The Grey Chronicles

2008.August.1

Review of Related Literature, Part 1


This is the first part of an overview of the current research and related studies on the three scenarios NSC faced between 1994 and 2000.


The Philippine Industry and Manufacturing

The Philippine Industrial Policy in the 1990s can be summarized in two key words: economic reform and liberalization.

In the 1980s, the Philippines initiated trade policy reforms and opened the economy to imports to promote competition in the local market. Furthermore, deregulation in the 1990s demolished barriers to entry in regulated key industries, and government-owned and controlled corporations (GOCCs), such as iron and steel, fertilizers, telecommunications and banking, were privatized (Clarete, 2005).

Luken (1999) noted that from the mid-1970’s to 1996 the Philippine manufacturing sector showed low rates of growth, roughly comparable to those of overall economic growth and to growth rates in the industrial sector as a whole.

In 1992, the Philippines signed up for the ASEAN Free Trade Agreement, which aimed for 0 to 4% regional tariff reduction, over a 15-year period, through the Common Effective Preferential Tariff scheme. Orbeta (2003) wrote that the Philippines underwent its third Tariff Reform Program four years later. The first and second were in 1981 and 1991, respectively. The tariff liberalization for some items, e.g., iron and steel, petrochemicals, garments and textiles, and motor vehicles, however, were slowed down from 1998-2001 due to the Asian financial crisis (UNDP, 2003) .

From 1995 to 1999, the iron and steel industry’s Gross Value Added in constant 1985 prices showed a declining trend, in contrast to a rising trend for the entire steel-based group of industries. Two sectors, particularly the basic metal products and electrical machinery, comprised at least 50% of Gross Value-Added attributable to steel-based industries (NSCB, 2004).

Sauer, Gawande, and Li (2003) performed general tests of the big push industrialization hypothesis of Murphy, Shleifer, and Vishny (1989) for selected industries, including iron and steel, in a set of eight emerging countries, including the Philippines, and preliminary results supported the theory that a role for activist government policy in the industrialization process is necessary.

Cook and Uchida’s study (2003) suggested that the deficiency in appropriate governmental reforms might be the cause for a negative relationship between privatization and economic growth. Later, Filipovic’s theoretical analysis of privatization (2005) suggested that to create economic growth incentives, such as improvement of economic efficiency, increase in investments, and adoption of new technologies, privatization should be coupled with government commitment to legal and regulatory reforms.

Under the First Pillar: Achieving Macroeconomic Stability, Bulan (2004) urged “the sale of all government holdings in the . . . business sector,” identifying National Steel Corporation, justifying that it posed conflicts of interest with the government’s objective.

Next: Asian Currency Crisis


Notes:

Clarete, Ramon L. (2005) “What Freer Trade Meant for the Philippines” School of Economics, University of the Philippines, 2005. back to text

Luken, Ralph A. (1999), “Industrial Policy and the Environment in the Philippines,” Manila: United Nations Industrial Development Organization, NC/PHI/97/020, July 1999. back to text

Orbeta, Aniceto C. Jr., (2002) “Globalization and Employment: The Impact of Trade on Employment Level and Structure in the Philippines.” Discussion Paper. Manila: Philippine Institute for Development Studies, Series 2002-04, February 2002, p. 13. back to text

United Nations Development Program (2003) “Philippine Progress Report on the Millennium Development Goals,” Manila: United Nations Development Program, 2003. p. 51. back to text

National Statistical Coordination Board (NSCB) (2004). 2003 Philippine Statistical Yearbook. Manila: NSCB, 2004. back to text

Sauer, Christine, Kishore Gawande, and Geng Li (2003). Big Push Industrialization: Some Empirical Evidence for East Asia and Eastern Europe, Economics Bulletin, Vol. 15, No. 9 pp. 1-7 back to text

Cook, Paul and Yuichiro Uchida (2003) Privatization and Economic Growth in Developing Countries. The Journal of Development Studies, Vol.39, No. 6, August 2003. pp. 121-154. back to text

Filipovic, Adnan (2005). Impact of Privatization on Economic Growth Issues in Political Economy, Vol. 14, August 2005: 17 back to text

Bulan, Ma. Susana T. (2004) “An Economic and Social Development Framework: Five Pillars of Growth,” Manila: SEPO, 2004. pp. 7-10. back to text

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