Economy and Development

The Philippines is classed as a developing country. Despite once being the second largest economy in Asia (after Japan), the country is now relatively poor. The economy is agricultural, lightly industrial and service orientated. Economic growth is much weaker due to enormous debt. Much government money goes towards payments of the debt leaving very little money remaining for improving infrastructure. Since 1986, efforts have been made to open up the economy to foreign investment but the privatisation of the economy has been just too slow. The Philippine Peso (PHP) or piso is the currency of the Philippines.

Economy

After WWII, the Philippine economy was in bad shape. During the term of President Quirino, the economy began a phase of rapid growth. The economic growth slowed over time but by 1965, the Philippine economy was the second largest in Asia. In 1970, the government was having serious difficulty with payments on its US$2.3 billion debt. This was largely due to the enormous spending of government funds by President Marcos. Arrangements were made with the International Monetary Fund (IMF) and so began the period in which the Philippine economy would be propped up with loans from the World Bank and IMF and heavy borrowing from banks and organisations. The economy of the Marcos regime can be described as debt driven. However, the economy continued to grow during the Marcos regime, even throughout martial law. In the 1980s, the economy started to falter due to a number of reasons. World demand for Philippine exports went into decline, corruption and economic mismanagement from the Marcos regime and the assassination of Ninoy Aquino in 1983 shattered investment confidence in the country. Economic growth was significantly negative in 1984 and 1985. In addition, Philippine debt had reached US$24.4 billion. As a result of a shrinking economy and enormous debt, the Philippines defaulted on its foreign debt payments 1983 - 1984. In the following Aquino years, the economic issues remained. It wasn't until the Ramos administration that the economy began to significantly grow. The Philippine economy was also hit by the 1998 Asian financial although not as much as some of the neighbouring Asian states, partly due to remittances from overseas Filipino workers. Currently, the Philippines is facing a fiscal crisis which if not resolved in the next couple of years, will almost certainly end in the country defaulting on its debt.

Currency

Prior to the arrival of the Spanish, there was no real currency in the Philippines. Trade was done by barter (a system in which goods or services are paid for with other goods or services). Small bits of gold were used as part of barter. During the Spanish period, a variety of coins were in circulation. The most preferred was the Mexican peso. Peso is a Spanish word meaning weight and it was worth eight reales. The real was a unit of currency in Spain for several centuries. The dominance of Mexican silver coins in the Philippines was the result of the galleon trade. Philippine peso paper notes first appeared in 1852 as pesos fuertes or strong pesos printed by Banco Español-Filipino de Isabel II (now the Bank of the Philippine Islands). These notes were released into circulation in 1854.

In 1878, a law was passed prohibiting the importing of Mexican coins but coins already in circulation continued to be legal tender but Mexican coins continued to be smuggled into the Philippines. In 1886, the colonial government began a phase-out of Mexican coins. With the outbreak of the revolution for independence, the revolutionary government and First Republic issued coins and notes until the capture of General Emilio Aguinaldo in 1901.

At the start of American rule, US coins were introduced but these were used at less than their true value and the banks were generally unwilling to hold accounts in US currency. In 1902, the US Congress passed an Act to cover the administration of the Philippines and certain articles of this Act included the coining of currency and the specification of the coins. The peso was chosen as the official currency and the value of the peso was fixed at half of the value of the US dollar. The Act was superseded in 1903 with the Philippine Coinage Act. The weights and fineness of the coins were modified in 1906 by Act No. 1564. Initially, the new peso under American rule was rejected by businessmen as it contained less silver than the Mexican dollar. However, all old Spanish, Mexican and other non-official coins were taken out of circulation and eventually the Philippine peso was accepted.

In World War II, under Japanese occupation, two variations of the peso were in circulation. The crudely made Emergency Circulation Notes were used by Filipino guerrillas but these were outlawed by President Laurel. The official currency was the Japanese government issued pesos but under this currency, the Philippines suffered from hyperinflation.

The Philippines was granted independence in 1946 and in 1949, the Central Bank of the Philippines (CBP) was created and became the only bank authorised to issue peso coin and notes. Within days of CBP opening, the value difference of the US dollar and the peso dramatically widened from the original value of the peso being worth half a US dollar. In 1964, President Diosdado Macapagal floated the currency. In 1993, the CBP was superseded by the Bangko Sentral ng Pilipinas (BSP).

