In the 1950s, the Philippines stood poised for greatness, considered alongside Burma as the most promising economy in all of East Asia. It outshone the trajectories of nations that would later become economic powerhouses – Singapore, Taiwan, Hong Kong, and South Korea. Yet, this early promise tragically faded, leaving the Philippines trailing far behind the remarkable success of its neighbors.
During the initial years of Martial Law, a team of skilled technocrats held a flicker of hope alive. Figures like Alejandro Melchor and Cesar Virata guided the economy, achieving GDP growth rates of 6% to 8% in the late 1970s. But this progress was ultimately derailed. Political shifts empowered a network of “cronies” who seized control of vital industries – coconut, sugar, infrastructure – and began a descent into economic hardship.
A fundamental flaw lay in the Philippines’ inconsistent industrial policy. While the future “Tigers” relentlessly pursued export-oriented strategies, the Philippines wavered between protectionism and import substitution, lacking a clear, long-term vision. There was little pressure on businesses to compete on a global scale, hindering their ability to innovate and grow.
The East Asian Tigers understood a crucial principle: temporary protection for emerging industries, followed by a swift transition to exports. They leveraged a demographic advantage and compensated for limited natural resources by tapping into the vast markets of Europe, North America, and Japan. They focused on labor-intensive goods – textiles, toys, furniture – building a foundation for sustained growth.
The Philippines, however, clung to protectionist measures for too long. Instead of capitalizing on its abundant workforce, the government prematurely invested in capital-intensive industries like steel and shipbuilding. Artificially high tariffs, low interest rates, and an overvalued peso stifled competitiveness, creating industries reliant on coddling rather than innovation.
One economist vividly recalled a debate about these “infant industries,” sarcastically labeling them “Bonjing” industries – perpetually underdeveloped and coddled, like a character from popular comics. The analogy highlighted a painful truth: prolonged protection had bred complacency, not strength.
An even more critical oversight was the neglect of the countryside and agricultural development. An artificially high peso made food imports easy, discouraging investment in the farming sector. Farmers lacked essential infrastructure – roads, irrigation, credit – hindering their productivity and contributing to widespread rural poverty.
Neighboring ASEAN nations like Thailand and Vietnam prioritized their agricultural sectors, while even land-scarce Taiwan and South Korea invested heavily in land reform and rural productivity. The Philippines, however, remained burdened by a feudal land ownership system, suppressing incomes and limiting domestic demand.
The Comprehensive Agrarian Reform Program (CARP) in the 1980s, though well-intentioned, proved disastrously mismanaged. Millions of hectares were divided into tiny, unproductive plots without accompanying investments in infrastructure or resources. The majority of Filipinos who fell into poverty were these newly landed farmers, often worse off than they had been as tenants.
Political instability further undermined economic progress. Frequent changes in leadership, particularly after the declaration of Martial Law, eroded investor confidence. Rampant corruption and “crony capitalism” ensured that economic opportunities were distributed based on political connections, not merit or efficiency.
Even after the restoration of democracy in 1986, instability persisted with multiple coup attempts, delaying crucial private investment. A constitutional provision limiting foreign direct investment (FDI) further hampered growth, allowing Vietnam to attract significantly more foreign capital.
Finally, insufficient investment in both physical and human capital held the Philippines back. While literacy rates were high, the country neglected technical and vocational education, prioritizing traditional college degrees over skills demanded by the market. Infrastructure investment lagged far behind the “Tigers,” resulting in logistical bottlenecks and high costs.
In essence, the Philippines’ failure to achieve tiger economy status stemmed from a confluence of factors: weak industrial policy, political turmoil, corruption, inadequate education, poor infrastructure, neglected rural development, and a flawed agrarian reform program. The success of the Tigers lay in their ability to address these very weaknesses, fostering stable governance, strategic industrial policies, effective land reform, and robust investments in infrastructure and education.
(To be continued.)
