ABSTRACT
The developments in the political institution in the Philippines in the 1972-1980 period under President Marcos are an important institutional factor explaining the blatant example of the famous capital flight in history. The flight of capital from the country is both a constant symptom of the Philippines' ailments as well as a factor in perpetuating its crisis. The measuring procedure used to estimate the magnitude of capital flight represents a departure from the earlier approaches to measurement in that the motivation factors are explicitly incorporated in the measuring technique. The increase in monopoly power led to external debt levels being negotiated beyond the debt repayment capacity of the country followed by capital flight by the authorities in power. The government's role in financial markets could partly explain the sudden turn around of capital inflows into the Philippines in the second half of 1983. In the Philippines, government intervention directed credit away from viable enterprises to capitalists with government connections.
