The view from without

Title

Language

English

Subject

Economic recovery -- Philippines

Philippines -- Economic conditions

Rights

In Copyright - Educational Use Permitted

Abstract

[This article discusses the economic recovery of the Philippines. A consultative group for the Philippines led by the World Bank held a meeting in 1973 to review the country’s economic situation.]

Fulltext

NO. 13 _______________________________ 16 JUNE 1973________________________________________ MANILA RP’S ECONOMIC RECOVERY The view from without It began with muscle spasms toward the end of last year. Then, the Philippine economy, a patient ether ized upon the table since last year’s July-August floods, began to stir, t<^ breathe easier. The patient has been recovering rapidly since. It was a recovery that stood up to the exacting and dispassionate ap praisal of foreign authorities. Just recently, for example, the Chase Manhattan Bank in its bi-weekly publication “International Finance” predicted enthusiastically that the Philippine Gross National Product this year would approximate the 6.5 percent gain posted in 1971. Among other things, the Bank cited easier credit conditions, increased public investment, and improved prices for Idi; , pine exports as the major it ierking* tip the ecJJfio my. Similarly, acknowledging the vastly improved economic conditions here in the past months, a consortium of US banks agreed last June 5 to renew a one-year $50 million revolving credit line with The Central Bank of the Philippines. The group made the decision “because the external reserves position of the Philippines is at a 25-year high, there was a trade surplus in the first quarter of 1973 and government tax collections are break ing records.” The consultative group for the Philippines headed by the World Bank which met recently was particularly satisfied with the country’s economic recovery. During the meeting, the atmosphere, a report noted, was a “strong contrast to the skepticism which overshadowed the December 1970 formative meeting, particularly on the part of the Europeans. This time around, the Philippines can point to significant real progress on their part even though the consensus of groups there are still many difficul ties to overcome.” The group, which met May 29-30 in Paris, included representatives from Australia, Canada, France, West Ger many, India, Japan, New Zealand, Spain, Switzerland, United Kingdom, the United States, and some interna tional financial institutions. Initially, the consultative group noted the marked disparity between last year’s economic performance and that of the first months of this year. By contrast, last year’s performance, particularly during the first three quarters, appeared rather anemic. On the whole, GNP growth rate at the end of calendar year 1972 registered 4.3 percent, a steep decline from 1971’s 6.5 percent. A number of causes were responsible for this: the San Juanico Bridge linking Leyte, Samar: quicker pace in infrastructure program severe floods in August and July 1972, the unsatisfactory performance of trade, and the effects of inflation as a result of the combined forces of the floating rate, imported inflation, and shortfalls in domestic food product ion. The floods last year not only caused extensive damage on infras tructure which needed to be rebuilt but also seriously affected the growth of food — particularly rice — product ion. The year 1972 ended with a size able balance of trade deficit. But the increased flow of official assistance plus improvements in invisi ble trade receipts (particularly tourism and private transfers) managed to offset the balance of trade deficit and bring about $198 million in the balance of payments for 1972. The first few months of 1973 were a contrast. Vicente Patemo, chairman of the Board of Investments and head of the Philippine delegation to the meeting, noted that during this time, the balance of trade registered sur-j pluses month by month. This wa» accomplished mainly through the drasll tic reduction of imports and th® increase in prices of some of the| country’s exports. As a result, the balance of pay ments for the months of January to April yielded a comfortable surplus of $260 million. Already, the Central Bank has made a net payment of $39.7 million of its foreign obligations. Gains have similarly been made in recent months on the domestic front. The level of government expenditures for infrastructure bounced from P760 million in FY1971-1972 to Pl,020 million during the first nine months of FY1972-1973 alone. Expenses for development are expected to be twice that of the preceding year. And yet these have been accom plished without resort to inflationary spending. Increased revenues account for this. As a result of the proclama tion of amnesty from past tax liabilities, an impressive P5.6 billion has been collected for FY1973, a 28 percent increase over the preceding year. The Paris meeting acknowledged the “impressive rehabilitation pro gram” following the floods. It was noted, however, that rice production was “still inadequate to meet domes tic demand.” The Philippine panel readily admit ted the fact that agriculture had been an Achilles’ heel in the country’s development. In this light, Arturo Tanco, Jr., the secretary of the Department of Agriculture and NaXtiral Resources, informed the group tjiat the Philippine government was sparing nothing to improve agricultu ral production. Under the “Masagana 99” rice production campaign, the Philippines plans to expand the use of fertilizers on 500,000 hectares of irrigated land ‘and to expose 100,000 hectares of rain-fed jands to high-yie]ding_yahe government alsdOecently pro vided P77.5 million fcp agricultural credit which should enabletthe lendings inr finn nfin hprjwrgT The Philippine National Bank esta blished 90 mobile banks staffed credit teams to go into rural areas where banking facilities are not available. The Central Bank, in addition, has provided P300 million to the National Grains Authority for price support operations at harvest. The NG A has increased rice price support by 10 percent, P30 per 50 kilos. In addition to emphasis on agricul tural development, the group re commended that the Philippines aim to raise its growth rate by 6-8 percent per year. Such a growth rate would provide food for the population, increase the standard of public ser vices, and absorb the rapidly expand ing labor force. To achieve this growth rate, the Philippines has embarked on programs to increase production. The 6.5 percent growth rate for 1973 predicted by the Chase Manhattan Bank speaks well of the efforts being taken by local authoriti wm Corollary measures are being un dertaken in addition to increasing production. During the group meet ing, BOI Chairman Paterno particular ly took note of two such measures: support for private foreign invest ment and family planning. Mr. Paterno informed the group that since martial law considerable incentives had been passed to improve foreign investment. The more impor tant ones were the revision of the export and investment incentive laws (copies of which Mr. Patemo distri buted to group members), and the liberalization of policies on the repatriation of profits and capital. Through family planning, the gov ernment plans to reduce population growth rate to 2.5 percent at the end of the next five ye «rs compared with the present rate of about 3.2 percent. The meeting ended on a very posi tive note for the Philippine economy. Although there was no mention of specific loans and aid grants for the coming year, an estimate of partial pledges made indicates the possible achievement of the $250 million development loan target. The group’s next meeting will be held in October next year, probably in Paris. INDEX World Muslim League mission visits Mindanao 2 Big leap for shrimp industry 4 Resurgence of sports in RP 5 Van Clibum: a legend visits Manila 6 Philippine corals draw world 8 People: Eugene Torre in Leningrad 8

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