Philippines May Finally Get Shot at Asia’s Boom : U.S.-Japanese 5-Year Plan Aims to Ease Debt Burden

A moment of opportunity may be at hand for the Philippines, the only capitalist country that has failed to achieve economic takeoff in East Asia, the world’s fastest-growing region.

A five-year multinational aid program, the first that the United States and Japan have joined in co-sponsoring anywhere in the world, is expected to be approved in early July, according to Roberto Villanueva, coordinator of the plan for the Philippines.

It is designed to promote foreign investment to help the Philippines cope with a $28.5-billion foreign debt and, at the same time, move forward economically.

Economists point out that higher wages are reducing the competitive advantage that labor-intensive industries have long had in South Korea, Taiwan, Hong Kong and Singapore, and that investment in Thailand is reaching the saturation point. In light of this, they say, it is the Philippines’ turn to attract foreign capital and to turn out goods for export.

Fresh Interest

Already there are signs of a step in this direction. More than 50% of the investment made here in 1987 and 1988 was in the export-oriented fields of garments and electronics, according to Jose Mario I. Cuyegkeng, an economist at the Center for Research and Communications here.

Foreign investors who snubbed the Philippines in the past are showing interest, with Taiwan taking the lead. Last year the Philippines attracted two and a half times the foreign investment it received in 1987, and businessmen, most of them from Taiwan, accounted for $139.6 million, a fifth of the net total.

Jose Concepcion Jr., secretary of trade and industry, said in an interview that he expects the Japanese to invest nearly $1 billion this year. He said he is also “looking for some $100 million” in investments by South Korean firms.

American businessmen in the Philippines have never stopped investing, a U.S. diplomat said, “even in the bad years” under deposed President Ferdinand E. Marcos.

Americans Bullish

The Americans continue to be bullish on the Philippines, the diplomat said, adding that reinvestment by established American firms is expected to amount to $600 million in the three years ending in 1990.

J. Marsh Thompson, executive director of the American Chamber of Commerce and Industry here, said he is “looking for a good year in investment” from American newcomers. “We’re giving briefings to visitors two or three mornings every week,” he said.

The Japanese ambassador here, Tsuneo Tanaka, said in a recent speech that Japanese annual investment tripled last year, to $75 million. And Japanese businessmen have made several significant new moves.

Uniden, a Japanese manufacturer of communications equipment, closed an electronics factory in Taiwan and replaced it with one in the Philippines. Asahi Glass made a major investment in a joint venture, and Toyota reopened a plant it had closed amid the chaos of Marcos’ waning years.

“There has been a turnaround here,” World Bank President Barber B. Conable said on a recent visit, “and that is very gratifying because turnarounds are hard to get.”

Against a background of stagnation during Marcos’ last three years in power--gross national product declined in 1985, the year before his fall--the economy last year expanded by 6.7%, with an inflation rate of 9%. By comparison, 16 other heavily indebted nations around the globe averaged less than 3% growth and inflation of 80%, Conable noted.

President Corazon Aquino’s government is aiming at growth of 6.5% a year through 1992, a goal that the International Monetary Fund accepts as realistic.

The long-promised multilateral aid package was expected to bolster Aquino’s goal.

Villanueva announced in early June that 17 nations and 14 international agencies will send representatives to Tokyo July 3-5 to discuss the plan and make pledges to contribute to it.

Last year, exports hit a historic high of $7 billion and will grow to $15 billion by 1992, according to Concepcion, who calls himself a “prophet of boom.”

Prophets of gloom are still around in abundance, though. According to Koicihiro Matsuura, director of the Foreign Ministry’s Economic Cooperation Bureau in Tokyo, the aid pipeline is clogged, with money coming in faster than Manila can use it.

Although the four U.S. congressmen who proposed the multilateral aid plan in 1987, the World Bank’s Conable and Philippine officials have repeatedly talked about the program bringing an additional $6 billion to $10 billion worth of aid and foreign investment to the Philippines over a five-year period, it promises to fall far short of that billing.

The program, officially called “the multilateral assistance initiative,” will gather Philippine aid programs, old and new, under the World Bank umbrella for coordination and is expected to encourage increased aid from overseas.

