JPRS-SEA-86-174 26 SEPTEMBER 1986

Southeast Asia Report



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Columnist Discusses Strategic Factors of U.S. Bases (Hermes Vittorio; THE MANILA EVENING POST, 29 Aug 86) .....

Paper on USAID ‘Pressure’ on Palay Support Price (Michael D. Marasigan; BUSINESS DAY, 2 Sep 86) ....eseeeees

Use of Peso Counterpart Funding for Loans Proposed (Daniel Cc. Yu; BUSINESS DAY, 5 Sep 86) eeeeeeeeeereeeeeeeeee

NDF International Representative at Nonaligned Summit (PANA, 3 Sep 86) eeeeeeaeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

Government ‘Finally’ Outlines Economic Thrust (BUSINESS DAY, 3 Sep 86) eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

Foreign Debt Repudiation Still Being Considered (THE MANILA CHRONICLE, 8 Sep 86 ) eseeeeereeeeeeeeeeeeeeeeeeeee

Economic Minister Wants Foreign Debte, Exports Linked (BUSINESS DAY, 5 Sep 86) e*eeeeeeeeee ee eeeeeeeeeeeeeeeeee eee

Minister Rules Out Total Lifting of Import Controls (Claro Fernandez; THE NEW PHILIPPINES DAILY EXPRESS,

2 Sep 86) eeeee eee ee ee eee eeeeeeeeeeeee eve ee eee eeeeeeeeeeeee

Minister Announces More Import Liberalizations (NEW DAY, 8 Sep 86) eeeeeeeee eee ee eeee eee eeeeeeeee ee eeteaeeeee

Rise of Raw Material Imports Reported (BUSINESS DAY, 2 Sep 86) eeeeeeet eee eeeeeeeceae eee ee ee ee eeeee

Coconut Exports Rise 115.6 Percent (BUSINESS DAY, 8 Sep 86) eeeeeveeeeeeeeeeeeeeeeeeee eee eeeeee








Justice Minister Stresses Need for Land Reform (Rey G. Panaligan; MANILA BULLETIN, 6 Sep 86) ..........--

Farmers’ Sub-Poverty Level Incomes Highlighted (Rodolfo Alancastro; THE MANILA TIMES, 6 Sep 86) .........

Development Bank's Non-Performing Assets Sold ( THE MANILA TIMES, 3 Sep 86) seer ewveeeeeeeeneeeeeeeeeeeeeee

Peso's Exchange Rate Declines; Dollars Sold (Noel D. de Luna; BUSINESS DAY, 5 Sep 86) eee eeeeeeeeeeee

Central Bank Sells All Three-Year Treasury Notes (MANILA BULLETIN, 6 Sep 86 ) see veeeeeeeeeeeeeeeerereeeeeeeee

Central Bank Reduces Rediscount Rate (BUSINESS DAY, l Sep 86) see ereeeeeeeeeeeeeeeeeneneeeeneeeeeee

Commercial Banks' Assets Drop 1.5 Percent (BUSINESS DAY, l Sep 86) eee eeeeeeeeeeeeeeeeeeeeeereeeeee

May 86 Retail Price Index Rises Slightly During May (BUSINESS DAY, 3 Sep 86) eeeeeeeeeeeeeeeeeeeeeeeeervreceeeee

Economic Indicator on Decline of Gross Credit (BUSINESS DAY, 1 Sep 86) “ee eeeeeeeneeeteeeneneneeneeeneeeeeeeeeee

Economic Conditions in Central Visayas Worsening (Manuel S. Satorre; BUSINESS DAY, 3 Sep 86) ....seccceeess

Food Authority Faces Rice Surplus Problem (BUSINESS DAY, 3 Sep 86) eeeeeeeeeeeeneeereeeeeeeeeeeeeee eee

Production Value Index Drops 7.6 Percent (BUSINESS DAY, 5 Sep 86) *eeeeeeeeeeeeeeeeeeeeeeeeeeee ee ee

Domestic Liquidity Rises 5.89 Percent (BUSINESS DAY, 8 Sep 86) *eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

Labor, Management Disagree Over Conference (M. Selirio; BUSINESS DAY, 3 Sep 86) seeneeeeneenrereeeeeeeeeeee

Article on Ailing Institutions Cost to Government (Daniel Cc. Yu; BUSINESS DAY, 8 Sep 86 ) eeeeeeeeeeeeeeeeeee

Deputy Minister Says CHDF To Be Retained (Romy Dizon; PHILIPPINE DAILY INQUIRER, 2 Sep 86) ........

