“Strong Republic”: An Analysis of the Philippine Political Economy in the context of Developmental State Model

 “Strong Republic”: An Analysis of the Philippine Political Economy in the context of Developmental State Model
August 7, 2009

Cyl Bryan A. Bagadiong, Developmental Politics, Meiji University Graduate School of Governance Studies

I. Abstract

The present political economy of the Philippines, dubbed as “Strong Republic” and inaugurated last July 22, 2002, reinforces its being as a mixed economy. But documentary evidences show that the Developmental State Models of the Asian Miracle Economies greatly influences the present economic doctrine of the Philippines that also serves as its guiding political ideology.

However, before one can conclude that it might as well as be a developmental state model especially if viewed upon the four thematic elements that this paper came up as viewing lenses, “Strong Republic” put in the middle of its strategy the Human Development Concept that neither of the developmental states had. While five years empirical data shows that the model works, it begs to ask the question, is it sustainable?
II. Introduction

The Philippines is at war. Its people are in revolt and no other than but the government called for the revolution. But unlike other typical warfare, this one doesn’t involve an enemy-state but nevertheless it is geared against an enemy of the state and its people.

This ongoing war will be costly, slow and painful. But unlike all other war, it does not call for the destruction of life, but the building of life. This is the Philippines’ war against Poverty.

In 2002, in the State of the Nation’s Address (SONA), this war had been declared by the President herself. She outlined the overarching goal for Filipinos of our generation: To build a “Strong Republic” (Philippine Information Agency 2004). She declared that the Philippines had been rent by political subdivision, self-interests and unfulfilled potential. As the country takes one step forward, it finds itself two steps backwards. Thus, the president laid her vision of seeing the country liberated from the grip and greed of the past. She declared that the only way of doing this is through a revolution in the way the people think, and in the way the government does its politics and economics. Therefore, this revolution must put first in its center commitment to reforms and putting the people first. This declaration of building a “strong republic” essentially became the template of the present Philippines’ political economy which is now the subject of this paper’s conceptual and evaluative analysis.

This political economy, known in the country as “Strong Republic” model, has the shadows and influences of the “Developmental State” model as I will try to point out in the later stage of this paper. We might see that there are elemental similarities between the “Strong Republic” model and the “Developmental State” model of political economy such as, but not limited to, the requirements of structural reforms, involvement (or intervention) of bureaucracy in a plan-rational economy, the requirement for the society at large to provide its unequivocal commitment to its vision of development goals (embedding), and the necessity for it to enhance the power of market economy towards its economic goals.

However, unlike the “developmental state”, the country’s political economy has also a distinguishing difference from the former. It put alongside economic development with social development. It puts “people’s first” alongside “business first” not putting people last and profit-first or vice versa. Its economic structural reform is not centered on the high-speed growth industrial sector that fuelled the developmental state models but on human-capitalized “service industry sector” and “value-added production sector”. But evidently, the present political economy of the country exhibits the strong influence of its neighboring “economic miracles” but with its unique Filipino values.

In short, the present Philippines political economy is not a carbon copy of a proven efficient political economy of its neighboring countries and western influences, instead, it comprises of lessons learned from its teachers and its experience of boom and bust pasts. It looks to its future by capitalizing from its pasts, hoping that it will never commit the same mistakes again, thus, it is a “developmental state” ex-ante.

But what is a “Developmental State”? What are the distinguishing features of a developmental state? In that perspective, is the Philippines’ political economy a developmental state, a hybrid model, or entirely indigenous to its society? In the context of developmental state, how shall we view the Philippines political economy? Is developmental state suitable for the Philippines?

These are the questions that this discursive paper wishes or attempts to answer. In my limited capacity, I wish to attempt to dissect from limited information available and to paint from my limited stock knowledge the political economy of the Philippines, my country. However, this analysis will be confined to the four primordial elements or features of a developmental state. Based on those elements, I have subdivided this paper in five chapters analyzing the country’s political economy based on that developmental state context.

First chapter (The Developmental State) will discuss the working definition of a developmental state, deriving concept from various authors that had previously exposited the concept of developmental state and the likes. Second chapter (Philippine Political Economy in the Context of Developmental State) will discuss the Philippines political economy viewed from the four primordial elements of a developmental state. Third chapter (Towards a New Political Economy of Strong Republic) will outline the student’s observations, derivations, and the theoretical description of the above-discussed political economy from the foregoing discursive analysis and the last chapter (Summary and Conclusion) will summarizes and lay s out the conclusion of this paper.

Suffice it to say, this paper is purely an academic discourse, as in the course of the analysis, there are various limitations that this student has to contend with. The lack of a comprehensive data, thus relying only on second-hand data, greatly affects the legitimacy of this work. Second, this analysis is being made on the perspective of my educational background – a student of political science and of laws. This student’s knowledge on sociology and economy is so limited that this incapacity might undermine the exhaustiveness of the analysis. It is therefore suggested that the Philippines political economy be also viewed on those latter’s perspective as the result might be different if seen on those lenses.
III. The Developmental State

The concept of developmental state attempts to explain the economic miracle of some of the countries belonging to the North East Asia. From the seemingly hopeless economic slumber to the sudden rapid and miraculous economic growth of Japan, South Korea, Singapore and Taiwan in early 1960’s to late 1980’s (Amsden 1989, Johnson 1982, Deyo 1987, Wade 1990) and the sudden adoption of the same economic model by Malaysia, Vietnam, China and Thailand in early 1980’s to late 1990’s (The World Bank 1991) had awed so many academics and economists. Thus, these academics and economists rushed to explain this “miracle” by coming up with an economic model of a state that forms now the present conceptual framework of the developmental state.

