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BUSINESS

Domesticindustry:hownationalismwith
blindersfailedus

READOTHERNEWS

CROSSROADS(TowardPhilippineEconomicandSocialProgress)ByGerardoP.Sicat

watergatewrote:

(ThePhilippineStar)UpdatedOctober24,201212:00AMComments(1)

READERCOMMENT

Theabjectfailureofthe
Philippinestocapitalize

Morethananycountryatthebeginningofpoliticalindependencein1946,thePhilippineswaspoisedto
becomeoneofthemostlikelyeconomicsuccessstoriesinEastAsia.Althoughitsufferedimmensely
fromWorldWarII,nocountryhadaninstanteconomicrecoveryprogramreadilyavailableundersound
financing.

onagoldenfuturethat
waseffectivelyhanded
tothiscountryona
silverplatterbythe
Americans,canonlybe

Moreover,thePhilippineshadahighlyeducatedlaborforceamongthecolonizedregionsintheEast,the
legacyofaprogramofuniversalfreeelementaryeducationandagenerouspublichealthpolicyenforced
duringthecolonialgovernment.MostFilipinoshadgonetoelementaryschoolatleastandalarge
proportionofthelaborforcehadgonetohighschoolandbeyond.Perhapscomparedwithanyothernew
country,therewereproportionatelymoreliteratecitizensthananywhere.
Poisedforrapidrecoveryfromwardamageontheroadtodevelopment.Thetraditionalexportsof
sugarandcoconutoilproductswereassuredarichmarket,eventhoughatquantitativebutsizable
quotas.Thesehadbeenthemainstaysofthenationsexportrevenuesbeforethewar.Moreover,a
preferentialtariffaccesstothemosteconomicallypowerfulcountryatthebeginningofthepostwar
periodfor25yearsassuredthePhilippinesawindowofgrowthfornewexports.
Whatagiftintermsofmarketaccessthatwas!Eventhoughthiswasabilateralpreferentialtrade
agreement(meaning,AmericanexportstothePhilippinesalsoenjoyedpreferences),thisarrangement
wasunique.Noothercountryhadthatreadyaccesstoahighlyindustrialandeconomicallypowerful

regardedasthoroughly
reprehensible.
Reply|ReadOtherPosts
Indolence,ignoranceand

ambivalenceprevailas
SHARE
keyconsiderationsin
facebook
Filipinoshavingallowed
themselvestobe
exploitedbyarelative
yahoo!buzz
handfulofcitizens
comprisingtheruling
0

eliteagroupthathas

beenallowedto
ARTICLETOOLS

monopolizeindustry,
postacomment
politicsandcircumvent

countrymarketatthetime.

theruleoflawfor
printerfriendly
personalgain,whilst

ItcouldbesaidthatthatagreementwasearnedatthecostofgivingAmericancitizensthesamerights

continuingtoengorge
emailarticle
themselveswithpower,

asFilipinosundertherestrictiveeconomicprovisionsagainstforeigncapitalinthePhilippine
Constitutionduringthe25yearadjustmentperiod.Inaddition,thatquidproquoalsobroughtinawar
damagecompensationprogramof$620million,whichwasaverylargesumthen.(Wehavetomultiply
thisby15toscaleuptotheUSdollaroftoday.)

selfaggrandisementand
Advertisements
riches.
Filipinoshavenoone

otherthanthemselvesto
Inadditiontothese,theexpendituresoftheUSmilitarylingeredfordecadesinthecountrywiththepresenceofmilitarybases
blameforthefactthat
employingalargelaborsegmentandprocuringlocalgoodsfromthePhilippineeconomy.Theinitialoutlaysattheendofthewarwere
thePhilippinesisnow
sizable,addingfurtherdollarinflowsintotheeconomy.
littlemorethanalawless
economicbackwater,
Wedenyourselvesthegoldengift.Asanewnation,ourpolicyactionsdeflectedusfromtakingadvantageoftheuniquesituationthat
plaguedbyendemic
wasourgreatedge.Wefocusedindustrialandeconomicpoliciesthatdistancedusfromexploitingthegoldengift.Themeasureofthat
denialcanbeassessedbylookingatwhatourneighborsdid.

corruption,incompetent

andequallycorrupt
TheycateredtotheUSmarketevenwithouttheadvantagesthatwehadinthecuspofourhands.HongKong,SouthKorea,Taiwanand
securityforces,judiciary,
SingaporedidnotenjoypreferentialtradebenefitsyettheyprogressedbyproducinggoodsfortheAmericanmarket.HongKongand
politiciansandGOCCS.
Singaporesimplyhadfreetradepolicyastheirweapon,whileSouthKoreaandTaiwanusedeconomiccontrolstofavormainly

industriesthatexportedtheirproduce.

