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CHAPTER I INTRODUCTION
This chapter provides an overview of the study by looking at the background of the research and the variables to be considered. It goes on to enumerate the research objectives and research questions to frame the flow of the study as well as the significance of the study in the development field. This chapter likewise provides a delimitation of the research.
RESEARCH BACKGROUND
Asia has seen an impressive record of economic growth in the past 40 years. Though it is most evident in Japan, the expansion is likewise seen in the East Asian Newly Industrialized Countries (NICs): Singapore, Hong Kong, South Korea and Taiwan (Doner, 1991), also known as the Four Asian Tiger Economies. In recent years, four members of the Association of Southeast Asian Nations (ASEAN) are also following this trend focusing on export-driven initiatives.
For the past several decades, Taiwan has experienced one of the most notable records of economic development. Its evolution from an impoverished agricultural society into a flourishing industrial country characterized by rapid and sustained growth brought about a strong middle class and equitable distribution of income has been noteworthy. Many scholars call it the “Taiwan Miracle” (Chan and Clark, 1992; Clark 1989; Galenson, 1979; Gold 1986; Haggard, 1990; Ho, 1978’ Myers, 1984; Ranis, 1992 and 2011; Wade, 1990; Winckler and Greenhalgh, 1988). For this reason, Taiwan becomes a very interesting model for developing countries seeking to formulate similar strategies in order to achieve the same level of economic development.
Approximately 750 miles south of Taiwan is the Philippine archipelago (Figure 1.1). In the past couple of years, the country has been experiencing growth like that of China and India. In 2014, the country’s GDP grew by 6.1% and could potentially hit 9% in 2015 (Sembhy, 2015). It is likewise included in the Tiger Cub Economies, a term coined to refer to Indonesia, Malaysia,
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Philippines and Thailand who are following the same export-driven model of economic development used by Hong Kong, Singapore, South Korea and Taiwan, also known as the Four Asian Tigers. With Taiwan as one of the success stories emerging from the Asian Tigers, the study looks at how it can become a model for a tiger cub economy like the Philippines.
Figure 1.1. Map of Taiwan and the Philippines.
Economic growth is the main indicator for the beginnings of economic development measured by the real Gross Domestic Product (GDP). It serves as the measure for the average income of a country which is equivalent to the market value of all final goods and services produced within the country within a given period of time (Mankiw, 2015). Spengler (1960) describes economic growth by stating the opposite: economic backwardness. This is characterized by various circumstances unfavorable to economic growth such as the society being tradition-bound, stable and disposed to preserve stability. Family is usually extended, meaning that aside from the nuclear unit composed of parents and children, other family members such as
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grandparents, uncles, aunts and cousins. Land is communally owned and operated. Educational attainment, as well as literacy is low.
While Taiwan has visibly reached this growth, the Philippines is still in the process of attaining the same level of progress and the country, its citizens and even the world remain optimistic. Proof of this is the PricewaterhouseCoopers (PwC, 2015) report entitled: “The World in 2050: Will the shift in global economic power continue?” which analyzes high-level trends that are expected to shape the global economic landscape in the coming decades. The report describes a dramatic shift in global economic power away from the advanced economies in North America and Western Europe toward Asia and a cluster of faster-growing emerging economies. The forecast projects a slightly more than 3% per year growth from 2014 to 2050, which can double in size by 2037 and may triple by 2050. Figure 1.2 below illustrates a summary of the global ranking of world economies in terms of annual average real growth per capita.
(Source: PwC, 2015)
Figure 1.2 Breakdown of components of average real GDP growth (2014-2015)
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Figure 1.3 GDP at PPP rankings
Figure 1.3 clearly establishes experts’ optimistic forecasts on the economic growth and performance of the Philippines. Coupled with this forecast, the Philippines needs to actively pursue concrete measures in ensuring that its economic goals is backed up with feasible and sustainable
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programs that will implement these strategies to achieve the country’s goals. In another study conducted by the Asian Development Bank (ADB) on a recent review of the operations and challenges in Southeast Asia has declared that the Philippines “is expected to reach upper middle-income level in the next four years backed by significant improvements in its public sector management operations and social welfare programs” (The Manila Times, 2016). This supports PwC’s forecast on the progress of the Southeast Asian country.
Table 1.1 Annual Average Growth Rate of Real Per Capita GDP: 1950-2010 (in percent) (Tiger Economies)
1951-60 1961-70 1971-80 1981-90 1991-00 2001-10
Hong Kong 9.2 7.1 6.8 5.4 3.0 3.2
Singapore 5.4 7.4 7.1 5.0 4.7 2.0
South Korea 5.1 5.8 5.4 7.7 5.2 3.5
Taiwan 7.6 9.6 9.3 8.2 5.5 2.7
Sources: Asian Development Bank (ADB); National Statistical Coordination Board (NSCB) To compare, Table 1. 1 illustrates the annual average growth rate of real per capita GDP of Tiger economies from 1950-2010. Looking at Taiwan, it displays an increasing and improved GDP per capita covering the period of the existence of JCRR from 1948 to 1978 and the efforts pursued alongside it. Out of the Tiger economies, it exhibits the highest growth, albeit decreasing after the 1980s. In the period of 1951-1960, it recorded the 2nd highest growth in Real GDP per capita after Hong Kong. However, from 1961-1990, it displayed the highest growth rate in real GDP per capita among the four economies. This indicates a vastly improved performance that can be attributed to the initiatives undertaken by the JCRR. With this, Taiwan can be considered as a model in economic development among the Tiger economies as it displays the best performance out of the four during this period.