So what is a developmental state? Developmental state may refer to the mixed breed between structuralism and neo classical theory of economic development. Developmental state may specifically refers to the economic industrial policy that had been adopted by Japan during its post-war rapid industrialization. It is characterized by industrial policies typified by competitive industrial structures deployed through an industrial institution of a close cooperative government-private partnership for the purpose of harnessing the market’s mechanisms in the attainment of its economic goals in a democratic setting. (Johnson 1982). It may also describes the Taiwan’s and Singapore’s model of development where a highly meritocratic bureaucracy coordinates to the private sector the government economic policy through a closed and institutionalized policy interfaces wherein the market is shaped by its elite bureaucrats with the abatements of state intervention. (Amsden 1989, Deyo 1987). These industrial policy institutional interfaces are embedded within the system as politicians allowed the bureaucrats to rule while the former’s reign. (Wade 1990, Deyo 1987)

Premises above, I wish to articulate on my own definition viewing developmental state as the political economy of state committing itself, over and above anything else, to economic development through economic strategic structural redesigning (as measured in normative economics) by creating institutional and policy infrastructures characterized by a three dimensional relationships among primary actors (industrialists, financiers and public sector) of the state economy for the purpose of harnessing the powers of market mechanisms towards the economic goals of the state. This rather wordy working definition of mine focuses on the commitment by the state as characterized by focused and planned strategic industrial policies putting priority to the accumulation of national wealth over welfare and social developments. More so, the three dimensional relationships between and among the primary actors of the economy are best described to be on a close cooperative symbiosis putting at the helm the elite bureaucrats while the society allows or purportedly support these symbiosis due to either trust or incentives brought by egalitarian beginnings or actions.

This lengthy and detailed working definition focuses on four thematic elements common across all the ‘developmental states’ which are:

1. Development goals are seen on normative economics rather on holistic developmental goals and are accompanied by the necessary industrial structures formations. This makes the development goals easily measured and benchmarked against other countries and competitors.

2. Although the strategic industrial structures and policies are deployed through a liberalized trade market, there is a selective intervention of state for selected high yielding industries deployed either through legit policies or backroom strategies. Thus, enabling the selected industries to compete globally and optimizing the returns in an otherwise liberalized market.

3. In the attainment of the economic goals, a close, almost consensual, public-private partnership is evident, albeit, it may be gainsaid that not all parties in the private sphere is included. The public sphere is run by independent, autonomous and highly meritocratic bureaucrats who use their inherent powers, or the powers given to them by the politicians, in the attainment of the country’s end goal.

4. Playing the lead and pivotal role, the bureaucracy must acquire legitimacy from the society in the implementation of the strategic industrial policies. This means that bureaucracy must have an embedded autonomy granted upon them by the social ties that binds the state and society. This embedded autonomy will allow the state to implement their industrial policies and mobilizes resources without much opposition from the society.

These four thematic elements are the most common among political economies of the so-called developmental states. Although there are many other complimentary elements that are also indispensable in the pursuit of the high yielding economic policies of the developmental states, the variance among these elements seems to be negligible albeit have vital impact to operationalization of the political economy of these developmental states.

For example of these variance is the noted political institutional structure where the economic policies are deployed. In Japan, it was said to be deployed amidst a democratic and consensual atmosphere (Johnson 1982), whereas, in Korea and Singapore, it was deployed through in a despotic atmosphere due to the prevailing military and dictatorial regime during those times (Amsden 1989) (Wade 1990). This variance may be negligible in the context of our analysis as our center focus is by where and in what way the economic policies are conceptualized, crafted and implemented particularly how the industrial structure had been built and shifted.

And so, due to the limitation of time, space and pages, this paper will have to set the parameters of the analysis on the four basic yet primordial thematic elements of the concept of developmental state model.
IV. Philippine Political Economy in the Context of Developmental State

The present Philippines political economy is the subject of the analytical description of this discursive paper. However, to get the whole picture, there is a need for this paper to also include in its discussion the past movements of its politics and governance as it affects the overall economic health of the Philippines. The discussion will be utterly illogical and unreasonable if we will not trace back the country’s political and economic movements. The value of the present and future political economy of the country actually arises from its past, lest, we may judge the present system and priorities unfairly and find it illogical. In short, for us to make sense of the present, we need to understand its past.

I shall therefore make the analysis of the Philippine’s political economy in the context of the developmental state model base on the four primary commonalities that this study had highlighted in the Third Chapter. From these thematic elements, we can make sense of the Philippines political economic direction and structure; and hopefully provide me enough realization to deduce my next chapter.
A. Industrial (Re)Structuring

Only a minority, and the so-called loyalists, would proffer that the Philippines had its golden years during the period of 1950s to 1960s – the period of rapid industrialization in Japan. Almost all scholars, both foreign and local, would sing in eerie unison that the country’s continuing political and economic stagnation has its roots during that period now known in the country as the Marcos Era (Bello 2004). It would be utterly difficult to find any scholarly literature that contends otherwise. According to Walden Bello, a known socio-economist of the country, the country’s industrial structure during those times is an import-substitution industrialization which bedazzles the entire Southeast Asia as it delivers a 6 to10 percent annual growth rates in industry (Bello 2004, 9). However, the economy ran aground as manifested by significant low growth rates in the late 1960’s. This was attributed to the fundamental structural problem of the narrowness of the market owing to massive income inequality (ibid).

