I.

Introduction Background of the Study Throughout the decade of the 1950s, the Philippines was known for being one of the fast growing economies in Asia. By the end of that decade, the Philippines, together with Taiwan, had the most progressive economies among the underdeveloped countries in East and Southeast Asia. However, nowadays, the country has been playing catch-up most of the time as it

depended mostly on agriculture, while others reduced their dependence on that sector. The industrial sector, on the other hand, had little expansion since the 1960s. It is thus important to know of the changes that happened in the 1950s and 1960s that shaped the economy, how the economy had a promising potential in the 1950s and how the potential shattered in the 1960s. Studying the administration of Carlos P. Garcia, which was from 1957-1961, would be of utmost significance and contribution to the problem stated above. By 1962, when Diosdado Macapagal assumed the presidency, the period of control, especially on import and foreign exchange, that characterized the Quirino, Magsaysay, and Garcia administrations, had ended as Macapagal implemented decontrols. Focusing on the economic policies of Garcia, it was in his term that the government took the first steps towards heavy industrialization. Noteworthy of course was Garcia’s promulgation of the Filipino First Policy.

Objectives of the Study Being the last administration to be under the 1949-1961 period of control, the study seeks to establish and discuss the economic development that happened during the Garcia admnistration. This paper shall also try to achieve the following:

To discuss the context of the period that characterized the years of Garcia’s administration 2. This paper is limited to few economic policies and programs and will not be dealing with Macapagal administration. Scope and Limitations The study limits itself to the historical background of the period of control. and the perpetuation of economic dependency on the United States. II. until the end of Garcia’s presidency in 1961. The context of the said period will be discussed to establish properly its effects and implications on the Garcia administration. Significance of the Study The study is an attempt to narrate and discuss the economic policies of the Garcia Administration. huge amount of capital fleeing the country. . To examine the major policies and programs of the Garcia administration. The study also will inform the readers of the importance of the economic policies during that era. It also meant a flood of imports. starting with the Bell Trade Act. Historical Background of the Period of Control The Bell Trade Act and the Economic Dependency on the US The Bell Trade Act implemented during the Roxas administration enabled free trade between the Philippines and United States. The study will help readers understand the significance of the actions done before the Garcia administration which lead to the economic policies approved during the Garcia administration.1.

Imports greatly surpassed the sum of exports and the inflow of dollar aid. Under this system. These resulted to the bankruptcy of the Philippine economy. and by exports as well. had to be surrendered to the Central Bank and exchanged to pesos at the rate of P2 is to $1. the United States had to agree with the implementation to save the Philippines from bankruptcy. all dollars earned by Filipinos and foreign residents. Manila promised not to change its overvalued exchange rate from the prewar P2 to the dollar. war compensation and earnings from export products had evaporated due to massive and unlimited importation of goods. By 1949 the situation had become untenable.The Bell Trade Act therefore operated against Philippine development efforts since all dollars that the country received. kept the Philippines closely linked to the United States economy and protected American business interests in the Philippines. the foreign exchange control came to existence. The Need for Controls The government then had to institute a system that would limit imports of the country and that would control the dollars that could be transferred abroad. the Philippine government agreed to a number of items that. or to impose tariffs on imports from the United States without the consent of the president of the United States. especially with the opposition of the American Chamber of Commerce in the Philippines. The effort to put up industries was prevented by the utilization of post-war funds received on importation. in effect. through aid. To allow the Philippines to go to bankrupt would be tantamount to handing over the country to . As a requirement for receiving war reconstruction assistance from the United States. Thus. Although the declaration of controls did not come easily.

The industrial sector’s contribution to Gross National Product rose from 8 percent in 1949 to 17 percent in the late 1950s. If the Philippines fall to the Communists.6 percent. seeing the need for economic independence through development. The controls initially reduced the inflow of goods dramatically. However.000 industries sprouted. imports of goods and nonfactor services as a proportion of GNP declined during the 1950s. he was a beneficiary of the good effects that this system brought with it. As Carlos P. Industry grew by 12 per cent per annum between 1950 and 1957.Communists. Economic Policies and Programs of the Garcia Administration Garcia’s as the New President Indeed the period of control would continue until the presidency of Carlos P. . Between 1949 and 1950. about the same percentage as that of exports. 5. In his inaugural address on December 30. something that the United States feared. from 1949 to 1953. imports fell by almost 40 percent to US$342 million and surpassed the 1949 level in only one year during the 1950s. especially to the United States. and thus. Being constrained. Garcia. The imposition of import and exchange controls in the late 1940s had a significant impact on the economy of the Philippines. it was the problems of the economic sector that he wanted to address the most. American businesses in the country would be lost forever. In the first four years. Garcia assumed the presidency once again after winning the 1957 elections. the Philippines was still very dependent for its local needs. The controls were still not enough. ending the decade at 10. III.