Special Report on Situation in Negros (Amando Doronila; THE MANILA CHRONICLE, various dates) ...


















Weekly on Political Background of Misuari (Alex S. Villanueva; NEW DAY, 8 Sep 86) ....ccicecccccceees

MALAYA Editorial Lauds Aquino-Misuari Meeting (ANG PAHAYAGANG MALAYA, 8 Sep 86) eeeeeeeeeeeeeeeeeeeee eevee

Sison Hits U.S. Bases Before Japanese Audience (THE MANILA EVENING POST, l Sep 86) eeeeeeeeereeeeeeeeeeeeee

NPA Member Tells of Setback After ‘Revolution’ (FHILIPPINE DAILY INQUIRER, 6 Sep 86 ) ereeeeeeeeneeeeneereeeee

NPA Guerrillas Attack Town Hall in North (AFP, 1 Sep 86) seep eeaeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

Columnist Laments CP?'s ‘Uncompromising Position’ (Orlando F. Aquino; MANILA BULLETIN, 2 Sep 86) ....eeeeeees

Paper Urges Listening to All Sides in Mindanao (Editorial; MANILA BULLETIN, 6 Sep 86) eseeeeeeeeeeeeeeeeeee

Tatad on Military Fears Over Talks (Francisco S. Tatad; BUSINESS DAY, 3 Sep 86) ...seseeeseees

Columnist on Handling of Ceasefire Talks (Melchor P. Aquino; MANILA BULLETIN, 3 Sep 86) .....seeee+.

Army Official Assures Capability of Military (BUSINESS DAY, 3 Sep 86) eeeeeee eo eee eeee ee eee eeeeeeeeeeeeee

Supreme Court Warns Military on Rights, Abuses (R. G. Panaligan; MANILA BULLETIN, 6 Sep 86) ....seseeeseees

Bicol Military Accused of Human Rights Violations (THE MANILA JOURNAL , S Sep 86) eeeeeeeeeeeeeeeeeeeeeeeeeer ee

Officers Group Denounces Military Discrimination (Proculo Maslog; THE NEW PHILIPPINES DAILY EXPRESS,

2 Sep 86) eeeeeeee ee eee eee eee eee eeeeeeee eee eee eeee ee eeeeeee

Military Says NPA Set Up Davao del Norte Ambush (THE NEW PHILIPPINES DAILY EXPRESS, 2 Sep 86) ...ceeseeeess

Paper on Insurgency's Impediment to Democracy (Editorial; MANILA BULLETIN, 2 Sep 86) eeneeeeeeeeeeeeeeeeee

Military Denies Breaking Davao del Norte Ceasefire (Lito Mangaser; THE MANILA CHRONICLE, 3 Sep 86) ...sseeeees

Analysis Notes ‘Fast-Rising' Level of Frustration (Luis V. Teodoro; THE MANILA CHRONICLE, 1 Sep 86) ......6..

eo Eg @=
















National Political Party for Women Organized (BUSINESS DAY, 5 Sep 86) see eeereeeeeeeeeeeeeeeeeeeeeeeeeeee

Valencia on Formation of Partido NG Bayan (Teodoro F. Valencia; THE NEW PHILIPPINES DAILY EXPRESS,

2 Sep 86) eee eee eeeeee eee eeeeeeeeeeeeeeen eee eee eeeereeeeeeee

Commission Opens Heariags on Marcos Wealth (AFP, l Sep 86 ) eee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeete

3,000 Loyalists Hear Taped Marcos Interview (Lito Zulueta; THE MANILA CHRONICLE, 8 Sep 86) ..cesececees

Briefs Trade Zones’ Export Earnings New Political Party Formed Military Participation in Peace Talks


Leaders Receive National Day Greetings From Socialist Countries (VNA, various dates; Hanoi Domestic Service, 6 Sep 86) ....

