemorefullyindomestictrade.Thisallowedcompaniesthatwere enjoyingBOIincentivestomoveintoexportsandalsotopartakeofthebenefitsofparticipating inthedomesticeconomy.Thus,amajoropeningwasalreadymadetomovesomeofthe industriesthatenjoyedBOIprotectiontomoveintomoreefficientindustrialization. ToescapesomeofthisBOIrestrictiveoutlook,Marcosliberalizedtheconductofexport processingactivitiesinbondedwarehousessothatimportsofrawmaterialsforreexportscould beundertaken.Heestablishedexportprocessingzonessothatonehundredpercentforeign ownedcompaniescouldparticipateinPhilippineindustryviaexportmarkets.Induetime,there werefourmajorexportprocessingzonesinthecountrywhichbegantoharnessagreatamount offoreigncapitalinlaborintensiveindustries.TheBaguio,CaviteandMactanexportprocessing zonesinadditiontotheearlieroneinMarivelesbegantoattractmajorinvestorsinthe

18

SeeSicat(2007)onConstitutionalandLegalIssuesofPhilippineEconomicDevelopment.

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electronicsfield,amongothers,andmakethePhilippinesbecomeapartoftheproduction centersformanufacturinginAsia. Thecountrymademajorgainsinindustryduringthemartiallawperiod,partlycatchingup withwhatotherneighborswereaccomplishing.Hadthisdevelopmentbeensustainedwithout interruption(duringthepoliticallyturbulentyearsofthe1980s),thecountrywouldhave certainlyreachedafarbetterlevelofindustrialdevelopment.Thesuccessoftheseexport processingzonesmadethegovernmenttoextendtheconceptinpostMarcostimes.Privately ownedindustrialexportprocessingzoneswerepermittedtobesetupinmoreareasofthe country.Thesezoneswereputundertheregulatorysupervisionofasingleagency,the PhilippineExportProcessingZoneAuthority(PEZA).
TARIFFREFORMS

Thepostindependencetariffsystemwasinstitutedin1957.Priortothisperiod,thenewly independentgovernmentcontinuedwiththetariffstructurebasedmainlyontheUStariffsin operationbefore.Theimportandexchangecontrolpoliciesadoptedfrom1949supersededthe tariffprotectionsystemeventuallyuntiltheywereabolishedin1962.Fromthenon,thetariff systemevolvedintoacomplexsystemofrates,combiningvariousratesofprotectionbasedon valueofimportsandonquantitativecontrolsofissuedpermitsforimports.Thesystemalso allowedapprovedimportsoflimiteddutyfreequantitieswhenpermittedbytheTariff CommissionandlatertheBoardofInvestment. Thenominaltariffrateshadacascadingstructurehightariffsforfinalproducts,lower ratesforrawmaterialsandotherinputsinordertoprovideimportprotectionfordomestic industry.Thisstructurecausedfinalconsumerimportstobetaxedatveryhighratesbutinputs fordomesticassembly,atverylowrates,ifnottaxfree.Producersofimportsubstitutes thereforewereessentiallyhandedasilverplattermonopolyinthehomemarket.Suchapolicy howeverencouragedmanydomesticindustriesthatwerehighcost,rawmaterialdependent, andhighlyincapableofestablishingefficienthomeeconomicoperations. Thetariffsystemwasinorderforrestructuring.Butthiswasnotaneasytask.Entrenched industriesthatbenefitedenormouslyfromthesystemresistedthereformprocess.Duringthe earlymartiallawperiod,amajortariffreformwasinitiated.Theratesoftariffsformostofthe essentialitemswerereducedtoauniformrateof10percent.Theprotectionsystemforvarious industrieswasrealignedtocoverasimplesetoffiveratesoftariffs,thehighestofwhichwould notexceed100percent.Thiswasaninterimreformthatwasintendedtobethefirststep towardloweringtariffprotectionrates.Theinitialintentwastoinstituteasimplerstructureof tariffprotectionthatalsoproducedrevenues. Theprovisionaleffortatreformgotstalledbynewdevelopments.Thecountrysentryinto variousinternationalmultilateraltariffnegotiatingroundsundertheauspicesoftheUNCTAD theUNConferenceonTradeandDevelopmentledtothepostponementofthedownward tariffrevisions.Themultilateraltradenegotiationshoweverweretakingenormoustimetoget concluded.Asignificantmovetowardamoreopentraderegimewasbecominganecessityifthe countryweretoundertakemajorrestructuringoftheindustrialandtraderegime. Suchwastheagendaoftariffreformstowardthecloseofthe1970showever.Amajor programwasgearedtowardlinkingitwiththestructuraladjustmentprogramthatwasbeing

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arrangedwiththeWorldBank.Theinitialstepswerethusundertaken,butseriouspoliticaland economiccrisesoftheearly1980sintervened.Theseweretheeconomicandpoliticalcrises around19821984culminatingintheendoftheMarcosgovernmentin1986.19

BANKINGANDFINANCIALREFORMS

Thereformsinthebankingandfinancialsectortookplaceduringmartiallaw.Earlierefforts wererendereddifficultbythefactthatmanybankswereownedbyverypowerfulpoliticians andpoliticallypowerfulfamilies.Buttheproblemsofthebankingsectormirroredtheinward lookingapproachofdevelopmentintheindustrialandtraderegime.Theparticipationofforeign equitywasessentiallyfrozenatindependencewithonlyfourforeignbankshavingsomeoutlet intothecountry.Theseforeignbankswerehighlyrestrictedfromexpandingtheirdepositbase andmanyofthemservedessentiallytheforeigntradesector.Therewashenceamonopolyof bankingbyFilipinocitizens.Fromanationalisticviewpoint,thissoundedjustaboutright.Butthe problemofinefficiencyofthebankingsystemwasamirrorimageoftheinefficiencyofthe highlyprotecteddomesticindustrialsector. Thebankingsystemwasinsularincharacter.Bankschargedhighfeesfortheirservicesthat oftenlackedsufficientnetworkstomakethemprovideconvenientbanking.Andoften,someof thebankssoughtfavorsfromthegovernmentfortheretentionofhighdepositofgovernment funds.Thebanksingeneralwereundercapitalizedandthereweretoomanyofthemthatwere licensedbytheCentralBanktooperateforbusiness,ostensiblytheresultofpressureswithin thesystemtoopenupbankingtoasmanygroups.Supervisingthebanksposedgreatdifficulty fortheregulator.Somebankswereshieldedbypowerfulpoliticalpatronsfromappropriate regulatorysupervision.Whatwasmorealarmingwasthatmanybankswereoftencaughtwith loanresourcesbeingdirectedtotheirowneconomicinterestsandotherofficials,eventhough thiswasprohibitedbyregulation.20Suchabankingsystemwasfragileandpronetocrisis. Thefinancialsystemwasthereforeinseriousneedofreform.Astudygroupwasorganized bytheCentralBanktogivesuggestionsforreforms.Thestudygroupincludedlocalbanking officialsandforeignexpertswerealsomadeavailablebytheIMFandtheWorldBank.Itsmain recommendationwastoraisethecapitalizationofbanks.Nonewlicensesweretobegivenbut effortswouldbemadesothatbankswouldbeputintoasituationofgreatercompetition amongthemselves.Banksthatcouldnotmeetthenewcapitalrequirementswouldeitherhave toinvitenewgroupstotheirbusinessorwouldhavetomergewithbiggerbanks.Incentives wereputinplacetoencouragemergersandconsolidation. Also,forthefirsttime,thegovernmentthroughtheCentralBankrecognizedtheneedto allowforeignbankstoparticipateinthePhilippinebankingsystem.Itwasanaturalcoursefor expansionbecausethecountrywouldneedtohavebroaderaccesstotheworldcapitalmarkets andthedemandsofrisinginternationaltraderequiredafirmerholdonbankingpartnersacross theglobe.Thiswentbeyondjusthavingcorrespondentbankingnetworks.Therewasneedto

19

Irefertothesuccessionofeconomicproblemsthatwoulddominatetheearly1980stheinterestrateshockinthe world capital markets leading to the Third World debt problems, the Ninoy Aquino assassination of 1983 and subsequenteconomicandpoliticalcatastrophethatwouldeventuallyleadtothefallofMarcosin1986.

20

OneofthemajorproblemsofbanksupervisionoftenrelatedtotheloansmadetoDOSRI,meaningdirectors, officials,andrelatedinterests,whichhadbeenabused.Thegrowthofregulatorysupervisioninthisareamadeit

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modernizebankingandmakethemintunewiththerequirementsoftheeconomyand globalization.Moreover,thepoorpracticesthathadbeenidentifiedwithfamilyownedand closedbankingcorporationscouldbedisciplinedthroughadiversificationoftheownership interestswithinthebanks.Bringinginoutsidecapitalthereforewasamajorobjectivein improvingthemanagementofbanks.Itwouldalsopreparethebanksforgreatercompetition. Togeneratesufficientcapitalforthemodernizationofthebankingreformprogram,around tenmajorforeignbankswereselectedfromasetofcountriesthathadinterestinaPhilippine operation.ThiswasalsolikelytopromotePhilippinetradingandbankinginterestsinthose countries.Thegovernmentauthoritiesselectedgroupsofpotentialbankswhosepresenceinthe countrywasconsidereddesirablefortheirinfluenceonthefutureexpansionofbanking, internationalcommerce,andpotentialcontributionstothedevelopmentofthecountrys capitalmarket.Thiswasundertakenwiththeendinviewtowardraisingforeigndirect investmentsinthecountry.Asaresultofthiseffort,thecountrysinfluxofforeigncapital jumped,thecountrysinternationalprofilerose,andthecountrysfinancialsystemgotlinked quicklyandmoredirectlywiththeworld. Newbankingproductsbecamemoreavailablewithincreasedbankcapitalization.Accessto moremodernbankingpracticesandtechnologybecameeasierinthedomesticbankingscene andeffectivelyraisedinternalbankingcapability.Theweakbanksbecamemoreenergizedwith theentryofnewpartners.Manyofthealliancesthatformedduringthisperiodhavesurvived andothersdevelopedfurtherintodeeperbusinessrelations.Moreover,theestablishedprivate banksbecameevenstrongerwithforeignpartnersmoreeffectivelyestablished.Thedomestic bankingsystemfoundawindowforintegratingitsoperationswiththeglobalizingworld. Contrarytofearsofbankerswithinsularthinking,thedomesticbankswerenoteatenup buttheygrewinstrength,thoughindifferentform.Thisreformmadepossibleevenmore internationalizationofthebankingsystemwiththegovernmentbecomingbolderinexposing localbankingtoforeignownershipratherthanjustbecomingminorpartnersinequityof establishedPhilippinebanksonedecadelaterduringthe1990s. Oneofthemajordevelopmentsofthisperiodwastheintroductionofdepositsofforeign moneybylocalcitizens.Inshort,citizenswerenolongerforcedtosurrenderanyholdingsof foreignexchangebutcouldholdontothem.Designatedbankshadtoapplyfortheprivilegeof offeringthefacilitytoacceptdepositsofforeigncurrency.Thiswassufficientlyregulatedsothat thedepositsofforeignmoneycouldbeintegratedwiththemonetarysystemwithoutany destabilizingimpact. Thisfacilityalsomadepossiblethemobilizationofforeigncurrencydepositstohelpfund theforeigncurrencyrequirementsofdomesticenterprisesandotherfinancialinstitutions therebyalsomakingthePhilippinebankingsystemmoreintunewiththerisingneedsof domesticbusinesstolinkwiththeworld. Stillamajordevelopmentinthebankingsectorwastheestablishmentofoffshorebanking inthePhilippines.Thiswastoallowtheoperationofforeignbanksasoffshorebanksthatcould takeindepositsandgrantloansbutnotoperateasdomesticbanks.Thisenabledthecountryto havemoredirectaccesstothefluidmovementofinternationalcapitalinPhilippineshoresas foreigncapitallooksforplacestoparktheirresourcestemporarily.Thisgavethecountrysome