Wecouldhavedonethesameourselves.Infact,wehadagreatheadstart

Wecouldhavedonethesameourselves.Infact,wehadagreatheadstart
overthemwhichwedeniedourselvesthroughadifferenceinoutlook.We
installedimportandexchangecontrolstopromoteindustrialization.We
devisedpoliciestopromotedomesticindustriesproducingonlyforthehome
market.
Whatwechosewasanarrowpathoffavoringourcitizensandlimitingthe
roleofforeigners.Insteadofallowingforeignersaspartnersinenterprise,our
leadersenactedrulesandlawsthatexpandedourrightswhiledenyingthem
thesame.
Therulesofexchangeandimportcontrolstypifiedthesemeasures.They
extendedthegrantofinvestmentincentivesinthecreationofindustrial
enterprisesmainlytocitizens.Thelawonretailtradenationalizationthat
Filipinizedretailtradedistributionisanotherexample.Thatlawclosedthedoor
towardtheroleofforeigncompaniesintheretaildistributivetrades.
Americaninvestmentsdeclineathome.Americaninvestmentsunderthesecircumstancescontinuedtocometothecountrybutthese
werethefirmsthatsimplysoldtheirwarestoforeigners.Eventually,wewouldloseoutinattractingmoreAmericancompanieswith
technologicaledgeandwhichsoughtproductionsitesfortheirworldwidemarketsthatbroughtthemcostadvantages.
WeencouragedmainlythoseAmericanindustriesthatproducedforourowndomesticmarketneeds.Thus,wemainlyhadthesame
industriesthatoperatedinthecountrybeforethewar.ThecountrygotAmericanbrandsalthoughundermuchmorelimitedmeans
toestablishinthePhilippinemarket.
Socameinassemblyindustriesthatmetdomesticdemandforcarsandtrucks,forhouseholdapplianceslikerefrigeratorsandair
conditioners,forprocessedfoods,forpersonalgroomingandcleaning,formedicines,andforsundryconsumeritemsthatwewereused
to.Wecontinuedtoenjoy,throughlicensingarrangements,consumergoodslikeCoke,Pepsi,bubblegum,popsongsandothers.We
evenimitatedthemtoproduceourownsubstitutes.Thepetroleumrefiningindustriesbuilttherequireddomesticneeds,butnomore.
WeremainedsteadfastinclingingtoAmericanproducts.Hollywoodcontinuedtomesmerizeus.
Inreturnforourinwardlookingpolicies,foreigninvestorscededthedomesticmarketforPhilippineenterprisestocatertoandnomore.
Thus,therestrictionsweimposedonforeignenterprisesathomewerematchedbyseveremarketrestrictionsthattheygaveto
Philippineenterprisesthroughlicenses.
ThesearrangementsmadesomeFilipinoindustrialistsrichandcomfortable.Theyhadmonopolyoverawiderangeoftheindustrial
market.TheyderivedcontinuingprofitsfromtheirlicensingagreementswithAmericanenterprises.Butthelimitedopportunitiesthat
thesebroughttoAmericanenterprisesalsomadethemloseinterestinthelimitedPhilippinemarket.Theysimplymaintaineda
contentedpresenceasthedomesticeconomyslowlyexpanded.
OurEastAsianneighborsgetAmericaninvestmentsinstead.Whatwefailedtocapitalizeonwaswhatourneighborsengagedintheir
owndevelopmenteffortsseizedupon.Theyhadenormouslaboravailableatlowcost.TheyusedtheirstrengthsandattractedUS
foreigninvestorstocometothem.
AmericancompaniessoughtinvestmentsiteswithlowproductioncostsandfoundtheseinSouthKorea,Taiwan,HongKongand
Singapore.Later,theseAmericancompaniessoldortransferredtheirfactoriestoreliablelocalsubcontractors.Thiswasagreat
technologicalandbusinesslearningexperiencefortheseAsianneighbors.
ThiswashowtheEastAsianfactoriesproducedthegarmentsandtextiles,householdcomfortsinthehomelikeradios,televisions,and
refrigeratorsandkitchenutensilsfortheAmericanhome.
Asacountry,thePhilippinescouldhaveexploiteditsadvantagedpositionearlyenough.Butdidnotthroughdefaultifnotneglect.
Myemailis:gpsicat@gmail.com.Visitthissiteformoreinformation,feedbackandcommentary:http://econ.upd.edu.ph/gpsicat/

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