Rolando R. Cruzada, Jr. Dr. Rico T.

Umagap
DPA Student- URSP Professorial Lecturer

PA 504 – Administration of Economic Development

1. Economic Status/History of the Philippines during the incumbency of Ferdinand E. Marcos,

Corazon C. Aquino, Fidel V. Ramos, Joseph E. Estrada, Gloria M. Arroyo, and Benigno Simeon
Aquino,III.

Marcos Regime

Marcos first term as president focused on developing the country’s infrastructure, economy and
the agriculture industry. Marcos established good relations with world leaders, therefore bringing the
Philippines’ image to higher grounds. Foreign relations brought foreign investments in and made the
economy boom. During this time, the ratio of the peso to a dollar is 1:1. Marcos helped the Philippines
reach economic prosperity during the first few years of his terms, also putting up a lot of schools; he put
up more schools than all of the previous presidents combined.

Nearing the end of his second term, Marcos declared Martial Law putting the whole country
under the military’s control. The Philippine economy between 1973 to 1986 suffered from a downturn
due to a mixture of domestic and international problems after experiencing years of positive growth.
The GDP of the Philippines rose during the martial law, rising from P55 million to P193 million in
about 8 years. This growth was spurred by massive lending from commercial banks, accounting for about
62% percent of external debt. As a developing country, the Philippines during the martial law was one of
the heaviest borrowers. These aggressive moves were seen by critics as a means of legitimizing martial
law by purportedly enhancing the chances of the country in the global market. Much of the money was
spent on pump-priming to improve infrastructure and promote tourism. However, despite the aggressive
borrowing and spending policies, the Philippines lagged behind its Southeast Asia counterparts in GDP
growth rate per capita. The country, in 1970–1980, only registered an average 3.4 percent growth, while
its counterparts like Thailand, Malaysia, Singapore, and Indonesia garnered a mean growth of 5.4
percent. Despite government efforts to pump-prime the economy to increase income and encourage
spending, unemployment and underemployment grew. The unemployment rate rose from 5.2 to 5.9
percent from 1978–1983, while underemployment was a problem, the latter tripling, in the same time
period, from 10.2 to 29.0 percent. Concurrently, the labor force of the Philippines grew at an average
4.47 percent in 1970-1983. This can be attributed to an increasing number of women seeking work in
the market.
Income inequality grew during the era of martial law, as the poorest 60 percent of the nation
were able to contribute only 22.5 percent of the income at 1980, down from 25.0 percent in 1970. The
richest 10 percent, meanwhile, took a larger share of the income at 41.7 percent at 1980, up from 37.1
percent at 1970.[1] These trends coincided with accusations of cronyism in the Marcos administration, as
the administration faced questions of favoring certain companies that were close to the ruling family.
 According to the FIES (Family Income and Expenditure Survey) conducted from 1965 to
1985, poverty incidence in the Philippines rose from 41 percent in 1965 to 58.9 percent in 1985. This can
be attributed to lower real agricultural wages and lesser real wages for unskilled and skilled laborers.
Real agricultural wages fell about 25 percent from their 1962 level, while real wages for unskilled and
skilled laborers decreased by about one-third of their 1962 level. It was observed that higher labor force
participation and higher incomes of the rich helped cushion the blow of the mentioned problems.

Cory Aquino Regime

Corazon Aquino became the president of the country because the people believed she was the
positive change they needed especially since her husband, Ninoy, who was supposed to be the change
for the country, passed away in a gunshot. During her administration, Cory was plagued by coup d’etats
by various groups that foreign investors started to pull their investments from the country. That’s why a
lot of her efforts were pointed towards disaster management from the various groups and sometimes,
her motherly methods such as giving cake worked. She was also linked to controversies such as
massacring farmers in Mendiola and holding the land she inherited rather than having it distributed.
Despite these problems, The economy still had a positive growth during her term with an average of
3.8% by the end of it. Cory, although wasn’t the best qualified president, still did a pretty good job.
Compared to Marcos or Ramos though, it still fell short of what truly makes a spectacular leader.

The economy was hemorrhaging when President Corazon C. Aquino assumed leadership
in 1986. There was flight in capital, the nation was heavily in debt, national banks were in
the red, inflation was galloping, and GNP was plunging continuously down. The Aquino
administration stopped all these and turned the economy around.
Although having to do with only about half of the national budget (since the other half was
meant to honor obligation), the Aquino administration did remarkably well in delivering basic services to
the people. And in putting the country back on track towards being a Newly Industrialized Country in
the year 2000.
Here is the political and economic accounts that transpired since she assumed the office until
the her last year:

Aquino entered the presidency with a mandate to undertake a new direction in economic policy.
Her initial cabinet contained individuals from across the political spectrum. Over time, however, the
cabinet became increasingly homogeneous, particularly with respect to economic perspective, reflecting
the strong influence of the powerful business community and international creditors. The
businesspeople and technocrats who directed the Central Bank and headed the departments of finance
and trade and industry became the decisive voices in economic decision making. Foreign policy also
reflected this power relationship, focusing on attracting more foreign loans, aid, trade, investment, and
tourists.