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roleintheflowofmoneyintheworldscapitalmarketasitbecamepartoftheinternational networkofdeposittakingbanks.
FINANCINGTHEDEVELOPMENTPLAN

OneofthemostimportantreformsintheeconomicsphereunderMarcoswastheincrease intheaccessofthecountrysdevelopmentprogramtosteadysourcesofinternationalfinance. Especiallyduringthe1970s,majorimprovementswereundertakenincreatingamoreorderly accessofthecountrythroughofficialdevelopmentassistance. ThecreationoftheConsultativeGroupundertheChairmanshipoftheWorldBankin1970 enabledamoreeffectivecoordinationofthefinancingofthecountrysdevelopmentprograms. TheConsultativeGroupenabledthegovernmenttodealwithalldonorsasasinglebodywhere thegovernmentpresenteditslongtermprogramsandtheplansfortheimmediateshortrun period.Inthisway,theinflowofresourceswasassuredatspecifictimes.Thegovernmentmade knownitsplanofactionandcorrespondingexternalsupportwasmatchedwiththatplan. Contrarytocommonbelief,accesstotheexternalprogramofsupportwasnotoneof dependenceonthem.Enormousinternaleffortshadtobeundertakentoassurethat forthcomingresourcesofthegovernmentcofferswererising.Thismeantacohesiveplanof preparingthefiscalexpendituresthatwerewithinthemeansthatthetaxprogramhad envisioned. Counterpartrevenuesofthegovernmenthadtoberaisedinorderforanyinfrastructureto befinanced.Infact,thefinancingofpublicinvestmentprogramswasajudiciouscombinationof raisingdevelopmentassistancetogetherwithcounterpartpesofundingthathadtoberaised fromtaxation.Thetaxmobilizationprogramwasextensiveanincreaseofexistingtaxbases,a wideningofthetaxbase,andaprogramofextensivetaxadministrationreforms,includingthe declarationoftaxamnestythatproducedenormousrevenuesforthegovernmentandthe consolidationoftheinternalrevenuecode. The1970swereanextremelydifficultperiodinthecountryshistory.Theinternational economicenvironmentwashostiletothePhilippinesbecauseitwasamajorenergyimporter.It wasthetimeoffirstmajorenergyshocktotheworld,followedbyasecondwave,making energyveryexpensive.Theinternationalpaymentssystemwenthaywirewiththeabandonment offixedexchangeratesandtheirreplacementwithvolatilefloatingratesamongthemajor currencies.WhenAmericanpolicymakerstriedtoconquertheinflationthattheUSfacedinthe lateperiodofthatdecadeandthecomingofthe1980s,theypushedshortterminterestratesto twodigitlevels.Thisupsettheworldscapitalmarkets.Internationaldebtsespeciallyof developingcountriessuddenlybecameveryexpensiveandunsustainablewhenrefinancingof shorttermdebtshadtobemade. Throughoutmostofthe1970s,however,Philippinedevelopmentfinancingwas sustainable.Mostofthefinancingforlongtermprojectswasmatchedbylongterm developmentloans.Moreover,thegovernmentundertookamassiveprogramofraisingpublic resourcesthroughavarietyofmeasuresintaxreformsandtaxadministration.Immediately aftermartiallaw,thepubliccoffersfilledandthisenabledthecountrytoraisecounterpart financingformajorpublicdevelopmentprojectsthatwerefinancedfromofficialdevelopment assistance(ODA),mainlylongtermloansfromtheWorldBank,AsianDevelopmentBank,

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Japaneseaidprogram,USaidprogram,andotherdevelopmentassistancefinancingsmaller projects.21 Theseweretheprojectsthatfundedpublicinfrastructurecoveringroadbuildingand rehabilitationacrossthenation,irrigationsystems,energyprojects,andotherprojectsinthe socialsectorslikeeducationandhealth.Theseinfrastructureinvestmentsraisedthelevelof publiccapitalformationfromalow1to2percentofGDPinthepreMarcosyearstoaround6 percentofGDPataboutthistime.Thesewerethemajoraccomplishmentsinpublicinvestment thatwerediscussedabove.

AGRICULTURALANDRURALDEVELOPMENTREFORMS

AttentiontoruralandagriculturalreformswasamajorthrustofMarcossearlyprograms thatwassustainedovertime.Thiswasachievedthroughacoordinatedprogramofsupport fromvarioussectorsofthegovernment.Asalreadyrecounted,hisearlyprogramsofrice,roads, andschoolbuildingprogramsresultedintangibleaccomplishmentsinruralandagricultural development.Theclearestoutcomewasinthegrowthofbasicstaplecropproduction, specificallyofriceandcorn. Acoordinatedprogramofgovernmentactionswasneededtoassureagoodoutcomein agriculturalandruraldevelopment.Investmentsinruralinfrastructuremadepossibleawide networkofroadswithinthecountry.Agriculturalcreditexpansionanditsavailabilityand improvedtechnicalassistanceatthefarmlevelwereprovidedbydepartmentofagriculture.The institutionaldevelopmentofcreditsupporttowardagricultureandthepromotionofrural bankinginstitutionswereimportantcomponentsofthisprogram.Agriculturalprogramsinrice agriculturerepresentedalargefinancialoutreachtotheruralsector.Theprogramhadbecome soextensivethatthecreditprogramtoagriculturehadleakedunintentionallytoward supportingotherformsofconsumptionspendingintheruralareas. Thelandreformprogramwasinpartlinkedtotheprogramofpromotingthedevelopment offarminginriceandcornlands.Themainpointaboutachievementsinagricultural developmentduringtheperiodwasthatitwasacoordinatedframeworkofgovernment programsdealingwithregionaldevelopment,infrastructureinvestments,reformsofinstitutions relatedtothedeliveryofcredittowardtheagriculturalsector.
SUGARANDCOCONUTISSUES

Traditionalexportearnersofthecountryhaddevelopedintoimportantindustriesthathad greatpoliticalaccesstoMarcos.Thiswastruespecificallyofthesugarindustrywhich traditionallyhadgreatswayonanyleaderspoliticalfortunes.Toalessextent,thiswasalsothe casewiththecoconutindustry.Forthisreason,Marcosassignedthemanagementofthese sectorstopeoplewhowerecloselytiedtotheseindustries.Thesepersonsalsowerehistrusted politicallieutenantsandsupporters.

21

Theunpredictabilityofexchangeratesamongtheworldsmajorcurrenciescausedaproblemforatimeevenwith loansaccessedfromtheworldspublicinternationalfinancialinstitutions(suchastheWorldBankandADB).These institutionspassedtheirfinancingoftheirlendingrequirementsinthecurrencyofchoiceforthemtotheborrowers, whooftenborrowedindollars.Thispracticecausedsomeunpredictabilityintheservicingofloansbytheborrowers. Butthispracticewasultimatelyabandonedtomakeloansmoretransparent.

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Duringthepremartiallawperiodsuchsensitivenesstothepoliticsofthesectorguided him.Duringthemartiallawperiod,hecontinuedtobesensitivetothepoliticalramificationsof hisdecisions.Fortohimtheseeconomicsectorshadmajorlinkstohispoliticalcalculusas leader. S UGAR DuringtheearlyperiodofindependenceuptothetimeoftheendoftheLaurelLangley Agreement,sugarwasinsulatedfromthehighlyvolatileinternationalpricecyclesofthe industry.AccesstotheUSsugarmarketguaranteedsugarexportersoftheprotectedmarket priceintheUSmarket.Marcoskeptinclosetouchwithdevelopmentsintheindustrythrough hischoiceofhismosttrustedpoliticallieutenantwhoalsocamefromthesugarbloctooversee thesector.22 Thesugarindustryunderwentamajorexpansionofplantingduringthe1970s.Thiswas financedwiththehelpandsupportofthegovernment.Sugardevelopmentpolicywasvetted withinthePhilippineSugarCommissionthen.Theproductionsystemwashighlyregulatedby oldpracticesinheritedfromdomesticproductionsugarquotasystemdevelopedbythe Americanquotasystem.Thevarioussugarcentraldistrictsdeterminedtheallocationofsugar millingoftheoutput. CoincidingbrieflywiththeendofPhilippineaccesstotheUSmarketafterthetermination ofspecialrelations,internationalpricesforsugarrosesteeplyfromaround3centsperpoundto 60centsperpound.Thepriceincentivesarisingfromsuchrisingpricesencouragedtheindustry tocentralizeitstradingoperationsandmoveitawayfromthecloserelationshipwiththeUS market.ThesamesetofcircumstancesmadetheUSundertakemajorchangesinitssugarquota systemthatexcludedthePhilippinesfromthemainbenefitsofthatmarketandwhenitwas extendedbackpartially,itwouldbeatamuchreducedlevelasexistsinthepresenttime.23 Thedivisivenesswithindomesticsugarindustrycontinuestothisdayeventhoughthe partiestothiscontestofinterestshaveshifted.DuringtheMarcosperiod,themajorproblemof thesectorwasthatitstradingarmtooksomewrongbetsontimingandwascaughtwithhuge inventorieswhenthecountrymovedawayfromtheUSmarket.Theswiftnessoftheindustry priceboomsandtheircorrespondingcollapseaccentuatedthemovementsofunsold production.Thisalsoaffectedgreatlythedomesticmarketasexpansionofsugarcapacitywhile bringingmoreproductionofthecrop,alsocoincidedwithnewsugarcentralsamortizingtheir newmillingassets. Ofcourse,aninevitablepartofchangewastheshiftinownershiparisingfromdeathofthe originalownersandthetransferofassetstoheirsandcompanyrestructuring.Astimewenton,

ThiswasRobertoBenedictowhomhemadePresidentofthePhilippineNationalBank.Thisbankhistoricallywas themajorsourceoffinancingofthesugarindustryfromevenprewardays.WhenhemovedBenedictotothepostof PhilippineAmbassadortoJapan,thelatterplayedamajorroleinthearrangementsofsuppliercreditsfromJapanese companieswhichprovidedcreditsfortheexpansionofthesugarindustry.Benedictowasalsomadetheheadofthe SugarCommissionthepowerfulbodythatundertookmajorindustrydecisionsintheindustry.

