Posted tagged ‘industrialization’


January 14, 2011

Erle Frayne D. Argonza


Let me continue with the reflections on my beloved Philippines’ economy. This effort is often part of my self-accepted duties to update myself and my compatriots about the state of the Philippine economy at the start of every year.

Just a week ago, I came across an article writ by one of the stock market columnists in the Philippine Daily Inquirer of PDI, that re-echoed an emerging perception in the international business community concerning the Philippine economy’s being ‘industrialized’ today. Coming from the business community itself, this evaluative perception is replete with many implications for the country. It bodes well for the country in fact.

I wish that the perception will resonate with greater power by the day so that those in academic and ideological circles will rethink their positions about the Philippine ‘mode of production’. As far as the Maoists are concerned, PH will always remain as semi-feudal/semi-colonial, backward, agrarian economy. Some academic circles will re-echo the same old worn out “PH is a service economy, with mixed economy features.”

This analyst still recalls very well the ‘mode of production’ debate that  reverberated the halls of the University of the Philippines in the 1980s. I graduated from this university in October 1980, then came back to take up graduate schooling in sociology from Nov. ‘83 to April ‘89, and so I was able to flow with the discussions and debates ensuing. The debate centered largely on whether the Philippines is semi-colonial/semi-feudal (Maoist) or capitalist mode (moderate Marxists, populists, social democrats).

By the mid-90s, the debate was already faltering and dying out. It was a dead debate when the year 2000 rang a sonorous beacon of the new millennium. But if you ask any of the competing ideological blocs today about their perceptions of Philippine reality, you will notice that they will churn out the same lines that they’ve been saying for decades.

As regards the perception that PH economy is a ‘service economy’, the criterion is largely based on what sector—agriculture & forestry? industry? services? –contribute the greatest to the gross domestic product or GDP. Since services contribute 55% to the GDP, then PH is a ‘service economy’.

That evaluative perception has a kindergarten undertone to it, as it relies on simplistic assumptions.  Just because the industrial sector, which churns out barely 30% (manufacturing + infrastructure combined) of the GDP, looks diminutive than services, doesn’t merit an economy to be judged as ‘services’ or ‘non-industrial’ economy.

To be fair to those opinion quarters who have their own paradigm that churn out specific evaluative judgements, the term ‘industrializing’ was used to label Philippine development since the 1980s. At one point, PH was included among the NIEs or ‘newly industrializing economies’, and so the reference point was industry more than services.

Let’s go back to the USA in the year 1900 when it was already adjudged as industrialized. Industries began to enable the imperialistic pursuits of the USA then, if you recall your history well. But at that time, agriculture was still employing over 90% of the workforce, and nary an evidence can be shown that industry had out-stripped agriculture at that juncture as the main contributor to the national income (today’s GDP) perentage-wise. Yet the USA was already adjudged as ‘industrial’ at that time!

If the criteria would be largely the (a) prevalence and (b) impact of capital goods or ‘reproducible goods’ industries, then the market players have clear evidences to show such increased prevalence and impact. Save for integrated steel and castings & forging industries, every vital capital goods are already being manufactured in PH today. Unless of course that the ‘services economy’ judges are blind to these developments.

The emerging perception and judgement about PH economy should be impetus enough to cause a re-tooling by the analysts and ‘best practices’ innovators. It would prove beneficial for everyone if coteries of opinion-makers, business executives and capitalists themselves would begin the ball rolling by publishing their emerging perception about the ‘emerging markets’ such as PH to be already ‘industrialized’.

As a related event, I just signaled the young Prof. John Ponsaran, head of the development studies program in the UP Manila, about the emerging perception. I once taught in the UP Manila’s department of social sciences, where development studies is niched, so I know the temper of the faculty there that goes for debating on anything under the sun. I hope the emerging perception will be tackled in that campus.   

[Philippines, 08 January 2011]


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September 15, 2010

Erle Frayne D. Argonza

Good evening from the Pearl of the Orient!

Marikina shoes, the top pioneering shoe industry in Southeast Asia after World War II, has been among the carcass industries in the aftermath of globalization. Lately though, the industry has been re-surging from the doldrums, so let me share some notes about the matter.

Marikina is a city to the east of Old Manila and is among the model cities for couples of reasons. It’s former administrators, the Fernando couple (a developmentalist couple), were able to tap official development assistance (ODA) funds directly for local infrastructures without needing securitization from national government, thus kicking off a new trend in development financing and urbanization pursuits.

Officially a part of metropolitan Manila that is the ‘Manila of the present’ (old Manila is ancient and diminutive in size), Marikina had been emulated for its cleanliness, efficient traffic management, and participative local governance. It had set off a trend for local governments to embark on ambitious projects without being subsidized by national government.

Those feats are part of the new image of Marikina, just to make it clear. For Marikina also has an older image as the home of the Philippines’ pioneer shoe industry. At one time the exemplar of Asia in shoe-making, Marikina’s exquisite shoes have straddled the planet like conquering commodity champions worth the possession of rising middle class members aspiring to acquire apparel items worth their pockets’ powers and esteem.

Marikina shoes have thus enabled the flourishing of backward linkages such as leather tannery, dye industry, and shoe accessories. Upon attaining industrial maturity circa late 60s through the 70s, product quality was at par with the best that the West can manufacture. And, Marikina shoes were priced so affordably, selling at around merely 1/5 to 1/3 of the western counterpart items.

