Integrating Culture in Economic Development: an Agenda for Nationbuilding

Year Anniversary 20th Special Issue

Vol. XV No. 5

September - October 1997

T

he past few years have witnessed a resurgence of the Philippine economy. The various indicators of its growth performance, as shown in Table 1, under a more liberalized and outward-oriented economic environment and under improving macro-

EDITOR'S NOTES It is not a silver or a golden anniversary. And most definitely, not a centennial celebration. But for PIDS, marking 20 years of existence as an institution deeply involved in policy research in aid of national policymaking is a milestone.

Being such, the Institute put its best foot forward and mounted one of its most memorable and significant gatherings ever—a three-day symposium in honor of two of its founding institutional fathers, Dr. Gerardo P. Sicat and Dr. José Encarnación, Jr.—as the center of its week-long celebration. The symposium had no less than the past and present chairpersons and members of the Institute's Board of Trustees either as paper presentors on various aspects of the Philippine economy and national development in the past 20 years and the years ahead or as testimonial speakers on the contributions of the two honorees in the spheres of economics and policy research.

This special issue of the DRN is dedicated to the observance of the Institute's 20th anniversary. It contains, among others, three of the papers presented during the symposium. While only three papers—dealing with a rela-

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ISSN 0115-9097

Sustaining the Philippine Economic Resurgence economic fundamentals had led many analysts to trumpet the Philippines as Asia’s next emerging tiger. Reaching the status of a newly-industrialized country (NIC), however, is not that easy. Nonetheless, such status is attainable if we further improve the foundations of the country’s economic growth performance. The question is "how do we do it?"

Ponciano S. Intal, Jr.* dominated the national saving rate until the late 1980s. Then in recent years, a dramatic drop in the household saving rate took place, leaving corporate savings as the biggest source of national savings. Similarly, govern-

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A central concern: Raise the saving rate High saving rates are central to sustaining a high economic growth rate. At the same time, a high domestic saving rate facilitates the inflow of large foreign direct investments primarily through joint ventures and macroeconomic expectations. Looking at historical data and comparing them with other countries in the region, we can see that the country's saving rate over time had declined. Compared to the post-1983 period, our saving rate in the 1970s was relatively higher as seen in Table 2. Two major events contributed to this decline—the major recessions in the periods 1983-1985 and 19911993.

In terms of composition, household and incorporated business had ———————— *President, Philippine Institute for Development Studies, and member, PIDS Board of Trustees.

WHAT'S INSIDE 2

Economic Liberalization and Foreign Exchange Management

4

Integrating Culture in Economic Development: An Agenda for Nationbuilding

5

Q and A on Culture and Economics

14

Gerardo P. Sicat: The Economist with a Vision

15

José Encarnación, Jr.: The Compleat Teacher

16

Responses of Dr. Gerardo Sicat and Dr. José Encarnación, Jr.

17 18

A Word About PIDS PIDS is 20

DEVELOPMENT RESEARCH NEWS

I

t is significant to note that the topic which I would be delving into today on the occasion of the twentieth anniversary celebration of the founding of the Philippine Institute for Development Studies is an issue to which our two honorees today have, in their own ways, contributed during their long careers as economists in the academe and government.

Dr. Gerardo Sicat, for one, helped initiate the long process of economic liberalization in the Philippines with analyses he and his partners carried out on the pattern of protection of Philippine industries three decades ago.

On the other hand, Dean José

economy and its policies. And since 1986, postponed economic reforms have been put back on track and major new ones have been initiated.

Recent Philippine economic reforms The Aquino administration started a number of economic reforms, beginning with the dismantling of government-sponsored monopolies in the agricultural sector, especially in sugar and coconuts. It also resumed the trade reform program and introduced a tax reform program. Other reforms including those in the social and administrative sectors followed, culminating in further trade and investment reforms and then in the foreign exchange lib-

Economic Liberalization and Foreign Exchange Management Cayetano W. Paderanga, Jr.* Encarnación, Jr., together with his colleagues at the School of Economics, University of the Philippines, built the first working macroeconomic model of the Philippines in the early 1970s. This model had a few sub-models, including one on the external sector.

Partly because of their efforts and those of the generations of students they have taught, the Philippines—in fits and spurts—finally embarked on a genuine, sustained drive for economic liberalization and reform. Over the last 25 years, attempts have been made to restructure the Philippine

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eralization. The Ramos administration then extended the reforms, especially in the areas of deregulation of critical industries and public sector financing.

The process of policy and institutional liberalization had been manifested in the various financial reforms.

For instance, during the decade of the eighties, the process started with the liberalization of interest rates and the introduction of universal banking.

Said reforms, however, were immediately followed by setbacks, resulting from a banking crisis that was ignited by the disappearance of a businessman ———————— *Member, Monetary Board, Bangko Sentral ng Pilipinas, and former Chairman, PIDS Board of Trustees.

who absconded with a few hundred million pesos and leading to an economic crisis in 1983. These took their toll on the financial system. The Central Bank had to impose restrictive rules on the financial system, in particular, on bank entry and branching.

At the same time, the ability to conduct monetary policy was stifled.

In 1990, the Central Bank slowly started to dismantle the controls that were imposed during the crisis years as well as those that had built up over the past four and a half decades. New bank branches in designated areas were first auctioned off until finally, the policy was completely changed to allow banks to open branches where they wanted.

One of the most significant recent changes occurred when the Monetary Board decided in late 1991 to immediately increase the percentage that foreign exchange earners could retain, from 2 to 40 percent, with the goal of full liberalization by December 1992.

In August 1992, the new Monetary Board decided to implement full liberalization of foreign exchange holdings four months earlier than planned.

This movement away from the more than 40 year-old policy of foreign exchange controls (except for a short interregnum in the early part of the 1960s) was one of the most radical macroeconomic policy changes in recent years.1 The moratorium on the opening of new banks was also lifted in 1990.2 ———————— 1 The Monetary Board floated the exchange rate in 1970 but maintained the controls on the holding of foreign exchange.

This was reported by the Central Bank Annual Report, Vol 1, p.61. Lamberte (1993:233) corroborates this by saying that “Bank entry was not allowed until 1989 when a new Central Bank Governor assumed office.”

2

DEVELOPMENT RESEARCH NEWS

Figure 1 Then, in another major change, the Congress of the Philippines passed an amendment to the General Banking Act3 allowing the entry of ten new foreign banks. In the meantime, the new Bangko Sentral has been allowing new banks to be established since 1993, reversing the moratorium on new banks which had been established during the crisis years.

The impact of economic and financial liberalization on the banking system is quite evident. The number of bank offices (Figure 1) of different types decreased in absolute terms during the crisis years (particularly in 1984 and 1985) and did not recover until the

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early 1990s when liberalization was effected. The impact is also reflected in the total assets of the banking system (Figure 2) as well as in the net increase in commercial bank branches (Figure 3).

From negative growth in the crisis years, the level stayed to almost zero up to 1990 and then it started to increase sharply.

The impact of economic liberalization could likewise be seen in key financial and monetary variables as noted in Figures 4 and 5. Financial deepening, as indicated by the ratio of M3 to GDP, has rapidly increased over the past four years. A similar trend is also shown by the real M3.

Global trends toward financial integration

———————— 3 Republic Act No. 667 as amended.

Said economic reforms enabled the Philippines to take advantage of the developments taking place around the world at the start of the 1990s. It should be recalled that the technological innovations and the abolition of capital controls which occurred at that time coincided with the then depressed economic conditions, low in-

Figure 3

Figure 4

Figure 2 terest rates and relative dearth of investment opportunities in the OECD economies. Combined with the relatively high expected returns on equities in the Asian markets, this scenario made conditions ripe for dramatic shifts in the allocation of investment funds around the world.

As a result, net long-term resource flows to developing countries increased at a phenomenal rate. External resource inflows increased from 2 percent of the GNP of developing countries in 1988 to 4.2 percent in 1995.

Figure 6 shows the net private capital flows to all developing countries and to Asia in the early to mid-1990s. The flows to Asia were seen as a response

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DEVELOPMENT RESEARCH NEWS

T

here is a gap in thinking between business and economics. But the gap is even wider between business and economics, on the one hand, and arts and culture, on the other. These are two different worlds. They think, behave and react differently. Yet, this being so, we see that there is much that can be reconciled in both the field of culture and arts and that of business and economics. In fact, it is actually quite easy to identify the areas in culture and the arts that are of immediate economic and business significance.

Culture and arts with business and economics: areas of reconciliation First of all, we have cultural tourism . All of us have been tourists at one point or another and what do we visit?

Museums, libraries, parks, historical sights, churches, palaces, old houses and other places that are inherently cultural in character. We also watch operas, concerts, rituals or performances in various fields of the arts. In these areas, tourism has an immediate business impact. Specifically, in developing countries, the hotel and restaurant industry hinges on cultural tourism.

A second area of reconciliation is architecture . Apart from the appearance and beauty of a building, it must be utilitarian. At the University of the Philippines (UP), we make a big virtue of tropical architecture. We have no air conditioning units because the buildings were designed with cross ventilation, high ceiling and more space. For the same amount of space, there is less expense on cooling and air conditioning system.

The third area is traditional medicine which involves cultural communities. Traditional medicines

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Integrating Culture in Economic Development: An Agenda for Nationbuilding are now being tapped for commercialization. The tribal groups who live in the tropical forests are knowledgeable of the economic and medicinal value of plants. One major argument for the preservation of tropical forest is the possible existence of many plants whose economic values have not yet been known. In the Philippines, we have many minority groups that are being exploited by medical companies and researchers. These companies and researchers harness traditional knowledge for commercial reasons with no returns to the groups. This situation is not only happening in medicine but also in the areas of chemicals, fibers and textiles. For fibers, in particular, piña is now being utilized by the Japanese and Europeans mixed with synthetic fabrics, a practice that is frowned upon by some in the textile manufacturing sector.