23 22

Itwouldtakeanothertwodecadesin1997whenUSquotapolicywouldagainincludethePhilippinesbutthis timeonlyasaminorsupplier.

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prosperousdomesticinterestswereabletoacquiresugarassetsthroughtakeover,purchase,or otherfinancialarrangements. Undertheseconditions,greatturbulencewouldvisitthesugarindustryandtheeconomic interestsdirectlydependentontheindustry.MarketconditionswouldchangeastheUS protectedmarketwouldeventuallybelostwhentheUSwasshiftingitsownsugarpolicytoward worldsupply.Thesugarindustry,despiterisingfarmhectarageinresponsetofutureprojections ofinternationaldemand,didnotinvestfullyintheimprovementoflandyields.Inthis,perhaps theindustrywasnottotallyatfaultasitwasperenniallybotheredbythethreatoflandreform. 24 Thiswasalsothetimewhenexperimentationswithmajorchangesinmarketingofthe sugarcropintheworldmarketwouldhappen.Mostofthedecisionsinthesetimesofturbulent pricingmovementsintheworldmarket,effortsoftheNationalSugarTradingCorporation directedmainlytocontrolthemarketposition,ledtoseriousmistakesintiming.These developmentswouldfurtherdividethesugarindustryatthetimeofMarcossfallfrompower. C OCONUT EventhoughthePhilippinesisamajorexporterofcoconutproducts,itsmarketpowerin theworldnaturaloilindustryisnotassignificantasisoftenthoughtbythoseintheindustry. Thereasonisthattherearemanyindustrialsubstitutesavailableforcoconutproducts.Palm, peanut,soybean,corn,andothervegetableoilsareinabundantsupplyassubstitutes.Whatever marketpowerthatispresumedforcoconutproductsisbluntedpartlybytheavailabilityof thesesubstitutes. Duringtheearlyyearsofpoliticalindependence,thecoconutindustryaccountedforavery significantshareofthecountrystotalexports.Overtimehoweverandastheeconomygrew, thissharebegantodecline.Inthe1960sitaccountedforover30percentoftotalexports.By the1970s,thissharehadcomedowntoaroundonefourthofthetotalexports. Theindustryleadershavecontinuouslypointedtothreemajorproblemsafflictingthe coconutindustry. Thefirstproblemwasthepooryieldofthecoconutfarms.Thislowyieldmeantthat increasesintheoutputofcoconuthavecomemainlyfromincreasingthelandcultivatedto coconuts.Raisingproductivityofcoconutfarmsmeantthateffortsbeundertakeninseveral directions.Improvementoffarmyieldrequiredbetterandmoreuseoffertilizationand improvedcultivationpractices.Becausecoconutsareperennials,replacingoldandlowyield treesrequiredaprogramofreplanting,anactivitywithaperiodoflonggestation.Theadoption ofahighyieldingcoconutplantmeantvigorouseffortsatnewplantingsandreplantingand somewaitingtimebeforethetreesborefruit.

Sinceindependence,thelandreformissueandtheagrarianissuesrelatedwithlandownershipandthewagesof migratory workers during harvest the sacadas had always threatened the land system within sugar agriculture with radical reform, including land reform. Even though throughout during the Marcos period, land reform issue never really got to sugar lands, the threat of it being taken further as a reform measure was present. In the post Marcosdevelopments,landreformencompassedalllands,includingsugarlandseventhoughthemannerofitsdetail waslefttowardavarietyofpotentialmodesoflandpartitioning,transfer,andlandrestructuring.
24

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Thesecondproblemwasthedesirabilityofincreasingtheeconomicvaluesderivedfrom thecoconutproduct.Thisinvolvedfindingextendeduseofthecropforotherfinishedproducts otherthancopra.Eventhoughthecoconutindustrywasasourceofexportrevenues,therewas excessiverelianceonexportofcopraandlessonmorefinishedproductsfromthecoconut.Asa result,theneedtohavegreaterprocessingofcoprainthecountrywasoftencitedasoneway toraisethevalueaddedfromthecrop.Oneobviousimplicationofthisneedthereforewasto developthedomesticcoconutoilmillingindustry.Anotherwastofindmorehighvalued finishedproductsfromcoconut. Althoughthisappearedobviousasanobjectivetococonutoilproducers,industrialand tradepoliciesofimportingcountrieshavesimplyfavoredtheshipmentofcopraasexports. Significanttariffswereimposedoncoconutoilimportsbutcoprawasallowedlowordutyfree entryasimportsofrawmaterials.Thisdisincentivetowardcoconutoilproductionneededtobe reversed.Therewasthereforeacaseforcreatingspecialincentivesandsubsidiesthatwould undertaketheencouragementofraisingthecapacityforcoconutoilmillsasanindustrialpolicy. Thusfromanindustryviewpoint,furtherindustrializationofcoconutbasedindustriesmeant raisingthevaluederivedathomefromtheproductionofthecoconut. Thethirdproblemofthecoconutindustrywasthehighpricevolatilityofinternationally tradedcoconutproducts.Wildpriceswingsproducestrongincomeeffectsathome.For instance,whencoconutoilandcoprapricesrise,thedomesticpriceindexoftengetsrattledvia theriseofcookingoilprices.Consequently,wheninternationalpricesfall,theimpacton coconutproducingregionsintermsofincomesissevere.Thecausesoffluctuationsinprices resultfromtheinteractionofinternationaldemandandsupplyofvariousoils.Inturn,these factorsareoftenduetoeconomicconditionsintheworldeconomy.The1970swereyearswhen thedemandorsupplyshocksincommoditiesaffectedthecoconutindustry. Thecoconutlevyproblemcontinuestobeathornyissuetothisday.Itisimportantto recounthowitcametobe. ThelevysoriginwasalawthatwascraftedinCongressin1972(RA6260).Itwasdesigned toaddresstheseproblemsofthecoconutindustry.ThecreationofaCoconutInvestment Companywasdeemedtheanswer.Aspecialdomesticlevyortaxoncoprawasimposedthat wasdestinedasaspecialfundtofinancethecapitalizationofthisnewcompany.Thelevywas setat55centavosper100kilostobecollectedover10years.Amongthedeclaredobjectivesof thiscompanywastopromotetheexpansionandgrowthofthecoconutindustry,toimprove, developandexpandthemarketingsystem,andtoensurestableandbetterincomesforcoconut farmers. Conditionschangedrapidlyasaresultofthecommoditypriceinflationthatfollowedthe energyshockofthe1970s.Amontheearlymartiallawreformswasthereorganizationofthe governingbodyoverthecoconutindustry.Oldgovernmentcoconutagenciesperceivedtobe ineffectivewereabolishedandanewPhilippineCoconutAuthority(PCA)wascreated(P.D.232, 1973).Thegoverningbodyhad11members,dominatedbygovernmentmembersthatdealt withthecoconutindustry.Buttwomembersrepresentingcoconutplantersandcoconut industryleaderswerespecificallyrepresented,plusthreeprivatecitizenswhoweretobe knowledgeablepersonsontheindustry.

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The1973commoditypriceupheavalsaffecteddomesticcookingoilprices,thusbuilding domesticpressurestostabilizeconsumercoconutcommoditypricesthroughtheadoptionofa scaledupdomesticlevyoncopra.Thiswasdonethroughpresidentialdecree(PD276,August 20,1973).ThescaleduplevywassetatP15pesosper100kilosofcopraoritsequivalentin othercoconutproductsinaccordancewiththemechanicsestablishedforthispurposeunderRA 6260. ThedecreegavethePhilippineCoconutAuthoritythepowertoadjustthetaxrate wheneverthemarketpriceofcopraroseandtoreduceitwhenmarketpricefell.Butthelevy wastobesuspendedautomaticallyshouldthepriceofcopraequalthebasereferencepriceof coprathathadtriggeredtheimpositionofthehigherlevy.Duringthisperiod,thepriceofcopra neverwentbacktothereferenceprice.However,coconutpricesbasicallyadjustedupwards, partlyasaresultofexchangeratedepreciation. Toachievepricestabilization,agovernmentcommitteewascreated,ledbytheAgriculture andTradeDepartmentsandthePriceControlCouncilchairman,withrepresentationsfromthe coconutindustry.Itsmaintaskwastodeterminethenatureofthepricecontrolissuesandthe correspondingsubsidiestobemade.TheproceedsofthelevyweretobeplacedinaCoconut ConsumersStabilizationFund(CCSF).Thefundwastobeusedtofinancesubsidiessoasto stabilizelocalcoconutpricesatretail.25 Buttheresidualpowerfordeterminingtheuseoftheproceedsofthefundbelongedtothe PCA.ThePCAwasgiventhepowertoreallocateanybalanceoftheCCSFtotheCoconut InvestmentFundthatwasconstitutedunderRA6260.Withenormousresourcescollectedfrom thecoconutlevyduringthisperiodofhighpricesandtheadministrativelagsinvolvedinthe reallocationoftheconsumersstabilizationfund,enormousbalancesaccumulatedintheCCSF. Bylaw,theproceedsweredepositedinthePhilippineNationalBank. ThePCAthereforebecameaverypowerfulpolicysettingbodythatdeterminednotonly thetaxratebutalsotheusesforwhichthelevywastobeapplied.Initially,ofcourse,thiswas forpricestabilizationtoassurethatthepriceofcookingoilwouldbesetatanaffordableand stablelevelfortheconsumer.Leadersofthecoconutindustrysawthemajoropportunitiesthat openedforthecoconutinvestmentfund.TheproblemwasthatthePCAboardwasessentially governmentalincomposition.ItdidnotactquicklytolinktheCCSFtothecoconutindustry investmentfund.Theplanthereforewastocapturethefundssothattheycouldbeusedbythe coconutinvestmentfund. AlmostfivemonthsaftertheCCSFdecreewaspassed,coconutindustryleaderssucceeded inpersuadingMarcostosignadecreethatreplacedtheentiregoverningboardofthePCAand putitalmostentirelyintheirhands.26
This was reminiscent of the price control measures used to stabilize gasoline and other energy prices duringtheenergyshockameasurethatbeganduringthe1970sandwhichwastolastthroughoutthe 1990suntilthepricestabilizationfundwasabandoned.
ThishappenedduringChristmastime,whenthegovernmentwasnotveryactive,forP.D.623,whichamendedthe PCAdecree,wasdatedDecember26,1974.
26