It soon became clear that the plight of the people had been subordinated largely to the
requirements of private enterprise and the world economy. As the president noted in her state-of- the-
nation address in June 1989, the poor had not benefited from the economic recovery that had taken
place since 1986. The gap between the rich and poor had widened, and the proportion of malnourished
preschool children had grown.
 The most pressing problem in the Philippine international political economy at the time Aquino
took office was the country's US$28 billion external debt. It was also one of the most vexatious issues in
her administration. Economists within the economic planning agency, the National Economic and
Development Authority (NEDA), argued that economic recovery would be difficult, if not impossible, to
achieve in a relatively short period if the country did not reduce the size of the resource outflows
associated with its external debt. Large debt-service payments and moderate growth (on the order of 6.5
percent per year) were thought to be incompatible. A two-year moratorium on debt servicing and
selective repudiation of loans where fraud or corruption could be shown were recommended. Business-
oriented groups and their representatives in the president's cabinet vehemently objected to taking
unilateral action on the debt, arguing that it was essential that the Philippines not break with its major
creditors in the international community. Ultimately, the president rejected repudiation; the Philippines
would honor all its debts.

Domestically, land reform was a highly contentious issue, involving economics as well as equity.
NEDA economists argued that broad-based spending increases were necessary to get the economy going
again; more purchasing power had to be put in the hands of the masses. Achieving this objective
required a redistribution of wealth downward, primarily through land reform. Given Aquino's campaign
promises, there were high expectations that a meaningful program would be implemented. Prior to the
opening session of the first Congress under the country's 1987 constitution, the president had the power
and the opportunity to proclaim a substantive land reform program. Waiting until the last moment
before making an announcement, she chose to provide only a broad framework. Specifics were left to
the new Congress, which she knew was heavily represented by landowning interests. The result--a
foregone conclusion--was the enactment of a weak, loophole-ridden piece of legislation.

The most immediate task for Aquino's economic advisers was to get the economy moving, and a
turn around was achieved in 1986. Economic growth was low (1.9 percent), but it was positive. For the
next two years, growth was more respectable--5.9 and 6.7 percent, respectively. In 1986 and 1987,
consumption led the growth process, but then investment began to increase. In 1985 industrial capacity
utilization had been as low as 40 percent, but by mid-1988 industries were working at near full capacity.
Investment in durable goods grew almost 30 percent in both 1988 and 1989, reflecting the buoyant
atmosphere. The international community was supportive. Like domestic investment, foreign investment
did not respond immediately after Aquino took office, but in 1987 it began to pick up. The economy also
was helped by foreign aid. The 1989 and 1991 meetings of the aid plan called the Multilateral Aid
Initiative, also known as the Philippine Assistance Plan, a multinational initiative to provide assistance to
the Philippines, pledged a total of US$6.7 billion.

Economic successes, however, generated their own problems. The trade deficit rose rapidly, as
both consumers and investors attempted to regain what had been lost in the depressed atmosphere of
the 1983-85 period. Although debt-service payments on external debt were declining as a proportion of
the country's exports, they remained above 25 percent. And the government budget deficit ballooned,
hitting 5.2 percent of GNP in 1990.

The 1988 GNP grew 6.7 percent, slightly more than the government plan target. Growth fell off
to 5.7 percent in 1989, then plummeted in 1990 to just over 3 percent. Many factors contributed to the
1990 decline. The country was subjected to a prolonged drought, which resulted in the increased need
to import rice. In July a major earthquake hit Northern Luzon, causing extensive destruction, and in
November a typhoon did considerable damage in the Visayas. There were other, more human, troubles
also. The country was attempting to regain a semblance of order in the aftermath of the December 1989
coup attempt. Brownouts became a daily occurrence, as the government struggled to overcome the
deficient power-generating capacity in the Luzon grid, a deficiency that in the worst period was below
peak demand by more than 300 megawatts and resulted in outages of four hours and more. Residents of
Manila suffered both from a lack of public transportation and clogged and overcrowded roadways;
garbage removal was woefully inadequate; and, in general, the city's infrastructure was in decline.
Industrial growth fell from 6.9 percent in 1989 to 1.9 percent in 1990; growth investment in 1990 in both
fixed capital and durable equipment declined by half when compared with the previous year.
Government construction, which grew at 10 percent in 1989, declined by 1 percent in 1990.