Inequality, in the sense that wealth re-distribution, was hardly noticed by that time due to its rapid industrial growth. Unlike its neighboring “developmental state” countries, egalitarian foundation is necessary to its structural change. While Japan has the common egalitarian beginnings as a consequence of WWII surrender (Johnson 1982, 17-29), extensive and swift land reform in Taiwan and Korea to accompany a nationalist industrialization stance are the twin turbo engines of its social structural transformation geared towards economic development (Islam 2000). True, there was a land reform program then but it miserably failed. The failure is now attributed to its conception. It was conceived not from a developmental stand-point like its counterparts in the developmental state but in the counter-insurgency standpoint (Bello, Kinley and Elinson 1982, 67-99).

In 1970s and in response to the above-mentioned failure, the Marcos Regime deployed another industrial policy grounded on a Keynesian philosophy of demand-led growth model. Counseled by the World Bank to avoid the limited markets for import substitution strategy, Marcos rode the country’s industrial growth to export markets. (Bello, Kinley and Elinson 1982, 67-99). However, unlike Japan’s rapid export industrial growth, this policy was pure rhetoric. The policy resulted only to setting up of few enclaves within a predominantly domestic market-oriented industrial and manufacturing structures resulting to an industry without the required dynamism to propel growth (Haggard 1990).

With rapid increasing unemployment, rapid expanding population and the unfavorable tilting of the Balance-of-Payment (BOP), the next policy of economics of the regime was the Labor Export Policy. The policy aims to address the problems mentioned above; however, a supposed to be temporary solution became a permanent fixture of the economy as administration after administration adopted the said policy up to the present. (Tigno April 2003, 65). In 2006, 8 million Filipinos are overseas remitting $13 billion amounting to 13.5% of the domestic Gross Domestic Product.

In 1980s, a people peaceful revolution took place against the sitting dictatorial regime of Marcos. The people won and ‘democracy’ was restored. With a new government and a massive external debt of $26 billion inherited from the previous regime – an economic and social structural reform is in order. Sadly, with a neophyte revolutionary government sitting, the World Bank took advantage of this and shoved to the neophyte government a structural adjustment purportedly to promote economic efficiency and to cleanse the government, with the previous administration’s close associate waging rearguard war to protect their privileged positions (Bello 2004, 12). This structural adjustment removed quantitative restrictions on no more than 900 items and tariff protection was brought from 43% to 28% in 1985 (Lamberte 1996). Coupled with tight fiscal monetary policy and the 1983 international recessionary trends, these created a vicious cycle that plunged the economy of once promising country of the Philippines downward and became the “Sick man of Asia” (Bello 2004, 13).

The pivotal event in this downward spiral came on fateful year of 1987. World Bank and the International Monetary Fund (IMF) ganged up the Philippines, upon pressure from the big commercial creditors, to pay its debt even at the risk of burying growth or face withholding of trade credit lines thus paralyzing foreign trades and termination of foreign assistance (Boyce 1993, 332). On the other end, Economist from the country’s National Economic and Development Authority (the MITI counterpart) opposed the pressure of the WB and IMF citing that the debt repayment scheduled by the creditors is inconsistent with the economic recovery in place, thus, the debt repayment is futile and should be abandoned (Alburo and et.al 1985). But history will tell us that WB and IMF won as the then President Aquino signed into law the infamous Executive Order 292 automatically appropriating the amount for full service debt repayment from the budget of the national government (Freedom from Debt Coalition October 23, 2003).

Thus, from 1986 until 1999, the Industrial Structure of the Philippines is a structure of Financial Hemorrhage. With a net transfer of financial resources to external creditors from 1986 to 1991 coming to negative $1.3 billion per year (Boyce 1993, 245) and still massive outflow of financial resources until 1999 (Bello 2004, 14), the country is internally bleeding, or more like a ship with holes slowly sinking.

But Filipinos are resilient. With nowhere to go but up, the government with its “Strong Republic” model started putting the house, and all its room, in order. The Arroyo’s “Strong Republic” political economy, like a developmental state, is supposed to be a plan-rational state model. However, its industrial structures are not only focused on normative economics but embraces the so-called developmental economics. How it is being deployed and what are its institutional support will be discussed later. But at this point, it is a must to discuss the industrial structure of the current political economy.

Strong Republic’s social, governance and economic goals are contained in a two-phase plan and have concrete independent verifiable and objective indicators for it to be allowed to benchmark its goals and performance with other economies (United Nation Development Programme n.d.). The first phase, dubbed as the “down payment plan”, seeks to establish strong macro fundamentals of the economy through various institutional and policy frameworks that will insulate the said economic fundamentals from stormy global and domestic conditions (Philippine Information Agency 2004, 21). The “down payment plan”, which runs from year 2001-2005, invested in High Human Capital by strengthening the education system to produce the needed human resources; Institutionalized an effective and secure financial system; Limiting price distortion through a proactive Central Bank, stable monetary exchange rates, preemptive inflationary measures, vigilant capital monitoring, etc; Acquiring foreign technology through Foreign Direct Investments, Researches, and other vehicles of acquisitions; and Agricultural Development Policies by mobilizing billions of pesos for agricultural modernizations, and small enterprises (Philippine Information Agency 2004).

The Second Phase of the “Strong Republic” is currently being implemented and had the vision to put the country into a “developed economy” status by 2015. There are four primary industries that the government is promoting as its economic backbone. These are Service Industry, Mining Industry, Manufacturing Industry and Agricultural Industry. These four “pet” industries are expected to sustain the economy of the country until it reached its desired status. I shall talk in length how the government shapes this industrial structure in the proceeding sub-chapters. However, worth mentioning at this point, is the social development that accompanies this industrial structure. It is believed that this is one of the strength of the current political economy of the Philippines.