GDR, Hungarian, Other Messages Polish, Nicaraguan Greetings Praise From Afghanistan

Bulgaria, Poland, Cuban Greetings Japanese, Others Mark National Day UK Amity Group Marks Day

Greetings on Bulgarian National Day (VNA, 8 Sep 86) eevee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee






98 98 98


99 101 101 102 103 103


JPRS-SEA-86-174 26 September 1986



("The White Paper" column by Hermes Vittorio: "U.S. Military Facilities: Their Strategic Factors")

[Text] In a few days, the Con-Com [Constitutional Commission] will hold a plenary session on the controversial issue of U.S. military facilities in the Philippines and their foreign policy implications. Despite the raging polemics, there is a growing sense that the majority of the Con-Com members still favor the retention of the facilities until 1991.

These facilities are here to stay.

Despite the majority votes favoring retention, however, the supporters of the U.S. facilities should come clean and candidly admit that these facilities are not primarily for Philippine but for American strategic policy. In the scheme of things, military calculations will show that the Philippines is merely secondary in American strategic thinking.

Based on the U.S. global security network, the military facilities in the Philippines have two purposes: an "ideal" deterrent system, and as part of the command, control and communications (3 C's) system vital to the development of weapons technology and strategic doctrine.

According to U.S. military calculations, intelligence and early warning systems (EWS), of which Clark and Subic are major installations, more than deter a per- ceived surprise attack. They identify targets necessary for the planning of counterforce attacks as well as locate missile silos and bomber bases, enemy command and control centers and other military installations of the American enemy. Without the Clark and Subic facilities, current U.S. strategic doctrine would have to be changed entirely. This they can carry out right now.

Consequently, the strategic implications for the are not indepen- dent of U.S.-Russian strategic thinking. Because of the unstable global strategic structure, there is no doubt that the Philippines is a cockpit in the nuclaer arena. Both the U.S. and the Soviet Union, by their very state- ments, have targeted the Philippines as a potential for counterforce attacks and selective and flexible response by America's enemy. Any military conflict

involving the great powers in the area will not preclude the Philippines as a prime target of attack. Since these facilities are more strategic- than tactical-oriented, the argument that they are here to defend the Philippines does not follow. These facilities will never be used in isolation. This means that they are for American rather than Philippine reasons. They will be used ior American reasons and purposes. They are not and have never been for mutual defense. Commitments therefore are doubtful.

American military facilities in the Philippines are unreliable in terms of Philippine defense against Philippine enemies. The U.S. will decide whether aid is to be given or not. In terms of strategic rather than conventional thinking, these facilities therefore become a reason for threat. Remove them and the threat disappears.

The Con-Com therefore is called upon to study the realities in the area before any decision on the U.S. military facilities is finally made.

/7358 CSO: 4200/1425

JPRS-SEA-86-174 26 September 1986


PAPER ON USAID ‘PRESSURE’ ON PALAY SUPPORT PRICE HKO31253 Quezon City BUSINESS DAY in English 2 Sep 86 p 2 [Article by reporter Michael D. Marasigan]

[Text] Notwithstanding the repeated denials of Agriculture and Food Minister Ramon Mitra and his deputy minister Emil Ong of the National Food Authority (NFA), the United States Agency for International Development (USAID) may have indeed pressured the government into lowering the support price for palay.

Documents obtained by BUSINESS DAY showed that Peter Timmer, a USAID grains expert, has submitted to the government as early as April a working paper on alternative palay procurement prices and retail prices for rice.

The government, through the NFA council, last week approved in principle to reduce the support price of palay from P3.50 to P3 a kilo. Sources further said a reduction in the support price of corn, from P2.90 to P2.50 per kilo, will also be implemented once the NFA is provided its procurement funds.

Several farmer organizations protested against the NFA decision, claiming that the government has again yielded to pressure from foreign interests, in this case, USAID. However, both Mitra and Ong denied that there was such a pressure.

The USAID has been extending soft loans to the Philippines to finance develop- mental projects. It agreed last week to convert about $99 million worth

of long-term loans into grants. In addition, it also approved last week a $20-million grant to finance agricultural projects.

NFA employes admitted that there was really pressure from the USAID. They claimed it was related to the country's consumption of wheat. The U.S. is the Philippines’ biggest supplier of wheat.

The strategy is simple, the sources said. Once the support price for palay is brought down, fevmers will be discouraged from planting palay since it is no longer profitable. In a scenario like this, it will be justifiable to increase wheat importation.

There is a ban on rice and corn imports but there is no such restriction on the importation of wheat. Too much importation of wheat could adversely affect both the rice and corn industries.

Thus, increased wheat importation should first be justified. Rice production should be inadequate so that consumers will buy more bread products.