25

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Bythattime,theamountofthecoconutinvestmentfundcouldtapdirectlyfromthe proceedsofthecoconutlevywashugeduetothehighrateoftaxandtherisingpriceofcopra andcoconutoilintheworldmarket.Thetotalcollectedfundshadreached,accordingtolater estimates,P9.7billion.Alargesurplusoffundsbecameavailableforthecoconutinvestment fundtofinanceawiderangeofinvestmentactivities. Thefundunderwrotethelargecoconutnurserydesignedtoraisehighyieldingcoconutsin BugsukIslandoffthesoutherntipofPalawan.TheAfricanvarietywasacoconuthybrid developedforuseinthecountry.Intime,however,theuseofthisseedlingmetwithresistance frommanyplanters.Thosewhowereplantingorreplantingpreferredtouseorbuytheirown seedlings.SomeresistedtheuseoftheAfricanvarietybecausetheyfeltthattherewas insufficienttrackrecordatPhilippineagriculturalexperiments.Theyweresuspiciousaboutits adaptabilitytolocalagriculturalconditions.Amassiveadoptionwasconsiderednotonlyrisky butreckless. EduardoCojuangco,whoessentiallyranthecorporateaffairsofPCA,afterwards,wasan aggressiveandastuteadministratorofthefund.Heusedtheresourcesathiscommandto expandtheinvestmentsofthecoconutindustry.27Thecoconutinvestmentfundacquireda domesticbankin1975,theUnitedCoconutPlantersBank.Thisbankwasdesignedtoservethe bankingneedsofthecoconutindustry.Thecoconutlevyproceedswerealsousedtoacquire sharesofexistingcorporations.Themostsignificantofthesewasthepurchaseofalargeblock ofsharesofSanMiguelCorporation,thecountryslargestfoodcorporation.Later,thisvery purchasewouldbecometheleverbywhichthecoconutfundwouldwrestmanagementcontrol ofthatlargecorporation. Moredirectlyrelatedtothecoconutindustry,thefundwasusedtosetupamajorcoco chemicalprojectthatwouldfurtherprocesscopraintootherindustrialchemicals.Inaddition, thecoconutmillswereacquiredandconsolidatedunderaholdingcompany.These interventionsthemselvesworkedtochangethenatureofthemarketingofcopraathomeand wouldbecomeasourceofcontentiousissuesamongthecoconutproducersbecausethe enlargedcoconutmillingcapacitywouldrequiremorecopraasdomesticinputratherthan competeasdirectexports.Thelevyoncopraofcoursepenalizedcopraasanexportproduct andhurtthosewhowantedtoexport. Manyoftheseactionsattractedcontroversyandcriticism.Forone,thePCAcartelized coconutpoliciesfromcopratradingtococonutmilling.Themarketingofcoconutproducts becamecentralizedwherebeforeitusedtobeundertakenbymanytraders.Partoftheproblem washowtocornerthemarketingofcopratobefedtothecoconutmillsascopraitselfhad domesticanddirectexportuses.Thesewerethetraditionaltensionsofthecoconutindustryall overagain,butnowmagnifiedbecauseofthepresenceoftheheavyhandofcartelizedbehavior withtheblessingsofagovernmentpolicymakingbody.

Eventhoughthestatewouldattempttosequesterthefundsandinvestmentsofthecoconutlevyafterthefallof Marcos,thefactisthatmanyoftheinvestmentshadcreatedgreatvaluesthathavegrownovertime.This,despite thefactthatmostofthemhadbeenplacedundersomestatefreezeontheuseandownershipoftheassets,which despitethepassageofyearsare(today)stillunderlegalcontestastotheirownership.

27

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Anothermajorproblemwasthatthecoconutinvestmentsalsoinvolvedprivate investmentsofdifferentmembersofthecoconutindustryintheirownpersonalandseparate corporatecapacities.Inshort,thefinelinebetweenpublicinterestandprivateinterestbecame blurred.Theseinvestmentsthereforebecameverycentraltotheissuessurroundingthecoconut levy. Thus,thecoconutlevybecameverycontroversial.Asinthecaseofthesugarindustrywhen thetradingissuebecamemonopolizedbycertaingroups,therewasresentmentinthecoconut industry.Moreover,somesectorsfeltthattheydidnotgetsufficientsupportforthemselvesor theirprojectsfromthehugecollections.

OTHERSECTORREFORMS

Tourism.Thereweremanysectorreformsthatpresagedusefuldirectionsfortheeconomy duringMarcosstime.Tourismwasonesectorthatenjoyedgreatencouragementandwhich beganpropitiously.Tourismisamajorearnerofforeignexchangeifproperlydeveloped.Ahotel buildingprogramraisedthecapacityofthecountrytooffertourismfacilities.Majorfacilitiesto complementthetourismprogramweresetup.Thiswasthetimewhenthefirstonemillion touristvisitorscametothePhilippines.Theeconomicturbulenceoftheperiod(early1980s) howeverpartlywhipsawedthetourismprogramandmadeitdifficulttosustainthetourism improvementconsistently. Energy.OneofthegreatachievementsofMarcoswastoenabletheeconomytodealwith theenergyshockinawaythatdependenceonpetroleumwastobereducedeffectively.The creationofthePhilippineNationalOilCompanywasanimmediatereactionwhichledtothe entryofthegovernmentintheoilrefinerybusiness.Then,hecreatedaDepartmentofEnergy thatwasgiventheopportunitytopreparecomprehensivesectorplansfortheresponsetothe energycrisisoftheperiod.BythetimeofthefallofMarcos,thecountrywasontoadiversified responsethatharnesseddomesticsourcesfromcoal,hydroelectricandgeothermalenergyfor electricitygeneration,inadditiontothetraditionaldependenceonpetroleum.28 Oneofthereasonsfornotcommissioningthenuclearpowerplantwasperhapsmeantto punishMarcosforthepaymentofcommissiontoacrony(whichwassuspectedtohavealso benefitedthepresident,onereasonfortheaccusationofcorruption).Thenationintheendpaid heavilyforthisdecision,plungingittoadecadeofelectricitydeficiciencyandcrisiswheninfact, itwasreadytoembraceaneweraofcleanerandcheaperlongtermpower. Hehadinducedenergyexplorationfortraditionalandalternativesourcesofenergytothe pointthatsomediscoverieshadbecomepromising.Evenpetroleumwasfound,althoughin relativelylowquantities,butinordertomoveforwardinthisdirection,Marcoshadtoimprove thelegalenvironmentunderwhichtoundertakeenergyexplorationefforts.Intermsof constructionofnuclearpowerplantforelectricitygeneration,thecountrywaswellinpacewith thatofregionalneighborssuchasTaiwanandSouthKorea.Itwasamajormistakeforthe

28

ThisprogramisdescribedinthememoirofGeronimoVelasco(2006),whowastheEnergyministerduringthe period.WhilegivingduecredittoVelascosimportantroleinthisprogram,itisbesttothinkoftheenergyprogramas theaccomplishmentofalargergroupofpeopleandoffices.Mostprogramsofthegovernmentduringthisperiod cannotsimplybeputintoactionmuchlessimplementedwithoutappropriateactionsonthepartofthevariousparts ofthegovernment:planning,financing,supportandfacilitationofprogramthrusts.

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successorgovernmenttostopthecommissioningintoserviceofelectricitygenerationbythe BataanNuclearPowerPlantthatwasbythencompleted.Marcosisoftenblamedforthenuclear powerproject.Buttheclearerblameisonthosewhodecidedtojettisonamajorinvestment projectandmakethenationpayforthatfailure. Casinogamblingcumresourcegenerator.Oneofthecontroversialissuesinthegoverning ofthenationisconnectedwiththelegaltreatmentofgamesofchance.Gamblinghappensin manyaspectsofeconomiclifeinbusinessintheguiseofdifferentformsofrisktakingasmuch asinpersonalconduct.Thegovernmentcoulddealwithgamblingbylegalizingaspectsofit therebycreatingtheinstitutionalmechanismsforthepurpose. Blanketprohibitiononmoralgroundsisasolutionsoughtbythosewhotakean uncompromisingstandagainstgambling.Therealityisthatgamblinghappenswhetherbanned ornot.Itwouldtakeaninfiniteamountofpolicepowerandgreathonestyfromevery governmentimplementorofpolicytoeradicateit. Therearethosewhofavorlegalcognizanceofcasinogamblingasameansofraisingtax andothergovernmentincomesrathercontributingtotheexpenditureofgovernmentresources tryingtoextirpateit.Theywanttotapthepotentialsthroughtheregulationofcasinogambling asadiversioninconnectionwiththepromotionofforeigntourism. Suchadebatehadpercolatedduringthedaysbeforemartiallaw.Itwasinthesamespirit thatthenationacceptedthelotteryasawayoftappingontheresourcepotentialsforsome specificsocialgains.ThePhilippineCharitySweeptstakes,evenbeforepoliticalindependence, wascreatedtoadministeragameofchancetopickaluckywinnerfromstatesupported lotteriestosupportmanycharitableactivities.Alongthisline,bingosandothergamesoftenget sponsoredevenbychurchgroupstogeneratefundingfortheirpetprojects. Ittookdecadesbeforeanyfurtheradvanceregardingtheissueofgamblingtookplace.The vehicleforthiswasthecreationofagamingcorporationthePhilippineAmusementsand GamingCorporation(PAGCOR).Marcosrevisitedtheissueofcasinogamblinginconnectionwith theneedtoforMetroManilasgovernmenttoraisepublicresourcesforitsprograms.The corporationwascreatedanditwasallowedtohaveatouristgamblingshipanchoredonManila Bay.There,foreigntouristswereallowedtogamble. ThePAGCORhasproventobeamajorrevenueraiser.CorazonAquinoassuccessorto MarcostriedtoimprovethePAGCORslegalstructureandwideneditscoverage.Thefactisthat itbecameacashcowforproducingrevenuesforimportantsocialprojects.Successorpresidents toMarcostriedtousetheresourcesinPAGCORtofundspecialprojectsthattheycouldnot supportunderthebudget.However,thefacilitywithwhichitproducesresourcesfromits operationsalsoencouragedlaxcontrolsoveritsoperations. TheheadsofPAGCORwereappointedbythesittingpresident.Duringtheincumbencyof corruptadministrations,thePAGCORfundedoperationswereahotbedofloosegovernance. Casesofcorruptpracticesconnectedwithpastleadershipsinthiscorporationwouldfillahouse

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ofhorrors.29Asaresult,thePAGCORdespiteitscapabilityasarevenueproducerhasbecome amongthemostpoorlymanagedpubliccorporations.Thisisanagencythatifproperlymanaged hasenormouspotentialsinsupportingthecountrysdevelopmentprograms.

