By EDUARDO T. GONZALEZ, Ph.D. with contributions from TINA S. CLEMENTE, Ph.D.

Foreign policy development in the Philippines fails in making a central and sovereign force that delivers social stability, and peace and security in the state. More often than not, openings for breakthroughs to change this situation are not reinforced and sustained. Such lapses are mediated through institutions, and understanding how the institutional environment shapes and influences the making and delivery of foreign policy is crucial.

This study outlines the recent institutional developments that shape Philip-pine foreign policy, which includes the shift from North-South bipolarity to a multi-polar, issue-based bargaining stance, and the involvement of non-state players, third parties and the Islamic factor. The research follows two case narratives to understand the status of foreign policy governance structures and the Philippine policy choices. It uses the analytic narrative, which is a case study method that blends detailed contextual understanding of the situation with explicit, context-specific modeling, using historical accounts. Using this method, the study hopes to develop empirically verifiable conjectures regarding the system of rules, beliefs, norms and their manifestations in organizations, that together prompt regular pat-terns of behavior.

The two case narratives studied are the peace negotiations in Southern Philippines and the US War on Terror and Philippine security policy. The case narratives trace the sequences of actions, decisions and responses of individuals and groups that generate events and outcomes. They piece together the stories that ac-count for the outcomes of interest: the creation of peace between government and insurgents, and the policy decision to combat terrorism. The case narratives at-tempts to shed light on the possible solutions to the difficulties of foreign policy-making.

This study specifically aims to discuss the relationship between institutional rules and foreign policy outcomes, to place Philippine foreign policy into a wider context of theoretical and empirical work using an institutional analytic-approach, and lastly, to indicate "second best" institutional changes that can be operated in the context of existing political equilibrium conditions in the Philippines.

The study poses the following conclusions: (1) The use of problem-solving informal institutions that substitute for the lapses of formal setups has induced effi-ciency gains; there could be efficiency losses when problem-creating informal insti-tutions arise from formal setups. (2) Philippine foreign policy is more effective and efficient when left alone by dominant global players. (3) The efficacy of a third party as a deal neutralizer depends on its ability to stand firm on its commitments. (4) While agents seek to maximize their expected utility (to their principals/constituencies), their actions may not necessarily maximize total welfare. (5) It remains to be seen whether a novel formal-informal institutional interplay can set off the evolution of more effective external relations structures.