Garcia saw the need to generate development funds from sources other than taxes and proceeds from export. Garcia saw the need to restore the correct proportion between dollar reserves and industrialization. with rice and fish being the basic articles of the Philippine economy. which can support a hundred more industries. It is also through the steel industry that Garcia hopes machineries would be generated for the entire Philippine agro-industrial structure. He also saw the importance of the collaboration between . Garcia enumerated the problems being faced by the Philippine economy and he proposed solutions on how to solve them. He recommended the hastening of establishing agricultural industries so as to utilize with least delay the abundant natural resources of the country.1967. wherein a substantial part of the supply of rice and fish had to be imported from abroad. while also submitting to measures of austerity. Garcia pointed out the problem of self-sufficiency in food. He thus wanted the reorientation of national economic policies towards doing first things first. Another problem was the apprehension that the international reserves of the country were deteriorating citing the over-eagerness to push forward industrialization as the cause. Garcia wanted the industrialization program to continue. He urged the production be done in the country by and for Filipinos to provide enough of the fundamental needs of life. he rightly called for the establishment of the basic steel industry. For an industrial economy. Realizing that the dollar reserves of the country could not do double role of providing for the normal requirements of foreign trade and the tremendous financing of the economic and industrial development. Nonetheless. He pointed out that a well-balanced agro-industrial economy is the best for the country.

stability and security of the Philippines.l and helped give recognition to joint-venture enterprises of both Filipino and foreign capital which the Filipino participation would be at least 60% of the stock ownership. the policy enabled the government to assist Filipino entrepreneurs to assume control of the economy and break the hold the foreigners exercised on the economy. The National Economic Council tried to correct this by providing for the promotion of substantial Filipino participation in commercial and industrial businesses in 1958 and in the future. More and more Filipinos thus began to own factories. Henares. 1958. Resolution No. This gave preference over to Filipino applicants for foreign exchange allocations. aided Filipino enterprises which seek to enter a field which was predominantly in foreign contro. For example. Filipinos or corporations with Filipino equity were given preference. The country was able to produce its own captains of industry such as Salvador Araneta who pioneered the flour and engine industries. As the word itself entails. 2% of the entire population were non-Filipinos. the government encouraged Filipinos to take part in enterprises and industries which were vital towards economic growth. It was known that in 1958. Moreover. The Filipino First Policy and Industrialization On August 21. in the allocation of dollars which were used to buy machineries. who was into industrial .the government and the private enterprise for deficiencies in finances and scientific and industrial research. Hilarion M.. the Filipino First Policy gave preferential treatment to Filipinos in the Philippine economy. This 2% of foreigners controlled 4/5 of the domestic trade in the Philippines. Jr. 204 or The Filipino First Policy of the National Economic Council was adopted. Together with the foreign exchange control.

000. who pioneered the manufacture of air conditioners. the Garcia administration approved a resolution calling for the establishment of an integrated steel industry in which the government would hold a controlling interest of 51%.831. Since its enactment in 1958. Pablo Silva. particularly the Jacinto Steel Incorporated. The increase during 1957 was only $29.000.144. and the Marcelo. by 1958.881.537. Severo Santiago. Jose Concepcion. Col. By 1959. To establish the foundations for heavy industrialization. With regards to capital increases of corporations and partnerships in general. the del Rosarios. the government hoped that it would not only make the country independent from steel imports but would eventually make it produce the various machineries and factories needed in the country. Filipinos had P157. Filemon Rodriguez.000. which was a joint venture with the private sector. the trend was always positive since.000.631. Although.000 and those of the Americans declined to P2.375. investments of new American businesses rose to P2.398.000 in 1961.433. Total capital investments of new Filipino businesses in 1958 was only P108. those of Filipinos still had the bigger advantage with an increase to P209. Meneleo Carlos. new Filipino-owned business organizations continued to sprout. who pioneered the steel industry. who founded a prestigious management company and the co-founder of FILOIL. The decision led to the formation of the Iligan Integrated Steel Mills. Martel and Jacinto families. With this. who pioneered in foundries and steel pipes. new Filipinos businesses’ investments rose to P143.012. who was into industrial resins. In the 1960.000 whereas the Americans had P2. with little equity from the foreigners. the trend continued.chemicals and school supplies. who pioneered the production of telecommunications equipment. who worked on household appliances.000 and Americans had P1. the first Filipino-owned oil refining company.000. it the .

