Background

The ecomony of the Philippines has been on a slow but steady

upturn since the mid-1990's. In his article "The Philippines at the
Crossroads" Paul D. Hutchcraft noted that the early 1990's presented a
number of challenges for the then president Fidel Ramos (1). Some of
the problems were the eruption of Mount Pinatubo in 1991, the
departure of U.S. military bases in 1992 and a decade of slow growth.
Hutchcraft classified the 1980's as the lost decade - with annual growth
rates averaging about 0.9%. When Ramos came into office he announced economic reforms
with a goal to liberalization and privatization. Ramos developed his plan under the banner
"Philippines 2000" - an ambitious plan to make the Philippines a Newly Industrialized Country
by the year 2000.

Ramos began with measures aimed at eliminating cartels and monopolies. He began with
the Telecomunications industry, and used its transformation as a model for other industries. He
wanted to create a "level playing field upon which entreprenurial activity can flurish" (1). Some
early successes were made in the telecommunications, airline, and shipping industries.
However, a major problem that President Ramos faced was the simple fact that the
government, at the time, was not sufficiently strong to break all the cartels and monopolies in
all key industries. An example was the banking industry - which supported liberalization as long
as did not touch them. The result was that "there [was] little promise that banks [would] service
the needs of small and medium scale businesses" (1).

Yet, despite the difficulties, it seems that the Philippine economy has been able to cope with
its many challenges - in particular the Asian Currency Crisis of 1997. Then President Ramos
made the following statement regarding the economy about six months after the crisis began:

Having taken our medicine, we are a step ahead of some other countries in facing the current
challenges. We now have a policy framework that rewards economic merit instead of political
access. Our banking system is sound--Morgan Stanley puts it in the same league with Hong
Kong and Singapore--and we have avoided the bankruptcies that have engulfed the region.
Inward investment is surging, with this year's level five times that of 1996's. And inflation is
under control at just about 5%. Yes, our currency has been dragged down by the Asian
contagion, but our strong macroeconomic fundamentals--the strengthening of which has been
pursued relentlessly--are there for all to see. (4)

The current Filipino president, Joseph "Erap" Estrada, is building on Ramo's economic
success - which is reasonable since he was Ramo's vice-president and choosen successor. In
June of 1999 it was reported that foreign investments were up, as was confidence by foreign
invesotrs (4). Erap announced that "the Bangko Sentral ng Pilipinas has reported for the first
time in history, that the country's dollar reserves has reached an all-time high of $13.78 billion
as of the end of April. In Central Luzon alone, a 75 percent year-on-year increase to P6.5 billion
in fresh investments was recorded, during the January-March 1999 period, which was viewed
as a "clear sign" of the increasing investor confidence in the Estrada administration" (5).

President Estrada has lead the Philippines into the the Information Age with a push to
develoup the infrastructure and human capital necessary to build an electric economy. In fact,
the "I Love You" computer virus which infected millions of computers around the world is
thought to have originated in the Philippines - demonstrating the ability that Filipino students
have (6).