The fourth area is design. Filipinos are good in the field of design in

Jaime C. Laya* both crafts and garments. This is an area where the Philippines can be internationally competitive. We are able to demand a higher value from the artistic designs of our products.

Given the economic and business significance of arts and culture as seen in the above, arts and culture should therefore be considered in the design of economic development plans. For instance, many regional development plans consider tourism as a starting point to progress. These regions capitalize on their natural resources and cultural attractions through the development of the service sector. Many of their residents thus become part of the hotel and restaurant business that services the tourism industry.

The difficult part: mainstreaming the cultural minorities A more difficult area to include in development plans, however, is the cultural minority. The minorities, in particular the Aetas or Agtas (technical term for Aetas), generally belong to the poorest of the poor. It is difficult to bring them into the mainstream of development because they have lost their self-esteem. Indeed, they have

Jaime C. Laya

———————— *Chairman, National Commission for Culture and Arts, and former member, PIDS Board of Trustees.

DEVELOPMENT RESEARCH NEWS

been looked down for centuries. This loss of self-esteem seems worse for them than the other cultural groups since the latter have somewhat been in close contact with the majority groups. Thus, to bring the Agtas into the mainstream of development, we have first to restore their self-esteem.

In a related vein, the Chinese have, for years, looked at the Malaysians as minorities (i.e., Malays) who do not respond to profit motive. The same case may be said about the cultural minorities in the country, e.g., the Muslims, Igorots, Ifugao, Tiboli, Manobo, and others. Each group thinks differently and has different value systems. Each responds to stimuli in different ways. These groups

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may not necessarily respond with the same alacrity to profit or they may even resist the profit motive. Given the different cultural perspective of the minorities, the development question is how we can bring them to modernity without sacrificing diversity or losing their wealth of traditions and culture.

This is one area that is not being studied adequately.

Search for an integrated approach What is needed is an integrated approach that will uplift the selfesteem of cultural minorities. The Christian lowland Filipinos should understand the cultural minorities. It is amazing, especially in the provinces, how many Christian Filipinos look at the minorities with contempt. On the other

hand, the cultural minorities seem to expect to be treated shabbily. There is something wrong in a developmentbuild ing effort that forgets the cultural m inorities. The wealth of Filipino life will be enhanced if these groups are made part of economic growth. This is another issue that has to be addressed.

Another area that calls for an integrated approach is the matter of reconciliation in places such as the Autonomous Region of Muslim Mindanao (ARMM) and the Cordillera Administrative Region (CAR). We should learn from the activities undertaken by the World Bank (WB) in Af-

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Q and A on Culture and Economics [The following is lifted from the open forum discussions of Dr. Laya's talk.]

Are we investing enough in using culture as a way of building a sense of nationhood in the country that is facilitative of economic growth or development?

We have not used culture enough. To be honest, the importance of culture and arts in nationbuilding did not occur to me until I got involved with the Commission. Many minority groups no longer welcome outsiders because they feel exploited. They are involved in the search for medicines and fibers but are not included in the economic benefit of such search. Cultural workers are also guilty of insensitivity. They interview the minorities to learn about their ethics but forget that these people are starving.

They (researchers) only want to extract the knowledge. These incidents make minorities feel bad and frustrated. We are thus working toward an integrated approach which entails a whole subset of the government machinery. For instance, the Department of Environment and Natural Resources has to be involved because the minorities’ way of life is associated with forests and natural resources. The local government units and cultural workers are likewise involved. The whole process is complex but interesting.

How much attention has the Commission given to cultural education in promoting the people’s sensitivity to cultural differences and their importance to nationbuilding and economic development? Cultural education in this context not only refers or is not only limited to building museums or preserving historical sites but to a real cultural awareness.

Cultural education is being done only in few cases. Even in the NCCA, this area is not fully recognized. The Subcommission on Traditional Arts and Cultural Communities realizes the situation. However, the activity is compartmentalized. The Subcommission works only with the cultural groups and not with the majority. On the other hand, the people in the arts such as the Bayanihan try to synthesize cultural dances. They go to the tribal communities and learn the dances. However, this does not necessarily improve the situation. In one performance of a dance company where a Maranaw princess was guest, for instance, the princess enumerated 16 steps that were wrong with the performance.

Cultural education is thus not necessarily learned through these efforts. This approach may not be the right thing to do. Instead, what I propose is to identify a performing group in, say, Marawi and get them not only to preserve their dances but improve on them without losing their past. It is really difficult to recognize the interfaces among cultures.

There have been conflicts between culture and the economics of public policy like, for instance, the policy of government on ancestral lands. Is there a way to reconcile public policy with cultural favors to achieve economic development?

Even the World Bank and the United Nations Education, Scientific and Cultural Organization (UNESCO) have come to recognize the importance of culture and arts in development only in recent years. It is a very young field and the initiatives come mainly from people in culture and the arts. It may thus be good if economists would also look into the issue. DRN

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Economic Resurgence... from Page 1

ment saving rate has been low and variable. There was a general and consistent government dissaving during the periods 1968-1970 and 1984-1992.

If we wish to sustain the recent resurgence in our economy, it is imperative that we raise the country's saving rate.

And how do we raise the saving rate?

In terms of the household saving rate, declines in per capita incomes must be prevented. This needs a conTable 1 Various Economic Indicators Gross domestic output (GDP): 1990-1993: 1.2% p.a.

1994-1997I: 5.1% p.a.

Gross national income (GNP): 1990-1993: 2.2% p.a.

1994-1997I: 5.9% p.a.

Merchandise Exports (at constant prices): 1990-1993: 5.2% p.a.

1994-1997I: 13.2% p.a.

Gross investment: 1990-1993: 1994-1997I:

4.6% p.a.

8.2% p.a.

Investment rate (share to GNP): 1991: 19.8% 1997: 26.9% Unemployment rate: 1991: 1996:

10.5% 8.6%

Fiscal surplus (deficit) to GNP: 1990-1993: (2.1%) Deficit 1994-1996: 0.6% Surplus Inflation rate: 1990: 1997 (Jan-Jul): 1997I – first semester

18.7% 4.7%

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sistent and robust economic growth as it affects expectations of households and their saving decisions.

At the same time, the fertility rate and d e p e nd e ncy ratio must also be reduced. A steady decline in the dependency ratio over time in an environment of high economic growth is the main driving factor in ensuring an increase in the saving rate (Kang). In a forthcoming Asian Development Bank volume, reduction in the dependency ratio is shown to contribute at least 5 percentage points to saving rates. This is one reason why demographic programs have a bearing on the long-term growth potential of the country.

Meanwhile, with respect to corporate saving rate, a n e f f e c t i v e economy and profitability of investments must be ensured to encourage savings. Chile, for example, had less than 2 percent in the national saving rate in the early 1980s but this went up to 25 percent in the mid-1990s partly because of the rise in the saving rate of the business sector. A competitive environment and an effective pension system both contributed to the rise in the business and subsequently, national saving rates.

With regard to the government saving rate, it may be increased in two ways: raise tax effort and reduce government expenditure .

The analysis of Dr. Rosario Manasan, PIDS Research Fellow, in a Po licy Notes on the proposed legislative bills on the Comprehensive Tax Reform Program (CTRP) states that both House and Senate versions are flawed. In many ways, they encourage tax evasion. The Senate version is particularly taxing on the middle class.

The income for the highest marginal tax is too low compared to the aver-

Table 2 Gross Domestic Saving Rate (Percent share to GNP) Country

1970

1994

Korea

14.8

39.2

Malaysia

26.6

36.9

Thailand

21.2

32.5

Indonesia

13.9

30.3

Philippines

21.9

17.4

Source: World Bank data tapes

age household income. The House version, on the other hand, exempts nearly 61 percent of the taxable individuals. This figure is extremely high compared to the United States, Thailand and Japan, thereby leading to a loss in tax revenues.

As to reducing government expenditure, efforts should focus more on corruption, especially with regard to the infrastructure budget, in order to attain credibility in government spending. Efforts to have better programming and greater local government control in the expenditure process should be encouraged.

The Asian currency turmoil: implications to the Philippine economy Amidst all these recommended actions is the reality of the present currency turmoil in the Asian region.

There are global, regional and national reasons behind this currency turmoil.

At the global level, there are other countries such as Germany, France, Switzerland and Japan which have depreciated their currencies vis-Ă -vis the U.S. dollar in the past year. Since the ASEAN countries have recently opened capital accounts, this currency alignment in the world towards a stronger dollar may not be surprising.

DEVELOPMENT RESEARCH NEWS

There are also regional bases for the currency turmoil brought about by the contagion effect. Compared to China's currency vis-à-vis the U.S. dollar, the ASEAN countries’ currencies appreciated in real terms. For the past two to three years, there has been a sharp depreciation in real terms of the Chinese yuan and this has had an impact on the competitiveness of Southeast Asian exports.

On the national level, meanwhile, we have to consider the financial dimensions. For instance, Thailand seems to have become less prudent with respect to its foreign borrowing in recent years. It had a large current account deficit rising to 8 percent which was increasingly funded by short-term funds, portfolio inflows and local banks' intermediated capital flows. Thus, when the international currency realignments took place amidst a climate of competition with a major competitor, speculators began to work on the region.

What does this mean? The present currency turmoil shows that at the very least, given open capital accounts, the day-to-day exchange rate is determined largely by financial market participants and not by the interplay of exports and imports. The financial market transactions influence the exchange rate either by putting barriers to capital flows or changes in financial variables like interest rates and market participants’ expectations about the economy. At the same time, the exchange movements have a significant impact on the production sector and are ultimately dependent on the performance and workings of the economy. In the context of the ASEAN countries, the currency depreciations reflect adjustments to the significant real appreciation vis-à-vis a major competitor country like China. This

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has led to their loss of competitiveness in the export market.

