Failure of ‘good’ trade intentions

From the perspectives of most Filipino technocrats, the progressive elimination of distortive protectionist mechanisms through unilateral reductions of tariff and non-tariff barriers will lead to the adoption of world market prices in the domestic economy (Clarete, Reference Clarete1995, Reference Clarete2005; Habito and Cororaton, Reference Habito and Cororaton2000; Wignajara et al., Reference Wignajara, Lazaro, de Guzman, Kawai and Wignajara2011). Domestic firms will be subject to a highly competitive market environment being dominated by industrialized economies which will compel them to develop efficiency-enhancing strategies in order to withstand external competition and remain relevant in their respective industries. From the trade policymakers' standpoint, the main motive for transforming the country's highly protectionist trade regime into a more liberalized one is to achieve high levels of efficiency that make Filipino consumers better off.

Hence, the Philippine government initiated a three-phase trade reform schedule designed to stimulate performance as well as to enhance the competitiveness of its lethargic economy by maintaining a low and nearly uniform tariff rate. In Phase 1 (1981 and1985), the Tariff Reform Programme (TRP) was introduced to narrow down the tariff band from 100‒0% to 50‒10% (Clarete, Reference Clarete2005). This was accompanied by the espousal of the Import Liberalization Programme (ILP) intended to abolish all non-tariff import mechanisms, but was temporarily suspended in the midst of mounting political pressures in the country toward the end of the Marcos regime (Habito and Cororaton, Reference Habito and Cororaton2000; Cororaton, Reference Cororaton2004; Clarete, Reference Clarete2005). Nevertheless, Phase 2 was launched in 1991 with the implementation of the Executive Order 470, which further narrowed the range of the tariff structure by clustering the commodities within a tariff scale of 10‒30% (Clarete, Reference Clarete2005). Finally, Phase 3 entered into force in 1994 with the introduction of a four-tier tariff rate classification: 3% for ‘non-endemic' raw materials and capital equipment; 10% for ‘endemic’ raw materials and capital equipment; 20% for intermediate goods; and 30% for finished products (Clarete, Reference Clarete2005).

To predict the effects of having freer trade on the Philippine economy after its WTO accession, ex-ante simulations using a 50-sector computable general equilibrium (CGE) were conducted. Initial assessments of tariff restructurings showed a 2.3% cumulative impact on real GDP (Cororaton, Reference Cororaton2004; Clarete, Reference Clarete2005). Statistical findings also suggested that although there would be a relatively small reduction in the employment level, specifically in service and agricultural sectors, the number of jobs that would be created in the more competitive manufacturing sector would more than offset this loss (Cororaton, Reference Cororaton2004; Clarete, Reference Clarete2005; Aldaba, Reference Aldaba2012). The predicted increase in real GDP would lead to more efficient income distributions and, therefore, would make the poorest quintile income groups the biggest gainers by receiving the largest share of GDP growth (Habito and Cororaton, Reference Habito and Cororaton2000; Clarete, Reference Clarete2005). In short, ex-ante results would verify the optimistic claims made by the chief proponents of WTO membership and the pursuit of trade liberalization in general.

Critics, however, expressed their scepticism toward these findings by emphasizing some of the serious threats that it could pose to the economy. They argued that domestic producers do not possess the required minimum capacity to compete with industries from the advanced economies (Bello, Reference Bello2004, Reference Bello2005; Kawai and Wignaraja, Reference Kawai and Wignaraja2010; Wignaraja et al., Reference Wignajara, Lazaro, de Guzman, Kawai and Wignajara2011). Although free trade creates some winners, however, their numbers are smaller than those that are forced out of their businesses. Displaced workers then face significant adjustment costs as they search for new job opportunities and attempt to develop the required skills for these new jobs (Malaluan, Reference Malaluan2011; IBON, 2013). For instance, the abolishment of protectionist measures in the manufacturing sector force local firms to shut down operations, thereby leading to higher unemployment rates that aggravate poverty conditions (Kawai and Wignaraja, Reference Kawai and Wignaraja2010; Wignaraja et al., Reference Wignajara, Lazaro, de Guzman, Kawai and Wignajara2011). Similarly, intensified competition in the agricultural sector drives down the prices of local produce in domestic markets and results in higher incidences of poverty in rural areas due to reductions in income (Mangabat, Reference Mangabat1999; CETIM, 2000; Malaluan, Reference Malaluan2011).