OVERSEASEMPLOYMENTPROGRAM

TheprogramoftakingadvantageofnewemploymentopportunitiesforFilipinocitizensto workabroadtookoffduringMarcosstimewhenhesupportedaconsciousprogramoftraining Filipinostobecomeseamenintheworldsmerchantmarine.Thesewerethefirstmassive streamofworkerswhowereencouragedtotakeupemploymentabroadinpartbecausethe salariesweregoodandtheyprovidedenormousopportunitiesforFilipinostoparticipatemore fullyinamajorlabormarket. WhentheMiddleEastboombeganwiththefirstenergyshockduringthe1970s,Marcos encouragedmassiveeffortstoemployFilipinostoworkinconstructionandindustrialsitesinthe newlyboomingregion.Initially,majorFilipinoconstructioncompanieswereencouragedtofully participateascontractors.However,becauseoftherelativelyweakhomeindustrialbaseofthe Philippineconstructionindustry,Filipinocontractorsdidnotsucceedaswellasotherslikethe KoreanandChinesecompaniesandofcourseWesternbasedcontractors.30Butthebeginnings ofthemassivedeploymentbeganwithMarcosandweresustainedasactivitiesovertime, expandingevenfurtherbeyondtheMiddleEastandothertraditionalareaswhereFilipino workersmigratedforwork.

PAGCORoperationsfeaturedintheimpeachmenttrialofPresidentEstradain2001.Themostrecentleadershipin PAGCOR(underPresidentGloriaMacapagalArroyo)isfacingmajorcorruptionchargesthatalsoinvolveshimselfand hisimmediatefamily.

30 29

Infact,manyPhilippinecontractorswereunabletocrackintothelargeprojects.Thosethatsucceededtopenetrate themarketinitiallygotintotroubleandwereunabletopursuesustainedactivities.Eventually,manycontractors becamemainlylabormarketrecruitersforworkerstobeemployedbymajorconstructioncompanies.

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E.

FOREIGNECONOMICRELATIONS

Duringtwentyyearsofrule,Marcosmovedthecountryforwardinthefieldofinternational economicrelations.Allthesehadmajorimplicationsonthecountryseconomicfuture. Ofthese,themostimportantinitiativesoneconomicrelationsthatheparticipatedinatthe beginningofhispresidencywerecenteredonbilateralissueswiththeUS.TheLaurelLangley Agreementendedunderhiswatchandfromthatpointon,hetriedtomanageabilateral economicrelationshipwiththeUSthatwasbasedonmutualbenefits.Normalizationof economicrelationswiththeUSbeganwiththeendoftheagreement.Marcosusedhis leadershiptoexpandAmericaneconomicassistanceduringtheperiod.Heconcludedatax treatywiththeUSthatavoideddoubletaxation. Withrespecttothemilitarybases,hewasabletoextractsomemeasureofrentalpayments fortheiruse,euphemisticallycalled,EconomicSupportFund,astimewenton.He accommodatedtheUScallforparticipationinVietnambutheinturngotmajorconcessionsin supportofconstructionoffacilitiesinthePhilippines.Moreimportantly,hesecuredUS conformityforthereductionofthebasesleaseagreementsothatthePhilippinescould determineby1992(insteadofanotherfiftyyearslater)whethertoextenditornot.Thecountry wasabletoexercisetheoptionofrejectingthemilitarybasesagreementbecausehe foreshortenedthelengthoftheleasein1967. Duringthisperiod,thecountrysexternalrelationsexpandedwithmanycountriesandwith this,thecountrywasabletosecuregreateraccesstowindowsofopportunityformore commercialrelationsandeconomiccooperation.Theprogramofeconomicassistancefrom Japanincreasedenormously.EnhancedrelationswithCanada,Australia,NewZealand,and majorEuropeancountriesimprovedalongcommercialanddevelopmentcooperation. Marcoswasquicktomovethecountrywiththechangingtimes.Heopenedeconomic relationswiththeSovietUnionandmanyothercommunistEastbloccountriesduringthe1970s. Mostsignificantly,heopenedeconomicrelationswithChinain1977.Thathiseconomic leadershipcarriedgreatforesightcouldbeseenfromthestepshetookbeforeheproceeded withtherecognitionofChinaandthennormalizedrelationsforthefuturewiththisimportant country.HesettledmajoroutstandingissuesofcitizenshipsforChinesewhohadbeenlivingin thecountryandhadwantedtobecomeFilipinocitizens.Heissuedadecreetorecognizethem ascitizens.Oneresultofthisisthattoday,manyethnicChineselivinginthePhilippinesbecame Filipinocitizens.Manyofthesenewcitizenstodayareimportantcontributorstothecountrys economicdevelopment. Hesupportedregionalmultilateralism.ThegrowthofASEANeconomiccooperation becameapartofthenationalagendaofregionalcooperation.Duringthe1970s,ASEAN economiccooperationbegantoflourishandheparticipatedinthe1976BaliSummitofASEAN Leaderswhichcreatedthemachineryforsucheconomiccooperation.Fromthattimeon,ASEAN economiccooperationmovedforward. Inthefieldofmultilateraleconomicrelations,thePhilippinesparticipatedactivelyin multilateralnegotiations.ThecountrywasaparticipantintheactivitiesoftheUnitedNations offices,inparticular,theworkofnegotiationsintheUnitedConferenceonTradeand Development(UNCTAD).Whentheroadtomoreconcreteundertakingsinmultilateraltrade

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negotiationstookplace,Marcosmadesurethatthecountrywasinvolved.Thusitcametobe thatthePhilippinesparticipatedintheKennedyRoundofmultilateraltradenegotiations, followedbytheTokyoRound,andthentheUruguayRoundwhenfinallythecharterofthe WorldTradeOrganizationwouldbeagreedupon.HisencouragementofPhilippineengagement intheearlyroundsofthesenegotiationsmeantthat(laterwhenhewasnolongerinpower)the PhilippineswouldbepresentandacomakerofthecreationoftheWorldTradeOrganization (WTO).

IV.CONTROVERSIALISSUES
OfintriguingquestionsaboutwhyMarcosintheendsufferedtheignominyofafallratherthan continuedsuccessasapolitician,perhapssomecommentaryisneeded.Withhisfall,helosthis voice.Thosewhotookpowerandsucceededhimdidtheirbesttoexposehisweaknessesand hisfaults.Theydominatedtheairwaves,thejournalisticspace,andthecurrenthistorical writing.Normally,whenpoliticaltransitionstakeplace,historyiswrittenbythevictorswitha forwardlookontheirowntrailofaccomplishmentsforthenation. ButinMarcosscase,historywaswrittenforhimbythosewhopulledhimdownfrom power.Silenced,muchofhisachievementsgotrelegatedtothebackgroundandtheversionof eventsthatweremadetosurvivewerethegravesinsthathewasaccusedofamongothers, plunder,corruption,cronycapitalism,nepotism,humanrightsabuses.However,fewdecisions ofthejusticesystemhavebeenrenderedwithfinalclosuretotheMarcoscases.Thismightbea reflectionoftheweaknessofthecountrysinstitutionsoflawandjustice.Atanotherlevel,it couldbethatthereislackofsmokinggunprooftofinishthecases.Inthemeantime,such failureofclosurehasputunderacloudthemansreputation.Morethanthat,ithaskept enormousresourcesthathavebeenputunderstatefreezefrombeingmoreeffectivelyusedfor thecountrysdevelopment.

A.

ADYNASTICATTEMPT

ThatMarcosfellfrompowerthewayhedidwasduetoatrainofmistakesthathemaderelative tothesuccessionissue.Forthesehewasmainlytoblame.Astimewasnolongeronhissideand hishealthbegantoflounder,hehandledthisissuewithselfinterestastheguidingprinciple.In dealingwithit,hemadethemistakesthatordinarypoliticianscommit.Onecouldarguethathe belongedtoamuchshrewdervarietythatwasseveralstepsaheadofthegame. Marcosunderstoodthatnoonecouldholdontopowerindefinitely.Thenameofthegame wastomanageapredictabletransition.Hehadgoodmaterialavailablearoundhimbuthe wantedarestrictedaccesstotheleadershipsuccessionandheexcludedthatresource.Hehad manybrilliantandhardworkinglieutenantswhomighthavebeenwaitingtobeinvolvedbuthe practicallyquelledanysuchthoughtsfromamusingorchallengingthem.Byhisovertactions, everyoneofthosearoundhimcouldtell.Bythistime,allthesemenhadreachedanagethat wasalreadyolderthanMarcoshimselfwhenhebecamepresidentattheageof46.Hedidnot

