Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Country Study: Philippines An Overview • Philippines is known as the ‘poor man of Asia’ • Even though it could reach the level of South Korea or Singapore, actual economic performance has remained poor • Unequal distribution of income and corruption are major problem • In 1898, Philippines was ceded to the U.S. following Spanish-American war and attained independence in 1946 An Overview (cont.) • President Marcos ruled Philippines for 20 years. People power movement forced him in exile in 1986 • Ramos’s administration brought more political stability • Current President – Gloria Arroyos faces many challenges An Overview (cont.) • • • • Population – 98 million Working age population 61% High population growth rate 1.98% GDP per capita $3,300 (compare with Thailand $8,500) • Agriculture 14% • Industry 32% • Services 53% An Overview (cont.) • High unemployment rate 7.4% • Gini coefficient 0.46 and inflation rate 9.3%, 40% of population below poverty line • External debt $54 million, FDI $20.78 million • Filipinos working abroad Development Model • Import-substitution policy and overvalued peso during 1950-80, diverted resources away from agriculture to import-substituting manufacturing • Heavy regulation – in 1970 Price controls on rice and other agriculture products • Reliance on agriculture as engine for economic growth • Centrally planned economy with heavy involvement of government • Overregulated economy Development Model (cont.) • During 1990’s, role of state was reduced, Privatization Program, Mixed-economy model • 11 million Filipinos work abroad (11% of population) • Heavy reliance on remittance as a source of foreign currency, surpassing FDI Development Model (cont.) • The remittances stand at $15.9 billion in 2008, representing 15% of GDP • Government is taking steps to protect overseas workers (from illegal recruitment, mysterious deaths) • They have been working in Japan, Hong Kong, China, U.K., Spain, New Zealand Development Model and Outcomes • Tax Reforms – Philippines has a very high level of corporate business taxes. Recently, the debate over Value Added Tax • Slow growth rates – In 1960’s Taiwan and Philippines were at the same level of economic development. But today, Philippines is way behind the Asian Tigers • Philippines’ economic policies have not fared well in terms of poverty reduction • In 2007, the growth rate of 7.3% was the best the country has had in 30 years Outcomes • High cost economy plagued by inflation, bureaucracy, corruption and inefficiency • During 1970-90, inflation rates averaged at 13% • Philippines has lowest saving rates in ASEAN nations (22% in 1992, 15% in 1994) • As a result, high Philippines depends heavily on remittance & foreign debt ($59 billion) Outcomes (cont.) • Philippines business environment is not conducive to attract foreign direct investment • The performance in poverty reduction is very disappointing. It has lagged behind East Asia and South East Asia • In 2006, 32 percent of the population lived below the poverty line. The number of poor people (27 million) rose to its highest in 2006 • Kuznets Curve – Even during good economic times, poverty levels increased Outcomes (cont.) • Vietnam & China started with higher poverty incidence in 1985 but their absolute poverty levels are lower than in Philippines (2000) • Regional disparities in Poverty. Western Mindanao and East Visayas had four times more poverty than metropolitan Manila. Poorest regions account for 33% of the total number of poor • Philippines has a high population growth rate (2.3%). To overcome poverty high and sustained level of economic growth are required • Pro-poor program such as credit to poor, food subsidies benefited non-poor and politicians. The character of growth and quality of institutions is important. Government Policies • Poor government policies – international trade, fiscal and monetary policies • Tax evasion is an important issue, compounded by corruption and mismanagement • Public sector fiscal deficit has remained around 5 to 6% of GDP. Government relies heavily on direct and indirect taxes (VAT) Government expenditure account for 20% of GDP • Debt-servicing burden is very high – about 45 to 50 percent of national budget went for debt-servicing Government Policies (cont.) • In 1990, Japan and IMF froze loan disbursements to Philippines as the targets for public deficits were not met • Resource gap due to low saving rate • Monetary policy – High inflation rates resulting in negative real interest rates, deregulation of financial sector in 1980’s • Monetary and fiscal policies resulted in high intermediary margins in 1988 (loan rate 16%, deposit 4%) Reserve requirements were also very high (20%) raised in 1990’s to 25% Government Policies (cont.) • Government levied a tax on bank! (5% on gross receipts and 20% of deposit earnings) • Supply shocks, dependence on agriculture, high levels of tariffs, protection of sugar industry (and others) • Overruled Philippine peso in early years, and major devaluations in 1962 and 1970 Reason for dismal trade performance • Overvalued Peso, a series of devolutions did not stimulate exports and curtailed exports (in preindependence era P2=$1, in 1990 P28 = $1) • Higher production cost • Protection to encourage import-substitution • Electric equipment and garments had a high import content Current Development and Problems • Philippines faces problems on almost-all the fronts • IMF and World Bank loans for restructuring • Super regions • Second largest economy for outsourcing in Asia (after India) • Cut in corporate tax reform from 35 to 30% • Privatization for electricity and energy sector, underdeveloped regions of Luzon and Visayas receiving benefits