These concerns proved to be legitimate given the significant discrepancies between forecasted and actual outcomes from implementing low, nearly uniform tariff rates upon the country's accession to the WTO. Contrary to the generally positive results that were derived from the ex-ante analyses of trade liberalization, ex-post assessments showed only a fractional positive adjustment (Cororaton, Reference Cororaton2004, Reference Cororaton, Cockburn, Decaluwe and Robichaud2008; Clarete, Reference Clarete2005). With respect to merchandise trade, results obtained from the ex-post assessments based on secondary data differed from those that came out of ex-ante CGE analyses. For most of the period covered in the ex-ante CGE analyses, imports exceeded exports, indicating a trade deficit as a result of trade liberalization (Cororaton, Reference Cororaton2004, Reference Cororaton, Cockburn, Decaluwe and Robichaud2008; Clarete, Reference Clarete2005). In addition, rather than showing fairly diverse exports baskets from a huge number of industries, ex-post assessments revealed a concentration of exports in very few industries (Clarete, Reference Clarete2005; Usui, Reference Usui2011; Aldaba, Reference Aldaba2012, Reference Aldaba2013).

Failure of ‘good’ trade theories

First, in terms of production, ex-post assessments revealed that the manufacturing industry would be a part of the problem rather than a solution to job reductions in agriculture and services contrary to initial reports obtained from ex-ante simulations (Cororaton et al., 2005; Clarete, Reference Clarete2005; Aldaba, Reference Aldaba2012, Reference Aldaba2013). Theoretically, trade liberalization would shift the resources from industries that are rendered uncompetitive by the lowering of import restrictions to those that would survive the increased market competition. In the case of the Philippines, however, the shares of various manufacturing sectors to total manufacturing production hardly changed (Habito and Cororaton, Reference Habito and Cororaton2000; David et al., Reference David, Intal and Balisacan2007; Aldaba, Reference Aldaba2012). In other words, the configuration of the merchandise sector remained largely stationary even during the period of aggressive tariff reduction. The evolution of the country's production space, therefore, would suggest that although its exports basket may become more sophisticated, nonetheless industrial diversification had stagnated over the years (Clarete, Reference Clarete2005; Aldaba, Reference Aldaba2012, Reference Aldaba2013).

Second, with respect to employment, ex-post analyses showed the service sector generating jobs at an annual rate of about 4.5%, thus making it the biggest source of labour in the country (Clarete, Reference Clarete2005; Cororaton et al., Reference Cororaton, Cockburn and Corong2006; Serrano, Reference Serrano2008). In fact, since 1988, the service sector has created more jobs for the Filipinos compared to the agriculture and manufacturing sectors. For instance, between 1995 and 2010, an estimated 10.3 million new jobs have been created (ILO, 2014). Out of this total, 46.9% came from services, 37.4% from agriculture, and only 15.7% from industry (ILO, 2014). Although both the agriculture and industry sectors continue to generate jobs, they usually fall short of the required levels, particularly in the rural areas (ADB, 2007; David et al., Reference David, Intal and Balisacan2007). Based on the percentage of Filipinos joining the labour force, an estimated one million jobs per year has to be created to allow improvements in household incomes, greater efficiency in domestic markets, and, ultimately, reduction in poverty levels (ILO, 2014).

