Saturday, January 8, 2011

Post-Marcos economic managers let RP industrialization shrink

Why did succeeding Cabinet members in charge of the Philippine economy—after the Marcos regime—let Philippine industrialization shrink to its present state of almost nothingness? Why did they abandon our steel industry, which any freshman-level economics or engineering student knows, is the lifeblood of industrialization?

In the 1960s the Philippines had a vibrant steel industry making it second to Japan in terms of competitiveness and efficiency. Today, the Philippines is lagging behind its neighbors, second from the bottom among other Asian countries.

Data from a 2008 study by the Southeast Asia Iron and Steel Institute (SEAISI) shows the Philippines having the lowest per capita consumption of iron and steel in the Asean region. Consumption is only 39 kilogram a person in our country compared with 749kg a person in Singapore. China’s consumption is 307kg a person. The global average is 184kg a person.

Steel demand in the Philippines also hasn’t increased much in the last 17 years, according to SEAISI data.
The Philippines has one of the Association of Southeast Asian Nations (Asean) region’s weakest annual demand for steel posting. Our annual demand rate of growth is only 3.6 percent from 1991 to 2008.
Vietnam, the highest, has a 21-percent annual rate of growth.

During the term of the late President Corazon Aquino, the government attempted to revitalize the local steel and iron industry. President Aquino signed into law Republic Act 7103 (Iron and Steel Industry Act) that aims to promote industrialization through the immediate establishment of an integrated iron and steel industry.

The law provides industry players with several incentives in terms of power generation, infrastructure, financing, tax and duty exemption, tax credit and many others.

Then in 1990, government began laying out privatization plans for the National Steel Corp. (NSC) (now the Global Steel Philippines Inc.). The aim was to check government’s financial exposure to the industry.

Not only NSC was to be privatized to reduce government spending, other government-owned and -controlled corporations would also be sold to private firms to raise money for the government.

Forgotten was the dream, stated formally in an enabling law, to develop what every self-respecting state like the Philippines should have: its own iron and steel industry.

The NSC was privatized. It then experienced successive transfers of its ownership. Laws were passed to support the growth of a steel industry.

Why has the Philippines failed? Why have our Asean neighbors and other Asian countries, including those that have been devastated by wars or crippled for decades by political instability, succeeded in building their own steel industry that helped them become more industrialized economies than the Philippines.

What about the successive administrations’ economic planners and decision makers? Why were they not decisive enough to create the necessary conditions to build a Philippine steel industry?

Did they all—from he time of the first Aquino presidency to the Arroyo one—believe that the Philippines did not need to have a steel industry in order to recover its abandoned industrialization?

Were they all believers that Philippine prosperity, economic viability, the final solution of our massive poverty problem and our having an honorable place in the world economy are all to be achieved without our archipelago becoming industrialized?

Were these economic teams of every president since the beloved Corazon Aquino all enthralled by the idea that the service industries, call centers and business process outsourcings and of course the exportation of Filipino workers in other countries are sufficient to take ours to the status of a First World country like Singapore?

Did all of them reject the elementary notion held by nation-building savants and wizards in making universal employment possible in their economies that “steel is the lifeblood of the industries of a nation”?

The other stories in this special report will try to answer why all the succeeding administrations, after that of the late President Ferdinand Marcos—whose economic planners had solid programs for Philippine industrialization—seemed to have given up on the basic need for the Philippines to have a sound industrial sector based on a credible steel industry. Manila Times

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