Without setting aside the social development agenda as characterized by a developmental state model, the Philippines’ Strong Republic Model requires that its economy must go hand in hand with the social development aspect – not one after another. This is so because, in order for this current political economy to succeed, immediate trickle-down effect and magnified-social-impact must accompany the economic plan to be acceptable to the society. Otherwise, social unrest will destroy the element of stability that is very crucial for the attainment of the goal.

Thus, the political economy model requires the generation of 3 million job in three years (years 2006-2008) through calibrated liberalization of the service sector while strengthening the labor protection and quality policies; lowering the cost of medicines and medical care through domestic production of generics medicines, social protection strategies against economic malfunctions such as oil shocks and sudden inflations shoot-ups, etc; massive investment in all stages of education (universal for primary and secondary, socialized for tertiary, subsidized for vocational, etc.); Accelerated and coordinated strategic infrastructure investments; investments in multipliers industry; serious governance reform through bureaucratic insulation and rationalization; implementation of holistic human security approach on both internal and external security threats; and shifting the developmental hub in Southern Philippines through the “mega-regions” strategy to attain a direct wealth redistribution across the regions of the country (Philippine Information Agency 2004, 19-21).

So far, as shown in Figure 1, the strong republic model had produced a straight five year (years 2002-2006) consistent 13% GDP growth year by year i.e. from 5.6% of 2005 GDP to 6.2% GDP acceleration in 2006 (Asian Development Bank 2007, 222) capping in 7.2% GDP growth in 2007. On the supply side, the pace of growth in agriculture doubled to 4.1% being corn and rice production recovered from the slump while fisheries maintained a solid advance (Asian Development Bank 2007, 222).

As shown in Figure 2, Industries growth rate is on solid and stable ceiling of 5% with Transport and Communications, Finance and Private Services including Business Process Outsourcing and other Information Technology-enabled services leading the growth by 6.3% and contributing 3 percentage points to the GDP growth (Asian Development Bank 2007, 222).

As shown in figure 3, even the government finances are showing promising order. From a decade of Budget deficits, the government is now targeting a balance budget by 2008 as the gap had already been narrowed. (Asian Development Bank 2007, 224)

But these better than average performance of the Philippines cannot be done without the support of its global development partners. FDIs, Loans, Developmental Credit Facilities, and Aids played a vital role in this political economy structures. This current economic industrial and social structure pervading in the country are actually aided and abated by its “friends” who strongly express confidence and encourage the Filipinos to stand-up even during those times that the Filipinos themselves are losing hope and are already highly critical of themselves. United States remain the strongest ally and trading partner of the Philippines. Japan is as extremely generous as a donor and development investor of the Philippines (Dimond 2006, 9). Despite economic stagnation in Japan, She still gave the Philippines a 6.7% market share increase in 2006 (Philippine Information Agency 2004, 36) while the EU and Australia engaged the Philippines in peace and security issues, and being the leading private investors in the country most notably in energy sectors (Dimond 2006, 36).

Despite these achievements, the Filipinos remain highly critical of themselves and possesses low self-esteem that it takes foreign nationals to urge the Filipinos to give credit to themselves (Dimond 2006, 9). As to why, this student doesn’t have the capability to explain, thus, a thorough sociological and psychological study must be done to the Filipino society’s pervasive inferiority complex and being too harsh to themselves - blaming all things that goes wrong to themselves - that greatly affects the overall influence of its politics and economics.
B. Selective Intervention

The Philippines is a regulatory state not a corporatist-protectionist state within a regulated, liberalized market economy. But the present form of the political economy of the Philippines takes the developmental state ex-ante mode but in a different modalities. The deployment of state intervention is a very different from what we were familiarized in the history of North East Asian development models. It is a product of evolution and boom and bust economic experience of the country’s economic history but is largely influenced of its economists who are now primarily schooled in the east.

In late 1980s and early 1990s, neo liberal economists, with newly minted Ph.D.’s from US Universities and with resumes brandishing a World Bank work experience came to dominate the technocracy and bureaucracy of the Philippines (Bello 2004, 15). They envy the performance of our East Asian neighbors and the Filipinos were told that the problem is too little market and too much state (ibid). They oversimplified the problem and misinterpreted the East Asian Industrialization as based on purely free-market mechanism and swifter, more thorough tariff and trade liberalization (Estanislao 1996). In reality, Indonesia, Malaysia and Thailand may have played a less aggressive role than Korea and Taiwan, but it doesn’t mean that the state did not intervened – for the truth is: a selective intervention deployed by these countries, as manifested in industrial policy, protectionism, mercantilism and intrusive regulation, were the keys in its industrialization (Bello 2004, 17). In short, some liberalization was going on in our neighbors’ economies, but it was selective liberalization pursued in the context of strategic protectionism driven by the state, the objective of which is to deepen the industrial structure, whereas, the Philippines misread it as pure liberalization and the unfettered market would bring the best of all possible worlds (ibid, 22).

And so the Philippines, for two decades beginning from the IMF-WB structural adjustment, engaged in indiscriminate liberalization instead of selective liberalization; and opportunistic protectionism instead of strategic protectionism driven by technocrats locked by a paradigm of misinterpreted and distorted reading of the experiences of our neighboring economies(ibid, 24). For two decades, instead of strengthening the state to push the elite and private sector in development-friendly policy directions of market efficiency and wedding out of corruption, the Philippines dismantled the state’s role in planning, production, trade and finance – thus, allowing the bureaucracy to be colonized by private interests( ibid, 24).