Third, with regard to development, the population's per capita income in general has remained relatively constant even years after implementing its tariff reform programs (ADB, 2007; UNDP, 2012). Put differently, the average Filipino's standard of living has remained roughly the same since 1995. Although per capita income slightly dropped from $1,173 in 1980 to $1,165 in 2001, the proponents of trade liberalization argue that this does not suggest that more liberalized trade would make the country either better or worse off (Clarete, Reference Clarete2005; Cororaton et al., Reference Cororaton, Cockburn and Corong2006; ADB, 2007). Indeed, per capita income could have substantially diminished had tariff reforms not been pursued and had the Philippines continued to be a non-WTO member. But for the staunch critics of neoliberal policies, per capita income could have significantly improved had trade protection been maintained or perhaps even intensified (Bello, Reference Bello2005; Malaluan, Reference Malaluan2011). Nevertheless, for the Filipino policymakers in favour of free trade, the positive trends being reflected by other development indicators, including life expectancy at birth and literacy rate, are attributable to its relatively open trade policies. For instance, Filipinos’ life expectancy has increased from 61.3 years in 1980 to 68.5 years in 2010 (UNDP, 2010). Similarly, the population's literacy rate has also improved as the percentage of illiterate Filipinos dropped from 12.21% in 1980 to 4.58% in 2010 (UNDP, 2010).

Finally, the mediocre performance of Philippine exports according to ex-post assessments could be substantively explained by the high transaction costs rather than the difficulties related to market access (WTO-TPR, 2005, 2012; ADB, 2007). More specifically, the country's inability to enhance its efficiency in mobilizing products from the production points to the markets has significantly contributed to the underperformance of the Philippine export industries. In other words, the problem was more logistical in nature given the lack of responsiveness on the part of the Filipino exporters to the changing demands of importers of the country's goods and merchandise. The Philippine experience has provided a clear illustration of how transaction costs could potentially weaken, if not reverse, the expected positive net effects of lowering trade protection rates on resource allocations. It showed reductions in import restrictions did not automatically result in the efficient redistrubution of resources to export-oriented industries considering the high levels of transaction costs involved (WTO-TPR, 2005, 2012; ADB, 2007).

The inability of various ex-ante and ex-post analyses to reasonably predict the impact of free trade on the Philippine economy have led the critics to claim that the government's decision to abandon its import substitution policies has further aggravated the poverty and inequality conditions due to significant loss of jobs (Bello, Reference Bello2004; Malaluan, Reference Malaluan2011; IBON, 2013). Thus, as far as the opponents of free trade policies are concerned, the Philippine experience proves that trade liberalization is not a straightforward solution to economic underdevelopment but only perpetuates structural poverty and institutionalized inequality in the country.

Failure of ‘good’ trade negotiations

The Philippines’ lack of a central agency responsible for the formulation and implementation of its free trade goals and objectives creates inefficiencies that constrain benefits, including: (i) turf mentality among government offices; (ii) limited capacity for trade research; (iii) blurring of authority delineations; and (iv) absence of suitable mechanisms for consultation and feedback (Pasadilla and Liao, Reference Pasadilla and Liao2005; Wignaraja et al., Reference Wignajara, Lazaro, de Guzman, Kawai and Wignajara2011).

First, representatives from various line agencies comprising the Tariff and Related Matters (TRM) Committee show symptoms of turf mentality that prevent the formulation of complete and cohesive cross-industry trade strategies (Pasadilla and Liao, Reference Pasadilla and Liao2005). A misplaced competitive spirit often dominates inter-agency dialogues which undermine efforts toward the facilitation of a more cooperative environment. The TRM members have developed a rather strange outlook that forces them to protect the industry that they are representing at all costs, regardless of its effect on other industries and the economy as a whole (Aldaba, Reference Aldaba2012, Reference Aldaba2013; Abad et al., Reference Abad, Gonzales, Rosellon and Yap2012). Rather than advancing the country's collective trade interests, they insist upon the protection of their respective sectors, which leads to sub-standard proposals and inferior outcomes. In other words, a better-equalized national position is traded over the narrowly defined sectoral motives. Accordingly, identifying priority industries has become highly politicized since all representatives demand preferential treatment for their own sectors.

