Introduction

Notwithstanding its sometimes negative international image, the Philippine economy has been performing well in recent years, better than is commonly recognized. Until the global financial crisis in 2008, the country experienced its longest period — five years — of uninterrupted positive per capita economic growth since the 1970s. It seems to have moved on from the “two lost decades”, 1983–2003, when there was no net increase in per capita incomes. Business is beginning to insulate itself from the seemingly perennial curse of political machinations souring the commercial environment. That is, business and politics are apparently “decoupling”.

The Philippines has an unenviable history of politics nipping promising economic growth trends in the bud, resulting in a volatile development trajectory around a low average growth rate. The country grew quite strongly in the 1970s under Ferdinand Marcos. But this was debt-driven growth, which became unsustainable when the debts came due and political instability set in in the early 1980s. One of Marcos's enduring contributions to international polemics was the phrase “crony capitalism”.

Then, under arguably the country's most successful president, Fidel Ramos, growth accelerated in the 1990s, until the onset of the Asian economic crisis. This was of course an event outside of Ramos's control. It had the effect of slowing the economy but, unlike its high-growth neighbours, the Philippines did not experience a deep economic crisis. Ramos was then succeeded by Joseph Estrada — under the 1987 Constitution, the president is not permitted to serve more than one consecutive term — and political instability and backsliding again set in. Estrada had been under house arrest since his removal in early 2001, but in late 2007 he was pardoned and set free by his successor, the current president, Gloria Macapagal-Arroyo.

The key to the recent success is that, since the deep economic and political crisis of 1985–86, the reformers have been able to enact and institutionalize enough major policy victories to satisfy the business community that they are a more or less permanent feature of the political economy architecture.