Under an agreement on the U.S. bases here, American aid is expected to total $483.6 million in fiscal 1990, up from $305 million this year. For the multilateral assistance initiative, President Bush requested an extra $200 million in the budget he submitted to Congress in February.

Japan last year pledged $925.4 million in aid and dispatched a mission to the Philippines in May to determine the level of this year’s aid.

Both Bush and former Prime Minister Noboru Takeshita have given their personal support to the initiative, and Sosuke Uno, Japan’s new prime minister, will reiterate Tokyo’s intention to contribute “substantially” to it when the leaders of seven advanced industrial democracies gather for an annual economic summit in Paris in July, Matsuura said.

Still, in terms of additional aid, no more than $1 billion or $2 billion spread over five years can be expected, economist Cuyegkeng predicted.

The initiative is expected to bring in new donors, including South Korea, Taiwan and Singapore, and will give the Philippines an international stamp of approval that can be expected to raise foreign investors’ confidence.

Hard Cash Needed

But “stamps of approval won’t be enough,” according to Solita Collas Monsod, secretary of the National Economic Development Authority. “We’ve had stamps of approval all over the place since 1986.”

What the country needs, she said, “is actual hard cash that will allow us to improve our infrastructure . . . that will build the environment for private-sector investment to come in.”

Repayment of domestic and foreign debt consumes 43% of the budget and, without new money, a Japanese official here said, “this country would go bankrupt.”

To sustain the goal of 6.5% real annual growth through 1992, Philippine officials estimate, the country will need at least $3 billion and perhaps as much as $8 billion in additional aid and foreign investment.

This year, according to Finance Secretary Vicente R. Jayme, the Philippines will have to repay $3.3 billion on its foreign debt, compared to a projected inflow of only $1.7 billion. Last year, the net outflow was $1.9 billion--and that after obtaining a moratorium from foreign commercial banks on repayment of principle until 1992.

Even with the multilateral assistance initiative, Monsod, the Economic Development Authority official, said, “more will be going out than comes in.”

Monsod recalls that 25 years ago the Philippines “exported more than South Korea and Taiwan put together (and) Thailand wasn’t even in sight.” Today, she said, “we’re even looking Thailand in the back. . . . We flubbed it.”

Monsod blames the quarter-century of stagnation on Marcos’ rule. But now, she said, “the opportunity is here because the growth is here, the human resources are here, the skills are here.”

But a quarter-century ago the level of education in the Philippines was ranked second only to Japan’s in Asia. Now, both South Korea and Taiwan have passed the Philippines in this respect. Illiteracy is on the rise, and the incidence of poverty has more than doubled, to the point where about half the people are considered impoverished, Concepcion said. Crime, insurgency, labor unrest and political instability have all increased.

An American who works for the Asian Development Bank said the economy has taken “two steps forward and one and a half steps backward” since he came to the Philippines in 1964 as a Peace Corps volunteer.

“I don’t know why things don’t get better,” he said. “There is a certain lack of discipline, of thinking of one’s own family or economic unit rather than the national good. It’s going to take a long time to pull the country up again.”

Even last year’s surge, as some foreign analysts see it, represented little more than “surface prosperity” limited to the cities.

The World Bank’s Conable warned Filipinos that they still face “the challenge of sustainable development, the deep and difficult structural problems of poverty . . . and the environment.” He said population growth, which is compounding the poverty problem, will double the number of Filipinos in 30 years to 120 million.

Aquino’s press secretary, Teodoro C. Benigno, acknowledged in February that little of the Philippines’ economic success has trickled down to the masses. And Cardinal Jaime Sin, archbishop of Manila, recently complained in a sermon that the ideals of the 1986 revolution that ousted Marcos had been forgotten. In Aquino’s presence, he charged that government officials have become insensitive to the needs of the people.

“The old politics,” Sin said, “has come back, to the dismay of us all--the positioning for power, the corruption, the grandstanding, the jet-setting, the influence peddling, the petty bickering. It seems we have gone back to life as usual, to what we really are: a nation of easygoing people, rascals, braggarts, thieves. It is we who are the problem.”