As of Aug 1, 04
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The Philippine State, Society & Economy, 1986-1992 Feb 25, 87 "Aquinomics" or Marcos Revisited? "Aquinomics," charity as development, free market economy, recycled trickle-down theory -- all are terms in vogue here to describe Philippine President Corazon Aquino's economic agenda as she enters her second year in power. But analysts here are quick to point out that however it is defined, Aquino's economic program is little different from that drawn up by deposed President Ferdinand Marcos with the World Bank and the International Monetary Fund (IMF). One year since she vowed to start building from the ruins, Aquino has established the infrastructure she hopes will draw in more foreign investment and loans. But her critics say the price of recovery may be high -- the welfare of the people who put her in power. At this week's festivities to celebrate Aquino's first year as president, prominent visitors are representatives from 22 U.S. corporations. The aim is to present the Philippines as a showcase for investment opportunities. The corporate visitors are being sponsored by the Overseas Private Investment Corporation (OPIC), the U.S. government agency which provides political risk insurance and financial services to encourage the flow of private investment to developing nations. "You could not have come at a better time," a Chase Manhattan Bank representative told the OPIC delegation on arrival. "All signs point to a turnaround in the economy and the weather has been just great." OPIC mission leader Alexander Trowbridge agreed: "U.S. investors believe that the Aquino government is moving in the right direction in so far as political and economic issues are concerned." Two recent developments appear to lie behind Trowbridge's optimism -- the ratification of the 1986 constitution which is strongly committed to private enterprise and the adoption of a debt-for-equity swap program. But the government is also set on an import liberalization program, under which tariff duties are being lowered by an average of 28 percent from 48 percent in 1980. Also on the drawing boards is a new omnibus investment code granting from five to eight years of tax freedom for foreign corporations which invest in the future. And Aquino has promised "less government in business," starting with the privatization of many of the public corporations Marcos and his associates controlled. Also in town this week is an IMF mission to discuss with the government a common set of macro-economic projects for the economy over the next two years. The team will set up quarterly monetary targets which, when met, will qualify the Philippines to draw more stand-by credit. "If we don't continue borrowing," says Finance Minister Jaime Ongpin, "we will not be able to finance our growth." He estimates that an additional $7 billion is needed within the next five years to ensure a 6.5 percent growth rate. Critics have hit Aquino's economic agenda hard, charging that despite the government's progressive posture, there have been no indications of major shifts in economic policies that would veer the country away from its crisis economy. The government's refusal to repudiate any of its debt is regularly cited as a case in point. When Aquino took over, the foreign debt included a number of dubious loans which were pocketed by Marcos or his associates. Since much of the funds have left the country, capital for repayment of these loans is scarce. More than half of the national budget currently goes to debt servicing. In 1986 about 83 percent of export earnings went to cover the $3 billion annual debt service bill. While selective debt repudiation has time and again been raised as a solution, official policy is that the country will honor all debts. To do so, the government has been negotiating with multilateral institutions, as well as with its commercial creditors, to restructure maturing debts. But Brazil's recent refusal to make interest payments has caused fear among creditors that the Aquino government may consider the same tack. Another trend which has alarmed analysts here is the growing share of public debt in the total foreign debt. In September 1986, 76 percent of all foreign debts were public loans, compared to 71 percent for the same month in 1985. Trends in economic policy show that the Philippines continues to be a "favorite guinea pig" of the IMF and the World Bank, according to political economist Robin Broad, a fellow with the Council on Foreign Relations of the Carnegie Endowment for International Peace. The Philippines came under IMF supervision 25 years ago and is now on the top-10 list of the world's most-indebted countries. Today it is battling for more aid from the World Bank under the yet-to-be implemented Baker Plan. The plan, named after U.S. Treasury Secretary James Baker, calls on industrialized nations to offer leading debtor nations some $29 billion in private and multilateral loans over three years, in exchange for the "free market" policies favored by the Ronald Reagan Administration. In a critique of the Philippines' 1987-92 medium-term plan, Teresa Diokno of Ibon Databank, a private economic research organization here, says that because the Aquino plan is based on the framework of a free market, the government "denies the people their due." She cites government figures showing that only 15 percent of agricultural workers own the land they till and that the income of the richest 20 percent of families is 10 times that of the poorest 20 percent. Only those companies -- most of them foreign -- which are big enough to withstand the instabilities of the market will be free to compete in the local market, "thus in the end, the development plan could bring us back to a crisis from which it vows to liberate us," Diokno warns. Aquino's plan has had some success -- inflation dropped from 23 percent in 1985 to one percent last year, putting a halt to the deterioration of real wages. But the daily minimum wage,fixed in November 1984, remains at the equivalent of $2.68 and the government has pledged to let market forces determine its actual level. With the country's poverty threshold standing at $160 a month, this means that even if a worker had the chance to work every day he would be able to meet only half of subsistence requirements. Close to 60 percent of Filipino families live below the poverty line. The debate on how to escape the debt trap and enjoy the freedom of real industrialization is a lively one in nationalist groups, such as the National Economic Protectionism Association, a group of small and medium businessmen. The association calls for a selective repudiation of the country's debt and government regulation of transnationals. There are also strong moves for policies on land redistribution and a change in property rights through land reform, the provision of credit and input subsidies for small peasants, progressive taxation and increased social services. Workers continue to demand the repeal of anti-labor laws which limit the right to strike or to organize in favor of decent wages and healthy working conditions. Observers here believe that the demands of debt servicing, the continuing threat of a rightist coup and the ongoing communist insurgency will force the Aquino government to delay major economic reform and land redistribution. Congressional elections scheduled for May 11 and local elections Aug. 24 will further delay land redistribution. The economic picture is also likely to darken as increased spending is expected to raise the rate of inflation by five percent, analysts here say. Further, world economic trends do not augur well for an export-oriented economy. Slow growth in the United States and in the world market is projected to last for at least two more years and is dimming hopes of lowering protectionist barriers. Aquino's first year in power saw the removal of many obstacles to free enterprise in the Philippines, but observers are questioning whether the president will be able to make the economy work for the people. Copyright © 1987 IPS-Inter Press Service/Global Information Network. All Rights Reserved. Return to previous page. |
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As of Aug 1, 04 |