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ECONOMY The Philippines are largely agrarian. Rice is the staple food product. The main export in this country is crops like dried coconut (copra), bananas, pineapples, mangoes and tobacco. Main mineral resources are gold, silver, chrome, iron, copper, marble and nickel. The major industries include textiles, garments, handicrafts, furniture and electronics. |
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 Predominantly
agricultural, the Philippine economy has grown in the manufacturing
sector since the 1960s. During the mid-90's, 46 percent of the work
force was comprised of those in agriculture, fishing and forestry.
These areas also contributed over 20 percent to the GDP. The service
industry comprised almost 40 percent with manufacturing, construction
and mining employing 15 percent. The main commercial crops during the mid-90's were bananas, pineapples, copra with the important subsistence crops being corn, rice, sweet potatoes and cassava. Other commercial crops were papayas, oranges, sugarne and mangoes. Deforestation has become a problem in the Philippines due to extensive logging of hardwood trees. In an effort to curb this trend, the government banned the exportation of hardwood logs during the 1980's. In spite of this, lumber products are still a major (legal) export. During 1996, 23 percent of the GDP was a result of manufacturing contributions - with nondurable goods and textiles, processed food, tobacco products comprising the largest output percentages. Also making notable increases were durable goods such as furniture, electric items and equipment (non-electrical). A narrow deficit was shown in the 1997 annual budget with revenue at $16.3 billion and expenditures at $16.6 billion. Growth was expected to slow to approximately 3% GNP in 1998 as a result of continuing effects of the East Asian financial crisis. Following through on its program of economic reforms, the government will try to ensure continued growth and provide an environment for foreign investments. The Philippines tends to spend much more on imports than exports and is trading partners with several countries - with the main countries being the United States, Singapore, Hong Kong, Japan, Taiwan. These countries imported items such as petroleum, metals, chemicals, food items, textiles and transportation equipment. The Philippines' main exports were fish, textiles, coconut items, and electronic (electrical) items. Excerpted from http://www.asianinfo.org/asianinfo/philippines/pro-economy.htm Historical Background Pre-Colonial Times  Politically, the Philippine islands initially were populated by
Austronesian-speaking peoples. These peoples arrived by boat, and set
up separate communities known as barangay, each of which was led by a
chieftain or datu. Initially, the religious beliefs and practices were
animistic, as was true throughout Southeast Asia and the Pacific. The
first major 'world religion' to penetrate the Philippines was Islam,
which spread north from Indonesia to encompass the coastal settlements
of many of the central and southern islands. This period was in the
12th-14th centuries. Upon the arrival of Islam, many community datu,
or chieftains, became known as sultans. Their leadership status was
enhanced by Islam, and their communities expanded in territory,
becoming known as sultanates. Economically, some of these communities were still engaged in hunting and fishing; others, in slash and burn agriculture; and still others developed the intricate rice terraces which are a hydraulic engineering marvel. These communities traded among themselves as well as with the people of neighboring and far-flung countries of what we now call China, Vietnam, Malaysia, Indonesia, India, and the Arab world – to whom the peoples of the Philippines exported, among other things, betel nuts, pearls, tortoise shells and from whom the peoples in the Philippines developed its written scripts and from whom it imported porcelain, silk, bronze gongs, and semi-precious stones. Spanish Colonialism Ferdinand Magellan landed in the central Philippines on March 16, 1521 and claimed it for Spain. He was killed by Datu Lapu-Lapu of Mactan island, near Cebu, who became the first recorded patriot in Philippine history. Later on, Miguel Lopez de Legaspi, who started the colonization of the country in 1565, named the country after Philip II of Spain. For over 300 years, the Philippines was under Spanish rule, during which time most of the country was converted to Roman Catholicism. Only certain regions of the remote highlands and the Muslim southern Philippines staunchly resisted conversion. Along with the Catholic Spanish friars came eventual economic exploitation by the 1800s and the usurpation of peasant lands into the hands of the Church. The Spaniards put in place a rigid class structure based on control of agricultural land, forming a two-class structure composed of landlords (known as hacenderos) on the one hand and peasants (magsasaka) and agricultural workers (sacadas) on the other hand. Spain's initial interest in the Philippines was as a place to seek out the famed 'spice islands' of eastern Indonesia. This goal was unsuccessful, and so the Philippines became essentially a transshipment region where silver from Spain's colony in Mexico was exchanged for silks, porcelains, and other goods from China. This period of the 'galleon trade', referring to the large Spanish ships that transported goods across the Pacific Ocean from Mexico to Manila, lasted around 150 years. By 1750 or so, Spain insisted that their Philippine colony become more self-supporting. At this time, Spanish troops focused on developing estate plantations to grow export crops, including hemp and sugar. The United States in the Philippines U.S.