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giveanyofthemanyopenencouragement.Whathewantedfromthemwasloyalty.31Hecould haveintroducedasuccessionprocessthatwascompetitive,transparent,andunselfishsothat thefuturecouldbeprotectedwithagoodleaderofhisownchoosingwhocouldtakeoverinhis placeandpreservehislegacy. Orhecouldhaveopenedthesuccessionissuemorewidelysothattherewouldbemore participantsinthatprocess.Thatwouldmeanofcourseopeningthearenatoincludehiscritics andpoliticalfoes.Hewouldhavewongreatapplauseforthatkindofmove.Thiswaswhat BenignoAquino,Jr.,SalvadorLaurel,andotherswanted.Indoingthat,thechanceofpreserving thepoliticalinnovationsthathehadintroducedbythattimewouldhavesurvivedthesuccession issuethussecuringforhimthelegacyofimpartingthepoliticalinstitutionsthathehadcreated forthefuture. Butheprobablyfocusedmainlyonoverseeingadynasticsuccessionthatwouldassure politicalcontinuityforhispersonallineage.Hegambledthathiswifecouldbethatsuccessor sincehischildrenweretooyoungtobeinthatkindoffrayatthetime.Heignoredthethought thathiswifewouldbeapoliticallightweightwithoutthebeamoflightthatshederivedfrom beingthewifeoftheincumbent.Itbecameclearthattowardsthecloseofthe1980s.Marcos wasbotheredbythequestionofsuccessionandhehadtomakeclearhisintentions.Whenhe gaveMrs.ImeldaMarcosprominentpoliticalpowersasmemberofthecabinetinanewand powerfulministryonhumansettlementsin1978(acombinationofhousing,environment,local governmentandotherthingsthatcouldbeimagined)andasMetroManilaGovernor simultaneously,itbecameclearwhowasbeinggivenenormouspoliticaladvantageforthat futurebattleforsuccession. Assoonasthishadtakenplace,itseemedasiftherewerealmosttwopresidencies: MarcosswhichwastherealgovernmentandthatofMrs.Marcos,whichtriedtocorneras muchresourcesfromthefirst.Marcoscouldhavestoppedthisfromhappening.Butheseemed tohavebeenhumoredbythisturnofevents.Perhapshefeltthathecouldsnuffitwhenhe neededto,becauseintheendhemadethefinaldecisions. Mrs.Marcosbeganbuildingapoliticalconstituencyandalliancesthatweremeantto expandherpoliticalfences.Heractivitiesbegantocausedisarrayingovernmentdirectionsand priorities.Herprogramsandprojectsbegantochipawayatscarcegovernmentandfinancial resources.Shedemandedfinancialsupportfromthegovernmentfinancialinstitutionsforher favoriteoffbudgetactivities.Shetriedtocornersomedevelopmentaidfundingforherfavorite

31

Onecouldeasilymakealist:CesarVirata,JuanPonceEnrile,JoseRono,BlasOple,VicentePaterno,JoseAspiras, EstelitoMendozafromhiscabinet,ConradoEstrella(fromhisowngenerationofleaders)andFidelRamosandeven Verfromthemilitary,andEduardoCojuangcofromamongtheyoungerpoliticianswhowerealignedtohim.Even youngerandwellpreparedanddedicatedleaderswereservinginthegovernmentwhocouldrisetothechallengeif thatwereopentothem.FromthemoretechnocraticofficialsoftheMarcosadministration,therewerethosewho exhibitedenormouspotentialbuttheylostfavorearlyordiedprematurely.AlejandroMelchor,RafaelSalas,and AlfredoJuiniowerecertainlyprominenttechnocraticmaterialsofthosetimeswhopossesseddifferent temperaments.Therewasalonglistofotherprofessionalmaterialswhoexcelledintheirfields.Tomentiononlya few,therewereforinstance,OnecouldalsoaddforinstancethosewhoheadedtheAgriculturaldepartmentsatone timeorotherDioscoroUmali,ArturoTanco,orJoseDrilon.Therewasalotofmaterialthatcouldhaverisentoa competitionforthecountry;sfutureleadership.

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projects.Shebegantocallgovernorsandmayorstohelpherinherministryprograms sometimesattheexpenseofwhattheyhadplannedtodo.Someprogramsofthegovernment weregettingrelabeledasherown.Thiscausedmixedsignalsaboutgovernmentintentionsand priorities. Inadditiontothese,shetraveledextensivelyoutofthecountrysometimesondiplomatic assignmentsforthegovernment.Butoftensomeofthedestinationsincludedtravelintheworld capitalsthatwerenotrequiredforthemissions.Theywereobviouslyforfunandshopping.Her wellknowntrademarkoffinancialprofligacy,jettravelsandotherextravagancesmadeherinto aseriouspoliticalliabilitytoMarcosthathehadfailedtoread. EvenasMarcosmighthaverecognizedwhatwashappening,hecouldnotfullystopthese activities.Intime,hishealthwouldgetinthewayandcausehimtoremainquietaboutthe burgeoningpubliccriticismsthattheactivitiesofMrs.Marcosinvited.Perhapshehadmadea calculatedriskthatthesecouldbecorrectedlater.Thiswassurelyasignofhiswaningjudgment asapolitician,amassivecaseofdiminishingreturnsinpoliticalskills.Ashishealthhadbegunto fail,hispoliticaldecisionsbegantolosetheirquality.

B.

ROOTSOFTHEDEBTCRISISANDINDUSTRIALCOLLAPSE

Thepoliticalcrisisof1983(NinoyAquinosassassination)transformedalingeringbutworsening debtproblemintoaneconomiccrisis.Industrialcollapsewouldinevitablyfollowascontinued debtservicingwouldstop.Withadropinexportearningsandpoliticalfundamentalsbecoming uncertain,thefinancingofcreditneedswouldnolongerflow.Astheeconomicsituation becameworse,thegovernmenthadtoadoptdefensiveeconomicmeasurestostaveofffurther economiccollapse.Manyreformsbeingundertakenwentofftrackandsomewereinfact reversedbythedryingupofcredit.Thisisariskincrisestimes:pastachievementscouldbe reversedordamaged.Crisismanagementtookoverandsurvivalissuestookoverthemain agendaasdevelopmentconcernsweredrivenofftothesidelines. Whentimeswerenormal,theamountofdebtthatthecountryhadheldwaswithintarget oftheservicingburdenoftheeconomy.Butthatsituationwasbalancedagainstthe maintenanceoffavorableexpectations.Formuchofthepreviousdecadeofstrong development,despitetheturbulenteconomicperiod,thosepositiveexpectationscontinued. Theinvestmentswouldraiseproductivityandtheywouldmakepossiblethegrowthofoutput thatwouldsustainmacroeconomicbalance. AsthesuccessionissuebecamemoreproblematicbecauseofMarcossfailuretodealwith itproperly,thosefavorableexpectationsbecamequestionable.Thenthepoliticalandeconomic crisesbroughtanendtothemsincetheyshatteredtheinternationalcredibilityoftheMarcos government.Creditlinesthatwouldhavecontinuedtofueltheeconomywerecutoff. Expectationsreversedandeconomicconditionsspiraleddownwards.Theeconomywould unravel,leavingmajorprojectsunfundedinmidstream.Thesedevelopmentsfurtherinducedan outflowofcapital.Marcossholdonpoliticalpowerwouldweakenandeventuallyleadtohis fall. Noeconomycouldeverbefullyshelteredfrommajorcrisessuchastheonethatbefellthe governmentatthetime.Overtheyears,theonethingthathadweakenedtheeconomys fundamentalswastheinadequacyofcapitalthatwouldfinancethedevelopmentofindustries

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athome.Thedevelopmentprocessisfueledbybothdomesticandforeigncapital.Yet,over time,sinceindependencein1946,withtheexceptionofthestrongflowsofAmericancapital fromwardamageandmilitaryspending,Philippinedevelopmentwasmainlyspurredbycapital arisingfromthedomesticeconomy.TheflowofforeigncapitaltoassistPhilippinedevelopment hadbeenrelativelysmallespeciallyincomparisonwithotherEastAsiancountries. Afterthewardespitedestruction,foreigncapitalwasinabundanceinrelativeterms.The presenceofAmericaninvestmentswasquicklyenhancedbythewardamagepayments compensationfordestroyedcapitalthatwasofficiallyrecognizedunderthatlaw.Theseincluded paymentstoAmericancapitalaswell.TheparityamendmentsallowedAmericancitizensthe optionofretainingtheirinvestmentsinthecountryanddidnotcreatethepanicofdivestment. BecausetheparityamendmentappliedonlytoAmericans,otherforeigncapitalfelt discriminatedagainst.SubstantialAmericaninvestmentsalsocontinued,atleasttoretaintheir earlypresenceinthePhilippinemarket.Underparityrights,thisincludedeventhoseinthe restrictedsectorsmining,naturalresourcesexploitation,andpublicutilities.Infact,new investmentsinimportsubstitutingindustriescontinuedtocome. Therestrictiveeconomicprovisionsinthe1935Constitutioncreatedsomelastingimpacts oneconomicpolicymaking.First,theyhelpedtodefinethebasictenorofeconomicpolicy. Althoughtheseprovisionswerelimitedonlytothreespecificsectorsoftheeconomy,they neverthelessprovidedthemainvirusthatinfluencedfurthereconomicrestrictionsthatwere appliedtoothersectors.Thus,duringtheseearlydecadesofindependence,restrictionslimiting theparticipationofforeigncapitalspilledovertoothereconomicactivities:retailtrade nationalization;bankingandfinance;theallocationofforeignexchangeandofimports;andin theinvestmentincentiveslaw.Despitetheeffortstoreformtheserestrictivelawsand regulations,theentrenchednatureoftheinterestsbenefitingfromthesepoliciesmadeitvery difficulttoreformtheselaws.Thisiswhytheeconomicprovisionsoftheconstitutionof1935 havesurvivedthe1973revisionandevenbecamewiderunderthe1987constitution. Second,theconstitutionalrestrictionsonforeigncapitalinspecialsectorshadapernicious effectontheexerciseofpresidentialpoliticalpower.Beforeindependence,thepowerto approvethedispensationofprivilegesrelatedtotheexploitationofnaturalresourcesbelonged totheAmericangovernorgeneralwhowasunderthesupervisionoftheUSpresident(through theUSDepartmentofInterior).Inturn,theseofficialsweresupervisedbyultimateoversight thattheUSpresidentandtheUSCongressexercisedovercolonialaffairs.Politicalindependence (forgoodreason)brokethatestablishedhistoryofinstitutionalcontrol. Thepresidentinheritedthesepowers,eventhoughtheCongresshadultimatepower.The oldtraditionsofapprovalsandpracticesinheritedbytherelevantbureausofthegovernment havingsupervisionovertheseissuesfromcolonialtimeshadsincevanished.32Thedisruption createdbytheharshwaryearsofoccupationerasedquicklytheinstitutionalmemorythatwas stillinplace.