The Aquino administration appeared to be unable to work with the Congress to enact an
economic package to overcome the country's economic difficulties. In July, as the government deficit
soared Secretary of Finance Jesus Estanislao introduced a package of new tax measures. Then in October,
stalemated with Congress, Aquino agreed to seek a reduction in the budget gap without new taxes. The
agreement met with resistance from the Congress for being an onorous imposition on an economy in
crisis, growth would be stifled and the poor would be impacted negatively. The willingness of the
Congress to pass the tax package called for in the IMF agreement was in doubt. In 1990 Congress placed
a 9 percent levy on all imports to provide revenues until an agreement could be reached with the
administration on a tax package. In February 1991, however, it was learned that in its agreement with
the IMF for new standby credits, the government had promised that it would indeed implement new
taxes.

Accusations were widespread in Manila's press about the 1990-91 impasse. On the one hand, it
was claimed that Aquino and her advisers had no economic plan; on the other hand, the Congress was
said to be unwilling to work with the president. Traditional political patterns appeared to be reasserting
themselves, and the technocrats had little ultimate influence. One study of the first Congress elected
under the 1987 constitution showed that only 31 out of 200 members of the House of Representatives,
were not previously elected officials or directly related to the leader of a traditional political clan.
Business interests directly influenced the president to overrule already established policies, as in the
1990 program to simplify the tariff structure. Business and politics have always been deeply interwoven
in the Philippines; crony capitalism was not a deviant model, but rather the logical extreme of a
traditional pattern. As the Philippines entered the 1990s, the crucial question for the economy was
whether the elite would limit its political activities to jockeying for economic advantage or would forge
its economic and political interests in a fashion that would create a dynamic economy.

One of the most significant accomplishments of the Aquino administration was the restoration
of a market-oriented economy and the dismantling of crony capitalism and economic cartels in the sugar
and coconut industries. These measures and others carried out immediately upon its assumption to
office partly explain the resilience of the economy despite the series of national and man-made disasters
that confronted the country’s economy. Agriculture served as the safety net as it proved to be a more
efficient and consistent earner and saver of foreign exchange. When the performance of all the sectors
of the economy went down, only the agricultural sector registered positive growth rate. For the years
1986-90, the agricultural sector grew by an average of 3.14 percent, 11 percent higher than the targetted
growth rate.
Ramos Regime

Prior to the Ramos Presidency, there were many coup d’état attempts and uprisings during the
Aquino administration, thus perceptions of political instability during the Aquino administration further
dampened economic activity. This led to a destabilized government. Politics were shaken and people
started to lose their trust in the government. A debilitating power shortage moreover contributed to the
economy’s contraction in 1991.

Since the restoration of democracy in 1986, the Philippines under the Ramos administration
came closest to breaking out of its “sick man of Asia” image. The confidence generated by the
administration among local and international players and analysts resulted from wide-ranging reforms
rooted primarily in a sound macroeconomic and investor-friendly regime as well as global
competitiveness. Ramos mustered it through restoring civil liberty and government stability. He
introduced a broad range of economic reforms and initiatives designed to spur business growth and
foreign investment through the flagship PILIPINAS 2000 which meant socio economic program that
envisioned the Philippines to be a tiger economy in Asia. As a result, the Philippines saw a period of
higher growth.
Investment activity then was based on tremendous amounts of domestic and international good
will and, a lot of consumer and investor exuberance and confidence in the Philippines. As reported in
one international magazine, “new businesses, once discouraged by the unfair domination of Marcos
cronies, are busting onto the scene,” and projects in the hundreds of millions that businessmen “could
only dream of before” became regular fare. The macroeconomic environment was moreover
characterized by stable prices and record tax collection as a percentage of GDP.
Reforms trade and investments liberalization, tax policy reform,privatization of government assets,
restructuring of government enterprises enabled investments to come in while improving
government’s financial position.
The Philippine government under President Ramos was finally seen as one that could “set its
mind to do something and actually do it.” Indeed, thereforms brought the economy within sight of
newly industrializing economy (NIC) status and by 1997 the Philippines was one step away from an
investment-grade rating, but the Asian financial crisis triggered in 1997 slowed economic development in
the Philippines once again, the economy plunged and the annual growth rate of the Gross National
Product fell in 1998 as compared to 1997.

Estrada Regime

During the 1998 presidential election campaign, like most presidential campaign, the
competition did not do anything between political platforms and programs. Estrada’s strategists were
aware that there is a large percent of the population who are poor and uneducated or “masa” who were
looking for a candidate whom they could relate to. Using the slogan “Erap para sa mahirap”, Estrada
succeeded in inspiring the lower class people with a hope that if he wins, he will be the president of the
masses. Estrada was inaugurated on June 30, 1998 in the historical town of Malolos in Bulacan province
in paying tribute to the cradle of the First Philippine Republic.

