Philippines - A Framework for Economic Recovery

A WORLD BANK COUNTRY ,,:,. ,--,I sw~-~ ~•1oec1• ....~. ~ ,,. t ·1 ~ -- WBG-LIB STACKS f :1 ~i HC455 .P523 1987 ..,~ World Bank. . ., V \ Philippines : a framework for economic PHILIPPI~S recovery. d! A Framework for Economic R~v~.x . ,,•,,..w.,,....•~,.,,...~~~ ....--.:.:...~~ 11111111111  A WORLD BANK COUNTRY STUDY u·,, ,,•_ '\;AL~iO'.'iiJ·: 1 .Y .,·1 , •• JOINT LliJHAHY PHILIPPINES A Framework for Economic Recovery The World Bank Washington, D.C., U.S.A. The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing July 1987 World Bank Country Studies are reports originally prepared for internal use as part of the continuing analysis by the Bank of the economic and related conditions of its developing member countries and of its dialogues with the governments. 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The most recent World Bank publications are described in the catalog New Publications, a new edition of which is issued in the spring and fall of each year. The complete backlist of publications is shown in the annual Index of Publications, which contains an alphabetical title list and indexes of subjects, authors, and countries and regions; it is of value principally to libraries and institutional purchasers. The latest edition of each of these is available free of charge from the Publications Sales Unit, Department F, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66 avenue d'Iena, 75116 Paris, France. Library of Congress Cataloging-in-Publication Data Philippines : a framework for econofflic recovery. p. cm. -- <A World Bank country study> ISBN 0-8213-0942-0 1. Ph111pp1nes--Economic conditions--1946- 2. Ph111ppines- -Economic policy. I. International Bank for Reconstruct1on and Developme~t. II. Serles. HC455.P523 1987 330.599'046--dc19 87-19697 CIP  CURRENCY EQUIVALENTS October 1986 US$1.0 = P 20.4 P 1.0 = US$0.05 Average 1985 US$1.0 = 18.6 P 1.0 = 0.05 Average 1984 US$1.0 = 16.7 P 1.0 = 0.06 Average 1983 US$1.0 = 11.1 P 1.0 = 0.09 ACRONYMS CB Central Bank CPI Consumer Price Index CRC Capital Recovery Component DBP Development Bank of the Philippines EPR Effective Protection Rate GDP Gross Domestic Product GFI Government Financial Institution gnfs Goods and non-factor services GNP Gross National Product GRT Gross Receipts Tax ha hectare h.c.v. Home Consumption Value H.Y.V. High Yield Varieties ICOR Incremental Capital Output Ratio IFS International Financial Statistics IMF International Monetary Fund ISF Irrigation Service Fees LBP Land Band of the Philippines LIBOR London Inter-Bank Offering Rate MAF Ministry of Agriculture and Food MOE Ministry of Energy MRR Manila Reference Rate MT metric tons NEC Non-essential consumer NEDA National Economic and Development Authority NFA National Food Authority NFPE's Non-financial Public Enterprises NIA National Irrigation Administration NPA's Non-performing Assets NPC National Power Corporation O&M Operation and Maintenance PCA Philippine Coconut Authority PGC Philippine Export and Foreign Loan Guarantee Corporation PIP Public Investment Program PNB Philippine National Bank PNOC Philippine National Oil Company UC Unclassified Consumer WPI Wholesale Price Index - iii -  PHILIPPINES A FRAMEWORK FOR ECONOMIC RECOVERY Table of Contents Page No. PREFACE vii SUMMARY AND CONCLUSIONS...................................... ix I. MACROECONOMIC OVERVIEW••••••••••••••••••••••••••••••••••••••• 1 A. Macroeconomic Developments: 1970-85 ...................•. 1 The Building of a Crisis: 1970-82 .....................•• 1 The Years of Stabilization: 1983-85 .......•......•...... 4 B. Macro-Adjustment for Growth•••••••••••••••••••••••••••••• 7 Recent Developments...................................... 7 Recovery Prospects....................................... 9 Medium-Term Prospects ••••••••••••••••••••••••••••••••••• 12 II. RESOURCE MANAGEMENT•••••••••••••••••••••••••••••••••••••••••• 16 A. The Balance of Payments•••••••••••••••••••••••••••••••••• 16 Recent Adjustments••••••••••••••••••••••••••••••••••••••• 16 Policies for Recovery•••••••••••••••••••••••••••••••••••• 19 Exchange Rate PolicY•••··••···•••·•••··•••••••••••·•••••• 19 External Debt Strategy••••••••••••••••••••••••••••••••••• 21 Implications for Creditors and Borrowers................. 22 8. The Financial Sector •.•..••...•....•..........•.......... 24 Recent Adjustments ■ •••••••••••••••••••••••••••••••••••••• 25 Requirements for Achievement of Sustainable Growth....... 27 Lowering Spreads and Real Interest Rates................. 28 Government Financial Institutions (GFis)................. 30 Crisis of Commercial Banks••••••••••••••••••••••••••••••• 32 Strengthening the Central Bank's Supervisory Functions••••••••••••••••••••••••••••••••••••••••••••• 33 This report presents the findings of a mission which visted Manila in April 1986. The mission consisted of Isabel Guerrero (Leader), Vittorio Corbo, Israel German, Hafez Ghanem, Kathie Krumm, Ahsan Mansur, Rakesh Mohan and Goran Segerlund. The report was updated and discussed with the Government in October 1986.  - vi - Page No. c. The Public Sector •.•.•...•...••••.•.••••••••••••••••••••• 34 Recent Developments and 1986 Outlook..................... 34 Consolidation of Central Bank Operations into the Financial Operations of the Public Sector............. 37 The Domestic Components of Fiscal Deficit................ 37 Structural Aspects of the Expenditure and Tax System.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Public Sector Expenditure•••••••••••••••••••••••·•••••••• 42 Elements of a Revenue Strategy for the Medium Term....... 43 Changes in Tax Administration........................ 43 Tax Reform........................................... 43 The Public Investment Program•••••••••••••••••••••••••••• 44 Recent Developments.................................. 44 III. THE PRODUCTIVE SECTORS••••••••••••••••••••••••••••••••••••••• 48 A. Agriculture ............................................. . 48 Requirements for Resumption of Sustainable Growth........ 50 Rural Credit••••••••••••••••••••••••••••••••••••••••••••• 50 Trade Policies........................................... 50 Exchange Rate ■ ••••••••••••••••••••••••••••••·•••••••••••• 51 Export Taxes ■ •••••••••••••••••••••••••••••••••••••••••••• 52 Agricultural ProductivitY••••••• • •••••••••••••••••••••••• 52 Fertilizers•••••••••••••••••••••••••••••••••••••••••••••• 54 Irrigation••••••••••••••••••••••••••••••••••••••••••••••• 55 Proposed Government Strate&Y••••••••·•••••••••••••••••••• 55 Rural Infrastructure••••••••••••••••••••••••••••••••••••• 56 Research and Extension•••••••·•••·••••••••••••••••••••••• 57 B. Industry . ............................................... . 57 Revitalizing Philippine Industry......................... 59 The Expansion of Exports••••••••••••••••••••••••••••••••• 61 Trade Liberalization•••••••••·•·•••••••··••••••••·••• 61 Electronics, Garments and the Quota System........... 61 Export Diversification and Promotion..................... 62 The Trade Reforms........................................ 64 Removal of Quantitative Import Restrictions.............. 65 STATISTICAL APPENDIX••••••••••••••••••••••••••••••••••••••••••••••• 67  PREFACE This economic report was discussed with the Government in October 1986 and distributed to the Consultative Group in November 1986. Since then, many reform measures have been undertaken by the Government which address key problem areas identified in this report such as taxation, public investment programning, the government financial institutions, and trade liberalization policy. Furthermore, the Philippine economy has started its way to recovery after nearly four years of contraction, and an accumulated drop in GNP of 10.6%. This preface briefly updates on the developments that have taken place since the end of 1986, while the rest of the report remains as it was pre- sented in gray cover at the end of last year. ~ Deflationary trends were reversed in the second half of 1986: GNP grew by 1.7% during the third quarter and by nearly 3.3% during the fourth quarter of 1986. Given the contraction of the first two quarters this resulted in a 0.13% growth of GNP for the whole year. Much of the improvement in economic activity came from agriculture fishery and forestry while the industrial sector as a whole declined. The expansion in aggregate demand was weaker. While real government consumption expenditures increased by 2.1%, personal consumption expenditure only increased by 0.8%, and total capital formation declined further by nearly 15%. Overall inflation as measured by the GNP deflator was only 1.5% in 1986 compared to 17.5% in 1985. However, 1n spite of the recent recovery, per capita GNP continued to decline in real terms in 1986. As a result, GNP per capita is now at 1974 levels in real terms. The latest balance of payments estimates show that the Philippines current account surplus in 1986 amounted to $0.9 billion, or 3.3% of GNP. The trade surplus continued to expand with both expo~ts and imports growing in real terms during the year. The main volume exPtJnsion in merchandise exports took place in crude coconut oil, copra oil and cake, gold and copper concen- trate. The higher than expected surplus is explained by a combination of a lower value of imports, higher service receipts, and higher transfers from abroad. Real interest rates substantially declined in the second half of 1986. By the last week of December, the Manila Reference Rate was down to 8.1%, compared to 11% in the previous year. Reserve money did increase in December, but the overall money supply (M3) remained stable. In 1986, the Philippines obtained substantial financial support from multilateral, bilateral and commercial bank creditors. First, the stand-by agreement with the IMF has remained on track and the government has drawn SOR 224.1 million from the Compensatory Financing Facility. Second, the Philippines successfully concluded negotiations with the Paris Club for a second rescheduling of official bilateral credits. Third, the Consultative Group on the Philippines endorsed the country's recovery program and the Medium Term Development Plan. Fourth, a multiyear rescheduling agreement was reached with the advisory committee of commercial banks in March 1987 which reduces interest margins on rescheduled debt and stretches the maturity of - vii -  - viti - previously restructured debt. Thus, it is expected that adequate official aid will be available to support the government's program. The national government deficit was broadly on target for the whole of 1986. However, the consolidated public sector deficit was well below pro- grammed levels. The fact that the the national government deficit remained within the expected range reflects the shortfall in public revenue. Lower revenues were the result of a combination of low growth and low imports, and lower than expected revenues from the tax reform package. As a result the deficit of the National Government was 4.7%, slightly higher than the pro- jected 4.4%. The process of building up political concensus for expenditure priorities of the new government, delayed expenditures on public investment and maintenance and on capital expenditures of public corporations. The economic recovery that began in the latter part of 1986, has gained momentun in the first quarter of 1987. Construction and manufacturing activities took off at an accelerated pace and combined to lead the recovery. Despite a temporary set back in agriculture, caused by weather conditions, the recovery seems to be broadly based and sustainable. Invest- ment activity has started to pick up, the balance of payments position is still strong, and domestic prices are stable. Manufacturing activity has picked up specially in investment-related industries. This has led to a significant increase in capacity utilization and to an increase in the level of capital goods imports. Overall the economy is estimated to have grown by 3 to 4% in real terms in the first quarter of 1987. A growth rate of 4 to 5% can be expected for 1987. As of March international reserves were over five months of the imports projected for 1987. In addition, the general price level has remained stable. Despite the increase in aggregated demand average consumer prices have not increased since the fourth quarter of 1986. Over the year to February 1987, the CPI declined by 6%. Some rise in inflation could occur because of increases in private and public sector wages, and short term shortages of raw materials.  SUMMARY AND CONCLUSIONS At the time of the last Country Economic Memorandum on the Philippines, stabilization was the central issue that policymakers needed to address. Today, the main objectives of economic stabilization have been achieved. The new Government now has to focus on increasing output, employ- ment, and living standards within an environment of constrained resources, both domestic and foreign. Although the Philippine economy is well endowed with natural and human resources, recovery will not be an easy task. Underly- ing weaknesses in the economy will inhibit the recovery effort. These include the biases against agriculture and export production, low productivity in industry, weaknesses in the financial system, low public-sector savings and the overhang of accumulated foreign debt. The main challenge for policymakers today is to design a program for economic recovery which is consistent with the objectives of the new Government's development strategy and addresses the country's fundamental structural problems. The Recent Adjustment The stabilization of the external account imbalance has been achieved but at the expense of a sharp drop in economic activity. The current account deficit, inflation, and the government deficit have all been substan- tially reduced in the last two years. The current account deficit was reduced and then shifted from 8% of GNP in 1982 to a small surplus in 1985. Inflation was reduced from a peak of 50% in 1984 to a rate of 2% in the first quarter of 1986. The consolidated public deficit was reduced from 5.8% of GNP in 1982 to 1.5% in 1985. At the same time that aggregate demand was controlled, overall output was also contracting and real interest rates were rising to unprecedented high levels. For the past two years, GDP growth has been negative, unemployment has increased, income per capita has declined to 1975 levels, and capacity utilization has dropped dramatically. The expenditure-output gap was reduced through a drop both in the level of domestic demand and aggregate supply, thus stabilizing the economy at a lower income level. Investment, both private and public, contracted more sharply than consumption. Reduced real income brought about a decline in imports, which had to offset not only the initial balance of payments deficit but also a significant decline in export earnings. The public sector's borrowing requirements combined with the monetary squeeze, contributed to high interest rates and to crowding out of the private sector. On the expenditure side, after the Government reduced public investment by more than half in two years, a large part of the deficit was due to foreign obligations of unprofitable private sector projects that the Government had to assume. On the financing side, tax collection was falling throughout the adjustment program, and foreign financing had sharply dropped. Thus, the Government had to resort to domestic financing to meet its borrowing requirements. Given the restrictive monetary policy in place, this borrowing was translated into very high real interest rates and a drop in private investment. Real interest rates reached a peak of 29% in the first quarter of 1986 while private investment dropped from 21% of GNP in 1982 to • - ix - 12.6% in 1985. The private sector financed the public sector investment- savings gap, as well as the surplus in the current account in 1985. In hindsight it appears that adjustment could have been both less painful and more structural if it had been done more through shifts in the composition of expenditures and output rather than exclusively through expenditure reduction. Although some drop in absorption was necessary, it could have been combined with a number of expenditure-switching policies such as appropriate exchange rate policies, tariff reform and removal of import restrictions, elimination of export taxes, and export promotion measures. These policies, by achieving an increase in the relative prices of tradables versus nontradables, could have shifted resources from the nontradable goods sector, where there was excess supply, to the tradables sector. Thus the external imbalance could have been closed by an increase in exports rather than exclusively through a decline in overall output. Instead, the real exchange rate remained stable in 1984 and it even appreciated in 1985 with the drop in economic activity. Stabilization was achieved without addressing the fundamental trade distortions which were partly responsible for the 1983 cr1s1s. In fact, a number of stabilization policies, such as import restric- tions, increased import duties and increased export taxes, were at cross pur- poses with the medium term adjustment requirements of the Philippine economy. Hacroadjustment for Growth At present, public sector resource mobilization remains inadequate, external debt continues to be large, and the financial sector remains weak. Without fundamental structural reforms, external imbalances are likely to reappear, once recovery is under way. Given that absorption has already been reduced, further adjustment should be done through both a switch in expendi- ture and through supply oriented policies. Growth oriented policies include increasing efficiency of domestic production, shifting expenditure composition (both private and public) towards maintenance and investment activities, increasing domestic savings, allowing for adequate government expenditures, and removing the constraints to expanding production in agriculture and industry. In the short run, the main constraint to economic recovery 1s the public finance problem. Through the rescheduling, external debt has now been transformed from a balance of payments to a fiscal problem. Since government expenditures have been significantly reduced, the only viable way to reduce the budget deficit any further is to cut transfers and improve tax collections. These two ~easures, however, are unlikely to lead to an innnediate increase in fiscal resources. In the meantime, given the size of external obligations--more than half of the assistance to government financial institutions is foreign-based--actions to cut the deficit will still leave an unfinanced gap. Financing such a gap domestically would either lead to an acceleration in inflation or to a significant further crowding out of much needed private investment. This is why external financing of the deficit will be essential while structural changes are being implemented to reduce the consolidated deficit.  - xi - There are a number of pos1t1ve developments which, if capitalized on, could significantly ease the adjustment and recovery process. First, the drop in international oil prices will reduce the import bill by close to 10%. Second, lower international interest rates will help alleviate the external debt burden. Third, although some industrial restructuring still has to take place, much of the painful adjustment in the manufacturing sector has already been undertaken as a result of the ongoing recession. Fourth, the change in economic and political conditions is likely to lead to an increase in investment in the next few years. Fifth, a number of reforms, especially in the agricultural sector, are in place and have not had a chance to show their impact, given the depressed level of economic activity. Last, the philosophy of the new Government is more clearly concerned with supporting activities such as agriculture, small producers and exports which have been discriminated against in the past. To capitalize on these positive developments, however, the Govern- ment should be careful to avoid some policies which are popular in urban areas but which go against the objective of agricultural and export development. Policies such as an overvaluation of the exchange rate, negative effective protection for agriculture and export activities and price controls on agricultural products are all policies which benefit urban producers or con- sumers at the expense of rural development and export profitability. Trade Policies Given the existing recessionary conditions the sequencing of trade policies should start with export promotion measures, together with the removal of import restrictions on raw materials and intermediate products. Maintenance of the present flexible exchange rate system is a crucial element of this strategy. This will ensure that the exchange rate adjusts to a level consistent with a recovered and liberalized economy. Other export promotion measures include quality control, duty-free inputs for export production, and negotiations for enlarged access to restricted markets. Import restrictions on raw materials and intermediate products also need to be removed immediately so that user industries are no longer penalized by the existence of these restrictions and can have an opportunity to become more efficient when they have to start competing with foreign products. The Government has already undertaken measures in this direction such as the removal of export taxes and the elimination of restrictions to a number of imported raw materials. Although further tariff reform can begin to be implemented after the mentioned policies are in place, it is crucial that the signals for future investment be consistent today with the Government's medium-term thrust. What is important on the trade front now is a clear commitment from the Government to a policy of trade liberalization and to the elimination of import restric- tions and all impediments to export expansion. This will require a clear statement on the goal of liberalization, its underlying rationale, and a timetable for implementation. The preannouncement of a schedule for liberali- zation, including an indicative schedule of tariff reduction, before new investments takes place will also make the adjustment easier for firms already in operation.  - xii - The Balance of Payments The balance of payments is going to be a focal point in the next five years. On the financing side, the current high debt obligations will constrain economic recovery so debt rescheduling will be at the center of the new government's policy agenda. On the real side, efficient import substitu- tion and export growth are essential components of a sustainable growth stra- tegy. Competitiveness of the Philippine economy must be improved through the trade measures summarized above so that sufficient foreign exchange is generated to finance the imports complementary to investment and output growth and also to meet the debt payment obligations. Although the balance of payments crisis has been reversed both in the current and the capital account, the reversal might not be sustainable. The current account improved mainly through a reduction in imports which will need to increase once recovery is underway. The capital account improved through the rescheduling covering only the October 1983 to December 1986 period. The new government has the potential to develop a sustainable growth strategy consistent with some reliance on continued external financing. As long as capital is used productively and favorable signals are given to the tradable producing sector, the Philippines can run small current account deficits over the next five years. An alternative strategy of maintaining or reducing the level of external debt is not compatible with substantial growth. As long as the growth in debt is slower than the growth in GNP and exports, the relative debt burden will be gradually reduced. Nonetheless, the extra financing requirements for this growth oriented strategy are large. A substantial portion of these financing requirements will have to be met through concessionary loans and additional debt relief. Multi-year debt rescheduling would allow the government some time to implement the policy reforms necessary for sustained economic growth. The Financial Sector The success and sustainability of the recovery will hinge on the financial system's capacity to mobilize domestic savings and supply credit for productive act1v1t1es. Although the 1980 financial reforms were successful in mobilizing resources, the financial system now faces problems stemming from the recent crisis and the economic recession. The agenda for policy actions in the financial sector should address a number of features present in the sector today. These include high real interest rates, high cost of inter- mediation, strong government presence in the financial institutions, and the present crisis of commercial banks. There has been a decline in the volume of credit available to the private economy as a result of the Government's need to source its financing domestically within tight monetary conditions. Taxes on intermediation have also increased and have then resulted in higher spreads between lending and deposit rates. In the short run, a lower level of domestic financing of the deficit combined with the removal of some taxes on intermediation will help to bring real interest rates down to a level consistent with economic recovery. In the medium term, the role of the Government in the financial sector should be reduced and focused on functions which the private sector fails to perform adequately, such as lending to agriculture and small scale industry. To the extent that it is not a result  - xiii - of private compet1t1on, merging of coRl!lercial banks should not be encouraged as a means of solving the present crisis of some formerly private banks now acquired by the Government. The role of the Central Bank should be limited to traditional functions with considerably strengthened supervisory capabilities. The Government is presently considering reforms in this area in order to reorganize and demarcate the future role of government financial institutions. The Public Sector The size of the public sector in the Philippines is structurally bounded by an exceptionally low tax ratio. To address this problem, the Government needs to increase its revenue generation capacity to continue building and maintaining basic infrastructure facilities and services needed for productive activities. Although the tax system is comprehensive, tax collection efficiency needs to be improved together with the removal of distortionary effects of the prevailing system. A substantial tax reform has recently been implemented which addresses both collection inefficiencies and distortionary effects on resource allocation. However, the benefits of the reform will not have their full impact on revenue generation until 1987. In