Second, the absence of a clear-cut mandate and delineated lines of authority in formulating trade policies has ultimately resulted in misunderstandings and grave misuse of national resources (Pasadilla and Liao, Reference Pasadilla and Liao2005). For one, going beyond the committee's collegial nature in order to make and implement difficult decisions on highly contested issues can be very problematic (Abad et al., Reference Abad, Gonzales, Rosellon and Yap2012). In addition, unqualified members from different line agencies are sometimes being tapped to represent the country in bilateral trade negotiations due to resource constraints (Nye, Reference Nye2011). Given their lack of technical qualifications for negotiating and limited experience with the language and practice of international trade, they usually end up conceding to the agreements that are unfavourable to the country's economic well-being. This problem was highlighted during the JPEPA negotiation rounds in which the inexperienced Filipino negotiators agreed to the non-trade-related demands being solicited by their Japanese counterparts but were previously rejected by the veteran trade representatives (Pasadilla and Liao, Reference Pasadilla and Liao2005; van de Haar, 2011). Such practice inexorably places the Philippines at a disadvantaged position without them realizing the costs. This highly fragmented delineation of authority leads to loss of institutional memory, which further underlines the lack of fit between the system and the country's trade activities.

Third, aside from the problem of disjointed coordination, the Philippine government is also severely restricted by its limited resources, particularly for various trade researches (Pasadilla and Liao, Reference Pasadilla and Liao2005; Abad et al., Reference Abad, Gonzales, Rosellon and Yap2012). The lack of financial resources for enhancing the technical capacities of concerned agencies for conducting extensive studies on trade policies undermines efforts toward effective negotiations. The government agencies responsible for the formulation of trade policies lack the necessary skills and knowledge for understanding the complex dynamics of international trade negotiations. One of the more serious effects of this problem is the reliance of line agencies on the researches being funded by private-sector lobbyists that do not necessarily provide accurate findings and credible recommendations given their vested interest in these particular trade issues (Pasadilla and Liao, Reference Pasadilla and Liao2005; Abad et al., Reference Abad, Gonzales, Rosellon and Yap2012). The derisory treatment of numerous trade matters that need to be explored results in incomplete understanding of the ramifications of different agreements that the government is signing or has previously signed.

Fourth, the presence of strong top-down influence with respect to policy formulation enables lobbyists to exploit multiple power centres in various segments of the government (Pasadilla and Liao, Reference Pasadilla and Liao2005). The systematic involvement in the policy planning process is being overwhelmed by the clientelist method being adopted by the powerful industrialists that is designed to capture the votes of the Congress and other key figures in the executive branch (de Dios and Hutchcroft, Reference De Dios, Hutchcroft, Balisacan and Hill2003; Nye, Reference Nye2011). This type of political climate breeds disillusionment on the part of trade policymakers given the patron's wherewithal to reverse or thwart the decisions that have been scrupulously formulated by the committee at the stroke of a prominent official's pen. As such, patronage politics breaks the shield that is supposed to ‘immunize’ national trade strategies from unwarranted external pressures. Moreover, it causes sluggishness in the TRM mechanism considering how resolutions that have been fervently debated between inter-agency committees can easily be upended (Pasadilla and Liao, Reference Pasadilla and Liao2005). Government officials are usually having a hard time standing their ground when confronted by representatives from private sectors, given the former's self-acknowledged limitations in contrast to the latter's sense of entitlement.

