19 countries, 11 institutions join hands to save Manila's economy
By Abby Tan (Manila Correspondent)
MANILA — Today marks the Philippines’ debut as the recipient of a multi-billion dollar foreign aid programme in which the majority of free world countries have a stake.
The Philippine Assistance Programme (PAP) or the Multilateral Aid Initiative (MAI) as the donors label it, is an international effort to revive an economy ravaged by years of corrupt rule under former President Ferdinand Marcos and save a democratic government burdened by some US$28 billion (S$54.6 billion) in foreign debt and an active communist insurgency.
It is a rare occasion when the Philippines does not need to convince the donors, observers say, pointing out that the PAP is not a Philippine initiative, but came from donors instead.
The presence in the pledging conference of donors in Tokyo today of United States Secretary of State James Baker underlies the importance Washington — the primary initiator — attaches to the aid package.
The package, which will run to billions of dollars in financing over the next five years, has been largely accepted even before details are ready. "We bought it for US$200 million," says a US diplomat, referring to Washington’s early commitment of US$200 million a year in grants before the plan had any shape or form.
The US and Japan are the largest donors, leading 17 other countries and 11 multilateral lending institutions. Donors have been averse to Uniting the PAP to the future of the bases which are covered by a treaty expiring in 1991.
Technically, there is no link although politically the connection is inevitable. "Japan will be anxious for the PAP to work and the bases to stay," says a senior diplomat in attributing Tokyo’s interest.
US legislators have already tied the two issues. The diplomat explains that the congressmen allotting the aid money are the same ones overseeing US-Philippines relations.
"If that (the relations) deteriorates, there will be an impact," he warned.
It is clear that the Philippines has been singled out for favored treatment when there are poorer Asian economies like Bangladesh and Nepal.
The earnestness of donor countries in seeing the Philippines succeed is not lost on the Filipinos themselves.
Mr. Roberto Villanueva, the PAP coordinator, says: "It Is obvious that they are looking not only at the economic implications, but the political implications too.
"I believe they are concerned that democratic government in the Philippines be supported and that the international donor community should go out of its way to do that."
If the economy does not grow, Mr Villanueva adds, and Filipinos’ living standards do not rise, then "democratic government will be in danger".
The donors say that although the Philippine economy performed much better than many poorer Asian countries, registering 6.7 per cent GDP growth in 1988, sustained growth is not a foregone conclusion. Hence the massive bailout has to be a continuing programme.
Philippine officials are confident that the country can absorb the aid despite the fact that an estimated US$2.3 billion in foreign aid remains stuck in the bureaucratic pipeline.
The Philippines has made efforts to put in place a mechanism for faster aid absorption, On June 23, President Corazon Aquino removed her combative Economic Planning Secretary Mrs Solita Monsod to enable Mr. Villanueva to become the overall foreign aid chief.
Mrs Monsod was partly blamed for the bottleneck in aid flow. Her rejection of prescriptions for economic reforms made her unacceptable to the country’s creditors and donors.
Aid mechanisms have been streamlined under Mr. Villanueva, who has put in place systems to monitor projects, cut red tape and minimize corruption.
Mrs. Aquino also acted swiftly to control damage arising from the scandal in land reform. The centre-piece of her government’s social programme has been rocked by a scandal in which a piece of land was sold to the government at 20 times the market value.
Mrs. Aquino has also sent signals to that donors the agrarian reform department will be revamped with Secretary Philip Juice likely to be dropped.
Mr. Villanueva says PAP money will not be used in land purchase, but only in support services such as land use and agricultural productivity. Money needed for these latter activities until 1992 is estimated at 55.5 billion pesos (S$5.5 billion).
To show the Philippines’ sincere desire to make good use of the aid, Mrs Aquino wifi chair the National Economic Development Authority (Neda).
The Philippines will present to the donors an outline of its needs and aspirations embodied in its economic plans.
It spells out measures the government will undertake to ensure the aid is well used. In pledging to re-structure the economy, Manila promises to improve tax collection, speed up privatisation, generate private investments, liberalise trade, expand social services, carry out land reform and a host of monetary measures to boost free enterprise.
These will serve as the Philippines’ report card. The fact that the World Bank gave high marks to the Philippines as the best performer among debtor nations in 1988 gives the PAP credibility, says an observer.
At this stage, Mr Villanueva says he will not speculate on how much money he expects to receive in Tokyo. Some countries like the US and Japan will pledge specific sums, others will merely endorse the PAP and follow up with detailed talks on a bilateral basis later.
Donors said they will not be governed by numbers. What seems important, says an observer, is the bigger political picture, "a meeting of minds between donors and the Philippine government and the trade -off will be a predictable amount in exchange for a predictable, sensible way of using the funds".
The framework of the PAP asks for, in order of priority, grants and concessionary loans, private sector investments, trade concessions and debt relief.
The indications are that most of the funds will initially go into huge infrastructure projects like roads, power, communications and industrial zones.
The bottom line, of the strategy is poverty alleviation in the countryside. With 70 per cent of the population living in rural areas, and social inequities fuelling the insurgency, the focus will be on jobs generation.
Greater weight age will be placed on labour intensive factories and agricultural business ventures with short gestation periods and export potential.
The private sector is expected to undertake massive infrastructure projects on a "build, operate and transfer" basis, Mr. Villanueva says.
To kick off the PAP, the government has laid down five demonstration projects in which the donors could participate.
These are the Cavite - Laguna - Batangas - Rizal (Calabar) provinces industrial area in Luzon; the General Santos-South Cotabato agro-industrial area and the Cagayan de Oro industrial area both in Mindanao, the Pansy agro-industrial area and the Samar livelihood and infrastructure project, both In the central Philippines.
The Calabar area looks most promising, with Singapore and Japan being mentioned as the major participants in ports and industrial zones management.
More than 120 investment applicants are waiting to get into Calabar, attracted by the rich agricultural hinterland and existing infrastructure. This area will be the pilot project to de-congest Manila.
The PAP, says Mr Villanueva, will not be a blank cheque for limitless credit for Filipinos. "My concern since Day One," he says, "is to tell everyone what (the aid package) is not."
Source : The Straits Times, July 3 1989
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