Unable to adjust adequately to external shocks, the
Philippines experienced the most Severe economic and financial
crisis in its postwar history in 1983. The country's economy was
particularly vulnerable because the pattern of development which
had -been pursued in the past was characterized by a distorted
incentive structure, inefficient investments and heavy dependence
on foreign borrowings.
After managing to grow by I.i percent in 1983, the economy
contracted by 7.0 percent in 1984 and by 4.1 percent in 1985.
Industrial and manufacturing growth rates collapsed during the
period. Domestic investments were the hardest hit, their growth
plummetting by as much as 43.1 percent in 1984 and 21.7 percent
in 1985. Open unemployment swelled to 25.0 percent in Metro
Manila and 12.5 percent nationwide. The inflation rate
accelerated to an average of 50.3 percent in 1984 before it
somewhat cooled down to 23.1 percent in 1985,
Shortly after the new government under President Corazon C.
Aquino took over in 1986, it instituted a wide-ranging set of
socio-economic and political reforms. The economic reforms were
primarily aimed at increasing efficiency in the economy through
the elimination of distortions in the incentive structure, the
revitalization of private sector initiative and greater reliance
on market forces.
The ma3or policy reforms in the area of trade and industry
which have been instituted by the Aquino. government include: (i)
trade policy reform, which continued a_d expanded the import
liberalization progra_ started in the early 1980s; and (2)
investment incentives reform, which involved changes in the
country's investment laws as well as the streamlining of the
process of investment incentives availment. Other measures such
as privatization, tax reform and financial sector reform are
expected to have a significant impact on the development of the
Philippine industrial sector.
The purpose of this paper is to evaluate the ongoing program
of industrial restructuring and development in the Philippines.
The main developments in the economy in the 1970s and 1980s will
be briefly reviewed to locate the place of industry in the
overall economy. The performance of industry as well as changes
in industrial structure will also be discussed to serve as the
point of departure for the subsequent assessment of trade and
industrial policy reforms and programs. Within the _ndustrial
sector, the main focus will be on the manufacturing sector.
The paper is structured as follows:
Section II provides an overview of the main developments in
the economy in the 1970s and the 19_0s, and reviews the
performance of the manufacturing sector duringthe period.
Section III assesses the government's progress in the
implementation of major policies and programs of industrial
restructuring and development, with emphasis on the period after
1985. The policies and programs to be covered are the following:
macroeconomic policies; trade reform; export promotion program;
program for the regional dispersal of industries; program for
technology upgrading and development; privatization; and
financial sector reform