But wheat is not only used for bread. It could also produce feed substitutes (by-products) such as bran and pollard. This could severely affect the animal feed market for corn and rice bran.

This issue, however, is not discussed in the Timmer working paper. The government's official reason for lowering the support price for palay is to enable the FNA to buy more despite its limited funds.

On the other hand, the Timmer report emphasized that the NFA will need a huge subsidy if the difference between palay procurement prices and rice retail prices is narrow.

But if the margin is wider, the NFA would only need a little subsidy or no subsidy at 211. Thus, the support price should be lowered to widen the margin.

The Timmer report cited several prices for palay procurement (ranging from P2.70 to P3.50 per kilo) and rice retailing (ranging from P6.50 to P8 per kilo).

At a support price of P2.70 per kilo, the NFA would only require a subsidy amounting to P8 million if it retails the rice at P6.50 per kilo. No subsidy will be required if the retail price is raised to P7 per kilo.

At a support price of P3 per kilo, the subsidy would amount to P363 million at a retail price of P6.50 per kilo. The subsidy could go down to P77 million if the retail price is brought up to P7 per kilo. No subsidy is necessary if the retail price is set at P7.50 per kilo.

At a P3.50 support price, however, the subsidy would start at P163 million if the retail price is fixed at P8 per kilo; P490 million at P7.50 per kilo; P980 million at P7 per kilo; and a staggering P1.63 billion if the retail price is maintained at P6.50 a kilo.

In a dialog with agriculture officials, farmer leaders of the Kilusang Magbubukid ng Philipinas [Peacants' Movement] yesterday said that instead of widening the margin, the government should convert the P3.50 support price into a “floor price.”

If this is not possible, the farmers asked that the support price be maintained at P3.50 and the government's procurement funds be increased.

Deputy Minister for Agriculture and Foo Carlos Dominguez told the farmers that their requests will be considered. However, he informed the farmers

that the government is really short of funds and may not be in a position to increase the NFA's procurement budget.

At the same time, he saic, it will be difficult to mandate a floor price since this would run counter to the government's policy of minimizing market intervention. There is also a possiblity that traders would refuse to buy palay if the support price is converted into ~ floor price,” he said.

/6662 CSO: 4200/1415

JPRS-SEA-86-174 26 September 198



[Text] The Philippines has proposed to the Japanese Government the use of the peso counterpart funding of three loans from Japan's Overseas Econonic Cooperation Fund (OECF) to finance critical government expenditures this year.

Finance Minister Jaime V. Ongpin submitted the proposal concerning the eight, ninth and a portion of the present 13th OECF yen package to fund the government's Rural-Based Eaploysent Progras.

Ongpin said the Japanese gcvertaoment's approval of the request would be regarded highly and that future budget programs would give priority to providing peso counterpart funding for conventional Japanese-assisted projects. Ongpin's proposal would mean a P5,777-million net inflow into the expenditure progrum for this year, basud on the current exchange rate.

Documents made available to BUSINESS DAY indicate that the eighth yen loan package has $74.8 million undisbursed since May 1984, when the yen package was made available. They also show that the ninth yen loan package has $103.6 million which can be tapped, and a proposed special commodity loan {n the 13th

yen package, can provide $103.3 sillion.

The Philippines has agreed to drop 4 «? 11 projects in the 13th yen package. It has proposed that credit for the 4 projecte be converted into a special

commodity loan.

Ongpin said this conversion would be “essential in building up (the country's) international reserves and in financing the government budget deficit.”

A BUSINESS DAY source in the Japenese embassy yesterday said Japan has received the Philippine request for the use of the peso counterpart funding to finence the employment programs but has not yet responded. The source explained thet the Philippines and Japan agreed last December to convert one- third of the $245 million in the 13th yen loan package into a commodity loan to finance imports, and to use the remainder to finauce 11 projects [word indistinct] the previous administration to the (CF.

The rew government has scrapped four of the projects because they were “political projects” of persons close to the past administration. The embassy source said that in view of the “already long pipeline of credit assistance” available to the Philippines, the Japanese Government has asked for additional documents to justify the conversion of loans for the four projects into a commodity loan. The Central Bank and the Ministry of Finance have submitted the documents. The source said the Embassy understands the government's urgent need to get Tokyo's response. A follow-up cable was sent to the OECF Tokyo office the other day, other sources said.

