Announcement of Meeting of the Consultative Group for the Philippines on April 23, 1971

n, t ltr\ 1-1/tHJ , JNTERNATIONA~L BANK FOR • RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 April 23, 1971 Subject: Meeting of the Consultative Group for the Philippines The following annoµncement was made today by the European Office of the World Bank in Paris: "The inaugu1:al meeting of the· Consultative Group for the Philippines was held in Paris on April 22 and 23, 1971, under the Chairmanship of the World Bank. Representatives of the following countries we~e present: Austraiia, Canada, Germany, India·, Japan, the Netherlands, New Zealand, Spain, Switzerland, the United Kingdom and the United States. Also re- • presented were the International Monetary Ftmd, the United Nations Develop- ment Programme, the Asian Development Bank, and the Organization for Economic Cooperation and Development. The Philippines delegation was led by the Honorable Cesar E.A. Virata, Secretary of FiQance. "The meeting was informed in a message from President Marcos that the Philippines intended to continue a development program consistent with social and economic stability and was committed to maintain fiscal discipline. The President's message stressed that the stabilization measures introduced ' by the Government would be greatly;. assisted by the orderly inflow o.f external financial assistance, suited to the country's development needs and potential. The Group discussed a report prepared by the World Bank on the problems and prospects of the Philippine. economy. It was agreed that the Government's policies of fiscal and monetary restraint had during the past year been • implemented with admirable courage and determination. There had been a /more  '-'"" I Consultative Group for the Philippines ... xi r, , I - 2 - significant· decline in the rate of monetary expansion in 1970 and an improvement in the Government's fiscal pbsition. Export earnings had Q • increased by 22% during the year resulting in an improved balance of payments position. The Group recognized the need for continuing stabiliza- tion measures and agreed that the implementation of a non-inflationary fiscal policy would help to moderate increases in the general price level and reduce pressures on the balance of payments. "The I>.eed to .regain the momentum of growth, which had been restrained by the stabi~iza~ion effort and affected by typhoon damage was stressed. The meeting noted that the overall investment level had declined and that a major effort at domestic and external resource mobiliz~tion ,was required if the GNP growth rate was to be sustained at the targeted average of 5% pP-r annum over the next four years. It was also agreed that an even higher rate of growth was desirable and could be attained given favorable develop- • ments. Reference was made in this connection to the declining share of public investment in total investment and to the urgency of mobiliz,ing additional tax revenues to reverse this trend. The Philippine Delegation indicated that the Govemment recognized the need for a more vigorous tax effort ancl that in addition to administrative measures which had raised additional revenues several tax mo!:IQnroQ Yo.,.'"' ~:!iti~g C.)ngressional approval. "The Group heard statements from the Ph;lippine Delegation on the revised targets of the Government's Four-Year Development Progrsm including a presentation on major development projects for which foreign assistance was being sought. It was noted that the level of infrastructure spending had been reduced but that th~ investment priorities were broadly in line with the needs of the economy. It was agreed that the absorptive capacity of the /more • }  .-. \ Consultati"f'e' Group for the ,Philippines i ,11 - 3 - public sector and the a11l\ation of adequate local funds were \J iltlPortant considerations in obtainin~\ external finance. The vital role played by i private investments -- both'domestic and foreign -- in meeting capital requirement for development was discussed. The Group was informed by the Philippine Delegation that seven non-pioneer areas conta:l::~1ed in the First Investment Priorities Plan of the Board of Investments will be'1 liberalized Ji for non-Philippine nationals in June of this year in accordance with law. "The meeting of the Consultative Group provided an occasion for the signing of a plan of operation for a. technical assistance project by representatives of the Government of the Philippines, the United Natioaa Development Programme and the International Bank for Reconstruction and • Development. The project would cover the costs of consultants' services require,d by the Board of Investments estimated at $803,000. The funds would be provided by the UNDP and IBRD would be the executing agency. "The Honorable Vi rat a indicated that he would welcome a survey ref.(ating to foreign investment in the Philippines to be financed. from funds available under the project. "In considering the longer term prospects of the economy, the Group expressed concern that despite the promising outlook for Philippine~exports and for long term growth,, the balance of payments would continue to reflect, through the seventies, the serious debt service burden caused by the accumu·· lation,of short and medium-term obligations. 'Ibey were encouraged, however, by the legislative and administrative measures which had been taken to keep external indebtedness within manageable limits. It was also recognized that ~ while the Philippines had the capacity to service this debt it would do so only by foregoing opportunities for growth. The Group was therefore of the /more  . I Consultative Group for the Philippines - 4 - view that there was need for quick disbursing aid and the Phili.pp,ines merited assistance from capital exporting countries and international institutiona on as liberal terms as practicable. "The importance, of aid coordination was discussed with particular reference to the power and transport sectors. As a result of discuss.ions between the Philippine Delegation and representatives of some participating count;ies and international agencies it was determined that there were good prospects for a package of international financing in the power ~ector amounting to $120 million -- to meet the immediate foreign exchange require- me~te of power generation, transmission and rural electrification projects. Similar possibilities for aid coordination exist in the transport sector. "It was agreed that the next regular meeting of the Consultative Group • would be held towards the end of April 1972. The leader of the Japanese Delegation invited the Group to hold the meeting in Tokyo." - 0 - •