32

TheWorldWar,incidentally,brokethattraditionalongwiththerecordsofgovernment,soeventhatbecameless important.Moreover,timeandnewpracticeshadsupplantedtheold.

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TheConstitutionalprovisionsprovidedtheprotectivewallagainstforeigncapital.With independenceandtheabrupthistoricalbreakprovidedbythewaryearspriortoindependence, thepresidentinheritedthehugepowersrelatedtothedispositionofpubliclandsandnatural resourcesforthecountrysexploitation.Publiclandscoveredthoseforgrazingandfor agriculturalpurposeswhilenaturalresourcescoveredthoseforforestry,forfishingrights,and fortheexplorationandexploitationofmineralwealth. Iftheconstitutionhadallowedforeignerstoparticipatemorefullyintheseactivities,the chancethatnationallegislationwouldhavefocusedondefiningrestrictionsontheexerciseof theserightsbyforeignerswouldhavebecomeamatterofearlypublicduty.Becauseofthe specificrestrictionsintheconstitutiononforeigncapitalparticipation,itbecamecustomarythat theexerciseoftheserightsweregrantedonlytoFilipinocitizens(andtosomeextent,to Americancitizensundertheparityrightsbutonlyforalimitedtime).ForthoseFilipino recipientsoftheserights,theproblemofmoralhazardexisted.Becauseoftheprivileges conferredbytheconstitution,itwaseasiertoskirttheobligationsimpliedbythegrantof exploitationrightsonlytocitizens.Forhowcouldoneexplain,forexample,therapid denudationofthecountrysforestcoverinareaswhereforestryconcessionshadbeengranted toconcessionairesduringtheearlydecadesofindependence?Theseweregivenmainlyto Filipinoindividualsandcorporationsthathadaccesstopresidentialfavors. Eachpresidentoftheyoungrepubliclearnedthepowerofthepresidencythroughthe exerciseoftheawardprocessinvolvedintheserights.Thepresidentialprerogativetoapprove contractsforthestategavethatofficeenormousclouttoraisefundsforpoliticalandother purposes.BecausetheawardsweremainlytoFilipinocitizens,thepowerofthepresidencyto makemajorawardstocronies,tobusinesscontacts,tospecialrelations,andtopoliticalallies wasamonopolyofpowerthatonlythepresidentcouldexercise.Thesetypesof accommodationswerenotfullyaccountedforbecausepresidentialapprovalswerenotlistedin publicgazettesthatgavefulldetailsofwhogotwhatandinwhatspecificsinthevarious importantbureausofthegovernmenttheBureauofLands,theBureauofMines,andthe BureauofForestry,forinstance.Thegrantingofsmallforestryconcessionsbegantomakea markintheeconomicstatisticsofthecountryintermsofthegrowthoflogexports,for instance,andthesebeganfromtheearly1950s.Thegrowthofthedomesticeconomyalsoled tothedispensingoflargetractsofopenlandsforfarming,grazingandthelikeandshorelines forfisheriesrights. Thus,cronycapitalismandotherdispensationsofpowerrelatedtothepublicwealthwas notapracticethatcouldbemainlyassociatedwithMarcos.Itwasasyndromethatcouldbe tracedtoallthepresidents.ItmighthavebecomemorepatentlyobviousinthecaseofMarcos becauseofhislongruleandtheabsolutepowerthatheexercisedundermartialrule.Andit wouldbeagrandstorywhenthesepracticeswereallfullyaccountedfor.Therecordsofpublic officeshoweverarenotwellorganizedbecauserecordkeepinghasnotbeenawelldeveloped artinthenewrepublic. Athirddevelopmentarisingfromtheseconfluenceofforceswastheunintendedalliancein theeconomicfrontofthoseopposedtoeconomicreformsbecauseoftheirvestedinterestsand thoseothersforpurelyideologicalreasons.Theoligarchicandmonopolisticintereststhat benefitedfromtheprotectivesystemofindustrializationandthosebenefitingfromvarious awardsarisingfromtheuseofresourcesinthesectorsinwhichforeigncapitalwasrestricted

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opposedthesereformsforobviousreasons.Theideologicalcriticsareamixedassortmentof reformistsofdifferentpersuasions.Somehavebeenalliesofconvenienceforaslongasithas beenuseful.Theseincludetheideologuesofvariousmovementsnationalists, progressives,communists,etc.Inthepast,someofthesecriticswereintheunderground whileothersremainedintheopen.Today,mostofthemareinthemainstreamandbelongto variouspoliticaloppositionforces. Thisallianceofconvenienceprovidesaheavyforceofresistancetoreforms.Therichand powerfuloligarchsandbusinesseshavecontrolofthepublicmediaandotherpublicforums, includingvariousoutletsforopinion.TheyalsohavetheresourcestolobbyCongress.Moreover, manymembersoftheCongresscomefromthesesectors.Theyhavecontrolandinfluenceover thepressinmanywaysthroughownership,advertisingmoney,anddirectlobbyactivities. Theyhavethemeanstocreatenoiseagainstreform. Finally,theimpactoftheseprovisionsonthefinancialstructureofthemanycompanies thatderivedthebenefitsfromtheindustrialprotectionsystemhastobeemphasized.Theseare companiesthatbecamehighlyindebtedbecausetheyessentiallylackedthecapitaltofinance theiroperations.Initially,creditaccesstogovernmentfinancingwasusedtocounterpart whateverequitytheycouldcontributetobuildtheirenterprises.Theyalsomainlydependedon theprofitsthattheprotectionsystemenabledthemtoamasstopayofftheirdebts. Thedemandfordomesticcapitalfinancetobacktheseindustriesoftenturnedtowardthe resourcesmadepossiblebythegovernmentfinancialinstitutions.Therequirementsofcapital investmentswhichoftenmeantforeignexchangeresourcesforthepurchaseofimported machineryandrawmaterialinputsledtoademandforforeignborrowing.Thegovernment financialinstitutionsprincipallytheDevelopmentBankofthePhilippinesandthePhilippine NationalBankborrowedfromtheworldscapitalmarkettofinancetheserequirementsof domesticprivateenterprisesfortheirrequirementsofcapitalandrawmaterialsinputs.Evenif theprotectivesystemoftenenabledtheseenterprisestogenerateinitialprofitspartlyto financetheseinvestments,amajorcomponentwasdependenceonborrowedcapitalfrom externalsourcesfromsuppliercredits,fromexternalfinancialinstitutions,andfromother foreignprivateinvestorsprovidingminimalequitycapital. Thesameprovisionsoftheconstitutionmadeitdifficulttopromoteindustriesthatwere morecompetitiveintheinternationalmarketbyreasonofbeingnaturalresourcebased.These includedplantationcropsforcommercialexports,treeplantations,agriculturalexportcrops, nickel,copper,andsteelmaking.Theseweremajorprojectsthatthegovernmentcould abundantlypromoteinwhichforeigncapitalwouldbeinvolved.But40percentmaximum equityparticipationmadeitdifficulttofindtherightforeignpartnersalthoughthereweremany Filipinobusinessmendependingontheiraccesstofavorfromthepresidency,accessto domesticfinance,andotherkindsofincentiveswhowerewillingappointeesfortheprivilege. Manyprojectsthatthegovernmentgotinvolvedinwerethereforehighlydependenton debtcapital,poorlybackedupbyequitycapital,andhadnodirecttechnologicalanchoron whichtobuildtheirindustries.Asaresult,manyoftheattemptsinthesefieldsbecamedifficult topursuetowardsuccess.Thelargeindustrialprojectsthesocalledtenlargeindustrial projectswerethemselvesinhibitedfromseekinglargeparticipationofforeignequitycapitalby virtueoftheserestrictions.

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Ateverystep,theindustriesbecamedependentongovernmentsupportforfinancingand protectionfromcompetition.IftheconstitutionhadinsteadallowedCongresstolegislatethe restrictivepolicies,adjustmentsinthoseprovisionswouldhavehappenedsoonerasmistakesof policywerediscovered.Theparticipationofforeigncapitalwouldhavebeenliberalizedalong timeago,allowingthePhilippineeconomytoproceedalongapathoflesseconomicdistressand moreefficiency.Itwouldhavecreatedamoreprosperousclimatewithitsattendantbenefitsin termsofexpandedoutput,employment,andtradepotentials.Asitturnedout,manyofthese venturessufferedandhelpedtobringdownthenationsmacroeconomicfundamentals. Thisisonereasonwhy,inassessingtodayseconomicproblems,theremovalofthe restrictiveprovisionsonforeigncapitalinthecountryspoliticalconstitutionrequirestheserious attentionofeconomicreformersinthecountry.Thelargerpresenceofforeigncapitaltodayin thedomesticeconomyhasmadeitmoreresilientbecauseenterprisesarebettercapitalized.In thepast,alotofinvestmentsintheindustrialfieldforinstancethosethatdealtwithelectricity generationwerecategorizedasbelongingtopublicutilities.Whenbyspecificrecognition,the governmentmadeitclearintryingtosolvetheelectricitypowershortagethroughlawthat electricitygenerationwasnotapublicutilityperse,thecountrywasabletobringinenormous foreigncapitalinthatsector.

C.