Ongpin also told the Japanese government that complete disbursement of the eighth OECF loan is expected by the end of this month. He said regulatory limitations had previously prevented fast use of the facility. Libralized rules have stcpped up disbursements, he said.

Ongpin proposed that, to facilitate disbursement from the ninth loan and the special commodity loan, the same liberalized procedures be adopted and that the list of commodities eligible for funding be expanded.

Ongpin said Japanese government support through new OECF commodity loans and liberalized procedures for disbursements would help the Philippines greatly in achieving a favorable balance of payments this year.

/12913 CSO: 4200/1413



[Text] Harare, 3 Sep (PANA)--The Philippines needs the assistance of anti- imperialist and other democratic forces in the world to get rid of U.S. domin- ation so as to become genuinely independent and thereby make full contribution for peace and non-alignment.

This was said by the representative of the opposition National Democratic (NDF) [as received] of the Philippines, Luis Jalandoni, in an interview with PANA.

He said that his front would continue to press for the dismantling of the more {words indsitinct] military bases in the Philippines as well as the domina- tion of the economy by [words indistinct] country's trade.

Jalandoni said the Philippines cannot qualify to be a nonaligned country if the military bases of the U.S. are not (?dismantled) because these were being used as launching pads for attacks against other countries.

The front condemns the misuse of the U.S. bases in the Philippines for sending aircraft carriers, troops and war material to the coast of Libya to threaten the people and Government of Libya and endanber peace and security in that region of the world, Jalandoni said.

He said this was not the first time it had used the military bases in the Philippines as launching pads of intervention. It did this in the 1960's against the people of Vietnam, he said.

On the peace talks between his front and the new government of President Corazon Aquino, he said these were being sabotaged by the U.S. which had doubled military aid to the Aquino government and was pressing it to go for a military solution to the Philippine problem.

He reiterated the resolve of his front to achieve a peaceful settlement based on a comprehensive agreement which would include a nationwide ceasefire.

However, he said, this was being sabotaged by Defence Minister Juan Ponce Enrile and the Armed Forces chief of staff, (?Gen.) Fidel Ramos, who had

intensified military repressions especially in the countryside, where he claimed his front controlled 62 of the 73 provinces.

He said his front's 30,000 combatants were implementing a policy of active defence and were restraining themselves from nationwide tactical offensive.

However, we reserve the right to actively prevent troops of Defence Minister Enrile and Gen. Ramos from committing acts of harassment and brutality against the people and entering our guerrilla fronts, Jalandoni said.

He said Aquino had a genuine desire for a negotiated solution but her defence minister and Army chief of staff were sabotaging her efforts.

On the ongoing summit of the Nonaligned Movement, Jalandoni [words indistinct] being taken to increase the anti-apartheid struggle in Namibia and South Africa and the Frontline States.

We hope that concrete steps will be taken so that the self-reliance efforts of these peoples and states will be complimented by militant assistance and solidarity to bring about the definitive abolition of apartheid, he said.

/6662 CsO: 4200/1415

JPRS-SEA-86-174 26 September 19



[Text] Six months after it assumed power, the Aquiono government has finally put together a broad outline of its economic thrust, strategies for develop- ment and overall thinking on key policy issues which businessmen and invest- ors alike have been waiting for.

The broad outline was drafted by a number of close presidential advisers in preparation for President Aquino's trip to the United States starting the middle of this month.

In a capsule, the Aquino government, according to this broad outline, will endeavor to keep the Philippine economy open, vigorously encourage local

and foreign investments, abandon a labor-intensive industrialization program and scrap a commodity-led export strategy.

The Aquino government is committed to a policy of an open economy and is distancing itself from the "isolationist stance" advocated by some quarters in the economy.

At the same time, however, the new government does not intend to swallow prescriptions of the International Monetary Fund-World Bank “hook, line and sinker." In fact, it said, some economic prescriptions of the IMF and the World Bank are seriously flawed.

The new government does not intend to focus its export strategy simply on the export of raw materials. It said export-led development should be seriously restudied in the light of new developments in the international economic environment.

At the same time, the Aquino government does not intend to make economic growth purely dependent on the country's labor-cost advantage. In today's environment and in view of recent technological developments, labor-intensive technology is no longer effective especially with the advent of robotics, it said.