Lastly, and perhaps the most disappointing of all, the Philippines’ trade sectors lack a significant level of awareness about the breadth and depth of the country's involvement in free trade (Pasadilla and Liao, Reference Pasadilla and Liao2005; Wignajara et al., Reference Wignajara, Lazaro, de Guzman, Kawai and Wignajara2011). Ironically, despite their vested interest, local industry players often do not have well-defined goals in relation to the concessions that they wish to gain from the Philippines’ various trading partners. The failure to properly set expectations with regard to the preferential access to foreign markets represents a missed opportunity on the part of Filipino industrialists to positively contribute to the development of effective trade policy strategies (Abad et al., Reference Abad, Gonzales, Rosellon and Yap2012; Aldaba, Reference Aldaba2012, Reference Aldaba2013). While this may be gradually changing, the Philippines’ trade orientation, however, remains largely defensive. Put differently, the government vis-à-vis the industrial players is more concerned about how to best safeguard the domestic interest rather than finding ways on how to more effectively exploit the foreign markets.

Improving the overall process of trade policymaking in the country, however, is far from being a panacea. For better or worse, the Philippines’ trade positions and strategies still rest in the hands of the elected officials since they are a function of the country's national priorities. The success in various trade negotiations, along with their actual impacts on the domestic economy, is contingent upon the general quality of the domestic polity and the choices that the government makes. Thus, while the institutionalization of trade policy mechanisms may indeed help, nonetheless much still depends on the head of state's overarching vision for the nation.

Limits of ‘patrimonial’ democratization

The decision of the American colonial regime to transplant its own brand of representative democracy into an economic arrangement dominated by the landed oligarchs has enabled the latter to seize control of the country's democratic institutions and procedures (Manacsa and Tan, Reference Manacsa and Tan2012; White III, 2015). In doing so, the United States set aside the policies which had the potential to transform the Philippine polity into a more level playing field. Consequently, the domestic political space was insulated from the revisionist agendas being espoused by various social factions. The government's capacity for independent actions, therefore, was curtailed by the oligarchic groups attempting to amass public power to protect their vested interests (Villacorta, Reference Villacorta1994; McCoy, Reference McCoy1994; Hutchcroft, Reference Hutchcroft1998). In addition, the ‘re-democratization’ process that took place immediately after the end of the Martial Law simply led to the reinstallation of a pre-Marcos political order (Quimpo, Reference Quimpo2009, 2015; Manacsa and Tan, Reference Manacsa and Tan2012; Hodder, Reference Hodder2014). The upshot is the reproduction of elite authority that has further subjugated the Philippine political economy – the sine qua non for the country's highly asymmetrical economic development. Despite the introduction of various democratic institutional reforms, the underlying oligarchic force is still able to permeate and saturate the Philippine government vis-à-vis bureaucracy.

The question therefore is: Why and how does oligarchic power overcome state power? Throughout Philippine history, a few very influential families owning huge corporations and vast lands have ruled over the government. The US strategy for consolidating their power throughout the archipelago enabled the elites to further expand their economic interests via political appointments (Krinks, Reference Krinks2002; Manacsa and Tan, Reference Manacsa and Tan2012). In the process, these families exploited the country's public goods and resources, which continue to fuel institutionalized corruption. Several infamous terms have been used to describe the country's pitiful politico-economic condition, such as ‘anarchy of families’, ‘booty capitalism’, ‘non-substantive democracy’, ‘ersazt capitalism’, and ‘cacique democracy’ (McCoy, Reference McCoy1994; Anderson, Reference Anderson1998; Hutchcroft, Reference Hutchcroft1998; White III, Reference White2015). The conspicuous incapacity of the government to ‘immunize’ itself from oligarchic manipulation has significantly helped in maintaining and exacerbating the country's disproportionate development.

When the United States’ colonial regime decided to erect political agencies to facilitate electoral contestations in the Philippines, the elite clans consolidated their powers to give birth to a national oligarchy instead of a national government (Anderson, Reference Anderson1998). Such a system bred what the Filipinos now call a trapos, a pejorative term that is being used to describe traditional ‘dirty’ politicians (Magno, Reference Magno and Holmes1995; Manacsa, Reference Manacsa1999; Eaton, Reference Eaton2003). These trapos are deemed to be responsible for the ‘reverse accountability’ in Philippine politics by holding the individual voters accountable for electing their respective patrons into power in exchange for favours that are either provided in the past or being promised to be delivered once elected (Hutchcroft, Reference Hutchcroft1998; Quimpo, Reference Quimpo2009; Hodder, Reference Hodder2014). In this scenario, the peasants and the labourers’ interests are being co-opted by the landlords’ personal preferences. Thus, it may be inferred that the voters’ support for their patrons is largely a function of the latter's ‘own interests, rewards for loyalty, and the fear of vengeance’ (Linz, Reference Linz, Greenstein and Polsby1975: 260).