-Spanish War The United States fleet led by Commodore George Dewey destroyed the Spanish fleet at the battle of Manila Bay on May 1, 1898. Under the Treaty of Paris, Spain ceded the Philippine Archipelago to the United States. Philippine-American War After defeating the Spaniards, the United States moved to secure the Philippines as a colonial holding, resulting in the deaths of (according to a U.S. general in 1901), approximately one-sixth of the country’s population. The U.S. was motivated by the ambitious desire to become a colonial power in Asia, similar to the colonial role of other European countries in the region. U.S. Colonialism The hacenderos prospered under U.S. rule. The country was brought inside normal tariff barriers and U.S. manufacturers had free access to the Philippine market. This unfortunately limited prospects for any domestic industrialization and led the Philippines to a growing dependence on agricultural exports to the United States. This policy also served to strengthen the hold of a small number of powerful agrarian elites, or landowners, in the countryside. World War II A few hours after the bombing on Pearl Harbor in Honolulu by the Japanese on December 7, 1941, the Japanese air force attacked the Philippines. Two days later, the Japanese army and navy landed on the main Philippine island of Luzon. The Japanese were interested in creating a larger economic zone throughout Southeast Asia, both for trading purposes and because of their growing population and limited land base. U.S. General Douglas MacArthur was forced out of the Philippines after three months of fighting, only to return three years later to liberate it from the Japanese. During this period, Philippine political leaders were forced to cooperate with the Japanese. Eventually, many people had to evacuate their villages and had their crops and animals confiscated by the Japanese army during the latter part of the war. Manila and Baguio City were carpet bombed and destroyed when the United States fought to regain control of the Philippines. Philippine Independence  On July 4, 1946, shortly after the end of World War II, the United
States finally granted the Philippines independence. Close economic
ties persisted, however, under agreements providing for preferential
tariffs, special treatment for U.S. investors in the Philippines, and
a fixed peso/dollar exchange rate. Military ties also persisted: the
U.S. retained Clark Air Base, Subic Bay Naval Base, and a number of
other smaller bases in the Philippines, and established a permanent
Joint U.S. Military Advisory Group (JUSMAG) for the Philippine armed
forces.The Green Revolution Rice: The Staple of Life Rice for the Philippines, and much of the rest of Southeast Asia, is the single most important crop. This is because it is the staple food for most of the population. In the early 1960s, Western countries began to develop and introduce new rice-growing technologies into the region in an effort to boost surplus rice production. This effort was known as ‘the green revolution’. Scientists around the world gathered at the newly built research centers, such as the International Rice Research Institute in Los Banos in the Philippines, in an effort to breed strains of rice that were high-yielding, very fertilizer-responsive, and used less water. By 1970, half of the Philippines’ rice acreage was planted with new rice varieties. By 1980, 75% of rice farmers were using the new high-yielding varieties. Positive Effects The effects of the green revolution were predicted to be as follows: First, increased rice output would lower the price of rice. The poor would benefit more from this because they spend a larger fraction of their income on rice than the rich do. Second, the new technology would be available for the poor farmers because it would require little investment and would be subsidized in part by the government through international loans. Third, landless workers would benefit from the increased demand for labor. The Reality Between 1900 and 1960, the annual output of rice per person rose from 80 to 140 kilograms. During this time, the population tripled and the cultivated rice acreage rose from 600,000 to 3.2 million hectares. After 1960, rice output rose mostly by yield growth rather than acreage increase. Rice output is at its highest level in years, although fluctuates according to rice pricing policies of the government and the destructive effects of typhoons. Many small farmers adopted the new high-yielding rice varieties, eager to increase their yields. Negative Effects The green revolution has helped increase yield, but it has also had some negative consequences. One major problem is the dependence on fertilizers. Not long after the farmers became dependent on the new technology, rice prices fell and fertilizer prices rose. This left rice producers with less real income than before the introduction of the new technology. The farmers did not have a choice to switch back to traditional rice varieties because prices of the new rice varieties were low and population pressure demanded that output stay high. The new rice technology now demanded more resources than some poor farmers could provide. Landlords with enough political clout to obtain government subsidies and access to water resources became the major rice producers, employing many former independent farmers or share tenants as wage laborers. This effect contributed to the disjuncture in landholdings between socio-economic classes that has a long history in the Philippines. Ever since Spain’s colonization, the Philippines has been exporting large amounts of agricultural resources around the world. Up until recently, export agriculture was the most important part of the Philippines’ interaction with the world economy. Cash Crops The major export crops include coconut, sugar, bananas, pineapple, and wood. Ideally, international trade has beneficial effects on both trading partners. By specializing in commodities, a country is able to benefit in selling what it is more suited to produce. Impact of Such Orientation in Agriculture There are complexities to this basic idea, though. First, foreign markets are neither purely competitive nor stable. Second, the Philippine government has sometimes regulated how much land is used to produce what kind of crops, which helps keep government revenue high, but does not let the producers make decisions that fluctuate