Estrada’s first priority was to focus on the improvement of the economy. Creating the
environment of peace and order in which business does well so as to uplift the economy of the country.
Estrada wanted to focus on the masses and put up programs for them first. He promised the masses that
they will not suffer anymore and let the rich people take a share on the sacrifices. As he stated
 “As far as resources permit, to the best of our ability and the limit of our energy, we will put a
roof over their heads, food on their tables, and clothes on their backs. We will educate their children and
foster their health. We will bring peace and security, jobs and dignity to their lives. We will put more
infrastructure at their service, to multiply their productivity and raise their incomes.”

During Estrada’s administration, the economic team was strong but during the latter part, the
administration failed to capitalize on the gains of the previous administration. When Estrada was
accused of influencing an investigation in the stock market manipulation, foreign investments declined.
The Asian Financial Crisis and climatic disturbance hindered economic performance of the country.
Towards the end of his term, the fiscal deficit doubled to more than Php100 billion. However, GNP
increased to 3.6% from 0.1% and GDP incurred a 4% growth rate. Debt reached Php2.1 Trillion in 1999.
Inflation rate went down from 11% to just a little over 3%. The Estrada administration upheld the foreign
policy thrusts of the Ramos administration, focusing on national security, economic diplomacy,
assistance to nationals, and image-building. The Philippines continued to be at the forefront of the
regional and multilateral arena.

There were several primary problems during this time:

 Graft and Corruption

Graft and corruption was pretty eminent not just during Estrada’s administration. Obviously, we all
know Estrada was sanctioned to have been getting or robbing money from the governments’ fund to use
for his own personal interest. That is why he was impeached due to his plunder and perjury case.

 Asian Financial Crisis

The Central bank raised interest rates by 1.75%. The BSP was forced to intervene heavily to defend
the peso raising the overnight rate from 15% to 24%. The peso fell from 26 per dollar to 28 pesos to 40
pesos by the end of the crisis.

 El Niño

The El Niño led to too many problems in the country. One of which is the serious drought of lands
in the rural areas that cause the unemployment of the farmers and the rise of the prices of rice.

 Poverty

Of the 14.37 million families, 5.75 million belonged to the lowest 40% income group while 8.62
million in the highest 60% income bracket. In terms of percentage to total families, families in the highest
60% income strata got the biggest percentage in almost all indicators. But in terms of the percentage to
the total families within each income strata, families in the lowest 40% income strata are not far off from
families in the highest 60%.

The Philippines came close to a financial meltdown in 2001 during the impeachment of Former
President Estrada. The revenues were too low, with its $54.8 billion in foreign debt too high which
followed a lower nation credit rating. In addition to this foreign investors were reluctant to invest in the
Philippines at that time due to the political crisis the country was experiencing.
 Arroyo Regime

The impeachment case against failed to push through, the people marched to the streets and
EDSA 2 was born. When Former President Estrada was finally removed from Malacanang, there was
another rally attempt by Estrada’s supporters. This attempt was supposedly “EDSA 3” but it failed due to
the lack of supporters.

Former President Joseph Estrada left President Arroyo with a country which needed to recover due
to the political crisis and the economic crisis. Estrada has left Arroyo with a lot of problems. When
Estrada was forced out of office, there were numerous rallies by Estrada’s supporters; some resulted into
a bloody confrontation between Erap Supporters and the police. It was a challenge to Arroyo to gain the
trust of not only her people but of the trust of the investors as well. She needed to encourage more
investments to improve the economy and to improve the lives of the Filipino’s. It was Arroyo’s challenge
to bring the Filipino’s back to its feet.

Despite occasional challenges to her presidency and resistance to pro-liberalization reforms by

vested interests, President Gloria Macapagal-Arroyo has made considerable progress in restoring
macroeconomic stability with the help of a well-regarded economic team. However, despite recent
progress, fiscal problems remain one of the economy's weakest points and its biggest vulnerability.

Important sectors of the Philippine economy include agriculture and industry, particularly food
processing, textiles and garments, and electronics and automobile parts. Most industries are
concentrated in the urban areas around metropolitan Manila. Mining also has great potential in the
Philippines, which possesses significant reserves of chromite, nickel, and copper. Significant natural-gas
finds off the islands of Palawan have added to the country's substantial geothermal, hydro, and coal
energy reserves.

The Philippines was less severely affected by the Asian financial crisis than its neighbors, aided in
part by more than $7 billion in annual remittances from overseas Filipino workers. Except for 1998 --
when drought and weather-related disturbances pulled down agricultural harvests, combining with the
contraction in industrial sector production -- real Gross Domestic Product (GDP) has recorded positive
growth year-on-year. From a 0.6% decline in 1998, GDP expansion picked up in 1999 (3.4%) and 2000
(4.4%) but slowed to barely 2% in 2001 in the context of a global economic slowdown, export slump, and
domestic as well as global political and security concerns. Year-on-year GDP growth accelerated to 4.3%
in 2002, reflecting the continued resilience of the service sector, gains in industrial sector output, and
recovering exports. The economy exhibited resilience during 2003 with 4.7% GDP growth,
notwithstanding serious external and domestic shocks. (including the Iraq War, SARS, uncertainties over
global economic prospects, sovereign credit-rating downgrades, and resurgent law-and-order worries).It
will take a higher, sustained economic-growth path to make more appreciable progress in poverty
alleviation given the Philippines' high annual population growth rate of 2.36 percent -- one of the highest
in Asia.

