The failure of the Philippine economy to achieve a full industrialized state is a confluence and a result of political and economic policies that can be traced back to as far as the post war period.
The Philippine post war economic policy is said to have taken the trajectory of Import Substitution Industrialization (ISI) —which puts premium in strengthening the locally owned industries catering to a huge domestic market to contain dollar outflow and encourage domestic entrepreneurship (Kuruvilla, 1996). This strategy saw the rise of a new domestic-industrial capital elite; and expanded manufacturing sector which registered growth rates of between 11% to 14% from the late 1940’s to early 1960’s (Toussaint, 2006). On the downside, the dependence from imported capital and technology to sustain this strategy had a negative impact on the balance of payments (BOP) in the 1960’s and onwards (Ofreneo as cited by Kuruvilla, 1996). The IMF-WB provided a short-lived solution (and imposition) to this dilemma by extending “stabilization loan” on condition that the Philippine government adopts an export- oriented industrialization (EOI) by deregulating and opening its economy to unrestricted foreign investments (Bello, et. al. as cited by Kuruvalla, 1996).
The export oriented industrialization (EOI) is an imposition of the IMF-World Bank to the Philippines. It is wedded in the antiquated Ricardian notion of industrialization based from the “comparative advantage of cheap labor”. Under this scheme, the country became the agro export base of Western democracies while suppressing the creation of industries of steel and machine tools—which are necessary for self sustaining economy (Bello, 1981). This strategy further pushed back the Philippine financial status under the Marcos dictatorship. Foreign borrowings ballooned to unimaginable proportion just to keep the economy afloat, without really contributing substantially to the vision of industrialization.
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