with market trends. Third, the degradation of the environment due to careless government regulation risks future income loss in many export sectors Relations among Government, Hacenderos and Agricultural Workers Sugar plantation owners, hacenderos, are the most powerful political bloc in the Philippines. The reason is that there are so few of them and they control vast tracts of land. Approximately 500 plantations make up 25% of the total sugar production. The sugarcane they harvest is extremely labor-intensive and the workers are paid below poverty wages in order to keep the prices low enough to maintain competitive pricing on the world market. The hacenderos are able -- through political control -- to manipulate the government enough to avoid harmful regulation, such as land reform and controlled wages. Mass Poverty The United States Agency for International Development (USAID) summarizes the result: "Export expansion favors plantation agriculture and ties up substantial land assets in the hands of the few to the detriment of the landless agricultural workers, who receive a small share of the returns while suffering prolonged unemployment during periods of over-supply and periodically depressed prices." Originally, in the 1850s when land was first being cleared for large plantations, workers were offered cash advances and then were bonded to plantations by means of high interest debts, which were then passed from one generation to the next. Today, many sugar plantation laborers are bound by poverty and landlessness in much the same way. Deforestation Logging Concessions During the last 30 years, earnings from forestry have at times surpassed the Philippines’ two leading crops: coconut and sugarcane. Ninety percent of the country’s forests are considered publicly held domain controlled by the government. The government then issues logging licenses to timber companies, based on a system of political patronage. These companies then strip the land of trees and sell the wood for export. It is a quick and easy way to make money. It does, however, have dramatic present and future social costs. The forests are being cut down much faster than they can rejuvenate without extensive planting. This will end any future income opportunities in the forestry sector. The environment is suffering due to soil erosion and biological diversity is lost. It is estimated that only 1 percent of the primary forest that existed in the Philippines in 1900 remains. Imperative of Sustainable Growth Using proper forestry management, old-growth trees can be harvested from tropical forests every 30 to 50 years, creating a stable renewable resource. It is also possible to replant timbered areas in order to preserve the soil content. These measures have some cost associated with them and therefore reduce immediate profits to timber companies. Hence, they are rarely followed. Land is intensively logged and then burned, making it available to settlers to farm. The land is only usable for slash and burn farming for around four years before the rains have leached away the nutrients. After that, the land is only suitable for grazing cattle unless it is left alone for 10-15 years to regrow its natural forest cover. The Philippines has already felt the effects of squandering a national resource. In 1970, exports fell from 4 billion board feet to 1 billion board feet in 1985. The current, remaining forest cover simply cannot support large-scale logging efforts anymore. A second, scarcely recognized type of resource is also being lost as the forest dwindles. The Philippines is a region of megadiversity in biological fauna. It is home to a wide range of unique fauna (especially unique primates such as the tarsier, unique bats, rats, and other small mammals such as the mouse deer and cloud rat) found nowhere else in the world. All of these animals are threatened and extremely endangered as their forest habitat diminishes. The loss of such biological diversity is hard to measure in cost/benefit terms, but most scientists would argue that a narrowing of faunal and floral diversity is harmful and risky in the long run for any sustainable ecosystem. Negative Impact on Philippine Hydrology The loss of the forest topsoil has a large effect on the hydrological systems of the Philippines. During the rainy season, the topsoil acts as a sponge absorbing water and then releasing it slowly into streams during the dry season. This helps to regulate the timing of water discharge and enhances the water’s quality. Without the forests to hold the topsoil in place when the rains come, the topsoil is washed downstream in a flood. This not only makes the area unable to be planted, but also dams, reservoirs, and irrigation systems are ruined by the silt. Coastal fishing areas near river deltas also suffer, as the silt settles on coral reefs, thus killing them. Similarly, the fishing industry is forced to move farther from shore to catch fish, or fishers are compelled to engage in destructive marine fishing practices to sustain a livelihood. Excerpted from http://www.niu.edu/cseas/outreach/philecon.htm MAIN TRADING PARTNERS: Its main trading partners are the USA
and Japan. TRANSPORT: Railroads; route length 1,059 km (658 mi) (1989), passenger-km 240,000,000 (149,129,000 passenger-mi) (1989), cargo ton-km 60,000,000 (41,094,000 short ton-mi) (1989). Roads; length 159,069 km (98,841 mi) (1989). Vehicles; cars 834,123 (1988), trucks and buses 121,495 (1989). Merchant Marine; vessels 1,420 (1990), deadweight tonnage 14,158,957 (1990). Air Transport; passenger-km 8,543,000,000 (5,308,000,000 passenger-mi) (1990), cargo ton-km 273,511,000 (187,328,000 short ton-mi) (1990). COMMUNICATIONS: Daily Newspapers; total of 43 with a total circulation of 3,200,000 (1992). Radio; receivers 8,300,000 (1994). Television; receivers 7,000,000 (1994). Telephones; units 859,800 (1993). MILITARY: 106,500 (1995) total active duty personnel with 63.8% army, 21.6% navy and 14.6% air force while military expenditure accounts for 2.2% (1993) of the Gross National Product (GNP).
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