Even the implementations of disastrous economic policies being endorsed by some top government officials and policymakers have eventually been manipulated to protect the interests of the Filipino oligarchs. To this extent, the Philippines’ uneven development is not simply a matter of constantly choosing the wrong policies to implement, but rather the result of conscious efforts by the rent-seekers to maintain them, despite their damaging effects on the rest of the country. A perfect example was the implementation of import substitution industrialization by the government after its independence from the United States in 1946 (Ranis, Reference Ranis1974; Bautista, Reference Bautista1989; Lim, Reference Lim and Doronila2001). In contrast to the export-oriented strategy launched by the East Asian countries that led to annual per capita GDP growth of 6%, the Philippines had chosen to implement the ISI and became the worst performing economy in the region (Sarel, Reference Sarel1994). Although the ISI promotion may have been an honest mistake on the part of the Filipino technocrats, nevertheless the oligarchs’ general disinterest for rectifying such an error underlines their tendencies to exploit all profit-maximizing policies, both the good and the bad. Thus, several critics have argued that despite its problems, the ISI policy was maintained its role in widening the space for oligarchic predation (Quimpo, Reference Quimpo2009; Manacsa and Tan, Reference Manacsa and Tan2012; Hodder, Reference Hodder2014).

Moreover, the ‘policy of attraction’ introduced by former US governor-general, William Howard Taft's (originally intended to entice the landlord class to collaborate with US forces rather than joining the revolutionary factions) transformed the economic elites of the Spanish-colonial era into political elites which now control Philippine politics (Hutchcroft, Reference Hutchcroft2008: 142). Since representative institutions emerged prior to the development of a strong republic, political parties have become ‘convenient vehicles of patronage that can be set up, merged with others, split, reconstituted, regurgitated, resurrected, renamed, repackaged, recycled, refurbished, buffed up or flushed down the toilet anytime’ (Quimpo, Reference Quimpo2005: 4–5). Paul Hutchcroft (Reference Hutchcroft1998: 18–21) has used the term ‘neo-patrimonial’ to describe this type of political economy in which the rent-seekers emerging from a bureaucratic capitalist system are able to control formal state structures from the outside. The unique Filipino customs of ‘giving for gratitude’ and ‘labour for loyalty’ have also complemented these prevailing patron‒client relationships, thereby maintaining the omnipotence of the oligarchic elites (Grossholtz, Reference Grossholtz1964).

The Philippine government has continued to operate within this context from one administration to another since the country had gained independence from the United States.

As the Philippine case has exceptionally illustrated, a patrimonial state that allows oligarch relations and interests to dominate bureaucratic systems will create a hunting ground for unrestricted accumulation of personal wealth (Weber, Reference Weber1978). Therefore, creating a new constitutional framework that replicates a pre-Martial Law system within a relatively unchanged economic arrangement is not only futile but also counterintuitive to any prospect of change. Neither regime change nor democratization in the Philippines has seemed to help in significantly mitigating the oligarchs’ influence over the state affairs, particularly with regard to decisions involving the domestic economy. As a consequence, a strongly developed Philippine republic has yet to emerge (Manacsa and Tan, Reference Manacsa and Tan2012; White III, Reference White2015).