Agriculture generally suffers from low productivity, low economies-of-scale, and inadequate
infrastructure support. Agricultural output fell in 1997 and 1998 due to an El Niño-related drought but
increased by 6.0% in 1999 (over 1998's low base). Growth reverted to more normal rates in 2000 (4.0%)
and 2001 (3.7%). Agricultural output (affected by another, albeit milder, dry spell) expanded by 3.8%
year-on-year in 2002 and in 2003.
 The global economic and electronics-demand slowdown combined with softer prices of
resource-based commodities to depress export performance in 2001. Full-year export receipts -- which
last declined in 1985 -- contracted by 16.2% year-on-year, dragged down by a nearly 24% drop in
revenues from shipments of electronic and telecommunications parts and equipment (which comprise
about 60% of annual export revenues). Reflecting improved levels of intra-Asia trade, export receipts
expanded from April-December 2002, breaking from 14 consecutive months of negative year-on-year
growth and nudging up the full-year 2002 export growth rate to positive territory (10%). Weaker global
demand saw 2003 export revenues sputter to 1.4% growth. Export receipts were up 5% year-on-year
during the first quarter of 2004.

Although less severely affected than its neighbors, the Philippines' banking sector was not
spared from high interest rates and non-performing loan (NPL) levels during the Asian financial crisis and
its aftermath. Increases in minimum capitalization requirements, increasing loan-loss provisions, and
generally healthy capital-adequacy ratios have helped temper systemic risk. Philippine banks average
NPL ratio, which peaked at 18% in 2002, has since stabilized to between 14%-15%. However, this current
performance now lags most hard-hit neighboring countries that have moved more aggressively to
address their NPL problem The burden of non-performing assets has squeezed profit margins and
inhibited bank lending, posing risks to the longer-term viability and stability of the banking system.

As of end-December 2003, the Philippine peso (which closed at P55.50) had weakened by 4.7%
year-on-year and by more than 110% vis-a-vis the US dollar since mid-1997, reflecting uncertainties over
export and balance of payments prospects, resurgent peace-and-order worries, and political
uncertainties in the run-up to the May 2004 national elections. Elsewhere, there have been some recent,
positive developments in the Philippine economy. Year-on-year inflation, a perennial problem in the
Philippines, is under control. Year-on-year inflation averaged 3.1% during 2002 and 2003, the lowest
since 1987, tempered in part by generally stable food prices, under-utilized capacities, still high
unemployment, and government efforts to control utility-rate increases. The Government expects to
contain average inflation within a 4%-5% range during 2004 despite cost-push pressures from oil price
increases and public utility rate adjustments The monetary authority’s adoption since January 2002 of an
inflation-targeting framework has enhanced price stability. Although under pressure due in part to
higher inflation expectations, domestic interest rates have tapered significantly in recent years, aided by
moderate inflation and a stable monetary policy. The Government -- which is targeting lower fiscal
deficits starting 2003 toward balancing the budget by 2009 -- contained the full-year 2003 budget deficit
to 4.6% of GDP, reflecting spending restraint and more vigorous efforts by tax collection agencies to
improve administration, enforcement, and governance.

The Aquino and Ramos administrations opened up the relatively closed Philippine economy and
provided a firmer base for sustainable economic growth. After a slow start, President Estrada and his
cabinet continued with, and expanded, liberalization and market-based policies and reforms. Efforts to
reform the constitution to encourage foreign investment, particularly foreign ownership of land, were
abandoned amidst nationalist opposition. Initial optimism about prospects for economic reform also had
dimmed amid concerns of governmental corruption. Scandals involving the Philippine Stock Exchange,
and the President's close ties to certain businessmen, shook confidence of investors and the business
community and ultimately led to successful efforts to impeach and remove President Estrada.

President Macapagal-Arroyo is working to continue with economic reforms in areas beyond

retail trade, electronic commerce, banking reform, and securities regulation. Her administration enacted
an anti-money laundering law in September 2001 and followed through with amendments in March
2003 to address remaining legal concerns posed by the OECD Financial Action Task Force (FATF). While
the Philippines has avoided FATF countermeasures, effective implementation will be key to the
Philippines removal from the FATF’s watch list of "noncooperating countries and territories." Although
encountering implementation hitches, her administration also enacted legislation to rationalize and
privatize the electric power sector. In January 2003, President Macapagal-Arroyo signed into law two
priority initiatives to reform the government procurement system (the Government Procurement Reform
Act) and to help ease the burden of non-performing assets on the financial sector through the
establishment of private asset management companies (the Special Purpose Vehicle Act).

