This is the last part of our open letter to BOI.
Dear Usec. Ceferino Rodolfo and Director Corazon Dichosa, our apology for this long reaction piece to the BOI-sponsored forum on “Leveraging Trade Investment Policies to Implement a Modern Industrial Strategy” (December 9-10, 2021). There are just too many important issues that need to be raised in visualizing and implementing a sound and effective industrial policy—e.g., national industrial visioning, strategizing trade policy in support of national industrialization (not the other way around), asserting State leadership in building up national industrial capacity, and so on. We hope the BOI can organize more brainstorming exercises to strategize how industrial policy, a policy abandoned by our neo-liberal economic technocrats in the 1970s-2000s, can be fully in place and help us reclaim our position as one of Asia’s leading industrial countries.
Our position is that industrial policy is not truly in place despite the BOI/DTI rhetorics and proclamation on the importance of industrial policy and the holding of BOI/DTI-sponsored conferences such as “manufacturing resurgence.” From our reading of the BOI/DTI documents on industry policy plans such as CARS, AI and high-skills development for advanced manufacturing, one key element of industrial policy is amiss or missing: articulation of the role of economic nationalism in all of these efforts.
The point is that industrial policy has a nationality. When one talks of Japan’s industrial policy, one does not only talk about the country’s overall industrial might but also concretely of the Japanese champions leading the industrial upgrading process such as Mitsubishi. The same with South Korea, Taiwan and even Singapore.
China will not be where it is now if it simply relies on partnership with foreign companies in building the new China. Chinese economic planners have defied the “comparative-advantage” proposals of Western economists (who wanted China to focus forever on low-value-adding GVC work); instead, these planners studiously promoted China’s ascent in the GVC system, supported the formation of Chinese-led GVCs and ensured that China would steadily reach the top of the industrial ladder. In all of these efforts, the government and the Chinese State corporations have taken the leadership role.
In the 1970s, when our Neda technocrats succeeded in imposing the narrow “labor-intensive export-oriented” (LIEO) industrial strategy, economic analysts from the ILO (Export-led industrialization and development, ed. by Eddy Lee, ILO, 1981) warned that the LIEO program was clearly discriminatory against the Filipino industrializing class, the class which spearheaded the country’s rapid industrial growth in the 1950s-1960s. Further, they noted that the LIEO program was launched and implemented without any constituency among the local or Filipino industrialists. In contrast, in Japan, Asian NICs and China, the home-grown industrial class was (and still is) on top of the twins: the domestic-oriented industrial sector (maintained by protectionist import substitution) and the export-oriented industrial sector (provided with all kinds of incentives). It was an integrated approach towards industrialization, while ours, a segmented one.
Because of the poor industrial visioning done by Neda in the 1970s and the succeeding decades, our industrial sector has not only stagnated but also got divided into segments with limited linkages, as raised by Dr. Balaoing in the December forum. The classic example here is the export-led garments industry, which boomed in the 1970s-1980s without any linkages with the local textile and other supporting industries. In short, the garments industry became part of the enclave economy under LIEO. This garments industry withered away at the turn of the millennium, a decade ahead of the collapse of the textile industry. There were calls for garments industry upgrading and higher-level global niching as well as proposals for local textile development (e.g., ramie, pineapple, etc.) in support of the garments industry. Nothing happened.
Dear Usec. Rodolfo and Director Dichosa, Western economic commentators keep saying that industrial policy has made a global comeback. The truth is that it has not left in the developed world. Former World Bank chief economist Justin YiFu Lin made an acerbic observation on the response of developed countries to the 2008-2010 global financial crisis: all OECD countries are practitioners of industrial policy, as reflected in their uniform efforts to keep critical and strategic industries at home afloat and alive. This is in defiance of the slogan of the neo-liberals: those who cannot compete, let them die on the wayside. The winning slogan: industries “too big to fail” has remained the guiding policy for each of the OECD countries.
Now what has economic nationalism got to do with the foregoing? History tells us that developed countries—in Europe, America and in Asia—have advanced industrially because of the strong spirit of nationalism. Or if you are scared with the term nationalism, patriotism and love of country. The classic example here is the United States. From George Washington to Abraham Lincoln and Franklin Roosevelt, America made tremendous industrial progress based on the original ideas of Alexander Hamilton, e.g., tariff protection against British industrial products and support to America’s industrial upgrading and diversification. America’s jobs, economic growth and well-being depended on its ability to build its industrial muscle. It was only after World War II that America began liberalizing its tariff regime (while maintaining protection to its highly-subsidized agricultural sector up to the present).
Ironically, economic nationalism is written all over the Philippine Constitution. The charter mandates not only protection but also preference to local industry, agriculture and labor. And yet, what do we see? All-out liberalization in industry and agriculture even if no transition program has been put in place to prepare the locals against the possibly adverse impact of such liberalization to them. The usual justification: attract foreign investments.
No, we are not against foreign investments per se. But no country in the world developed by simply relying on foreign investments. They are supplements in a country’s promotion of growth.
As it is, there is no serious effort on the part of Neda to make economic nationalism as a guide in economic planning. The various Constitutional provisions on how the economy should be run based on an integrated program of industrial and agricultural development are not even mentioned in the present Philippine Development Plan 2017-2022 and in the past PDPs.
The opening chapter of PDP usually starts with a projection of imaginary growth based on the work of ivory tower economists with no practical exposure to the labor market and the social-economic environment confronting Filipino industrialists, entrepreneurs and workers. Their framework: growth likely to surge under the triple policies of economic trade/investment liberalization, economic deregulation and privatization. If the PDP goals are not achieved after five years, the next government, strangely, tries to update the previous PDP without any major change on development strategy, especially in relation to industrial policy. And surprisingly, they still rely on the same economists whose projections on industrial and agricultural growth did not work.
We hope the present leadership of the BOI and DTI can make a difference. Please revive the spirit of economic nationalism in industrial planning. Needless to say, the spirit of economic nationalism was a driving force in the struggle of Jose Rizal and Andres Bonifacio for independence against Spain, of Crisanto Evangelista and Manuel Quezon for an Independent Philippine Republic, and of the post-war Filipino industrialists and nationalists such as Sen. Gil Puyat and Sen. Claro Recto for an advanced industrial Philippines. Please make their vision work.