The real, seldom-discussed reason for our underdevelopment
A RECENT column (“Reflections on PH’s industrial decline”) in another newspaper by a contributor, engineer Pete Maniego, pointed to one main reason, very seldom pointed out, for our underdevelopment, and hence, widespread poverty. Maniego wrote:
“My first job was with Stanford Associates Inc., a pioneer of Philippine manufacturing. Stanford [in the 1970s] was the first semiconductor company in Southeast Asia, producing and exporting electronic components when most of the region had no such capability.
Filipino engineers met international standards long before ‘high-tech’ became a buzzword. At its peak, Stanford and its affiliates employed over 7,000 people.
“Yet despite its first mover advantage, Stanford did not survive.
“It failed not for lack of talent, but because industrial fundamentals steadily turned against manufacturing. Power became expensive and unreliable. Export support was weak. Supplier ecosystems never fully formed. Above all, industrial policy lacked focus. As Taiwan, Singapore and Malaysia relentlessly strengthened infrastructure and export discipline, the Philippines stood still. Unable to move up the value chain, the company eventually closed — taking with it not just jobs, but accumulated skills and technological learning.
“The usual explanations for our poverty — corruption, politics, missed opportunities — are real but incomplete. What we truly lost was industrial momentum. Manufacturing depends on ecosystems: reliable power, skilled workers, supplier networks, export discipline, and policy continuity over decades. We once had these. But we failed to protect them. As factories closed, skills atrophied and investment declined.”
Maniego didn’t expound on why our “industrial policy lacked focus.” The reality is that by the mid-1980s, we really didn’t have any “industrial policy” in the way Taiwan, Singapore and Malaysia did, which involved state intervention to steer our capitalists towards an export-oriented industrialization, the building of basic industries, and its accompanying infrastructure.
Rivalry
Indeed, in the Marcos dictatorship’s technocracy, one rivalry shaped the trajectory of the Philippine economy more profoundly than any cabinet reshuffle or IMF negotiation. It was the quiet but ferocious clash between Cesar Virata, the emblem of financial orthodoxy, and late Roberto Ongpin, the fierce champion of state-led industrialization. Their dispute was a contest over two visions of what the Philippines could, or dared, become.
Virata, finance minister and later prime minister, was the consummate “rational technocrat,” steeped in the doctrines of the IMF and the World Bank. His core belief was unyielding: macroeconomic stability is the prerequisite for development. Government must not gamble with industrial ambitions; it must live within its means, protect creditworthiness, and avoid “distortions” that interfere with market signals. To Virata, industrial policy — a government picking winners, giving subsidies, protecting industries from competition — was a risky and expensive temptation. He saw it as a recipe for corruption, inefficiency and fiscal disaster.
Virata’s ideology was that of the United States’s neoliberal ideologues, expounded by such economists as Friedrich von Hayek (The Road to Serfdom) and Milton Friedman (The Constitution of Liberty). It was actually nothing but classical free-market capitalism, and the World Bank and the IMF imposed it on our economy as well as those of other Latin American nations, such as Chile and Argentina which, like the Philippines, became dictatorships, to implement the neoliberal agenda, which also came to be known as the “Washington Consensus.”
Ongpin stood on the opposite end of this philosophical spectrum. Impatient with the Philippines’ halfhearted attempts at development, Ongpin believed that no country ever industrialized through laissez-faire. He looked at South Korea, Taiwan, Singapore — states that deliberately nurtured steel, shipbuilding, petrochemicals, electronics — and saw a model the Philippines should have adopted before it was too late. As Minister of Trade and Industry, Ongpin pushed for bold industrial roadmaps, targeted investment incentives, and the creation of “national champions” — Filipino conglomerates strong enough to compete globally. He wanted sectoral plans for petrochemicals, textiles, automotive and electronics, and he insisted the state take the lead in financing and coordinating them. Without such “big push” interventions, he warned, the Philippines would stay trapped in low-value export processing.
However, Ongpin’s industrial policy required heavy state financing, long-term protection, and deep restructuring of the domestic economy. Virata saw these as dangerous luxuries in a country drowning in debt, and a violation of his free-market capitalism ideology.
While Ongpin rallied agencies like the Board of Investments behind his industrialization blueprint, Virata used the finance ministry to slow, dilute, or block the measures he considered fiscally irresponsible. Ongpin wanted to “force the future.” Virata wanted to survive the present.
Battlegrounds
The battlegrounds were real industries — not abstract theories. Ongpin’s flagship projects were monumental: the Bataan Petrochemical Complex, the Integrated Steel Mill, and sectoral rationalization plans for textiles and automotive manufacturing. These were the backbone of a modern industrial economy. Ongpin argued that without petrochemicals, there would be no plastics industry; without steel, no machinery; without rationalized textiles, no competitive exports.