powers and functions and it also created the Tobacco Classification Council.092. or Republic Act 2282. The law states that taxpayers pay a total of Php60M for the promotion of the Tobacco industry. The increase reached the centennial mark when in 1960 it was $103. Republic Act 2233. the physical volume of production of tobacco products increased by about 35% from 1958 to 1961.155. 15% of the amount will be spent for operating expenses. This policy was administered by the Development Bank of the Philippine and the fund was used to grant loans at 2% annual interests for capital requirements of farmers and cooperatives. was an amendment of Republic act 1135 of 1954. concerning Philippine Tobacco Administration.000 in 1961. It was an act to rapidly develop the Philippine coconut industry. The Philippine Tobacco Administration was the agency which was responsible for the spending and allocations of the total budget. 75% of the total amount will be spent for native tobacco cigar fillers trading and 10% of the amount will be spent for research to improve the tobacco industry. established the Virginia Tobacco Administration as a self sustaining agency which would handle the Virginia Tobacco industry. . As a result of these two resolutions on tobacco. 1959. The creation of this body did not entail the appropriation of fund but it permitted the agency to borrow money from the Central Bank to use as capital. there were policies enacted to fund and help locals to develop their industries.increase was $74.763. One of which was the P30M Coconut Financing Fund.000 and $162.315.000. Republic Act 2265. The objective of the act was to establish the Philippine Tobacco Administration’s objectives. it was $99.000 and in 1959. Support to Local Industries To show how the government prioritized and gave preference to Filipino industries. approved on June 19. on the other hand.

the President must designate a government agency to facilitate the importation.000 metric tons produced in 1958 grew by 19.Further Controls More controls were implemented by the government to achieve its economic goal of being self-sufficient and independent.016. Rice production continued to increase to 1.7% in 1960 and by 3. For corn. The importation of rice and corn was banned unless there is an inadequacy of local supply which would constitute a national emergency. approved on June 18. It increased by 14. The controls also helped in the continued economic and industrial development of the country. Violations of the ban were subjected to penalties.000. the 852. Approved in May 15. The goods Filipinos may not export.685.000 in 1959. Republic Act 2207. re-export and tranship outside the country unless with a permit from the President are uranium and other atomic energy materials. In case of such emergency based on findings of the Office of Statistical Coordination. and remained relatively the on the same level during 1961. The policy helped to accelerate the self sufficiency of the country in terms of rice and corn production.204. there was a 16% increase to 3. prohibited the importation of corn and rice by any person. . 1959. corporation and government agency at any point of the archipelago. From 3.2% to 1.1959. association. Republic Act 2240 was the new amendment on export control law.000 metric tons of rice produced in 1958.8% in 1961. or the Rice and Corn Import Ban. The law provided that export control shall continue until December 31.5% in 1960. This policy protected local rice and corn producers and promoted the interests of local producers and planters in a way which is also consistent to the welfare of the buyers or consumers. 1962 unless cancelled by Congress.

In 1958. By this program. since the country was prioritized for its use of its own resources. also demanded payment of $900 million from the United States government for claims arising from the balance of war . fuel.machineries and their spare parts. One instance was the austerity program that was known for being the first step Garcia took as he was elected in 1959 after finishing the remaining term of President Magsaysay. oil. The program called for the reduction of government expenses on account of the almost bankrupt treasury that was inherited from the Magsaysay administration. he undertook a successful State visit to the United States to negotiate loans and other forms of economic aid. lubricants. the Garcia administration did not rely solely on the advantages that the controls gave to develop the economy of the country. abaca seedlings. However. who demanded jurisdiction over cases in military installations of the United States in the Philippines. food. he meant a government with utmost economy. being a beneficiary of the import and foreign exchange controls. the government was able to initiate and implement policies and programs for the further development of the economy. Garcia’s negotiations with the United States also helped to prop up the country’s sagging economy. Through these. and he fairly succeeded doing so. medicine. was able to initiate heavy industrialization and to implement the famous Filipino First Policy. This policy led to the regulation of control and prohibited certain exports. scrap metals. military equipment and items which are essential for industrialization and economic development. It promoted economic and industrial development as well as national security. Other Means of Bolstering the Economy The Garcia administration. The Philippine Government.