And finally, on October 2, 2003, the Philippines changed its course and reversed direction as Executive Order 21 was issued by the government to form part of its new economic strategy. From the previous unilateral industrial liberalization and neo-liberalism, Executive Order 21, a policy tool of the new industrial structure, raised, review and imposed tariff protections to vital and strategic industries of the country pragmatically retreating and ideologically reversing the political economy of the Philippines (Gonzales 2003). This policy tool forms part of the Strong Republic model of the country.

So what is the role of the state in the social and economic development as expressed by its political economy? According to the published document by the government explaining the concept, the Strong Republic is independent from manipulation and control by narrow interests or sectors, whether these are business groups or cronies, and whose policies and actions are for the good of the national community not only for the dominant sectors (Philippine Information Agency 2004, 20). Further, a Strong Republic must implement its policies and programs through an effective institutions and bureaucracy – efficiently and effectively serving its people in the form of ensuring peace and order, upholding the rule of law, intervening in the market to ensure economic growth, protecting the weakest, and helping the poorest (ibid).

State selective and strategic interventions took many forms and are expressed in various economic policies and regulations of the strong republic. Examples of these are the keeping of the prices of the basic commodities at the 2000 level through tax exemptions and price subsidies; Keeping low key interests rates by close monitoring of cash flows in the market and by a central bank that adopts a hawkish stance and other pre-emptive measures; Protective tariff rates for key agricultural products, agricultural production subsidies, billions of pesos of agricultural infrastructure construction and modernization; Establishments of Credit lines and lending institutions for key industries such as Mining Industries, Alternative Energy Development Industries, Manufacturing Industries and Agricultural Industries; Adopting Economic Sovereignty and Fair Trade Policy in global trade talks; and investing on alternative renewable energies and explorations of its vast reserves of Natural Gas (Philippine Information Agency 2004).

But how it is being deployed when in fact the Philippines is a signee of AFTA, WTO, APEC and other three or four letter word economic and trade organizations? The answer will lead me to the next sub-chapter.
C. Public-Private Partnership

The Philippines now, being considered to be a mixed economy and not a purely developmental state or any specific economic ideology, enforces it industrial policy on at least two ways. Primarily, Economic Policies are enacted by its congress and some industrial policies are expressly given by the constitution to the President, i.e., imposition of tariffs, charges etc. These policies are implemented by the Bureaucracy under direct supervision of the President. However, the Philippines has a third pillar in its democracy – the co-equal and co-powerful Judiciary that has the power to interpret the laws. Another peculiarity is the so-called “fourth estate” which refers to the media. These four played a vital role in the current Public-Private Sector Governance.

The importance of the role of the Supreme Court to dwell in the rule of law in business is important in a sense that its adjudicative role into economic policy levels the playing field, which in the end, legitimate businesses benefited (Panganiban 2004). Indeed, in an anarchical economic setting, the first casualties are the private sector themselves. However, it is important to note that these three branches of the government and the fourth estate of media provides the institutional framework of public-private governance atmosphere in an encouraging and respectful tone while maintaining their individual legitimate powers and sphere of influence, otherwise political rivalry may poison the very democratic base it all protects (Dimond 2006, 10).

Another is through numerous multi-sectoral policy boards created by the country’s triad of premier economic bureaus - National Economic Development Authority (NEDA) for Domestic Economy, Bureau of Investment for the industries and commerce; and the Department of Finance for the overall financial health of the economy. The economic system rests its foundations on various laws enacted by congress and issued by the President. However, it is common to the country policy process the participation of the various stake holders, representing all the sectors that will be affected by the policy, in the enactment and crafting of the policies through the so-called “Public Hearing” and “Committee Hearings” institutionalized in “Rules of Congress” in both houses or through the so-called Multi-sectoral Policy Boards. It is called multi-sectoral because precisely it is composed of all the stakeholders regulated coming from various sectors, i.e., financers, business, consumers, academe, students, etc.

By allowing a participatory process in the enactment of policy, the private sector is being involved the policy formulation. Through these, the private sector became part of the governance process, most noted in industrial policy formulation. Ultimately, the private sector is able to get the sense of ownership of the policy themselves, they being a part of those who crafted it. Being one of the owner of the policy, the private sector understands the necessity of the policy, thus fully supports it. Like a classic case of Bottom-to-top policy formulation process, the policy is therefore implemented in the spirit of understanding and cooperation rather than forcible hierarchical and unilateral imposition of the policies’ intent.

Worthy to note also is the fact that the government, being a regulatory state, requires from the private sector various clearances and special permits to do business. This clearances and special permits are sometimes used by the bureaucracies to impose a kind of administrative guidance. This administrative guidance is also institutionalized in the Philippines by the Supreme Court by adopting a principle of law called “Doctrine of non-exhaustion of Administrative Remedies” which means that a private sector, being felt aggrieved by bureaucracy, must first exhaust all possible administrative remedies from the proper various administrative authorities before he brings his case in court, otherwise the same will be dismissed as the court will have no jurisdiction on the case (Castro Vs. Department of Education 2001, Laguna Cable Television Network, Inc versus Department of Labor and Employment 2002). In a multi-layered and cross functional bureaucracy of the Philippines, before you entirely exhausted the administrative remedies, your hair are probably all white – that is, if your patience had not been exhausted first.

