The Philippines: Reaping the Fruits of Reform and Stability

Abstract

When Fidel Ramos took his oath of office as President in 1992, the Philippines was going through difficult times. The economy had stopped growing as a result of a major belt-tightening programme designed to rein in double-digit inflation and rising interest rates. Industries were beginning to feel the crippling effects of power shortages, which were to reach their peak a year later. The dampening impact on investor confidence of the December 1989 coup attempt launched by military rebels still lingered on. The series of natural disasters that hit the Philippines ? a destructive earthquake in 1990 and a volcanic eruption in 1991 that unleashed mudflows burying surrounding towns and villages ? left thousands of people and businesses dislocated in the Central Luzon region. Meanwhile, the government continued to face a persistent communist insurgency operating from jungle bases, an armed separatist movement in the Muslim-dominated provinces of Southern Philippines, and an underground military rebel group that was waiting for another opportunity to launch a coup d'?tat Nevertheless, the foundations had already been laid for the Philippines' recovery. In the last three years of its term, the Aquino Cabinet had initiated a series of important economic and administrative reforms. Liberal reformers in the Cabinet succeeded in launching a tariff reform programme designed to reduce import tariffs over a five-year period. A massive privatization programme was undertaken. The Congress passed laws liberalizing foreign investment rules and devolving financial authority to local governments. The government weathered heavy criticism to implement unpopular but much needed economic stabilization measures.