Given this scenario, there is a greater likelihood of an exchange rate volatility. To be able to weather a more flexible exchange rate, there should be a v further deepening of the financial system. This may call for a further opening up of the financial market to more participants and competition, both local and foreign, thereby allowing for a greater diversification of offerings of financial instruments.

The latter will help temper the "pass through" of exchange rate changes and reduce the negative impact of an exchange rate volatility on the economy; and v strengthening of regulatory mechanisms and support institutions.

This will require more stringent financial reporting and disclosure standards for greater transparency, stronger rating institutions, greater reliance on indirect methods (rather than direct methods) of monetary control, and strengthening of the analytic and monitoring capabilities of the financial authorities. This may also call for the further development of support financial markets like the secondary bond market.

The exchange rate–wage rate-productivity nexus The Philippine peso appreciated the most in real effective terms among the four ASEAN currencies. Without a corresponding compensation in terms of higher growth in productivity, this translated into a reduction in international competitiveness. For example, the Indonesian rupiah depreciated vis-à-vis the peso by 46 percent from 1984-1996. This depreciation is almost equal to the decrease in unit labor cost in manufacturing of Indonesia viz the Philippines during the same period (44%). In many industries, the

September - October 1997

decrease in wage cost in Indonesia visà-vis the Philippines more than compensated for the deterioration in the relative labor productivity of Indonesian labor compared to Philippine labor. In the case of wearing apparel and miscellaneous manufactures, Indonesian labor productivity even increased.

The appreciation of the peso can be compensated by productivity improvements in order to maintain competitive niches. As in the case of South Korea, the won appreciated vis-à-vis Philippine wages but Korean labor productivity increased much more than Philippine labor productivity in many industries that it was able to maintain its competitive advantage.

Living with a more flexible exchange rate in a liberalized trade regime implies that the labor market “performs well” in terms of encouraging both firm and individual investments in human capital formation, allowing reasonable flexibility in adjustments to market uncertainty, export competition and technological developments, and facilitating the means for firms and employees to benefit from productivity improvements.

The realization of the above means that: v The labor market signals appropriate wage differentials rewarding investments in education, skills training and “learning by doing,” among others, rather than reflects results of rent-seeking from noncompetitive behavior or from discriminatory policies. Alba (1997) finds that there are persistent interindustry wage differentials in the country even after accounting for the effects of human capital, demographic, job-related and

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Economic Resurgence... from Page 7

locational characteristics. Alba also finds that it is not education but experience that explains wage differentials with respect to human capital effects.

Studies on the labor market in the Philippines are scarce and much remains to be done. It is clear, however, that as we face the world of open economies and greater domestic and international market competition with potentially volatile exchange rates, we have no choice but to be more realistic in our labor market policies. Toward this end, more information and analysis on the dynamics of the Philippine labor market are particularly warranted. v Wage adjustments and deci-

sions would have to be more decentralized at the firm level rather than at the regional level (through the Regional Wage and Productivity Boards) or at the national level (through Congress) through minimum wage orders. In effect, the government may have to give more teeth to its old policy enunciated in the Medium-Term Development Plan to strengthen collective bargaining rather than minimum wage-fixing. v Greater emphasis should be placed on productivity improvements at the firm, sector and national levels. At the national level, there is a whole range of policy and program initiatives that the government can do based in part on the experience of other countries in the region. These initiatives can include a national movement on statistical quality control as well as an extensive technical and industrial extension system especially meant for the small and medium enterprises.

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A more stable and rapidly growing macroeconomy also encourages the drive for productivity by inducing firms to rely less on casuals and contractuals and more on permanent employees with accompanying better incentives for more firm investments on skills-upgrading of workers.

Agriculture, food prices and industrialization A strong agricultural sector contributes to industrial growth especially for a country where agriculture is a large sector of the economy. The rapid

improvements in per capita income while at the same time had a turnaround in agricultural trade from a deficit during the early 1980s to a surplus in the early 1990s. In contrast, the Philippines went from being a surplus to a deficit country in agriculture from the early 1980s to the early 1990s (Table 3).

The countries with the largest agricultural trade surplus experienced the sharpest drops in the share of agriculture to GDP during the period.

Given the poor performance of the

Table 3 Net Exports of Agricultural Products (In billion US dollars) Country Indonesia Malaysia Philippines Thailand Vietnam China

sum(1973-75)

sum(1981-83)

sum(1988-90)

sum(1992-94)

0.73 3.02 2.56 3.51 -1.38 1.20

0.94 5.61 2.62 9.62 -0.50 -4.32

4.56 7.93 0.23 12.54 0.89 7.61

3.97 8.02 -0.46 13.16 1.55 8.03

growth of the industrial sectors of Malaysia, Indonesia and Thailand coincided with an increase in per capita food and agricultural output during the 1980s and a rising agricultural trade surplus. Similarly, China and Vietnam also experienced significant

Philippine agricultural sector, it is not surprising that it had one of the lowest declines in the share of agriculture to the national economy. The apparent contradiction that a strong agricultural sector is needed in order for its share to decline fastest arises because a robust agricultural sector creates a more broad-based economic Table 4 growth. Given the higher inNominal Rates of Protection come elasticity for manufac(In percent) tured products, it would help push and sustain the higher Product 1980-84 1985-89 1990-94 1995 growth rate of the industrial sector. In addition, the substanRice -13 16 19 65 tial growth of the domestic Corn 26 67 76 150 economy becomes a major Sugar 42 154 81 104 magnet for foreign investChicken 46 39 74 84 ments as the Thai, Indonesian and Malaysian cases indicate.

Source: C. David (1997)

DEVELOPMENT RESEARCH NEWS

Agricultural protection Agricultural growth increased in the first half of the 1990s compared to the 1980s. Relatively good weather is one reason. However, one most likely reason is the sharp rise in agricultural protection during the period. As seen in Table 4, the nominal rates of protection for rice, corn, sugar and chicken all showed significant increases during the period. The symbiotic increases in the rates of protection for corn and chicken are not surprising since cornbased feed is a critical input to the poultry industry.

Recent estimates on the rates of protection in the whole economy indicate that the agricultural sector is more protected compared with the manufacturing sector in the Philippines. This situation is in contrast with that in previous decades until the 1980s. The “switch over� has led to a level of per capita income of $1,000 or so compared to the normal expected $4,000 per capita or so.

What are the implications of the rise in agricultural protection? One is in the manner by which the Philippines would cope with the challenges of the ASEAN Free Trade Agreement (AFTA) when tariffs for manufactures within the region are expected to go down to a range of zero to five percent. The current structure of tariffs for the corn-feeds-livestock-processed meat cluster is shown in Table 5 for the Philippines, Indonesia, Malaysia and Thailand. Indonesia and Malaysia have low tariffs compared to the Philippines. Thailand is an exporter of corn and therefore has potential comparative advantage in food processing.

How the processed meat industry in the Philippines will compete with the rest of the ASEAN in the light of high input tariffs when AFTA gets implemented by the year 2003 remains an

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Table 5 Tariff Structure of Selected Industries FOOD PROCESSING Product Philippines Corn Animal Feeds Live Animals Bovine Swine Poultry Meat of Bovine Swine Poultry Processed Meat

Indonesia

Malaysia

Singapore

Thailand (Applied)

35/80 45

0 5

Nil Nil

Nil Nil

B2.75/kg 10

30/40* 30/50* 40/65*

0 to 10 10 10

Nil Nil Nil

Nil Nil Nil

10 10 40

30/80* 30/80* 45/80* 30/80*

20 20 15 to 20 20 to 25

Nil Nil Nil Nil to 20

Nil Nil Nil Nil

60 60 60 60 or B50/kg

*Refers to tariffs on in-quota and out-quota imports Source: C. Azarcon (1997)

important policy challenge.

Another implication is that food prices can be expected to be higher in the country than in the other agricultural exporting countries in the region.

In comparison to the price of rice in the Philippines, the retail price in Indonesia averaged only 81 percent of Philippine retail rice prices during the period 1984-1993. The comparison is particularly interesting because it took place during the period when Indonesia had a successful macroeconomic adjustment. This was when its rupiah was devaluated and yet inflation was low. The low and declining price of rice was probably a major reason behind that success story.

With comparatively higher food prices in the Philippines, it is not surprising that wage workers ask for comparatively higher wages in the country. With declining tariffs and appreciating currency (in real terms), this translates into difficult challenges for the labor intensive manufacturers;

hence their failure to grow robustly and to become a more important source of employment.

Reinvigorating the Philippine agricultural sector Perhaps what is most needed for the agricultural sector is a thorough overhaul of the government bureaucracy and the institutional structure supporting and/or overseeing the Philippine agricultural sector. This needs a clearer vision in the light of the significant changes in East and Southeast Asia, rearrangement of functions, streamlining and engineering of the Department of Agriculture (DA) and related agriculture agencies, and better linkages with local government units.

It appears that the DA has failed to creatively and effectively utilize the large infusion of government funds into the sector in the past two years.

An organizational and institutional

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Economic Liberalization... from Page 3

to the region’s increasing bright prospects for future growth. For example, in 1994, developing countries in Asia grew by an average of 8.2 percent.