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Table 1.2 Annual Average Growth Rate of Real Per Capita GDP: 1950-2010 (in percent) (Tiger Cub Economies)
1951-60 1961-70 1971-80 1981-90 1991-00 2001-10
Malaysia 3.6 3.4 5.3 3.2 4.6 2.2
Thailand 5.7 4.8 4.3 6.3 2.4 3.1
Indonesia 4.0 2.0 5.3 4.3 2.9 3.8
Philippines 3.3 1.8 3.1 -0.6 0.9 2.3
Sources: Asian Development Bank (ADB); National Statistical Coordination Board (NSCB) On the other hand, among the Tiger Cub economies, the Philippines clearly lags behind the three other countries from 1951-2010 in terms of real GDP per capita. It consistently places last in term of performance from 1951-2000 even it performed better than Malaysia from 2001-2010 by merely 0.1%. In the past couple of years, the country is striving to perform better and its efforts have been recognized by different international organizations and think-tanks (PwC, 2015. ADB, 2014, 2015). With this, it is crucial for the Philippines to be able to continue this positive performance in order to achieve further economic growth.
Based on these studies and forecast, this paper will focus on Taiwan and the Philippines since Taiwan is one of the successful Asian Tigers and the Philippines is one of the Tiger Cub economies aiming to attain the level of economic growth of the former. Comparison will be made since, at a glance, Taiwan and the Philippines share some characteristics such as having the history of colonization, both are democracies and have unitary form of government and such.
Taiwan’s economic reconstruction started in the late 1940s through its agricultural sector which was the most affected during the Second World War. This period saw the government actively promoting the agricultural and industrial as well as transportation infrastructure reconstruction. In the next decade, it went on to pursue import substitution measures based on
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labor-intensive light industries resulting in a period of rapid export growth in the succeeding decades (ROC, Ministry of Economic Affairs, 2015).
At the same time, the Philippines was experiencing a rapid growth it its economy. Though it seemed like it was poised to become a tiger economy, a rapid decline was seen in the 1980 following the political turmoil brought about by the dictatorship of the late President Ferdinand Marcos and his subsequent ousting after a peaceful revolution. Since then, the Philippines has been trying to slowly recover and boost its economy.
The study will look into how Taiwan pursued and underwent capacity building initiatives as highlighted in the Joint Commission on Rural Reconstruction in comparison to the Philippines’
Development Plan 2011-2016 which is currently used as a blueprint for the country. This paper is organized in five chapters. Chapter 1 provides a background on the study as well as the objectives and research questions to be addressed. It also highlights the significance of the study and the delimitations. Chapter 2 discusses the existing literature on the subject-matter being studied.
Chapter 3 provides a general view of how the research will be conducted. Chapter 4 presents the data collected from books, journals and other pertinent documents as well as interviews with subject matter experts for both countries. Finally, Chapter 5 discusses the findings and conclusions as well as recommendations on how Taiwan’s experience can be a model for the Philippines.
RESEARCH OBJECTIVES
The study will look into Taiwan’s historical record on its political and economic development as well as the Philippine one. By comparing the experience of these two countries, the researcher aims to satisfy the following objectives:
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1. Identify the capacity building initiatives that contributed to the economic growth of Taiwan;
2. Determine how capacity-building initiatives, specifically foreign aid and human resource development became instrumental in Taiwan’s economic growth.
3. Come up with possible policy recommendations that can aid the Philippines in its transformation from a Tiger Cub to a Tiger economy following Taiwan’s example.
RESEARCH QUESTIONS
Based on the research objectives outlined, the study aims to answer the following questions:
1. Under what conditions was Taiwan able to reach its economic goal?
2. What capacity building initiatives were pursued by Taiwan in order to achieve economic growth?
3. What specific areas should the Philippines strengthen/improve in order to achieve the same growth as Taiwan?
SIGNIFICANCE OF THE STUDY
In the Philippines’ initiative to further boost its growth and to attain the economic growth enjoyed by Taiwan, the study is significant in contributing to the literature which can help determine possible institutional and policy projects to obtain these goals. The study can help identify both weak and strong points that the Philippines currently possesses as well as provide suggestions on how these points can be improved. Being dubbed as one of the Four Tiger Cub economies, the Philippines can learn a lot from Taiwan who underwent a similar route to achieve its economic growth and development. In order to realize the projections indicated in the PricewaterhouseCooper (PwC) report, the Philippines has to take concrete steps in strengthening its capacity building initiatives.
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This study is delimitated to the analysis of Taiwan’s Joint Commission on Rural Development and the Philippines’ Development Plan for 2011-2016. These documents highlight the capacity building initiatives undertaken by both countries to achieve their economic goals. In the case of Taiwan, the document recorded its conditions prior to achieving its Tiger economy status. For the Philippines, the Philippine Development Plan 2011-2016 highlights the initiatives undertaken by its current administration in order to elevate its position from a Tiger Cub to a Tiger economy. JCRR covered capacity building initiatives over a 30-year period. However, in the case of the Philippines, the PDP only cover six years since it is the first time that the plan was documented clearly as such, thus the difference of period covered for Taiwan and the Philippines.
To further understand the initiatives for both countries, interview was conducted with several Philippine government agencies directly related to the formulation of the PDP such as the National Economic and Development Authority, Technical Education and Skills Development Authority, Department of Labor and Employment as well as the Development Academy of the Philippines to further understand how the initiatives are prioritized, implemented and monitored. The National Economic and Development Authority spearheads the formulation of the Philippine Development Plan in partnership with different government agencies, private sector, non-government organizations and the civil society. For Taiwan, experts directly and indirectly involved in the JCRR were interviewed. Additionally, due to the interchangeable nature of the capacity building and capacity development concepts, discussions on both will be used under one umbrella concept of capacity building which will be used throughout the paper.
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