Announcement of Philippines Consultative Group Meeting on June 17, 1976

•World Bank 1818 H Street, N.W., Washington, D.C 20433, U.S.A. • Telephone: (202) 393-6360 BANK NEWS RELEASE JUNE 17, 1976 PHILIPPINES: CONSULTATIVE GROUP MEETING The following announcement was issued yesterday at the World Bank's European office in Paris. The sixth meeting of the Consultative Group for the Philippines was held in Paris on June 15 and 16, 1976, under the chairmanship of the World Bank. Repre- sentatives of the following countries were present: Australia, Belgium, Canada, France, Federal Republic of Germany, India, Italy, Japan, New Zealand, Norway, United Ki,ngdom, and the United States. Norway participated for the first time and was represented by an observer. Also represented were the International Monetary Fund, the Inter- national Finance Corporation, the United Nations Development Programme, the Asian Development Bank and the Organization for Economic Cooperation and Development. The ~ Philippine delegation was led by the Honorable Cesar Virata, Secretary of Finance. The Philippine delegation reported on economic developments since the Consultative Group met last in October 1975. The Philippine economy had continued to grow at an annual rate of about 6% despite difficulties resulting from inter- national economic conditions. Inflation had been reduced to the moderate rate of 8% in 1975 and had fallen further to a level of about 7% for 1976. During 1975 and the first quarter of 1976, a significant deterioration in terms of trade had adversely affected the Philippines' balance of payments position. However, Phil- ippine exports are now increasing partly as a result of recently signed agreements for the export of sugar. In the long-term, the recent oi 1 discovery may offer the prospect of reducir.g imports of petroleum. International reserves remained at the 1975 level of $1. 1 billion and the external debt has been kept within manageable limits. Secretary of Finance Virata and his colleagues also reported on recent economic reforms with respect to taxation and interest rates and described new programs in agriculture and industry for the benefit of low income groups. The Government's delegation also reported on the effect of typhoon Didang, which had caused substantial flooding and other damage, but fortunately did not affect food • supplied adversely. Secretary Virata paid special tribute to those governments and agencies which were providing humanitarian assistance in the face of that disaster. I ... NOTE: Money figures are expressed in U.S. dollar equivalents.  • -2- staff. The meeting also discussed the longer term development prospects for the Philippine economy on the basis of the economic report prepared by the World Bank The Philippine Government stated that the report is serving as an important • source for their longer-term planning, and the meeting endorsed the development strategy set out in the report. It was agreed that the Philippine economy has the potential to grow at a somewhat more rapid rate than in the past and that a 7% an- nual growth in GNP and a broader distribution of the benefits of growth to large segments of the population was possible. To achieve these objectives, strong ef- forts will be needed not only to expand exports to alleviate the balance of payments constraint but also to increase employment to provide better standards of living. Further expansion of the public sector is essential and can be achieved through continued efforts to increase resource mobilization and improve the capacity of public sector agencies to implement larger development programs. Attention wi 11 need to be given to strengthening agricultural support programs to provide necessary increase in food production and in rural incomes. Continued support for the on- going agrarian reform is a central part of the Government's program. The Govern- ment is also taking steps to increase the coverage of its family planning program, particularly in rural areas, with the expectation of reducing population growth rate to less than 2.4% per annum by 1985. The meeting also noted that particularly high priority needs to be given to increasing industrial growth to provide jobs to • the rapidly growing labor force and to expand exports. The growth in exports is central to the Government's efforts to reduce reliance of foreign capital tnflows. The Philippine Government described its longer-term investment program and submitted a list of important investment projects, many of which require financing from foreign sources. The program is designed to meet major infrastructure and social needs of the growing economy and gives high priority to regional balance in future development. The meeting recognized that, despite development efforts by the Government and the favorable long-term prospects of the economy, the level of income of the majority of the population is still very low. Thus, substantial capital from abroad, including considerable assistance on concessional ar semi-concessional terms, wi 11 continue to be necessary for some years to sustain the Philippines' development effort. In the case of some large projects, co-financing by several sources of foreign financing is likely to be necessary. In order.that disbursements attain a level commensurate with the development expenditures required in the latter part of the decade and the 1980s, the Philippines wi 11 need large new commitments of I . .. •  -3- • medium- and long-term loans in 1976 and 1977. The meeting confirmed that it was likely that the Philippines would be able to obtain the $600 million of new commitments of official development assistance, which was the target agreed at the October 1975 meeting of the Consultative Group. The meeting also agreed that the Government would need to seek about $700 million of official development assistance in 1977. This semi-concessional assistance would ensure that the necessary capital inflows would occur without adversely affecting the Philippines' strong debt servicing position. In addition, the Philippines' development effort wi 11 require very substantial amounts of medium- and long-term loans in form of official export and commercial credits. The Government also welcomes foreign private investment which it considers an important source of financing for the Philippine development effort. It was agreed that the next meeting of the Group would be in June 1977 . • • - 0 -