. for an effective employment of reparations resources. 1789) provided the utilization to be guided and regulated by the priority system formulated by the National Economic Council.S. Although the Philippines did not get all the demands. When Garcia returned from his State visit. Thus.A. it showed the independent and firm policy of the country. Bureau of Internal Revenue. especially in the revenue-producing departments. The law also provided that proceeds from sale of reparations goods and utilization of services shall constitute a Special Economic Development Fund. Realizing that no program could succeed in bolstering the economy of the country without insuring honesty in the government. A supplementary agreement also allows the Philippines to secure loans from Japan in the amount of $250 million. Reparations were sources of capital formation and could be channelled to be used for economic development. During the Garcia presidency. and a few other offices. the Reparations Law (R.damage payments. and the devaluation of the dollar. the oil excise tax.S. for differential pay of military service men in the U. he came back with great hope of being able to tide the country over its precarious economic situation. Army. the Congress may appropriate amounts for a Special Trust Fund to which the Development Bank of the Philippines and the Philippine national Bank shall have access for their use in extending loans for economic and industrial development projects. From this. construction. This agreement provided that the Philippines shall be paid by Japan in the amount of U. the President launched an intensive effort to eradicate reported frauds in the Bureau of Customs. The reparations payment from Japan was an addition to the country’s foreign exchange reserves. there were also negotiations with Japan as the Reparations Agreement was made. and repair and improvement of public school buildings. $550 million as war damage payment.

636.8% in 1959. an expansion of 2% from the previous peak established in 1958. industrial. Thus. industrial development.8% in 1958 and 3.7%.582. The reaction of manufacturing production to the expansionary policies of the government had a proportional increase in employment in 1960-61. from the reparations.419. Employment reached 8.043.7% in 1959. as the capital of many industries increased during the Garcia administration. However. Of this sum. Agricultural employment expanded at a rate of 7. while being harsh to the working and lower classes. communication and other developmental projects. There were favourable labor developments as average monthly earnings of wage earners and salaried employees made a good showing.68 placed into agricultural. by 1959 unemployment was reduced by 14.053. the private sector received P61. public works.As of the end of 1959.426. mineral resources.32 for the country’s electric power.7% in 1958 and 0. While non-agricultural employment increased by 7. the total amount of goods and technical services received in Manila was P164. The government received a total of P103. Effects on Employment The Filipino First Policy and the industrialization program of the Garcia administration was criticized for only being advantageous to the elite and the business sector. and other projects. fishing.959 million in 1959. Employment for manufacturing . transportation and communications. transportation. while the money wage rates of agricultural. The steady growth of production in recent years has improved further the underemployment problem in the Philippines. the employment rate saw a similar trend as well. skilled and unskilled laborers also rose moderately.

Garcia. the economic condition of the system of controls has shaped the period and thus helped the government under Garcia to push through economic and industrial development projects. The Bell Trade Act and the economic dependency of the Philippines to the United States proved to be detrimental to the economy and thus import and foreign exchange controls had to be implement to save the country. However.increased by 1. respectively. from 1957-1961. This gave rise to the Filipino First Policy and heavy industrialization soon followed. preference given to Filipinos to fund .5% between 1960 and 1961.6% expansion in the volume of production between 1960 and 1961. huge dependency on the United States was still felt that controls were not enough to become truly economically independent. Conclusion It was the period of control that started in 1949 that characterized the administration of Carlos P. IV.5% in contrast to the 7. followed by plowmen who had 4. The enactment of such policy resulted in the implementation of other policies that spurted economic growth. Agricultural wages also increased by 3.6% on the average between 1960 and 1961.6%. Harvesters and common labourers also received increments in their wages. Statistics would show this growth was achieve. while the wages of the skilled labor remained sustained. As the years passed and the Garcia administration came to existence in 1957.9%. more Filipino ownership of businesses. with increased capital.8% increase. with increases of 3% and 1. The productivity gains for the non-agricultural sector was shared by the employed unskilled labor in the form of increases in money wages which averaged 2. Planters received the largest wage boost of 5.

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