Part 2

IT was the late Filipino industrialist Salvador Araneta who uncovered the existence of the Dodds Report and denounced it in his book America’s Double-Cross of the Philippines.

In his book, Araneta explained the failure of the country to industrialize, thus: “The indifferent economic development of the country…was due to America’s policy toward Japan and the Philippines. This policy was the result of the Dodds Report, which Truman accepted and which had as its objective to make Japan the industrial workshop of Asia and the Philippines a mere supplier of raw materials.”

Araneta bitterly continued: “We do not argue against the wisdom of providing Japan with the means to rehabilitate herself and allowed to become an industrial country once again, although this was contrary to the prior recommendation of a postwar planning committee headed by Secretary [Henry] Morgenthau [Jr.], a recommendation which was in line with the prevailing sentiment at the end of the war. But certainly, we can argue against a policy that would make Japan the exclusive industrialized country in the Far East, for such a policy was most detrimental to the Philippines. Indeed, the United States could not justify a policy that provided all kinds of stumbling blocks, to the industrialization of her ally [the Philippines] in the war against Japan. As a result of this policy, industrialization in the Philippines suffered severe setbacks.”

The Dodds Report explains the continuing obsession to this day of US foreign policy to keep the Philippines a free and open market for imports, because a liberal import policy—another name for free trade—ensures that this country will never be able to industrialize and take the same protectionist, nationalistic developmental strategy, that

enabled once poorer neighbors like Taiwan, Malaysia and Thailand, to transform into the newly industrialized countries that they are today. The late nationalist Claro M. Recto described the geopolitical plan embodied in the Dodds Report as “America’s anti-industrialization policy for the Philippines.”

Conclusive proof of what Recto described as America’s anti-industrialization policy for the Philippines came when Ferdinand E. Marcos formally launched an industrialization program in the late 1970s based on 11 heavy industries led by the steel, petrochemical and engineering industries. The announcement of that plan swiftly followed a protest by the International Monetary Fund (IMF), the World Bank and the pro-American technocrats in the Marcos Cabinet, led by no less than Prime Minister Cesar Virata.

After four years of struggle with the IMF, the World Bank and his own technocrats over his industrialization plan, Marcos, in the end, partly gave up the project, but not until after he had expressly denounced a conspiracy between his own technocrats and the IMF-World Bank to keep the Philippines under the yoke of the industrial powers.

The anti-industrialization policy has been implemented all these years through IMF conditionalities, and it isn’t hard to understand that for the past 60 years, this country has been under the continuous economic supervision of the IMF. There is no country in the world that can claim to be under the supervision of the IMF for even a fraction of that time. And it isn’t coincidence either that this country is the only one in the region that isn’t making any headway toward industrialization.

When the Philippines, Malaysia, Thailand, Indonesia and Singapore originally founded the Asean in the early 1960s, not one of them was a Newly Industrialized Country (NIC). Today only the Philippines remains outside of the NIC-hood status. The four other cofounders of the Asean are now acknowledged NICs.

“We are today a hungry people in a land so fertile that one can drop a seed anywhere and see it sprout into something he can eat. And we are hungry because we are a nation frozen by design in the pre-industrial age, preserved as a raw material economy,” nationalist economist Alejandro Lichauco said.

In a book, titled Export-Oriented Industrialization in Developing Countries, economists Pitou van Dijck, Harmen Verbruggen and Hans Linnemann discuss in detail the economic case of the Philippines based on a timeline of events. They wrote: “From 1950 onward, import substitution has been the principal policy to promote industrialization in the Philippines. Initially, this strategy relied on a strict regime of controls on imports to relieve the pressure on the balance of payments (BOP). The import regime was aimed at a sharp import reduction of so-called nonessential products, identified as nondurable consumer goods. Hence, the high average annual-growth rate of manufacturing production of 12.1 percent from 1950 to 1955 was mainly realized by the domestic production of substitution for consumer goods.

“By the late 1950s, the domestic market started to impose serious limitations on further expansion. As a result, the manufacturing growth rate slowed down to 7.7 percent per annum from 1955 to 1960. In addition to the sluggish manufacturing growth, once again, the Philippines was faced with severe BOP problems in the late 1960s.

“Faced with this predicament, the government devised policies to intensify industrial efforts and actively promote exports. The Industrial Incentives Act of 1967 provided incentives mainly in the form of tax privileges for industrial investments, aimed at boosting export production. The Act also extended other extra fiscal benefits, such as tax and duty-free importation of materials, with the purpose of reducing the cost of inputs and increasing competitiveness for exports. As a consequence of the export promotion program, the level of protection for the domestic market was relatively high.”

The authors further observed: “The shift to a more export-oriented strategy of industrialization in the early 1970s marked again the beginning of a decade of better growth performance. During the 1970s, the manufacturing sector showed again a stronger performance with an average annual growth rate of production of 7 percent. The pattern of effective protection in 1974 favored manufacturing over agriculture and mining. Until the early 1980s, the industrialization and trade strategy remained essentially intact.”

To be continued

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