Peso Symbol The symbol for the peso is the letter P with two horizontal strikethrough lines as shown left. Because of problems with font support, it is sometimes shown as a P with just one strikethrough line or just a P with no strikethrough lines at all. The ISO 4217 code for the Philippine peso is PHP.

Coins and Bank Notes

Philippine currency exists as both coins and bank notes (or bills). The peso or piso is equal to 100 centavos or sentimo. Centavos are virtually worthless and as such, most centavo coins are not used that often in every day business. Below is a description of all coins and notes that are in or were recently in circulation. The sizes of coins varies but all bank notes or bills should be assumed to be 160 mm by 66 mm in size unless specifically stated otherwise.

1 centavo (sentimo) coin: A copper-coloured coin with a diameter of roughly 15 mm. On the front side, the value is stated and on the reverse side is the BSP logo. The one cenatavo coin is extremely rare because it is extremely worthless.

5 centavo (limang sentimo) coin: A copper-coloured coin with a diameter of roughly 15 mm with a hole in the middle of the coin which has a diameter of roughly 4 mm. The value is stated on the front side and the reverse side is mostly blank because of the hole. This coin is also rarely used because it is of such tiny monetary value.

10 centavo (sampung sentimo) coin: A copper-coloured coin with a diameter of roughly 17 mm. On the front side, the value is stated and on the reverse side is the BSP logo. This coin is not often used because it represents such a tiny value.

25 centavo (dalawampu't limang sentimo) coin: A gold-coloured coin with a diameter of roughly 20 mm. The value is stated on the front side and the BSP logo is on the reverse side. This is the most common centavo coin and the only one that is used to to a significant degree.

1 peso (piso) coin: A silver-coloured coin with a diameter of roughly 24 mm. One the front side is Dr. Jose Rizal, the national hero and the value of the coin is stated. On the reverse side is the BSP logo.

5 peso (limang piso) coin: A gold-coloured coin with a diameter of roughly 27 mm. One the front side is General Emilio Aguinaldo, the first president of the Philippines and the value of the coin is stated. On the reverse side is the BSP logo.

10 peso (sampung piso) coin: This consists of a gold-coloured coin in the centre which is encapsulated by a silver-coloured belt. The diameter of the entire coin is roughly 27 mm and the diameter of the inner gold-coloured section is roughly 17 mm. On the front side of the inner gold-coloured section are Andres Bonifacio, The Father of the Katipunan (infront) and Apolinario Mabini the Brains of the Katipunan and the Sublime Paralytic (behind) along with the stated value of the coin. On the reverse side of the inner gold-coloured section is the BSP logo.

5 peso (limang piso) bill: On the front side of this turquoise-coloured bill is General Emilio Aguinaldo, first president of the Philippines. To the right is an illustration of a cannon and of an histocial marker of the First Republic 1898 - 1901. On the reverse side, Aguinaldo displays the Philippine flag from the balcony of his house and proclaims independence from Spain to the Filipino masses below. The 5 peso bill has been superseded and replaced by the 5 peso coin.

10 peso (sampung piso) bill: This brown-coloured bill has been superseded and replaced by the 10 peso coin. On the front side are Apolinario Mabini (left) and Andres Bonifacio (right) although some older bills show only Mabini and not Bonifacio. To the right are items relating to the Katipunan. On the reverse side is the Barasoain Church where the Malolos Constitution was proclaimed and the Congress of the First Republic convened. to the right (not on older bills), Filipino revolutionnaries meet under the Katipunan banner.

20 peso (dalawampung piso) bill: On the front side of this orange-coloured bill is Manuel Quezon, second president of the Philippines and first president of the Commonwealth. To the right, the illustrations relate to the establishment of the Commonwealth (a Coat of Arms) and the 1935 Constitution. Malacañan Palace is shown on the reverse side.

50 peso (limampung piso) bill: On the front side of this red-coloured bill is Sergio Osmeña, the second president of the Commonwealth who assumed office upon Quezon's death. On the reverse side is the old Congress building which is now part of the National Museum.

100 peso (sandaang piso) bill: Manuel Roxas is shown on the front of this purple-coloured bill. To the right, a crowd watch the lowering of the US flag and the raising of the Philippine flag indicating the end of the Commonwealth and the begining of the Third Republic of the Philippines. On the reverse side is an ariel view of the BSP compound.

