Philippines and the World

Bank
The race to the bottom
1968 ......
Marcos won his 2nd term in office but at
the cost of the nation’s foreign
exchange, the country is on the verge of
economic collapse. Marcos approaches
the World Bank for help.
World Bank demands
60 % Devaluation of the peso

Liberalization of the Philippine Market

Export Processing Zones (EPZ)

Weaker Labor Laws (lower wages)

Devaluation of the Peso
The prime motivation is to make Philippine Goods globally
competitive.

The actual result was hundreds of entrepreneurs who

required importation of raw materials and equipment where
thrown into bankruptcy overnight.
Liberalization
Liberalization basically means free market, no
protectionism , reducing the size of regulation bodies and
elimination of any barriers. (laisse-fair economics)

“Its highly unusual for a country to develop successfully

without some degree of protectionism”

The United States itself did not practice Liberalization when

it was a small country
EPZs
Just like the taiwan models

Actual effect : the Bataan EPZ costed the Philippines

$150M

Due to special regulations the government lost more money

as the EPZs operated

Basically the Philippines was forced to build infrastructure to

loan, but to build these infrastructure we had to loan first.
Weaker Wage Laws
In order to make Philippine labor much more competitive

In actuality, horrendous working conditions were given to

workers, and businessmen taking advantage of this
creatively made sure they paid the workers as low as
possible.

Real wages dropped by 25% despite an almost equal rise

in inflation between 1972 to 1978
“It was a very nice arrangement for
the richer countries, because they
have all these poor countries
desperately competing with each
other to see who can produce goods
most cheaply.”
Martial Law
“ The American Chamber of Commerce wishes
you every success in your endeavor to restore
peace and order, business confidence and
economic growth... We assure you of our
confidence and cooperation ... We are
communicating the feelings of our associates and
affiliates in the United States”
-Telegram

The World Bank funneled $2.6B to 61 Marcos Projects

10% GNP growth to the crash
1973, saw the Philippine’s hard work could have paid off
froma $120M deficit in Agriculture to a $270M surplus. $55
Million in foreign investments

1980-1981 : Australia, Canada, Europe , Japan and the

United States set-up trade barriers against the Philippines

The World Bank just watched as the country fell into ruins.
1966- $1B |-| 1986 - $26 B
Rural Poverty Unrest Reduction
The world bank forced farmers to adopt expensive
mechanization.

The ones who truly benefited are the large landlords and
commercial farmers not the small farmers that make the
bulk of the rural population
World Bank in the Cabinet
1981 : Martial Law lifted and the new cabinet dominated by
Bank-sponsored technocrats.

The World Bank then granted Marcos with more loans

“The Bank was perfectly aware of the fact that ost loans
were transferred into the bank accounts of Marcos and his
generals, nevertheless, the Bank considered these as
necessary bribes for paying the political staff in power. “
$11 B Heavy Industries
“If the Philippines developed its own industrial base, the
country would no longer be such a good customer for the
multinationals. What finally brought the demise of the
projects (heavy industries) was the “cold shoulder given by
prospective financiers who had learned of the Bank’s veto”
Effects of the World Bank relationship

OFW dependent economy

Mini-Size Me

90% of budget goes to debt servicing

Privatization (Meralco, Water Services, Philippine Airlines

etc)

Way behind compared to our counter-parts.