During the first quarter of 2004, she signed into law legislation to rationalize and plug leakages in
the Philippines convoluted documentary stamp tax system and encourage secondary trading of financial
instruments, as well as legislation (the Securitization Act) towards establishing the necessary
infrastructure and market environment for a wide range of asset-backed securities. She also signed
legislation to institutionalize Alternative Dispute Resolution for civil cases to help address the problem of
overburdened court dockets.

Notwithstanding favorable developments, the Philippine economy continues to juggle extremely

limited financial resources while attempting to meet the needs of a rapidly expanding population and
address intensifying demands for the current administration to deliver on its anti-poverty promises. The
current high level of government debt, the substantial share of foreign obligations, the emerging risks
posed by contingent liabilities (particularly those of the Government’s debt-saddled power generation
firm, the National Power Corporation), and the worrisome deterioration in the tax collection
performance over the past five years have increased the country’s vulnerability to severe external and
domestic shocks. Reflecting weaknesses in intellectual property rights protection, the country remains
on the U.S. Trade Representative's Special 301 Priority Watchlist. Potential foreign investors, as well as
tourists, continue to be concerned about law and order, inadequate infrastructure, and governance
issues. While trade liberalization presents significant opportunities, intensifying global competition and
the emergence of low-wage export economies also pose challenges. Competition from other Southeast
Asian countries and from China for investment underlines the need for sustained progress on structural
reforms to remove bottlenecks to growth, lower costs of doing business, and promote good public and
private sector governance. Sonny Africa said, “The disturbing divergence between the fortunes of a few
and the welfare of the many is the most troubling legacy that the Arroyo presidency leaves behind– and
among the greatest challenges that the incoming administration has to confront to deliver any real
change.” This is an insinuation of looming circumstances that Arroyo’s administration brought into that
left dark legacies.

‘The Arroyo administration will be remembered for lost ground on important measures of
development and progress in the face of economic growth. Filipinos are worse off today than when
President Gloria Macapagal-Arroyo came to power nine-and-a-half years ago.’ These were the reasons:

Unemployment is at record sustained highs, household real income declined, poverty increased,
inequality worsened, and Filipinos were forced abroad in unprecedented numbers. Prospects have been
undermined by the steady erosion of domestic manufacturing and agriculture, a rapidly deepening fiscal
crisis, and defeatist international trade and investment policies. In contrast, the profits of the country’s
biggest corporations and the wealth of its richest families have continued to improve substantially.

This disturbing divergence between the fortunes of a few and the welfare of the many is the
most troubling legacy that the Arroyo presidency leaves behind– and among the greatest challenges that
the incoming Aquino administration has to confront to deliver any real change.

The Arroyo administration plays up the economic growth over its term– touted as the best in
over 30 years– as the gold standard of its performance. Official reported growth in gross domestic
product (GDP) during the Arroyo administration (2001-2009) averaged 4.5% annually compared to 3.9%
under Aquino (1986-1991), 3.8% under Ramos (1992-1997) and 2.4% under Estrada (1998-2000). The
economy expanded by 47.2% in real terms since 2001. The results however speak for themselves.

The period 2001-2009 is the longest period of high unemployment in the country’s history with
the true unemployment rate averaging some 11.2% (correcting for the government’s not counting
millions of jobless Filipinos as unemployed since 2005). The number of jobless and underemployed
Filipinos grew to 11.4 million in January 2010 which is 3.1 million more than in January 2001, when Pres.
Arroyo came to power. The 4.3 million jobless Filipinos as of last January is an increase of 730,000 from
nine years ago; the 7.1 million underemployed is 2.4 million higher.

Some 877,000 jobs were created annually since January 2001 to reach 36.0 million in January
2010. However the quality of jobs created is very poor: 3.8 million are “unpaid family workers” (585,000
increase from January 2001), 12.1 million are “own account workers” mainly in the informal sector (1.6
million increase), and around 12.6 million are “wage and salary workers” but without written contracts.
The number in merely part-time work increased by 3.8 million to reach 12.3 million last January and now
accounts for over one out of three jobs.

Poverty has continued to rise even by the government’s low official poverty line. The number of
poor families increased by 530,642 or 13% since 2000 to reach 4.7 million in 2006. The number of poor
Filipinos increased by 2.1 million over that same period to reach 27.6 million. But the official poverty line
is only P42 per person per day in 2006 which buys just a kilo of rice and a chicken egg; a higher threshold
of P86 more than doubles the number of Filipinos classified as poor.

