Page last updated at 09:21 UTC, Wednesday, 05 March 2025 PH
We have seen how the present “sweet spot” in which the Philippine economy finds itself, attested to by independent international institutions, can be partly attributed to game changing economic policy reforms over the last twenty years, a period much longer than it took for most of our East Asian neighbors to be on a sustainable growth path. No need to cry over spilled milk, however. It is now incumbent on the Gen Y and Z generations to take full advantage of the favorable economic environment that is now facing the Philippines. The vast majority of these young professionals and workers are in the private sector. As Dr. Limlingan wrote in the paper to which we referred in the first two articles of this series, “the HSBC report rightly credits our government officials for these economic reforms. But we argue that the private sector should share in the credit. Private sector groups did some of the policy reforms studies and proposals, attended congressional hearings to expound on the benefits of the proposed laws, and provided political and moral support for the politicians enacting the needed but politically controversial economic reforms.” Dr. Limlingan rightly cited the prestigious think tank, the Foundation for Economic Freedom (FEF) as one of these private institutions ( I described the role of the FEF in economic policy reforms in the Philippines in previous articles in this column together with other think tanks like the Makati Business Club, the Philippine Institute for Development Studies, the Philippine Business for Education, and the Center for Research and Communication).
Equally important in the private sector are all the business enterprises--large, medium-scale and small—who took advantage of the more favorable investment climate that resulted from the policy reforms. In this regard, we must give special mention to the economic reforms that took place under the Presidency of Fidel V. Ramos (1992-1998). It was under the Ramos Administration that we saw the largest number and most serious reforms that encouraged the private business sector to start investing heavily again in the Philippine economy after the so-called EDSA revolution of 1986. These policy reforms are usually summarized in economic literature as “privatization, deregulation and liberalization” measures. Thanks to what happened during the Ramos Administration, we now have a proliferation of large investors—both foreign and domestic—in such vital areas as infrastructures, telecommunications, public utilities, agribusiness and other capital-intensive businesses. There is no question that if the private business sector today is alive and kicking, we can attribute a great deal of the existing strong foundations to the economic reforms that happened during the Administration of Fidel Ramos (1992 -1998). He pushed for the deregulation of key industries and the liberalization of the economy; he encouraged the privatization of public utilities to include the modernization of public infrastructures through an expanded Build-Operate-Transfer (BOT) Law. Ramos also ended the government’s monopoly over the skies and opened aviation to new players. Thanks to what happened during his term, the phrase Public Private Partnership (PPP) has become a byword in Philippine business.
Among the difficult but eventually successful privatization moves during the Ramos Administration was that of the water utilities. In 1997, two concession contracts for the Eastern and Western sectors of the Metro Manila area were awarded after an open competition. The concessions represented the largest population served by private operators in the developing world. Both winning companies, Maynilad Water Services in West Manila and Manila Water in East Manila, submitted bids with extremely low water tariffs. It was not easy sailing for both privatized companies. Neither company achieved its contractual targets of increased access. Improvements in both quality and access were slow during the initial years, especially in West Manila. Tariffication was pursued, with tariffs in both halves of the metropolitan area first reduced and increased substantially later.
The difficult effort to privatize the water utility sector was only one of the planks of the ambitious development plan dubbed “Philippines 2000.” Under this plan, several strategic industries critical to long-term economic development were privatized or deregulated. The taxation system was reformed, and external debt was better managed. Under the Ramos Administration, the Philippines enjoyed economic growth and stability. The Philippine Stock Exchange in the mid-1990s was considered one of the best in the world and the vision of Philippines 2000 was leading the country into a newly industrialized country status and the country was increasingly being regarded as the “Tiger Cub Economy in Asia.” By 1996, GNP was growing at a rate of 7.2 % and GDP at 5.2 %. The annual inflation rate had dropped to 5.9 % from its high of 9.1 % in 1995. By the late 1990s, the Philippines’ growth gained favorable comparisons with some of its East Asian peers such as Taiwan, South Korea, Malaysia and Thailand. In fact, during the East Asian financial crisis of 1997, which started in Thailand, the Philippines was the most resilient, suffering a GDP decline of less than one percent in 1998, in comparison with -13 of Indonesia, -7 of Thailand or -5 of Malaysia. To be sure, the Philippine economy suffered a sharp downturn during the financial crisis of 1997. Its fiscal deficit in 1998 reached P50 billion from a surplus of P1.6 billion in 1997. The peso depreciated from the rate of P40.89 to P29.47 to a US dollar. Despite these set- backs, however, other nations complimented the Ramos Administration for “good housekeeping.”
Other economic reforms implemented during the Ramos Administration included the adjustment of the value added tax (VAT) from four percent to an IMF-mandated rate of ten percent. Ramos also implemented a comprehensive Social Reform Agenda (SRA) that addressed the long-standing problem of high poverty incidence together with the related issues of jobs and livelihood, environmental protection, children and youth welfare, the elderly and the handicapped, agrarian reform and a more equitable distribution of income. In fact, long after his retirement from public office, he continued to work indefatigably in cooperation with former members of his Cabinet and other like-minded economists and professionals to advise subsequent Administrations about the continuing need to balance free market forces and the indispensable role of the State to provide the necessary physical infrastructures and the institutional and policy support needed by the private sector to perform its primary role of increasing the GDP of the economy and to distribute that GDP more equitably among the population. Considering all the Presidents of this country for the last 60 or more years (since the Administration of President Diosdado Macapagal), if anyone comes close to be compared to leaders like Lee Kuan Yew of Singapore or Park Chung Hee of South Korea, it would be Fidel V. Ramos. For comments, my email address is bernardo.villegas@uap.asia.
forgot your password?