ERRORSOFTHEPOSTMARCOSTRANSITION

Ifausefulthreadiscutoffatapointwhenitstillhasawaytogoforthejobtobefinished,who istoblametheonewhospunthethreadortheonewhocutitoff? ThisisthedilemmaconcerningthejudgmentofthepostMarcostransitioninthe Philippines.TherewereanumberofimportantcontributionsthatMarcoshadundertakenwhich couldhaveenhancedthenationseconomicdevelopmentbutwerediscontinuedafterhisfall. ThepostMarcostransitioninsomepartwasmainlyabouthistoricaldiscontinuityratherthana seamlesstransferofcapablepeoplewithinthereinsofthegovernment.Someofthe discontinuitywasintheformofmistakesofinordinateproportions.Insteadofcapitalizingon thefoundationsalreadylaidandtheenormousopportunitiesmadeavailable,therewereefforts toconsciouslyturnawayfromtheprogramsthatMarcoshadstartedwhichwereleftin midstreamashefellfrompower.Theseweredoneforreasonsofbadfeelingsandpolitical reprisalorbacklash.Thiswasthedangerofaturbulentsuccessionthatwasthehallmarkofthe transferofpowerandwhichsufferedtheinexperienceofthesuccession. Therewassomelegacyfromvariousinfrastructureachievementsthatwerenotfullyused becauseofthetransferofpower.Howmuchtheeconomycouldhavetraveledforwardifsome ofthemajorprojectswerefullyharnessedbythesucceedingleadersremainsamajorissuefor speculation. ButMrs.CorazonAquino,whosucceededMarcos,wastooinexperiencedandemotionally affectedbyherpersonallossduringthemartiallawyears.Shehadintendedtodowellandin someaspectsoftheeconomy,shedid.Sheowedmuchtotheenormouslegacyinpublic infrastructureintransport,telecommunications,andirrigationandpublicservicesinvestments thatMarcoshadundertaken.Onherown,sheadvancedthetradeliberalizationprogramthat gotstalledwhencrisishittheeconomy.Butingeneral,shefailedtotakeadvantageofthe importanteconomiclegaciesthatshehadinheritedfromherpredecessor.Hadshebeenmore capableofunderstandinggovernanceofadividedcountry,shecouldhaverestoredeconomic

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andpoliticalstabilityquickly.Butbecauseofthosepoordecisionsasleader,sheinvitedpolitical instabilityduringherterm.(Forone,herweakleadershippostureservedtoencouragemilitary adventurismthroughattemptedcoupsforpoliticalpower.) Themistakesthatshecommittedcouldbegroupedgenerallyintofourareas:(1)failureto achieverapidnationalreconciliationthatwasessentialinrebuildingthenation;(2)outright condemnationofthemanycontributionsininfrastructureandinstitutionbuildingmade emotionsdisplacereason;(3)displacementofthebureaucracyofgovernmentthatwasrunning thecountryseconomicandsocialprograms;and(4)thedissipationofthehugepoliticalcapital arisingfromtheEDSArevolutionandhersuccessintopplingMarcos.Todealspecificallywith thesemajorareasoffailureisnotthefocusofthispaper.Butafewcommentsareneeded simplytoillustratethepoint. (1)Failuretoachievenationalreconciliation.TheideaofavengingMarcoswassostrong thatthesucceedingleadershipforgottostressreconciliationandnationalunitytoachievequick closuresothatthenationcouldreturntothebusinessofnationalprogress.Thedominantview wastomountcasesagainstMarcosforplunderandcorruption.Intheend,thoseinchargeof theprocess(likethePCGG)wouldenlargethenetworkofassetsequestrationsforthestate ratherthannarrowthemdowntothemostimportantandfeasibletobringtoclosure.Itisnow overtwodecadesandfrozeneconomicresourcesthatcouldhavebeenrecirculatedwithinthe economycontinuetobedissipated.ThestoryofthePCGGrepresentsasadstoryofscandals arisingfromthemismanagementofsequesteredresourcesratherthanbringingthetaskof settlingcontroversialissuestoacompletefinish. (2)Nuclearpowerplant.Theabandonmentoftheplantocommissionafinishednuclear powerplantwasagreatnationaltragedythatbroughttothenationamajorpowercrisiswhich delayedthecountrysforwardmotionbyatleastsixyearstoadecade.Thatwashowlongit tookPresidentFidelRamostobringtheelectricitycrisistowardasolution.Today,thecountry continuestosufferthehighestelectricitycostsamongcountriesintheEastAsianregion. Definitely,suchhighcostsreflecttheimpactofthisbaddecision. Inthemeantime,thecountryrandownitsabilitytogeneratepoweratatimewhenitcould havemovedforwardtowardgrowthduringatimewhenSoutheastAsiawasgettingmassive flowsofforeigncapital.Thecostofthisbadpoliticaldecisionhadanotherdimension.Thenation wasforcedtopayforproducingnothingamortizationonforeigncapitalthatthenationhad toamortize.Thisconclusionwillsurviveinthelongterm,evenwhenwetakeintoaccountthe nucleardisasterthathadhappenedinJapanafterthetsunamiof2011thatemphasizesnuclear safetyissue. Thisdecisionnottocommissionthenuclearpowerplantasameansofpunishingthe Marcoslegacybecauseofthepriceandcostoverrunsoftheprojectwastobringtothenation theburdenofhighenergycoststhatcontinuetothisdaybecauseitdislocatedtheenergy planninginthecountry.Theperiodicbrownoutsthathappenedsoonafterduringtheelectricity crisesoftheearly1990swerejusttheinitialcostsonthenationsproductivity.Theadded financialcostofbuildingnewpowerplantsandtheresultingcontractsofpurchaseofelectricity oncetheprojectswereputonstreamputthecountryatthehighestspectrumofpowercostper unitwithintheEastAsianregion.Theworstpenaltywastoimposeonthenationthecostof amortizingaplantofmultibillionsizeovertheyearsforzerokilowattofpower!Thesecond

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penaltywastheaddedcostofhurriednewinvestmentsinemergencygeneratingcapacityto replacethegeneratingcapacitythatwasnotputinplace. Athirdpenaltywasthefailuretoseizeatechnologicalleadforthenationinanimportant areaofindustry.Insteadofbecomingatechnologicalleaderinthenuclearfield(therewere manyengineersthatweretrainedforthatprojectwhowerereadytoassumethegovernments runningofthenuclearplant),thecountrylostalltheseimportantskilledmanpowerandbrains toothercountrieswhoeventuallyhiredthem.Still,therewereotherprojectsandsector programsthatwereabandonedandconsideredtobepartofthewastefularithmeticthatwas dumpedonMarcosforhavingstartedthem.Unfortunately,thosewhodiscontinuedthem preventedanybenefitsfrombeinggenerated,thusmakingthewasteevenlarger.Thus,itwas thenationthatpaidahighpriceforthefailuretocommissionthenuclearpowerplant.33 (3)Bureaucracy.Thebiggestblowofthedisorderlytransitionintherunningofgovernment programswasthedamagetoinstitutionalmemorythatfollowedinthechangeofgovernment officialsatthetop.Theblanketremovalofseniorgovernmentofficialsrunningimportant ministries,bureaus,andagenciesledtothedisruptionofgovernmentprograms.An implementationvacuumwascreatedasinstitutionalmemorywaserasedbychangesin personnelwithnopreviousconnectionstothegovernmentprograms.Thiscertainlyhadan impactonthequalityofgovernance.AseriousdamagewasdealtontheCareerExecutive Serviceaprogramoftrainingtheseniorbureaucracyinthegovernmentthatwaswellonthe waytowardimprovingtheoverallrunningofthevariousgovernmentprograms.Thiswasfurther madeworsebythepoliticizationofmanyseniorlevelpostsinthegovernmentasaresultofthe programsandpoliciesthatneglectedthecareerserviceandeventuallythecivilserviceprogram. (4)Wasteofpoliticalcapital.OnetellingaspectoftheinexperienceoftheAquino governmentwasthewasteoftheenormouspoliticalcapitalthatthecountrygainedwithher ascensiontooffice.Astriumphantnewleader,shewasunabletoharnessthegoodwilland politicalcapitalthatsheherselfhadacquiredinheroverthrowoftheMarcosgovernment.That wouldhaveenabledhertojumpmanystepsaheadinrestoringtheeconomybackonthepath ofeconomicgrowthaftertheeconomiccrisisyearsofthe1980s.Thepublicdisplayof disagreementsintheopenofthevariousministersandthelackofcohesivedirectionthatthe presidentgavetothemlednotonlytoamisdirectionofgovernmentaction.Italsocreateda lossofsupportfromexternalsources. Theinternationalcommunitycouldhavebeenmobilizedtoprovidethehelptoweatherthe financialstressesthatwerefacedbythenationatthetime.Butmisstepsmentionedabove madesuchacooperationandsupportlesspossible.Herfailurecontrastssharplywiththe mannerbywhichFidelRamoswasabletomovethecountryquicklyforwardbydealingwiththe energyproblemofthe1990sandintroducingindustrialandeconomicreforms.

33

Althoughtheissueofsafetyofthenuclearpowerplantwasusedasareasonforthedecision,muchoftheevidence forthiswasenhancedlargelybythepoweroftheantinuclearlobbyintheUS,whichFilipinoleadersaccepted.Yet,a publichearingontheissueofsafetyhadbeenconducted,infactwithformerSenatorLorenzoTanadaaschairmanof theinvestigationpaneltohearallviewsonthematter.

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AlltheseaspectsofthedysfunctionofthepostMarcostransitionneedtobefurther commenteduponbyanalystsandhistorians.Theeconomicandhistoricalrecordswillhavetobe studiedbetter.Often,whenwelookbackontheeconomicrecord,toomuchblameand emphasisismadetovilifytherecordofMarcosbutnotontheproblemsoftheimmediatepost Marcostransitionthatwasasmuchacauseofthecountryspooreconomicrecord.

V.LEGACY:SUMMARY
ThebalancesheetforMarcosisthatheleftalegacythatwassignificantlypositive.Yetinthe writingofhistory,ithasbeenmadetolookverynegative.Perhaps,itcanbearguedthatthat positivelegacywasreducedbyhismistakesandshortcomings.However,therewasstillasizable economiclegacyleft. Certainly,someoftheblamemustfallonthosewhoimplementedthepostMarcos transition.Thosewhosucceededhimfailedtocapitalizefullyandeffectivelyonwhathehadleft behind.Thelargerblameforthatfailuretoseizeonhiseconomicaccomplishmentswasthatof hisimmediatesuccessors.Althoughshewasgenuinelysincereandwellintentioned,Corazon Aquinobycarelesschoice,lackofexperience,orsheerlackofunderstandingfailedtoturn opportunityintomissedchances.ThroughapolicyofdenialofMarcossaccomplishments, vindictivenessandthemagnificationofhisfaults,thesuccessorgovernmentmadewrong decisionsthathaveledtothecripplingofthenationsleapintheeconomicrealm. IfMarcoshadleftviaanorderlytransitionofpower,mostofhisaccomplishmentswould havehelpedmovethecountryforwardwithoutthecountryhavinglostanymomentum.Infact, hisaccomplishmentscouldhavebecomeafoundationforthatnewmomentum. Inthefinalaccounting,theeconomiclegacyfromMarcosisverypositivebutitwas lessenedduringthetransitioninleadership.Thediscontinuityofthetransitionledtomany problemsthatwereblamedconvenientlyontheshortcomingsoftheMarcospresidency, whereasinfactsomeofproblemstocertaindecisionstakenduringthetransition.Toanalyze manyofthesewillbethetaskoffutureeconomists,socialscientistsandhistorians.

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