As it is, household real incomes fell by an average of 20% across all surveyed homes between
2000 and 2006– the recorded 19% increase in nominal income over the period was easily offset by the
38% rise in prices. The latest available poverty data is for 2006 so these trends occurred long before the
global turmoil and natural calamities since 2008 which can only swell the numbers even more.

The country’s inequalities remain severe. In 2006, the net worth of just the 20 richest Filipinos–
including close Arroyo allies Lucio Tan, Enrique Razon, Jr., Eduardo Cojuangco, Enrique Aboitiz and
others– was P801 billion (US$15.6 billion) which was equivalent to the combined income for that year of
the poorest 10.4 million Filipino families.

The net income of the Top 1,000 corporations in the country rose from P116.4 billion in 2001 to
average P416.7 billion annually in the period 2002-2008. On the other hand, workers have seen the
smallest increase in their real wages during the Arroyo administration than over any government since
the Marcos dictatorship. The minimum wage in NCR increased just P5 in real terms over the almost
decade-long Arroyo term compared to P82 during the time of Aquino, P16 of Ramos, and P22 of Estrada
(inflation-adjusted figures based on 2000 prices).

The hyped economic growth has also been largely concentrated in Metro Manila which
increased its share of the country’s GDP from 30.9% in 2001 to reach 33.0% or a third of the national
economy in 2008. This was at the expense of 10 other regions which each saw their share of GDP fall –
Cordillera, Ilocos, Cagayan Valley, Central Luzon, Southern Tagalog, Eastern Visayas, Zamboanga
Peninsula, Davao, ARMM and Caraga. Only two other regions, Northern Mindanao and SOCCSKSARGEN,
saw about a percentage point each increase in their share of GDP.

This has caused income disparities to widen even more. In 2001 income per head in Metro
Manila, the richest region, was eight (8) times that of the poorest region ARMM– by 2008, income per
head in Metro Manila was 12 times that in ARMM.

The fundamentals for modernizing the economy have eroded. Manufacturing’s share in GDP was
down to 21.8% in 2009 or as small as in the 1950s. The sector created just 15,370 jobs annually since
January 2001 to reach 3.0 million in January 2010. In contrast, seven times more household help jobs
were created over the same period– 107,730 were added annually to reach 2.1 million last January. The
number of household help in the country is fast approaching the number of its manufacturing workers.

The agriculture sector meanwhile has shrunk to 18.1% of GDP or its smallest share in the
country’s history. Only 172,600 agricultural jobs were created annually over the last nine years to reach
11.8 million last January, most of which were in low- or even non-paying work. Rural poverty persists
due, among others, to the slow pace of agrarian reform: the Department of Agrarian Reform (DAR) of
the Arroyo administration only distributed an average of 119,301 hectares annually (2001-08) which is
smaller than under Estrada (121,274 ha.), Ramos (296,395 ha.) and Aquino (169,063 ha.).

The deterioration of domestic manufacturing and agriculture go far in explaining the weak job
creation. This also underpins how the period 2001-2009 has seen the most Filipinos forced abroad to
find work in the country’s history. Deployments during the Arroyo administration averaged 1.04 million
annually compared to 469,709 (Aquino), 713,505 (Ramos) and 839,324 (Estrada); 1.42 million were
deployed last year which was equivalent to almost 3,900 Filipinos leaving every day. The economy’s over-
reliance on remittances reached record levels during the Arroyo watch and, in 2005, breached the
psychological threshold of being equivalent to 10% of GDP.

The erosion of domestic production is also causing an over-reliance on external sources of

growth – especially overseas work but also such as low value-added export manufacturing and business
process outsourcing (BPO). These activities are essentially disconnected from the domestic economy
though and do not contribute to any broad-based economic dynamism. BPOs for instance have been
hyped in growing rapidly from 5,600 employees and US$56 million in revenues in 2001 to 442,164
employees and US$7.2 billion in revenues in 2009. Yet the sector can only ever account for a tiny share
of the economy and in 2009 was just 1.3% of total employment and only some 2% of GDP.

It is also clear that nothing has been done to address the root causes of the country’s fiscal
troubles. The Arroyo administration is exiting upon the steepest increase in the national government
(NG) deficit in the country’s history– a P286 billion or 2,300% increase over just two years from P12.4
billion in 2007 to P298.5 billion in 2009. This is on top of the government having it worst deficits already
with a cumulative NG deficit of P1.34 trillion over the period 2001-2009 or more than triple the deficits
of the Aquino, Ramos and Estrada administrations combined (P422 billion).

It also passes on a heavy debt burden that already reached P4.36 trillion in February 2010 or
more than double the P2.17 trillion debt inherited from the Estrada government. The Arroyo
administration has effectively been borrowing an additional P243 billion annually since coming to power.
This is even after paying P5.1 trillion in debt service from 2001 to 2009 which is nearly triple the P1.8
billion in debt payments made over 15 years by the Aquino, Ramos and Estrada administrations
combined.

