RESTRICTED Report No. EAP-16a

Public Disclosure Authorized This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

CURRENT ECONOMIC POSITION

AND PROSPECTS

OF THE

PHILIPPINES Public Disclosure Authorized

August 10, 1970 Public Disclosure Authorized

East Asia and Pacific Department CURRENCY EQUIVALENTS

Before Feb. 21, 1970

US$ 1000 Pesos 3q90 Pesos 1,000 US$ 256.40 Pesos 1 million US$ 256,400

After Feb. 21, 1970

US$ 1000 Pesos 6.00 (rate used in the report; official rate is floating between F5.80 and 26.,30) Pesos 1,000 US$ 166.67 Pesos 1 million US$ 166,667

FISCAL YEAR

In the Philippines the Fiscal Year covers the period July 1 to June 30. This report is based on the findings of an Economic Mission which visited the Philippines from April 3 to May 8, 1970. Its members were:

Rudolf Hablutzel Chief of Mission Miss H.J. Goris General Economist George C. Maniatis General Economist K. Bengt 0. Holmgren General Economist Jose Datas-Panero Industrial Economist Norton N. Franklin Consultant for Employment (II0) Mirko Lamer Agricultural Consultant

This report was reviewed by the Economic Committee in July 1970.

TABLE OF CONTENTS

Page No.

BASIC DATA

SUMMARY AND CONCLUSIONS i - v

I. RECENT DEVELOPMENTS

A. Background 1 B. Economic Growth and Sector Developments 3 C. Infrastructure Program 7 D. Money and Credit 9 E. Balance of Payments Problems 12 F. The Stabilization Program 18

II. THE FOUR-YEAR PLAN

A. Introduction 24 B. Overall Targets 24 C. Government Investment 27 D.. Public Finance 29 E. Administrative Changes and Policies 34 F. Private Investments 37 G. Agricultural Development 39 H. Planning for Industry 45 I. Employment 55 J. Education 57 K. Family Planning 59

III. BALANCE OF PAYMENTS OUTLOOK

A. Exports 61 B. Imports and Invisibles 63 C. Short-Term Debt 67 D. Capital Requirements 68

Annex PRE-INVESTMENT ACTIVITIES

STATISTICAL APPENDIX

BASIC DATA

Area 297,000 square kilometers

Population Total (1970 mid-year) 38.5 million Rate of growth 3.5% Density 130 per square kilometer Gross National Product Total 1969 (current market prices) P31.1 billion Growth rate 1968/1969 6.3% Per capita GNP 1969 US$207

Gross National Product by Expenditure (percent) 1962 1968 Private consumption expenditure 70.1 757 Government consumption expenditure 8.8 9.3 Gross domestic capital formation 19.6 22.3 Net exports of goods and services -7.2 -4.2 Net factor income from abroad -o.5 -1.3 Errors and omissions 1.2 -1.6 100.0O 100.0

Net Domestic Product by Origin (percent) 1962 1969 AgrIculture, fishery and forestry 307 3§7 Mining and manufacturing 20.4 18.9 Others 48.8 45.5 1L00.0 100.0

Balance of Playents (US$ million) 1959 1964 1969 Merchandise export -1:5 =7 3 Merchandise import -524 -780 -1,131 Net services -95 -1 -132 Net transfer payments 131 109 152 Current account balance 56 85 -238 Net long-term capital 79 32 101 Bas'Lc balance 135 117 -137 Major Exports (percent) 1969 Coconut products 19 Sugar products 18 Forest products 33 Mineral products 19 Others 11 BASIC DATA Page 2

Foreign Exchange Reserves (US$ million) March 1969 March 1970 International reserves a/ 218 197 Net reserves b/ 46 -111

External Debt (US$ million) c/ APril 1970 Long term 624 Medium term 457 Sub-total l,Of Short term 329 Total I,N1

1970 1971

Debt service d/ 460 309

Debt service ratio d/ 32.5% 20.5%

Central Government Operations (million Pesos) FY 1963 FY 1969 Revenue 1,77U 2,862 Current expenditures 1,493 2,873 Capital expenditures 390 844 Net cash operating deficit e/ 186 637

IMF Position Quota US$110 million Drawings outstanding US$100a5 million Par value - up to Feb. 21, 1970 P3.90 per US$1 After Feb. 21, 1970 P5.80 to P6.30 (floating)

Bank/IDA Operations Bank loans outstanding (Dec. 31, 1969) US$197 million Undisbursed US$89 million

a/ Net reserves of commercial banks plus gross reserves of Central Bank. b/ Net reserves of commercial banks plus net reserves of Central Bank. _/ Public and private debt. d/ Assuming debt rescheduling. e/ Including government corporations. SUMMARY AND CONCLUSIONS

1. Up to 1969 the Philippine economy has been growing at a satisfactory rate. GNP increased at about 6.2 percent a year since 1966, compared with just over 5 percent in the preceding three years. This acceleration has been achieved through stepped-up investments, both private and public, and was accompanied by a reversal from a balance of payments surplus position into a sizeable deficit, substantial losses of reserves, and short-term borrowing abroad. Prices moved up at a moderate pace of about 4 percent a year.

2. Agriculture and forestry have been making greater advances than other sectors. Contributing factors were the introduction of new rice varieties, making the country self-sufficient in this crop for the first time last year, the provision of additional irrigation, a modestly favorable development of rural credit, and rapid exploitation of forest resources. As a result, 40 percent of the increment in GNP in the last three years originated in agriculture and forestry, and their share in GNP increased to about 32 percent. The second largest contribution to growth (perhaps 30 percent) originated in manufacturing and mining. The latter is an increasingly important and export-oriented sector with substantial future potential; manufacturing is largely inward-oriented, protected, and comparatively inefficient, so that rapid expansion of plant in some branches has led to under-utilization of capacity, as the limits of the domestic market were reached. Its heavy import dependence makes manufacturing vulnerable to adverse changes in the country's balance of payments position. Export industries on the other hand, e.g. wood processing, are plagued by structural problems such as uneconomic size and location.

3. Exports since 1966 have virtually stagnated, mainly because of a decline in coconut products and abaca, and a stagnation in the volume of sugar exports at a level well below the quota available in the U.S. market; this was offset by increases in logs, copper and other exports, but total earnings increased only from $828 million in 1966 to $855 million in 1969, while merchandise imports continued to grow at a rapid pace from $853 million to $1,131 million. Only about 10 percent of imports are finished consumer goods, mostly essential items like cereals, fish and dairy products.

4. The deteriorating trade balance, reinforced in 1968 by adverse developments in the invisible account, in turn caused speculation against the peso in the form of unrecorded exports (explaining the drop in official exports of copra), diversion of invisible receipts to unofficial channels, and reliance by investors on excessively short-term credits from abroad.

5. In the course of 1969, during the election campaign which led to the reelection of President Marcos in November, monetary and fiscal discipline was relaxed to the point of causing a 32 percent increase in domestic money supply, with a net increase, after partial neutralization through a decline in foreign reserves, of 19 percent. Government deficit - ii - financing was responsible for virtually all of this. Heavy short-term borrowing from abroad continued, and the year 1970 started with the prospect of amortization and interest payments falling due in the amount of over $500 million.

6. Already in November 1969 severe import restrictions had to be imposed; in December a fiscal austerity program was announced; and in February 1970 a stabilization program was incorporated in a Standby Agreement with the IMF. The agreement provided for a floating exchange rate, abolition of exchange and trade restrictions, limitation of new borrowing abroad, a program of monetary stabilization through tightening of credit and budgetary restraint, and introduction of new tax measures. The floating exchange rate, which moved quickly to around P6 per $1, was accompanied by the requirement to surrender 80 percent of major export proceeds at the old par rate of P3.90 per $1 and sterilization of the resulting exchange profits by the Central Bank.

7. Progress in implementing the Standby Agreement up to July has been on the whole satisfactory. However, given the comparatively dis- tressing balance of payments prospects and the absence of positive exchange reserves, the resulting degree of devaluation under the floating rate has imparted a strong upward push to prices in import-dependent sectors, while creating large windfall gains to exporters not affected by the exchange surrender scheme. In May, after protracted debate in Congress, this scheme was replaced by an export tax of 10 percent for unprocessed and 8 percent for semi-processed exports; this further improved the position of the four main exports as well.

8. In the meantime, some social unrest had occurred; partly in response to this, a law was passed to increase minimum wages by a third. This will further increase cost and price pressures. The floating exchange rate of about P6.10 per $1 may have temporarily undervalued the peso. However, with the ongoing price movements the prospective equilibrium level remains uncertain.

9. A draft Four-Year Plan for 1970/71 to 1973/74 was submitted to the National Economic Council in May 1970. It incorporates a set of reasonable and comparatively modest macro-economic targets, by taking account of the severe balance of payments constraint that has arisen, at the start of the Plan, from the present short-term foreign debt problem, and of the inevitable economic retrenchment associated this year with the effort to stabilize the monetary situation. GNP growth is projected for FY 1971 at 4.5 percent, to improve gradually to 6.5 percent in FY 1974. In all likelihood, the slowdown in FY 1971 will be somewhat sharper, while possibilities exist for a somewhat higher than projected growth rate towards the end of the Plan.

10. Agriculture is given high priority in the Plan after having been somewhat neglected in the past, and is expected to continue as the leading sector of the economy, although at a slightly reduced pace of 6 percent a year compared with 7 percent in recent years. Policies necessary to achieve agricultural diversification will need to be given more focus than is given in the Plan. In particular, price policies for rice and corn will have to be worked out in the light, among other things, of initial experience with rice exports. Similarly, some questions remain to be solved with regard to adequate credit and other inputs such as fertilizer, particularly since the devaluation has pushed up their prices. Land reform has go far been implemented at a very slow pace and will need to be given more attention.

11. Manufacturing industry will have to carry the brunt of the adjustment that goes with the reduction of imports by nearly 10 percent during 1970. Excess capacity has already been built in several industries including cement, glass, textiles and paper. This will now be aggravated in many cases by the constraint on imports of raw materials. Industrial value added grew 8 percent in 1968, 4 percent in 1969 and probably zero in 1970. Industrial recovery will depend on how rapidly the balance of payments situation improves; the Plan assumes a gradual recovery of the manufacturing sector to a growth rate of 9 percent by 1973. Considerable improvements in industrial policy have already begun to take effect with the 1967 Investment Incentives Act, and the Board of Investments has made a creditable effort to guide private investment into priority areas.

12. A comprehensive Transport Survey was recently completed and should enable the government to make further substantial efforts to improve transport infrastructure in the Philippines in the coming years.

13. The government's Infrastructure Program, which in the last four years has already been doubled from the preceding four years, is proposed in the Plan to increase again by 150 percent, but this incorporates the price effects of the devaluation. Of the total amount of P6.2 billion to be invested, 41 percent is planned to be spent on highways alone; power is expected to absorb 15 percent and irrigation and water supply about 9 percent each. The priorities are generally in line with the needs of the country.

14. As regards public finance, to achieve the planned acceleration in government investments (from 10 percent of total capital formation in 1969 to 21 percent in 1974) the Plan proposes a sharp slowdown in the growth of current expenditures and an increase in taxation, from the present 10 percent of GNP to 12 percent in 1974. The latter target would represent a creditable improvement but would still be a modest ratio; since the proposed targets for current expenditures are probably unrealistic, a somewhat larger effort in additional taxation should be given active considerationr.

15. A Commission on government reorganization with wide terms of reference is expected to submit its proposals later this year. The Plan already suggests far-reaching changes in the machinery for economic planning and Plan execution, which could result in considerable improve- ments in the country's economic management. Some changes have taken place - iv -

recently in the field of financial planning through merger of three different advisory committees, and by establishment of a Presidential Development Budget Committee permitting wider representation in policy- making for capital expenditures. To improve on cash management, an operational cash budget is being established for which the IMF is expected to provide technical assistance.

16. The Plan projects exports to grow at a rate of nearly 10 percent a year between 1970 and 1974. Even allowing for deterioration in world market prices for some key products like copra and copper, the mission comes up with a very similar rate of growth. Important factors are the expansion plans of mining companies, and new large mining ventures in nickel, and a return of part of the unrecorded copra as well as some other exports into official channels. Continued expansion in log exports is also expected, and some new exports such as bananas. Little allowance is made in the projections for manufactured goods, but with the devaluation, some industries might well find it profitable to develop export markets.

17. Total imports according to the Plan would increase at 5 percent a year after a decline in FY 1970 by 10 percent. The mission considers this too low a level to support the recovery of the economy to previous growth rates, and tentatively postulates an expansion of imports at about 8 percent year which would be in line with past experience. This of course, will result in a resource gap somewhat larger than in the Plan.

18. An agreement is about to be concluded with U.S. banks to restructure Central Bank short-term debt obligations in the amount of $207 million, most of which was falling due in 1970, but is now to be made repayable over six years starting in 1971. A similar agreement is hoped to be reached with European banks for an amount of $27.5 million, all falling due in 1970. A one-year standby agreement was obtained in April from a group of Japanese banks in the amount of $50 million.

19. After restructuring, total amortization payments in 1970 would still be $361 million, and if $99 million of interest is added, debt service this year is still equivalent to about 33 percent of gross foreign exchange earnings. It will go down to 21 percent in 1971 and assuming a gross inflow of foreign capital of about $350 million annually in the next four years, the ratio might be in the order of 14 percent in 1977.

20. A change in the nature of the capital inflow, compared with what it has been in recent years, is projected in two respects. First, borrow- ing at terms of less than five years should be avoided because even after the restructuring, the time profile of service payments still shows a heavy concentration in the immediate years ahead. The IMF Standby Agreement in fact precludes any borrowing at less than five years. Secondly, there should be a marked increase, between now and 1973, in the proportion of long-term official borrowing for projects in the public sector, and a relative decline in suppliers' credits for investments in the private sector. The government's infrastructure program implies that project aid disbursements would increase from a present level of about $34 million to over $150 million annually towards the end of the Plan. This assumes a rapid build-up in project preparation, of which there is already some evidence; some doubts remain nevertheless about the achieve- ment of the target quoted. Finally, the government is preparing a program for official commodity loans; there is justification for seeking such loans in amounts of up to about $100 million a year, but efforts should be made to obtain such loans on terms that would not aggravate the debt burden in the coming years.

21. Of the total capital inflow projected for the next four years, almost 90 percent will be offset in the balance of payments by amortiza- tion and interest, and 7 percent would result in replenishment of reserves. The small size of the required net transfer is indicative of a basically sound position of the economy and relatively favorable long-term prospects of the balance of payments. The size of the projected debt service burden should not by itself give cause for concern, and the Philippines can well afford to envisage additional borrowing on the scale indicated, provided that average amortization terms are reasonably long and initial grace periods are obtained.

CHAPTER I

RECENT DEVELOPMENTS

A. Background

1. In November 1969 Ferdinand E. Marcos was reelected to the Presidency of the Philippines, with a majority of some two million votes out of nine million cast. This victory was unprecedented in that he is the first President to be returned to office for a second term, and since the Constitution precludes reelection for a third term, it carries with it the hopeful promise that the next four years will be a period where considerations of political patronage will be of far less weight in the framing and execution of economic policies than they have traditionally been, and that towards November 1973 there would be far less of a motive for the administration to engage in massive spending and borrowing, only remotely related to economic development, as has occurred last year. In other words, some of the political restraints on responsible economic management in the Philippines should not now be expected to apply for a considerable time.

2. The Philippines is reputed for its systematic adoption of dem- ocratic processes of government along American lines; indeed her consti- tution is modelled after that of the U.S.A., with the same functions and powers vested in the President, and with the same checks and balances between the Executive and the Legislature, which consists of a Senate and a House of Representatives. Congress has traditionally been very jealous of its prerogative to legislate in virtually all matters pertaining to the government's economic and financial policies, and this has tended to limit the government's freedom of action for economic development. This is not to say that members of Congress are not enlightened. However, in a country which also has extreme income disparities between the mass of the people and the privileged rich, the operation of political pressure groups has often succeeded in modifying proposed legislation in favor of vested interests. This is exemplified in income tax legislation of recent years which has made the tax system increasingly regressive, and in the extraordinary difficulty which the adminietration has been facing in increasing taxation generally. Besides this, legislative action tends to be slow even if, as in the case of the recent export tax, protracted debate is known to produce disruptive effects on the balance of payments.

3. The administration itself is not free of its own shortcomings and over the years has grown into a large and complex organization. Reg- ular line departments dealing with finance, agriculture, etc. are supple- mented by a proliferation of agencies reporting directly to the Office of the President, including innumerable Committees, Commissions, Councils, Boards, and Authorities, all with representation from various other agencies and government departments, so that the amount of debate involved in the decision-making process is unusually heavy, suggestive of a deep- seated need for democratic consensus, and on occasion of unproductive use of time and manpower. - 2 -

4. Against these general observations and in spite of these limit- ations, the first Marcos Administration has a number of notable achieve- ments to its credit. It has succeeded in raising more financial resources both through improved tax administration and some new revenue measures. It has greatly stepped up investment expenditures on badly needed infra- structure works. The creation of the Infrastructure Operations Center has been helpful in improving the execution of infrastructure investments through centralized control.

5. The National Food and Agriculture Council was set up to central- ize information and coordinate the activities previously carried out in- dependently by the various agencies charged with limited and specialized aspects of agricultural development. Through promotion of new seed var- ieties, price incentives, increased agricultural credit and improvement in transport facilities, it has made it possible for agriculture to move on to a growth path since 1966 leaving behind all other sectors of the economy.

6. An Investment Incentives Act was passed in 1967, which established tax incentives for priority industries, and the Board of Investment, es- tablished to implement this Act, has become a competent and effective institution; it produces annual Investment Priorities Plans, which provide general guidance for private investment. A general Transport Survey was undertaken, which will serve as a basis for future transport investments over a ten-year period. A Commission was constituted to prepare recom- mendations on the reorganization of the government itself, which is ex- pected to complete its work later this year. A comprehensive survey of education and training the Philippines was started in early 1970 and a first draft is expected for October.

7. While improved economic management has resulted in a slight increase in the overall growth rate from less than 5 percent a year before 1966 to over 6 percent from 1966 through 1969, the stagnation of exports has at the same time created serious balance of payments problems, and these have been compounded by the loosening up of monetary and fiscal discipline in the election year 1969. Also, short-term foreign debt obligations reached unusual proportions. At the same time, little has been achieved toward a diminution of the gap between the rich and the poor; the land reform was not carried out with anything like the necessary vigor, and real wages of industrial labor have shown some decline.

8. Not long after the election, sporadic demonstrations begun in Manila, led by students but gathering support from the working class. After the Stabilization Program and the floating exchange rate was announced in late February, this was followed by some strikes and further mass demonstrations. All this is an expression of a long felt malaise in Philippine society, brought to eruption already during the heated election campaign and later by the most recent inflationary pressures affecting the mass of the people particularly in urban areas. -3-

9. Certain personnel changes made by the President in the Admin- istration not only seemed to have helped student demonstrations to subside, but by any standards hold out the promise of greater efficiency and rationality in the conduct of the affairs of government. Also, prepara- tions have started for a Constitutional Convention to convene on June 1, 1971 for which the delegates are to be elected in November 1970, based on strictly proportional representation. The issue is a general but vague dissatisfaction with the malfunctioning, in the Philippines, of a form of government inherited from the United States. It is not clear yet what reforms, if any, will emerge from this convention. One issue which has already given rise to debate, will certainly be a change in the present tenure of the Presidential office.

10. In the meantime, the government has before itself the difficult task of maintaining economic growth and stability at the same time. A certain degree of monetary and financial stabilization has already been achieved in a relatively short time, and the effective devaluation achieved through the floating exchange rate has emitted certain shock waves on the structure of aggregate demand and of prices. Certain import dependent activities are living off inventories and others are reducing work hours. At the same time, minimum wages were increased by a third through Act of Congress, and the introduction of price controls is under discussion. Prospects exist for some increase in unemployment. The government will not be able to afford a serious or prolonged economic setback that might be caused by upward pressures of costs and monetary contraction. The success of the Stabilization Program will have to be watched very closely in the coming months, and means are available to adjust it, in cooperation with the IMF, to enable the economy to regain its earlier momentum.

B. Economic Growth and Sector Developments

11. The performance of the Philippine economy in past years can be regarded in many ways as quite satisfactory, although if measured against the country's resources and economic potential, it can be argued that economic growth should have been somewhat higher. Average real growth from 1963 to 1969 has been 5.6 percent a,year with a slight acceleration to rates over 6 percent during the last three years. This acceleration followed an increase in the rate of fixed investment from a previous average of 18.3 percent of GNP to 20.5 percent in 1967 and to 21.2 percent in 1968 and 1969; it also went hand in hand with a sharp deterioration in the current external account and a decline in the rate of savings.

12. The Philippines has large resources in the form of agricultural land, mineral deposits, and above all, a level of literacy and general education almost unique in South East Asia, which partly accounts for, and certainly made possible, a dynamic native enterpreneurial class. Awareness of business opportunities and willingness to take risk for profit is widespread among the population, and material advancement ranks - 4 - high among personal and social values. Free private enterprise is a basic belief for an important majority of the people. This is not un- related with the historic relationship with the United States, which in turn also has continued to benefit the economy through close association of Filipino enterprises with U.S. private investment and through special preferences for Filipino products in the U.S. market.

13. In contrast to most countries of the region, the role of the public sector in the economy is small. Almost 90 percent of total invest- ment is private, although under the first Marcos administration public investment was more than doubled. This creates a difficult task for the government to give a measure of direction to the country's investment pattern through indirect means. Tax and other incentives by the govern- ment are powerful means to act on private enterprise; however, in the peculiar circumstances of Filipino politics, it is the very private enter- prises who would be the object of such government action, who are best represented in the legislature and have powerful means to pattern such action in a way to suit the national interest as they define it. This creates certain drawbacks and hampers the implementation of policies drawn up by economic planners. In fact, it accounts for the remarkable ineffectiveness, in the past, of economic planning in the Philippines, where no less than 15 Plans were prepared in 20 years but where economic policies and measures in retrospect tended to bear only very remote resemblance, if any, with those envisaged in the plans.

14. As can be expected, industrialization proceeded along the lines of least resistance, i.e. import substituting industries are placed under heavy protective umbrellas. An attempt at a liberal import policy in the early sixties, based on the assumption that exposure to international competition would cause established industries to improve their efficiency, in fact brought these industries into grave financial difficulties and necessitated government action through financial institutions to restore their solvency.

15. As can be expected also, taxation and public finance has been a weak spot in the Philippines' economic performance for a long time. Taxation tended to become more regressive than progressive; this is one factor making the Philippines one of the countries with the most conspic- uous inequalities in income distribution, and with almost the lowest ratio, in Asia, of government revenues to GNP. This in turn severely limited the scope for public investments, and has been responsible for many short- comings in the country's economic infrastructure.

16. Within this setting, the private sector has been marking the pace for economic development. In agriculture, the introduction of high- yielding varieties of rice has given an added boost in recent years; copra production increased at over 5 percent annually through the sixties, and logging continued to expand very rapidly. The result has been that in the last three years agriculture and forestry advanced faster than any other sector in the economy and was responsible for 40 percent of the increment in net domestic product between 1966 and 1969 as shown below. Besides the farmers, some credit for this achievement must also be given to the government in their endeavor to make additional inputs available, particularly water, and in promoting rural credit. Change in Net Domestic Product, 1966-69 (In million Pesos)

Share Annual Contribution in NDP rate of to aggregate 1966 1969 1969 growth growth

Agriculture/Forestry 4,071 5,040 31.9 7.4 40 Mining/Manufacturing 2,564 3,043 19.2 5.9 20 Construction 505 531 3.4 1.7 1 Transport/Utilities 634 724 4.6 4.5 4 Commerce 2,023 2,301 14.5 4.4 12 Other Services 3,613 4,179 26.4 5.0 23

NDP at 1955 factor cost 13,410 15,818 100.0 5.7 100

GNP at 1955 market prices 15,673 18,792 6.2

17. The contribution of mining and manufacturing to growth in recent years appears rather modest with an annual growth rate of 5.9 percent, which incorporates a considerably higher rate in mining. There is no doubt that manufacturing industry is plagued with several diffi- culties of a structural nature, the most important of which is its heavy import dependence. Thus, while in 1968 manufacturing output grew by about 8 percent, the introduction of import restrictions brought this rate down to 4 percent in 1969.

18. The general performance of manufacturing industry in the last five or so years is particularly difficult to evaluate because of the increasingly inadequate coverage of new industries in the national accounts. Value added in manufacturing is estimated to have grown at only 3.5 percent a year between 1963 and 1968. However, other indicators would suggest a much higher rate of growth, as shown below. Informed guesses suggest a real rate of growth of at least 6 percent in the last five years.

Annual Rates of Growth

1956-1960 1963-1968

Cement consumption 13.6 14.0 a/ Electricity generation b/ 16.7 11.6 Imports of raw materials n.a. 9.7 Imports of- semi-processed materials n.a. 14.6 Value added in manufacturing 6.3 3.5 a/ 1963-1967 b/ MERALCO - 6 -

19. The year 1968 was a relatively good year for manufacturing with a recorded increase of 8.2 percent in real terms because of (a) income increases in agriculture, (b) increased public expenditures, and (c) res- trictions on imports of consumer goods providing added protection to local producers. Industrial growth began to slow down in 1969 and as noted was about half the previous year's. No growth is expected in manufacturing during 1970 and only a slight expansion is foreseen for 1971.

20. Estimated employment in manufacturing has grown only 13 percent in all between 1963 and 1968, to reach a total of 341,000 persons. This implies a significant decline in the growth of employment generated by the manufacturing sector, due to increases in productivity and the use of more capital intensive methods partly encouraged by government policies. (In the decade ending 1966, the value of fixed assets per person employed increased by 120 percent, and the value added per person increased by 90 percent.).

21. Gross fixed capital formation in manufacturing in the last five years has been growing at about the same rate as the economy as a whole with a constant share in gross domestic capital formation of about 23 percent. In some branches like textiles, chemicals, cement, iron and steel products, glass and rubber products, low capacity utilization is becoming an important problem. The Board of Investment has designated some of these branches as "overcrowded industries" and has taken steps to prevent further investments in such industries. Most recently, with a considerable number of new sugar mills coming up, this industry has been incorporated in this category.

22. The mining sector, because it is almost entirely export oriented, has been faring better than manufacturing; the most important product, copper concentrates, which accounts for about one-sixth of GDP originating in mining and manufacturing, has been growing 12.5 percent a year in volume and 21 percent a year in value from 1966 to 1969. Further substantial expansion in copper as well as new large investments for nickel are planned or under way.

23. In agriculture, progress has been quite remarkable up to 1968; a series of typhoons in the first half of 1969 and prolonged drought in the second half considerably reduced the growth in output of major crops. In the case of rice, a considerable decline would have occurred had it not been for the increase in acreage under high-yielding and short-matur- ing varieties. The supply was still sufficient to cover domestic con- sumption. Total crop output in 1969 increased only 1.9 percent compared with about 5 percent in 1968. Corn was not affected by the drought and output increased 7 percent, a rate barely below previous years. Copra made the largest advance, with production up 12.6 percent. On the other hand, surgarcane suffered and sugar production was virtually unchanged from the previous year. -7-

24. In principle, conditions would exist for the green revolution in the Philippines to gain momentum, and for agricultural production particularly in 1970 to increase at a high rate over 1969. In fact, the present crop year for rice and sugar looks very promising and an export surplus in rice can be expected. It seems possible, however, that a reduction of output might occur in 1971. With a high price elasticity of demand for inputs like fertilizer and equipment, the devaluation of the peso which will be discussed further on, caused price increases of about 50 percent for these items, and domestic sales of fertilizer have already declined by half in recent months. Even if agricultural credit were adequate or could be stepped up appreciably, it is doubtful that farmers would be prepared to pay the new price. What is of particular concern is that inadequate or no fertilizer application on high-yielding rice brings their yields back to those of traditional strains, and given the taste difference could discredit these varieties in the eyes of the farmers.

25. In the case of sugarcane, on which half of the country's fer- tilizer is applied and where fertilizer has accounted for 25.30 percent of production costs, the change in the price will be particularly felt, and a resulting decline in sugar production would be especially unfor- tunate as the U.S. quota for Philippine exports has still not been filled and manufacturing capacity is being sharply increased.

C. Infrastructure Program

26. Infrastructure investments had for many years fallen short of the country's needs. A Four-Year Infrastructure Investments Program (July 1966 to June 1970) was adopted in 1966, which spelled out targets both in financial and physical terms and incorporated a regular progress reporting and trouble shooting procedure, and aimed at substantial increases in development expenditures by the central government, which form the major part of public investments; principal aspects of the new program were highways and schools. The P2,745 million program is being executed by technical government agencies like the Bureau of Public Highways, Civil Aeronautics Administration, Irrigation Service Unit and National Power Corporation, as well as units of the Armed Forces of the Philippines. For program supervision a special Infrastructure Operations Center was created, which not only keeps track of progress but moreover has been of great help in eliminating bottlenecks which cause delays in execution.

27. So far, the administration has managed to achieve a remarkable progress over previous years, by more than doubling overall infrastructure expenditures as compared with the preceding four-year period. In financial terms, the program is likely to be implemented to the extent of 84 percent of the target, or slightly less if expenditures for cormunity development, added later to the program, are excluded. Physical achievements in school- building construction, asphalt and gravel roads, communal irrigation and pump installation for irrigation, all exceed their original targets. Some other categories, like national gravity irrigation, scored very low, though. In this category, new projects had to be put off repeatedly because of lack of funds.

Expenditures on Infrastructure Program

1966/67 to 1968/69 a/

(In million Pesos)

3 Years % of 4-Year 4-Year 1966/67 1967/68 1968/69 Target Target

Highways 179 260 230 960 70 Airports 10 11 33 135 40 Ports 29 35 22 123 70 Telecommunications 16 18 22 123 46 Power 60 60 32 285 55 Irrigation 25 33 45 294 35 Water supply 63 63 84 328 64 Buildings 32 88 104 283 79 Other 7 13 19 60 65 Total 421 581 596 2,745 58 a/ Includes only expenditures in domestic currency.

28. During 1969/70, the last year of the program, cash releases on infrastructure investments will considerably increase over the previous year, but not all of these releases will have been spent for purposes originally included in the program. Since this was an election year, public expenditures were influenced by political considerations; between July and November 1969, about 0170 million was spent on community devel- opment projects, about half of which was charged to regular agencies' funds for various types of projects for road improvement, irrigation, flood control, etc. For part of the balance it has been difficult so far to ascertain physical accomplishments or to relate them to the Infra- structure Program.

29. Realizing the monetary implications of rapid spending, the government sharply curtailed infrastructure expenditures after the election. In the first 5 months of 1969/70 P445 million had been released, which is a level 70 percent higher than in 1968/69. At the beginning of December 1969, the Budget Commission issued a directive suspending all projects executed by the technical agencies themselves and not by contractors; this brought monthly releases down from P85 million to P15 million. With the lifting of this measure in March 1970, expenditures increased again, and for the year as a whole, total peso expenditures may exceed P700 million. -9-

D. Money and Credit

30. For many years monetary policy has been determined by two prin- cipal considerations; namely, first, the credit needs of the public sector caused by the notorious inadequacy of tax revenues and the limited scope of non-bank borrowing by the government, and secondly, the need to impose credit restraints as inflationary pressures translated themselves into pressure on the balance of payments. While the first factor has been of a more or less permanent nature, the second consideration gained weight whenever foreign exchange reserves began to dwindle, and credit restric- tions have thus been intermittently tightened and relaxed depending on the behavior of the external accounts. The election year of 1969 made an exception to this rule in that credit policy was relaxed in spite of con- tinued losses of reserves.

31. In these circumstances it is not surprising that of total net credit expansion to the public and private sectors combined, the latter's share from 1963 to 1969 amounted to less than 19 percent although the private sector contributed over 90 percent of the country's capital for- mation. The private sector's gross credit absorption, in this period, of P3.3 billion, was financed with private deposit resources to the extent of P2.6 billion or 78 percent. Out of total net domestic credit expansion of P3.9 billion, P3.2 billion was for the public sector as shown below:

Analysis of Increases in Money Supply, 1963-1969 (In million Pesos)

1964 1965 1966 1967 1968 1969 Total

Public sector, net 239 290 319 793 283 1,244 3,168 Private sector, net 325 22 20 153 28. 187 735 Total 564 312 339 946 311 1,431 3,903

Bank's profit and mis- cellaneous accounts -192 -334 -126 -145 - 13 - 162 - 972 Total domestic 372 - 22 213 801 298 1,269 2,931

Foreign sector -442 205 91 -390 - 98 - 497 -1,131

Net change in money supply - 70 183 122 411 200 772 1,800 in percent -2.4 6.3 10.0 12.2 5.0 19.4 60.9

32. During the five years up to 1968, total money supply increased at about the same pace as GNP, and it is difficult to argue that there were pressures of monetary inflation; wholesale prices moved by less than 4 percent a year, which is not out of line with price movements in the rest of the world, and the impact of the preceding devaluation and some deliberate measures to increase prices of agricultural products were res- - 10 - ponsible for at least part of this. On the other hand, it should not be overlooked that the balance of payments absorbed nearly 30 percent of domestic monetary expansion in this period, which by itself eased off some of the pressure on domestic prices which otherwise would have been felt more strongly. This is particularly true in 1967 when imports jumped by 24 percent (or P1.2 billion) following a net increase in domestic credit at about the same rate or by P800 maillion. This led the government to initiate promptly a tight money policy which lasted through early 1969.

33. The real crunch came in 1969 when money supply increased by 19.4 percent and would have increased by 32 percent had it not been for a loss in net exchange reserves by almost P500 million. Nearly all of this was due to deficit financing by the government. It aggravated an already deteriorating situation in the country's external accounts to a point where, just after the elections, unprecedented difficulties called for drastic action which will be described further below.

34. Credit Policies. As already noted, credit controls were re- instituted in mid-1967 after a short period of easy money policy, to curb the sharply rising import demand. Thus, in June 1967 the rediscount rate was raised from 4.75 to 6.0 percent. At the same time, rediscount quotas were reduced, but they were increased later in the year in order to facilitate export financing. The reserve requirement for all deposits was raised to 16 percent from a previous 10 percent against demand deposits and 5-8 percent for others. The portion of required reserves in the form of balances with the Central Bank was increased twice in 1967. Advance deposit requirements for opening letters of credit were introduced and further tightened by mid-1968, but the system was relaxed in the last quarter of the same year. The restrictions on commercial banks' foreign borrowings were tightened, but were subsequently eased. Finally, in October 1968 ceilings on domestic loan portfolios and on outstanding import letters of credit of the banks were established. However, imports on a deferred payment basis for export-oriented industries and government infrastructure projects were exempted from the ceiling on banks' foreign financing. As a result of all these measures, money supply increased by 5 percent in 1968 compared with 12.2 percent in 1967, which is below the increase in real GNP. The price level rose only by 0.7 percent as opposed to 5.9 percent in the preceding year.

Growth of Money Sup ly and GN? (Percentage) 1964 1965 1966 1967 1968 1969 GNP (in current prices) 7.3 8.3 10.4 11.0 10.0 9.9 GNP (in constant = 1967 prices) 4.7 4.0 6.1 6.2 6.4 6.3 Money supply -2.4 6.3 10.0 12.2 5.0 19.4 Consumer price index (1957 = 100) 8.9 3.1 5.0 5.9 0.7 1.7 Money supply as a percent of GNP in constant prices 13.7 14.0 14.6 15.4 15.3 17.0 - 11 -

35. Early in 1969, the monetary authorities yielded to pressure for credit relaxation. Thus, imports of machinery, equipment and spare parts and supplies of export-oriented industries were exempted from the special time deposit requirement. The special time deposit requirement for opening import letters of credit for imports classified as essential was reduced from 120 to 90 days. The requirement that one-half of the reserves against special time deposits be held in the form of balances with the Central Bank was waived, and the banks were allowed to hold the entire amount of required reserves in government securities. The ceiling on domestic credits of the banks was raised and a much broader definition of export-oriented industries was adopted, thereby increasing the number of enterprises eligible for special credit facilities. Finally, the ceiling on banks' foreign borrowings was lifted. The increase in the rediscount rate to 10 percent - except for the preferential rates for rice and corn financing and for export financing - and the increase in the rate of interest on savings deposits from 5-3/4 to 6.0 percent were of little consequence in this general movement toward more liberal credit. In spite of all this, credit to the private sector increased only by P310 million, or 4.4 percent, compared with 11.4 percent in 1968. By contrast, the public sector made a very extensive use of credits during 1969. Bor- rowing by the government and government entities rose by P1,245 million, or 30 percent, compared with 5.4 percent in the preceding year. The major part of this was through treasury bills and notes, and the minor part in the form of various types of bonds, acquired by the banking system.

Annual Rates of Growth of Credit

(Percentage)

Sector 1964 1965 1966 1967 1968 1969 1970 a/

Credit to private sector 14.6 4.7 13.4 17.0 11.4 4.4 -0.4

Credit to public sector 7.5 15.1 10.2 33.6 5.4 30.0 1.5 a/ End of February Source: Appendix Table 6.1.

36. During the second half of 1969, certain restrictive measures were taken to cope with the balance of payments problem. The commercial banks were directed to limit the opening of import letters of credit successively to 85, 70 and finally 55 percent of the monthly October 1968 - March 1969 average. Towards the end of the- year, only four categories of essential imports were allowed, while all other imports were suspended. Most exemptions from advance import deposit requirements were cancelled, and government financial institutions selectively suspend- ed loans for cash purchases of imported equipment and machinery as well - 12 - as guarantees on import credits. The preemption of credit facilities by the government to finance its deficits, reinforced by the restrictive import measures, has resulted in a significant decline of industrial production in 1969, as noted in paragraph 17.

E. Balance of Payments Problems

37. Since 1966 the Philippine balance of payments has undergone a radical change from a surplus position in the current account into rapidly growing deficits, to the extent that in the three years from 1967 through 1969 the country's international indebtedness increased by nearly US$900 million or more than one year's merchandise exports to a level of $1.5 billion, of which about $540 million was private short-term or medium- term debt of less than five years maturity.

38. Three factors are responsible for this unfavorable development. One is the virtual stagnation of merchandise exports since 1966, after they had grown at an encouraging rate of 10.5 percent per annum in the preceding four years. The second is the sharp acceleration in the growth rate of imports, also starting after 1966. The third is the permissive attitude on the part of the authorities vis-a-vis private short-term bor- rowing abroad and the availability of public sector bank guarantees for an excessive amount of short-term trade credits obtained from private foreign sources, at a time when import demand was increasingly boosted by fear of devaluation.

39. Imports. The causes for the unprecedented growth of imports since 1966 are complex and have to be understood in the context of long- term developments starting in the fifties. From 1951 to 1961 the volume of imports increased at barely over 2 percent a year, while real GNP advanced by over 6 percent a year. This was possible through a system of import restrictions and encouragement of import substitution industries. Import restrictions were removed in 1962 but the de facto devaluation, which was effected at the same time, caused a 3 percent decline of imports in that year, mainly affecting capital goods while imported raw materials were stocked up pending uncertainty about the floating exchange rate until it was stabilized. The depressed state of new industries depending on im- ported intermediary goods following the devaluation is reflected in the stagnation of this type of imports between 1960 and 1963 as shown below. - 13 -

Merchandise Imports and Rates of Growth, 1960-1969 (In million US dollars)

Imports Capital Raw Semi- Consumer Total of: Goods Materials Finished Goods Imports Value added in infra- Invest-, structurq & ments- miningE/ GNP-

1960 152 60 252 84 604 Annual rate of increase - 10% 20.8% 1.6% 3.8% 0.9% 1963 101 106 289 94 618 Annual rate of increase 16.5% 4.8% 7.0% 6.9% 4.2% 4.8% 11.4% 4.9% 1966 160 130 399 108 853 Annual rate of increase 15.0% 5.9% 6.3% 12.9% 5.9% 0.3% 9.8% 6.3% 1969 243 156 574 109 1131

Annual rate of increase 7b 5.8%-E/ 1960-69 4.5% 6 .9 %-/ 11.2% 9.6% 5 .3%-/ 3 .0%Z/ 8 0 a/ Constant prices. Growth of manufacturing is under-reported in later years. b/ 1961-69. c/ 1962-69.

40. What followed in the six years after 1963 can be considered (a) an initial rapid recovery of imports of capital goods, followed in later years by some unusually high proportion of imported equipment in total investment - with the whole 9-year period however showing a higher rate of growth of investment in real terms than capital goods imports, particularly if an allowance is made for price increases for imported machinery - and (b) a steadily growing import dependence of manufacturing industry, particularly as regards semi-finished imports in the later period. This reflects the growth of engineering, electric appliance and vehicle assembly plants, which make a small contribution to domestic value added but have a high import content in their value of production. While there is much to be said on other grounds against the proliferation of import substitution industries which indeed make a large contribution to import growth, it is nevertheless evident from the above table that they did substitute consumer goods imports. In a country with the per capita income of the Philippines and a large and growing urban middle and upper class, demand for imported consumer durables would normally show a rapid increase. In fact, imports of consumer goods through the - 14 - sixties appear to have increased only half as fast as GNP, and by far the largest part of this constitutes food items. This may be true in spite of certain misclassification of import items that make Filipino import statistics highly suspect in certain respects. 1/

41. During the whole period 1960-69, an average growth rate of 8 percent a year of imports compares with a growth in GNP of about 6 per- cent or slightly more if a correction is made for manufacturing industry. This differential is entirely due to the growth of industrial import requirements and to capital intensive investments in recent years. It does not on the whole seem excessive, but due to unfavorable developments in exports and, most recently, in the invisible accounts, has created a situation in the balance of payments which reached a crisis by the end of 1969.

42. As shown in Appendix Table 3.1, the big jump in imports occurred in 1967, when imports increased by US$209 million or 25 percent in a single year. Merchandise exports in that year declined by 1 per- cent. From the previous discussion, it follows that the only unusual thing about this increase is that it represents a lumpy one-year occur- rence within an otherwise fairly steady trend. What caused it was (a) an increase in the government's infrastructure investments in FY 1967 and 1968 by some P250 million whose import content would account for an additional $20-30 million, (b) unfavorable weather affecting the rice crop accounting for an additional $32 million (60 percent increase) in cereal imports, (c) arrival of most of the equipment for the construction of the Iligan Integrated Steel Mill, the total value of which was in the order of $70 million, and (d) easy credit policy by the Central Bank resulting in a 10 percent increase in money supply in 1966 and 12 percent in 1967.

43. It has been observed earlier that financial and monetary discipline was instituted in mid-1967 and lasted until 1969. No drastic action was taken to curb imports, however, since favorable developments in invisible earnings for the time being prevented the current account deficit from taking large proportions. As seen in Appendix Table 3.1, the account for goods and services turned from a surplus of $161 million in 1966 to a deficit of $25 million in 1967.

1/ For example, CKD cars are treated as capital goods, and many food products appear as semi-finished materials. This problem is minimal, however, if compared with the problem of unrecorded imports. As discussed in paragraph 48 below, there is some dis- tinct evidence that in recent years the amount of smuggled exports reached massive proportions. There is no way of knowing, however, how these illegal earnings were used. If only a third of it were spent on unrecorded consumer goods imports, the above argument would lose a good deal of its substance. - 15 -

44. Events in 1968 turned to the worse. Imports increased by another $88 million (8.5 percent) while exports increased only by $27 million. At the same time, invisible earnings dropped by $153 million. These three elements enlarged the deficit by $194 million for 1968. The unfavorable turn in invisibles was in major part a return to a more normal level from unusually high receipts in 1967 in the form of (a) a one-time increase in settlement of veterans' claims by the U.S. resulting in a $44 million boost in dollar receipts, (b) disbursements under Japanese reparations twice the normal amount of $30 million, and (c) high increase by $25 million in travel receipts. These three factors disappeared in 1968, and some other invisible receipts declined, while invisible payments increased, mainly because of a more than 50 percent larger transfer abroad of investment income which reached an all-time high of $79 million. This may have reflected either the beginning of some doubts about the stability of the currency or higher profits or some form of disinvestment in early anticipation of the termination of the Laurel-Langley Agreement, or a combination of the three.

45. Import Restrictions. By the end of 1968, it was clear that no improvement in the balance of payments was in sight for 1969. Neverthe- less, special time deposit requirements for imports, introduced in 1968, were relaxed in April 1969, while specific ceilings were maintained. Government securities were made eligible for 100 percent of banks' re- serves against import letters of credit. Such relaxations proved to be altogether unwarranted and by June 1969 the Central Bank felt obliged to suspend the opening of letters of credits for all imports. Later, they were selectively restored, but ceilings were reduced in steps until on November 17 they were down to 55 percent of the monthly average of the base period October 1968-March 1969. Only essential imports were permitted, and Central Bank approval has been required for equipment imports over $50,000 since early 1970. As a result of these policies, imports in 1969 already declined by 2 percent and will further decline in 1970.

46. Exports. Earnings from merchandise exports in the last three years increased by about 1 percent a year on average. Had there not been a decline in export of coconut products, the rate would have been 5.4 percent a year which is still not a high rate of growth. The lead- ing growth commodity has been copper concentrates which in value increased by 77 percent from 1966 to 1969, with the benefit of a 24 percent price improvement. Logs have become the largest single export item, although in value it has grown much more slowly since 1966 (2.8 percent a year) than in the preceding three years (10.5 percent a year), and in volume there has been a decline. - 16 -

Merchandise Exports (In million US dollars)

Unit Price Index (1966 = 100) 1960 1963 1966 1969 1969

Copra 168 157 87 102 Coconut oil 47 75 51 105 Other coconut products 29 35 25 91 Sugar (centrifugal) 147 132 149 113 Abaca 38 22 16 96 Logs 146 197 215 109 Wood products 33 42 44 100 Copper concentrate 41 75 133 124 Tobacco 13 12 17 85 Other 65 81 118

Total 560 727 828 855

Annual increases 9.1% 4.4% 1.1%

47. There are strong reasons to believe that the amount of illegal exports has increased substantially between 1966 and 1969. This is par- ticularly evident in the case of logs and of copra. Log output during these three years increased by at least 12 percent a year. With a similar rate of growth in exports of logs and wood products, and taking account of the movements in export prices shown above, total earnings from exports of logs and wood products in 1969 could have been almost $100 million larger than what is shown in the above statistics.

48. In the case of coconut products, official statistics take account of specific and large amounts of unreported exports prior to the de facto devaluation of 1962 but disappearing in 1963. From 1963 through 1966, a comparison between production data and exports of copra plus the copra equivalent of oil suggest an average level of domestic consumption of about 150,000 tons per annum of copra. If a growth rate in domestic consumption of 5 percent a year is assumed, the surplus for export in 1969 would have been 1.5 million tons of copra equivalent, or 85 percent more than recorded. In terms of value, this difference would amount to somewhere around $110 million. It is a known fact that during these last three years the peso underwent speculative pressures as shown below in the movements of the black market rate quoted in Hongkong. Nevertheless, it is difficult to believe that smuggling reached anything like the proportions suggested by the above figures. On the other hand, it is equally implausible, e.g. that export earnings from copra and coconut oil declined by 40 percent from 1966 to 1969 in the face of an improvement in world prices and in- creased production. - 17 -

Exchange Rates

Average Hongkong Rate: Average premium Pesos per US dollar over par

1966 3.921 0.5

1967 4.115 5.5

1968 4.225 8.3

1969 4.765 22.2

49. Recorded exchange earnings from services have also suffered from the growing disparity between the official exchange rate and the black market. Receipts, e.g. from travel, tourism and other private services declined by more than half in 1968, or US$114 million. Combined with the deterioration on merchandise account, the balance of payments in 1968 produced a current deficit of US$260 million. With the marginal decline in imports in 1969 which has already been discussed, and the marginal increase in exports, the deficit in 1969 turned out a little smaller at US$238 million. While it is true that the unprecedented expansion of short- and medium-term borrowing from abroad, discussed in the next paragraphs, did nothing to ease speculative pressure against the peso, it is nevertheless clear from the above analysis that the Philippines has a very large potential for expanded foreign exchange earnings through official channels, with a more realistic exchange rate and as foreign transactions are normalized, and a stabilization program successfully carried out.

50. Foreign Debt. In the three years from December 31, 1966 to December 31, 1969, total outstanding foreign liabilities of all kinds of the Philippines increased from US$692 million to US$1,583 million (see Appendix Table 4.4). This total amount by any standard is not an excess- ive degree of indebtedness for a country like the Philippines, particularly as it includes revolving commercial bank liabilities and normal trade advances. However, the authorities have taken unduly long to realize the consequences of relying on massive borrowing at very short terms, and have taken no positive steps until 1970 to influence the future profile of debt service obligation by e.g. restricting foreign credits with very short maturities. The result has been that amortization payments alone maturing in calendar year 1970 piled up to an impressive US$454 million after excluding US$216 million of commercial banks' liabilities and open account private trade advances, which in normal circumstances are subject to renewal. If interest payments of $85 million are added, the 1970 debt service would have been equivalent to 42 percent of gross foreign exchange earnings. Of course, given the structure of total debt, this ratio would have declined on existing debt rather sharply to about 13 percent in 1972 and 3 percent in 1977. - 18 -

51. Of the maturities falling due in 1970, more than half or US$238.7 million constituted Central Bank obligations vis-a-vis private U.S. banks, plus another $33.5 million due to European banks. The balance was an assortment of long-term and private and public medium- and short-term debt as summarized below. More detail is given in Appendix Table 4.7.

Debt Outstanding and Maturing in 1970 (In million US dollars)

Amortization Outstanding Payments due mid-1969 1970

Short term (up to 1 year) 249.1 247.4 Central Bank to US private banks 160.9 159.2 Central Bank to European banks 33.5 33.5 Private (excluding commercial banks and revolving trade credits) 54.7 54.7

Medium term (up to 5 years) 417.1 133.0 Central Bank to US private banks 77.8 23.2 Central Bank to European banks 2.8 1.0 Public trade credits 68.0 35.9 Private trade credits 268.5 72.9

Long term (in excess of 5 years) 624.4 73.7 Public 214.9 18.0 Private 409.5 55.7

Total (excluding revolving credits and IMF obligations) 1,290.6 454.1

52. Some deferments of debt falling due in 1969 had already been arranged with US banks by converting a $81.5 million credit into a four- year loan. It became clear, however, that a similar restructuring arrange- ment had to be sought on a much larger scale in 1970. As a first step, the US banks agreed to extend all early 1970 maturities until mid-year. In the meantime, assistance was requested from the IMF, and on February 21, 1970 a Standby Agreement went into effect enabling the Philippines to draw $27.5 million under the third IMF tranche.

F. The Stabilization Program

53. With the massive deficit financing by the government during 1969, the acceleration in the growth of money supply to a rate of 19 percent, and the worsening balance of payments situation, it had become clear already before the end of the year that a switch in the signals for economic policy was a matter of urgency. In November 1969, ceilings for import letters of credit were severely tightened, and later all imports suspended except for essential categories. Remittances of profits and dividends were - 19 - temporarily withheld, foreign travel allowances reduced, and most exempt- ions from special advance deposits for imports were cancelled. On the fiscal side, in mid-1969 a revised revenue code went into force raising duties for certain luxury items by over 100 percent. In early December 1969, as already noted, government investments were drastically curtailed. On the monetary side, in January 1970, reserve requirements for all types of deposits in commercial banks were increased by 2 points to 18 percent, and 50 percent of reserves were to be held in deposit balances with the Central Bank. Similar increases in reserve requirements were imposed on savings, development and rural banks.

54. Under the Standby Agreement with the IMF, 1/ a comprehensive stabilization program was adopted. It provides for a number of measures aimed at reducing excess liquidity in the economy, limiting the growth of short-term external debt, curbing the expansion of imports and promoting exports. For the latter two purposes, the rate of exchange for all foreign transactions was allowed to float, with the exception that 80 percent of the proceeds of major exports (items earning over $75 million each during 1966-68) were surrendered at the par rate of P3.90 per US dollar. As a result, the effective rate for all other transactions moved rapidly to a level slightly over P6.00 per US dollar. Trade and payments restrictions were to be eliminated in their entirety with the exception of certain luxury items and travel allowances for which restrictions remained in force but would have to be lifted before the end of 1970. Limits on openings of import letters of credit were to be lifted and special time deposit requirements eliminated. Concurrently, net inter- national reserves were not at any time to be allowed to decline below the December 1969 level, and to be increased by $40 million before July 1970, and by another $35 million during the second half of the period of the Standby.

55. No new private suppliers credits with an initial maturity of less than five years will be permitted during the period of the Standby, and new foreign debt with maturities up to 12 years will be limited to $100 million, of which debt maturing up to eight years is not to exceed $50 million. 2/ An exception to this was a line of credit to be obtained by the Central Bank for immediate needs from US banks that would be fully repayable in 1970.

56. The exchange profits to be collected by the Central Bank from the purchase of major export proceeds at the par rate, and their sale at the floating rate, were to be sterilized pending the mid-term review of the Agreement in July. This was one of a number of monetary steps to be taken which by itself could have been expected to mop up over P1 bil- lion of liquidity in a 12-month period.

1/ Taking effect on February 21, 1970, for a period of one year.

2/ At the mid-term review in July 1970, certain credits to exporters were exempted from the ceiling. - 20 -

57. The Central Bank undertook to reduce its domestic assets from F3,695 million at the end of 1969 by P300 million by July 31, 1970. Among the measures to achieve this, net credit to the public sector including public corporations, was to be reduced by P150 million or 6.5 percent, and special assistance loans to the Philippine National Bank by P107 million or about 15 percent. The high rediscount rate of 10 percent, previously applied to a small portion of its loans and discounts, was to be applied to most of these transactions, and rediscount ceilings, previously established but with exceptions (mostly for PNB), to be made comprehensive. To encourage savings, an 8 percent interest ceiling was to be set for time deposits of more than one year, as against 7 percent previously.

58. In the fiscal field, the government was to curtail cash outlays in the second half of FY 1969/70 by cancelling most unused releases and suspending additional releases for non-priority infrastructure projects, as had already been done in December. The government expected to achieve a cash surplus in the second half as a result of this austerity policy, and thereby to substantially reduce the domestic deficit for the whole year.

59. Finally, the government undertook to increase tax revenues by about P600 million within the next two years through the adoption of new tax measures as well as through improved tax administration, so as to ensure that there will be no inflationary financing of the budget.

60. Implementation of the Stabilization Program. The most notable events since the Standby Agreement was concluded, besides monetary stabili- zation which has so far proceeded by and large satisfactorily, have been in connection with the floating exchange rate. In a normal situation, the rate might have moved quickly upward for an initial period after which it would gradually recover and settle at an equilibrium position. In the Philippine circumstances, with social unrest preceding the enact- ment of this measure, with negative international reserves, and with im- pending insolvency vis-a-vis foreign debtors, the removal of import and exchange restrictions simultaneously with the introduction of the floating rate all contributed to speculation against the peso on a scale that made the attainment of an equilibrium position difficult.

61. Another factor intervened which at least temporarily further postponed the date of an improvement in the trade balance expected to result from the effective devaluation. As the exchange rate effectively moved over 50 percent upwards within days of the untying from the par rate, the 80 percent surrender requirement at par for major exports was felt to be an undue degree of discrimination and the proposal of an export tax to replace the retention scheme was introduced as a bill, which would have tended to reduce this discrimination considerably. However, Congress debated the export tax bill throughout March and April, so that in the meantime there were strong incentives to withhold shipments of exports particularly when no specific delivery contracts were involved. No reliable estimates are yet available, but it is possible that major exports - 21 - went down to half their normal level during this period. At the same time, demand for import letters of credit were reported to be signifi- cantly over their previous year's level in spite of the 50 percent cost increases in terms of pesos - which is a measure of the degree to which a further deterioration of the exchange rate was expected even from the Y6.25 rate which prevailed through April. Nor was this a rate determined by demand and supply. In the free market where the proceeds of minor exports and 20 percent of major export proceeds could be sold, average daily trading went down to a fraction of normal levels and at times to near zero in the face of dwindling supply and zooming demand, and the banks exercised voluntary restraint in pricing, in an attempt to prevent speculation from going overboard.

62. Whether the peso is undervalued at present and whether the rate is likely to stabilize around the current P6.20 per $1 level remain uncertain. It was not clear that the previous P3.90 per $1 rate overvalued the peso on the export side, and the recent growth in import demand, mostly for capital and semi-finished goods, could not be directly related to domestic inflation - in the last seven years the domestic wholesale price index had been moving at an average rate of just over 4 percent a year 1/. On the other hand, the 50 percent increase in the cost of imports has already started to produce price repercussions on the economy. Officially recorded imports of goods and services are equivalent to 20 percent of GNP. In the case of essential low income consumer goods as well as fuels, the immediate impact is on the cost of living; in the case of raw materials and intermediary goods, the formerly depressed industries like textiles and paper are again facing difficulties similar to those encountered in the early sixties; they will attempt to pass on the increased cost to the consumer, although the removal of quantitative import restrictions may, to some extent, expose them to a greater degree of competition. Other and new industries having had heavy recourse to foreign suppliers' credits in most recent years will be faced with the problem of substantially higher interest and amortization costs. The resulting increment in these annual charges for 1971 in terms of domestic currency, for medium- and long-term trade and suppliers' credits incurred by the private sector, will be in the order of P400 million, which is about 10 percent of the net domestic value added in 1969 by the private manufacturing, mining, construction, transport and communication sectors combined, and of course much more if branches without foreign debt are excluded. Bank credit will be needed by many such new enterprises to tie them over these difficulties, particularly if the intention, expressed by the government, to introduce price controls, will in any way succeed in preventing them from increasing their prices. In the case of fertilizers, the increased cost combined with continued inadequacy of agricultural credit is currently jeopardizing the rice program. The high cost of imported capital equipment might tend to induce some less capital and more labor intensive investments, but in many

1/ The CIF import price index in dollars also increased at 2.2 percent per annum in this period. - 22 - sectors the choice between these two alternatives is very limited, and a decline in overall investment is a more likely outcome. Furthermore, in the wake of the floating rate, demands for higher wages were becoming articulate and led to a general increase of minimum wages by one-third through Act of Congress in mid-May (from P6 to P8 for industrial workers and from P3.50 to P4.75 for agricultural workers), which will inevitably shift the general wage structure in an upward direction. In conclusion, the undervaluation of the peso resulting from the floating rate, through cost effects on current and capital imports, increase in financial charges of past investments, and the induced wage movements, has already set a cost-push inflationary movement in motion that will in time perhaps more than correct the undervaluation. Initially, however, the tightening of monetary and credit policy as well as certain demand rigidities place a number of industries into a difficult position. Large-scale dismissal of labor has not occurred because of expectations that the overall situation will improve soon.

63. The effect of devaluation on the total flow of imports is diffi- cult to evaluate as long as the exchange rate is floating with continued potential upward pressures; the authorities still expect a 10 percent decline in 1970 imports from calendar year 1969. A sharper decline in the months to come is conceivable with the further tightening of credit policy, but would be an expression of a more deeply recessionist trend in the economy than would be either desirable or necessary.

64. The immediate effect of the floating rate on exports was not expected to be appreciable (except for a return of unrecorded exports into official channels) because major exports had not previously met with problems of price competition. gather, the export sector is now making windfall profits. On May 1 the new export tax law was passed which superseded the 80 percent retention scheme of the Central Bank. The tax is described as a "Stabilization Tax" to mop up part of the profits created by the floating rate. Up to June 30, 1971 the tax will be 10 percent on logs, copra, sugar, and copper ore and concentrates, and 8 percent on molasses, coconut oil, dessicated coconut, copra meal and cake, iron ore and concentrates, chromite ore, abaca, tobacco, wood products, canned pineapples and bunker oil. Each following year these rates will be reduced by 2 percentage points and the tax will lapse on June 30, 1974. According to the law, 50 percent of the proceeds of the tax will be used to service foreign and domestic government debts and to reduce government debt to the Central Bank; 25 percent will be used towards the local currency costs of projects financed by the ADB, the IBRD, the UN and loans under bilateral agreements; the remaining 25 percent will be deposited with the Development Bank of the Philippines in a special account for loans to export industries, especially industries adversely affected by the floating rate, and agricultural development projects in the private sector. - 23 -

65. The total proceeds of the Stabilization Tax in fiscal 1970/71 are estimated in the order of P350 million. Additional tax revenue will accrue from customs and sales taxes through the revaluation of imports. Further increases through improved tax administration as well as some new tax proposals are discussed in the following chapter; at any rate, a considerable improvement in the government's revenue efforts commensurate with the provisions of the Standby Agreement is now in evidence.

66. The monetary authorities also have so far made substantial efforts toward meeting the goals of the Stabilization Program. By April 22, 1970, net domestic assets had been reduced by P60 million. The Central Bank's special assistance loans to PNB by that date had been reduced by P155 million from the end of December level, and since then have been further reduced to P182 million, thus exceeding the July 1970 target ahead of time.

67. In the peculiar circumstances of exports temporarily being with- held from shipments, total net international reserves by the end of March 1970 declined to minus Plll million compared with minus P71 million at the end of last year; after some further slippage they are reported to have started to recover in May.

68. The government is confident that the monetary and fiscal aspects of the stabilization program will be successfully implemented. A small cash surplus in the government's operations for the current six months is likely to materialize. The contribution of monetary policy to stability, however, is reaching its reasonable limits. Money supply had already contracted by 3 percent during January and February, and has further contracted in the meantime by an even greater amount, given the reserve loss and the reduction in Central Bank domestic assets. As a result of devaluation, businessmen need to tie up more funds in the form of cir- culating capital and new industries are in need of additional credit for service payments as well as cash for payment of imported equipment already ordered before. Private industry already felt the impact of restrictive credit policy in 1969, caused by preemption of bank credit by the public sector, to the point that the increase in industrial production was halved in 1969. To offer some temporary relief, the Central Bank in mid-April restored the 25 percent share of banks' reserves to be held in Central Bank deposits (government securities being eligible for the balance of 75 percent) after it had been increased to 50 percent in January, together with the increase in reserve requirements from 16 to 18 percent. Still, total reserve requirements against deposits are now again being raised from 18 percent in four steps to 20 percent by August 1970. - 24 -

CHAPTER II

THE FOUR-YEAR PLAN

A. Introduction

69. A Five-Year Development Program for 1970-74 had reached the stage of a final draft in September 1969. It was not adopted in the end however, because the inflationary developments that occurred in the course of 1969, combined with the sharp deterioration in the balance of payments, changed the outlook for the permissible level of government spending, and made it necessary to prepare for a constraint in the country's import capacity at least for a period during which the accumulated short-term debt would be worked off. A new Plan framework was prepared after the announcement of a fiscal austerity program by President Marcos in November 1969. With the Stabilization Program and the devaluation of the currency, the Plan had to be changed again later on. In early May the final draft of a Four-Year Plan for the fiscal years 1970/71 to 1973/74 was submitted to the National Econo- mic Council.

70. Compared with the earlier draft, there are no basic changes in strategy, but in expectations of achievement. Overall investment targets were lowered in the private sector, and only in minor part is this offset by a more rapid increase in public investment. The underlying assumption is an absolute decline in private investment by about 8 percent in FY 1970, and a decline in imports by 10 percent, with a slow recovery in subsequent years given the limitations on increases in net capital inflow in the immediate future.

71. Given the highly unstable situation and uncertainties during the time when it was written, immediately following the introduction of the floating rate, the task of preparing this new Plan has been extremely dif- ficult. Nevertheless, it is a realistic document and takes account of all the constraints that can be foreseen to operate in the immediate future in connection with the necessity to carry through a stabilization program, and with the effects of the devaluation. If anything, the resilience of the private sector and its ability to expand in the later years of the Plan may have been underestimated; but at this stage the Plan in any case can only be indicative and its annual targets will have to be reviewed as circumstances change.

B. Overall Targets

72. In terms of economic growth, the objective of the Plan, in essence, is to bring about a recovery to the previous high rate of growth within about three years and set the stage for subsequent further acceleration. Average growth in the four years ending FY 1970 had been about 6 percent per annum, - 25 - including a decline to 5 percent in FY 1970. A further decline is assumed in FY 1971, the first year of the Plan, and tentatively a rate of 4.5 percent is postulated for that year. This may in fact be on the high side - rely- ing on a near record 7.6 percent growth in agriculture and a 2 percent growth in manufacturing. While the former implies some recovery of ground lost through adverse weather conditions and at least on that score appears plausible, the possibility of a decline rather than expansion in industrial production is still not ruled out. But even the agricultural target for FY 1971 is ambitious since the recovery has already occurred in the current crop year and in the case of major crops, particularly rice and sugar, the new price developments for important inputs throw some doubts on the achieve- ment of output: targets next year.

73. From the second year onward, an average agricultural rate of growth of about 5.6 percent a year is proposed, which appears modest if compared with past achievements (see below). Manufacturing, on the other hand, is proposed to achieve rates of expansion beyond 9 percent per annum starting in FY 1973. This in turn, of course, includes a large element of recovery through improvements in capacity utilization with the gradual easing off in overall import constraints, and should therefore be regarded as an entirely reasonable target from this point of view.

Past and Proposed Rates of Growth

F i s c a 1 Y e a r s 1963-69 1970 1971 1972 1973 1974 Average

Agriculture 7.4 6.9 7.6 5.4 5.8 5.5 Mining 43.0 20.6 24.1 6.9 20.1 Manufacturing 0.4 1.9 4.6 9.1 9.3 Others 5.2 2.1 5.0 5.2 5.3

Net Domestic Product 5.7 5.6 4.4 5.6 6.1 6.5

74. The projected rapid growth of the mining sector is based on exist- ing plans by major companies and is probably feasible; in terms of contri- bution to GNP, mining even at the end of the Plan will still be accounting for only 3.7 percent, but since virtually all of it is exported in one form or other, this sector is one of the keys to the removal of the balance of payments constraint, as will be further discussed in Chapter III.

75. With an average 5.6 percent overall growth rate, the expected per capita increase is 2.2 percent a year, following the anticipated decline in the population growth rate from the present 3.5 percent to 3.2 percent by FY 1974. Such a gain is anything but assured, however, since the problems of implementing a program of family planning, which is still at an embryonic state, have probably been underestimated. Even so, the projected growth rate per head is less than the 2.5 percent in real per capita GNP attained during the last four years. - 26 -

76. The volume of total investment expected to generate the set growth target is P28.2 billion during the Plan period, implying a fairly constant share of 21.2 percent of GNP devoted to capital formation. This is a little higher than the FY 1970 ratio but 1 percentage point less than the average for the last four years.

National Exe nditures in Constant 1967 Prices

Four-Year Totals

FY 1963-66 FY 1967-70 FY 1971-74 P million Percent P million Percent P million Percent GNP 85,870 100.0 107,565 100.0 133,047 100.0 Consumption 68,880 80.2 88,333 82.1 107,655 80.9 Investment 18,279 21.3 23,870 22.2 28,196 21.2 Current Account Deficit -1,289 1.5 -4,638 4.3 -2,804 2.1

Average Annual Increases (In percent) FY 1962-66 FY 1966-70 FY 1970-74 GNP 4.9 6.0 5.6 Investment 6.2 5.0 5.8 Imports 12.8 7.4 5.0 Exports 5.3 1.8 9.4

77. The 5.8 percent annual growth rate of investment includes the recovery from the reduced 1970 level; if FY 1969 were used as a benchmark, the implied growth rate would be only 3.9 percent. Private fixed investment in particular which was P5,265 million in 1969, is projected to reach P5,564 million in 1974; on that basis the growth rate is 1.1 percent per annum but if 1970 is the benchmark, the growth rate is 4 percent and this is still very low. By contrast, public investment is to increase by 150 per- cent from 1969 to 1974. If the P1,588 million target for 1974 is compared with 1970, the increase is by 84 percent or 16.5 percent a year. However, 1970 was a year with relatively high public investments, including elements for community development which it will not be possible to continue if eco- nomic standards are applied. Thus, the public investment targets are very ambitious; in itself, the implied expansion of the public sector from 15 to 21 percent in total capital formation is not difficult to justify, given the continued need to improve the country's infrastructure; and with the completion of the Transport Survey, it should be possible to come up with a sufficient number of projects to make large investments in this sector pos- sible. In this, as in other fields, the expansion of the public Infrastruc- ture Program is hoped to expand possibilities for project-type official bor- rowing abroad from both bilateral and multilateral sources. The limited scope for utilization of this type of foreign aid has been a problem in the past. The planners recognize that the limited availability of projects was not the only factor; another was the limited ability of the government to - 27 - finance the local cost element from public savings; still another was con- nected with administrative problems. Both these factors will be further discussed below.

C. Government Investment

78. More than 85 percent of public capital formation is proposed for the Infrastructure Program, or roughly P 6.2 billion out of a total of P 7.2 billion in current prices, taking account of the devaluation. Within the Infrastructure Program, 75 percent is allotted to the four major categories, highways, power, water supply and irrigation. The remaining quarter is to be spent on continued investments in airports, portworks, telecommunications, flood control, building construction and miscellaneous public works. An allocation for railways is now added, and preliminary engineering will re- ceive substantially higher allotments than in the past.

Infrastructure Program (Million pesos at current prices)

FY 1967 - 70 FY 1971 -74 a/ b/ C/ Domestic Foreign-a Total-= Domestic Foreign-/ Total Highways 763 115 878 1,551 1,002 2,553 Airports 79 11 90 127 132 259 Portworks 83 22 104 103 42 145 Railways - - - 70 138 208 Telecommunications 34 64 98 98 324 422 Power 140 44 184 326 564 890 Irrigation 88 41 130 306 270 576 Water Supply 171 66 237 326 258 584 Flood Control 21 - 21 83 - 83 Building construction 190 71 262 179 96 275 Miscellaneous 214 - 214 112 - 112 Preliminary Engineering 8 - 8 80 - 80

Total Expenditure 1,791 435 2,226 3,360 2,820 6,180

(Constant prices) (2,060) (5,240) (Increase) (154 percent)

- Totals may not add up due to rounding. a/ $1 - P 4 b/ July 1966 - March 31, 1970. c/ $1 - P 6 - 28 -

79. In general, the investment priorities, as expressed in the above quantitative terms, would seem to be in line with the infrastructural needs of the country. Compared with the previous four years, the share has been increased for highways (to 41.5 percent) but also for airports, communica- tions, power and irrigation, while ports, water supply and particularly building construction appear to be de-emphasized at least in relative terms.

80. So far, work on highway construction in physical terms has already proceeded satisfactorily: 4,400 km of national roads, 5,400 km of other roads plus improvement of 7,400 km of gravel roads were completed. The Plan projects construction of 4,400 km and improvement of 5,700 km of national roads. Priorities have been set on the basis of the UNDP Transport Survey. This constitutes an important improvement since choices in the past were guided mainly by the existence of a large number of projects initiated earlier on an ad hoc basis.

81. The power program aims at expansion of existing generating capacity and networks both in Luzon and Mindanao, and starting rural electrification under the National Power Corporation and the newly created Electrification Administration, respectively. The plans of the private sector, dominated by MERALCO, are not included in this Program. Capacity of 275 MW and transmis- sion lines of 840 km are to be installed, as compared with 262 MW (target 387 MW) and 981 km (target 2,100 km) in the previous four years.

82. Irrigation affecting 330,000 ha is to be improved or added, of which 204,000 ha by irrigation works under the National Irrigation Adminis- tration (NIA) and 83,000 ha by pump installation under Irrigation Service Unit (I.S.U.) supervision; past performance shows 263,000 ha compared with a target of 458,000 ha (for details see paragraph 126).

83. In Water Supply and Sewerage, the four-year program covers the ini- tial years of a long-term program for expansion and rehabilitation of water supply in Metropolitan Manila which would cost P156 million and US$34 mil- lion in disbursements during FY 1972 to FY 1974, to be continued thereafter. But first the Interim Construction Program of NWSA has to be completed in FY 1971 or FY 1972, with expenditures during the last four-year period of P157 million which is only 55 percent of the target, and US$14 million in foreign exchange. Construction of an adequate sewerage system for Manila is expected to cost P30 million and $5.5 million. Legislative steps are at present con- sidered to abolish NWSA and create a new organizational set-up.

84. Total expenditures for the Infrastructure Program are expected to increase rapidly from year to year. Targets for domestic finance and dis- bursements from foreign sources are shown below: - 29 -

FY 1971 FY 1972 FY 1973 FY 1974 Total (In million pesos)

Domestic Sources 600 780 900 1,080 3,360

Foreign Sources Cs) 73 94 151 152 470

(P6 - $1) 438 564 906 912 2,820

Total 1?038 1,344 1,806 1,992 6,180

The success of the Infrastructure Program will depend in the first place on an adequate and regular flow of domestic funds, and this will also directly influence releases of already committed foreign funds. As to new foreign loans, it is not yet certain that a sufficient number of feasibility studies will come forth in time for early commitment which will be necessary if the sharp increase in disbursements from $73 million in 1970/71 to $151 million in 1972/73 is to be achieved. A factor of equal importance is the availabi- lity of an institutional framework securing competent project management by reorganizing recipient agencies or creating suitable ones.

85. The increased level of foreign aid to finance infrastructure pro- jects does not in itself reflect a shift between domestic and foreign com- ponents, but rather a shift in sources of foreign financing. The import requirements of the previous infrastructure program were roughly 50 percent, and while the government relied for about 20 percent of the total program on foreign sources, it managed to cover the remaining 30 percent out of its own foreign exchange sources. In the new program, foreign exchange require- ments financed from foreign sources amount to 45 percent which implies that with an unchanged import content of 50 percent the Government intends to reduce foreign exchange requirements not covered by foreign sources to a minimum. This is a sound course of action considering that free foreign ex- change will be a far greater constraint for the Philippines' economic devel- opment than it was in the past.

D. Public Finance

86. Total expenditures by the national and local governments in the coming four years is projected at P27.6 blllion or 62 percent higher than in the past four years. In line with the policy of the Decentralization Act of 1967, local governments are given a more important role to play and their share in total outlays is to go up marginally from 19 percent to 20 percent. - 30 -

National and Local Government Expenditures (In million Pesos)

_ FY 1967-70 FY 1971-74 National National Total Government Total Government

Current expenditures n.a. 10,708 19,284 14,930 Capital expenditures n.a. 3,087 8,293 _7177

Total expenditures 17,010 13,795 27,577 22,107 Revenues 14,278 10,998 22,214 16,744

Balance 2,732 2,797 5,363 5,363

New taxes - a/ - a/ 1,751 1,751 Foreign borrowing 552 552 2,820 2,820 Domestic borrowing 2,180 2,245 792 792

a/ Included in revenues.

87. Financial targets for the national government's operations appear reasonable. Domestic borrowing is proposed to be much less than in the past and the objective is to refrain from inflationary financing altogether. The apparent fivefold increase in external borrowing is somewhat exaggerated by the devaluation; in dollar terms it is to be somewhat more than tripled. As noted elsewhere, this is still an ambitious target, even if it is remembered that the foreign borrowing potential of the public sector has in the past always been larger than the actual utilization. Even more striking is the planned increase in public savings from a bare P 290 million in 1967-70 to P 1,814 million in 1971-74. The questions, therefore, to be asked are whether (a) revenue projections are realistic, and (b) current expenditure projections are adequate to meet requirements.

88. Revenues. Total tax revenues of the national government including taxes earmarked for transfer to local authorities, increased at about 13.5 percent a year since 1967 and on the existing tax base are projected to grow at a rate of 10.8 percent in the future. While the achievement of growth in the past has been partly attributable to some new tax measures next to im- provements in collection, a continuation at this pace from existing taxes would seem possible, but only if significant improvements are continued to be made in tax administration. In discussions with the Joint Legislative Executive Tax Commission, it became apparent that the government is in fact more determined than before to make taxation more effective, and will try out every means available to combat evasion, under-assessment and arrears in pay- ments.

89. Out of the cumulative 4-year national government revenues projected at P18.5 billion, P1.7 billion is to come from new taxes, including the re- cent export tax. If this element is added, total tax revenue will increase - 31 - at a rate of 13.7 percent a year between FY 1970 and 1974. This includes, of course, the effects of the devaluation on customs revenues and sales tax levied ad valorem on higher prices. The implied tax effort should be con- sidered of reasonable magnitude; the planners took the realistic view that while the package of proposed new tax measures is in fact of quite moderate size, it would be bad planning if the fiscal program were based on a large tax program that might subsequently be cut back drastically in the legislative process. From the purely economic point of view, however, a case could be made for a greater effort. The ratio of tax revenue to GNP has been notor- iously low in the Philippines, compared with other countries in a comparable position. Total government tax revenues were 9.3 percent of GNP in 1967 and went up to 10.1 percent this year. With the new taxes, it would go up to 12 percent by 1974; this would represent a creditable, though still modest, improvement in tax performance; the Philippines' tax potential would certainly warrant the setting of the target at 14 percent.

Projected Revenues (Existing and New Taxes) (In million Pesos)

Fiscal Year 1970 1971 1972 1973 1974 A. New Proposals Export tax (75% of proceeds) 307 242 177 112 Tax on securities transactions 57 66 75 Rate increase for gasoline, etc. 130 138 147 Reclassification of customs items 101 106 Imposition of 5% duty on exempt items 21 Legalized gambling 22 Miscellaneous 50 Total 307 429 482 533 B. Existing taxes a/ 2,740 3,130 3,458 3,766 4,119

Total Tax Revenue 2,740 3,437 3,887 4,248 4,652 C. Other Revenues 456 492 545 592 643

Total Revenue 3,196 3,929 4,432 4,840 5,295 a/ Excluding taxes collected but transferred to local government.

90. Although the introduction of the export tax in May 1970 (see paragraph 64) represents a certain achievement of the present Administration, since it was proposed several times in the past but always defeated by vested interests, the amount of windfall profits still left in the exporters' hands is considerable. Both on equity and revenue ground continuation of this tax after FY 1974 should be secured. The increase in gasoline tax was already included in the 1968 but had failed to pass. It is now envisaged for 1972. - 32 -

91. The proposed 1/2 percent tax on securities transactions is expected to be a more effective measure than the existing capital gains tax which is difficult to implement. If approved in FY 1971, proceeds of P 57 million in FY 1972 and higher in subsequent years are projected. This implies (maybe at present somewhat over-optimistically) a continued very rapid expansion of trade in the Makati and Manila stock exchanges, which has been spectacular in the past few years. The proposal was already approved by the House and is awaiting Senate action. The increase in rate of import duty on articles classified as "Others" (carrying the lowest rate) in the Tariff Code is ex- pected to bring in annual additional amounts of over P 100 million in FY 1973 and following years. By bringing the rates closer to those on goods falling under the same heading or sub-heading of the tariff, misclassification of articles for tariff duty purposes (so-called technical smuggling) will be curtailed. The estimated P 100 million may be a rather high estimate in view of the fact that import duties totalled less than P 600 million in FY 1969 and may go up to P 875 million in FY 1973 under favorable assumptions. The House has already approved the proposal.

92. Sundry other tax proposals which are expected to bring in smaller amounts of additional revenues are in less advanced stages of preparation. The only exception which already achieved approval by the House is the travel tax, an additional P 100 to be paid by each permanent resident leaving the country. In 1968, the number of departing Filipinos was as large as 96,239. Since in most cases this does not concern the lower income groups, this is a welcome measure both from the equity and revenue points of view. Revenue might be over P 10 million a year. In earlier stages of preparation, an amount of P 300 per person was considered, which would have meant a more substantial addition to revenue without necessarily being prohibitive for travellers.

93. Current Expenditures. Plan forecasts for current expenditures by the Government assume the carrying out of a fairly severe austerity program throughout the next four years. In fact, if GNP is projected at current prices, which means a growth rate of 10.2 percent per annum, taking account of the direct effects of the devaluation, the share of current expenditures in GNP is implied to go down from 9.4 percent in FY 1970 to 8.3 percent in FY 1974 - while public investment is to increase from 3.0 percent to 4.3 percent of GNP. - 33 -

Projected Current Expenditures (In million Pesos, at current prices)

1970-74 1966-70 Annual Annual rate of rate of 1970 1971 1972 1973 1974 increase growth (%) (%) Economic services 663 665 665 665 665 - 14.0 Social services 1,291 1,362 1,511 1,654 1,795 8.6 11.2 Defense/security 572 599 657 692 725 6.1 15.5 General government 402 450 492 520 543 7.8 6.6 Debt service 231 270 255 335 410 15.4 11.7 Total 3,159 3,346 3,580 3,866 4,138 6.9 11.8

94. Even with the best of intentions, adherence to these targets will hardly be possible. Nor is the case convincing for keeping expenditures for economic services at a constant level, which means a reduction in constant prices, if public investment is to increase at 16.6 percent a year in real terms. The past growth of current outlays for economic services may have been excessive, and with some streamlining some savings may be diverted from low priority to high priority areas, but with the mounting costs of operation the targets will have to be revised. In a more general way, the expected rise in the general price level in the course of next year, and the effect of in- creases in the legal minimum wages, do not seem to have been taken adequately into account.

95. The growth in social expenditures by 8.6 percent a year, although it accounts for over half of the total in current outlays, also would not appear compressible. Four-fifths of it is for education; the implications are that in real terms, total expenditures by the national government on education, including investment, would slightly go down from 3.3 percent of GNP in 1970 to 3.1 percent in 1974. Defense outlays including the police force, which have increased at over 15 percent a year in the past, in 1970 accounted for 1.7 percent of GNP and the proposed increase also implies no increase in this percentage. For general government expenditures, an allow- ance does appear to have been made for wage adjustments in 1971 and 1972, and it may be possible to hold the line in this field along Plan targets.

96. In short, while it would seem commendable to reduce the growth rate of current outlays from near 12 percent in the past to about 7 percent in the future, certain requirements will grow faster than assumed by the planning authorities, and in some other areas it may not be realistic to envisage a reduction, in real value terms, of these outlays from the 1970 level, as the Plan projections imply. It is therefore suggested to increase the aggregate amount of current expenditures for the Plan period by an amount of at least P 500 million. - 34 -

97. Borrowing. All external borrowing envisaged by the government, in the amount of $470 million over the four-year period, is in the form of project-tied loans for the Infrastructure Program. This is 3-1/2 times the amount for the past four years. Contrary to what happened in the past, one might expect some slippage to occur in securing the necessary commitments for such a volume of disbursements, and therefore some reduction in require- ments of associated local expenditures.

98. The remaining financial gap in the public sector plan is P 792 million (see paragraph 86). This is to be covered by non-inflationary do- mestic borrowing. In the absence of a secondary market for long-term gov- ernment securities, GSIS and SSS, and to a lesser extent DBP, are expected to absorb P 450 million of government bonds during the Plan period. To fulfill this goal, GSIS and SSS may have to restructure their past invest- ment pattern and cut down on consumption loans. Underlying is the assump- tion that GSIS will succeed with the collection of arrears, and that this problem will not assume proportions in the future. Insurance companies, private pension funds, and other financial intermediaries provide a potential market for the remaining P 350 million. The ability of the insurance com- panies to invest in government bonds will be enhanced as a result of pending legislation, according to which they will be required to increase their paid- in capital from P 0.5 to P 1 million. Foreign insurance companies, in addi- tion, will be required to increase the amount of their statutory deposit from P 250,000 to P 1 million, which they will be allowed to invest in securities authorized by law. Mushrooming pension funds, whose liquid funds increase at an annual rate of 10-20 percent, so far have been investing in equities. They now appear willing to invest a certain portion of the in- crease in their annual subscription in public issues. The government is prepared to increase the relative attractiveness of its securities and thus ensure acceptance and a more regular absorption by these institutions. Under such circumstances, it is quite reasonable to expect that the govern- ment will succeed in tapping these sources of private savings.

99. If, as suggested above, public savings are overestimated by perhaps P 500 million, three possible solutions or a combination of them might be envisaged. First, a somewhat larger effort in additional taxation could be proposed; second, further bond marketing possibilities could be explored; and third, some shortfalls in capital expenditures could be anticipated. Since the wage and price increases that constitute the main part of the argument for the additional gap will be most effective in the early years of the Plan, the most obvious answer would be an additional tax effort in 1971. For the Plan period as a whole, there is probably some room for the other two alternatives as well.

E. Administrative Changes and Policies

100. Reference has already been made at the beginning of this report to the likelihood of further considerable improvement in the country's eco- nomic management as a result of the election to a second term of President - 35 -

Marcos. On the administrative level, the government is increasingly aware of a number of shortcomings that should be capable of correction through organizational change. Such problems can be mainly located around three general areas, i.e. (a) the relation between economic planning and execu- tion, (b) financial control, and (c) the administration and coordination of public agencies, corporations and instrumentalities.

101. A Government Reorganization Commission was constituted in 1968 composed of 3 members from the Administration and 3 members of each of the Houses of Congress, with the specific task of preparing recommendations leading to a more efficient pursuit of economic development policies. Several working panels were established dealing with Agriculture, Public Works, Social Sectors, and Government Corporations. This work is to be completed by December 1970, but principal conclusions are expected to be reviewed by the Commission in September. The administration of land reform and agricultural development is an important object of their work, and a number of changes are already considered with respect to central coordina- tion of various agencies having an independent charter. Generally, it is expected that the Commission will recommend the abolition or merger of a number of redundant and overlapping agencies. This applies also to the field of national economic planning, although this being a subject of con- troversy, the staff of the Commission has not yet officially come up with detailed proposals.

102. The Four-Year Plan itself formulates proposals in this regard. At present the National Economic Council (NEC) is, by statute, the central planning bodly, while the Presidential Economic Staff (PES), which is the successor of the former Project Implementation Agency, is the coordinating and implementing body. Yet, there is an overlap and blurring of functions between the two, as attested in the preparation of the Plan FY 1971-74, where the NEC performed mainly a coordinating function, while the PES assumed major planning resiponsibilities. Further, since the NEC is a joint executive- legislative advisory body to the President, the Budget Commission feels no obligation to abide by its decisions. There is a weak organizational and operating relationship between the development planning authorities and Budget Commission, and the formulation and execution of the budget bears a tenuous link to the targets set in the Plan. Similar problems exist in the relationship with executing agencies. The present Plan proposes the fusion of existing agencies into a two-tier structure. First, it envisages the institution of a consultative body composed of the top executive and legis- lative leaders, to achieve a consensus of the political level. Secondly, the practical planning and implementation functions would be vested in a body composed of cabinet-rank officials directly involved in the formulation and execution of sectoral development activities, such as commerce and industry, agriculture, budget and finance, public works, transportation and communica- tions. This cabinet-level body, with the sanction of the top consultative body, would formulate development programs to guide all government activities and allocate resources; assume the function of coordinating sectoral and re- gional objectives, priorities and programs, evaluating plan implementation - 36 - and adjusting objectives to new circumstances. Both bodies will be served by one technical staff, to be constituted by merger of a considerable num- ber of existing bodies operating independently at present. Within the over- all purview of this new arrange~nnt, planning units are also proposed to be attached to executive departments, and for regional development both re- gional planning bodies and regional development agencies are to be set up, with the former to undertake studies and formulate regional plans, while the latter will be concerned with the promotion of regional industrial develop- ment.

103. These proposals are not yet sufficiently specific to permit a judgez ment on the likely improvements that would follow. This is particularly true with the two-tier central planning machinery. However, with this proviso, the recommendations appear promising, particularly for the merger of technical staff, including their statistical organizations.

104. In the field of financial management, the Fiscal Policy Committee and the Special Committee on Government Investments were abolished in March 1970, and their respective functions assumed by the (also existing) Finan- cial Policy Committee, which was subsequently renamed Financial and Fiscal Policy Committee. At the same time, and to ensure wider representation, the size of the Committee was increased from 5 to 11 members and now is composed of the Secretary of Finance (Chairman); the Commissioner of the Budget; the Chairman, National Economic Council; the Governor, Central Bank of the Philippines; the Administrator, Office of Economic Coordination; the Chair- man, Board of Investments; the Chairman, Development Bank of the Philippinesi the General Manager, Government Service Insurance System; the President, Philippine National Bank; the Administrator, Social Security System; and thl Director-General, Presidental Economic Staff.

105. Before this reorganization, the major functions of the Financial Policy Committee had been to coordinate the borrowing activities of all government corporations and agencies, including those of the national government, by preparing an annual government-wide financing program and establishing procedures for implementation; to consult with the President on the financial needs of the Government and the means to satisfy such requirements; to evaluate, with respect to timing and terms, borrowing pro- posals, domestic or foreign, of the government and its instrumentalities; to develop standards and criteria for their security issues; and to design a program of legislative amendments and enactments to implement a comprehen- sive program of financial and debt management controls.

106. In addition to these responsibilities, the Financial and Fiscal Policy Committee is now also discharging the functions of advising the President on all fiscal, monetary and other matters related to economic development, including the assessment of the impact of proposed public bor- rowings on the economy, the allocation of bond funds, and the close scrutiny of the fiscal and overall economic situation. Furthermore, it is now also concerned with the financial position of government instrumentalities, the propriety of disposing of assets or stocks of government eorporations, the investment policies of all government financial insti~t#tuono and their coordination. - 37 -

107. Another step that has been taken is the creation of the Presiden- tial Development Budget Committee, composed of the Budget Commissioner who chairs the Committee, and the Chairman of NEC, the Director-General of PES, the Secretary of Finance, and the Governor of the Central Bank, as members. Its major task will be the determination of the level and the functional allocation oi- annual government expenditures, the allocation of capital and operating expenditures for each development activity, and the timely release of appropriations for capital outlays. The novelty in this case consists of the inclusion of other interested agencies in the policy-making functions with regard to capital outlays, which had previously been a prerogative of the Budget Commissioner. To improve on cash management, the Administration has also moved to establish an operational cash budget. The IMF is expected to provide the necessary technical assistance.

108. The regrouping of advisory bodies in itself does not necessarily vouch for a better performance of the government and the various government entities in the future. With respect to fiscal discipline, their advice can be overruled by political considerations. However, in terms of spending ability beyond a certain point, the Central Bank has the resources and, in principle, the authority to limit the creation of inflationary assets. In the Philippines, the Central Bank's policy is subject, however, to control by the Monetary Board, chaired by the Secretary of Finance, which is the decision-making body and charged with the responsibility for overall monetary policy in the country. The Board at times in the past has not done much to prevent runaway deficit financing by the government. Greater independence of the Central Bank in this respect would appear desirable; it should also be able to exercise more effective control over the government's financial institutions, and to have some control on the allocation of credit, accord- ing to Plan priorities, in particular as between the public and the private sector. As it is, the responsiveness of the Monetary Board to economic considerations is the key to monetary stability. Its membership at present gives hope for improved performance in future, and as described earlier, the current Stabilization Program is being carried out with reasonable stringency.

F. Private Investments

109. The Plan contains a rough sectoral breakdown of expected private investments. Except for industry and agriculture, gross investment and the required financing are expressed in aggregates for the entire Plan period and in constant (FY 1967) prices. The funds expected to be mobilized by the banking system and the financial intermediaries are based on projections of past trends, and there is no appreciation of the possible effect of the sharp rise in prices, following the devaluation, on the composition of the asset holdings of institutional and non-institutional investors. As a re- sult, the Plan figures shown below should be considered as very rough orders of magnitude.. - 38 -

Private Investments and Sources of Financing (Billion Pesos in FY 1967 Prices) FY 1971-74 Percentage Gross Investment 23.0 100.0 Agriculture 2.1 9.2 Mining & Manufacturing 8.1 35.3 Stocks 2.0 8.6 Construction, Transport, Utilities & Other Services 10.8 46.9

Sources of Financing 23.0 100.0' Foreign Capital 3.0 12.8 Private Savings, of which: 20.0 87.2

Government Financial Institutions (DBP,. GSIS, SSS) 2.0 8.7 Private Commercial Banks (including PNB) 2.4 10.4 Other Financial Intermediaries 1.6 7.0 (insurance companies, investment banks, etc.) Corporate Savings 3.4 14.8 Non-institutionalized Personal Savings 10.6 46.3

Source: Four-Year Development Plan for the Philippines, FY 1971-74.

110. During the four-year period, gross private investment is' projected at P 23 billion, of which 9 percent is expected to go to agriculture ndt 35' percent to mining and manufacturing. (Comments on industrial inve'stments! are made below in section H of this chapter.) Of the tota'l private invest- ments, 87 percent is expected to be financed out of private savings, andh thle' remainder by private foreign borrowings. Government financial instiflt-' ohns (DBP, GSIS and SSS) are expected to fund P 2 billion of investments duriig the Plan period. In the preparation of a consolidated cash flow statement for the three institutions, it was assumed that DBP's debt, bonds and time deposits, held by GSIS and SSS will be renewed at maturities and, further, that DBP will tap these institutions for supplementary funds to implelii_nt its lending program and the planned purchases of government bonds. The target, in the light of past performance, does not seem unrealistic. It takes account of DBP's difficulties, particularly in the first two years of the Plan, resulting mainly from the advances on guarantees it will have to make to accommodate clients adversely affected by the devaluation. A downward adjustment will have' to be made in the assumed accruals to DBP from the export tax proceeds by P 234 million, from the' original estimate of P 621 million for the four-year period. This somewhat nar'rows the scope for investment in the private sector by these institutions, particularly if the target for government borrowing is upheld (see paragraph 98).

1ll. Private commercial banks, including PNB, are expected to invest another P 2.4 billion. The figure is arrived at on th6 basis of past- - 39 -

trends and it does not seem to be beyond the capacity of the system. Fi- nancial intermediaries, such as insurance companies, investment banks, mutual building and loan associations, private pension funds, etc., may not be able to finance P 1.6 billion of private investments, but this of course depends on their ability to capture a greater proportion of the non- institutionalized savings than in the past. Corporate savings may well, as expected, finance P 3.4 billion of investment or more, even if a decline in profits in FY 1971 and 1972 is hypothesized. Corporate savings rep- resented an average 21.5 percent of private savings during the period FY 1965-68 which is much higher than implied above. Finally, the Plan does not elaborate as to how personal savings, which appear as a residual and which account for over 50 percent of national savings, is to be mobilized and channelled into areas of priority.

112. Turning to the external financing requirements, the projected volume of private investment would call for an inflow of capital in the form of direct investment and suppliers' credits in the amount of about $750 million. Although the amount involved for the entire period does not appear excessive, the private sector may encounter initial difficulties in securing the necessary financing, if foreign creditors cannot offer matur- ities consonant with the debt management scheme of the Central Bank.

G. Agricultural Development

113. With agriculture (including forestry and fishing) contributing, in 1968, about one-third of GNP and employing over half of the active popu- lation, this sector is receiving major attention by the authorities. Fur- ther, agriculture provides over 80 percent of the country's export earnings (crops 50 percent, forest products 30 percent). Food imports still account for 12 percent of all import expenditure, however. In recent years export earnings have not developed very satisfactorily, while the food import bill has been steadily growing. The former development is not due to adverse price trends but rather to a drop in the volume of some major export com- modities, in particular copra and also sugar. Production data, however, to the extent that they are reliable, suggest that unreported exports have in- creased considerably.

114. On the import side, cereals (rice and wheat) are the main import item; in years of bad harvest cereal imports may account for as much as 50-60 percent of food imports, e.g. in 1965 and 1967. But with self-sufficiency for rice approaching, attention should be drawn to the growing imports of meat (including fish) and dairy products. These products have a high income elasticity of demand (contrary to rice) and imports of these commodities accounted in 1969 for-about one-half of all food imports. Improving the agricultural trade balance should be considered as one of the main goals of economic policy in the years to come.

115. Production Targets. In the past the authorities have tended to neglect the problems of agricultural development, and concentrated on indus- trial expansion. This situation has changed, however, and agricultural - 40 - development is given high priority in the FY 1971-74 Four-Year Plan. Among the various issues treated in the Plan, the production targets are of great- est importance, as most of the other issues are related to the production goals and possibilities. A comparison with recent performance indicates a considerable degree of optimism regarding prospects for some domestic food- stuffs (see Table below). Not only are some of the growth rates projected for the Plan period well above past growth rates, but also the starting level of the Plan is in some cases quite out of line with the results of the most recent year known 1968/69 (in particular for milk production, but also for corn, fruits and vegetables). On the other hand, the objectives for the main export commodities of copra, sugar and logs, appear quite conservative, in particular the projections for logs.

Production of Main Agricultural Commodities

Thousand metric tons Annual Rates of Growth Actual Projections Actual Projections 1967/68 1970/71 1973/74 1961/68 1971/74

Products mainly for domestic consumption

Palay (paddy) 4,560 5,510 6,655 3.0 6.5 Corn 1,619 2,039 2,568 4.2 8.0 Fish 938 1,180 1,487 10.9 8.0 Meat 362 457 579 n.a. 8.2 Rootcrops 1,305 1,392 1,456 -1.5 1.5 Fruit and nuts 1,372 1,531 1,818 10.0 6.0 Milk 9 26 33 n.a. 8.3 Eggs 96 130 167 n.a. 8.7 Vegetables 251 328 391 4.5 6.0

Major export products

Copra 1,542 1,678 1,861 5.3 3.5 Sugar 1,658 1,836 2,079 3.0 3.8 Logs 4,711 4,847 5,144 7.7 2.0

116. Until 1967/68 rice output had been growing at an average rate of 1.5 percent per year; the rise was exclusively due to yield increase. A sudden expansion in cropped area accompanied by favorable yields resulted in a record crop in 1967/68, some 11 percent above the previous year. The drought in 1968/69 brought a slight setback, which would have been much greater were it not for the new varieties. The area under new varieties is expanding rather fast (3 percent of total area in 1966, 18 percent in 1968/69 and 21 percent in 1970). On the assumption that farmers plant progressively more of their area with the new varieties, the Plan's targets seem attain- able, in particular if the irrigated area were to be expanded, as foreseen by the Plan. There is the question, however, whether the planned growth rate of 6.5 percent should be deliberately stimulated. Self-sufficiency has apparently been largely reached, and future demand growth will depend almost exclusively on population growth. Thus, the Philippines should soon be in a surplus situation. However, outlet prospects in world markets are in no - 41 -

way promising, and even with the devaluation it is not certain that Philippine rice will be competitive in price. Marketing experience and facilities are furthermore hardly existing.

117. In such a situation, more emphasis will have to be given to crop diversification; and in any case, whether the export plans are pursued or not, further increases of the floor price should be avoided. 1/ In the past, farmers have tended to interpret the floor price as a guaranteed price, but the funds of the administering organization, Rice and Corn Administration (RCA) were insufficient and in 1968 intervention had suddenly to be stopped. In normal years the RCA has so far bought some 5-10 percent of the crop and its losses have averaged P 100 million per year. The role and functioning of the RCA require great attention, as the spreading of the new varieties may cause rapid changes in the outlook, e.g., it might be considered pos- sible to lower the floor price once the new varieties have made more progress. The spreading of the new varieties will partly depend on the construction of new drying and storage facilities, essential for the second crop harvested during the monsoon.

118. While corn so far was mainly produced for human consumption, its importance as a feedgrain has only recently been recognized. Indeed, future requirements of feedgrains appear-to be very great (see below). Production, for food, however, takes place under difficult conditions (marginal land, very low fertilizer use, absence of high-yielding varieties). Although pro- duction conditions for feed corn are not quite comparable with those pre- vailing for food, the 1970/71 target and the planned growth rate appear difficult to attain. Particularly strong efforts are needed to overcome the obstacles mentioned. Demand for domestic corn is likely to increase following the recent devaluation of the Peso affecting the cost of imported feedstuffs, and this might be an incentive for producers.

119. Even if the growth target for corn were to be reached and the introduction of other feedgrains were to have the expected results, it is unlikely that domestic feed supply would be sufficient to meet internal demand. The planned increase in eggs, poultry and pig meat is about 50,000 MT per year, which could require a yearly increase of some 300,000 MT in feed requirements. The planned growth in output of feedgrains is less than this at about 180,000 MT per year. Growth in rice output should also pro- vide some additional feed, e.g. bran but domestic shortages are likely to occur if the Plan targets for poultry and pigs are met.

120. Taking these various factors together, it would appear that any expansion of the rice area should take place only if it has been ascertained that the land in question cannot economically be cropped with feedgrains. It might even be found economical to convert some of the existing rice acreage for that purpose, but in areas other than Central Luzon. The high population density on Luzon makes it preferable to maintain rice production 1/ In 1966 the floor price was raised from f 12 to f 16 per cavan (46 kg. gross) and in 1970 to P 17.50. The growers association were claiming, in May 1970, a support price of P 27. - 42 - there and to expand feedgrain production in other regions. The price re- lationship between rice and corn might also be reconsidered in favor of corn. The possibilities for a regional differentiation would also need to be investigated. The suggested switch in emphasis would at the same time improve the relatively bad position of corn growers.

121. Sugar. In recent years the Philippines have failed to make full use of their export possibilities to the U.S. WIhile domestic consumption has been increasing, output has stagnated, mainly as a result of limited water supply and insufficient milling capacity. The latter problem is now fast disappearing. The Bank's Economic Report of 1969 had suggested, however, that it would have been more advantageous to invest in irrigation so as to obtain a cane supply all year round and to make more intensive use of the existing and new milling capacity. The Development Plan now calls for improved irrigation among other yield-increasing programs (high- yielding varieties, increased fertilization).

122. Coconut. Production growth of coconut products, in particular copra, has slowed down in the past five years because of a gradual drop in yields. The main reasons for this unsatisfactory development seem to be insufficient fertilizer used and inadequate rejuvenating of old plantations. However, considerable replantings, starting in the early sixties, may now begin to bear fruit, and the target growth rate of about 3.5 percent a year for the Plan period does not seem unrealistic. The Philippine coconut economy is one of the most traditional and also backward sectors. It is scattered throughout the country and new techniques are not easy to in- troduce, particularly the use of fertilizer. Furthermore, existing credit is mainly short term, while coconut growers would need medium- and long- term credit. The recent creation of production cooperatives may contribute to an improvement in farming methods.

123. As regards forest products, most of the production is exported: two-thirds of log production (in 1967-68), 60 percent of plywood, most of veneer, but only 10 percent of lumber. Log exports, by far the most important of the forest products in value and volume, have developed quite rapidly in recent years. The authorities now intend to slow down the ex- ports of logs to a yearly growth rate as low as 2 percent and to promote the exports of the processed products. These intentions are sound in principle but such a conversion will require a considerable effort in trans- port and marketing and results are likely to be achieved more slowly than the Plan suggests. The slowness of the reforestation is a matter of concern and the illegal removal of forest products seems to take considerable pro- portions; these problems are reconfirmed by the authors of the Plan and remedies are proposed.

124. Major Policy Issues. Price policies for both agricultural inputs and outputs are of great importance because of their influence on the volume and pattern of agricultural production. Furthermore, the conditions of Philippine farming and its present stage of development require important interventions by the public authorities. This takes the form not only of - 43 - public investments (in particular irrigation, also in forestry and market- ing structures), but also of agricultural credits and incentives to gene- rate private investment. Credit is also a particularly important matter in the light of its direct relationships with the current Land Reform measures.

125. Price Policy. The Plan notes that in the development of rice production, Philippine farmers have been receptive to technological inno- vations and that there is now plenty of room for the expansion and diver- sification of agriculture. However, the Plan does not mention the role price policy is expected to play in bringing this about. The following issues represent areas requiring priority consideration:

- Should the system of minimum prices for rice and corn be maintained and if so, how should the floor price be fixed? Should this system be expanded to other products? Would it be preferable to stop spending a yearly P 100 million on rice subsidies and use these funds for modernizing the sector, e.g. by subsidizing inputs the price of which has recently gone up sharply with the devaluation? Or by creating additional drying and storage facilities in order to spread the use of high-yielding (amd thus low cost) varieties.

- If output subsidies should be maintained for any product, these should be only temporary and only products that particularly need to be promoted, e.g. the new feedgrains or beef or dairy products. It should be ascertained that the funds available are sufficient for the period announced; the 1968 experience when the RCA had to stop rice purchases because of lack of funds is more harmful than no price guarantee at all.

- Could a case be made for adopting a discriminatory price policy for inputs (and, possibly, for output of some deserving products) on a regional basis, and should any such preferences be considered in support of the Land Reform Program?

126. Irrigation. During the last four years, 263,000 ha were added to the existing irrigable area, but this performance remained substantially below the initial plans. The 1966-70 Infrastructure Program had envisaged an area of 450,000 ha and investments of P 278 million; the expenditure rate reached only 45 percent. While the Irrigation Service Unit (ISU) whose activities are mainly based on installation of pumps, surpassed its 102,000 ha target by 19 percent and communal projects were completed on 29,000 ha versus 19,000 ha foreseen, the National Irrigation Administration (NIA) reached only 28 percent of its target of 307,000 ha of newly irrigated land; their efforts in the rehabilitation of existing irrigated land were more successful: 93 percent of the target of 30,000 ha. - 44 -

127. During the FY 1971-74 Plan work is expected to be completed on over 300,000 ha, of which 204,000 ha by NIA, 22,000 ha of communal projects and 83,000 ha by ISU. In view of the past performance and the relative small amounts involved (P 11 million for communal projects and P 24 million for the ISU) the targets for these two programs seem quite feasible and even conservative. This may be different for the NIA's program: of their total target of 204,000 ha the Upper Pampanga River Project will cover 77,000 ha and this may occupy much of the NIA's financial and executive capacity. Its total cost is P 200 million plus US$60 million, i.e. US$1,200 per ha. It was started in FY 1970 and over half of the total cost will be disbursed during the Plan period. It is therefore uncertain that the other projects in the NIA's program can be executed, in particular the intended new projects covering a total of 70,600 ha. Besides, it may be questioned if the funds foreseen by the Plan for these new projects (P 91 million, i.e. US$210 per ha) would be adequate.

128. Credit Policy. Both government loans and loans by private banks to agriculture have grown considerably over the last few years (see Appendix Table 7.3). Much of this expansion is accounted for by institutional loans replacing those of private moneylenders, in particular the landlords in the areas subject to land reform. However, most of the credit to agriculture consists of short-term crop loans, which actually contribute little to the sector's development, while medium- and long-term loans are not yet very important. Most of the latter are provided by the Development Bank of the Philippines, although lately the Rural Banks, with the help of IBRD have also made some medium-term loans available. In view of the scarcity of public resources and the preference commercial banks are giving to short- term loans, consideration should be given to introducing a system of govern- ment guarantees for medium- and long-term loans. Such a system could gene- rate an increase in commercial loans, further reduce the role of the private, moneylender, would cost little to the state and, if efficiently administered;, would be an important instrument for reaching specific policy goals (e.g. diversification). The Plan estimates that during FY 1971-74 the yearly credit needs of the agricultural sector will be P 2.7 billion, of which P 600 million for fixed capital.

129. Land Reform. The credit issue has become particularly important since the land reform measures were introduced. The Land Reform would be in two stages: sharecroppers become tenants and then tenants become owners. The first stage is now well underway and it was recently proposed to declare it operative for the whole country except for some categories of sharecroppers that were excluded from the land reform right from the start. In practice, however, the first stage has tended to be relatively ineffective because newly created tenants in many instances continue to pay a similar part of their output as they did previously as sharecroppers, while at the same time the owners have shown a tendency to stop being suppliers of credit. - 45 -

130. The second stage could become more attractive to the farmers, but so far it has not really started. Its execution in the near future seems unlikely. Considering the lack of administrative capacity, as well as the cost of land acquisition and additional credit requirements, the Plan treats the land reform program with great caution and refrains from setting any targets. Considering that many holdings, particularly in Central Luzon, after reform will be of economically unviable size, the land reform should be viewed in conjunction with the program of land colonization in other parts of the country.

H. Planning for Industry

131. Since virtually all industrial activities are in the private sector, industrial planning is basically indicative and its success depends on the policy tools selected, and the effectiveness with which they are applied. Sinice its creation in 1967, the Board of Investments has assumed most of the responsibility for industrial planning and also for implemen- tation in itsi capacity as a regulatory agency. It is possible, as well as desirable, that with the strengthening of the BOI - technical assistance through the INDP is now at the stage of negotiation - it may in future also play a more promotional role vis-a-vis private investment.

132. The BOI each year, by issuing an Investment Priorities Plan (IPP), lists specific industrial projects, whether applied for or not by private parties, which will be eligible for incentives available under the Incen- tives Act. These lists are revised each year by deletion of projects already undertaken and for which the market is deemed to be saturated and inclusion of new projects; at the same time, new general guidelines are given and objectives for the role of manufacturing and mining industries restated. These Priority Plans are useful instruments for the government to impart an overall direction to industrial investment; the third IPP was issued early in 1970 and served as a basis for the industrial part of the Four-Year Plan. However, since the project list of the third IPP excludes some of the projects already approved earlier, and does not include projects to be listed in subsequent IPP's, it did not provide an aggregated basis for investment estimates for 1970-74; most of the Plan investment and output targets are therefore based on macro estimates without any direct link with concrete BOI investment proposals.

The broad objectives of the Four-year Plan are:

- to help alleviate the balance of trade problem by encouraging export industries and those using domestic raw materials;

- to promote intermediate and capital goods industries;

- to encourage backward and forward linkages; and

- to generate greater employment opportunities. - 46 -

In this general form, none of these objectives is open to crit-icism. The shift away from consumer goods industries is an accepted postulate, since it has long been recognized that import substitution of consumer goods had already reached a saturation point in the late fifties and their growth since then was limited to the relatively slow growth of the domestic market; their contribution to GNP increased only by 1.9 percent per annum from 1963 to 1968. Also, the shift to intermediary goods industries has already been under way for some time, with an annual growth in value added in the same period of 6.7 percent. The capital goods industry is still negligible in terms of value added and growth.

133. As far as backward and forward linkages are concerned, there is sonme scope, but in the case of backward linkages, careful consideration of the costs involved would be necessary. In forward linkages, particularly' for export processing of food and other domestic crops, as well as in the mining sector through copper smelting, and the development of the wood- working industries, there are good prospects. Both of the latter two are,. however, subject to certain difficulties that are not easy to overcome,, in connection with the very high profitability in exporting copper concentrates- as wiell as logs (increased again with the devaluation) and the relatively low financial return obtainable in forward linkage. The woodworking industry is plagued with problems of suboptional plant size,. byproduct use, and location. Solutions to this type of problems are not easy to find, but in other branches where they are not present the promotion of forward linkages should have a good chance of success, particularly when the new exchange rate will permit export of new products. As far as employment generation is concerned, past experience is not too encouraging. The target for the last four years to create some 100,000 additional jobs fn the industrial sector will probably not be met to the extent of more than 50 percent.

134. The target for growth in manufacturing industry from 1970 to 1974 is 6.2 percent per annum or about 5 percent per annum for the five years if 1969 is used as a benchmark. This is a modest target. As already noted, manufacturing growth in FY 1970 is assumed to be practically zero and to recover only after 1972 to a rate beyond 5 percent, in which year the projected level of raw material imports recovers to what it was in 1969. The relation between these imports and the levels of production is evidently of crucial importance given the high import content as shown below.

Import Projections for Industrial Raw Materials (In million pesos at 1967 prices) 1969 1970 1971 1972 1973 1974 Value added in manufacturing 4,020 4,035 4,113 4,301 4,691 5,127 Raw material imports a/ 2,108 1,880 1,960 2,108 2,300 2,520 Import dependency (%) 52.2 46.6 47.7 49.0 49.0 49.2

a! Import projections are in US dollars in the Plan and were converted at the old rate. - 47 -

135. It might be suggested that the 10 percent reduction of raw material imports in 1970 would make it difficult to envisage anything but a decline in industrial output; there is some evidence however, at least in some branches, that excess inventories had been built up in the last three years, partly for speculative reasons. Raw material imports grew at an unprecedented 13 percent a year from 1966 to 1969 compared with an esti- mated growth in manufacturing of perhaps 6 percent a year. Even assuming a growing effective import dependency of manufacturing industry as a whole in recent years as a result of the shift to intermediary goods industries, it is possible that excess stocks in 1969 were built up in the value of perhaps US$50 million. For 1969 and 1970 the import dependency should thus be averaged, and the average works out at 49.5 percent. The project- ions shown above do not seem unreasonable, therefore, and in fact the postulated promotion of industries using more domestic raw materials should bring the import dependency somewhat down in later years. The point should also be made that with the undercoverage of new industries in the national accounts, the import dependency in recent years would probably appear progressively overstated. This does not alter the fact that for the imme- diate future, manufacturing growth is held in check by the import con- straint, and the implied drop in capacity utilization is reflected in the aggregate ICOR which, for the economy as a whole, is projected to go up from a past average 3.3 to 4.2 in 1970 and 1971, after which it is pro- jected agairn to go back to the earlier ratio.

136. Investment Targets. The plan does not distinguish between investment in manufacturing and in mining, and gives no details for indus- trial branches. Nor are any estimates for actual investments in the last two years available for these sectors. The Plan figures, therefore, have to be taken as very rough orders of magnitude. However, it is interesting to compare the investment targets with those that had been worked out in great detai:L in the September 1969 draft Five-Year Plan. Five-Year Investment Targets FY 1970-1974 (Millions of constant 1967 pesos) 1969 Proposals Plan (5-Year Period) Fixed investment in: Metal industries 1,775 n.a. Non-metallic mineral manu- factures 227 n.a. Chemicals 897 n.a. Wood and fibers 722 n.a. Food industries 783 n.a. Others 1,464 n.a. Research/modernization 488 n.a. Mining 1,328 n.a. (A) Total Mining and Manufac- turing (fixed) 7,683 9,864 (B) Total Private Investment 37,141 31,883 of which: Working capital n.a. 6,082 (c) Total (a) as percent of (b) 20.7 30.9 - 48 -

137. The new industrial and mining targets are 28 percent higher while total private investment has been scaled down by 14 percent. This is a result partly of a reappraisal of past trends and new proposals having been received and approved by the BOI for industrial projects, and partly of new ventures proposed in mining. In fact, a number of new projects had to be added that had not been contemplated before, in fields such as primary steel, nickel, and aluminum. Implicit in the above revision is the assumption that the initial austerity program of the government would have a depressing effect on private investment outside of mining or manufacturing, e.g. in residential and commercial construction. It is too early to see whether this is borne out by events during 1970, but there is reason to question the optimism that is apparent in the upward revision of industrial targets. While it is true that already up to December 1969 the BOI has approved a large number of new projects, adding up to a total of about P2.3 billion, there is no assurance that they will be carried out on the original schedule after the Stabilization Program. While it is also true that up to 1969 industrial investment has probably expanded at an accelerating rate - to judge from the 20 percent a year increase in imports of non-electric machinery since 1966 - it is equally certain that the type of external borrowing that has made this possible will not be either available or permitted in future. Whether suppliers credits on terms suitable for the Philippines' balance of payments situation will be available during the Plan period to support the proposed level of invest- ment in this sector is, of course, a matter that needs to be considered in a different context.

138. Financing. The Development Bank of the Philippines (DBP) has beenx the major source of long-term loans, providing substantial amounts of financial assistance at favorable interest rates and repayment terms. 1/ Easy access to government assistance has probably encouraged local firms to rely on public resources rather than on their own for solving their financial problems. The Private Development Corporation of the Phili- ppines' operations have been on a relatively small scale, and in recent years some investment banks have also made a minor contribution. Commercial banks have been lending for working capital, but also for fixed investment to a certain degree.

139. Recent years have seen an important change in DBP lending, from direct loans to guarantees for foreign loans.

1/ Government agencies from January 1966 to June 30, 1967, provided about P1.7 billion (P0.9 billion in loans and equity, and P0.8 billion in guarantees), in all types of financial assistance or almost as much as gross fixed capital formation in manufacturing during the same period. - 49 -

Development Bank of the Philippines (In million Pesos)

Loans to Guarantees for Manufacturing Foreign Loans a/

1965-66 34 244 1966-67 183 251 1967-68 229 793 1968-69 154 1,083 a/ Includes loans guaranteed to establishments outside manufacturing; the latter account for approximately 70 percent of the total.

Source: DBP

140. This change in the source of lending is, of course, a significant component of the recent build-up of the country's foreign liabilities. With the establishment of the floating exchange rate, it has imposed a heavy cost burden on firms with low equity and heavy loan conmitments.

141. The evaluation of the sources of financing proposed in the Plan, and shown below, for the industrial program is rendered difficult by lack of complete comparable data for the recent past. The contributions to financing seem reasonable and in line with past experience in the case of paid-up capital of enterprises and borrowing from financial institutions excluding commercial banks. Two aspects are, however, unclear and would deserve further investigation: uninstitutionalized savings, and financing from commercial banks.

Sources of Industrial Finance (In million Pesos, at current prices) 1971-74 Share (Percent)

Total Fixed Capital for Mining & Manufacturing 11,412 100.0

Paid-up capital 980 8.6 Corporate savings 1,433 12.6 Uninstitutionalized savings 2,773 24.3 DBP 1,000 8.7 Other financial institutions 326 2.9 Coimmercial banks 2,261 19.8 Direct foreign investment 240 2.1 Foreign borrowing 2,400 21.0 - 50 -

142. Looking at the past relationship between households income, expenditures, and consumption, it would appear that, over the Plan period, uninstitutionalized savings going into mining and manufacturing investment represent approximately 20-22 percent of total household savings. This would not, offhand, seem impossible, but the Plan does not explain how such a transfer would be accomplished.

143. Financing from commercial banks is expected to contribute, over the Plan period, 112,261 million for fixed investment plus R1,716 million for working capital. The former contribution is based on the assumption that 10 percent of total credits by commercial banks to manufacturing and mining are used for capital formation. This target is consistent with the expansion of commercial credits at an annual rate of 11 percent, which took place in 1963-68 and applying this growth rate to 1968 as the base year. 1/ However, long-term and intermediate loans as a proportion of total credit by commercial banks have been going down appreciably in the last five years, and it is not quite clear whether the Plan assumes a reversal of this trend or an increase in financing of fixed assets through short-term borrowing.

144. It is not easy to comment on the direct import element, in the form of capital goods, of this investment program, since an attempt to quantify it has not been made in the Plan. The third IPP of the Board of Investments outlines a program involving investment of P12.4 billion in current prices prior to devaluation - including a number of projects already approved. An analysis of the structure of these investments, blown up to the size of the four-year targets, suggests the following content of imported equipment in total Plan outlays:

Equipment Import Requirements for Mining and Manufacturing (In current prices) Fixed Equipment Investment Imports (11 million) (US $ million) Total Four-Year Plan for Mining and Manufacturing, 11,413 1,538 of which: Manufacturing - 10,842 1,467 Consumer goods industries 271 25 Intermediate industries 10,148 1,388 Capital goods industries 423 54

Mining 571 71

1/ The calculation shows commercial banks' credits to manufacturing and mining, over the Plan period, would reach P22.8 billion, of which 10 percent or P2.3 billion would be allotted to capital formation. - 51 -

145. On this basis, the investment program would require about US$1.5 billion of imported equipment. This compares with a projection in the Plan of total imports of capital goods of US$1,757 million, leaving some US$200 million for agricultural equipment and utilities and other public invest- ments. This is clearly inadequate and would call either for larger imports or some compression in private investments particularly inter- mediary goods industries, which would appear to absorb an inordinate amount of foreign exchange. However, after the devaluation it may well be possible that private initiative would indeed, as desired, move somewhat toward less capital intensive and more labor intensive industries, or it might eventually invest altogether less than implied above, particularly in the next two years. This will not be true in the mining sector where the devaluation has, by contrast, enhanced incentives to invest.

146. Protection. Since the removal of import controls in 1962, local industries have mainly been protected by tariffs. Additional protection is also provided by the domestic sales tax, since the effective tax is significantly higher on imported than domestic goods. This additional protection is very substantial in products considered "semi-luxuries" (appliances, some textiles, etc.), and "luxuries" (automobiles, jewelry, etc.). The tariff Otructure has shown little overall change since 1966 and remains biased in favor of ii¶port substitution in consumer goods. Thus the actual sttucture of avetage nominal tariffs may be summarized as follows:

Cte gory Percent Tariff Consumption goods 78 Intermediate goods 28 Capital goods 21

147. Effective rates df pr-otection sh6 the net re8ult of tariffs on both inputs and outpufs and provide a better measure than nominal rates for adsessing the imipact of the tariff structure on resource allocatibn. Effective protection studies confirm that the tariff system favors the manufacturing sector, and specially consumption goods over intermediate goods while capital goods are the least protected. 1/ On the other hand, negative effedtive pkotection in mining, forestky and exports (excluding sugar) indicates that the tariff structute is biased against these sectors. The tariff system thus strongly encourages import replacement even if it is at relatively high cost, and discourages export- oriented manufacturing.

1/ these comments are based on the study by J.H. Power, and G.P. Sicat, Industrialization in the Philippines, Discussion Paper No. 70-11, University of the Philippine Press, April 24, 1970. - 52 -

148. The future pattern of industrialization could be greatly improved by a review of the tariff system with particular attention to a reduction in the high rates of protection for consumer goods, and by avoiding further rises in tariffs. The Board of Investments already gives some weight to tariff considerations in selecting industrial projects, and it would seem useful to coordinate the Tariff Commission's work with it. The Tariff Commission seems to be aware of the importance of tariff policy but it has little power and is frequently overruled by other government institutions. In other cases, tariffs are changed without the Tariff Commission being informed at all. Furthermore, requests for tariff increases are normally approved on the basis of what is needed to cover the difference between local and imported prices without questioning the efficiency or competitiveness of the firm. The fact that the power to grant tariffs is diffused and uncoordinated is probably the result of political pressures and vested interests from firms which developed under the protectionist policies of the import substitution strategy.

149. To offset the bias against exports requires special measures. The BOI has already drafted a bill for the promotion of exports and is the agency best suited to administer the program. The BOI is also engaged in efforts to improve payments of drawbacks on import tariffs to exporters and speed up customs administration in close cooperation with the Ministry of Finance, and these efforts need to be extended. The credit support of the export program could take the form of preferential rediscounting facilities for export letters of credit. The export promotion program should include both tax and credit incentives and, besides being administered by a well- staffed agency, it also requires an organization of manufacturers.

150. Effects of the Devaluation on Industry. The new floating exchange rate in force since February 21, 1970, has resulted in general price in- creases in all industries. By April 1970, these increases were already quite substantial but probably less than expected because of some inventory accumulation from pre-devaluation times, lags between import orders and shipments, and the adjustment period between supply and demand. At the time of the devaluation, many industries were operating below full capacity and this helped to expand output without resorting to price increases. Therefore, most price increases are the result of either higher import costs or rises in wages.

151. Price increases from the end of 1969 up to April 1970, due to the new floating exchange rate, have been substantially larger in inward- oriented than in export-oriented industries. This is explained by the much higher import content, direct plus indirect, in the former than in the latter, and by very high rates of protection. Thus, prices of many items produced for local consumption have risen from 30 to 80 percent. Price increases for traditional export products were normally from 10 to 30 percent. Some typical price increases in products manufactured locally were: - 53 -

Percent average increase Category in ex factory price a

Inward-oriented industries Coffee products 20 Vegetable oil 30 Beer 35 TV sets, refrigerators, air conditioners 30 - 40 Chemicals 30 - 40 Textiles 35 - 40 Glass bottles 40 Biscuits and crackers 45 Cocoa and chocolate products 50 Wheat flour 50 Motor Vehicles 40 - 60 Finished steel products 25 - 90 Onion skin paper, bond paper & book paper 100 - 170

Outward-oriented industries Tiles 20 Desiccated coconut 30 Plywood 30 Logs 30 Copra 40

a/ Price increases up to April 1970. Further price increases should be expected until the price levels stabilize. Source: Plant visits by the Mission.

152. Almost all capital goods have increased in price to the full extent of the new peso rate. In the few cases where domestic production exists, the price increases have also been sizeable because of higher domestic costs indirectly induced by the new exchange rate. Domestic prices of consumer durables, i.e. television sets, refrigerators, air conditioners, etc., rose between 30 and 40 percent due mainly to higher costs of imported materials.

153. All local industries with significant import components are likely to show a relatively small improvement in their competitive position vis-a-vis foreign products. At the same time the higher peso cost of imports will now create a larger tax base for the calculation of the tariff duties; and it will provide additional inducement to protected domestic producers to raise their prices to compensate fully for the higher cost of their foreign inputs, plus those arising from local inputs, rather than to improve their efficiency. It would now appear to be appropriate to at least offset the increment of protection achieved through the devaluation by reducing tariff rates applicable to all import substituting industries with high tariff levels by a corresponding degree. This reduction would - 54 - encourage more efficient production and a more appropriate structure in future industrial development. One should recall the disappointing results of the 100 percent devaluation in 1962 which led to practically no improvement in the industrial structure. In conjunction with appropriate changes in tariff and other incentives, the new exchange rate could now provide the basis for a significant change in the direction and rate of expansion in the industrial sector. It should open up opportunities for new products to reduce the import content, promote backward integration in selected cases, and develop new exports.

154. Wages. Most organized industries visited by the mission were paying average daily wages of 117-8 except in textiles where 80 percent of the workers were getting the minimum wage of 116 per day. New legislation in April raised the minimum industrial wage to P8; if fringe benefits are added, the average industrial wages, at the new exchange rate, would seem to be close to US$2 per day, which is considerably higher than in neigh- boring countries. However, this does not apply to the smaller manufacturing establishments and the handicraft sector, where wages are in fact con- siderably lower.

155. Most organized industries are oriented to the domestic market and are protected, making relatively high wages possible. The tariff structure has encouraged capital intensive industries, with a resulting low labor absorption in manufacturing. This has become acute in recent years. The BOI first attempted to give some preference to projects with high employment creation but it appeats that there were few cases where this alternative presented itself at all. In the third IPP, a sharp increase is implied in investment per person employed - from about P77,000 on average for projects approved before the end of 1969 to an average of about 1140,000. This rise is particularly pronounced in the consumer goods section and somewhat less in intermediary goods industries.

156. Location. Regional development of industries has been attempted through the creation of 15 regional Development Authorities, but for lack of funds and other reasons only two of them - Mindanao and Central Luzon - appear to have achieved some results. The Laguna Lake Authority is in process of completing a comprehensive reconnaissance study. Most of the others seem to exist only on paper; reportedly only 7 percent of appropria- tions appear to have been released by the government in recent years. As noted, the Plan envisages a reorganization of regional planning in coordi- nation with national planning.

157. Less concentration of industrial activity in the Manila area appears to be desirable. The encouragement given in the Plan to new industries based on domestic raw materials could have an effect in this direction, and mineral and agricultural resources which are considerable in the Visayas and in Mindanao could be linked to industries for further processing and export.

158. Serious consideration is given at present to setting up industrial free zones, which would have the advantage for industries to be relieved - 55 - of the extreme amount of red tape in customs administration and reimburse- ment of drawbacks to exporters. The principle of free zones in these circumstances is sound, but so far the selection of sites has been somewhat less than judicious. A free zone at Mariveles in Bataan has already been chosen and the land acquired, although there is inadequate labor available in the vicinity, and labor costs are lower in other parts of the country. However, it has fairly good port facilities (with need for expansion at a cost of about $10 million), and some applicants are coming forth in the field of light industry like garments, footwear and electronics, including foreign investors. Other sites ought to be given serious consideration, such as Cebu where a good port is already available with ample space, minimizing infrastructure costs, proximity to large supply of labor at lower cost, and proximity of mineral and other resources. Possibilities for fuller industrial expansion in Mindanao have not yet been sufficiently studied, although the Mindanao Development Authority, within its limited means, has made a creditable effort in this direction. A list of MDA project studies and proposals is given in the Annex of this report. It is important, in developing policies for industrial expansion outside Manila, that primary attention should be given to a limited number of growth poles so that economies of industrial concentration can be achieved.

I. Employment

159. About a million people out of a labor force of about 13.2 million, or about 7.6 percent, are estimated to be totally unemployed in the Philippines. About 60 percent of these are young people, and the unemploy- ment rate probably reaches 20 percent among young males in towns. About 25 percent of all those in employment in 1966 worked less than 40 hours per week. These statistics reflect only a part of the substantial underemploy- ment which occurs seasonally in agriculture and throughout the year in over- crowded service occupations in towns, and which is reflected in very low incomes.

160. The 1970-74 Plan is the first Philippine Development Plan to in- clude a chapter on employment requirements, and this is welcome. The Plan recognizes that substantial unemployment and underemployment are basic problems of the Philippine economy; it does not expect, however, that the unemployment problem can be solved during the Plan period. The target is for the reduction of the unemployment rate at best to 5 percent of the labor force in FY 1974. The Plan estimates that the labor force will amount to 15 million in 1974. The target accordingly involves a reduction of unemploy- ment to 750,000 and the provision of 14.25 million jobs. This means provid- ing a net total of about half a million new jobs a year.

161. There are projections, though no firm targets, regarding the sectoral distribution of new employment. These are shown below with output targets and figures for the most recent five-year period with which a comparison can be made. - 56 -

Distribution of Emplomyent and Growth Rates

Sectoral Distribution Annual Rates of Growth 1967 1962-1967 1970-1974 a/ Employment Oyuput Employment Output Employment---

All Sectors 100.0 5.2 2.6 5.5 3.9

Agriculture, fishing and forestry 58.3 5.1 1.4 6.25 3.0

Manufacturing 11.3 ) 3.1 6.25 5.8 ) 4.8 Mining 0.4 ) 2.4 18.5 6.9

Transportation, communication, storage and utilities 3.4 4.8 5.1 ) 5.9 ) Commerce 9.9 5.1 3.4 ) 4.8 ) 4.4 Services 14.2 5.1 6.0 ) 4.6 ) Construction 2.5 9.0 3.2 ) 6.6 a/ 1967-74.

The proportion of the labor force engaged in agriculture would fall from 58.3 percent to 54.5 percent over the 7 years from 1967 to 1974, the propor- tion in other sectors increasing slightly. The proposed sectoral distribution of employment increases seems offhand reasonable, though the intention to raise employment in construction only from 2.5 to 3.1 percent of the labor force seems rather unambitious. What is not clear is how the implied changes in the ratio of labor to output will come about in the next four years, particularly in agriculture and in manufacturing and mining.

162. In 1962-67 the growth in output was attributable in almost exactly equal proportions to higher employment and higher productivity per person employed. The planned growth rate for 1970-74 is not much higher than the rate attained in 1962-67, and if the relative contributions of employment and productivity remained the same, the rate of increase of employment would go up from 2.6 to only 2.75 percent annually instead of the proposed 3.9 percent. If so, unemployment would amount in 1974 to 1.86 million or 12.4 percent of the labor force.

163. Various general principles are stated and the Plan stresses the need to give a new orientation to employment policies, and to coordinate man- power planning with overall development; however, what these employment - 57 - policies should be is still a matter to which the Plan gives little guidance, and much of the work still remains to be done.

164. For planning purposes at this stage, it would seem desirable to set separate targets, both globally and by sector, for wage-earning jobs and other types of employment, since the number of wage-earning jobs is amenable to more reliable statistical checking than others. It might also be desirable to set a target for a reduction in short-time working.

165. In some areas, there are obvious possibilities which should be actively investigated and pursued. For example, it would seem that rural development and diversification of agriculture with the small family farm as a typical unit could offer an important area for labor absorption; in fact this is in line with the land reform policy of the government, and crop diversification will have to be an important feature of agricultural policies in any case. Also, the Plan objectives for a large increase in the public infrastructure program could similarly lead to greater employment provided the past preference for the use of heavy equipment-is modified. This might come as a natural consequence of the recent devaluation of the peso, but the use of shadow rates for wages in project appraisal would'-&ls4 seem necessary.

J. Education

166. Philippine education is facing several serious problems and the need for basic policy decisions has been recognized by the government. The basis for planning in the educational sector will be laid by the current National Survey of Education, which is being undertaken by a Philippine staff, assisted by Ford Foundation - financed Australian consultants. The Survey will focus on secondary and higher education. Pending the outcome of the Survey, the Plan provides for over P5 billion in current and P430 million in capital expenditure or 28 percent of total expenditure in the Plan period under the national government budget, plus several hundred millions of pesos under the local government budgets to cover traditional and some improvement outlays for the ever-growing school population; the Plan also mentions a during number of general objectives to be translated into management goals the Plan period. These refer among others to coordination of public and private higher education, standards for facilities and achievement, curricula for teacher training and high schools, and scholarships. at- 167. Elementary education is free and compulsory. Since Filipinos tach much value to education, year after year a stupendous number of children seek admission in schools. In 1968, 6.4 million or 85 percent of all 7-14 year olds were enrolled in elementary schools, of which 95 percent in public and 5 percent in private schools. At an estimated 3.5 percent population growth the school population has been going up at over 6.5 percent in the early sixties. The costs of elementary education are an-enormous burden on the national budget. Special campaigns had to be organized such as the pre- fab school building program which put up over 70,000 schoolrooms between June 1966 and March 1970 and required P213 million. But this is small money - 58 - compared with the annually recurrent outlays mainly for teachers' salaries which now run at over P 800 million a year. In 1968 an attempt was started to transfer part of the financial responsibility for elementary education together with the financial means to local governments; realization of this reversal of the past trend is a desirable objective. Additional ways in which the financial burden of elementary education for the national govern- ment can be lightened, including family planning, deserve serious consider- ation. Simultaneously, the government should look into ways of improving the quality of education without increasing costs per pupil. Although expecta- tions of savings cannot be very high, the government should spend more money and attention on secondary and higher education, which both have great need for improvements.

168. All high schools charge tuition fees; for private schools they are generally higher than for public schools; only few students are exempted from payment, and fellowships are rare. Selective admission examinations are the exception rather than the rule at high school level. Notwithstanding the cost, the thirst for education is such that no less than 70 percent of the sixth graders entered high school in 1967/68. In the early sixties, enrollment in secondary schools moved up by more than 12 percent per year; by 1967/68 about 1.3 million students or over 30 percent of the age group 13-17 years were enrolled, of which 41 percent in public and 59 percent in private schools.

169. The present high school system offers four-year curricula for general academic and vocational education. (Vocational training outside the regular classes is limited). It lacks both quality and an orientation geared towards the manpower needs of the country. Manpower planning is virtually non- existent. Many public vocational schools are not much more than academic high schools turned over by local governments to the national government for financing reasons; they often lack adequate laboratory workshops and qualified specialized teachers. Depending on the outcome of the Survey, it may be desirable to shift responsibility and financing for a large number of high schools back to the local governments regardless of the type of school which will be decided upon in accordance with established needs. The national government could then, on the high schiool level, concentrate its own scarce resources on a few pilot schools such as the Science High School, a five-year specialized school which selects first-rate students from all over the country, and seek foreign assistance for teacher training and equipment which would benefit large numbers of public high schools. Barrio high schools should be included as much as possible in this upgrading movement.

170. Among private schools which have filled to a large extent the gap left by the public school system, quality varies from good (for instance in religious schools which often receive private assistance from abroad) to very low in some of the plain profit-motivated institutions. In principle the State regulates and supervises the quality of private education but neither Congress nor the Department of Education has been effective in this respect. Stricter enforcement of standards is urgently needed; this should include a compulsory admission examination for all public and private - 59 - colleges. A bill was submitted to Congress in 1970 seeking greater regula- tory powers for the Secretary of Education with regard to tuition fees charged by private institutions and allocation of profits as between divi- dends and investment to be ploughed back into schools.

171. At the university level, the student population expanded by about 11 percent annually in the early sixties. A very high proportion, namely 80 percent of the fourth-year high school students went on to college in 1967-68. Of the 576,000 students representing 18 percent of the relevant age group, 92 percent went to private and 8 percent to public universities. As for the high school level, the quality and composition of output of universi- ties is a matter of concern. Some "diploma mills" among the private universi- ties offer courses at a modest fee mainly in subjects requiring minimal overhead investment, for which many students enroll for lack of alternatives, notwithstanding the low quality; this applies mainly to business administra- tion and commerce courses. 54 percent of graduates in 1965/66 had chosen teacher education courses varying from 2 to over 4 years; 19 percent graduated in commerce; agriculture scored only 1.2 percent and engineering 5.8 percent. Remedial action may partly run parallel to and partly follow from action desirable for the secondary level. This would include improvement for specific areas of public higher education, including teacher training, as well as seek- ing foreign loans for faculty and equipment improvement in the framework of the Survey recommendations.

K. Family Planning

172. Pending results of the census of population held in May 1970, the population growth rate is most often estimated at 3.5 percent, the highest rate in Asia. The Philippines arrived at this point by the interplay of a rather stable birth rate and a gradually decreasing death rate, which is expected to continue its downward movement. Therefore, the Philippines population growth will accelerate unless action is taken to lower the birth rate. For many years, this problem was publicly ignored and action was left to private organizations and a few city health services. The country is predominantly catholic. The year 1969 however marked a turning point: in February, the President established a Commission on Population; in April, importation of contraceptives was legalized; in August Congress and in December the President issued a statement endorsing a national family planning policy. The matter became the subject of frank discussions and seminars. Further, the merger of the private Family Planning Association and the Planned Parenthood Movement into the Family Planning Organization of the Philippines in February 1969 promised better coordination in ongoing private activities. In his 1970 State of the Nation message, Presidlent Marcos proposed an official family planning policy, including education, dissemination of knowledge of techniques as well as provision of facilities, especially in the rural areas. - 60 -

In May, 1970 the Commission on Population's terms of reference were redefined to place a new accent on action projects, and an Executive Committee was created.

173. The Plan envisages a drop in the rate of growth of population from 3.5 percent in 1970 to 3.2 percent in 1974, and sets annual targets of users to be enrolled by all agencies in order to achieve this goal. Unfortunately, the $5 million package of projects obligated by US AID in FY 1970 which will set the pace of activities in the first Plan year is very heterogenous and represents in effect an experimental stage, not yet the first year of a clearly defined plan geared towards a maximum impact in terms of births prevented. This follows maybe from a cautious attitude and competing interests in some parts of the administration more than from incomplete information. Moreovet, since some of the assumptions outlined in the schedule for reduction of births are rather optimistic (drop-out rate of 40 percent a year of new and continuing participants; a rate of 4 births per 10 users prevented per year) results in the first year will most probably fall ghott of targets. The Commission on Population should pull the program as soon as possible out of this preliminary stage.

174. The Plan proposes simultaneous action by a new private organization, the Responsible Parenthood Council (RPC) and existing public and private agencies. The Council intends to work through church organizations and the Department of Education's barrio school teachers; it will emphasize the rhythm method in its informational campaign. By contrast, most other organi- zations offer interested couples a choice of methods, especially pill§, IUD]s- etc. The very rapid expansion which the RPC aims at (25,000 barrios t6 be coveted within 3 years) suggests that organizational problems are being seriously underrated.

175. All family planning activity in the Plan period will rely heaevily on foreign financing as in the past. Foreign assistance so far has been easy to obtain; US AID has played the most important role followed by private assistance, and U.N. is showing interest. The fact that the government so fat has not been willing to appropriate additional public funds over and above the present very modest amounts, plus the equivalent of the school teachers' time to be used by RPC, casts doubt on the government's real commitment to family planning. Within the limits of its scarce means, it should set aside resources for this program, which concerns essential Philippine interests. - 61 -

CHAPTER III

BALANCE OF PAYMENTS OUTLOOK

A. Exports

176. During the past 10 years, merchandise exports increased from US$529 million per annum to US$855 million, an annual growth rate of 5 percent. Remarkably, the composition of exports has practically not changed in this period, and primary goods including sugar still account for about nine-tenths of 'total merchandise exports. In 1969, four items, i.e. coconut products, sugar, forest products and mineral products con- stituted 88 percent of total exports, compared to 87 percent in 1959.

177. The volume and value of exports in past years is shown in detail in Appendix Tables 3.3 and 3.5; the stagnation of merchandise exports in the last three years has already been mentioned earlier; the decline in coconut products is mainly responsible for this, and a good deal has to be attributed to a growing amount of unrecorded exports. The rectifica- tion of the exchange rate can be expected to restitute a substantial amount of this to official channels; furthermore, prospects for expansion of traditional exports plus some new items are good, and the Four-Year Plan projects exports to grow at over 9.5 percent a year on average from 1969/70 to 1973/74. The mission has made an evaluation of the prospects for major export items. For all practical purposes, the mission projections corroborate the overall growth rate assumed in the Plan, even though there are some differences in timing and composition. The breakdown of exports in five-year intervals, including the mission's projections, are shown below. Growth of Export Earnings Growth Rates (Million US dollars) (percent) 15-year Period 1959 1964 1969 1974 1959/64 1964/69 1969/74 1959/74 Coconut products 183 247 163 272 6 -9 11 3 Sugar 121 171 157 188 7 -2 4 3 Logs 72 135 215 276 13 10 7 9 Wood products 26 43 44 78 11 0 12 8 Copper concentrate 16 34 133 186 16 31 7 18 Other minerals 39 25 27 165 -9 2 43 10 Miscellaneous 72 85 115 180 3 6 9 6

Total 529 742 855 1,345 7 3 9.5 6 - 62 -

178. This high growth rate for the next five years is in line with the long run growth rate of export - the implied growth rate between 1959 and 1974 is slightly higher than 6 percent. Even including the last three years of stagnation the exponential trend up to 1969 gives a least square fit at the rate of 5.8 percent. The projections imply very little change in the share of the four main items in total export proceeds. The follow- ing paragraphs give a brief summary of the outlook for these main exports.

179. Coconut products are expected to recover and in spite of declin- ing prices the total value is expected by 1974 to reach the highest pre- vious levels which was $270 million in 1965. The 11 percent growth.rate during the period 1969-74 is therefore composed of (a) a doubling of the volume of coconut oil and a 65 percent increase for copra, which includes a restitution of some previously illicit exports, and (b) a decline in the price for these two products by 6 percent and 13 percent, respectively. The degree of processing will increase and in 1974 only 47 percent of the ex- port value of coconut products will come from unprocessed copra compared to 53 percent in 1969.

180. Sugar exports, after having been stagnant in the past six years, are expected to increase by 20 percent over the 1969-74 period - a growth rate of almost 4 percent per year. This forecast assumes that the Philip- pine quota for the US market does not change and also that the price pre- mium paid in the US market remains unchanged. However, the present US Sugar Act of 1965 expires in 1971 and the assumption therefore hinges on the continuation of favorable US sugar legislation.

181. The value of export of forest products is expected to grow by 6.5 percent per year, which is a slowdown compared with the past 8-year growth rate of 12 percent per year. It is expected that the depreciation of the peso, as well as the rapidly expanding Japanese plywood market, will give a boost to exports of processed wood products. However, the Plan projection for plywood exports is too optimistic - much more should be expected to be exported as logs and less as plywood than is assumed in the Plan.

182. Export of mineral products will continue to grow rapidly - over the next five years by 17 percent per annum compared to just under 14 per- cent per annum during the past eight years. This is due to an increase in output from copper mines which partly will be offset by an expected price decrease. In addition, in 1972, nickel metal will be exported for the first time from the Philippines and in 1974 this will make mineral products the largest dollar earner together with forestry products.

183. All other exports together are expected to reach US$180 million in 1974 which represents a growth rate of 9.5 percent per annum, just about the same as for total merchandise exports. Of the total increase of US$65 million over the 1969 level more than half is expected to come from an entirely new product, namely bananas. The value of exported manufactured products is projected to increase at a lower rate than total exports. - 63 -

184. The impact of the depreciation of the peso on exports is diffi- cult to assess. The principal export products would seem to have been competitive at the old rate except sugar, where this consideration does not apply. For several products, however, like coconut oil, plywood and cement, production costs may have been a constraint on export, to judge from the observed under-utilization of capacity. However, to what extent the price improvement would itself increase capacity utilization has not been attempted to quantify in detail in this report. Other constraints are likely to be operative, such as marketing capabilities, particularly for new products, supply of raw materials as e.g. in sugar, and credit for working capital.

Mission and Plan Forecast of Export Earnings (In million US dollars)

Actual Forecast Calendar Years 1969 1970 1971 1972 1973 1974 Mission a/ 874 1,033 1,104 1,188 1,328 1,358

Plan b/ 874 960 1,045 1,140 1,250 1,370

Difference - 63 59 48 78 -12 a/ Including non-monetary gold. b/ Plan targets are expressed in fiscal years and the above figures are biennial averages.

185. The Plan forecasts for exports are compared above with the fore- cast of the mission. In general it ig difficult to evaluate the Plan fore- cast because assumptions are not explicitly expressed and in some cases they are unrealistic, as with the assumed decline in domestic per capita con- sumption of sugar. However, the aggregate comes out quite similar; the largest difference in the order of 6 percent appears in 1970 and relates mainly to the mission's assumptions regarding unrecorded exports in pre- vious years.

B. Imports and Invisibles

186. The Plan assumes a decline in FY 1969/70 of merchandise imports by about 10 percent to a level of $1,050 million as a consequence of the restrictions imposed in late 1969, which were later replaced by devaluation. This reduction may be achieved, without necessarily causing a reduction in manufacturing production since some excess stocks had previously been built up. For simplicity, the Plan suggests a 5 percent annual increase in im- ports in the coming four years by considering this a minimum rate consist- ent with continued growth of the economy. As shown in paragraph 41, this compares with an average 8 percent growth rate between 1961 and 1969 during which period GNP grew at about 5.8 percent a year, which is about the same as projected for the Plan period. - 64 -

Import Prol ections (In million US dollars)

1968/69 1969/70 1973/74 Growth rate Actual Estimate Projection 1969/70 - 1973/74 (Percent)

Total Imports _,170 1050 1,275 5

Consumer goods 175 180 200 3

Producer goods 468 400 445 3

Raw materials 527 470 630 7.5

187. The use in the Plan of 1969/70 benchmarks for calculating import growth rates is somewhat deceptive; in fact what the Plan proposes is a stagnation of producer goods imports below the 1968/69 level and a growth rate of total imports during the whole 5-year period of 1.75 percent a year. While it is true that some degree of excessive importing has taken place in recent years, particularly of producers goods and raw materials, the import projections of the Plan must nevertheless be regarded as in- adequate; if enforced, this minimum level might well inhibit a reasonable recovery of growth. It is of course admitted that the import constraint is basic to the present economic position of the Philippines, and it is also basic to the whole Plan; in its absence, a higher growth target could have been envisaged for the 4-year period. However, the mission takes the view that from the low position of 1969/70 an 8 percent growth of imports will more likely be a minimum requirement, which would be in line with past experience and with the observation, made in other parts of this re- port, that a significant reduction in the country's import dependency is difficult to visualize for the period under consideration. Considering the probable size and recent growth of illicit foreign exchange transac- tions in both merchandise trade and services, and the large degree of un- certainty regarding changes in this field following the devaluation, a debate of percentage growth rates in merchandise imports for the next four years is, in any case, of relatively academic value. Not until next year will it be possible to evaluate the real effects of the devaluation on ex- ports, and on invisible earnings on the one side and on imports and related activities on the other.

188. Gross invisible earnings in past years have been in the order of $500 million. They declined from a high of $581 million in 1967 to $404 million in 1969. A good deal of this decline probably represents losses through evasion. The view that the major cause for this decline was a reduction in US military expenditures does not check out with US expendi- ture records. - 65 -

189. US military and civilian spending in the Philippines has been increasing since 1967 with the stepped-up activities in Viet Nam, from about $200 million to over $250 million, and has remained at about the same level from 1967 through 1969. The major factor in this increase has been remittance of Filipino nationals working in Viet Nam ($30 million in 1969) and offshore purchases in the Philippines in support of activities in Viet Nam. Estimates of total US expenditures are compared below with changes in total Philippine invisible receipts.

Gross Receipts from Invisibles 1965-1969 (Million US dollars)

1965 1966 L967 1968 1969

Total earnings from services and transfers a/ 412 458 581 428 404

U.S. military expenditures b/ 120 130 181 187 171 U.S. civilian expenditures b/ 70 75 78 82 85 c/ Japanese reparations a/ 22 33 60 27 28

Balance 200 220 262 132 120 Of which - Freight/insurance and investment income 33 34 32 32 25 Travel 28 70 95 56 55 Other services 139 116 135 44 40 a/ Philippine Balance of Payments Statistics. b/ U.S. Government estimates. c/ Of which $62 million was Veterans' payments; the total also includes about $12 million of PL 480 and USAID loan disbursements in 1969 which should not appear in the current account and therefore overstate US expenditures within total receipts for services and transfers.

190. The above table is illustrative of the pitfalls in interpret- ing and projecting invisible earnings. The apparent decline by two-thirds in receipts from "other services" after 1967 can most readily be explained by underreporting of US expenditures in Central Bank records, and there- fore of total invisible receipts, since these expenditures include a large variety of transactions that are difficult to police. For example, of total military spending in 1969, $38 million was non-base spending includ- ing Filipino transfers from Viet Nam. Of total base spending of $133 mil- lion, about one-fifth represented spending by (ISnaval personnel on visits ashore; one-half consisted of local salaries and private expenditures by US base personnel; and the balance of offshore purchases. Particularly private spending by US military has recently been reported to have implied local currency purchases in the parallel market, and the same may increas- ingly have been the case for transfers. The magnitudes involved are sub- - 66 - stantial. Recently, action has been taken by the US, by issuing script to military personnel convertible only at the official rate, to reduce these transactions, and with the floating rate the incentives have fur- thermore been largely eliminated.

191. The projections made below for invisible earnings through 1974, which in the aggregate do not differ greatly from those implied in Plan forecasts, are probably conservative because it is not possible to quan- tify the effects of the factors just cited; they do not on the other hand take account of the possibility of a reduction in overall US military ex- penditures, in connection with a settlement in Viet Nam; within the total, what is attributable directly to the Viet Nam war, is a relatively minor part. An attempt has been made, however, to take account of the reduced dollar cost of US civilian and military local expenditures after February 1970, balancing off some of the expected gains from reduction in transac- tions outside official channels. The relatively high figure of $50 mil- lion for direct investment income payments includes some remittances pre- viously withheld, and projections take account of a continued high rate of repatriation of earnings by US private companies expected in connec- tion with the anticipated termination of some of the special privileges under the Laurel-Langley Agreement.

Projections of Services and Transfers (Million US dollars)

(Calendar Years) 1966 1970-/ 1974-/ Credit Debit Credit Debit Credit Debit

Freight/insurance 16 -71 20 -93 25 -112 Travel/transportation 70 -57 58 -77 78 -97 Investment income b/ 18 -26 12 -50 13 -71 Interest payments - -29 - -99 - -34 c/ Veteran receipts 43 - 63 - 65 - Other services 278 -105 200 -115 231 -151 Reparations 33 - 30 - 30 -

Total 458 288 383 434 442 465

Net Services/ Transfers 170 - - -51 - -23

a/ Mission estimates. b/ Debit excludes interest payments. c/ On existing debt. - 67 -

192. Net receipts from tourism and other t:ravel are projected to be negative although they were positive in 1966 and 1967. Gross receipts of $58 million in 1970 may be on the conservative side depending on the con- tinuation of the parallel market. Private tourism may account for receipts of between $25 million and $30 million a year at present. Tourist arrivals increased about 13 percent a year in the past, with Japanese arrivals in- creasing over 20 percent a year. The initiation of a study for the promo- tion of tourist facilities is under consideration and foreign technical assistance :is likely to come forward. Expenditures for travel are pro- jected high; this is an area however where a compression could be achieved; at present some restrictions on foreign travel are in force but are planned to be removed. Some other action to discourage private travel abroad, par- ticuarly to other parts of the Far East, generally known to be associated with unrecorded imports, would appear desirable to save foreign exchange.

C. Short-Term Debt

193. The overall position of short term and other debt at the begin- ning of 1970 has been described in paragraphs 50-52. Amortization pay- ments falling due in 1970 were about $454 million, and if interest pay- ments were added, total debt service payment would have totalled about $628 million or over 45 percent of total gross earnings on goods and serv- ices. Given the further deterioration in the balance of payments, another $40 million credit was obtained from the US group of banks in March 1970, and with the waiver of the negative gold pledge another $40 million was obtained from the Federal Reserve Bank of New York; both repayable within six months. Further, US oil companies operating in the Philippines-arranged for another $40 million foreign credit to finance their import requirements, of which $6 million is already repaid and the balance is due in 1971.

194. A restructuring of Central Bank debt to US private banks, mostly very short term (less than one year) was proposed in May, and an agreement is shortly to be signed whereby total outstanding credits of $207 million are restructured, the unsecured part of which, amounting to $142 million, is to be made repayable over 5 years, starting in 1971, on an ascending scale, whereas the balance is to be repaid over a 6-year period including a grace period of three years. Interest to be charged is 2 percent above the prevailing Eurodollar rate. A similar arrangement may be forth- coming with regard to $27.5 million of Central Bank obligations to European banks, all of which would also be falling due in 1970. On the basis of this, the Philippines' amortization payments in 1970 would be reduced by $173 million after having been increased earlier in the year by $86 million. This still leaves $361 million of amortization payments and interest in the order of $99 million to be paid in calendar year 1970. Certain relief has been obtained by $18 million of Special Drawing Rights from the IMF and a third tranche availability of $27.5 million under the Stand-By. In May 1970 agreement was also obtained with a consortium of Japanese banks to a stand-by credit line of $50 million, under which each drawing is re- - 68 -

payable in six montlis and interest is 1-1/2 percent above the Eurodollar rate. Medium- and long-term capital inflow will be discussed below.

D. Capital ReTuirements

195. Up to now, the Philippine balance of payments problem has been described as a transitional bunching of short-term obligations, with quite a small prospective resources gap, and a rapid diminution of the debt service burden to an almost negligible amount within seven or so years. With the necessity of stretching out imminent payments obligations, lhigh interest charges, and the need to borrow additional amounts in the next few years to support a minimum import requirement for growth, the problem has to be restated as one of working off large amortization pay- ments over a number of years, resulting in the continuation of a consider- able debt burden through at least the next four years even if, as the Four-Year Plan proposes, the resource gap would disappear during the period of the Plan. The current year still remains the most critical with regard to external financing, and it is still not quite clear how it will be possible to bring about the urgently needed replenishment of interna- tional reserves that ought to have been available already in the first half of the year, if the policy of a floating exchange rate should succeed in establishing a realistic rate, rather than causing continual speculation against the peso.

Summary Balance of Payments Projection 1969-74 (Mission projections; calendar years; million US dollars) 1969 1970 1971 1972 1973 1974

Merchandise exports a/ 874 1,033 1,104 1,188 1,328 1,358 Merchandise imports b/ 1,131 1,067 1,120 1,176 1,235 1,297 plus additional requirements c/ - - 32 68 108 153 Trade balance -257 - 34 - 48 - 56 - 15 - 92 Net Invisibles + 20 - 29 - 31 - 54 - 74 - 74 (of which: interest) d/ (38) (99) (77) (64) (48) (24) (of which: interest on new debt) - (16) (32) (50) (61) Current account balance - 237 - 63 - 79 - 110 - 89 - 166 Amortization e/ n.a. - 361 - 216 - 252 - 204 - 174 Capital requirements -424 -295 -362 - 293 - 340 Gross inflow 499 345 412 293 340 Reserve increase (-) - 75 - 50 - 50

a/ Including non-monetary gold. b/ Assuming Plan rate of growth of imports at 5 percent per annum. c/ Projecting an 8 percent annual rate of growth as discussed in para. 187. d/ On existing debt, after restructuring (see Appendix Table 4.7). e/ After restructuring (see Appendix Table 4.7); new debt during the period is assumed to be obtained with 3 years grace, resulting in amortization payments of $7 million in 1973 and $25 million in 1974. - 69 -

196. Total capital requirements come to $1,390 million for the period 1971-74, an average of about $350 million a year; of this, 61 percent is offset by amortization payments and another 28 percent by interest payments, leaving 11 percent of the total as a net transfer. In this calculation, service charges on new debt to be obtained during 1970 and the Four-Year Plan are included. These projections ought to be considered maximum requirements; 26 percent of the total is a result of the upward revision in import requirements from what the Plan postulates; furthermore, invisible earnings during the period might turn out better than assumed. Against this, the rapid 9.5 percent annual growth of merchandise exports, while reasonable from both the technical and economic point of view, has to be considered in the generally moderating light of these exports being raw materials to the extent of over 90 percent, and subject to sometimes unexpected movements in world prices. Considerable reductions in some of these prices for future years have in fact been built into these projections so that any uncertainty might be in either direction. The upshot is that these projections are rough orders of magnitude, and gross inflow require- ments might turn out lower than shown - although it should be stressed that from past experience, absorptive capacity in general does not seem to have been a constraint, however severely such a constraint had been operative in the case of public sector projects.

197. AEs noted earlier, the public sector Infrastructure Program, as outlined in the Plan, implies a drastic increase in absorption of external long-term credit from a current level of about $35 million to $150 million a year by 1973. As will be shown below, the external gap of the private sector, by implication, is proposed to decline in absolute terms. This is in consonance with the general strategy of the Plan, although on practical grounds the realism of so drastic a change may be questioned. In the public sector, prospects appear much improved for a removal of the old standing problem of finding adequate local currency funds required to carry out foreign financed projects on schedule; but this still hinges on new tax measures being passed into law in the coming years. It also presupposes rapid production of feasibility studies as well as organiza- tional improvements. On the other hand, the private sector might well turn out to be capable of further borrowing at acceptable terms in a continuing fashion, and in later years might be in need of more than what is assumed here. Much will depend on how satisfactorily the approach toward the termination in 1974 of special US privileges in the Philippines will be handled by both parties concerned, and this in turn will have a bearing on the general investment climate. A situation could be visualized where direct private foreign investment - which has taken the form of a net outflow until recently - could again assume a more significant role in the Philippine capital account (and the figures projected below, which by some might be described as optimistic, could in retrospect appear unduly conservative). - 70 -

Financing the Gap 1970-74 (Mission projections; Calendar years; million US dollars) Four- Year 1970 1971 1972 1973 1974 Total

Gross capital inflow 499 345 412 293 340 1390

Direct investment 8 10 10 10 15 45 Private medium/long terma'/ 150 176 208 74 118 576 (of which: existing loans) (36) (25) (15) (-) (-) Public long-termb/ 34 73 94 151 152 470 (of which: existing loans) (24) (25) (20) (18) (12) Commodity loans 60 86 100 58 55 299 Other capital2/ 81 Short-term Central Bank 120 Special drawing rights 18 d/ d/ IMF third tranche 28 a/ Very tentative. b/ See paragraph 84. c/ Including Japanese standby credit. d/ Exact amounts not yet known, probably about $15 million a year.

198. It can readily be seen in the above table that the problems for 1970 are not yet entirely solved. It is uncertain that $150 million will disburse from private medium- and long-term borrowing this year, since at the time of the mission, commitments at that level were not yet in sight on terms acceptable under the Stabilization Program, although appli- cations for suppliers.' credits in excess of $200 million were pending. Commodity loans in the amount shown above are likely to disburse during 1970 in the form of a $10 million PL 480 credit and $50 million from CCC. A residual gap of about $80 million is still to be filled; drawings under the Japanese standby would of course postpone it into 1971 and the same is true for a possible similar standby which has been requested from US banks; in combination, such arrangements would at least offer a breathing space - and what is equally important, they would in fact in the meantime permit an urgently needed boost to turn net exchange reserves into a positive figure, which otherwise would seem to be extremely difficult, particularly if private borrowing falls short of the above figure, and if imports are not further to be compressed. Given these circumstances, some difficulty may also remain in financing next year's requirements, but for subsequent years the situation becomes increasingly manageable; the gross capital requirements do not appear unduly large considering the size of the Philippine economy, and considering also that with the petering out of existing debt obligations in the years beyond 1974, the gross inflow requirements should be expected to decline in the longer run. - 71 -

199. For the immediate future, while pre-investment activity is being stepped up for the preparation of new projects in the public sector, the need is particularly great for foreign lending in a form suitable for rapid disbursement. The government is preparing a program of commodity imports that could be financed from official sources, in amounts up to $95 million a year, which might be composed as shown below. A request for PL 480 assistance in the amount of $27.5 million has already been submitted to USAID recently. The availability of concessional foreign aid of this kind is limited, however, and further commodity assistance similar to PL 480 or on otherwise favorable terms may be difficult to arrange.

Annual Bulk Commodity Requirements

Metric tons $ milli on PL 480 Proposed ($ million)

Wheat 500,000 30 5 Raw cotton 40,000 25 16 Rayon/synthetic fibers 30,000 30 Tobacco 2,600 4 6 Dry skim milk 24,000 6 Other (soy bean) 0.5 95 27.5

200. In addition to bilateral commodity loans and a growing level in future years of official project-type loans directed to the government's infrastructure program, suppliers' credits, particularly in the immediate future, will have to play an important role in sustaining an adequate level of private Filipino investment, which still by far constitutes the major part of total capital formation. Conceivably, suppliers' credits on terms compatible with the need for careful external debt management might also become available for the financing of goods other than machinery and equipment. Generally, suppliers' credits will have to cover the major part of the projected external borrowing needs of the private sector which, according to the above projections, would be upwards of $140 million a year on average. However, as shown earlier, the assumption is that over the next four years the amount of private borrowing would decline and give way to a substantially increased amount of official project financing for the public sector, as and when feasibility and engineering studies now under way will come to fruition.

201. Creditworthiness. The total external debt of the Philippines, public and private, at present is about $1.4 billion, or about equal to one year's gross foreign exchange earnings. This size is not a matter of concern; the extremely unfavorable composition of maturities, however, even after a major part of the Central Bank's debt to private foreign banks has been restructured, will still result in 33 percent of gross earnings of foreign exchange being pre-empted for debt service payments in 1970. This ratio is now projected to come down to 21 percent in the following - 72 - year. Assuming new borrowing in the next four years in the amounts indicated, partly in the form of suppliers' credits and partly as official loans from bilateral and multilateral sources, the debt service ratio 1/ yill still continue to decline and may be between 12 and 14 percent by 1977 depending on the terms. Although this is a higher rate than projected in the last Bank report, it is still not a burden that by itself should give cause for concern. These projections presuppose that the Philippine upthorities will continue to exercise control over private borrowing gbroad as they do at present, and that commercial borrowing at short terme wi.ll be kept to an absol_te minimum in futMipq, rompatible with the overa4l Oq.bt management priorities to be established on a continuing basis by -t-he Central Bank.

1/ Including public and private debt. LIST OF PRE-IN'VSTINT STUDIEZS FOR PROJECTS RSQUIRTNG EXTERNAL FINANZIN,3 1/

DOMESTIC FO. IiN PROJECT PROJECT D3.$C0IFTION COST OF PROJECT IN HiLITONS 2/ STATUS OF FRASIBLliTY ST'JDY PESOS US$ -

I. POWER p 383.4 $ 173.9

A. POWE.R PLANTS 235.4 137.7

* 1. Limay (Bataan) Thermal Unit No.2 Construction of a second thermal unit a 23.2 15.0 Study completed by NPC. capacity of 150 MWin Limay to meet the pro- jected load growth during the Plan period. To be ^ompleted by 1974.

* 2. Thermal Unit No.3 in Luzon A unit with a capacity of 203 MW is con- 4j5.C 15.3 Location studies are going on sidered necessary to provide back-up energy by NPC. No definite timetable. to the hydro capacity of NPC. Will be on stream by 1976.

* 3. Thermal Unit No.4 in Luzon An additional unit with a capacity of 45.0 16.0 Will be undertaken by NPC in 200 MWi.~ necessary to maintain a normal 40 due course. hydro/60 thermal capacity in the electric grid. Will be on stream by 1978.

* LL. Maria Cristina Unit No.5 A unit with a capacity of 50 hW is plan- 14.0 3.2 Undertaken by NPO. ned to be installed by 1974 to provide reserve capacity.

* 5. Agus River e4indanao) Hydro Installation of a 71 MWunit to increase 76.0 1.;.2 Feasibility report is being Project No.2 the capacity of the Mindanao grid. To be held in abeyance pending the find- completed in 1974. ings and recommendations of the consultant Middle West Services Co. in 1970. The latter's terms of reference are survey, analysis and projection of the potential market, development of plans to provide electric service to the potential 1/ Virtually all of these projects are in the public sector. market and preparation of feasib- 2/ In many instances costs have been roughly estimated. In all ility studies for promising projects. cases the estimated are in pre-devaluation prices.

* Included in the Four-Year Plar. FY 1971-7%. ANNEX 'i ga 2

6. Caliraya (Luzon) Pump Storage Pump storage scheme to supply low-cost P 32.2 c 74.0 MERALCO has completed a study Hydroelectric Project hydro peaking capacity. and prepared an appraisal report. Necessary that an agreement be reached between MERAILO and NPC. Not yet in sight.

B. TRANSMISSION LINES 77.0 16.2

* 1. Southern Luzon Electrification A series of transmission lines to extend 24.0 5.8 Completed by NPC. Standard Project Stages I, II and III service to Southern Luzon. design.

* 2. Minda ao 3lectrification Project Extension of high and low voltage lines 31.3 5.7 To be completed late in 1970. in the area.

* 3. Angat-Caliraya Tie Line Construction of transmission lines. 12.7 2.3 Undertaken by NPC. Standard design.

* 4. 'ambales Electrification Project - Electrification of Southern Zambales. 2.4 0.4 Same as above. Phase A

* 5. Llocos Electrification Construction of high tension transmiss- 3.2 1.5 Same as above. ion lines and sub-stations and addition of transfrwmers.

* 6. Laguna-Batangas Electrification Same as above. 3.4 0.5 Same as above.

C. RURAL ELECTRIFICATION 71.0 20.0

* 1. Electric Cooperatives Promotion of the institution of rural 42.0 12.0 Feasibility studies on-going electric service cooperatives. NEA plans to under joined effort of NEA, NPC set up 5 - 6 cooperatives each year. and US/AID experts.

* 2. Municipal Electric Utilities Part of the rural electrification pro- 20.5 5.5 Same as above. gram.

* 3. Private Electric Utilities Part of the rural electrification pro- 8.5 2.5 Same as above. gram. ANNEX Page 3

II. TELECOMHUNICATIONS P 98.8 $ 54.0

* 1. Nationwide Telecommunications Expansion and modernization of the 98.8 5l.0 Preliminary engineering under- Expansion and Improvement country's telecommunications network. taken by BUTEL. Detailed engineering Project on-going. Expected to be completed by mid-1970.

III. TRANSPORTATION 1,245.5 231.4

A. HIGHWAYS 968.6 179.1

* 1. Upgrading of road system Improvement of the Calanatuan- 97.8 16.h Feasibility studies completed by Tuguegarao, Lucena-Legaspi and METRA International. Detailed engin- Cotabato-Digos roads. eering studies have been undertaken by the Italian consulting firm SAUTI and are in progress. Expected to be completed late in 1970.

2. Upgrading of road system Improvement of the Cayayan de Oro- 23.6 3.2 Feasibility study completed by [apatagan road. HETRA. Detailed engineering study not yet prepared.

* 3. Road Improvement The scheme involves apackage of 167.0 h1.7 Feasibility studies have not highway improvement projects of a total been PreDared vret. length of 1,200 kma. The majority of the road projects are trwnk lines or parts of a trunk line left out in previous projects. The improvement of these roads is envisaged in the Survey of the Philipp- ines Transport Sector completed in 1969, which proposed a 10-year phased investment program. The total cost is estimated at P333.5 million, including the foreign ex- change component. If the contractor is a foreigner, the foreign exchange outlays usually amount to 1/2 of the total cost, if a local firm to 1/3-1/4. During the FY 1972-74, the estimated outlays on this package amount to P112.8 million and $28.7 million in foreign exchange. ANNEX Page 4

p $ * 4. Road improvement A package of highway improvement projects 163.9 19.0 Detailed engineering studies of a total length of 1,000 kms. During the not yet available. F! 1974, the estimated expenditure amounts to P53.6 million and the foreign currency to $8.1 million.

* 5. Road improvement Two packages of highway improvement 153.3 53.5 Detailed engineering studies projects. not available. Government will seek ADB financing.

* 6. Road improvement Reconstruction of national roads and 363.0 45.3 Based on the Philippines Trans- bridges. port Survey by IE1TRA International. Datailed engineering studyes not yet available.

B. RAIWAYS 69.8 22.7

* 1. Four-Year Railway Program Rehabilitation and modernization of PNR's 69.8 22.7 Based on the recomsndations of existing rail facilities as well as motive the Philippine Transport Survey of and rolling stock. METRA International. go specific feasibility stud undertaken. C. AIRPORTS AIWD AIR NAVIGATION 126.7 21.6

* 1. Improvement of facilities Rehabilitation and expansion of exist- 126.7 21.6 For the installation of air ing trunkline and secondary airports. navigation equipment CAA has entered Improvement of air navigation facilities. into a contract Aith lJIIOOX, Philipps The program is in line with the recommenda- and 1&RCOMI. tions of the Philippine Transport Survey.

D. PORTWORKS 80.4 8.0

* 1. t) 23 national ports and various Improvement and extension of selected 54.4 0.4 To be prepared by Bureau of municipal ports national and municipal ports to provide Public Works. adequate berthing and storage facilities through constru tion and dredging works. Improvement of 50 lighthouses. The foreign exchange requirements will be covered by a proposed German loan of $3 million. ANNEI Page 5

* 2. Havotas Fisherman's Wharf Construction of a new fish landing and P 12.4 $ 5.0 Undertaken by SCANDIA under ADB (at Navotas, Rlsal) market. The foreign exchange requirements contract. Loan application pending will be covered by an ADB loan of $5 million. with ADB.

* 3. Batangas Port Extension of port facilities. Foreign 4.1 0.9 Pre-feasibility study (Phase I) exchange requirements will be covered from completed by NTRA International. the German loan. Application for feasibility study (Phase II) expected to be approved by UNDP by January 1971.

* 4. Cagayan de Oro Port Same as above. 3.0 - Same as above.

* 5. Ootabato Port Construction of a new maritime port to 2.0 - Same as above. replace the existing fluvial port.

* 6. Davao Port Extension of port facilities. Foreign 3.2 1.7 Same as above. exchange requirements to be provided through the German loan.

7. General Santos Port Port improvements. n.a. n.a. Same as above.

* B. Tabaco Port Same as above. 1.3 - Same as above. IV. WATER SUPPLY AIlND SEWERAGE 396.8 62.1

* 1. Manila Waterworks System - The first phase of the long range program 218.4 36.4 Economic and engineering studles Long Range Project will follow the Interim Construction Program undertakea by Metcalf and Ecddy. Pre- (1st phase) of NAWASA to be completed sometime in FY 1971. feasibility study completed. Feasibil' It is expected to satisfy an annual average ity study to be completed by end of demand of 830 M1D in 1985. The 2nd phase will 1971. However, Laguna Lake Developmnt follow after the completion of the 1st phase. Authority has come up with a study for The 4-Year Plan envisages spending of Y156 the supply of water to Nanila from the million and $33.9 million during FY 1972-74 Laguna Lake. The project involves a for the 1st phase, which includes the improve- gated control struture on the Napin- ment of the following: (a) Ipo Dam and a New dam river, which wrll prevent salt water Intake; (b) enlargement of the original Ipo-Bicti from flowing into Lagima Lake during tunnel; (c) Bicti-San Jose-Tandang Sora-Road high ocean tides. According to this Aqueduct; (d) San Jose Water Treatment Plant; scheme, the lake will also be improved (e) feeder and primary mains; (f) Bagbag and for irrigation, fisheries and recrea- Super highwayreservoirs ; (g) Tandang Sora Road tional purposes. A lock will allow and Highway Pumping Station; (h) secondary distribution mains. ANNEX Page 6

uninterrupted river traffic. Estimated investment $23.5 million. Prefeasibili- ty study completed. The two studies should be appraised as alternative solutions.

* 2. Provincial Waterworks Construction of new and improvement of P 28.4 $ - The Government has sought financial existing waterwarks systems in the provinces. aid from US/AID for preparation of feasibility studies. * 3. Artesian Wells and Spring To supplement the sources of water of 12.4 3.4 Development existing waterworks or serveareas where there are no waterworks sys tems.

* 4. Metropolitan Manila Sewerage Improvement of the present sewerage 137.6 22.3 An interim report of the MAster System collection system and disposal facilities of Plan for a Sewerage System for the Manila and the suburbs. The 4-Year Plan Manila Metropolitan Area was prepared envisages an expenditure of P30 million and by Black & Veach International in $5.5 million during FY 1973-74. June 1969. The report proposes improve- ment of the following areas considered as having the most urgent need: Manila, Pa- gay, Caloocan, Queson City, Navotas and Malabo . The Master Plan involves a 10-year phased construction period. The sewerage program should be combined with flood control and drainage. A project suitable for external finacing could be produced by the Bureau of Public Works. Necessary for the maors of the Greater Manila Area to reach an agreement among themselves. V. WATER RESOURCES 298.7 93.8

1. Nueva Ecija Groundwater Development of groundwater resources 50.0 12.5 Feasibility study to be undertaken by Development Project in the towns of Guimba, Licab, Cuyaro and NIA with UNDP/FAO assistance. Expected to St. Domingo in Nueva Ecija province through be completed in 2 years. As of moment, a tubewell irrigation from shallow and deep team to do the work has not been recruited well aquifers. Estimated area to be or consulting firm assigned by FAO. irrigated 40,000 ha of riceland. ANNEX Page 7

2. Balog - Balog Project Basically a water supply project designed P 136.3 $ 20.0 Feasibility studies under way by to irrigate year-round 25,0oo hectares and the Bueau of Public works, under the ensure an annual supply of }5 million cubic technical supervision of the U.S.Bureau meters of municipal and industrial water. of Reclamation. Expected to be completed Principal features of the project would be the in 1970. However, NIL is dDubtful as to Balog-Balog Dam and reservoir, and modificat- the viability of the project since it ion and rehabilitation of the existing Talac is a purely irrigation program with no River Irrigation System. power complement.

3. Magat Multi-purpose Project Construction of a dam and reservoir in the 112.4 32.3 Reconnaissance study has been pre- (Isabela, Lazon) Nagat basin of the Cagayan Valley, power genera- pared for the Cayagan River Basin (part ting facilities of 100,000 KW, improvement and of which is the proposed Magat P:roJect) extension of existing irrigation facilities by by the U.S. Bureau of Reclamation, US/AID 74,000 ha, and flood control. and the Government of the Philippines. Feasibility study expected to be completed between FT 1973 and F! 1974. The Govern- ment has sought US/AID financing for the study.

4. East Bay IAnd Reclamation Reclamation of the easternmost section of - 13.0 Pre-feasibility stucdy has been Project the Iaguna de Bay. A lake dike will separate prepared by the Laguna Lake Development the main boly of the aginma from the reclaied Authority. portion, creating an ialand of reclaimed land within the East Bay. Pumps will drain the exceas water out of the enclosed area. Tvo alternatives have been considered. One involves the reclamation of 7,500 ha . part of which is permanently subeerged land claimed by private owners. The other alternative involves only land owned by the Government and is much less time consuming to put together. Iand can be used mainly for agricultural purposes or fish ponds. If the latter solution is adopted, the investment involved will be $7 million. ANNEX Page 8

5. East Bay Agro-Reclamation Development into a mechanized farm of n.a. n.a. Prefeasibility study pending by Project 5,300 ha of government-owned land from the the Laguna Lake Development Authority. East Bay. This can also be combined with a processing complex including mills, driers, canneries, freezers, parking facilities and warehouses.

6. Mangahan Floodway Diversion of floods originating in the - $ 14.5 Prefeasibility study completed by Marikina River and damaging the low lying the Laguna Lake Development Authority. areas of Greater Manila to Laguna de Bay, via a 9 km. channel.

7. East Bay Fish Pond Development into an industrial fish pond - 1.5 Same as above. Reclamation Project operation of 3,100 ha of governmend-owned reelaimed land.

8. Fort Bonifacio Warehousing - The project proposes to create on the n.a. n.a. Study under way by T. Ingledow & Cargo - Transfer Center southern shore of the Pasig river an inte- Associates Ltd. grated modern warehousing-cargo-transfer center within reach of the Laguna and with access to Manila Bay Area. The project will include a barge loading and unloading quay, warehouse facilities and development of small-scale industries. Benefits expected to be lower transportation and trans-shipment costs, relief of the overcrowded warehousing and cargo transfer facilities of the Metro- politan Manila.

9. Lake Fishing and Fish Improvement of the ecological balance n.a. n.a. Prefeasibility study completed by Processing of the Laguna de Bay by scientific intro- the Laguma Lake Development Authority. duction of fish species living off presently underutilized food resources of the lake. Fish take is expected to increase from 39,000 to over 50,000 tons by 1975. The project envisions the creation of an Ahtho- rity for the management of the lake . As a by-product, the establishment locally of a fish processing plant may become justifiable to produce fish meal from fresh fish sur- pluses and discards, and/or to establish a canning operation to absorb part of the surplus and smooth out seasonal variations of the fish market. ANNEI Page9

10. Cayagan River Basin (Luzon) Multipurpose water resource projects.The n.a. n.a. Reconnaissance study has been pre- Chico and Magat sub-basins seem to have the pared by U.S. Bureau of Reclamation, greatest potential.. 114,000 ha are under US/AID and Government of the Philippines. irrigation, while an additional 640,000 ha have been classified as suitable for irrigation. Involves hydropower, irrigation, regulation, and flood control projects. 11. Cotabato River Basin Maltipurpose water resource projects, in- n.a. n.a. Same as above. (Mindanao) volving flood control, regulation, distribution, irrigation and transmission grid. Presently, 71,000 has are under irrigation, while 928,000 ha have been identified as suitable for irrigation. 12. Agusan River Basin The project involves flood control works, n.a. n.a. Same as above. (Mindanao) diversion of surface water for the irrigation of 290,000 ha now farmed, but out of which only 18,000 ha are under irrigation. 13. Llog-Hilabangan River Basin The project involves irrigation of 126,000 n.a. n.a. Same as above. (Negros) ha for sugarcane produrtion, flood control, surface drainage of lands. 14. Bicol River Basin (Luzon) The project proposes the irrigation of n.a. n.a. Same aa above. 100,000 ha generation of hydropower and crea- tion of a qsytem of flood control.

VI. 6 AGRICULTURE p3 .7 2.5 1. Pilot Cattle Improvement Intensification of livestock produ tion 36.7 2.5 An FAO/IBRD Cooperative Program Project on existing large ranches (1,000 ha ) and on mission will visit the Philippines in coconut plantations in Cayagan Valley, Masbate, 1970. FA0 ia considering adding pig and Mindoro, Davao-Cotabato and Negros Provinces. poultry finAncing to the original beef The project ensivages investments for basic production project. The project is improvements, such as fencing, corrals, water expected to be ready for financing in facilities, dips, and pasture improvement. A F! 1972. With the additions the project limited number or breeding stock will also be may go up to $5 million. purchased. ANNEX Page 10

VII. FISHERIES P 6.8 $ 50.5 = 1. Deep-Sea Fishing Development Exploitation of the reportedly abundant 6.8 50.5 Survey is being undertaken by Project quantities of tuna in the territorial waters UNDP/FAO and the Philippine Fisheries of the country. The project involves fish Commission. capture, handling and processing, public infrastructure (freezing and cold storage facilities, fishing harbors) and canning factories.

VIII. MINING

1. Lumbong,Halangas (Zambonga del Possibility of expanding the exploitation n.a. n.a. Interim Report has been prepared Sur Province) Coal Mine of coal deposits in the vicinity of Malangas by UNDP. A UNDP expert is currently port. With blending, it is possible to make working on a study to be completed by metallurgical grade of coke. May 1971.

2. Santa Ines (Risal Province) Development of the Santa Ines Ore Mine n.a. n.a. Prefeasibility study by Laguna Iron Ore Mine to supply the developing steel industry of Lake Development Authority pending. the country.

IU. INDUSTRIAL PARK AND URBAN DEVEIOP1NT The survey undertaken by the Laguna Lake n.a. n.a. Reconnaissance study by the Laguna Development Authority recommends the develop- Lake Development Authority. ment of a major Industrial Park within the context of a major New Town, which will bring together places of work, housing, jobs, schools, community facilities and public utilities. The New Town concept envisages urbanization occurr- ing in separate and complete land-use pattern. TheNew Towns will have a separate identity,while depending on each other for regional support in economic and social terms. It is proposed to develop a New Town between Muntinglupa and Santa Rosa along the Laguna de Bay shore, with a population of 145,000 based on a comprehensive industrial park. The land for the park could be readily reclaimed from the lake. Such a New Town will serve as a major step in implementing a Regional Develop- ment Plan. The objectives are to avoid further concentration of industrial activities in already congested Manila and to prevent a further sprawl of urbanization along the margin of a major metropolitan area. ANNEX Page l1

X. INDUSTRY

1. Steel Billet Plan It is proposed to build a small steel n.a. n.a. Prefeasibility report pending by billet plant with capacity of 50-100,000 tons the Laguna Lake Development Authority. a year. The plant would be located next to the Mapindan River or the Laguna de Bay shore and would use local iron ore, limestone, water, labor and power. The production, which will supply 10-15 percent of the total steel billet market, will cover mainly the requirements of the small mills in the Manila Metropolitan Area.

XI. EDUCATION P 114.1 $ 36.4

* 1. Improvement of Educational A set of projects are to be identified - 20.0 Survey study underway by the System in the forthcoming Survey Study. Presidential Commission on Education, with the assistance of the School of Education, McGuire University, Sidney, Australia through the Ford Foundation. To be completed in October 1970.

* 2. Expansion of Educational Investment in building other facilities 114.1 16.h Mostly pre-fabricated classrooms. Facilities and equipment to accommodate growing demands for elementary, and vocaticral edination.

XII. TOURISM Assessment of the tourism potential of n.a. n.a. The Government will submit shortly the country. an application to UNDP or, possibly, the Spanish government, for a study of the tourism sector and the preparation of a tourism development plan. ANNEX ½nge I2

LIST OF PROJECTS UNDER CONSIDERATION BY THE MINDANAO DEVELOPMENT AUTHORITY

The Mindanao Development Authority is a public corporation created by R.A. 3034 approved June 17, 1961. It operates as an independent corporation subject only to the supervision of the President of the Philippines. For its region (Mindanao, Sulu and Palawan) MDA's functions are among other things

a) to identify projects and undertake feasibility studies in agriculture, manufacture, commerce, infrastructure, etc.

b) to implement projects if the private sector does not show interest; within its modest budget, MDA set up several subsidiary corporations. It can also participate in joint ventures or invest in private enterprises.

The projects mentioned in the list aim therefore in most cases at implementation by the private sector. No order of priority in the regional context has been formulated. Moreover, projects included may be of low interest in the national context. (Where possible links with the National Plan FY 1971 - FY 1974 were added within brackets.) The tentative project costs were calculated before the introduction of the floating rate in Feb., 1970. Estimates of the foreign capital element are not available.

COST OF PROJECT PROJECT PROJECT DESCRIPTION MILLIONS OF PESOS STATUS OF FFASIBILITY STUDY

AGRICULTURE

Fish Pond Development Pilot demonstration project to 2 Study made by MDA. Request has been Bulua, Cagayan de Oro be integrated with ice and cold storage made for public lands to be assigned to and later on fish processing (both acti- MDA. vities included in the National Plan without specification as to locations

Banana Growing and Marketing Project intends to organize small Davao City growers. 10 Negotiations under way with growers

Grain Milling, Drying and Warehousing, N. and S. Cotabato To provide facilities for growing 15 Feasibility study indicated marginal grain production in the Mindanao area. return on investment. Has to be reviewed Capacity 737,000 cavans of rice and corn in depth or reoriented. (Sept. 1969) annually. (Corn processing in Mindanao included in the National Plan) ANNEX Page 13

COST OF PROJECT PRWOECT PROJECT DESCRIPTION MILLIONS OF PESOS STATUS OF FEASIBILITY STUDY

Integrated African Oil Palm Growing and processing 16 Study by Mr. Rijkhoven, Royal Institute Sulu of the Tropics, Amsterdam, available. Legal complication about land.

Livestock Integrated Livestock Farm. 2.5 Feasibility study ready Bukidnon (Activity included in the National Plan among other areas in Davao and Cotabato)

Meat Processing Slaughterhouse, meat processing and 2 Feasibility study ready. Cagayan de Oro preservation, tannery

Abattoir, Davao Replacement of existing old slaughter- 0.5 Feasibility study ready. Arangements house with city necessary.

Salt production. Solar salt production. 0.9 Feasibility study ready.

Banana dehydration plant. May be executed by private group. 2.1 Feasibility study ready. Some initial negotiations took place.

Tree Farming Fast growing tree varieties for short-fiber 15.8 Feasibility study ready. Initial project pulp for paper industry; pilot projects for covering 1,024 ha would cost i9 million. reforestation. (Both activities included in the National Plan without specifications as to locations)

Agro-Industrial Investment Fund No specific information available 20 Money appropriated by Congress but not disbursed. Status of project no clear.

Integrated Rubber Project Rubber growing and processing plant for 7 Updating of preliminary study available. HHevea crumb. For domestic and foreign consump- Difficulty is to secure a 5,000 ha planta- tion. 5,000 ha plantation. tion.

Commercial Seed Farms Primarily for vegetables. (Activity 0.9 No study available in MDA. included in National Plan.) ANNEX inge I

COST OF PROJECT PROJECT PROJECT DESCRIPTION MILLIONS OF PESOS STATUS OF FEASITBILITY STUDY

COMMRCE

Four Sub-regional Food To be linked to GMTFM and other 69 No study available in MDA. Terminal Centers regional food terminals.

Export Marketing Organization of Export Marketing 33 No study available in MDA. Corporations for major export crops and products of Mindanao. (Improvement in marketing included in National Plan for country at large.)

FISEERIES

Integrated Fish Cannery n.a. An updating study is underway. Palawan MDA subsidiary PACADECO has leased 9 fishing vessels to Litton and Co. Inc., and this company has undertaken to establish a cannery out of its own funds. Projected capacity 250,ooo cases per annum of 48 tins at 8 oz. each.

Oyster farm Introduction of oyster culture Study near completion. Availability of suitable site is prerequisite for project

INFRASTRUCTURE

Industrial Estates Supplement to port improvements included 20 No studies available in MDA. Development at port sites of in National Plan for Cotabato, Gen. Santos Cotabato, Gen. Santos, Cagayan and Cagayan de Oro under German loan of $2.1 de Oro, Butuan City million.

Agricultural Estates No specific information available. 20 No studies available in MDA Development in Cotabato, Palawan, Lanao del Sur, Sulu ANNEX 'age 15

COST OF PROJECT PROJECT PROJECT DESCRIPTION MILLIONS OF PESOS STATUS OF FEASIBILITY STUDY

Sasa Industrial Estate Power, water supply, telephone, 23 Stanford Research Institute Davao Port berthing. 42 ha of feasibility land for use by study in 1956. Public bidding industrial and commercial on June 30, firms. Foreign 1969. Contract to be awarded exchange component to either of about 1/4 of total. two selected bidders. 30 ha will be available for storage, silo operation, small scale metal working and assembly feed mills and food processing. (Supplement to Davao-Sasa port improvement included in National Plan) MANUFACTURING

Feed Mill Processing of feed grains to be grown in 12 Study for comparable project Davao City Mindanao. (Corn processing elsewhere in Mindanao available at MnA. included in the National Plan) Raw Sugar Milling and Refining Projected capacity 4,000 ton cane per day, 109 Davao Mindeva Study. U.K. turnkey suppliers del Sur and 300 milling days a year. Private enter- credit under negotiation. Plantation under prise with MIA participation of Pl million in preparation. initial capital of P10 million.

Ice making and Cold Storage Palawan plant might be built or existing 1.5 No studies available in MDA. Plants private plants taken over by PACADECO. Palawan, Misamis Occidental, Zamboanga del Sur

Coco-oil processing Joint venture MDA - private firm under 20 Surigao del Norte Implementation appears probable. consideration by BOI for registration. Local (including contribution P7 million. German supplier's foreign credit secured. component) Industrial Chemicals No specific information available 13 No study available in NDA. ANNEX ';'ge 16

The MD]A also contemplates to play a role in some fields of basic infrastructure and therefore the following projects already listed in the preceding national schedule have been omitted above:

- Multipurpose river basin development Cotabato and Agusan.

- Electric power transmission grid from Maria Cristina plant to other parts of Mindanao

- Mindanao telecommunications network. STATISTICAL APPENDIX

Title Table No.

Population and Employment

Population Projections, 1965-1985 1.1 Labor Force, Eaployment, Underemployment and Unemployment May 1956-1969 1.2 iSnployment by Industry during 1967 and 1974 1.3 Sectoral Growth, Investment and Employment Targets 1. The Structure of Unemployment, October 1967 1.5 National Accounts

GNP Dxpenditures and NDP by Industrial Origin, 1966-1969 (At current prices) 2.1 GNP by ;xpenditure Shares and NDP by Industrial Origin, 1966-1969 (At constant 1955 prices) 2.2 Total Investments FY 1960 - FY 1969 2.3

Balance of Payments

Balance of Payments of the Philippines, 1960-1969 3.1 Gold and Foreign Exchange Reserves and Foreign Exchange Liabilities of the Central Bank and Commercial Banks, 1960-1970 3.2 Value of Exports, 1961-1969 3.3 Export Projections, 1969-197 3.h Volume and Unit Values of Principal Exports, 1961-1969 3.5 Imports by Commodity Group, 1963-1969 3.6 Imoorts Classified by Use of Goods, 1961-L969 3.7 Origin and Distribution of Foreign Trade 3.8 Indices of Quantity, Prices, and Terms of Trade, 1960-1969 3.9 Average Level of Philippine Tariff, 1961-1969 3.10 External Debt ;xternal Public Debt 4.1 Service Payments on External Public Debt 4.2 Foreign Debts of the Philippines, By Maturities, 1961-1969 4.3 Foreign Debts of the Philippines, 1961-1969 4.4 Amortization of Foreign Debts Payable as of December 30, 1969 h.5 Changes in Central Bank Foreign Credit Liabilities during 1970 for Periods Indicated 4.6 Present External Debt of the Philippines and Debt Service Payments Projections, 1970-1979 4.7 STATISTICAL APPENDIX (Continued)

Title Table No. Public Finance

Consolidated Fiscal Operations 5.1 National Government Revenue 5.2 National Government bcpenditure 5.3 Annual Expenditures on Infrastructure by Major Sectors 5.4 Physical Accomplishments of Infrastructure Investments 5.5 Revenue and Expenditures of Local Authorities by Function 5.6 Outstanding Internal Public Debt 5.7 Holders of Government Securities 5.8 Securities Issued by National Government and Government Corporations 5.9 Holders of Different Types of Government Securities 5.10

>Aneyr and Credit

Factors Affecting Money Supply, 1961-1968 6.1 Volume of Savings and Time Deposits, 1965-1969 6.2 Net Domestic Credits of the Commercial Banking System 6.3 Loans and Investments Outstanding of Financial Institutions, 1961-1969 6.4 Comrnosition of Credit Outstanding to the Private Sector, 1961-1969 6.5 Loans and Investments of the Government Service Insurance System and Social Security System, 1965-1969 6.6 Agiiculture

Actual Production for 1968 & 1969 and Physical Targets of the Agricultural Program FY 1971-1974 7.1 Average Growth Rates of Major Agricultural Products 7.2 Loans Granted and Outstanding to Agriculture by Financial Institutions, 1965-1969 7.3 *?4nnufracturing and Mining

Net Value Added in Manufacturing by Type of Product, 1962 to 1968 8.1 lalue Added in Mining and Percentage Distribution, 1962- 1968 8.2 Mining Production, 1956, 1963, 1967 and 1969 8.3 Tndices of the Physical Volume of Manufacturing Production, 1962-1969 8.4 Capacity Utilization in Selected Manufacturing Industries, 1965 to 1969 8.5 Indices of hmployment in Manufacturing and Mining, 1962-1969 8.6 Actual and Projected Value Added in Manufacturing, 1968 and 1974 8.7 STATISTICAL APPENDIX (Continued)

Thitle Table No.

Manufacturing and Mining (cont.)

istimated Import Dependency of Manufacturing Supplies, 1963-1968 8.8 Investment Requirements of Projects Approved by the Board of Investments from July 1, 1968 to December 31, 1969 8.9 Boqrd of Investments - Third Investment Priorities Plan: Investment Requirements, Value of Output, and Ehployment 8.10 Financing of Manufacturing Industry (Source of finance and working capital) 8.11 Paid-in Capital of Newly Registered Business Organizations Classified by Nationality and Kind of Business, 1965-1969 8.12 Comoarison of Estimated Prices of Selected Industrial Products in the Philippines and the United States, 1970 8.13 Average Effective Rates of Protection By Sector and Manufacturing Branches, 1965 8.14 Average Effective Rates of Protection for Selected Projects Proposed by Board of Investments 8.15 Prices and Wages

Price Indices, 1962-1970 9.1 'Wholesale Price Indices, 1956-1969 9.2 Wage Indices, 1961-1969 9.3 Index of Average Monthly Earnings of Salaried Ehployees and Wage Earners in Selected Non-Agricultural Industries in the Philippines, by Industry Division, 1956-1969 9.4 Education

Department of Education Expenditures 10.3 :]nrollment in Public and Private Schools, 1967/68 10.2

Table 1.1

Population Projections - 1965-1985

1965 1970 1975 1980 1985

All Ages 32,355 38,114 45,347 54,095 64,023

0-4 6,170 6,977 8,495 10,088 11,366

5-9 4,807 5,935 6,760 8,283 9,890 10-14 4,135; 4,750 5,877 6,706 8,229

15-19 3,412 4,o83 4,700 5,826 6,657

20-24 2,773 3,349 4,019 4,639 5,763

25-29 2,268 2,711 3,286 3,956 4,579

30-34 1,871 2,215 2,658 3,232 3,902

35-39 1,547 1,823 2,167 2,609 3,182

40-44 1,302 1,501 1,777 2,120 2,560

45-49 1,109 1,254 1,452 1,726 2,065 50-54 916 1,053 1,197 1,394 1,662

55-59 702 852 987 1,128 1,319

60-64 508 632 774 903 1,038 65-69 354 433 545 674 792

70- + 481 544 652 812 1,019

Source: UN World Population Prospects 1965-1985 as assessed in 1968. Medium Variant. Table 1.2

Labor Force,, Employment, Undere Mloyment and Unemployment M 95y 169 (In thousands)

2/ Underemployed Unemployed Percent Percent Labor 1/ of Labor of Labor Year Force Eloyed Total Force Total Force

1956 9,497 8,314 n.a. n.a. 1,182 12.5

1957 8,922 8,149 n.a. n.a. 773 8.7

1958 9,659 8,782 686 7.1 878 9.1

1959 9,575 8,836 602 6,3 739 7.7

1960Ž' ------

1961 10,277 9,395 629 6.1 883 8.6

1962 (April) 10,692 9,680 658 6.2 1,012 9M5

1963 11,187 10,315 869 7.8 871 7.8

196L 11,296 10,572 647 5.7 72h 6.4

1965 U1,h91 l0,543 815 7.1 947 8.2

1966 11,886 11,032 673 5,7 854 7.2

1967 13,274 12,185 905 6.8 1,089 8.2

1968 13,534 12,481 987 7.3 1,053 7,8

1969- 12,040 11,229 n,a, noa. 811 6.7

1/ Fully and partially.

2/ Wanting additional work and worked less than 30 hours per week.

3/ No survey.

h/ Preliminary.

n.a. = Not available.

Source: Bureau of Census and Statistics. Table 1.3 Employment by Industry during 1967_ and 1974

Change over the 7 year Percent Planned rate for mid- period (including 4 years Increase Employment in October 1967 year 1 74 of the Develo ment Plan) In Each In thousands % of total % of total In thousands % Number Sector 1. Agriculture, forestry, hunting, fishing, etc. 6,330 58.3 54.5 7,770 - 3.8 f 1,440 22.7 2. Mining and quarrying 45 o.4 0.5 72 0.10 f 27 60.0 3. Construction 276 2.5 3.1 433 f o.6 f 157 59.9 4. Manufacturing 1,223 11.3 12.7 1,814 i 1.4 f 591 48.3 5. Electricity, gas, water and sanitary services 30 0.3 o.4 58 ft 0.1 f 28 93.3 6. Commerce 1,078 9.9 10.5 1,497 f o0.6 f 419 35.6 7. Transport, storage and communications 375 3.4 3.9 547 it 0.5 i 172 45.9 8. Government, community, business & recreation- al services 769 7.1 7.6 1,080 f 0.5 f 311 40.o 9. Domestic and personal services, and industry not reported 741 6.8 6.8 979 - f 238 32.1

TOTAL 10,867 100.0 100.0 14,250 3,383 31.1

Source: Four-Year Develonment Plan, 1970-74, Table VI-I-?. Table 1. h

eeck -r' 2r-wth. YnvrstmPrt and hm.nplovTnent ''-r'etz (Amnlnt F in rr 'Iion nesos at 19(17 nrices)

Annuial Percent Sectoral Percentages of Increase in Private Investment Public I vestment Total Growth Employm't Amount Percent Amount Percent Investment flew investment New emplorm't

All sectors 5.5 14.4 22,961 100.0 4,464 100.0 27,435 100.0 100.0 Agriculture 6.25 3.2 2,096 9.1 - - 2,096 7.6 42.6 Manufacturing 6.25 6.9 17.5 8,114 35.3 _ _ 8,114 29.6 Mining 18.5 8.5 0.8 Other private activities n.a. n.a. 12,761 55.6 - - 12,761 46.5 Public 39.1 construction.-. 20.5 8.e2' - - 4,464 100.0 4,464 16.3

1/ Including water resources development, transportation, power, telecommunications, social infrastructure and preliminary engineering.

2/ All construction.

Source: Four-Year Development Plan, 197O-74. rctut of Jeh ipltori- t :t. (In thousands)

Total 7.7% 909 11776

Tkural TJrban 6.6% 10.3%

8293 343

Female Male Female Male 11.9% 3.7% 12.1% 9.2%

356 ~~~~~19t4 162 197 2985 5308 130

rV I' -1 1T f' Old Young Old Young Old Young Old Young 9.2% 16.9% 1.7% 7.6% 10.0% 15.2% 5.3% 20.2%

7I6 180 61 -133 8 81 _83 I1 1922 1063 3556 1752 808 532 1579 564 _ i __1 . .|_ I t(. r . -a.*p. E-. Ep. i4.7% j 7.3% 1.4% 2.9% 3.7% 3.8% 3.9% 7.0%

Inexp. Inexp. Inexp. Inexp. Inexo. Inexp. Inexp. Inexp. 90 86 110 70 13 48 84 42 53 _28 63 18 22 61 80 34 1832 953 3543 1668 755 469 1557

Total young, inexperienced unemployed = 337

Notes: Young = 10-24 years Old = all others

Source: Tabulations of the October 1967, BCS Labor Force Survey.

Table 2.1

Gross llational Product by Expenditure Shares and Net Domestic Product by Industrial Origin, 1966 - 1969 (At Current Prices)

Value in lILillion Pesos Percent Distribution 1966 L/ 1967 A/ 1968 A/ 1969 g/ 1966 1967 1968 1969

Expenditure on Gross National Product at Market Prices 23,251 25,803 - 28,376 31,100 100.0 100.0 100.0 100.0 Private Consumption Expenditure 18,111 20,086 21,441 n.a. 77.9 77.8 75-5 Government Consumption Expenditure 2,180 2,427 2,639 n.a. 9.4 9.4 9-3 Gross Domestic Capital Formation 5,031 5,923 6,341 n.a. 21.6 23.0 22.3 Net Exports of Goods & Services 385 -567 -1,210 n.a. 1.7 -2.2 -4.2 Net Factor Income from Abroad 143 -297 - 383 n.a. -0;6 -1.1 -1.3 Statistical Discrepancy -2,313 -1,769 - 452 n.a. -9.9 -6.9 -1.6 Per Capita GNP (in pesos) 695 745 791 837 Annual Change in GNP (per cent) 10.4 11.0 10.0 9.9 Net Domestic Product at Factor Cost 19,705 21,796 23,958 26,063 100.0 100.0 100.0 100.0 Agriculture, Fishery & Forestry 6,393 7,301 8,245 9,290 32.4 33.5 34.4 35.6 Miniing & manufacturing 3,783 4,119 4,574 4,932 19.2 ?8.9 19.1 18.9 Construction 759 812 871 833 3.9 3.7 3.6 3.2 Transportation, Communication, Storage & TJtilities 865 925 1,003 1,069 4.4 4.2 4.2 4.1 Commerce 3,018 3,281 3,465 3,676 15.3 15.1 14.5 14.1 Services 4,887 5,358 5,800 6,263 24.8 24.6 24.2 24.1 Per Capita NDP (in pesos) 588 628 667 701 Annual Change in NDP (per cent) 10.0 10.6 9.9 8.8

NOTE: This series revises previous estimates.

j lRevised estimates as of April 15, 1969. 2/ Advance estimates based on trends established by available figures and indicators up to the end of third quarter 1969. Source: OSCAS, National Economic Council. Table L -2

Gross iational Product by Expenditure Shares and Net Domestic Product by Industrial Origin, 1966 - 1969 (At Constant 1955 Prices)

Value in M4illion Pesos Percent Distribution 1966 l/ 1967 i/ 1968 I/ 1969 / 1966 1967 1968 1969

Expenditure on Gross National Product at Market Prices 15,673 16,602 17,672 18,792 100.0 100.0 100.0 100.0

Private Consumption Expenditure 11,845 12,414 13,122 n.a. 75.8 74.8 74.2 Government Consumption Expenditure 1,440 1,520 1,639 n.a. 9.2 9.1 9.3 Gross Domestic Capital Formation 2,668 3,000 3,167 n.a. 17.1 18.1 17.9 Net Exports of Goods & Services -115 -861 -1,410 n.a. -0.8 -5.2 -7.9 Net Factor Income from Abroad - 83 -171 - 220 n.a. -0.5 -1.0 -1.2 Statitical Discrepancy -122 700 1,374 n.a. -0.8 4.2 7.7 Per Capita GNP (in pesos) 467 479 492 506 Annual Change in GNP (per cent) 6.1 6.2 6.4 6.3

Net Domestic Product at Factor Cost 13,410 14,174 15,028 15,818 100.0 100.0 100.0 100.0

Agriculture, Fishery & Forestry 4,071 4,357 4,712 5,040 30.4 30.7 31.3 31.9 Mining & Manufacturing 2,564 2,707 2,879 3,043 19.1 19.1 19.2 19.2 Construction 505 535 561 531 3.8 3.8 3.7 3.4 Transportation, Communication, Storage & Utilities 634 665 692 724 4.7 4.7 4.6 4.6 Commerce 2,023 2,121 2,206 2,301 15.1 15.0 14.7 14.5 Services 3,613 3,789 3,978 4,179 26.9 26.7 26.5 26.4 Per Capita GNP (in pesos) 401 408 418 425 Annual Change in NIP (per cent) 5.5 5.7 6.0 5.3

NOTE: This series revises previous estimates.

2 Revised estimates as of April 15, 1969. U/ Advance estimates based on trends established by available figures and indicators up to the end of third quarter 1969.

Source: OSCAS, National Economic Council. Table 2.3

Total Investments FY 1960-FY 1969 (In million pesos, at current prices)

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969

Total investments 1,754 2,214 2,885 3,424 4,096 4,542 4,845 5,477 6,132 6,584

Public investments 1641/ 250 178 255 192 207 182 420 581 596

Economic services Agriculture & natural resources 49 21 13 37 15 13 29 25 36 57 Transport & commun'ication 90 112 86 147 119 159 86 234 324 307 Commerce & industry 1 3 5 2 3 2 2 60 60 37 Other economic development 24 23 3 6 5 8 9 5 7 6

Others - 94 71 63 50 25 56 96 154 189

Private investment 1,590 1,964 2,707 3,169 3,904 4,335 4,663 5,057 5,551 5,988

1/ Excludes items included under other services (General Administration, Social Services) but includes capital transfers and direct lending. Public Investments exclude local government investment.

Note: FY 1960-FY 1966 data exclude foreign-financed capital expenditures.

Source: Presidential Economic Staff.

Table 3.1

Balance of Payments of the Philippines 1960-1969 (US $Tmillions)

Goods Services and Transfer payis ts 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969

Receipts 1 Merchandise Exp. 560 500 556 727 742 768 828 821 848 855 2 Non-Monetary Gold 14 15 15 13 15 15 16 17 18 19 3 Freight &Insurance 4 7 9 12 12 1I 16 17 17 18 4,5 Travel & Other Transportation 3 4 4 11 17 28 70 95 56 55 6 Investment Income 6 8 9 9 12 19 18 15 15 7 7 Governsment n.A.e. 1/ 22 32 - 32 35 143 68 81 106 126 89 8 Other Services 34 48 93 86 101 179 158 151 76 80 9 Private Transfers 81 77 83 70 97 77 70 124 93 107 (US Veterans Aid Pen.) (na) (na) (na) (na) (na) (na) (41) (87) (59) (62) 10 Reparations 39 10 8 9 11 22 33 60 27 28 10 Other Government Transfers 21 10 6 5 6 5 12 13 18 20-2/

Total 3- 10 205 196 244 237 299 412 458 581 428 404

Total 1 - 10 784 711 815 977 1.056 1.195 1,302 1.419 1.294 1,278 Disbursements 1 Merchandise Imp. 604 611 587 618 780 808 853 1,062 1,150 1,131 3 Freight &Insurance 56 54 56 53 69 66 71 95 104 96 4,5 Travel & Other Transportation 14 26 47 35 33 59 57 66 69 82 6,1 Direct Investment Income 73 36 16 17 13 17 26 55 79 '47 6,2 Other 8 2 10 9 25 33 29 36 33 38' 7 Government n.i.e.' 7 5 7 7 12 8 7 13 16 15 8 Other Services 26 40 57 50 34 63 79 106 100 103 9,10 Transfer Payments 1 1 5 6 5 5 19 11 3 3

Total 3 - 10 18S 164 198 _2$1 288 JL2 h!h I&

Total 1 - 10 788 7 785 _2_ 971 2.-02 LIUJh Lh4L 2I1.45I

Net 1 - 10 -4 -66 +30 182 85 137 161 -25 -260 -238 Capital account, net

11 Direct Investment 29 -56 -3 -4 -4 -10 -15 -9 -5 2 12 Other Private Long-Term Capi- 45 66 3 -26 +38 -11 +3 +12 +107 +85 tal 13 Private Short-Term Capital -1 -33 -27 +29 -109 -118 -17 +12 +174 +63 14,15 Government -7 -21 +21 +5 -2 +49 -23 -41 +38 +14

Total 11 -15, net 67 -4 -6 + -77 -90 -j2 -26 + +1

Total 1 -15, net 63 -111 2 186 8 47 109 -i -,

Net lrrors and Omissions -35 -30 +19 -159 -51 -75 -56 -24 -103 -63

16 - 19 Monetary Movements -28 1141 -43 -27 143 28 -53 75 49 137 (Minus * Incrsase of reserve)

1/ Including part of US military expenditures in the Philippines.

2/ Estimate

Source: IMF 3alance of Payments Yearbook. Table 3.2

Gold and Foreign Exchange Reserves and Foreign Exchange Liabilities of the Central Bank and Commercial Banks, 1960-70 (In million U.S. dollars)

Foreign Exchange Inter- Gross Reserves Liabilities national Net Comm'l. Reserves-V Reserves Lnd of Period Cent 7l Commn'l. Total Central bank-' banks bankZ/ banks (3-5) (6-4) (1) (2) (3) (4) (5) (6) (7)

1960 120.0 76.0 196.0 5.0 4.0 192.0 187.0 1961 54.0 63.0 117.0 61.0 4.0 113.0 55.0 L962 75.0 76.0 151.0 43.0 11.0 140.0 97.0 463 109.0 88.0 197.0 10.7 50.0 147.0 136.3 19644/ 123.3 74.3 197.6 29.4 159.1 38.5 9.1 19654/ 193.0 91.7 284.7 110.7 188.6 96.1 -14.6 1966 193.6 120.7 314.3 128.1 135.5 178.8 50.7 1,967 179.8 146.1 325.9 234.6 104.4 221.5 -13.1 1.968 161.4 152.2 313.6 120.1 118.5 195.1 75.0 1969 January 144.1 139.2 283.3 125.6 101.2 182.1 56.4 February 147.3 145.3 292.6 135.1 106.9 185.7 50.6 'larch 174.9 144.9 319.8 172.6 101.6 218.2 45.6 April 153.4 142.2 295.6 166.8 95.9 199.7 32.9 May 132.2 129.9 262.1 164.2 86.9 175.1 10.9 June 138.0 144.2 282.2 173.8 105.1 176.3 2.5 July 134.1 144.9 279.0 172.8 122.3 156.7 -16.1 August 126.5 135.5 262.0 182.8 116.8 145.2 -37.6 September 129.2 131.9 261.1 197.8 115.6 145.5 -45.3 October 130.0 143.7 273.7 195.2 125.9 147.8 -47.4 November 125.3 143.9 269.2 205.3 139.0 130.2 -75.1 December 120.6 135.5 256.1 196.4 130.2 125.9 -70.5 1970 January 125.3 131.5 256.8 189.0 119.2 137.6 -51.4 February 158.8 129.4 288.2 228.2 111.9 176.3 -51.9 March 192.0 125.8 317.9 308.2 120.9 197.0 -111.2

Order I/ Includes IMF gold tranche position and excludes foreign balances of the Money Fund and the Fiscal Agency Fund. '/ Consists of short-term loans from U.S. commercial banks, Exim Bank and the Federal Reserve Bank of New York. 3/ As defined by the Philippine authorities, i.e., gross reserves of the Central Bank plus net reserves of commercials banks. 4,' Revised as of November 22, 1966 to include deferred payments liabilities previously unreported by commercial banks. These revisions supersede those previously made on end of 1964 data.

Source: Central Bank of the Philippines Table 3.3

Value of Exports, 1961-69

(F.O.B. in millions of U.S. $)

6 Commodity 1960 1961 1962 1963 19 4 1965 1966 1967 1968 1969

Coconut products 1/ 179 122 168 244 247 270 267 216 236 163 Copra m T m7 Ii T i57 T' Coconut oil 16 16 31 47 60 68 75 59 77 51 Desiccated coconut 19 14 15 18 20 20 i8 17 25 16 Copra meal or cake 5 4 9 11 11 12 17 11 11 9

Sugar 143 144 132 160 171 147 l1t 151 151 158 Centrifugal Tr m T78R 12 1 6r 7 -17 '¶olasses5 5 5 8 12 lo 6 7 7 7 Others 5 5 5 5 11 5 3 2 - 1

Abaca and manufacture 45 32 28 38 33 26 22 17 13 16 Unmanufacture,d -7 5 7 T 7I7 _ W7 Abacarope 2 3 3 3 6 3 2 3 2 2 2

Forest products 102 105 128 179 178 194 240 249 262 259 Logs ; T 7 TO Tr T5 Tr 77 7 Lumber 7 7 5 7 8 8 7 6 9 11 23 18 18 18 21 19 Plywood 6 8 11 16 1 Others 4 5 5 10 12 14 18 18 2t JIL Mineral oroducts 60 57 52 66 61 77 107 104 I14 160 Copper concentrates *7 7 7 _T _TC 77 7 75 85 Iron ore 9 8 9 11 11 7 6 4 2 2 Chromite ore 3 17 17 9 9 10 11 8 4 3 5 Iron concentrate 3 in.a. n.a. 1 1 2 2 5 7 10 n.a. h/ Others 5 4 4 4 4 10 13 14 10 20

Fruits and vegetables 4/ 10 14 14 11 13 15 12 14 12 20 Pineapple (canned) -lo17 -ri -7 --E 79 9 -T- 9 T7 Fineapple (juice) 1 2 2 3 3 3 1 1 1 1 Others 2 2 1 1 2 3 2 3 2 2

Tobacco 7 9 12 13 17 16 12 11 16 17 Raw 7 ° T X! 6 77 1 11 17 7 Cigas!and others - 1 1 1 1 1 1 - 1 1

All other exports t14 17 22 16 22 23 27 59 44 62 Total exports 560 500 556 727 742 768 828 821 8&8 855 Percentage change over -10.7 11.2 30.8 2.1 3.5 7.8 -0.9 3.2 0.8 previous year

1/ Exports of coconut products are known to be understated in the period prior to 1963 and after 1966. 2/ includes mats and other)xinor abaca Droducts. 2 Obtainable only for FY. _/ Excluding coconut products.

-/ Differ from exports in the balance of payments principally by the amount of non-monetary gold exported.

S/ Included in 0Others".

Fource: Statistical Bulletin, Central Bank of the Philippines. Table 3.4

Bs)ort Projections, 1969-1974 (In million US dollars)

Actual Projected (Calendar Year) 1969 1970 1971 1972 1973 1974 coconut Products 163 244 268258 272 ,oconut oil 7 -766 7 7 9 Volume (1000 tons) 202 305 350 380 390 400 Price (US$/ton) 250 245 245 24C 240 235

Jopra 87 136 139 140 140 141 Volume (100 tons) 509 800 840 880 900 940 Price (US$/ton) 171 170 165 160 155 150

Desiccated cocunut 16 20 20 20 20 20

Copra Meal and Cake 9 12 13 14 14 15

,Dugar 157 166 173 179 187 188 Centrifugal sugar 7 m w 171 179 1 Volume (1000 ton) 980 1030 1080 1120 1170 1210 Price (US$/ton) 152 153 153 153 153 149

Molasses and others 8 8 8 8 8 8

Forest Products 259 271 294 314 334 354 Log 215 20- 2-52 Volume (million board feet) 3586 3800 4000 4200 4400 4600 Price (US$/lOOObf) 60 60 60 60 60 60

Lumber 11 11 11 11 11 11 Plywood 19 20 25 30 35 40 Others 14 12 18 21 24 27

I;inerals 160 215 221 261 350 351 Copper (metal equivalent) 133 1 7 1 1016 Jolume (thousand metric tons) 130 177 210 230 240 260 Price (US$/ton) 1020 1050 905 826 770 715

Niickel (metal equivalent) - - - 39 132 132 'olume (thousand metric tons) - - - 16 55 55 Price (US$/ton) 2420 2420 2420

Others 27 30 31 32 33 33

All Other Products 115 121 139 153 168 180

TOTAL EXPORT 855 1020 1085 1170 1310 1345 r = = =

Source: Mission estimates. Table 3.5

Volume and 11rit Values of Princinal ExDorto 1961-1969

Average Volume (thousand rmtric tons) 1955-57 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 Copra 1/ 905 o04 627 778 1,033 910 883 1,015 6/ 775 640 509 Coconut oil 94 60 74 1448 195 229 ?36 314 230 256 202 Desiccated coconult 1. 59 59 63 70 69 68 67 61 62 54 Copra meal or cake 98 81 89 14h 168 193 182 239 185 189 177 Sugar, centrifugal 843 1,090 1,071 961 1,027 1,094 1,017 980 974 964 980 Abaca, unmanufactured 117 101 oh4 S2 113 104 89 79 67 57 62 Logs 2/ 758 1,455 1,543 1,760 2,309 2,319 - 2,963 3,624 3,503 3,517 3,586 Lumber 2/ 60 60 80 4L 54 62 50 53 48 62 78 Copper concentrates 78 223 209 207 327 277 279 329 368 412 470 Iron ore 1,351 1,008 960 1,009 1,333 1,345 838 674 438 234 199 Chromite ore 705 746 613 3614 L8o 558 592 558 228 174 279 Pineapple, canned 26 45 43 40 32 34 44 45 57 55 109 Pineapple, juice 3/ 31 12 24 22 28 28 17 14 15 10 12 Tobacco, raw 10 8 18 23 24 23 18 23 20 43 22

Value (US $ per metric ton)

Copra 142 173 141 145 163 172 192 168 6/ 167 192 172 Coconut oil 221 267 216 214 239 261 289 239 252 302 250 Desiccated coconut 269 322 246 240 262 281 302 269 280 397 298 Copra meal or cake 49 62 48 63 70 57 65 71 59 59 51 Sugar, centrifugal 115 122 126 127 142 135 130 135 145 149 152 Abaca, unmanufactured 291 416 345 267 280 291 271 241 218 197 232 Logs 4/ 50 58 55 61 70 58 52 55 59 59 60 Lumber 4/ 117 117 87 116 123 133 143 142 133 139 141 Copper concentrates 154 133 129 110 125 123 168 228 203 216 283 Iron ore 8 9 9 9 8 8 8 9 8 8 9 Chrornite ore 19 23 2P 20 19 19 19 14 19 19 18 Pineapple, canned 1146 156 233 288 219 225 197 200 179 170 156 Pineapple, juice 5/ 99 110 83 97 100 100 160 71 100 100 99 Tobacco, raw1 447 500 444 493 500 428 482 179 455 355 409

1/ Excludes substantial amounts of unrecorded exports prior to 1962.

/ In million board feet.

3/ In million liters.

4/ Per thousand board feet. 5/ Per thousand liters.

6/ Inconsistent with Table 3.3.

Source: Statistical Bulletin, Central Bank of the Philippines. Table 3.6

Imports by CoUmodity Group. 1963-69 (Value in million US$)

Commodity 1963 1964 1965 1966 1967 1968 1969

Uonsumer Goods 132.7 159.2 192.6 160.7 204.5 185.2 172.2 Live animals chiefly for food 0.2 0.4 0.7 0.1 0.1 0.1 - Meat and meat preparations 4.0 6.o 5.5 8.6 5.7 9.6 8.9 Dairy products, eggs and honey 18.7 23.9 26.0 28.6 29.4 34.9 37.4 Fish and fish preparations 12.2 12.7 13.9 15.7 19.5 22.7 18.3 Cereals and cereal preparations 58.9 66.4 94.8 52.8 84.7 40.7 38.1 Fruits and Vegetables 5.5 6.7 7.6 9.9 9.2 10.9 7.6 Sugar and sugar preparations 0.3 0-3 0.3 0.2 0.2 0.2 0.4 Coffee, Tea, Cocoa, Spices & Manufactures Thereof 2.3 3.4 3.6 3-3 4.0 4.5 3-3 Feeding stuffs for animals 2.3 2.6 2.6 3.1 5.2 7.2 7.2 Miscellaneous food preparations 0.2 0.2 0.3 0.5 2.0 1.9 3.4 Beverages 0.8 0.9 1.4 1.1 1.5 1.6 1.4 Tobacco 1.3 0.7 1.0 2.8 4.5 7.1 9.8 Prefabricated bldg., sanitary plumbing, heating and lighting fixtures and fittings 2.1 2.0 1.4 1.5 2.3 2.1 1.7 Furniture and fixtures 0.2 0-3 0.1 0.2 0-3 1.1 0.3 Travel goods, Handbags, similar articles ------Clothing 2.1 3.9 2.6 2.5 1.0 0.9 0.3 Footwear 0.1 0.1 0.1 0.1 - - 0.1 Prof. Scientific and controlling instruments 6.0 7.4 7.7 7.6 9.4 11.9 12.0 Misc. Manufactured articles 8-3 9.9 8.7 10.9 13.2 15.7 16.1 Returned goods and sp. transactions 7.2 11.4 14.3 11.2 12.3 12.1 5.9

Capital Goods 209.0 274-3 275.8 297.4 406.8 443-8 444-4 Machinery and parts, other than electric 113.6 140.0 141.3 151.3 229.0 238.5 258.5 Electric mach. apparatus and appliances 28.7 42.2 47.5 36.o 47.1 60.6 60.2 Transport equipment 66.7 92.0 86.9 109.9 130.3 143.9 124.9 Live animals, not for food 0.2 0.1 0.1 0.2 0.4 0.8 0.8

intermediates 276.1 346.8 339.9 394.8 450.5 520.7 514.7 Hides, skins and fur skins, undressed 0.1 0.5 0.4 0.6 0.7 0.7 0.6 Oil seeds, oil nuts and oil kernels 0.4 0.6 0.9 0.6 0.2 1.8 - Crude rubber incl. synthetic and reclaimed 5.1 6.3 4.6 5.7 4.5 4.0 3.7 Wood, Lumber and Cork 0.4 0.7 0.7 0.6 0.5 0.4 0.2 Pulp and waste paper 3.8 3.0 2.0 3.4 4.4 4.6 4.4 Textile fibers, not mftd. into thread or yarn 25.6 23.2 21.7 34.9 29.1 49-5 41.8 Crude fertilizer, minerals except coal and precious stones 2.0 2.8 3.6 3.2 4.6 5-3 5.1 Metallic ferrous ores and metal scrap 0.1 0.2 0.5 0.4 0.1 0-3 1.7 Animal and vegetable crude materials, inedible o.6 4.0 0.9 1.6 1.1 1.4 1.3 Mineral fuels, lubricants & related materials 61.8 77.0 76.6 84.1 93.7 105.8 106.7 Chemical elements and campounds 15.1 19-3 20.1 22.3 26.2 33-9 34.5 Mineral tar and crude chemicals from coal, petroleum and natural gas 0.2 0.2 0.2 0.1 0.2 0.1 0.1 Dyeing, tanning and coloring materials 6.0 6.3 6.6 8.1 7.6 8.5 7.1 Medicinal and pharmaceutical products 8.0 7.9 6.6 7.6 12.2 15.1 15.5 Essential oils, perfume materials, toilet, polishing and cleaning preparations 2.7 2.8 3.4 4.3 3.7 4.6 6.o Fer'ilizers, manufactured 4.0 11.6 11.9 4.9 10.5 8.6 8.7 Explosives and misc. chemical products 18.9 22.2 24.4 30.7 36.1 38.4 41.7 Animal and vegetable oils (not essential) 3.5 4.8 4.1 4.1 4.2 4.6 5.1 Leather manufactures nec. and dressed furs 0-5 0.7 0.7 0-5 0-5 0.5 0.4 Rubber manufactures 3.5 4.8 5.5 6.4 6.8 7.1 6.6 Wood and cork manufactures 0.3 0-5 0-5 0.5 0.6 0.4 0-5 Paper and paper board manufactures 16.0 23.2 21.9 24.4 27.0 27.3 28.7 Textile yarns, fabrics and made-up articles 20.8 19.0 16.8 30.6 31.8 43.6 33.6 Non-metallic mineral manufactures 7-5 11.0 9.4 10.9 12.4 11.9 10.6 Gold, silver, platinum gems and jewelry - - - - - 0.1 - Base metals 53.4 74.2 78.0 84.0 105.9 109.7 116.3 Manufactures of metals 15.8 20.0 17.9 20.3 25.9 32.5 33.8

Note: There is a certain extent of overlapping of the three categcries of commodities (consumer, capital goods and intermediates). Because of lack of time, no attempt was made to segregate each commodity group (e.g., dairy products, transport equipment, etc.) into the three categories. Source: Foreign Sector, Department of Economic Research, Central Bank of the Philippines. Table 3.7

Imports Classified by Use of Goods 1961-1969 (F.O.B. in million US dollars)

Commedity 1p60 1961 1962 1963 196L 1965 1966 1967 1968 1969

Producer Goods

Machinery, equipment 152 112 9L 1 01 133 151 160 216 234 243 Unprocessed raw materials 60 73 101 105 120 110 130 139 163 156 Semi-processed raw materials 252 287 265 289 367 353 399 502 574 574 Supplies 56 43 44 29 4o0 4 56 51 51 49

TOTAL 520 515 504 52)i 660 658 745 g98 1,022 1,022 Consumer Goods

Durable s 5 5 5 5 9 8 15 13 12 10 Non-durables 79 91 78 89 111 142 93 141 116 99

TYTAL 8h 86 83 9u 120 150 108 154 128 109 GRAND TOTAL 604 611 587 618 780 808 853 1,062 1,150 1,131

-ource: Statistical 91l11etin, Central Bank of the Philinpines. ahl1e 3.8

Orirt-nariDistri__ iti_n_of Foreii-n Trfde

Valiue in 'ii]inc of 'I.S Dollars _____ 'rrcenta-'es 'Tnted Ud'Inited Exports Total States Japan 7Throoe Cther T-ta.l ctates Japan Europe Otlier

1955-1957 (average) 428 236 73 80 39 100 56 17 18 9 1960 560 28L 132 100 U 100 51 23 18 8 1961 500 269 125 72 34 100 54 25 14 7 1962 556 281 137 90 L8 100 51 25 16 8 1963 727 33] 193 152 46 100 46 27 21 6 1964 7h2 3clh 188 1b5 55 100 48 25 20 7 1965 768 39 218 146 55 100 45 28 19 8 1966 828 346 264 37 89 100 h2 32 18 8 1967 821 353 279 97 92 100 43 34 12 11 1968 858 391 284 87 96 ion L6 33 10 11 1969 855 360 329 68 97 100 12 39 8 11

Imports

1955-1957 (average) 556 331 56 65 1o0 100 60 10 11 19 1960 604 255 159 75 115 100 42 26 13 '9 1961 611 289 108 92 122 100 47 18 15 20 1962 587 253 10(6 103 ]25 100 43 18 18 21 1963 618 254 105 103 156 100 41 17 17 25 1964 780 312 159 1214 185 100 40 20 16 24 1965 808 274 195 124 215 100 34 24 15 27 1966 853 235 244 135 189 100 33 29 16 22 1967 1,062 363 307 16r 232 100 31 29 15 22 1968 1,150 372 327 200 251 100 32 28 17 23 1969 1,131 320 337 219 255 100 28 30 19 23

Source: Statistical Bulletin, Central Bank of the Philippirnes. Table 3.9

Indices of Quantity, Pricesand Terms of Trade, 1960-69 (1955 = 100) Terms Quantum Index Price Index of Period IoDrErts Imports Exports Trade

1960 96.5 123.2 111.5 114.1 102.3

1961 99.0 119.2 113.2 105.0 92.6

1962 93.7 130.6 115.4 106.2 92.0

1963 92.1 162.3 123.0 111.8 91.0

1964 113.9 166.3 124.1 110.9 89.4

1965 117.1 170.7 126.2 112.8 89.4

1966 124.6 187.4 128.2 114.1 89.0

1967 149.5 174.6 129.3 115.9 89.6

1968 162.0 177.2 130.4 121.7 93.3 1969 155.0 171.4 133.6 123.8 92.5

Source: Central Bank of the Philippines. Table 3.10

Average Level of Philippine Tariff, 1961-1969

Average Percentage Rate of Duty./

Non-U.S. Total Year U.S. Imports Imports Imports Average 1956 - 60 5.33 10.46 7.97

1961 6.17 4.15 7.07

1962 7.90 9.01 6.91

1963 11.00 11.23 10.60

1964 9.65 9.86 9.40

1965 9.91 9.67 9.05

1966 11.24 11.57 141 .5

1967 11.01 11.45 11.30

1968 14.19 11.52 12.39

1969 15.02 10.30 11.62

1/ Ratio of duties collected to c.i.f. value of imports.

Source: Central Bank of the Philippines Table 4.1

External Public Debt Outstanding as of December 31, 1969 2! Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

Debt Outstanding December 31, 1969 Source Disbursed Including only undisbursed

TOTAL EXTERNAL PUBLIC DEBT 426,038 545,621

Privately held debt 182,250 190 ,529 Pablicly issued bonds 11,713 11,713 Suppliers 64 0 65v) 5 Australia 1,054 Belgium 1,189 1,189 France 1,586 1,586 Germany 1,398 1,398 Japan 20,718 20,718 United States 38,1h9 39,6h9 Financial institutions lo6,h52 113,231 France 25e 25z Netherlands 2,762 9,1h2 United States 103,)438 103,838 1 Loans from international organizations 108,324 201,9! t ADB 358 %5O0O IBRD 107,966 196,941

Loans from governments 133.63 Canada 10,523 10,523 Germany 10,247 10,929 Japan 17 20 United States 112,3046 129,,547

Unclassified 1j832 1,832

1, £)cbt' with an original or extended maturity of over one year.

Source: Statistical Services Division, Economics Department August 7, 1970 ?cblo 4.2

3etiuated FPttLro Sorvico Pyonts or, rtornl. ftbli Dobt Outstan,iM Incliidiug Undiebursad as of Doccrbor 31. 1969 Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERIOD INCLUDING ANORTI, YtAR UNDISBURSED zATIoN INTEREST TOTAL

TOTAL EXTERNAL PUBLIC DEBT

s97o 3430789 77.974 23P,63 101s537 j97j 463,813 69D254 21o547 90,800 1972 3960561 66.196 18,814 683010 1973 330,365 35.894 16,713 52,609 1974 294,472 35.079 13.077 50.556 19TS 2590392 27,829 14.184 42.013 1976 231,564 26 99? J2#993 39.990 1977 2040567 25,926 11,481 379407 1978 178,641 23.243 99992 33S235 1979 155,398 20.554 6,691 29,246 1980 134,844 19,223 7,521 26.744 1981 115.620 17.190 69456 24,247 1982 97,8s30 16,600 sp448 22.048 1983 81.230 14,581 4.530 19,112 1984 66.648 11,969 3P711 15,680

NOTE: Includes aervice on all debt listed in Table 14.1 prepared Aug. 7, 1970 with the exception of the following, for which repaynfent terms are not available: Unclassified $1,832,000

For an amount of approximately $53,00o,000 minor assumptions were made on repayment terms as accurate repayment schedules were not available. ______DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERIOD INCLUDING AMORTIO YEAR UNDISBURSED ZATION INTEREST TOTAL

LOANS FRO4 INrERNATIoNAL ORAGANIZATIONS

IBRD 1970 196.941 -5643 6,720 12.363 1971 191,298 9,054 8.040 17,094 1972 182.244 9P415 6s336 17.951 1973 172.829 10,934 9.243 20o1i7 1974 161,895 115313 9,013 20.526 1975 150,382 11.829 8.679 20.508 1976 138,553 12.104 8,335 20p439 1977 126,449 12P355 7.685 20.040 1978 114,094 11J617 6,939 S8.556 1979 102.4?? 10,844 6.242 1,'o86 1980 91.633 10.989 3,573 16.562 1981 80.644 1o0.78 4,902 15,610 1982 69.936 9.961 4.244 14.205 1983 59.975 0P384 3.653 12.037 1984 51,591 7,8s3 3.154 11.003

LOANS FROM GOVERNMENTS 1970 151,318 12,679 6,787 199466 1971 138,639 13:913 6,608 20,520 1972 124.727 13,590 6,oll 19A600 1973 111#137 11,574 3.385 16.959 1974 99.563 11,738 4.791 16,529 1975 87.825 11,213 4P187 15,400 1976 76,613 100723 3,612 14.335 1977 65.890 9,533 3.065 12,599 197e 56,356 9,146 2.377 11.723 1979 47r.211 7T64 2.122 9s736 1980 39,597 .0ool 1;756 s8756 1981 32.596 6.876 1.414 87.90 1982 25.721 6,421 1.077 7,498 1933 19-300 5,965 764 6,729 1984 13P335 3,071 458 4.329

Source: Statistical Services Division, Sconomics Department August 7, 1970 Table 4.3

Foreigri Debts of the Philippines, by Maturities, 1';61-1569 (In millions of U.S. dollars)

End of Period 1961 1962 1963 1964 196$ 1966 196J 19.D8 Jn e Sept Dec.

Short-term 65.0 54.0 60.7 188.5 261.9 238.3 278.1 387.6 365.3 371.9 468.8 467.0 Public sector 61.0 43.0 10.7 29.4 73.3 102.8 153.3 209.0 120.1 167.3 190.8 196.4 Central Bank 61.0 43.0 10.7 29.4 73.3 102.8 153.3 209.0 120.1 167.3 190.8 196.4 Private sector 4.0 11.0 50.0 159.1 188.6 135.5 124.8 178.6 245.2 204.7 278.0 270.6 Commercial banks 4.0 11.0 50.0 159.1 188.6 135.5 124.8 104.4 118.5 105.9 115.6 130.2 Othiers ------74.2 126.7 98.8 162.4 140.4 Medium-termn 179.1 175.4 172.5 200.2 231.9 194.9 165.7 224.3 456.5 436.8 476.1 491.6 Public sector 101.7 124.4 126.4 129.0 135.9 113.7 87.0 113.0 244.4 242.8 238.3 223.1 Central Bank 49.2 86.6 97.8 105.6 51.8 25.3 11.0 53.0 168.6 166.8 171.3 155.1 Others 52.5 37.8 28.6 23.4 84.1 88.4 76.0 60.0 75.8 76.0 67.0 68.0 Private sector 77.4 51.0 46.1 71.2 96.0 81.2 78.7 111.3 212.1 194.1 237.8 268.5 Long-term 3/ 169.4 178.3 145.9 151.6 230.9 258.6 253.2 426.6 517.4 527.4 557.5 624.4 Public sector 58.4 66.4 49.1 62.7 149.6 154.0 151.7 162.1 184.0 192.7 202.8 214.9 Priv&te sector 111.0 111.9 96.8 88.9 81.3 104.6 101.5 264.5 333.4 334.7 354.7 409.5

T o t a 1 413.4 407.7 379.2 54C.3 724.6 691.8 697.0 1,038.5 1339.2 1336.1 1,502.4 1583.0

1/ Payable within one year, originally contracted; commercial banks include PNB and NIDC.

Payable from one to five years, originally contracted.

3/ Payable over five years and beyond, originally contracted.

Source: Central Bank of the Philippines L>1lb:c 4.;

l-,Ln Debts of the lI ppLr ! (Tin millions of ' ioL ,rs)

Irntral G aIevciv l Other Tot-n End of Period ,mnrk .:k Trade Foreign (1+2+3+4) Classified by Sectcr Liabilities 1/ LianiLities Credits 2/ Debts 3/ or (5+6) Public Private (1) -L (3) - ~_(2)() (5 (6)

(Outstanding Balance) 1961 December 110.2 4.0 89.1 210.1 413.4 221.0 152.4 1962 December 129.6 11.0 71.6 195.5 407.7 233.7 174.0 1963 December 108.5 50.0 60.0 160.7 379.2 186.2 193.0 1964 December 135.0 159.1 69.4 176.8 540.3 221.1 319.2 1965 December 125.1 188.6 105.8 305.1 724.6 358.7 365.9 1966 December 128.1 135.5 97.9 330.3 691.8 370.5 321.3 1967 December 263.7 104.4 318.6 351.8 1,038.5 538.0 500.5 1968 December 288.7 118.5 418.8 513.2 1,339.2 592.1 747.1 1969 June 334.0 105.9 420.5 475.8 1,336.1 602.7 733.4 September 362.1 115.6 447.2 577.5 1,502.4 680.9 821.5 December 351.5 130.2 511.6 589.7 1,583.0 692.2 890.8

(Change from Preceding Period) 1962 December +19.4 + 7.0 -17.5 -14.6 - 5.7 +12.7 -18.4 1963 December -21.1 +39.0 -11.6 -12.8 - 6.5 -25-5 +19.0 1964 December +26.5 +109.1 + 9.4 +16.1 +161.1 +34,9 +126.2 1965 December - 9.9 +29.5 +36.4 +128.3 +184.3 +137.6 +46.7 1966 December + 3.0 -53.1 - 7.9 +25.2 -32.8 +11.8 -44.6 1967 December +99,4 -20.4 +225.4 A'374 +341.5 +146.0 +195.5 1568 December +25.0 +14.1 +100.2 +161.4 +300.7 +54.1 +246.6 1969 June +45.3 -12.6 + 1.7 -37.4 - 3.1 +10.6 -13.7 September +28.1 + 9.7 +26.7 +101.7 +166.3 +78.2 +88,1 December -10.6 +14.6 +64.4 +12.2 +80.6 +11.3 +69.3

1/ Includes short- and medium-term foreign liabilities and purchases from IMF.

2/ Includes short-, medium- and long-term suppliers' credit and D/A, D/P and open accounts, public and 'private sectors.

3/ Includes DBP medium-term borrowings and other medium- and long-term borrowings, public and private.

Source: Central Bank of the Philippines Table 4.5

Amortization of Foreign Debts Payable as of December 30, 1969 (In million U.S. dollars) Beyond 1970 1971 922 1973 4974 1975 1976 1977 1978 1979 1979

Short-term 467.02 ------Public Sector 196.37 ------Central Bank 196.37 ------

Private Sector 270.65 ------Commercial Banks 130.22 ------Trade Credits 85.73 ------_ _ Others 54.70 ------

Medium-term 135.58 140.6o 113.3 74.09 28.02 - - - - _ Public Sector 62.80 55.53 363.37 L.90 - - - - _ Central Bank 26.8 2 43.47 6. 27.86 ------Trade Credits 8.24 7.27 6.89 6.51 3.90 - - - - - Others 27.74 4.79 2.69 ------

Private Sector 72.78 85.07 46.80 39.72 24.12 - - - - - Trade Credits 34.30 Mr. 99 20.82 135=.2T - - - - _ Others 38.48 56.08 25.98 26.14 16.88 - - - - -

Long-term 73.65 71.14 69.76 65.83 60.7 53.29 46.64 40.09 27.53 33.06 82.60 Public Sector 17.95 18.70 18.74 17.49 16.57 16.50 15.18 14.99 12.98 9.99 55.80 Trade Credits 7.T7 6.7 7 8B 5.43 3.42 3.16 1.47 1.22 .20 .20 1.80 Others 10.08 12.03 12.86 12.06 13.15 13.34 13.71 13.77 12.78 9.79 54.00

Private Sector 55.70 52.44 51.02 48.34 44.22 36.79 31.46 25.10 14.55 23.07 26.80 Trade Credits 30.09 3 3 33.03 28.86 24.44 21.07 15.31 7.98 17.28 5.31 Others 25.61 18.50 17.48 15.31 15.36 12.35 10.39 9.79 6.57 5.79 21.49

TOTAL PAYABLE DEBTS 676.25 211.74 183.11 139.92 88.81 53.29 46.64 40.09 27.43 33.06 82.60

Source: Central Bank of the Philippines Cliazesill;-ntral i3m.k Foreign Credli lIaia-li A esDlujji:917~ For Periods Indical,ed (Million U.S. Dollars)

Outstani(trg January February Narch Total Ou tstanding December 31, Acqui- Dispo- Acqui- Dispo- Acqui- Dispo- Acqui- Dispo- March 31, 1969 sition sition sition sition sition sition sition sition 1970

T o t a 1 3jS,86 - 7.71 __o,on__.22 2_35 98.22 l0.91 443.17

A. Foreign Commercial Banks 268.99 - 7.71 - 2,40 40.00 10.91 298.08

1. Short term 196.37 - 7.36 - .85 0.00 40.00 1o.56 225.81 U. S. 162.90 _ 3.67 - .03 40.00 .85 40.00 4.55 198.35 European 33.47 - 3.69 - .82 - 1.50 - 6.01 27.46

2. Medium term 72.62 - .- 5 - .35 72.27 U. S. 69.86 - - - -- European 2.76 - .35 - - - - .35

B. International Monetary 82.50 - - 18.00 - 18.00 - 100.50 Fund

C. International Bank for 4.37 - - - - .22 - .22 - 4.59 Reconstruction and Development

D. Federal Reserve Bank - - - 40.00 - -4000 - 40.00 of New York

Source: Central Bank of tine Philippines Table 4.7

Present Externel Debt of the Philippines and Debt Service P antProjections. 1970-1979 (In million ll dollrs)

Borrowing D eb t S e r v i c e P a y a e n t s Jan. -April Oo,tstandibng 1978 1979 Dec. 31. 1969 1970 1970 1971 1972 = 1974 17 1976 1977 624.4 Long Term 65.8 60.8 53.3 46.6 4C.1 27.5 33.1 Amortization 73.7 71.1 69.8 25.6 21.9 18.6 15.4 12.0 8.9 6.6 Interest 38.0 34.8 30.3

Mediun Term Central Bankt *1968 Agreement 58.2 *11.6 *23.3 *23.3 1968 Agreement repaid 1 April 1970 11.6 31. 6 Trust Fund 8.0 * - - * 6. 2.0 *Oirard o.4 Amsterdamn Rotterdam 2.8 0.7 0.7 1970 Oil loan 6 34.c 0.32t Total Central Bank 80.60.7 39.7 24.1 Private credit 268.5 72.9 85.1 46.8 Public trade credits 68.o 35.9 12.2 9 6.5 Total (Amortization) h l 7 Uo.o1 - 4 . 213.0I

Interest payments 33.7 22.5 14.1 5.7 1.9

Short Term

*1968 Credit Agreement 40.0 *40.0 *Special Consortium advances 29.1 *29.1 *Special Non-Consortium advances 6.5 * 6.5 Under treasury warrants 10.0 10.0 Clean loans repaid March 1970 9.7 9 7y/ European banks 33.5 *33 5?/ *Secured loan under certificate of deposit 65.6 *64.o * 1.6 1970 Credit Agreement 40.0 40.0 Federal reserve 40 40.0 Total Central Bank i1i4.; 0l7 m72 1. Private credit (mtai54.7 Total (Amnortization) 249.1 32 7 1.6~ .

Interest payments 16.6 145.7 112.6 71.9 62.0 52.1 36.4 39.7 Grand Total 1,290.6 120.0 628.4 285.3 200.5 88.8 53.3 46.6 40.1 27.5 33.1 Amortization 540.1 228.0 156.1 114.4 31.3 23.8 18.6 15.4 12.0 8.9 6.6 Interest 88.3 57.3 44.4 Effect of proposed conversion of private U.S. credits: +55.0 +61.8 +30.6 Amortization -151.2 -14.9 - 9.3 +28.0 +75 16.7 +17.6 +14.8 1 1. Interest + 9.3 Total net effect -1 .L39

Proposed conversion of European banks credits: -27.5 + 2.5 +5.0 + 5.0 + 5.0 + 5.0 . 5.0 Amortization + 1.2 + 0.7 . 0.2 Intw est +2.8 + 2.6 + 2.2 + 1.7 6 5.7 + 5.2 Total net effect - 24.7 +5.1 7 7.2 + 67

Total debt service payrments corversion: 3/ after 148.8 120.1 82.2 40.1 27.5 33.1 Amortization 361.4 215.6 251.8 147.4 98.6 766 6 47.8 34.3 22.4 17.1 12.0 8.9 6.S Interest 195.2 18 3 .199.3 52.1 3t6 39.7 Total .2 316.0

Not included in above:

Zommercial banks' revolving liabilities 130.2 Private open account trade liabilities 85.7 11IF gold/credit tranches 82.5 18.0

* Denotes credits to be rescheduled by U.S. and European banks.

l/ Repaid. 2/ Of which $6.0 million are repaid up to March 1970. 3/ Excludes debt service on debt contracted after April 1970. Source: Compiled from data provided by the Central Bank, and Mission estimates.

Table 5.1

Consolidated Fiscal Operations (In Million Pesos)

1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69

A. Summary of Government Accounts

'. Revenue 1,778 1,931 1,865 1,868 2,339 2,553 2,862 2. Current Ebcpenditure 11493 1,713 1,779 1,920 2,106 2,389 2.878 3. Current Surplus/Deficit (1-2) 285 218 86 -52 233 164 -11 4. Capital Expenditure / T90 18e7 420 847 462 689 84U

5. Deficit of National Government (3-4) 105 167 334 399 229 525 855 6. Deficit of Government Corporations g/ 105 34 g4. 117 96 191 466

7. Overall Deficit (5+6) 210 201 577 516 325 716 1,321 8. Adjustment (Leads and Lags) -24 +46 -118 -128 -112 -364 -68L

9. NIetCash Operating Deficit (7+8) 186 247 4_9 388 21a __2 637

B. Financing of Deficit

1. Borrowing Abroad (net) 14 -10 138 42 -18 126 96 National Government 22 - 3 115 24 - 107 73 Government Corporations _ '8 - 7 23 18 -18 19 23

2. Domestic Non-Bank Borrowing 85 72 42 _ 3 3 80 108 National Government 37 79 34 -23 - 6 80 84 Government Corporations 48 - 7 8 20 9 - 24

3. Sub-total (1+2) 99 62 180 39 -15 206 204

4. Borrowing from the Banking System 190 71 268 1I5 344 247 632 National Government 124 23 5236 % 239 / 75 332 Government Corporations 66 48 212 79 105 172 300

5. Change in Cash Balances -103 11 11 34 -116 -101 -199 Natiorial Government - 41 49 -59 62 -121 -- 7 - 91 Government Corporations (Increase -) - 62 65 70 -28 5 -13 -108 7. Sub-total (4+5) 87 185 279 349 228 146 L33

8. Total Financing (7+3) 186 247 3__388 213 TS26

0C=: Some of the historical figures have been revised and do not correspond to data given in earlier IBRD Reports.

~/ Includes foreign loans. , ~Excludes Central Bank and Development Bank of the Philippines. Includes availment of E184 million in FY 1966 and 97 million in FY 1967 by Philippine Government of deposits of the International 1Monetary Fund with Central Bank through substitution of Philippine Government non- negotiable and non-interest bearing notes pursuant to Art. 3, Sec. 5 of the fl4F Articles of Agreemcnt. ~ouzoe: Data obtained from the Central Bank. Table 5.2

National Government Revenue (In Million Pesos)

1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1Ok8/6c 1969/70 1970/7 REVENUE BY SOURCE

Tax Revenue X363 1,561 1s525 1562 1916 2158 1459 2,740 437

Income Taxes 382 424 477 487 565 668 836 992 I1142 Exciss Ta.:e 320 372 361 349 410 378 449 596 655 License anid Business Taxes 365 440 444 468 604 761 822 858 100l, Import Dutde 373 1419 381 363 497 542 584 575 660 Exp-:t Tax ------307 Others 84 95 91 108 126 142 157 222 255 Traasfers to local gover;-ients -161 -189 -229 -213 -286 -333 -389 -503 -583

Other Revenue 415 370 340 306 423 395 403 456 492 Margin fee m- - - - - _ Operating and Service income 176 191 217 232 251 267 267 329 36D Income from government enterprises 9 12 10 5 - - 21 1 1 Miscel.a'eous Inceo-ne 121 117 59 32 67 55 79 88 93 Repa,,.e it of Advances 8 18 2 4 3 3 1 10 9 Reparations 7 9 5 3 9 9 13 11 11 others 12 4 47 30 93 61 22 17 18

TDTAL REVENUE 1778 1931 1865 1868 2339 2,553 2/ 2862 3196 3929

REVENUE BY FUND-/

General Fund 1495 1608 1495 1552 1928 2141 2365 2588 3267

Bureau of Internal Revenue (Net) 691 768 753 831 905 1039 1235 1480 2007 5/ Bureau of Customs (Net) 552 642 596 589 804 843 918 913 - 1063 0!1_,.: 252 198 1116 132 219 224 182 195 197

Special Fund 283 333 380 3160 431 477 543 627 684

Fiduciary Fund 42 45 46 25 48 46 50 67 65

Reparations Fund 8 9 5 3 9 9 13 11 11 Less: Interfund Transfers -50 -64 -61 -72 -77 -84 -109 -97 -98

TOTAL REVENUE 2.78 X 1865 1868 2339 2. 53 2862 3196 3929

Total Revenue including transfers to local. g vernments as a per'entage of 11.4 11.3 10.3 9.2 10.7 10.8 13.9 11.0 11.0

1/ Excludes borrowing. 2/ P2,589 million accordixg to more recent irnformation. 3 Accor.ling to more recent information, P950 million. 1/ " " " , P1050 million. ./ Inclul_c P307 mil'ion proceeds of export tax (PES May 8, 1970 estimate)

Sol-ce: Budget Commission, End of April 1970 Table 5.3

National Government Expenditure 1/ (In Million Peso)

I962/63 1963/6S 1964/65 1965/66 1966/7 196i/68 1968/69 1969/70 / 1970/71 2/

TOTAL EXPENDITURES 1 852 2.067 2.077 2,227 2.531 L2.94 3.611 1.82 4,152

General Administration 386 463 507 538 572 714 774 863 951

3cneral Gozernment 13L 132 220 226 221 253 289 303 310 Justice and Police 86 98 109 120 134 158 192 225 283 National Defense 166 183 178 192 214 303 293 335 358

Social Services 559 669 701 783 892 883 12.19 1. 1.362

Education h63 562 590 663 762 751 932 1,061 1,110 Health 86 95 100 107 117 118 166 184 200 Labor and Welfare 10 12 11 13 13 14 21 46 52

Economic Services 279 315 350 359 398 451 59 663 665

Agriculture and Natural Resources 104 110 118 113 126 136 185 189 203 Transport and Communication 124 152 171 178 204 230 280 228 241 Commerce and Industry 21 24 27 25 26 28 68 80 88 Other Economic Development 30 29 314 37 82 57 60 166 133

Transfer Payments 269 266 221 246 247 341 342 3

Subsidies 117 102 64 18 44 53 170 165 106 Other Transfers 103 102 102 15L 126 196 113 102 120 of which (National Defense 37 IL 16 55 63 27 75 74 7 (Other 66 58 57 99 63 169 38 28 46 Interest Payments 49 62 55 74 77 92 103 75 142

CURRENT EXPENDITURiE 1.713 1.779 1.Q20 2.109 2.189 27 3.1N 32dA6

General Administration 22 18 14 22 33 43 35 46 18

General Government 12 13 11 19 15 20 12 40 9 Justice and Police 3 2 1 1 3 7 7 1 - National Defense 7 3 2 2 15 16 16 5 9

kconomic Services 296 305 273 251 352 451 6L1 560 680

Agriculture and Natural Resources 46 26 22 53 68 68 99 96 132 Transport and Comasanications 229 248 226 173 256 332 454 366 403 of which loan repayments and sinking fund contributions 68 98 79 83 55 69 153 100 n.e. Commerce and Industry 5 12 3 2 2 6 9 15 16 Other Economic Development 16 19 22 23 26 45 79 83 129

Social Services 41 31 11 34 37 61 63 77 108

Education 9 18 6 25 31 54 48 43 78 Health 23 7 4 8 6 7 15 27 21 Welfare and Labor 9 6 11 1 - - - 7 9

CAPITAL EXPENDITURES 359 35L 298 307 422 555 738 683 806

1/ Expenditures of Government Corporations financed by sources other than the national budget are excluded. Also excluded are all foreign financ&d expenditures. 2/ As of March 29, 1970. 3/ PES-NEC estimate which is Pll5 million lower than revised prelininary Budget Cosmnission estimate.

Source: Budget Comruission and PES-NEC. Table 5.4

Annual Exbpenditures on Infrastructure by Major Sectors (In Million resos) Target Execution of Four-Year Infrastructure Investments Program 1966/67 ~/ Total Domestic Total Foreign Total to July 1 - June 30 1962/63 1963/64 1964/6S 1965/66 1966/67 1967/68 1968/69 1969/70 Irpenditure Expenditure Erenditure 1969170 %Realization

i,ghways 50 91 139 89 179 260 230 209 763 116 878 960 91 Airports 13 10 10 5 10 11 33 35 79 11 go 135 67 Portvorks 35 64 32 39 29 35 20 20 83 22 104 119 87

Railways n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Telecommu.mications 8 9 7 4 16 18 22 43 34 64 98 123 80 Pover 36 44 54 64 60 60 36 27 140 44 184 285 65 Irrigation 6 5 3 11 22 32 43 33 88 41 130 286 3/ 45

Water Supply 11 8 7 34 61 63 79 34 171 66 237 299 y 79 Flood Control 19 7 3 5 1 3 11 6 21 - 21 60 35 Building Construction 14 25 17 17 32' 88L/ 104g/ 49 190 71 262 267 98

Commuzity Projects n.a. n.a. n.a. n.a. 1Oi/ 8i' 15?/ 170 214 - 214 196'2 109

Preliminary Eagineering n.a. n.a. n.a. n.a. 1 3 2 2 8 - 8 14 57

Total Expenditures 189 263 272 267 J4 21 581 596 628 - - 2,226 2,745 81 of whtich Domestic Funds n.a. n.m. n.a. n.a. 360 480 482T 1,791 - 1,791 2,099 85 Foreign Sources n.a. n.a. n.a. n.a. 61 112 116 146 - 435 435 646 67

_4/ July 1969 - March 1970

]/ Building Construction includes Pl] million to be clasified under Community Projects.

y Four sub-targets were reduced to accommodate a 956 million excess in Communlty Projects. The total target was not chazged. Source: Infrastructure Operations Center. Table 5.5

Pbysical Accomplishments of Infrastructure Investments

4-Year Target

July 1 - June 30 Ullnits 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1/ Total / 1966/67-1969/70 Accomplishment

1. Rig 74 Concrete Kms. 60 74 79 108 162 625 566 383 1,736 2,350 130 Asphalt Kms. 600 672 664 553 240 963 760 631 2,594 2,000 Gravel/feeder Kms. 2,100 2,539 2,021 1,115 557 976 855 2,962 5,350 3,900 137 75 Permanent Bridges Lineal Meters 2,637 2,409 1,835 2,367 4,400 6,183 7,247 4,771 22,601 30,000 58 2. Irrigation Heotares 26,492 19,113 8.872 ?ih.67q rl.r1b 95, 86 85.74S 3..763 263.408 658.050 93 Rehabilitation Hectares n.a. n.a. n.a. n.a. 11,000 14,500 2,000 500 28,000 30,000 28 Nat. Gravity Hectares n.a. n.a. n.a. n.a. 11,620 29,130 25,800 18,050 84,600 307,050 153 Communal Hectares n.a. n.a. n.a. n.a. 7,471 7,406 9,191 5,078 29,146 19,000 119 Pump Units Hectares n.a. n.a. n.a. n.a. 21,423 44,350 48,754 7,135 121,662 102,000

3. Portworks

Foreign Berths No. 2 1 3 1 9 8 1 - 18 38 47 108 Domestic Bertha No. 16 14 18 15 30 12 18 11 71 66 8 Reclaimed Port Area Heotaree n.a. n.a. n.a. n.a. 0.4 0.2 7 1 9 108 Warehouses Sq. Meters n.a. n.a. n.a. n.a. 5,708 14,626 8,650 2,900 31,884 38,960 82 119 Causeway Bulkheads Linear Meters ::.a. n.a. n.a. n.a. 1,672 2,950 4,526 6,494 15,642 13,175 Dredging Million Cubio Meters 3 5 4 3 13 17 11 6 55.5 84 Seawalls Lineal Meters n.a. n.a. n.a. n.a. 479 629 2,106 3,810 7,024 4,120 170

4. Airports

Airports No. 3 11 9 5 2 4 2 4 12 / 48 25 Air Navigation Facil. No. 8 - 3 4 3 2 2 - 7 181 4

5. River Control

Earth Dikes Kms. n.a. n.a. n.a. n.a. 2 12 9 2 25 237 11 74 Revetmete Lineal. Meters n.a. n.a. n.a. n.a. 1,626 268 2,242 358 4,494 6,100 168 Draina Mains Linsal Meters n.a. n.a. n.a. n.a. 208 465 - _ 673 400 173 Dredging Cubic Meters n.a. n.a. n.a. n.a. 12 1,965 819 670 3,466 2,004

6. Waterorks

Mnila ead Saburbs % n.a. n.a. n.a. n.a. 39 13 24 3 79 y 89 89 Provincial He. 10 5 5 49 26 115 29 43 213 808 26 Artesian Wells No. 616 465 228 293 206 269 168 36 679 4,800 14

7. Power

Pover Generation W. n.a. n.a. n.a. n.a. 12 250 - _ 262 387 68 Power Distribution Kms. 160 68 187 317 283 353 345 - 981 2,100 47 8. BuIIdings

Schools Rooms 1,400 3,000 1,600 1,500 1,361 18,583 20,556 32,263 72,763 88,445 / 82 National Buildings Sq. Meters n.a. n.a. n.a. n.a. .13,625 6,945 32,343 17,876 70,789 216,700 33 Hospitals Sq. Meters n.a. n.a. n.a. n.a. 2,620 2,230 16,400 12,982 34,232 151,200 23

9. Telecommmication % - - - - 9 7 21 10 47 V 61 77

Percent of 4-rear Program elapsed :94

/ Until the end of March, 1970. 2/ Adjusted to include complete rehabilitation of airports only. 3/ Excludes 11% completed before the start of the program. E x3cludes 39% completed before the start of the program. Original target 73,200 rooms.

Source: Data supplied by Governiment authorities. Table 5.6

Revenue and E3penditures Of Local Authorities By Function (In Million Pesos)

1962/63 1963/64 1964/65 1965/66 1966/67 1967/68

Revenues - Total Local Government lL502 581 !) 674 741

Internal Revenue Allotment 161 189 229 213 249 1/ 333 Real Property Tax 77 82 89 98 111 120 Ihunicipal Licenses 58 64 71 76 82 98 Fees and Charges 67 65 81 91 98 105 RTational Aid 35 35 47 61 43 68 All Others 45 67 64 95 91 17

,.penditures - Total Local Government 417 10 541 638 586

General Administration 189 224 250 286 308 340 Economic Development 70 90 102 118 118 142 Social Improvement 71 86 75 85 102 112 Debt Service 7 6 7 11 9 11 All Others 80 104 107 137 49 151 Provincial 115 146 161 186 llt 200

General Administration 44 54 58 63 61 69 Economic Development 33 42 48 54 55 65 Social Improvement 18 23 25 30 29 33 Debt Service 2 1 1 2 3 4 All Others 18 26 29 37 27 29 city 175 214 209 253 251 317

General Administration 79 93 104 123 145 155 iconomic Development 18 23 25 30 36 38 Social Improvement 46 54 41 44 61 64 Debt Service 3 3 4 7 4 5 All Others 29 41 35 49 5 74

Municipal 127 E50 171 199 160 219

General Administration 66 77 88 100 102 116 Pconomic Development 19 25 29 34 27 39 Social Improvement 7 9 9 12 12 15 Debt Service 2 2 2 2 2 2 All Others 33 37 43 51 17 48

'-;urp1us (+) / Deficit (-) +26 - 8 +40 - 4 +88 -15

, iBudget Document, FY 1971 shows P286 million.

.ource: Report of the Auditor General on Local Government, FY 1968. Table 5.7

Outstanding Internal Public Debt As of December 31, 1969

(In Million Pesos)

Outstanding Outstanding December Additional Repay- December 31, 1968 Borrowings ments 31, 1969

T 0 T A L 4,575.4 2,467.7 1.204.7 5.838.4

National Government 2,666.6 2,015.6 1,145.4 3,536.8

Provisional Loans and Advances 245.0 369.9 290.0 324.9 Metropolitan Water District Bonds 1.0 - - 1.0 Negotiable Land Certificates 12.9 3.3 - 16.2 Public Works & Economic Development Bonds 950.8 60.3 28.0 983.1 Treasury Notes 588.8 730.91/ 56.o 1,263.8 Treasury Bills 214.8 80 9 .8/ 645.5 379.1 Backpay Obligations to Pre-War Govern- ment Enployees 105.9 2.1 3.0 104.9 Backpay Obligations to Veterans of World War II 84.0 39.3 37.5 85.8 Others 463.3 - 85.4 377.9

Local Governments 10.3 55.2 44.5 121.0

Provisional Loans and Advances 19.0 36.4 39.5 15.8 Backpay Obligations to Pre-War Govern- ment Employees 15.2 0.3 0.4 15.1 GSIS Loans 23.4 1.6 2.4 22.6 DBP Loans 50.3 16.9 2.1 65.1 Manila Public Improvement Bonds 2.5 - - 2.5

Government Corporation 1,413.3 394.9 14.4 1,793.8 (Guaranteed by the National Government)

National Power Corporation Bonds 228.8 21.0 1.5 248.3 National Waterworks & Sewerage Autho- rity Bonds 171.0 53.0 - 224.0 National Irrigation Administration Bonds 50.7 11.3 - 62.0 Land Bank Capital Bonds 5.0 - - 5,0 Land Bank Bond 1.1 1.8 - 2.9 Development Bank of the Philippines Bonds 650.3 90.0 12.7 727.6 Development Bank of the Philippines Progress Bonds 280.9 217.5 - 498.4 Backpay Obligations to Pre-War Government Eaployees 6.6 0.1 0.1 6.6 Metropolitan Water District Bonds 2.0 - - 2.0 Agricultural Credit Administration Notes 17.0 - 17.0

Government Corporations 385.2 2.0 0.4 386.8 (Not Guaranteed by the National Government)

CBP Loans to DBP 35.0 2.0 - 37.0 Agricultural Credit Administration Notes 118.9 - 0.4 118.5 CBP Loans to PVTA 231.3 - 231.3

1/ New Issues, P665.9 million; refunding issues, P50.0 million.

2/ New Issues, P164.3 million; refunding issues P645.5 million.

Source: Presidential Economic Staff. Table 5.8

Holders of Government Securities!/ (In million pesos)

E n d o f P e r i o d June June June June June June June June December 1962 1963 1964 1965 1966 1967 1968 1969 1969

Banking System 1,464.4 1,415.5 1,405.1 1,426.3 1,532.7 2,114.1 2,498.9 2,894.2 3,574.0

Central Bank 1,194.2 965.7 1,010.9 1,009.6 1,034.4 1,371.5 1,612.2 1,828.3 2,225.2 Commercial Banks 270.2 449.8 394.2 416.7 498.3 742.6 886.7 1,065.9 1,348.8

Government Financial Institutions 163.0 186.0 252.0 282.7 305.5 227.9 234.2 282.8 323.4

GSIS, SSS 128.4 144.4 213.8 239.6 261.1 193.1 205.6 229.6 251.8 Others 34.6 41.6 38.2 43.1 44.4 34.8 28.6 53.2 71.6

Government Trust Funds 228.6 266.0 312.0 389.0 258.2 405.9 411.6 478.3 581.8

Private Sector 27.3 40.2 39.8 43.2 112.5 217.8 303.5 325.2 367.5

Total 1,883.3 1,907.7 2,008.9 2,141.2 2,308.9 2,965.7 3,448.2 3,980.5 4,846.7

1/ Includes bond issues of the Development Bank of the Philippines (DBPP).

Source: Securities Market Department, Central Bank of the Philippines. Table 5.9

Securities Issued by National Goverrment and Government Corporations January to December 1965 to 1969; January to March 1970 (In million pesos)

Type of Security 1965 1966 1967 1968 1969 1970

Total 551.3 952.4 1,280.4 1,068.0 1,993.2 466.6

National Government 472.3 691.3 909.3 828.7 1,604.3 411.0 PW&ED bonds 2.5 39.6 94.1 80.9 60.3 16.6 Socio-economic bonds 6.5 - - - - - Treasury notes 289.3 569.2 165.0 56.8 730.9 Negotiable land certificates - - - 0.3 3.3 Certificates of -indebtedness 115.0 - - - - - Treasury bills - 82.5 470.0 690.7 809.8 394.4 RP replacement bonds - 180.2 - - - RP external loan bond 59 0l/ - - - -

Government Corporation 79.0 261.1 370.8 239.3 388.9 55.6 NIA bonds 5.0 - 30.0 15.7 11.3 10.9 NPC bonds 11.5 - 21.7 11.4 15.2 7.0 NWSA bonds 15.3 47.2 35.0 33.3 53.0 6.8 DBP bonds 47.2 120.0 180.0 90.0 90.0 30.0 DBP progress bonds - 93.9 v 103.8 83.2 217.5 0.9 Land capital bond - - 5.0 - - Land Bank bond - 0.3 0.7 1.9

1/ $1 = P3.95

Source: Presidential Economic Staff. Table 5.10

Holders of Different Types of Government Securities As of March 31, 1970 (In million pesos)

Semi- Outstanding Commercial Trust Gov't. Private Foreign Mar. 31, 1970 CBP Banks Funds !Lntities Sector Holders

Total 5,125.1 2,409.5 1,294.8 538.9 339.7 495.4 46.8

National Government 3,188.1 1,552.1 913.9 183.7 177.7 313.9 46.8

PW & ED bonds 998.2 240.1 413.0 142.4 167.5 35.2 - Socio-economic bonds 50.0 4.1 29.6 5.3 1.0 10.0 - Treasury notes 1,263.7 1,101.7 148.4 4.0 9.2 0.4 - Negotiable land certificates 16.3 - - 11.9 - 4.4 - Certificates of Indebtedness 15.0 15.0 - - - - - Treasury bills 617.9 31.1 322.9 - - 263.9 - RP replacement bonds 180.2 160.1 - 20.1 - - - RP external bonds 46.8 - - - - - 46.8

Government Corporations 1,937.0 857.4 380.9 355.2 162.0 181.5 -

NIA bonds 72.9 3.2 31.6 33.0 5.0 0.1 _ NPC bonds 255.3 69.6 15.5 151.1 15.7 3.4 - NWSA/MWD bonds 233.8 78.0 42.2 99.8 - - ACA 135.1 118.1 - 17.0 - - DBP bonds- 1,226.2 586.5 289.3 54.0 121.6 174.8 Land Bank capital bond 5.0 - - - .0 - Land Bank bond 3.0 - - - 0.4 2.6 - IPM bonds 5.7 2.0 2.3 0.3 1.0 0.1 -

1/ Inclusive of DBP Progress Bonds.

Source: Presidential Economic Staff. Table 6.1

Factcra A feti }tne SuVPEly. 1961-1968 In mi ons ,p 08

1961 1962 1963 1964 1965 1966 1967 1968 1969 1970

Public Sector Bank Credit to the National Gevernment Gross Credit Central Bank 1/ 76e7 826 eii 882 831 956 1,252 a/ 1,256 1,773 1,789 Cammercial Banks 2/ 396 326 423 415 450 541 641 775 1 039 1 154 ,75 i1,152 123 1,2i11 1,2497 2,031 CaTh Balances and Depoits 31 -21 -627 -594 -582 -733 -671 -827 -796 -772 -871 TOTAL 642 525 640 715 548 826 1,065 1,235 2,o4o 2,072 Bank Credit to Local Governmert and Semi-Government Entities Gross Credit Central Bank 4/ 658 702 750 740 754 871 1,054 1,045 1,149 1,138 C-mmercial Banks 5/ 125 9 187 297 652 594 1,012 1 098 1,458 1 ,21 TOTAL 783 796 937 1,037 1,406 1,465 2, 2,143 2,7 2 Time and Savings Deposits -8 -352 -390 -326 -28 -256 -303 -267 -292 -268 Net Credit 11 1ME 514 711 1,1 1,209 !M 1,T763 l,d7 2,291

Net Credit to the Public Sector 1,136 969 1,187 1,426 1,716 2,035 2,828 3,111 4,355 4,363

Private Sector Gross Bank Credit Loans, Discounts, Overdrafts 6/ Customers Liability Acceptances 2,502 3,003 30937 4,518 4,729 5,360 6,264 6,983b/ 7,250b/ 7,212b,' CcrDorate Securities 2 4 7 3 2 5 5 4 47 5i4 TOTAL !If55l T7M7 7 r, T Mt , 73,5 F 6,987 7,297 7,266 Time and Savings Deposits -1 108 -1 367 -1 770 -2 022 -2 210 -2 823 -3 575 -4,265 -4,388 -4 501 Net Credit to Private Seetor 1,39 1 61i0 M 2,722 2,909 Net Domestic Credit (3 + 5) 2,532 2,609 3,361 3,925 4,237 4,498 5,437 5,833 7,264 7,]28

Net Miscellaneous Account of Banks Net Miscellaneous Account of Central Bank and PNB 314 220 207 182 429 14 594a/ 501 555 534 Net Miscellaneous Accounts of Private Commercial Banks 188 172 345 562 649 790 755 861 969 998 TOTAL 502 3792 T _U 078 1,204 1,362 1,5271 1,532

External Sector Foreign Assets 7/ (a) Central Bank 159 184 328 434 735 648 701 629 470 629 (b) Commercial Banks (net) 234 -109 42 268 314 2 174 217 TOTAL 292 1418 1422 325 777 916 1,016 887 7 j f 3

Offsets (a) Central Bank Foreign Liabilities 8/ 165 212 88 166 342 1401 903 1,108 1,371 1,565 (b) Revaluation of Foreign Asaets (-Loss) -62 -82 189 456 527 516 503a/ 268 259 267 TOTAL 103 130 277 E m RT7 I,0 T131,630 6 1,32 Net External Sector (9-10) 189 288 145 -297 -92 - 1 -391 -489 -986 -997

Money Supply (6,1I-7-8) 2,219 2,505 2,954 2,884 3,067 3,371 3,783 3,982 4,754 4,599 Percentage rate of change 17 13 18 - 3 7 10 12 5 19

Note: Individual figures may not exactly add up to the totals because of rounding. 1/ Central Bank loans plus securities held by Central Bank. 2/ Securities held by commercial banks and loans by commercial banks. 3/ Includes cash in Treasury values, deposits with commercial banks and with the Central Bank and Trust Funds with the Central Bank. 17/ Same as in footnote 1. §/ Same as in fbotnote 2. Includes unused overdrafts. 7/ Denoted as International Reserves in the corresponding tables in the Annual Reports of the Central Bank of the Philippines. T/ Special loans and advances abroad. a/ The following figures in this table differ from the corresponding figures given by the Central Bank of the Philippines: the gross Central Bank credit is higher in this table by P134 millionj the miscellaneous account of the Central Bank is lower by P100 million and the Revaluation account is higher by P234 million. These adjustmenta have been made by us because the decrease of P234 million in the Revaluation account is merely a bookkeeping adjuAtmnt and should not be treated as if it were related to transactions in the external sector. b/ Including Central Bank Em?erge ry loans to savings banks.

Source: Central Bank of the Philippines. Table 6.2

Volume of Savings and Time Deposits, 1965-69 (In million pesos)

Savings and Commercial Rural Savings Development Loan End of Period Banks Banks Banks Banks Associations

1965 2,456.4 75.2 168.6 34.1 -

1966 3,140.6 96.5 257.2 82.3 7.0

1967 3,872.3 135.5 350.4 173.2 10.2

1968 4,072.2 163.5 343.2 263.9 18.3

1969 4,386.6 173.2 425.0 316.5 26.5

Feb. 1970 4,484.2 173.21/ 448.3 306.2 29.6

1/ Tentative.

Note: Data on insurance policies (net income and gross rates are not available).

_ _: Staff. _ Presidential Economic Table 6.3

Net Domestic Credits of the Commercial Banking system, 1965-1969 (In million Pesos)

P N B O t h e r B a n k s Central Other Public Private Central Other Public Private Grand Ehd of Period Govt. Institutions Sector Total Govt. Institutions Sector Total Total (T) (2) T3T (4) TSM (6) (7) TBT (7- 8) 1965 -374.0 201.7 756.6 584.3 157.2 -60.1 1,125.7 1,222.8 1,807.1 1966 -270.3 102.8 800.5 633.0 324.h 6.1 862.7 1,193.2 1,826.2

1967 -316.6 448.6 1,016.6 1,148.6 317.2 -4.9 2,318.9 2,631.2 3,779.8 1968 -300.4 468.9 992.3 1,160.8 449.6 74.4 1,161.5 1,685.5 2, 8 4 6 .3 1969 - March -250.2 617.9 868.3 1,236.0 491.6 70.4 1,141.1 1,703.1 2,939.1

June -344.8 613.0 850.2 1,118.4 487.2 76.1 1,247.0 1,810.3 2,928.7

September -285.7 636.4 889.0 1,239.7 528.4 10.2 1,171.0 1,709.6 2,949.3 December -312.2 754.2 957.5 1,399.5 708.4 132.0 707.5 1,547.9 2,947.4 1970 - January -321.6 747.9 931.6 1,357.9 760.0 124.5 584.3 1,l468.8 2,826.7

February -356.4 749.3 941.6 1,334.5 828.5 131.9 623.4 1,583.8 2,918.3

1/ Includes rural banks accepting demand deposits.

Source: Central Bank of the Philippines. Table 6.4

Leans and inveotments Outstanding of Fimnanial Institutions i/ 1961-69

(Cn million pesos)

Change 1970 Institutions 1~~962 1963 ChageChng 167 Ch Chlg c~~~~~~~~~~~~~~~~~~~~. 6 19566 9' 97 19196 1968 16-76-716-8 1969 16-8 FbFb ImtitutislcjI. 1 1 196~~~~' ~1965 96-6 4~;

Banks 2 6 6 Central Bank 1,172.5 1,225.1 1 7 . 1 253 1 -23.5 1 375.3 122.2 1 539 5 164.2 1,~. 220.3 2 288.0 28. 2,303.9 ~"1,079.0 2,09 To public sectorn 1,079.0 1.,172T 1,225. 1.2 I93.l,5 3-23.5 ,7. 2. 1,759.6 20-.358. - - - To p.eivatisector------94712L CommeercialBanks 2 762 9 3 216 8 4 234 9 4,912.3 5,547.7 635 4 6 2298 682.1 1 37 '1 1,4. -5. .5 9,1. 1,o4±22 766 l06 1t,W7 2799. 2,W9-2-. uZa_.l 2,571.2 To public sectwr ~ T ~ 1 . ~ 9 To private sector 2,244.3 2,762.6 3,629.7 4,205.5 4,450.8 245.3 5,095.8 645.0 5,724.2 528.4 6,290.9 566.7 6,970.8 679.9 6,900.0

Deve',opment Banks 31 814.2 929.0 1,030.5 1,31. 2 1,283.5 152.3 1,343I.1 59.6 1 671 1- 328.0 2~,7 %6 2.416.7 9? ,5. To public sector 113.2 939 90.2 81.2 139.2 5 7h l19.~ -1.19.-1.5158 75 1. lfoprivate sectcr 701.0 835.1 940.3 1,050.0 1,144.3 94.3 1,223.6 79.3 1,562.8 339.2 1,909.9 347.1 2,297.4 387.5 2,337.8 Rurl av V 3 ii.o 153.8 210.0 23. 21.7 26 .9 36.2 a- 7.2a

To public sector 10.9 .1 -77I To private sector 82.4 109.9 145.6 201.5 221.7 20 .2 261.0 39.3 333.0 72.0 390.0 57.0 416.5 26.5 41-6.5 83 -453 Savi%-s Bank 58.4 75.5 111. 2 141.2 30.0 206.9 65.7 268.4 61.5 0. 20 327 ~/42.5 -3 1.3 11. M '-3 To public sectar 7.0 -10.5 _IB2F- !6?75 19- T -M3 TZ7T _1flT _10.5T -115 To private sector 35.5 47.9 57.1 94.4 121.4 27.0 172.6 51.? 223.6 51.0 277.1 53.5 277.7 0.6 272.1 -,7. All Banks 4,785.9 1927 6719.8 7,641,3 §,5. 815.9 9__3_0 965.8 11 191 9 1~68.9 12 2.~ 1 9 1,8. ,J55b 2 To pubiLic sector 1,722. I77 ~ 7 ?6. ,1 .4 91 ,670.0 3,1043,348.3078.3 To private sector 3,063.2 3,755.5 4,772.7 5,551.4 5,938.2 386.8 6,753.0 814.8 7,843.6 1,090.6 8,867.9 1,000.6 9,962.4 1,068.0 9,926.4

Non-Bank Institubioms

0 S I S 545.6 625.5 718.0 891.7 1,079.6 187.9 1,181.2 101.6 1,379.3 198.1 1,477.6 98.3 1,749.2 271.6 1,766.1 44.1 884.6 S S 5 158.6 212.9 275.4 348.8 428.0 79.2 535.7 107.7 596.6 60.9 780.8 184.2 824.9 -0.1 106.4 A C B 6 79.2 77.8 79.1 78.8 86.6 7.8 88.2 1.6 96.7 8.5 106.7 10.0 106.6 137.8 0.3 128.9 II ITDc - - - 17.3 105.1 87.8 124.0 18.9 120.0 -4.0 137.5 17.5 251.9 20.8 215.9 Private Instituotions (111.0 11.7 56.3 59.0 1.12.6 53.6 139.7 27.1 179.8 40.1 231.1 51.3 3,070.4 3,101.9 All Non-Bank Institutioms 794.4 927.9 1,128.8 1,395.6 1,811.9 416.3 2,068.8 256.9 2,372.4 303.6 2,733.7 361.3 33.

All Financial Institu- 18.055.1 18,173.3 tions 5,580.3 6,2o 7.848.6 9,036.9 10,269.1 1,232.2 U, 491.O& 1,222.7 13.564.3 2,072.5 15,386.0 1.798,2 2,4.

With the exception of credits granted by the Central Banik to the Agricultural Credit Adoninistration,the figuresin this table exclude lernding to each other by th e financial instituztions. The public sector is defined to ansnist ofthle National Government, local goeernxeents and govarnosent-owned enterprises and corporations. ~/Excludes Central Bank loans and advan.es to commoercial banks, rocal bkank and savings banks; DBP borrowings and Centra1 Bank holdings of DElPbonds. Includes all private developsiat banks and the DBP (inclusive of trust BaUnds).

WHoldings of securities were assumed to be all government Issues, shile all outstanding loans were assumed to be granted to private entities. j/ ncludes all savings banks except the Festal Savings Bank which sakes all of its loanable f'unds available to DBP.

6/ Excludlesthe security holdings due to unavai-lability of data.

J/Themxmposition of private institutions was i~evised. Under the new concept, private insurance companies and pawnshopa were excluded while Private Develop- ment Corporation of the Philippines, Banoom Developsent Corporation and Stock Savings and Loan Associations were added to Matual Buildinig and Loan Association.

a/ As of July 31, 1969. h/ Excluding rural banks.

Source: Department of Economic Research, Central Barnk of thce Philippi-nes. Table 6.5 1/ Composition df CrediOu To The Private Sector, 1961-1969

6/ a, I t e m s 1961 1962 1963 1964 s 1965 1966 1967 1968 1969-

Agriculture, Forestry and Fisheries 837.7 951.0 1,172.5 1,382.3 1,535.2 1,641.7 1,881.5 2,252.1 2,169.8 Percentage rate of change 13.5 23.3 17.9 11.1 6.9 14.6 19.7 -3.7

Industry 1,255.5 i,504.6 1,759.8 2,014.2 2,084.1 2,312.1 2,568.6 2,826.9 2,908.5 Percentage rate of change 19.8 17.0 14.5 3.5 10.9 11.1 10.1 2.9

Conmerce 635.5 826.6 1,248.5 1,528.3 1,858.2 1,805.3 2,319.6 2,091.2 2,225.9 Percentage rate of change 30.1 51.0 22.4 21.6 97.2 28.5 - 9.8 6.4

Foreign Trade 3/ 368.6 485.3 735.3 929.2 1,139.8 1,056.5 1,273.6 h83.3 Z/ i.87.5 Percentage rate of change 31.7 51.5 26.4 22.7 -7.3 20.5 -62.1 0.9 Exuort 133.4 192.9 278.2 327.5 336.1 341.1 347.8 218.7 165.9 Percentape rate of change 44.6 44.2 17.7 2.6 1.5 2.0 -37.1 -24.1

Imnort 235.2 292.4 457.1 601.7 803.7 715.4 925.8 264.6 321.6 Percentage rate of change 24.3 56.3 31.6 33.6 -11.0 29.4 -71.4 21.5

Domestic Trade 201.8 269.2 388.9 456.5 526.3 562.0 773.6 1,389.2 8/ 1,506.2 Percentage rate of change 33.4 U4.5 17. 15.3 6.8 37.7 79.6 8.4

Others h/ 65.1 72.1 121s.3 142.6 192.1 186.8 272.4 218.7 232.2 Percentage rate of change 10.8 72.h 14.7 34.7 -2.8 45.8 -19.7 6.1

Puiblic Utilities 61.4 74.7 97.2 115.4 125.9 169.0 211.5 240.0 207.9 Percentage rate of change 21.7 30.1 18.7 9.1 34.2 25.1 13.5 -13.h Services 43.4 57.4 74.0 81.4 81.4 97.6 142.4 178.1 168.4 Percentage rate of change 32.3 28.9 10.0 - 19.9 45.9 25.1 - 5.1,

Real Estate 463.6 513.4 579.3 747.2 976.5 1,186.1 1i,66.o 1,756.8 1,851.1 Percentage rate of change 10.7 12.8 29.0 30.7 21.5 23.6 19.8 5.4

Consumption 222.3 241.8 281.0 351.6 407.3 519.0 673.9 746.3 7Ls2.2 Percentage rate of change 8.8 16.2 25.1 15.8 27.h 29.8 10.7 - 0.6

Others 5/ 15.8 27.9 37.9 57.5 76.1 101.4 118.0 135.8 139.'9 Percentage rate of change 76.6 35.8 51.5 32.6 33.2 16.4 15.1 3.0 TOTAL 3,535.2 4,197.4 5,250.2 6,277.8 7,14.7 7,832.2 9,381.5 10,227.2 10,413.7 Percentage rate of change 18.7 25.1 19.6 33.8 9.6 19.7 9.0 1.8

a/ The financial institutions included in this table are the same/in the preceding table. The values of the total credit outstanding to the private sector given in this table will differ from the values of total.loans and investments outstanding to the private sector in the preceding table for the fbllowing reasonss (i) credit to each other by the financial institutions is included in this table; (ii) the data in this table do not include those investmsents by financial institutions for which no breakdown by in>ustry is available. Also, a revision in the composition of the fijncial institutions which granted these loans was made. The revision pertained only to the change in concept in the composition of the non-bank financial institutions. Additional revisim was also made to include "other" loans and to exclude inter-bank transactions of development banks. 2/ Includes manufacturing, mining and construction.

3/ Including credits to some semi-government institutions which could not be segregated.

4/ Loans to banks and other financial institutions. Also commercial loans by non-bank financial institutions.

5/ Loans by non-bank financiatl institutions which do not fall under the above classification.

6/ Starting January 1, 1968, data for commercial banks are based on DER Form No. 1 (Revised January 1, 1968) which excludes credits to public sector under the industry classification.

7/ Starting 1968, data excludes loans, advances, discounts and overdrafts.

8/ Includes advances to exports and imports trade which cannot be separated due to revision of form. a/ As of June 30, 1969.

_ource: Presidential Economic Staff. Table 6.6

Loans and Investments of the Government Service Insurance System and Social Security System 1965 -1969 (In n Ionpesose

L o a n s -I n v e s t m e n t s Grand Real 1/ Consumm- Govern- Item Total Total Estate- tion_/ Total ment Private 1965 1,480.6 936.9 688.3 248.6 543.7 415.0 128.7

Government Service Insurance System 1,060.0 744.9 515.4 229.5 315.1 293.8 21.3

Social Security System 420.6 192.0 172.9 19.1 228.6 121.2 107.4

1966 1,695.2 1,133.8 821.5 312.3 561.4 367.9 193.5

.,overnment Service Insurance System 1,162.5 879.0 603.0 276.0 283.5 275.4 8.1

Social Security System 532.7 254.8 218.5 36.3 277.9 92.5 185.4

1967 1,969.4 1,440.1 1,006.5 433.6 529.3 329.9 199.4

Government Service Insurance System 1,371.7 1,080.8 702.5 378.3 290.9 277.0 13.9

Social Security System 597.7 359.3 304.0 55.3 238.4 52.9 185.5

1968 2,239.2 1,599.9 1,152.2 447.7 639.3 376.8 262.5

Government Service Insurance System 1,470.5 1,153.3 774.5 378.8 317.2 301.6 15.6

Social Security System 768.7 446.6 377.7 68.9 322.1 75.2 246.9 1969 2,662.1 1,875.7 1,358.5 517.2 786.4 469.9 316.5

Government Service Insurance System 1,742.4 1,373.2 946.6 426.6 369.2 353.7 15.5

Social Security System 919.7 502.5 411.9 90.6 417.2 116.2 301.0

1970 (February) 2,643.6 1,904.4 1,369.9 534.5 739.2 473.6 265.6

Government Service Insurance System 1,759.0 1,388.6 953.9 434.7 370.4 354.9 15.5

Social Security System 884.6 515.8 416.0 99.8 368.8 118.7 250.1

Note: Data for private insurance companies are not available.

1/ Mostly housing loans granted to members; hence, all these loans fall under private credits. 2/ Mostly salary and policy loans to respective members.

Source: Presidential Economic Staff. Table 7.1

Actual Production for 1968 & 1969 and Physical Tarpet of the Agricultural Program F! 1971-1974 (In 000 MT!)

1968 1969 Commodity Actual Actual 1971 1972 1973 1974

Food Crops 9,294 9,353 10,950 I1,620 12,342 13,127 Palay 4,561 4,445 5,510 5,868 6,249 6,655 Corn 1,619 1,733 2,039 2,202 2,378 2,568 Fruits and Nuts 1,372 1,376 1,531 1,618 1,715 1,818 Rootcrops 1,305 1,338 1,392 1,413 1,434 1,456 Vegetables 251 272 328 348 369 391 Coffee 43 43 52 55 59 63 Sorghum - - 4 9 15 30 34 Soybean - - 2 5 16 Others 84 45 97 102 107 112

Commercial Crops 3,948 4,146 4,406 4,583 4,718 4,910 Copra 1,542 1,737 1,678 1,737 1,798 1,861 Desiccated Coconut 56 48 100 104 108 112 Sugar (Centrifugal and Mascovado) 1,658 1,665 1,836 1,929 1,976 2,079 Molasses 503 505 550 566 583 600 Abaca 103 105 141 143 145 147 Tobacco - Virglnia 17 20 24 24 25 25 Tobacco - Native 48 37 54 56 58 60 FRabber 14 21 17 18 19 20 Others 5 6 6 6 6 6

Total Crops 13,209 13,499 15,356 16,203 17,060 18,037

Forestry (logs).- 4,7I1 5,003 4,847 4,944 5,043 5,144

Fishery 938 1,036 1,180 1,275 1,378 1,487 Commercial 407 512 553 598 645 Fishpond 87 109 118 127 137 Mhunicipal and Sustenance 444 559 604 653 705

Tivestock

- Population (no. in 000) Cattle 1,644 1,823 1,887 1,953 2,021 Carabao 4,173 4,626 4,788 4,956 5,129 Poultry 71,395 92,458 100,779 109,849 119,735 Hogs 6,090 7,779 8,440 9,157 9,935 Others 906 933 942 951 960 Slaughtered (no. in 000) Cattle 212 235 243 251 260 Carabao 30 33 34 35 36 Poultry 32,566 42,174 45,970 50,107 54,617 Hogs 6,715 8,577 9,306 10,097 10,955 90 Others 84 87 88 89 Dressed Weight (in Mr) 361,687 457,255 494,604 535,091 578,987 Cattle 23,299 25,833 26,737 27,672 28,641 Carabao 4,197 4,654 4,817 4,985 5,160 Poultry 35,823 46,391 50,567 55,118 60,078 Hogs 295,440 377,362 409,438 444,240 482,001 Others 2,926 3,015 3,045 3,076 3,107

Fresh Nilk 9.40Ž' 25.9 26.2 29.3 33.2 167.2 Poultry Eggs 9 5.83_/ 130.0 138.5 157.0

a/ In million board feet. b/ Program of Production of Animal Protein prepared by the Bureau of Animal Industry, April 1970.

Source: Presidential Economic Staff. Table 7.2

Average Growth Ratee of MaJor Agricultural Products (Percentage)

Four-Year Actual Growth Rates Projections Development 1961-66 af 1965-68 M 1960/69 2/ of 1969 7 Plan df

Food Oros 3.3 o.6 7.6 6.2 Palay paddy) 3.0 NI9 -_ 10.0 Corn 4.2 7.2 7.0 8.8 8.0 Fruits and Nuts 10.0 4.2 0.3 5.8 6.0 Rootcrops -1.5 -5.3 2.5 1.2 1.5 Vegetables 4.5 2.8 8.7 6.1 6.o Coffee 4.5 -0.1 7.3 6.4 6.6 Sorghum - - - - 72.2 Soybeans - - - - 127.5

Export Crops 3.9 1.6 5.0 5.1 3.7 Copra 7-7337 1TT TT 3 Desiccated Coconut -0.7 -3.6 -11.7 4.2 3.9 Sugar (centrifugal and Mascovado) 3.0 o.8 0.4 7.6 3.8 Molasses 5.1 6.7 0.4 2.7 3.0 Abaca -1.6 -8.3 1.5 1.6 1.4 Tobacco - Virginia -6.7 0.4 14.4 0.8 1.4 Tobacco - Native 6.o 18.5 -22.3 4.3 3.6

Fishery (Total) 10.9 12.0 10.5 7.6 8.0

Forestry Logs 7.7 22.0 4.2 (5/.0 2.0 Lumber -0.3 -6.6 - f/ n.d. n.d. Plywood 15.1 5.2 - n.d. n.d. Veneer 26.0 17.1 - f/ n.d. n.d.

Livestock Population Cattle 3.8 3.5 Carabao 3.9 3.6 Poultry fl.0 9.0 Hogs 10.5 8.5 Others 1.0 1.0 a/ Bureau of Agricultural Economics. bS/ Presidential Economic Staff. c/ The Revised Agricultural Development Program Fl 1969-73, Presidential Economic Staff, Agricultural Program Office, Jan. 1969. d/ Four-Year Development Plan for the per-iod FT~ 1971-74. Prepared by Interagency Commlittee, M4arch 1970. e/ ¶Timber cut to decelerate by 5.0 percent yearly from a bigh attained in 1968 and domestic processing of logs to accelerate from 4O percent in 1969 to 80 percent in 1973. fl Forestry Statistics show an increase of lumber production from 432,921,000 bd. ft. in 1967/68 to 620,975,000 bd. ft. in 1968/69, decline of plywood from 695,034 to 523,866 sq. ft. and of veneer a decline from 1,205,910 sq. ft. to 627,271 sq. ft. in the same period. n.d. = no data. Table 7.3

(In million pesos) G r a n t e d O u t s t a n d i ng End of Rural Other Rural Other Period Total AGLF ACA Banks!/ DBP PNB_-/ Camejial Total AGLF ACA BanksY1 DBP PNB ComnefialBa

1965 1,429.5 - 10.2 215.5 36.2 619.2 522.4 1,525.3 - 86.6 167.4 243.5 569.4 458.4

1966 1,615.6 - 16.3 247.4 62.5 665.4 595,5 1,626.9 - 88.2 198.5 262.1 630.1 448.0

1967 2,065.1 16.6 31.6 318.3 101.3 815.7 735.3 1,866.3 n.a. 96.7 259.4 308.2 751.8 450.2

1968 2,216.8 15.3 29.6 362.8 130.1 858.2 792.0 2,246.8 15.2 106.7 302.8 359.5 857.7 604.9

1969 1,913.3 7.4ai 23.6 406.3a/ 85.3 903.1 457.9b/ 2,320.3 16.5a/ 106.6 325.3a/ 403.9 923.1 544.09b

1 Excluding loans granted and outstanding under AGLFo / Data from 1965 to 1967 include credits to semi-government institutions. Starting January 1, 1968 data are based on DM from No. 1 (Revised January 1, 1968) and exclude credits to public sector. a/ Tentative. b/ As of June, 1969, tentative.

Source: Presidential Economic Staff.

Table 8.1

Net Value Added in Manufacturing by Ivpe of Product, 1962 to Ii68

,In million pesos at carrent prices etnd 1'55 constant prices)

1962 1963 1960 1965 1966 1967 1968 1/ SIC Major Current Constant Current Constant Current Constant Current Constant Current Constant Current Constant Current Constant Group Type of Product Prices Prices Prices Prices Prices Prices Prices Prices Prices Prices Prices Prices Prices Prices

TOTAL NET VALUE ADDED .594 2.0140, 3,084 2,219.7 3,146 2,191.7 3,213 2,209.3 3,072 2,318.2 3,773 2,442.3 4,147 2,642.6

Consumer Goods 1,484 1,212.1 1,797 1,342.5 1,822 1,307.1 1,853 1,312.1 1.942 1,311.7 2,106 1,363.8 2,309 1,474.9 20 Food, except beverages 785 639.8 968 696.4 921 621.0 875 582.2 897 541.0 972 557.0 1,072 609.4 21 Beverages 155 137.1 200 169.2 232 193.2 264 214.6 301 242.7 328 245.7 377 272.8 22 Tobacco 112 99.1 112 94.8 131 109.1 150 122.0 159 128.2 174 130.3 200 144.7 23 Textiles 117 89.0 161 119.0 156 111.0 152 105.9 156 106.6 169 115.2 180 122.2 24 Footwear, other wearing apparel and made-up textile goods 191 105.9 207 153.0 216 154.3 226 157.6 205 167.5 264 180.0 268 181.9 26 Furniture and fixtures 47 35.9 43 31.8 03 30.7 65 31-4 55 37.6 59 40.2 60 40.7 28 Printing, publishing and allied products 77 58.8 98 72.u 114 81.0 131 91.4 119 81.3 129 87.9 142 96.4 29 Leather, leather products and fur products except footwear & other wearing apparel 8 6.1 8 5.9 9 6.0 10 7.0 10 6.8 11 7.5 10 6.8

Intermediate Goods 871 665.0 1,001 726.0 1,059 744.0 1,118 768.9 1,258 863.9 1,372 925.8 1,524 1,007.5

25 Wood, cane and cork, and products 111 o4.8 148 109.4 109 106.4 149 103.9 160 109.4 174 118.6 208 141.2 27 Paper and paper products 49 37.4 60 u4.3 63 45.0 66 46.0 77 52.6 84 57.3 95 64.5 30 Rubber products 88 67.2 88 65.0 91 65.0 94 65.5 114 79.5 124 84.5 135 91.6 31 Chemicals and chemical prod. 186 141.6 218 157.0 255 180.9 292 205.0 349 207.2 381 -265.0 419 285.0 33 Non-metallic mineral prod., except products of petroleum and coal 88 58.1 106 62.o 125 69.6 142 73.6 188 81.5 162 81.9 188 83.9 35 Metal products, except machi- nery & transport equip. 2/ 148 113.. Io7 123.0 1c7 133.6 209 105.7 20 160.7 262 178.6 265 179.9 39 Miscellaneous manufactured products 3/ 201 162.9 210 163.,; 18" 103.5 166 129.2 16;' 129.0 185 139.9 214 161.4

Mechanical Goods 239 136.9 286 151.2 265 1lO.6 242 128.3 272 142.6 295 152.7 314 160.2 36 Machinery, except electrical machinery 51 29.2 38 20.1 37 19.6 36 19.1 00 23.1 07 24.3 54 27.6 37 Electrical machinery, apparatus, appliances and supplies 96 55.0 118 62.4 118 62.6 117 62.0 125 65.5 136 70.4 132 67.3 38 Transport equipment 92 52.7 130 68.7 110 56-4 89 47.2 103 50.0 112 58.0 128 65.3

1/ Preliminary estimates. 2/ Includes products of petroleum and coal (SIC 32). 3/ Includes basic metal products (SIC 30). Source: National Economic Council. Table 8.2

Value Added in Mining and Percentage Distribution, 1962-1968 (Million pesos at current prices and percentages)

N e t V a 1 u e A d d e d (At current prices in million pesos) Percentage Distribution

Category 1962 1963 1964 1965 1966 1967 1968/a 1962 1963 1964 19 _ 1966 1967 1968 1/

TOTAL NET VALUE ADDED 175 182 188 235 311 346 427 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Coal Mining 3.2 3.1 2.4 1.8 1 1 1 1.8 1.7 1.2 0.8 0.3 0.3 0.2

Iron Ore Mining 23.9 24.6 22.6 29.1 31 31 26 13.7 13.5 12.0 12.4 10.0 9.0 6.1

Chromium Ore Mining 19.6 16.2 16.8 20.6 23 17 15 11.2 8.9 8.9 8.8 7.4 4.9 3.5

Copper Mining 64-3 77.2 80.2 101.9 174 192 268 36.8 42.4 42.7 43-3 55.9 55.5 62.8

Gold Mining 40.8 39.4 44.9 45-5 49 57 59 23.3 21.6 23.9 19.4 15.8 16.5 13.8

Other Metal Mining, Mec. 5.5 5.8 6.3 10.4 10 12 16 3.1 3.2 3-4 4-4 3.2 3-5 3.8

Stone Quarrying 12.6 12.0 12.0 16.2 17 26 30 7.2 6.6 6.4 6.9 5.5 7.5 7.0

Other non-metallic 5.1 3.7 2.8 9.5 6 10 12 2.9 2.1 1.5 4.0 1.9 2.8 2.8

1/ Preliminary estimate. Source: Central Bank of the Philippines. Table 8.3

Mining Production, 1956, 1963. 1967 and 1969 (Value in thousand pesos at current prices)

Unit of 1956 1963 1967 1969 Item Measure Quantity Value Quantity Value Quantity Value Quantity Value

Total 158,897.4 307,944.1 591,103.6 944,366.4 Gold Fine ounce 406,163 44,580.5 376,006 71,516.8 490,557 103,462.3 571,145 118,239.7

Silver " 541,168 919.8 838,304 3,689.5 1,368,976 7,532.8 1,561,312 10,501.7

Base Metals:

Iron ore Metric ton 1,440,232 23,201.1 1,384,704 44,671.2 1,477,751 56,208.6 1,561,406 53,684.3 Chromite ore " " 709,055 27,785.9 459,121 29,524.1 419,823 31,466.7 469,431 34,185.9 Copper (metal) " " 26,963 47,073.1 63,686 140,127.2 85,846 349,533.3 131,426 657,503.9 Manganese ore " " 4,414 304.7 7,666 998.2 80,189 5,651.9 20,002 1,498.9 Lead (metal) " " 2,140 1,308.2 71 61.3 89 107.7 67 79.2 Zinc (metal) 950 480.8 3,893 3,203.3 1,485 1,792.2 3,286 4,080.2 Quicksilver (metal) Flask 3,015 1,567.9 2,651 1,553.8 2,611 4,802.9 3,478 6,586.1

Non-metallics: Coal Metric ton 151,708 3,631.8 156,535 4,047.9 69,753 1,616.0 53,341 1,156.8 Sand and gravel Cubic meter 1,271,646 3,951.1 992,711 3,712.7 2,683,917 12,920.2 4,307,832 22,570.6 Salt Cavan 1,271,994 4,040.0 1,402,420 3,715.5 2,311,760 12,531.2 4,623,740 28,683.8 Silica Metric ton 31,560 52.5 111,472 1,662.6 311,440 3,477.8 637,816 5,595.3

Source: Central Bank of the Philippines. Table 8.1, Indices of the Phwsical Volum of ManufacturiMg Production. 1962-69 (1955 -oo)

Jaruary - September Item 1962 163 126_ 1965 1966 1968U g 19 A Change

Manufactures 169.7 180.5 195.5 200.9 218.6 226.6 247.7 244.7 257.3 5.1 Non-durable manufactures 165.6 174.9 186.8 193.3 211.6 217.7 237.9 234.8 246.9 5.2 -Manufactured food products, except beverages 172.4 177.4 184.9 201.1 209.7 224.3 227.1 226.6 239.6 5.7 Slaughtering, preparation and preservation of meat 284.8 519.0 573.9 727.3 714.2 941.8 1,234.8 1,286.3 1,015.2 -21.1 Dairy products 168.3 184.3 210.6 175.7 174-5 178.2 213.2 206.5 263.3 27.5 Processed fruits and vegetables 184.8 169.9 172.7 252.1 227.6 237.1 2h2.6 239.5 238.1 -0.6 Processed fish products 192.2 197.6 196.1 1955. 257.4 281.9 269.6 269.4 225.1 -16.3 Bakery products 141.3 166.6 161.8 154-5 151.9 165.9 172.3 166.2 209.1 25.8 Cocoa, chocolate, coffee, sugar and confectionery 118.4 131.6 151.0 179.3 188.9 207.1 192.3 207.3 227.7 9.8 Miscellaneous food preparations 195.2 188.5 191.0 194.9 212.2 220.4 217.8 211.0 224.1 6.2 -Beverages 177.4 205.0 217.9 226.6 2h9.h 251.2 323.3 31h.7 335.6 6.6 Distilled spirits 17h.3 221.1 267.9 315.0 398.3 421.h 190.7 h89.7 533.8 9.0 Wine 125-. 133.8 153.6 101.3 104.0 101.5 131.7 136.7 151.1 10.5 Beer 246.8 323.9 346-1 380.2 384.6 385.6 525.4 506.0 516.8 2.1 Soft drinks 133.7 124.7 123.1 110.0 133.4 131.3 160.5 156.8 179.9 14.7 -Tobacco products 123.5 120.9 1h6.2 159.6 187.1 181.1 210.3 218.1 197.9 -9.3 -Textiles 1/ 296.2 321.7 338.0 328.9 343.h 3440. 332.h 332.2 339.4 2.2 -Footwear, wearing apparel and other made-up textile goods 50o. 51.0 L9.5 51.0 51.1 51.2 50.9 49.1 47.1 -4.1 Footwear, except rubber 58.1 76.4 64.9 65.1 68.4 73.9 72.0 62.3 66.8 7.2 Wearing apparel 32.7 37-3 34.8 hO.2 40.1 37.8 38.o 39.0 34.5 -11.5 Other made-up textile goods 113.5 159.3 285.5 197.9 167.5 180.7 182.5 185.3 186.5 0.6 -Paper products 211.0 250.7 254.1 25h.4 263.7 269.2 227.3 230.6 323.9 1.0 Pulp paper and paper board 209.9 301.8 239.2 270.0 253.2 272.1 2h7.8 263.8 261.8 -0.8 Manufactured articles of paper and paper board 211.4 232.5 259.5 248.8 267.5 268.2 220.1 218.8 222.5 1.7 Printing, publishing and allied industries 103.6 83.4 77.7 75.9 80.6 78.8 72.3 73.1 70.8 -3.1 Leather products, except footwear 154-5 159.0 158.9 1h7.2 131.5 127.9 122.9 126.3 126.2 -0.1 Rubber products 2/ 222.3 229.5 254.6 268.5 265.2 323.6 392.0 375.h 421.6 12.3 Chemicals 2/ 155.-4 167.9 173.8 187.9 196.1 199.4 197.0 189.7 205.3 8.2 Manufacture of miscellaneous products of petroleum and coal 175.8 173.0 181.8 161.0 208.4 231.5 282.7 268.2 326.2 21.6 Miscellaneous non-durable manufactures 133.4 75.6 101.1 84.o 102.2 103.6 117.4 120.1 124.9 4.0 Darable Manufactures 189.3 207.5 237.3 237.h 251.9 269.1 294.7 292.1 307.4 5.2 - Wood and cork manufactures, except furniture and fixtures 121.7 167.9 142.1 151.2 188.3 214.1 277.1 274.7 244.7 -10.g Furniture and fixtures 120.3 131.7 170.8 154.1 114.1 145.6 124.3 124.8 119.4 -1.3 - Non-metallic mineral products 20o.8 210.0 238.8 269.2 287.9 297.3 326.1 330.5 335.2 1.L Clay and cement products 267.2 284.9 297.9 340.h 41l.8 427.0 h69.9 460.7 h8h.1 5.1 Concrete products 340.7 385.5 129-5 436.9 789.6 725.9 740.9 762.7 7h9.2 -1.8 Glasswares and glass containers 195.2 180.4 194.9 253.6 231.4 252.0 326.0 333.9 301.9 -5.6 Plate and sheet glass products 28.1 27.5 27.0 19.0 23.8 19.7 hh.9 17.7 74.0 318.1 Cement 205.2 214.8 249.8 271.8 281.9 289.8 299.9 303.3 318.1 h.9 Asbestos products 107.9 120.2 166.7 161.5 131.5 194.4 20h.9 213.9 3h1.9 59.8 Limestone products 92.3 122.2 101.1 263.2 572.3 635.3 1,224.8 1,148.4 671.3 -11-5 -Metal products, except machinery 272.5 269.7 304.2 330.2 347.2 347.5 335.9 333.3 356.8 7.o -Manufacture of machinery, except electrical machinery 122.5 121.8 178.0 97.3 151.1 181.9 175.2 190.3 91.9 -51.7

-Electrical machinery, apparatus appliances and supplies 273-. 316.9 356.7 323.6 3h0.4 412.5 h37.5 429.8 197.7 15.8 -Manufacture of transport equipment 97.3 142.7 .96.1 1h5.2 154.8 173.h 234.1 225.1 212.7 7.8 -Miscellaneous durable manufactures 119.5 92.3 57.1 50.9 42.6 59.1 51.3 50.5 78.6 55.6

1, Includes floor covering. 2/ Includes rubber shoes. ./ Includes fertilizers Sources: Cooperating government agencies and private firms. Table 8.5

Capacity Utilization in Selected Manufacturing Industries, 1965 to 1969

1965 1966 1967 1968 1969

FE.ZTILIZERS (Metric tons) Production Capacity 237,000 727,000 896,349 896,349 n.a. Actual Production 100,212 140,769 286,775 /1 225,724/2 n.a. CEMENT (Million bags of 50 kilos each) Production Capacity 36.72 60.72 73.92 91.92 126.72 Actual Production 35.71 39.36 49.75 61.63 101.16

IRON & STEEL (Metric tons) Production Capacity 613,200 759,200 847,200 1,302,760 1,339,000 Actual Production 297,229 329,668 356,863 366,416 n.a. GLASS & GLASS CONTAINERS (Metric tons) Production Capacity 218,000 Actual Production 109,713 122,366 129,000 137,500 146,000 SUGAR (Thousand short tons) Production Capacity 1.855 1.760 Actual Production 1.723 1.538 1.724 1.750 1.900 PAINT (gallons) Production Capacity Actual Production 5,823,772 6,674,295 8,464,664 8,251,828 n.a. BASIC CHEMICALS (Metric tons) Production Capacity 1,028,900 1,028,900 1,028,900 1,028,900 n.a. Actual Production 483,194 447,387 545,998 n.a. n.a. TEXTILES (Million yards) Production Capacity n.a. 403.90 n.a. n.a. 482.68

/1 Excluding ESFAC. 75 Excluding GENERAL. Source: Presidential Economic Staff. Table 8.6

Indices of Employment in Manufacturing and Mining, 1962-1969 (1955 = 100)

M A N U F A C T U R I N G 1962 1963 1964 1965 1966 1967 1968 1969 1/

Food 104.4 110.2 115.8 124.1 121.9 120.8 125.6 126.1 Beverages 114.8 114.8 118.9 121.8 128.5 136.6 138.8 142.9 Tobacco Manufactures 126.3 124.8 135.5 140.9 141.8 158.5 168.1 185.4 Textiles 198.7 211.3 211.0 213.5 211.4 214.9 222.5 235.9 Footwear & Wearing 97.0 102.5 104.4 98.9 94.3 95.1 104.7 109.4 Wood and Cork 96.0 97.4 100.4 103.2 105.4 107.1 106.6 104.1 Furniture & Fixtures 90.4 96.1 96.3 94.1 99.4 100.3 96.5 98.3 Paper & Paper Products 103.4 103.3 98.6 95.5 92.2 93.5 94.9 98.7 Printing & Publishing 131.8 128.0 129.2 126.7 121.3 121.7 121.7 118.5 Leather & Products 141.7 132.0 131.4 135.0 127.1 129.8 129.7 145.7 Rubber Products 137.3 131.2 125.6 130.6 134.3 135.6 121.5 111.9 Chemical & Products 119.8 122.6 119.6 122.6 125.4 126.0 122.1 121.9 Non-Metallic Mineral Pro. 111.0 106.7 104.8 104.5 97.2 102.7 102.0 103.4 Metal Products 215.6 215.0 184.4 185.9 179.1 152.5 156.1 150.8 Machinery 95.6 98.8 102.4 103.0 92.1 107.9 127.6 108.3 Electrical Machinery 382.4 354.0 250.0 192.1 177.9 159.2 101.4 82.2 Transportation Equipment 86.6 86.9 89.4 88.2 84.5 85.3 97.7 95.5 Others 137.7 127.3 125.1 127.1 120.6 111.1 117.6 126.9

Total 118.8 121.3 123.3 127.0 125.6 127.2 130.6 132.5

M I N I N G

Coal 58.8 59.9 58.4 42.3 38.5 44.2 47.0 42.4 Chromnite 145.8 150.5 144.3 133.4 155.2 169.5 206.5 179.8 Gold 75.6 75.2 77.4 83.3 83.5 83.1 82.5 81.2 Iron Ore 68.2 79.9 75.4 87.5 84.8 82.2 72.5 72.0 Copper 106.0 109.2 113.4 116.1 120.2 129.0 144.9 148.5 Manganese 61.9 18.2 22.7 13.8 6.3 2.9 2.9 2.9 Crude Petrol. & Nat. Gas 71.4 91.7 94.3 25.0 17.1 17.1 17.1 17.1 Non-Metallic 56.7 31.3 30.2 47.2 60.0 61.2 62.7 63.4

Total 76.5 77.4 77.6 83.6 84.7 85.3 85.4 83.7

1/ January to September average. Source: Central Bank of the Philippines. Table 8.7

Actual and Projected Value Added in Manufacturini, 1968 and 1974 (In million pesos at 196t pri ces)

Projected Projected rate Projected value Value Estimated of annual value added added elas- growth 2/ added 1974 at Category 1968 ticity 1/ percent- 1974 1967 prices

Total Manufacturing 4,147 5.13 5,601 5,443 Consumer Goods 2,309 5.19 3,136 3,048 Food, except beverages 1,072 0.89 5.28 1,460 1,419 Beverages 377 1.15 5.80 529 514 Tobacco 200 1.17 5.84 281 273 Textiles 180 0.70 4.90 240 233 Footwear, other wearing apparel ancl made-up textile goods 268 0.43 4.36 346 336 Furniture and fixtures 60 0.41 4.32 77 75 Printing, publishing & allied products 142 o.88 5.26 193 188 Leather, leather prod. and fur products, except footwear & other wearing apparel 10 0.00 0 10 10 Intermediate Goods 1,524 5.06 2,043 1,985 Wood, cane and cork, & products 208 1.36 6.22 298 290 Paper and paper prod. 95 1.06 5.62 131 127 Rubber products 135 0.84 5.18 183 178 Chemicals & chem. Prod. 419 0.91 5.32 572 556 Non-metallic mineral prod. except products of petroleum & coal 188 1.23 5.96 214 208 Metal prod., except machi- nery & transport equip. 265 0.45 4.40 343 333 Yiscellaneous manu. prods. 214 1.21 5.92 302 293 Capital Goods 314 5.05 422 410 Machinery, except electri- cal machinery 54 1.14 5.78 76 74 Electrical machinery, apparatus, appliances and supplies 132 0.25 4.00 167 162 Transport equipment 128 1.10 5.70 179 174 V Proportionate change in value added divided by proportionate change in gross national product during 1966-68. 2/ Calculated by the formula: d=p+i L , where d - projected annual growth rate; p = expected rate of population growth (3.5 percent); i - expected annual rate of increase in per capita gross national product (2 percent); f= elasticity in relation to gross national product. Source: Calculations based on available data. Table 8.8

Estimated Import Dependency of Manufacturing Supplies, 1963 - 1968 ( Imports as percent of total supplies )

1963 1964 1965 1966 1967 1968

Total Manufacturing 44.2 49.2 49.5 48.9 53.1 51.9

Consumer Goods 25.9 27.4 29.6 28.4 31.4 28.9

Food 30.2 34.4 40.9 34.8 39.1 32.6 Beverages 1.5 1.7 2.2 1.3 1.8 1.6 Tobacco 4.3 2.2 2.6 6.5 9.4 12.3 Textiles 52.9 51.4 49.8 62.1 58.5 66.9 Footwear, other wearing apparel and made-up textile goods 4.2 6.9 4.6 3.9 1.5 1.5 Furniture and fixtures 17.3 17.3 11.8 11.3 14.5 17.8 Printing,publishing and allied products 0 0 0 0 0 0 Leather,leather products and fur products 20.0 35.7 28.6 28.6 31.3 33.3

Intermediate Goods 0 55.0 53.6 52.5 54.6 54.3

Wood,cane and cork 2.0 3.2 3.2 2.4 1.7 1.4 Paper and paper products 56.2 61.8 58.2 58.4 59.4 56.6 Rubber products 27.9 32.1 29.3 29.2 26.2 24.2 Chemicals and chemical products 68.8 70.9 68.o 65.7 67.2 68.0 Non-metallic mineral products 21.5 25.6 20.7 22.5 22.9 19.7 Metal products, except machinery and transport equipment 1/ 61.0 66.0 64.o 62.9 66.2 67.4 Miscellaneous manufactured products 28.2 37.2 42.0 40.7 42.h 42.0

Capital Goods 74.0 80.1 81.6 81.0 84.3 84.6

Machinery except electrical machinery 92.1 93.7 93.9 93.1 95.0 94.5 Electrical machinery,apparatus, appliances and supplies 48.7 58.3 61.3 52.8 57.5 64.1 Transport equipment 66.7 76.5 79.2 80.6 81.9 81.4

Note: Total supply represents domestic value added plus imports of corresponding category.

1/ Includes products of petroleum and coal.

Sources: Calculated from information submitted by the National Economic Council, and Central Bank of the Philippines. Table 8.9 Investment Requirements of Projects APProved by the Board of Investments from July 1, 1968 to Dec. 31, 1969

Imported Equipment Investment Total Total Imported as percent of Total per person Investment Equipment Eouipment Total Invest. Total Epuip. Employment employed

Total Manufacturing 2.142.93 1.776.38 1.657.64 77.1L 93 3 27,721 77.3 Consumer Goods 220.69 174.32 124.10 56.2 71.2 102482 21.1 20 Livestock 0.70 0.37 0.37 52.9 100.0 38 18.4 Bananas 4.33 1.76 0.96 22.2 54.5 832 5.2 Rice 10.99 10.86 10.86 98.8 100.0 311 35.3 Marine products 130.44 103.53 68.64 52.6 66.3 4,236 30.8 Cassova starch 1.71 0.81 0.63 36.8 77.8 884 1.9 Processed coconut 14.13 8.81 5.17 36.6 58.7 2,275 6.2 Cornstarch 36.40 31-94 21.96 60.3 68.8 4L10 88.8 Processed food 12.05 9.38 9.15 75.9 97.5 410 29.1

28 Clothing &Footwear Footwear 9.94 6.86 6.36 61.0 92.7 1,086 .2

Intermediate Goods 1,878.74 1,590-43 1.522.23 81.9 95.7 14,976 127.2 25 Wood, Cane & Cork, except furniture Ramie (integrated) 18.93 17.88 17.88 91B.5 100.0 205 92.A Forest products (plywood, veneer, etc.) 131.91 118.86 102.08 76.7g 85.9 5,556 27.7

27 Paper and Paper Products Pulp and Paper 308.07 256.71 256.71 83.3 100.0 1,214 253.8

31 Chemicals Industrial chemicals 79.72 74.37 70.10 87.9 93.3 837 95.2 Fine chemicals 10.114 8.80 8.80 86.8 100.0 5 2,028.0 Activated carbon 1.36 1.17 1.17 86.0 100.0 29 85.9 Coconut oil 22.09 19.11 17.24 78.0 90.2 203 108.8 Antibiotics 6.30 5.00 5.00 79.11 100.0 222 28.4 Synthetic bags 22.89 19.58 19.44 81.9 99.3 ],010 22.7

32 i'etroleum Products Lubricating oil 99.62 99.62 99.62 100.0 100.0 180 553.1, 33 Non-metallic Minerals Ceramics 12.40 11.62 11.19 90.1 96.3 1186 2.6 Glass products 41.54 28.95 28.22 67.9 97.5 764 55.11 Dinnerware .55 .55 .37 67.3 67.3 32 17.2 34 Metal Manufactures Aluminum, smelted 77.61 58.89 41.85 57.8 76.5 372 207.5 Primary steel1 486.0o 41.90 4114.90 85.11 100.0 615 750.2 Cold-rolled strips and coils 322.08 241.29 241.29 71.9 100.0 917 351.2 Nickel 185.86 170.67 111.12 75.9 82.7 1,456 122.7 35 Metal Products except machinery Metal products &engineering, 48.67 42.46 42.25 86.8 99.5 189 5 Dinnerware

Capital Goods 43-5 11.63 11.31 26.0 97.2 2,1168 17.6 36 Machinery &Capital Equipment 8.56 7.11 7.07 82.6 99.4 646 13.3 37 Electrical Equipment Communicationis equipment .40 .0 .C40 100.0 100.0 679 .6 Electrical equipment 8.o0 4.12 3-84 47.8 93.2 113 56.2 38 Transport Equipment 26.50 - - - - 1,000 26.5

Source: Elaborated from data submitted by the Board of Investments.

Table 8.10 Page 1 of 2 Third Investment Priorities Plan of the Board of Investments Investment Requirezments, Value of Output, and Employment (In million pesos)

M ANU F ACT U RIN G Tnvestss nt sic Investment Requirements per person Major Value of emnployed Group Total Capital Kauip. Others output Employsmon (thou. pesos) Total Manuftacbri"n 2.2714.25 1367.-07 90.18 1.2149.61 16,30 _39.

CONSUMER GOODS 57.28 214.38 32.90 564 1,235 46.9 20 Food 50.31 23.16 27-1 64121 53.8 Fruit and vegetables Tomnato paste .43 .25 .17 .38 10 93.0 Fish .96 .29 .67 2.50 26 36.9 Dairy products 1.20 .63 .57 2.15 19 63.2 Agar-Agar 2.10 1.30 .80 1.89 14 150.0 Dextrose 1.70 .80 .90 .62 10 ~ 170.0 Cattle 2.09 .12 1.97 .39 8 260.0 Fish (deep sea) 1.21 .96 .25 1.36 57 21.2 Fish (inland) 1.79 .95 .84 1.44 36 99.7 Hogs 1.99 .08 1.41 1.60 11 135.5 Poultry: meat .09 .02 .07 .25 7 12.9 eggs .13 .01 .12 .30 9 19.4 chicka .49 .09 .35 .59 13 33.8 Shrimps: deep sea 3.07 1.93 1.13 1.75 58 52.9 inlanid 1.15 .59 .56 .94 26 99.2 Processed graini 5.06 2.68 2.38 11.86 66 76.7 Rice 13.90 7.48 6.942 11.05 186 79.7 Corn 2.90 .46 24'.5 1.10 109 26.6 Soybeans & Sorghum 2.90 .96 24h5 24h6 112 25.9 Peanuts 3.08 .46 2!.62 1.89 112 27.5 24 Footwear 6.97 1.22 10.08 300 23.2

INTERMEDIATE GOODS 2,128.54 1,289.69 838.85 1,079.61 9,657 220.4 25 Wood. Cane and Cork. except furniture 54.25 10~_ 71.71 1,652 32.8 Ramie 20-47 18.52 1.95 32.26 720 28.4 Wood chips 1.20 .68' .52 .71 47 25.5 Ply-wood 10.00 7.20 2.80 15.69 400 25.0 Veneer 6.40 3.50 2.90 741l 229 27.9 Tree farming 2.50 1.85 .65 2.20 99 26.6 Coated board 10.68 9.33 :L.35 9.29 122 87.5 Particle board 3.00 2.55 .46 4.25 140 75.0

27 Pae n ae rdcs348.00 212.10 135.90 111.99 1,873 185.8 Pulp and Paper 108.00 69.o0 39.00 39.00C 570 189.5 Long-fiber pulp 200.00 120.00 80.00 51.69 1,200 166.7 Fiber board 90.00 23.10 16.90 15.30 103 388.' 31 Clamicals 347.12 20o6.07 141:05 223.21 1,941 178.8 Palm oil 3.00 2.26 .79 9.59 76 39.5 TAimbang oil 6.31 9.20 2.11 10.52 76 83.0 Activated carbon 2.62 1.36 1.26 1.36 13 201.5 Coconut oil 18.63 12.12 6.51 50.62 57 326.5 Rice bran oil 14.85 3.06 1.79 9.49 33 IL 3.0 Polystyrene re-sins 19.56 9.73 9.83 19.07 138 191.7 Polyvinyl alcohol resins 3.25 2.00 1.25 5.00 h2 77.94 Polyvinyl chloride resins 20.00 15.00 5.00 22.90 129 195.0 Nylon fibers 51.35 30.29 21.06 33.66 196 3151.9 Rayon fibers 197.73 111.58 86.15 56.25 999 195.3 Polyacrylic shieets 1.00 .147 .53 .74 19 71.9 Benzene hexachLloride (6%) 6.6o 5.06 1.59 6.19 70 99.3 Antibiotics 5.60 3.90 1.70 3.32 81 69.1 Edible salt 6.62 5.09 1.58 5.00 72 91.9 33 Non-metallic minLeral Products, except products of netroleumend_coal 11.91 9.45 2.96 11.21 176 67.7, Asbestos .75 .66 .09 1.53 65 11.5 Refractories 11.16 8.79 2.37 9.68 1II 100.5 39 Metal manufacture 1,280.42 740.96 5j . 6 579.12 3.870 330.9 Primary steel 783.00 384.00 399.00 363.19 2,000 351.r Ferro-alloy 6.30 6.02 .28 9.80 1,19 152.9 Copper mretal 126.80 123.36 3.49 30.00 988 259.8 Nickel, metal & alloy 363.32 227.15 136.17 179.33 1,200 302.8 SPecial & alloy steel 1.00 .43 .57 1.80 63 19.9 35 Metalprodcts,excp cinr ad trnpr t qupmnt9.73 6.08 3.65 22.-87 195 67.1 Dinner-ware 2.92 2.05 .37 9.37 67 .6.1i High-carbon steel wire 3.93 1.92 1.51 6.95 Li I3.7 Copper tubes 3.88 2.11 1.77 12.00 3711. Mis cellaneous 3 ~Metallurgical Coke 77.10 71.40 .70 5.029 ~ Table 8.10 (Continued) Page 2 of 2

Third Investment Priorities Plan of the Board of Investments Investment Requirements, Value of OUtput, and Employment (In million pesos)

Investment SIC Investmnt Requirements per person Ra,inr Value of employed Grcup Total Capital Equip. Others output Employment 1/ (thou. pesos)

.APITAI, GOODS 88.43 53.00 3113.1 5.225 16.9

36 Machinery, except electrical 26.61 807 33.0 Pliers and wrenches 1.16 .53 .63 1.29 38 30.5 Shapers 2.78 1.I41 1.37 2.60 63 44.1 Lathes 3.97 2.13 1.84 3.60 130 30.5 Drill presses 1.46 .56 .90 1.20 51 28.6 Fishing winches 1.01 .25 .76 3.00 39 25.9 Band saws 2.11 1.00 1.11 2.40 94 22.4 Carbide- tipped tools .92 .39 .53 1.61 32 28.8 Platform scales .74 .27 .47 .55 18 49.3 Pumps .60 .14 .'47 .60 37 16.2 Pa-ay threshers .64 .06 .57 .66 38 16.8 Steam boilers 1.95 .41 1.53 3.90 51 38.2 Diesel engine 3.05 1.23 1.82 5.40 69 41,.2 High HP diesel engine 6.23 4.14 2.09 3.50 147 42.1,

37 Electrical Machinery. Apparatus, Appliances and Supplies 18.52 12.58 5-94 13-45 472 39.2 Electric drill 1.16 .59 .57 1.68 50 23.2 Electric grinders 1.09 .59 .50 2.36 32 34.1 Porcelain insulators 5900 3.80 1.20 2.25 70 71.4 Electric motors 7.70 5.10 2.60 3.00 250 30.8 Kilowatt hour meters .40 .12 .28 1.13 25 16.0 Electric controls .78 .34 .44 1.50 35 22.3 Power transformers 2.39 2.04 .35 1.53 10 15.6

3 Ftransport Eouipment 43.30 27.90 15.40 69.75 3,959 11.0

Barg"s ad tugboat 59 30 3.00 2.30 7.50 250 21.2) -ithing boats( Inter-island ships 14.00 6.90 7.10 22.25 1,950 9.0 Ocean-going ships 24.00 18.00 6.0o 40.00 2,150 11.2

M I N I N G

Total Mining 115.13 945 20.56 80.41 2,573 1447

Coal 3.67 3.27 .40 5.58 405 8.2 Natural gas 8.00 6.0o 2.00 2.60 200 40.0 Sulphur 60.00 56.oo 4.00 23.52 500 120.0 Rock asphalt .60 .38 .22 .60 60 10.0 Perlite 1.75 1.04 .71 4.20 71 24.6 Clay '94 .68 .26 1.90 30 31.3 Iron ore 6.00 1.81 4.19 10.00 500 12.0 Chromite ore 10.80 10.00 .80 6.27 347 31.1 Copper ore 14.85 8.15 6.70 17.25 150 99.0 Mercury 1.20 .92 .28 1.00 100 12.0 Lead-zinc concentrate 7.32 6.32 1.00 o.69 210 34.9

Total Manufacturing &Mining 2,389.38 1.161.64 927-74 1,330.02 l8,913 126.3

I/ Employment figures include professional and supervisory employees, skilled, semi-skilled and unskilled workers.

Source: Elaborated from data in the Third Investment Priorities Plan of the Board of Investments. Table 8.11

Financing of Manufacturing Industry (Source of finance for fixed and working capital) (In viillion pesos) Preliminary

Category 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69

Public Institutions

D B P Loans approved - FY /1 170.31 85.43 33.86 182.92 228.88 154.43 Guarantees approved 72 - FY n.a. 433.97 2444.9 251.08 792.79 1,083.41 Guarantees availed of - FY n.a. 37.22 107.63 30.4 2 443.67 392.46 Investments in preferred shares /3 - FY 0 0 0 158.78 18.80 23.23

N.I.D.C. Loans approved CY 1964-69 16.49 45.75 0 0.08 5.05 3.96 Equity CY 0.80 17.25 11.00 3.39 2.64 17.62 Guarantees approved CY - 8.26 4.89 60.56 50.62 24.88 Guarantees availed of n.a. n.a. n.a. n.a. n.a. n.a.

G.S.I.S. Loans n.a. n.a. n.a. n.a. n.a. n.a. Stocks & bonds CY 1964-69 9.62 7.50 5.92 5.18 10.69 21.25

S.s.S. Loans n.a. n.a. n.a. n.a. n.a. n.a. Stocks & bonds n.a. n.a. n.a. n.a. n.a. n.a.

Cammercial Banks, CY 1964-69 Loans outstanding A 1,226.8 1,264.4 1,339.8 1,394.4 1,473.3 1,481.3 /6

Loans granted /5 2,092.9 2,238.3 2,287.8 2,615.4 2,963.6 979.7 /7

/1 Loans approved are loans that can be availed of 75 About 70% went to manufacturing industries 7Y 97% of these investments went to the manufacturing sector 7 Loans outstanding represent the unpaid balances of the loans granted 7 Loans are granted when an actual availment or release of a loan has been made to the borrower As of June 30, 1969 77 January to Harch. Source: Presidential i]conomic 3Bfrf. Table 8.12

Paid-in Capital of Newly Registered Business Organizatiors C)assified by Nationality and Kind of Business, 1965-1969 (thousand pesos)

Total Filipinos Chinese Amnericans Other

1965 327,267 268.835 3674 17.776 4.015 181 Agriculture 8,137 3,938 18 51 18 For-•.,try, fishing and livestock 8,888 5,162 253 Metal mining 10 10 - - 10,001 N4on-metallic mininig and quarrying 1-1,762 1,761 - 2,701 2,102 Manufacturing 64,700 48,246 11i,651 2,678 25 Construction 11,661 8,589 369 7 Electricity, gas and water services 1,122 1,0Li5 70 629 993 kholesale and retail trade 120,295 100,858 17,915 10 20 Banks and othier finiancial in3titutions 21,951 21,621 300 1,20C 799 Insurance 4,893 2,494 - 23 2 Real estate 20,907 20,631 251 72 5 ransportation, storage & cormmunication 16,750 16,128 545 221 91 u.omanunit,yand business services 19,283 17,893 1,878 nreOnand p,ersonal serv-ices 1,2 1789 3,8912- 388,009 35,9 27,998 8,6 ,615 6,668 6,L83 11 150 28 Agricul ture 3 Forestry, fishing and livestock 12,878 12,585 287 3 Metal mini-ng 70 70 - - N-n-:setallic mining and quarrying 2,161 2,130 - 31- 9,319 815 88 M-,nuifaz2-uring 95,946 85,325 Cons truction 21,119 21,059 60- Electricity, gas and water services 690 558 132 - 3,752 889 Wdholesa-le and retail trade 118,790 100,832 15,275 56 & financial inLstitutions 18,807 16,?72 279 200 Banks otner 20) Insurance 8,004 3,988 Lo 88 57 Real estate 82,886 81,893 889 8 115 30 Transportation, storage & commrunication ?23,73 23,320 812 Co,trnunity and business services 22,837 21,139 87 H.ecrea:tcn a-ndpersonal services 2012? 18,682 1.,287 IL8 28,562 2,599 5,817 1967 8,1~82 381,802 35 8 Agri culture 17,198 16,928 235 150 191 Forestry, fishing and livestock 18,888 18,503 3') M.Ctal mining 215 165 20 2)~ Non-netallic mining and quarrying 5,366 81,799 16 597 8,816 Manu.facturing 85,620 70,603 10,o0L 707 E06 Construction 18,610 18,188 263 - Electricity, gas and water services 626 626 - 576 909 Wholesale and retail trade 130,18? 113,282 15,855 1 1 0 2 Banks &, tntcr financial institutions 32,560 32,233 215 - Insurance 675 618 57 280) Real estate 88,889 88,250 300 13 - rransPcxrtation, storage & cossmunication 27,168 27,181 18 c5 b08 9? Commnunity and bustness services 27,910 26,081 1,173 5L Recreation and personal services 13,583 12,873 1,056 - 6,122 8,19? 1968 870,815 826,691 29,811 122 13 Agriculture 9,181 9;,006 - 83 820 Forestry, fishing and livestock 28,267 23,537 267 Metal mininig 50 50 - -- 281 - Non-meta-llic mining and quarrying 8,360 7,793 286 912 629 Manufacturing 82,279 70,121 10,617 899 261 Cons tructi on 25,108 26,331 617 80 - Electricity, gas and water services 672 628 8 1,560 5,986 Wholesale and retail trade 159,813 136,868 18,999 - Banks & other financial institutions 26,926 26,668 262 - 1 18 Insuranice 2,840 2,820 5 1,786 - heal estate 57,503 55,283 838 26 395 Trransportation, storage & communication 20,916 20,585 150 288 672 Community and business services 37,666 35,816 898 167 2 Recreation and personal services 12,678 11,233 1,272 1.098 1969 410.024 391,272 13.115 LL)- 107 - Agriculture 12,025 11,872 86 30 20 Forestry, fishing and livestock 10,277 10,221 6 Metal mining 110 110 - - - 530 155 Non-metallic mining and quarrying 30,4838 29,729 20 390 329 Manufacturing 88,262 85,388 2,159 296 32 - Cons truction 16,192 15,868 - Electricity, gas and water services 1,090 1,090 - - 56 585 Wholesale and retail trade 132,063 122,588 8,87 - Banks E, other financial institutions 18,120 18,116 - - Insurance 622 612 -10 3,100 - Real estate 88,893 85,629 168 storage & communication 41,841 81,641 82 158 - Transportation, 9 and business services 40,037 39,003 906 119 Community 3 Recreation and personal services 14,058 13,453 602

Source: Central Bank of th~ePhilippines. Table 8.-13

C"eParsen Of Estimsated Ret-ail Prices of Selected Industrial Products in the~Philippines md the United States, 1970 (Inl U.S. dollars) Philippines Percest Ratio of tariffs hiipie chenge U.S.A. Philippines to percent Item Unit jL 1970 1968 t. 1970 1970 U.S.A., 1970 Ad Valorem

Cement metric ton 28 16 -43 37 .k3 2/ Gasoline (regular) liter .08 - - .09 - 28 - tree metric too 128 83 -35 93 .89 5 Sulphuric acid "- 33 - 3k .97 Auronium sulphate "- 57 - 38 1.50 Caustic sods ' l 7-6--aoe 60 31 '.v.C. ' 354 - - - - 60 Chlorine 90 87 -3 83 1.09 80 Gait " 26 27.9 6 29 .99 100 Silica - 2.7 - 34 Gypsum" - 12 - - Limestone 0.3 - -

TV ctot 23 in. 905 436 -1k 300 1.k5 100 19 is. kk 308 -30 200 1.5k 100

Refrigerators cubic ft. 365 385 9 210 1.83 1590 11 cubic ft. k10 938 31 220 2.kk 150 13 cubic ft. h60 769 67 290 2.69 120

11 cubic feet 135 561 30 229 2.91 190 17 cubic feet 513 897 75 240 2.6k 120

Air Conditioners 12,(CO BTi k30 389 -10 270 1.13 110 2L,000 BTUi 929 718 37 kk9 1.6o 110 3heet Glass (singlestrength) (100 sq. ft.) 2 m/m Bio~~~81 - - - - 70U 3.9 n/s 1,330 - - - - 70 S m/in 2,6oD - - - - 70 Tractor, Ford 2000, 3 HP 4,076 - - - - 10 Internatiosul 423, 10 HP 4,575 - - - - 10 Ford 3000, k6 HP 4,56k - - - - 10 David Brown 990, 95 HP 9,030 - - - - 10 J. Deers 2910, 55 HP 6,980 - - - - 10 I'nternational B-6114 , 6-2.5HP 6,640 - - - - 10 Ford 900, 67Hff 6,860 - - - - 10 Trucks Internati cool Harvester Model 1800 7,950 8,103 2 6,6kb* 1.22 15 F2LOD (for logging industry) 29,790 25,11k -16 17,831* 1.41 20 Auton-biles Uoder 1000 CC 4/ Flat 600 D 2,179 2,295 5 1,790 9/ 1.31 Renault 4E 2,299 2,299 0 1,7995' 1.28 Simca 1000 2,926 3,026 20 1,879 1.6i 1000 CC to 1900 CC Ford Cortina 2,962 2,949 -1 2,200 1.3k Datsun Pl-Ill 2,963 3,718 kS 2,100 1.77 Opel Kaudett,2 D-Sedan 3,119 3,231 1 2,300 1.10 ToyqotaCorona, 4 D-Sedan 2,769 3,000 8 2,391 1.25 1500 CC to 2000 CC: Mercedes Benz 200, 1 D-Seden 9,000 5,769 19 1,960 f/ 1.16 Toyota Crown, I D-Sedan 3,372 k,9 9 2361 18 Peugot 11, k fl-Sedan 3,718 3,846 3 3,191 j/ 1.10 2000 CC to 3000 k77 kk7- ,0 Chevy 1I, I D-Sedan 477 ,7 6 3001.25 Mercedes Sens 250-5, kD-Sedan 9,103 9,231 1.1 6,900 1.3k Ove 3000 CC Chevelle Malibu, ID-Sedan 6,026 6,191 2 2,800 2.20 Dodge Curt 270 9,987 7,179 20 3,100 2.32 Ford Galamie, 500 6,21k 7,692 23 3,300 2.33 Ranb2er American, I D-Sedan 4,821 6,923 kk k,1k2 1.67 Steel Products m/etric ton Rtebars C133 119 1.12 35 Merchant bow,s 172 117 1.17 35 Tin plates 314 181 1.73 10 Govid rolled sheets 186 173 1.08 19 Skelps 1 - - 7.5 Hot rolled sheet and plates -i5165 .9k 19 BiUlets ,Uk119 7/ .71 none Pig Irosn6 69 '9/ .96 cone

EsRtimate from 3968 price in Philippines and U.S. I1/ Philippine retail prices were originally given in U.S. dollars, calculated at the, old exchange rate. 2/ Tariff on cement (a) standard portland g.v. 100 Kgs. P. 3.90 (b) other g.w. 100 Kgs. P. 1.90 ,j/ The duty is P. 20 per 100 [gs. g.v. 4/ The tari-ff duties are: Assembled Unassembled with not sore than k cylinders 40% 25% with 6 cylinders 80% 60% with more than 6 cylinders 100% l00% dismal or semi-diesel 35% 20%

5/ Fiat 600 D is not sold any sore in the U.S. The price shown is for Fiat 50 Renault I E '' """ . 1 '' . . .'" 11" Renault 10 Mercedes tonz 200 " ' " Mercedes Benz 220 Peugot 10 " " " " " Peugot 50k 6/ The prices ohcwn are ex factory prices for the U.S. 1/ The unit sh.w for U.S. price 1970 is in met tons . i/ " " '" " " " " gross ton. Sources, Iron Age April 23, 1970, P. 198; i,Pitad DrgRepm ter, June 8, 1970; Journal of Commoerce,June 5, 1970. Prices c,fcars in U.S. obtained by telephone covrston it eaes nWas iu ton D.C.; Industr'yWeek, May 11, 1970. Philippine prices were obtained from data submitted by the BOI and from interviews with"plant managers mde by the World Bank Mission. Table 8014

Average Effective Rates of Protection By Sector and Manufacturing Branches, 1965

Item Percent

Agriculture 17 Ilining -17

Forestry -26

1bcDorts (excluding sugar) -20

14anufacturing 50 Sugar 186 Capital goods (machinery only) 35 Trucks and buses 77 Intermediate goods 67 Inputs into construction 67 Consumption goods 87

Source: J.P. Power, and GoPo Sicat, Industrialization in the Philippines, Discussion Paper No. 70-11, University of the Philippines, April 24, 1970, p. 109. Table 8.15 Average Effective Rates of Protection for Selected Projects Proposed by the Board of Investments

Ex-factory CIF import Nominal Nominal Effective domestic price price tariff Protection 1/ Protection p P t t G d w j j j Product (inpesos) (in U.S. $) (%) (%) (%)

Polystyrene resins GPS 1,572.70/MT 2/ 291.64/MT HPS 2,150.57/MT 389.70/MT 20 27 39 Nylon fibers 8.50/Kg. 1.57/Kg. 15 20 20 Polyacrylic sheets 6.20/Kg. 1.20/Kg. 20 27 38 Benzene hexachloride 938.00/MT 175.50/MT 10 14 9 Antibiotics 158.00/kilo 27.00/kilo 5 7 12 Edible salt 50.00/MT 10.00/MT 50 54 71 Special & alloy steel 3,600.00/MT 728.72/MT 10 13 14 High carbon steel wire 1,150.00/MT 231.73/MT 10 14 6 Copper tubes 8.00/kilo 1.73/kilo 10 17 49 Pliers & wrenches Pliers 2.00/unit .5o/unit) 10 14 23 Wrenches 3.50/unit .80/unit) Shapers 6,500.00/unit 1,092.00/unit 10 19 19 Electric drills 140.00/unit 28 .46/unit 10 17 19 Electric grinders 300.00/unit 60.60/unit 10 15 11 Lathes 12,000.00/unit 2,444.00/unit 10 14 16 Drill presses 1,200.00/unit 241.00/unit 10 14 5 Fishing winches 25,000.00/unit 5,060.00/unit 10 19 19 Band saws 20,000.00/unit 4,200.00/unit 10 15 8 Carbide-tipped tools 4.95/unit 3/ 1.00/unit 3/ 10 13 11 Platform scales 550.00/unit 112.00/unit 30 40 70 6 Pumps 460.00/unit 9 .7/unit 5 10 8 Palay threshers 3,300.00/unit 668.00/unit 10 14 11 Steam boilers 65,000.00/unit 13,150.00/unit 10 14 12 High-HP diesel engines (100 HP & above) 35,000.00/unit 7,083.00/unit 10 11 12

Note: Prices are based on $1 = P4 1/ Includes effects of advanced sales tax on imports and domestic sales tax. 2/ GPS means general purpose polystyrene resins; HPS high powered polystyrene resirs. 3/ Price of standard brazed tools of sizes i ", 5/161,378, 7/16". Source: Board of Investmernts.

Table 9.1

Price Indices, 1962 - 1970 (Twelve-monthly aver ages )

I t e m 1962 1963 : 1964 1965 : 1966 1967 : 1968 1969 1970

General wholesale price index for Manila (1955 = 100) 129.4 142.0 148.6 151.9 158.5 165.9 170.7 171.9 190.1

Percentage rate of change 5.0 9.7 4.6 2.2 4.3 4.7 2.9 0.7 10.6

Sectoral Components: Locally produced for home consumption 119.6 130.1 139.2 142.8 151.2 158.4 161.2 163.3 178.6 Import Products 158.2 167.8 169.4 170.2 172.3 173.5 174.6 178.2 198.6 Export Products 167.1 200.0 194.2 199.6 197.7 216.2 243.0 233.3 271.1

Consumer price index for the Philippines (1957 - 100) V/ 113.6 122.6 133.5 137.6 144.5 153.0 154.1 156.7 168.1

Percentage rate of change 2.9 7.9 8.9 3.1 5.0 5.9 0.7 1.7 7.3 Individual components: Foodstuffs 116.6 132.5 151.2 156.3 167.0 180.8 179.9 181.0 193.2 Clothing 121.4 125.3 129.6 136.1 142.1 150.3 155.7 160.2 173.8 Rent and repairs 103.2 104.8 105.7 107.1 109.0 111.1 114.3 115.3 120.0 Fuel, etc. 108.8 111.2 116.9 121.7 123.0 123.1 123.1 124.2 131.0 Miscellaneous 2/ 109.4 111.6 114.5 117.0 120.0 122.7 125.7 130.4 141.9 GNP price deflator (1955 = 100) 3(calendar years) 123.8 133.0 139.3 143.0 148.7r/ 155.4r/ 160. 6 r/ 16 5.5/*

Percentage rate of change 7.4 4.7 2.7 4.0 4.5 3.3 3.1

1/ Constructed from the consumers price indices for Manila and forregions outside Manila. The weighting pattern was developed on the basis of surveys conducted in 1953-54. This index is intended to reflect changes in the retail prices (including indirect taxes) of a "fixed basket of goods and services" purchased by an average household. This can be interpreted as a cost-of-living index. This is also regarded as an indicator of price stability by the monetary authorities.

2/ Consists mostly of various services (such as education and medical care), tran3portation, beverages and tobacco, etc.

3/ Ratio of Gross National Product in current prices to the same in constant 1955 prices multiplied by 100.

4/ First three months. r/ Revised.

W/ Preliminary.

Source: Department of Economic Research, Central Bank of tha Philippi-nes. OSCAS, NEC. Table 9.2

Wholesale Price Indices, 1956-1969

A. General Wholesale Price Indices in Manila (1955 = 100)

1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969

Food 101.4 107.5 110.6 103.7 110.8 119.5 122.7 139.0 148.3 150.3 165.8 174.5 175.9 178.3 Beverages & Tobacco 104.4 105.7 106.4 107.0 108.3 113.3 113.0 118.2 120.1 123.0 124.0 133.5 138.2 138.8 Crude Materials (inedible) 106.7 109.2 117.1 138.1 137.1 135.2 131.5 168.4 179.0 192.3 181.3 197.1 222.8 218.9 Mineral Fuels 102.1 110.4 110.5 112.3 114.8 127.5 135.4 140.5 140.5 142.2 146.9 147.6 147.6 149.2 Animal & vegetable oils & fats 94.2 99.2 134.6 164.6 145-3 138.1 163.7 183.0 197.2 230.0 201.3 225.3 267.0 234.4 Chemicals 100.3 105.5 109.7 113.6 110.9 115.4 131.4 138.5 1Ll.0 142.4 141.2 143.8 147.0 147.8 Manufactured Goods 108.8 112.8 112.9 119.6 123.0 126.6 130.9 135.3 140.0 143.4 146.3 146.7 147.3 151.2 Machinery & Transportation Equipment 102.4 106.7 115.4 128.3 147.6 163.5 174.7 189.2 188.5 188.7 190.8 193.0 196.0 202.1 Miscellaneous Manufactured Art. Nec. 102.3 101.8 103.9 110.8 116.5 116.2 123.4 130.6 131.7 128.5 131.0 132.2 132.6 133.5 All Items 103.1 107.6 111.2 112.7 117.4 123.2 129.4 142.0 148.6 151.9 158.5 165.9 170.7 171.9

B. Whholesale Price Index of Domestic Products in Manila

Food 101.0 107.1 110.2 102.1 109.0 117.7 119.6 136.4 146.0 147.8 163.9 173.1 174.5 176.6 Beverages & Tobacco 102.4 103.4 103.1 103.0 104.0 107.0 107.9 113.1 114.7 117.5 120.1 129.4 134.5 134.5 Crude Materials (inedible) 106.8 109.5 118.0 138.8 137.4 134.8 151.5 169.2 179.5 193.0 181.7 197.7 224.0 219.9 Mineral Fuels 102.2 109.2 109.3 111.0 113.4 122.6 129.4 133.9 134.0 136.5 139.6 140.5 140.5 141.4 Animal & Vegetable oils & fats 93.7 98.8 135.4 166.5 145.8 138.4 164.6 184.5 199.0 232.8 202.7 227.1 270.1 236.3 Chemicals 99.1 101.0 102.8 104.1 103.9 112.1 126.8 131.7 135.3 138.0 135.9 139.0 143.3 143.6 Manufactured Goods 105.9 110.3 109.6 114.3 116.9 120.4 120.6 122.7 128.8 134.6 138.0 138.4 138.2 143.4 Machinery & Transportation Equipment 103.8 106.9 113.9 121.8 144.1 171.5 181.4 194.4 196.1 200.1 202.2 207.4 212.6 227.9 Miscellaneous Manufactured Art. Nec. 101.5 100.4 102.2 108.4 114.2 113.5 120.0 127.4 128.8 125.4 127.9 129.1 129.6 130.2 All Items 102.2 106.4 109.9 109.9 114.1 119.7 124.7 137.7 145.2 149.0 156.3 164.6 170.0 170.8

Source: Presidential Economic Staff. Table 9.3

Wage Indices-/, 1961-69 (1955 = 100) (Averages of twelve monthly figures)

Sept. Sept. Sept. 2 Item 1961 1962 1963 1964 1965 1966 1967 1968 1967 1968 1969 1969-/

Nominal wages

Skilled labor 104.8 106.1 109.3 111.2 114.4 120.1 125.7 135.8 127.6 138.2 143.4 142.5

Unskilled labor 104.4 107.5 113.4 114.4 122.5 131.4 137.6 153.1 140.9 157.9 162.9 160.4

Real wages3/

Skilled labor 92.6 88.6 86.4 81.2 81.5 80.6 79.8 86.0 79.5 85.7 87.1 90.0

Unskilled labor 92.2 89.7 89.6 83.6 87.3 88.2 87.3 96.9 87.8 98.0 99.0 101.3

1/ Applies to laborers in industrial establishments in Manila and suburbs. 2/ January to September average. 3/ This series has been revised by deflating money wage rate index by the consumer price index (1955 100) in Manila.

Source: Central Bank of the Philippines. Table 9.4

Index of Average Monthly Earnings of Salaried Employees and Wlage Earners in Selected Non-hgricultural IndLstries in the Philippines, by Industry Division, 1956-1969 (1955 = 100)

1956 1962 1963 1964 1965 1966 1967 1968 1969 1/

All Workers Salaried employees 101.2 127.1 131.4 134.2 135.7 142.6 145.1 152.2 159.2 Wage earners 101.4 119.0 120.2 125.6 133.0 146.8 155.4 156.2 161.6

Mining and Quarrying Salaried employees 92.9 137.4 137.6 138.4 143.9 141.8 133.0 140.5 151.0 Wage earners 105.4 139.6 145.7 155.9 158.2 171.5 196.7 201.4 213.3

Manufacturing alaried employees 105.0 119.7 127.5 133.5 136.8 143.8 152.8 157.9 166.5 Wage earners 96.7 116.3 121.4 125.7 129.2 139.8 147.1 149.5 155.6

Electricity, Gas & Heat, Water & Sanitary Services SalarJed empioyees 100.0 113.7 119.4 121.2 111.1 136.0 148.7 160.8 163.7 Wage earners 93.1 110.8 112.7 119.7 134.0 151.8 160.5 158.8 168.6 Commerce Salaried employees 106.3 127.8 132.5 136.7 138.8 144.5 144.7 148.9 154.6 Wage earners 105.1 121.8 116.6 122.1 128.3 139.1 146.3 142.8 142.4

Transport & Comimnication Salaried employees 104.4 131.2 136.2 139.1 144.1 147.1 153.5 159.6 165.6 Wage earners 105.8 110.9 111.8 112.7 119.4 135.2 133.9 138.0 138.9 Number of Workers: 165,538 187,029 190,341 194,854 200,907 197,981 199,361 205,258 207,324

1/ January to September average. Source: PresiCential Economic Staff. Table 10.1

Department of Education Expenditures (In iiiillion pesos)

1961/62 1962/63 1963/6h 196h/65 1965/66 1966/667 1967//68 1968/69

Bureau of Vocational 31 35 20 32 37 39 45 Education ) ) 378 Bureau of Public Schools) h12 477 504 620 667 718 827

Bureau of Private Schools 1 1 1 1 1 2 1 2

Office of the Secretary 1 1 1 1 1 1 1 1

Other Offices 1 2 1 2 2 2 2 2 3

Total 382 445 516 537 656 709 762 878

1/ Including Institute of National Language, National Library and National Museum

Source: Budget Documents FY 1964 - FY 1971. Table 10.2

Enrolment in Public and Private Schools 1967/68

(Schools under Bureau of Public Schools, Bureau of Vocational Education, State Universities and State Colleges, and Private Schools) Total Total Public S.U. & Public Private and B.P.S. B.V.E. S.C. Education Education Private

J411rsery n.a. n.a. n.a. n.a. 37,760 37,760

,-emensary 6,134,252 220 2,075 6,136,547 287,111 6,423,658

*)f' which: primary 4,623,604 n.a. n.a. 203,435 inter- mediate 1,510,648 n.a. n.a. 83,676

Secondary 460,431 87,224 12,904 560,559 812,906 1,373,465 of which: general 387,409 barrio 73,022

College 9,174 9,070 26,803 45,046 531,135 576,181

Graduate of which n.a. 2,356 2,356 8,176 10,532

Graduate (Master) n.a. 7,930

Post Graduate (oct.) n.a. 246

Special Vocational Courses n.a. 81,294 81,294 i!nclassified 167 167

6,603,857 96,5114 44,138 6,744,508 1,758,549 8,503,057

,our e: Annual Report 1967/68 Department of Education and Statistical Bulletin 1967 - 1968 Bureau of Private Schools.