the interim, expenditure levels for 1986 should allow for higher capital outlays, maintenance and budgetary assistance for the government financial institutions. Also, expenditure priorities will have to be reoriented towards developing agriculture infrastucture, and provision of services in health and education. The medium-term expenditure strategy should aim at increasing the share of capital and maintenance in total public-sector expenditure while limiting the growth of statutory obligations such as public and publicly guaranteed debt. Cash generation of public enterprises should also increase through improvement in their management, cost-recovery efforts, divesting of those enterprises which can be oRerated by the private sector, and liquidation of unviable operations. In the short run, given the size of the deficit, some increase in external budget support may be necessary. The Agriculture Sector The overall incentive system in the agriculture sector has significantly improved after a number of reforms which have been recently implemented. Subsidies and directed credit to agriculture have been removed; price controls on agricultural products have been liberalized; export taxes have been eliminated with the exception of those in place for conservation purposes; the importation of inputs to agriculture, such as fertilizers and animal feeds has been liberalized; and the range of nominal tariffs has been reduced. In addition, monopolies in sugar and coconut trading are being dismantled and the institutional structure in these subsectors is being rationalized. However, the macroeconomic framework still discriminate against agriculture. A protected manufacturing sector has made investment in agriculture relatively unattractive and resources have continued to move out of this sector. Effective protection rates are still negative for agricul- tural activities as a result of the current tariff and tax structure. In addition to a discriminating macroeconomic framework, there are number of  Y.iV institutional constraints which prevent producers from responding to the new set of incentives following the recent reforms. These constraints have resulted in a low, and sometimes declining, productivity in the agriculture sector. Elements of a strategy to increase productivity include greater incentives for fertilizer use through reduction in taxation and improvement of the physical distribution system; improvements in irrigation services through substantial increases in the level of operation and maintenance expenditure; increased government expenditures on rural infrastructure, research and rationalization and strengthening of the extension system. Finally ration- alization of existing agriculture institutions, in particular the area of planning and policy formulating is another important requirement for agricultural development. Industry The recent collapse in economic activity has in some respects made it easier to develop a competitive industrial structure more suited to Philippine comparative advantage. Many of the most uncompetitive industries and firms have already ceased operations. Industry can now contribute in large measure to future growth given the right and timely policy measures. A recovery program for industry will have to address the present low final demand, high credit cost, and import restrictions. Urgent action is also required on nonperforming assets and will do much to revive business confi- dence. The more growth oriented macro-economic environment and appropriate real exchange rate policies will need to be bolstered by further action in the regulatory environment, new industrial promotion measures, and changes in the incentive system. On the regulatory environment it is necessary to liberalize domestic trade restraints and review the role of fiscal incentives. Changes in the trade environment include immediate lifting of import restriction on raw materials and intermediate goods, and a preannounced program for further rationalization of tariffs along with implementation of antidumping measures. The implementation of export promotion actions will allow Philippines industry to seize the emerging set of opportunities, as many of its competitors in the region shift their activities out of labor-intensive industries in response to their rising wage levels. A substantial wage differential between the Philippines and other East Asian competitors has opened up in recent years, as real wages have remained constant in the Philippines, while they increased in the other countries. Domestically, the recovery of the public investment program will help in reviving demand, 1n particularly for the construction sector. In the medium term, a major outstanding issue will be the provision of industrial term credit.  PHILIPPINES COUNTRY ECONOMIC REPORT: A FRAMEWORK FOR ECONOMIC RECOVERY I. MACROECONOMIC OVERVIEW A. Macroeconomic Developments 1970-85 The Building of a Crisis: 1970-82 1.01 Although the Philippine case was generally perceived as a success story during the seventies, the seeds of the 1983 crisis were already being planted. GNP growth rates were quite high, but manufacturing expansion largely occurred in highly protected sectors. Export growth rates were also quite high, but the incentive system was not conducive to a broad-based export expansion. The peso was adjusted periodically, but the structure of tariffs, import restrictions, and export taxes allowed the peso to be overvalued by around 30% during the seventies. Investment rates were about 30% of GNP, but these resources wete not productively used and responded to a distorted set of incentives. To sustain a high rate of growth under these conditions, the Government increased its reliance on external sources of finance. 1.02 The deterioration in terms of trade in the late 1970s, followed by r1s1ng interest rates in the early 1980s, brought into the open the underlying structural weaknesses of the economy. The faltering growth performance in the early 1980s ended up in an open crisis situation in 1983. Because of falling terms of trade and an inefficient industrial structure, growing import requirements were not met with commensurately higher export receipts. The current account deficit increased from an average surplus of 0.7% of GNP in the 1970-74 period to a deficit of 4.6% in 1975-80 and 7.6% in 1982. As most of the deficit was financed with foreign borrowing, total external debt increased from $4.9 billion at the end of 1975 to $13.4 billion at the end of 1979, an average rate of 28.6% per year during this period (see Table 1.1).  - 2 - Table 1.1: SELECTED MACROECONOMIC INDICATORS, 1970-85 1970-74 1975-79 1980 1981 1982 1983 1984 1985 Real GNP Growth Rate(%) 6 .1 6.4 5.0 3.4 1.9 1.1 -6.8 -3.8 Inflation (yearly averages) Consumer prices (CPI) (%) 18.9 9.9 18.2 13.1 10.2 10.0 50.3 23.1 GNP Deflator (%) 16.8 9.8 15.6 11.0 8.4 10.l 49.1 17.6 Net Terms of Trade (Index 1972=100) 125.5 79.4 68.6 60.4 58.7 61.3 59.8 55.0 Current Account Deficit/ GNP (%) (minus = deficit) /b 0.7 -4.6 -4.9 -5.1 -7.6 -7.l -2.7 0 .1 Real Exchange Rate /a (Index 1980=100) 97.8 103.1 100.0 96 .2 91.0 105.7 105.0 96.3 External Debt US$ billion n.a. 8.76 17.4 20.8 24.2 23.9 24.4 25.2 Consolidated Public Sector Deficit/GNP (%) n.a. n.a. 3.0 5.1 5.8 4.2 3.0 2.6 /a A higher number means a depreciation. Calculated on a trade based average using 1980 shares of the main trading partners. /b Derived from national accounts; differs slightly from balance of payment estimates. Sources: National Accounts. Central Bank, Statistical Bulletin. World Bank, World Tables, 1985-86. 1.03 Another cause of the 1983 cr1s1s was a growing public sector gap as increased public sector investment and government consumption was not offset by increased public sector savings (see Table 1.2). The larger deficits reflected an attempt by the Government to implement a countercyclical expan- sionary policy rather than adjusting to the drop in terms of trade and the accumulating debt.  - 3 - Table 1.2. PRIVATE AND PUBLIC SECTOR RESOURCE ABSORPTION (percentage of GNP) Private sector /a Public sector /b Surplus/ Surplus/ Year Investment Savings deficit /c Investment Savings deficit Deficit /c 1978 22.4 20.2 -2.2 6.6 3.S -3.l -S.3 1979 25.0 21.0 -4.0 6.0 4.6 -1.4 -S.4 1980 22.8 20.l -2.7 7.9 4.9 -3.0 -S.7 1981 22.0 21.l -0.9 8.7 3.6 -S.l -6.0 1982 21.8 19.1 -2.9 7.0 1.2 -S.8 -8.S 1983 19.4 15.4 -4.0 7.7 3.5 -4.2 -8.2 1984 14.6 15.0 0.4 4.6 1.0 -3.0 -2.6 1985 12.6 14.6 2.0 3.6 1.0 -2.6 -0.6 /a Private sector and others is computed as residual. Tb Public sector includes National Government and nonfinancial corporations. Tc Minus= deficit; equals current account balance less transfer; derived from national accounts. Source: NEDA, National Accounts Staff. 1.04 In addition to internal structural weaknesses, the external environ- ment of the late seventies made adjustment even more urgent. The sharp dete- rioration in the Philippines' terms of trade, the increase in international interest rates, and the drying up of medium and long term international capital markets called for moderate fiscal and monetary policies and a real devaluation in the early eighties. However, even after the substantial contraction in medium and long term international financial markets following the Latin American debt crisis, the Philippine authorities continued post- poning the needed adjustment measures by increasing short-term debt. When a political crisis developed following the Aquino assassination, the external debt problem came into the open, as co11111ercial lenders refused to roll over short-term credits or extend new medium- and long-term loans. 1.05 The debt problem in the Philippines was a result of misdirected investment in the seventies. The fact that investment resources were not pro- ductively used, together with rising real interest rates, turned what could have been a liquidity crisis into one which has imposed tremendous longer run costs to the economy. The debt crisis in other countries occurred ai a conse- quence of exchange rate mismanagement and following capital flight (Latin America), or overconsumption both private (Israel) and public (Mexico). In the Philippines, the large accumulation of foreign debt did not result in a major real appreciation of the exchange rate since the investment had a large import component. This investment surge occurred in both the public and pri- vate sectors, but much of the private investment took place with guarantees or loans from government-owned banks. While a large portion of the public sector  - 4 - investment helped reduce petroleum imports by developing indigenous energy sources, much of the investment financed during this period was ill-conceived, overpriced, or proved unprofitable in a rapidly changing international environ- ment. When these private investments proved unprofitable, they became a public liability through their financial links with government banks. The Years of Stabilization 1983-85 1.06 During the second half of 1983, when international banks stopped lending to the Philippines and called their maturing loans, the country's critical balance of payments position was exposed. By late 1983, the option of continuing to postpone adjustment by further increases in external debt was no longer available. The capital flight that followed the political crisis of the second half of 1983 exacerbated the emerging balance of payments problems; it was becoming increasingly difficult to get external financing for a current account deficit equal to 7.1% of GNP. 1.07 The Philippines started a stabilization process in late 1983 and brought under control the short run external imbalances. The turnaround in the cy rent account deficit has been achieved through a drop in real absorp- 7 tion - and a sharp output contraction. Lowering of imports has been achieved through a contraction in productive activity, and as a consequence exports have also dropped substantially. In the absence of foreign financing some cut in real absorption was inevitable but in order for the stabilization effort to represent a structural adjustment conducive to longer-term sustainable econo- mic growth, it should have been accompanied by an appropriate realignment of relative prices. This in turn would have required a medium-term perspective in stabilization policy formulation, which was lacking. Drastic cuts in public expenditures and restrictive monetary policies, which were the primary instruments used by the Philippine Government to stabilize the economy, were appropriate ones. There is room for argument, however, about the extent of the monetary and fiscal restraint during some episodes of the stabilization period. Moreover, the balance of payments management which relied, initially at least, on restraining imports rather than on adequate exchange rate adjustment, may have prevented a more buoyant export response which would have enhanced the sustainable growth prospects of the economy. 1.08 Some of the Government's stabilization policies during the 1983-85 period were not appropriate for the medium-term adjustment needs of the Philippines economy. Quantitative import restrictions, increases in import duties, and taxes on exports introduced as part of the stabilization program were at cross purposes with medium term requirements. For the medium term, the deterioration in the terms of trade and the reduction in international bank lending required new incentives to promote export oriented activities and efficient import substitution. In reality, however, the net effect of the trade measures actually implemented after 1983 was to reduce the incentives for export-oriented activities relative to highly inefficient import competing activities. 1/ Real absorption 1s defined as total consumption plus total investment.  - 5 - 1.09 The Government's initial reaction to the economic cr1s1s in 1983 was to devalue the peso and then close the economy. The government undertook a series of nominal devaluations to reverse the 1978-82 appreciation. The first of these, in June 1983, was too small (7.8%) to reverse the appreciation of the currency in the 1978-1982 period (Table 1.1). Furthermore, the suspension of international bank lending to the Philippines required a much heavier devaluation. When the political situation started to unravel in late 1983, it led to substantial capital flight. A second, sharper devaluation, of 27.3% occurred in October 1983. The net effect was a real devaluation of 16% between 1982 and 1983. 1.10 In October 1983, the Philippine authorities imposed foreign exchange rationing and as a result a wide range of imports was prohibited and the import liberalization program was halted. The program to remove import restrictions, which started in 1981, had been designed to complement the tariff reform program. Although the tariff reform was not abandoned during the stabilization, its effect was offset by the increase in nontariff controls and the imposition of an import surcharge. Furthermore, taxes were imposed on both traditional and nontraditional exports. 1.11 In 1983, the intensification of import controls at the time of the devaluations, complemented with accomodating monetary policy, resulted in an acceleration of inflation which eroded part of the effect of nominal devalua- tions on the real exchange rate. Inflation surged from 10% in 1983 to 50% in 1984. Previous devaluations were followed by another 28.6% devaluation in June 1984 and a managed float was implemented starting in October 1984. How- ever, the real exchange rate remained constant in 1984. (Table 1.1, line 5.) 1.12 The stabilization measures, which were introduced only in the second half of 1983, became effective in 1984 and were later supported by an IMF standby agreement. Real absorption in fact increased 0.2% in 1983, and only started falling by 5.6% in 1984. As a result of import restrictions, a depre- ciated currency and the cut in real absorption, the current account deficit as a share of GNP was dramatically reduced in one year from 7.1% in 1983 to 2.8% in 1984. 1.13 Although by 1984 the contractionary effects of the macroeconomic adjustment were already apparent, the Government's monetary policy continued to be restrictive in 1985. As a result, inflation continued to drop together with GNP and the real exchange rate appreciated. By 1985 the government's stabilization policies produced a further drop of 1.9 percentage points of GNP. However, concern about the sharp increase in inflation during 1984, together with the need to control the deficit of the Central Bank, led to a monetary policy aimed at slowing down the rate of nominal devaluation. Indeed, the nominal exchange rate appreciated 4.8% between December 1984 and December 1985, while in the same period CPI inflation dropped to 5.7%. The resulting real appreciation further penalized export oriented activities when, in fact, a substantial real depreciation was required. In spite of the real appreciation the further reduction in real absorption in 1985 led to a small current account surplus. Inflation, in fact, was sharply reduced but GNP, which had already dropped 6.8% in 1984, fell by an additional 3.8% in 1985. The December-December Wholesale Price Index (WPI) inflation rates went from  - 6 - 47.4% in 1983, to 52.4% in 1984 and -0.8% in 1985; CPI inflation dropped from 50.8% in 1984 to 5.7% in 1985.~1 1.14 The contraction in aggregate demand took place largely through a drop in investment, both private and public. Total investment dropped from 27.1% of GNP in 1983 to 16.2% in 1985. Public investment dropped from 7.7% of GNP in 1983 to 3.6% in 1985 (Table 1.2). Private investment contracted by around 6.8% of GNP during the period. 1.15 The fact that private consumption levels as a share of GNP were maintained during the 1983-85 period shows that the burden of the adjustment was mainly borne by the productive sector and by the government. National accounts estimates show that the Philippine adjustment was an exception to stabilization experiences in other countries in that private consumption levels in the Philippines have been safeguarded and have even increased as a share of GNP (Table 1.3). Private consumption levels were kept by sacrificing personal savings. The share of private savings as a share of GNP fell from 19.1% in 1982 to 14.6% in 1985. In part, this could represent the perception by the private sector that the crisis was temporary, and reflects consumer behavior compatible with a longer-term view of income and consumption. This particular development gives an advantage to the recovery process since there will not be pressure to recover historical private consumption levels. However, since both savings and investment fell, it will be important to ensure that investment recovers and private savings get back to precr1s1s levels. This implies that the propensity to save out of income will have to return to the 23-25% level. 2/ These end-of-the-period figures are different from the yearly averages used in Table 1.1. The end-of-year figures reflect more accurately the rapid drop in inflation rates than do yearly averages.  - 7 - Table 1.3: ABSORPTION, OUTPUT AND THE CURRENT ACCOUNT (Percentage of CNP) Cross Statistic Net trans- Current Conswn2tion capital dis- Total fers from account Private Public Total formation crepancy absorption abroad deficit (1) (2) (3) (4) (5) 6=(3)+ (7) (8) (4)+(5) 1978 67.1 9.1 76.2 29.0 0.1 105.3 1.1 4.2 1979 67.2 8.4 75 .6 31.0 -1.3 105.3 0.8 4.6 1980 67.3 8.0 75.3 30.7 -0.3 105.7 0.8 4.9 1981 68.2 8.2 76.4 30.7 -1.0 106.1 0.9 5.1 1982 69.9 8.7 78.6 28.8 1.1 108.5 0.9 7.6 1983 70.8 7.8 78.6 27.1 2.6 108.3 1.1 7.1 1984 76.9 6.8 83.7 19.2 -0.2 102.7 -0.1 2.7 1985 81.7 7.1 88.8 16.2 -S.5 99.5 0.5 -0.1 Note: Total Absorption= Consumption+ Investment+ Statistical Discrepancy Current Account Deficit= Absorption - CNP - Net Transfers from Abroad. Source: NEDA, National Accounts and National Accounts Staff. 1.16 In 1985, private savings financed the public sector investment sav- ings gap as well as the surplus in the current account. The monetary squeeze and the sharp increase in real interest rates both contributed to crowd out private investment. The overall government deficit as a share of CNP was reduced from 5.8% in 1982 to 2.6% in 1985 (see Table 1.1, line 7). In terms of sectoral absorption of resources, the national government and the 15 largest non-financial public corporations reduced their investment-savings gap as a percentage of CNP from 8.9% in 1982 to 3,2% in 1985. At the same time, the investment-saving surplus of the private sector increased from 2.9% of CNP in 1982 to 2.0% of CNP in 1985. 1.17 The restrictive monetary policy that the Government followed in 1985 produced not only a nominal currency appreciation, but also a significant appreciation in real terms. In addition, given the rigidity in the already reduced government borrowing requirements, the stock of credit to the private sector decreased by 54% during the adjustment period. Comparisons of esti- mated and actual demand for money indicate a shortfall of 6% and 9% in 1984 and 1985, respectively. B. Hacroadjustment for Growth Recent Economic Developments 1.18 After two and a half years of stabilization, the Philippines has eliminated the current account deficit and controlled inflation, but GNP has  - 8 - dropped for two consecutive years and no substantial growth, if any, is expec- ted in 1986. As we saw in the previous section, stabilization was achieved through reduced income and without addressing the medium term needs of the Philippine economy. Furthermore, the decrease in imports was initially made possible by import controls and later by declining output, not by a change in relative prices. 1.19 Deflationary trends continued during the first part of 1986: GNP, which declined 3.8% in 1985, only slightly recovered in the first quarter of 1986. GNP per capita is now slightly below 1975 levels in real terms. The achievements of the rapid growth period of the seventies have been lost in two years. Unemployment in Metro Manila has increased from 11% in 1980 to 22% in 1985. For the current year there is little sign of recovery by the private sector, and private investment remains depressed because of slack demand, high levels of unused capacity, and high interest rates. A growth rate of GNP of no more than 1% can be expected for this year. Thus, it is extremely import- ant that the appropriate mix of fiscal, monetary and exchange rate policies be put in place to facilitate a major recovery of the economy in the short term, without losing the gains of the past stabilization period. 1.20 The drop in GNP per capita, and its socioeconomic implications, are even more pronounced if we take into account the recent population estimates and trends. Population growth in the Philippines is now estimated to be in the range of 2.7-2.9%, which is higher than the 2.5% now officially used for planning purposes. As a result, the Philippine population growth rate is the highest among major Southeast Asian countries. Assuming a 4 to 5% average GDP growth from 1987 to 2000, 1983 per capita GNP will not be regained until the year 2000. Present schooling requirements, the demand for health and other social services, and the need for future job creation are probably underesti- mated with the current official population growth rate. 1.21 As a result of election spending, the budget deficit in the first quarter of 1986 amounted to 10 billion pesos. This represents a large increase with respect to the same period in 1985 when the deficit for the whole year was 11 billion pesos. Preliminary estimates suggest a budget deficit of 35 billion pesos for 1986. The expansion in government spending during the first quarter of 1986 was not translated into higher economic activity. The reason for this is that the Central Bank undertook open market operations to offset the increased liquidity by issuing special Central Bank bills. Reserve money which had reached a peak of P 44 billion in February was reduced to P 40 billion by the end of March. Inflation has been kept under control with the consumer price index increasing only at an annual average rate slightly above 3% during the first quarter of the year. However, interest rates increased dramatically to a peak of 30% at the end of February from 16% in mid-January. 1.22 The public perception was that the monetary authorities were reacting, not only to the possible inflationary impact of increased spending, but more importantly to the depreciating pressure on the nominal exchange rate. There was upward movement in the exchange rate which was then con- trolled through contractionary monetary policy. With the imp~ovement in the overall political climate and the reversal of capital flight, the exchange  - 9 - rate returned at the end of the first quarter to its January level of about P 20.5 to $1. At the same time, overall gross foreign exchange reserves of the Central Bank increased over their end-year position, rising from $1.1 bil- lion to $1.5 billion. 1.23 Although the adjustment program has created a current account sur- plus, this is unsustainable given the need for GNP to recover. Without an expansion in exports any GNP recovery will increase the current account deficit through higher import requirements. For the Philippines to achieve acceptable growth with a sustainable current account position it is necessary to expand exports and efficient import competing activities. In the medium term, the export expansion should be sufficiently large to finance imports at a higher level of output and to leave a surplus to finance net factor pay- ments. Such a strategy for export-oriented growth will require an adjustment effort that should start to be implemented now. Some of the key components are outlined in Chapter II. Recovery Prospects 1.24 Export-oriented medium-term adjustment will require the Philippines initially to increase investment in export oriented activities and in branches of manufacturing that, after some initial restructuring, can become competi- tive with imports on the basis of relatively low tariffs. A return to the saving rates of the 1972-81 period, averaging 24 to 25%, would be sufficient to finance the investment requirements of the export-cum-efficient-import- substitution strategy. With a more stable economic environment and appro- priate incentives for export expansion, the Philippines should be able o return to these savings rates, which are comparable to those of Korea.-37 In the short run, the investment requirements in the tradable sectors will have to come from reallocation of investment away from non-tradables and highly protected import competing activities and towards export-oriented activi- ties. This reallocation will have to be complemented with a increase in foreign savings for a period of time. The current account could be allowed to rise to about 2% of GNP for the next five years. Once GNP growth gets under way, however, foreign savings should be gradually replaced by national savings and the current account deficit should be reduced. 1.25 In addition, a consistent adjustment program that is perceived as sustainable should help the Philippines to attract foreign direct investment, and should encourage repatriation of some of the capital that left the country earlier. The best way to attract these kinds of inflows is to provide an environment conducive to medium term growth with a stable real exchange rate-- which is also a pre-condition for moving towards export-oriented growth. 1.26 The Philippine Government can now address the structural adjustment problem directly without simultaneously facing the problem of stabilizing the economy. One of the main achievements of the recent adjustment was to elimin- 3/ See Vol. II, Annex 8 for recent successful adjustment experiences 1n other countries.  - 10 - ate the heavy inflation of 1983-84, and this substantial gain made on the stabilization front should be safeguarded. 1.27 Sources of Recovery. Apart from the need to put together a consistent medium-term strategy, the most urgent issue now is how to start the recovery process. The absence of recovery in economic activity in spite of the change in government and greater confidence, reflects primarily a lack of final demand, but possibly, also insufficient clarity in the public about the nature, continuity and sustainability of future courses of policy. 1.28 There is no single receipe for short term recovery. A set of measures are required to stimulate activity in the private sector. The pack- age should consist of a combination of relaxation of import controls, money supply expansion, government spending and increased foreign borrowing. In addition, the short-term recovery effort needs to be defined within a broader medium term strategy. Therefore, structural issues should be a vital compo- nent of this short run strategy. The Government has initiated or is in the process of elaborating policies on a number of these issues which need to be tackled as a precondition for a healthy recovery. 1.29 Short-term recovery will require a higher level of government spending. This would allow for higher operating and maintenance expenditures and to shift resources to agriculture. The deterioration of public sector infrastructure is beginning to pose a real obstacle to economic recovery. Changes in the budget composition could also have an expansionary effect in the economy, and help raise the level of aggregate demand. The size of the deficit, however, should be one which does not crowd out private activity, leading to an increase in inflation or in real interest rates. There is now some leeway for aggregate demand expansion because of existing excess capacity and very low annual inflation. However, support from foreign sources will be crucial given the existing level of foreign obligations that · have to be paid • by the Government in 1986. 1.30 Short-Term Issues. The recovery program needs to face squarely the fiscal difficulties that have developed as part of the problem of servicing external debt. The external debt problem has now been transformed into a fiscal problem. Two and a half years of recession have led to a further dete- rioration in the domestic assets of government financial institutions (GFis) putting additional pressure on the government budget. Support to the GFis is estimated to require in 1986 an amount equal to the total capital expenditure of the national budget, and a significant factor explaining the projected budget deficit. As government expenditures on goods and services have already been reduced significantly in the last two years, and the Government needs to increase social expenditures and infrastructure rehabilitation, the most promising ways of reducing the public sector deficit is to cut transfers and improve tax collection in the medium term. The recent tax measures taken by the government greatly improve the prospects for higher revenue performance. 1.31 In the meantime, given the size of the GFis' external obligations, all feasible actions to cut the consolidated public sector deficit will still leave an unfinanced gap. The problem then becomes one of financing the defi- cit without an acceleration in inflation and/or crowding out much needed  - 11 - private investment. Indeed, with an annual inflation rate below 8%, and allowing for some noninflationary increase in the monetary base, seigniorage can contribute no more than 1% of GNP to the financing of the consolidated public sector deficit. 1.32 Therefore, some external financing of the deficit will be essential while structural measures are taken to reduce the consolidated deficit. However, for the external savings to be actually absorbed, they must be transformed into actual imports of goods and services. This is, in part, why a reform of the trade regime is a crucial component to achieve sustainable growth. For the country to succeed in having a more open and competitive economy, the key question at this stage is the timing and sequencing of trade reform. One possibility is to start with the liberalization of imports allowing for exports to become profitable once the economy is more open and the exchange rate adjusts to the new protective environment. Another alter- native is to start promoting exports and then undertake trade liberalization. Given that the economy is in a depressed situation, there is here something to be said for a policy that leads to an accumulation of reserves in advance of the liberalization process. This sequencing, as opposed to liberalizing and then allowing the exchange rate to adjust, has the advantage of stimulating aggregate demand. In ~ddition, the ;cushion of reserves is needed since the export response will lag behind the increase in imports once the economy is opened. 1.33 Since delaying the tariff, reform preserves the disincentive to greater efficiency and gives the wrong signals for resource allocation, a strong and credible commitment should be made for further reform. This would mean clearly stating the goal of liberalization, the underlying rationale and the time table for implementation. Removal of import restrictions should be the first priority, with a gradual scheduled adjustment of tariff rates to follow. The change in the tariff structure should be ideally carried out in the context of multilateral trade negotiations. The process of tariff adjustment could be done over a period of five years where the end rates would be uniform at 20% or 30%. 1.34 Complementary measures should be the maintenance of a competitive exchange rate as the reform and larger imports take place, changes in the sales and excise tax rates, and removal of all export taxes. The Government has recently removed taxes on all exports with the exception of those in place for conservation purposes. During the adjustment to the change in incentives, which should start as soon as the trade reforms are announced, firms who are uncompetitive due to the protective system should get some temporary assistance in the transition to a more open system. This assistance should be clearly stated as temporary so that there would be an incentive to replace capital or encourage new investment. Medium-term Prospects 1.35 The medium-term scenario and the corresponding financing require- ments have been projected taking into account different assumptions on policy changes. Assuming that a turnaround in economic activity will be brought about by the appropriate short term policies discussed above, the most  , - 12 - important issues are in the sustainability of recovery over the next five years. Our projections are therefore concentrated on the 1987-91 period. It is important to bear in mind that projections are quite speculative at this time. In addition to the standard sources of uncertainty are the developments in the world economy, particularly in commodity price and trade volume prospects. There is additional uncertainty over the timing and pace of the recovery of the Philippine economy from its current depressed level. Furthermore, in the wake of the substantial structural adjustment measures undertaken, it remains to be seen how much existing productive capital can be reoriented towards profitable use and how much must be considered as obsolete in the new environment. 1.36 The projections assume a relatively favorable world economy in the next five years as a result of the recent decline in oil prices and real interest rates. Industrial countries' GDP is projected to grow around 3.5% per year, international inflation remains low, and real interest stays at current levels. Global manufactured exports are projected to grow at around 7.5% and energy prices are projected to increase by 18% from 1986 levels by the year 1990. 1.37 Given this external environment, two possible paths for the Philippine economy during the next five years are described. The base case is what was considered as the most likely scenario. It anticipates a recovery in 1987, led by industrial growth, that results in a real GDP level 5% above 1986. This can be achieved if existing capacity is more effectively uti- lized. In 1988 and beyond, GDP growth would be sustained at around 5% as in- vestment and exports cohtinu~ strong growth and new projects srate to yield returns. The high case is what the recommended agenda might bring about if adequately implemented, and if private sector confidence is rapidly rebuilt. If next year's recovery is stronger than in the base case in all segments of the economy, growth in the range of 6-7% of GDP could be achieved. For this to be sustained over the next five years strong investment and export perfor- mance will be required. The policies envisioned in agriculture for the high case include significant improvements in irrigation services through increas- ing O&M expenditure on irrigation infrastructure; increase in fertilizer and pesticide use stimulated mainly by reduction in taxation levels; improved farm-to-market roads and general improvement in rural infrastructure; and effective price stabilization for rice and corn. On trade policy it is assumed that export ·taxes will not be reimposed and an appropriate exchange rate policy will corttinue to be pursued. Under this case the agricultural sector is projected to grow at a rate of 3.9% p.a. In the industrial sector, growth will need to be about 10% per year to reach 1981 per capita value-added levels by 1990. This growth, which is higher than that achieved in the second half of the seventies through heavy government investment, can be achieved now only through private-sector responses to a considerably improved environ- ment. Growth will depend on a sharp reduction in the bias of the protective system against export and efficient import substitution activities. The high case also assumes that macroeconomic policies will be directed to secure domestic financial stability and external competitiveness. 1.38 How feasible is it for the Philippines to increase the ratio of its current account deficit to GNf? Of the 17 most heavily indebted countries,  - 13 - only five had a current surplus in 1985. Among the remaining 12, the current account deficit ranged from 5 to 11%. A well siructured adj~stment program should allow the Philippines to get access to external financing for invest~ ment with a high and sustainable return. Naturally, the higher the proportion of this financing that is provided on concessional terms, the better. 1.39 The key to future growth, in a macroeconomic sense, will be to achieve the right balance of savings, investment and consumption that will permit both the higher investment rates necessary to accelerate the rate of growth, and also provide for sufficient growth in consumption so as to allow some increase in per capita living levels. Because of the already high debt overhang, the financing of a very large portion of the investment program through foreign savings is neither practical nor possible. On the other hand too great a reliance on domestic savings could obviate the required growth in consumption levels and restrict domestic investment. New foreign capital inflows can help facilitate the recovery process. In the base case, non-grant foreing financing would be a modest 2% of GNP. In the high case, foreign financing needs could be greater, at 3 to 4%, because of the substantially higher investment levels. 1.40 To a large extent, the debt expansion necessary to support growth depends on the exchange rate policy pursued, and on the resulting impact on , trade. The scenarios presented have assumed growth oriented real exchange rate policies will be followed. Additionally the relative cost of Philippine labor has been decreasing with respect to ot~r East Asian countries. These would boost exports, especially in nontraditional categories. Based on estimates of export functions, manufactured exports in the high case should be able to increase their share in world markets and grow around 11% in real terms assuring other export constraints are removed and markets are penetrated. In the base case exports will merely keep their international market share. 1.41 Imports of goods and nonfactor services are expected to increase by 9 to 10% after 1987 in the high case. The decline in oil imports is expected to be offset by the expansion of intermediate inputs as growth resumes. However, greater emphasis on rural development and improved capital efficiency should reduce the import intensity of growth. Imports will grow between 6 and 7% in the base ·c ase, largely due to lower intermediate and capital equipment requirements. 1.42 In sum the Philippines cannot be a capital exporter and still have substantial growth during the next decade. To support a growth oriented strategy total debt outstanding is likely to increase. However, if the growth in debt is less rapid than the growth in GNP and exports, the relative debt burden is gradually reduced. (See Table 1.5) Debt outstanding as a share of GNP can be expected to decline from 91% in 1986 to 75% by 1991. Thus, the Philippines should attempt to "grow out" from under its debt burden, as higher output and exports eventually ease the problem of debt repayment.  - 14 - Table 1.4: COMPARATIVE REAL GROWTH RATES FOR TWO POLICY SCENARIOS (percent) 1986 1987 1988 1989 1990 1991 GDP High 0.5 6.0 6.4 7.0 7.0 7.0 Base 0.5 4.9 4.5 4.9 5.3 5.4 Agriculture High 2.3 3.9 3.9 3.9 3.9 3.9 Base 2.3 3.0 3.0 3.0 3.0 3.0 Industry High -1.2 9.0 9.8 10.8 10.7 10.6 Base -1 .2 7.3 6.3 7.1 8.0 8.0 Investment High 2.6 41.9 19.1 16.3 7.2 7.2 Base 2.6 33.2 8.5 12.8 9.4 5.7 Consumption ~ High 2.0 1.9 4.0 4.5 7.2 7.2 Base 2.0 2.0 4. 1 3.0 4.5 5.5 Exports (GNFS) High 2.4 2.6 4.8 7.6 8.0 8.2 Base 2.4 2.6 3.4 5.6 5.8 6.0 Manufactured High 5.0 8.6 9.5 11.0 11.0 11.0 exports Base 5.0 8.5 7.0 7.5 7.5 7.5 Imports (GNFS) High 11.3 17.2 10.0 10.6 8.8 8.9 Base 11.3 14.5 5.9 6.9 7. 1 6.8 ~ These numbers are just illustrative. It might be difficult to compress consumption in 1986 and wait for the resumption of growth in the rest of the period.  - 15 - Table 1.5: PROJECTED RESULTS OF THE TWO RECOVERY SCENARIOS 1986 1987 1988 1989 1990 1991 Investment High 17.3 23.3 26.0 28.3 28.3 28.4 (% of GDP) Base 17.3 21.5 22.3 24.0 24.9 25.0 Current account deficit High -0.9 1. 3 3. 1 3.6 3.1 4.0 (% of GNP) Base -0.9 0.7 1.9 2.1 2.1 2.3 Debt out- standing High 91.0 85.0 82.6 80.4 78.5 75.3 (% of GNP) Base 91.0 85.9 83.3 81.0 78.7 74.9 Debt service ratio~ High 45.7 47.5 45.1 40.6 37.4 38.5 (DS/XG) Base 45.7 47.5 45.4 41.2 38.0 34.9 ~ Percent of exports of goods and services. Does not include further rescheduling after 1986.  - 16 - II. RESOURCE MANAGEMENT 2.01 The management of the external, financial and fiscal resources will be critical in various ways for the achievement of a sustainable medium term strategy. The balance of payments, although no longer in a crisis situation, will continue to reflect the presence of unsustainable structural patterns in the Philippine economy until adequate measures are implemented. Only then will the external sector be able to provide a basis for continued growth while also achieving an improvement in creditworthiness. While clearly external resources are needed to spur recovery in the short run, in the medium term growth will have to be financed through domestic savings. Therefore, the success of the recovery will also hinge on the financial system's capacity both to mobilize domestic savings and to supply domestic credit for productive activities. Finally, fiscal resources will be necessary to provide the private investors with the adequate support for productive activities. This will require the implementation of policy measures which will eventually result in a self-sustaining public sector which does not displace but rather supports private initiative. A. The Balance of Payments 2.02 The balance of payments is going to be a focal point in the next five years. On the financing side, the current high debt obligations will constrain economic recovery so debt rescheduling will be at the center of the new government's policy agenda. On the real side, efficient import substitu- tion and export growth are essential components of a sustainable growth stra- tegy. Competitiveness of the Philippine economy must be improved so that sufficient foreign exchange is generated to finance the imports complementary to investment and output gro~th and also to meet the debt payment obligations. Recent Adjustments 2.03 Although the balance of payments crisis has been reversed both in the current and the capital account, the reversal might not be sustainable. The current account moved from a deficit of 8% of GNP in 1983 to a small surplus of eight million dollars in 1985 but mainly through a reduction in imports which will need to increase once recovery is underway. The capital account improved through the rescheduling covering only the October 1983 to December 1986 period.  - 17 - Table 2.1: IMPORTS BY COMMODITY GROUPS (US$ million) % Change % Change Item 1983 1984 1983-84 1985 1984-85 Capital goods 1,698 1,150 -32.3 788 -31.5 Raw materials and inter- mediate goods 2,882 2,505 -13.1 2,092 -16.5 Mineral fuels 2,123 1,649 -22.3 1,452 -11.9 (of which petroleum) 1,741 1,472 -15.5 1,277 -13.2 Food 528 425 -19.5 426 0.2 Other 256 341 33.2 353 3.5 Total Imports 7,487 6,070 -18.9 5,111 -15.8 Nonoil Imports 5,746 4,598 -20.0 3,834 -16.6 Source: Central Bank of the Philippines 2.04 Imports in most areas dropped sharply, both in volume and in value, initially through quantitative controls on imports, and later through the drop in domestic activity. Overall, the volume of commodity imports declined 36% between 1983 and 1985. The sharpest decline was in the import value of capital goods which dropped by 54% and petroleum which dropped 27%. (See Table 2.1) The contraction in intermediate goods was greater than that explained by price and output elasticities, mainly due to the tightening of import restrictions. Major exceptions to the import decline were inputs to garments and electronic exports which continued growing in 1984. However, by 1985 these imports also dropped in line with the poor export performance. (See Table 2.1.) 2.05 Exports growth rate dropped in the early eighties as compared to the seventies. In volume terms, exports declined 5% between 1983 and 1985, or 7.5% in value terms. In particular, traditional agricultural exports dropped by 13% and 24% in dollar terms in 1984 and 1985. This was due to a combination of unfavorable prices and a domestic drought. Growth declined because of a combination of world recession, continuing decline in terms of trade and an appreciation of the real exchange rate. Although manufacturing exports were sheltered during the 1983 crisis, they did start falling during the stabilization program as a result of the appreciation of the peso and the downturn in the electronics world market. (See Table 2.2). 2.06 Overall, services and transfer accounts slightly worsened during the period. Services fluctuated from a deficit to a surplus reflecting the decline in international interest rates, and declining tourism earnings. Invisible receipts in the form of workers remittances, fell in 1984 reflecting the decline in construction activity in oil-producing countries. Remittances rebounded slightly in 1985 because of the shift in composition of contractual  - 18 - workers and changing devaluation expectations. As the economy stabilized, more remittances came through official channels since devaluation expectations were reversed. Table 2.2: BALANCE OF PAYMENTS (US$ million) Item 1983 1984 1985 Merchandise trade -2,482 -679 -482 Exports 5,005 5,391 4,629 (growth rate) (7. 7) (-14.2) Imports 7,487 6,070 5,111 (growth rate) (-18.9) (-15.8) Non-merchandise trade -740 -975 111 (of which interest expense) -1,985 -2,330 -2,208 Transfers, net 472 386 379 Current account -2,750 -1,268 8 (as% of GNP) -8.1 -4.0 .03 Long term loans 1,347 258 2,727 Inflow 2,336 1,259 4,181 Outflow 989 1,001 1,454 Direct investments, net 112 6 -9 Short-term capital, net -618 549 -1,526 Net errors and omissions, gold monetization and revaluation adjustments -254 255 771 Capital account 587 1,068 1,963 Changes in net international reserves -1,011 -646 1,798 Source: Central Bank of the Philippines. 2.07 Improvements in the current account were accompanied by improvements in the capital account. About $5.6 billion in external debt was rescheduled in 1985 and succeeded in moving the Philippines away from a crisis situation. The most notable feature of the rescheduling is the large proportion of short- term debt and arrears that we~e converted to long-term debt. As a result, it eliminated about $1 billion in debt payments in both 1985 and 1986. However, repayments of the rescheduled debt during the 1989-95 period will add to an already heavy debt burden in the period and may necessitate further reschedulings.  - 19 - Policies for Recovery 2.08 A program of adjustment for growth requires reversing the current bias against export oriented and efficient import competing activities other- wise output growth will continue to be bounded by current account deficits. This will require changes in the trade regime, export promotion measures and exchange rate adjustment. As noted above, changes in the trade regime, should give a clear signal that the profitable sectors in the medium-term will mostly be export oriented and efficient import competing activities. Before starting tariff reduction an explicit export promotion program should be implemented including: (a) speedy access to export financing at internationally competi- tive interest rates; (b) availability to exporters of tradable inputs at international prices; (c) an appropriate mechanism for ensuring quality control of exports; and (d) provision of information on external markets to exporters. Together with these changes, the nominal exchange rate should continue to be allowed to adjust to deal with the potential trade balance problem. The value of the real exchange rate should be such that new export activities and efficient import competing activities should become profitable. Exchange Rate Policy 2.09 In the Philippines, the nominal exchange rate is flexible and determined by the daily transactions in the foreign exchange market. This mechanism, which is appropriate for the current and likely future needs of the economy, allows for an interaction of demand and supply for foreign exchange and prompts the necessary adjustments. This, however, needs to be seen in the light of other policy developments in the economy to ensure that competitive- ness will be restored and maintained. The determinants of the demand and supply of foreign exchange cover virtually the entire range of macro-economic policy choices. Some variables, however, have a more direct and innnediate bearing on the exchange rate policy outcome and should therefore be more particularly monitored by the Government. For instance, restriction on certain imports and limitations on the capital account flows may result in unintended outcomes in the exchange policy area. Foreign reserves management and external borrowing policies should, of course, be considered in this perspective. 2.10 Exchange rate policy in the Philippines has proved to be, in the past, a -powerful instrument for structuring the economy. In this respect it is important to bear in mind that what determines the behavior of economic agents is the real exchange rate in its actual and expected path. In most countries, but certainly in countries with less developed financial markets like the Philippines, individual producers and consumers will not have, as a rule, the financial resources necessary to base their decision-making on long- run considerations. In such situations, Government must recognize that the equilibrium rate will change over time in the presence of structural change and evolving structural preferences, and in response to Government's own policies with respect to foreign borrowing, reserve accumulations and expenditures. 2.11 Despite technical difficulties, it is possible to estimate in rough orders of magnitude how the real equilibrium exchange rate for the Philippines  - 20 - evolved even for the period before floating rates were instituted. This rate is found after making the necessary allowance for structural developments in the period 1972-86. The relevant adjustments made for the Philippines are for changes in terms of trade policy, productivity and build-up of external debt. The results of such calculations indicate that the Philippines peso appreciated during much of the 1970s and 1980s. However, the significant real depreciation of the peso during early 1986 (in tandem with the depreciating US dollar) helped restore the competitiveness of the peso. 2.12 The competitiveness of the Philippine peso was also calculated in relation to its dynamic East Asian neighbors. According to this indicator the Philippines since 1980 has seen an erosion of its competitive position, since its real exchange rate has depreciated less than the exchange rates of the competitor countries. Especially since 1984, the currencies of most major East Asian competitors, have steadily depreciated in real terms. For the Philippines, the real depreciation has been a more recent trend and the passive result of the depreciation of the dollar vis a vis the yen and other currencies. 2.13 For the future, two considerations are relevant for the management of the country's real exchange rate. First, as the economy moves out of the current recession, and with the implementation of a program of trade liberal- ization, one would expect the demand for foreign exchange to pick up. Since the equilibrium exchange rate would then also change along with the changed structural conditions of the economy, continued flexible management of the exchange rate is an appropriate response and would contribute to ensure an improved competitiveness of Philippine exports in international markets. 