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Political Economy of United States Military Bases

In early 1991, the Philippine government was in ongoing negotiations with the United States on the future status of United States naval and air facilities at Subic Bay and Clark Air Base (see Relations With the United States , ch. 4; Foreign Military Relations , ch. 5). What would normally be an issue of foreign policy and national security became a major domestic political issue and took on an economic dimension of considerable importance. At the domestic level, the conflict was between those who argued that the continuing presence of the United States bases was an infringement on Philippine sovereignty and a continuation of a neocolonial relationship and those who, for a combination of internal security, foreign relations, and economic reasons, saw the need for maintaining the presence of the bases. President Aquino, through 1990, refused to publicly commit herself to a position; however, it was clear that her government was working to reach accommodation with the United States. As negotiations progressed, the economic issue became prominent.

There were three economic considerations from the point of view of the Philippine government. First, the proportion of the Philippine budget allocated for its armed forces was the smallest in the region, a fact linked to the presence of United States air and naval forces in the Philippines, as well as direct military assistance. Second, in the latter half of the 1980s, the bases directly employed between 42,000 and 68,000 Filipinos and contracted for goods and services from Filipino businesses. During this period, yearly base purchases of goods and services in the Philippine economy (when corrected for the estimated import content of the goods purchased) was in the range of P6.0 billion to P8.3 billion.

A third and politically very important consideration, was the sum given to the Philippines by the United States in connection with the presence of the bases, referred to as aid by United States officials and as rent by the Filipinos. Base-related payments were first agreed to in 1979 when United States president Jimmy Carter made a "best effort" pledge to secure US$500 million for the Philippines from the United States Congress over a five-year period. In 1983 another five-year commitment was made, this time for US$900 million. In October 1988, the Philippines' Secretary of Foreign Affairs Raul Manglapus and United States' Secretary of State George Schultz signed a two-year agreement for US$962 million, an amount double the previous compensation but substantially less than the US$2.4 billion that the Philippines initially demanded. In 1991 talks over the future of the bases and the size and terms of the aid or rent that would be given in consideration for continued United States access to military facilities in the Philippines was the most important unresolved issue. The decision of the Philippine administration to bring Secretary of Finance Jesus Estanislao into the negotiations in March 1991 was a further indication of the economic importance of the bases to the Philippine government.

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Vicente B. Valdepeņas, Jr. and Gemelino M. Bautista's The Emergence of the Philippine Economy is a concise history of the Philippine economy from the pre-Hispanic period until the 1960s, and Frank H. Golay's The Philippines is an excellent overview of the 1945-59 period. Romeo M. Bautista, John H. Power, and others offer a major critique of Philippine industrialization policy and an argument for liberalizing the economy in Industrial Promotion Policies in the Philippines. The argument in favor of continued protectionism is put forth in Alejandro Lichauco's Nationalist Economics, and Alichir Ishii's National Development Policies and the Business Sector in the Philippines explores several aspects of the interaction between the business sector and the government. Yujiro Hayami, Ma. Agnes R. Quisumbing, and Lourdes S. Adriano's Toward an Alternative Land Reform Paradigm reviews the history of land reform and current reform efforts, and suggests an alternative policy. The monopolization and control of export agriculture industries during the martial law period is examined by Gary Hawes in The Philippine State and the Marcos Regime. Elias T. Ramos's Dualistic Unionism and Industrial Relations has the only extensive discussion of the development of unions in the Philippines.

An Analysis of the Philippine Economic Crisis, a collective work of University of the Philippines economists edited by Emmanuel S. De Dios, provides insight into the 1983 economic crisis. Walden Bello, David Kinley, and Elaine Elinson's Development Debacle and Robin Broad's Unequal Alliance criticize World Bank activities in the Philippines. The Philippine Institute for Development Studies has produced a number of studies of specific aspects of the economy. Its Survey of Philippine Development Research series contains articles that survey research on specific areas of the economy. Specialized studies include Rosa Linda P. Tidalgo and Emmanuel F. Esguerra's Philippine Employment in the Seventies, and James K. Boyce's The Political Economy of External Indebtedness, which examines the extent of capital flight from the Philippines.

A Guide to Philippine Economic and Business Information Sources, edited by David G. Timberman, provides a good bibliography of newsletters, government documents, and other material of interest to Philippines businesses. (For further information and complete citations, see Bibliography).

Data as of June 1991

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Philippines Table of Contents