200 peso (dalawandaang piso) bill: On the front of this green-coloured bill is Diosdado Macapagal and to the right, the Aguinaldo mansion where in 1898 Aguinaldo proclaimed independence from Spain. Macapagal moved Independence Day from July 4 to June 12. On the reverse side, Macapagal's daughter, Gloria Macapagal-Arroyo is sworn in as president in conlcusion to the EDSA 2 revolution. This bill is no longer being printed.

500 peso (limandaang piso) bill: The original theme of the limandaang piso bill was Ferdinand Marcos but after EDSA, it was changed to Benigno "Ninoy" S. Aquino Jr. On the front side of this yellow-coloured bill from left to right is a dove, an image of Ninoy, the Philippine flag and in words, two of Ninoy's beliefs which are Faith in our people and faifth in God and The Filipino is worth dying for. Earlier in his life, Ninoy was a journalist and there is also a typewriter on the front side of the bill signed with the initials BSAJ. On the reverse side are more of Ninoy's aspirations. In the top left, Filipinos of different faifths and class of society, civilian and military are seen standing united. In the centre, a mother and a boy give flowers to two soldiers, representing the desire for a democratic and peaceful nation. In the bottom left, part of an article from Ninoy's years as a journalist covering the war in Korea. In the top right is a girl holding a book with the words Study Now Pay Later which refers to an education bill Ninoy sponsored. In the bottom right are the Concepcion Municipal Hall and the Tarlac Capitol building where Ninoy held the office of Mayor and Governor respectively. On the far right at the top is the dove again. While imprisoned during martial law Ninoy campaigned for a seat in the Batasang Pambansa from his cell. During a pro-Ninoy rally outside his cell, a dove landed on the ledge of his cell window and has since then become symbolic of freedom.

1,000 peso (sanlibong piso) bill: There are three Philippine patriots who were martyred by the Japanese on the front of this blue-coloured bill. Chief Justice Jose Abad Santos refused to go into exile with the Commonwealth government when the Japanese invasion began in WWII. The Japanese eventually found him and repeatedly requested he swear allegiance to Japan. Santos repeatedly refused for which he was eventually executed by being shot to death. Vicente Lim was the first Filipino graduate from the US Military Academy at West Point. He was also one of the founders of the Boy Scouts of the Philippines. Brigade General Lim was commander of the 41st division during the Japanese invasion. He was captured while trying to reach an American submarine for which he was later executed. Josefa Llanes Escoda was a suffragette, a social worker for the Philippine Chapter of the American Red Cross and a founder of the Girls Scouts of the Philippines. During the Japanese occupation, her husband was arrested and imprisoned in Fort Santiago. Escoda was arrested two months later and also imprisoned at Fort Santiago. She was later offered freedom but chose to stay in prison to be with her husband. She was last seen being moved to another building where it is presumed she was executed. On the far right of the front side is the eternal flame. The reverse side of the bill is mostly dominated by the Banaue rice terraces. To the right there is also an image of a Manunggul Vase cover (a ship with two dead people paddling to the netherworld) and a Lanngal, also called a Ranggar by Maranaos. It looks like a hut and is a Muslim place of worship.

2,000 peso (dalawang libong piso) bill: This blue, yellow and purple bill was created for the 1898 - 1998 centennial. On the front side, President Joseph Estrada is seen taking his oath of office at the historical Barasoain Church. On the reverse side, President Fidel Ramos waves the Philippine flag from the same balcony where General Emilio Aguinaldo first displayed the original Philippine flag. The Philippine Centennial logo is also visible. The bill is larger than the usual size at 216 mm by 133 mm.

100,000 peso (isandaang libong piso) bill: The gold-coloured 100,000 peso bill was created for the 1898 - 1998 centennial and the Philippine Centennial logo can be seen on both side of the bill. Only 1,000 bills were created and each bill contains 21 security codes to prevent counterfeiting. This bill is larger than the usual size at 355.6 mm and 215.9 mm. The front of the bill illustrates the Cry of Pugadlawin led by Andres Bonifacio, marking the beginning of he revolution for independence against Spain. The reverse side is the same as the reverse side of the older five peso bill. From the balcony of his house, General Emilio Aguinaldo displays the Philippine flag to the crowd below and proclaims independence from Spain. The 100,000 peso bill is currently listed by Guinness World Records as the largest legal tender although the bill was meant to be a collector's item rather than to be used. Images courtesy of Romeo Castillo MananQuil.

