1. the Philippine Economy

8/2/2019 1. the Philippine Economy

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THE PHILIPPINE ECONOMY

Reported by:Randy Adviento


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Predominantly agricultural

During the mid-90's, 46% of the work force was

comprised of those in agriculture, fishing andforestry.

The service industry comprised almost 40% withmanufacturing, construction and mining

employing 15%.


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Philippine Economic

Development Before World War II (1939-1945) the economy of

the Philippines was based on the production andexport of a narrow range of primary commodities,

mainly agricultural and forest products. the United States imported Philippine agricultural

goods and provided the Philippines with mostmanufactured items.

After independence in 1946, the Philippines initiallyremained dependent on free-trade access to UnitedStates markets for its agricultural commodities,especially sugar.


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During the 1950s the Philippines tried to become an

industrialized nation. In the 1970s the government implemented a policy

to encourage export manufactures and foreigninvestment, and the rate of economic growth

accelerated. The countrys foreign debt rose dramatically,

however, and by the mid-1970s the country facedproblems meeting payments on its international

loans. This problem was compounded by a worldwide

recession in the early 1980s.


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The recession resulted in less demand for Philippinemanufactures, and the economy moved into a deeprecession in the mid-1980s.

At this time the Philippine economy also sufferedfrom more than a decade of economicmismanagement under President Ferdinand Marcos,who ruled by decree after declaring martial law in1972.

There was concentration of ownership and control

among the presidents closest business associates,friends, and relatives became known as cronycapitalism.

The system allowed for rampant corruption.


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During the economic recession of the 1980s, manyof the crony enterprises experienced severe financial

difficulties. Economic reforms reduced government intervention

in the economy and stimulated the private sector.

By the mid-1990s the Philippine economy had

largely recovered and was experiencing steadygrowth.

The modest pace of economic recovery wasadversely affected by corruption in government and

a global economic downturn in the early 2000s thatreduced demand for Philippine manufactures by thecountrys two largest trading partners, the UnitedStates and Japan.


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In the early 2000s the government waspursuing economic reforms to help the

Philippines match the pace of developmentin the so-called newly industrializedeconomies of East Asia.


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A. Labor

In 2002 the labor force of the Philippinesnumbered 34.2 million people.

Employment opportunities associated with themodern economy, mostly services andmanufacturing, are concentrated in a few urbancenters, especially the Manila metropolitan area.

Agriculture, forestry, and fishing employed 37percent of the labor force; manufacturing,construction, and mining, 16 percent; andservices, 47 percent.


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Labor Force (2002)

37%

16%

47%

Agriculture, Forestry & Fishing

Manufacturing, construction & mining

Services


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The shortage of employment opportunitieshas resulted in large-scale migrations ofFilipino workers, both sophisticatedprofessionals and unskilled workers, tocountries such as the United States andMalaysia.

Approximately 6 million Filipinos work

abroad.Many of them send a portion of their earnings to

relatives in the Philippines, infusing the economywith a significant source of foreign exchange.


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The migration of vitally neededprofessionals has created a serious braindrain in the Philippines.

The Trade Union Congress of the

Philippines (TUCP) is the largest unionbody in the Philippines, with about 1.5million members and 39 affiliated laborand trade unions

In the late 1990s the Philippines had morethan 8,000 trade unions with a totalmembership of 3.6 million.


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B. Agriculture, Forestry, and

Fishing About 19 percent of the total land area of

the Philippines is arable, or suitable for

cultivation. The most important subsistence crops are

rice, corn, cassava, and sweet potatoes.

Hardwood trees such as mahogany wereonce one of the countrys most valuableresources, but now this resource is severelydepleted.


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Fishing is an important industry in the Philippines. The surrounding and inland seas of the Philippines

yield crab, sardines, anchovies, tuna, and mackerel.

Shrimp, milkfish, and tilapia are raised in artificially

created fishponds, in the fish-farming industryknown as aquaculture.

Shrimp and prawn exports to Japan are a significantsource of foreign exchange.

The pollution of coastal and inland waters anddepletion of fish populations through overfishinghave reduced the fishing sectors productivity insome areas of the Philippines.


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C. Mining

The Philippines has extensive deposits ofvaluable metallic and mineral ores, includingcopper, gold, silver, chromium, lead, and nickel.

Copper is the countrys leading mineral product.

The nonmetallic sector was stimulated by a risingdomestic demand for coal.

The countrys plentiful coal deposits wereexplored as an alternative to costly petroleumimports


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D. Manufacturing

In the 1970s the government created four specialeconomic zones designed to stimulatemanufacturing for the export market.