The larger portion of the increase came from a surge in private capital flows to the private sector in recipient countries. Private capital dominated the inflows, accounting for about 75 percent of the region’s net external inflows from 1991-1994. Foreign direct investment and portfolio equity investment constituted the most important forms of private capital flows, with net foreign direct investment increasing from $12.1 million in 1991 to $54.8 million in 1994 and net portfolio investment growing from $0.5 billion in 1991 to $9.2 billion in 1994. Conversely, the share of multilateral and bilateral official sources of finance declined sharply from 38 percent in 1991 to 15 percent in 1994. These flows were mediated by the equity and debt markets of recipient countries which have enjoyed bullish behavior over the last few years. The East Asian stock markets, as measured in U.S. dollars, for instance, have seen their capitalization increase by 241 percent from 1990 to 1994.4 East Asian economies attracted 82 percent of the net long-term external resource flows into the region in the 1990s. In contrast, South Asian economies continuously relied on official sources of finance.

Enthusiasm and caution Needless to say, the foregoing developments have been very benefi———————— 4 This includes China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, and Thailand.

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cial for the Philippines. Among the many consequences of our economic recession more than ten years ago was the drastic reduction in our investment and saving rates as shown in Figures 7 and 8 (the figures also show that the rates are just beginning to slowly recover now). These capital flows which came in provided and continue to provide a substantial source of spontaneous, private sector funds for the muchneeded capitalization and retooling of our economy. They are also expected to enrich the available instruments and strengthen the environment for the mobilization of our own domestic re-

September - October 1997

lion per annum and bringing a rapid accumulation of foreign exchange reserves. Large foreign capital inflows have positive and negative effects. If employed in productive activities, capital flows permit higher investment relative to domestic saving. However, large capital inflows may also make macroeconomic management more difficult. The recent turmoil in the Southeast Asian currency market is only the latest reminder of the complications that come from the entry of highly volatile capital flows.

The developments within Southeast Asia in the last few weeks provide us with the inducement to consider the impact of financial integration on macroeconomic and monetary management.

Financial liberalization: “The baby . . .”

Figure 6 sources which are expected to carry the brunt of national investment in the medium and long-term. My own research at the Bangko Sentral (Tan and Paderanga 1997) shows that while the Philippine economy is not yet fully integrated with the rest of the world, the degree of integration has increased in the last few years. And the economic reforms, i.e., liberalization, helped prepare the country for this.

At the same time, though, we are also aware that there is a cloud in every silver lining. Substantial shortterm capital flows were attracted in the 1990s, averaging a little over $10 bil-

Before we start the reexamination, we should remember why we undertook liberalization and market-orientation policies in the first place. In discussing the impact of reforms, we often focus on the “distressing” aspects and sometimes forget the benefits. We ruefully decry the reforms because of the oneside picture that may unintentionally emerge and as such, may end up “throwing out the baby with the bath water.”

In a recent paper in the Econom ist, Sachs (1997) stated that “openness was decisive for rapid growth.

Open economies grew 1.2 percentage points per year faster than closed economies, controlling for everything else.” Krugman (1987), one of the foremost “new trade economists” who provided the arguments for theoreti-

DEVELOPMENT RESEARCH NEWS

cal deviations from free trade, asserted that, given all the uncertainties introduced by lags and imprecision about information, recognition, and implementation, freer trade would still be the best guide for economic management. Our own record of the past few years attests to the advantages of allowing freer commerce with the rest of the world and letting the market determine the allocation of resources.

International financial integration itself enhances international trade and commerce as well as each of the individual economies. It facilitates the flow of goods and services which transmits the benefits of specialization, economies of scale and other benefits of freer trade. It provides clear signals to economic managers as to how their decisions and plans are perceived.

Financial integration also provides some advantages in the financial front. Three advantages immediately come to mind. First, it helps develop the financial sector itself. The resulting lower cost of capital and efficiency in financial services are expected to benefit the economy as a whole. Second, it increases the available financial instruments for the market actors to attain their portfolio balances efficiently. Finally, the flow of capital enables economies to isolate their consumption and financial decisions. For example, financial integration facilitates the ability of countries to undertake significant investments during their early growth phases.

“. . . and the bath water.”

At the same time, the turmoil in Southeast Asian foreign exchange markets in the last few months highlights one of the consequences of open economies and integrated financial markets. “Global capital markets . . . are dispassionate, brutally calculating

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11

Figure 7

Figure 8

and . . . fickle . . .” (Hirsch and Powell 1997). Like raging bulls, they can suddenly break from established trends and turn upon unsuspecting actors.

While these markets provide economic activity and resources, economic managers need to be nimble enough to adjust to their unpredictable ways.

nancial firms now do this as a matter of course.

One of the sources of unpredictability stems from the possibility that domestic markets will be affected by what happens in other countries, in the same way that the Mexican peso crisis and the overall currency movements in Southeast Asia today have affected Philippine financial markets. This phenomenon of contagion among countries has increased in frequency since the increase in financial integration of emerging markets in the 1980s.

Technological innovations in communication and transportation and advances in information processing, i.e., computers and computation, and financial theory all compound (and support) financial integration.

Technological innovations in transportation now allow investors to operate in more financial markets around the world. Communication advances and information processing allow them to accomplish portfolio allocation around the world and throughout the day if they desire. In fact, large banks and fi-

At the same time, advances in financial theory have allowed a much expanded array of financial instruments. This has led to an increased ability by firms to pass on the financial chore to third parties and to concentrate on their core activities, leading to increased specialization and efficiency. The availability of financial instruments also reduces the cost of liquidity and capital. The trade-off is that financial firms now operate at much thinner margins (good) and with higher leverage (bad), sometimes imperceptibly. That is, new financial instruments allow entities to participate at much smaller entrance costs but they also increase the possibility that market reversals will rapidly eat into core capital.

The combination of wider financial reach, speedier transactions, more complicated and numerous financial instruments and the possibility of higher leverage have all combined to increase the probability of rapid financial market meltdowns spreading globally or within geographic regions.

Recent research into the causes of contagion in international financial

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DEVELOPMENT RESEARCH NEWS

Economic Liberalization... from Page 11

markets have increased our appreciation for new and more explanations.

Calvo (1995) analyzed the impact of investor-herd behavior in international financial markets due to asymmetric information across national borders.

When an initial exchange rate correction is experienced within a region, foreign investors who invest on the basis of broad regional indicators and have not gone into more detailed analysis of individual countries are unable to distinguish between currencies.

There is a tendency to escape from the region as a whole rather than make distinctions between individual currencies.

Frankel and Schmukler (1996) have also studied contagion through changes in the net asset values of investment funds and the resulting portfolio reallocations. As exchange rate corrections reduce the net asset value of the portfolio, investment managers are induced to liquidate investments in some regions in order to realize gains to balance reductions in “losing” regions. Other researchers have also studied how fundamentals can change with shifts in market perception.

Although the data still have to be reviewed and analyzed, the recent contagion episode in Southeast Asia does not seem to have been caused by any of the previously hypothesized reasons. Rather, given the stability of the exchange rate of local Southeast Asian currencies to the US dollar and the slowdown in the growth of their exports, there had been widespread speculation that these countries had lost competitiveness over the last few years. When the US dollar appreciated

12

substantially relative to the German DM and the Japanese yen during the first six months of 1997, the expectations for exchange rate corrections became acutely heightened.

Political problems in Thailand starting more than a year ago triggered the first large correction in Southeast Asian currencies on July 2, 1997 when the Thai baht had to be freed from the effective peg to the US dollar. Considering the speculations mentioned previously, the market may have expected the other countries to adjust their own currencies in order to maintain their competitiveness relative to Thailand.

The strength of the expectation made for a self-fulfilling prophecy. The resulting continued adjustments in each country in turn lead to reactive corrections in the others. In the end, a series of exchange rate corrections—still ongoing as of today, September 24—have been going around.

Given this background and the relatively young age of research in this area, there is a nagging suspicion that an unknown cause of contagion lurks somewhere behind those markets. In this area, much heightened vigilance is still required.

The integration of financial markets also changes the effectiveness of monetary and other macroeconomic policies. In a nutshell, monetary and credit control is diminished, the degree of diminution depending on the exchange policy chosen, and more use of fiscal and related policies have to be resorted to. A changing menu with varying proportions among the major policy components—monetary, fiscal, trade and others—requires more sophisticated financial markets as well as analysis and planning.

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Impact on macroeconomic management One of the major complications of macroeconomic management in the new environment is that while the economics profession probably has a relatively working idea of how financial integration affects the effectiveness of monetary instruments, there is only initial research on the character of international financial flows. The nature and timing of private financial flows, now in the trillions of dollars, is another complication that will have to be learned and addressed by economic managers.

The literature on open economy macroeconomics has prepared managers with some answers on how market openness and financial integration modify the expected effects of the various monetary instruments. For example, college students now know that with fixed foreign exchange rates, monetary authorities essentially lose effective control over the volume of money supply. With full financial integration, domestic control over interest rates also becomes weak. Thus, the influence over economic activity of most of the monetary instruments is much reduced. Other approaches to foreign exchange management modify this result but the conclusion remains: in an integrated global environment, monetary micromanagement by the government loses much of its force.

There are several levels of implications of these developments on economic management. The most “obvious” and ones most often quoted in undergraduate text, namely, that under fixed exchange rates, “monetary policy becomes ineffective and fiscal policy becomes important” (and that under flexible exchange rates “monetary policy is weak and fiscal policy is powerful.”), can actually be danger-

DEVELOPMENT RESEARCH NEWS

Monetary Board member Dr. Cayetano Paderanga, Jr.

ously overstated. While each policy is relatively more important than the other under different exchange rate regimes, the fact is that with full financial integration, both policies are weakened by the increased ability of economic resources to relocate and avoid the effects of policies. The corollary is that these policies may have unwanted side effects that economic managers ignore only at their own risk.