While his image was that of a no-nonsense straight shooter, Virata was a Machiavellian who used the prestigious Business Day newspaper, the only publication during martial law which was not owned by a Marcos crony, to pound continuously against Ongpin’s programs, called the Ten Major Industrial Projects.
I was a witness as I was a reporter in the newspaper from 1981 to 1986, when Business Day was headed by Raul Locsin, which we young, naive reporters saw as the epitome of economic journalism excellence. Locsin declared in one meeting, “We will not stop until that Ongpin’s projects are ended.” The reporter covering Ongpin of course relentlessly followed orders, so much so that the irritated industry minister in one instance, after several glasses of his favorite brandy, challenged our reporter to a fist fight.
I would only learn later how Virata could control Locsin: He ordered the Philippine National Bank to extend to Businesss Day a huge P40-million loan to buy state-of-the-art printing presses, which gave the paper a huge competitive advantage in the industry.
Virata pushed back on every front. He believed the country could not afford to pour billions into capital-intensive ventures burdened by technological risk. International lenders, already skeptical of the Philippines’ rising debt and widening current account deficits, echoed his concerns. Protected industries, Virata argued, would only breed inefficiency, requiring endless subsidies the state did not have. In meeting after meeting, he insisted that the Philippines follow the conditions of the World Bank’s structural adjustment loans: lower tariffs, reduce protection, liberalize imports, and avoid grand industrial projects that required huge amounts of borrowing.
Marcos
In the 1970s, Marcos leaned toward Ongpin’s bold industrialization agenda. Flush with petrodollar loans flooding the world’s financial markets, the Philippines briefly imagined itself rising into the ranks of middle-income industrial nations. Ongpin had Marcos’ ear; the BOI issued ambitious industry plans; foreign lenders backed marquee projects.
But the global economy changed. When US interest rates soared in the early 1980s and the Philippines’ debt crisis exploded in 1984, everything turned upside down. The IMF and World Bank arrived with their conditions to convince banks to restructure their loans: austerity, trade liberalization, deregulation. And in this changed world, Virata — the cautious, bank-friendly stabilizer — became the dominant figure in economic policymaking. Ongpin was reduced to the role of arm-twisting the Chinese to hand over their dollars for proper distribution to needed industries. Marcos, weakened by illness and political crisis, clung to stability. Ongpin’s industrial dreams were shelved, delayed, or abandoned. The petrochemical and steel dreams of Bataan never rose. The Philippines entered the 1980s without the industrial backbone its neighbors were building.
What is truly striking is the long-term impact of Marcos acceding to Virata’s neoliberal fantasy that led to our underdevelopment, and widespread poverty. As Korea built Pohang Iron and Steel Company and Taiwan built China Steel, the Philippines abandoned its own steel and petrochemical ambitions. As Malaysia developed industrial corridors, and Thailand nurtured an automotive cluster, the Philippines retreated into stabilization mode, fearful of large industrial commitments. Taiwan recruited engineers from our chip assembly firms that closed to build its Taiwan Semiconductor Manufacturing Co. now the world’s biggest firm in that strategic industry. Malaysia and Singapore would become the world’s top exporters of textiles garments.
By the time the debt crisis of the late 1980s passed, the window for heavy industrialization had closed. Ongpin’s blueprint was never revived – to this day.
The Marcos dictatorship was a moment when the Philippines, standing at a crossroads, quietly chose its path: a cautious, lender-pleasing, survival-oriented development trajectory (followed also by many Latin American countries) over the bold, state-led industrial push that what would be later called the East Asian Economic Miracle. The cost of that choice — missed opportunities, a hollowed industrial base, decades of dependence on low-value exports — continues to define the Philippine economy today.
We still haven’t learned this most important lesson of the Marcos era, and the notion of “industrial policy” directed by the state is still anathema in academic and government circles, even as China’s spectacular growth was precisely due to this kind of economic management, demonstrated recently when it undertook its electric vehicle program that had American and European carmakers biting the dust. Virata remains the Filipino economists’ guru, with the once anti-Marcos University of the Philippines naming its business school the Virata School of Business Administration, and the economists and pretend-economists at the Foundation of Economic Freedom, worshipping him as a god.
Ask our top government official economists what our present industrial policy is, and the response you will get: ”Duh. POGOs? BPOs?”
(Sources for this column are listed in my website rigobertotiglao.com)
Facebook: Rigoberto Tiglao
X: @bobitiglao
My website: www.rigobertotiglao.com
The post The real, seldom-discussed reason for our underdevelopment first appeared on Rigoberto Tiglao.
The real, seldom-discussed reason for our underdevelopment
Source: Breaking News PH
No comments: