Report No. 525W8PH

The Philippines: An Agenda for Adjustment andGrowth

November 30,1984

East Asia and Pacific Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

January -- , to June 22, 1983 - US$1.0 = P 9.4- P 1.0 = US$0.11

June 23 to October 4, 1983 - US$1.0 = P 11.0- P 1.0 = US$0.09

October 5. 1983 to June 5. 1984 - US$1.0 = P 14.0- P 1.0 = US$0.07

June 6 to October 15, 1984 - US$1.0 = P 18.0- P i.0 = US$0.06

October i5 to November 1.5. 1984 - USS1.0 = ? 20.0 (a-;eraaefloacing rate)

- P 1.0 = USSO.05

ACRONYMS

DBP - Development Bank of the PhilippinesCDP - Gross Domestic ProductGFI - Governmenc FinanciaL InstitutionsGNP - Gross National Productha - hectareICC - Investment Coordination CommitteeIBRD - International Bank for Reconstruction and DevelopmentIFPRI - International Food Policy Research InstituteIMF - International Monetary Fundkcal - kilocalorieLBP - Land Bank of the PhilippinesLIBOR - London Inter-Bank Offering RateXAF - Ministry of Agriculture and FoodMBOE - Million of barrels of fuel oil equivalentMOE - Ministry of EnergyMRR - Manila Reference RateMYW - MegawattNACIAD - National Council on Integrated Area DevelopmentNASUTRA - National Sugar Trading AgencyNEA - National Electrification AdministrationNEDA - National Economic and Development AuthorityNPC - National Power CorporationOISF - Oil Industry Special FundPCA - Philippine Coconut Authorit-PHILSUCOM - Philippine Sugar CommissionPNB - Philippine National BankPNOC - Philippine National Oil CompanySDR - Special Drawing RightsUNICOM - United Coconut Oil Mills

FOR OMCIAL USE ONLYPHILIPPINES

COUNTRY ECONOMIC MEMORANDUM(An Agenda for Adjustment and Growth)

Table of Contents

Page No.

WORLD BANK REPORTS ON THE PHILIPPINES, 1983-84SUMMARY AND CONCLUSIONS . .. .............. *. i-viii

I. OVERVIEW OF ADJUSTMENT ISSUES AND MEDIUM-TERM PROSPECTS 1

A. Introduction .1B. The Current Economic Crisis and its Causes .2C. The Short-Term Adjustment Process 5D. A Strategy for Medium-Term Adjustment and Growth. 6E. Medium-term OutLook . .......................... . ... 8F. The Revised Development Plan .10

II. XACRO-ECONOMIC ADJUSTMENT ISSUES AND PROSPECTS .12

A. Balance of Payments .................. 12(a) Recent Developments .... 12

vi) Current Account . .12

(ii) Patterns of External Financing and Debt 16(iii) Policy Responses to the Crisis . .17

(b) Outlook and Options for the Future 19Ci) Short-term Prospects . . i

(ii) Medium-term Adjustment ....................... 19

B. Public Finance . . .23(a) Past Performance and Policy Issues . 23

Ci) Overview of Expenditures . .25Cii) Resource Mobilization . .26

(b) Stabilization PoLicies ............................,. 27(c) Medium-term Prospects and Adjustment Needs . .28

(i) Expenditures . . 29(ii) Resource Mobilization . .29

C. Financial Intermediation .. 30(a) Sectoral Reforms and Performance .30

(i) Financial Sector Reforms .30(ii) Structure and Growth of the Financial

System ............. ...... 31(iii) Resource Mobilization and Allocation . .33(iv) Recent Setbacks and Responses .. 33

This report presents the findings of a mission which visited Manila inKarch/April 1984. The mission consisted of Regina Bendokat (leader),Rozany Deen, Madhusudan Joshi, Jeffrey Katz, Christian Moulin, andBhanoji Rao. The report was updated and discussed with the Government inOctober 1984.

LThis document has a restricted distribution and may be used by recipicnts only in the performance oftheir ofrGcial duties. Its contents may not otherwise be disclosed without World Bank authorizationL

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Page No.

'LI. MACRO-ECONOMIC ADJUSTMENT ISSUES AND PROSPECTS (cont'd)

(b) Impact of Stabilization Policies ..................... 34(i) Monetary Policies .. *..... . .... e. ............ . . 34

(ii) Interest Rate Policies ....................... 35(c) Development Prospects and PoLicy Issues . . 36

(i) Short-term PoLicies .36(ii) Longer-term Policies . .37

III. SECTORAL ADJUSTMENT ISSUES AND MEDIUM-TERM PROSPECTS .39

A. Manufacturing Industry .... 40(a) Structural Issues and Past Performance. . 40(b) Impact of Stabilization Policies . . .43(c) 1edium-term Prospects and PoLicy Issues . . .45

(i) Policy Issues .. 45(ii) Growth Prospects .. 46

B. Energy .... 47(a) Past Performance and Sectoral Adjustment .... 47(b) Impact of Stabilization Policies . . . 50(c) Development Prospects and PoLicy Issues... 50

(i) Energy Demand .. 50(ii) Energy Pricing............... 52

(iii) Energy Supply .. 54(iv) Balance of Payments Impact 56(v) Energy Investment Program 1984-88 . .57

Cvi) Financing the Investment Program . .58

C. Agriculture .... 59(a) Past Performance and Structural Issues. 59

(i) Past Growth and Export Trends .59(ii) Policy and Institutional Issues 61

(iii) Employment and Poverty Issues .63(b) Growth Prospects and Policies ....... 64

(i) Medium-Term Development Strategy .64(ii) Growth Scenarios ........... 65

(iii) Prospects and Policies in Key Subsectors 67(iv) Irrigation ................. O*.71

STATISTICAL APPENDIX .72

MAP

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Page No.

TEXT TABLES

Table No.I.1 Investment and Saving Ratios, 1978-84 .... ................ 3I.2 Trends in Capital-Output Ratio, 1970-83 ... S..* .... 7I.3 Growth Performance and Projected Growth Scenarios,

1975-90 ................................................ 10II.1 Current Account Summary, 1972-83 ....... .......... so... 13II.2 InternacionaL Comparison of Manufactured Exports

and Terms of Trade, 1972-83 14II.3 Selected Payment RequiremenEs in Relation to Exports of

Goods and Services, 1972-83 .151I.4 External Liabilities in Relation to Export Earnings for

Selected Countries, 1982 .16II.5 Summary of Excernal Capital Requirements and Sources,

(High Case), 1985-90 ................................... 22II.6 Public Finance Overview, 1978-85 ......................... 24II.7 Trends in Public Expenditures, 1978-82 ................... 25II.8 Structure and Growth of the Financial System .... ......... 32Il.9 Nominal and Real Interest Rates, 1982-84 ................. 36

_II.1 Manufacturing Industry: Selected Indicators of Structureand Performance ........................................ 42

III.2 Energy Consumption Indicators, .-973-83 ................... 48III.3 CommerciaL Primary Energy Balance, 1983-90 .... ........... 51II1.4 Sectoral Composition of Commercial Energy Consumption,

1983-90 .53III.5 International Comparison of Prices for Selected Petroleum

Products, June 1984 .................................. .. 54III.6 Growth and Structure of the Agricultural Sector, 1972-83.. 601II.7 Growth Scenarios for Agriculture, 1983-90 ................ 66III.8 Indicative Export Earning Projections in Two Growth

Scenarios, 1983 and 1990 .68

WORLD BANK REPORTS ON THE PHILIPPINES, FY1983/84 /a

A. Sector Reports and Special Economic Studies

Irrigation Program Review, No. 3545-PH, December 1982Agricultural Credit Sector Review, No. 4117-PH, May 1983Population, Health and Nutrition, No. 4650-PH, January 1984A Review of External Debt, No. 4912-PH, November 1984

B. Appraisal Reports

Agriculture and Rural Development

Central Visayas Regional Project, No. 4504-PH, October 1983Agricultural Sector Inputs Project, No. P-3860-PH, July 1984

Structural Adjustment

Second Structural Adjustment Loan, No. P-3389-PH, April 1983

Transportation

Fifth Highway Project, No. 4535-PH, May 1984

Urban

Regional Cities Development Project, No. 4094-PH, March 1983Municipal Development Project, No. 5027-PH, May 1984

Energy

Petroleum Exploration Promotion Project, No. P-3297-PH, September 1982Geothermal Exploration Project, No. P-3360-PH, September 1982

Education

Vocational Training Project, No. 3750-PH, August 1982

Water Supply

First Rural Water Supply and Sanitation Project, No. 3866-PH, August 1982

/a The previous economic report "The Philippines: Selected Issues for the1983-87 Plan Period," No. 3861-PH, June 1982, lists World Bank reports onthe Philippines distributed in FY1980-82.

SUMMARY AND CONCLUSIONS

1. The Philippine economy is in the midst of a severe economic andfinancial crisis. Falling prices for export goods, increased oil prices andinterest rates, a drought, combiLied with structural weaknesses of the economyand a changed political situation have stopped the growth process, erodedinvestor confidence, and left the economy in a position of inability to payits external debt. Serious questions now arise over the medium-term prospectsof the economy and the set of policies required to restore growth and improveinternationaL creditworthiness. This report examines the causes of theworsening economic situation, summarizes the stabilization program, andattempts to Lay out an agenda for medium-term adjustment and sustainableeconomic growth.

The Causes of the Economic Crisis

2. The roots of the current crisis can be traced to changes in theinternational economy after 1979 and the Government's attempt to adapt toit. Under-estimating the severity and duration of the worLd recession, andits domestic impact, the Government embarked upon a major expansion of pubLicinvestment. This program was designed both to accelerate development ofdomestic substitutes for imported petroleum and to act as a countercyclicalbuffer to the international recession. Thus, the share of public investmentin GNP expanded while private investment stagnated; public sector savings,however, did not increase in tandem with investment. The public sectorinvestment-savings gap, which widened from 3X to 6% of GNP during 1979-82. wasfinanced Largely through commercial bank credits which then were readilyavailable. The expanded investment program produced some substantialbenefits, in particular, oil imports were reduced as a result of energyinvestments and pricing policies. For the most part, however, the choice ofprojects left much to be desired. Investments in the public and privatesector were often over-priced, poorly designed, or resulted in excess capacityor industries that could not compete in world markets. Many poorly plannedprivate sector projects became a public sector burden since they were financedthrough government-owned financial institutions, or through government-guaranteed domestic and foreign borrowings.

3. The Government early on recognized that the economy's industrialstructure was inefficient, highly capital- and import-intensive, and insuffi-cientLy geared toward export markets. Thus, starting in 1980, it began toliberalize the trade regime and the financial sector and to improve export andinvestment incentives. These reforms, whose full impact was expected to belonger-term, were swamped by the growing balance of payments problems in theshort term. The continuation of the international recession through 1982 ledto a deterioration of the Philippines' terms of trade by 18% in 1980-82. Italso meant little growth in manufactured exports. Copper prices reached anall-time low, forcing several Philippine companies to stop production, furtherreducing export volumes. Sugar prices also remained low, and the volume ofagricultural exports, which stilL accounted for one-third of Philippine exportearnings, was adversely affected by a drought in 1982/83. At the same time,

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real international interest rates increased, and the interest burden on therapidly expanding external debt of the Philippines grew from 1.4% of GNP in1979 to 4.7% of GNP in 1983. Its growth was a major factor in the widening ofthe current account deficit from 5% of GNP in 1979 to 8% of GNP in 1983.

4. The results of deteriorating internal and external economic perform-ance were an increasing capital-output ratio and a deceleration of economicgrowth. GNP, which had grown at an average 6% during the 1970s, increased byonly 1% in 1983 and is expected to decline by as much as 6X in 1984. Withpopulation growth of 2.5% and labor force growth of 3%, the economy failed toproduce sufficient productive employment opportunities; under-employmentincreased, real wages declined steadily, and social tensions mounted.

5. Faced with continued poor economic performance, the Government'sreaction was insufficient, both in timing and content. In particular,exchange rate policies necessary to complement the adjustment program lagged,and the real effective exchange rate appreciated by 10% between 1979 and end-1983. While the national government budget was curtailed in 1983, publiccorporations continued their large investment programs, relying on bothexternal and domestic financing.

6. With continued poor economic performance, a rising debt serviceratio, and reserves dwindiling to support an unsustainable exchange rate,external creditors attempted to contain their exposure. Existing credits wererolled over on shorter terms, and new money was increasingly difficult toobtain. When the political situation changed in August 1983, externaL creditlines were terminated, capital flight accelerated, and reserves were notavailable to offset the ensuing massive balance of payments deficits. As aresult, the government was forced to declare a moratorium on debt repaymentsand begin negotiations for a debt rescheduling.

Stabilization Program

7. Since mid-1983, the Government has introduced several measures aimedat stabilizing the economy. The peso was devalued vis-a-vis the US-dollar by43% between June 1983 and July 19S4, the public sector deficit was narrowed,and reserve requirements were increased to reduce liquidity of the bankingsystem. The impact of these actions, however, was limited. The realeffective exchange rate declined by only 14%. Budgetary stringency did nocextend to public corporations and was relaxed in early 1984 to accommodateadditional financing requirements of financial institutions. Liquidityreduction was also hampered by the fact that many financial institutions werealready undergoing a liquidity crisis due to weak performance of the realeconomy and a deteriorating portfolio. Thus, the stabilization process hasbeen protracted, inflation has increased to an estimated 45-50% in 1984, andthe positive impact of some measures has been eroded.

8. In the last quarter of 1984, the Government has expanded andstrengthened the stabilization program to restore stability of the economywithin the next 18 months. The program seeks to control inflation by reducingcredit to the public and private sectors, restore external balance through afloating exchange rate, improve the level and structure of taxation, and

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eliminate the temporary foreign exchange controls. In public finance, theGovernment aims at reducing the public sector deficit to less than 2Z of GNPby 1985. Substantial revenue measures have been taken, including revisions ofexcise taxes, deletion of tax exemptions for major public corporations, andthe introduction of a more broadly based sales tax, thus reducing thedependence on international trade taxation. A special effort will beundertaken to reduce investment by public corporations and increase theirself-financing. The Government, which has made further cuts in its investmentprogram, is committed to giving priority to ongoing projects which are closeto completion and to projects which have a large ODA component, while ensuringadequate funding for operation and maintenance of existing investments.Financing of public investment is designed to prevent an increase in exposureof the domestic banking system to the public sector. On the monetary side,the Government aims at reducing reserve money through additional sale ofgovernment financial instruments to the public; this will require furtherincreases in interest rates. A flexible exchange rate policy, the abolitionof exchange controls, and increased incentives for export production,especially in the agricultural sector, are designed to contribute to exportgrowth and restrain imports, thus reducing the current account deficitsubstantially. Import reductions, while necessary to reduce the externalimbalance, will constrain investment and economic growth in 1984-85. TheGovernment has requested an IMF standby arrangement to support thestabilization program.

9. Stabilization of the economy is the first and indispensable taskfacing the Philippine decision makers today. The heavy cost of stabilizationeffort in terms of lost growth opportunity can and should be reduced. Thechallenge for the management of Philippine economy is to design and implementthe stabilization phase so as to provide a basis for the resumption ofadequate long-term growth and for a durable resolution of the debt problem andthe external imbalance. While a rigorous and timely implementation of thestabilization program may reduce its economic cost, a systematic concentrationof public expenditures on maintaining the existing capital and completing themost viable projects may be beneficial by itself. Enhancing the competitive-ness of the Philippine industry, and the discipline in the financial manage-ment will serve simultaneously the short-term stabilization objectives andthat of longer-term growth. But more fundamentally, the Government needs totransform the current crisis into an opportunity to carry out a long-termdevelopment strategy. This requires that the economic management should alsohave a longer-term perspective, in addition to short-term stabilizationconcerns.

A Policy Agenda for Medium-Term Adjustment and Growth

10. The present crisis has obscured many of the real underlyingpotentials and capacities of the Philippine economy. The country is endowedwith natural and human resources to be able to move into the league of EastAsian exporters, such as Korea, Taiwan and Singapore. The question is how theGovernment can implement the stabilization measures in a way which iscompatible with the structural reforms required to restore a viable economy.

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11. The agenda proposed in this report for Government policy actionscenters around a strategy based on four principles:

- First, the improved utilization of existing capital stock andcompletion of those on-going investment projects that have highfuture returns;

- Second, the careful selection of new public sector investments so asto focus on those having high returns, particularly in the shortrun, a high foreign exchange impact, or provide for therehabilitation of existing infrastructure.

- Third, the establishment of a policy environment for the privatesector that emphasizes efficient import substitution, exportproduction, and increased employment opportunities.

- Fourth, a major expansion of domestic resource mobilization by thepublic sector through both a reform of the tax system and throughbetter self-financing by the public corporations.

Economic policy making would need to reflect these principLes already duringthe stabilization period to provide clear and consistent policy signals to theprivate sector and a framework for investment decisions. These principleshave implications for all sectors of the economy, but in different degrees.Below, the policy agenda for specific sectors is spelled out in more detail.

12. Trade Policy. In this area, substantial policy changes which havebeen initiated in 1980, need to be maintained and expanded. They are requiredto achieve high export growth of 6% in volume between 1984 and 1990 and toensure that economic growth is not unduly constrained by a low import growthof about 1% during the period. Most crucial for successful balance ofpayments adjustment will be the continuation of a flexible exchange ratepolicy and the elimination of remaining foreign exchange controls, initiatedunder the stabilization program. While the international competitiveness ofPhilippine exports essentially depends on the efficiency of production in thereal economy, export promotion policies need to be maintained. In particular,the bias against export industries under the tariff regime should be reducedas scheduled in the 1981-85 trade reform program and the administrativeprocedures for exportation simplified. Since imports will be constrained bythe availability of foreign exchange for a number of years, efficient importsubstitution will be essential; in addition to exchange rate policies, pricingpolicies in energy and agriculture will be important instruments in thatrespect. The scheduled reduction of import tariffs, realignment of relatedindirect taxes, as well as gradual reduction of quantitative importrestrictions are needed policy measures.

13. Public Finance. While the stabilization program introduces steps inthe right direction, further policy measures are required to improve thestructure of public finance in the next few years. The objective is not onlyto reduce the public sector deficit to levels commensurate with continuedbalance of payments adjustment, but to establish an expenditure pattern that

is based on the medium-term development objectives for the economy and toprovide a revenue system that would support this program. On the expenditureside, this implies:

- First, the National Government needs to restore recurrentexpenditures to more adequate levels while improving theirefficiency; e.g. while limiting public sector employment, operationand maintenance expenditures need to be augmented selectively toensure efficient use of the substantial past investment.

- Second, since public investment will remain severely constrained forthe rest of the decade, improved investnient programming becomes ahigh priority, at the level of implementing agencies, line minis-tries, as well NEDA and the Budget Ministry, to ensure that theinvestment program focusses on projects with a high economic rate ofreturn.

- Third, priority should be given to completion of ongoing projectswith high marginal rates of return. New projects would be primarilythose which complement existing investments or have a shortgestation period. All projects that have been planned before thefinancial crisis of 1983 need to be re-assessed in light ofincreased scarcity and cost of foreign funding.

14. The main issue in public finance, however, will be resource mobili-zation by the national government as well as public corporations. Publiccorporations need to increase their internal cash generation as the mainsource of future growth of their investments, consistent with efficiency andequity objectives. Beyond this, the principal area requiring reform is thenational government tax system. While the stabilization program includesinitial measures, a comprehensive reform of the tax system is required toprovide the basis for sustained growth of public expenditures. The reform hasto address four major and chronic problems:

(a) increase the tax effort further through broader-based taxes;

(b) improve the structure of the tax system by reducing the heavy andgrowing reliance on indirect, especially international trade, taxes;

(c) improve the cost-effectiveness of the tax system by expanding thereform of tax incentives beyond manufacturing industry; and

(d) improve the efficiency of tax collection and administration.

15. Financial Intermediation. As is the case in the public sector, thefinancial system of the Philippines will have to reduce its reliance on for-eign savings. First, this requires increased emphasis on financial sectorpolicies designed to raise domestic savings and thus maintain an adequate sizeof the financial system. Second, the structure of the financial system needsto be rationalized further and the efficiency of its operations improvedthrough better supervision by the Central Bank. Third, government financialinstitutions, which have grown rapidly, need to reduce their portfolios to a

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size commensurate with their resource mobilization from non-budgetary sources;this also requires restructuring of the largest institutions to make them moremanageable. Fourth, the deteriorating portfolios of many financial institu-tions require systematic policies for the disposal of non-performing assetsand strengthening the evaluation of new project proposals. Fifth, with thetightening availability of financial resources and monetary policyconstraints, the role of the Central Bank as a source of funds and itsrediscounting policies need to be reviewed to ensure that adequate credit ismade available to priority sectors, as e.g. manufacturing exports andagriculture. Sixth, while the ongo4 ng government study on public financiaLinstitutions is expected to provide specific recommendations in several of thepolicy areas mentioned above, the impact of the financial sector reformsinitiated in 1980 should be reviewed in detail to provide specific directionsfor future financial policy, taking into account the substantially changedmedium-term prospects.

16. Manufacturing Industry. This sector is most severely affected bythe worsening economic conditions in the Philippines and will experiencecontinued financing and import constraints. The most important policyprinciple for manufacturing industry, therefore, is a continuation of ongoingpolicy reforms which aim at increasing the efficiency of the sector throughlowering of protection, and reforms of export and investment incentives. Thispolicy thrust needs to be reaffirmed and the interim measures taken in the1983 crisis to be phased out, in particular, the quantitative restrictions.Trade liberalization should go in tandem with realistic exchange ratemovement. In addition, subsector studies have to be undertaken as a priorityto establish the rationale and specific policies for restructuring ofinefficient industries oriented toward the domestic market which still accountfor 86% of the value added in the sector. Subsector programs are alsorequired to identify industries which diversify Philippine exports. Withrespect to the program of major industrial projects, the viability of theprojects under implementation as well as those currently deferred should bereviewed, given the severe financing constraints and the change in economicoutlook.

17. Energy. The energy sector has a large potential for furtherefficient import substitution, and the Covernment's reform program which aimsat increased domestic energy production, energy conservation, and increasedself-financing of investment by public corporations, would need to continue.Priorities of policy action within the sector are changing, however. With thelarge capacity expansion coming on stream in the next few years, the emphasisshould be on efficient use of existing capacity. The energy investmentprogram must give highest priority to the completion of major ongoing projectswhich would allow to reduce import dependence frcm 772 of commercial energy in1983 to 56Z by 1990. Once the on-going investments are completed, the energysector will no Longer be a priority sector for new investments for some yearsto come, since energy demand growth will be constrained by slow growth of theeconomy. These and the financing constraints must be taken into account inthe current review of the least-cost investment program for the power sectorto determine the optimum size and timing of new investments. Energy pricingpolicy will have to remain the principal tool for demand management and self-

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financing of key agencies. In the longer run, there is a need for formulatinga policy on rural energy supply, to address the issue of diminishing woodresources.

18. Agriculture. In light of the current economic problems, the Govern-ment is giving increasing attention to agriculture for efficient import sub-stitution, diversification of exports, and increased earning- from traditionalcommodities. While agriculture will be the main sector to contribute toeconomic recovery in 1984-85, its medium-term growth prospects are lessassured and require substantial policy reforms to realize the sector's produc-tion potential. The most important element in this respect is a comprehensivereform of the incentive framework for agricultural production. While theGovernment hac taken initial steps in liberalizing poultry prices andincreasing the private sector role in rice marketing, further substantialreforms are required. They include: liberalizing pricing policies andmarketing arrangements for foodcrops and traditional export crops; revisionsin input pricing, in particular fertilizer and irrigation water charges; andreview of investment incentives and the trade regime. In addition, the roleof government institutions in the agricultural sector needs to be rationa-lized, overlapping functions and conflicting roles - especially in the sugarand coconut subsectors--require attention. More generally, government insti-tutions should concentrate on providing the appropriate policy frameworkrather than intervening directly in production and marketing. With respect tothe irrigation system, the priorities are improved operation and maintenance,thus reducing the need for government subsidies and freeing scarce publicresources for investment. Several large irrigation schemes will becomeoperational in the next few years; the emphasis for public investment,therefore, should be on rehabilitation and cost-effecti-.,e communal irrigationschemes.

Growth Scenarios

19. The report presents two growth scenarios to illustrate and todelineate the range of possibilities. Both scenarios assume a moderate growthof the international economy which would not constrain Philippine exports.The high case is based on the assumption that the stabilization program,ongoing adjustment measures, as well as other policy reforms described in thereport are implemented in a timely fashion. Thus, under this scenario GDPcould grow on average at 4% p.a. during 1985-90, reaching 6% by 1990. Theattainment of this target is based on a number of critical assumptions,namely:

- a more efficient utilization of capital and hence a decline in theincremental capital-output ratio;

- resumption of a high 6X export volume growth, with manufacturedexports growing by over 8% p.a.;

- significant import substitution in energy, permitting a decline ofthe volume of energy imports by 12% in 1984-90;

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- a moderately high growth in agriculture of about 4.3% and a recoveryof industry to an average 4.8% growth during the period.

In the high case, personal consumption would grow at a rate slightly Lowerthan the 2.4% population growth rate; per capita consumption would still be 9%lower in 1990 than it was in 1983. Thus, even the high case would include aperiod of lower levels of living for the population and the possibility ofincreasing poverty. In the low case, GDP growth would average 1.1% in 1985-90and reach only 3.0% by 1990. Per capita consumption would be 21% lower in1990 compared to 1983. Thus, failure to attain a recovery similar to the highcase implies the possibility of significant declines in living standards forthe majority of the population, growing unemployment, declining real wages,and increasing proportions of peopLe living below the poverty line. Thesocial implications of the low case, as well as its failure to provide anadequate solution to the balance of payments problem, make this a highlyundesirable option.

Financing Requirements

20. The adjustment outlined above would require considerabLe externalfinancial support. New gross loan inflows would need to average about$2.2 billion annually to meet debt service, allow some rebuilding of reserves,and finance an adjustment of the current account deficit from about 4% of GNPin 1985 to 0.1X by the end of the decade. The debt service ratio on MLT woulddecline to 27% by the end of the 1980s, but would rise again during the early1990s, reflecting the effect of the debt rescheduling, before falling off.However, the level of indebtedness would fall notably in relation to exports,which would be a precondition for a restoration of lending from privatesources on a voluntary basis. The amount of private foreign capital that willmaterialize is highly uncertain at this time. Market borrowings will not befeasibLe until creditworthiness is strengthened, but special arrar- ments,including debt rescheduling, may need to be continued in the interim. Arealistic recovery program, combined with substantial official support, canlead to the restoration of creditworthiness in the medium term.

PHILIPPINES

COUNTRY ECONOMIC MEMORANDUM

I. OVERVIEW OF ADJUSTMENT ISSUESAND MEDIUM-TERM PROSPECTS

A. Introduction

1.01 During the 1970s, the Philippines achieved substantial progress ineconomic development. ReaL growth of GNP averaged 6%, agriculture grew byalmost 5%, and the country became self-sufficient in rice, its major food-crop. Spurred by government support through credit and investment incentives,the industrial sector expanded rapidly at 9Z p.a. Supported by exportincentives, nontraditional manufactured exports, especially electronics andgarments, grew dramatically and increased their share in exports from insig-nificant amounts to 47% in the early 1980s. Public investment was raisedsignificantLy, expanding infrastructure and social services.

1.02 There were, however, weaknesses in the structure of the economy.The import-substitution strategy in manufacturing industry, which providedhigh protection, resuLted in inefficient production and high dependence onimported inputs and capital goods. Export industries, while growing rapidly,remained an enclave and highly import-intensive. Thus, manufacturing industrywas not the leading sector and had only a limited impact on employment. Inagriculture, government marketing and price controls as well as the institu-cional framework had a depressing effect on the output of major export crops,and productivity in many subsectors remained low. As a result, a large partof the popuLation did not benefit significantly from the high economicgrowth. The country remained vulnerable to balance of payments shocks, sincevolatile commodity prices affected about half of its merchandise exportearnings, and it was heavily dependent on imported fuel. In addition, whilepublic expenditures grew rapidly, long-standing issues of 'ow domesticresource mobilization persisted, and the Philippines relied heavily on exter-nal borrowings to finance the gap. By the late 1970s, however, the Governmentbegan to recognize the need to address these underlying structural problemsand embarked on a program of reforms in the trade, industrial, financial,energy and resource mobilization areas. Thus, the growth prospects of theeconomy appeared good for the 1980s, with sufficient external resourcesavailable to finance adjustment and growth.

1.03 By 1984, in contrast, a different picture has emerged with thecountry in the midst of a severe economic and financial crisis. Economicgrowth has decelerated in the last fo:ur years and is expected to be -6% in1984. The agricultural sector is suffering from the impact of a drought in1982/83 and adverse movements in the terms of trade. Industries producing forthe domestic market are operating far below capacity and have difficultiesmeeting their debt service obligations. Due to the proLonged recession, manyfinancial institutions are in a liquidity crisis, and several of them areapproaching insolvency. The already high under- and unempLoyment increased

further. Private investment has slowed, reducing the generation of newemployment opportunities. Inflation has accelerated to 45-50Z p.a., and realwages have been reduced. Export volumes for primary commodities and manu-factures have stagnated, and export earnings have fallen as a result of aserious deterioration in the terms of trade. In October 1983, the Governmentdeclared a moratorium on payment of most maturing external debt obligations,and additional capital inflows from commercial banks are currently notavailable.

1.04 The baLance of this chapter explores the reasons for this rapidreversal of economic conditions and the prospects of the economy for the restof the decade. It provides an overview of the current economic crisis and itscauses, describes briefly the short-term stabilization process, develops astrategy for medium-term viable growth, with particular emphasis on governmentpolicy changes required, and presents the medium-term prospects of the eco-nomy. The balance of the report elaborates on the theme of a medium-termadjustment and growth strategy. Part II reviews the situation in crucialmacro-economic policy areas, i.e. balance of payments, public finance, andfinancial intermediation. Part III addresses the same questions at thesectoral level for industry, energy, and agriculture.

B. The Current Economic Crisis and its Causes

1.05 The deterioration of the Philippines' economic performance followedthe second oil crisis in 1979 and reflected the impact of the subsequentinternational recession, in addition to structural problems of the economy.The oil import bill increased by 1.8% of GNP from 1978 to 1980. The interna-tional recession led to weak demand and Lower prices for most exports. Thus,export earnings from the traditional primary commodities copper, sugar, andcoconut were sharply reduced. Agricultural exports in 1983-84 were alsoaffected by adverse weather. Earnings from non-traditional manufacturedexports stagnated; services, thus, were the main element to stabilize exportearnings. Despite the deterioration in export performance ar-d the increasedforeign exchange requirements for fuel imports, the country continued withlarge imports of intermediate goods for industrial production, spurred by anexchange rate that did not reflect the true scarcity of foreign exchange.During 1980-82, the Philippines was able to finance its increasing currentaccount deficits from foreign commercial bank credits, although borrowing wasincreasingly at short maturities and real interest rates on existing and newdebt increased. The current account deficit as a consequence rose from analready high 5% of GNP in 1979 to 8% by 1983.

1.06 The growth of the external deficit is mirrored by an increasinginvestment-saving gap (Table I.1). Gross domestic investment in thePhilippines was high by international comparison, while the relatively lownational saving effort deteriorated further in 1982-83. The Philippineinvestment-saving gap which was negligible in the early 1970s, expanded to 5%of GNP by the end of the decade and took a further leap to 8% of GNP in1982-83. During the same period, the external debt increased rapidly,reflecting the growing inflow of external resources which financed one-thirdof fixed investment in 1983. A disaggregation of the investment-saving gapshows that the public sector gap was high through most of the period 1978-82.

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Table 1.1: INVESTMENT AND SAVING RATIOS, 1978-1984(percentage of GNP)

Est.1978 1979 1980 1981 1982 1983 1984

Gross Domestic Investment 27.0 29.0 28.7 28.7 28.1 27.5 22.0Fixed Investment 23.9 25.8 25.7 26.1 25.6 25.1 21.3Private 16.9 18.9 17.2 16.2 16.1 17.3 16.9Public 7.0 6.9 8.5 9.9 9.5 7.8 4.4

Increase in stock /a 3.1 3.2 3.0 2.6 2.5 2.4 0.7

Gross National Savings 22.4 24.0 23.3 23.3 20.2 19.4 16.8Private 18.5 18.5 17.8 18.5 16.5 15.3 16.0Public 3.9 5.5 5.5 4.8 3.7 4.1 0.8

Foreign Savings /b 4.6 5.0 5.4 5.4 7.9 8.1 5.2

Public Investment-Saving Gap 3.1 1.4 3.0 5.1 5.8 3.7 3.6

/a Adjusted downwards for 1978-82.7T Current account deficit in the balance of payments.

Source: NEDA and mission estimates.

This corroborates findings -1 that the share of the public sector as an end-user of foreign resources increased during che same period. During 1980-83,public investment, especially in energy, transportation, industry, andhousing, kept overall investment at high Levels. The expansion of the publicinvestment program reflected several factors. The effort to substitute indi-genous energy sources for imported oil was in line with the adjustment needsof the economy. The Government also made an attempt to reduce the effects ofthe deepening world recession through countercyclical public spending. As aresult, public investment went up from 7% of GNP at the end of the 1970s toover 9% in 1981-82 and helped to offset a decline in private investment. Atthe same time, public sector resource mobilization declined, which was a sig-nificant factor in bringing about the current crisis. National governmentrevenue declined steadily from 13.62 of GNP in 1978 to 11.4% in 1982; andpublic corporations, which accounted for over 60% of public investment duringthat time, financed only about 15% of their capital expenditures from internalcash generation. The Government, therefore, continued its strategy of relying

1/ cf.: The Philippines: A Review of External Debt, Report No. 4912-PH.November 2, 1984, p. 20.

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heavily on external borrowings to finance the public investment program at atime when the real cost of external debt was increasing.

1.07 In 1980, the Philippines initiated a five-year program to improvethe structure of the economy and, thus, the balance of payments. Besides alarge energy investment program, the Government took steps to liberalize thetrade regime, decontrol interest rates, and improve industrial incentives.These reforms aimed at reducing the biases favoring capital-intensive import-substituting industries and gave greater incentives for investments in export-oriented industries that foilowed the country's comparative advantage. Theimpact of these reforms was expected to be felt fully only after severalyears.

1.08 The strategy of structuraL adjustment combined with acceleratedpublic investment might have been more successful if a number of additionalconditions had been met. First, government policy measures to complement theprogram lagged, in particular with respect to domestic resource mobilizationand exchange rate policy. Second, the long gestation period of public invest-ment and the delays in realizing their impact on the economy were not suffi-ciently appreciaced in anticipating the debt servicing burden. Third, as men-tioned above, the international recession aggravated the foreign exchangeproblem unexpectedly by reducing export earnings while real interest ratesincreased. Fourth, the legacy of past inefficient industrial investment wasaggravated by the worsened economic condition of the Philippines. Pastinvestment incentives, financial policies, and heavy protection had resultedin import-substitution industries which were not efficient. These firmsneeded to adjust to the new policy environment, but the economic situation andmixed policy signals were not conducive for rehabilitation investment. Fifth,the Government took over a substantial number of private sector companieswhich were in financial difficulties and needed rehabilitation, thus adding tothe public finance difficulties. In addition, the Government came underincreasing pressure--because of company closures and rising unemployment--tomaintain or increase protection of domestic industries, i.e. to reduce thepace of implementation of the structural adjustment program.

1.09 The economic difficulties of the Philippines have also seriouslyaffected the financial sector. Deteriorating performance of industrial enter-prises was reflected in the worsening portfolio and increasing liquidity prob-lems of financial institutions. Again, the public sector was particularlyaffected. Although most industrial projects were implemented by the privatesector, they were often financed through public financial institutions, suchas the Development Bank of the Philippines or the Philippine National Bank, orobtained public guarantees for private financing. Thus, as the industriaLsituation worsened, these public financial institutions began to experiencedifficulties and turned to the Central Bank and the Government for support.

1.10 As the economic performance deteriorated and the creditworthiness ofthe country decreased, external private creditors attempted to contain theirexposure by shifting to short-term credits, beginning in 1980. A large shareof these Loans escaped the regular Central Bank debt monitoring proceduresand, thus, the magnitude of increased external debt was understated. Whilesome adjustments were made to the exchange rate, these were less than required

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to maintain the current account deficit at manageable levels; short-termcapital and reserves were used to balance the external accounts. The movementto short-term debt and variable interest rates increased the volatility of theexternal situation, through a higher impact of increasing interest rates on analready precarious current account and through the country's dependence on theexternal financial institutions to roll over these loans. Thus, when thepolitical situation changed in August 1983, the reduction in credit lines andthe capital flight accelerated, resulting in a massive balance of paymentsdeficit which could not be offset by a drawing-down of internationalreserves. The Government was forced to seek a moratorium on debt payments andto begin negotiations for a debt rescheduling.

C. The Short-Term Adjustment Process

1.11 Stabilizing the economv has been a major concern of che Governmentand several measures have been taken since mid-1983 to reduce monetary growth,restore fiscal baiance, and maintain a flexible exchange rate. From June 1983to June 1984, the peso has been devalued by 43% vis-a-vis the US-doLlar;spending cuts and tax increases reduced the national government budget deficitto 2% of GNP in 1983; and reserve requirements were increased to reduceliquidity to the banking system. The impact of these actions, however, hasbeen limited. The real effective exchange rate declined by only 14%.Budgetary stringency did not extend to public corporations and was reLaxed inearly i984 to accommodate additional financing requirements of three publicfinancial institutions. Liquidity reduction was also hampered by the factthat many financial institutions were already undergoing a liquidity crisisdue to weak performance of the real economy and a deteriorating portfolio.Thus, the stabilization process has been protracted, and the positive impactof some measures has been eroding over time.

1.12 In the last quarter of 1984, the Government has expanded andstrengthened the stabilization program which aims at restoring stability ofthe economy within the next 18 months. The program aims to control inflationby reducing credit to the public and private sectors, restore externaL balancethrough a floating exchange rate, improve the level and structure of taxation,and eliminate the temporary foreign exchange controls. The Government aims atreducing the public sector deficit to less than 2% of GNP by 1985. Substan-tial revenue measures have been taken, including revisions of excise taxes,deletion of tax exemptions for major public corporations, and a more broadlybased sales tax, reducing the dependence on international trade taxation. Aparticular effort will be undertaken to reduce investment by public corpor-ations and increase their self-financing. The Government, which has madefurther cuts in its investment program, is committed to giving priority toongoing projects which are close to completion and to projects which have alarge ODA component, while ensuring adequate funding for operation and mainte-nance of existing investments. The Government is reviewing the 1985-86 publicinvestment program with World Bank assistance. Financing of public investmentis designed to prevent an increase in the exposure of the domestic bankingsystem to the public sector. Measures to address the severe funding problemsof public financial institutions, which result from rapid expansion anddeterioration of their loan portfolio as well as large guarantee obligations

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for private investment projects, include restrictions of new lending andguarantees. To reduce inflation, the Government aims at reducing reservemoney through additional sale of government financial instruments to thepublic; this will require further increases in interest rates. A flexibleexchange rate policy, the abolition of exchange controls, and increased incen-tives for export production, especially in the agricultural sector, will con-tribute to export growth and restrain imports, thus reducing the currentaccount deficit substantially. Import reductions, while necessary to realizethe externaL imbaLance, will constrain investment and economic growth in 1984-85. The Government has requested an IMF standby arrangement to support thestabilization program.

1.13 Stabilization of the economy is the first and indispensable taskfacing the PhiLippine decision makers today. The heavy cost of stabilizationeffort in terms of lost growth opportunity can and should be reduced. Thechallenge for the management of the PhiLippine economy is to design and imple-ment the stabilization phase so as to provide a basis for the resumption ofadequate long-term growth and for a durable resolution of the debt problem andthe external imbalance. While a rigorous and timeLy implementation of thestabilization program may reduce its economic cost, a systematic concentrationof public expenditures on maintaining the existing capital and completing themost viaole projects may be beneficial by itself. Enhancing the competitive-ness of the Philippine industry, and the discipline in the financial manage-ment will, serve simultaneously the short-term stabilization objectives andthat of longer-term growth. But more fundamentally, the Government needs totransform the current crisis into an opportunity to carry out a long-termdevelopment strategy. This requires that the economic management should alsohave a longer-term perspective, in addition to short-term stabilizationconcerns.

D. A Strategy for Medium-Term Adjustment and Growth

1.14 The improvement of international creditworthiness will depend, asidefrom the implementation of a comprehensive stabilization program, on increas-ing growth of output and an improved balance of payments. These, in turn,will depend on higher domestic resource mobilization and enhanced efficiencyof resource use. Although the present crisis has obscured the underlyingdevelopment capacity of the Philippine economy, it is endowed with natural andhuman resources which would allow it to become one of the leading East Asianexporters. The past record attests to the Government's ability to adjusteconomic policy as a basis for future growth. The challenge now for theGovernment is to implement the measures under the stabilization program in away which is compatible with the ongoing reforms which aim at improving thestructure of the economy. In addition, the Government would need to expandthe adjustment program to other sectors, in particular agriculture, and toaddress structural issues in public finance.

1.15 A possible strategy for resumption of longer-term growth, in aperiod in which funding for new investment is constrained severeLy, could bebased on the following four principles:

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(a) improved utilization of the existing capital stock and completion ofthose on-going investment projects which have high future rates ofreturn;

(b) careful selection of new public investments so as to focus on thosehaving high returns, particularly in the short run, a high foreignexchange impact, or provide for the rehabilitation of existinginfrastructure;

(c) establishing a policy environment for the private sector thatemphasizes efficient import substitution, export production, andincreased employment opportunities;

(d) a major expansion of domestic resource mobilization by the publicsector through both a reform of the tax system and through betterself-financing by public corporations.

1.16 The recent period of high investment and low growth has left anendowment of an unutilized capital stock which can play an important role inthe future recovery. Rough estimates of the aggregate capital stock indicatethat the ratio of capital to output increased from about 1.9 during the 1970sto 2.4 for the period 1980-83. The incremental capital-output ratio more thandoubled, from 3.9 to 10.6 during the same period (TabLe I.2). The rise in thecapital-output ratio reflects a number of factors, including past investmentincentives and interest rate policies which favored capital-intensive privateinvestment, as well as--more recently--the shift of public investment towardsheavily capital-intensive, long-gestation projects, the choice of marginalprojects which will add little to output, and poor management. Externalfactors, ranging from adverse weather to a deterioration of the terms oftrade, also contributed to reducing output, leaving a large portion of theproductive capital stock unutilized. At the present time, it is not clear howmuch of the existing capitaL stock is unutilized because of poor investmentplanning, and how much could be usefully re-employed given a restoration of afavorable international environment and appropriate domestic management. Itseems possible, however, to increase total output by as much as 20% withlittle or no additional investment, if capital productivity is restored to thelevel of the 1970s.

Table I.2: TRENDS IN CAPITAL-OUTPUT RATIOS, 1970-83

1970-79 1980-83

Average capital-output ratio 1.9 2.4Incremental capital-output ratio 3.9 10.6

Source: Mission estimates.

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1.17 Increasing capital productivity will entail not only a better use ofexisting capital, but also priority given to the completion of ongoing proj-ects with high future returns. A judicious use of new investments is likelyto result in a choice of projects which will mainly complement existinginvestments or rehabilitate existing capital stock. For the public sector,this means better project analysis and inveJtment programming as well astighter control over the investment programs of public corporations. For theprivate sector, the Government needs to strengthen its policies which aim atincreasing investment in export industries; it also needs to provide incen-tives for investment toward developing primary inputs for export industries.

1.18 The strategy of blending some new investments with better use ofexisting capital and policy changes which affect incentives will take differ-ent forms in different productive sectors. In manufacturing industry, many ofthe sectoral policy measures are already being implemented. In parcicuLar,reduced protection through reform of the tariff regime and a revision ofexport and investment incentives aim at improving the efficiencv and inter-national competitiveness of the sector. Continued government adherence tothese reforms needs to be affirmed while the stabilization program is beingimplemented. In addition, exchange rate policies in line with the industrialpolicy principles of increasing efficiency of home-oriented industries andpromoting export industries need to be maintained. Direct government inter-vention thus can be limited to resolving the issue of rehabilitating/livestingfirms which have been taken over by the public sector due to financialdifficuLties. In energy, large public investments, which have been made toreduce oil imports, are now coming on stream and will have a significantimpact if they can be used efficiently. To ensure this, emphasis on operationand maintenance as well as limited rehabilitation investment are needed. Newinvestments are no longer a priority for a period of time, given the expectedreduction in dcmestic demand growth and international energy prices. Inagriculture, a significant amount of investment has gone into expanding theirrigation system. Increased output can also be realized from the moreefficient use of the existing system, as well as through investment in small-scale communal irrigation systems. Recent moves to liberalize agriculturalmarketing arrangements and to limit price controls, if continued, couldprovide the necessary incentive framework that would make possible increasedoutput of such crops as rice, corn, and coconuts, as well as non-traditionalagricultural exports. The analysis of these themes in the productive sectorsis developed more fully in Part III.

E. Medium-Term Outlook

1.19 The medium-term outlook for the Philippine economy, at this junc-ture, is highly uncertain. This uncertainty results from the unclear futureof the international trade and financing environment, volatile commodityprices, the prospect for the implementation of stabilization measures and con-tinuation of structural reforms domestically, as well as private sectorresponses to government policies and political developments.

1.20 There is a wide range of possible growth scenarios that could beconstructed for the Philippine economy, based on various combinations of

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assumptions. This report presents only two cases for the period 1985-90(Table 1.3) to delineate the range of possibilities; i.e., any growth andadjustment path between these scenarios is conceivable as well. The premisefor both cases is that future external financing is severely constrained andthat the growth path of the Philippine economy will depend essentially onefficiency improvements and investment levels determined largely by domesticresource mobilization. Both scenarios assume a moderate growth of theinternational economy which would not constrain demand for Philippineexports. In particular, CNP growth in the industrial countries is assumed toaverage 3% p.a.; however, the impact of e.g., a 22 GNP growth in the indus-trial countries could reduce Philippine export earnings by 2-3% per year.

1.21 While it is impossible to quantify precisely the impact of a suc-cessful recovery program, the high case illustrates the opportunities of agrowth path which could result from a strategy of prudent investment, effi-cient utilization of existing capital, and policy changes in che incentivestructure. The high-case scenario is based on the assumption that thestabilization program is fully implemented in a timely fashion and that theongoing adjustment measures as well as other policy reforms described in sub-sequent chapters are implemented. Thus, under this scenario, it should bepossible to have an average GDP growth rate of 4.0% during the 1985-90 period,with growth reaching 6% by 1990. The high case is based on the followingassumptions which are built into the projections:

(a) better utilization of the capital stock and judicious new invest-ment, which will permit a decline Ln the incremental capital-outputratio to 3.7 bv 1990, compared to a level of 7.0 in the Low case;

(b) resumption of high export volume growth, with total exports growingat close to 6%, and manufactured exports by over 8%;

(c) significant import substitution in energy, permitting a decline inthe volume of oil imports by 12% in 1984-90;

(d) a moderately high growth in agriculture of about 4.3%, permittingsignificant import substitution for food and primary products, butonly moderate growth of agricultural exports; and

(e) a recovery of the industrial sector to an average growth rate of4.8% during the period.

Personal consumption expenditures would grow at a rate slightly lower than the2.4% population growth rate; per capita consumption in the high case, thus,would be 9% lower in 1990 than it was in 1983. The growth of the labor forceis expected to be about 3.1% per year, reflecting high population growth.Thus a GDP growth of 4.0% as in the high case may be insufficient to createenough productive jobs for all of the labor force entrants.

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Table I.3: GROWTH PERFORMANCE AND PROJECTED GROWTH SCENARIOS, 1975-90(percent per year, period averages)

1975-79 1979-83 1984 1985-90Estimate High Low

GDP 7.1 3.4 -6.0 4.0 1.1Industry 9.3 3.1 -10.3 4.8 1.0Agricul:ure 5.9 2.4 1.5 4.3 2.4Services 6.0 4.4 -6.2 2.8 -0.1Personal consumption 5.5 3.8 -4.4 2.0 -0.1Fixed investmer.t 10.5 2.0 -22.0 4.1 0.8Merchandise Imports (volume) 10.3 -1.4 -26.0 0.9 -1.2Merchandise Exports (volume) 13.5 4.8 0 5.5 3.5

Source: NEDA for historical data, mission estimates and projections.

1.22 The low-case scenario places more emphasis on the downward risks andpresents a development path that wouLd result from less successful and timelydomestic adjustment. Thus, in the low case, GNP growth would average 1.1% in1985-90 and reach only 3.0% by 1990. Per-capita consumption in 1990 would be21% below the 1983 level. A low-case growth of about 1% would mean growingunder- and unemployment in the economy. Thus, failure to attain a recoverysimiLar to the high case implies the possibility of significant declines inliving standards for the majority of the population, growing unemployment,declining real wages, and increasing proportions of people living below thepoverty line. The social implications of the low case, as well as its failureto provide an adequate solution to the structural problems of the economy,make this a highly undesirable option.

F. The Revised Development Plan

1.23 The Government has begun to tackle the difficult recovery problem,and has laid out a revised development strategy in its updated Five-Year Planfor the period 1984-87. While reiterating the basic goals of the original1983-87 Development Plan and the commitment to its various economic and socialprograms, the revised Plan is based on a five point recovery program whichincludes:

(a) An economic stabilization program which aims at improving thebalance of payments position, reducing the budget deficit, andbringing down inflation through appropriate demand managementmeasures, some of which had already been taken at the time theUpdated Plan was proclaimed in August 1984.

(b) An external financing program which includes rescheduling ofexternal debt maturities falling due from October 17, 1983 to theend of 1985, new loans, and extension of trade credit lines.

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(c) Economic priorities will be refocused in line with the stabilizationprogram. In the public sector, this includes a reduction in thepublic investment program, increased emphasis on completion ofongoing projects, and rehabilitation of existing infrastructure.For the productive sectors, a balanced agro-industrial developmentstrategy will be pursued with particular emphasis on productivityincreases.

(d) The ongoing structural adjustment program will be continued toachieve sustainable economic growth in the medium term throughimproved resource allocation and increased efficiency in factorutilization. Reforms in trade liberalization, industrialdevelopment/restructuring programs, and in the investment incentiveregime will be strengthened further. Energy policy measures willcontinue in the areas of investment and pricing policy, to reducethe import dependence of the Philippines. The structural adjustmentprogram will be expanded to include agriculture, with emphasis onproductivity improvement, reforms in pricing and marketing as wellas in sectoral planning and management.

(e) Programs to achieve social equity, including improvements in healthcare, education, and housing, will continue.

The overall thrust of the Plan is similar to the approach outLined above inthat it pLaces increased emphasis on efficient export production and importsubstitution, increased reliance on domestic resource mobilization as opposedto external borrowing and reliance on the private sector. Given the impact ofthe stabiLization program on industry, the Plan places particular emphasis onraising the growth rate in agriculture through better private sector partici-pation, and through restructuring incentives in pricing and marketing.

1.24 Since the Plan provides only a broad outline of the strategy, itwould be necessary to make it operational through a detailed investment andfinancing plan. The Plan provides indications of aggregate capital expendi-tures per year for the national government, local governments, and publiccorporations, but does not indicate the planned amounts for individualprojects and programs. Total capital expenditures are planned to reach 5.1%of GNP in 1987, i.e., they will remain severely constrained for the balance ofthe Plan period. The constraints on capiLal expenditures indicate that annualinvestment programs and financing plans by the national Governmen" and publiccorporations would be useful tools to establish investment priorities. Thereview of the public investment program which the Government is undertakingwith World Bank assistance is an important step in that direction.

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II. MACRO-ECONOMIC ADJUSTMENT ISSUES AND PROSPECTS

A. Balance of Payments

(a) Recent Developments

(i) Current Account

2.01 Structural deficits in the Philippine balance of payments emergedfollowing the first oil price shock in the 1970s (Table II.1). Whereas in theearly years of the decade the current account was roughly in balance, itshowed a deficit averaging 5% of GNP in 1975-79. The rise in fuel import pay-ments from 1.8% of GNP in 1972 to 4.62 in 1979 was an important factor contri-buting to the widening of the deficit, even though efforts were begun toencourage conservation and to develop domestic energy sources. At the sametime, the non-oil trade balance also deteriorated, despite the extraordinarygrowth of non-traditional exports. Growth of manufactured exports was concen-trated in industries heavily dependent on imported inputs, i.e., electronicsand garments, so that their net contribution to the balance of payments waslimited. High and uneven levels of protection fostered investment in import-substitution industries that were inefficient and highly dependent on importedinputs. While the volume growth of exports consistently exceeded that ofimports it was insufficient to offset the effect of a deterioration of theterms of trade by 18% from 1972-79.

2.02 When these structural problems became more severe after the secondoil shock, the government began a medium-term adjustment program in 1980.This program was designed to improve resource use in industry so as to encour-age the growth of nontraditional manufactured exports, reduce reliance onimported inputs, and limit dependence on external borrowing. A major elementof the program was trade liberalization, including: (a) a five-year tariffreduction program, which was expected to reduce the average effective protec-tion rate from 52% in 1980 to 28% by 1985; (b) the gradual reduction of importrestrictions on consumer and capital goods; and (c) measures to encourageexports further.

2.03 While the impact of these measures was expected to be felt in themedium term, the international recession worsened, and policy actions designedto have ai immediate impact were inadequate to contain the current accountdeficit, which widened from 5.4% of GNP in 1980-81 to 8% in 1982-83. Theterms of trade fell further by 18% in 1980-82, largely due to the impact oflower world demand on the prices of traditional exports which still providedabout 50% of the Philippines' export earnings. Though this trend was reversedin 1983, terms of trade losses were equivalent to more than half of thedeterioration in the current account between 1980 and 1983. To finance thegrowing current account deficit, external borrowings were expanded, atincreasingly shorter maturities and at variable interest rates. This,together with the increase in interest rates, raised net Philippine interestpayments from 1.8% to 4.7% of GNP during 1980-83.

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Table 11.1: CURRENT ACCOUNT SUMMARY, 1972-83(Percentage of GNP)

Average annual_growthrate (X)/a

1972 1979 1980 1981 1982 1983 1972-80 1980-83

Exports 13.3 15.4 16.4 14.9 12.8 14.7 22.2 -4.5Traditional 11.8 8.6 R.7 7.3 5.5 6.; 14.3 -10.3Nontraditional 1.5 6.8 7.7 7.6 7.3 8.6 46.0 6.3

Imports -14.8 -20.5 -21.9 -20.7 -19.5 -22.0 25.2 -1.0Oil /b -1.8 -4.6 -6.4 -6.4 -5.4 -6.3 47.2 -1.9Inputs for exportproduction/c - -1.6 -2.0 -2.1 -2.1 -2.7 n.a 7.4

Other -13.0 -14.3 -13.5 -12.2 -12.0 -13.0 20.7 -1.2

Trade Balance -1.5 -5.1 -5.5 -5.8 -6.7 -7.3(Non-oil tradebalance) (0.3) (-0.5) (0.9) (0.6) (-1.3) (-1.0)

Interest payments, net -1.2 -1.4 -1.8 -2.2 -3.9 -4.7Other services and

transfers 2.8 1.5 1.9 2.6 2.7 3.9

Current AccountBalance 0.1 -5.0 -5.4 -5.4 -7.9 -8.1

Memorandum items:Annual % change:- Export volume 6.9/d 9.3 20.7 1.1 5.7 -5.0- Import volume 5.47Td 9.2 1.2 -8.0 14.1 -4.0- Terms of trade -2.7/d 4.3 -15.9 -12.0 -2.8 4.4

/a Based on values in current USS./b Includes other mineral fuels and lubricants.ic Electronics and garments./d 1972-78

Source: Mission calculations based on Statistical Appendix Table 3.1, 3.5, and 3.7.

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2.04 Net changes in trade volume accounted for about 10% of the wideningcurrent account deficit in 1980-83. Real export growth, which had averaged14% per year in 1975-80, slowed to 3% in 1981-82 and turned negative to -5Z in1983. While this mainly reflected weakened external demand, supply factors,notably the 1982-83 drought which affected agricultural exports, also played arole. In addition, the real appreciation of the peso gradually eroded thecompetitive edge of Philippine manufactured exports. Real import growth didnot fully adjust to the reduction in foreign exchange availabilities.Although the purchasing power of exports fell by 20% between 1980 and 1983,imports continued to rise in 1980-81 before falling back to their 1980 levelin 1983. In particular, strong growth in public investment appears to havebeen a major factor underlying the demand for imports, together with anexchange rate that was appreciating in real terms.

2.05 The negative effect of the above factors was mitigated by acontinuing rise in non-interest service and transfer receipts. Thesereceipts, which include earnings of Philippine contractors and workers abroad,have become an increasingly important source of foreign exchange. However,due to the large interest payments, the overall services account has shown alarge deficit in 1982-83.

2.06 The effects of the worLd economic slowdown in 1980-83 experienced bythe Philippines were also felt by other middle income oil importing countries(Table II.2). However, in comparison with these countries as a group, twodistinctions stand out regarding trade performance: (1) the deceleration ofPhilippine manufactured exports was sharper than average; (2) the loss interms of trade appears to have been greater in the Philippines, suggesting aless favorable mix of commodity trade and greater exposure to price swingsthan average, as well as a lower ability to respond to changing internationalconditions.

Table I1.2: INTERNATIONAL COMPARISON OF MANUFACTURED EXPORTSAND TERMS OF TRADE, 1972-83(Average annual X change)

1973-80 1981 1982 1983

Manufactured Exports /aPhilippines 26.7/b 27.8 -2.3 6.2Middle-income oil importers 10.9 16.8 -1.6 6.3

Terms of TradePhilippines -6.3 -12.1 -2.8 4.4Middle-income oil importers -2.8 -4.3 -1.8 3.0

/a Deflated by World Bank Manufactured Unit Value Index.7s 1975-80.

Source: Statistical Appendix Table 3.5 and World Bank estimates.

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2.07 Reflecting the increased balance of payments pressures, the sum ofpayments for oil, debt service, and imported materials for electronics andgarments rose from 48% of exports of goods and services in 1979 to 71% in 1982despite the rapid growth and diversification of exports (Table II.3). During1979-83, fuel imports slightLy decreased in volume, but doubled their value;as a consequence, their absorption of export earnings rose from an alreadyhigh 22Z in 1979 to 26Z in 1983. The high import conEent of manufacturedexports increased further relative to exports. The growing indebtedness isindicated not only by the rise of amortization and interest payments from 20%of exports of goods and services in 1979 to 37% in 1982, but aLso by theincrease in short-term debt from 852 of exports in 1979 to 142% in 1982.

Table II.3: SELECTED PAYMENT REQUIREMENTS IN RELATIONTO EXPORTS OF GOODS AND SERVICES, 1972-83

(z)

1972 1979 1980 1981 1982 1983

Fuel imports 10 22 28 29 26 26Imports of manufactured goodsfor export production /a - 6 7 7 8 9

Interest payments, net 8 10 12 16 25 24MLT debt amortization /b 19 10 7 9 12 10

Total 37 48 54 61 71 69

Memorandum itemShort-term externalliabilities /c 53 85 94 109 142 139

/a Material for production of exports of garments and electronics.7i Adjusted to exclude prepayments.7h Includes short-term non-monetary debt and liabilities of the banking

system.

Source: Mission calculations.

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(ii) Patterns of External Financing and Debt 2/

2.08 While the current account deficits in the second half of the 1970swere fully matched by inflow of long-term capital, it covered only about one-half of the further widening deficits in 1980-82. The ability of thePhilippines to attract substantial amounts of loan capital in the 1970sreflected the relatively favorable conditions for borrowers which existed infinancial markets during these years, the positive effect of rapid exportgrowth on expected debt servicing capacity, and the continued support of offi-cial lenders. Ample availability of finance permitted an ultimately unsus-tainable current account deficit to persist for a number of years. In the1980s, however, sharply higher use was made of short-term borrowing by boththe monetary and non-monetary sectors. The increase in short-term borrowingreflected not only the rise in the deficits but also less favorable conditionsin financial markets. Consequently, short-term debt rose markedly in relationto total external debt, and total debt continued to expand rapidly, even asthe country's capacity to service debt was eroding. Between 1978 and 1982,the total external liabilities of the Philippines rose from the equivalent of2.2 times exports of goods and services to 3.1, and the share of short-termdebt of the totaL debt rose from 35% to 47%. As shown in Table II.4, by 1982these ratios had reached or exceeded the levels of oth r countries which werealready experiencing difficulties in servicing their debt.

Table I1.4: EXTERNAL LIABILITIES IN RELATION TOEXPORT EARNINGS FOR SELECTED COUNTRIES, 1982

Total debt/Total debt/ exports of Totalmerchandise goods and Short-term/ debtexports services total debt (USS billion)

Philippines 4.9 3.1 46.7 24.4Argentina 4.8 3.8 21.3 36.7Chile 4.5 3.1 19.2 17.2Brazil 4.2 3.5 16.4 83.2Mexico 3.9 2.7 27.2 82.5

Source: World Bank estimates.

2.09 The buildup of external debt was largely and increasingly used tofinance public sector activities. The public resource gap expanded sharply aspublic investment accelerated while domestic resource mobilization faltered in

2/ A detailed discussion of the external debt of the Philippines through1982 is given in The Philippines: A Review of External Debt, op. cit.

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the late 1970s (cf. Chapter II.B). The proportion of medium- and long-termdebt owed by the public sector rose from 48% in 1972 to 77% by the end of1983, including onlending to the private sector.

2.10 Reflecting both the buildup of debt and its higher average cost, thegrowth of debt service payments by the Philippines increased in the late1970s. Total debt service payments, excluding rollover of short-term debt,rose by 451 between 1978 and 1980, and by 80Z between 1980 and 1982. Measuredagainst exports of goods and services, the debt service ratio (defined here asinterest on all maturities and amortization of MLT debt) rose from 19X in 1980to 36.5% in 1982.

2.11 In 1983, there was a marked and progressive deterioration of thefinancial position that reached crisis proportions during the latter part ofthe year. Although long-term capital inflows on a net basis were littlechanged from the previous year, commercial lenders became increasingly unwill-ing to further increase their exposure. Reserve assets of the banking systemwere drawn down by $2.6 bilLion for the year as a whole, but already by theend of the third quarter, the foreign exchange resources were nearlyexhausted.

(iii) Policy Responses to the Crisis

2.12 Since October 1983, a series of measures have been introduced to dealwith the deterioration in the balance of payments and liquidity position. Thepeso was devalued in October 1983 and June 1984 by a total of 39% vis-a-vis the USdollar. A moratorium was declared, initially for 90 days, on principalrepayments on (non-trade) maturing debt obligations to foreign banks andfinancial institutions, in anticipation of formal debt rescheduling. Thismoratorium has been extended for four additional 90 day periods. Capitalcontrols were imposed through centralized foreign exchange collection in theCentral Bank and establishment of procedures for the allocation of the pooledreceipts by rationing to priority needs. Allowance was made for importerswith their own access to resources through various channels, such as equitycontributions from foreign affiliates, imports on a no-dollar (largelyconsignment) basis, deduction from export receipts of funds required forimported inputs for export production, and prepayment of import letters ofcredit from own resources. In addition, a 3% surcharge on import value, whichhad been introduced in January 1983 for revenue purposes, was raised to 5% inOctober 1983 and subsequently to 8X and then 10% in 1984.

2.13 These measures remained in effect longer than anticipated, as theliquidity crisis and the preparation of a financial stabilization plan becameprotracted. As a result, new problems arose. The benefits of the devaluationwere eroded as inflation accelerated from 10% in 1983 to an estimated 45-50%in 1984. The debt moratorium relieved some pressure on the foreign exchangeposition, but its extension has held up new inflows of private finance andcontributed to the disruption of normal trade financing. The provisions foruse of funds outside of the foreign exchange pool for imports contributedsignificantly to the continued availability of essential imports, particularlythose related to export production, in very difficult circumstances, but theamounts available to the pool have been insufficient to meet the needs, and

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imports appear to have fallen sharply. Thus, by August 1984, foreign exchangereceipts of the Central Bank were equivalent to only about 52X of recordedexport shipments. Of the payments into the pool between November 1983 andMarch 1984, only 9% became available to commercial banks for import financeafter other priority allocations were made.

2.14 In these circumstances, foreign exchange arrearages continued tomount, even on obligations accorded high priority. Total payment arrears ofthe banking system (including the Central Bank) and the nonbank sector rosefrom $0.7 billion on October 17, 1983, when the freeze was announced, to$1.6 billion by the end of 1983 and to $2.4 billion as of October 1984.

2.15 The foreign exchange crisis which unfolded during 1983 forced thepace of external adjustment, while creating obstacles to its achievement.Although incentives to export have been heightened by the preferred access toforeign exchange accorded to exporters, and the devaLuation of the peso,switching into export production has been made more difficult by theuncertainty about the future availability of finance and by the restriction ofsome foreign exchange privileges to existing exporters. The foreign exchangecontrols have insulated some essential items from the import reductionsrequired by the absence of finance. Price signals became muddied under therationing scheme. More broadly, adjustment by crisis has entailed an erosionof private sector confidence that seems to inhibit investment.

(b) Outlook and Options for the Future

(i) Short-term Prospects

2.16 Recent economic developments have thus left a legacy of problemsthat are being addressed under the stabilization program. In October 1984, areturn to a freer foreign exchange regime was begun; the exchange rate isdetermined on a market where the commercial banks are required to sell theirforeign exchange receipts. The foreign exchange surrender requirement and theallocation system consequently have been discontinued. The new system stillis evolving; initial trading at the floating exchange rate was low in voLumeand, after a decline of 10% in the peso exchange rate, showed only smalloscillations around the rate. Projections indicate that the current accountdeficit could be brought down from 8.1% of GNP in 1983 to 5.22 in 1984 andabout 4% in 1985. With a continued recovery in export markets, projectedexport growth of an average 8% in current dollars in 1984 and 1985 appearsfeasible. Nonetheless, imports, which are already being reduced by 23% in1984, would need to decrease further by 2% in 1985 to achieve these currentaccount targets.

2.17 To finance the current account deficits and meet other priorityneeds, such as clearing away arrears, substantial additional external financ-ing is needed. A financing package that would meet these needs is beingfinalized. It would include a rescheduling of medium- and long-term debtfalling due in 1984 and 1985, owed to financial institutions and to creditorseligible for Paris Club arrangements, together amounting to about $4.7billion. Even with a debt rescheduling of this magnitude, there would be anunfinanced gap of $3.1 billion in 1984-85. This wouLd be met from disburse-

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ments of new official lending of about $2.2 billion and the balance in newloans from private financial institutions. In addition, arrangements arebeing made to restructure about $3.9 billion of non-trade related debt fallingdue in this period and to create a revolving short-term trade facility ofabout $3.0 billion.

(ii) Medium-Term Adjustment

2.18 In addition to the corrections envisaged for 1984 and 1985, theextent of the deterioration of the external position over the past severalyears means that a vigorous program of adjustment will have to be pursued forthe rest of the decade if creditworthiness is to be improved and satisfactorygrowth resumed. First, the level of indebtedness itself is clearly in excessof the countryt s current debt-carrying capacity. This underscores the need tostrengthen policies to expand the export base and improve che efficiency ofindustry; it also means that new borrowing must be closely tied to effortsthat will expand debt servicing capacity. Growth prospects then will be cru-cially dependenc on the rate of export growth achieved and on the degree towhich import growth can be kept below export growth to bring about steadyimprovements in the current balance. This will require greater efficiency inthe use of imports. Second, the vulnerability created by the growth of short-term debt must be reduced through appropriate arrangements with creditors.Some non-monetary short-term debt has cLearly been used for non-trade pur-poses, including the long-term investments of public corporations. Bankingsystem Liabilities have not been used to support liquid foreign currencyassets only, and access to the international interbank market would seem to beimpaired for a considerable period. Third, the initernational reserve positionneeds to be restored over time to a positive balance. The excess of CentralBank and comnercial bank foreign exchange liabilities (inclusive of arrears)Over assets exceeded merchandise exports in 1983. Finally, instititutionalarrangements for debt management need to be improved. These issues areexplored below with the use of a set of iLlustrative projections.

2.19 Conditions in the world economy will continue to be important toPhilippine prospects. In some contrast to recent years, the projectionsassume relatively favorable developments, based on global projections assumingconditions in between the "High" and "Low" cases in the World DevelopmentReport, 1984. In particular, it is assumed that GNP growth in the industrialcountries will be sustained 3 t an average of about 3% per year, inflation willaverage about 6% per year, - and LIBOR will fall to 9%. Energy prices, on theother hand, are projected to reverse their decline of recent years and beginto increase in real terms, reaching their 1981 real level by the end of thedecade. In conjunction with the projected recovery of the relative prices ofother commodities, this would imply for the Philippines that there would belittle change in the overall terms of trade from the 1983 position.

3/ Due to an assumed depreciation of the US dollar against currencies ofother industrial countries, international inflation expressed in terms ofUS dollars would be closer to 9% per year in the second half of the1980s.

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2.20 Exports. For the high case, volume growth of merchandise exports isassumed to average 6% p.a. between 1984 and 1990. The share of agriculture inmerchandise exports is projected to decline slightly from 32% in 1983 to 30%in 1990, due to a combination of moderate volume growth and depressed pricesfor the traditional products coconut, sugar and timber. The projection ofmineral exports is slightly above projected growth of world exports of theseproducts, but increases in market share seem to be feasible.

2.21 The assumption regarding an average 7% p.a. real growth ofmanufactured exports is in Line with the global estimate that these mayincrease 2-3 times the GDP growth of the industrial countries. To achievechis growth, however, competitiveness must be restored, and a flexibleexchange rate policy must be pursued. While electronics and garments haveprovided che strongesc impetus to manufactured export growth in the past,diversification would have to be accelerated. Quota and other trade barriersare already cutting into the growth potential in exiscing areas. Agroprocess-ing and wood manufacturing industries, on the other hand, appear to offerexcellent prospects. They have strong export markets, high income elasticityof demand, and high value added even in initial stages and offer the prospectof dampening the volatility of export earnings derived from local commodities.

2.22 Another important source of foreign exchange has been remittancesfrom Philippine workers abroad and related service receipts, although data inthis area are deficient. Philippine seamen have established themselves ininternational maritime trade, and their remittances should remain as strong asthis industry. Remittances from foreign contract and other workers, mostly inthe Middle East, grew rapidly in the 1970s and early 1980s. The demand forforeign workers in this area has fallen off dramatically, however, since thesoftening of oil prices. Nonetheless, Philippine workers are reported to haveestablished excellent reputations in this area; these flows have held up andare assumed to remain constant in real terms.

2.23 Imports. Import voLume growth in the high case is projected toresume in 1987 and to average 5% p.a. for the rest of the decade. Thefeasibility of this path, which implies very tight availabilities, depends notonly on the realization of the relatively favorable export growth ratesdiscussed above and on the availability of sufficient capital inflows, butalso on improvements in the structure of imports that would reflect efficientimport substitution. A significant reduction is expected in the dependence onimported oil as a result of the ongoing program to develop of domestic energysources as well as recent energy pricing reforms. These policies and invest-ments are expected to bear fruit in the next few years; energy imports areprojected to remain below their 1983 volume through 1990 and to require theequivalent of 28% of merchandise export earnings by 1990. Much furtheradjustment is possible and necessary in reducing the import content ofexports, particularly electronics and garments, and in lowering the importintensity of goods produced for the domestic market. This can be achievedmost appropriately through continuous reduction of effective protection and aflexible exchange rate policy.

2.24 Capital Requirements, Debt, and Debt Service. The adjustment out-lined above for the high case would still require considerable external

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financial support. Even with a possible extension of the external debtrescheduling to cover $1.4 billion falling due in 1986, new gross loan inflowswould need to average about $2.2 billion annually to meet debt service, alLowsome rebuilding of reserves and finance an adjustment of the current accountfrom about 4Z of GNP in 1985 to 0.1% by the end of the decade (Table II.5).Net foreign investment, which fluctuated in the last few years, is expected tohave only a small impact on external financing. The debt service ratio on MLTwould decline to 27% by the end of the 1980s, but would rise again during theearly 1990s, reflecting the effect of the debt rescheduling, before fallingoff. However, the level of indebtedness would fall notably in relation toexports, which would be a precondition for a restoration of lending fromprivate sources on a voluntary basis.

2.25 The amounts required in the high case are within the range ofofficial lenders' project loans in the past. The amount of private foreigncapital that will materialize beyond 1985 is highly uncertain at this time.The projections are conservative and assume that private gross loandisbursements would be in the order of $700 million annually until the end ofthe 1980s. Market borrowings will not be feasible until creditworthiness isstrengthened, but special arrangements, including debt rescheduling, may needto be continued in the interim.

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Table 1I.5: SUMMARY OF EXTERNAL CAPITAL REQUIREMENTSAND SOURCES (HIGH CASE), 1985-90

(in US$ billion) -

1985 1986 1987 1988 1989 1990

Requirements -2.7 -1.4 -2.3 -2.3 -2.4 -2.6Current account -1.1 -0.5 -0.5 -0.2 -0.2 -0.1Amortization/a -0.2 -0.3 -1.7 -1.7 -1.9 -2.5Change in net reserves/b -1.4 -0.6 -0.1 -0.4 -0.3 -

Sources 2.7 1.4 2.3 2.3 2.4 2.6Direct investment, net - 0.1. 0.1 0.1 0.1 0.1Short-term and other capital - - 0.1 0.1 0.1 0.1MLT (gross) 2.9 1.3 2.1 2.1 2.2 2.4Official 1.8 1.3 1.4 1.4 1.5 1.5

(Existing pipeline)/c 0.7 0.7 0.7 0.5 0.4 0.3(New loans) 1.1 0.6 0.7 0.9 1.1 1.2

Private 0.9 - 0.7 0.7 0.7 0.9

Memorandum itemsMLT debt/exports of goods andservices 208 199 179 160 146 123

Total debt/exports of goodsand services 320 300 268 240 217 195

Debt service on MLT/exports ofgoods and services 21 20 31 28 27 28

Total debt service/exportsof goods and services 32 31 41 36 34 35

Current account deficitas Z of GNP 4.1 2.3 2.0 0.3 0.3 0.1

/a Assumes rescheduling of 1985 and 1986 maturities in private and officialMLT debt (other than that owed to multilateral institutions) of $3.7bilLion.

/b Includes elimination of arrears of $2.4 billion in 1985.T7 Loans signed as of October 17, 1983.

Source: Central Bank and mission estimates.

2.26 Following serious debt problems at the end of the 1960s, thePhilippines established one of the most comprehensive systems of debt regis-tration and approval among developing countries. However, the scope and focusof this effort has been shown to have been too narrow. The use of the statu-torily-defined debt service ratio, by incorporating the previous year's capi-tal inflows in the denominator and omitting interest payments on most short-term debt in the numerator, clearly failed to point to the deterioration thatwas evident by more conventional indicators. Monitoring of short-term liabil-

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ities, which is divided in the Central Bank, needs to be systematicallyincorporated into debt m7nagement. More broadly, as noted in the Bank'sreview of these issues,4 debt management needs to be more clearly integratedinto overall macroeconomic policy.

2.27 Risks of a Low Case. A far more difficult outcome is a possibilityand has been explored with a set of "Low Case" projections. This scenarioassumes the same international conditions as the adjustment scenario outlinedabove, but posits a less effective pursuit of adjustment policies by theGovernment. As a result, real export growth is only 3X. With similar capitalinflows, which could be more difficult to obtain, real imports would declineby 5%, so that the level of imports in 1990 would be only two-thirds of thatobtained in 1983. The debt service ratio, however, would be higher, pushingthe period of fragile creditworthiness into the 1990s.

2.28 A far less benign international environment is also possible. Basedon 1983 debt, a one percentage point rise in LIBOR would translate into anincreased net interest pavment requirement of about $100 million, or 2% ofexports. Similarly, a $1/barrel increase in oil prices would cost about$50-60 million on an annual basis. The impact of a 12 reduction in the GNPgrowth of the industrial countries is more difficult to estimate, but couldeasily translate into a reduction of export earnings of 2-3Z per year fromwhat it otherwise would be expected to be. These possibilities indicate thatthe pursuit of adjustment in the medium term is no guarantee of the high caseoutcome. At the same time, they underscore that the best strategy to copewith such an eventuality is to more vigorously pursue adjustment policies.

B. PUBLIC FINANCE

(a) Past Performance and Policy Issues

2.29 The sharp increase in the public sector deficit from an average of2.5Z of GNP in 1978-80 to 5.5% of CNP in 1981-82 reflected structural problemsof the Philippines' public finances as well as the impact of the recession(Table 11.6). The public sector, especially public corporations, continued togrow rapidly, due to a large investment program and the acquisition of dis-tressed private companies. At the same time, the revenue effort deteriorated,and the public sector increasingly resorted to external borrowings to financethe gap, thus contributing to the external debt problem of the country at atime when real international interest rates were rising.

4/ Report 4912-PHL op.cit.

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Table II.6: PUBLIC FINANCE OVERVIEW, 1978-85(in Percenr of CNP)

Actual Est. Proj.1978 1979 1980 1981 1982 1983 1984 1985

NATIONAL GOVERNMENTRevenues 13.6 13.5 13.1 11.8 11.4 12.0 11.2 12.1Expenditures and net lending 14.8 13.7 14.4 15.8 15.7 14.0 13.3 13.1Interest payments 0.6 O. 0.9 0.8 1.1 1.3 2.0 2.0Other current expenditures 10.2 8.6 8.4 7.9 8.1 7.7 6.9 6.7Capital outlays 2.5 2.3 3.2 4.2 3.0 2.8 1.9 1.8Equity and net lending to 13 NPrCs 1.2 1.4 1.6 2.6 3.1 2.1 0.9 0.7Other equity and net lending 0.3 0.5 0.4 0.4 0.2 0.1 1.6 1.q

Deficit -1.2 -0.1 -1.3 -4.0 -4.3 -2.0 -2.1 -1.n

THIRTEEN NONFINANCIAL GOVT. CORPORATIONSInternal cash generation 0.6 n.6 n.8 0.9 0.7 1.2 -0.1 n.qCapital expenditures /d 4.4 4.4 5.1 5.5 6.3 4.8 2.4 2.4Investment-saving gap -3.R -3.6 -4.3 -4.6 -5.6 -3.6 -2.5 -1.5

LOCAL COVERNMENTSRevenues 1.R 1.8 1.8 1.8 1.8 1.R 1.7 1.7Current expenditures 1.6 1.5 1.4 1.5 1.5 1.5 1.2 1.1Capital expenditures 0.2 0.2 0.2 0.2 n.2 0.2 n.2 0.3Surplus - n.1 0.2 0.1 0.1 n.1 0.3 n.3

SOCIAL SECURITY INSTITUTIONSRevenues 1.9 1.8 1.7 1.9 2.3 1.8 1.8 2.nBenefit payments and other expenditure 1.3 1.0 0.9 1.1 1.6 1.0 1.2 1.2Surplus 0.6 0.8 0.8 n.8 0.7 n.8 0.7 0.8

CONSOLIDATED PUBLIC SECTOR DEFICIT /a -3.1 -1.4 -3.0 -5.1 -5.8 -3.7 -3.6 -1.4

Memorandum items:Government current expenditures /b 11.3 9.5 9.4 8.9 9.1 9.0 7.7 8.0Public fixed investment /c 7.0 6.9 8.5 9.9 9.5 7.8 4.4 4.5

Note: Totals may not add up due to rounding.

/a Sum of the four fiscal balances (national government, government corporations, local government, andsocial security institutions) less nartional government equity contributions and net lending to thethirteen government corporations.

/b National government current expenditures (net of Interest payments and allotments to localgovernments) plus local government current expenditures. Allotments to local governments are abont0.5% of GNP.

/c Includes capital expenditures of the national government, 13 nonfinancial public corporations, andlocal governments.

/d Excludes interest during construction for 1983-85.

Sources: Statistical Appendix Tables 5.1, 5.6, 5.7, 5.8 and 5.9.

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(i) Overview of Expenditures

2.30 Public expenditures,51 which accounted for about 18% of GNP in1978-82, were adjusted with a considerable lag to the deceleration of economicgrowth and deteriorating resource mobilization in the recession. During1978-81, public expenditures increased by an average 5.6% p.a. in real cerms,slightly faster than the 5.32 GNP growth. The NationaL Government whichaccounted for about two-thirds of public expenditures, introduced budgetarycuts in 1982, thus beginning a reduction of overall public expenditures.Public corporations, however, expanded their investmenc by over 12% p.a. inreal terms during 1978-82 and increased their share in public expenditures by6%. Local government expenditures grew moderately and accounted for only 10%of total expenditures (Table II.7).

Table II.7: TRENDS IN PUBLIC EXPENDITURES, 1978-82

Real growth Percentageaverage p.a. shares1978-81 1982 1978 1982

Total public expenditures 5.6 -0.3 100.0 100.0National government 3.7 -4.1 68.7 63.0Public corporations (capital

expenditures) 12.8 7.5 21.6 27.5Local governments 2.6 4.8 9.7 9.5

Source: Mission calculations based on tables 5.1, 5.6, and 5.7 in theStatistical Appendix.

2.31 The most important factor in the growth of public expenditures wasinvestment. It had grown rapidly from 1.5% of GNP in 1970 to 7% of GNP in1979 and peaked at almost 10% of GNP during 1981-82. The latter reflected acountercyclical reaction to the recession as well as large ongoing projects.In the last few years, the Philippines' share of public investment in GNP andin total investment was among the highest for middle-income, oil-importingcountries. The sectoral allocation of public fixed investment during the planperiod 1978-82 remained dominated by infrastructure, especially transportationand a large energy investment program to reduce import dependence. Infra-structure accounted for 70% of public investment, while the productive sectorsreceived 16%, and the social sectors 7Z. The expansion of public investment

5/ The public sector here includes total expenditures of the national andlocal governments and capital outlays of 13 major public corporations.This understates 'he size of the public sector, since governmentfinancial institutions and about 20% of investment by public corporationsare not included.

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was accompanied by a strong regional bias favoring Luzon, and Metro-Manila inparticular. Although the data base is incomplete, it appears that about 46%of public investment took pLace on Luzon; this translates into twice the percapita level of investment in the Visayas and Mindanao. In recent years, theGovernment has taken several steps to reduce regional disparities of publicinvestment, e.g., through a regional focus of investment planning anddevelopment programs, but their impact on regional allocation of publicinvestment so far has been small.

2.32 The rapid expansion of public investment has exacerbated weaknessesin the planning, programming, and budgeting of public investment. The agen-cies to perform these functions could not adequately handle the rapid increasein public expenditures. Although technical assistance funded by externalsources quadrupled in real terms during the last plan period and amounted to$230 million--equal to 7% of public investment--in 1982, the planning andimplementation capacity proved to be inadequate. As a result, projects wereundertaken without careful analysis of their economic viability, their long-term financing needs or their debt servicing impact on the balance of pay-ments. The current crisis in particuLar emphasizes the need for increasedcentral government control over the investment programs of publiccorporations.

2.33 The growth of investment was achieved at the expense of recurrentexpenditures. Interest payments by the National Government rose from 0.6% to1.3% of GNP between 1978 and 1983, refleccing increases in external borrowingand incernational interest rates. Domestic transfer payments, mainly to localgovernments, also increased their share. Recurrent expenditures by theNational Government on personnel, operations, and maintenance, however,declined by 13% in real terms during the last plan period. Operation andmaintenance expenditures have therefore been underfunded, resulting ininefficient use and premature deterioration of the public sector capitalstock.

(ii) Resource Mobilization

2.34 The national government revenue effort which declined from 13.6% ofGNP in 1978 to 11.4% of GNP in 1982 has been a major element of the Philippines'public finance problem. Although increasing revenues, especially fromtaxation, has been a longstanding objective of Philippine development .Aans,progress has been slow. The Government has taken steps to improve theefficiency of taxation through the 1980-85 tariff reform, a reLated rerl.ign-ment of indirect taxes, the revision of fiscal incentives for investment andexports, and restructuring of taxes on petroleum products. Their combinedimpact on the revenue level has been neutral. Major structural problems inthe tax system persist, however, including a small tax base, low elasticitiesand buoyancy, high dependence on international trade taxation, and poor taxadministration. The buoyancy of the tax system of 0.7 in 1978-82 requiredsubstantial discretionary tax measures every year to maintain the revenueeffort. In 1981-82, the impact of the recession aggravated the revenueproblem. The structure of the revenue system did not change markedly in1978-82; taxes on international trade and domestic indirect taxes eachcontributed about one-third of revenues, while a low 222 came from direct

- 27 -

taxes. Internationai comparison of tax ratios, elasticities, and buoyanciesalso indicates that the Philippines is a Low-performing economy in taxationmatters. Internal cash generation of pubLic corporations deteriorated as welland contributed only about 15% of the resources required to finance theirinvestments in 1978-82. While power and water supply corporations improvedtheir internal cash generation, cost recovery in other sectors, such ashousing and transportation, remained low.

2.35 Over 70% of the public sector deficit in the last plan period wasfinanced from foreign borrowings, contributing to the rapid growth of externaldebt and an unfavorable debt structure, both resulting in high debt servicerequirements. While the national Government financed 24% of its capitalexpenditures from external borrowings, public corporations relied on foreignborrowings for about 60% of their investment outlays. A growing share ofpubLic corporations' external borrowings was short-term, which increased theshare of the public sector in official non-oil short-term debt from 22Z to 36%between 1978 and 1982. The impact of the large public sector deficit ondomestic credit is less clear; while domestic and foreign financing hadsimiLar shares in financing the deficit in 1980-81, about 85% of the nationalgovernment deficit in 1982 was financed domestically, resulting in a rapidexpansion of net bank credit to the public sector. Total domestic credit didnot expand significantly since private sector demand was weak.

(b) Stabilization Policies

2.36 Budgetary measures have played an important role in the Govern-ment's stabilization policies, beginning in 1983. Steps to reduce thenational government budget deficit in support of the balance of paymentsadjustment were sucessful; the deficit was reduced to 2% of GNP in 1983 and1984, compared to 4.3% of GNP in the previous year. The Government achievedthis through expenditure cuts; most significant was the reducticn in equitycontributions and net lending to non-financial public corporations from 3.3%of GNP in 1982 to 2.1% of GNP in 1983. In 1984, the Government introducedfurther cuts in recurrent and capital expenditures; both are expected to bereduced to shares in GNP comparable to those of the early 1970s. Thecontinuation of the stabilization program in 1985 will require to maintaincurrent and capital expenditures at the 1984 share in GNP. This constraint onexpenditures emphasizes the importance of the comprehensive review of thepublic investment program which the Government is undertaking with World Bankassistance.

2.37 Revenue measures contributed much less to reducing the nationalgovernment budget deficit in 1983-84; revenues increased slightly to 12% ofGNP in 1983 but are estimated to fall back to 11.2% of GNP in 1984. Given thedepressed domestic economy and the need for quick results, the Governmentinitially relied on increased international trade taxation which contributed36% of revenues in 1983, compared to an average 32% in 1978-82. A temporaryimport duty surcharge of 3% was introduced in January 1983 and, in severalsteps, increased to 10% in June 1984. In view of the Government's continuedcommitment to trade liberalization, the surcharge will be reduced to 5% onJanuary 1, 1985 and maintained on a contingency basis through 1985. In thesecond half of 1984, a substantial tax package was implemented; it is

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estimated to contribute 0.5% of GNP to revenues in 1984 and 2.5Z of GNP in1985. This would allow to reduce the budget deficit further in 1985. The taxpackage combines measures to increase revenues quickly with a first step tostructural improvements in the tax system. The measures include increases intaxes on petroleum products, a shift to an ad-valorem base for specific taxes,and a more broadly based sales tax, resulting in a reduced reliance oninternational trade taxation. However, the underlying structural problems ofthe revenue system still remain to be addressed.

2.38 Despite the national government austerity program, the consolidatedpublic sector deficit still was 3.7% of GNP in 1983, because public corpora-tions continued with a large investment program due to insufficient governmentcontrol. Although some corporations reduced their 1983 investment programsand improved their internal cash generation, total investment of publiccorporations was not brought into line with financing constraints. Adjust-ments in 1984 focus on steep cuts in government corporations' fixed invest-ment. This also reflects the financing constraints: equity contributionsfrom the National Government are being cut further, external financing islimited due to the debt moratorium, and domestic credit is constrained bymonetary policy. There are indications, however, that some corporations haveused the pesos accumulated to service their external debt as bridge-financingfor capital expenditures. From the vantage point of the individual corpora-tion, this practice has avoided disruptions in the investment program, but italso has postponed the necessary reduction of public investment and made thefinancing problem more acute in the future. Adjustments in 1985 willconcentrate on improving the internal cash generation of public corporationsand thus contribute to further reducing the public sector deficit. Tariffsfor public goods and services have been increased to reflect the exchange ratedepreciation and the deletion of various tax exemptions. This policy willneed to continue in order to improve the pubLic corporations internal cashgeneration over the anticipated deficit in 1984.

2.39 These developments highlight the need for greater national govern-ment control over the total public investment program, and the Government hastaken steps in that direction. In the second half of 1983, the role of theInvestment Coordination Committee (ICC) has been strengthened and investmentpriorities have been reviewed. Greater attention is being given to theregional allocation, budgetary requirements, and external financing needs ofpublic investment. However, the ICC-system is still in the initial stages ofoperation and not fully integrated with the budgetary process, although prepa-ratory work is underway to introduce medium-term financial planning. TheGovernment has also taken steps to monitor the investment program and financ-ing of public corporations more closeLy; a cabinet subcommittee has beenestablished for this purpose in 1984. The success of these steps tostrengthen the institutional framework for public investment decisions willdepend on continued careful implementation.

(c) Medium-term Prospects and Adjustment Needs

2.40 In the next few years, the Government would need to address thestructural issues of public finance which have become more pronounced in thecurrent crisis. It is unlikely that past expenditure and financing trends can

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continue. The issue is not only to reduce the public sector deficit to levelscommensurate with continued baiance of payments adjustment, but to establishan expenditure pattern that is based or. the medium-term development objectivesfor the economy and to institute a revenue zystem that would support thisprogram. The challenge to achieve this becomes even greater if emergingissues are taken into account. Several government financial institutions (cf.Chapter II.C.) are in a severe liquidity crisis, due to a deteriorating loanportfolio, and the national government budget has to provide financing fortheir debt service over several years. In addition, monetary policy willconstrain domestic credit, in particular to the public sector. To adjust tothese new parameters, substantial changes in expenditures and revenues arerequired for the National Government and public corporations.

(i) Expenditures

2.41 The structure of public expenditures would need to be changedsubscantially in the next few years and more atcention given to investmentprogramming. Restoring government recurrent expenditures for operation andmaintenance to a more adequate share in GNP would need to oe given the highestpriority but, due to financing constraints, levels which existed at the end ofthe 1970s are likely to be achieved only towards the end of the projectionperiod. Restoration of recurrent expenditures to more adequate levels would,thus, need to be combined with improving their efficiency, e.g., whilelimiting public sector employment, operation and maintenance expenditures needto be augmented selectively to ensure efficient use of the substantial pa<tinvestment. The second priority would have to be accorded to the financingneeds of government financial institutions. In 1984 and 1985, their claim onthe budget is estimated to amount to 10-112 of national government expendi-tures. Budgetary support to these institutions might need to continue for anumber of years. As a consequence, the level of public investment will beseverely constrained; capital outlays of the national government and publiccorporation:- will depend mainly on efforts to increase public sectorsavings. The composition of the public investment program will largely bedetermined by ongoing projects. Priority would need to be given to thoseongoing projects which are close to completion and which have high re-evaluated economic rates of return. New projects would need to be carefullyselected to ensure that they have high, preferably short-term, returns, a highforeign exchange savings impact, or provide for the rehabilitation of existinginfrastructure. New projects that have been planned before the financialcrisis of 1983 need to be re-assessed in light of increased scarcity and costof foreign funding. More fundamentally, the role and share of the publicsector in the economy need to be reviewed with respect to public investment indirectly productive sectors.

(ii) Resource Mobilization

2.42 The main issue in national government finance, however, will beresource mobilization. Even if capital expenditures remain constrained, theneed to reduce the budget deficit while raising recurrent expendituresrequires an increased revenue effort. Public corporations need to furtherincrease internal cash generation, consistent with efficiency, equity, andresource mobilization objectives.

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2.43 The principal area of reform would have to be the tax system. Thelong-planned review of the overall tax system would need to be undertaken inpriority to provide the basis for sustained growth of public expenditure. Astrategy to increase the tax ratio and improve the elasticity and equity ofthe tax system in the medium term would have to address four major and chronicproblems: (a) increase the tax effort further through broader-based taxes;(b) improve the structure of the tax system by reducing the heavy and growingreliance on indirect, especially international trade, taxes; (c) improve thecost-effectiveness of the tax system by expanding the reform of tax incentivesbeyond manufacturing industry; and Cd) improve the efficiency of tax collec-tion and administration. While several recent measures, such as the reform ofindustrial incentives and realignment of indirect taxes, are steps in theright direction, a comprehensive medium-term revenue strategy is required toimprove domestic resource mobilization.

C. Financial Intermediation

(a) Sectoral Reforms and Performance

(i) Financial Sector Reforms

2.44 The Philippine authorities followed a fairly eclectic approach tofinancial intermediation by creating a complex and fragmented structure offinancial institutions since che 1950s. The financial system thus evolved hadmuch overlapping of functions and considerable interlinking between institu-tions. The most significanc drawback of the system was and continues to bethe relatively underdeveloped state of the long-term capital market. As aresult, there was excessive reliance on short-term credit. Other areasrequiring improvement related to prudent management, proper criteria ofcreditworthiness in seLecting investments, as well as the level and structureof interest rates.6/

2.45 In 1980, the Government undertook major financial sector reformswhich moved in the direction of the universal banking concept, thereby permit-ting a more flexible system to increase the flow of longer term savings andloans. The main objectives of the reforms were to improve the efficiency ofthe system through more competition and utilization of economies or scale;reduce the specialization and expand the range of services offered; liberalizeinterest rates; increase the rate and share of savings in a financial form;and increase the availability of and access to longer term funds. The revi-sion of the banking structure introduced a new class of "expanded commercialbank" or "unibank" which combines commercial banking with the functions of aninvestment house (equity investment, underwriting, and securities dealer-ship). It also reduced differentiation among other categories of financialinstitutions, eliminated functional distinctions among thrift banks andincreased the functions of nonbank financial intermediaries. The revision of

6/ For details see "The Philippines: Aspects of the Financial Sector,"Joint World Bank/IMF Study, Report No. 2546-PH, October 1, 1979.

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administrative regulations was designed to provide a framework for prudentoperations, while encouraging more competition in the mobilization and alloca-tion of longer-term funds. It included: increasing the minimum capitalrequirement for unibanks to 500 million pesos; encouraging mergers and con-solidations; avoiding undue concentration of economic power; expanding thepowers of nonbank financial intermediaries and granting them access to CentralBank credit facilities; and providing discount facilities including a "lenderof last resort" facility. Another major element of the reforms focussed oninterest rate policies. Historically, the authorities had tried to retaincontrol over interest rates. The new policy relied on the market mechanism todetermine the levels and structure of interest rates. The Central Bank gra-dually decontrolled interest rates over a three-year period. These policychanges were expected to result in positrve real interest rates and to rein-force the incentives for longer-term resource mobilization and lending.

(ii) Structure and Crowth of the Financial System

2.46 Tha financial system of the Philippines has continued to growrapidly in recent years in terms of assets, number of institutions, and com-plexity. The growth of financial assets averaged 9% a year in real termsduring 1979-83, while real GNP grew at only 4% and gross national savingsdecreased their share in GNP. While past growth trends reflect substantialfinancial layering, they seem to indicate that the formal financial sector hasexpanded its role in financial intermediation. The sources of its growth,however, have been international credit rather than domestic savings. Thestructure and growth of the financial system are presented in Table II.8. Thebanking system, and within it commercial banks, dominate the financial sec-tor. The rapid growth of thrift banks, which are among the smaller institu-tions, contributed largely to the instability of the financial system. Ruralbanks constitute the smallest group of banking institutions and have shownonly modest growth during the last ten years. Nonbank financial interme-diaries, one third of them government-owned, have acquired a sizeable share offinancial assets, from a modest beginning merely a decade ago. They have alsogrown in complexity and contributed to the volatility of the system. Whilethe role of the capital market has been marginal, the money market has con-tinued to grow rapidly in volume and complexity and has assumed increasingimportance in the financial system.

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Table II.8: STRUCTURE AND GROWTH OF THE FINANCIAL SYSTEM

Real rates ofAssets (1983) growth p.a.P bilLion Z 1975-79 1979-83

Central Bank 130.4 23.5 6.9 13.9

Banking system 331.5 59.8 10.2 8.7Commercial banks 240.6 43.4 9.5 8.0Thrift banks 16.1 2.9 24.3 8.5Rural banks 9.5 1.7 4.1 5.7Specialized government banks 65.3 11.8 11.6 12.0

Nonbank financial intermediaries 92.0 16.6 6.2 4.5

Total Financial System 553.9 100.0 8.7 9.0(of which: public institutions) (291.8) (52.7) (6.3) (11.5)

Source: Central Bank of the Philippines.

2.47 In recent years, the financial system has been characterized byincrei.ing importance of public institutions and of foreign banks. TheCentral Bank and specialized government banks, the Development Bank of thePhilippines being the largest among them, have been the most rapidly growingparts of the financial system. With about 20% of assets of the bankingsystem, the Philippine National Bank (PNB) was by far the largest public bankin 1983 and thus occupies a unique position in the system. There appears tobe increasing involvement of government institutions in financing economicactivity; this reflects not only increased lending but also take-over ofdistressed private sector companies and financial institutions. Among the 30domestic commercial banks, 12 have a capital of over P 500 million; the othersare fairly small in size. Four foreign banks have become prominent in termsof resource mobilization and assets, increasing their share in the bankingsystem from 8% in 1977 to 17% in 1983.

2.48 Regional concentration of financial institutions remains high,despite rapid growth of the number of branch offices. The 5,800 officesexisting in 1983 translate into one office per 10,000 inhabitants, which ishigh by international comparison. About one-third of these offices belong tocommercial banks which are heavily concentrated in Metro Manila, reflectingthe concentration of business activity.

2.49 Given the current economic difficulties, it would be premature toassess universal banking, but the initial developments have been encourag-ing. Ia 1983, ten commercial banks have been authorized to operate as"unibanks," apart from the Development Bank of the Philippines (DBP) and Land

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Bank of the Philippines (LBP). There have also been some prominent examplesof mergers and consolidations leading to the formation of "unibanks."

(iii) Resource Mobilization and Allocation

2.50 Resource mobilization in the financial system has shown anincreasing trend towards longer-term periods. The 4% real growth p.a. ofresource mobilization in terms of deposits and deposit substitutes of thebanking system during 1979-83 was achieved exclusively by longer-term savings,which increased from two-thirds to three-fourths of total deposits. Financialresource mobilization in terms of deposits and deposit substitutes is increas-ingly done by commercial banks, which accounted for 83% of total financialresources at end-1983. Thrift banks and specialized government banks providemost of the remaining financial resource mobilization with only a marginalcontribution from the rural banks.

2.51 Although some progress has been made towards term lending which wasone of the objectives of the financing sector reforms, resource allocation ofthe financial system still favors short maturities. Two-thirds of credit out-standing by financiaL institutions has been of short-term maturity as at theend of 1983. However, commercial banks have increased medium- and long-termlending from 22% of their credit outstanding in 1980 to 30% in 1983. Thus,there has been movement towards term credit as financial institutions havetaken advantage of the incentives provided through the financial reforms, e.g,deregulation of interest rates.

2.52 The structure of credit allocation by industry has hardly changedduring the past five years, except for an increase in loans to financialinstitutions accompanied by a declining share of loans for trading. The morethan doubled share of financial institutions from about 6X prior to 1979 to13% in 1983 indicates, aside from the growth of the financial sector, increas-ing financial Layering and stronger interconnections among the financialintermediaries. The manufacturing sector continues to obtain about one-thirdof total credit while the share of agriculture remains around 12% despite theincentives provided by the Government.

(iv) Recent Setbacks and Responses

2.53 The impact of financial sector reforms so far has been less thananticipated, due to severe strains imposed on the financial system in 1981 and1983. Soon after the initiation of the financial reforms in 1981, althoughcoincidental, the Philippines' financial system went through a serious crisisof confidence characterized by a run on the banking system. It was triggeredby the defaults of a prominent businessman, who left the country with aboutP 700 million of debts unpaid. The main cause of this crisis was the abuse ofthe money market by an individual who could issue commercial papers on anunsecured basis. The crisis highlighted two fundamental weaknesses of thesystem, namely its excessive dependence on short-term credit and the tendencyof financial institutions to rely on general knowledge about borrowers ratherthan on proper creditworthiness and project analysis. These raise importantissues of prudent management and choice of investment portfolios. The mone-tary authorities averted a collapse of the system through prompt rescue

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operations of the affected institutions. As a part of these measures, threeprivate banks were absorbed by public financiaL institutions.

2.54 The financial sector, still recovering from the 1981 crisis,suffered another serious setback beginning in September 1983. It resultedfrom a combination of ongoing portfolio deterioration with massive capitalflight and deposit withdrawals. The current crisis has affected many finan-cial intermediaries, most severely the smaller banks and finance companies.Many finance companies, even more solid ones and those with international col-laborations, are iLliquid following massive deposit withdrawals and theimposition of tighter credit concrols. In many cases, even maturing depositscannot be repaid, and some investment houses and foreign bank branches havereported a moratorium on payments. By end-1983, the Central Bank had providedabout P 4.3 biLlion in emergency loans to 46 financial institutions. Therehave been some mergers and consolidations of financial institutions followingthe crisis. One commercial bank and an investment house are under conserva-torship, while about 15 finance companies are in serious financial difficul-ties with some under receivership and some under cease-and-desist order.

2.55 The lack of confidence and the element of uncertainty, whichconstitute major dimensions of the present crisis, have led to notable shiftsof funds within the banking sector. This has created the paradoxical situa-tion in which some large banks have high levels of liquidity while smallerbanks are suffering from shortage of funds.. Particularly evident is a shiftof deposits to foreign banks, which recorded a 67% increase in liquid assetsin 1983, while commercial banks as a group showed a net decrease. In 1983,nearly three-fourths of the interbank deposits were with foreign banks,compared to over 90% with domestic banks in the previous year.

(b) Impact of Stabilization Policies

(i) Monetary Policies

2.56 Monetary policy measures which were introduced in the second half of1983 to help stabilize the economy, began to have a significant contractionaryeffect only in the latter part of 1984. Until then, their impact was miti-gated by the requirements of government financial institutions to meetmaturing guarantees on external obligations of the private sector; emergencyCentral Bank funding for some domestic financial institutions, due to atemporary crisis of confidence; Central Bank commitments on forward covertransactions; national government budgetary requirements, and insufficientenforcement of the monetary measures. The reserve requirements for all bankswere raised in order to prevent further deterioration in the balance ofpayments position and to control credit supply. Reserve requirements on shortterm deposits and deposit substitutes of less than 730 days maturity wereraised by five percentage points during September-December 1983 to 23% forcommercial banks and 13% for thrift banks; they have been increased by anotherone percent in April 1984. In addition, marginal deposits on imports weresubjected to a 100% reserve requirement starting in November 1983. Thecontractionary effect of these measures was reduced by insufficient enforce-ment; i.e., the reserve position of commerciaL banks showed a deficit for mostof the time. Private financial institutions remained slow in meeting the

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increased reserve requirements, when public institutions like the PhilippineNational Bonk were allowed to exchange illiquid assets for reserve-eligiblepublic bonds. In addition, the peso counterpart payments on foreignliabiLities covered by the moratorium were in most cases not surrendered tothe Central Bank, thus contributing to monetary growth.

2.57 As part of restrictive monetary policies, rediscounting operationswere reduced and rediscounting rates align7d with the market rates as indi-cated by the Manila Reference Rate (MRR).7 The new rate structure stressesthe role of rediscount facilities for managing liquidity rather than for allo-cating credit. Although these policy changes increase the maximum lendingrates, they remain below market rates. At present, preferential rediscountingcontinues only for high priority sectors, mainly agriculture and exportindustries.

2.58 Despite these measures, total liquidity expanded significantly in1983, due mainly to overdraft and emergency loans to financial institutions.With the exception of quasi-money, all the components of domestic liquidity,which exhibited decelerating growth trends for che first nine months of 1983compared to the same period in 1982, increased in the last quarter of 1983.Money supply, in particular, increased by 38% in 1983 compared to no growth inthe previous year; the increase was of internal origin, money supply of exter-nal origin declined. Expansion of net domestic credit to the public sector,which constitutes about 15% of net domestic credit, slowed down in 1983reflecting the impact of budgetary constraint; private sector credit, however,expanded by 19% on acount of loans from deposit money banks and Central Bankemergency advances to financial institutions.

'ii) Interest Rate Policies

2.59 The move toward a market-oriented interest rate struct'ire, aimed atencouraging competition and efficiency in intermediation, was completed in1983 when interest rate ceilings on short-term loans and transactions wereremoved. Interest liberalization had a positive effect on the growth of pesosavings and time deposits in the first nine months of 1983, although the trendwas reversed subsequently (cf. para. 2.56). As part of interest ratederegulation, the payment of 3% interest on bank reserves with the CentraLBank was eliminated on January 1, 1983, but reinstated eight months later tocompensate banks for the concurrent increase in reserve requirements. Inconjunction with the increase in reserve requirements in April 1984, interestpaid was raised to 4%. A prime rate system was introduced to provide up-to-date information on the lowest effective lending rates charged by banks. Thesystem was discontinued in July 1984 since it no longer fulfilled its purpose.

7/ The Manila Reference Rate for 90 days (MRR-90), which applies here,refers to the reference rate for 90 days determined and announced by theCentral Bank for floating rate loans. It is computed weekly on the basisof the weighted average rate paid on promissory notes issued by the tenconmercial banks with the highest level of deposit substitutes.

/

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2.60 While interest rates remained relativeLy stable during the firsteight months of 1983, they increased subsequently due to the contractionarypolicy measures mentioned earlier. The average prime rate, which had beenaround 17.9% during the first eight months of 1983, moved up to 20.6% by theend of the year. Similarly, MRR-90 increased from 14.8% to 17.1% during thesame period. This uptrend in interest rates also reflected a more cautiousapproach of banks in their Lending strategy including reduction in lendingvolume and maturities as well as lending primarily to prime customers and morestringent credit evaluation. TabLe II.9 also reveals a significant increasein real interest rates. For example, real rates for longer-term loans morethan doubled to 14.7% from January 1982 to January 1984. However, inflationhas accelerated sharply in 1984, thus turning real interest rates negative.

Table II.9: NOMINAL AND REAL INTEREST RATES, 1982-84(% p.a.)

Nominal rates Real rates1/82 1/83 1/84 9784 1/82 1/83 1/84

Deposit ratesSavings 9.91 9.8A 9.74 9.60 -3.09 0.41 -0.251 year 13.87 13.81 15.46 22.49 0.77 3.56 5.472 years 14.50 13.54 15.78 26.57 1.40 3.29 5.79Over 2 years 18.77 15.49 19.31 24.05 5.67 5.24 9.32

Lending ratesUp to 2 years 16.54 17.63 21.04 30.23 3.44 7.38 11.05Over 2 years 20.15 21.64 24.65 38.38 7.05 11.39 14.66

Source: Central Bank of the Philippines.

(c) Development Prospects and Policy rssues

(i) Short-term Policies

2.61 Short-term financial sector policies will continue to reflect thedeflationary approach taken to stabilize the economy. Thus, domestic creditwill remain constrained and expensive, although the current liquidity crisisin the financial system reduces the scope for using this instrument. Animportant consideration at this time will be to revive and maintain publicconfidence and reduce the uncertainty in the financial system, which meansstricter supervision by the Central Bank to ensure that institutions are runin a prudent way under clear policy guidelines.

2.62 One aspect of short-term management deserving serious considerationrelates to the Central Bank's rescue operations of financial institutions andfirms in difficulties. The 1981 crisis was handled successfully in the shortrun by preserving the integrity of the financial system through Central Bankemergency loans. More attention, however, is needed to the longer-term impli-

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cations of this policy stance for public finance and the signals it gives tothe private sector. The issue is whether institutions which experienceddifficulties as a result of imprudent management and practices should beassisted without substantial penalties. At the extreme, some of these insti-tutions could be allowed to liquidate, while the rescue of institutions ofnational importance should be accompanied by sufficiently strong deterrentpunishment.

(ii) Longer-term Policies

2.63 Although progress was made in deregulation of interest rates andformation of universal banks, the main objectives of the financial sectorreforms largely remain to be achieved. The crises of confidence whichaffected the financial system in 1981 and 1983 delayed the impact of thereforms. The worsening economic situation has made the implementation of thereforms more difficult, affected the performance of the financial system andthe prospects, and, therefore, has added to the financial sector policyagenda.

2.64 Policy reforms have to continue in terms of rationalizing thestructure of financial institutions and improving efficiency through strictersupervision combined with appropriate incentives. Despite some mergers andconsolidations, there seems to be a proliferation of the number of financialinstitutions. A prominent example is that of finance companies; more than 400finance companies are registered with the Securities and Exchange Commission,but only half of these are active. There are many examples of institutionsbeing set up by small groups to benefit their own ventures. Governmentpolicies would need to continue to encourage mergers, consolidations and, ifnecessary, elimination of unsound institutions. The emphasis of policy wouldneed to be on competition among fewer and stronger institutions rather thanpreserving a large number of institutio-s.

2.65 Another structural issue in the financial sector relates to the roleof government financial institutions (GFI). First, the longer-term policyissue is to rationalize the role of major government financial institutions.Both DBP and PNB have reached a size and diversity of operations which makethem increasingly difficult to manage. Institutional restructuring, includingtransfer of some of their functions to the private sector, might be requiredto improve future management of government financial institutions. Second,there also is need to reverse the growth in the number of quasi-public insti-tutions which in part resulted from the financial sector crises mentionedabove. Several private domestic banks are associated with public institutionsin their management of resources which gives them access to funding and otherprivileges. Although some of these arrangements are temporary, the number ofinstitutions and the amount of resources is sufficiently large to become anissue in the financial community. By one count, as many as half of the insti-tutions and resources of commercial banks have some direct or indirect linkwith public sector institutions. The Government is preparing a study on thecomplex problems of GFIs, which would serve as a basis for a restructuring andpolicy program for the GFIs.

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2.66 An issue which has gained increasing importance is the deteriorationof portfolios of financial institutions. This development is particularlyalarming among givtrnnment financial institutions although other financialinstitutions, whicn -.ere already under heavy stress due to the worseningeconomic situation are affected as waLl. The portfolios of public financialinstitutions reflect the recent rapid growth of their project lending and alsothe impact of successive rescue operations. Significant amounts of financialassistance from the Government's budgetary and other resources to GFIs inrecent years helped financing this expansion. It continues to have seriousimplications on the Government budget as well as on the total resourceposition (see also Chapcer II.B). Evolving issues in this context are thedisposition of non-performing assets of government financial institutions andtheir approach to restructuring/liquidation of individual accounts. Theseproblems also highlight the need for thorough project evaluation and portfolioreviews of government financial institutions as well as other financial insti-tutions in a stricter manner and on a continuous basis.

2.67 The Development Bank of the Philippines (DBP) is the governmentfinancial institution which is most seriously affected by structural andportfolio problems. DBP has been the country's major source of long-termindustrial finance, and a significant conduit of funds from externalmultilateral agencies. DBP's perennial problems of low loan collectionsreached a crisis in 1982, when the institution was unable to meet its debtservice obligations and maintain its operations. The liquidity problem wasfurther aggravated by heavy withdrawals of Government deposits with DBP. Atpresent, over two-thirds of its portfolio is classified as non-performingassets, the majority of these being projects that were financed at the behestof the Covernment. As a result, support from the external agencies hasceased, and DBP has been forced to turn to the Government for budgetarysupport to meet its obligations. The major underlying reasons for DBP'spresent critical situtation are: a complex corporate structure and span ofresponsibilities, an inherently weak capital structure relying heavily onGovernment deposit, a dual and often conflicting role of a financial institu-tion as well as a development arm of the Government, internal organiza:ionaland management weaknesses. In addition. the continued economic recession hasadversely affected the debt servicing ability of many of DBP's clients. TheGovernment has developed a rehabilitation program for DBP which includes thesegregation of the non-performing projects into a separate account whoseobligations would be met directly by the Government, and a program ofinstitutional reforms within DBP itself intended to strengthen its managementand to tap new sources of funds through an expansion into commercial bank-ing. In the short-term, the financial situation of DBP remains precarious,and there has been little improvement in loan collections or loan arrears.Budgetary support required during 1984 and succeeding years will place a majorburden on the national Government, and make control of the budgetary deficiteven more difficult. For 1984, it is estimated that DBP's requirements willexceed P 5.0 billion, or over half of the projected total budgetary deficit.

2.68 In the nonbank financial intermediaries area, structural problemsrelate to the proliferation of finance companies and toe need for their stric-ter regulation. As noted earlier, many of these institutions have been crea-ted recently as the financing arm of a business group. There have been many

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examples of speculative use of funds, off-book transactions, overborrowings,and failure to satisfy maturing money market placements. Many companies havestarted operations without the necessary license as they could find ways tocircumvent the Corporation Code and other regulatory laws. The Securities andExchange Commis, >n (SEC) at present cannot refuse their registration. Toimprove the Longer-term viability of non-bank financial intermediaries, theirsupervision needs to be strengthened and their operation rationalized. SEC isplanning to amend the Corporation Code to that effect.

2.69 In light of future zonstraints in financial resources, creditpolicies and the rediscounting policy of the Central Bank need to be reviewedto ensure that access to credit is provided for priority sectors like manufac-tured exports and agricultural processing. In the past, mechanisms to channelfunds into agriculture have not worked well, as the share of agriculturalcredit has not increased, partly because of reguLations that offered variouschoices of substitutes. Similarly, che allocative mechanism related to exportcredits does not seem to have worked satisfactorily. There are increasingconcerns in the private sector about slowdown or closing of rediscount facili-ties and increase in rediscount rates. The rediscounting priorities of theCentral Bank thus need to be reviewed as well as incentives for borrowers tomobilize more resources on their own.

2.70 The financial system, which appears to have an adequate basic struc-ture to support future development thrust, will continue to evolve, takingadvantage of the opportunities that open up within the new policy environ-ment. The financial policies are well poised and initial steps in the rightdirection have been taken. It will clearly take some time to achieve the mainobjective of the financial sector reforms, namely the development of longer-term finance facilities, given the history of the financial system in thePhilippines and the worldwide shortening of maturities in the face of volatileinterest rates. However, at this stage, it would be desirable to review indetail the impact of the financial sector reforms initiated in 1980 to providespecific directions for future financial policy taking into account the sub-stantially changed medium-term prospects. Further reforms may be necessary toreinforce government objectives in other fields, such as export financing,term credit to the agriculture sector, and hotsing finance.

III. SECTORAL ADJUSTMENT ISSUES AND MEDIUM-TERM PROSPECTS

3.01 A resumption of viable growth in the key sectors manufacturingindustry, energy, and agriculture -requires a strategy which combines thefollowing elements. First, the efficiency in the use of the existing capitalstock would need to be increased. This would have to be the principal sourceof economic growth for the Philippines in the medium term, given the severedomestic and external financing constraints. Increasing the efficiency ofcapital use would apply to the private and public sector. Second, a review ofthe Government's sectoral investment programs is required to ensure that theirsize and composition reflects the substantial revisions in economic pros-pects. Priority would need to be given to completing expeditiously ongoinginvestments with high marginal rates of return and making only those new

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investments which have high re-evaluated economic rates of return. Thesewould include rehabilitation investments and investments with a short gesta-tion period. Third, the policy environment for private sector investment andproduction needs to be strengthened to emphasize efficient import substitutionand export production which has a high domestic value added. The effective-ness of sectoral policies will also depend on the macro-economic policy frame-work, in particular, the trade regime, exchange rate policies, tax policies,and financial policies, as discussed above. This chapter reviews sectoralperformance and develops the sector-specific policy requirements for medium-term adjustment and growth in manufacturing industry, energy, and agriculture.

A. Manufacturing Industry

3.02 In response to increasing inefficiency of manufacturing industry inthe 1970s, the Covernment introduced major industrial policy changes, begin-ning in 1980, with respect to export promotion, improving the efficiency ofhome industries, and reforms in the investment incentive system. Thus, mostof the industrial policies providing a framework for private sector activitiesin line with the adjustment and growth strategy are already being imple-mented. Their impact, however, is diluted by the effects of the recessionwhich were felt particularly strongly in manufacturing, and subsequently byseveral short-term stabilization measures. Continued government adherence tothe principles of efficiency and export orientation needs to be affirmed whilethe stabilization program ia being implemented, and macro-economic policiesneed to support the sectoral policy orientation more strongly in the future.Planned public investment in manufacturing industry through large-scale,capital intensive projects has been reduced, and government intervention couldbe limited to resolving the issue of rehabilitation/divesture of distressedfirms.

(a) Structural Issues and Past Performance

3.03 Manufacturing industry grew at a satisfactory 7% p.a. during the1970s and accounts for 25% of CDP, equal to the average of middle-income oilimporters. The structure and performance of the sector have been influencedby trade and industrial policies which until well into the 1970s were gearedtowards import-substitution of consumer goods. In 1983, about 86% of grossvalue added in manufacturing still was produced by industries oriented towardsthe domestic market. They are affected by severe inefficiencies and highimport dependence of production mainLy as a result of a protective traderegime in the past. Furthermore, past financial and incentive policies hadskewed investment toward capital-intensity. This 'had led to a relatively lowlabor absorption by the sector, and its share in total employment hadstagnated at 10-12% since the early 1950s. Non-traditional manufacturedexports have been growing rapidly since the early 1970s and increased theirshare in merchandise export value from a negligible level to 48% in 1983.However, in 1983 export production still accounted for only 141 ofmanufacturing value added and a mere 4% of GDP, because the products are stillderived largely from assembly and consignment activities which have fewbackward linkages.

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3.04 In 1980, the Government initiated a medium-term program of indus-trial policy changes. The program aims at achieving an industrial structurewhich is based on the country's comparative advantage in labor and rawmaterial availability and which is efficient and competitive by internationalstandards. The most important element of the program is a five-year tariffreform and trade liberalization program which is reducing protection of domes-tic industries (cf. para. 2.02). Average nominal tariff rates have beenlowered from 43% in 1980 to 29% in January 1983. However, initial measurestaken to stabilize the economy in 1983-84 have increa.sed tariff protection andquantitative import restrictions (see para. 3.09). Thus, it is still tooearly to gauge in any concLusive way the impact of the trade liberaLizationmeasures undertaken to this point in time. Several important phases of thetariff reform and import liberalization program remain to be completed. Inaddition, the protective element of indirect taxes will be phased out only in1985, and reductions in import licensing still remain to be acted upon. Thefull impact of the trade liberalization will be felt only after several years,when the investment and production decisions of the manufacturing sectorreflect these new parameters. The recent recession and the financial crisisare ectending the implementation period further and also delay investmentdecisions by the private sector. While the correlation between reductions ineffective protection and output growth for individual industries has been weakso far, due to all these mitigating factors, output data indicate that export-oriented industries have been growing at a high 12X p.a. in 1979-83, whiledomestic-market oriented industries, which grew at only 2% p.a., were far moreaffected by the recession (Table III.1).

3.05 Another major improvement in industrial policies was the intro-duction of a new industriaL incentive system in line with the above objectivesin 1983. Under the new system, a small number of incentives aim at compensa-ting investors directly and more fully for distortions and imperfections inthe market. The incentives are performance-oriented and neutral with respectto factor choice. Economic evaluation of projects by the Board of Investment(BOI) has been strengthened. Since the industrial sector is largely private,BOI has instituted an active dialogue with industrial interest groups whichhas aided the effective implementation of the policy reforms. Early indica-tions show that the new incentive scheme is attracting potential investmentsmainly in export manufacturing. However, it is expected that the full impactof this scheme will be felt slowly due to the prolonged depressed investmentclimate in the Philippines.

3.06 The reforms also include the formulation of subsector programs totranslate the broad industrial development objectives into a consistent policyframework at the industry level. The subsector programs are designed to for-mulate approaches to rehabilitation/restructuring and development of indus-tries. They would thus provide the basis for further industrial policy reformat the subsector level. Rehabilitation programs are being implemented for thetextile and cement industries. Programs have been formulated for electronicsand several food-processing industries. A development program is under prepa-ration for the metal working sector which would have the potential of deepen-ing the Philippines' industrial structure. Other programs are being developedfor the leather, footwear, and furniture industry, i.e., areas of high poten-tial for efficient import substitution as well as exports. The Government is

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also providing assistance to export industries through identifying promisingproducts and revising related policies and regulations. Institutiona'. prob-lems, however, have delayed the systematic use of subsector programs :or areview of policies and the preparation of further reforms at the industrylevel. The paucity of industrial statistics in the Philippines and the delaysin strengthening the statistical system compound the problem of monitoring theimpact of the current reforms at the subsector level and preparing futureindustrial policy decisions.

Table lII.1: MANUFACTURING INDUSTRY: SELECTED INDICATORSOF STRUCTURE AND PERFORMANCE

Z share in Average X share ofmanufacturing annual imports in raw

Industry gross value X change in materialadded output requirements1983 1979-83 /a

Export-oriented Industries 14.0 12.3Garments 5.9 9.5 80Electronics 3.4 49.1 100Wood processing 3.5 0.7 3-15Furniture 0.5 5.8 15-25Other 0.7 15.1 n.a.

Domestic-market orientedIndustries 86.0 2.0Food/beverage/tobacco 39.3 3.7 n.a.Petroleum and coal 14.7 -0.8 n.a.Metal 2.8 1.3 n.a.rextile 5.4 -1.6 n.a.Chemicals 5.5 -0.2 50-60Automotive 3.0 -3.6 85Pulp and paper 2.2 2.9 70Cement 2.1 2.7 4Drugs 1.8 -0.2 95Appliances 1.5 4.4 60Other 7.7 3.0 n.a.

/a Estimates are based on 1978-83 data.

n.a. = not available

Source: NEDA and mission estimates.

3.07 Finally, in order to deepen the country's industrial structure andaccelerate the emergence of intermediate goods industries, the Governmentinitiated a program of major industrial projects in 1979. These projects are

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large and capital-intensive and have long gestation periods. The contemplatedaluminum smelter, pulp and paper mill, and petrochemical complex whichtogether amount to about US$2.0 billion have been deferred due to currenteconomic conditions. The Government has also decided to delay implementationof the US$1.8 billion integrated steel mill due to resource constraints. Ofthe remaining projects, amounting to US$1.0 billion investment cost, thecopper smelter and the diesel engine manufacturing have started operation in1983, and the coal conversion of the cement industry has been completed. Thephosphatic fertilizer plant, the heavy engineering project, and the coco-chemical plant are in various stages of implementation. Given the futuresevere financing constraints and the change in economic outlook, the viabilityof the projects under implementation as well as those currently deferredshould be re-assessed.

(b) Impact of Stabilization Policies

3.08 Manufacturing industry has been the sector which felt most of theimpact of the domestic recession and the recent stabilization measures.Industries producing for the domestic market were already experiencing lowoutput growth in the early 1980s due to the slower growth in domesticdemand. The impact of the foreign exchange shortage by the end of 1983 com-bined with worsened domestic demand prospects resulted in short-term cuts inoutput. Export industries which had been growing at respectable rates despitedampened prices and demand on international markets, experienced increaseddemand in the first half of 1983, when the international economy improved.Subsequent balance of payments problems and stabilization measures, however,led to a stagnation of nontraditional manufactured exports in 1983.

3.09 The stabilization measures which the Government adopted during 1983have had a direct impact on the manufacturing sector's performance. Severalof the measures, in particular the devaluations, tighter monetary policy whichresulted in high cost of capital, and scarcity of foreign exchange support thebasic thrust of industrial policies and contribute to reduce structural weak-nesses which existed in the sector, i.e., high capital intensity and importcontent. However, the impact of these policy measures has been mitigated bytwo countervailing factors. First, the rapid increase in domestic inflationquickly eroded the benefits export industries gained from the devaluation.Second, some of the policy signals became less clear by the approach taken totheir implementation e.g., by granting exceptions, lack of enforcement orcumbersome administrative procedures. Other stabilization measures are inconflict with the thrust of the industrial reform program. An import dutysurcharge on all imports which was introduced in January 1983 for revenue pur-poses and gradually increased to 10Z, had the effect of increasing relativeprotection of industries producing for the domestic market; it was thus biasedagainst export industries. :a view of the government's continued commitmentto trade liberalization, the import duty surcharge will be reduced to 5% for1985 and maintained on a contingency basis, to cover a potential revenueshortfall. The reduction of quantitative import restrictions under thestructural adjustment program was suspended and additional quantitativerestrictions were introduced, further increasing protection of home indus-tries. Although these measures are temporary, the policy signals given to the

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protected industries have become confusing, and adjustment of inefficientindustries might be delayed.

3.10 WhiLe the structural impact of these measures can only be felt overa longer period of time, their impact on manufacturing industry's performancein 1983 and early 1984 was a cut-back in production. The 1983 growth of manu-facturing industry is estimated to have fallen to 2.32 compared to an averageof about 6% per year during 1972-82. Industry observers in the Philippineshave estimated that during 1984 some 300,000 persons, i.e. 12-15% of thoseemployed in manufacturing, may become unempLoyed and 25-30Z of the domestic-market oriented firms will face temporary or permanent closure. The sectormay contract by more than 10% during 1984, mainly as a result of falteringdomestic-market oriented firms. These firms have experienced a fast escala-tion of prices for their imported inputs, which range from about 50% inindustrial chemicaLs to 95X for drugs. Due to the weak domestic markets, theincreased costs have not been passed fully to consumers; production has beenreduced, and losses have been incurred. For export industries, the impact ofthe devaluations in 1983 was initiaLly beneficial as export receipts indomestic currency increased much faster than the costs of production. How-ever, the steadily increasing wage pressure and a high import content of pro-duction have quickly eroded the initial benefits and foreign exchangeconstraints hampered production.

3.11 The shortage of foreign exchange for trade financing since the lastquarter of 1983 has hampered industrial production and increased costs. Inresponse to the foreign exchange shortage, the Government introduced a poolingsystem to allocate foreign exchange to importers (cf. Part I.B.). Since onlylimited amounts of foreign exchange entered the pool, it did not prove aneffective measure to deal with the shortage in the short run. With theintroduction of a floating exchange rate in October 1984, the Central Bankallocation system of foreign exchange has been abolished; it is, however, tooearly to assess the impact of these changes in the exchange regime on manufac-turing industries. In 1983-84, many exporters have resorted to the processingof goods on a consignment basis as a way of avoiding the need for a foreignexchange outlay for imports, but this often resulted in higher prices beingpaid for raw materials, and reduced net foreign exchange earnings. Sinceearly 1984, however, exporters have benefitted from a newly implemented ExportDeduction Scheme, which allows them to retain a certain fixed proportion oftheir export earnings to meet maturing letters of credit on imports. This isnot an entirely satisfactory arrangement, since it depends on a timing matchbetween the export earnings and import payments which may not always bepossible. It has, however, been useful in easing the import problem for manyexporters.

3.12 During the last year, domestic-oriented firms had to rely on othermethods than the official pool to finance their imports. The Governmentallowed firms to import essential producer goods (about 40X of total imports)on a prepaid letter of credit or "no-dollar" basis. Under these arrangements,importers furnished their own foreign exchange for payment, either from pastsavings or from purchases on the unofficial foreign exchange market. Thisimplied raw material costs that were 30-40% higher than those that would haveprevailed using official exchange rates. The resulting higher prices for

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final products, combined with decreased domestic demand, often meant thatfirms had to reduce production. As a temporary relief, essential importscould also be obtained from foreign suppliers or parent companies against pay-ment in the form of equity in the importing company. Firms requiring goodsclassified as "semi-essential", have generally not been able to obtain foreignexchange except from the official pool, even if the semi-essential goods areonly a small proportion of total needs. Requests from manufacturers to allowthe importation of semi-essential goods on a "no-dollar" basis have not beenapproved by the Government.

3.13 Another short-term negative impact of stabilization policies, incombination with lack of confidence in the economic policies and prospects ofthe Philippines voiced by the private sector, has been a severe reduction inindustrial investment. Private sector investment decisions are being post-poned due to low prospective domestic demand and unclear longer-term policysignals. In addition, restrictive monetary policy reduced the amount ofcredit available and increased its cost. Access to credit is also limited tomainly large firms. Controls on capital goods imports and the lack of foreignfinancing further reduce investment opportunities. Reflecting all thesefactors, it is estimated that total investment will decrease by as much as 25%in 1984; a sectoraL breakdown of investment data, however, is not available.

(c) Medium-Term Policy Issues and Prospects

3.14 The medium-term growth prospects in manufacturing will depend to alarge extent on a successful stabilization program, efficient utilization ofthe existing capital stock, and restoration of confidence in the privatesector. However, the longer-term viability of the manufacturing sector andits contribution to future economic growth are crucially dependent on thecontinuation of the Government's structural reform program and private sectorreactions to these new parameters.

Ci) Policy Issues

3.15 Reflecting the constraints which the Philippine economy faces forthe next few years, manufacturing industry will have to reduce its importdependence and increase the efficiency of existing investment, in addition tochanneling new investment into areas that provide high net foreign exchangeearnings. Since, in the next few years, the investment climate may remaindepressed in Philippine manufacturing, a high priority needs to be given torestructuring the domestic manufacturing industries into viable, competitiveindustries. Removal of the temporary import controls, continued tradeliberalization, and a flexible exchange rate policy are important policymeasures to that effect. Maintaining protection of manufacturing industrywould reduce the pace of sectoral adjustment and decrease its growth potentialin the long run. Current investment constraints put a premium on policy deci-sions which promote efficiency of investment and employment creation. Contin-uation of major industrial projects will need re-evaluation to ensure theircompatibility with economic policies and rapidly changing conditions. This isespecially important for big capital-intensive projects, since the downwardrisks are large and might not be affordable in the current economic difficul-ties. Investment policy wilL need to be supported by financial policies which

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will draw private domestic resources to the sector. The Government is alsoreviewing its policies towards foreign investment which might help alleviatethe external funding constraints.

3.16 Adjustment policies for existing export industries are also neces-sary to ensure their continued international competitiveness and increasetheir net foreign exchange earnings. Key industries which will need to adjustare garments and electronics which, together, accounted for about 60% of earn-ings from non-traditional manufactured exports in the last 5 years. For thegarment industry, policies which improve the performance of the textile indus-try and thus allow an increase of domestic raw material utilization are essen-tial. Continued support of the ongoing textile sector restructuring is,therefore, an important eLement. The garment industry, however, is facingincreasingly difficult export markets and has problems receiving higher quotafor items which have the potential of a higher value added. The industry alsoneeds to diversify export markets and reduce growth constraints resulting fromincreasing protectionism in its major markets. The electronics industry canincrease domestic value added by introducing additional production steps suchas testing and by moving towards production of higher level integratedproducts. It is, however, facing increased competition from highly automatedproduction methods in industrialized countries for the manufacturing of thesame products. A highly efficient and reliable work force needs to bemaintained in this industry and "red tape" eliminated from customs, BOI, etc.,for continued export success.

3.17 Given these possible constraints to continued high growth in theexisting export industries, diversification becomes increasingly important.The greatest potential seems to lie in development of domestic resource basedprocessing with high export potential. Industries which are especially pro-mising in this category are agriculture-based, such as food processing andwood based industries. The sector development programs proposed by theCovernment for fruit and fish/seafood processing industries, which assess thegrowth potential of these industries and the policies required to supportthem, indicate that these have excellent economic and financial 7iability aswell as dynamic markets. Similar good prospects exist for the furnitureindustry. The gestation period for investment in these industries is expectedto be relatively short which makes them attractive for both domestic and for-eign investment. An important policy tool is already in place in the invest-ment incentives system which favors industries with high domestic value addedand export production. Successful diversification into these industries willaLso depend on government policy to streamline the multitude of agencies inagriculture and industry so that they assume a consistent and supportive role,minimizing the regulatory functions and keeping policias transparent to giveclear signals to the private sector.

(ii) Growth Prospects

3.18 The high-case scenario assumes continued implementation of theindustrial adjustment program with eaphasis on the policy areas detailedabove, as well as a recovery of the financial sector to support industrialdevelopment. Even under this scenario, manufacturing industry is seen asaveraging -1% growth during 1984-86, reflecting the completion of the stabili-

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zation process in the economy, the balance of payments constraints, and theanticipated gestation period of new and lower investment. While growth ofdomestic-oriented industries would be negative during that period, it islikely that export-oriented industries would compensate for most of thatloss. Non-traditional exports could be expected to grow at an average of4% p.a. and net exporc earnings would become increasingly larger as importdependence is lessened. Beginning in 1987, the structural improvements in thesector might allow a growth rate of 6% per year, reflecting successfulrestructuring of the domestic-oriented industries and high growth of non-traditional export industries of close to 9% p.a.

3.19 If the implementation of industrial policies is less successful,inefficient production and high import-dependence would increasingly constrainthe growth of the sector. In the low-case scenario, the structural problemswould keep manufacturing as a net burden on the balance of payments and limitthe sectoral contribution to employment. Growth during 1984-86 would be nega-tive; exports of manufactures might still grow at about 5% p.a. but wouldrequire a larger counterflow of imported inputs which would diminish their netforeign exchange earnings. Sectoral growth thereafter would be limited to 3Xper year, a rate which would depress overall economic growth.

B. Energy

3.20 The energy sector in the Philippines is of critical importance tothe structural adjustment effort since it has the largest potential forefficient import substitution. In response to the 1979-80 oil price increase,the Government drew up an energy reform program aimed at increasing domesticenergy production, improvements in energy conservation, and increased genera-tion of investible funds within the sector. The m-jor policy reforms initi-ated under the program have been implemented successfully. The main directionfor the medium-term is the continuation of the structural adjustment programand the consoLidation of the gains already achieved, including more attentionto efficient use of existing capacity. The investment program should givehighest priority to the completion of major on-going projects to realize thetarget of reduced import dependence and foreign exchange savings. The leastcost investment program for the power sector requires review to determine theoptimum size and timing of new investments given reduced demand, financingconstraints, and other sectoral priorities. Energy pricing policies wouldneed to continue to support demand management, self-financing of key agencies,and domestic resource mobilization. There is a need for the formulation of apolicy on rural energy, given that higher prices for commercial energy willresult in an increased demand for diminishing wood resources.

(a) Past Performance and Sectoral Adjustment

3.21 The oil import bill for the Philippines increased more than ten-foldbetween 1973-83 from $188 million to $2.1 billion and from 12% to 28% of totalimports. This heavy dependence on imported oil contributed to the deteriora-tion in the terms of trade, and adversely affected both the balance of pay-ments and economic growth.

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3.22 The Government responded to the situation quickly and effectively.By increasing domestic energy prices it helped reduce the elasticity of com-mercial energy consumption with regyect to GDP from 2.0 in the pre-1973 periodto less than unity during 1973-83 - (Table II1.2). This was complemented byaccelerated efforts to explore and develop the country's considerable domesticenergy resources: geothermal steam, hydro power, coal, oil, and biomassmateriaLs. In particular, a large public investment program leading to theprogressive substitution of domestic energy resources for imported oil wasinitiated for the power sector. Fiscal incentives were introduced for energyconservation, and the cement industry, traditionally the country's largestuser of industrial fuel oil, was mandated to convert to coal. Energy auditswere also initiated. In order to improve the formulation and implementationof energy policies and programs, the Ministry of Energy was established in1977; major implementing institutions in the sector have been strengthened:the National Power Corporation (NPC), responsible for power generation andtransmission; the Philippine National Oil Company (PNOC), responsible forenergy resource development and petroleum refining and marketing; and theNational Electrification Administration (NEA), responsible for rural electri-fication. The Government was also committed to undertake pricing/financingreform measures to improve resource mobilization in the sector following the1979-80 oil price increases.

Table III.2: ENERGY CONSUMPTION INDICATORS, 1973-83/a

1973-76 1977-80 1981-83

Growth of commercial primary energyconsumption (Zp.a.)/b 2.0 2.7 1.8

Elasticity of energy consumption withrespect to GDP 0.3 0.5 0.9

Share of imports in total commercial energy(Z of energy equivalent) 94.0 89.0 80.0

Share of energy imports in total imports (Z) 19.8 24.7 29.0

Memo item:Energy imports ($ million) 647.0 1,414.0 2,229.0

/a Averages for the periods shown.Th Excluding bagasse and agriwaste.

Source: Ministry of Energy, Central Bank of the Philippines.

8/ The much lower elasticity during the late 1970s and early 1980s waspartly due to recessionary conditions and sluggish growth of energy-intensive sectors such as industry. These figures exclude bagasse andagriwastes as sources of commercial energy to maintain consistency withdata prior to 1981.

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3.23 The structural9adjustment program in the energy sector has been pro-gressing satisfactorily.- One of the major effects has been the rapiddevelopment of domestic energy sources. Although the country still importslarge volumes of oil, indigenous energy resources, including bagasse and agri-wastes, constituted 35Z of total energy supply in 1983 as against 21Z in 1979.

3.24 Measures to increase domestic resource mobilization are alsobeginning to show progress, particularly in the power subsector, which in thepast had been largely dependent on Government equity contributions for itsinvestment program. Wholesale power tariffs have been significantly increasedand automatic adjustments introduced to reflect exchange rate changes and fuelcost increases. As a result, between June 1982 and June 1984, the nominaltariffs increased by 116% and real tariffs by 63%. This improved NPC's finan-cial position, reducing its need for Government equity contributions. NPC'srate of recurn increased from 6% or less in earlier years to 8.2% in 1983.The Government also restructured retail electricity rates in the Metro Manilaarea to reduce cross subsidies and geographical inequities.

3.25 The Government initiated a two-phase study of the price structure ofpetroleum products for formulating a long-term pricing and refining policy.The first phase of the study was completed in 1982 and suggested short-termprice measures. The second stage is being finalized. In the meantime,reflecting changes in international oil prices and the depreciation of thepeso, the Government increased the average domestic prices of petroleum pro-ducts by 100% between July 1982 and June 1984, i.e. about 47% in real terms.Simultaneously, the price differentials among various products, which had beeninducing inefficient substitution and uneconomic investments, were reduced.For example, the dfferential between the diesel and gasoline prices droppedfrom 40Z to 212.1U/

3.26 The Government also accelerated energy conservation and conversionthrough the provision of incentives. The Bureau of Energy Utilization esti-mates that during 1978-82 energy savings equal to P 488 million were made withan investment of P 349 million. The investments include the government-mandated conversion of cement plants from fuel oil to coal, which is nowcompleted.

9/ Details of the reform measures are found in the President's Report forthe Second Structural Adjustment Loan (Report No. P-3387-PH of April 1,1983).

10/ The price of diesel was 15% below that of gasoline in 1973 but thedifference had increased to 402 by 1981. This had induced substitutionof dieseL for gasoline and encouraged diesel consumption. Because of thelimited flexibility in refining coefficients, this resulted in dieselimports and gasoline exports.

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(b) Impact of Stabilization Policies

3.27 The major effect of the short term stabilization measures on theenergy sector has been cuts in budgetary contributions to the energy invest-ment program and a shortage of foreign exchange due to the debt moratorium.These have slowed down the implementation of on-going energy projects and ledto the deferral of new projects. Measures to overcome these financialconstraints and complete on-going projects have included short-term bridgefinancing arrangements. For example, due to the cancellation/suspension ofunutilized and committed foreign loans as a result of the debt moratorium, NPCfinanced part of the shortfall in its capital budget by utilizing P 1.6 bil-lion of oil supply credits due to PNOC and the retention of pesos correspond-ing to the debt service covered by the moratorium. PNOC, on the other hand,used short-term trade credits to partially finance its exploration program dueto the non-availability of Government resources from the Oil Industry SpecialFund (OISF).m These measures prevented a further slow-down in theimplementation of projects, but will compound the problem of future debtservicing.

3.28 The devaluation of the peso has led to increases in power tariffsand petroleum prices. The former has contributed to reducing the burden onthe government budget and the latter to increasing government revenues.Revenues from taxes and custom duties on petroleum products have increasedtheir share in total tax revenues from 18% in 1978 to 20Z in 1983.

(c) Medium Term Development Prospects and Policy Issues

3.29 The medium-term prospects for the energy sector will be affected bythe general economic outlook as well as public finance and balance of paymentsconstraints. These factors have resulted in downward revisions in energy demandand supply projections, reductions in the investment program, and recognitionof the need for an even higher degree of self-financing for energy investments.The major policy recommendation for the medium term is to continue thestructural adjustmenc program and consolidate the gains already achieved.

(i) Energy Demand

3.30 Reflecting lower GDP projections, the Ministry of Energy has revisedits energy consumption projections significantLy downwards and currentlyassumes an average growth rate of 4.2X p.a. for 1985-89, foLlowing a decline

1l/ The OISF was established in 1974. Its revenues came from a levy onpetroleum products over tnd above specific taxes and was Largely used forenergy-related projects. The OISF was abolished in October 1984. At thesame time, a Special Account, called the Oil Price Stabilization Fund,was created in the national government budget. The purpose of the newfund is to minimize the frequency of energy price changes due to exchangerate adjustments and increases in world market prices of crude oil andpetroleum products.

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of 4.2% in 1984. These projections include both commercial and non-commercialenergy sources. In 1984, non-commercial energy, mainly bagasse and agri-wastes, is estimated to constitute 15% of energy consumption, and the projec-tions largely maintain this ratio. The analysis in the following paragraphsconcentrates on commercial energy sources due to their importance for macro-economic and balance of payments problems, and the lack of detailed informa-tion on non-commercial energy sources.

3.31 As seen in Table III.2, the growth of commercial energy consumptionhas shown a fluctuating trend since 1973. The elasticity of commercial energyconsumption initially fell sharply due to higher energy prices. Since 1980 ithas increased, although it is still less than unity. This may indicate thatthe major adjustments in energy intensity have occurred in the 1970s and thatfuture CDP growth will be associated with a higher elasticity ratio. Conse-quently, for the medium term an elasticity of unity has been assumed for thelow and high growth scenarios (Table III.3).

Table III.3: COMMERCIAL PRIMARY ENERGY BALANCE, 1983-90(Millions of barrels of fuel oil equivalent)

Low Growth High GrowthAverage Averageannual annualgrowth growth

1983 1984 1990 1985-90 (Z) 1990 1985-90 (X)

Demand 83.9 81.3 86.2 1.0 100.8 4.0Oil 68.3 58.3 47.8 -3.0 60.1 0.5Coal 3.5 6.3 8.2 9.9Hydro 5.1 9.3 13.7 13.7Geothermal 7.0 7.4 10.9 11.5Nuclear - - 5.6 5.6

Domestic Production 19.4 24.1 42.3 12.6 44.1 13.8Oil 4.7 2.7 5.0 5.0Coal 2.6 4.7 7.1 8.3Hydro 5.1 9.3 13.7 13.7Geothermal 7.0 7.4 10.9 11.5Nuclear - 5.6 5.6

Net Imports 64.5 57.2 43.9 -3.9 56.7 0.1Oil 63.6 55.6 42.8 -3.8 55.1 -0.1Coal 0.9 1.6 1.1 1.6

Source: MOE/NPC data and mission estimates.

3.32 The industrial sector is the major consumer of commercial energy(56% in 1983). It is the largest consumer of electricity and also consumes a

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significant portion of petroleum products (diesel and fuel oil). Electricityconsumption is expected to decrease in the short term due to the recessionaryconditions. Fuel oil consumption will decrease as a result of energy conser-vation measures and the coal conversion program in both the cement and miningindustries. rhe cement conversion program alone will result in the substitu-tion of about 3 million barrels of fuel oil a year. Currently, the coalquality required in the cement plants does not fully match the domestic supplyand some imports are still required. However, as prices for coal are lowerthan for oil, foreign exchange savings are still substantial. Financialassistance and technical support are required to fully realize the significantpotential for energy conservation in this sector. Although non-commercialenergy is not considered in this analysis, energy conservation and substitu-tion potential exist to the extent these forms of energy are used in certainindustries, for example bagasse in the sugar industry.

3.33 The transport sector accounted for about 27% of commercial energyconsumption in 1983. Consumption of transport fuels has stagnated at about30 million barrels between 1974-83 as a result of higher fuel costs. Thetrend has been for a reduction in gasoline consumption at an average annualrate of 5% between 1974 and 1983 and a corresponding 5% increase in dieselconsumption. The interfuel substitution is a reflection of Government's pastpricing policy. The realignment of taxes on these products in 1983, however,has helped reduce the growth of diesel consumption. For the medium term, ithas been projected that, while diesel and premium gasoline consumption willgrow with GDP, the demand for other transport fuels will reflect historicalgrowth rates. It is also assumed that further interfuel substitution, parti-cularly between diesel and gasoline, would be limited. The ongoing programsfor non-conventional energy for the transport sector - cocodiesel and alcogas- have been scaled down due to technical, economic, and financial problems andlack of consumer acceptance. These fuels will provide little substitution forgasoline and diesel in the medium-term. In the commercial/residential sectorsthe demand for both electricity and petroleum products in the medium term willbe largely determined by the growth of CDP.

3.34 Projections of the sectoral composition of commercial energy con-sumption through 1990 are shown in Table III.4. Projections are broad ordersof magnitude and indicative only; for example, the rate of commercial energyconsumption growth will depend on future energy pricing policies adopted bythe Government and the extent to which future energy conservation measures aresuccessful.

(ii) Energy Pricing

3.35 As indicated previously, the Government has relied primarily on theprice system to encourage energy conservation and changes in energy use. Fur-ther adjustment in pricing policies are envisaged to assist Government'sresource mobilization efforts, and correct remaining distortions in the pric-ing of energy products. The Government is undertaking a comprehensive studyof the structure of both wholesale and retail power tariffs of public andprivate utility agencies. The objective of the study is to provide recommen-dations for restructuring wholesale and retail tariffs to eliminate existinginefficiencies and inequities. In many cases, tariffs vary considerably among

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Table III.4: SECTORAL COMPOSITION OF COMMERCIAL ENERGY CONSUMPTION,1983-90 (MBOE)

Low growth High growthAv. annual Av. annualgrowth growth

Sector 1983 1984 1990 1985-90 1990 1985-90(Z) (Z)

Industry /a 46.8 45.3 48.4 1.1 56.7 4.2Transport 22.8 22.0 23.4 1.1 27.6 4.2Commercial/residential 13.3 12.9 13.4 0.6 15.5 3.4Other 1.0 1.0 1.0 - 1.0 -

Total (MBOE) 83.9 81.3 86.2 1.0 100.8 4.0

/a Includes small quantities for the agricultural sector, but excludes bagasse andagriwaste.

Source: Mission estimates based on data from MOE/NPC/PNOC.

consumer classes, regions and even districts without necessarily reflectingmarginal cost differences, and the study would devise tariff structures whichreflect as closely as possible the efficiency costs to the economy of meetingthe demand for electricity. At the moment, the Government's policy onpetroleum product pricing is to adjust prices to reflect OPEC crude oilprices, exchange rate movements and refining margins. Thus petroleum pricesare being continuously changed, with relative price distortions being gradu-ally decreased. A longer term pricing strategy will be formuLated on thebasis of the second phase petroleum product pricing study, which analyzeslonger term issues related to retail and ex-refinery prices, domestic demandand supply projections and the appropriate refinery mix for the Philippines.Petroleum prices, at the moment, are significantly higher than border prices. Acomparison with other countries in the region is seen in Table III.5 andindicates that, while diesel, kerosene and fuel oil prices compare favorablywith other countries in the region, gasoline prices are lower than prices inThailand and Korea.

3.36 The geothermal steam pricing issue is largely bridging the gapbetween the suppliers' price based on a targeted rate of return on investmentin geothermal steam (18% for the private sector and 15X for PNOC) under theGovernment's royalty and tax structure and NPC's affordable prices given thepower tariff structure. The Government has an uneven tax structure with geo-thermal bearing a higher tax relative to alternative fuels such as coal, hydroand even fuel oil (for NPC); this can lead to distortions in fuel utiliza-tion. Recent measures that may reduce this differential include higher taxes

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Table III.5: INTERNATIONAL COMPARISON OF PRICESFOR SELECTED PETROLEUM PRODUCTS, JUNE 1984

Comparative pricesDomesticprice Thailand Indonesia Korea Singapore

Philippines postings /aUS$/gaL. - (US$/gal)

Gasolineregular 1.69 1.83 1.35 3.12 0.88premium 1.74 2.07 1.54 4.20 0.90

Diesel 1.30 1.15 .77 1.34 0.81Kerosene 1.30 1.00 .58 1.41 0.88Fuel oil 0.98 0.68 .77 0.97 0.67

la Approximate border prices.

Source: MOE/PNOC/IBRD.

on coal and the removaL of NPC's exemptions from the specific tax on fueloil. The difficulty in agreeing on a steam price with NPC aLso continues tobe a constraint to encouraging private sector participation. Various propo-sals to address the issue have been raised, and one of the objectives of theproposed geothermal poLicy studies is to analyze the issue of steam pricingand contract bases. Domestic coal prices are about 30Z above border prices,due to import restrictions and negotiated prices between consumers andproducers.

(iii) Energy Supply

3.37 The medium-term projections for the supply of energy are largelybased on the commissioning of non-oil power plants in 1984-90. These includein Luzon, the nuclear power plant (620 MW), Calaca coal fired plant (300 KW),and Makban geothermal plant (110 MW), as well as hydro plants in Mindanao(540 Mi). The new plants are expected to increase NPC's generating capacityby 44Z by 1990. Domestic petroleum production will continue to make a smallcontribution to supply in the medium term.

3.38 There are a number of policy and technical issues on the supplyside. The key one is the need for NPC to review its least cost expansion

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program given the changed demand situation and financing constraints.12/ Areview started in November 1984 and is now under discussion. The least-costprogram will assist in form Nating a policy on the future use of the existingoil-fired pLants in Luzon - and the longer-term development of the grid,including the location of future generation plants.

3.39 Another important technical issue relates to NPC's inefficientutilization of existing capital stock. For example, despite a high reservemargin, NPC has at times been unable to meet peak demand and consequently lostsales revenues. The power system also suffers from load shedding and frequentbrownouts. The problems in part are related to the lack of maintenance andrehabilitation of the oil fired plants, which accounted for 62% of the totalgeneration in 1983. To utilize its investments efficiently, NPC is now maingdecisions on the appropriate use of the oil-fired plants. These include theidentification of units for which rehabilitation would be most cost-effective,alternatives to rehabilitation for spinning reserve duties, and the possibili-ties for reducing the minimum load oil consumption. These decisions vouldhave implications on the timing of new investment and future oil imports. Forexample, given NPC's projected low growth of demand in Luzon (2.9% p.a. from1983 to 1990) investments in the medium term will be for fuel substicutionpurposes only in the initial period, and the economic justification of newplants thus dependent on the extent to which they will be utilized. A studyto improve the efficiency of transmission Lines and substations, particularlythrough maintenance and rehabilitation, is also underway. In addition, withthe substantial increase in new capacity in the medium term, a high priorityshould be to ensure the efficient operation of the new plants to achieve thetarget of reduced import dependence and foreign exchange savings. Distri-bution losses of the other power utilities are also high, and need to bereduced.

3.40 Another issue relates to the operating efficiency of the new non-oilpower plants. NPC has estimated plant utilization factors for coal and forthe nuclear plant at 70Z. Although desirable targets, these utilizationfactors do not apy2jr realistic given industry experience as well as NPC'spast performance._ The optimistic utilization factors have also led to

12/ The Power Expansion Program (June 1984) on which the above comments arebased, lists a number of proposed projects, but does not provide anyinformation on the least cost analysis regarding various options.

13/ In 1983, Luzon had 78% of the installed generating capacity in thecountry.

14/ Industry experience on reactors of the type built in the Philippines isthat they have been utilized on average between 55-60%. However,Westinghouse has built only 3 reactors in the Philippines' size range inthe last 10 years. Two have had considerable difficulty in starting up(Brazil, Yugoslavia) and the one in Korea has averaged 60% in its fiveyears of operation. The average utilization factor for coal plants indeveloping countries is aiso 55-60%.

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projections that the supply of fuel oil for electricity generation woulddecline from 19.1 MBOE, about 23% of the country's commercial energy consump-tion in 1983, to 6.0 MBOE or 7X in 1988. This may be realizea provided aprogram is implemented for the rehabilitation/maintenance o. the oil-firedplants and the transmission system which would result in further oilsavings. Estimates of domestic energy supply in Table III.3 are based on moreconservative assumptions on operating efficiency for the coal and nuclearplants.

3.41 A second issue on the supply side is the over-optimistic coal outputprojections. MOE currently estimates that domestic supply wili expand fromabout 1.3 million metric tons in 1984 to about 3.8 miLlion metric tons in1990. Bank estimates indicate that between 2.0-2.4 million metric tons willactually be available by this date, implying a continuing neti for importsvalued at about $40 million a year. The coal supply projections inTable II.3 reflect the lower estimates.

3.42 A final issue on the supply side is that with the higher cost ofpower and petroleum products, the; demand for fuelwood and charcoal willincrease further. Already the forests have been depleted, although not pri-marily due to rural energy r-eeds, resulting in deforestation and soil ero-sion. Although the Ministry of Energy and other organizations have undertakenstudies on rural energy problems, ti.Bre is a need for a comprehensive nationalpolicy to anticipate the problem of rural energy supply. Further expansion ofthe mini-hydro and dendro-thermal program should depend on a review of itsfinancial viability. Other non-conventional sources, such as biogas, biomrss,and solar energy, will not make much of a contribution for the medium-term,but the ongoing research and the involvement of the private sector in theirdevelopment should be encouraged.

(iv) Balance of Payments Impact

3.43 In 1980-83, the Philippines has imported on averare 67 MBOE peryear. The country has incurred substantial expenditures in trying to limitthis oil dependence. The net foreign exchange savings, which are currentlydifficult to estimate given that many power plants are still under execution,would have to include the considerable debt service on foreign borrowings.Projections in Table III.3 indicate that the volume of oil imports willdecrease at an annual rate of 3.8% in the low case and 0.1% in the high-growthscenario. Oil consumption would, thus, be in the range of 48-60 MBOE by 1990,compared to 68 MBOE in 1983, largely as a result of fuel savings in the powersector. This effect, however, introduces a major element of uncertainty, asituation that may be further exacerbated if there are delays in commissioningthe proposed non-oil plants or technical problems in their use. Using thehigh estimate for oil consumption, the result will be an annual fuel importbill (including coal and nuclear fuel) of about $3.1 billion by 1990.Imported energy would consume 27% of projected merchandise export earnings in1990, compared to an average of 41% in 1980-83. In the low-growth icenario,the fuel import bill would require 24% of export earnings by 1990, as demandfor oil would be suppressed due to the continuing economic constraints.

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3.44 In both scenarios, despite the reduction in oil consumption as aresult of the development of indigenous resources, oil imports would stilLrequire a significant amount of foreign exchange due to the projected oilprices. Energy imports would thus still constitute a burden on the balance ofpayments, and future movements in international oil prices remain a crucialelement for the projections.

(v) Energy Investment Program 1984-1988

3.45 The key conclusion for the medium-term is that priority shouldcontinue to be given to completion of on-going projects, new investments forthe energy sector should be for rehabilitation/maintenance of selected oil-fired plants and strengthening the transmission system, and that increasedemphasis should be put on efficiency improvement. While the rapid developmentof energy sources was of overriding importance in the latter half of the1970s, a careful assessment needs to be made of new investments for the1980s. Key considerations should be the increased cost of borrowing, scarcityof public resources and oth competing sectoral priorities. The revisedenergy investment program -5 indicates that total programmed capital outlaysfor the period 1984-88 are P 64.7 billion in constant 1984 prices; this repre-sents a reduction of 35% in real terms from the previous program. Of theP 53.6 billion public investment programmed, NPC accounts for 73%, while NEAand PNOC account for 15% and 12%, respectively. It is unclear where theprivate resources, which would contribute 17% to the total investment program,are to be obtained. Although the Covernment has maintained a cooperativepartnership with the private sector in energy resource development, the limi-ted success of past exploration efforts in petroleum and the lack of agreementon a mutually acceptable geothermal steam price have constrained privatesector participation in recent years.

3.46 A comparison of the previous and current investment program revealstwo main points. First, in several iterations, the energy investment programhas been scaled down significantly for 1984-88, reducing its share in GNP to2.2% in the high-case scenario. This is significantly lower than the 2.7%averagel1 are of energy capital expenditures in GNP during the 1978-83period._ However, given the public finance constraints, the composition ofthe program needs to be reviewed, and there might be scope for furtherreductions in all the agency programs. Second, due to the cuts, a number ofprojects have been dropped and the start of new project;; has been postponed.NPC started no new projects in 1983 and 1984; PNOC has reduced its investmentexpenditures planned for 1984 by half. NEA has also significantly scaled backits rural electrification program.

15/ The information was provided in October 1984.

16/ NPC's expenditures accounted for 82% of the 1978-83 energy investmentprogram. One-third of NPC's expenditures during this period were for thenuclear power plant.

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(vi) Financing the Investment Program

3.47 The Government recognizes the increasing need for the energy programto be financed by internal cash generation as a result of constraints on thenational budget and external borrowings. Consequently, it has targeted thatinternal cash generation be raised to contribute about 50% to capital expendi-tures by 1987. Although the program's local cost financing will benefitsignificantly from the stabilization measures adopted, particularly the powertariff increases for NPC and petroleum price adjustments for PNOC, this targetmay not be attainable. NPC's financial projections show only a 22% self-financing ratio in 1984-88. This would allow NPC to require no furthergovernment equity contributions after 1985 and to achieve a rate of return of8Z by 1988. However, NPC has both short- and longer-term financing prob-lems. It had a deficit in its capital budget in 1983 and is projecting onefor 1984. These have been and are expected to be partially financed by theretention of pesos corresponding to the debt service covered by the mora-torium. NPC's foreign byr7owings wiLl be substantial over 1984-88, amountingto about US$1.4 billion - in constant 1984 prices. The ability of NPC toobtain foreign commercial loans and supplier credits has been seriouslyimpaired following the debt moratorium and may not be fully restored evenafter completion of the ongoing rescheduling exercise. Thus NPC needs toresolve: (a) whether it should continue with a fuel substitution program inthe medium term given the financing constraints and shortfall on its capitalbudget; and (b) if it continues to do so, and for the completion of ongoingprojects, it may have to rely heavily on loans from official sources ratherthan export credits and commercial loans as in the past. By utilizing longer-term external financing, it would also reduce the debt service burden on theeconomy.

3.48 NEA's internal cash generation contributed less than 1% to itscapital expenditures during 1980-83. The gap has been largely met by govern-ment contributions and foreign borrowings. However, both these sources offinancing are uncertain in the future. Government's contributions are doubt-ful given the budgetary constraints. It is also questionable whether foreignloans should continue to be incurred for this program. If for social andpoverty alleviation considerations the program is to be continued, the focusshould be on improving the financial viability of the rural electric coopera-tives, which collectively have been experiencing losses since the inception ofthe program. As a result of the financial performance of the cooperatives,NEA has been collecting only 40% of the debt service due to it. An actionprogram for the improvement of the financial viability of the cooperativesshould be a precondition for the continuation of the program.

3.49 Overall, PNOC has been in a better financial situation than NPC andis expected to finance its development expenditures largely from its ownresources and foreign borrowings. Following the abolition of the Oil IndustrySpecial Fund, PNOC may have to rely increasingly on internally generated fundsto finance its exploration program. The extent to which PNOC's investment

17/ These estimates reflect the June 1984 expansion ,rogram.

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program can be further scaled back will depend on decisions to continue withthe geothermal developments in Luzon and the coal projects in Mindanao as theyconstitute the largest portion of PNOC's capital expenditures. The former isdependent on an analysis of NPC's least cost program and the latter ondecisions regarding future industrial and power projects. It is essentialthat PNOC and NPC closely coordinate their planning for future investments ingeothermal and coal projects.

C. Agriculture

3.50 Substantial agricultural growth in the past decade was largely theresult of investments aimed at achieving self-sufficiency in food crops, inparticular rice, and of crop diversification. A recent slowing in the agri-cultural growth rate is related to both short-term factors and more funda-mental problems, including the loss of momentum in the pace of technologicalchange, institutional rigidities, and government policies that dampened pro-duction and investment incentives. In light of current problems, the Govern-ment's attention has increasingly focussed on the sector as a potential fordeveloping efficient import substitutes, new export products, and increasedearnings from traditional commodities. Investment priorities include therehabilitation of irrigation systems and tree crops as well as selected newinvestments that augment the existing productive system. Most important, how-ever, is a continuation of recent moves to liberalize agricultural marketingarrangements and prices.

(a) Past Performance and Structural Issues

Ui) Past Growth and Export Trends

3.51 The agricultural sector accounted for 23% of GDP, about one-third ofmerchandise export earnings, and over half of total employment in the early1980s. In the 1970s, the agricultural sector grew by an average of 4.9% peryear (Table III.6). The high rate was largely the result of Government poli-cies aimed at food self-sufficiency. Objectives of export diversification,import substitution in non-rice agriculture, and productivity advances did notespecially guide the sector's growth strategy. It is noteworthy that valueadded per worker increased only by 1.62 per annum during 1970-80. In theearly 1980s, agricultural growth gradually declined and actually turned nega-tive in 1983. The main factors causing the decline in output growth, whichwas shared by the four principal crops, included the impact of a drought in1982/83, the growing shortage of foreign exchange and associated policymeasures restricting imports, and the gradual contraction of credit to thesector. Low commodity prices on international markets also contributed toconstraining production.

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Table 11I.6: GROWTH AND STRUCTURE OF THE AGRICULTURAL SECTOR, 1972-83

Subsector Trend/Annual Growth (Z p.a.) Percentage Shares1972-80 1981 1982 1983 1972 1980 1983

Paddy 5.3 2.4 4.7 -13.3 16.9 17.7 15.7Corn 5.4 7.1 0 -6.7 6.2 5.9 5.6Coconut 3.3 7.7 -7.1 0 7.5 5.5 5.2Sugarcane 2.9 /a 0 15.4 -26.6 6.9 5.5 4.4Banana 17.8 0 14.2 4.3 3.7 10.1 9.7Other Crops 8.8 2.3 6.8 6.4 14.4 18.1 20.2

Livestock 1.8 /a 5.5 5.3 10.0 10.6 7.6 8.9Poultry 10.3 25.0 10.0 13.6 4.4 6.8 10.1Fishery 4.7 5.1 4.9 2.3 16.9 16.5 17.7Forestry -6.9 -14.3 -16.7 -20.0 12.5 5.9 3.2

Total Sector 4.9 3.8 3.2 -2.4 100.0 100.0 100.0

/a Average of annual growth rates is used here since data on value added forthis subsector have not portrayed a good exponential trend.

Source: Table 7.9 of Statistical Appendix.

3.52 The principal contributors to agricultural growth were the foodcrops rice and corn. A large irrigation investment program, adoption of highyielding varieties, and increased fertilizer application together helped toachieve a trend growth rate of 5.3% in rice production in 1972-80 and riceself-sufficiency in 1978. During the 1970s, the area under irrigationincreased by 100,000 ha, i.e., from less than 40Z to 50% of rice land. Over-all rire yields increased from 1.6 tons/ha in the early 1970s to 2.4 tons/hain 1982/83. Corn production grew at about the same rate, but largely due toan expansion in the planted area, rather than yield improvements. Althoughfood production grew rapidly, this was only sufficient to keep up with popula-tion growth. Data available indicate that the level of average caloric in-take, which had increased significantly in the earlier years of the decade,stagnated at about 1,800 kcal per day in 1978-1982.

3.53 While agricultural export earnings increased by 5% p.a. in the1970s, which is significantly below the 12X p.a. growth of total merchandiseexport earnings, they declined in the early 1980s, reflecting a combination ofadverse weather, price developments, and institutional issues. The share ofagricultural exports declined from. 68% of merchandise export earnings in 1972to 32% in 1983. This decline was distributed unevenly among the traditionalproducts coconut, sugar, and forest products which continue to dominate agri-cultural exports. From almost equal shares of 30% in 1972, coconut productsincreased to 40% of agricultural exports in 1983, reflecting substitution ofcoconut oil for copra; sugar products declined to 17% reflecting higher growth

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of domestic consumption; and forestry products declined to 201, largely due tosupply constraints. Exports of nontraditional agricultural products, in par-ticular fruits and fish, doubled their share to 20Z during that time.

(ii) Policy and Institutional Issues

3.54 Progress in effecting policy and institutional changes was slow inthe past decade, and indeed the lack of appropriate policy and institutionalreforms, in addition to the drought and other natural causes, hindered thecontinued progress of the sector in the last few years.

3.55 Policy Framework. In the Philippines, the price of no major crop iswholly determined by the market. Rice and corn have both support and ceilingprices. Although copra and coconut oil prices reflect international marketconditions, domestic prices and marketing are controlled. Until recently,copra was subject to a levy, recovered by mills and paid into a special fundused for various purposes including price stabilization. Sugar exports, theshare of the domestic market, and the price received by the miller and, inturn, by the farmer are determined by the National Sugar Trading Agency(NASUTRA) and the Philippine Sugar Commission (PHILSUCOM). Retail prices forhousehold sugar are controlled to keep them below industrial and exportprices.

3.56 Prices of three major agricultural inputs are also determined by theGovernment in varying degrees. Charges for irrigation water are below itslong-run marginal cost, are largely uncollected, and are, therefore, subsi-dized through the budget. Similarly, fertilizer prices have been control-led. Labor is guaranteed a minimum wage which has been adjusted upwards toreflect cost of living increases. This may have given an upward push to ruralwages especially in the plantation sector. There is little evidence, however,that minimum wages have been strictly observed in the rural sector.

3.57 The results of government interventions have been complex. Growingintervention in the rice market and government pricing policies did not pro-vide adequate incentives to rice farmers. From 1960 to 1977, the real valueof rice yield per hectare increased by 114%, and dropped by 18% by 1982, dueto the deterioration of the internal terms of trade to rice farmers. A recentstudy suggests that coconut has becn taxed up to 20% at times, the levy fall-ing on the farmers who belong to a recognized poverty group. Due to lack ofprice incentives to the farmer, there has been hardly any replanting of coco-nut trees; as a result, trees are over-aged and have Low yields. Similarly,sugar has been taxed heavily, probably adversely affecting sugar productionand sugar workers' income, while holding retail prices below export prices hasresulted in an income transfer to consumers. Overall, the national pricingand marketing system appears to have favored industry over agriculture.

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3.58 Institutional Framework. The institutional framework in agricultureis rather weak. There is a costly overlap of responsibilities and duplicationof functions. For example, in area development programs, the National Econo-mic and Development Authority (NEDA) and the National Council on IntegratedArea Development (NACIAD) are involved in regional planning. Furthermore, theMinistry of Agriculture and Food (MAF) has authority for coordinating deliveryof inputs and services in area development projects. Similar problems alsocharacterize other critical aspects of agricultural development, most notablyresearch and extension, irrigation services, land use, and forest resources.There is therefore an urgeni need for institutional reforms to reduce theduplication of functions an6 the overlapping of responsibilities.

3.59 Some important and powerful bodies have had a level of autonomywhich made it difficult for the concerned Ministries to influence policies andprograms with regard to key development activities. The most important amongthese are the Philippine Coconut Authority (PCA), which recently has beengiven representation in the Cabinet, the Philippine Sugar Commission and thePhiLippine Crop Insurance Corporation which both report directly to the Officeof the President and have independent budge.s. In mid-1984, the role of theMinistry of AgricuLture was strengthened; it is now represented on the boardsof these three agencies and obtained the food policy function of the NationalFood Authority. The incr2asing influence of MAF is a step in the rightdirection, and the ministry would now have to exert this leadership.

3.60 The complex organizational and management structure has alsohinderea government efforts to develop an effective sectoral planning mecha-nism. Planring has focussed on individual crops rather than farm units, thus.iistorting the conclusions for optimal allocation of resources; the commodityapproach to planning thus has been fragmented and not internally consistent.Although NEDA is responsible for sectoral plans, responsibility for planningand setting investmenc priorities is divided among several institutions whichfocus narrowly on their specific subsectoral or commodity problems. To formu-late sectoral investment plans which have well defined priorities, the agri-cultural ministries Wo2ld need to clearly define their strategies and improvecoordination among the concerned agencies.

3.61 AgricuLtural Credit. Formal agricultural credit expanded rapidly inthe 1970s, supporting the. growth of the sector. About three-quarters ofinstitutional rural credit is provided by 1,000 rural banks, owned and opera-ted by close family groups. Rural banks have access to Central Bank redis-counting facilities, but many have not been able to take advantage of thesefacilities because of arrears in excess of the 25X limit for rediscounting,caused particularly by their involvement in Government's Masagana 99 rice pro-duction program in the 1970s. Commercial banks have been required to setaside 25% of their loanable funds for agricuLtural finance but, except for thegovernment-owned Philippine National Bank, they have few rural branches, andthe quota system has been thwarted in its objective as banks invested inCentral Bank securities rather than directly in agricultural lending. TheDevelopment Bank of the Philippines provides 20% of its medium- and long-termcredit to agricuLture. But, with only 50 branches, its coverage is limited.Thus, small farmers have limited access to formal credit facilities which areconcentrated in relatively prosperous areas. It is therefore not surprising

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that, although institutional credit expanded significantly in the 1970s, itconstituted onLy about one-third of rural lending.

(iii) Employment and Poverty Issues

3.62 Over half of the total employed persons in the country are engagedin agriculture, livestock, forestry and fishery. Of those engaged in thesector, landless laborers constitute about 16%. The degree of underemploymentis also high, at about 60% (compared to 25% in the non-agricultural sector).While real wages in agriculture increased by about 402 between 1972 and 1977,they declined 50% between 1977 and 1981. With stagnant output and increasinginflation in recent years, further declines have probably occurred since 1981.

3.63 Farm size is the most important variable explaining differcnces inincome level, ard the distribution of cultivated land among Filipino house-holds is highly skewed: 61% of farmers have Less than 3 ha and own only 242of all farmland, while 5% of farmers have more than 10 ha in production andtogether account for 34X of farmland. Other important factors explainingincome variations are qualities of land and the availability of non-farmjobs. Rural poverty is particularly associated with farmers growing rice andcorn because rice and corn are the dominant stapLes in the Philippines andlittle more than subsistence amounts are being produced on many of the smallholdings, especially in the rainfed areas. Not surprisingly, extensivepoverty is found in inaccessible, resource-poor areas. Poverty is associatedwith shifting agriculture in mountain areas, "municipal" fisherman, andlandless laborers. The regional incidence of poverty varies markedly. Thehighest incidence is found in Central and Eastern Visayas, Northern Mindanao,Ricol, and the Cagayan Valley; the lowest in Southern Tagalog, Central Luzon,and CentraL Mindanao.

3.64 Since 1972 the Government has pursued a program of agrarian reformaimed at the transfer of land ownership to tenant farmers on rice and cornlands. The reform is being implemented in two ways: under "Operation LandTransfer,11 applicable to all landowners with over 7 ha, tenants become owner-cultivators, paying for the land over 15 years; and under the LeaseholdEnforcement Program, for farms up to 7 ha, tenants receive security of tenureon land being cultivated. Some 730,000 ha and 400,000 tenants were targetedfor the land transfer program, and about 1,460,000 ha and over 1 milliontenant families under the leasehold program. Land Reform has moved fastest inCentral Luzon and areas near Manila and slowest in Mindanao and other regionswith security problems. Certificates of Land Transfer have been issued toabout 80X of the tenants involved in Operation Land Transfer and leaseholdcontracts have been issued to nearly 70% of potential beneficiaries in theleasehold program.

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(b) Growth Prospects and Policies

(i) i-edium-term Development Strategy

3.65 The Government's medium-term strategy for agricultural developmentis described in an "Agenda for Action in Agriculture: 1984-88".- Theprogram aims at achieving self-sufficiency in all basic food items and atincreasing agriculture's contribution to the balance of payments by expandingexports and import substitutes. This implies a shift in emphasis from self-sufficiency to export development. The Agenda provides for policy actions andinstitutional reforms to improve production and investment incentives,strengthen the institutional framework for sector management, mobilize finan-cial resources, and improve the allocation of scarce public resources. Thesuccess of the strategy will also depend upon increased efficiency in the useof the existing investment in the sector.

3.66 Price and trade regimes. Pricing policies for agricultural inputsand outputs as well as domestic marketing arrangements would need to be con-tinually reviewed to ensure adequate production incentives. The Governmenthas recognized the need for reforms in this policy area and is undertakingstudies to that effect. Initial measures have already been taken to phase outthe monopoly of the National Food Authority with respect to imports of feedgrains, when imports of soya beans and yellow corn were opened to the privatesector in 1984. Steps to decontrol prices have also been taken with thelifting of price controls on poultry and pork. The mandatory price ceiling onyellow corn has recently been lifted, and measures for rice pricing are beingreviewed. In the area of trade regulations, the under- or negative protectionof the agricultural sector is being reduced under the structural adjustmentprogram.

3.67 Government-Sponsored Institutions. The number of governmentagencies in the agricultural subsectors need to be reviewed further, and therole of those in the sugar and coconut industries examined. Conflicts ofinterest, including overlapping representation on the managing boards ofregulatory and executing agencies, and lack of public accountability are thekey issues; The Government would need to ensure that the institutional set-ting will not remain an impediment to private initiative and growth in theagricultural sector. The private sector voices complaints that the presenceof Government quasi-monopolies with their powerful interventions in productionand marketing does not leave much room for agribusiness investments. The roleof government-sponsored institutions should be promotional and facilitating,rather than in the form of direct intervention in production, marketing, anddistribution. In particular, the role of NFA needs to be made commensuratewith the functioning of an open market as well as with government budgetaryconstraints.

18/ The program is supported by an Agricultural Sector/Inputs Projectdescribed in Report No. P-3860-PH, dated July 17, 1984.

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3.68 Agricultural Credit. Credit institutions and programs have to playa supportive role for agricuLtural growth. Areas that require attention are:promotion of greater deposit mobilization in ruraL areas and use of depositresources for agricultural lending; rationalization and gradual elimination ofsubsidies on credit; increasing the efficiency of the ruraL financial marketthrough functional despecialization and financial rehabilitation of theDevelopment Bank of the Philippines and the rural banks; increasing partici-pation of commercial banks in agricultural lending, and introduqtion of aninstitutional mechanism for agricultural credit coordination. 91 In thematter of providing rural credit, the key issue is the type of institutionalarrangement that is most appropriate to mobilize savings, provide credit on arational basis and minimize arrearages. A question that arises is whetherfinancial institutions owned and operated by the large majority of ruralproducers rather than continued heavy reliance on informal money Lenders aremore suitable to achieving these objectives. The Government shouLd evaluatethe alternative institutional approaches and identify the relatively moreefficient.

3.69 Investment Incentives. In the past, various investment incentives,e.g. tax concessions and foreign exchange releases on a priority basis, havebeen provided for agriculture and agro-processing. Currently, agriculturalinvestment incentives are being reviewed to ensure that they support thepolicy thrust of the ongoing structural adjustment program.

3.70 Rural Employment. AgricuLtural development would help to provideproductive employment and alleviate poverty in rural areas, although addi-tional measures focussing on poverty groups are required. For the rest of the1980s, agriculture will need to continue absorbing about 330,000 persons peryear, i.e. about half of the 3.1% annual increase in the labor force. Provid-ing productive empLoyment thus remains an important objective of agriculturaldevelopment. Productivity gains would help increase rural purchasing powerwhich is needed to improve the nutritional status of the rural population.Rural employment would need to be developed not only through direct agricul-tural employment, but also through forward and backward linkages to off-farmemployment.

(ii) Growth Scenarios

3.71 For the period 1984-90, two growth scenarios are presented inTable III.7. Both scenarios reflect the recovery from the 1982/83 drought andthe impact of recent macro-economic policy measures, in particular the pesodevaluations, on the 1984 performance. Table III.8 presents the correspondingexport scenarios. They indicate that even moderately high output increases,as in the high case, have little impact on export earning performance.Commodity prices, which the World Bank projects to remain depressed for most

19/ cf. Philippines: Agricultural Credit Sector Review, Report No. 4117-PH,May 12, 1983.

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products, are a far more significant factor in determining agriculture's con-tribution to prospective export earnings in the Philippines over the mediumterm.

Table III.7: GROWTH SCENARIOS FOR AGRICULTURE. 1983-90

Subsector Value added in 1983 prices(Billion pesos) Annual Growth Rates (%)

Low Case High Case Low Case High Case1983 1984 1990 1990 1984 Ave. 1985-90 Ave. 1985-90

Crops 47.8 48.9 56.0 61.5 2.3 2.4 4.3Paddy 12.2 12.8 14.7 15.9 5.0 2.4 4.0Corn 4.3 4.4 4.9 5.5 3.5 1.7 3.8Coconut 5.2 4.6 5.4 5.7 -12.0 3.1 4.0Sugarcane 3.3 3.1 3.3 3.5 -7.0 1.1 2.3Banana 7.3 7.6 8.4 9.1 4.0 1.7 3.3Other Crops 15.5 16.4 19.4 21.8 6.0 3.0 5.5

Livestock 5.3 5.1 5.6 6.1 -5.0 2.0 3.6Poultry 7.1 7.4 8.9 10.2 4.5 3.3 6.3Fishery 16.8 17.4 20.0 22.0 3.5 2.5 4.4Forestry 7.5 7.0 7.6 8.1 -7.0 1.5 2.8

Total 84.5 85.8 95.8 107.9 1.5 2.4 4.3

Source: Statistical Appendix, Table 7.8 for 1983 data; 1984-90 data are missionestimates.

3.72 In the low case, the sector is expected to grow at an average annualrate of 2.42, in line with population growth. The rice, livestock, and fish-ery subsectors would broadly match that growth rate. Coconut would grow at3.1% by recovering from past weather-induced low levels of production. Sugar-cane output is expected to suffer from rising costs and relatively low exportprices and hence would register only a 1.1% growth rate. Banana exports, ifthey continue to be tied to one principal market, also would experience slowgrowth. The growth of poultry would be constrained by insufficient growth infeed industries. The forestry sector would recover slowly from pastdecline. Real growth of agricultural export earnings would be an average 1.3%p.a., mainly on account of non-traditional agricultural products which wouldgrow by about 4% p.a., while traditional agricultural exports would stagnateor decline.

3.73 In the high case, the sector's average growth is projected to be4.3% per annum. This is composed of a trend lower than the growth achieved inthe 1970s and the recovery from the drought. The scenario implies substantialgrowth of rural purchasing power, export diversification as well as import

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substitution without Loss of efficiency. The high-case scenario is based onthe assumptions that the private sector reacts positively to reduced govern-ment intervention, and that efficiency in the sector increases as a responseto policy changes. Here as well, the main source of growth for exports wouldbe nontraditional agricuLtural products which would grow by an average of 7Zp.a. in real terms, while overall agricultural export growth would be 2.7%p.a.

(iii) Prospects and Policies in Key Subsectors

3.74 Food Crops. The target for food crops would be to achieve a growthtrend in line with the still relatively high population growth and allow amoderate increase in per capita caloric intake. This would require improvingyields in rice and corn which - by international comparison - seems to befeasible without significant expansion of investment; the productivityincreases can be 3chieved Lhrough a more effective use of inputs, adequatemaintenance, and limited invcsLmenL tor rehabilitation. Pricing policy,marketing arrangements, as well as cos0 recovery to ensure maintenanc fundingappear to be the main issues in this context.

3.75 (a) Rire. The strategy For rice wouLd emphasize improvements inyields which are still. low by international comparison. While, in the past,expansion of irrigated areas was a major factor in increasing *ieLds, for themedium-term future only minor investments seem to be needed, .i particular forrehabilitation. Yields could bit incre;ised through better input mix and opera-tion of existing investment. IPricing incentives and reduced government inter-vention in marketing appear to be the most important policy instruments atthis time. Given the public finance constraints, cost recovery in irrigationschemes would need to be improved. The high case projection is based on amodest increase in per capita consumption from 90 kg in the early 1980s to92 kg by 1990, rather than significant export growth. The world market forrice is not growing relative to production, since countries continue to givevery high priority to food security and are willing to pay a relatively highprice to achieve self-sufficiency. From 1950 to 1980, world rice outputdoubled from 120 to 248 million tons, but the share of exports stagnated at4%, and the world rice market has failed to reallocate production from high-to low-cost producers.20 In such a market, it is not clear how the Philip-pine rice will perform, even if the current quality problems are overcome.

3.76 (b) Corn.In regard to corn, the low-case growth rate of 1.7% wouldeliminate imports (which in recent years have made up 10% ot total supply) by1990, but not allow any increase in total domestic usage. In the high case,overall use could increase at an annual rate of 2% which would assist theg:owth of livestock and poultry. No major prospects for corn exports are

20/ For a discussion of these trends and the causes behind them, see AmmarSiamwalla and Stephen Haykin, The World Rice Market: Structure, Conductand Performance, IFPRI Research Report 39, June 1983.

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anticipated during the 1980s. If the Philippines can produce corn at competi-tive prices, its location vis-a-vis the three major East Asian imporLingcountries Japan, Taiwan, and Korea can stand in its favor. However, thePhilippines hiscorically was a high cost producer; its corn to rice priceratio was 0.67 in the last decade, compared to a world average ratio of0.32. Yield levels in the Philippines during 1979-82 averaged 0.97 tons/ha.,significantly lower than in other countries in the region; this indicates chatthere is scope for yield improvements via modern inputs.

3.77 Other Import Substitution. In 1982, agriculture, livestock, andfishery imports amounted to $720 million or 37% of the sectoral exports. Over80X of these imports is constituted by eight commodities, almost all of whichcould be replaced by domestic production. Fisheries, tobacco, cocoa beans,and cotton are probably more easily substitutable by domestic production thandairy products. The scope for producing others, animal feeds in particular,is being investigated by the Government. Agricultural imports would be equalto one third of the sector's exports at the end of the decade in both growthscenarios, slightly lower than recent shares. It is possible that importsubstitution can lead to substantial future foreign exchange savings; however,careful case-by-case evaluation is required.

3.78 Traditional Exports. The approach for the traditional exportproducts coconut and sugar would aim at improving thoir yields to ensureinternational competitiveness in the longer term. Investments, mainly in theprivate sector, are required to support this strategy; however, the gestationperiod is too long to affect production significantly in the 1980s.Institutional, pricing, and financing issues also will have to be addressed inthese subsectors.

Table III.8: INDICATIVE EXPORT EARNING PROJECTIONS IN TWO GROWTH SCENARIOS,1983 AND 1990

Export EarningsCommodity 1983 1990 1990

Low Case High Case($ m) CZ) (S m) (%) ($) (Z)

Coconut products 639 (40) 990 (34) 1,030 (30)Sugar 282 (18) 650 (22) 740 (22)Forest products 327 (20) 540 (18) 710 (21)Other products 364 (22) 770 (26) 900 (27)

Total 1,612 (100) 2,950 (100) 3,380 (100)

Source: Mission estimates.

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3.79 (a) Coconut. The coconut industry is one of the largest users ofagricultural land in the country and z_counts for about 20% of total exports.In the medium term, output is constrained by the absence of a comprehensivereplanting program in the past and measures to enhance the Philippines' compe-titiveness. It is believed that yields can improve by 0.5 to 1.0 tons/ha fromthe existing "talls" through rehabilitation and intercropping. Moreimportantly, replanting with hybrid planting material could produce yields ashigh as 6 tons/ha., as against the less than one ton obtained currently. DuetA long gestation periods, however, the impact of a replanting program whichthe Government is preparing now would only be felt in the 1990s. Outputgrowth in the medium term will thus reflect recovery of production from theadverse effects of the drought in 1982-83 and the responsiveness of farmers topolicy and institutional reforms. Over the last decade, government inter-vention in the industry has taken a variety of forms, including export taxes,levies, a coconut replanting scheme, and a vertical integration of theprocessing industry. The latter was undertaken under private auspices,through the United Coconut Oil Mills (UNICOM), the largest buyer of copra inthe country and virtually the only exporter of coconut oil. At present, oneof the main issues facing the industry is the growers' perception that theGovernment's program and policies have not adequately safeguarded theirinterests. For instance, while the Philippine Coconut Authority is intendedto be the Government's vehicle for regulating and promoting the coconuitindustry, its Board consists mainly of large scale producers and millers.Attention needs to be directed at the most effective means of reducing costsand margins in domestic marketing and processing of copra, and measures toensure that farmers get a fair share of the proceeds of exports and domesticsales.

3.80 (b) Sugar. The national average yield has stagnated during the pastdecade at around 50 tons of cane per ha. Only 29,600 ha out of over 400,000were irrigated, thus virtually all farming was on unirrigatee lands. It isexpected that irrigation can add at least 22 tons/ha to yield and this can bean important argument in favor of covering a large area by modern irrigationsystems. This, however, cannot affect growth in the near term. The growthprojections do not go beyond a modest 2.3% even in the high case reflectingmostly domestic demand growth, and recovery of output from the drought.However, if export prices continue to be as low as 6C per pound as in early1984, than the low case of 1.1% annual growth is expected. A key question isthe outlook for export demand growth, which depends on the Philippines'competitiveness. A survey in 1979 found that among the 40 countries studied,the Philippines ranked 10th in terms of cost of production which was$245/ton. Subsequently, performance deteriorated as labor costs increased andtotal cost was estimated to have risen to $336/ton in 1982. This pushed thePhilippines down to 19th in the cost ranking. There is a danger that thecountry can lose export markets unless urgent steps are taken to improveefficiency of the sugar subsector.

3.81 In the past, the Government has controlLed sugar marketing toprotect producers and consumers from excessive price fluctuations. For1974-84, the National Sugar Trading Corporation (NASUTRA) acted as the soLebuyer of sugar from the mills and the sole exporter, under the principle thata single trading entity has greater marketing power in the global arena.

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Also, domestic distribution was allocated by NASUTRA to a limited number ofselected traders. Recently, the Covernment has allowed free trading on thedomestic market, but, after an early move to hand exporting over to theprivate sector, has decided to retain NASUTRA as the sola exporter. NASUTRA'spractice of selling sugar under forward contract has enabled the Philippinesco export sugar at an average price of about 14.5c in 1983, compared to aprevailing world market price of 8.5C. This has meant substantially higherincomes for sugar farmers than would have ordinarily prevailed under spotprice sales.

3.82 The policy-making and regulatory body is the Philippine SugarCommission (PHTLSUCOM), which aLlocates sugar production for export and domes-tic consumption. xt also fixes the raw sugar buying price on the basis of theaverage of liquidation price on the domestic and export markets. As in thecase of coconuts, there is a conflict between the regulatory interest ofPHILSUCOM and the trading interests of NASUTRA: their Boards comprise largelythe same individuals. Attention needs to be directed at improving theefficiency of the current system ind the examination of alternativeapproaches. rn particular, there is a need to review and analyze the impactof the current price setting, market alLozation and revenue liquidationarrangements, the cost of PHILEV'COM's and NASUTRA's operations, t.e possibil-ity of separating the reguLatory from the trading functions, and the estab-lishment of pubLic financial accountability.

3.83 Export Diversification. To er'.a-ce rhe future growth potential ofagricultural exports, diversification would be an important element of thestrategy. In addition to diversification of export markets, the country wouldhave to export a range of new preducts. This applies to export ofagricultural products as well as agricultural inputs to manufacturingindustries. Studies are needed to systematically explore the potential ofgrowing non-traditional crops and assessing their future markets. Theemphasis should be on short-gestation c-ops and new crops, such as fruits andvegetables, which could also be inputs into domestic processing industries.The policy issues in these new areas are government assistance in identifyingcrops and markets and providing appropriate investment incentivtis.

3.84 Fishery. Fishing exports as a proportion of total Philippine supplywere less than 2% in 1979 and did not increase significantly. Export valuewas $94 million in 1979 and $119 million in 1982. Japan is the most importantmarket and next comes U.S.A. Both markets can absorb more imports, especiallyshrimp. The Philippines is endowed with almost ideal physical conditions forshrimp farming, including climate, water quality, soil characteristics, andnumber of indigenous species that could be developed on a commercial scale.The high growth projection assumes that a large part of the 4.4Z annual growthwill come from export development.

3.85 Forestry. Forestrv is a sector which seems to require particularattention in the future. First, the sector needs to be rehabilitated fromoverlogging in the past which Led to a continuous decline of log productionfrom a record level of 10 million cu m in 1973 to 4 million cu m in 1983.Seccnd, there is additional pressure on forests due to increased prices ofimported energy and possible substitution by wood or charcoal. Third, wood is

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an important input into the export industries and has been constraining itsgrowth. In addition to the economic reasons above, reforestation has consid-erable indirect benefits in terms of ecology and climate. All of these andthe long gestation period, argue for government support in terms of investmentincentives. Improved performance of the sector would also require improvingthe governmer.t planning and regulatory functions. In the medium-term, how-ever, growth p'rospects are modest and do not go beyond 2.82 p.a. in the highcase.

(iv) Irrigation

3.86 The agricultural strategy, as the strategy for other sectors,emphasizes efficiency improvement and incentives for private sector produc-tion. Future government investment appears to be required mainly inrehabilitation and selective expansion of irrigation schemes. It is estimatedthat over half of che irrigated area needs rehabilitation, which would vieldcheaper and faster returns than new projects. Studies indicate that convert-ing from rainfed to irrigated rice production costs 50-80% more per incre-mental ton of paddy than rehabilitation; rehabilitated areas are producingyield increases of as much as 70%. The rehabilitation needs at presentreflect the inadequate funds allocated for operation and maintenance, which inturn reflects poor collection of water charges in irrigation schemes. Appro-priate measures will need to be taken to ensure that new investmencs do notdeteriorate prematurely due to insufficient maintenance. At present, invest-ment plans in irrigation are being scaled back due to a shortage of governmentbudgetary resources. However, the area expansion through the completion ofongoing schemes and a moderate increase in yields and cropping intensity wouldensure that the Philippines maintains self-sufficiency in rice into the 1990s.

STATISTICAL APPENDIX

Table of Contents

Table No. Page No.

1. POPULATION AND EMPLOYMENT

1.1 Population Estimates of Census Years andPopulation Projections ................ .......................... 76

1.2 Labor Force, Employment, and Unemployment .......................... 771.3 Employment by Sector ............. 78

2. NATIONAL ACCOUNTS

2.1 Expenditure on GNP at Current Prices ................... ............ 792.2 Expenditure on GNP at Current Prices: Percent Distribution ........ 802.3 Expenditure on GNP at Constant 197 2 Prices ....................... 812.4 Expenditure of GNP at Constant 1972 Prices: Growth Rates .......... 822.5 Expenditure on GNP: Implicit Price Indices ........................ 832.6 Industrial Origin of GDP at Current Prices .. 842.7 Industrial Origin of GDP at Current Prices: Percent

Distribution ................................................................ 852.8 Industrial Origin of GDP at Constant 1972 Prices .................... 862.9 Industrial Origin of GDP at Constant 1972 Prices: Growth Rates .... 872.10 Industrial Origin of GDP: Implicit Price Indices .................. 88

3. BALANCE OF PAYMENTS

3.1 Balance of Payments Summary ....................................... . 893.2 Current Account: Services and Transfers ................ ........ 903.3 Foreign Exchange Reserves .......................................... 913.4 Trade Indices ............................................. ... 923.5 Exports by Commodity Groups ............................. ............ 933.6 Volume and Unit Value of Principal Commodity Expo rts ............... 943.7 Principal Export Markets ....... ...... ..................... 953.8 Imports by Commodity Groups ....................... 963.9 Imp orts of Capital soods by SectorCt ...ao.o.. sb.y..o et.... 973.10 Imports of Petroleum and Coal ........................... 983.11 Principal Sources of Imports-.. . ... .. o.... .................. . 99

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Table No. Page No.

4. EXTERNAL DEBT

4.1 External Debt Outstanding and Disbursed at End-Year,by Maturity and Borrower . ................................ . 100

4.2 External Medium- and Long-Term Debt Transactions,by Type of Borrower . ... 101

4.3 External Medium- and Long-Term Borrowings: Commitments,by Type of Borrower........................... . 102

5. PUBLIC FINANCE

5.1 Cash Operations of the National Government ................ 1035.2 Distribution of National Government Cash Balances at

Year-End ............... 1045.3 National Government Expenditures by Sector...9..*................. 1055.3a National Government Contributions and Transfers to Other

Public Sector Units, by Sector .................................. 1065.3b National Government Current Expenditures on it own Account,

by Sector ....................................................... 1075.3c National Government Capital Expenditures on its own Account,

by Sector .*........................... e...........6-6................ 1085.4 National Government Equity Contributions by Recipient

(Cash Basis) .............. ................... o............... 1095.5 Major Revenue Legislation, 1982-84 ..... ........ 1105.6 Consolidated Revenues and Expenditures of Local Governments,

-<ash Basis ............. ..................... ..6 .......... ...... ill5.7 Major Nonfinancial Government Corporations: Capital

Expenditures by Sector .. ............ - ......................... 1125.8 Major Nonfinancial Government Corporations: Internal

Cash Generation by Sector .. ......... .... o......... o....... 113

6. MONEY AND CREDIT

6.1 The Monetary System at Year-End................ ..................... 1146.2 Reserve Money at Year-Endte-s.-o...voo . ......... 1156.3 Financial Sector: Loans and Investments Outstanding by

T-ype of Institution ................................... o .............. o............. 1166.4 Total Assets of the Financial System.............. 1176.5 Selected Interest Rates ........ ..... o.. ........ .. 1186.6 Structure of Deposit of Conmercial Banks ............................ 1196.7 Structure of Credits Granted by Commercial Banks -

by Maturitys ....... .......bi....Cab...s.......... 1206.8 Credits Outstanding by Commercial Banks - by Interest Rate ... - ................................. 121

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Table No. Page No.

6.9 Credits Outstanding by Commercial Banks - by Industry .............. 1226.10 Credits Outstanding by Financial Institutions by Maturity

as of End of 1983 ............................................... 1236.11 Deposits and Deposit Substitutes, Short- vs. Longer-Term

Financial Savings ............................... 1246.12 Interest Margin between Central Bank Rediscount and

Lending Rates of Banks ............................... 125

7. AGRICULTURE

7.1 Coconuts: Area, Production, Yield and Disposition . 1267.2 Sugar: Area, Yield, Extraction Rate, Production and Yields . 1277.3 Rice: Area, Yield, Supply, and Use . 1287.4 Corn: Area, Yield, Supply, and Disappearance . 1297.5 Minor Crops: Harvested Area, Production and Yields ... 1307.6 Production of Selected Livestock and Fishery Product . 1317.7 Forestry Products: Production and Exports ........ 1327.8 Gross Value Added in Agriculture, Fishery and Forestry

by Subsector in Current Prices . ... 1337.9 Gross Value Added in Agriculture, Fishery and Forestry

by Subsector at Constant 1972 Prices . 1347.10 Agrarian Reform Program: Operation Land Transfer at Year-End . 1357.11 Selected Agricultural Prices . 1367.12 Support Prices for Palay and Corn Grains . 3377.13 Selling Prices of Rice and Corn at NFA Outlets . 1387.14 Procurement and Distribution of Palay and Corn by NFA . 1397.15 Average Import Price of Selected Fertilizers . 1407.16 Authorized Ex-Warehouse Prices of Selected Fertilizers . 1417.17 Fertilizer Consumption . 1427.18 Terms of Trade of the Agricultural and Food Sectors .. 1437.19 Copra: Average Annual Prices . 1447.20 Sugar: Average Annual Prices of Sugarcane and Raw Sugar . 145

8. MINING AND MANUFACTURING

8.1 Mining Production, Volume of Major Products . 1468.2 Major Mining Production, Value in Current Prices ................... 1478.3 Gross Value Added in Manufacturing by Industry Group

at Current Prices... ..... 0...... ...... .** 1488.4 Gross Value Added in Manufacturing by Industry Group

at Constant 1972 Prices .......... ................... .. 1498.5 Major IndustriaL Projects: Schedules, Costs, and

Financing PLanso .... 150

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Table No. Page No

9. ENERGY

9.1 Primary Energy by Source .......................................... . 1519.2 Energy Utilization by Sector ... 1529.3 Petroleum Product Consumption . .. 1539.4 Energy Investment ProgrAm ......... 1549.5 National Power Corporr.cion Expansion Program ...................... . 1559.6 NEA Loan Recovery from Member Cooperatives . . . 1569.7 Status of Rural Electrification .................................... 1579.8 PNOC and Subsidiaries - Schedule of Capital Expenditures ......... 158

10. SERVICES

10.1 Tourism: Travel Receipts and Visitors by Country of Origin .. 159

11. PRICES AND WAGES

11.1 Consumer Price Index for the Philippines ..................... 16011.2 Wholesale Price Indices for Manila ................................. 16111.3 Retail Prices of Selected Commodities in Metro-Manila .............. 16211.4 Wage Rates Index of Laborers in Industrial Establishments

in Metro-Manila .............................. ................... .......... O16311.5 Legislated Minimum Money and Real Daily Wage Rates ................. 16411.6 Retail Price Ceiling for Selected Commodities in

Metro-Manila ........................................ 16S

12. REGIONAL DATA

12.1 Population by Region ............................................... 16612.2 Gross Regional Product at Current Prices .................-......... 16712.3 Gross Regional Product at Constant Prices .......................... 16812.4 Regional Distribution of NEDA Investment Requirements .............. 169

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Table 1.1: POPULATION ESTIMATES OF CENSUS YEARSAND POPULATION PROJECTIONS

Population /a Growth rateYear (in million) (% p.a.)

Census

1948 19.23.0

1960 27.43.0

1970 36.82.8

1975 42.22.7

1980 48.3

Projection /b

1981 49.5 2.5

1982 50.8 2.5

1983 52.0 2.5

1984 53.3 2.5

1985 54.7 2.4

1986 56.0 2.4

1987 57.4 2.4

1988 58.7 2.4

1989 60.1 2.3

1990 61.5 2.3

1995 68.4 2.1

2000 75.2 1.9

/a Mid-year (July 1) estimates./b Preliminary projections, based on moderate fertility

and mortality decline.

Source: National Census and Statistics Office.

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Table 1.2: LABOR FORCE, EMPLOYMENT AND UNEMFLOYMENT

Labor Force

Working age Labor force (in thousands) Unemploy-Survey date population/a participation Total Employed/b Unemployed ment rate

(in thousands) rate (%) (%)

1970 - Census 20822 55.5 11566 10734 832 7.2

March 1971 20333 57.7 11732 11101 631 5.4May 1971 20511 59.6 12223 11624 599 4.9August 1971 20B86 59.0 12324 1169B 644 5.2November 1971 21073 59.8 12607 11931 676 5.4

February 1972 21333 61.7 13172 12244 926 7.0May 1972 21343 61.6 13140 12176 964 7.3August 1972 21423 59.6 12778 Ll9B 795 6.2November 1972 21639 58.0 12659 11961 698 5.5

February 1973 21895 58.7 12843 12169 674 5.2May 1973 22372 58.2 t3016 12407 609 4.7August 1973 22926 60.3 13635 13107 728 5.3November 1973 23081 59.9 13824 13141 683 4.9

February 1974 23054 58.4 13466 12897 569 4.2May 1974 23014 60.9 14024 13324 700 5.0August 1974 22961 59.0 13545 12975 570 4.2November 1974 22880 59.3 13564 13117 447 3.3

February 1975 23047 59.0 13598 13090 508 3.7August 1975 23772 60.7 14434 13795 639 4.4

August 1976 24992 61.9 15460 14662 798 5.2Third quarter 1976/b 24837 60.5 15017 1423e 779 5.2

First quarter 1977 25251 63.3 15989 14985 1004 6.3Third quarter 1977 25787 58.2 15002 14334 668 4.5Fourth quarter 1977 26J48 57.6 14994 14323 671 4.5

First q4arter 1978 26307 58.5 15386 14588 798 5.2Second quarter 1978 26567 63.0 16758 15699 1059 6.3Third quarter 1978 26882 62.5 16792 16101 691 4.1Fourth quarter 1978 27169 63.9 17363 16668 695 4.0

First quarter 1979 27466 61.6 16919 16124 795 4.7Second quarter 1979 27770 63.2 17551 16744 807 4.6Third quarter 1979 27598 61.4 16945 16267 678 4.0Fourth quarter 1979 28369 65.0 18440 17795 645 3.5

Third quarter 1980 28835 61.4 17705 16749 956 5.4Fourth quarter 1980 29027 64.2 18634 17825 809 4.3

Third quarter 1981 29847 61.7 18422 17452 970 5.3Fourth quarter 1981 30079 62.6 18818 1781O 1008 5.4

Third quarter 1982 30747 60.1 18474 17371 1102 6.0Fourth quarter 1982 3097S 63.6 19698 18614 1084 5.5

First quarter 1983 31211 62.2 19408 18254 1154 5.9Third quarter 1983 31676 64.6 20465 19522 943 4.6

Fourth quarter 1983 31907 64.3 20521 19671 850 4.1First quarter 1984 Z2141 62.2 19982 18724 1258 6.3

-------------------------------------------------------------------- __-_.----__------------

/a Population 15 years and older.

/b Prior to and including the survey of August 1976, survey respondents were asked if theyhad worked during the week before the survey. Beginning with the third qua-ter of1976, respondents were asked if they had worked during the previous quarter.

Source: National Census and Statistics Office.

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TAble 1.3t EMPLOYMENT BY SECTOR(Thousandu of persons)

Agriculture. Electri- Tran-p.,fishery and Manufac- city. gas Construc- comm. and Other Totalforesty Mining turing and water tion Commerce storage sorvices/a *mployuent

1970 - Census 5614 51 1324 33 437 e9s 496 1964 10734

March 1971 5297 49 1399 55 416 1358 526 2012 11101fay 1971 5696 55 1430 59 465 1459 517 1954 11624August 1971 5579 66 1393 57 442 1536 499 2109 11690November 1971 5874 58 1409 49 419 1lS5 526 2091 11931

February 1972 6294 5/ 1446 40 426 1525 489 1967 12244May 1972 6351 56 1413 40 454 1580 477 1905 12176August 1972 6330 54 1296 43 402 1459 502 1909 11983November 1972 6378 35 1293 44 431 1450 464 l966 11961

February 1973 6397 72 1327 34 474 1469 480 1916 12169May 2973 6357 61 1375 37 516 1602 503 1954 12407Auqust 1973 6990 59 1409 41 401 1513 538 2156 13107November 1973 7199 51 1 62 -7 349 1499 499 2156 13141

February 1974 6993 52 1427 36 355 1497 503 2134 12997May 1974 7260 43 1468 44 402 1550 511 2046 13324August 1974 7005 42 1355 35 411 1512 518 2097 12975November 1974 7107 46 1390 36 400 1519 489 2131 13117

February 1975 6962 44 1406 42 417 1537 525 2157 13090August 1975 7190 54 160l9 46 456 1591 488 2361 13795

August 1976 7538 56 1638 46 491 1812 542 2539 14662Third quarter 1976 7659 El 1598 51 429 1964 SSo 2514 14238

First quarter 1977 7046 91 19Z7 72 593 1951 704 2791 14995Third quarter 1977 7474 52 1515 42 494 1355 681 2731 14334Fourth quarter 1977 7308 72 1561 56 492 1394 654 2796 14323

First quarter 1979 7315 72 1665 53 519 1458 692 2814 1459BSecond quarter 1978 9054 So 1755 51 506 1660 659 2935 15699Third quarter 1978 9403 61 1743 49 519 1626 696 3005 16101Fourth quarter 1978 9702 67 1916 55 480 1ZAS 691 3022 16668

Non-agricultural employmentFirst quarter 1979 7643 8481 16124Second quarter 1979 7953 8791 16744Third quarter 1979 7743 9801 16544Fourth quarter 1979 9967 9929 17795

Third quarter 19B0 8745 7912 16657Fourth quarter 1980 9441 9305 17746

Third quarter 1981 9929 8523 17452Fourth quarter 2981 9171 B639 17910

Third quarter 1982 8919 8452 17371Fourth quarter 1982 9696 9918 19614

First quarter 1993 9139 9115 18254Third quarter 1993 10197 9335 19522

Fourth quarter 1983 .0250 9423 19671First quarter 1984 9187 9537 18724

/a Includes industry not reported.

Notes Integrated Quarterly S.rvey of rlouseholds was not conducted for the following quartercs1976 - fourth; 1977 - second; .980 - first and second.

Source: National Census and Statistice. J44ice.

Table 2.1: Expenditure On Gross National Product at Current .'rices (revised)(Billion pesos)

--------------------------------------------- _...------------__--------------__---------------------------------------

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1963r p

Consumption 45.3 54.5 76.1 87.3 100.3 117 135 164.8 199.3 231.7 263.7 299.1Personal 40 49.2 67.2 76.2 87.1 102.6 1198. 146.6 178.1 206.9 234.5 269.2General government 5.3 6.2 8.9 11.1 13.2 14.3 16.1 18.3 21.2 24.9B8 .9? 30.9

Gross domwutic capital formation 10.9 14.6 25.1 33.9 42 44.4 51.3 67.7 81.2 93.3 96.5 104.4Fixed capital formation 9.2 11.4 19.4 27.1 33.7 36.4 42.3 56.3 68 79.3 86 95.3

Construction 3.6 4.4 7.6 11.7 17.8 20.4 22.7 30.6 37.4 46 51.4 54.4Government 1 1.4 2.9 4.4 9.3 9.5 10.6 14.5 16.3 20 22 19.8Private 2.5 3 4.7 7.3 9.5 10.9 12.1 16.1 21 26 29.4 34.6

Durable equipment S.7 7 10.9 15.4 25.9 16 19.6 25.7 30.6 33.3 34.6 40.9Increase in stocks 1.7 3.2 6.6 6.7 8.3 7.9 9 11.4 13.2 14 10.5 9.2

Expor%.s of goods andnonfactor services 9.9 15.9 22.3 21.3 23.2 28.9 32.4 41.5 53.6 57.8 56.2 75.3

Imports of goods ananonfactor services -10.3 -13.4 -25.4 -29.1 -31.8 -34.9 -41.3 -53.6 -68.7 -74.4 -79.3 -100.5

Statistical discrepancy 0.8 0.7 1.5 1.4 1.6 -1.3 0.2 -2.9 -0.7 -3.2 3.5 6.7

Expenditure on gross domesticproduct 56.5 72.3 99.5 114.7 135.3 154.2 177.7 217.5 264.7 305.3 340.6 384.9

Net factor income fromthe rest of the world -0.5 -0.1 0.4 -0.3 -1.1 1 -0.6 0.5 -0.1 -1.6 -5.2 -5.4

Expenditure ongross national product 55.9 72.2 99.9 114.4 134.2 153.3 177 219 264.5 303.6 335.4 379.5

r - Revisedp = Preliminary

Source: NEDA National Accounts Staff.

Table 2.2s Expenditure on Gross National Product at CurrentPrices (Revised): Percentage Distribution

1972 1973 1974 1975 1976 1977 1978 1979 19B0 1951 1982 1983r p

Consumption 81.0 75.5 76.2 76.3 74.7 76.3 76.2 75.6 75.3 76.3 78.6 789.Personal 71.6 66.9 67.3 66.6 64.9 67.0 67.1 67.2 67.3 69.2 69.9 70.7General government 9.4 8.6 8.9 9.7 9.8 9.4 9.1 8.4 8.0 8.2 e.7 8.1

Gross domestic capital formation 19.5 20.3 25.1 29.6 31.3 29.0 29.0 31.0 30.7 30.7 28.8 27.5Fixed capital formation 16.5 15.8 19.5 23.7 25.1 23.9 23.9 25.8 25.7 26.1 25.6 25.1

Construction 6.4 6.1 7.6 10.2 13.3 13.3 12.9 14.0 14.1 15.2 15.3 14.3Government 1.8 1.9 2.9 3.B 6.2 6.2 6.0 6.6 6.2 6.6 6.6 5.2Private 4.5 4.2 4.7 6.4 7.1 7.1 6.8 7.4 5.0 8.6 8.8 9.1

Durable equipment 10.1 9.7 10.9 t3.5 11.8 10.5 11.1 11.8 11.6 11.0 10.3 10.9Increase in stocks 3.0 4.4 6.6 5.9 6.2 5.2 5.1 5.2 5.0 4.6 3.1 2.4

Export. of goods andnonfactor services 17.7 22.1 22.3 18.6 17.3 18.9 18.3 19.0 20.3 19.0 16.7 19.9

Imports of good. andnonfactor services -18.5 -18.6 -25.4 -25.4 -23.7 -22.7 -23.3 -24.6 -26.0 -24.5 -23.6 -26.5

Statistical discrepancy 1.4 0.9 1.5 1.2 1.2 -0.8 0.1 -1.3 -0.3 -1.0 1.1 1.9

Expenditure on gross domesticproduct 100.9 100.2 99.6 100.2 100.9 100.6 100.4 99.8 100.0 100.5 101.5 101.4

Net factor income fromthe rest of the world -0.9 -0.2 0.4 -0.2 -0.9 -0.6 -0.4 0.2 0.0 -0.5 -1.5 -1.4

Expenditure ongross national product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

r - Revisedp = Preliminary

Sources NEDA National Accounts Staff.

Table 2.3z Expenditure on Gross National Product at Constant 1972 Prices(Billion pesos)

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983r p

Consumption 45.3 49.2 51.1 53.8 56.3 59.9 61.9 64.7 67.6 70.2 72.7 74.1Personal 40 42.3 44.4 46.5 49.9 51.4 54.1 56.7 59.3 61.6 63.5 65.3General government 5.3 5.9 6.7 7.3 7.4 7.5 7.7 8 9.3 8.6 9.1 898

Gross domestic capital formation 10.9 12.1 14.8 19.3 21.1 21.1 2.9 25.5 26.6 27.2 26.3 25Fixed capi .al formation 9.3 9.5 11.4 15 17.2 17.6 19 21.3 22.7 23.5 23.7 23

Construction 3.6 3.7 4 6.2 8.7 9.2 9.4 10.5 11.1 12 12.5 11.9qov,.rnment 1 1.2 1.5 2.3 4 4.3 4.4 5 4.9 5.2 5.4 4.4Private 2.5 2.5 2.5 3.9 4.6 4.9 5 5.5 6.3 6.9 7.2 7.6

Durable equipment 5.7 5.9 7.4 9.9 B.6 8.3 9.6 10.7 11.6 11.5 11.2 11.1Increase in stocl;s 1.7 2.5 3.5 3.3 3.9 3.6 3.9 4.2 3.9 3.7 2.6 2

Exports of goods andnonfactor services 9.9 11.3 10.1 10.2 12.1 14.1 14.7 15.7 17.7 17.9 17.7 18.7

Imports of goods andnonfactor services -10.3 -10.7 -12.5 -13.3 -13.4 -14.3 -16.1 -12.9 -19.4 -19.9 -19.5 -19.2

Statistical discrepancy 0.9 0.4 0.9 -0.5 -2.2 -1.4 -0.5 0.9 0.1 -0.3 1.9 1.5

Expenditure on gross domesticproduct 56.5 61.3 64.5 69.5 73.9 78.5 82.8 99 92.6 96.2 99 100.1

Net factor income fromthe rest of the world -0.5 -0.1 0. 2 -0.2 -0.6 -0.5 -0.3 0. 2 0 -0.5 -1.5 -1.3

Expenditure ongross national product 55.9 61.2 64.L 69.4 73.3 7 892.5 89.2 92.6 95.7 97.5 989.

r = Revisedp - Preliminary

Source. NEDA National Accounts Staff.

Table 2.4: EXPENDITURE ON GROSS NATIONAL PRODUCT AT CONSTANT1972 PRICES, GROWTH RATES (Percent)

1973 1974 1975 1976 1977 1978 1979 1980 1991 1982 1983r p

Consumption 6.5 6.1 5.2- 4.6 4.7 4.9 4.7 4.4 3.9 3.5 2.0Personal 5.8 5.0 4.7 4.9 5.3 5.3 4.8 4.6 3.9 3.1 2.8General government 11.3 13.6 9.0:} 1.4 1.4 2.7 3.9 3.9 3.6 5.6 -3.3

Gross domestic capital formation 10.9 22.9 23.5 15.4 -0.1 8.6 11.2 4.4 2.3 -3.5 -4.7Fixed capital formation 2.2 20.0 31.6 14.7 2.3 8.C 12.1 6.6 3.5 0.9 -3.0

Construction 2.8 3.1 55.0 40.3 5.7 2. 11.7 5.7 8.1 4.2 -4.8Government 20..) 25.0 53.3 73.9 7.5 2.3 13.6 -2.0 6.1 3.8 -19.5Private o*:f.C 0.0C) 56.0 17.9 6.5 2. C 10.0 14.5 7.9 5.9 5.6

Durable equipment .5 25.4 18.9 2.3 -3.5 15.7 11.5 8.4 -C.9 -2.6 -0.9Increase ir stocIks 47.1 40.') -5.7 18.2 -7.7 8.3 7.7 -7.1 -5.1 -29.7 -23.1

E:ports of goods andnonfactor services 14.1 -10.6 1.0 18.6 16.5 4.3. 6.8 12.7 1.1 -1.1 5.6

Imports of goods andnonfactor services 3.9 16.8 6.4 0.8 6.7 12.6 16. 3 -2.6 3.2 -1.5

E::penditure on gross domesticproduct 8.5 5.0 6.6 7.9 6.1 5.5 6.7 5.3 5.9 2.9 1.1

E::penditure ongross national product 9.3 5.6 6.0 7.2 6.3 5.8 6.? 5.0 3. 4 1.9 1.3

r = Revisedp = Preliminary

Source: NEDA National Accounts Staff.

Table 2.5a EXPENDITURE ON GROSS NATIONAL PRODUCT. IMPLICIT INDICES(1972 - 100)

1972 1973 19.4 1975 1976 1977 1979 1979 1990 1991 1982 1983r p

Consumption 100.0 113.0 148.9 162.3 178.3 198.6 218.4 254.7 295.0 330.0 362.8 403.4Personal 100.0 113.9 151.4 163.9 178.5 199.6 219.6 258.6 300.3 335.9 369.3 410.7General government 100.0 105.1 132.8 152.1 178.4 190.7 209.1 229.8 255.4 289.4 320.9 351.1

Gross domestic capital formation 100.0 12t.2 160.9 184.7 198.7 210.1 224.0 265.5 305.0 342.6 367.5 417.2Fixed capital formation 98.9 120.0 161.4 160.7 195.9 206.6 222.6 264.3 299.6 337.4 362.9 414.3

Construction 100.0 118.9 190.0 188.7 204.6 221.7 241.5 291.4 336.9 383.3 411.2 457.1Government 100l).0 116.7 193.3 191.3 207.5 220.9 24'.9 290.0 332.7 394.6 407.4 450.0Private 100.0 120.0 186.0 167.2 206.5 222.4 242.0 292.7 333.3 382.4 408.3 4S5.3

Durable equipment 100.0 118.6 147.3 175.0 164.9 192.6 204.2 240.2 263.8 289.6 309.9 368.5Increase in stocks 100).0 128.0 189.6 203.0 212.S 219.4 230.8 271.4 338.5 378.4 403.B 460.0

Exports of goods and 0nonfactor services 100.0 140.7 220.8 208.8 191.7 205.0 220.4 264.3 302.6 322.9 317.5 402.7 W

Imports of goods andnonfactor services 100.0 125.2 203.2 218.8 237.3 243.4 256.5 265.1 354.1 393.7 406.7 523.4

Expenditure on gross doanesticproduct 100.0 118.1 154.7 167.3 183.0 196.5 214.6 247.3 265.7 317.3 344.0 384.4

Expendituire ongross national product 100.0 118.1 154.7 167.3 183.0 196.5 214.6 247.3 285.7 317.2 343.9 384.1

r - Revisedp = Freliminary

Sourcea NEDA National Accounts Staff.

Table 2.6: Industrial Origin of Gross Domestic Product at Current Prices(Billion pesos)

1972 1973 1974 1975 1976 1977 1978 1979 1990 1981 1982 1983r p

Agriculture, fishery and foresty 16.1 21.2 29.6 33.2 37.6 42 47.4 55.5 61.8 69.4 76.7 84.5

Industry 19.1 23.9 32.9 38.1 46.1 53.1 61.3 76.9 96.7 111.6 122.6 138.2Mining & quarrying 1.3 2.4 3.1 2 2.1 2.5 3.3 5.8 8.1 6.9 6.1 7Manufacturing 14 18.2 24.3 28.2 32.9 37.4 43.7 52.1 64.6 75.2 83.1 95.4Construction 2.2 2.8 4.6 6.9 9.9 11.9 12.6 16.9 21.3 26.3 29.3 30.7Electricity, gas, water 0.5 0.6 0.9 1.1 1.2 1.4 1.7 2.1 2.8 3.3 4 5.1

Services 22.3 27.2 37.1 43.4 51.6 59.1 69 B5.1 106.2 124.3 141.3 162.2Transport, communication & m

storage 2.7 3.5 4.9 5.9 7.3 8.4 9.9 12.4 16.4 19.6 21.4 24.4Trade 7.5 9.5 13.9 15.8 19.8 22.3 26.4 33.5 42.1 49.8 56.4 66.1Finance & Housing 4.5 5.7 7.6 9.1 10.4 11.7 13.6 16.6 20.6 22.6 24,.1 30.BOther services 7.5 8.5 10.7 12.7 15.1 16.8 19.1 22.6 27.1 32.3 37.4 40.9

GDP at market prices 56.5 72.3 99.5 114.7 135.3 154.2 177.7 217.5 264.7 305.3 340.6 394.9

Net factor income fromthe rest of the world -0.5 -0.1 -0.4 -0.3 -1.1 -1 -0.6 0.5 -0.1 -1.6 -5.2 -5.4

GNP at market prices 55.9 72.2 99.9 114.4 134.2 153.3 177 219 264.5 303.6 335.4 379.5

r - Revisedp = Preliminary

Sources NEDA National Accounts Staff.

Table 2.7: INDUSTRIAL ORIGIN OF GROSS DOMESTIC PRODUCT ATCURRENT PRICES: PERCENT DISTRIblITION

…______-____------ _ _ _ --- -- _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ____________________-- _ _ _ _ _ _ _ _ _ _ _ ________ - -_ ---- ---- _

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983r p

AgricLulture, fishery and foresty 28.8 29.4 29.6 29.0 28.) 27.4 26.8 25.5 23.3 22.9 22.9 22.3

Indust- 32.3 3.31 32.? 33.3 34.3 34.6 34.6 35.3 36.6 36.8 36.5 36.4Mining &< quarryint 2.3 3.3 3.1 1.7 1.6 1.6 1.9 2.7 3.1 2.2 1.8 1.81lanLlfacturing 25.') 25.2 24.3 24.7 24.5 24.4 24.7 23.9 24.4 24.6 24.8 25.1Construction 3.9 3.9 4.6 5.9 7.3 7.7 7.1 7.8 8.1 8.7 8.7 8.1Electricity, gas, water 0.9 0.8 C0.9 1.0 0.9 0.9 1.0 1.0 1.1 1.1 1.2 1.3

Services 39.8 37.7 37.1 37.9 3B.4 38.6 39.0 39.0 40.1 40.9 42.1 42.7Transport, communication &

storage 4.8 4.8 4.8 5.1 5.4 5.5 5.6 5.7 6.2 6.5 6.4 6.4Trade 13.4 13.2 13.9 13.8 14.0 14.5 14.9 15.4 15.9 16.4 16.8 17.4 cFinance & Houtsing 8.1 7.9 7.6 9.0 7.7 7.6 7.7 7.6 7.B 7.4 7.6 6.1Other services 13.4 11.6 10.7 11.1 11.3 11.0 10.8 10.4 10.2 10.6 11.2 10.8

GDP at market prices 100l.9 100.2 99.6 100.2 100.8 100.6 100.4 99.9 100.0 100.5 101.5 101.4…_________________ ----- ----- __ ___ _ ____ ----- ----- ____ ----- -----

Net factor income fromthe rest of the world -0.9 -0.1 -0.4 -0.3 -0.8 -0.7 -0.3 0.2 0.0 -0.5 -1.6 -1.4

GNP at market prices 100.0 100.0C) 100.0 100.0 L00.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

r = Revisedp - Preliminary

Source: NEDA National Accounts Staff.

Table 2.86: Industrial Origin of Gross Domestic Product at Constant 1972 PricesCBillion pesos)

1972 197-3 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983r p

Agriculture, fishery and foresty 16.1 17.1 17.6 18.3 19. 8 20. 21.6 22.6 23.7 24.6 25.4 24.8

InduIstry 18.1 20.3 21.5 23.3 25.7 27.9 29.6 32 33.5 35 35.7 36Mining & qLtarrying 1.3 1.4 1.4 1.4 1.5 1.7 1.8 2.1 2.2 2.2 2 2Manufacturing 14 16 16.7 17.3 18.3 19.7 21.1 22.2 23.2 24 24.5 25.1Construction 2.2 2.4 2.7 4 5.3 5.8 5.9 6.8 7.1 7.8 8.1 7.7Electricity, gas, water 0.5 0.5 0.6 0.6 0.7 0.7 0.8 0.8 0.9 1 1.1 1.2

Services 22. 23.2 25.3 26.9 28.4 29.6 31.5 33.4 35.4 36.6 37.9 39.3Transport, communication &

storage 2.7 3 3.3 3.6 4 4.2 4.5 4.6 4.8 5 5.2 5.3Trade 7.5 8 B.5 8.8 9.3 10 10.7 11.5 12.2 12.7 13.1 13.9Finance & HOUSing 4.5 4.7 4.9 5.4 5.7 5.9 6.2 6.6 7.1 7 7.3 7.8Other services 7.5 8.1 8.7 9.1 9.4 ?,7 10.2 10.7 11.3 11.9 12.4 12.3

GDP at market prices 56.5 61.3 64.3 68.5 73.9 78.5 82.98 28 92.6 96.2 99 100.1

Net factor income fromthe rest of the world -0.5 -0. I C.2 --0. 2 -0. 6 -0.5 -0.3 C0. 2 0 -0.5 -1.5 -1.3

GNP at market prices 55.9 61.1 64.5 68.4 73.3 78 82.5 82.2 92.6 95.7 97.5 98.8

r = Revisedp - Preliminary

Sources NEDA National Accounts Staff.

Table 2.9: INDUSTRIAL ORIGIN OF DOMESTIC PRODUCT AT 1972 CONSTANT PRICESGROWTH RATES (PERCENT)

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983r p

Agriculture, fishery and for-esty 6.1 2.6 4.3 8.0 5.0 4.1 4.5 5.0 3.7 3.1 -2.1

Industry 12.4 5.6 2.7 10.4 e.4 6.1 8.0 4.7 4.5 2.1 0.7Mining & quarrying 7.7 0.0 0.0 7.1 13.3 5.9 16.7 4.8 0.0 -9.1 0.0Manufacturing 14.3 4.4 3.6 5.8 7.7 7.1 5.2 4.5 3.4 2.1 2.4Construction 9.1 12.5 48.1 32.5 9.4 1.7 15.3 4.4 9.9 3.8 -4.9Electricity, gas, wJater 0.0 20.0 0.0 16.7 0.0 14.3 0.0 12.5 11.1 10.0 9.1 0

Services 7.0 6.2 6.3 5.6 4.9 5.9 5.8 6.2 3.4 3.5 3.7Transport, commLunication &

storage 11.1 10.0 9.1 11.1 5.0 7.1 2.2 4.3 4.2 4.0 1.9Trade 6.7 6.3 3.5 5.7 7.5 7.0 7.5 6.1 4.1 3.1 6.1Finance & Housing 4.4 4.3 10.2 5.6 3.5 5.1 6.5 7.6 -1.4 4.3 6.6Other services 8.0 7.4 4.6 3.3 3.2 5.2 4.9 5.6 5.3 4.2 -0.8

GDP at market prices 8.5 5.0 6.6 7.9 6.1 5.5 6.3 5.3 3.9 2.9 1.1

GNP at market prices 9.3 5.6 6.0 7.2 6.3 5.8 6.9 5.0 3.4 1.9 1.3

r = Revisedp = Preliminary

SoLurce: NEDA National Accounts Staff.

Table 2.10: INDUSTRIAL ORIGIN OF GROSS DOMESTIC PRODUCT: IMPLICIT PRICE INDICES (Revised)(1972-100)

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

Agriculture, Fishery& Forestry 100.0 123.8 168.2 181.2 190.1 202.1 219.0 245.7 260.2 282,3 302,3 340.3

Industry 100.0 117.6 153.1 163,4 179.1 190,3 207,0 240,6 289.0 319.2 343.2 384.3Mining & Quarrying 100.0 171.9 220.7 138.4 142.7 142.8 184.3 272.3 262.0 314.9 302.9 357.1Manufacturing 100.0 113.7 145.0 163.2 180.0 190.1 207.0 234.5 278.6 313.7 338,8 379.8Construction 100.0 113.2 166.7 172.1 185.9 204.0 211.8 249.4 298.5 335.5 362.7 399.7Utilities 100.0 112.6 158.6 174.1 181.6 200.6 222.5 251,7 300.0 334.8 371.8 425.2

Services 100.0 114.4 146.7 161.3 181.6 198.5 218.8 254.8 299.6 339.2 372.7 412.4Transportation Communi-cation and storage 100.0 115.9 147.6 161.6 183.6 198.7 219,8 268,8 340,7 389.3 413.9 462.9 X

Trade 100.0 118.8 164.3 179.9 202.0 223.8 247.1 290.8 344.0 390.9 430.1 474.7 cFinance & housing 100.0 121.0 156.3 167.0 182.1 198.7 220.9 253.1 289.4 324.7 360.5 395.9Other services 100.0 105.5 123.7 139.9 160.3 172.5 187.5 211.2 240.3 271.2 302.1 331.3

GDP at Market Prices 100.0 118,1 154.7 167.4 183.0 196.5 214.6 247.3 285.7 317.3 344.0 384.4

GNP at Market Prices 100.0 118.1 154.7 167.3 183.0 196.5 214.6 247.3 285.7 317.2 343.9 384.1

1972-83 revised as of September 1984.

Source: NEDA National Accounts Staff.

- 89 -

Table 3.1a BALANCE OF PAYMENTS SUMMARY(In Millions of US$)

1972 1973 1974 1975 1976 1977 1978 1979 1980 1991 1982 1993

Current Account

Merchandise trade (net) -124 290 -41B -1165 -1060 -764 -1307 -1541 -1939 -2224 -2646 -2482Exports 1106 1886 2725 2294 2574 3151 3425 4601 5799 5722 5021 5005Imports 1230 1596 3143 3459 3634 3915 4732 6142 7727 7946 7667 7487

Services (net)Ia -55 0 -34 -45 -259 -248 -107 -311 -399 -309 -1040 -740Receipts 347 639 834 907 971 105 14B4 1655 2222 2896 2993 3127Payments 402 639 866 952 1130 1333 1591 1966 2621 3205 4023 3867

Private transfers (net)/b 82 96 123 167 149 146 197 229 300 325 322 237Receipts 69 99 124 170 151 152 200 234 305 328 324 242Payments 6 3 1 3 2 4 3 5 5 3 2 5

Official transfers (nethfb 106 150 153 151 120 112 115 126 134 147 164 235Receipts 110 157 160 159 129 121 122 135 146 I57 174 241Payments 4 7 7 9 9 9 7 9 12 10 10 6

Current account balance 9 536 -176 -892 -1050 -752 -1102 -1497 -1904 -2061 -3200 -2750

Capital Account

Direct investment (net)/a -22 64 29 125 144 216 100 20 -102 175 17 112

Total MLT loans 140 71 145 357 1040 662 991 1151 1032 1332 1549 1392Disbursements 372 360 456 677 1407 1242 1850 2110 1579 2072 2533 2336Repayments 232 309 311 320 367 580 959 959 547 740 985 944

Private MLT loan capital (net) -17 -5 5 126 336 101 209 163 496Disbursement 137 196 276 S31 538 476 905 790 876Repayments 154 201 243 205 202 375 696 627 374

Public MLT loan capital (net) 157 76 112 231 704 561 682 988 536Disbursements 235 194 160 Z46 869 766 945 1320 709Repayments 78 108 69 115 165 205 263 332 173

Short-term capital (net)/c 37 -64 79 70 -332 -172 -90 -458 310 -219 -56 -837Inflows 579 657 1138 1263 1361 2475 3442 4265 7537 8767 12127 13429Outflows/d 542 721 1059 1213 1713 2647 3532 4723 7227 8966 12163 14266

Capital account balance 155 71 252 552 852 706 901 713 1240 1299 1509 667

Errors and omissions/d -93 57 34 -181 37 210 115 145 126 -214 -207 -166Allocation of SDRs 16 28 29 27Monetarization of Gold 7 32 41 128 400 277 183Revaluation -50

Overall Balance /I 94 664 110 -521 -161 164 -54 -570 -381 -560 -1621 -2118

/a Adjusted to reclassify withdrawals of 343/547 deposits in pesos from direct investment inflows to other services.fb Adjusted to reclassify USVA pensions from private transfers to official transfers.fc Original maturity up to and including one year.Id Adjusted to reclassify constructive outward remittances of export

receipts arising mainly from lag in remittances of export receipts from errors and omissions to short-termcapital outflow.

Ie Overall balance for 1983 includes 51107 million non-monetary foreign exchange arrears.

Source: Central Bank of Philippines.

Table J3.22: CURRENT ACCOUNT: SERVICES AND TRANSFERS(In millions of US$)

I t e in 1972 1973 1974 [975 [976 1977 1978 1979 1980 1981 1982 1983

Services (net) -55 0 -34 -45 -259 -248 -107 -311 -399 -309 -1040 -740Receipts 347 6379 834 907 871 1085 1484 1655 2222 2896 29983 3127

Freight and insurarice 14 19 24 237 32 94 62 91 100 106 101 100Other transportation 21 31 47 67 67 63 57 71 106 138 73 33Travel 122 77 58 110 93 145 210 238 320 344 450 465Direct investment income 1 5 11 12 2 1 2 13 5 5 4 1rnterest on placement 22 60 160 158 125 13a 179 200 336 519 365 374Government (n.i.e.) 116 165 156 181 204 190 204 193 233 259 281 292

Military Servicez 41 42 48 5O 53 56 71 71 85 103 101 88Other 75 143 108 131 151 134 133 122 148 156 180 204

Personal income 5 55 11 103 111 2137 291 365 421 546 810 944Other Services* 46 207 260 253 237 241 459 484 701 979 899 918

Paymerits 402 639 868 952 113') 1333 1591 1966 2621 3205 4023 3867Freight and insuirance 109 193 324 324 320 356 411 471 568 533 596 495 1Other transportation 13 11 18 Z0 37 73 91 170 192 248 220 167 0Travel 24 16 17 27 28 35 51 74 106 126 147 221 1Direct investment income 7'T 60 20 73 68 158 85 95 159 126 158 153Interest on loans ; deposits 120 125 152 234 259 236 440 626 975 1374 1990 1985Government Cin.i.e.) 32 47 63 75 80 62 104 92 121 110 107 135Other services 71 187 214 189 338 413 409 438 500 686 805 711

Transfr.r-s (net) 188 246 276 318 269 260 312 355 434 472 486 472Receipts 196 256 284 329 280 273 322 369 451 485 492 483

Personal remittances 54 67 1 04 128 112 125 154 191 205 254 239 10US Veterans Admin. 71 74 78 87 88 92 86 106 114 121 126 110Others 73 115 102 114 80 56 82 72 132 110 133 193

Payments 10 10 8 11 11 13 10 14 17 13 12 11

* Adjusted to include withdrawal

Source: Central Bank of Philippines.

Table 3.3: FOREIGN EXCHANGE RESERVES Ie(Millions of US$, at year end)

Foreign ExchangeGross reserves liabilities Net Change

Central Commercial Central Commercial international inYear Bank Banks Bank/b Banks reserves/b reserves/c

1970 251 128 435 160 -2161971 375 149 396 280 -152 641972 549 186 399 453 -117 351973 1037 379 314 540 562 6791974 1503 475 416 812 750 1981975 1361 718 793 990 296 -4541976 1642 564 1019 1062 105 -1911977 1525 739 577 1419 268 1631978 1883 1312 628 2353 214 -541979 2423 1308 1109 2979 -357 -5711980 3155 1903 2110 3666 -738 -3811981 2697 2608 2431 4173 -1299 -5611982 1815 2540 3185 4870 -3700 -16211983 865 1577 3797 /a 4495 -5850 /a -211819e4/d 552 1638 3740 4166 -5716 97

/a Inclusive of arrears as of Dec. 31, 1983 and July 31, 1984 amounting to$1107 million and $1215 million, respectively.

/b The net international reserve for 1970-1981 are computed based on the old conceptwhere the CB liabilities are already net of certain long-term yen liabilities (IBRDrural credit liabilities, long-term yen liabilities to OECF) agreed with IMF.The NIR for 1982 to 1963 uses the new concept of NIR computation under the1983 IMF Standby Agreement where only short-term and IMF credits are includedas CB liabilities. Thus, due to the difference In concepts used, the change innet reserves for 1961 and 1962 will not be equal to the BOP in table 3.1.

Ic Beginning in 1976 when an understanding was reached with IMF in connection withthe Extended Fund Facility, 'change in net reserves' equals 'overall balance' inbalance of payments statement (Table 3.1).

/d As of July 31, 1984 and the beginning levels for the commercial banks used werebased on the reconciliation of 01-05 Reports of KBS, different from thoseshown in 1983.

Ie Figures for 1983 and Jan.-July 1984 include revaluation adjustment.

Table 3.4: TRADE INDICES /a(1972 = 100Ž

Quantum index Price index Value indexYear --------------- -------------- --------------- Net terms

Imports Exports Imports Exports Imports Exports of trade

1972 100.0 100.0 100.0 100.0 100.0 100.0 100.01973 93.6 107.7 128.6 145.9 120.6 157.1 113.31974 110.3 96.2 211.6 242.3 233.4 233.1 114.51975 115.9 101.9 219.6 192.8 254.3 196.5 87.81976 122.6 130.5 217.2 168.8 266.3 220.3 77.71977 119.2 157.4 241.1 171.3 287.4 269.6 71.01978 140.9 152.6 245.8 192.1 346.3 293.1 78.21979 153.8 166.8 289.4 236.1 445.1 393.8 81.61980 155.8 201.3 358.7 246.1 558.9 495.4 68.6 a1981 143.2 203.5 398.7 240.6 570.9 489.6 60.31982 163.4 215.0 340.5 199.9 556;4 429.8 58.71983 156.9 204.2 342.4 209.8 537.2 428.4 61.31984/b 118.5 196.9 347.2 230.5 411.4 453.6 66.4

/a Unit values of imports are based on c.1.f. value, while those forexports are based on f.o.b. value.

lb Based an estimated values of exports and imports.

Sourcet Central Bank of the Philippines.

_9 _

Table 5.5. EXPORTS BY COMMOOITY G*OUPS(f.o.b. value in millions of LU8S at current price.)

Est.1972 1973 1974 1975 1976 1977 1978 1979 1990 1981 1982 1983 1984

--------- _-----------------------------------_-------------------_------ ------- ---------- ____-----------_------

Coconut Products 227 372 605 462 556 729 872 965 781 719 563 639 790Coconut oil (crud.) 893 15 390 226 295 380 585 683 537 502 374 475 b30

Dessicated coconut l8 32 60 51 57 90 82 107 114 102 68 9a 104Copra meal orcke e 16 23 28 33 54 58 69 a8 82 e1 72 72 56Copra 110 166 140 172 150 201 136 89 47 34 49 4 0

Sugar and Products 217 292 765 615 451 526 213 239 590 454 596 282 325Centrifugal 211 274 737 561 426 506 197 212 557 416 371- 265 280oClasses 6 18 28 34 25 20 16 27 35 39E 25 17 45

Other Agricultural Products 84 114 141 174 220 264 293 406 477 435 421 364 455Bananas 24 29 45 73 76 73 84 97 114 124 146 105 117Pineapple, canned 19 20 31 35 47 56 60 74 82 89 88 74 9sFish, fresh or simply

preserved 11 20 17 26 26 41 57 87 107 90 71 77 75Coffee, raw 0 0 0 2 25 45 34 44 45 39 49 47 77Tobacco, unmanufactured 17 24 30 34 28 29 29 33 29 48 47 34 43Abac- fibers, unmanufactured 13 20 38 14 19 17 15 25 27 21 20 1i 25Rice 0 0 0 0 0 4 14 46 73 24 0 9 0

Forest Products 226 416 292 225 266 262 324 494 420 344 290 327 272Logs 164 304 216 167 135 134 145 144 92 76 79 74 B4Lumber 10 35 30 27 68 67 85 199 19I 126 124 149 ItoPlywood 34 59 27 23 47 41 72 107 111 ll 67 76 60Venwr and corestock la 19 19 8 19 20 22 35 36 31 20 26 18

Mineral Products 249 455 531 Z77 437 520 534 820 1174 976 687 607 367Copper concentrates 191 290 393 212 266 268 250 440 545 429 312 249 125Sold 27 104 74 76 65 72 76 103 239 215 169 154 79Nickel 0 0 0 33 59 77 55 92 138 103 49 .53 EIron ore and concentrate 10 17 12 12 7 0 0 0 0 0 0 0 cIron or aogglomerates 0 0 0 0 0 57 104 120 119 116 106 114 10?.Choromnte orp 5 9 13 13 15 25 25 23 33 25 . 15 10 20

Other i& ZS 39 31 25 22 24 42 101 88 36 27 31

Nontradittonal Manufactures 77 212 328 367 546 711 1045 1474 2005 2374 2376 2387 2700Electrical equipment and

components 2 It 27 47 85 124 253 412 671 938 1000 2053 1195Garments 2 5 94 100 185 250 327 405 502 618 541 545 630Food products and beverages 11 15 17 14 20 31 42 46 92 154 150 127 120Handicrafts 13 27 46 79 71 67 91 110 132 131 le 120 112Chemicals 6 10 15 21 27 51 59 112 89 105 95 86 96Furniture and parto 2 ' 6 5 10 22 27 55 77 87 72 B4 86Footwear 1 2 4 3 5 10 32 51 67 73 62 55 56

Wood manufactures,excludingplywood, ven-er and lumber 8 24 S5 29 32 28 30 40 35 46 41 53 54

Machinery and transportequipment 3 S 6 10 16 26 37 47 47 47 48 35 30

Textile yarn, fabrics andother related products 9 24 20 22 39 34 44 55 74 69 56 44 34

Others 20 35 58 38 56 68 114 141 219 206 193 185 307

Other 26 25 40 74 116 139 144 213 341 420 288 399 411Petroleum products 19 15 16 37 34 37 32 42 90 89 64 142 100

Other exports and re-exports 7 10 24 37 82 102 113 171 251 531 224 257 311

Total 1106 1996 2725 2294 2574 3151 3425 4601 5788 5722 5021 5005 5300

C------- l -------- o---- -----P----------------------- -------------------- ------------------------ _------

Sourcos Central B-nk of the Philippines.

Table 3.6a VOLUME AND UNIT VALUE OF PRINCIPAL COMMODITY EXPORTS

Eat

Category 1972 1973 1974 1975 1976 1977 1978 1979 1990 1981 1982 1983

Volume ('000 mt)Coconut oil (crude) 461 427 415 606 854 714 962 743 874 994 866 933Dessicated coconut 76 78 64 66 a1 99 91 96 87 86 90 89Copra meal or cake 352 263 271 303 498 436 535 549 545 620 599 551Copra 926 734 269 761 923 635 365 145 121 108 178 16Sugar, centrifugal 1224 1470 1542 972 1456 2419 1124 1150 1602 953 1096 , 842Bananas 422 466 663 823 796 693 776 859 923 869 927 643Pineapple, canned 108 91 125 116 136 154 162 199 197 174 171 146

Log. /a 7126 7762 4702 4595 2332 2045 2210 1248 715 705 752 786Lumber Ia 181 427 284 254 493 457 573 915 742 547 591 729Plywood /a 455 535 171 175 283 221 368 393 344 371 241 294

Copper concentrates 523 764 B30 799 942 1007 695 1049 1140 1139 1060 798Gold lb 501 536 541 491 535 513 412 367 420 476 473 367Nickel 0 0 0 7 12 17 13 17 23 19 11 12Iron ore agglomerates 0 0 0 0 0 1993 3280 4100 4240 3551 3752 32Q5

Unit Value (USS per mt)Coconut oil (crude) 180 354 916 373 345 532 608 919 614 510 432 509Dessicated coconut 237 410 937 470 457 919 901 1244 1333 1186 756 989Copra meal or cake 45 87 103 109 108 133 129 157 149 131 122 131Copra 119 226 522 226 162 316 373. 614 3BB 315 275 250Sugar, centrifugal 172 186 478 598 293 209 175 184 348 436 339 315Bananas 57 60 68 89 95 105 108 113 124 143 157 163Pinmapple, canned 176 220 249 302 341 364 370 392 439 511 515 507

Logs /c 23 39 46 36 58 66 66 115 129 108 105 94Lumber /c 55 82 106 106 138 147 146 216 244 230 210 205Plywood /c 75 110 158 131 166 196 196 272 323 299 279 259

Copper concentrates 232 360 473 265 282 266 279 420 478 377 294 316Gold /d 54 194 137 155 121 139 184 291 569 452 357 420Nickel 0 0 0 4714 4917 4529 4231 5412 6000 5722 4454 4417Iron ore agglomerate. 0 0 0 0 0 29 32 29 28 33 29 35

/a In thousand cubic meters.lb In thousand troy ounces.Ic Per cubic meter./d Per troy ounce.

Sources. Central Bank of Philippines for 1972 and 1973, National Censusand Statistics Office from 1974.

Table 3.7* PRINCIPAL EXPORT MARKETS

------------------------------------------------------------------- __--------__------------------------------------

1972 1973 1974 1975 1976 1977 1978 1979 1980 1991 1982 1993

----------------------------------- Millions of US$ ----------------------------

United States 447 676 1157 664 923 1112 1156 1384 1588 1766 1556 lOOJapan 373 674 949 865 622 727 819 1201 1535 1251 1146 1015European Community 162 231 323 372 464 561 634 931 961 924 726 814ASEAN countries 15 39 36 61 90 126 208 186 377 413 359 364Socialist countries 1 14 32 36 148 253 97 144 256 257 231 123

USSR I 9 19 10 97 130 40 83 190 171 115 87China, People's Republic 0 6 14 25 40 106 47 51 45 78 105 29Other 0 0 0 1 21 15 10 10 21 9 11 0

Middle East 1 3 19 50 32 32 58 61 116 99 90 84Hongkong 14 se 32 27 39 51 91 158 192 222 198 171Australia a 17 30 32 45 61 75 94 98 122 89 76Taiwan 20 44 28 29 42 27 41 69 101 102 75 75Other countries 65 150 119 158 159 191 246 371 546 566 521 493

Total 1106 1686 2725 2294 2574 3151 3425 4601 5790 5722 5021 5005 c

------------- ---------------------- Percent of total ----------

United States 40.4 35.8 42.5 28.9 35.9 35.3 33.8 30.1 27.4 30.9 31.6 36.0Japan 33. 7 35.7 34.8 37.7 24.2 23. 1 23.9 26.1 26.5 21.9 22.8 20.3European Community 14.6 12.2 11.9 16.2 1.8 18.4 18.5 20.2 16.9 16.1 14.5 16.3ASEAN countries 1.4 2.1 1.3 2.7 3.1 4.0 6.1 4.1 6.5 7.2 7.1 7.3Socialist countries 0.1 0.7 1.2 1.6 5.7 8.0 2.8 3.1 4.4 4.5 4.6 2.5USSR 0.1 0.4 0.7 0.4 3.4 4.1 1.2 1.6 3..3 3.0 2.3 1.7China, People's Republic 0.0 0.3 0.5 1.1 1.6 3.4 1.4 1.1 0.9 1.4 2.1 0.6Other 0.0 0.0 0.0 0.0 0.e 0.5 0.3 0.2 0.4 0.2 0.2 0.0

Middle East 0.1 0.2 0.7 2.2 1.2 1.0 1.7 1.3 2.0 1.7 1. 1.7Hongkong 1.3 2.0 1.2 1.2 1.5 1.6 2.7 3.4 3.3 3.9 3.9 3.4Australia 0.7 0.9 1.1 1.4 1.7 1.9 2.2 2.0 1.7 2.1 1.6 1.5Taiwan 1.9 2.3 1.0 1.3 1.6 0.9 1.2 1.5 1.7 1.6 1.5 1.5Other countries 5.9 8.0 4.4 6.9 6.2 5.7 7.2 8.1 9.4 9.9 10.4 9.7

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: Central Bank of the Philippines, 1972-19731 National Census and Statistics Office, 1974 onwards.

- 96

Table 3.1o S 9Jro9 BY COEODITY mnoups(f.o.b. In millions of IS)

SITC Eat.clams Coamodity group 1972 1973 1974 3975 1976 1977 197B 1979 1950 1911 3952 1953 3994

O Food & Food Preparations 175 202 310 322 299 299 296 354 492 565 650 529 4a802 Dairy products 46 45 74 62 55 70 60 96 112 135 167 328 7103 Fish & it h preparations 20 20 32 33 30 22 24 20 26 30 39 7 4041 Iheat 34 49 79 95 133 78 85 106 149 151 1o9 335 139042 Race 34 45 39 37 22 5

Others 41 43 86 95 w9 124 127 132 205 247 287 25D 274

2 Boverages L Tobacco 9 10 17 23 35 44 44 49 48 53 66 73 30

Crude Maturials, Inedible 70 90 145 18 2333 se9 219 260 269 256 267 233 215263 Cotton 39 30 34 36 37 30 44 36 44 34 20 29 22266 Synthetic fibers 27 29 53 42 43 55 56 75 62 79 78 66 60

Iran ore under consignment 30 45 49 74 60 74 49 b6Others 24 31 58 52 53 74 74 100 89 83 95 89 65

S Minwral Fuels - Lubricants 149 288 653 770 990 993 1030 1385 2249 2458 2105 2123 1500Coal And coke I 1 2 2 2 9 15 14 22 19 26 16 30

321 Petro1eum. crude 134 166 573 710 OI 859 907 IIS 3057 2091 1784 1741 1337Others 14 21 79 59 87 125 3o0 256 369 358 295 366 133

4 Animal & Vegetable Oils L Fats 4 7 12 7 7 11 14 29 19 l8 16 25 15

S Chemicals 148 219 491 380 352 432 523 670 741 765 743 772 6,452 Chemical compounds 44 151 loB 132 160 203 249 267 299 _a9 267 26754 Pharmaceutacals 16 21 36 34 Z9 43 54 63 69 72 92 76 60

Utea 4 10 65 46 10 29 37 51 89 57 59 45 53Frrtilier, ecl, urea 12 5 84 43 i1 14 1t 40 50 48 49 46 34Others 72 207 155 149 160 296 2216 2&Y 266 290 294 337 20

6 Manufactured Goods ClassifiedChiefly by Material 214 ZO6 530 457 460 549 701 945 907 832 1(31 931 692

64 Papwr & paper products 35 34 57 "1 29 36 53 62 67 64 67 65 5165 Textile yarn L fabrics 25 47 69 66 50 8O Be 117 144 159 ISO 103 166411 Iron 1. steel 97 115 229 176 194 237 304 430 399 .25 423 .356 29069 Metal products 23 49 60 93 81 71 107 12f 133 148 272 147 75

Others 44 62 116 91 I3O 125 151 200 244 187 219 t8O 120

7 Machinery t TransportEqui pm4nt 419 469 795 1114 2088 1022 1359 1700 2960 1797 3469 1592 1035

71 NonJeectrical machinery 240 296 42 455 42S 589 737 935 2015 945 989 902 42572 ElectriCal machinrwy 54 71 106 357 187 I33 203 229 322 392 385 404 441,3 Tranport equipment 124 102 265 302 276 295 399 544 533 460 295 236 169

a Mincellaneous Manufactures 34 45 61 74 at 97 128 341 200 200 195 177 10Professional ec1entific,

& controhling instruments 16 22 30 3 37 55 71 77 126 129 I1O 106 65Other Is 23 31 36 44 42 57 64 74 72 77 72 40

9 Commodities and Transactionsnot Classified Elsehere 9 60 29 194 289 279 446 h1: 63 V954 926 1033 3021

Materials *r manufacturingelectric & electronicequipment 9 24 41 92 207 219 351 549 6:6 b77 765 589

Material for embroidery ormanufacture of gar-eets 45 a2 58 115 9; 121 125 142 193 250 140 207

Other 9 7 4 85 83 77 106 136 172 140 99 223 223

Total imports 1220 2596 143 54:9 5b54 ;391 473- 6142 7727 /946 7667 7407 5737

Sources Central bank of the Philipplnes. National Census and Statistics Offace.

Table 3.9: IMPORTS OF CAPITAL GOODS BY SECTOR(f.o.b. value in millions of US$)

Sector 1972 1973 1974 1975 1976 1977 1972 1979 1980 1981 1982 1983/a

Agriculture 15 21 35 56 31 15 19 34 28 33Construction 13 23 43 59 40 44 58 79 100 75Manufacturing 179 233 281 357 376 361 459 590 650 623Energy 73 85 119 200 211 189 262 279 290 301 1Transportation 124 102 265 302 276 295 389 544 533 460 wOthers 29 26 82 175 191 173 214 258 385 433 1

Total 433 490 825 1149 1125 1077 1401 1784 1986 192S 17B6 1698

/a Estimate.

Table 3.10: IMPORTS OF PETROLEUM AND COAL

--------------------------------------------- ___------_---------------___-_--__---------------------------------------

1972 1973 1974 1975 1976 1977 1975 1979 1980 1981 1982 1983

Crude petroleumVolume (mln barrels) 64.9 67.1 61.6 66.5 69.6 69.4 72.2 65.8 63.9 61.6 54.4 59.7Price (*/barrel) 2.0 2.5 9.3 10.7 11.5 12.4 12.6 16.9 29.1 33.6 32.8 29.1Value (S mln) 134 166 573 712 600 861 910 1112 1859 2082 1764 1737

Petroleum productsVolume (mln barrels) 4.3 7.6 7.6 14.0 13.9 11.2 9.7 13.2Price ($/barrel) 13.5 11.5 14.2 18.3 26.5 31.9 30.4 27.8Value (S mln) 15 22 s0 58 87 125 108 256 368 357 295 367

CoalVolume ('000 MT)Price ($/MT)Value ($ mln) 1 1 2 2 2 9 15 14 22 19 26 16

Source: Central Bank of the Philippines, National Census and Statistics Office.

Table 3.11: PRINCIPAL SOURCES OF IMPORTS

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

---------------------------- Millions of US$ -----------------------------------

Japan 391 519 864 966 976 975 1285 1398 1786 1494 1532 1266United States 313 450 733 754 802 799 995 1402 1531 1787 1266 1739European Community 179 206 387 429 438 469 598 851 828 619 814 B80Saudi Arabia 56 90 347 369 269 324 264 368 797 1036 913 913Kuwait 20 44 146 142 221 136 163 282 406 416 289 2e6ASEAN countries 56 35 75 173 244 261 274 364 463 538 510 671Taiwan 16 25 79 s0 74 81 132 173 183 205 220 213Australia 59 66 134 126 116 169 167 206 215 213 218 171Socialist countries 2 23 47 58 66 86 123 152 239 212 233 156

USSR 0) I 0 0 2 4 6 6 22 2 11 16China 2 21 24 47 54 78 112 121 206 195 206 122Other 1 23 11 10 4 5 23 11 15 16 16

Other countries 136 138 329 362 405 613 731 946 1259 1224 1235 1292

Total 1230 1596 3143 3459 3633 3915 4732 6142 7727 7946 7230 7487

---- Percent of total ---- ---------------------------

Japan 31.8 32.5 27.5 27.9 26.9 24.9 27.2 22.8 23.1 16.8 21.2 16.9United States 25.4 28.2 23.3 21.8 22.1 20.4 21.0 22.8 19.8 22.5 17.5 23.2European ComMnunity 14.6 1.2.9 12.3 12.4 12.1 12.0 12.6 13.9 10.7 10.3 11.3 11.8Saudi Arabia 4.6 5.6 11.0 10.7 8.0 6.3 5.6 6.0 10.3 13.1 12.6 10.9Kuwait 1.6 2.8 4.7 4.1 6.1 3.5 3.4 4.6 5.3 5.2 4.0 3.8ASEAN countries 4.7 2.2 2.4 5.O 6.7 6.7 5.8 5.9 6.3 6.8 7.1 9.0Taiwan 1.3 1.6 2.5 2.3 2.0 2.1 2.8 2.8 2.4 2.6 3.0 2.8Australia 4.B 4.1 4.3 3.6 3.2 4.3 3.5 3.4 2.8 2.7 3.0 2.3Socialist countries 0.2 1.4 1.5 1.7 1.9 2.2 2.6 2.5 3.1 2.7 3.2 2.1

USSR 0.0 0.1 0.0 0.0 0.1 0.1 0.1 0.1 0.3 0.0 0.2 0.2China 0.2 1.3 0.6 1.4 1.5 2.0 2.4 2.0 2.7 2.5 2.8 1.6Other 0.0 0.1 0.7 0.3 0.3 0.1 0.1 o.4 0.1 0.2 0.2 0.2

Other countries 11.1 8.6 10.5 10.5 11.1 15.7 15.4 15.4 16.3 15.4 17.1 E:'.3

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Sources Central Banks National Census and Statistics Office.

Table 4.1: EXTERNAL DEBT OUTSTANDING AND DISBURSED AT END-YEAR,BY MATURITY AND BORROWER

(In millions of US dollars at end of period)

1974 1975 1976 1977 1978 1979 1960 1981 1982 1983 /d

Short Term Credits /a 331 436 715 1009 1357 1814 2548 3664 4046 4071

Public Sector 11 29 147 267 330 566 947 1862 2149 1936Private Sector lb 320 409 568 742 1027 1246 1601 1802 1897 2133

Medium-Term /b 355 398 456 481 395 442 728 868 856 1013

Public Sector 217 234 295 354 258 357 654 783 717 859Private Sector 130 164 161 127 137 85 74 85 139 154

Long-Term /c 2037 2567 3928 5073 6443 7478 8911 10392 12153 13631

Public Sector 962 1320 2277 3036 4489 5492 6531 7716 9063 10493Private Sector 1075 1247 1651 2037 1954 1986 2380 2676 3090 3138 o

MLT Debt - Subtotal 2392 2965 4364 5554 6838 7920 9639 11260 13009 14644

Public Sector 1179 1554 2572 3390 4747 5849 7185 8499 9780 11352Private Sector 1213 1411 1812 2164 2091 2071 2454 2761 3229 3292

Total All Maturities 2723 3403 5099 6563 8195 9734 12187 14924 17055 18715…______________________ - ---- - ---- - ---- _ _ - -- ----- ----- ----- ----- _____

(of which IMF drawings) (128) (239) (452) (551) (639) (783) (1063) (1232) (1073) (1133)

--------------------------------------------------------------- __------------__-----------------------

/a Consists of revolving credits and fixed-term credit with original maturityof up to one year excluding Central Bank compensatory financing.

/b Original maturity of 1-5 years./c Original maturity exceeding 5 years.Id Preliminary.Source: Central Bank of the Philippines.Notes In this and succeeding tables, 'public' refers to debt of the Republic of the Philippines,

government corporations, government financial instituions,and includes transactions with IMF. 'Private' refers to all direct loans to the private sectorincluding those guaranteed by government financial institutions.

- 101 -

Table 4.2: EXTERNAL MEDIUM-AND LONG-TERM DEBT TRANSACTIONS,BY TYPE OF BORROWER(In millions of US$)

Debt Services Debt out------------------------ Net standing &

Disburse- Amorti- disburse- Adjust- disbursedYear ments zation Interest Total ments ments/a at end-year

Public

1972 269 125 37 162 - 144 7 9191973 226 198 61 259 30 35 9841974 300 186 58 244 114 84 11821975 572 182 77 259 390 -18 15541976 1125 178 75 253 947 69 25701977 900 190 96 286 710 135 34151978 1479 *547 131 678 932 471 46181979 1916 639 300 939 1277 -165 59301980 1502 372 420 792 1130 168 72281961 1700 406 596 1002 1294 -49 84731962 1966 613 803 1416 1353 -44 97821963 2377 654 646 1300 1723 468 11973

Private

1972 160 154 46 200 26 -22 9831973 191 200 56 256 -9 67 10411974 276 178 54 232 98 74 12131975 307 134 65 199 173 25 14111976 538 190 77 267 348 53 18121977 476 18B 87 275 2E8 65 21651978 489 501 139 640 -12 -62 20911979 468 487 186 673 -19 -1 20711980 472 320 239 559 152 231 24541981 607 387 299 686 220 87 27611982 567 447 384 831 120 348 32291983 306 317 280 597 -11 -177 3041

Total

1972 449 279 83 362 170 -15 19021973 419 398 117 515 21 102 20251974 576 364 112 476 212 1S8 23951975 879 316 142 458 563 7 29651976 1663 368 152 520 1295 122 43821977 1376 378 183 561 998 200 55801978/b 1968 1048 270 1318 920 409 69091979/b 2384 1126 486 1612 1258 -166 80011980/b 1974 692 659 1351 122 399 96821981/b 2307 793 895 1698 1514 38 112341982/b 2533 1060 1187 2247 1473 304 130111983/b 2683 971 926 1897 1712 291 15014

/a Currency reevaluation adjustments and audit adjustments.lb Amortization and debt service include prepayments of $401 million in 1978,

$429 million in 1979, $92 million in 1980, $24 million in 1981, $120 millionin 1982,and $566 million in 1983 and disbursement includes financeof these prepayments.

Source: Central Bank of the Philippines.

- 102 -

Table 4.3EXTERNAL MEDIUM- AND LONG-TERM BORROWINGS: COMMITMENTS

BY TYPE OF BORROWER(In millions of US$)

TotalNew loan commitments/b Disbursed Undisbursed

Year commitments (end-year) (end-year) (end-year)

Public

1972 455 1334 907 4271973 369 1552 984 5681974 739 2131 1179 9521975 803 2844 1554 12901976 1709 4522 2572 19501977 1160 5674 3390 22841978 2649 8266 4748 35181979 1954 9402 5849 35531980 2070 11557 7185 43721991 1884 12870 8500 43701982 2062 14648 9780 4866

1983/a 1391 11352

Private

1972 130 1304 983 3211973 128 1298 1040 2581974 206 1456 1213 2431975 283 1676 1411 2651976 472 2295 1812 4831977 347 2481 2164 3171978 682 2589 2090 4991979 583 2823 2071 7521980 863 3558 2454 11041981 515 3930 2760 11701982 333 3916 3229 6871983/a 96 3292

Total

1972 585 2638 1890 7481973 497 2850 2024 8261974 945 3587 2392 11951975 1086 4520 2965 15551976 2181 6817 4384 24331977 1507 8155 5554 26011978 3331 10855 6838 40171979 2537 12225 7920 43051980 2933 15115 9639 54761981 2399 16800 11260 55401982 2395 18564 13009 5555

1983/a 1487 14644

/a As of October 14,1983.lb Net of payments and cancellations.

Source: Central Bank of the Philippines.

Table 5.1: CASH OPERATIONS OF THE NATIONAL GOVERNMENT, 1979-25(In billion pesos)

---------------------- ACTUAL ---------------------------- EST. PROJ.1978 1979 1980 1981 1982 1983 1984 1995

/b lb

REVENUE 24 29.5 34.7 35.9 39.2 45.7 58.1 76.3Tax Revenue 20.4 25.9 30.5 31.4 33.8 39.7 51.2 68.3

Taxes on Income and Profit 5.5 6.2 7.3 7.8 8.3 8.9 11.6 14.7Individual 3.4 3.3 3.4 3.9 3,9 4Corporate 2.1 2.9 3.9 3.8 4.4 4.8

Taxes on Goods and Services 6.5 9.7 10.9 11.5 12.2 13.2 19.5 24.7Sales and business taxes 2.4 4.1 5 5.3 5.6 5.7 6.5 8.4Excise taxes 4.1 5.6 5.9 6.2 6.6 7.5 12 16.3

Taxes on International Trade 7.6 9.4 11.6 11.2 12.2 16.4 19.9 27.2Import duties 7.4 8.7 11.2 10.9 11.9 16.1 17.5 22.3Export duties 0.4 0.7 0.4 0.3 0.3 0.3 2.4 4.9

Other Taxes 0.6 0.6 0.7 0.9 1 1.2 1.2 1.7Nontax Revenue 3.6 3.6 4.2 4.5 4.4 6 6.9 8

EXPENDITURES AND NET LENDING 26.2 29.8 38.1 48.1 52.6 53.1 69 82.9Current Expenditure 19.2 20.6 24.5 26.4 31 34.5 46.6 55 3

Personnel services 7.4 8.2 9.4 10.6 11j7 13.9 17.4 21.2 oMaintenance/other

operating expenditures 9.3 6.9 10.7 10.8 11.4 11.9 14.9 17.4Interest payments 1.1 1.8 2.3 2.4 3.6 5 10.3 12.6Allotment to local gov'ts 0.8 1.2 1.5 2 2.4 2.6 2.6 2.9Transfer to other public

sector entities 0.6 0.5 0.6 0.5 2 1.1 1.1 1.3Current Surplus 4.8 8.9 10.2 9.;5 7.2 11.2 11.5 21Capital Expenditure 4.4 5 9.4 12.7 10 10.4 9.6 11.3

Infrastructure 3.6 4.3 7.3 10 7.5 6.9 6.2 5.7Other capital outlays' 0.7 0.7 1.1 2.7 2.5 3.5 3.4 5.6

Equity Contrib. and Net Lend. 2.6 4.2 5.2 9 11.6 8.2 12.9 16.3Equity contributions 2.4 3.4 4.5 8.1 9.4 5.7 3.7 3Net lending 0.2 0o. 0.7 0.6 1.6 2.4 2.2 4.2Assistance to GFIs 0.3 0.6 0.1 6.9 9.1

DEFICIT -2.2 -0.3 -3.4 -12.1 -14.4 -7.4 -10.9 -6.6

FINANCING 2.2 0.3 3.4 12.1 14.4 7.4 10.9 6.6

External (net) 1.9 3.2 2 6 4.6 5.4 6.4 13.3Gross Borrowing 2.3 3.7 2.9 6.7 5.4 6.7 9.1 17.5Amortization -0.4 -0.5 -0.9 -0.7 -0.9 -1.3 -2.7 -4.2Domestic (net) 0.3 -2.9 1.4 6.1 9.6 2 4.6 -6.7Banking System -0.2 1.2 4.8 7.3 -1.1 2.5 -2Nonbank /a 0.3 -2.7 0.2 1.3 2.5 3.1 2.1 -4.7

/a includes discrepancies.lb Revenues do not include the contingency retention of a 5% import duty surcharge which is

estimated to generate 0.2 billion pEso. in 1984 and 2.9 billion pesos in 1985.

Totals may not add up due to rounding.Source: Ministry of Finance and Ministry of the Budget.

Table 5.2: DISTRIBUTION OF NATIONAL GOVERNMENTCASH BALANCES AT YEAR-END, 1979-83

(In million pesos)

Depository Bank 1978 1979 1980 1981 . 1982 1983/a

Development Bank: of thePhilippines 3629 4406 5862 7988 8029 5554

Philippine National Bank 1865 3394 3332 3143 1961 490ZOther commercial banks 1635 2516 3148 3511 3168 4338Other depositors lb 2172 2244 1652 2673 2264 2710

Total 9301 12560 13994 17315 15422 17505 H

Change in cash balance of which: 2195 3259 1434 3321 -1693 2083 1Budgetary funds 2030 2962 1228 2616 -1222 2488

BLidgetry trans. 1904 3505 403 2633 -3818 4718Non-Budgetry trans. 126 -537 825 -17 2596 -2230

Non-BLidgetry funds 165 288 209 705 -678 405

/a Preliminary.

Source: Bureau of Treasury.

_ 105 -

Table 5.3: NATIONAL GOVERNMfENT EXPENDITURE BY SECTOR, 1978-1985(In million pesos, obligation basis)

Est. ProJ.S E C T O R 1978 1979 1980 1902 1982 1983 1994 1995

ECONOMIC SERVICES 11427 13370 15721 19353 17700 15425 16160 22145

Agriculture, Forestry andFl shery 3324 2431 2475 2992 4146 3395 3958 6007

General adminstratlon,reguldtion and research 531 424 537 442 1131 1273 1772 3779

Agriculture 2431 1599 1451 1968 2399 1467 1-98 1586Stabilization of farm

prices and Inco_m 127 121 19q 313 59 104 168 257Extension Program 376 517 146 224 37 41 113 148Irrigatton lb 1661 655 ¶37 938 1940 1154 8W0 896Other Agriculture 267 30o 349 493 263 168 237 285

Forestry and Hunting 256 279 325 406 430 428 543 570Fishing 106 130 162 166 166 22- 245 72

Industry, Trade, Labor andTourism 790 797 1424 2839 2159 2700 1227 1363

Labor, Wage and EmploymentPrograms 71 82 64 116 109 108 124 124

Mining 45 60 45 59 58 61 71 75Manufacturang 71 119 130 186 117 109 143 239Construction 1 5 11 12 14 14Tourism 87 151 177 108 159 79 84 90Commerce 314 123 168 142 220 158 224 273Other 202 262 819 2223 1484 1173 567 548

Utilities and Infrastructurw 7313 10142 11822 12552 11396 10330 10975 14775

General Adminstration,regulation and research 826 2244 1786 2031 2133 2620 2498 3693

Electricity 2259 2991 2843 3934 2507 1615 1207 1294dater Supply 401 965 1185 1194 987 499 492 869Roads and Road Transport 2936 3234 4636 4593 4548 4419 5201 7188Other transport 566 39- 920 394 806 76- 1058 1012

Water transport 194 157 115 107 306 292 543 655Air transport 279 117 64e 129 136 149- 180 201.Railways 93 119 157 158 364 322 3Z5 i56

Communications 277 274 341 364 92 392 491 694Other utilities and

infrastructure 49 51 Ill 22 23 22 28 35

SOCIAL SERVICES 5397 6879 7577 9537 10933 L1618 16169 17712

Education 3283 3616 4204 5491 6531 6995 9890 10994

General adminstration,regulation and research 191 514 723 B17 961 1079 1834 2038

Schools 278B 2762 2974 3861 4635 4862 6696 7151Primr-y and intermediate 2221 2329 2418 -3249 3910 4069 5644 6000Secondary 567 433 456 612 725 793 1052 lISI

Universities & Colleges 92 ±O-3 37 459 522 555 778 1000Technical, vocational

and other 99 10- 57 84 105 139 159 282Subsidiary services 123 134 193 270 308 360 413 513

Housing and CommunityAmenities 620 1443 I33I 1633 2534 770 944 86S

Housing 257 1036 900 1437 1304 727 898 814Community development 363 407 431 196 230 43 46 49

Health 955 1239 1333 1668 2157 2462 3219 3604

General adminstration,regulation and research 79 97 105 131 163 175 245 287

Hospitals and clinics 475 607 662 793 1060 1346 1591 1663Individual health services 259 331 344 417 525 568 802 902Population control 67 75 120 164 221 193 323 463Other 76 129 102 163 198 190 258 29

Social Secur *nd Welfare 386 410 442 448 367 999 1638 1749

(*NbhNL PUBLIL rMiJNbIikhlUft 42a16 5924 5d92 Iu_y9 92Ui3 GB/V dbt6 b8S7

DEBT SERVICE (interest & 2092 1973 2985 4019 5325 8543 13928 21063repayments)

TOTAL 27573 32894 36935 47073 48793 50271 60403 74101

Sources Office of Budget and Mangoeent.

- 106 -

Table 5.3a: NATIONAL GOVERNMENT CONTRIBUTIONS AND TRANSFER TO OTHERPUBLIC SECTOR UNITS, BY SECTOR, 1978-85

(In million pesos, obligation basis)

-------------------------------------------------------------------- __-------__-----------------

Est. Froj.S E C T 0 R 1978 1979 1980 1981 1982 1983 1984 1985

FCONOMIC SERVICES 2512 3737 5030 6869 7024 4201 2764 2442

Agriculture, Forestry andFishery 409 324 695 1056 1993 1026 789 813

General adminstration,regulation and research 106 32 67 43 63 61 107 87

Agriculture 288 282 606 962 1905 941 640 654Stabilization of farm

prices and income 0 117 195 311 153 100 150 225Irrigation /b 233 125 371 546 1560 760 400 330Other Agriculture 55 40 40 105 192 81 90 99

Fishing 15 10 22 51 25 24 42 72

Industry, Trade, Labor andTourism 346 195 815 2249 1346 713 333 394

Manufacturing 34 62 86 134 96 87 73 84Tourism 0 0 0 50 92 4 4 4Commerce 200 0 50 0 65 0 38 34Other 112 133 67? 2065 1093 622 218 272

Utilities and Infrastructure 1757 3218 3520 3564 36B5 2462 1642 1235

General Adminstration,regulation and research 0 5 60 67 118 361 82 61

Electricity 1421 2602 2372 2381 2414 1498 792 640Water Supply 179 390 771 B43 587 88 76 57Roads and Road Transport 25 10 90 25 0 7 7 7Other transport 101 180 158 248 566 508 685 470

Water transport 10 26 1 90 202 186 350 314Air transport 2 35 0 0 0 0 0 0Railways 89 119 157 158 364 322 335 156

Other utilities andinfrastructure 31 31 79 0 0 0 0 0

SoCIAL SERVICES 235 733 564 1284 1034 694 334 256

Education (secondary schools) 1 1 1 1 2 2 2 2

Housing and CommunityAmenities 225 730 533 1220 954 436 272 190

Housing 222 730 533 1220 954 436 272 190

Community development 3 0 0 0 0 0 0 0

Health (hospitals & clinics) 0 0 28 43 57 238 44 53

Social Security and Welfare 1 1 1 0 0 0 0 0

Other Social Services 8 1 1 20 21 18 16 it

GENERAL PUBLIC ADmINSTRATION 1614 1584 1505 4251 3775 2846 3446 384,6of which: Sharing of nat'lrevenue with local gov'ts 1103 1071 1078 1743 2297 2597 2820 2900

TOTAL 4361 6054 7099 12404 11833 7741 6544 6544

Source: Office of Budget and Mangement.

- 1W, -

Table 5.3bm NATIONAL 9OVERNtENT CLRRMENT EXPENDITZT£ O ITS OdN ACCOUNrBY SECTOR, 1979-US

gin million pesos, obilgation bhaus)

Eat. Proj.S E C T O R 1979 1980 1961 1982 1993 1994 1965

ECONOFIC SERVICES 4015 3954 5228 4545 4424 705O 11326

Agriculturw, Forestry andFishery 1277 998 1317 1511 1472 2155 4034

GEneral adminutratLon,regulation and rensarch 213 244 315 877 839 1274 3244

Agriculture 717 362 522 101 113 243 309Stabilization of f-ar

prices and income 4 4 2 4 4 is 31Extension Programs 503 I15 201 29 32 102 132IrrigationOth-r Agriculture 210 207 319 69 77 123 146

Forestry and Hunting 264 310 381 423 408 477 481Fishing 93 02 99 110 112 161 0

Industry. Trade, Labor andTourism 539 568 526 779 780 817 906

Labor. Wage and EmploymentPrograus 92 S3 99 107 104 119 119

Mining 52 44 51 58 61 71 75Manufacturing 39 30 34 20 21 67 150Construction 0 1 4 11 9 11 ItTourism 151 177 S5 67 75 90 96Cormmre- 121 116 140 352 152 178 221Other 94 117 141 364 358 291 244

Utilities and Infrastructure 2999 2399 3385 2255 2172 4091 6306

General Adminstration,regulation and research 1061 215 179 153 155 653 1337

Electricity 176 306 1203 92 114 391 579Water Supply 10 24 22 17 IS B4 179Roads and Road Transport 1377 1337 3564 1437 1315 2228 3335Other transport 9l 139 139 155 166 218 245

Water transcort 6 30 1o 19 19 39 47Air transport 75 209 129 136 149 279 196

Communications 274 341 364 383 399 496 689Other utilities and

infrastructure 20 26 16 I 16 21 24

SOCIAL SERVICES 5266 6060 7591 9100 10095 14336 15564

Education 3289 3655 5091 6035 6354 6950 9730

General adminstration,regulation and research 415 633 694 905 913 I55 1688

Schools 2625 2700 3709 4446 4606 6249 6661Primary and intermediate 2227 2278 3137 3766 3978 5324 5645Secondary 398 422 572 690 730 925 1016

Universities & Colleges 39 299 384 420 450 646 723Technical. vocational

and other 98 52 66 92 99 119 222Subsidiary services 112 171 229 272 295 350 436

Housing and CoamunityAmenities 291 361 311 429 321 540 546

Housing 101 162 121 200 279 497 500Community development 190 199 190 229 42 43 46

Health 1120 l194 1541 1985 2102 2805 3147

General adminstration,regulation and research 89 99 125 156 168 216 236

Hospitals and clinics 547 577 714 951 1051 1366 1419Individual health services 291 309 394 492 537 706 900Population control 74 1I9 152 207 165 289 426Other 119 92 156 179 181 229 266

Social Security and Welfare 409 437 443 364 992 1623 1732

Other Social Services 157 213 215 27 326 419 429

DEFENSE 4275 4441 4740 5312 5639 =10 6058

DENERAL PUBLIC ADOIINSTRATION 4111 3636 5426 4995 4292 4125 2732

DEBT SERVICE (interest2 1450 2087 2601 3665 4891 10320 12508

TOTAL 19917 20178 25506 27607 29321 41344 48206

Sources Of4ice of Budget and tiangmgnt.

- loll -

Table 5.3ca NATIONAL GWYERNWENT CAPITAL EXPENDITURE ON ITS OWN ACCOUNTBY SECTOR, 1979-S8

(In million peso, obligation basis)

--- - ------- - --------- - -------- _---------------- - ------------ _ ____-__________________

Eat. Proj.S E C T O R 1979 1990 1981 1982 1983 1984 1985

_____ - -- - -- - -- - -- - - ----------- -------------- - -- ------------------------ ---_ ___ ____ ____ _ __

ECONOMIC SERVICES 4918 6737 6256 6130 6B00 6343 9377

Agriculture, Forestry andFishery 830 782 609 641 897 1014 1160

General adminstration,* regulation and research 179 226 94 211 373 391 449

Agriculture 600 493 494 392 413 515 623Stabilization of form

prices nd income 0 0 0 2 0 0 1Extension Programs 14 15 23 9 9 11 16Irrigation /b 530 366 392 380 394 480 566Other Agriculture 56 102 69 1 10 24 40

Forestry and Hunting 14 15 25 7 20 66 89Fishing 37 56 16 31 91 42 0

Industry, Trade, Labor andTourism 63 41 64 33 207 77 63

Labor, Wage and EmploymentPrograms 0 1 36 2 4 5 5

Mining a I 9 0 0 0 0Manu4acturing I6 14 39 I I 3 5Construction 0 0 1 0 3 Z 3Tour amnCommerce 2 2 2 3 6 a 19Other 35 23 17 27 193 58 S2

Utilities and Infrastructure 3925 5914 5583 5456 5696 5252 7154

General Admanintration,regulation and research 1178 1511 1786 IB62 2104 1763 2295

Electriclty 203 165 450 1 3 24 66Water Supply 565 390 329 363 393 332 633-Roads and Road Transport 1047 3219 3004 3111 3097 2966 3846Other transport 132 623 9 85 89 155 297

Water transport 125 64 7 6S e8 354 294Air transport 7 539 S 0 1 1 3

Communications 0 0 0 9 4 5 6Other utilities and

infrastructure 0 6 6 5 6 7 11

SOCIAL SERVICES 8a0 944 662 799 829 1472 1872

Education 326 348 409 494 639 928 1252

General adninstration,regulation and reswarch 99 90 123 156 166 249 350

Schools 136 173 I51 187 252 445 488Primary and intarmediate 102 140 112 144 191 320 355Secondary 34 33 39 43 61 15 133

Universities & Colleges 64 58 75 102 105 130 277Technical* vocational

and other 5 5 18 13 41 41 60Subsidiary servces- 22 22 42 36 75 63 77

Housing and CommunityAmenities 422 437 102 151 13 132 127

Housing 205 205 96 150 12 129 124Community development 217 232 6 1 1 3 3

Health 119 111 84 115 122 343 404

General adminstration,regulation ano research 8 7 6 7 7 2 51

Hospitals and clinics 60 57 36 52 57 381 191Individual health services 40 6 23 33 31 96 102Population control I 1 12 14 18 34 37Other 10 10 7 9 9 30 23

Social Security and Welfare 0 4 5 3 7 15 17

Other Social Services 1 44 62 36 48 54 72

DEFENSE 463 319 384 240 467 76 284

GENERAL PUBLIC ADMINSTRATION 229 751 361 523 1451 989 239

DEST SERVICE (repayments) 523 69S 1419 1660 3662 3606 B557

TOTAL 6913 9649 9081 9352 13209 12458 19349

Sources Office of Budget and Mangement.

- 109 -

Table 5.4: NATIONAL BOVERNMENT EQUITY CONTRIBUTIONS BY RECIPIENT1978-84

(In million pesos, cash basis)

------------------------ ACTUAL -------1978 1979 1980 1951 1982 1993

Govenment Financial Institutionsand Credit Programs 461 446 400 1404 2247 205

Central Bank 26 37 38 58Z j25 25DBP 105 76 85 ,OC} 607DSP Rural Bank Trust Fund 5Philippine National Bank 100 10O 72 210 160 150Land Bank of the Philippines 30 110 140 125 30Home Financial Corporations 78 50NHMFC 100 50 25 20Philguarantee 20CI 5ClKKK (Livelihood Program) 15') 950Others 18 15 8 1C

Government Corporations 1972 2952 4122 6677 7121 5573

Energy Sector 1474 2004 2408 2443 2971 1497National Power Corporation 1195 1629 1983 1834 25C4 10bONational Electrification

Adminstration 230 220 273 3C02 199 I7Philippine National Oil Co. 49 156 152 200 142 30ONational Coal Authority 107 126

Industrial Sector 65 158 679 1951 999 456National Development Co. 38 94 618 18Z7 893 406Export Processing Zone

Authority 27 64 61 78 1O6 50

Housing Sector 85 228 209 76Z 882 477Human Settlements Develop-

ment Corporation 12 5 -42 51 269National Housing Authority 80 208 154 36Z 355 168Southern Philippines

Development Authority 5 8 50 58 14 41

Water Supply 128 154 249 419 393 398Metropolitan Waterworks

& Sewerage System 61 79 122 265 301 346Local Water Utilities

Adminstration 67 75 115 135 80 25Rural Waterworks

Development Corporation 12 19 12 27

Agricultural Sector 115 199 359 859 1369 1062National Irrigation

Adminstration 38 84 249 706 1115 891

Philippine Cotton Corp. 19 5 16 5 10 4Philippine Virginia

Tobacco Adminstration 37 5O 44 7 Z4 26Philippine Fisheries

Development Authority 6 28 23 34Farm System. Development

Corporation 10 32 36 47 49 30National Food Authority 44 41 48Pilippine Crop Insurance

Corporation 8 75 25Other Agriculture 5 17 14 14 22 24

Transportation Sector 70 191 195 183 376 583Philippine National Railway 58 13J6 1ZO. ic16 102 79Metro Manila Transit Co. 35 65 15 7Light Rail Transit Authority 62 274 210Philippine Ports Authority 142Others 12 20 145

Other 35 29 23 59 131 1080

TOTAL 2433 3398 4522 8081 93768 5778

- 110 -

Table 5.5: MAJOR REVENUE LEGISLATION, 1982-84

First year revenue lmpactTax measure 1982 1983 (Fst.)

19_4

Taxes on Income and ProfitModified gross Income taxation -Inventory galns tax on oil companies 450 /aInvestment Incentives act -Change in inventory valuation method 4nWithholding on interest income 294Withdrawal of private sector tax exemptions 14

Taxes on Goods and ServicesExcise TaxIncrease and revisions of specific tax onpetroleum product. 1,586

Ad-valorem tax on petroleum products 212Increase in specific tax on coke & coal 16Increase in specific taxes on beer and

distilled spirts 25 299Ad-valorem tax on beer 100Increase in specific taxes on cigarettes

and cigars 17Ad-valorem tax and increase in specific taxes

on cigarettes 250

Sale. TaxRestrictions on use of tax credit method

for computation of sales tax 100Increase in percentage tax on domestically

produced crude 107Improvement in sales tax administration 100Imposition of private motor vehicles tax 45Lifting of private sector tax exemption 24

Taxes on International TradeImport duty surcharge (3% + 2%) 1,570Additional import duty surcharge (32 + 2%) 1,371Advance payment of Import duties 400Lifting of import duty exemptions of NPC and NFA 494Lifting of tac exemptions of private sector 162Modification of import duties on coke, coal, maize 31Additional export duties 80Imposition of economic stabilization tax 282Excise tax on foreign exchange (102) 200Foreign exchange transaction tax (12) 450

Other TaxesIncrease in documentary stamp tax 100

Nontax RevenueIncrease in fees and charges 60Additional airport terminal fee 30

Total - 2.702 6.207

/a Collected In January 1984.

Source: Ministry of Finance.

Table 5.6. CONSOLIDATED REVENUES AND EXPENDITURES OF LOCALGOVERNMENTS, CASH BASIS, 1978-84

(In million pesos)

ACTUAL ------------------------- EST.1978 l979 1980 1981 1982 1983 1984

REVENUES 3278 3997 4311 5431 6215 6915 8854

Local Source Revenue 2230 2523 2778 3453 3658 4090 5705

Business taxes 615 736 744 780 639 961 1422Property taxes 674 799 621 1068 1125 1229 1471Nontax revenue 941 988 I213 1605 1694 1900 2812

Allotments fromNational Government 774 1186 1238 1.650 2203 2468 2775

Special aids fromNational Government 274 288 295 32S 354 357 374

EXPENDITURES 3237 3781 4181 5078 5828 6617 7631

Current expenditure 2847 3332 3649 4419 5131 5780 6392Capital outlays 390 449 532 659 697 837 1239

SURPLUS 41 216 130 353 387 298 1223

Sources Ministry of Finance.

Table 5.7: MAJOR NONFINANCIAL GOVERNMENT CORPORATIONS: CAPITAL EXPENDITIJRES BY SECTOR, 1978-85(in million pesos)

Government corporations Actual Est./a Proj./aby sectors of activity 1978 1979 1980 1981 1982 1983 1984 1985

Economic Services

Agriculture 940 568 ,721 1,070 2168 2,385 1,706 2,035NIA 940 568 1,721 1,070 2,168 2,385 1,706 2,035

Industry 90 207 2,464 1,799 1,850 2447 245 323EPZA 90 107 164 99 100 71 65 188NDC 0 100 2,300 1,700 1,750 2,376 180 135

Energy 5,546 7,090 6,530 8,392 8,635 10,647 6,775 9,438NEA 483 387 511 595 946 803 613 400NPC 4,761 5,859 4,959 6,623 6,304 8,005 5,996 7,930PNDC 302 844 1,060 1,174 1,385 1,839 166 1,108

Transportation 167 335 687 1,767 2,595 1,889 2,132 1,079LRTA 0 0 0 608 2,233 1,530 1,133 193MMTC 15 0 0 166 47 0 37 111PNR 78 103 122 128 78 42 123 196PPA 74 232 565 865 237 317 839 579

Water Supply 221 280 543 873 1,111 1,342 1,428 1,759LWUA 137 129 171 204 156 260 121 306MWSS 84 151 372 669 955 1,082 1,307 1,453

Social Services

Housing 122 163 501 575 548 676 417 413NHA 122 163 501 575 548 676 417 413

Total 7,086 8,643 12,446 14,476 16,907 19,386 12,703 15,047

/a Data for 1984-85 are not comparable to earlier years which include 13% interest during constructions

Source: Corporations for 1978-83 and OBM for 1984-85.

Table 5.8: MAJOR NONFINANCIAL GOVERNMENT CORPORATIONS: INTERNAL CASH GENERATION BY SECTOR, 1978-85(in million pesos)

C-overnment corporations Actual Est. Proj.by sectors of activity 1978 1979 1980 1981 1982 1983 1984 1985

Economic Services

Agriculture 26 5 47 -89 9 -64 -381 -337NIA 26 5 47 89 9 -64 -381 -337

Industry -1 -1 0 81 413 134 -156 -135EPZA -1 -1 0 21 23 32 -13 -4NDC - - - 60 390 102 -143 -131

Energy 678 795 1,275 1,541 1j531 2,445 246 5,958NEA 11 13 5 4 3 4 -262 -381NPC 308 384 794 985 829 1,691 -930 4,537PNDC 359 398 476 552 699 750 1,438 1,802 E

Transportation 101 89 113 143 163 191 -101 -170LRTA 0 0 0 25 0 -35 -195 -223MMTC -12 -28 -13 1 26 6 34 34PNR -9 -27 -8 -29 -38 -6 -57 -67PPA 122 144 134 146 175 226 117 86

Water Supply 92 179 185 245 304 298 36 221LWUA 7 8 10 3 10 -15 -16 7MWSS 85 171 175 242 294 313 52 214

Social Services

Housing 0 8 12 17 11 14 25 -14NHA 0 8 12 17 11 14 25 14

Total 896 1,065 1,632 1,939 2,431 3,018 -331 51523

Source: Corporations for 1978-83 and OBM for 1984-85.

Table 6.1s THE MONETARY SYSTEM AT YFARS END(In billions of pesos)

------------------------------------------------------------------- __--------__---------------------------------

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

Net foreign assets 2.9 0.8 -0.4 -1.2 -2.2 -7.0 -17.3 -22.8 -41.6 -74.5

Domestic Credit, Not 26.3 34.8 42.7 50.8 63.1 79.5 93.8 115.5 139.4 166.0

Credit to Government -1.6 -0.1 1.4 3.4 3.3 3.1 5.1 9.6 16.9 15.9Credit to othur public sector 1.8 4.8 6.1 6.0 4.9 5.5 2.7 2.3 4.8 8.8Credit to private sector 26.1 30.1 35.2 41.4 54.9 70.9 86.0 103.6 117.7 141.4

Net unclassified assets 2.5 2.3 2.8 5.9 4.9 2.4 11.3 12.9 24.0 61.7

Total Assets = total liabilities 31.7 37.9 45.1 55.5 65.9 74.9 87.8 105.6 121.8 153.2

Total Liquidity 24.3 28.8 35.9 43.9 51.9 57.4 67.8 92.1 95.3 113.0

Money supply 9.0 10.3 12.1 14.9 16.9 18.8 22.5 23.5 23.5 32.5Time and savings deposits 7.8 9.9 12.9 17.6 23.4 26.6 32.9 42.1 55.2 63.4Deposit substitutes 7.5 9.6 10.9 11.4 11.5 12.0 12.4 16.5 16.6 17.1

Other liabilities andcapital accounts 7.4 9.1 9.2 11.6 14.0 17.5 17.1 23.5 26.5 40.2

---ource---------------C----ntr---------l-------a----------of------_the------__---hi------ippin---------------.-

Sources Central Bank of the Phil1ippines.

Table 6.2: RESERVE MONEY AT YEAR'S END(In miillions of pesos)

1977 1978 197? I?80 1981 1982 1983

rotAi 17IRsesrve Muney 9814 12093 14629 16192 17798 18644 27723

Net Fcreiqn Assots 4452 6007 5650 3505 -40-;23 -18070 -34784

A 4 (a e, t5 s 114!3,7 14106 16146 23609 21123 15694 12107L.i abilities -6985 -8099 -- 12496 -20104 -25146 -33764 -46891

Net Claims o01 Government 2830 3097 3948 5254 8696 12058 13029

Claims on government 43.16 5727 6247 6827 11381 14500 16582Government depcosi ts -1486 --2630 -2299 -1573 -2685 -2442 -5553

C1aims on offficial entities 806 741 662 556 460 4.32 1081

Claims on commercial banl:s 2727 3466 6114 10027 13129 13547 8258

Cl dLi ms or- other f i narnc i alinsti tUtions 2624 3266 4131 4860 6072 7288 9907

Bonds (CBCIs) -7998 -- 9907 -119a41 -11440 -10062 -8155 -5030

Other i.tems (net) 437;3 5423 6045 3430 3526 11544 35262

SoLtrce: C:entral Bank: of the Fhilippines.

Table 6.3: FINANCIAL SECTOR: LOANS AND INVESTMENTS OUTSTANDING BY TYPE OF INSTITUTION

1?74 1975 1976 1977 1978 1979 1920 1961 1982 1983

------------------------------------------------------------------- __--------__---------------------------------

---------------------- (In billions of pesos) ---------------------------------

Commercial banks 31.1 38.9 44.9 53.7 69.6 86.9 102.1 117.8 136.5 171.6Development banks 5.3 7.3 10.5 13.1 15.0 18.5 23.5 33.9 40.7 51.0Rural banks 1.8 2.4 2.7 2.8 3.5 4.3 4.8 5.6 6.9 5.0Saving bankcs 1.0 1.2 1.7 2.4 3.3 4.2 5.5 5.3 4.6 5.7Private nonbank financial

institLutions 10.4 13.9 17.0 16.6 19.9 24.4 29.2 27.5 27.9 27.4Government nonbank financial

institutions 5.6 6.6 9.8 10.5 11.9 14.5 17.2 22.0 26.9 42.5

Total 55.2 70.4 85.6 99.1 123.2 152.8 182.3 212.1 243.5 306.2_____ ----- ----- ______ ----- ----- ----- ----- ----- ----- ----

~--------------------- (As percent of total) ---------------------------------

Commercial banks 56.3 55.1 52.5 54.2 56.5 56.9 56.0 55.5 56.1 56.0Development banks 9.6 10.4 12.3 13.2 12.2 12.1 12.9 16.0 16.7 16.7Rural banks 3.3 3.4 3.2 2.8 2.8 2.8 -2.6 2.6 2.6 2.6Saving banks 1.8 1.7 2.0 2.4 2.7 2.7 3.0 2.5 1.9 1.9Private nonbank financial

institutions 16.8 19.7 19.9 t6.8 16.2 16.0 16.0 13.0 11.5 8.9Government nanbank financial

institutions 10.1 9.7 10.3 10.6 9.7 9.5 9.4 10.4 11.0 13.9

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: Central Bank of the Philippines.

- 117 -

Table 6.4: TOTAL ASSETS OF THE FINANCIAL SYSTEM(In billion of pesos)

1974 1975 1976 1977 1978 1979 1980 1981 1982 1993

-------------- __------------------------------------__----------------__________________________________________-

Central Bank 21.3 26.0 29.0 29.0 38.4 51.0 65.4 71.6 91.7 130.4

Banking System 54.1 69.9 80.0 95.3 121.2 154.0 198.8 226.0 269.9 331.5

- Commercial Banks 42.4 53.2 58.7 69.7 89.5 113.9 139.4 164.6 195.S 240.6_____________.__- - -___ ----- . .----- - -_ - _ ___ _ ----- _____ __

Private 29.9 35.1 40.2 42.6 56.4 70.0 85.1 103.4 115.9 134.4Government 12.5 19.1 18.5 18.6 22.3 29.9 34.6 40.6 53.3 65.2Foreign banks 7.5 11.1 15.0 18.7 20.6 26.7 41.0

Thrift Banks 1.7 2.1 3.0 4.1 5.6 7.7 10.6 11.6 12.6 16.1_____._______ - -_ - _ _ - -__- -- _---__ __ _____ __ __ __

Savings 1.2 1.4 2.0 2.9 3.9 5.4 7.4 6.9 5.9 7.4Frivate dev. banks 0.3 0.4 0.5 0.6 0.8 1.0 1.6 2.6 3.7 4.6Savings & loan

associations 0.2 0.3 0.5 0.7 0.9 1.3 1.6 2.1 3.0 4.1

Rural Banks 2.1 2.8 3.1 3.4 4.1 5.0 5.6 6.6 8.1 9.5

Specialized Govt. Banks 7,9 11.8 15.2 19.1 21.7 27.4 34.2 43.2 3. 65.3

Development Bank of thePhilippines 6.7 9.6 12.7 15.B 18.2 22.3 29.0 35.9 45.2 56.5

Land Bank 1.2 2.1 2.4 3.2 3.4 5.0 6.1 7.1 7.9 8.5Philippine Amanah Bank 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.3

Nonbank Financial Intermediaries 2Q.4 26.8 33.9 35.1 41.3 49.6 58.9 6Z.3 74.2 92.0

Insurance Companies 10.0 1i.9 15.2 17.5 21.6 24.6 29.5 33.3 40.7 44.6

Govenment /a 6.5 7.7 10.0 11.3 13.8 15.6 19.5 22.0 27.0 30.9Private /b 3.5 4.2 5.2 6.2 7.8 9.0 10.0 11.3 13.7 13.7

Investment Institutions 6.9 10.3 13.2 14.5 16.0 20.4 25.6 23.5 25.6 25.2

Financing companies 2.3 3.5 4.6 5.8 6.8 9.7 11.9 12.1 12.9 11.8Investment companies 0.7 2.0 3.2 3.9 4.4 4.1 5.0 5.5 5.9 6.2Investment Houses 3.9 4.8 4.6 4.8 4.8 6.6 8.7 5.9 6.8 7.2

Trast ooerations (Fund 2.0 2.6 3.3 0.5 0.8 1.2 1.7 0.7 1.1 1.5

Managers)

Other Financial Intermediaries 1.5 2.0 2.2 2.6 2.9 3.4 2.1 5.9 6.9 20.7

Total 95.8 122.7 142.9 159.4 200.9 2a4.6 313.1 360.9 435.7 553.9

la Includes Government Service Insurance Systems (GSIS) and Social Security Systems (SSS).;b Far 1983, data of end-1982 have been used.

--ource: Central Bank of the PiLlippines.

Table 6.5: SELECTED INTEREST RATEStX p.a.)

Administeredmaximum rates Market-determined rates (except as noted) /a1979 1980 07/81 01/82 07/82 01/83 07/83 01/84 091r84

Deposit RatesSavings deposits 9.907 9.541 9.841 9.778 9.73R 9.604Below Y 50,000 7 9 9-10P 50,000 and above 7 9 9-12

Time depositsOne year 10 14 11-17.5 13.872 14.471 13.810 12.982 15.456 22.4R6Two years 12 14 12-21 14.5nO 13.770 13.539 16.082 15.782 26.570Over two years /b /b 12-21 IR.766 16.894 15.492 15.143 19.308 24.048

Deposit substitutes IT T7 14.76 15.176 13.2n2 14.038 14.652 22.720 n.a.

Lending RatesUp to two years mattiritySecured 12 14 16/c 16.537 18.017 17.629 18.746 21.039 30.234Unsecured 14 16 18/c 18 18-25 18-24 18-25 n.as n.a.

Over two years maturitySecured 19 21 21-25 20.153 22.211 21.640 21.130 24.649 35.37RUnsecured 19 21 21-25 19-25 18-25 19-25 19-25 n.a. n.a.

Selected Central BankRediscount RatesBasic rediscount rate 9 it - - - - - /dRediscount rate for tra- /dittonal exports /c 4 6 .n R.n0 8.0 8.0 F.0 LR less 6 LR less 6

Redisconnt rate for non-traditional exports /c - 4 3.0 3.n 3.0 3.n 3.0 7.0 LR less 9/d

/a For market-determtned rates, weighted average rates of sample commercial banks are shown it available; otherwise,ranges of observed Interest rates are shown.

/b Not applicahle; interest rates on time deposits over two years were deregulated in 1976./c Administered rate.7T LR refers to the prescrihed hank lending rate, which is based on the MRR-90 of the tmmediately preceding week at the

time of avatilment. For example it was 16.933 in January 19R4.

Source: Central Rank of the Philippines.

- 119 -

Table 6.6: STRUCTURE OF DEPOSITS OFCOMMERCIAL BANKS

End of Demand Savings Time Totalyear deposits deposits deposits deposits

…__ … ---------

------ - (In millions of pesos) ------

1972 3735 4670 2559 109641973 5276 6865 3044 151651974 6062 8261 4032 183751975 6665 8951 5131 207471976 7513 11128 7602 262431977 9045 13262 11470 377771978 9602 17314 16737 436531979 11397 20884 23716 559971980 12792 23047 36791 726301981 13028 27034 38467 785291962 11996 33445 48227 936681983 19139 40893 56195 116227

1984 (July' 16138 42059 57582 115779

------- (As percent of total) -------

1972 34.1 42.6 23.3 100.01973 34.7 45.2 20.0 100.01974 33.0 45.1 21.9 100.01975 32.1 43.1 24.7 100.01976 28.6 42.4 29.0 100.01977 26.8 39.3 34.0 100.01978 22.0 39.7 39.3 100.01979 20.4 37.3 42.4 100.01980 17.6 31.7 50.7 100.01981 16.6 34.4 49.0 100.01982 12.8 35.7 51.5 100.01983 16.5 35.2 46.3 100.0

1984 (July) 1.9 36.3 49.7 100.0

Source: Central Bank of the Philippines.

- 120 -

Table 6.7: STRUCTURE OF CREDITS OUTSTANDING BYCOMMERCIAL BANkS - BY MATURtIIY /a

End of Shoi-t Intermed- Longyear Demand term iate term term Total

- (In mil:l.ions of pesos) -…- -

1977 7490 26767 4234 1682 401731978 91.63 35227 5549 4139 540781979 10637 3.7601 93;89 10637 682641980 10458 49844 7747 9149 771981981 1.0667 52823 14977 63038 865051982 9308 58478 17778 12675 982391983 10434 66792 16858 17304 111388

(As percent of total)

1977 18.6 66.6 10.5 4.2 100.01976 16.9 65.1 10o.3 7.7 1 00. C01979 15.6 55.1 13.8 15.6 100.019B0 13.5 64.6 l0.0 11.9 100.01981 12.3 61.1 17.3 9.3 100.01n82 9.5 59.5 18.1 12.9 100.01983 9.4 60.0 15.1 15.5 100.0

/a Data prior to 1977 not available.

Source: Central Bank of the Philippines.

Table 6.8: CREDITS OUTSTANDING BY COMMERCIAL BANKS - BY INTEREST RATES /a

--------------------------------------------------------------------__-------__---------------------

End of Up to 19% andyear 4/. 5-7/. 8-10% 11-12% 13-14% 15-16% 17-18% above Total

-------------------------------- (In millions of pesos) ------------------------------

1977 1641 599 3134 17339 14461 546 677 1777 401741978 2302 4o4 4238 22367 21552 1108 781 1326 540781979 3083 1714 7947 23879 18350 9112 2119 2060 682641980 3766 3938 9849 13739 15056 21768 3977 5085 771981981 3621 2480 4512 9777 17679 21042 15306 12089 865061982 3298 5093 6152 10355 20102 16346 19034 17859 982391983 3321 4783 4530 11835 19161 12669 14349 40740 111366

------------------------------- (As percent of total) ----------------------------

1977 4.1 1.5 7.6 43.2 36.0 1.4 1.7 4.4 100.01978 4.3 0.7 7.8 41.4 39.9 2.0 1.4 2.5 100.01979 4.5 2.5 11.6 35.0 26.9 13.3 3.1 3.0 100.01960 4.9 5.1 12.8 17.6 19.5 28.2 5.2 6.6 100.01981 4.2 2.9 5.2 11.3 20.4 24.3 17.7 14.0 100.01982 3.4 5.2 6.3 10.5 20.5 16.6 19.4 18.2 100.01983 3.0 4.3 4.1 10.6 17.2 11.4 12.9 36.6 100.0

/a Data prior to 1977 not available.

Source: Central Bank of the Philippines.

Table 6.9: CREDITS OUTSTANDING BY COMMERCIAL BANKS - BY INDUSTRY /a

----------------- _,----------------------------------------------__----------__--------------

1977 1978 1979 1980 1961 1962 1983------------------------------------------------------------------- __--------__-------------

-------------------- (In millions of pesos) --------------------

Agriculture 5448 5770 6120 12010 11120 12691 14790Mining 1578 3610 5508 7334 7066 9745 13145Manufacture 13126 17490 22105 27053 26348 29958 35410Construction 887 1556 2044 2723 4050 5076 5818Public utilities 115 315 764 645 976 1077 518Trade 11831 14156 14046 11211 15561 16597 14573Transport 798 1084 1746 1966 2786 3408 3886Financial institutions 2576 3300 6141 7914 10620 10590 12886Real estate 1811 2042 2620 2298 3808 4150 4145Services 2005 4755 5171 4045 4169 4949 6217

Total 40175 54078 66265 77199 86506 98241 111388

-------------------- (As percent of total) --------------------

Agriculture 13.6 10.7 11.9 15.6 12.9 12.9 13.3Mining 3.9 6.7 0.1 9.5 8.2 9.9 11.8Manufacture 32.7 32.3 32.4 35.0 30.5 30.5 31.8Construct.on 2.2 2.9 3.0 3.5 4.7 5.2 5.2Public utilities 0.3 0.6 1.1 0.8 1.1 1.1 0.5Trade 29.4 26.2 20.6 14.5 18.0 16.9 13.1Transport 2.0 2.0 2.6 2.5 3.2 3.5 3.5Financial institutions 6.4 6.1 9.0 10.3 12.3 10.8 11.6Real estate 4.5 3.8 3.8 3.0 4.4 4.2 3.7Services 5.0 8.8 7.6 5.2 4.8 5.0 5.6

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0

/a Data prior to 1977 not available.

Source: Central Bank of the Philippines.

Table 6.10: CREDITS OUTSTANDING BY FINANCIAL INSTITUTIONSBY MATURITY AS OF END OF 1983 /a

(Million pesos)

…__ _-__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

IntermediateShort term term Long term

% of % of % ofAmount totiil Amount total Amount total

Commer:ial banks 77226 69.3 16858 15.1 17304 15.5Saving bankss 1741 39.3 1269 28.7 1417 32.0Stock S&L associations 2035 69.6 726 24.9 162 5.5LBP and PAS 1757 43.6 996 24.7 1274 31.6 1PDBs 1069 35.9 1320 44.3 566 19.8Investment houses/b 2294 52.2 2103 47.8 wFinancing companies/b 555S 67.9 2626 32.1Investment companies/b 508 54.9 418 45.1Security dealers/

brokers /b 321 98.2 6 1.8Others /b 3161 48.0 3418 52.0

Total 95667 65.5 21171 14.5 29316 20.1

/a Breakdown of data in the case of institutions like DBP, 6SIS, SSS, andprivate insurance companies are not available.

/b Long-term loans include intermediate-term loans.

Source: Central Bank of the Philippines.

Table 6.11: DEPOSITS AND DEPOSIT SUBSTITUTES, SHORT-VERSUS LONGER-TERM FINANCIAL SAVINGS /a

(Million pesos)

Short-term savings Longer-term savings…__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - - - - - - - - - - - - - - - - - - - - - - - - - - -

End of Demand Deposit Savings Timeyear deposits substitutes Total deposits deposits Total

1973 5291 7471 12762 8587 3634 122211974 6079 12681 18760 10715 5086 158011975 6686 16248 22934 14063 6820 208831976 7501 17454 24955 16134 10247 263811977 9065 18155 27220 18990 14748 337381978 9768 19363 29131 24539 20676 452151979 11550 23303 34853 29952 28680 586321980 131099 23699 36798 34466 42799 772651981 12666 25763 38429 40099 46634 867331982 12376 26215 38591 47610 57113 1047231983 19594 25872 45466 54114 67334 121448

/a Inc1Ludes banking institutions and NBQBs.

Source: Central Bank of the Philippines.

_ 125 -

Table 6.12: INTEREST MARGIN BETWEEN CENTRAL BANK REDISCOUNT RATESAND LENDING RATES OF BANKS /a

Maximum InterestType of paper/loan Discount rate lending rate margin

1. Nontraditional exports MRR (90) less 9 MRR (90) less 2 7

2. Agricultural and cottageindustriesSupervised MRR (90) less 12 MRR (90) less 2 10Nonsupervised MRR (90) less 8 MRR (90) less 2 6

Special programsNFA MRR (90) less 10 MRR (90) less 6 4FTI MRR (90) less 10 MRR (90) less 6 4Food Quedan MRR (90) less 10 MRR (90) less 6 4

3. General purposeTraditional exports andother shoA-term redis-counts MRR (90) less 6 MRR (90) 6

Medium- and long-term MRR (90) less 3 MRR (90) plus 3 6

4. CB|IBRD 6.5-9.0 14% plus 3% -service charge

5. IGLF loansSmall-scale industries 11 18 7Medium-scale industries 16 21 5

/a As of October 1984.

Source: Central Bank of the Philippines.

Table 7.ls COCONUTS: AREA, PRODUCTION, YIELD AND DISPOSITION(Thousand metric tons)

--------------------------------------------------------------------- __------__-----------------------------------------

Exports Domestic usesArea Yield of -------------------------------------- ---------------------------

------------------ Copra harvested Coconut Dessicated Coconut Food-Calender Planted Harvested production area Copra oil coconut Total oil nuts Total

year (Thousand ha) ('000 mt) (mt/ha) -------------- ('000 mt in copra equivalents) /a -----------------

1972 2126 1791 2174 1.21 968 757 95 1820 313 40 3531973 2133 1633 1871 1.15 728 691 95 1514 320 38 3581974 2206 1750 1424 0.81 309 699 77 1085 296 43 3391975 2280 1890 2199 1.16 833 954 80 1867 288 44 3321976 2521 1985 2742 1.38 867 1373 98 2339 349 55 4041977 2714 2091 2440 1.17 560 1276 119 1955 436 49 4851978 2890 2166 2517 1.16 380 1596 110 2086 320 50 4301979 2995 2172 1903 0.88 145 1282 100 1536 /b 326 50 3761980 3126 2290 2069 0.90 123 1451 136 1718 /b 309 50 3591981 3105 2211 2306 1.04 106 1661 136 1913 /b 353 50 4031992 3162 2301 2157 0.94 192 1506 138 1871 /b 271 50 3211963 3209 2265 2147 0.95 12 1619 131 1813 /b 283 51 334

1984(est.) 1521 1021 116 1196 /b 275 50 325

---------------------------------------------------------------------- __-----__----------------------------------------

/a The conversion factors used in Philippines are as follcws: coconut oil, 62% of copra equivalenteidessicated coconut 83%. From 1980 onward, conversion factor used is coconut oil - coconut 64.68%.

/b Including the copra equivalent of coconut oil processed for fatty chemicals mainly for export.

Source: United Coconut Association of the Philippines.

Table 7.2: SUGAR: AREA, YIELD, QUALITY RATIO, PRODUCTION AND EXPORTS

YieldCrop Area ----------------- Ltality Sugar

year- /a planted Cane Sugar ratio production Exports(mt/ha) --- /b ('000 mt)

1972 441 44.2 4.1 10.6 1814 12621973 422 53.8 5.3 9.9 2246 14!51974 463 56.2 5.3 10.6 2446 16,361975 473 52 5.0 10.1 2396 10t061976 540 53 5.2 10.1 2880 15151977 514 53 5.2 10 2685 25751978 451 49.9 5.2 9.5 2335 11421979 483 42.3 4.3 9.7 2289 11571980 442 47.2 4. 8 9.8 2267 17931981 392 53.8 5.5 9.6 2315 12781982 496 50.1 4.9 10.1 2447 13011983 464 50.2 5.i 9.5 2465 9991984 427 56.1 5.5 11.2 2335 052 /c

1985(est.) 383 50.8 4.9 10.3 1890

…__ _ _ h _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

/a September to AugLst./b Ratio of sugar to sugarcane./c As of September 1984.Soturce: Philippine Sugar Commission.

Table 7.3: RICE: AREA, YIELD, SUPPLY AND USE

Rice supply and use

Beginning EndingCrop Har-vested Mean yield Total inventory Net imports Available stocks Domesticyear area of palay /a production as of July 1 /b supply June 30 use IC

(U'C)OO ha) (tons/ha) --- ('000O metric tons) -------------------

1971/72 3332.3 1.598 3248 632 633 4513 698 3815i972/73 3194.2 1.443 2834 698 238 3770: 445 33251973/74 3527.8 1.656 3621 445 311 4377 837 35401974/75 3632.5 1.627 3693 837 238 4766 929 38391975/76 3674.o 1.751 4052 929 71 5052 777 42751976/77 3641.4 1.851 4280 777 24 51)81 841 42401977/78 3601.7 1.999 4607 841 -39 5409 1212 41971978/79 3560.7 2.110 4847 1212 -38 6021 1540 44811979/S0 3636.8 2.154 5093 1540 -236 6397 1575 48221980/81 3459.1 2.233 5020 1575 -175 6420 1331 50691981/82 3442.8 2.359 5279 1331 -10 6600 1520 50801982/83 3239.6 2.386 5040 1520 -11 6549 1478 5071

Data for harvested area and production have been revised for 1971/72 - 1979/80.

/a Paddy with about 61% rice content.lb Negative figure indicates net exports./c Refers to all Luses includinig feed, losses and seed.

Source: Statistics Division, Bureau of Agricultural Economics.

Table 7.4: CORN; AREA, PRODUCTION, SUPPLY AND DISAPPEARANCE

Rice supply and use

Beginning EndingCrop Harvested Average Production stock Net imports Available stocks Domesticyear area yield (stocked as of July 1 supply June 30 use

('000 ha) (tons/hat corn) - ('000 metric tons) -------------------

1971/72 2454.3 0.825 2024 148 193 2365 241 21241972/73 2350.6 0.784 1843 241 90 2174 96 20781973/74 2726.4 0.828 2258 96 94 2446 257 21911974/75 3009.9 0.835 2514 257 159 2930 243 26871975/76 3193.2 0.851 2717 243 54 3014 153 28611976/77 3242.5 0.856 2775 153 160 3088 154 29341977/78 3158.1 0.885 2796 154 134 3084 153 29311978/79 3252.4 0.950 3090 153 56 3299 264 30351979/80 3201.1 0.976 3123 264 93 3480 148 33321980/81 3238.7 0.960 3110 148 351 3609 175 34341981/82 3360.7 0.979 3290 175 275 3740 172 356B1982/83 3157.5 0.990 3126 172 406 3704 104 3600

Source: Statistics Division, Bureau oF Agricultural Economics.

Table 7.5. MINOR CROPSi HARVESTED AREA, PRODUCTION AND YIELD

-…-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Crop year /a 1972 1973 1974 1975 1976 1977 197E 1979 1980 1981 1982 1983

Area Harvested ('000 ha)______________

Abaca 145 163 170 180 244 250 244 235 236 230 207 169Bananas 244 250 212 233 298 300 284 312 318 312 331 315Coffee 55 61 65 65 77 76 85 95 102 119 136 138Cotton 0.02 0.02 0.04 0.3 0.4 0.5 2 1 4 9 10 9Mango 41 44 44 47 36 36 35 39 39 42 41 42Pineapple 30 28 28 31 35 36 45 55 63 67 60 51Rootcrops 258 266 314 351 401 451 461 481 486 477 460 432Tobacco 78 84 87 85 86 76 74 67 61 55 57 54Vegetable 52 54 52 55 54 56 57 53 53 51 53 49

Production ('000 mt)__________

Abaca 110 119 126 134 139 151 130 160 157 129 120 91Bananas 980 1013 1236 1686 2271 2447 3156 3582 3977 4073 4077 3668Coffee 52 51 53 91 61 105 119 115 125 147 171 139Cotton 0.1 0.1 0.2 0.8 0.7 5 7 7 6 wMango 143 186 192 239 293 308 335 363 377 367 426 400Pineapple 282 293 338 424 420 422 465 605 1281 1293 1242 964Rootcrops 1218 1220 1411 1807 2143 2774 3004 3568 3470 3407 3173 2660Tobacco 56 65 63 57 59 50 57 51 42 39 47 44Vegetable 240 272 311 337 359 370 384 358 385 366 390 329

Yield (mt/ha)

Abaca 0.76 0.73 0.74 0.74 0.57 0.60 0.53 0.68 0.67 0.56 0.58 0.54Bananas 4.02 4.05 5.83 7.24 7.62 8.16 11.11 11.46 12.51 13.05 12.32 11.64Coffee 0.95 0.84 0.82 1.40 1.05 1.38 1.40 1.21 1.23 1.24 1.26 1.01Cotton 0.33 0.25 0.40 0.40 0.70 1.25 0.78 0.70 0.67Mango 3.49 4.27 4.36 5.09 8.14 8.56 9.57 9.31 9.67 8.74 10.39 9.52Pineapple 9.40 10.46 12.07 13.66 12.00 11.72 10.33 11.00 20.33 19.30 20.70 18.90Rootcrops 4.72 4.59 4.49 5.15 5.34 6.15 6.52 7.42 7.14 7.14 6.61 6.16Tobacco 0.72 0.77 0.72 0.67 0.69 0.66 0.77 0.76 0.69 0.71 0.82 0.81Vegetable 4.62 5.04 5.98 6.13 6.65 6.61 6.74 6.75 7.26 7.57 7.36 6.71

--------------------------------------------------------------------- __------__------------------------------

/a July - June.

Source: Bureau of Agricultural Economics.

Table 7.bs PRODUCTION OF SELECTED LIVESTOCK AND FISHERY PRODUCTS

Calender year: 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

Livestock Production

(Millions of heads)Chickens 50.10 49.96 /a la 45.67 45.29 58.69 49.32 52.76 57.72 59.71 62.25Hogs 7.74 8.63 /a /a 6.49 5.70 6.91 7.44 7.93 7.76 7.79 7.98Cattle 1.93 2.10 /a /a 1.74 1.72 1.82 1.83 1.98 1.94 1.94 1.94Carabao 4.71 4.94 /a Ia 2.72 2.90 2.96 2.50 2.97 2.95 2.90 2.95

Fisheries ('000 mt)

Commercial (marine) 425 465 471 499 532 550 541 516 489 495 504 521Municipal (coastal) 599 640 684 732 773 801 883 468 762 806 708 697Fishponds 99 100 113 106 113 116 119 122 285 181 180 194

/a No survey.

Sources Bureau of Agricultural Economics, Bureau of Fisheries and Aquatic Resources.

Table 7.7: FORESTY PRODUCTS: PRODIJCTION AND EXPORT'S(Millions of cLubic meters)

Pr-oduct i on Exports

ProducCtion Logs Lumber FPlywood Veneer Logs LUmber Flywvood Veneeryear /a

1972 8.42 578 1 089 1587 7. 13 77 736 .3 661973 10o.45 449 1241 i431 7.76 181 9014 19131974 10c..17 472 1196 1167 4.7 119 276 14261975 11.16 964 789 1404 4.59 108 268 6721976 8.65 612 705 2734 2.33 209 444 1126 H1777 7.87 1.57 0.467 o.496 2.05 o.455 O.221 0.1551972 7.17 1.78 0.490:) 0. 546 2.21 0.573 C. 0362 0.1541979 6.56 1.63 0.503 C.634 1.25 0.915 0.393 0.1861960( 6..35 1.53 0.553 0.66 0.715 0.741 0.322 0.1641981 5.40 1.22 0.457 0.553 0.706 0.547 0.370 0.1381982 4.il 1.21 0.422 0.428 0.752 0.591 0.241 0.0981983 4.43 1.22 0.459 0.445 0.786 0.72e 0.294 0.123

/a July-June for 1972-75, from 1976 onwards prodLtction year equals calendar year.

Source: BureaRu of Forest Development and NCSO.

Table 7;8: GROSS VALUE ADDED IN AGRICULTURE, FISHERY AND FORESTYBY SUBSECTOR IN CURRENT PRICES

(In billion pesos)

Est.1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

------------------------------------------------------------------- __--------__------------------------------

Agriculture 8.9 12.3 16.8 20.5 23.3 25.6 28.5 34.3 36.3 40.3 43.9 47.8

Paddy 2.7 3.6 4.7 5.6 6.3 6.3 6.9 7.7 9.1 10.9 11.9 12.2Corn 1.0 1.2 1.8 2.0 2.3 2.7 2.8 2.9 3.5 4.0 4.5 4.3Coconut, including

copra 1.2 2.2 3.0 2.8 3.1 3.8 4.0 5.9 3.0 3.1 3.0 5.2Sugarcane 1.1 1.2 2.0 2.6 2.5 2.1 2.2 2.5 2.7 3.2 4.0 3.3Banana 0.6 0.7 1.0 1.9 2.2 2.6 3.2 3.9 4.8 5.1 5.2 7.3Other crops 2.3 3.2 4.3 5.6 6.9 8.1 9.4 11.4 13.2 14.0 15.3 15.5

Livestockc 1.6 2.2 3.2 2.7 2.9 3.1 3.4 3.8 3.8 4.2 4.6 5.3 W

Poultry 0.7 0.6 1.1 1.3 1.5 1.8 2.1 2.7 3.6 4.9 5.6 7.1

Fishery 2.7 3.1 5.1 5.6 6.4 7.5 8.5 9.5 11.2 13.8 14.8 16.8

Foresty 2.0 2.6 3.3 2.2 3.3 3.7 4.7 5.1 6.7 6.2' 7.3 7.5

Total 16.1 21.0 29.5 32;9 37.4 41.7 47.2 55.4 61.6 69.3 76.4 64.5

Notea Totals may not add up due to rounding.

Source: National Accounts Staff, NEDA.

Table 7.9: GROSS VALUE ADDED IN AGRICULTURE, FISHERY AND FORESTYBY SUBSECTOR AT 1972 CONSTANT PRICES

(In billion pesos)

-------------------------------------------------------------- __-------------__-------------------_.----------

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

Agriculture 89.9 9.0 9.9 11.2 12.1 12.7 13.3 14.1 15.0 15.4 15.9 15.0

Paddy 2.7 2.8 3.1 3.4 3.4 3.8 3.8 3.9 4.2 4.3 4.5 3.9Corn 1.0 0.9 1.1 1.2 1.2 1.3 1.4 1.4 1.4 1.5 1.5 1.4Coconut, including

copra 1.2 1.0 0.8 1.1 1.4 1.3 1.3 1.3 1.3 1.4 1.3 1.3Sugarcane 1.1 1.1 1.4 1.4 1.6 1.3 1.3 1.4 1.3 1.3 1.5 1.1Banana 0.6 0.7 0.9 1.3 1.4 1.7 2.0 2.2 2.4 2.4 2.3 2.4Other crops 2.3 2.4 2.6 2.6 3.1 3.2 3.6 4.0 4.3 4.4 4.7 5.0

Livestock 1.8 2.0 2.0 1.7 1.7 1.8 1.9 2.0' 1.8 1.9 2.0 2.2 w

Poultry 0.7 0.8 0.8 0.9 1.0 1.1 1.2 1.4 1.6 2.0 2.2 2.5 £

Fishery 2.7 2.9 3.0 3.2 3.3 3.5 3.7 3.7 3.9 4.1 4.3 4.4

Foresty 2.0 2.4 1's 1.3 1.6 1.6 1.6 1.4 1.4 1.2 1.0 0.9

Total 16.0 17.0 17.5 16.2 19.7 20.6 21.6 22.6 23.7 24.6 25.4 24.9

Notes Totals may not add up due to rounding;

5ourcgs National Accounts Staff, NEDA.

.

Table 7.10: AGRARIAN REFORM PROGRAM: OPERATION LAND TRANSFER AT END-YEAR(In thousands)

…-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _ _ - - - - - - - - - - - - - _ _- - - - - - - - - - - - - - - - - - - - - -

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

Land Transfer

No. of CLTs issued 207 269 295 323 359 397 444 478 551 597 640No. of tenant

recipients 145 189 209 231 258 286 320 366 471 393/a 428H.ctares 259 311 367 401 445 492 545 572 647 680 735

Land Compensation lb

No. of landowners 0.7 1.5 2.5 3.5 5.2 6 7.3 8.8 9.8No. of tenants 3 18 31 46 57 77 86 98 109 117Hectares 6 34 59 as 111 149 171 188 209 224

/a Adjustments were made due to cancelation of some CLT's.

/b Land compensation started in February 1974.

Source: Ministry of Agrarian Reform.

Table 7.11: SELECTED AGRICULTURAL PRICES

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Coconut Products1. Coconut oil export unit value

($/M4T) 373 345 532 608 919 615 510 432 5092. Cooking oil domestic retail price

(P/1 pt) /a 2.27 2.05 2.05 2.47 3.60 3.48 3.33 3.32 4.20 13.45/b3. Copra export unit value (f.o.b.)

($/MT) 226 182 316 372 616 389 315 277 2504. Copra domestic procurement price

(millgate) (P/kg) 1.47 1.68 2.56 3.04 4.06 2.56 2.33 1.76 3.51

Sugar (Refined5, Export unit value (f.o.b.) ($/MT) 597 293 210 175 184 348 436 339 3156. Domestic wholesale price (P/kg) /a 1.69 1.73 2.17 2.30 2.68 3.08 3.40 4.10 4.63 8.19/b

Rice7. Price received by farmer (P/50 kg

of palay) 48.84 49.72 50.04 49.08 52.14 57.49 65.05 68.25 76.25 107.08/c >8. Domestic retail price (P/50 kg of

palay) 53.77 52.34 63.95 62.75 55.48 61.61 70.79 73.98 82.38 110.54/c9. Domestic retail price (P|50 kg of

rice) 97.00 102.00 106.00 104.50 114.50 122.50 136.00 148.00 159.50 209.83/c

Corn10. Price received by farmer (P/50 kg

of white shelled corn) 46.96 48.42 50.54 48.42 48.06 53.41 58.84 62.26 67.3611. Domestic retail price (P/50 kg of

white milled corn) 73.00 76.00 79.50 79.00 81.50 92.00 106.00 112.50 117.50

/a Retail prices for Manila.T7 Augsut 1984.7TW January to June 1984 average.

Sources: Central Bank for 1, 3 and 5; NCSO for 2 and 6; United Coconut Association for 4; BAEcon for 7-11.

- 137 -

Table 7.12: SUPPORT PRICES FOR PALAY AND CORN GRAINS(P/kilo)

Price support Effective date

Palay 1.00 November 28, 1974

1.10 May 29, 1976

1.30 April 1, 1979

1.40 July 1, 1980

1.45 October 21, 1980

1.55 June 17, 1981

1.70 May 22, 1982

1.80 October 1, 1983

2.10 December 1, 1983

2.35 May 25, 1983

2.65 June 9, 1984

Corn grains 0.80 October 15, 1974

0.90 May 29, 1976

1.00 September 29, 1979

1.10 July 30, 1980

1.20 December 29, 1980

1.30 June 17, 1981

1.40 September 1, 1983

1.65 December 1, 1983

2.00 May 26, 1984

2.30 June 9, 1984

Source: NFA.

- 138 -

Table 7.13: SELLING PRICES OF RICE AND CORNAT NFA OUTLETS

(P/kilo)

Year Rice Corn

1974 1.80 -

1975 A..80 1.05

1976 2.00 1.16

1977 2.00 1.16

1978 2.00 1.16

1979 2.10 1.23

1980 2.45 1.63

1981 2.85 2.15

1982 2.85 2.15

1983 2.95 2.23

1984/a 4.00 3.10

/a Preliminary report as ofOctober 17, 1984.

Source: NFA.

- 139-

Table 7.14: PROCUREMENT AND DISTRIBUTION OF PALAY AND CORN BY NFA

Procurement DistributionYear Palay WGN WCT YGN Rice WGN WCT YGN

1975 223,209 42,365 16,135 617 227,209 - 13,209 129,413

1976 274,461 30,358 7,896 156 255,012 8,971 37,449 53,990

1977 649,803 72,039 6,660 1,648 201,750 326 34,290 28,878

1978 518,521 146,263 2,231 4,629 123,020 7,539 30,943 167,777

1979 757,696 53,212 - 2,835 60,938 52,920 22,997 48,293

1980 551,089 12,274 - 379 279,739 4,285 40,870 188,985

1981 580,641 57,653 - 4,492 304,251 136 21,000 276,740

1982 649,193 44,929 - 23,130 244,052 7,511 30,784 328,951

1983 533,952 86,420 1,000 34,409 798,785 37 32,219 515,542

1984/a 169,424 5,187 - 2,168 181,214 12 41,296 122,875

hGN = White corn grainWCT = White corn gritsYGN = Yellow corn grain

/a January-June 1984.

Source: NFA.

- 140 -

Table 7.15: AVERAGE IMPORT PRICE OF SELECTED FERTILIZERS($/MT C & F)

Grade: Urea 21-0-0 18-46-0 14-14-14

1973 105.53 57.87 153.60 147.30

1974 277.98 168.03 149.22 282.38

1975 371.37 219.34 - -

1976 122.36 67.87

1977 130.14 90.02 - -

1978 158.18 103.41 172.60 170.50

1979 175.22 111.57 203.75 176.75

1980 250.53 136.83 317.48 263.19

1981 275.08 153.14 300.50 235.97

1982 195.07 99.76 258.98 179.42

1983 146.67 88.73 222.94 169.16

1984 202.23 98.50 290.30 188.96

Note: 1973-77 - weighted average; 1978-80 - straight average.

Source: Fertilizer and Pesticide Authority.

- 141 -

Table 7.16: AUTHORIZED EX-WAREHOUSE PRICES OF SELECTED FERTILIZERS(e'/MT)

Date of effectiveness Urea 21-0-0 18-46-0 14-14-14

November 25, 1974 2,234 1,034 1 3,814 1,3743,348 2,016 1 { 2,516

May 20, 1975 1,654 904 - 1 1,204{{ rrr 1,914

September 27, 1976 1,507 936 2,667 1,204

April 8, 1979 1,769 1,263 2,674 1,534

August 24, 1980 2,006 1,480 3,320 1,724

July 23, 1981 2,367 1,746 3,638 2,048

Mmay 21, 1982 2,307 1,666 3,632 2,248

July 12, 1983 2,438 1,782 3,950 2,414

October 1, 1983 2,647 1,782 4,303 2,601

October 22, 1983 3,145 2,117 5,250 3,090

Mmay 27, 1984 3,868 2,11/ 5,894 3,770

Junne 9, 1984 5,030 2,624 7,188 4,841

August 3, 1984 4,745 2,514 6,422 4,417

Note: Prices shown are for areas around Metro Manila. Prices authorized forother areas in the country were somewhat higher, allowing for addi-tional costs.

Source: Fertilizer and Pesticide Authority.

Table 7.17: FERTILIZER CONSUMPTION, 1972-83

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

MT ('000) 492.5 676.9 738.3 577.6 643.9 685.6 791.6 84B.9 819.6 785.4 845.9 878.3

Urea 132.7 153.0 212.2 143.8 174.8 229.3 287.1 320.0 329.2 307.3 342.2 371.5Ammosul / CAN Amchlor 134.6 210.0 200.5 167.5 185.4 177.7 171.2 175.4 143.6 126.5 140.3 137.7NP & P 89.2 129.4 130.7 105.5 116.0 106.1 125.3 124.2 131.8 124.2 143.1 145.2NPK 88.6 116.3 126.9 102.1 108.0 124.1 147.2 159.5 158.2 163.7 161.6 150.5Potash 47.4 68.2 68.') 58.7 59.7 48.4 60.8 69.8 56.8 63.7 58.7 73.4

Nutrient MT (C 'OO) 216.0 258.5 285.2 221.1 245.8 260.5 311.8 342.3 334.0 321.7 346.6 363.7

N 132.8 151.9 177.5 132.8 152.4 174.2 205.4 226.7 224.8 209.9 232.8 244.3P 35.0 51.0 47.7 38.6 38.3 40.4 49. E8 51.9 53.4 51.2 56.4 54.6K 48.2 55.6 60.0 49.7 55.1 45.9 56.6 63.7 55.8 60.6 57.4 64.6

Note: Data are based on sales to dealers.

Source. Fertilizer and Pesticide ALuthority.

- 143 -

Table 7.18: TERMS OF TRADE OF THE AGRICULTURAL AND FOOD SECTORS(1972 = 100)

Agricultural terms of trade Food terms of tradeAgricultural Nonagricultural Terms of Food Nonfood Terms of

Year prices /a prices /b trade prices /c prices /d trade

1960 37.0 49.6 0.746 37.0 61.2 0.6051961 37.8 51.3 0.737 39.7 62.0 0.6401962 40.7 54.5 0.747 39.2 63.5 0.6171963 45.4 58.6 0.775 43.7 64.9 0.6731964 47.5 61.2 0.776 48.1 66.3 0.7251965 49.5 63.8 0.776 49.3 67.9 0.7261966 52.5 67.5 0.778 54.7 70.1 0.7801967 57.6 70.5 0.817 55.8 72.3 0.7721968 64.0 72.4 0.884 55.8 74.1 0.7531969 69.8 75.2 0.928 56.4 75.3 0.7491970 79.8 85.1 0.938 68.1 84.3 0.8081971 95.7 92.7 1.032 86.6 93.0 0.9311972 100.0 100.0 1.000 100.0 100.0 1.0001973 124.4 115.1 1.081 105.2 125.9 0.8361974 170.2 150.1 1.134 148.6 166.0 0.8951975 181.3 159.7 1.135 163.1 182.0 0.8961976 187.3 180.6 1.048 172.4 198.9 0.8671977 207.2 196.3 1.056 203.6 220.6 0.9231978 218.9 214.6 1.020 221.7 240.1 0.9231979 245.7 251.1 0.978 256.9 280.5 0.9161980 260.0 296.6 0.877 291.0 339.9 0.8561981 - - - - - -1982 - -1983 - -1984 - -

- = No available data

/a The agricultural price index is the implicit price deflator for net domes-tic product of agriculture, fishery and forestry.

/b Index of nonagricultural prices is a value-weighted average of the impli-cit price deflator for r-et domestic product of the industiral and servicessector.

/c The food price index is the wholesale price index of locally produced foodfor home consumption in Metro Manila.

/d The nonfood price index is the weighted average of consumer price indexesfor areas outside Metro Manila for clothing, housing and miscellaneousitems.

Source: "Impact of Economic Policies on Agricultural Development," a PIDSresearch project underway at the University of the Philippines at LosBanos. Data sources used are as follows:

Agricultural and nonagricultural price indexes: NEDA, 1980Philippine Statistical Yearbook (Manila: NEDA, 1980) and NEDA, TheNational Income Accounts CY 1978-80, Preliminary Estimates as ofJune 1, 1981 (Manila: NEDA, 1981). Food and nontoodp priceindexes: Central Bank, Statistical Bulletin: 1974, 1976 and 1979(Manila: CB-DER, 1974, 1976 and 1979); for 198U figures: CB mimeosheets (undated).

- 144 -

Table 7.19: COPRA: AVERAGE ANNUAL PRICES

Average AverageAverage Average Average export export export

Domestic export export price for coco- price for price forFarmgate wholesale price for price for nut oil in copra desiccatedprice /a price copra coconut oil copra equiv. /b meal cake coconuts

Year ---- (P/kg) ----- -------------- - (f.o.b. Manila Pfkg) ----

1972 0.45 0.65 0.80 1.21 0.74 0.33 1.541973 1.12 1.69 1.51 2.43 1.55 0.61 2.911974 2.07 2.71 3.63 6.25 3.94 0.68 3.061975 0.80 1.07 1.70 2.68 1.67 0.80 3.121976 0.89 1.28 1.46 2.60 1.64 0.82 3.201977 1.32 1.89 2.55 3.77 2.37 0.96 6.141978 1.65 2.32 2.75 4.50 2.80 0.96 6.631979 2.50 3.29 4.55 7.75 4.87 1.13 9.151980 1.20 1.70 2.92 5.33 3.38 1.11 9.911981 1.13 1.78 2.45 4.50 2.84 1.03/c 9.311982 1.07 1.76 2.34 4.10 2.56 1.04/c 6.511983 3.51 3.12 5.76 3.63 1.45 10.96

la The farmgate price for chopped copra is higher by about 8-15% than for regular copra.

lb Based on the conversion factor of 1.587 from coconut oil to copra equivalent.

/c Philippine coconut authority (PCA) placed 'ban' on copra exports in 1981.

Sources: Bureau of Agricultural Economics, Prices Received and Paid by Farmers, 1981/82.

Philippine Council for Agriculture and Resources Research: Data Series onCoconut Statistics in the Philippines, 1980.

UCAP Coconut Statistics for average export price for copra.

_ 145 -

Table 7.20: SUGAR: AVERAGE ANNTAL PRICES OF SUGARCANE AND RAW SUGAR(p/M)

Price Sugar pricereceived by farmers Domestic Export Composite World

Year Sugar /a Sugarcane /b price price price price

1972173 561 53 490 961 880 1,0741973/74 570 58 490 1,068 895 1,4011974/75 928 88 808 1,804 1,456 4,5001975/76 1,102 109 1,1.3 2,016 1,729 3,2811976/77 1,095 108 9L9 1,976 1,719 1,8981977/78 802 80 949 1,423 1,259 1,4191978/79 907 95 1,423 1,423 1,423 1,2701979/80 976 101 1,660 1,423 1,532 1,5671980/81 1,244 127 1,739 2,134 1,953 4,8081981/82 1,460 152 1,739 2,727 2,292 2,9501982/83 1,458 144 1,739 2,656 2,289 1,5881983/84 1,680 177 2,609 2,656 2,637 2,1011984 2,323 207 3,162 3,969 3,646 2,460/c

/a Based on the following sharing of proceeds from sugar:Planters' share: 63.71%Mill share: 35.55%Association dues: 0.74%

The above figures are the national average for September 1982. However,because of lack of information on the sharing for other years, the samesharing distribution was assumed for the entire period.

/b Price calculation is based on the quality ratio corresponding to annualvalue (see Table 7.2).

/c As of June 1984.

Source: PHILSUCOM

Table 8.1: MINING PRODUCTION, VOLUME OF MAJOR PRODUCTS

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983/a 198o /b

Gold metal 18.9 17.6 16.7 15.6 15.6 17.4 18.2 16.6 20 23.6 26 24.9 25.5(thousand mt)

Silver metal 57.5 58.8 53.9 50.4 46.1 50.4 51 57.2 60.7 62.9 61.7 62.2 49(thousand mt)

Copper metal 213.7 221.2 225.5 225.8 237.6 272.8 263.6 298.3 304.5 302.3 292.1 308.8 226.3(thousand mt'

Chromite ore 349.6 580.3 529.5 520 431.1 538.5 539.9 556.1 496.1 439.2 321.1 284.4 235.9 .(thousand dmt)

Iron ore 2205 2255 1608.1 1351.4 571 1.8 6.3 5.7 5.6 2.4(thousand dmt)

Nickel metal 0.4 0.4 0.3 9.5 15.2 36.8 29.5 33.3 47.1 29.2 11.2 18.8 11.4(thousand mt)

Coal 38.9 39 50.7 105.1 120.B 254.6 255 263.1 325 318.2 556.8 1140 1499(thousand mt)

/a Estimates./b Projections.

Sources Bureau of mines and Geo-Sciences, Ministry of Natural Resources (MNR).

Table 6.2i MAJOR MINING PRODUCTION, VALUE IN CURRENT PRICES(In million pesos)

1972 1973 1974 1975 1976 1977 1975 1979 1980 1951 1952 1983/b 19B4/c

Precious Metals 243 388 606 625 490 636 B57 1313 3053 2794 2773 3724 4454.6

Gold 225 360 554 575 446 587 799 1180 2795 2642 2651 3495 4262.6Silver 15 25 52 50 44 49 59 133 269 152 122 226 192

Nonmetallcs 467 639 902 1166 1349 1516 1910 2246 3043 3542 4160 5694 4980.2

Cement 311 473 720 900 977 1071 1192 1370 2002 2107 2387 3620 3299.2Sand and gravel 38 40 43 103 1S7 230 432 491 613 691 959 1039 1005.8salt 30 30 44 69 87 77 e1 161 204 213 219 318 334Silica sand 7 7 11 10 9 9 14 11 18 21 28 43 41.2Coal 2 2 8 13 19 46 42 47 58 64 189 439 n.a.Other nonmetallics 79 87 76 72 99 83 149 166 149 446 479 235 300

Base Metals 1532 2503 2990 2158 2586 3252 3303 5548 6724 5541 4369 6730 5035.7

Chromite 48 i5 s0 117 148 240 251 291 277 271 229 241 304.7Copper 1360 2296 2794 1640 1942 1927 2164 3690 4409 3782 3446 5539 4457.8Iron are/conc. 105 It 82 91 39 0.3 1 1 0.9 0.4Nickel 4 5 7 263 484 927 635 922 1437 1109 577 871Others/a 15 16 27 47 73 159 252.7 644 601 378 116.1 78.6 273.2

Total 2242 3530 4498 3949 4424 5404 6070 9107 12820 11877 11302 16146 14471

/a Zinc, lead, manganese, cobalt, pyrite and others./b Estimates./c Projections.n.a. - not yet availableSources Bureau of Mines and Geo-Sciences, MNR.

Table 8.3: GROSS VALUE ADDED IN MANUFACTURING BY INDUSTRY GROUPAT CURRENT PRICES

(In millions of pesos)

Industry Group 1972 1973 1974 1975 1976 1977 1976 1979 1980 1981 1982 1983/a…------------------------._--------------------------------------__----------__--------------------------------------

Food manufactures 3623 4787 6626 7231 8241 11257 13211 16530 20026 23694 27189 31387Beverage industries 724 796 1111 1264 1429 1574 1850 2268 2684 2818 3083 3522Tobacco manufactures 950 1434 1723 1975 2084 1408 1741 2362 2544 2806 2973 3277Textile manufactures 798 1047 1470 1687 2154 3204 3735 4277 4622 5161 5261 5794Footwear, wearing apparel 431 541 723 834 982 1961 2375 3013 3657 4567 4983 5852Wood and cork products 582 776 1076 871 1148 1379 1517 2080 2426 2882 3042 3431Furniture and fixtures 86 99 140 131 156 213 225 254 327 375 404 465Paper and paper products 345 442 729 826 1009 594 661 780 919 967 920 1115Publishing and printing 265 355 473 557 608 386 450 541 632 747 827 936Leather and leather products 22 26 36 42 50 78 90 111 172 191 201 208Rubber products 220 267 369 400 398 516 558 712 780 900 1029 1125Chemical and chemical products 1812 2223 3054 3530 4254 3825 4617 5142 5918 5983 6105 7227Products of petroleum and coal 1048 1713 2723 3526 3625 4482 4697 6051 9535 10651 11617 13000Nonmetallic mineral products 445 632 762 954 1027 991 1159 1421 1929 1978 2285 2506Basic metal industries 409 649 883 1373 1629 1456 1708 2079 2237 2217 2612 3245Metal products 401 476 656 678 729 1002 1305 1666 1919 1945 2283 2639Machinery except electrical 164 219 279 303 336 766 920 1134 '1377 1610 1824 2043Electrical machinery 355 431 653 751 727 770 1161 1529 2006 2844 3383 4471Transport equipment 516 595 864 1447 1586 991 1280 1381 1530 1757 1841 1666Miscellaneous manufactures 172 207 256 264 313 367 481 644 854 1058 1264 1460

Gross Value Added in____________________

Manufacturing 13388 17715 24608 28544 32545 37220 43941 53995 65993 75151 83126 95369

/a Estimates as of December 23,1983.

Sources NEDA.

Table 8.43 GROSS VALUE ADDED IN MANUFACTURING BY INDLUSTRY GROUPAT CONSTANT 1972 PRICES(In millions of pesos)

Industry Group 1972 1973 1974 1975 1976 1977 1976 1979 1980 1981 1982 1983

Food manufactures 3623 3871 4129 4245 4558 7189 7498 7865 8419 8803 9099 9246Beverage industries 724 758 787 808 859 661 685 707 732 730 747 763Tobacco manLufactures 950 1291 1457 1542 1556 979 990 1032 1039 1100 1114 1117Textile manufactures 798 852 899 923 1097 940 1022 1071 1049 1095 1053 1050Footwear, wearing apparel 431 533 544 591 628 785 857 932 1019 1189 1224 1247Wood and cork products 582 627 638 471 558 629 660 686 665 707 704 716FurnitLire and fiRtures 86 90 88 74 79 104 107 114 132 139 140 142Paper and p.iper products 345 420 480 466 538 186 193 202 191 186 172 196Publishing and printing 265 339 430 447 455 262 283 301 324 344 359 368Leather and leather products 22 25 26 30 31 43 45 49 68 70 71 66Rubber products 220 238 257 263 232 274 293 312 302 311 324 316Chemical and chemical products 1812 1994 2075 2165 2462 203 3 2163 2321 2365 2317 2273 2315Products of petroleLum and coal 1042 1358 1219 1230 1134 12C4 1325 1398 1373 1287 1313 1351Nonmetallic mineral products 445 597 541 597 613 478 520 535 574 540 569 587Basic metal industries 409 526 505 587 631 756 819 865 653 791 856 947Metal products 401 414 424 398 389 807 952 1040 1041 977 1052 1091Machinery except electrical 184 206 193 190 195 54B 618 670 726 764 787 797Electrical machinery 355 376 408 443 394 591 814 1005 1153 1401 1475 1717Transport equipment 516 561 688 842 854 760 875 898 885 910 883 742Miscellaneous manufactures 172 176 193 205 218 168 198 230 265 296 320 334

Gross Value Added in____________________

ManuLfacturing 13388 15252 15981 16537 17481 19492 20917 22239 23175 23959 24535 25108

Sourceg NEDA.

Table 8.5: MAJOR INDUSTRIAL PROJECTSSCHEDULES, COSTS, FINANCING PLANS

(In Million US S)

Financing (5 mm)

Project Start of Start of Project Government Private Equity ForeignProject Proponent Construction Operations Cost /a Equity Domestic Foreign Loans

Copper Smelter PASAR (NDC) 1980 1983 344 63 60 37 244

Diesel Engine Manufacturinglow HP engines 1980 1983 9 4 5

Cement ldustry PrivateCoal Conversion Cement 1981 1983 37 37Expansion Companies Deferred

(DBP)

Phosphatic Fertilizer Philphos 1981 1984 513 60 40 413(NDC)

Coconut-based Chemicals Unichem 1982 1984 116 60 4 52(Cocobank)

Heavy Engineering NHEC 1982 23 23

Integrated steel /b NSC(NDC) 1983 1402 53 114 1235

Total 2444 176 234 85 2009

/a Project cast includes fined asspti and interest during construction./b Implementation affected by 4 oreign debt rescheduling.

Source: NDC

- 151 -

Table 9.1: PRIMARY ENERGY BY SOURCE(In million of barrels of fuel oil equivalent)

Est.1978 1979 1980 1981 1982 1983 1984

Indigenous Energy 11 19.2 18.8 26.2 30.5 35.3 38.4

Conventional 5.5 13.9 13.9 13.4 17 19.4 24.1

Oil 7.2 3.5 1.4 3 4.7 2.7Coal 0.9 0.8 1 0.9 1.1 2.6 4.7Hydro 4.6 4.8 5.9 6.4 6.7 5.1 9.3Geothermal 1.1 3.5 4.7 6.2 7.0 7.4

Nonconventional 5.5 5.3 4.9 6.2 7.4 15.8 14.3

Bagasse 5.5 5.3 4.9 6.2 7.4 5.5 5.5Agri-Industrial Wastes 6.3 6.1 9.1 8.7Other 0.3 0.1 1.3 0.1

imported Energy 75.3 70.5 69.5 67.2 65.5 64.5 57.2

Oil 75.3 70.5 69.5 67.2 65.5 63.5 55.6Coal 0.9 1.6

Total Energy 86.4 89.7 88.2 93.4 96 99.6 95.5

'Source: Ministry of Energy.

- 152 -

Table 9:2 ENERGY UTILIZATION BY SECTOR

1978 1979 1980 1981 1982 1983

Energy Use by Sector, MMBOE /a 66.4 89.7 88.2 93.4 96.0 99.7

Industry 45.2 48.5 48.5 54.6 55.2 59.0Transportation 25.9 26.4 24.3 23.5 24.'. 22.9Commercial 7.2 6.2 6.6 6.6 7.1 7.2Residential 8.3 8.5 8.9 8.8 9.2 9.5

Energy Use by Sector (.) 100.0 100.0 100.0 10.0 100.0 100.0

Industry 52.1 54.1 55.0 58.5 57.5 59.2Transportation 30.0 29.4 27.6 25.2 25.1 22.9Commercial 8.3 6.9 7.5 7.1 7.4 7.2Residential 9.6 9.5 10.1 9.4 9.6 9.5

/a Totals may not add up due to rouiiding.Source: Ministry of Energy.

Table 9:3: PETP.OLEUN PRODUCT CONSaHPTION(Thousand Barrels)

Product 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

Avgas 158 172 185 176 151 140 112 62 59 59 51Avturbo 2,035 1,992 2,165 2,145 2,320 2,597 2,668 2,605 2,588 3,436 2,658Premium gasoline 4,171 4,177 5,124 5,530 6,102 6,832 6,652 5,866 5,700 5,941 6,206Regular gasoline 12,290 10,436 10,132 9,268 8,791 8,395 7,805 5,299 3,942 3,270 2,971Diesel 12,753 12,216 13,227 14,027 14,836 15,582 16,952 17,428 17,787 18,568 18,879Fuel oil 28,257 26,987 29,829 31,418 35,784 36,838 36,659 37,129 34,385 32,875 33,690Kerosene 3,320 2,878 3,154 3,236 3.393 3,683 3,463 3,179 2,860 2,803 2,569LPG 1,842 1,839 2,086 2,177 2,407 2,593 2,734 2,411 2,437 2,478 2,374Propylene - - - - - - 10 3 1 0 0Asphalts 435 295 425 458 377 397 418 343 359 462 538Refinery pticess gas 212 240 262 204 18i 211 236 233 210 105 185Solvents 221 221 244 237 214 230 371 311 312 297 170Naphtha 145 W82 748 676 866 709 792 813 805 476 349LAbes 1,102 907 912 900 905 999 1,064 965 903 914 1,038Grease 33 31 30 29 28 30 33 28 24 25 29Waxes and petrolatum 16 55 69 105 128 137 2 1 2 2 1

Total Producta 66,990 62,728 68,592 70,586 76,485 79,373 81,971 76,676 72,374 71,712 71,808

AddsRefinery fuel and loss 4,036 3,759 3,533 3,314 3,639 3,608 3,569 3,283 2,847 2,993 2,853

Total PetroleumConsumption 71,026 66,487 72,125 73,900 80,124 82,981 85,540 79,959 75,221 74.705 74,661

Source: tinistry of Energy.

- ;54 -

Table 9.4: ENERGY INVESTMENT PROGRAM(In millions of pesos)

Actual Estimate1978 1979 1980 198. 1982 1983 1984

National Power Corporation 4,761 5,859 4,959 6,623 6,304 8,005 9,703

Luzon Grid 3,281 4,990 2,971 4,068 4,420 5,605 6,307Oil-fired 855/a - - - - - -Coal-fired - - 2 238 284 1,631 709Hydroelectric 160 532 756 686 425 308 149Geothermal 737 1,386 800 726 502 577 332Nuclear 1,194 1,969 1,290 1,798 2,716 2,419 4,037Transmission 90 248 123 ;E20 492 644 1,081

Vissyas Grid 286 208 689 650 975 395 730Oil-fired 154 33 313 119 - 177Coal-fired 84 137 252 132 lo: 153 426Geothermal 3 3 98 335 716 37 2Transmission ,5 35 26 64 66 205 125

Kindanao Grid 128 258 875 705 830 992 1,407oil-fired 23 36 277 21 - - 13Coal-fired - - - _ _ _ _Hydroelectric 55 199 450 612 602 714 1,173Transmission 50 23 148 72 228 278 234

Other capital outlay /b 1066 403 424 1.200 79 -146R 1,259

National Electrification Admin. 483 387 511 595 946 803 1,447Rural electrification /c 483 387 511 553 384 452 843Dendro-thermal - - 28 350 100 358Mini-hydro - - - 14 212 251 246

Philippine National Oil Company 262 852 1.044 1,209 1.250 1839 1,272PNOC Coal Corporation 23 19 55 101 127 451 356PNOC Energy Development Corp. 73 125 256 408 687 1,170 212PNOC Exploration Corp. 29 36 57 35 52 161 185Other subsidiaries /f 137 672/d 676/dI 665/d 384 288 519

Total 5.506 7,098 6,516 8,427 8,500 10,647 12,422(4,406)/e (6,243)/e

Memorandum items (Z)Share of public investment 46.8 50.1 30.4 30.2 30.8 35.3

'37.5)/e (44.1)/eShare of GNP 3.1 3.Z 2.5 i.8 2.5 2.8

(2.5)/e (2.8)/e

/a Purchase of generating plants of the Manila Electric Company.7T; Includes surveys and investigations, engineering adminisrration, and improvement to plants.T7e Includes small amounts for NEA in-house capital expenditures.7-d Principally expenditures on tankers and refineries.7Te Excluding purchase of generating plants of Manila Electric Company.T Includes interest during construction for all PNOC subsidiaries in 1984-87.

Source: Ministry of Energy.

- 155 -

Table 9.5: NATIONAL POWER CORPORATION EXPANSION PROGRAMInstalled Capacity at Year's End (in megawatts)

Actual Est.1978 1979 1980 1981 1982 1983 1984

Luzon Grid 1,902 2,994 3,226 3,156 3,511 3,906 4,100Oil-fired 1,375 2,230/a 2,230 2,105 2,105 2,230 1,925Coal-fired - - - - - - 300Geothermal - 220 440 495 550 550 660Hydroelectric 527 544 556 556 856 1,126 1,215

Visayas Grid 73 93 103 224 263 478 506Oil-fired 68 88 95 166 202 192 220Coal-fired - - - 50 50 50 50Geothermal 3 3 6 6 9 234 234Hydroelectric 2 2 2 2 2 2 2

Mindanao Grid 213 429 487 523 550 617 682Oil-fired 11 47 105 141 141 181 141Hydroelectric 202 382 382 382 409 436 541

Philippines 2,188 3,516 3,816 3,903 4324 5001 5j288Oil-fired 1,454 2,365 2,430 2,412 2,448 2,603 2,286Coal-fired - - - 50 50 50 350Geothermal 3 223 446 501 559 784 894Hydroelectric 731 928 940 940 1,267 1,564 1,758

Memorandum item:Net capacityincrease duringyear /a n.a. 1,328 300 87 421 677 227

/a Includes purchase of generating plants of Manila Electric Company.

Source: National Power Corporation.

- 156 -

Table 9.6: NATIONAL ELECTRIFICATION ADMINISTRATION:LOAN RECOVERY FROM MEMBER COOPERATIVES

(millions of pesos)

Actual Est.1978 1979 1980 1981 1982 1983 1984

Total collections 2 15 20 27 71 124 163

Total amount due 5 36 69 132 213 283 340Current year 5 33 48 83 108 141 181Overdue from pre-vious years - 3 49 105 142 159

Collection ratio(Z) la 40 42 29 20 33 44 48

/a Ratio of collections to total amount due.

Note: The difference between collections in a year and the total amount due ina year is carried forward to the next year as "overdue."

Source: NEA.

- 157 -

Table 9.7: STATUS OF RURAL ELECTRIFICATION

Potential Actual Est.coverage 1978 1979 1980 1981 1982 1983 1984

Municipalities 1,340 651 829 934 1,060 1,149 1,195 1,270

Barangays 32,900 6,995 8,818 10,955 13,694 15,799 17,140 18,600

Households ('000) 5,700 845 1,118 1,441 1,770 2,034 2,284 2,605

Source: National Electrification Administration.

- 158 -

Table 9.8: PNOC AND SUBSIDIARIES - SCHEDULE OF CAPITAL EXPENDITURES(in million pesos)

Est.1978 1979 1980 1981 1982 1983 1984

PNOC-Own 76.0 81.0 142.0 384.0 97.0 92.9 5.2

Petrophil Corporation 25.0 51.0 39.0 35.0 39.0 46.0 35.0

Bataan Refining Corporation 36.0 180.0 114.0 42.0 17.0 60.9 60.0

Tanker Companies - 1.0 253.0 54.0 60.0 9.0 1.5PNOC Shipping & Transport Corp. - 149.0 29.0 19.0 45.0 7.7 5.7

PNOC Marine Corporation - 192.0 58.0 14.0 22.0 10.6 3.4

PNOC Coal Corporation 23.0 19.0 55.0 101.0 127.0 450.8 356.3

Malangas Coal Corporation - 18.0 34.0 92.0 70.0 51.1 3.2

PNOC Energy Drilling Inc. - - 7.0 25.0 34.0 8.9 0.8

PNOC Energy Dev. Corp. 73.0 125.0 256.0 408.0 687.0 1,170.2 212.1

PNOC Exploration Corp. 29.0 36.0 57.0 35.0 52.0 160.5 185.0

Others - - - - - 0.9 0.2

Capitalized interest - - - - - - 398.0during construction

Total 262.0 852.0 1,044.0 1,209.0 1,250.0 1,839.0 1,272.4

Source: PNOC.

Table 10.1: TOlJRISM: TRAVEL RECEIPTS AND VISITORS BY COUNTRY OF ORIGIN

Year Travel NUMBER OF VISITORS ('000)receipts --------------------------------------------------------------------

(US$ mln)/a Other United UK & WestTotal Japan Asia States Europe Australia Other

1972 122 166 26 24 49 16 13 381973 77 243 50 3}0 63 22 14 641974 58 410 151 46 57 23 18 1151975 110 502 158 67 75 30 29 14.31976 93 615 138 97 68 43 ;33 2161977 145 730 185 151 106 56 39 1931978 210 859 222 198 159 75 52 15.31979 238 967 254 202 179 100 53 1791980. 3210 1003 260 217 177 114 69 1711981 344 939 193 220 174 116 64 1721982 450 891 160 203 178 110 64 1761963 465 861 179 178 185 109 54 156

/a Travel receipts in balance of payments (Table 3.2 ).

Source: Ministry of Tourism, Central Bank.

Table 11.1

CONSUMER PRICE INDEX FOR THE PHILIPPINES<1978 = 100)

Weigh 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983t/.)

Indices

Food, Beverage:;, Tobacco 58..06 48.1 55.4 4.5 78.5 86 94 100 115.6 132.9 149.8 162.5 176.5Clothing 7.92 42.4 48.6 72.5 79.5 83 91.3 100 117.9 144.2 162 178.2 194.5Housing anj Repairs 10.49 44.4 57 68.2 71 60.5 90.9 100 118.3: 137.4 154.7 180.5 200.3Fuel,Light. and Water 5.23 43.4 47.4 68.8 75.4 83.6 29.4 100 127.6 173.8 211.5 240 281.6Services 10.66 46.7 53.8 68.5 76.6 83.1 91.9 100 121.1 152.1 171.2 192.9 216.8Miscellaneous 7.64 42 48.4 70.9 80 89 93.8 100 119.1 139.8 153.3 165.9 180.6All Items 100 46.4 53.91 72.47 77.54 84.96 92.99 10 117.55 138.98 157.06 173.19 190.53

Annual Change(X) /a /

Food, Beverages, robacco 15.2 34.5 5.4 9.6 9.3 6.4 15.6 15.0 12.7 8.5 5.6Clothing 14.6 49.2 9.7 4.4 10.0 9.5 17.9 22.3 12.3 10.0 9.1Housing and Repairs 28.4 19.6 4.1 13.4 12.9 10.0 18.3 16.1 12.6 16.7 11.0Fuel, Light and Water 9.2 45.1 9.6 10.9 6.9 11.9 27.6 36.2 21.7 13.5 17.3Services 1;7.2 27.3 11.8 8.5 10.6 8.8 21.1 25.6 12.6 12.7 12.4Miscellanenuz 15.2 46.5 12.8 11.3 5.4 6.6 19.1 17.4 9.7 8.2 8.9All Items 16.2 34.4 7.0 9.6 9.4 7.6 17.6 18.2 13.0 10.3 10.0

/a Percentage change from previous year.

Sources National Census an

TABLE 11.2: WHOLESALE PRICE INDICES FOR METRO MANILA(1978 = 100)

1976 1979 1980 1981 1982 198.3

IndicesFood 100 116.2 133.2 156.5 178.4 207.2Beverages and tobacco 100 115 134.6 147.2 160.2 178.2Crude materials, inedible

except fuel 100 125.3 137.9 139.6 164.9 217.7Mineral fuels 100 128.4 203 255.1 260.9 331Chemicals 100 t21.1 135.4 137.7 147.5 183.2Manufactured goods 100 121 146.1 162.8 170.3 184.3Machinery and transport

equipment 100 110.7 123.9 136.9 155.2 173.3Miscellaneous manufactured

articles 100 115.3 140 157.7 173.6 169.8All Items 100 119 140.6 159.2 176.3 208

Annual Change % /aFood 16.2 14.6 17.5 14.') 16.1Beverages and tobacco 15 17.0 9.4 8.8 11.2CrLude materials, inedible

except fuel 25.3 10.1 1.2 18.1 32.0Mineral fuels 28.4 58.1 25.7 2.3 26.9Chemicals 21.1 11.6 1.7 7.1 24.2Manufactured goods 21 20.7 11.4 4.6 8.2Machinery and transport

equipment 10.7 11.9 10.5 13.4 11.7Miscellaneous manufactured

articles 15.3 21.4 12.6 10.1 9.3All Items 19 18.3 13.1 10.7 18.0

/a Percentage change from previous year.Source: National Census and Statistics Office.

Table 11.3: RETAIL PRICES OF SELECTED COMMODITIES IN METRO MANILA(P per kg)

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984/a

Rice 1.28 1.72 2.02 1.90 2.03 2.10 2.10 2.36 2.51 2.73 2.98 3.20 6.29

Corn (Milled)White 0.94 1.08 1.45 1.47 1.55 1.60 1.60 1.70 1.96 2.31 2.34 2.44 3.85Yellow 0.82 0.91 1.39 1.53 1.46 1.60 1.60 1.67 2.00 2.23 2.35 2.49 4.44

Sugar (refined) 1.35 1.34 1.58 1.69 1.73 2.17 2.30 2.68 3.08 3.40 4.10 4.63 8.19

Meat (beef) 8.94 9.62 12.89 16.26 16.62 1R.32 21.36 25.75 31.24 33.39 35.71 38.18 54.16

ChickenLive 7.24 8.10 11.33 12.53 13.28 15.39 14.89 17.88 20.58 21.20 22.12 20.88 28.81Dressed 5.78 6.98 8.89 9.98 9.59 12.16 13.23 14.57 15.70 17.65 17.93 18.93 32.68

Pork 7.61 8.12 12.01 12.92 12.51 14.02 14.66 16.78 18.08 19.66 21.01 22.53 41.62

Pineapple (P/piece) - - - 2.32 2.16 2.33 2.71 3.45 3.00 4.17 3.94 4.69 7.48

Mango (P/dozen) 8.99 8.20 14.26 16.83 15.29 16.02 18.88 26.33 24.59 n.a. 30.30 35.38 58.81

Tomatoes 1.96 1.94 2.59 2.80 2.97 2.94 3.41 3.50 4.54 4.74 4.63 5.75 10.36

PotatoesIrish 1.40 1.42 2.48 2.72 2.30 3.01 3.42 4.01 3.99 5.71 4.99 5.46 7.55Sweet 0.71 0.75 1.02 1.02 1.29 1.37 1.46 1.82 1.56 2.10 2.13 2.71 4.70

Coconut oil (P/1 pt) 1.21 1.46 2.21 2.27 2.05 2.05 2.47 3.60 3.48 3.33 3.32 4.20 13.45

Source: NCSO and Central Bank.

- 163 -

Table 11.4: WAGE RATES INDEX OF LABORERS ININDUSTRIAL ESTABLISHMENTS IN METRO MANILA

(1972 - 100)

Daily money wage rates Daily real wage rates /aSkilled Unskilled Skilled Unskilled

Period laborers laborers laborers laborers

1972 100.0/b 100.0/c 100.0 i00.0

1973 105.3 102.6 92.4 00.0

1974 115.1 110.8 75.6 72.8

1975 119.7 120.1 72.7 72.9

1976 124.4 126.2 71.2 72.3

1977 137.5 132.9 72.9 70.4

1978 154.4 138.4 76.1 68.3

1979 170.1 145.8 70.8 60.7

1980 180.9 151.5 63.7 53.4

1981/d

1982/d

1983/e

/a Money wage rate index deflated by the consumer price index (1972 = 100) inManila.

/b Money wage in 1972 = P 12.47.

/c Money wage in 1972 = P 10.42.

/d No surveys conducted for these years.

/e Results of 1983 survey not yet available.

Source: Cential Bank of the Philippines.

- 164 -

Table 11.5: LEGISLATED EFFECTIVE MINIMUM MONEY AND REAL DAILY WAGE RATES /a

Metro Manila: highest minimum /b Agriculture: lowest minimum /cPeriod Money wage Real wage Id Money wage Real wage /d

1972 8.00 16.26 4.75 10.34

1973 8.00 14.04 4.75 8.91

1974 9.98 13.11 5.34 7.45

1975 10.65 12.94 5.74 7.49

1976 12.81 14.78 7.09 8.37

1977 15.18 16.24 9.47 10.15

1978 16.27 16.27 10.55 10.55

1979 23.19 19.24 13.51 11.53

1980/e 27.66 19.55 15.83 12.20

1981/e 31.49 19.84 18.36 11.71

1982 31.82 18.06 19.65 11.98

1983/e 42.07 17.54 25.90 11.05

1984 (June) 51.92 18.17 32.00 11.71

/a Minimum wage rates are set for 12 different categories - by location, type ofactivity and size of firm. This table presents only the highest- and lowest-paying categories.

/b Minimum wage payable by a large firm (capitalization of over 1 million pesos)in Metro Manila.

/c Minimum wage payable by a small-scale employer in nonplantation agriculture.

/d Money wage deflated by the Consumer Price Index (1978 = 100).

/e Weighted average, by duration, of the minimum wage rates legislated during theyear.

Source: (Money Wages) National Wages Council.(Real Wages) Economic Planning and Research Staff, NEDA.

- 165 -

Table 11.6: RETAIL PRICE CEILING FOR SELECTED COMMODITIES IN METRO MANILA(P/kilo)

Price ceiling Effective date

Rice 1.90 Jan 18, 19742.10 May 29, 19762.45 Apr 01, 19792.60 Aug 19, 19802.60 Aug 21, 19802.85 Jun 20, 19813.10 Jun 17, 19823.30 Oct 01, 19833.80 Dec 01, 19834.25 May 26, 19844.85 Jun 09, 1984

Corn grits 1.45 Feb 20, 19741.60 May 29, 19761.75 Feb 04, 19801.90 Aug 21, 19802.15 Jun 20, 19812.30 Oct 01, 19832.70 Dec 01, 19833.25 May 26, 19843.85 Jun 099 1984

Refined sugar 2.90 Feb 04, 19803.25 Aug 21, 19823.30 Jun 22, 19834.15 Mar 15, 19825.26 Oct 22, 19836.60 Jun 12, 19848.15 Jul 07, 1984

Brown sugar 2.10 Feb 14, 19802.30 Aug 21, 19802.35 Jun 22, 19813.10 Mar 15, 19823.73 Oct 22, 19834.70 Jun 12, 19845.70 Jul 09, 1984

Coconut edible oil (per qt) /a 6.68 Feb 14, 19806.95 Aug 21, 19808.01 Jul 19839.12 Aug 19839.28 Sep 19839.57 Oct 198311.75 Nov 198312.81 Dec 198316.71 Jan 1984

/a Delisted as of April 29, 1983.

Sources: Price Stabilization Council and National Food Authority.

Table 12.1: POPULATION BY REGION(In thousands)

1970 1975 1980/a 1981 /a 1982 /a 1983 /a 1984 Ia

National Capital Region 3,967 4,970 5,970 6,155 6,345 6,540 6,740

I (Ilocos) 2,991 3,269 3,543 3,612 3,682 3,754 3,828

II (Cagayan Valley) 1,691 1,933 2,227 2,283 2,340 2,399 2,460

III (Central Luzon) 3,615 4,210 4,827 4,947 5,070 5,196 5,325

IV (Southern Tagalog) 4,457 5,214 6,155 6,333 6,516 6,703 6,895

V (Bicol) 2,967 3,194 3,489 3,572 3,658 3,744 3,832

VI (Western Visayas) 3,618 4,146 4,538 4,646 4,755 4,866 4,979

VII (Central Visayas) 3,033 3,387 3,796 3,873 3,952 4,032 4,113

VIII (Eastern Visayas) 2,381 2,600 2,805 2,857 2,910 2,963 3,018

IX (Westerr, .1indanao) 1,869 2,048 2,547 2, 08 2,671. 2,734 2,798

X (Northern Mindanao) 1,953 2,314 2,773 2,851 2,931 3,012 3,094

XI (Southern Mindanao) 2,201 2,715 3,368 3,459 3,551 3,645 3,740

XII Central Mindanao) 1,941 2,070 2,278 2,340 2,403 2,467 2,532

Total 36,6R4 42,071 48,3!6 49,536 50,783 52,055 53,351

/a Projections based on moderate fertility and moderate mortality decline assumption, Projections;Series 2.

Source: National Census and Statistics Office.

Table 12:2 : CROSS DOMESTIC PRODUCT BY REGION (REVISED) 1972-198S3 AT CURRENT PRICES(MILLION PESOS)

Region 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

TOTAL 56464 72322 99533 114587 137273 154225 177669 217523 263692 304490 340610 384916

NCR Metro Manila 16690 21342 28252 33116 39586 45435 52573 63536 79698 93826 105682 121445I. Ilocos Region 2392 3330 4363 4540 5017 5732 6540 8394 10712 11844 13021 146151I. Cagayan Valley 1805 2408 3104 .3028 363G2 4297 5103 6310 7665 S800 9582 10786 a

111. Central Luzon 4824 6094 S80S 10202 11950 13391 15324 19098 24563 29803 33177 37019 wIV. Southern lagalos 7666 958Z 13542 16159 19341 22442 27031 32491 39652 44063 49807 57282 -

V. Bicol Region 2040 2552 3608 4073 4972 5860 6171 7373 9080 10422 10546 11813 1VI. Western Visayas 5552 6920 9796 11151 12349 13246 14423 17231 20266 23383 26408 29206

VII. Central Visayas 4013 5394 7616 8154 9516 10693 12029 15358 18471 20797 22654 25630VIII. Eastern Visayas 1687 2248 2999 3463 3753 3984 4498 5500 5227 7019 7695 8377

IX. Western Mindanao 1437 1849 2594 3098 3925 4677 6039 7501 9099 10798 11718 13105X. Northern Mindanao 2583 3265 4881 5372 8472 7869 'd900 11410 12789 14307 16823 17590

XI. Southern Mindanao 3T817 4999 7031 2529 10410 118ss .32e4 16257 18438 20397 22019 253J4Xil. Central Mindanao 1958 2339 3042 3702 4150 4705 57¶j4 7064 8032 9031 11478 12734

Sources NEDA National Accounts Staff.

Table i2:3: GROSS DOMESTIC PRODUCT BY REGION (REVISED) 1972-1983, AT CONSTANT PRICES(MILLION PESOS)

Region I 972 1973 1974 1975 1976 1977 1978 1979 1980 1981 19982 1983

TOTAL 56664 6123E8 64339 68492 75013 78486 '2791 P7959 92297 95963 99015 100134

NCR Pietro Manila 16690 18071 18262 19794 21632 2S122 24498 25692 :7896 29570 30722 31593I. Ilocos Region 2392 2220 2820 2714 2742 2920 3048 3394 3749 3733 3785 3802

II. Cagayan Valley 1805 2039 2032 1810 20.94 2157 2378 2552 2683 2773 2785 2806III. Central Luzon 4824 5160 ' 56C01 6098 657fl 68'5 7.41 7723 8597 9393 9644 9630 1IV. Southern Tagalos 7866 8113 8754 9659 10 5 6 9 114 1 12596 1313B 13879 13887 14479 14902V. Bicol Region 2040 2161 2332 2435 2717 29d2 2876 2981 3178 328F 3066 3073 c

VI. Western Visayas 5552 5859 6332 6665 6748 6741 6721 6968 7'093 7369 7677 7598VII. Central Visayas 4013 4567 4923 4874 5200 5442 5605 6210 6465 6554 6585 6666

VIII. Eastern Visayas 1687 1903 1939 2070 2051 2027 2096 2224 1830 2212 2237 2179IX. Western Mindanao 1437 1566 1677 1852 2145 2380 2814 3033. 3135 3403 3406 3409X. Northern Mindanao 2583 2765 3155 3211 4630 4005 4147 4614 4476 4509 4890 4576

XI. Southern Mindanao 3817 42.33 4545 5098 5689 6050 6190 6574 6454 6428 6401 6585XIl. Central Mindanao 1958 1981 1966 2213 2268 2394 2681 2856 2811 2846 333/ 3:31:3

…---------- --- ----------- ---- ------ - ------------- -- ----------------- ---- _ _ _ _ _ _ _ _ _ _ _ __ ___________-- --------------- -------

Source: NEDA National Accounts Staff.

- 169 -

Table 12.4: REGIONAL DISTRIBIUTION OF INFRASTRUCTUREINVESTMENT REQUIREMENT, 1983-87 /a

(in million pesos)

Actual Requirements1983 1984 1985 1986 1987

National Capital 1,123 3,263 2,767 2,233 3,805I. Ilocos 36 439 496 229 296II. Cagayan Valley 54 592 532 404 219III. Central Luzon 60 264 401 400 338IV. Southern Tagalog 104 592 955 915 589V. Bisco 52 359 493 331 289

VI. Western Visayas 46 350 695 262 157VII. Central Visayas 24 318 281 315 310VIII. Eastern Visayas 28 457 619 640 570

IX. Western Mindanao 36 264 249 111 93K. Northern Mindanao 64 230 556 335 206XI. Southern Mindanao 50 437 476 368 242XII. Central Mindanao 32 149 120 143 106

Total Regional 1,709 7,714 8,650 6,686 7,220

Non Regional/Nationwide 4,551/b 3,776 2,209 3,605 5,195

Power and Electrification /c 9*932 7,962 8,193 6,121 8,11-4

Total 162192 19.452 19,052 16,412 20,529

/a 1983 figures are actual using the average exchange rate of P 8.50: $1;1984 figures are based on the average exchange rate of P 16: $1 and1985-87 figures are at mid-1984 prices assuming a constant exchange rateof P 18: $1.

/b Includes the actual expenditures of PPA, PNR, Bureau of Air Transportation(MOTC), NIA, FSDC, LWUA Bureau of Telec.o'mmunications and Bureau of Posts(MOTC), NTC, and the Highway portion of ?hPWH for which regional breakdownare not available.

/c Regional breakdown not available.

IBRD 17234116 CLASSIFIATION OF PROVINCES 20l4- JldlE 19 13

BYGEOGRAPHIICAL REGIONS

NCR NATIONAL CAPITAL REGION

I ILOCrS VI WESTERIN VISAYASI lloomNorte 3BAkIanr PHILIPPINES2 Abln 39CIPiz

. 3 llocosSur 40Antique 20'20 A4 ourntain 411bilo

S La Union 42N1V0r Occidental6 equet VI( CENTRAL VISAYAS Airport7 Peqmnan 44Nqoros Oriantal

tCAGAYAN VALLEY 45BrhlO8 Batie 44Siquqor Roilwys9 C"WO n VilI LASTF RNVISAYAS … Prrrniol Boundors

:0 KCalinga.Apasacr 47NarthariwiSmtr Pc.ca onas1 liiteerS 4B5 M nsr p- R.giool Boundories12 Itugro 49lEaatern 5SrnirW Aporri 13Nunl Venyc Sle 1 - - - - InN VolyonolaBoundarie L14 Ouwino 51 Soathern L.Vte Loocg 9 - nentin odre(flCITNrRAL LUZON 01 WEI;TLRN MINDANAO15NueaEcilm 52Zan bowingadelNorte l; ' -'

Ii Tarlac 53Znmboengadel Sur 217 Zambales 54Bailan Iis Pumpna 55Sukb I;19 Bulacmn 56 Taviteni iio;o|20 Batlen X NJRTIIEKNNMINDANAO 3!gn

IV SOYIILN TAALOG 57Sung,aodaINorle Son 1IV souA-aRN 1At;ALOt; 5BCnigurn Fernando 6 : v

23 Airol 68Mgnis Orien t l N0 50 00 ISO 2100 2gr 30033 OunSOfi ~~6$ Mnnmis Orcidental ~ 4KILOMETERS

18, 24 Caiete 621u Mitrion OMIiLnta25 Laqun 61 Aukrdn de1u5fl 10 li26 asugan 3AunuSr son 2' o :0 s 2

7Merinduque Xi I ASIRIN INI1)NA(i Jo. 1

28 Min.dor Oriental 64 Suniqao del Sur TA :.C29Mindoro Occidental 65DaDraoOr.entai I1 13C Ronmblon 660mao AngeleA i 19 r-31 Palasn 6 7 0.w,o del S., 17'>

V BICOL 68 South Cotabato

32Carmurines Nortn. XI t} 4rRAL%INI)ANAt) NCRAlA)LAM3 Cainaines Sur 69 Lan.so dcl Nor le34 DC__sSuam 70 L a.o del Sur 3235 ACav dae 71 North Cotoa. iato36 Aolgay 72 Amaqu.Inm 33a

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