And so, this tool of imposing “administrative guidance” Philippine-style, allows private sector to provide a convivial cooperation on the regulatory agencies rather than lend a deaf ears. However, with the policies in the Philippines tends to be wordy and detailed, bureaucrats rarely uses this tool as the policies themselves are already clear and doesn’t requires any further interpretations.

The danger, however, of this close public-private partnership or cooperation is that it may breed corruption or patronage cronyism like what happened during the Marcos Era that derails the export-led industrialization attempts of the government as private interests prevailed over (Bello 2004). To counter this are the two safety nets in the system: the very vibrant civil society and the media that are considered watchdogs of the government and the business sectors. With information available and the civil society possessing the capability to process the information, abuses are deterred or prevented like what happened when former President Estrada was charged by an impeachment case and forced to resign.
D. Bureaucratic Embedded Autonomy

In the context of developmental state, an embedded autonomy usually comes from an egalitarian base. But this iota of bureaucratic embedded autonomy present in the Philippines do not come from an egalitarian base, but, out of sheer frustration of the Filipinos to the politicians that time and time again had promised to give them a better life and bring the country to a sustained development, yet, time and time again also failed.

After WWII, Filipinos also started in egalitarian beginnings. The Battle of Manila, the only battle that Americans and Japanese Army fought for a city, left Manila worst damaged by WWII, than any other city, except Warsaw (Dimond 2006, 3). The re-establishment of the Commonwealth and the inauguration of President Roxas in 1946 ushered development for the country only to be interrupted by the regime of Marcos in 1972 when he declared Martial Law and allow crony capitalism to ate away the very institutional fabric that allowed them to hoard wealth (ibid, 4). With the succeeding administration espousing indiscriminate liberalization coupled with privatization and weakening of the bureaucracy that resulted to the overheating of the economy in 1997, the already weak bureaucracy was even more subjugated by private interests (Bello 2004, 24).

With the ushering of the “Strong Republic”, this embedded autonomy is being called for. But how shall it be woken up from the very fabric of the society? It cannot be made overnight. The Strong Republic requires radical reform – from the market to the last recesses of the society. The Strong Republic approached this by calling to the Filipinos to bind as a community – or pamayanan – a concept easily understandable by everyone in the country, but this time, not a community composed of few families and neighbors, but the whole nation-state (Philippine Information Agency 2004, 20). It calls for the Filipinos to help create a strong republic by, first, the sense of national community – the Filipino nationalism – should be nurtured through changing the people’s consciousness by extolling the virtues of being a Filipino, being proud of its roots and history, and reminding the citizens that they are all members of one community (ibid, 22). Second, by calling to all its citizens to render its god-sworn duty to its fellowmen through supporting its government rather than badmouthing it continuously, fighting corruption by refusing to participate on it and exposing even how minor it may seems, paying taxes, joining NGOs, supporting local products, and yes, even by simply following simple traffic rules, etc (ibid).

But how it will be done to a people who became so wary of the government because of its past experience of structural oppression, most noted from the state itself? There were many strategies employed by the government to awaken this consciousness from its people – from media campaign to integration in school curriculum. However, the most important strategy is that the short term effects of the economic wealth that may be gained from the “down payment plan” I had already discussed earlier must be immediately brought down to the grassroots and it be felt immediately by the people. This is the very key of success of this economic model.

I had mentioned earlier in the previous chapter that immediate trickledown effect and magnified social impact accompanies this political economy model. This is so to let the Filipinos felt immediately the sacrifices they are making for the building of the strong republic economic infrastructure – and so, embeddedness will be attained. That is why; the second phase of the “down payment plan” is being called by the President, herself, in her various public speeches as the “Payback Plan” denoting that the sacrifices made by the citizens are now being paid back to the citizens.

Example of the down payment plan is asking the Filipinos to finance the government’s developmental activities by paying more taxes in the form of “expanded value added tax” which the Filipino comply without much ado. With the government having put the financial house in order, the economy registered growth and income. However, not all of the income by the government is being reused to finance further developmental activities. Half of it are actually being spent for social protection programs and social development projects such as “conditional cash transfer” to secure the basic food and health needs of the poor and at the same time investing in human resources by requiring the poor to put their children in the school and have them checked-up regularly by the community hospitals in exchange of money from the government. By this, immediate trickle down effects are being felt by the people and the so-called magnified social impact is being attained. Thus, the required embeddedness in the social fibers can also be nurtured.
V. Towards a New Political Economy of “Strong Republic”

According to the President, a Strong Republic does not solely mean a strong state nor does it solely mean a strong nation. A Strong Republic means a strong Philippine Republic which is equated to a one strong indivisible nation-state (Philippine Information Agency 2004). In this context, the strong Philippine republic is actually comprised of two elements – the nation which is comprised by a community of people with generally common decent history; and the state which is the nation’s servant together with all its institutions. In a Strong Republic ideology, the prime community is the nation where the reality is that the Filipino worker, Filipino capitalist, Filipino landlord and the Filipino tenant share somehow the same fate since they are all members of the same Republic.

The Strong Republic visions recognizes the individual’s inalienable right to life, liberty and pursuit of happiness; but it emphasizes that such rights will be best enjoyed and exercised by the majority of the people in a prosperous country that only the Strong Republic can create. It recognizes the consensus of the economists and academicians that ‘strong effective state’ is crucial factor in the economic growth of advanced countries and the “Asian miracles states” yet it also interfused the focalities of the most noted economist and Nobel Laureate Amartya Sen. Thus, it described the “Strong Republic” as a government independent from manipulation and control by narrow interests or sectors, whether these are business groups or cronies, and whose policies and actions are for the good of the national community not only for the dominant sectors (Philippine Information Agency 2004, 20). Further, a Strong Republic must implement its policies and programs through an effective institutions and bureaucracy – efficiently and effectively serving its people in the form of ensuring peace and order, upholding the rule of law, intervening in the market to ensure economic growth, protecting the weakest, and helping the poorest (ibid).

