Comments and discussions
Hitoshi Hirakawa*Dr. Peter Lee U’s paper, entitled ‘A Tale of Two Philippine Industries’ attempts toanalyze two main industries in the Philippines, namely the automotive and electronics
industries which are drastically in contrast with each other.
The Philippine automotive industry has a long history - starting from theestablishment of Fabar Inc. in 1951 which assembled vehicles in completely knocked-down
form. The industry was supported by the government’s import substitution policy in the1950s as well as by some of its industrial policies such as the Motor Vehicle Development
Program and People’s Car Program in the early 1970s and 1990s, respectively. However, its
market was very limited, and the industry had less competitiveness and exported only afew.
In contrast, the electronics industry is now the largest in the Philippine
manufacturing industry. In 2000 alone, the industry accounted for about 90 percent of thecountry’s total exports, of which about 65 percent was exported by electronics industry. The
electronics industry has also a long history like the automotive industry - the first air
conditioner company, Aircon, Inc., and the first refrigerator manufacturer, Ysmael SteelCompany, among others, were established in the 1940s and enjoyed government importsubstitution policies such as the Electronics Local Content Program of 1975. In spite ofsuch support, however, these local companies never took the main lead in exports. Almost
all exporters are located in industrial export zones, and foreign companies which wereaffiliates of multinational companies from Japan, the United States and others mainly
invested in the 1990s.
The author tries to explain the reasons behind the Philippine electronics industry’ssuccess in comparison with the automotive industry, even though both were recipients ofgovernment intervention. He focuses on the two industries’ contrasting and unique
circumstances, and the timing of the electronics industry’s birth. Then, he sums up that
although government industrial policy for the automotive industry failed, the government’s
investment incentive program took a crucial role in attracting foreign electronicscompanies. In this regard, he acknowledges(?) the government role and does not support
the thought theory (?) of neoclassical economics which asserts that ‘government should stepin only in instances of market failure,’ and ‘market intervention distorts price signals.’
In his paper, we will understand the fundamental history of the Philippines’ twomain manufacturing industries which are in great contrast, and consider again thesophisticated relationships between state and market. I wish to comment on one thing. We
are now in a globalized world in which multinational companies’ strategies are crucial in
the industrialization of developing countries. Although liberalization and industrial policies
led by governments are important, these are only part of elements that industries indeveloping countries need to grow and obtain competitiveness in the world market. For
Philippine industrialization to be successful, I hope that the author makes deeper researchfrom a wider perspective.
*Professor, Graduate School of Economics, Nagoya University