A COMPARATIVE A ALYSIS OF THE DIFFERE TIAL ECO OMIC PERFORMA CE BETWEE THE PHILIPPI ES A D THAILA D FERDI A D P UKO ATIO AL U IVERSITY OF SI GAPORE 2006 A COMPARATIVE A ALYSIS OF THE DIFFERE TIAL ECO OMIC PERFORMA CE BETWEE THE PHILIPPI ES A D THAILA D FERDI A D P UKO 2006 A COMPARATIVE A ALYSIS OF THE DIFFERE TIAL ECO OMIC PERFORMA CE BETWEE THE PHILIPPI ES A D THAILA D FERDI A D P UKO (Ph.D.), US A THESIS SUBMITTED FOR THE DEGREE OF DOCTOR OF PHILOSOPHY SOUTHEAST ASIA STUDIES PROGRAMME ATIO AL U IVERSITY OF SI GAPORE Acknowledgements This research project would not have been possible without the help of individuals and institutions My quest for a postgraduate degree leading to this research project practically commenced with a Research Scholarship generously awarded by the National University of Singapore (NUS) In addition, the financial assistance that I received for fieldwork was helpful in easing the financial burden of conducting a field study I am grateful to my supervisor, Dr Teofilo Daquila, and the rest of my thesis committee members, Dr Michael Montesano and Dr Jose Tongzon, for their guidance and direction I specifically express my sincerest gratitude to Dr Daquila for his patience in reviewing my drafts as well as for all the useful comments and suggestions In addition, his encouragement and gentle reminder kept me on track and focus in writing this research project The opportunity of pursuing a postgraduate program has been likewise made possible by my acceptance to the Southeast Asian Studies Program (SEASP) by Professor Chua Beng Huat who also assisted me re-gain my Research Scholarship which I briefly lost when I transferred to SEASP Meanwhile, Dr Reynaldo Ileto’s support in extending my scholarship after it expired is also highly appreciated This allowed me to continue writing my thesis in Singapore I also acknowledge the assistance extended to me by the Philippine Institute for Development Studies (PIDS) based in Makati, Philippines headed then by Dr Mario ii Lamberte and the Institute of Asian Studies (IAS) at Chulalongkorn University in Bangkok, Thailand headed by Dr Supang Chantavanich Both institutes allowed me to attach with them and to have access to their vast resources Special thanks to Dr Erlinda Medalla who was assigned as my adviser while with the PIDS as well as to Dr Gilberto Llanto, Dr Melanie Milo, Dr Aniceto Orbeta, and all those present during my final presentation at PIDS for their useful comments and suggestions This resulted to my research focus being narrowed to sugar interests My research work would not have been more convenient if not for the efficient administrative support by SEASP staff My sincerest appreciation to Lucy Tan for making some of my administrative concerns such as the processing of the extension of my Research Scholarship, filling of request for financial assistance to attend an international conference, and reimbursement of my fieldwork expenses, less complicated Finally, this effort would not be as meaningful and sweet as it is without the full support and encouragement of my family My life partner, best friend, and loving wife Gina who is always behind my decision to pursue a postgraduate degree which entails years of family sacrifice, who believes in me when I sometimes doubted my own capability, and who acted as my proofreader, editor, and fiercest critic; my little princess and angel Niyah Taharah who is my other source of inspiration and joy (aside from my wife); and, my dad, mum, brothers and sisters who will always be my most loyal supporters To everyone, thank you very much iii Table of Contents Acknowledgements ii Table of Contents iv Summary ix List of Tables xi List of Figures xii CHAPTER O E Introduction A Tale of Non-Identical Twins Explanations to the Puzzle Rethinking Differential Performance in the Context of Rent-Seeking 10 Research Objectives and Hypothesis 12 Methodology 13 Data 14 Theoretical Framework 15 Structure of Study 23 Conclusion 24 iv CHAPTER TWO A Review of Literature: Perspectives on the Philippine and Thai Economic Performance and the Link