Limits of ‘one-size-fits-all’ economic policies

The 2011‒16 Philippine Development Plan (PDP) is Aquino III's blueprint for implementing the government's so-called ‘social contract with the Filipino People’.Footnote ¹² The Plan underlines the twin problems of inadequate investment and human capital as the main culprits of Philippine economic and human underdevelopment. In doing so, it acknowledges the social reality that the large majority of the Filipinos are being excluded from the country's economic growth. The Plan's main economic thrust is straightforward: stick to the globalization policies that have been implemented over the last decades; deepen and broaden privatization through public‒private partnerships or PPPs; and selectively implement social protection programs, such as conditional cash transfers (CCTs).Footnote ¹³ A more in-depth analysis of the Plan, however, indicates serious problems which are likely to sustain the country's uneven economic development. By insisting on the appropriateness of ‘one-size-fits-all’ economic policies, the government is misinterpreting the country's current economic situation.

First, the Plan lacks ingenuity in terms of formulating strategies that foster inclusive growth (IBON, 2011). The administration's passive adherence to free market philosophy prevents it from taking a more proactive role in stirring its development goals. While the recent data have shown relative growth in investments, exports, and overall GDP, these figures have failed to translate to lower the levels of inequality and poverty incidence.Footnote ¹⁴ Critics have argued that the government's phlegmatic devotion to free trade underlines its anachronistic outlook with regard to development policies (IBON, 2011). This is particularly unsettling when analysed against the backdrop of the continuing WTO stalemate in which member states, particularly those in the developing world, are rejecting more advanced liberalization measures (Ezeani, Reference Ezeani2013; Hartman, Reference Hartman2013).

The selection of target sectors that the government envisions developing reflects the administration's lack of strategy for inclusive and sustainable national development. Examples of these are the cheap labour business process outsourcing, foreign-controlled ship-building, export-oriented agri-business and forestry, extractive mining, and international tourism.Footnote ¹⁵ Although investments and exports figures will certainly rise in these sectors, none of these can stimulate Filipino industrialization. Thus, critics have claimed that that the principal task of the government's development plan is to sell the country's national and human resources to foreign investors at a bargain price (Bello, Reference Bello2004, Reference Bello2005; IBON, 2011). The government does not shy away from its explicit promotion of cheap labour export, setting aside the agenda for creating local jobs that will cut down the number of Overseas Filipino Workers (OFWs). In fact, it even attributed the country's new-found resilience against global financial crises to the steady inflow of remittances.

Moreover, the administration's view of good governance is heavily influenced by the requirements of the free market, that is improving governance and strengthening weak institutions to bring down the costs and risks of doing business instead of securing the poor's rights to development (Bello, Reference Bello2004, Reference Bello2005; IBON, 2011). This gives the impression that the initiatives being undertaken to address bureaucratic maladies, including institutionalized corruption, are directed toward the goal of attracting foreign direct investments rather than practicing good governance to better serve the people.

Second, the Plan also prioritizes the creation of an environment conducive for foreign investors over the construction of a people-oriented development strategy that secures the general well-being of the Filipinos (IBON, 2011; Malaluan, Reference Malaluan2011). Despite the Plan's well-articulated mission of fighting poverty and bridging inequality, its systematic evasion of politically unpopular yet socially beneficial policies (such as more just and equitable distribution of wealth, assets, and incomes) undermines the credibility of the administration's inclusive development rhetoric. The government seems to be more interested in the development of the business sector rather than the people themselves. While such a strategy may indeed foster a good business climate, nonetheless it is not necessarily favourable for the economy as a whole. In short, the government seems to favour foreign investments over local capitals, private business profits over the labourers’ welfare, and landowners’ claims over the farmers’ rights (Bello, Reference Bello2004, Reference Bello2005; IBON, 2011; Malaluan, Reference Malaluan2011). These biases further strengthen the wherewithal of oligarchic elites for exploiting the bureaucratic systems and resources. In other words, the rudimentary equation of private business success to socio-economic advancements invalidates the government's capacity toward inclusive growth and development.