Labor, in today's international economic setting, no longer provides the so- called comparative advantage which was true during the ‘60s and ‘70s. In


the coming decade, the new government believes capital will be the key to development .

The economies that provide the cheapest cost of capital for development will most likely be the ones to succeed in the coming years. Thus, the real rate of interest must be brought down, the government said.

In addition, the new government will increasingly shift its attention away from the never-ending negotiations with the IMF, the World Benk and the country’s creditor-banks. It will widen its scope of coverage to include as well other sources of capital fund.

In view of these, the Aquino government would work toward making the invest- ment climate in the country as attractive as possible for both local and foreign investors.

These [as published] broad policy outline which the President will discuss in her visit to the U.S. was disclosed yesterday by Jesus P. Estanislao, chair- man of the Development Bank of the Philippines (DBP) and who is believed

to be one of the key presidential advisers that drafted the framework.

Estanislao yesterday spoke before the American Chamber of Commerce of the Philippines and said this broad indication of the stand of the new government principally reflects a new approach as a result of international developments.

Basically, he said, the notion of an inter-linkage between agriculture and industry in development has slowly been eroded and that worldwide developments indicate that such a linkage has already been broken with agriculture and industry going their separate ways.

In the case of industry, there is no longer a connection between industrial production and industrial employment as data on the world economy during the last decade (1975 to 1984) showed that while industrial production went up by 40 percent, industrial employment actually fell by five million people.

Estanislao also pointed out that there is no longer any linkage between capital movement and trade surplus. A clear example, he said, is the United States which continues to suffer a substantial trade deficit but, on the other hand, continues to attract capital.

Estanislao said the Aquino government's economic program, which is now being finalized, will be completed by the end of this month.

Principally, it will focus on the development of farm products for domestic consumption. There will be a deliberate effort to reduce the total number of food items imported by the country.

At the same time, the government will work toward rebuilding its consumer goods industry. The rehabilitation will be undertaken in line with the need to upgrade the industry's standard in order to meet international competition. Tariff protection of 5 percent to 10 percent will be given.


The Philippines will also go into production sharing arrangements. These will entail the linking of the Philipoine economy with international produc-

tion processes, something which an observer noted, is what t*> IMF-World Bank wants.

Industry observers told BUSINESS DAY that the pronouncements made by the government on its economic orientation would perhaps clear once and for all the leaning of the Aquino government.

/6662 CsO: 4200/1415


JPRS-SEA-86-174 26 September 1986



[Text] Economic Planning Minister Solita C. Monsod has not given up efforts to reduce the country's foreign debts through her controversial case-to-case disengagement, or the nore diplomatic term for selective debt repudiation.

Monsod said that she already has an itemized listing of the foreign loans stating the nature of the borrowing, the names of the borrower and creditors and the date they were contracted. She said that she was furnished the listing by the Central Bank [CB] last month that contained the loans inventory made by the CB 1984. Monsod pointed out that she would ask the help of some businessmen in identifying which of the foreign loans would be eligible for the case-to-case disengagement scheme. She said that the eligible loans would be those with which the tacit knowledge of the creditors, were contracted for projects that were grossly overpriced and non-feasible and those where there is strong evidence that the money was incurred to finance “ghost” projects and essentially aimed at capital flight.

While many in the Aquino Cabinet favor such scheme in reducing the country's debt burden, some bankers have cautioned that this could further delay the planned restructuring negotiations with the foreign creditor banks. The delay in the approval of the standby credit by the International Monetary Fund (IMF) has already pushed back the planned talks with the commercial bank creditors.

Monsold' case-to-case disengagement plan, however, could well serve as a good bargaining point in the Philippines’ negotiations for a lighter debt burden with the foreign banks.

For one, part of the loans identified as eligible for litigation could be traded off for lower interest charges on rescheduled loans.

/12913 CSO: 4200/1413




[Text] Economic Planning Minister Solita C. Monsod is proposing that the Philippines pay interest on foreign debts only if there is foreign exchange left after deducting import payments from export earnings.

If imports equal or exceed exports, the unpaid interest will be considered “new loans" automatically, according to her proposal.

Monsod said she would “push very hard" for such an arrangement with foreign credit banks, calling it an “interest conversion scheme."

"I'm going to be pushing for it so hard, as hard as I'm pushing for internal structural reforms," she said.

She said she expects the creditor banks to “react very badly because auto- matic capitaliziation of interest is a no-no," but added, “we just have to

keep pushing."