between Interest Groups, Rent-Seeking and Economic Growth Economic Performance in Perspective 28 Clientelism 28 The Philippines 30 Elite Democracy 30 Crony Capitalism 31 Patrimonial Oligarchy 33 Thailand 35 Bureaucratic Polity 35 Semi-Democratic Polity (Liberal Corporatism) 39 Insights Interest Groups in the Policy Process 41 43 Models of Policymaking 43 Definition of Interest Groups 48 Classification of Interest Groups 50 Interest Groups in Historical Perspective 51 Rent, Rent-Seeking and Economic Performance 56 Economic Rent 57 Conventional Perspectives on Rent-Seeking and Social Cost 59 Rent-Seeking in Dynamic Setting 62 v Rent-Seeking, Economic Performance and the Conditions for Creating or Maintaining Value-Enhancing (Reducing) Rents Conclusion 68 73 CHAPTER THREE Cultural and Institutional Parameters of Rent-Seeking Culture, Institution and Rent-Seeking 79 Culture and Institutional Evolution 85 The Philippines 86 Thailand 92 Economic Culture and the Chinese Subculture 99 Political Culture and Process 102 Conclusion 110 CHAPTER FOUR Explaining Differential Economic Performance Growth Accounting 114 Sectoral Performance and Contribution to Growth 114 Sources of Growth 119 Capital Accumulation and International Trade 128 Trade and Relevant Policy-Induced Factor Inputs to Economic Performance 133 vi Trade Policies under Import Substitution Industrialization, 1950s-1970s 134 Trade Policy Reforms and the Export-Led Industrialization, 1980s – onwards 140 Favored Sectors/Industries 147 The Policymaking Process 149 Value-Enhancing Trade and Relevant Policy-Induced Factor Inputs in Context 157 Non-Policy Influences 163 Conclusion 165 CHAPTER FIVE Explaining the Rent-Seeking Success of Interest Groups Size, Concentration and Organizational Formation 169 Importance of the Sugar Industry 179 Rent-Seeking Activities to Influence Economic Policies 181 Impact of Rent-Seeking Success of Interest Groups in Trading Partners on Sugar Policies Conclusion 184 189 vii CHAPTER SIX Summary and Conclusion Summary 191 Conclusion 196 Context-Determined Value-Enhancing Rents 196 Rent-Seeking Independent Variables 198 Rent-Seeking Success of Sugar Interest Groups 199 Further Research 200 Bibliography viii Medalla, Erlinda M., Gwendolyn R Tecson, Romeo M Bautista, and John H Power (1995) Philippine Trade and Industrial Policies: Catching up with Asia’s tigers, Volume 1, PIDS, Makati, Philippines Milbrath, L (1963) The Washington Lobbyist, Chicago: Rand MacNally Moe, T.M (1980) The Organization of Interests: Incentives and the Internal Dynamics of Political Interest Groups, Chicago: University of Chicago Press Montes, M.F (1988) “The Business Sector and Development Policy” in National Development Policies and the Business Sector in the Philippines, Tokyo: Institute of Developing Economies Mulder, N (1997) Inside Philippine Society: Interpretations of Everyday Life, Quezon City, Philippines: New Day Publishers Mulder, N (2000) Thai Images: The Culture of the Public World, Chiang Mai: Silkworm Books Muscat, R (1994) The Fifth Tiger, Helsinki: United Nations University Press North, D.C (1981) Structure and Change in Economic History, New York: Norton & Co 212 North, D.C (1990) Institution, Institutional Change and Economic Performance, Cambridge: Cambridge University Press Nye, J.S (1989) “Corruption and Political Development: A Cost-Benefit Analysis” in Hiedemheimer, A.J., Johnston, M and LeVine, V.T (eds.) 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Economics and Pridi Banomyong libraries of the Thammasat University, Thailand Development Research Institute, Cane and Sugar Board of Thailand, and the Ministry of Industry Theoretical Framework As a. .. Philippine population grew by an average of 2.2%, Thailand by 1%, and ASEAN by 1.6% As of 2004, the Philippines has an estimated population of 82.7 million, Thailand has 64.5 million, and ASEAN has 550.2... characteristics of the context on which the competition and policies are created and implemented will explain the variation in economic performance of the Philippines and Thailand The analysis of the success