2.14 Second, in the short term there might well arise a surge of capital inflows which are not matched by a coDl1lensurate increase in the demand for foreign exchange, for example, a capital reflow as a result of increased investor confidence in the economy. These capital flows would put upward pressure on the exchange rate causing it to move away from its long run equilibrium, thus harming the country's international competitiveness and chances for recovery. In this case, accumulation of foreign reserves by the central bank, or repayments of short term debt would be an appropriate response in order to prevent an appreciation of the real exchange rate. Exchange rate management could also be complicated in the medium-term if real interest rates were to remain high because of large borrowing requirements of the public sector and the Central Bank. External Debt Strategy 2.15 As long as the Philippines follows a strategy which productively uses capital and gives the favorable signals to the external sector, it is not inappropriate to run small current account deficits over the next five years. Even countries which followed consistent policies and managed prudent borrowing strategies have required some access to external financing of the order of 1% to 5% of GNP over extended periods. The new government has the potential to develop a sustainable growth strategy consistent with some reliance on continued external financing. As shown in Table 2.4, the Philippines has a sizeable stock of external debt relative to the size of its  - 21 - economy and external sector. The interest serv1c1ng on this debt, about 6% of GNP and 30% of exports of goods and non-factor services (gnfs), is about the average for highly indebted middle income countries. As a ratio to resources, the external debt of the Philippines represented in 1984 about 350% of exports (gnfs) and 77% of GNP, which is above the average for all highly indebted middle income countries (see Table 2.4). Table 2.4: EXTERNAL DEBT INDICATORS Heavily Indebted Middle Philippines L Income Countries /a 1978-81 1982 1983 1984 1985 1978-81 1982 1983 1984 Interest/GNP. 4.5 6.1 6.0 6.4 6.9 3.0 5.2 5.4 6.0 Interest/Exports of goods and non- factor services 23.3 36.3 30.5 28.7 32.1 20.2 32.6 28.9 30.9 Debt Service/GNP 7.3 8.8 9.1 8.8 7.8 5.9 8.3 7.9 8.6 Debt Service/Exports of goods and non- factor services 37.8 52.5 46.1 39.4 35.7 39.4 51.6 42.8 44.0 Debt/GNP 48.9 61.5 70.0 77.5 82.3 31.1 45.6 57.3 59.0 Debt/Exports of goods and non- factor services 254.2 367.2 352.4 346.6 381.9 206.1 283.5 309.2 302.5 /a Sample of 17 high debt countries. Sources: World Bank, staff estimates, Central Bank of the Philippines for 1985 figures. 2.16 The Philippines may prefer to move gradually back to the more com- fortable debt levels of the late 1970s so as to increase flexibility and re- duce the risk of being again susceptible to a severe balance of payments cri- sis. This improvement in creditworthiness is consistent with increasing ex- ternal debt as long as it is accompanied by even greater output and export expansion. For example, a 800-990 million annual increase in external debt matched with GNP growth of about 5% would move the Philippines gradually towards more comfortable relative debt levels. With these feasible growth rates, by 1991 debt relative to output and exports would reach 75%. An alternative strategy of maintaining or reduc1ng the level of external debt may be possible only by reducing per capita c.onsumption levels. 2.17 In the high case presented in the previous chapter the external financing needed is large, but because of more rapid growth, relative debt changes in a similar fashion to that described for the base case. The current account deficits rise from $0.4 billion in 1987 to $1.8 billion by 1991. A substantial amount of the resulting capital requirements will have to be met  - 22 - through concessionary official loans and from additional debt relief arrangements, particularly from private sources. Additional debt relief should be on a multiyear basis, in order to prevent the need for repeated rescheduling, and to give the Government some breathing space within which it can enact policy reforms, and reap their benefits. In addition, these reschedulings should be on as favorable terms as possible. Annual interest payments are already a burden on the economy, and could be $2.2 billion by 1991. A large part of these payments are being met by a resource transfer out of the economy, since there is a positive resource balance (exports minus imports). These debt service projections are dependent on the assumed terms for new capital inflows and/or debt rescheduling. The projections in Table 2.5 assume that new capital flows are available at an interest rate of '), about 9.0%. • Implications for Creditors and Borrowers 2.18 Reaching the satisfactory net foreign savings pos1t1on outlined above involves new funding as well as possible rescheduling of amortization payments on existing debt. As shown in Table 2.5, the financing requirements, net of disbursements from money already committed are in the range of US$2 billion to US$4 billion per year in the base case. This has a number of implications for both the c'reditors and borrowers. 2.19 The government has declared its intent to change the composition of its foreign financing in favor of more concessional official sources. None- theless,,commercial banks will continue to play a key role in the external financing strategy since they represented 55% of Philippine external debt, as of the end of 1985. Until voluntary lending has been resumed, an important source of financing will remain rescheduling of scheduled maturities on out- standing debt. 2.20 A possible multi-year rescheduling of commercial banks' debt will be a major issue in the coming months. On the one hand, it is widely accepted that multi-year restructurings have a number of advantages over a series of yearly exercises. They can contribute to an improvement in the climate for effective economic decision making by reducing uncertainty. They also eliminate costly and time consuming negotiations given the large number of banks involved. On the other hand, the creditors may not choose to lock themselves into a more comprehensive financing package consistent with a higher growth strategy unless they are convinced that the debtor country is taking the steps necessary to ensure this outcome. The Government will there- fore enhance its chances of obtaining multi-year rescheduling by pursuing a clear policy direction and implementing the corresponding measures. 2.21 In regard to the terms of the res~heduling, the Philippines and her creditors can draw on recent favorable trends in the international market and political developments in the Philippines in negotiating both longer grace and maturity structures and smaller interest spreads. Since the projections exercise indicates that debt repayments remain high in the early 1990s, the restructuring should aim to extend the maturities beyond that period. Reduced spreads also avoid exacerbating the problem by maintaining interest payments at manageable levels.  - 23 - Table 2.5: FINANCING REQUIREMENTS: BASE CASE i.2.. (Current US$ billions) Base case 1986 1987 1988 1989 1990 1991 Current account 0.28 -0.21 -0.66 -0.77 -0.82 -0.90 Scheduled amortization /b -0.78 -1.87 -2.78 -1.93 -2.39 -2.40 Changes in reserves (- increases) -1.23 -0.42 -0.12 -0.35 -0.39 -0.30 Changes in short-term debt J5::.. -o. 91..6!_ -0.4.0 J' -0.10 -o.so -a.so -0.50 Pipeline disbursements 0.85 o.19 0.54 0.38 0.30 0.10 Financing Gap 1.79 2.51 3.12 3.17 3.80 4.00 New official money~ 0.24 0.69 0.98 0.99 l.ll 1.16 Other /f 0.12 0.52 0.47 0.52 0.53 o.so Rescheduling and other new money ft 1.43/d 1.30 1.67 1.66 2.16 2.30 Memo items: CA/GNP(%) 0.9 -0.7 -1 .9 -2.1 -2.1 -2.1 Debt service ratio 45.7 47.S 45.4 41.2 38.0 34.0 Debt/GNP 91.0 85.9 83.3 81.0 78.7 74.0 i.2.. This table is consistent with the base case presented in Tables 1.4 and 1.5. /b Total maturities falling due, including monetary liabilities except IMF repurchases, after 1985 Paris Club and commercial bank rescheduling agree- ment. /c Short-term debt reductions of the amount indicated from 1989 on should be construed as a desirable objective of debt restructuring and not as a projected amount. /d Includes conversion of short-term debt into medium-term obligations. /e Estimated disbursements from official commitments signed after Decem- ber 31, 1985. Includes estimates of likely commitment programs for loans not yet identified. J..!. Includes direct foreign investment, capital not elsewhere included and gold monetization ~ Residual to be obtained from rescheduling and other new money sources, both private and official. Eligible schedled maturities are defined as projected maturities of private financial institution and bilateral offi- cial debt. Other maturities and payments may also be rescheduled subject to negotiation. Sources: Central Bank, Bank staff calculations.  - 24 - 2.22 In addition, banks can be called upon to contribute with fresh financing to the current account deficits consistent with the growth strategy and the improvement in debt servicing capacity outlined above. As shown in Table 2.5, the source for the additional US$1.7-2.3 billion in 1988-91 remain unidentified. A major portion of this can be expected to come from private sources to complement multilateral and bilateral efforts. The same rationale for favorable terms, both maturity structure and interest spreads, applies to new money as well as to the restructuring of existing debt. 2.23 Another important source of the US$2-4 billion yearly new money re- quirements is official lending. This source is closely linked to public finances. First, for project related assistance, counterpart funds as well as adequate operating and maintenance expenditures are necessary to make use of these resources. Second, concessional official lending will be crucial in the shorter term to support the budget. This involves identification of the amounts to cover the budget gap in 1986 and 1987 to prevent undue strain on interest rates and inflation from the alternative domestic bond and money financing sources. A critical component of the fiscal picture is the debt servicing of the government financial institutions for the 1987-91 period. 2.24 The amortization of debt already comnitted from bilateral creditors represents about 7% of the total scheduled 1987-91 maturities. A similar share is covered by suppliers' credits with guarantees by official export credit agencies. Although these amounts are relatively small, the official bilateral lending community also may be called upon to reschedule obligations. In that case, it would be crucial for the export credit agencies in coordination with their national governments to agree to maintain existing credit lines rather than cut them off as has been the practice in some cases in the past. 8. The Financial Sector 2.25 As a result of the recent crisis, the financial system currently faces a number of problems. Credit supplied to the private sector has de- clined sharply, together with a rapid increase in real interest rates. Two factors seem to have been at least partially responsible for high lending rates. First, government has been forced to increasingly source its financing domestically. Since much of government borrowing is to finance debts originally incurred by the private sector, this is not strictly a case of the public sector crowding out the private sector. Nevertheless, there has been a decline in the volume of credit available to the private economy for new and replacement investment, which then contributed to the rise in lending rates. Second, the increase in taxes on intermediation, which is translated into higher spreads, has lead to a further increase in lending rates. 2.26 The present crisis has also magnified some long-standing weaknesses in the financial sector, which could impair its future development. Partly as a result of weakened economic activity, some private acquired banks are facing liquidity/solvency crises. In addition, steaming from longer term deficien- cies, government financial institutions are facing even more serious solvency problems. To deal with the private banks crisis, the Central Bank has been forced to increase emergency assistance and is encouraging mergers of commercial banks.  - 25 - 2.27 Another structural weakness, and one of the most disturbing features of the Philippines financial sector, are the large spreads between commercial deposit and lending rates. Spreads in the Philippines are in the range of 16% while in most countries spreads are much lower, around 3-4%. These large spreads stem from high intermediation costs, mainly in the form of taxes and probably do not contain significant rent elements. Recent Adjustments 2.28 The financial reforms which started in 1980 were quite successful in mobilizing savings before the economic crisis started. The reforms included o· liberalization of interest rates and lifting resttrictions on commercial banking activity. The volume of savings mobilized by the financial system rapidly increased during 1980-83. After stagnating for more than a decade, the ratio of M2 to GNP increased from 21% in 1980 to 25% in 1983 (see Table 2.6). Commercial banks' deposits and credit outstanding increased and there was a significant lengthening of loan maturities. Table 2.6: COMPARATIVE FINANCIAL DEPTH: RATIOS OF M2 TO GNP (%) Country 1976 1978 1980 1982 1983 1984 1985 Philippines 18.8 22.7 20.9 23.5 25.5 20.8 15.3 Indonesia 17.7 17.9 18.6 21.2 21.7 n.a. n.a Korea 30.3 32.7 33.7 38.4 39.3 37.8 n.a Malaysia 47.3 48.4 54.8 64.3 64.4 64.0 n.a Singapore 64.0 61.3 68.9 73.4 74.0 74.0 n.a Thailand 37.4 38.8 37.4 44.3 49.6 56.5 n.a Source: IFS 2.29 However, after 1983 the economy has undergone a period of consider- able financial shallowing. By 1985, the ratio of M2 to GNP had dropped to 15.3%, bank real deposits and loans outstanding fell by 29 and 54% respec- tively. (See Table 2.7) Saving mobilization is at an all time low, credit to the private sector has severely contracted and real lending rates increased to about 30% in the first quarter of 1986. The present setback in the financial sector's ability to mobilize domestic resources threatens both short- and medium-term recovery possibilities.  - 26 - Table 2.7: COMMERCIAL BANK DEPOSITS AND LOANS (billions of 1978 pesos /a) 1980 1981 1982 1983 1984 1985 Total Deposits 30.4 34.4 38.1 40.1 30.8 28.4 % Share demand 29 22 16 17 13 12 % Share time and savings 71 78 84 83 87 88 Loans Outstanding 55.6 55.1 56.7 58.7 40.6 27.1 % Share short term 78 73 69 70 61 61 % Share medium and long term 22 27 31 30 39 39 /a Deflated by the CPI. Source: Central Bank and IFS 2.30 The domestic recession is partly responsible for this rapid financial shallowing. The fall in income resulting from the contraction in economic activity led in itself to a decline in the level of financial sav- ings. In addition, the portfolios of financial institutions, both private and public, worsened as a result of corporate distress in the productive sectors. 2.31 Direct government intervention, through reserve money expansion and higher reserve requirements, made the situation even worse. Reserve money expanded by nearly 50% during the second half of 1983 alone, and reserve requirements increased from 18% to 24%. Government revenue from this implicit taxation rose from 0.3% of GNP to 2.7% in 1983 and 1.6% in 1984. As a result of this increased implicit taxation, bank spreads doubled thus contributing to the increase in real lending rates. The Government decreased reserve require- ments in August 1986 but only to 21%, which is still high. 2.32 In addition, government led the increase in real interest rates through increased domestic borrowing. In order to meet its monetary targets, given its borrowing requirements and the lack of foreign financing, the government had to borrow from the private sector. The real stock of govern- ment securities held by the private sector increased by more than 75% between September 1984 and December 1985, and the government received around 40% of the total credit generated by the financial system by the end of last year. Requirements for Achievement of Sustainable Growth 2.33 The analysis of the recent adjustment brings us to the importance of consistent macroeconomic policies. As stated earlier, monetary policy should ensure price stability. However, more importantly, fiscal policy has to be consistent with monetary targets in order to keep the government from crowding  - 27 - out the private sector. During the recovery, the stock of public securities held by the private sector should not increase any further in real terms. With a 10% inflation, government borrowing from the private sector should not be above 9 to 10 billion pesos. Otherwise, real interest rates will continue to be so high that few productive investments will be profitable. 2.34 Financial policies should be designed with both long and short run objectives in mind. In the short run, financial policies should assist economic recovery through increasing the volume of financial savings and credit available to the private sector. Increased credit availability will help to achieve a reduction in real interest rates which is a vital component required to encourage productive activity. In the long run, the objectives are to improve the institutional structure of the financial sector, and to increase the efficiency of intermediation. Since developing the financial sector will mobilize the resources necessary for new productive activities, the achievement of these long run objectives is crucial for economic growth to be sustained. 2.35 The following agenda for policy actions addresses a number of short- comings present in the Philippine financial sector today. The shortcomings include high real interest rates, high cost of intermediation, strong govern- ment presence in the financial institutions, and the present crisis of comner- cial banks. Lowering Spreads and Real Interest Rates 2.36 Starting in 1985 real interest rates have been so high that they seriously threaten economic recovery (see Table 2.8). High real rates are a result of falling inflation, high intermediation costs, and the high level of government borrowing. As inflation started to fall, nominal rates did not adjust fast enough so real rates were high in part because of this lagged adjustment.  - 28 - Table 2.8: INTEREST RATE DEVELOPMENTS /a (period averages) Year Real Deposit Rate Real Lending Rate Inflation Rate 1981 1.5 4.5 11.7 1982 4. 7 7.0 9.2 1983 -2.0 6.0 16.5 1984 -27.2 -19.7 58.1 1985: I -17.9 -5.3 42.4 II -11.1 4.9 33.1 III 1.0 21.7 15.7 IV 4.7 21.1 1.1 1986 I 8.9 29.5 3.S a/ See Table 2.3 in Chapter II, in the Appendix for details on data specification. Source: Central Bank and IFS. 2.37 The main cause of high intermediation costs is the high, and increasing, taxation on financial intermediation. In the Philippines there are implicit and explicit taxes on intermediation. The implicit taxes are high reserve requirements, forced investment in agrarian reform bonds, and inflation. There is also an explicit tax of 5% on gross receipts and a tax on profits. With no taxes on intermediation real lending rates would have been 7.2% in 198S as opposed to 11%. Taxation on financial intermediation, which has been historically high in the Philippines, has further increased in the 1983-85 period. Since these taxes increase the cost of intermediation, they are reflected in higher bank spreads.  - 29 - Table 2.9: THE EXPECTED IMPACT OF POLICY PROPOSALS ON BANK SPREADS (percentage points) Loss in Revenue Resulting spreads /a (billion in pesos) With no policy change 5.2 Adopting the entire package 1.5 2.1 Eliminating the CRT only 2.9 0.8 Raising interest on reserves only /b 3.8 0.7 Reducing reserve requirements only/c 4.2 0.6 Repealing PD 717 only (agri-agra) - 4.3 o.o /a Calculated under the assumption of a nominal deposit rate of 15%. Tb A 4% increase in interest has been multiplied by the amount of reserves available on December 1985. /c Reserve money has been assumed to initially fall to compensate by the fall of reserve money demand by cormnercial banks. 15% growth has been assumed thereafter. Source: Bank Staff estimates. 2.38 High spreads get passed on by conmercial banks to their borrowers in the form of higher interest rates. In order to reduce spreads several policy options are available, without significant decreases in revenues (see Table 2.9). These include the reduction of reserve requirements, inifeasing interest paid on reserves and elimination of Agri-agra requirements - and the Gross Receipts Tax. 2.39 Reserve requirement regulations are responsible for a significant portion of the costs of intermediation. As a result of the recent adjustment, in which they were used as one of the instruments for monetary contraction, reserve requirements are higher today than before the financial reform. Since the interest paid on reserves in the Philippines is much lower than cormnercial rates, reserve requirements represent a cost to the banks while not necessari- ly having the benefit of increasing financial stability. With an easier mone- tary policy there will be room for substantial reduction in intermediation costs through changes in reserve ratios. Intermediation costs could also be reduced through increases in the interest paid by CB on bank reserves. Reserve requirements should be decreased from 21% to 18% in order to reach 1982 levels. This should be done gradually and coordinated with money supply targets. 4/ Agri-agra are securities which carry a 9% coupon rate that banks can hold to meet their agriculture lending Legal requirements. The proceeds are not earmarked for agriculture,  - 30 - 2.40 The Agrarian reform requirement, agri-agra, should also be eliminated since it does not affect lending to agriculture, is not an impor- tant source of revenue, and its removal would reduce bank spreads. Since 1975 banks have had to allocate 25% of their net loanable funds to agri-agra securities or to direct lending to agriculture. However, this program has had no effect on agricultural credit and the share of loans to agriculture actually fell after 1975. Furthermore, in 1985, 1.5 percentage points of the spread were due to the 10% agrarian reform requirement. The agri-agra program has simply been an additional tax on intermediation since the yield on agri- agra securities has been consistently lower than alternative loans, some times it was even lower than the banks' costs of funds. The repeal of the agri-agra requirement would help reduce lending rates without affecting the volume of loans going to agriculture. 2.41 The Gross Receipts Tax (GRT) should be eliminated and taxation to the banking system should be achieved exclusively through the existing profit tax. A tax of 5% is levied on banks gross receipts. In 1985, the GRT was responsible for roughly 1.3 percentage points of bank spreads. Although this tax has the advantage of being easy to collect, it adversely affects both depositors and borrowers. 2.42 Other features of the tax system also discourage resource mobiliza- tion such as the withholding tax on interest income which represents a tax on savings. Further increases in this tax might discourage savings and should be avoided. Had there been no withholding tax in 1985, the same amount of financial savings could have been.mobilized at 3.3% lower deposit rates, on average. It is estimated that this lower deposit rate would have implied an average spread 1.7 percentage points lower. Lending rates would have been on average 5 percentage points lower. 2.43 The growth in base money, by generating inflation, increases bank spreads. The government reaps seignorage by printing more money and creating inflation. Since the burden of this seignorage is shouldered by the financial system, it is then translated into higher spreads. Controlling base money also reduces the implicit tax on intermediation through lower inflation. Changes in inflation have dramatic effects on spreads. In spite of the fact that usually spreads take some time to adjust to lower inflation, changes in inflation seem to have had an important effect on bank spreads in the Philippines in the past years. Government Financial Institutions (GFis) 2.44 The poor performance of the two largest public financial institu- tions, Philippine National Bank (PNB) and Development Bank of the Philippines (DBP), raises questions about their role in the financial system, and suggests that it may be desirable to reduce their size and functions considerably. This is a crucial area for action since government assistance to PNB and DBP in 1986 alone is expected to be around 15 billion pesos and these two institutions together represent around one third of the Philippines financial system, excluding the Central Bank. The government's role in the financial sector needs to be reexamined. The economic rationale for the existence of GFis in the Philippines is that they provide services which, due to market  - 31 - imperfections, the private sector is unable to provide. Specifically because of uncertainty and the private banks' excessive risk aversion, the amount of credit provided to agriculture and to small- and medium-scale industries is lower than what is deemed to be socially desirable. Hence, GFis are needed to provide this type of risky credit. Therefore, in the transition to a more developed financial system, the government should focus on lending to small- and medium-scale industries and in providing credit to small farmers. 2.45 However, in practice PNB and DBP have competed in functions with private institutions and might have even hindered their development. Most of PNB loans are for trade-related activities. In addition, PNB does not seem to have a comparative advantage in mobilizing deposits of small savers since about 80% of its deposits come from accounts of two thousand pesos or more. Similarly, most of DBP's resources did not come from mobilizing small savers and the majority of its loans went to large enterprises which could have probably obtained private-sector funding had their projects been viable. 2.46 Furthermore, the two institutions did not succeed in providing significant amounts of additional risky credit for agriculture nor medium- and small-scale industries. Table 2.10 shows that agricultural loans account for only 8.8% and 7.6% of PNB's and DBP's portfolios, respectively. DBP provided more loans to support investment in real estate than it did to agriculture, and nearly one-third of PNB's portfolio consists of trade-related loans. The ratio of agricultural credit to total credit in these two institutions' portfolios is lower than the average for the commercial banking sector as a whole. In addition, these institutions have been lending mainly large amounts to a few big enterprises. PNB's top 100 loans account for 80% of its portfolio and 20 loans account for more than half of DBP's portfolio. By and large, GFis were not financing projects that private banks would not support because these were in risky sectors or they were small in size. Unless their lending can be redirected in the future, there is little rationale for their existence as public entitites.  - 32 - Table 2.10: SECTORAL DISTRIBUTION OF PNB AND DBP LOANS OUTSTANDING (% of total) /a PNB DBP Agriculture 8.8 7.6 Industry /b 39.2 71.4 Trade 29.2 le Real Estate le 9.6 Other 2278 11.4 /a 1985 data for PNB and 1984 data for DBP. Tb Includes mining and construction. Tc Does not appear as a separate category in bank's classification. Source: PNB and DBP. 2.47 In order to prevent the recurrence of past problems primary reliance for financial intermediation should be placed on the private sector, and the Government's participation in the financial system should not replace nor unfairly compete with the private sector. The restructuring of existing GFis should reflect this objective, while the creation of any new government banks should be generally avoided unless there is a need to fulfill a clearly defined function which the financial system otherwise could not meet. In that case Government banks should operate under the same rules and regulations as private sector counterparts. 2.48 Government banks should be financially viable without need for continuing government financial support and special privileges, including special tax treatment and access to government deposits above working balances. Similarly, they should not support directed and subsidized credit programs without explicity off-balance sheet funding from the Government. Government banks should be subject to regular audits by independent private firms, in addition to government audits; to ensure public accountability. These principles have recently been adopted by the Government and measures aimed at implementing them are currently under preparation. Crisis of Connercial Banks 2.49 Several government-acquired banks are currently facing liquidity and/or solvency problems. As shown by the loan to deposit ratios presented in Table 2.11, several banks have overstreched their resources to provide loans and are now facing stability problems. The two other ratios in the table indicate a bank's ability to adjust its portfolio in response to shocks. In the case of foreign branches low liquidity ratios are not a cause for concern since they rely on resources from their head offices. However, the acquired banks do have a problem of liquidity in addition to a problem of stability.  - 33 - Table 2.11: REPRESENTATIVE FINANCIAL RATIOS OF COMMERCIAL BANKS (DECEMBER 1985) (in percentage) Loans/ Liquid assets/ Liquid assets/ deposits liabilities all assets Foreign banks 190.79 23.92 23.72 Government-acquired 164.98 38.48 37.52 Private domestic 50.63 52.68 46.11 Source: Published statements of condition. 2.50 Government institutions took over these banks from the private sector because they were facing financial difficulties. This intervention, however has not been successful, since they are much less stable than the average. Ratios of liquid assets to total liabilities and liquid assets to total assets for the acquired banks were 73 and 81% of those for private banks. Only two of these banks have a loan to deposit ratio which is less than one;,and for one of them the relatively low loan to deposit ratio is off- set by below average liquidity ratios. The acquired banks' position has probably deteriorated since December. As government-controlled banks, they were subject to the boycott called for by the opposition after the February elections. Some lost deposits and had to increase their borrowing or sell off their liquid assets. Government institutions acquired these sick banks with the aim of rehabilitating them and then reselling them back to the private sector. The rehabilitation effort has so far not been a success. Problems at the government-acquired banks affect the stability of the entire banking system. The Government is now considering the reprivatization of these banks. Concrete steps in that direction need to be taken. 2.51 In general, private banks, although affected by the crisis in the real economy, are financially stable. Faced with the crisis which &tarted in 1983, private domestic banks reduced the size of their loan portfolios. Loans outstanding, in real terms, fell at a rate which was double that of the rate of decline in deposits. Instead of lending, many banks preferred to hold government securities. Hence, as Table 2.11 indicates, this group of banks seems to be fairly liquid at the moment. 2.52 CB's policy of merging and consolidating banks may have some benefi- cial short-run effects. However, the risk of encouraging further consolida- tion of co11111ercial banks is that it might lead to an uncompetitive financial system in the long run. Merging a failing bank with a strong institution may avoid some of the problems associated with the bankruptcy of the weaker bank. However, this approach will have no long-run effect on the soundness of the banking system. Bigger banks are not necessarily more stable than smaller  - 34 - ones. An analysis of the data shows no significant relationship between size and stability. Strengthening the Central Bank's Supervisory Functions 2.53 The history of the Philippines financial system indicates that bank failures have almost always been associated with mismanagement. Increasing bank size will not necessarily improve the quality of management. In the long run, problems associated with mismanagement can only be avoided if CB effec- tively carries out its role in supervising banks. New regulations that ensure the soundness of banks need to be introduced, and CB's ability to enforce such regulations need to be strengthened. 2.54 CB has played an important role in maintaining financial stability during the recent crisis. However, its interventions to stabilize specific institutions have always taken place only after the crisis is well underway. It would be better if interventions by the CB could occur before an institu- tion is on the brink of bankruptcy and requires emergency assistance. As suggested by the Asian Development Bank, CB should set guidelines to improve the financial conditions of banks. These can take the form of various ratios reflecting a bank's exposure to risk, its liquidity, its solvency and the adequacy of its capital base. If one of these ratios is violated, CB should intervene innediately. It should penalize the management of the violating bank and force it to take prompt corrective actions. A strong CB which effec- tively carries out its role of supervising financial institutions is a prere- quisite for the long-run stability of the financial system. C. The Public Sector Recent Developments and 1986 Outlook 2.55 Since 1983 the overall public sector deficit has been significantly reduced, as a part of stabilization policies, through drastic reductions in public investment programs, in national government maintenance and service expenditure, and in subsidies. The overall consolidated public sector deficit had reached 5.8% of GNP by 1982, compared with 1.4% of GNP in 1979 {Table 2.12). This widening deficit was temporarily reversed in 1983 as receipts from international trade-based taxes rose after the introduction of an import surcharge in December 1982. However, revenue in relation to GNP declined to its lowest level {10.8% of GNP) in 1984, notwithstanding a series of tax increases implemented in 1983 and 1984. The drop in revenue mobilization was associated with the decline in economic activity and export prices, tax administration problems and some changes in the tax system which reduced the buoyancy of the system.  - 35 - Table 2.12: PUBLIC FINANCE OVERVIEW, 1979-86 (% of GNP) 1979 1980 1981 1982 1983 1984 1985 p 1986 E National Government /a Revenues 13.5 13.1 11.8 11.4 12.1 10.8 11.6 12.4 Expenditures and net lending 13.7 14.4 15.8 15.7 14.0 12.2 13.5 17.9 Deficit -0.1 -1.3 -4.0 -4.3 -2.0 -1.9 -1.9 -5.5 Major Nonfinancial Govt. Coreorations Investment-saving gap -3.6 -4.3 -4.6 -3.3 -3.6 -2.3 -1.4 -2.2 Local Government Surplus 0.1 0.2 0.1 0.1 0.1 0.1 Social Securitl Institutions Surplus 0.8 0.8 0.8 0.9 0.8 0.6 0.8 0.9 Consolidated Public Sector Deficit /b -1.4 -3.0 -5.1 -5.8 -4.2 -3.0 -2.6 -5.0 Memorandum items: Government current expenditures 10.4 10.2 9.7 10.2 10.0 8.6 9.9 11.0 Public fixed investment 6.9 8.5 9.9 9.5 7.8 4.6 3.7 4.8 Note: Totals may not add up due to rounding. /a Includes assistance to the GFis. Sum of the four fiscal balances (national government, government corporations, local government, and social security institutions), less national government equity contributions and net lending to the major government corporations. 2.56 In 1985, the overall nonfinancial public sector deficit was esti- mated to be around 2.6% of GNP. This reflects in part an improvement of about 1 percentage point in relation to GNP in the saving-investment gap of the major enterprises. The deficit at the national government level remained unchanged at 1.9% of GNP. The increase of 0.8% of GNP in revenue was offset by increases in interest payments, wages and salaries, and assistance to the government financial institutions (GFis). The deterioration of the financial position of the GFis has emerged as a much bigger problem as budgetary sup- ports to the GFis increased from an average of P 0.5 billion during 1980-83 to over P 10.3 billion (1.7% of GNP) in 1985.  - 36 - 2.57 The overall deficit was entirely financed from domestic sources as net external financing was marginally negative. Although the deficit appears to be low, given the monetary targets financing of the deficit through Treasury Bills contributed to higher domestic interest rates. 2.58 Without any new fiscal measures the consolidated public sector defi- cit is projected to be 5% of GNP in 1986.11 This deterioration reflects a sharp increase in the budgetary support to the financially troubled GFis, increased provisions for operations and maintenance (O&M), and higher capital expenditure. 2.59 Assistance to the GFis is estimated to more than double to P23 bil- lion mostly because of the deteriorating cash-flow position of the Philippine National Bank (PNB) and the Philippine Export and Foreign Loan Guarantee Corporation (PGC). Original estimates have been revised to incorporate assistance from either public institutions and the Central Bank to the GFI's. 2.60 The deficit of the nonfinancial public enterprises is projected to almost double to 2.2% of GNP in 1986 due both to a reduction in their operat- ing surplus and to a higher level of planned capital expenditure. Their internal cash generation deteriorated mostly because the National Food Admini- stration will incur a loss of more than P 1 billion due to the abolition of its wheat import monopoly and debt service on past loans. In addition, the operating deficit of the National Irrigation Administration is projected to deteriorate further, reflecting problems in collection of service charges. Total capital expenditure of the NFPEs is also expected to increase by more than 28%, mostly due to planned increases in capital outlays of the NPC and the Metropolitan Water and Sewerage System. 2.61 Through a combination of expenditure measures and revenue effects, the overall deficit of the National Government in 1986 should be reduced to around P 25 billion or 4.1% of GNP. The overall deficit on account of the financial operations of the major nonfinancial public expenditures should be reduced to around P 10 billion from the currently projected level of more than P 14 billion. In addition to fiscal measures, some tax reforms will be implemented. The authorities have adopted a comprehensive tax reform plan for 1986 which includes some revenue-losing measures designed to improve equity and allocational efficiency, and some revenue-enhancing measures directed at expanding the tax base. 2.62 Even if all measures suggested above are implemented immediately, the deficit will remain too high to be entirely financed from domestic sources without having undesirable effects on the interest rate, or inflation. Consequently, the availability of transitory external budgetary support would be highly desirable. 5/ Covers the nonfinancial public sector, but includes government assistance to GFis.  - 37 - The Domestic Components of Fiscal Deficit 2.63 The consolidated budget deficit which includes both domestic and foreign-based ezpenditures and payments of the principal, measures the effect of public sector operations on the monetary accounts and the rest of the economy. However, the cash basis fiscal deficit does not adequately show the thrust of public sector operations on domestic demand when a significant proportion of the public sector outlays are on account of foreign obligations. To the eztent that a component of the total ezpenditure is paid abroad, this does not ezert any effect on the domestic aggregate demand. Thus, the mone- tary effect of fiscal deficit may not parallel the direct thrust on domestic economic activity originating from the fiscal operations. I 2.64 This difference is important in the case of the Philippines where a significant proportion of the total expenditure is on account of foreign obligations. At the national government level, out of the total projected deficit of P 34.8 billion in 1986, about P 24.7 billion (3.8% of GNP} is attributed to ezternal sources (Table 2.13). Foreign-based ezpenditure is mostly due to interest payments on foreign debts. Ezternal interest payments on behalf of the GFis and the public corporations are shown as part of the equity and net lending operations of the National Government. 2.65 The domestic-based deficit indicates that the contribution to domestic demand arising from the national government operations will be about 1.6% of GNP, compared with the overall cash deficit of 5.5% of GNP. Therefore in 1985 when the overall deficit was 1.9% of GNP, given that ezternal payments obligations fulfilled, the fiscal policy was contractionary in its effect on domestic demand. The domestically based surplus coniributed to the sharply improved current account position of the balance of payments.  - 38 - Table 2.13: PHILIPPINES: DOMESTIC AND FOREIGN-BASED COMPONENTS OF THE NATIONAL GOVERNMENT BUDGET DEFICIT, 1986 /a (P bln) Foreign- Domestic- based based Total Revenue 4.10 76.20 80.30 Domestic-based taxes 49.00 49.00 Income and profit (--) (19.00) (19.00) Excises (--) (13.80) (13.80) Sales and licenses (--) (14.40) (14.40) Other (--) (1.80) (1.80) International trade taxes 20.00 20.00 Import duties and taxes (--) (18.80) (18.80) Export taxes (--) (0.90) (0.90) FOREX taxes (--) (0.30) (0.30) Nontax revenue 4.10 7.10 11.20 Of which: Economic Support Fund (4.00) (--) (4.00) Expenditure and Net Lending 28.82 86.31 115 .13 Current operating expenditure 6.85 60.25 67.10 Personal services (0.05) (25.55) (25.60) Maintenance and operating (1.20) (17.60) (18.80) Interest payments (5.60) (12. 70) (18.30) Subsidies (--) (0.90) (0.90) Allotments to local governments (--) (3.50) (3.50) Other (--) (--) (--) Capital outlays 3.-19 10.71 13.90 Infrastructure (0.69) (5.21) (5.90) Other capital outlays (2.50) (5.50) (8.00) Equity and net lending 18.78 15.35 34.13 Of which: Assistance to GFis (12.00) (10.90) (22.90) DBP /5.70/ /4.30/ /10.00/ PNB /4.70/ /5.90/ /10.60/ PGC /1.60/ /0.70/ /2.30/ 15 government corporations Other government corporations ! (6.78) (4.45) (11.23) Deficit (-) -24.72 -10.11 -34.83 Percent of GNP (-3.8) (-1.6) (-5.4) /a Under unchanged fiscal policies. Sources: Data provided by the Philippine authorities; and staff estimates.  - 39 - 2.66 Both concepts of deficit, cash-based and domestic-based deficit, are important for the purpose of policy analysis in the case of the Philippines. In situations where domestic demand is slack and other sectors of the economy are not expected to pick up, fiscal policy may play some temporary stimulatory role, and the concept of domestic-based deficit may be useful for that purpose. The cash-based deficit, on the other hand, would highlight the financing problem which will persist in the medium-term. Structural Aspects of the Expenditure and Tax System 2.67 In addition to the current debt constraints on public finances, the size of the public sector in the Philippines is structurally bounded by an exceptionally low tax ratio. The size of the public sector is small relative to most of its regional comparators. Total expenditure (excluding net lend- ing) at the central government level was less than 12% of GNP in 1983. This is the lowest in the region where central government expenditures range from 18.2% of GNP in Korea to 40.8% of GNP in Malaysia (Table 2.14). The tax ratio in the Philippines in proportion to GNP is one of the lowest in the world. Among the regional comparators, the Philippines has the lowest tax to GNP ratio, 10.4 % of GNP. This does not mean, however, that the Philippines has to reach much higher expenditure to GDP ratios. The private sector is an important agent in providing services which are provided by the government in other countries. A low level of expenditures relative to other countries suggests that expenditures should not decrease any further and that the public sector gaps should be closed through increased revenue generation.  - 40 - Table 2.14: COMPARATIVE TAX AND CENTRAL GOVERNMENT EXPENDITURE DATA, SELECTED YEARS (in percent of GNP) Philippines Indonesia Malaysia Thailand Korea (1983) !_/ (1983) (1981) (1984) (1984) Tax revenue 10.4 20.3 24.2 14.0 17.0 Taxes on income and profits 2.3 16.7 10.7 3.2 4.4 Domestic taxes on goods and services 4.5 2.4 2.6 6.9 8.6 Taxes on international trade 3.2 1.0 8.1 3.6 2.9 Other taxes 0.4 0.2 2.8 0.3 1.1 Total ex2enditure U.9 24.0 40.8 19.8 18.2 Current expenditure 9.1 12.3 25.2 16.3 15.6 Capital expenditure 2.1 11.7 15.6 3.5 2.5 Net lending 2.1 1.5 4.2 -0.1 2.4 Overall deficit 2.0 2.8 15.8 3.8 1.3 /a Figures may not be exactly comparable with other tables because of classification discrepancies. Sources: IMF, Government Finance Statistics, and International Financial Statistics. 2.68 The low buoyancy and low elasticity of the Philippine tax system creates serious difficulties for policymakers as it requires continuous legis- lative changes to prevent a fall in the ratio of revenue to GNP. In fact, in recent years revenues fell despite many discretionary·revenue raising measures that the Government adopted. This is a clear indicatig? that the underlying buoyancy and elasticity of the tax system is very low.- Buoyancy calculations indicate that the problem has become more serious in recent years, particularly before the introduction of the 1985 tax reforms (Table 2.15). 6/ Buoyancy estimates the responsiveness of.the yield of a given tax to changes in some relevant aggregate variable without any correction for discretionary (statutory) tax changes. An elasticity measures that responsiveness afcer correcting the tax revenue series for such discretionary changes.  - 41 - Table 2.15: ESTIMATES OF BUOYANCY AND TAX ELASTICITIES, 1978-85 Buo1:ancI Estimates ElasticitI Estimates a/ 1978-80 1980-85 1978-85 Tax revenue 1.0 0.8 0.5 Taxes on net income and profits 1.3 0.8 0.8 Taxes on domestic production and consumption 0.9 0.9 Sales and business taxes (1.2) (0.4) (0.4) Excises (0.8) (1.2) (0.3) Taxes on international trade 1.0 1.0 0.6 Nontax revenue 0.4 0.7 /a An elasticity of at least one in a basic prerequisite for a healthy tax system. Source: Staff Calculation. 2.69 The existing tax system may be affecting a broad range of economic decisions while raising relatively little revenue. Economic decisions of tax- payers may be influenced by the relative ease with which taxes are evaded. For example, the prevailing schedular nature of the tncome tax may well encourage better-off taxpayer, to diversify their activities across the various income tax schedules.-1 Public Sector Expenditure 2.70 Total nonfinancial public sector expenditure as a proportion to GNP is low in the Philippines compared to most countries of comparable income levels. Among other things, this results from very low revenue collection. Inadequate revenues constrain the government ability to provide adequate public economic and social infrastructure and fior maintenance expenditures. In the medium term, any significant increase in public sector expenditure, in 7/ The income tax system is defined as schedular since it has different tax rates for different sources of income. Income from interest, dividends, royalties and government compensation have different rates in the Philippines.  - 42 - line with the authorities' desired objective, will continue to be constrained by the revenue collection efforts. 2.71 Apart from the lower level of expenditure, the composition of public sector expenditure has also shifted to an undesirable direction in recent years. At the national government level, capital expenditure, and expenditure on goods and services (mainly on account of operations and maintenance) rapidly declined in relation to both total expenditure and GNP. The share of capital expenditure in total expenditure declined from a peak of more than 26% in 1981 to 11% in 1985; and from 4.2% of GNP in 1981 to 1.5% in 1985. Expen- diture on goods and services declined from 4% of GNP to 2.2% in 1985. Expen- ditures on wages and salaries, interest payments, and assistance to GFis increased rapidly in recent years both as a percent of total expenditure and in relation to GNP. The increase in the wage bill occurred, notwithstanding a decline in real wages in the public sector, and may be attributable to addi- tional hiring. 2.72 The two debt components of national government expenditure, have introduced additional inflexibility in the budgetary operations. Interest payments on account of national government debts and transfers to GFis to service their maturing liablities have a~so reached alarming proportions and will continue to remain high in the medium term. Elements of a Revenue Strategy for the Medium Term Changes in Tax Administration 2.73 There is a considerable gap between revenue potential and actual collection in the Philippines. The main shortfall in revenues is due to poor compliance and needs to be tackled through administrative reforms. Some changes are already starting to be implemented in Internal Revenue. Personnel changes and administrative reorganization are underway in the Bureau of Internal Revenue to increase collection effic,iency. Tax Reform 2.74 The new administration has adopted a major Tax Reform Program that took effect in July 1986. The package has been designed to redress the tax system into a more efficient instrument for revenue generation, resource allocation and redistribution. The, major elements to improve the revenue elasticity of the system include a partial shift to global taxation, a shift to a fully and valorem basis and increase in rates for excise taxation of cigarettes and licor, and abolition of most exemptions from direct and indirect income tax. The Government has also decided to institute a full- fledged value-added tax in place of a complex and poor revenue performing sales tax, effective January 1988. 2.75 In order to improve resource allocation the package include measures to rationalize trade taxes and marginal income tax brackets. A tariff reform of import taxes include establishment of a minimum 10% duty on presently zero- rate imports, selective lowering of certain high rates, and a shift to a CIF basis of import taxation. With respect to export taxes, the Government has  - 43 - abolished export duties that have penalized exporters in present comodity market conditions. To boost incentive~ and reduce evasion the highest marginal rate has been unified as a substantially lower level of 35% (compared with the previous 60%). 2.76 To enhance the redistrictive impact of the tax system the measures include increase of personal exceptions under income tax so as to exclude all households below the poverty line. The decision to reassess taxable values of properties represent an important step in providing for a more equitable distribution of the tax burden. 2.77 In total, the net revenue yield of the tax package for 1986 is estimated at P 3.5 billion and, for 1987, at P 13.4 billion. Included in these estimates (P 1.6 billion and P 6.5· billion for 1986 and 1987 respectively) is the effect of the withdrawal of exemptions to the nonfinancial public corporations which, for the time being, will be balanced by explicit budgetary subsidies, thus making transparent, traditional implicit subsidies on the operation of these corporations. The Public Investment Program 2.78 During the 1970s the public sector gradually increased its invest- ment rate from a low level of 1.5% in 1970 to 6% of GNP by the end of the decade to meet the infrastructural requirements of a rapidly growing economy. After 1979, however, there was a pronounced acceleration in the public investment rate to counter cyclically offset the then deepening world recession and to fund investments in the energy sector that would help reduce the heavy dependence on imported petroleum. In addition, a major program of industrial investments was launched to save foreign exchange through import substitution. As a result of this effort the overall public investment rate increased to a peak of about 9% in 1981. Recent Developments 2.79 Most of the fiscal austerity measures were aimed at reducing the Public Investment Program (PIP). As a result the PIP was cut, in real terms, by almost 50% during the stabilization period (See Table 2.16). Reductions were particularly severe in such areas as transport/conununications (-80%), industry (-83%) and energy (-54%). While there has been a sharp reduction in new projects, there have also been considerable delays experienced in comple- tion of ongoing projects. 2.80 A substantial reordering of the public investment program took place in 1984/85 to scale back the budgetary deficits and public borrowing require- ments. The restructured investment program showed a substantial increase in agricultural investments in line with the previous Government's announced policy of shifting to balanced Agro-Industrial Development. In light of the constrained resource situation many large capital intensive projects in energy, irrigation and industry were either deferred or deleted from the program.  .., 44 - Table 2.16: PUBLIC SECTOR INVESTMENT (P bln) 1977 1979 1981 1982 1983 1984 1985 1986 1987 National Government 3.2 5.0 12.7 10.0 10.4 • 9.8 8.8 14.6 20.2 Public corporations 4.8 7.6 12.9 12.9 18.1 12.7 11.1 15.4 15.7 Local government 0.4 0.5 0.7 0.7 0.7 1.5 1.4 1.4 1.5 Total 8.4 13.1 26.3 23.6 29.2 24.8 21.3 31.4 37.4 % of GNP 5.6 6.0 8.7 1.q 7.7 4.6 3.6 5.0 5.5 Sources: NEDA 2.81 Although public investment cuts were largely appropriate, the cut in Operation and Maintenance (O&M) has been counterproductive. O&M expenditures have been cut by about 50% in.real terms compared with 1982. (See Table 2.17) Cuts have been particularly serious in irrigation where O&M has fallen 40% in real terms since 1981. The underfunding is also substantial in the various public corporations. Table 2.17: NATIONAL GOVERNMENT BUDGET: MAINTENANCE AND OPERATING EXPENDITURES (million pesos, 1972 prices) 1977 4,973 1979 3,592 1981 3,551 1982 3,611 1983 3,109 1984 2,160 1985 1,871 Source: NEDA 2.82 The national government budget for 1986 restores capital spending to about the same level as in 1979, through a doubling of the investment program. For the entire public sector, investment would rise from 3.6% last year to about 5% of GNP. The target increase in the national budget are in areas that will support employment oriented rural works projects. The investment program for the corporations calls for a fairly substantial increase for NPC from P 4.9 billion to P 8.8 billion ;this year. This increase is the result of two factors: the final payment of the nuclear power plant of P 2.6 billion, and increased expenditures for the rehabilitation of existing oil-fired plants of P 2.0 billion. 2.83 The 1986 national budget also calls for a substantial increase in O&M expenditures by 62%. This increase redresses the past trend of declining levels of O&M expenditures which have fallen 50% since 1982, despite an expanding capital base. The current total increase would raise the level to about 80% of the 1982 level. The restoratio~ effort would be even larger for economic and social services reaching about 95% of the 1982 level. 2.84 To stimulate aggregate demand in the short term and to provide for adequate structural support of private sector development in the medium term, the Government should try as a minimum to maintain a public investment program of about 5-5.5% of GNP which represents more of a restoration of the invest- ment level to the 1976-77 period (5.4% of GNP). A 5% public investment program would still represent a substantially lower public investment program than in a number of lower/middle income LDCs, such as Turkey (11%), Morroco (10%), Tunisia (15%), Ecuador (8.6%), Portugal (7.1%), Pakistan (9.2%) and Jordan (14%). The above proposed minimium public investment program of 5-5.5% is based on a number of factors including the above-mentioned "bottom-up" sectoral investment analysis and "top-down" ICOR and capital depreciation assumptions. 2.85 The new government wants to encourage private initiative, reduce government intervention and eliminate favoritism. Under the new investment guidelines the government would basically function as a provider of public goods, rather than as a direct producer, in areas in which market failure, externalities, or social objectives do require intervention. This is in fact one of the major changes from the past decade. In this context public sector participation will be concentrated in development of rural and urban infra- structure, encouragement of small farmers, and provision of services in health and education. 2.86 In line with this new role, privatization of public corporations is now one of the most urgent concerns of policy making. The government wants to privatize an important number of public corporations including the Philippine National Oil Corporation (PNOC), the National Food Authority (NFA), the National Development Corporation (NDC), and Philippine Airlines. In the case of PNOC, the first step is to decentralize and privatization will start to be considered only when the subsidiaries are independent. In addition, nonperforming accounts of the various GFis will be transferred to a separate entity which will manage the disposition or rehabilitation of these assets. 2.87 Following the recent cuts the high priority sectors for public investment are agriculture, transportation, water supply and telecommunica- tions. Efforts should be concentrated in these areas since any medium term strategy which pursues agricultural and export development will hinge on infrastructure, which at this point is largely inadequate in all of these four sectors.  - 46 - 2.88 In agriculture, public investment should be limited to research and extension, and investment in rural infrastr~cture, but not commodity produc- tion. On rural infrastructure, the most urg~nt problem in irrigation is the, severe underfunding of O&M which in 1986 is one third below the desirable level. Deferred O&M may result in accumulated rehabilitation investment needs of P 8.7 billion by 1995. 2.89 In the industrial sector, the governments strategy is to start divesting public firms most of which are now under NDC. As mentioned before, the major industrial projects have been completed or cancelled and the NDC is starting to be privatized. Therefore, the PIP does not contain any projects in industry, since all productive 4ctivity in this sector will clearly be left to the private sector. 2.90 The ongoing transportation investment plan has high priority, with high rates of return, and considerable social benefits. While the road net- work is adequate in location and extent, in reality an important part is in very poor conditions. Only 13% of the network is paved, and the conditions of many roads are poor in terms of deficient design and construction, lack of maintenance, and damage from overloaded vehicles. The usefulness of the existing network is significantly diminished by missing or weak bridges and the scarcity of access roads in remote areas. In the PIP the emphasis of investment in transport has shifted away from new construction to maintenance, rehabilitation and improvements. Increased attention is also being given to rural roads. 2.91 The country's economic situation, growth in power demand and falling oil prices have affected proposed investments in the power and energy sector. While geothermal energy sources are still competitive with alternative fuels, many proposed coal projects, which were already marginal investments before the change in oil prices, are probably no longer viable investments, and need to be carefully re-examined.  - 47 - III. THE PRODUCTIVE SECTORS 3.01 With an adequate macroeconomic environment and the appropriate incentive structure, it is the productive sector which will provide the real resources to supply domestic demand and to pay for import needs. During the past few years there has been little new private investment because of uncertain economic and political conditions. Policy makers have had to focus on stabilizing the economy in the short run. Having achieved that, attention must now turn toward the launching of medium-term economic planning. Given new political conditions and the likelihood that private investment will eventually resume, the incentive structure should promote growth along the lines of Philippine comparative advantage and away from a highly distorted output pattern. 3.02 The stabilization, although dramatic in terms of output drop, has probably left a healthier productive base than before the crisis. As a result of the economic crisis and the adjustment that followed, competitiveness and efficiency in industry might have improved since those firms that were able to survive despite the recession are probably the most competitive in the sector. In addition, there are significant amounts of unutilized capital. Therefore, industrial output can expand in some cases with little new investment given an increase in demand and the appropriate signals, it can start to contribute to economic growth. For agriculture, a number of reforms are in place which will support the sector's development once growth is resumed. A. Agriculture 3.03 Agriculture has been the only sector which has kept positive growth rates in the past two years, but output has been growing at lower than histo- rical rates. Production of a number of basic food commodities and coD1Dercial crops, labor productivity, real wages, and employment have all declined. Although the sector has been affected by the 1983 foreign exchange shortage and the credit constraints during the stabilization program, macro policies have systematically discriminated against agriculture for a long time. However, agriculture still remains a dominant sector: it is the most important employment generator, represents 26% of total value added, and over a third of export earnings.  - 48 - Table 3.1: GROWTH AND STRUCTURE OF THE AGRICULTURAL SECTOR 1972-85 Growth rates (real value addedz % p.a) Percentage share 1972-82 1983 1984 1985e 1972 1980 1985 Palay (rice) 4.7 -13.3 1.1 4.1 17.1 14.7 18.1 Corn 3.8 -6.7 7.1 15.5 6.3 5.6 6.5 Coconut (incl. copra) 1.4 -9.0 -21.3 27.6 1.2 4.9 4.5 Sugarcane 2.2 -14.3 17.6 -39.8 6.6' 4.3 3.1 Banana 13.0 4.3 .6 10.8 3.7 7.8 9.2 Other Crops 6.5 4.3 3.9 2.80 14.2 21.3 20.8 Livestock 1.0 10.0 -.4 -2.2 10.9 6.2 8.1 Poultry 10.9 13.6 4.4 -0.5 4.5 5.9 10 Fishery 4. 7 2.3 -1.8 2.2 16.7 18.1 16.9 Forestry -6.9 -16.6 -6.6 -1.1 12.5 10.9 2.7 Total Sector 4.2 -2.1 2.27 2.37 100.0 100.0 100.0 e - Bank estimates. Source: Derived from National Accounts Staff, NEDA. 3.04 Following the historical trend, resources have continued to move out of this sector because of a policy environment which resulted in a set of incentives that made production in agriculture relatively unprofitable. Macro policies have discriminated against agriculture through price controls, an overvalued exchange rate, export taxes, marketing monopolies, and negative effective protection for agricultural products. Many of these policies were the result of piecemeal decisions addressing a whole range of needs such as quick revenue generation, protecting the urban consumer and protecting industrial producers. The resulting set of incentives was one in which the profitability of agricultural activities declined steadily as both the external and internal terms of trade of agriculture have declined. 3.05 Today, after a number of reforms, the incentive system in agriculture is much improved. Major sector-specific reforms have been undertaken which have considerably ~educed the anti-agricultural bias. With the exception of the protective system which still favors manufacturing production, other price distortions have been largely eliminated. Producer prices of pork, eggs, and poultry have been liberalized and the price ceiling on milled rice has been removed; the overall range of nominal tariffs has been narrowed and the importation of animal feed, wheat, and fertilizer has been liberalized; subsidies and directed credit to agriculture have been removed. In addition, monopolies in sugar and coconut trading are being dismantled and the structure of the institutional set-up in these subsectors is being rationalized.  - 49 - Requirements for Resumption of Sustainable Growth 3.06 In addition to providing agriculture with the appropriate macro- economic framework, the government still needs to remove some institutional constraints which might prevent producers to respond to the new set of incen- tives. Specifically the government should address two interrelated issues in agriculture: the low productivity of the sector, and the sector's concentration in a few crops. Both issues face similar constraints which hinder the development of activities in which the Philippines enjoys comparative advantage. Rural Credit 3.07 Significant factors in the relatively weak performance of agriculture in recent years have been the sharp contraction in the supply of credit and, more recently, the severe inadequacy of existing channels for the delivery of rural credit. The flow of institutional credit for farm production and seasonal production loans have declined drastically in recent years. Efforts by the Central Bank to direct credit into agriculture as a preferred area have failed and the share of agriculture in total credit outstanding by conmercial banks declined from 16% in 1980 to 8% in 1984. Structural problems in the banking system and financial weaknesses of individual institutions currently constrain the flow of formal credit to agriculture, limit the range of services offered, and lead to increased transaction costs. Massive arrearages in the rural banking system pose serious problems to the efficiency and viability of both government owned or supported financial institutions as well as private rural banks. Out of 904 rural banks, 119 have closed and in the remaining banks more than 50% of total loans are now performing. The private rural banks suffer from subloan arrearages, low capitalization and limited deposit mobilization. As a result, the rural banking system cannot' adequately supply the needs of agriculture and the rural sector. A major thrust, therefore, in agricutlure must be the development of an efficient delivery system for rural lending. Government should embark on a comprehensive plan which should include selective rehabilitation of rural banks, mobilization of rural savings, reduction of intermediation costs, and simplification of loan procedures. Trade Policies 3.08 A relatively less protected industrial sector is a crucial requirement to make investment in agriculture more attractive. In spite of the tariff reform program, overall agricultural activities have negative effective protection rates of around -2% while manufacturing activities are protected by about 20% (see Table 3.2). The tariff reform program reduced the negative EPRs in the agricultural sector for a number of agricultural products. However, for some products protection became even more negative because of the imposition of export taxes, as a revenue measure, following the 1983 crisis. Today, effective protection rates for the agricultural sector are still negative while remaining positive for import-substituting manufactured products. Historically negative ~PR's help explain the fact that resources have moved out of agriculture and into industry. Over time this has lowered agricultural production and export earnings, provided significant  - 50 - income transfers from the rural to the urban population, and resulted in a level of national output below that which would have existed under a more neutral environment. 3.09 The gradual reduction in the level and dispersion of the tariff rates is a necessary but not sufficient condition to remove the anti- agricultural bias of the existing trade regime. The elimination of import restrictions now being implemented should continue and export taxes should not be reimposed. Lowering tariffs and narrowing the rates to the 10-30% range would not reduce by itself importantly the negative EPR's of the major agri- culture products. Quantitative restrictions and import controls on agricul- tural conmodities and inputs should also be eliminated. Specifically, the ban on importation of yellow corn imposed in October 1985 should be removed since it penalizes the feed meal industry for which yellow corn is an important input. The import duty on yellow corn is already a very high 50%, and the government should even consider lowering the duty to the 20-30% range. Other commodities and inputs that are subject to import licensing and control are meat and meat products, and tin plates, (which are used in food processing for canning). For agricultural exports in general the Government should also address the high tariffs on packing materials, and delays in obtaining permits in fish importation. Table 3.2: EPR ESTIMATES (%) Sector 1979 1985 Corn Unmilled 9 9 Milled 11 11 Rice, milled 11 11 Coconut, including copra -8 -16 Sugar, milled and refined -6 0 Banana -6 -4 Commercial fishing Exportable -4 -3 Importable 8 9 Primary and agricultural sectors -2 -5 Manufacturing sectors 27 20 Source: PIDS. Exchange Rate 3.10 The penalty of an overvalued peso has been shown to be a powerful disincentive to agriculture--and to agricultural exports in particular. Although the peso was adjusted periodically to reflect market conditions, the structure of tariffs, quantitative controls opimports, export taxes and  - 51 - currency restrictions have allowed the peso to maintain an artificially high value throughout most of the postwar era. In the Philippines the overall impact of the overvaluation of the effective exchange rate between 1969-80 was to reduce the price of agricultural exports relative to the prices of indus- trial exports, import-competing goods, and home goods by 11.3%, 6.6% and 3.2%, respectively. Thus, agricultural export production was discouraged in favor of industrial exports, import-competing products, and home goods. The annual cost of the overvalued exchange rate has been estimated to include foreign exchange losses on the order of P 5 billion, employment loss for around 126,000 workers and welfare loss to producers of P 1.8 billion. The off- setting welfare gain to consumers of P 2.9 billion can be largely translated as welfare transfer from the rural to the urban areas. The competitiveness of agricultural exports further deteriorated in the past two years as the real effective exchange rate appreciated. The international competitiveness of Philippines rice, corn, coconut oil, sugar, coffee, banana and tobacco has declined mainly because of the exchange rate appreciation that took place in the last two years. 3.11 In the past, the overvalued exchange rate has had a more negative effect on agriculture exports than on manufactured exports. In the case of industrial exports, the existing biases of the tariff structure and indirect taxes have been partly offset in the seventies, by fiscal and financial incentives provided under the investment codes, as well as the development of export infrastructure specifically directed toward labor-intensive manufac- tured products. Export Taxes 3.12 Export taxes in the Philippines have been the main factor explaining negative effective protection for a number of products. Export taxes have been levied until July 1986 on 10 traditional export products with rates rang- ing from 2% to 20%. Although export taxes were recently eliminated, through- out most of the past two decades the overall implicit export tax on agricul- tural export was close to 16%. • These taxes were originally imposed in order to encourage domestic processing and manufactured exports and to generate government revenue. However, export taxes effectively increase the relative protection to manufacturing industries and be~efit consumers and Government. They represent once again a transfer of wealt~ from agricultural produc~rs to the urban sector. Furthermore, it has been shown that export taxes also represent a deadweight efficienc~ loss to the economy since producers lose more than consumers and government gain. Finally, the revenue generated from export taxes was only 3% of total government revenues. For all these reasons, the recent elimination of export taxes is an important step towards improving the competitiveness of agricultural exports. With the exception of the export tax on logs imposed for conservation purposes, export taxes should not be reimposed. Agricultural Productivity 3.13 The ability of the agricultural sector to significantly contribute to economic growth has been hindered by the pr~sent low, and in some places declining, productivity. Unlike Malaysia and Indonesia where new lands are  - 52 - still available, Philippines has very limited potential farmland, so future increases in production will have to come from higher yields on existing crop land. 3.14 Crop yields in the Philippines are quite low by international standards. (See Table 3.3). In rice, for example, the yields in Asia average about 3.3 MT/ha, while in the Philippines they were only 2.5 MT/ha. The yields of rice per hectare were 2.9 MT/ha in Indonesia and 6.5 MT/ha in Korea. Yields in the Philippines are also lower than the international and regional averages for maize, sugar, copra and tobacco. Low corn yields are a result of the unavailability of disease resistant high yield varieties (HYVs), the lack of drying facilities, inadequate seed control and low level of fertilizer and pesticide use. Sugar yields on the other hand, suffer from the spread of production to marginal areas, and the deterioration of cane varieties. Table 3.3: YIELD COMPARISONS FOR MAJOR CROPS, 1984 /a (Metric t9ns/ha) International Philippines Asia South America average Rice (paddy) 2.5 3.3 2.1 3.2 Maize 1.0 1.5 2.0 3.4 Sugar (cane) 48.1 53.0 63.0 58.0 Tobacco 1.1 1.4 2.1 1.5 /a As the area compared is heterogeneous, this is only a rough comparison of yield. Source: FAO Production Yearbook. 3.15 Given the important linkages with other productive sectors, an increase in agricultural productivity would have beneficial economy-wide effects through price and quantity adjustments as well ft? on the rural and households' income generation and consumption patterns.- Thus, a major component of a long-term strategy in the agricultural sector should be the improvement of the productivity of 'the sector. 3.16 Elements of a strategy to increase productivity include inducement to use of fertilizers through reduction of taxation and improvement of the 8/ For a quantitative analyses of the effects of an increase in productivity in Philippine agriculture see Bautista R.M. "Effects of Increasing Agricultural Productivity in a Multisectoral Model for the Philippines." IFPRI, July 1985.  - 53 - physical distribution system; improved irrigation services through substantial increases in the level of O&M expenditures in irrigation systems; increased Government expenditures on rural infrastructure; increased budgetary alloca- tion for research and extension; and rationalization and strengthening of the extension system. Fertilizers 3.17 Despite the major role fertilizers have played in improving agricul- tural productivity, the Philippines is still a low level user of fertilizer. Furthermore, the use of fertilizers in the Philippirtes has been economically suboptimal. Government pricing policies,the high cost distribution system and technical problems associated with water supply and e*tension services have all contributed to low levels of application. The high fertilizer/crop price ratios, the foreign exchange shortages in 1983-84 and the credit shortages especially starting in 1983, have caused a significant decline in fertilizer consumption in recent years. Fertilizer use has declined from a level of 846,000 MT in 1982 to 701,000 MT in 1985--a level comparable to 1977 consump- tion levels. As a result, the average use of fertilizer per ha declined significantly and the nitrogen use per ha in the Philippines is one of the lowest in Asia (38.5 kg per ha compared to 57 kg and 45 kg in Indonesia and Malaysia, respectively). In order to increas~11 the use of fertilizers, the Government should initiate policies to reduce the cost of fertilizer and reduce the risk associated with the use of agrochemicals by farmers. This should include the complete elimination of the fertilizer levy; improving the physical distribution system; providing adequate extension services; improving the supply of water and stabilizing rice and corn prices. 3.18 The major problems affecting fertilizer consumption in the Philippines is government pricing policies which lead to high fertilizer/crop price ratio. These ratios in the Philippines for rice and corn are amongst the highest in Asia. Past government policies have protected fertilizer producers from foreign competition through import restrictions and import duties. Farmers were thus bearing the burden of an inefficient fertilizer industry. Import restrictions were removed in August 1984. However, ex- warehouse prices of most fertilizers remained higher than world prices because of high levels of taxation and high physical distribution costs. In the last quarter of 1984 urea prices, for example, were 28%i higher than world prices. Recently, the domestic price of fertilizer declined significantly after the decline in world prices and, in addition, fertilizer importers were practi- cally exempted from the 20% tariff. However, the farmgate price of urea in April 1986 was still 10% higher than world prices. The main distortion in fertilizer prices was caused by the capital recovery component (CRC) which is a levy of P 10 per bag of fertilizers, imposed in order to pay for nonguaran- teed private debt, which adds about 6% to the farmgate price. The Government is currently reviewing the CRC in view of the disincentive created for farmers and as of July 1986 importers and distributors have discontinued paying the P 10 tax. It is recommended that after the review by Government the CRC would be abolished completely. 3.19 Even after taking into account the negative effect of higher prices on fertilizer consumption, the use of fertilizers in the Philippines is econo-  - 54 - mically suboptimal. In all regions, 1n irrigated and nonirrigated areas, farmers produce at levels at which the value of the marginal product of ferti- lizer exceeds the price of fertilizers. ·The main factors explaining subopti- mal fertilizer application are: (a) the instability of output prices; (b) un- certainty and inadequacy of water supplies; (c) lack of sufficient knowledge on fertilizer application techniques; and (d) the high probability attached to losing the crop through natural disaster. Apparently the most important fac- tor in the farmer's decision as to the applications of fertilizer has to do with the price of the crop. The absence of an effective price stabilization system for rice and corn is translated into a lower expected value of marginal product. Combined with the risk factors involved in uncertain water supply and uncertain yields, the result is lower application of fertilizer. Irrigation 3.20 Inefficient and unproductive use of past investment in the agricul- tural sector is also a major reason for the low productivity of the sector. In spite of the massive investment in irrigation infrastructure undertaken in the last two decades, frequently less than two thirds of the planned service area are effectively irrigated because of inadequate operation and main- tenance. Operation and Maintenance (O&M) expenditures at the system level declined in real terms from P 189/ha in 1981 to P 117/ha in 1984. The conse- quences are a steady decline in system's efficiency, and premature deteriora- tion of past investments. The decline in service area i~ estimated at 1.5-2% per year with a corresponding decline in yield and production. 3.21 The inadequate funds allocated for O&M are a result of the low levels and poor collection of Irrigation Service Fees (I~F) and the decline in Government equity contributions for irrigation investment. Current ISF levels are, on average, 50% lower than the rates required to cover total investment costs and the desired level of O&M expenditures. The present levels are inadequate even to recover only the direct irrigation construction costs.~/ There is, therefore, a circular problem in which poor O&M result in poor service. This in turn helps to explain the low collection of fees since farmer do not want to pay for poor services. Finally, the reduced resources resulting from low collection will imply a lower level of O&M than required. 