The minister emphasized that the Philippine economy "is trying to grow,” and that growth is impossible when all of the country's foreing exchange earnings are spent on foreign debts.

A local banker interviewed by BUSINESS DAY said Monsod is following the example Peru has set in dealing with international creditors, but is “modifying” it. Whereas Peru has acted unlaterally in limiting foreign debt payments to a portion of its export income, the Philippines hopes to ne- gotiate with its foreign creditors to accept the proposal.

However, the banker said, "We're just going to be buying time with that proposal, I guess. She (Monsod) cannot convince the bankers to turn the unpaid interest into equity.”

/6662 CSO: 4200/1415



[Text] Trade and Industry Minister Jose S$. Concepcion Jr. yesterday said that a number of products would continue to receive protection from the government.

This means that of the 304 items still excluded from the government's trade liberalization program, only about 138 products will be liberalized.

Concepcion made this disclosure in reaction to earlier reports that the International Monetary Fund (IMF) and World Bank (WB) “were dismayed" by a government decision declaring a three-month moratorium in the full implement- ation of the import liberalization scheme.

Covered by the moratorium were 304 products on which the government were to conduct hearings to determine which of the items “will be free and which will continue to receive protection."

The government has so far lifted import controls on some 939 products or short of the 1,243 items demanded by the IMF.

The IMF has demanded the lifting of import curbs on the products in connection with the country's bid for a new standby credit.

According to Concepcion, the IMF and WB should not be dismayed over the moratorium declared on the 304 products “because the government is doing a ‘tailored program’ to come up with a healthy compromise on the issue."

He added “the Philippine government, through Finance Minister Jaime Ongpin, will be sending a telex to the IMF today to explain the deferred implementa- tion of import liberalization program."

The telex will include the results of the 12 public hearings that the MTI [Ministry of Trade and Industry] has so far conducted. The moratorium on the liberalization program will expire this October 31.

/6662 CsO: 4200/1415


JPRS-SEA-86-] 26 September



{[Text] The government will liberalize the importation of 80 more commodities by the end of this month. They are among the 137 commodities that were sche- duled to be liberalized last April 30, Trade and Industry Minister Jose S. Concepcion Jr. said.

Concepcion also said the government will comply with the deadline set by the International Monetary Fund and the World Bank on May 1, 1988 on the absolute deadline for the deregulation of the remaining commodities under the current program which covers a total of 1,232 items.

Among the 80 items to be liberalized this month are steel products (which accounted for 43 items), high tariff rubber-based and wood-based items, new tires, vinyl-asbestos tiles and sheets, synthetic resins and paper products.

The remaining 54 items due for liberalization in April are currently being reviewed and a plan of action on what to do will be available by the end of next month, Concepcion said.

The 80 items will be deregulated as soon as adjustments on their import taxes are made within this month.

Other commodities still regulated, including 169 items scheduled to be liber- alized by the end of this year and anothe: 77 items by the end of June next year, will be reviewed and a program of action will be available by the end of this year, he added.

The import liberalization program is one of the key policy reforms that the government has committed to undertake under the letter of intent it had sub- mitted to the IMF.

The government has furnished the IMF with the results of consultations with the affected sectors. Substantial compliance with the import liberalization plan is one of the IMF requirements for approval of a Philippine request for a new standard by arrangement.

/6662 CSO: 4200/1415


JPRS-SEA-86-174 26 September 1986



["Economic Indicator" column: "Raw Material Imports Rise"]

[Text] The country's imports of raw materials and intermediate goods in the first half of 1986 rose by 15.30 percent to $1,246 million from $1,072 mil- lion during the first six months of 1985, latest data from the Central Bank showed.

This represented 51.04 percent of vital imports of P2,441 million in the first half of the year.

These commodities included wheat, inedible crude materials, animal and vege- table oils and fats, chemicals, manufactures, embroideries, materials and accessdries for the manufacture of electrical equipment, and iron ore (not agglomerated).

Purchases of raw materials used in the manufacture of rubber, paper and paper products, textile yarn, fabrics and made-up articles, iron and steel, nonOferrous metals and metal products reached $291 million, up 19.26 percent from last year's $243 million. Responsible for the increase was the substan- tial 44.72 percent growth (from $65 million in 1965 to $94 million) in the purchase of raw materials used in the manufacture of iron and steel.