Industries in these export-processing zones receiveincentives to produce nontraditional (mainlynonagricultural) exports.

The zones have helped to stimulate foreign

investment in the Philippine economy, in partbecause they are exempt from certain taxes andrestrictions on foreign ownership of businesses.

Businesses receive tax exemptions and other

incentives in these zones.


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Nondurable goods such as processed food,textiles, and tobacco products make up thelargest percentage of manufacturing output.

Other major products include refined petroleum,chemicals, construction materials, and clothing.

The Philippines has increased its production of

durable items, especially electrical and electronicequipment and components, nonelectricalmachinery, transport equipment, and furniture.


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E. Services

The services sector includes transportation,wholesale and retail trade, the hospitality andtourism industries, currency and banking, andforeign trade.

Skilled Filipino labor has prompted somemultinational companies to set up serviceoperations in the country to serve consumers inEurope and the United States.


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F. Infrastructure

The infrastructure of the Philippines is inadequate forthe economic development sought by the government,international agencies, and multinational corporations.

Government investment in infrastructure has not keptpace with population growth and modern technologies.

Roads remain unpaved in most rural areas.

Cities lack sufficient public transportation, garbage

collection, energy resources, potable water, andsewerage treatment. Resources for infrastructure-development projects are often limited because of thecountrys huge payments on its foreign debt.


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G. Energy

Since the early 1970s the Philippines has developeda variety of domestic energy resources, includinggeothermal resources, hydroelectric power, offshore

oil reserves, and coal fields Oil was discovered near the island of Palawan in

1976, and commercial production began in 1979.

A natural-gas field off western Palawan was

estimated to contain abundant reserves and heldpromise for future production.


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The major potential of undersea fields inthe South China Sea is diminished by

competing claims from China, Vietnam,and Malaysia.

The Philippine government has alsopursued the development of alternativesources of energy. The Philippines hassignificant geothermal resources.


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H. Transportation

Despite the difficult terrain, the Philippines hasan extensive road system; however, only about21 percent of roads are paved.

The Pan-Philippine Highway, also called theMaharlika Highway, is a system of roads,bridges, and ferries that connects the islands ofLuzon, Samar, Leyte, and Mindanao.

The rail system, concentrated on Luzon, islimited.

A light-rail transit system known as Metrorailwas opened in Manila in 1985 to help reducetraffic congestion.


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I. Communications

The Philippines has 47 daily newspapers. Many arepublished in Manila in both Filipino and English.

TheManila Bulletin, founded in 1900, is the

longest-running daily newspaper. Other large-circulation dailies includeAbante,

People Tonight, Ang Pilipino Ngayon, PhilippineDaily Inquirer, and Tempo.

Some regional publications are written in locallanguages, including Ilocano, Hiligaynon, andCebuano.


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The official Islamic news journal is The Voice ofIslam, founded in 1973 and published in Davao.

Freedom of the press is guaranteed under theconstitution.

The country has an extensive broadcastingsystem, with hundreds of radio stations and

several national television networks


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Factors that Bring About Economic

Growth

Economic Growth

- simply mean increase in per capita income

or increase in GNP. In recent literature, the termeconomic growth refers to sustained increase in acountrys output of goods and services, or moreprecisely product per capita.

Economic Development

- is the development of economicwealth of countries or regions for the well-being of their inhabitants.


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Keynesian Approaches

2.) Government-Financed Investment

1.) Savings and Investment


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Market-Based Approaches

4.) Trade Liberalisation, Capital Mobilityand Exchange Rate Policy

3.) Macroeconomic Stability


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Economic Growth


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Economic Growth


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Benefits


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Improvement in welfare

Pensions

Benefits

Support Housing

Infrastructure


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Costs


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Environmental Impact

Negative Externalities

Pollution

Environmental Degradation Non-renewable resources


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Opportunity Cost of Growth

Resource allocation

Consumer Goods?

Capital Goods?


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Models of Development


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Models of Development


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Rostow - Stages of Growth


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Criticisms:

Too simplistic

Necessity of a financial infrastructure

Need for other infrastructure Efficiency of use of investment

Will economies learn from each other?


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Market Based


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Problems:

Existence of market failure

Problems of lack of infrastructure

Problems of equity in allocation


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International Dependence


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Criticism:

Offers causes but no solutions


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Structural Change


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Lewis 2 Sector model

Agriculture - low value added

Industrial sector - higher productivity and wealth

generation


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Criticisms:

Labour re-allocation not always productive

Wealth not re-invested locally

Wealth goes abroad Imperfections in the labour market

Importance of complementary policies by all countriesinvolved

Documents

1. the Philippine Economy