President was cleared of liabilities. The new

Presidentof the Philippines from one of the economic managers in the Cabinet. In addition,the balance sheet of the new BSP was cleared of liabilities.

Thenew charter upholds “price stability” as the major goal of the BSP. In linewith this new mandate, the BSP has adopted inflation targeting as its monetarypolicy rule. With this rule, the economy has entered a low-inflation rate regimethat has held up until now in spite of shocks like the recent oil-price spikes.Again,this BSP Act would not have passed without strong support from Congress. Thebill had been filed in Congress during the Aquino years but it was bottled upuntil Ramos came along.Exchange-rate system:Prior to the Ramos years, there were recurrent BOP crises that could be tracedto inappropriate exchange-rate systems. The system was either fixed or a managedfloat, none of which prevented an exchange-rate collapse.

Theexchange-rate system favored by the Ramos administration was a flexible one. Theexchange value of the peso against major foreign currencies was determined inforeign exchange markets. This system allowed large inflows of mobile foreigncapital, funds that provided liquidity to the stock and bond markets, and ledto episodes of a peso appreciation.Inthe mid-1990s, currency appreciation became the norm in East and SoutheastAsia.

From hindsight, this helped sowed the seeds of the 1997 Asian financialcrisis.Long-term industrial restructuringTheunwanted growth fluctuations through the years posed another major challenge tothe Ramos administration. In the 1980s, the Philippines had been left behind inthe industrialization race by the likes of Thailand and Malaysia. How thencould the Philippines rejoin and catch up with the newly industrializingeconomies in East and Southeast Asia? Pres. Ramos rallied the Filipinos under”Philippines 2000,’ and made international competitiveness by the year 2000 amajor goal.

This meant reforms in industrial policies, foreign-trade policies,and foreign investments.Industrial policy:This rested on raising agricultural productivity and accelerating investmentsin the non-agricultural sector, e.g., industry and services. To raiseagricultural productivity, access to modern inputs, such as, seeds developedfrom research and development, was improved through import liberalization.

Ruralinfrastructure development was stepped up. Irrigation was expanded, includingthe pest management program. To raise investments in industry and services, theLand Lease Law was enacted, extending leases to foreigners to 75 years. TheSenate ratified accession to the Multilateral Investment Guarantee Agreement(MIGA). The Negative Lists in the Foreign Investments Act were trimmed, therebyexpanding the industry areas that allowed hundred-percent foreign participation.Import liberalization and tariffreduction: To enable domestic firms of any size to have accessto least-cost imported inputs, such as, capital equipment, spare parts and components,import liberalization was accelerated. Executive Order (EO) no. 470 was issuedproviding for tariff reduction through time until a uniform rate of fivepercent was reached.

WTO accession:In 1994, the Senate ratified Philippine accession to the World Trade Organization(WTO), which was established following the conclusion of negotiations under theUruguay Round of the General Agreement on Tariffs and Trade (GATT). The WTO is basedon the Most-Favored-Nation (MFN) Principle. Any tariff privilege accorded toone member country cannot be withheld from another. In other words, theprinciple of nondiscrimination applies. The Philippines welcomed the WTO sinceit was able to access even the privileges forged bilaterally between developedmember countries.ThePhilippines, under Pres.

Ramos, was also active in the ASEAN Free Trade Area, whichwas anchored on the Comprehensive Effective Preferential Tariff (CEPT) scheme.The CEPT puts tariffs on imports within AFTA between zero to five percent,except for items in the temporary exclusion list.ThePhilippines, meanwhile, hosted the Leaders’ meeting of the Asia-Pacific EconomicCooperation in 1996. APEC is an informal preferential trade and investment arrangementdedicated to “open regionalism.” It adheres to WTO rules.Financial market liberalization:Modern foreign trade is based on trade credits. In this regard, it wasimportant to liberalize financial and capital markets alongside trade liberalization.

UnderPres. Ramos, commercial banking was opened up to foreigners with the entry often new foreign banks. And since trade in always conducted under risk anduncertainty, ten new foreign insurance companies were also allowed to operate.Inthe stock market, the Ramos administration caused the merger of the two boursesoperating in Manila and Makati. Undesirable arbitraging was thus eliminated.Followingthese reforms, the Philippines got more integrated than before with the world economythrough trade not only in commodities, but also in securities and national currencies.Aid EffectivenessAfterthe restoration of democratic political institutions in 1986, many donors expressedtheir support for the rebuilding efforts of the government.

But for variousreasons, aid commitment to the Philippines from donor countries got mired inlow utilization and availment rates. In this regard, one of the first measuresof Pres. Ramos was the setting up of a Presidential Task Force on Right-of-WayAcquisition. One of the first major expressways that got completed was C5,which traversed a former military camp, e.g., Fort Bonifacio, today a high-rentcommercial, residential, and financial center.

Inaddition, Pres. Ramos issued orders to the Development Budget Coordination Committee(DBCC) inter-agency committees, to protect the budget appropriations ofODAfunded projects approved by the Investment Coordination Committee (ICC).Whenforeign borrowings of the government neared the limits, he caused the enactmentof the Official Development Assistance Act of 1996, which exempts ODA funds fromthe said foreign borrowing limit.

Interms of institutional arrangements, one of the achievements of the Ramos administrationto make foreign aid effective is the strengthening of the links betweenplanning and budgeting. The DBCC and the ICC worked closely to link the MTPDPand the public investment program to the annual budget of the national government.In addition, high-level senior officials participated in programming dialogueswith missions from the donor countries, ensuring agency commitment toODA-funded projects.Outcomes of the Reform ProcessTheRamos approach to governance and the comprehensive economic policy reforms basedon market reliance and getting prices right did not fail to produce soundeconomic outcomes.

In 1993, the economy recovered from stagnation of 1992brought about by natural disasters and power shortages. Over time, real GDPgrowth gathered strength reaching a peak of 5.8% in 1996. In 1997, the Asianfinancial crisis broke out. The economy, however, escaped a recession thatyear, unlike, Thailand, South Korea, and Indonesia. When the crisis persisted,the economy slowed down and contracted slightly in 1998 by .

58%. Meanwhile, as aresult of financial reforms and prudent monetary policy, inflation was kept atthe single-digit level; over the period 1993-97, it averaged 7.5%.Theeconomy’s openness was enhanced by the trade reforms. As a result, growth rate ofgross exports expanded nearly five times from 1992 to 1997. Gross internationalreserves rose in that same period to four months’ worth of imports, helpingstabilize the exchange value of the peso against the US dollar.

Amajor accomplishment was the strengthening of the fiscal position of thenational government. Tax effort went up while government spending was prudent. Oneunfinished business in the fiscal from was the rationalization of specialfiscal incentives, a major source of foregone tax revenues.Inclosing, Philippines 2000 achieved what it set out to do, i.e.

, demonstrate thecapacity of the Philippines to compete globally. Real per capita incomerecovered and reached more than a thousand US dollars by 1998. Exports expandedenabling the Philippines to elude the painful impacts of the 1997 Asianfinancial crisis.

When Ramos exited in 1998, he handed a long-term plan to theincoming president that embodied a 2020 vision, essentially a continuation ofthe comprehensive reform process aimed at transforming the Philippines into anewly industrializing economy by the year 2020. 

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