In terms of volume, 330,000 metric tons of these materials were imported at a unit price of $284 per metric ton compared with the 169,000 metric tons purchased in 1985 at a unit price of $384 per metric ton.

[Word indistinct] reason for the increase was the 41.94 percent hike in the purchases of raw materials for textile manufacturing to $28 million during the first six months of 1986 from $62 million in 1985.

[Table on following page]


Raw Materials and Intermediate Foods Imports January to June 1985 & 1986 (FOB value in million US dollars)

Commodity 1986 1985 Z of change Wheat 60 51 17.65 Crude materials, inedible 113 67 68 .66 Animal & vegetable oils & fats 6 8 (25.00) Chemica! 328 270 21.48 Manufactures 291 244 19.26 Embroideries 106 102 3.92 Materials & accessories for manu-

facture of electrical equipment 308 304 1.32 Iron ore, not agglomerated 24 26 (7.69) Total 1,236 1,072 15.30

Source: Central Bank

/6662 CSO: 4200/1415



COCONUT EXPORTS RISE 115.6 PERCENT HKO81211 Quezon City BUSINESS DAY in English 8 Sep 86 p 3

[Text] A generally much lower price for coconut oil pushed up the volume of coconut product exports by as much as 115.6 percent to 1,260,582 metric tons in copra terms during the period of January to July this year from 564,637 metric tons last year.

The average coconut oil price for the seven-month period was reduced by sore than half to $311.29 per metric ton from the previous year's record of $684.46 per metric ton. As a result, total export receipts increased by only 6.6 percent from $313,511 million to $334.04 aillion despite the substantial increase in volume.

The latest available data from the United Coconut Association of the Philippines, Inc. (UCAP) showed that coconut ofl accounted for the bulk in terms of both volume and value.

Representing 86.3 percent of the total volume (copra terms), coconut oil shipped during the period amounted to 685,622 metric tons, marking a 127.8 percent increase from lest year’s 301,000 metric tons.

In terms of value, coconut oil improved 3.6 percent from $206.02 aillion to $213.43 million, accounting for 63.9 percent of the total for all coconut products.

The second biggest earner among coconut products was copra meal with $39.97 million or 191.7 percent sore than last year's $13.7 aillion. The total shipment likewise went up 152.3 percent to 460,262 metric tons from 182,412 metric tons.

All copra seal exports went to Western Europe which has become the Philippine's biggest buyer of coconut products. The continent, during the period, again edged out the United States as the country’s biggest buyer of coconut oil.

Although the US and Western Europe combined accounted for almost half of the country's total coconut oil shipments, buying 45.7 percent and 42.8 percent, respectively, Europe's total coconut oil purchase increased gore than three- fold fro 73,730 metric tons last year to 313,181 setric tons.


The US reported a 71.6 percent increase from last year's volume of 171,079 metric tons to 293,609 metric tons. In terms of value, however, the United State's $92 million worth of coconut ofl purchased during the period was not very far from Europe's $%6.26 million.

It was only in 1983 that Europe bought more coconut oil from the Philippines than the US. During that year, the Europeans bought 442,339 metric tons against the Americans’ 426,612 metric tons. In terms of value, however, the USA's purchases were bigger at $225.92 million against Europe's $204.96 aillion.

Exports of copra which resumed last March also went mostly to Europe. During the period, a total of 26,153 metric tons were exported to Korea, Taiwan, Japan, and Europe. Total shipments were valued at $3.33 million.

Europe accounted for more than a third, buying 9,000 metric tons for $1.14 million.

Exports of coconut products are expected to increase this year following a substantial improvement in production. According to UCAP’s initial forecast for 1986, total output will reach 2.15 million metric tons, a 9 percent increase from last year's 1.973 million metric tons in copra terns.

Due to the expected increase in overall production, UCAP estimates that the total exportable volume will reach 1.795 million metric tons from 1985's 1.254 million metric tons.

/12913 CSO: 4200/1413

JPRS-SEA-86-174 26 September 1986



[Text] Justice Minister Neptali A. Gonzales warned yesterday of communist take over if the government fails to implement immediately a genuine land reform in the country.

Speaking before a group of lawyers of the Ministry of Agrarian Reform (MAR), Gonzales said that “a genuine land reform must be a reality in our time.” He said that failure on the part of the government “may drive the people into