Trade liberalization however struck a bitter chord in the 1980s, and down came Marikina shoes with globalization’s ascent. Former shoe factories closed shop, tens of thousands of shoe workers were laid off, and shoe retail shops followed the pattern of foreclosures. At the end of the day, only a few notable Marikina brands stood tall amid the storms caused by trade liberalization and serial recessions.

I won’t be surprised to find out that similar industries elsewhere, inclusive of the USA’s, will be shutting down due to the same reason: globalization. The trend is now hitting shoe factories in the USA that closed down production in the homeland as the same (production) were outsourced to developing countries where labor and capital goods (leather, dyes, chemicals) are priced cheaper than the homeland.

As Europe’s economies literally burn, its consumers are cutting down on luxuries, thus opting to buy essentials that are more affordably priced, such as garments & apparel. We shouldn’t be surprised if the prime shoe brands of Italy and France would be knocked out cold turkey by the economic storm in the continent.

Incidentally, Marikina’s local stakeholders were able to address some core social issues concerning their dying shoe industry in the 1990s yet. Those strategic measures, such as relief funds for affected industries, are now reaping fruits for the industry players.

As a whole, Marikina’s show industry was reduced to carcass indeed, but a carcass that is able to stand up at certain junctures. With the wave of China shoes conquering so many shores worldwide, Marikina shoe industry is again getting whacked heavily and paying the price of slow adjustments to make their products more competitive (i.e. attain greater comparative advantage)

Another tranche of relief subsidies for affected industries, akin to a stimulus package on a local level, is now out-flowing from the city government’s coffers. Whether the said funds are able to stave off potential deaths on specific factories and outlets remains to be seen.

For the moment, let me declare that all of my leather shoes are Marikina products. I’ve already decided to shy away from Western imports, and I’m saying no to China shoes that suffer from quality problems. This is my own way of appreciating the craftsmanship of Markina’s shoe designers and the labors of shoe workers in the city.

[Philippines, 11 September 2010]







July 17, 2010

Erle Frayne D. Argonza

Magandang araw! Good day!

For so long now did I harbor an admiration for certain leaders of the South, one of whom is the late Park Chung Hee of South Korea. Among the most admirable of developmentalist Asian leaders, I nurtured wishful thoughts that hopefully we can have the equivalent of Park Chung Hee for many developing economies so as to accelerate the graduation towards prosperity.

His governance style was authoritarian, which I surmise worked well for demonstrating political will in pushing through reform programs and the industrialization of his poor country. I am no dogmatist who contends that democracy is the only true best governance modality, though to my mind this is the most fit for my country the Philippines that has failed in attaining a mature developed economy via the martial law route.

South Korea was so poor as its economy was wrecked by two great wars, World War II and the Korean civil war. Right after the truce with the North, South Korea experienced the additional misfortune of selecting a corrupt leadership under Shingman Rhee which proved costly to the fledgeling nation.

Pushing through first of all with agrarian reform, by enticing the chaebols (big landlords) to divest in land and invest instead in manufacturing concerns, just couldn’t make a headway under that corrupt regime. And so it has to take the iron hands of a developmentalist authoritarian regime, under President Park, to rectify the malady and propel South Korea towards industrialization.

President Park thus enticed the chaebols to establish the strategic or heavy industries of the nation, with the state providing sovereign guarantees to their installation. The caveat was: the state will help the chaebols enable their newly owned industries and accumulate gains, but in no way should they engage in investments outside of Korea.

In an interview before with Dr. Antonio Arrizabal, former science & technology secretary and foremost expert on steel industry in the Philippines, he revealed that Park was forewarned by the Americans not to push through with the heavy industries. The first salvo of retaliatory measure by the American elites was the blockage of financing for the big projects.

Unwavering in his decision to pursue heavy industrialization, including the installation of steel and shipbuilding industries, President Park instead diversified the financing source. He turned to Japan for alternative financing, which the latter acceded to. The rise of Pohang Steel Works (once the world’s biggest steel producer) and Hyundai are clear testaments to the success of the industrialization program under the stewardship of President Park.

Very clearly, Park pursued a nationalist economic development policy regime for his country, using interventionist measures as well as capital controls. As shown by the experiences of other countries that have industrialized, state intervention and capital controls were necessary measures to propel their respective countries to industrial prosperity. Attendant social policies led to the creation of a huge middle class in the same countries, thus ensuring a steady and strong domestic market (consumption) for the manufactured goods of the country.

Park knew his economic lessons very well, and he coupled his vision with the determination and zeal to build a prosperous South Korea and a huge domestic market in the long run. And he was undaunted by external threats by the main imperialist power, the USA, of retaliatory attacks for establishing industries that would later compete with America’s and Western powers’ articles of manufactures.

For his deep patriotism and nationalism, he lost his life eventually. Inside the Korean government was a puppet of the Americans—the very chief of the Korean intelligence body (KCIA)—who snuffed off President Park’s life with a bullet.

I wish that the young Koreans and youth across the world today, who would become leaders in their own countries some day, would re-study the exemplar from Asia in the person of Park Chung Hee. No matter what threats may come from vested interests aimed at retarding the development of their respective country, they should go ahead just the same and stand pat on their wise judgement and decision to pursue highly ambitious yet doable and noble goals for their country.

Be ready to become martyrs for the cause of liberating your own country and people from poverty. For after you’re gone, there will be other patriots who will carry on with your cause and bring your sublime vision to fruition.

[Philippines, 10 July 2010]