One of the essential features of the Strong Republic is that it stands for the interest of the people rather than of a powerful minority and it must be a reality and in fact (United Nation Development Programme n.d.). It involves the painstaking process of strengthening institutions and communities; and the process advances only on a broad platform of shared ethical values, a firm consensus to serve common interests and a common vision of a national future (ibid). But the work to build a Strong Republic is not a monopoly of east or west, of governments and business sector but equally of the civil society; and it benchmarks and measures itself not only through normative economic measurements such as GDPs, or GNPs but of Human Development Index as well (ibid).

Another feature of the concept is that it is a “republic” which means simply that it must be established within the nurturing environment of democracy in democratic institutions with democratic mechanisms such as participatory policy processes and based on laws of the people, by the people and for the people. The government itself committed that this political economic ideology must be founded in a democratic ideals, otherwise, it will not be acceptable to the society that had already experienced a western style of democracy. And most crucial of course, not only that it should be a democracy de facto, but a democracy that exist, in reality and can be measured against the development of its society to pursue it potentialities and opportunities.
VI. Summary and Conclusion

The Philippines political economy can be gainsaid to be a mixed economy. It is a cognizant fact that when we talked of a mixed economy, it means that it is an economic system that incorporates aspects of more than one economic system. This usually means an economy that contains both private-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and planned economy characteristics, or a developmental state and welfare state.

But if the present political economy of the Philippines dubbed as “Strong Republic” will be analyzed in the developmental state lenses using the four thematic elements of the former – such as Industrial Restructuring, Selective Intervention, Public-Private Cooperation, and Embedded Autonomy, it would seems that the influence of the developmental state model of the Asian miracle economies has a great influence over the current Philippine political economy -with one noted exemption. In the Strong Republic, it put alongside economic development the human development aspect. Alongside may be the wrong context but it is actually the central and focal point of the Strong Republic.

Focal point in a sense that it is not being economically wealthy the ultimate end goal of the Strong Republic. It will only use the economic wealth to further a more ideal goal, that is – Human wealth. It does not sacrifice human wealth to achieved economic wealth, albeit, it employs the same elements and strategies of a developmental state in a democratic framework, it also includes and tasks from the very start the civil society in the building of a Strong Republic.

However, although it may seem that it is effective at the start, it remains to be seen if indeed the combination of these two focuses is sustainable, realizable, and not purely a rhetoric, - or worst, just another fateful hope of a better tomorrow.

VII. Works Cited

Alburo, Florian, and et.al. Towards Recovery and Sustainable Growth. Quezon City: School of Economics - University of the Philippines, 1985.

Amsden, Alice H. Asia’s Next Giant: South Korea and Late Industrialization. New York: Oxford University Press, 1989.

Asian Development Bank. Asian Development Outlook 2007. Economic Analysis and Forecast, Manila: Asian Development Bank, 2007.

Bello, Walden. The Anti-Development State: The Political Economy of Permanent Crisis in the Philippines. Quezon City: University of the Philippines Press, 2004.

Bello, Walden, David Kinley, and Elaine Elinson. Development Debacle: World Bank in the Philippines. San Francisco, USA: Institute for Food and Development Policy, 1982.

Boyce, James. The Political Economy of Growth and Impoverishment in the Marcos Era. Quezon City: Ateneo De Manila University Press, 1993.

Castro Vs. Department of Education. G.R. No. 132174 (Supreme Court of the Philippines, 3rd Division, August 20, 2001).

Deyo, Frederic C., Ed.,. The Political Economy of the New Asian Industrialism. Ithaca: Cornell University Press, 1987.

Dimond, Paul. “The Philippines: Fragile Democracy or Strong Republic?” Asian Affairs, Volume XXXVII, No. II, 2006: 10.

Estanislao, Jesus, interview by Marco Mezzera. Finance Secretary, Aquino Adminsitration (November 13, 1996).

Freedom from Debt Coalition. “The Call for a Congressional Inquiry and Audit of All Public Sector Debt.” NGO report, Quezon City, October 23, 2003.

Gonzales, Iris. “Tarrif Review Ends.” Business World, September 18, 2003.

Haggard, Stephan. “The Political Economy of the Philippines Debt Crisis.” In Economic Crisis and Policy Choice:The Politics of Adjustment in Developing Countries, by Joan, ed Nelson. Princeton, NJ: Princeton University Press, 1990.

Islam, Iyanatul and Chowdhury, Anis. The Political Economy of East Asia:Post Crisis Debates. New York: Oxford University Press, 2000.

Johnson, Chalmers. MITI and the Japanese Miracle. Stanford: Stanford University Press, 1982.

Laguna Cable Television Network, Inc versus Department of Labor and Employment. G.R. No. 139492 (SUPREME COURT, November 19, 2002).

Lamberte, Mario qouted in Joy Chavez-Malaluan. “Shaping Philippine Economic Policy: The Role of Neoclassical Activists.” Unpublished Study. Manila: MODE, 1996.

Panganiban, Chief Justice Artemio V. Leveling the Playing Field. Manila: Print Town, 2004.