Third, the administration's problem with budget deficit also compels it to pursue a more intensive privatization scheme (IBON, 2011; NEDA, 2011). In developing the bulk of the proposed infrastructure programs included in the Plan, the administration relies on extensive PPPs. Such a strategy, however, has the unintended consequence of transferring government responsibility for creating public goods and delivering social services to the private firms. Consequently, the government becomes heavily reliant on the ability of the private firms to generate even more profits from providing public goods and services (Bello, Reference Bello2004; IBON, 2011). The commonly held view is that private funding enables the government to curb its expenditures and debts. By doing so, the government is able to focus its scarce resources on more important issues that need immediate attention. Furthermore, the private sector is also said to enhance the efficiency for handling public projects given their technical expertise which the government tends to lack. In reality, however, estimating a project's actual cost is not always straightforward since contingent liabilities may easily increase, despite the strict procurement procedures (IBON, 2011). In addition, the private sector is not always immune from the inefficiencies which are commonly associated with different government agencies. Problematic contracts sometimes fail to provide the expected level of service and in the process may require additional budget in order to rectify the problem, if not a complete bailout (Bello, Reference Bello2004, Reference Bello2005; Malaluan, Reference Malaluan2011).

Fourth, in efforts to cushion the effects of non-discriminatory privatization, the Plan promotes CCTs as a smokescreen for the marginalizing effects of globalization policies (IBON, 2011). By enabling poor Filipino families to purchase basic health and education services from the private suppliers, the CCTs become an integral component of the privatization of social services. Critics have argued that the administration's unjustified expansion of the program is not only unsustainable but is also expensive to target because it is merely a debt-propelled aid devoid of any critical reform (Bello, Reference Bello2010; Comia, Reference Comia2010). Meanwhile, the more consequential but politically arduous socio-economic restructurings are continuously being ignored given the government's subscription to unadulterated free market economy. Examples of these are job creation on an economy-wide scale, higher wages and improved incomes, the creation of opportunities for Filipino agricultural and industrial producers, local technological progress and innovation; domestic capital accumulation, and greater equity (IBON, 2011; NEDA, 2011). By maintaining the current domestic conditions, foreign investors are able to systematically exploit the economy to their incontestable advantage, thereby shutting out local firms and producers (Bello, Reference Bello2004, Reference Bello2005; Malaluan, Reference Malaluan2011). The huge and profitable infrastructure projects being carried out under the PPP, for instance, benefit not the people living under a dollar a day but the well-established foreign corporations and landed elites (Bello, Reference Bello2004; IBON, 2011; Malaluan, Reference Malaluan2011). Without proper monitoring and evaluation, the government's highly optimistic assessments about its so-called, pro-people development plan can easily be misdirected.

Finally, the Plan is bent on increasing tax collections from the poor workers while thoughtfully shielding the rich from further increases in tax obligations (Quimpo, Reference Quimpo2009; IBON, 2011). Instead of imposing direct taxes on high-income individuals and corporate profit, and indirect taxes on non-basic luxury goods and services, the administration's strategy for addressing the country's deficit problems is tightening its development expenditures related to welfare spending, social investments, and public infrastructures (IBON, 2011; NEDA, 2011). By insisting on higher taxes on essential goods as well higher fees for basic government services, the administration is effectively transferring a huge part of the burden to the lower-income groups. Indeed, recent improvements in tax revenue collections did not spring from better tax administration but from the reformed value added tax (RVAT), along with de facto higher tax liability from rising energy and oil prices. Thus, for the staunch opponents of the administration, the final outcome of the Plan is sustainable inequality rather than sustainable economic development. By systematically evading the social-equalizing measures that cut into the oligarchs’ fortunes, the ultimate recipients of the increasing national wealth are the powerful elites. The elusiveness of the trickle-down effect from the country's recent growth in GDP can be explained by the lack of development-oriented leadership that challenges the elite's interests. The Plan's subconscious democratic biases prevent the government leaders and policymakers from fully appreciating the economic plight of the non-oligarchs and the non-elites in the Philippines.