The second implication has to do with the character of monetary and exchange management. Before, economic managers could and often directly controlled capital and other flows through regulations and directives. With increased integration and innovative financial instruments, the ability of residents and foreign investors to balance their portfolio among local and foreign assets has eroded the authorities’ control over monetary, credit and currency flows.

Under these circumstances, economic managers can no longer expect to control monetary and currency magnitudes as tightly as before. Market actors now respond independently to perceived prices and underlying

13

trends. They will find ways around restrictions which are inconsistent with market signals, and economic resources now rapidly migrate according to market intentions. This implies that economic managers can no longer command and must shift towards keeping the fundamentals right. The whole framework of policymaking must now turn towards keeping the prices, structures and institutions conducive for market activities instead of trying to influence the volume of flows directly.

Third, we need to do research on how best economic managers, especially central banks, can cooperate to reduce the probability of financial crises and how to mitigate their effects.

Cooperative agreements on coordinated actions or even just the continuous and prompt exchange of information can be explored. Agreements on coordinated actions include the “repo” arrangements among Asian central banks. A more direct example is the set of coordinated actions by several central banks on the purchase of the Thai baht in order to repulse a speculative attack on that currency sometime in May 1997.5 The specific details and schedule for effective information exchange will require further study and need to be worked out.

Agenda for future work A period of “retrenchment” and reflection is now needed by economic managers. This is especially true in the face of the seeming inevitability and irresistibility of the recent currency crisis. Managers now need to know exactly what they can do and what they ———————— 5 The limited effectiveness of this kind of coordinated action in the face of underlying fundamentals is shown by the inability of authorities to prevent the subsequent currency turmoil in Thailand and the other ASEAN countries later in July 1997.

September - October 1997

will have to leave to the market and to the normal course of economic activity. A whole new agenda of research for economic managers seems to have opened up in the face of the changing world economic environment.

Among the first things economic managers need to find out are what the remaining monetary, fiscal and other instruments are left for them to use and how effective each of these is under different circumstances. Given the instruments at their disposal, what should be the objectives of macroeconomic policy? While it may still be useful to think about the same broad objectives of stability, low inflation, growth, equity and others which we had before the significant changes in the environment, the intermediate and operational targets may have to be modified.

Current economic ideas as well as institutional and market realities combine to influence how macroeconomic management is carried out.

For example, with many exceptions, one can generalize monetary management in the late 1960s and 1970s as interest rate targeting. In the eighties, this shifted to money supply targeting.

Now in the nineties, there are suggestions to formally describe it as inflation targeting, especially in the face of many central banks being reorganized and given specific mandates to keep inflation low. Considering the new circumstances, there seems to be no doubt that the character of economic management has to change. For example, in the face of financial integration, how sustainable would an interest rate target diverging from world interest rates be in the medium and long term? While a high saving rate would still be desirable in order to re-

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DEVELOPMENT RESEARCH NEWS

D

r. Gerardo P. Sicat’s eminent career as an economist and a public servant began in 1970 when he was appointed to a Cabinet position as Chairman of the National Economic Council. He was subsequently appointed as the first Director-General of the National Economic and Development Authority (NEDA) and concurrent Minister of Economic Planning.

He served in this capacity until July 1981.

Known for his insights and ideas that were considered ahead of his times, Sicat’s 11-year service in government as chief economic planner was marked by a vigorous promotion of sound macroeconomic management, economic reforms and preparations for the national development plan.

Largely through his leadership, the

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GERARDO P. SICAT: The Economist With a Vision nomic Ministers from 1975 to 1981. The ASEAN initiated major economic cooperation programs during this period.

Considered the father of the Philippine Institute for Development Studies (PIDS), he suggested the founding of the Institute in 1977 as a research arm of the government that would assist decisionmakers in analyzing policy issues and in promoting freer debate of socioeconomic concerns. He provided the Institute with the guidance and inspiration that shaped its character and thrust as an independent and credible research institute.

Amid his numerous responsibilities, Sicat always found time to write.

He was editor of the Philipine Economic Journal from 1965 to 1970 and wrote the widely-used textbook, Economics, in the early 1980s while he was Chairman of the Philippine National Bank. His heart and mind also stayed close to the academic world where he served as a Regent at the University of the Philippines (U.P.) for more than ten years, from 1971 to 1983, spanning the university presidencies of Salvador Lopez, O.D. Corpuz, and Edgardo Angara.

Philippine economy experienced unprecedented growth despite worldwide turbulence caused by various economic shocks. He was also instrumental in forging stronger regional economic ties as he headed the Philippine delegations to the ASEAN Eco-

September - October 1997

tion-building projects during his service in government. Besides the establishment of the PIDS, he played a pivotal role in establishing the U.P. in the Visayas (sited in Miag-ao, Iloilo) as part of the UP System of campuses, in having a building constructed to house the Philippine Social Science Council in Diliman, Quezon City, in obtaining funds for the construction of the School of Economics’ building and library, and in setting up the Philippine Center for Economic Development (PCED).

After his government stint, he joined the World Bank where he served in several positions and worked in three major areas, namely, development research, operations, and operational evaluation. His work dealt with related issues of tax reform and incentives, value-added taxation, structural adjustment programs, financial restructuring, and privatization.

His stint at the World Bank gave him the opportunity to contribute to the discussion of adjustment and development issues of countries in Africa, Asia, Latin America, the Middle East and Eastern Europe.

He was likewise an ardent supporter of the UP School of Economics where he established a fund, supported by the royalties earned from his textbook, to award the best undergraduate papers in Economics.

Dr. Sicat was born in 1935 in San Fernando, Pampanga and grew up in Manila during World War II. He is a product of the Philippine public school system from grade one to the university. He earned three degrees from the University of the Philippines (UP): B.S.F.S (cum laude), 1957; A.B. (cum laude), 1958; and M.A. in Economics,

He also assisted in many institu-

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DEVELOPMENT RESEARCH NEWS

15

JOSÉ ENCARNACIÓN, JR. The Compleat Teacher

A

s Professor Emeritus at the School of Economics, University of the Philippines and an academician who is regarded with high esteem, Dr. José Encarnación, Jr. typifies the compleat teacher who excels in many fields of endeavour—teaching, research, management, and advisory services—and whose years of sharing his thoughts have brought about a bountiful harvest of economists and thinkers. When he was given the Presidential Award for Distinguished Service to the University in 1993 by the University of the Philippines (UP), the distinction therefore not only capped more than four decades of loyal and dedicated service to the state university but also served as a tribute to his significant contributions to the country and the international community.

Dr. Encarnación’s leadership as dean of the UP School of Economics for 20 years (1974-1994) was marked by a strong advocacy for advancing economics education. He was guided by the vision of making the UPSE the leading economics education center in Asia.

As a member of different economic think-tank institutions, Dr. Encarnación was instrumental in effecting economic reforms and development policies in the country. As an active member of the research advisory committee of the PIDS from 1979 to 1992, for instance, his ideas and foresight greatly influenced the research thrusts and character of the Institute

as the latter provided rigorous analysis of policy issues to help decisionmakers in their deliberations. He has sat in various capacities in the boards and committees of well-known institutions like the Social Science Research on Population and Development, the

World Health Organization/World Bank/United Nations Development Program, the UN’s Committee for Development Planning, Economic and Social Council, the Council for Asian Manpower Studies, and Ford Foundation, among others. He was Executive Director of the Philippine Center for Economic Development from 19751994. He is currently a member of the Executive Council of the National Academy of Science and Technology.

Dr. Encarnación holds a Ph.B. and M.A. in philosophy from the UP and an A.M. and doctorate degree in

September - October 1997

economics from Princeton University.

He started as an instructor in 1950 right after graduation, teaching philosophy and then economics while taking up his graduate studies. He was Assistant Professor of Economics at the UP from 1960-62, Associate Professor from 1962-66, then full Professor beginning 1966 and eventually became the dean for two decades of the UPSE. His teaching career spanned four decades of molding today’s successful economic leaders—both in government and in the business sector.

In between his fruitful endeavors, Dr. Encarnación wrote and/or edited various journals and publications, contributing to economic theory and economic literature. A veritable intellectual, he has won various honors and awards for his writings and ideas. His name has been cited on several occasions in international Who’s Who lists, including Men of Achievement (12th ed., 1987) and Dictionary of International Biography (20th ed., 1987), both published by the International Biographical Centre of Cambridge, England as well as the Internatio nal Directo ry of Distinguished Leadership (1st ed., 1986) published by the American Biographical Institute and Who’s Who in the World?(8th ed., 1986) published by the Marquis Who’s Who. Dr. Encarnación is a founding member and former President (196667) of the Philippine Economic Society (PES) as well as a founding member of the East Asian Economic Association. He continues to be an active member of the Econometric Society and the Philippine Statistical Association.

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DEVELOPMENT RESEARCH NEWS

Response of Dr. Gerardo Sicat

I

t is with great pleasure and honor to receive this recognition for tasks that have been accomplished years ago.

To be reminded that they had made a difference to others makes the life of public service and the risks attached to it worth living.

In 1984, as I was set to leave for abroad to accept a different challenge in my professional work, I reviewed our economic problems in historical perspective for the Philippine Economic Society. That was during the midst of the deepest economic and political crisis faced by our country. The prognosis was uncertain and somewhat gloomy and our nation then was divided. The diagnosis was a litany of missed opportunities. We were then faced with very hard choices, with our backs literally against the wall. They arose from the complications of the political crisis but they were nonetheless manifested as economic and social crises.

Since then I had been away for 13 years with just intermittent visits. Like Rip Van Winkle, I have awakened and to my surprise, some of the things that I had hoped we were capable of achieving long before but were denied are indeed happening. We are late but we can catch up. The process of catching up is exciting because it will unleash the latent energies of our people—managers in the government and in the private sector, intellectuals in universities and think-tanks and labor.

Today, there are many hopeful signs that our leaders have achieved some remarkable change in the psychology of turning our economic destiny. There is an ocean of change in attitudes towards keeping fiscal discipline, maintaining sound macroeconomic fundamentals, using the rules of the market mechanism, pushing export growth and competitiveness, opening up to foreign investment and technology, and reigning in the role of the government by making it deal with the most important fundamental functions of regulation, encouragement and not direct intervention.

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Response of Dr. José Encarnación, Jr.

I

t is very heartwarming to see so many old friends and colleagues this afternoon. There was a time when I thought the use of the term “old” should be prohibited but now I think there’s such a phrase as old friends, old loves. The word is not really that bad. I want to thank Philip (Dr. Felipe Medalla) and Dodong (Dr. Agustin Kintanar) for the excessively kind words they used. I did not recognize myself as being referred to. It’s embarrassing, for one thing. I also appreciate Ruping (Dr. Ruperto Alonzo) very much. One time I wrote a paper and

he showed me an error there. I like that. I think I corrected the error and I mentioned him. I keep saying that the new students should be better than the old because obviously, they learned from the old and they learned from their own efforts. So I’m very proud of Ruping as well as of Philip and Gerry (Dr. Gerardo Sicat). On the first day of this symposium, somebody said that Gerry was the father of PIDS and I was the godfather. I think Gerry has a story to tell about that. But I think I’m getting old because I don’t remember what I’m going to say. Thank you very much. DRN

There is unanimity in this assessment from many observers. The country’s international credit rating has been improving. The flagbearers in this economy—our big local companies—are seeking their own credit ratings openly accessing international capital markets. They are seeking world-class competitive status and not sheltered protection.

Exports have been in the impressive doubledigit growth and suddenly the opening of new export products appeared to show no end in sight. Foreign investment is flowing in impressive amounts and the dynamism of foreign capital mixed with Filipino management and labor is bringing gains and productivity in these new industries. In the midst of this growth in foreign capital, Filipino investment can only grow because the current development strategy allows for Filipino capital to complement rather than to substitute foreign capital.

complementing these export industries to grow strong.

We need foreign capital to achieve faster growth but we also need to raise our domestic savings to raise Filipino investments. We will need to target large companies—multinationals to examine how they can fill a void in our industrial goals making it clear that they exploit their presence to find the export markets and not just fill a domestic demand gap. It will also be important to attract many of the medium-scale export industries from Taiwan, Hong Kong, Japan, Korea and the West into the industrial estates as well as other parts of the country (Clark, Subic, Calabarzon, Cebu, etc.), the small scale Filipino industries

The phenomenal frenzy of construction taking place in Manila—and the gridlock of traffic that it has engendered—and in other new centers of growth is an outward manifestation of these happenings. These developments represent a growing demand for Philippine labor. Egged on by international competition through comparative advantage, the growth of enterprise in the country will eventually raise wages and incomes and will mean a good future for our population. Eventually—but not yet for sometime to come, for our population growth is very high—Philippine labor will not seek to have jobs abroad because they will be found at home.

All these require that policymakers will have to be vigilant to the continuing challenges to be faced. We are reminded of how fragile these gains are to political wranglings among us. Of course, we are also partially hostage to the regional crisis affecting exchange rates and capital flows which began with the crisis in Thailand. We are inevitably involved within ASEAN and our immediate neighbors and further developments in these economies will affect us. The challenge is to maintain a policy posture that isolates us from the worst consequences of interdependence.

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DEVELOPMENT RESEARCH NEWS

Vision and mandate: Role and goals The Institute is committed to serve the interests of the Filipino people through the provision of rigorous analyses of policy issues that can guide policymakers and leaders in their decisionmaking.

The Institute's goals are: v to provide analyses of socioeconomic problems and issues to support the formulation of plans and policies for sustained social and economic development in the Philippines; v to establish a continuing channel of communication between policymakers and planners, on the one hand, and researchers, on the other; and v to promote the utilization of research results.

Corporate profile v Nonstock, nonprofit government research institute with a corporate character v Functionally attached to the National Economic and Development Authority v Created by Presidential Decree No. 1201 on September 26, 1977 but started actual operations in May 1978 v 103 employees composed of 65 permanent and 38 contractual (as of September 1997).

Major activities v Development of the research

program v Conduct of research studies v Dissemination and promo-

tion of the use of research results.

Accomplishments v Completed 404 studies from 1978 to 1997 covering the entire range of its research program. v Published 364 titles of books,

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A Word about PIDS working papers, discussion papers, monographs, executive memoranda, and policy notes. v Prepared 105 issues of the PIDS journal and newsletter. v Issued press releases resulting in 413 media exposures since 1989. v Organized a total number of 361 conferences, seminars, roundtable discussions, and other fora since 1982.

Some major outputs and contributions Industrial Promotion Policy in the Philippines (1979) v Reviewed the impact of trade and industrial policies in the Philippines from the 1950s to the 1970s. v Recommended measures for the industrial restructuring of the country (policy reforms in the industry sector drew heavily from this study). v Served as major input in the negotiation of the first structural adjustment loan from the World Bank.

Economic Policies and Philippine Agriculture (1983) v Reviewed the impact of government’s macroeconomic policies on the agricultural sector. v Extensively used as reference in the restructuring of the agricultural sector done during the period.

PIDS-Tariff Commission Joint Research Project (1983-1990) v Results of several macro and industry studies were used as inputs to the government’s Tariff Reform

Program and import liberalization program implemented during the period.

Annual Macroeconomic Model (1984-1994) v Being used by the National Economic and Development Authority (NEDA) in its planning work and policy analyses. v Selected NEDA staff were also trained on the use of the model.

Economic Recovery and Long-Run Growth: Agenda for Reforms– "The Yellow Report" (1986-1989) v Identified short-term measures to address the economic crisis and medium-term structural reforms for sustained growth. v Adopted by the Aquino government in principle and used as inputs in the preparation of the Philippine Medium-Term Development Plan, 1987-1992. v Presented in 13 regional consultations across the country to generate support for the reforms.

Agenda for Action for the Philippine Rural Sector – “The Green Report” (1986) v Identified short- and long-term measures needed to reinvigorate the Philippine agricultural and rural sector. v Provided the framework for the reform agenda and action plan of the Philippine agricultural sector as formulated and implemented by the Department of Agriculture starting in 1986.

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DEVELOPMENT RESEARCH NEWS

About PIDS... from Page 17

Streamlining the Bureaucracy: Overall and Sectoral Framework Papers (1993-1994) v Defined the nature and extent of government involvement in specific societal activities and the rationale for the institutional changes in structure and support needed to accomplish such involvement. v Helped the government develop a reorganization plan that would lead to a lean, efficient and effective government bureaucracy.

Philippine Accession to the World Trade Organization (1994) v Served as the major input for the Senate Committee Report on the Philippines' accession to the World Trade Organization (GATTWTO).

PIDS-DOH Joint Project on Health Care Financing (1992-1995) v Provided twenty-two baseline studies on various aspects affecting health care finance.

Completed Research Projects 1977-1997 (by research themes) Employment, human resource development and technology 53 Resource mobilization 133 Trade expansion, agricultural and industrial development 103 Poverty, income and wealth distribution 6 Natural resources and environment 34 Regional, urban and rural development 47 Others 28 Total 404

v v

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18

Provided inputs to the DOH on various health policy actions.

Served as major input to the formulation of the National Health Insurance Law as a core policy reform package on the country's health care financing system.

Assessment of the Manila Action Plan for APEC (MAPA) for the APEC Leaders' Summit (1996) v Provided an assessment of the individual action plans (IAPs) submitted by APEC membereconomies for the Manila Action Plan of the 1996 APEC Leaders' Summit.

Urban Water Pricing (1997) v The study aims to come up with a framework for optimal pricing, allocation and use of urban water, using Metro Manila and Metro Cebu as case studies. DRN

PIDS Publications Special Publications (1979 to date) PIDS Economic Outlook Series (1992 & 1993) PIDS Monograph Series (1983-1991) PIDS Working Paper Series (1979-1992) PIDS Research Paper Series (1994 to date) PIDS Staff Paper Series (1982-1987) Discussion Paper Series (1994 to date) PIDS Executive Memo (1991-1996) PIDS Policy Notes (July 1996 to date) Total No. of titles published: Journal of Philippine Development (1981 to date) Development Research News (1983 to date)

29 2 13 146 11 34 93 23 13 364 26 79

is

F

20

or one week in September 1997, a flurry of activities were held to celebrate the 20th anniversary of the Philippine Institute for Development Studies (PIDS). Two decades after it was established on September 26, 1977, the PIDS has grown to be a credible government think tank that has been able to contribute to high-level decisionmaking through policy-oriented research.

On September 22, the first day of the week-long celebration, the PIDS management and staff congregated at the Romulo Hall of the NEDA sa Makati Building for the opening of the online PIDS photo exhibit and book fair. PIDS President Dr. Ponciano Intal, Jr. and other senior officials assisted Dr. Loretta Makasiar Sicat in the cutting of the ribbon. Afterwards, Dr. Sicat and the PIDS staff were treated to a nostalgic and at times hilarious montage of online photos at the PIDS homepage chronicling the beginnings of the Institute and some of its once skinny and young-looking staff.

The highlight of the week-long celebration was the three-day symposium held on September 23-25 in honor of Dr. Gerardo Sicat and Dr. José Encarnación, Jr.—two economists who were instrumental in establishing and shaping the Institute to accomplishing its mandate. Dr. Sicat is considered the founding father of PIDS while Dr. Encarnación was one of the first and longest-serving members of its Research Advisory Committee. Together, they provided the PIDS with the guidance and inspiration that shaped its

DEVELOPMENT RESEARCH NEWS

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September - October 1997

6 Ms. Corazon Desuasido (Publications Division Chief and Chair of

the Book Fair/Sale Subcommittee) shows Dr. Ponciano Intal, Jr., Dr. Loretta Makasiar Sicat, and her son Keith Sicat the various publications on display during the week-long PIDS anniversary celebration.

5 Dr. Loretta Makasiar Sicat, wife of PIDS honoree Dr. Gerardo

Sicat, cuts the ceremonial ribbon during the opening of the PIDS Book Fair/Sale and Online Photo Exhibit held at the Romulo Hall of the NEDA sa Makati Building. Assisting her is PIDS Fellow Dr. Erlinda Medalla. Also in the photo are (from left) Mr. Mario Feranil (Acting Vice-President and Director for Project Services and Development), Ms. Jennifer Liguton (Director for Research Information), and Dr. Ponciano Intal, Jr. (PIDS President).

4 The two honorees, Dr. Gerardo Sicat and

Dr. José Encarnación, and Dr. Ponciano Intal are amused by the remarks of guest presentors on the third day of the symposium held at the Traders Hotel in Manila.

character and thrust as an independent and credible research arm of government that assists decisionmakers in analyzing policy issues.

The first two days of the symposium were held at the Philippine Trade Training Center along Roxas Boulevard, Manila where past and present members of the PIDS Board of Trustees—all distinguished government officials, economists, social scientists and members of the academe in their own right—presented papers on various socioeconomic topics. The line-up of speakers were a veritable Who’s Who in their fields of expertise which included PIDS President Dr. Intal, Social Weather Station President Dr. Mahar Mangahas, University of the Philippines (UP) School of Economics professor and former National Economic

and Development Authority (NEDA) Director-General, Prof. Solita Monsod, Monetary Board-Bangko Sentral ng Pilipinas Members Dr. Cayetano Paderanga, Jr. and Dr. Vicente Valdepeñas, Jr., UP School of Economics Professors Dr. Benjamin Diokno and Dr. Edita Tan, Westmont Bank President Atty. Edgardo Espiritu, UP President Dr. Emil Javier, former Central Bank Governor and former Minister of Education Dr. Jaime Laya, University of Asia and the Pacific President and former Department of Fi-

nance Secretary and former NEDA Director-General Dr. Jesus Estanislao, Quezon City Administrator Dr. Manuel Alba, former PIDS Board of Trustees member and renowned social scientist Dr. Gelia Castillo, Miriam College President Dr. Patricia Licuanan, and NEDA Deputy Director-General Atty. Raphael P.M. Lotilla, representing NEDA Director-General and present Chairman of the PIDS Board Dr. Cielito Habito.

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September - October 1997

PIDS is 20... from Page 19

3 Academicians all. all (From left) Prof. Solita

Monsod (University of the Philippines' School of Economics), Dr. Gelia Castillo (formerly, University of the Philippines at Los Baños), Dr. Jesus Estanislao (University of Asia and the Pacific), and Dr. Emil Javier (University of the Philippines).

6 Behind the success of any endeavor is a group of trustworthy individuals. The PIDS staff pose with the honorees and guests during the cocktails held at the Traders Hotel Manila. Seated from left are Dr. Cesar Virata, Dr. Encarnación, Dr. Sicat, Dr. Intal, Dr. Kintanar, Dr. Manuel Alba (Quezon City Administrator), Dr. Loretta Makasiar Sicat, and Dr. Pante, Jr.

6 Dr. Cesar Virata (former Prime Minister of the Philippines) delivers an exalting speech for his colleagues Dr. Sicat and Dr. Encarnación while Dr. Felipe Medalla (UP School of Economics), Dr. Filologo Pante, Jr. (Asian Development Bank), Dr. Agustin Kintanar (UP School of Economics) and Dr. Intal listen.

Representatives from different sectors attended the symposium where much insights and exchange of ideas were raised during the open discussion.

The third day of the symposium culminated in a testimonial program to honor Dr. Sicat and Dr. Encarnación.

UP School of Economics Dean Dr. Felipe Medalla lengthily extolled his former professor, Dr. Encarnación, who jokingly reminded his former student of the importance of brevity. Another colleague in the UP School of Economics, former professor Dr. Agustin Kintanar likewise gave tribute to Dr. Encarnación, a dear friend.

Afterwards, Dr. Filologo Pante, Jr., former PIDS President and NEDA

DEVELOPMENT RESEARCH NEWS

Deputy Director-General who served under then NEDA Director-General Dr. Sicat, paid homage to Dr. Sicat. Dr. Pante, who is currently connected with the Asian Development Bank, recalled the times under his former mentor from whom he learned invaluable lessons in leadership and received guidance in accomplishing his tasks at the PIDS and NEDA. Dr. Cesar Virata, former Prime Minister and Minister of Finance, then paid tribute to both Dr. Encarnación and Dr. Sicat. He related how he was able to convince Dr. Sicat to join the Cabinet in the early 1970s and make a big difference in the country’s well-being by resolving the challenges facing its economy.

Dr. Sicat and Dr. Encarnación later gave their responses and expressed their gratitude to their friends and colleagues. [Excerpts of their responses are shown on page 16.]

The testimonial program was graced by Mr. Francisco Aseniero, President of the APO Production Unit and one of the country’s finest tenors, who regaled the audience with songs coming from famous operas like La Bohème with the accompanying music from the stringed instruments of the Moonlight Quartet.

September 26, the actual founding day of the Institute, was a special day for the staff. Starting with an ecumenical thanksgiving prayer and a celebration lunch, the day was capped by the presentation of loyalty awards to employees who rendered 15 and 10 years of service to the Institute. The awardees’ formal, hilarious and at times tearful speeches brought the house down and added much to the camaraderie and strong bond among the entire PIDS staff.

The week-long celebration ended on a happy and relaxing note with an out-of-town trip at the beach for the staff and their families. The PIDS Family Day on Saturday, September 27,

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September - October 1997

5 The Institute recognizes the loyal services of eight PIDS staff and presents them with plaques and awards. The awardees are (starting from 3rd left) Alejandro Manalili, Delia Romero, Herminio Isip, Jennifer Liguton, Josef Yap, Valentina Tabayoyong, Rossana Cleofas, and Jane Alcantara. Flanking them are Dr. Intal, Dr. Mario Lamberte (Vice-President), Mr. Feranil, Dr. Benjamin Diokno (PIDS Board of Trustees member) and Ms. Andrea Agcaoili (Director for Operations and Finance).

6 Mailene Victoria and Anselmo Cesar lead the white team to victory in the PIDS Family

Day cum sportsfest held at Caylabne Bay Resort in Cavite. Team members include (from left) Faith Cacnio, Doris Remolador, Laila Garcia, Corazon Desuasido, Emma Cinco, Edwin Guillartes and Emiliano Isip.

started early, with breakfast and “videoke” singing. Then, a sportsfest was held among six teams competing for, among others, a prize for Best Cheer Group. The other hotly-contested games were in sack racing, tug o’ war, medley relay, swimming and candle lighting around the lechon de leche. The children of the PIDS staff were kept equally busy as they en-

gaged in various painting/art contests for different age categories.

With the 21st century nearing, the PIDS embarks on its 21st year of dedicated service to the country and people. The management and staff of the Institute remain as committed as ever in rendering service through research for the next 20 years. DRN

DEVELOPMENT RESEARCH NEWS

Integrating Culture... from Page 5

rica and recently in Cambodia. The WB has designed and implemented loan programs intended to bring back the insurgents into civilian life. This process has been done in Uganda which entailed a large WB loan. The WB also initiated the creation of entirely new communities where insurgents were trained on civilian skills, including a reorientation of attitudes and mindset. It is not easy to transform a person trained to kill into a peaceful civilian. Thus, adjustments have to be designed carefully allowing for the cultural background of those concerned.

Similar programs as those applied to Uganda were also employed in Cambodia. However, there were problems encountered such as: v the existence of "ghost" teachers and soldiers; v low compensation; and v a number of demobilized insurgents going back to being insurgents.

Creating new communities is not entirely difficult but the bigger problem lies on how the new community can assimilate into existing communities. Reconciliation thus requires a great deal of cultural design to make it work.

Of course, the problem in the ARMM and the CAR is not as bad as in Cambodia and Uganda. Still, we are faced with the issue of bringing the Moro Islamic Liberation Front (MILF), the Moro National Liberation Front (MNLF), the Christians and the Muslims to work and live together in the

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same community. Many Christians are trained to think that “A good Muslim is a dead Muslim.” Perhaps, this may also be how the Muslims think of Christians.

Culture as an instrument for accord The starting point in reconciliation is culture and understanding.

There is a common denominator among cultures such as music and performances. The differences though can also be great. For instance, the UP Conservatory of Music researchers have gone around to study the music of different minorities. They came up with the result that some minorities sing in half notes that cannot be reduced to what we learned as the standards. A first step in understanding is for Christians to realize these differences. Culture is the first and logical bridge in understanding and reconciliation.

How this is done has to be studied. In Indonesia, they have tried to use culture to develop values and awareness of economic development. Another suggestion is for songs to be composed to inculcate love of work, entrepreneurship, and industry, among others. Conceptually, it will work in the same way that we have been subconsciously influenced by the song “Planting rice is never fun.” It becomes ingrained in the minds of children that planting rice is never fun; thus, when they grow up, they do not work in the fields but instead take up law, accounting, and others. One must, however, approach this suggestion with caution as there can be a thin line between government propaganda and some cultural awareness schemes.