Philippine Information Agency. Strong Republic. Vission Setting and Performance Evaluation Report, Quezon City: Philippine Information Agency, 2004.

The World Bank. The East Asian Miracle: Economic Growth and Public Policy. New York: Oxford University Press, 1993.

The World Bank. The World Development Report 1991: The Challenge of Development. New York: Oxford University Press, 1991.

Tigno, Jorge Villamor. Managing the Public Policy Process in the Philippines: RA 8042 and Deregulating the Overseas Employment Sector. Quezon City: Dissertation: National College of Public Administration - University of the Philipines, April 2003.

United Nation Development Programme. www.hdr.undp.org. http://hdr.undp.org/en/reports/global/hdr2002/launch/title,3466,en.html (accessed July 7, 2008).

Wade, Robert. “Governing the Market: Economic Theory and the Role of Government.” In East Asian Industrialization, by robert Wade. Princeton: Princeton University Press, 1990.

Comments 3 comments

conradofontanilla profile image

conradofontanilla 3 years ago from Philippines


It is good to have a view of how other people look at the Philippines. In my comments are views of a Filipino.

There are superstructures of Filipino society, some of which you mentioned but did not give them their due importance. That is how you view them.

The superstructures are:

Neocolonialism. Spain first colonized the Philippines, the USA annexed it in its empire in the far east. There are vestiges of both colonizer. Spain, largely the vast tracks of lands it awarded to favored subalterns and to the Catholic church. These are still being recognized at legal. USA, making as its collaborators in controlling the Philippines the ruling class comprised largely of owners of land awarded by Spain.

USA has suffused the economy of the Philippines to the capitalist system of America is pulling the strings of collaborators. Therefore, these collaborators do not have the welfare of the middle class, and poor; their interest is to perpetuate their wealth and political power.

Feudalism. Spain awarded vast tracks of land to favored subalterns. There are called haciendas. These are the foundation of the wealth and political power of the ruling class.

In Japan feudalism was the base of the war freak Japanese leaders. Gen. MacAthur dismantled feudalism as a way to break up the leadership of the war freaks. Early Japan on after WWII was costing USA a lot that it had to rehabilitate Japan into the world economy and and enable it to feed itself. However, USA did not dismantle feudalism in the Philippines. Instead it supported it because it is the base of power of the collaborators. You mention the ruling class as politicians. Bureaucrats cannot no against the ruling class.

IMF-World Bank. It largely controls the economy of the Philippines. Its conduit in the Philippines is the Central Bank of the Philippines. The Governor and its board are independent from the President of the Philippines, Congress and Supreme court. It largely controls monetary policy, minting of coins, public borrowing, interest rates. It works like the Federal Reserve Bank of USA that is a private bank largely running the economy of USA. To ensure collection of loans and interests, foreign lender make Pres. Corazon C. Aquino to incorporate in the Philippine yearly budget the payment for foreign loans.

Globalization. This has broken down country barriers. It prohibits subsidy in agriculture in the Philippines, like sugar cane, but allows subsidy of corn in USA and beet sugar in Europe. Onions from other countries glot the Philippine market making it hard for Filipinos to market their produce because foreign imports are priced much lower. Filipino farmers cannot compete in the way of economic advantage. That may be their fault but that translates in their difficulty and poverty. Globalization has broken down several tariff barriers.

Climate change. More floods and typhoons have visited the Philippines destroying crops, croplands, bridges, dams, houses, and fostered diseases. These are costly that waste a lot of government resources and reduced small farmers and farm labor poorer.

Drain from the Philippine economy. Foreign capital is draining the Philippine economy by tax incentives and repatriation of profits.

You did not see that the Catholic church in the Philippines is draining the economy by its collection pf alms, donations, and repatriation to the Vatican profits from business it runs without paying taxes.

This church supports the perpetuation in power of the ruling class in return for favors. The ruling class does not assert possession and control of landholdings of the Catholic church now illegal because it was awarded by Spain that no longer hold authority of the Philippines. The ruling class does not impose tax the business of the Catholic church. I have a Hub "The Philippine government should impose tax on the Catholic church in the Philippines."

I have a Hub "How the Catholic church goes on in making Filipinos poorer."

These superstructures superimpose any economic theory or model that may be planned for and implemented in the Philippines. These economic theories or models are considered as substructures. These shape the data that you may be able to collect. Analysis of such data do not show the overriding power of the superstructures.

Filipinos do not have inferiority complex. We threw out Spain by means of armed revolution. We fought USA as a very young nation in 1900s. We fought imperialist Japan. Reforms will not bring about resurgence of the Filipino nation. Restructuring will do.

Cyl 3 years ago

Hi condradofontanilla: Thanks for the comments. These are greatly appreciated.

michaelcapelle@yahoo.com 2 years ago

Corruption from all designated branches of the government must be seriously tackled and stopped or no development will succeed regarless who is in power. Everywhere you look from PNP, Customs, DOTC, NRA, LTFRB, NBI, Corrections, Prisons are involved or fired in conjunction of of major work violations and no accountability of the assigned positions. If you are incharge of the section as thesupervisor you are partially responsible of the correlations as part of your duty to minimize unrealiable and untrusworthy personnel under their watch. Commissioners and Department heads should have multiple meetings with lower supervisors so they remember and basic standards job specifications must be followed by all. Regional supervisors can relay to the subordinateds and now the know lower -rank positions adhere and have a standardized set of rules and procedures in accordance to their assigned tasks to be performed. And also post and signs to the public if necessaary, so they know what is specific law, direction or rule in that area is restricted. I am just suggesting..

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