The government’s tax effort has barely kept pace with nominal growth in gross national product
and only stop-gap measures such as record privatization– including selling off as much in 2007 as had
been sold off in the previous 15 years spanning three administrations– made it momentarily appear that
fiscal reforms were in place.

The Arroyo administration has made the country’s tax system even more regressive, burdening
the poor (such as with RVAT) and unburdening those most able to pay (such as by lowering corporate
income taxes). Meanwhile the most important sources of deficit pressures are unaddressed: graft and
corruption, trade liberalization, foreign investment incentives, unproductive debt service, and bloated
military spending.

Recent years have seen some external global events beyond the administration’s control but the
country’s problems were there even earlier– poor job growth, manufacturing decline, low rural incomes,
and a bloating informal service economy. These troubles were not primarily due to the consecutive food,
fuel and financial crises but to mistaken economic policies.

The Arroyo administration pushed an economic strategy built on ‘free market’ policies of
globalization– removing trade barriers, taking away investment controls, privatizing public utilities and
social services, deregulation, and continued debt payments. These far-reaching measures are the biggest
factor behind the country’s severe economic troubles and need to be reversed for there to be any
prospects of steering the economy towards real social progress. Even corruption, which has certainly
become severe, has not caused as sweeping damage.

Foreign investors were aggressively courted and enticed with generous incentives, as well as the
freedom to operate with hardly any obligations to contribute to domestic economic development.
Transport, power and water infrastructure were built mainly geared towards serving the needs of big
foreign and domestic business interests.

Trade deals such as the Japan-Philippines Economic Partnership Agreement (JPEPA) and with the
Association of Southeast Asian Nations (ASEAN), World Trade Organization (WTO) and others were
entered into. The government even pushed to seal a free trade deal with the United States (US). All
these have made the Philippines more vulnerable and more exposed than ever before to the global
economy. They also hamper meaningful progress by preventing nationalist economic policy-making.

This means that a much more progressive governance is needed to able to overturn the dark
legacies of Arroyo.
Benigno S. Agquino Regime

Economic growth that benefits all. That's one of the main goals of President Benigno Aquino III.
After all, high growth is meaningless if it doesn't lift the quality of Filipinos' lives, he says.

Faced with a mediocre growth performance, a population growth rate of more than two
percent a year, and with its resiliency challenged by the double-dip global financial crisis, the Philippines
through its new administration in June 2010 committed itself to achieving inclusive growth through
transparent and responsive governance, massive infrastructure investment, increased
competitiveness, improved access to financing, improved social services, a stable macroeconomic
environment, ecological integrity, quality education, appropriate science and technology applications,
and advanced peace process alongside improved national security. From the second half
of 2010 to the end of 2011, Philippines sought to meet these targets despite unexpected external
shocks that threatened its economic growth. However, by the first semester of 2012, indicators
significantly improved, thus bringing the country’s development path closer to the targets set by the
Philippine Development Plan (PDP) 2011-2016.

The Philippine economy recorded a growth of 6.7% in the second half of 2010, which slightly
dampened full year growth to 7.6%. At the beginning of 2011, growth fell short of the target due to a
series of external shocks and finally closed the year with at 3.9%. Recovery, however, was well on its way
in the first half of 2012, with gross domestic product (GDP) expanding by 6.2%.

Growth in 2010 was fuelled primarily by the Economic Resiliency Plan (ERP), which pumpprimed
the economy through upgrades in infrastructure and capital stock and expanding social safety nets.
Strong domestic demand, sustained growth in overseas Filipino remittances, and low inflation
complemented further the growth. However, external weakened the economy in 2011, affecting trade,
foreign direct investments, and other financial channels. The delay in spending for public construction in
2011 further dampened growth. But by the first half of 2012 real GDP expanded by 6.2%, placed the
Philippine economy in a more aggressive stance. Services and industry on the supply side and by
household consumption, government consumption, and net exports on the demand side accounted for
the growth mentioned.

Government data(2013) show that despite economic gains, the country's poverty rate hardly fell
from 2009 and 2006 levels. Below are fast figures showing where the Philippine economy stood when
Aquino assumed office, and what has changed since. –

INDICATORS THEN NOW

GDP 7.3% 7.8%

Poverty 28.6% 27.9%
Jobs 35.4 M 37.819-M
Underemployed & Unemployed 9.395-M 10.338-M
Inflation 3.9% 2.9%
Budget Deficit P162.107-B P42.839-B
Revenue Collections P500-B P708.374-B
Debt per Filipino P51,095 P57,063
PSE Index 4,201.146, 619.95
Exports42.1%-6.18%
Foreign Tourist Arrivals1.307-M2.01-M
FDI$779-M$1.577-B
ForexP45.1097:$1P41.56611:$1