The response to the profit motive also needs to be studied further. There has to be a consensus among groups

September - October 1997

on how to move toward the achievement of economic growth. It is easier to draw consensus among business and economic people. It is not the same in arts and culture. In designing a program for economic development, therefore, we should consider cultural differences and sensitivities.

Setting priorities Finally, at the National Commission for Culture and Arts (NCCA), we are involved in many activities. But because there could only be so much resources, we also engage in setting priorities among our activities. Priority setting is necessary even in arts. If we are to be world class, we should devote resources in an area where we can be competitive. Thus, in terms of designing a program for economic development, we must not only take into account cultural differences and sensitivities but must also make the necessary adjustments to move forward.

These are the interfaces that we are trying to address at the NCCA. And we provide grants in culture and development intended to attract economists, among other groups, to do research on this area. DRN

Gerardo P. Sicat... from Page 14

1958. Scholarship grants by the Rockefeller and Fulbright Foundations helped him earn his Ph.D in Economics in 1963 at the Massachusetts Institute of Technology (M.I.T.) in Cambridge, Massachusetts, USA. His early professional career started at the U.P. as assistant profes-

DEVELOPMENT RESEARCH NEWS

Economic Liberalization... from Page 13

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mission mechanisms? Credit?

Money supply?

In this mechanism, what is the role of banks and the banking system?

main on a high growth path, the return incentive may have to be stated in a slightly different way6 and in a means of achieving that may be different.7 Let me end by listing a few questions which I feel to be the minimum agenda for research in the new environment. We need answers to these as fast as we can in order to respond to the changing needs of economic management. There are, no doubt, additional questions that you who are just as interested as I am in these topics can think of. At any rate, I propose them to start some serious effort at looking for basic answers.

What are the monetary trans-

———————— 6 For example, through differential taxation between consumption and saving.

In the same way, inducements for domestic and foreign direct investments may take the form of higher infrastructure and efficient support services.

7

sor of economics and subsequently as program director of the UP-Wisconsin Program in Development Economics.

He rose from the ranks to become Professor of Economics in 1968 where his writings on industrial policy studies caught national attention.

Dr. Sicat is married to Dr. Loretta Makasiar Sicat whose educational credentials match his. After living with their five children in Washington, D.C.

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Vol. XV No. 5

September - October 1997

What should be the objectives of macroeconomic management in general and monetary policy in particular? These have to be classified into ultimate, intermediate and operational objectives.

Editorial Board

What is meant by the concept of Central Bank’s independence? Is it a useful concept? If so, how should it be implemented? What is the role of internal policy coordination?

Mr. Mario C. Feranil Acting Vice-President and Director for Project Services and Development

What about international agreements on policy coordination and cooperation? Are multilateral central bank agreements useful? What should they contain?

On this note, I am sure that you will take part in the research and discussion that will need to be carried out in these important areas. I am also sure that you will be enthusiastic partners in the search for a framework for economic management in the emerging world environment. DRN

for 13 years, Dr. Sicat will retire on November 1, 1997 from the World Bank. He intends to come back to the Philippines and continue working on development issues and to enjoy life much more. After all, what more can one wish for? All five children are now professionals except for the youngest who is still in his second year of university study. He and Mrs. Sicat are also blessed with five grandchildren.

Dr. Ponciano S. Intal, Jr. President Dr. Mario B. Lamberte Vice-President (on leave)

Ms. Jennifer P.T. Liguton Director for Research Information Ms. Andrea S. Agcaoili Director for Operations and Finance Atty. Roque A. Sorioso Legal Consultant

Staff Jennifer P.T. Liguton Editor-in-Chief Barbara B. Fabian Issue Editor Corazon P. Desuasido, Genna J. Estrabon, Edwin S. Martin and Liza P. Sonico Contributing Editors Valentina V. Tolentino and Rossana P. Cleofas Exchange Delia S.Romero, Galicano A. Godes, Necita Z. Aquino, Lilet L. Lamayo and Federico D. Ulzame Circulation and Subscription Jane C. Alcantara Lay-out and Design

And who knows, he might find more time to document his rich experiences and write down his insights on a wide spectrum of development issues for the benefit of the young generation of the next millennium. DRN

DEVELOPMENT RESEARCH NEWS

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Editor's Notes...

Economic Resurgence...

from Page 1

from Page 9

tively diverse range of topics—appear in this issue, it should be noted that a special volume of the PIDS Journal of Philippine Development for 1997 containing all the papers, highlights of the various module discussions, testimonial speeches and responses made during the three-day symposium is in the works and is expected to come off the press towards the end of next year.

change is warranted in order that the Philippine agriculture sector can meet the challenges of the fast changing domestic, international and regional economic environments.

Also included in this DRN issue are the profiles and responses during the testimonial ceremony of the symposium's two honorees. Reading through them, one can see why they are indeed being honored.

This issue likewise gives a glimpse of what the PIDS is all about, especially some of its major outputs and contributions throughout the two decades of doing policy research. And while it is not for us to lay claim on the impact that they have had on the national economy, we would like to believe that in some small way, a number of them had indeed made a difference.

Finally, an institution’s greatest asset is its human resource. For its 20th anniversary, the Institute paid tribute to the men and women in its staff through various activities. In this issue, we take you to a short journey of some of the activities wherein the PIDS personnel were the central participants.

Dr. Sicat's Response... from Page 16

This crisis is likely to remain for a while.

The edge that must be kept is to assure that the macroeconomic fundamentals are kept sound and the financial system is kept disciplined but essentially liquid so as to allow for growth. Another requisite is to continue the economic liberalization which has been on course. If we manage these key areas, the country will sustain the growth that it wants and progress will be achieved.

DRN

Conclusion There are other institutional challenges entailed in sustaining the country’s economic resurgence at an even higher and more robust growth rate in the future. One of them is the strengthening of the country’s R&D capacity. This may call for, among oth-

José Encarnación... from Page 15

Among the many distinctions that he had won include: Phi Kappa Phi Honor Society membership in 1955, Ten Outstanding Young Men award in 1963 by the Junior Chamber of the Philippines, Distinguished Scholar award in 1968 by the University of the Philippines, Miguel Cuaderno Chair in Political Economy granted in 1969-1994 by the University of the Philippines, Outstanding Fulbright award in 1988 by the Philippine Fulbright Scholars Association and the National Scientist title in 1987 by the Republic of the Philippines.

His list of papers and publications is simply too long to enumerate in this brief write-up.

Born in Manila on November 17, 1928, he grew up in the then idyllic pre-war capital. Dr. Encarnación is married to Patricia Kearney Encarnación and has four children: Paul, John, Mark and Riza. DRN

September - October 1997

ers, joint public-private ownership and financing of industry-linked research institutions, and better incentives to scientists, researchers and technologists. There may also be a need to reorient the bureaucracy and the judiciary toward greater outwardness and effective facilitation, especially in the light of suggestions for commitments under collective actions in the APEC. A more facilitative bureaucracy would call for a greater emphasis on timebased processing for operational targets, better knowledge of other countries and their practices, and greater concern for reducing the costs of transactions of doing business with the government. DRN DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights the findings and recommendations of PIDS research projects and important policy issues discussed during PIDS seminars.

PIDS is a nonstock, nonprofit government research institution engaged in long-term, policyoriented research. This publication is part of the Institute's program to disseminate information to promote the use of research findings.

The views and opinions expressed here are those of the authors and do not necessarily reflect those of the Institute. Inquiries regarding any of the studies contained in this publication, or any of the PIDS papers, as well as suggestions or comments are welcome. Please address all correspondence and inquiries to: Research Information Staff Philippine Institute for Development Studies Room 304, NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, 1229 Makati City, Philippines Telephone numbers 892-4059 and 893-5705 Telefax numbers (632) 893-9589 and 816-1091 E-mail address: publications@pidsnet.pids.gov.ph Re-entered as second class mail at the Makati Central Post Office on April 27, 1987. Annual subscription rates are: P150.00 for local subscribers; and US$20.00 for foreign subscribers.

All rates are inclusive of mailing and handling costs. Prices may change without prior notice.

DEVELOPMENT RESEARCH NEWS

Addenda

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Figure 3: FAO State of Food and Agriculture (SOFA) 1993, diskette form; FAO Trade

September - October 1997

and Economic Studies, Federal Reserve Bank of San Francisco, 1996.

Commerce Yearbook 1995.

References Dr. Intal’s paper: Figure 1: National Statistical Coordination Board (NSCB), National Income Accounts, vari-

Hirsh, Michael and Bill Powell. “Hunting Tigers.”

Dr. Paderanga’s paper: Calvo, Guillermo. “Varieties of Capital Market

Krugman, Paul. “Is Free Trade Passe?” Jour-

Crises.” Unpublished manuscript. Cen-

nal of Economic Perspectives 1, No. 2

ter for International Economics, Univer-

(Fall 1987): 131-44.

sity of Maryland at College Park, 1995.

ous years; Bangko Sentral ng Pilipinas (BSP), Selected Philippine Economic Indicators, October and September 1997;

Sachs, Jeffrey D. “Economic Transition and the Economist. “One World?” October 18-24, 1997: 99-100.

IMF International Financial Statistics, 1994 and 1997.

Figure 2: World Bank, “STARS Retrieval System,’ in World Data 1995, CD-ROM.

Newsweek, September 1997.

Exchange-Rate Regime.” American Economic Review 86, No. 2, (May 1996): 147-52.

Frankel, Jeffrey and Sergio Schmukler. “Crisis, Contagion and Country Funds: Ef-

Tan, Jose Antonio III and Cayetano Paderanga,

fects on East Asia and Latin America.”

Jr. “A Note on Philippine Financial Inte-

Pacific Basin Working Paper No. PB96-

gration.” Philippine Review of Econom-

04. Center for Pacific Basin Monetary

ics and Business, forthcoming.