Announcement of the World Bank’s 1981 Annual Report Approval of Five Hundred Thirty-Three Million for Philippines in Fiscal Year 1981

. ' HOLD FOR RELEASE . . :-World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. AR 81/17 EMBARGO: For publication on Monday, September 21, 1981 WORLD BANK APPROVED $533 MILLION FOR PHILIPPINES IN FISCAL YEAR 1981 World Bank lending to the Philippines reathed $533 million in fiscal year 1981, according to the Bank's Annual Report released today. The year's largest loan of $200 million was approved for financing struc- tural adjustment, which, the Report says, is "based on a comprehensive set of industrial and trade policy reforms being implemented by the government." The funds will be used to finance the import of raw materials, intermediate and in- ve$tment goods and spare parts needed to stimulate industrial growth, non- traditional exports and employment. The second largest loan, for $150 million, went to the Apex Development Finance Unit. This project represents a new approach in Bank lending, whereby funds are channeled to a single agency (the Apex Unit), which in turn, lends to domestic banks to finance industrial development. Other loans include $100 mill ion to strengthen elementary education and a total of $83 million for two projects in agriculture and rural development. Of the two, a $45 m!llion loan was approved to provide medium- and long-term credit (through the Development Bank of the Philippines) to the livestock and fisheries sectors. The second loan (for $38 million) is for reforestation, construction and maintenance of rural roads and several pilot projects. The Philippines• Economy Like the other oil-importing nations of the iegion, the Philippines was "deeply affected by recent events in the international economy," the Report notes. "The approximate doubling of nominal petroleum prices between mid-1979 and mid-1980 cost these countries some 4-6 percent of their real incomes." In addition, it states that unlike the situation in 1974-75, (with the first round of oil price hikes), these countries were unable to compensate for the loss by increasing the price of their exports. I . •. NOTE: Money figures are expressed in U.S. dollar equivalents.  - 2 - The Report observes that as a result of the loss in terms of trade, the government will be required to "reduce current account deficits, if not immed- iately, then at least in the medium term." • But, the deteriorating climate of world trade, the Report warns, will "make it difficult to . effect the adjustment by increasing exports." Also, the Annual Report states that inflation pressure was "less strong" but the rate sti11 increased by 18 percent. Morever, ln the government's attempt to control inflation, by adopting a tight monetary policy and selective price freezes, the country's growth momentum was somewhat reduced. It observes, however, that some progress was made in alleviating poverty. "Based on some economic and social indicators, the incidence of poverty probably declined a few percentage points by the end of the 1970s." The Region With regard to reducing poverty in the East Asia and Pacific region, in generai, the Report notes that while some progress was made in the last few years, there is now 11 a danger that increasing poverty wi 11 assert i tse 1f ••• unless governments can effectively counter the less favorable economic condi- tions that prevail and are expected to prevail in the future." It also states that on May 15, 1980, the People's Republic of China assumed China's representation at the Bank; following this, work on preparing a small group of high priority projects for that country began immediately. • - 0 - •  - 3 - •• WORLD BANK PROJECTS APPROVED FOR THE PHILIPPINES IN FY 1981 Structural Adjustment $200 Million to Stimulate Growth in Industry, Exports and Employment A structural-adjustment loan will support the implementation of a com- prehensive program of industrial development designed to accelerate industrial growth, expand employment, maintain the rapid growth of non-traditional exports, and stimulate industry outside the metropolitan area of Manila. Proceeds of the loan will be used to finance the acquisition of industrial raw materials, inter- mediate and investment goods, and spare parts, in addition to technical assistance for implementation of the program. ~lopment Finan~e Companies $150 Million to the Apex Development Finance Unit for Industrial Projects Funds will be onlent through the specially created Apex Development Finance Unit in the Central Bank of the Philippines to accredited financial institutions for the financing of projects in the industrial sector. Cofinancing ($400,000) is being provided by the United Nations Development Programme. Total cost: $250.4 mr11ro~. Education $100 Million to Strengthen Elementary Education To strengthen policies, manageme.nt, and instructional pr.ograms in elemen- tary education, some 60 subprojects will be undertaken during the next three years. Educational materials, buildings, equipment, training for managers, planners, and school staff, and a revised cu~riculum are included. Total cost: $448. 1 million. Agriculture and Rural Development $45 Million to Provide Credit to the Livestock and Fisheries Sectors The government's policy of increasing the supply of animal protein through provision of medium-term and long-term credit through the Development Bank of the Philippines to both the livestock and fisheries subsectors will be supported. Technical assistance designed to strengthen institutional capability for planning and implementing the current and future programs is included. Total cost: $140.66 million • • I • ••  - 4- • $38 Million for Reforestation, Rural Roads and Pilot Projects The project--including reforestation in two watersheds, construction and maintenance of forest roads, construction of charcoal ovens, pilot programs • in range manag~ment and smallholder agroforestry, and the initiation of pilot programs of forest protection in two provinces--will help preserve and enhance the productive capacity of the catchments and provide a permanent and better livelihood for the local population. Total cost: $75 million. - 0 - • •