The Politics of Market Liberalization: A Comparative Study of the South Korean and Philippine Telecommunications Service Industries

Abstract

Introduction A large number of studies have examined the East Asian developmental model, (1) in which the state is said to maintain its autonomy and strength, or capacity to implement effective economic policies. This thesis has, however, been challenged by other competing schools of thought. Some scholars have found that changes in the domestic power structure contradict the thesis. (2) The state's monopoly in economic policy-making in many developing countries has been eroded in the course of economic development. The conception of the state as the engine of growth has been gradually fading away. The business sector has been finding its own way of doing business outside state protection and support. The wave of democratization stimulated the suppressed demands of populations in developing countries. (3) Economic development has not distributed benefits equally to people at large. The labour sector, whose contribution to development was immense, received a disproportionately lesser share of the benefits. The strategic coalition (4) between the state and the business sector has monopolized the fruits of economic development, and has largely ignored the distribution of social wealth. Ideological and moral support from domestic and international society has, however, enabled the labour sector to become one of the influential political players in state policy formulation. Furthermore, the market guided by the state has frequently distorted the price system, favouring selected beneficiaries from the business sector at the expense of consumers. However, growing average educational levels have raised the social consciousness of the general population. People are no longer ignorant and tolerant of the trampling of their rights. They have learned how to organize themselves, such as in consumer associations, and to impose group pressure on entities/institutions that affect their lives. Under the pressures of democratization, state autonomy in economic policy-making has been questioned in many developing as well as newly developed countries. (5) Without proper consultation and consensus from the private sector, policy formulation and implementation have become increasingly difficult. On the other hand, the strong international trend towards neo-liberalism has affected a restructuring of the global economic landscape. The strong advocates of this ideology, particularly the United States, have pressured other states to adjust themselves to the new trends by adopting this ideology in their domestic and foreign policy frameworks. Many countries, whose economic backbones are mainly dependent upon the international market, have little choice but to follow the global trend. As Stephan Haggard has put it, (6) the appropriate economic function of government has become linked to the prevalence of liberal economic ideas in the international system. Thus, governments have tended to retrench interventio nist economic policies and allow market forces to have greater economic sovereignty. Under such domestic and international pressures, the state in some developing countries has been pressured to open up its monopolized sectors of industry and privatize government-owned enterprises. This trend may be interpreted as either one step forward towards economic development or as a means of getting out of an economic deadlock. (7) Whatever the interpretation, many developing countries face the irresistible long-term trend of market liberalization. Liberalization refers to the removal of entry barriers to a previously monopoly market situation. However, liberalization is only a necessary condition for market competition since non-structural barriers, such as the lack of sufficient market size and the hostility of incumbent market players, discourage potential entrants. It is one reason why the role of the state is a critical factor in bringing out the meaningful results of market liberalization. …