Development

Large debt is a major factor in the hindrance of the Philippine economy. During the Marcos years, loans and heavy borrowing were used keep the economy propped up. This dramatically increased the US$2.3 billion debt in 1970 to US$24.4 billion in 1983. The decline in demand for Philippine exports, the uncontrolled and unrestrained corruption of the Marcos administration and the assassination of Ninoy Aquino took its toll. The government defaulted on debt payments 1983 - 1984 and the economy underwent a period of significant contraction in 1984 and 1985. In 1986, after the downfall of Ferdinand Marcos, the debt was at US$28 billion with the country in a bankrupt state. In more recent times, the public debt is just over three-quarters of the Gross Domestic Produce (GDP) and a large trade deficit has grown from the heavy importing of goods combined with a weak export growth. Given this situation, much of government funds is being used to pay off the debt (or probably more accurately, the interest on the debt) this leaves little money for the government to develop infrastructure. The lack of infrastructure in turn has resulted in much lower growth in various economic sectors. Since 1986, administrations have gradually opened up more of the economy to foreign investment. However, the privatisation of the economy is currently just too slow. The corruption of the government and tax evasion tactics by big businessmen has also robbed the government of funds. The situation has been described as a fiscal crisis and on the current course, it is expected the Philippines will default on its debt in the next few years.

The Philippines is essentially an agricultural area but in more recent years other sectors have developed. Although greatly potential in the agricultural sector, the lack of infrastructure and finance combined with government policy have limited the success of this sector. The rural economy is largely based on agriculture, forestry and fishing. Years of uncontrolled logging are having an impact on forestry and fishing may have its days numbered due to the expense of equipments. The country has numerous natural resources including deposits of copper, chrome, nickel, gold, silver, coal, sulphur, gypsum, limestone, marble, phosphate, silica, clay and natural gas. Despite these resources, mining has gone into decline over the years. Problems from the energy sector also contribute to economic woes. Electricity is relatively expensive and is subject to government red tape, preventing unprofitable public sector electricity companies from raising rates to raise money to develop and improve services.

Industry has grown over the past few years but only in the urban areas. The industrial sector includes textiles, food and beverage processing, pharmaceuticals and chemical products, such as paints and fertilisers, and also electronics. In 2005, the Philippines began exporting cars in significant quantities. Electronic based companies such as Intel have been in the Philippines for many years too. The services sector is a big player in the economy and one of the more recent booms is the establishment or transferring of call centres in the Philippines for many large and in some cases multinational and international companies. Setting up call centres in the Philippines is ideal because of much lower costs than in the developed countries of origin and cheaper labour. A major advantage the Philippines has over other countries is the significance and usage of the English language within the country.

Infrastructure

Because the Philippines is an archipelago of 7,107, roads and bridges alone are inadequate. On Luzon, the largest island there is a large network of highways and major roads connecting Manila to almost all corners of Luzon. There is also a rail network in Luzon but this is extremely limited and connects only a small number of locations near to the Manila, which has its own light rail system to various destinations within the sprawling metropolis. In Manila, the international and domestic airports connect the capital to most major cities in the Philippines and some of the most major cities of the world. Various airports can be found around the Philippines, several of which are international. The facilities of these airports vary from one to the next and some are fairly primitive. However, flying is the more expensive way of getting from island to island. The cheaper alternative is in the form of boats, ferries and ships. There is no shortage of ports in the Philippines and some major cities have international ports with shipping routes to a number of neighbouring Asian countries. For travel within an island by road, jeepneys are the most common form of public transport followed by tricycles. Again, for major islands like Luzon, buses run regularly between major cities and towns. In major urban towns and cities, taxis are largely available. The telecommunications sector is well established in the Philippines. Although some remote rural villages are without electricity, certainly all major town and cities have public internet facilities in the form of the internet cafes. However, electricity is relatively expensive and brown outs are not uncommon, even in some major cities. Improving and expanding existing infrastructure is typically a slow and painful process because of the enormous debt burden that plagues the economy.

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