3.22 Proposed Government Strategy. High priority should be given by the Government to a substantial increase in expenditures for operation, maintenance, and rehabilitation, of existing irrigation works, and completion of on-going irrigation projects. This should be financed by an enlarged public expenditure program for irrigation and recovered through better water charges collection and more appropriate rates. O&M expenditures should be increased to the level of P 400/ha (in 1985 prices), and greater emphasis should be given to the creation of Irrigator Associations to encourage direct involvement of farmers' in the operation and maintenance, and the development of small-scale irrigation projects. 9/ Defined as the construction cost of the irrigation systems only, excluding roads and supporting infrastructure.  - 55 - 3.23 Concurrent with the improvement in irrigation services to the farmers, new strategies to increase the collection and level of ISF should be initiated. Measures to increase collection should include improvement of the billing system, updating of irrigation fee registers and parcellary maps, strengthening NIA's legal capacity of enforce fee collection and punish delin- quent farmers, and enabling NIA to negotiate with farmers the payment of past• accounts. Beyond improving collection, there.:is also a clear need to increase ISF level particularly for the reservoir systims. However, gradual increases in ISF level should be initiated only after irrigation services to the farmers are substantially improved and an effective collection mechanism is firmly in place. Rural Infrastructure 3.24 The deterioration of the rural infrastructure is a major constraint on a sustained recovery of the agricultural sector. The condition of most of the rural road network is in very poor condition because of deficiencies in design and construction, lack o/ maintenance, and damage from overloaded vehicles. Missing or weak bridges diminish the usefulness of many existing roads and in remote areas access roads are scarce. Most of the lower standard roads are impassable during the rainy ·seasons, and a number of fertile upland and coastal regions are practically inaccessible in any season. The stock of transportation equipment has deteriorated drastically in recent years, making transportation and distribution of produce and inputs unreliable, time consuming and expensive. As a consequence, vehicle operating costs are very high, significantly increasing the transportation costs of agricultural products. Inappropriate rural infrastructure has increased farmers costs in real terms by approximately 30% from 1980 to 1985. 3.25 Transport investments that support agricultural production should be given high priority in the investment program. While construction of new roads is still necessary, the emphasis should shift toward maintenance, reha- bilitation and improvements of existing infrastructure. Through improved maintenance the economic life of existing assets would be extended as well as transport costs would be reduced. Rehabilitation should be undertaken when regular maintenance is no longer effective, in order to avoid costly replacements. 3.26 In the Philippines postharvest faciliti~s, especially drying and storing, are very inadequate. In 1985, the drying capacity in the Philippines covered only 23% of total corn production; storing capacity covered 55% of total production. This bottleneck to increased crop production breaks the potential linkages between producers and processors and compels farmers to sell wet produce at depressed prices rather than facing total crop spoilage. There is a wide gap between post harvest facilities and corn production, particularly for driers since they are used for both paddy and corn. 3.27 Investment in postharvest facilities is and should continue to be a private act1v1ty. The recent liberalization of grain prices and trade should provide incentives for the private sector to invest in economically viable facilities. Government involvement could complement private initiative through provision of facilities on a lease basis with provision of option to  - 56 - buy qr by facilitating long-term credit, and chrough effective price stabilization for rice and corn. Research and Extension 3.28 Although the Philippines has one of the oldest research and exten- sion system in Asia, the support provided by the existing system is inade- quate. In addition to insufficiept research funds there is no clear link between agricultural research and extension work; and the extension system is diffused, undertrained and underfunded. For example, the agronomic efficiency of fertilizers currently used in the Philippines is so poor that the farmer benefits from no more than 40% of the nitrogen applied to rice crops, while the rest is lost through improper use. 3.29 Operating and capital expenditures devoted to research and extension should increase in real terms to more adequate levels of about 1% of agricul- tural value added. Current operating expenditures of the three ministries responsible for research and extension in agriculture have fallen both in nominal and in real terms, between 1981 and 1984. The extension staff lack fuel, vehicles, spare parts and other essentials to perform their duties. Furthermore, international comparison of agricultural research expenditures as a percentage of agricultural . value added show that already in 1980 the Philippines level was amongst the lowest in Asia (0.16%). 3.30 The fact that the existing extension system is extremely diffused limits the efficiency of the services provided to farmers. About 15 govern- ment ministries and agencies provide varying forms of rural extension. Agri- cultural extension has developed along comodity lines and each major crop has its own research and extension apparatus. For example, coconuts are handled by the Philippine Coconut Authority (PCA), sugar by Philsucom, cotton by Philcotton, tobacco by Philippine Tobacco Administration and Philippine Virginia Tobacco, rice and corn by Bureau of Agricultural Extension and animal protection is serviced by the Bureau of Animal industry. With so many agencies involved in extension, overlaps and inefficiencies are bound to exist. In the case of multicrop farming the same group of farmers must deal with at least three agencies and at times with up to eight. Clearly there is a need to rationalize the structure of the extension system, reduce the number of bodies dealing with extension and assemble the major responsibility under one roof, preferably the Ministry of Agriculture. This will also help to strengthen the link between the research side and the extension as at present there is no clear line of command from the national level down to the field. 8. Industry 3.31 The recent collapse in economic activity particularly affected the industrial sector which had already started to contract after the second oil shock. However, the adjustment ha_s left a more competitive industrial struc- ture in place. Therefore, given the right policy measures, the sector has the potential of importantly contributing to future growth. 3.32 Table 3.4 is quite graphic in describing the depressed state of industry in the Philippines in 1985: there is really no subsector which has  - 57 - not be~n hit hard by the economic recession. While the export industries were shielded during previous years they were also seriously affected in 1985, though partly because of external developments. Manufacturing activities have been the most affected within industry while capital goods industry has been the most affected within manufacturing. Table 3.4: ANNUAL GROWTH RATES GROSS VALUE ADDED IN MANUFACTURING BY INDUSTRY GROUP, 1983-85 At current Erices At constant Erices Industry/Industry group 1983-84 1984-85 1983-84 1984-85 Food manufacturing 50.48 12.70 1.06 -7.47 Beverage industries 30.91 15.63 5.50 -1.12 Tobacco manufactures 34.09 34.05 -20.32 8.99 Textile manufactures 30.93 -.86 -9.62 -22.66 Footwear, wearing apparel 48.19 16.93 4.17 -.15 Wood and cork products 14.34 3.90 -17.88 -8.84 Furniture and fixtures 37.70 1.17 o.oo -23.24 Paper and paper products 67.26 -.05 -7.14 -13.19 Publishing and printing 60.79 25.38 0.54 5.14 Leather products 61.54 5.95 -4.55 9.52 Rubber product 56.98 -1.19 5.70 -15.87 Chemical products 42.99 .87 -22.38 -5.18 Products of petroleum & coal 47.57 -4.59 -6.01 -8.42 Nonmetal mineral products 17.96 -9.74 -18.06 -22.04 Basic metal products 62.12 27.45 18.37 -4.55 Metal industries 4.89 31.43 -32.17 -.81 Nonelectrical machinery -6.22 21.76 -44.54 -7.47 Electrical machinery 43.26 -4.81 14.39 -18.33 Transport equipment -72.29 40.04 -83.29 9.68 Misc. manufactures 120.60 40.30 27.25 5.18 Gross Value Added in Manufacturing. 44.21 9.67 -7.13 -7.27 Source: National Income Accounts of the Philippines. 3.33 The industrial contraction was not only caused by the second oil shock, the 1983 crisis, and the following adjustment program. These three factors just accelerated what was a longer term structural problem. The current industrial crisis had its real origin in the overpriced and inappro- priate investments which were made in the 1970s. The 1983 crisis and the adjustment program just gave the final push to a large number of inefficient industries which were already in trouble. Unavailability of foreign exchange, higher cost of credit, import restrictions and drop in government expenditures were just proximate causes for the collapse of structurally inefficient industries.  - 58 - 3.34 \ A review of the major distressed industries reveals that many of the regulated imports which have proved most difficult to liberalize also pertain to these industries. The large majority of restricted products are outputs of industries identified as high energy intensity industries and which figure prominently among the nonperforming assets (NPAs). This indicates that many of these industries were inappropriate for the Philippines to begin with. Perhaps because of the protection provided by the import controls they never had the inducement to be efficient. Import controls also insulated these firms from the effects of tariff reform and probably increased effective protection in some cases. 3.35 The main exogenous factor which precipitated industrial contraction was the energy price increase of 1979-80. The sectors which have experienced a major downturn in activity have been those with high energy intensity such as mining, sugar, textiles, wood and cork, pulp and paper, cement, and ship- ping and transport. In each of these sectors a large proportion of existing capacity are non-performing assets. With low oil prices it was feasible for inefficient firms to survive but the 1979 oil price increase gave the exogenous shock which accelerated their collapse. 3.36 Subsector information also suggests that investments made in the 1970s were often overvalued for their capacity rating and as compared with other countries. In addition t~ the fact that domestic interest rates were already negative, overpricing of the capital equipment effectively made bor- rowing in itself a profitable operation almost regardless of the project's viability. The 1983 crisis was therefore only a culmination of faulty invest- ments and misused borrowed funds made much earlier. 3.37 For the medium term, the required reallocation of investments to export oriented activities might be less painful since a large part of the transition costs usually associated with reallocation have probably been borne. With the recent crisis many of the ill conceived industries that were spawned in the 1970s have now met their natural death. Evidence in some sub- sectors reveals that those firms which used their resources more efficiently before the crisis have been able to keep their precrisis production levels. The painful process of phasing out some uncompetitive industries like auto- mobiles and home appliances has been borne to a great extent. It is now easier for a competitive industrial structure, suited to the Philippines comparative advantage, to develop. Revitalizing Philippine Industry 3.38 If industry had been more efficient it might have more readily sur- vived the 1983-84 crisis and resumed growth subsequently when the foreign exchange controls were no longer binding. But by then many firms had already ceased operating. For other firms that survived the foreign exchange crisis, by 1984, either the final demand had dropped or credit costs became prohibi- tive. Because of the poor condition of many of the intermediate goods indus- tries, largely energy intensive, it was difficult for the government to lift import restrictions as planned in 1980. The major using industries, particu- larly textiles, therefore continued to suffer. A recovery program would therefore have to address low final demand, high credit cost, and import restrictions, some in the short term and others over a much longer haul.  - 59 - 3.39 However, today the cost structure of Philippine industry is more favorable than before the adjustment. There is a substantial real wage diffe- rential between Philippines and other East Asian competitors {Table 3.5), and this gap has widened in the past few years as real wages have increased in other countries but not in the Philippines. This growing wage differential increases the Philippines' comparative advantage in labor intensive goods and improves its export competitiveness. This represents a shift in comparative advantage even further towards more labor intensive products. In addition, the drop in oil prices represe,ts an opportunity to reduce energy prices and thus production costs. This is especially important given the fact that industrial power tariffs in the Philippines are considerably higher than other countries in the region. Table 3.5: INDEX OF ANNUAL GROSS EARNINGS IN SELECTED ASIAN CITIES, 1985 Primary C1.-.1- Electri- Female school st ruction Department cal Secre- textile City teachers workers managers engineers taries workers Manila 1.0 1.0 1.0 1.0 1.0 1.0 Singapore 7.8 4.4 1.9 4.0 4.8 3.2 Bangkok 1.7 0.9 1.5 2.2 1.8 1.2 Hong Kong 11.4 5.1 2.2 7.5 5.6 4.8 K. Lumpur 4.0 4.3 2.2 3.3 4.5 2.1 Seoul 7.1 3.9 1.4 3.6 3.8 2.6 Tokyo 15.8 13.0 4.6 7.0 14.2 10.9 Source: Union Bank of Switzerland: "Prices and Earnings Around the Globe, 1985." 3.40 In order for industry to resume sustainable growth a number of measures need to be taken. These include changes in the regulatory environ- ment, industrial promotion measures, a stable macroeconomic environment and changes in incentives. On the regulatory environment it is necessary to liberalize domestic trade restraints, review the role of BOI, and review the role of fiscal incentives. On industrial promotion policies a number of things need to be looked at such as export promotion, reduction of structural constraints, and technological support. 3.41 On export promotion a number of measures need to be considered including improved access to inputs at world prices for indirect and small exporters, product design and product improvement programs, programs for upgrading the labor force to the technical skills required for new export products (when these are not firm specific enough for the firm to undertake on the job training), improvements on the a~ailability ~f financing for new and small exporters.  - 60 - The Expansion of Exports Trade Liberalization 3.42 The program of trade liberalization is discussed at some length in the next section. However, in relation to export expansion it is important to be careful with the sequencing of import liberalization. Many of the products which were to be liberalized at the end of the program were among the most widely used intermediate goods and inputs that go into broad based industries. One example is textiles which itself has forward link.ages to the apparel industry. Studies suggest that if some segments of the domestic textile industry could have access to inputs at near world prices it would stand a good chance to be competitive. Whatever tariffs are maintained on grounds of infant industry protection should be for a preannounced time period so that the infant industry is prodded to become competitive and eventually export. Particular care should be taken in designing the sequencing of further liberalization so that the raw material and intermediate good imports are liberalized first so as not to cause negative tariffs in exportable commodities. 3.43 However, an improved trade regime may not be enough to induce the magnitude of export expansion that is now needed by the Philippines. The previous export surge between 1975 and 1980, when an astounding annual growth rate of 40% was recorded for manufactured exports, occurred after a series of specific policy measures had been taken for export promotion over the preced- ing few years. A similar concerted effort will now have to be made for a new surge in exports. Electronics, Garments and the Quota System 3.44 The nontraditional manufactured exports--semiconductors and garments--do not have a very optimistic prognosis for further unlimited expan- sion. In the case of electronics, it may be that recent changes in technology have shifted back the comparative advantage to countries which can afford higher capital/labor ratios such as the United States, Japan and South Korea. This shift could be to countries that also have a comparative advan- tage in technological research and development. It is important that this issue be investigated with some urgency: is the 1985 downturn in Philippines semiconductors exports a cyclical phenomenon reflecting the market or is it a permanent one reflecting changes in technology? Some similar remarks apply to textiles and garments where newly automated machines might make the developed countries more competitive in these products. 3.45 At the same time, there are still unutilized opportunities within the textile and garment sectors. Of about 100 categories of textile and gar- ment items subject to quota in the US, almost 60 are typically less than 75% utilized. In the case of European countries, almost all the categories are underutilized. Moreover, under the existing system of administering quotas to firms within the Philippines, much more could be done to maximize value added within the constraints of the quota system. At present, firms with old quotas can simply perpetuate themselves as long as they have the required fill ratios--even if there are other firms who could use the same quotas with  - 61 - highertvalue items. There is thus a need for review of the quota allocation system where much can be learned from the practices of other more successful countries like Hong Kong. Yet, there is a clear need for efforts to be made to diversify the market of Philippine manufactured exports. Export Diversification and Promotion 3.46 As mentioned earlier the fall of Philippine per capita income in recent years and the further fall in real wages has made the Philippines extremely competitive in East and South East Asia. With rising wages and incomes in South Korea, Malaysia and Thailand, it is logical to expect that many of the industries that located there in the late 1960s and 1970s would be looking for a new location. Given the high quality of the Philippine labor force, the country is well placed to receive such footloose industries as comparative advantage in labor intensive industries shifts towards the Philippines. Specific measures would have to be taken to bolster the effects of such economic forces already under way so that these industries are indeed attracted to the Philippines. The provision of a stable economic environment and the removal of antiexport biases are more important than special invest- ment incentives. 3.47 Past experience in other countries suggests that small and medium firms should be at the forefront of exploiting these cost advantages for export expansion. How is this to be achieved? The Government has already begun the implementation of a set of policy measures which will make it easier for small and medium firms to have access to foreign inputs and to markets. These measures include: (a) Duty Exemption and Drawback System: Present procedures for duty drawback are cumbersome and time consuming, since they are done on a case by case, product by product, basis. The present program to move towards formula based "standard drawback" system should be accelerated such that procedures are strea~lined and delays are minimized. Secondly, the current bonded warehouse system is a "closed" one favoring larger firms. There i:S an elaborate system of physical controls to ensure that duty free imported inputs are indeed used for export production. This could be replaced by an "open" system relying more on expert technical knowledge of the respective products and production processes, and the use of random inspections. If such a system is put into effect, a much larger array of exporters would have access to inputs at international prices. (b) Export Credit and Financing. At pr~sent exporters have difficulty in gaining access to both short- an~/ long-term financing. Although there is a limited amount of short-term financing that is available to exporters it is cumbersome to avail of it because of the proce- dures involved between the Central Bank's rediscounting procedures and the participating commercial banks. Second, there is an urgent need for a well functioning export credit guarantee system without which it is almost impossible for small and medium exporters to gain access to even the limited funds available. Once again, the Govern-  - 62 - ment has already begun consideration of ways in which export credit, credit guarantees and insurance can be provided. The establishment of such a system should be undertaken urgently. At present there is almost no long~term export financing available. For the future development of exports, such financing is clearly essential, but needs to be addressed under the whole issue of industrial financing. (c) Technical Assistance to Small Exporters. Even if some of the procedures outlined above are put into operation, it is difficult for small and medium sized firms to have access to foreign markets, product information and product designs. The information costs are simply too high to make it economic for small firms to get into export markets. Moreover, their bargaining power is low with respect to foreign buyers. There should therefore be an active search for modes of organization and management which can accomplish these tasks on behalf of small and medium producers. Industry associations, trading houses, government organizations, subcontract- ing firms, etc. are various types of arrangements that have succeed- ed elsewhere. If small firms are to succeed in exporting, a mecha- nism for ensuring quality control must be established. A beginning has been made with the government financing product specialist for specific products. But the more important need for the medium term is the establishment of institutions that are self-financing, self- perpetuating and responsive to the needs of exporters. The Govern- ment needs to participate because of the externalities inherent in such an operation, but its potential profitability should eventually make it an autonomous enterprise. (d) Indirect Exporters. In order to move towards a more integrated and diversified export base, it is also important that indirect expor- ters are also able to avail of the various export incentives offered. The institution of domestic letters of credit would be helpful in this regard. 3.48 Reduction of structural constraints is crucial for the development of exports and efficient import substitution ~ctivities in the Philippines. In this context the government needs to suppo~t the provision of adequate transport and communication infrastructure between the different islands of the country. It is also needs to help reduce transaction costs for SMI pro- ducers on specific activities such as marketing and information. Industrial promotion policies would not be complete without articulating a technology system where firms have the adequate incentives to invest in research and development (R&D). 3.49 It is also important to reduce power tariffs for industrial consu- mers by reducing cross subsidization. As seen in Table 3.6, contrary to prac- tices in other Asian countries, industrial tariffs are lower than residential consumption tariffs. The residential power rate is the lowest in Asia while industrial rates were the highest in 1984, and the second highest in 1985. Since the mothballing of the nuclear plant might make power costs even higher and the transition to lower industrial rates will probably require increasing residential rates.  - 63 - Table 3.6: POWER RATES IN SELECTED COUNTRIES IN EAST ASIA (in current Philippine pesos/KWH) /a City or Average Residential Industrial Country Dec. 85 June 84 Dec. 85 June 84 Dec. 85 June 84 Metro Manila 1.58 1.12 1.05 1.03 1.95 1.40 Taipei 1.40 1.19 1.47 1.55 1.20 1.09 Bangkok 1.45 1.48 1.55 1.20 1.33 1.35 Hong Kong 1.46 1.32 1.68 1.20 1.46 1.28 Singapore l.S7 1.47 1.73 1.56 1.39 1.32 Jakarta 1.77 1.78 1.88 1.77 1.40 1.40 Korea n.a. 1.47 n.a. 1.44 n.a. 1.21 Kuala Lumpur n.a. 1.72 rt.a. 1.5,9 n.a. 1.59 Tokyo n.a. 1.79 n.a. 2.14 n.a. 1.66 a/ All rates are quoted at prevailing exchange rates. Source: MERALCO. 3.50 There is evidence of a wide disparity of practice within industries in that many firms simply do not use best practice technologies given the same factor and goods prices. For the Philippinesi[to be ready for the effects of shifting comparative advantage, and in order ~o cope with trade patterns in a world of changing factor and input prices, Philippines must have the technical capacity to successively shift to new products. Given the change in produc- tive activities of some countries like Korea, considerable attention has to be given to articulating the appropriate technology system. In such a system, firms themselves should have adequate incentives to invest in technological research and development. Given the nature of externalities inherent 1n R&D, the government has to play a large role in these activities. 3.51 Last, and most importantly, changes are required in the protective environment: Rationalization of tariffs, lifting of import restrictions on raw materials and intermediate goods, and implementation of anti-dumping measures. The Trade Reforms 3.52 Several components of the trade reforms, which had been started in the early eighties, were aborted before they could begin to be effective. The trade liberalization program had proceeded broadly on schedule until the 1983 cr1s1s. The program included reduction in level and dispersion in tariff rates; removal of quantitative import restrictions; and realignment of indirect taxes in order to make them ttade neutral. The ensuing balance of payments crisis induced an effective rollback of some reforms and abandonment of others.  - 64 - 3.53 The tariff refo'rm program has, however, survived the cr1s1s. Maximum tariff rates have been reduced from 100% to 50%, with the average tariff rate reduced from 43% to 28%. Effective protection rates (EPRs) have been narrowed to a range of 10-80% and the degree of tariff escalation, from low tariffs on raw material inputs to much higher tariffs on finished pro- ducts, has been reduced. The current range of nominal tariffs is 10-50% with the exception of 33 tariff lines which still have duties below 10% . .!Q/ The main deviation on the tariff reform program was the imposition of a flat across-the-board import surcharge. The rate of this, surcharge began as an emergency revenue measure with 3%, it was increased up to 10% by June 1984 and then reduced to 5% in early 19~5 before being finally ;phased out later in the year. In addition, a foreign exchange tax of 1% was imposed on all trans- actions in late 1984 but was removed in late 1985. 3.54 Once the economy has stabilized and resumed growth, it will be advisable to continue with further tariff reforms in order to enhance the com- petitiveness of the economy. As mentioned in Chapter 1, the trade liberaliza- tion program should start with export promotion measures followed by lower tariffs once the economy recovers. Manufacturing is still the most protected sector and agriculture, primary goods, and exforts continue to have negative EPRs. Tariffs and import restrictions only p~otect certain segments of econo- mic activity at the expense of other productive sectors. What is of most con- cern is that exports are still the most affected activities with highly nega- tive EPRs. These calculations do not take account of the quantitative import restrictions that exist and therefore understate the magnitude of the true distortions. Given the magnitude of the external debt overhang, it is impera- tive that this antiexport bias be removed as soon as possible, particularly since accession to GATT precludes a whole range of other specific export incentives. Removal of Quantitative Import Restrictions 3.55 As part of the Structural Adjustment Program the government started to implement in 1980 a program to lift import restrictions over a five-year period ending in 1985. This plan con.centrated on the successive liberaliza- tion of 1,304 items classified as "nonessential" consumer goods (NEC) and unclassified consumer goods (UC). By 1983, 921 items out of this list had been liberalized and further liberalization was programmed for 1984 and 1985. The program was suspended after the balance of payments crisis in 1983, which also led to the temporary introduction of foreign exchange controls. 3.56 Three other categories of import restrictions have been in place since 1980. First, there were 36 groups of "regulated" commodities in 1980, which although importable, are monitored by various government agencies, usu- aly by the Board of Investments. These items include a large number of raw materials and intermediate goods like caustic soda, hydrogen peroxide, poly- vinyl chloride, asbestos vinyl tiles and sheets, fabrics and textiles, basic iron and steel products, cotton and synthetic fibers, synthetic resins, and 10/ These items largely consist of food products and iron and steel products.  - 65 - pulp and paper products. The regulation is designed to protect specific domestic industries, and some cases, specific companies. In 1984, these items comprised over 10% of the nonoil import bill. A second category of regulated items consists of those designed to promote the various progressive manufac- turing and local content programs and to restrict the creation of new capacity in these areas. Items included in this group included industrial machinery and spare parts (used in the production of cars, trucks, motorcycles) and con- sumer electronic items. The third category of regulated items is for the pur- pose of safeguarding public health, safety and national security. 3.57 Foreign exchange controls were dropped in October 1984, and a plan was introduced to lift most of the restrictions at the end of December 1985 (909 items) and (the rest) in December 1986. , fhis program was further deferred first in view of the elections and taen because of the change in government. The new Government is reviewing the program and the NEDA task forces have forcefully reconunended the lifting of restrictions in accordance with the original program. 3.58 In the short run, however, the government is concerned about further loss of industrial employment that might result from import liberalization during a time of recession. There can be little disagreement that import liberalization at the present time should be carried out very carefully such that essentially competitive industries are not fatally hurt by competition from imports when industrial costs are high because of low capacity utilization. 3.59 However, on balance given the specific products which are still regulated the lifting of restrictions on most of these items should stimulate industrial recovery. Liberalization of most of the currently restricted goods will reduce the costs of many of the downstream industries, particularly employment-intensive ones like garments and textiles. A careful examination of the existing restrictions suggests that many employment intensive down- stream industries are adversely effected by controls on raw materials and intermediate goods imports. For example, the textile industry is affected by controls on chemicals such as caustic soda and hydrogen peroxide, and on spun yarns and threads. Similarly the garment industry is affected by the controls on fabrics and textiles. Indeed, if input costs of the textile industry are reduced it is quite likely that it would be able to compete successfully against imports of textiles and fabrics. There would then be much more incen- tive for modernization over time. Another example are controls on iron and steel products which affect a whole range of industries, including food pro- cessing exports which use tinplated steel as a major input. 3.60 It should be emphasiz~d that even after the restrictions are lifted, relatively high tariffs would still remain, giving adequate protection to domestic industry. An important benefit of translating restrictions into tariffs would be reduced uncertainty for using industries. As has been men- tioned earlier, the regulation of imports has been capricious, depending on perceived availability of foreign exchange as shown by the import data of the restricted products which widely fluctuates year to year. Adequate business plans can scarcely be made under such conditions.  - 66 - 3.61 As many of these restrictions are lifted it is important that effec- tive post-monitoring procedures are put into effect to counteract any instan- ces of dumping. The retention of SGS for preshipment valuation should help to the extent tht it achieves correct valuation of imports in terms of home consumption value (h.c.v.). Once the h.c.v. of suspected dumping products is well known it will be easier to institute qui~k antidumping actions.  - 68 - Table of Contents 1. POPULATION AND EMPLOYMENT Table No. Page No. Population Estimates of Census Years and 1.1 Population Projections••••••••••••••••••••••••••••• 72 1.2 Labor Force, Employment, and Unemployment ..•...•.•... 73 1.3 Employment by Sector ..........•...................... 74 2. NATIONAL ACCOUNTS 2.1 Expenditure on GNP at Current Prices ....•.•....•.•... 75 2.2 Expenditure on GNP at Current Prices: Percent Distribution••••••••••••••••••••••·•··••••• 76 2.3 Expenditure on GNP at Constant 1972 Prices .......•... 77 2.4 Expenditure of GNP at Constant 1972 Prices: Growth Rates•••••••••••••••••••••••••••••••••••••·• 78 2.5 Expenditure on GNP: Implicit Price Indices ........•. 79 2.6 Industrial Origin of GDP at Current Prices .......... . 80 2.7 Industrial Origin of GDP at Current Prices: Percent Distribution••••••••••••••••••••••••••••••• 81 2.8 Industrial Origin of GDP at Constant 1972 Prices ••... 82 2.9 Industrial Origin of GDP at Constant 1972 Prices: Growth Rates •••• J•••••••••••••••••••••••••••••••••• 83 2.10 Industrial Origin f GDP: Implicit Price Indices .... 84 3. BALANCE OF PAYMENTS 3.1 Balance of Payments Summary ...•...................•.. 85 3.2 Current Account: Services and Transfers .........•... 87 3.3 Net International Reserves .......................... . 88 3.4 Trade Indices ....................................... . 89 3.5 Exports by Commodity Groups ...................•..•... 90 3.6 Volume and Unit Value of Principal Commodity Exports .....••..••.••..•.••.•.••....•••.. 91 3.7 Principal Export Markets •....•....................... 92 3.8 Imports by Commodity Groups•••••••••••••••••••••••••• 93 3.9 Imports of Capital Goods by Sector .................. . 94 3.10 Imports of Petroleum and Coal ....................... . 95 3.11 Principal Sources of Imports••••••••••••••••••••••••• 96 3.12 Actual Current Account ...••••....•••.•••.•••••.•••••• 97  - 69 - Table No. Page No. 4. EXTERNAL DEBT 4.1 External Debt Outstanding and Disbursed at End-Year, by Maturity and Borrower••••••••••••••••••••••••••• 98 4.2 External Medium- and Long-Term Debt Transactions, by Type of Borrower•••••••••••••••••••••••••••••••• 99 4.3 External Medium- and Long-Term Borrowings: Conmitments, by Type of Borrower .•.....•.•••....... 100 5. PUBLIC FINANCE 5.1 Cash Operations of the National Government •••••..•••• 101 5.2 Distribution of National Government Cash Balances at Year-End••••••••••••••••••••••••••••••• 102 5.3 National Government Expenditures by Function •••.••... 103 5.3a Transfer to Government Corporations and Local Government Units, by Function 1976-85 •.••••••....•. 104 5.3b National Government Current Expenditures on its own Account, by Function, 1976-85 ...•••••..•... 106 5.4 National Government Equity Contributions by Recipient (Cash Basis) 1978-85 •...•••••••..••.•• 107 5.5 Consolidated Revenues and Expenditures of Local Governments, Cash Basis•••••••••••••••••••••• 109 5.6 Major Nonfinancial Government Corporations: Capital Expenditures by Sector••••••••••••••••••••• 110 5.7 Major Nonfinancial Government Corporations: 1 Internal Cash Generation by Sector ...•••..••....... 111 6. MONEY AND CREDIT 6.1 The Monetary System at Year-End ...•.••....•••........ 112 6.2 Reserve Money at Year-End•·•••••••••••••••••••••••••• 113 6.3 Financial Sector: Loans and Investments Outstanding by Type of Institution .•....•••........ 114 6.4 Total Assets of the Financial System ...••.......•.•.. 115 6.5 Structure of Deposit of Commercial Banks ............ . 116 6.6 Structure of Credits Granted by Co11111ercial Banks - by MaturitY•••••••••····•••••••••·••••••••• 117 6.7 Credits Outstanding by Commercial Banks - by Interest Rate................................... 118  - 70 - Table No. Page No. 6.8 Credits Outstanding by Commercial Banks - by Industry 119 6.9 Credits Outstanding by Financial Institutions by Maturity as of End of 1985 ...............•..•... 121 6.10 Deposits and Deposit Substitutes, Short- vs. Longer-Term Financial Savings ....................•. 121 6.11 Interest Margin between Central Bank Rediscount and Lending Rates of Banks ............•. 122 7. AGRICULTURE 7.1 Coconuts: Area, Production, Yield and Disposition .•••••.•••••••••••..•••....•.•••••.• 123 7.2 Sugar: Area, Yield, Quality Ratio, Production and Exports•••••••••••••••••••••••••••••••••••••••• 124 7.3 Rice: Area, Yield, Supply, and Use ••••••............ 125 7 .4 Corn: Area, Yield, Supply, and Disappearance ....... . 126 7.5 Minor Crops: Harvested Area, Production and Yields••••••••••••••••••••••••••••••••••••••••• 127 7.6 Production of Selected Livestock and Fishery Product•••••••••••••••••••••••••••••••••••• 128 1.1 Forestry Products: Production and Exports .......... . 129 7.8 Gross Value Added in Agriculture, Fishery and Forestry by Subsector in Current Prices .•....•. 130 7.9 Gross Value Added in Agriculture, Fishery and Forestry by Subsector at Constant 1972 Prices .. 131 7.10 Agrarian Reform Program: Operation Land Transfer at Year-End•••••••••••••••••••••••••••••••••••••••• 132 7.11 Selected Agricultural Prices••••••••••••••••••••••••• 133 7.12 Price Structure of Pesticides 1986 .................. . 134 7.13 Urea Price Structure - April 1986 ............•......• 135 7.14 Index of Real Peso Value of Selected Agricultural Commodities••••••••••••••••••••••••••• 136 7.15 Average Import Price of Selected Fertilizers ...•...•. 137 7.16 Fertilizer Consumption••••••••••••••••••••••••••••••• 138 7.17 Principal Agricultural Imports, 1979-85 ............. . 139 8. MINING AND MANUFACTURING 8.1 Mining Production, Volume of Major Products ......... . 140 8.2 Major Mining Production, Value in Current Prices .... . 141 8.3 Gross Value Added in Manufacturing by • Industry Group at Current Prices ................... . 142 8.4 Gross Value Added, in Manufacturing by • Industry Group at Constant 1972 Prices ............ . 143  - 71 - Table No. Page No. 9. ENERGY 9.1 Primary Energy by Source••••••••••••••••••••••••••••• 144 9.2 Petroleum Product Consumption•••••••••••••••••••••••• 145 9.3 Energy Investment Program•••••••••••••••••••••••••••• 146 9.4 Dependence of Energy Consumption on Imported Energy•••••••••••••••••••••••••••••••••••• 147 9.5 Electricity Generation by EntitY••••••••••••••••••••• 148 10. SERVICES 10.1 Tourism: Travel Receipts and Visitors by Country of Origin•••••••••••••••••••••••••••••••••• 149 11. PRICES AND WAGES 11.1 Consumer Price Index for the Philippines ........•••.. 150 11.2 Wholesale Price Indices for Manila ••.....••••....•••• 151 11.3 Retail Prices of Selected Conmodities in Metro-Manila •••••••••.•••.••••••••••••••••••••••••• 152 11.4 Legislated Minimum Money and Real Daily Wage Rates •••••••••••••.•••••••••••••••••••..•••••. 153 12. REGIONAL DATA 12.1 Population by Region••••••••••••••••••••••••••••••••• 154 12.2 Gross Regional Product at Current Prices .......•..... 155 12.3 Gross Regional Product at Constant Prices •......••... 156  - 72 - Table 1.1: POPULATION ESTIMATES OF CENSUS YEARS AND POPULATION PROJECTIONS Year Population .I.!.. (in millions) Growth rate(% p.a.) Census 1g48 19.2 3.0 1960 27.4 3.0 1970 36.8 2.8 1975 42.2 2.7 1980 48.3 Projection .& 1981 49.5 2.5 1982 50.8 2.5 1983 52.0 2.5 1984 53.3 2.5 1985 54.7 2.4 1986 56.0 2.4 1987 57.4 2.4 1988 58.7 2.4 198g 60.1 2.3 1990 61.5 2.3 19g5 68.4 2.1 2000 75.2 1. 9 /a Mid-year (July 1) estimates. Tb Preliminary projections, based on moderate fertility and mortality declines. Source: National Census and Statistics Office.  - 73 - Table 1.2: LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT Working-age Labor force population participation Labor force (in '000■ 2 Unnployaent Survey date (in '0001) rate(%) Total Employed Une■ployed rate(%) 1970-Censu, 20,822 55.5 11,566 10,734 832 7.2 March 1971 20,333 57.7 11,732 11,101 631 5.4 May 1971 20,511 59.6 12,223 11,624 599 4.7 August 1971 20,886 59.0 12,324 11,680 644 5.2 November 1971 21,073 59.8 12,607 11,931 676 5.4 February 1972 21,333 61.7 13,172 12,244 928 7.0 May 1972 21,343 61.6 13,140 12,176 961 7.3 August 1972 21,423 59.6 12,778 11,983 795 6.2 November 1972 21,839 58.0 12,657 11,961 698 5.5 February 1973 21,895 58.7 12,843 12,169 674 5.2 May 1973 22,372 58.2 13,016 12,407 609 1.7 August 1973 22,926 60.3 13,835 13,107 728 5.3 November 1973 23,081 59.9 13,824 13,141 683 4.9 February 1974 23,054 58.4 13,466 12,897 569 4.2 May 1974 23,014 60.9 14,024 13,324 700 5.0 August 1974 22,961 59.0 13,545 12,975 570 1.2 November 1974 22,880 59.3 13,564 13,117 447 3.3 February 1975 23,047 59.0 4.3,598 13,090 508 3.7 August 1975 23,772 60.7 14,434 13,795 639 4.4 August 1976 24,992 61.9 15,460 14,662 i 298 5.2 October 1976 24,837 59.5 14,776 16,883 935 6.3 October 1977 25,787 56.6 14,595 13,267 1,328 9.1 January 1978 26,048 57.2 14,903 13,763 1,140 7.6 April 1978 26,307 62.3 16,387 13,782 2,405 14.7 July 1978 26,587 61.6 16,368 15,011 1,357 8.3 October 1978 26,882 61.1 16,428 15,256 1,172 7.1 January 1979p 27,169 63.l 17,135 15,920 1,215 7.1 October 1980 28,967 59.7 17,300; 15,900 1,400 8.1 1i1 January 1981 29,155 62.5 18,214 16,538 1,676 9.2 October 1981 29,847 61.3 18,287 16,653 1,634 8.9 January 1982 30,079 60.1 18,682 16,883 1,799 9.5 October 1982 30,748 60.l 18,488 16,734 1,754 9.5 ' January 1983 30,978 63.5 19,676 17,697 1,979 10.1 April 1983 31,211 63.3 19,761 17,132 2,629 13.3 October 1983 31,676 63.6 20,159 18,559 1,600 7.9 January 1984 31,908 63.8 20,363 18,475 1,888 9.3 April 1984 32,195 62.5 20,130 17,851 2,279 11.3 October 1984 32,679 63.5 ' 20,756 18,550 2,206 10.6 January 1985 32,920 63.0 20,727 17,901 2,826 13.6 April 1985 33,163 63.0 20,902 18,000 2,902 13.9 July 1985 33,408 63.0 21,046 18,624 2,422 11.5 October 1985 33,646 63.4 21,329 18,967 2,362 11.1 January 1986 33,887 64.1 21,732 19,116 2,616 12.0 p • preli■inary results. Note: Ba1ed on a "past-eek" reference period. Source: National Census and Statistic, Office.  - 74 - Table 1.3: !MPLOY!iENT SY SECTOR l'l'liouHnda of peraona) Agriculture, Electri- Trana port, flahery and Manufac- cttv, 11ta• Conatruc- co..,., and Other '!'otal foreatry l'!tnin11t turin11t and water t1on Comaerce atoraite aervicea ~ emplor-nt 1970-Cenau ■ 5,614 51 I, 124 n 437 1115 49(, 1,964 l'l,714 March 1971 5,2117 4q 1,398 55 4 lfi I, 3511 52(, 2,n12 11, 1n1 May 1971 5,686 55 1,430 511 4fi5 1,459 517 1,954 I 1,f>24 AUJltU ■ t 1971 5,579 6" I, 393 57 442 I, 536 499 2, 1011 11,fillO November 1971 5,1174 58 1,409 49 419 I, 515 52(, 2,0111 11,cn1 February 1972 ,,,294 57 l ,44fi 40 42" 1,525 4119 I, q,,7 12,244 l'!ay 1972 fi, 351 56 1,413 40 454 I, 5110 47} 1,1105 12, 17(, Augu ■ t 1972 fi,3)0 54 1,211(, 41 402 1,4511 502 1,908 ll,'111) November 1972 6,3711 35 1,2'13 44 4)1 1,450 464 1,866 l I ,9fil February 197'3 fi, 3q7 72 l, 127 14 474 I, 4fi9 47Q 1,917 12, jf,Q May 1973 6,357 fil I, 375 17 5111 1,602 503 1,954 12,407 AUJltUllt ICl73 fi,990 5q 1,409 41 401 I, 51) 538 2,156 I 3,107 Nove■be r 19 73 7,188 51 1,362 17 349 l ,IJ9'1 49'1 2, 151\ 13,141 February I 974 l\,IICl3 52 1,427 ,,. 1'5 I ,4Cl7 503 2,114 12 ,IICl7 May 1974 7,260 43 1,468 44 402 1,550: 511 2,046 13,324 August 1974 1 ,nos 42 1,355 15 411 I, 5 I 2: 5111 2 ,nCl7 12,cn5 November 1974 7,107 4(, I, 390 36 400 1,5111 4119 2, 1ll I), 117 Fehruarv 1'1115 ,,,%2 44 1,40(, 42 417 1,517 525 2, I 57 11,ncin August · 1975 7,190 54 I ,fiOCI 4f, 45fi I, 5CII 41111 2. 11i I 13, 7Cl5 August 1'176 7,5311 5f, I ,Ii 1'1 4fi 4CII I ,1112 542 2, 51'1 l4,6t,~ Third quarter 1976 7 ,t.5'1 Ill I, 5CIII 51 429 I, 1Cl7 600 2,421 14,21A Fi rat quarter 1'177 7,04fi CII 1,1137 72 5Cl1 I ,115 I 7(14 2,791 14,QR5 Third quarter 1977 7,474 52 I, 515 42 4114 I, 155 lilll ~, 711 14,114 Fourth quarter 1977 7,3011 72 I, 5(,1 56 4Cl2 I, 1114 f,54 ',]Q(, 14, 1?l First quarter 19711 7,315 72 l,M5 53 5 I Cl 1,4511 f,92 2,'114 14, 51111 Second quarter 1978 11,054 IIO I, 7 55 51 51)1\' 1,1,f,(1 1,511 2,Q15 I s,1,Qq Third quarter 1978 11,403 61 I, 743 49 5Ui, 1,626 "'Cl6 ),005 lfi, IOI Fourth qua~ter ICl711 11,702 1,7 l,'116 55 411~1 I, 745 Ml 1,n22 1... ,,,"11 Firat quarter 1'179 7,643 11,4111/h Iii, 124 Second quarter 1979 7 ,'151 ll,7917li .,,, 7:.4 Third quarter 1979 7,743 II, 52470 I fi, 21i7 Fourth quarter 197CI 11,967 II, II 21f7li 17,7Q5 Third quarter 1980 R,4n t Cl4 1,1114 511 SRI\ I ,6fi0 712 1,n1s lf',,414 Fourth quarter 19110 11,1194 '130 1,1150 55 f.00 I, 7qq 725 l, IOI I 7, I 54 Third quarter 19111 ll,'12CI 80 1,Rn7 M 592 I ,Cl51i 714 1, 21111 I 7,452 Fourth quarter 1'1111 Cl, 17 I 'II I, 711n "'1 5111, 2 ,01 ~ 725 1, 111~ 11,111n Third quarter 19112 R,'IICI 75 I, 741 q F,04 l,'llli n11 1, 1ns 17,171 Fourth quarter 1'1112 Cl,fi'lfo 711 1,111111 fol "I 5 2, 11n 740 1,426 '• 1~ ,fd - quarter 1'1113 Fir ■ t 11,919 111 1,111\2 (,Cl MR 2 ,0511 11n11 ,. 551 I II, 11 7 Third quarter 1'1111 Fourth quarter 19113 Q,11110 10,075 102 141 I ,11117 1,1122 ,,,, 711 F.Cl7 1,34 2, l '17 2,220 1111 Ml 1,c;4n 1,516 I q, 212 19, )Mi First quarter 1'1114 'I, 215 12(, l ,Cl1'1 R1 1114 2,171 Ql5 l,4" l I A, 7 I~ Third quarter 19114 9,740 1)11 I ,911 RI 75'1 2,437 1174 1,67) I '1,612 Fourth quarter ICIR4 Cl,704 1)3 I ,1147 71 711\ 2 ,4111 RIii 1,577 ICI, 1hA First quarter !CIR~ 9,411 I 31, I, 717 70 707 2,431 147 1,~99 19,144 Second quarter 1'1115 9,7)7 121 1,1171\ 711 72f, 2,SCIO 111\2 1,712 1'1,7'1 Third quarter 19115 'l,fi911 12R I ,922 71 lill'I 2,611 'Ill J,750 19,1101 Fourth quarter 1'18~ 1n,n11s 12CI I ,'12(, 7CI (,711 2 ,1iso q 11 1, .,, 7 20, 1"7 /a Includes tnduatrv not reported. 7o Nonajllricultural e11ployment, Note: Integrated Quarterly Survev of householrls was not conrluct@d for the followinR quart@r~: ICIH,-Fnurth; JQ77- second; 19RO-firet and aecond, Source: National r.en ■ u ■ and Statiett~• Office (NC.SO),  Table 2.1: Expenditure On Gross National Product at Current Prices (Billion pesos) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 r r r p.e. Consumption 45.3 54.5 76.1 87.3 100.3 117 135 164.8 199.3 231. 7 263.7 297.7 440.3 528.4 Personal 40 48 . 2 67.2 76.2 87.1 102.6 118.8 146.6 178.1 206.9 234.5 268.2 404.7 485.9 General government 5.3 6.2 8.9 11.1 13.2 14.3 16.1 18.3 21.2 24.8 29.2 29.5 35.6 42.5 Gross domestic capital formation 10 . 9 14.6 25.1 33.8 42 44.4 51. 3 67.7 81. 2 93.3 96.5 102.5 100.8 96.6 Fixed capital formation 9.3 11.4 18.4 27.1 33.7 36.4 42.3 56.3 68 79.3 86 95.3 105.6 97.9 Construction 3.6 4.4 7.6 11. 7 17.8 20.4 22.7 30.6 37.4 46 51.4 54.4 63.9 56.2 Government 1 ~ 1. 4 2.9 4.4 8.3 9.5 10.6 14.5 16.3 20 22 19.8 20.1 18.7 Private 2.5 3 4.7 7.3 9.5 10.9 12.1 16.1 21 26 29.4 34.6 43.8 37.5 Durable equipment 5.7 7 10.9 15.4 15.9 16 19.6 25.7 30.6 33.3 34.6 40.9 41.7 41. 7 Increase in stocks 1. 7 3.2 6.6 6.7 8.3 7.9 9 11. 4 13.2 14 10.5 7.2 -4.8 -1. 3 Exports 0£ goods and nonfactor services 9.9 15.9 22.3 21. 3 23.2 28.9 32.4 41. 5 53.6 57.8 56.2 75.2 117. 7 126.5 I ..... V, Imports of goods and I nonfactor services -10.3 -13.4 -25.4 -29.1 -31.8 -34.8 -41. 3 -53.6 -68.7 -74.4 -79. 3. "".101.1 -118.4 -108.5 Statistical discrepancy 0.8 0.7 1. 5 1. 4 1.6 -1.3 0.2 -2.9 -0.7 -3.2 3.5 9.8 -1 -33 ;.., -~·· -- Expenditure on gross domestic product 56.6 72.3 99.6 114. 7 135.3 154.2 177.6 217.5 264 . 7 305.2 340.6 384.1 539.4 610 ------------------------------ Net factor income from the rest of the world -0.5 -0.1 0.4 -0.3 -1.1 -1 -0.6 0.5 -0.1 -1.6 --•5. 2 -5.3 -13.1 -14.9 Expenditure on gross national product 56.1 72. 2 100 114.4 134.2 153.2 177 218 264.6 303.6 335.4 378.8 526.3 595.1 ------------------------- r = Revised p.e.=Preliminary estimate Source: NEDA National Accounts Staff.  Table 2.2: Expenditure on Gross National Product at Current Prices: Percentaae Distribution 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 r p.e. Consuaption 80.7 75.5 76 . 1 76.3 74.7 76.4 76 . 2 75.6 75.3 76.3 78.6 78.6 83.7 88 . 8 Personal 71. 3 66.8 67.2 66.6 64.9 67.0 67.1 67.2 67.3 68.2 69 . 9 70.8 76 . 9 81. 7 General aovenuaent 9.4 8.6 8.9 9.7 9.8 9.4 9.1 8.4 8.0 8.2 8.7 7.8 6.8 7.1 Gross doaestic capital formation 19.4 20.3 25.1 29.6 31. 3 29.0 29.0 31.0 30.7 30.7 28.8 27.1 19.2 16.2 Fixed capital formation 16.6 15.8 18.5 23.7 25.1 23.8 23.9 25.8 25.7 26.1 25.6 25.2 20.1 16.5 Construction 6.4 6.1 7.6 10 . 2 13.3 13.3 12.8 14.0 14.1 15-.2 15. 3 14.4 12.1 9.4 Government 1.8 1.9 2.9 3.8 6.2 6.2 6.0 6.6 6.2 6.6 8.6 5.2 3.8 3.1 Private 4.5 4.2 4.7 6.4 7.1 7.1 8.8 7.4 8.0 8.6 8.8 9.1 8.3 6.3 Durable equipment 10.1 9.7 10 . 9 13.5 11. 8 10.5 11.1 11.8 11.8 11.0 10.3 10.8 7.Q. 7.0 Increase in stocks 3.0 4.4 8.6 5.9 6.2 5.2 5.1 5.2 5.0 4.6 3.1 1. 9 -0.9 -0. 2 I .... Exports of goods and 19.0 16.7 22.4 21. 3 I " nonfactor services 17.6 22.1 22.3 18.6 17.3 18.9 18.3 19.0 20.3 19.9 Imports of aoods and nonfactor services -18.5 -18.6 -25.4 -25.4 -23.7 -22.7 -23 . 3 -24 . 6 -26.0 -24.5 -23.6 -26.7 -22.5 - 1 8.2 Statistical discrepancy 1.4 0.9 1. 5 1. 2 1. 2 -0.8 0.1 -1. 3 -0.3 -1.0 1.1 2.6 -0.2 -5.5 Expenditure on gross domestic - ~-·-- · product 100.9 100.1 99.6 100.3 100.8 100.7 100.3 99.8 100.0 100.5 101.6 101.4 102.5 102.5 ------------------------------ Net factor income from ..-.- -....,.. the rest of the world -0.9 -0.1 0.4 -0.3 -0.8 -0.7 -0.3 0.2 0.0 -0.5 -1.6 -1.4 2 ..5 -2.5 Expenditure on gross national product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 ------------------------- r = Revised p.e.=Preliminar:, estimate Source: NEDA National Accounts Staff.  Table 2.3: Expenditure on Gross National Product at Constant 1972 Prices (Billion pesos) 1972 1973 1974 1975 1978 1977 1978 1979 1980 1981 1982 1983 1984 1985 r p.e. Consuaption 45.3 48.2 51.1 53.8 56.3 58.9 61.8 64.7 67.6 70.2 72.7 74.1 74.3 74.4 Personal 40 42.3 44.4 46.5 48.8 51.4 54.1 56.7 59.3 61. 6 63.5 65.4 66 66.2 General aovernaent 5.3 5.9 6.7 7.3 7.4 7.5 7.7 8 8.3 8.8 9.1 8.7 8.3 8.2 Gross do■estic capital formation 10.9 12.1 14.8 18.3 21.1 21.1 22.9 25.5 26.6 27.2 26.3 24.9 15.9 12.5 Fixed capital formation 9.3 9.5 11. 4 15 17 .2 17.6 19 21.3 22.7 23.5 23.7 23 16.6 12.7 Construction 3.6 3.7 4 6.2 8.7 9.2 9.4 10. 5 11.1 12 12.5 11.9 9.5 6.9 Governaent 1 1.2 1. 5 2.3 4 4.3 4.4 5 4.9 5.2 5.4 4.3 3 2.3 Private 2.5 2.5 2.5 3.9 4.6 4.9 5 5.5 8.3 8.8 7.2 7.6 8.5 4.8 Durable equipment 5.7 5.9 7.4 8.8 8.6 8.3 9.6 10.7 11.6 11.5 11.2 11.1 7.1 5.8 I Increase in stocks 1. 7 2.5 3.5 3.3 3.9 3.6 3.9 4.2 3.9 3.7 2.6 1. 9 -0.7 -0.2..., ..., Exports of aoods and nonfactor services 9.9 11.3 10.1 10.2 12.1 14.1 14. 7 15.7 17.7 17 .9 17.7 19.3 20.8 19.3 Imports of aoods and nonfactor services -10.3 -10.7 -12.6 -13.3 -13.4 -14.3 -16.1 -18.8 -19.4 -18.9 -19.5 -21.8 -18.2 -14 Statistical discrepancy 0 .8 0.4 0.8 -0.5 -2.2 -1._4 -0.5 0.9 0.1 -0 . 3 1.9 --3_.,4 1.4 -1.8 Expenditure on aross domestic product 56.5 81.3 64.5 88.5 73.9 78.5 82.8 88 92.6 98.2 99 99.9 94.2 90.4 ------------------------------ Net factor inc0119 from the rest of the world -0.5 -0.1 0.2 -0.2 -0.8 -0.5 -0.3 0.2 0 -0.5 -1.5 -1.3 -2 . .1 -2 Expenditure on aross national product 55.9 61.2 64.6 68.4 73.3 78 . 82.5 88.2 92.6 96.7 97.5 98.8 91.9 88.4 ------------------------- r = Revised p.e.=Preliainary estimate Source: NBDA National Accounts Staff.  Table 2.4: EXPENDITURE ON GROSS NATIONAL PRODUCT AT CONSTANT 1972 PRICES: GROWTH RATES {Percent) 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 r p.e. Consumption 6.5 6.1 5.2 4.6 4.7 4.9 4.1 4.4 3.9 3.5 1.9 0.3 0.1 Personal 5.8 5.0 4.7 4.9 5.3 5.3 4.8 4.6 3.9 3.1 3.0 0.9 0.3 General aoverruaent 11. 3 13.6 9.0 1. 4 1. 4 2.7 3.9 3.8 3.6 5.8 -4.4 -4.6 -1. 2 Gross domestic capital formation 10.9 22.9 23.5 15.4 -0.1 8.6 11.2 4.4 2.3 -3.3 -5.3 -36.1 -21.4 Fixed capital formation 2.2 20.0 31.6 14.7 2.3 8.0 12.1 6.6 3.5 0.9 -3.0 -27.8 -23.5 Construction 2.8 8.1 55.0 40.3 5.7 2.2 11. 7 5.7 8.1 4.2 -4.8 -20.2 -27.4 Government 20.0 25 . 0 53.3 73.9 7.5 2.3 l;i. 6 -2.0 6.1 3.8 -20.4 -30.2 -23.3 Private Durable equipment 0 .0 3.5 0 .0 25.4 56.0 18.9 .17.9 -2.3 6.5 -3.5 2.0 15.7 10 . 0 11. 5 14.5 8.4 7.9 -0.9 5.9 -2.6 5.6 -14. 5 -0.9 -36.0 -29.2 -18.3 Increase in stocks 47.1 40.0 -5.7 18.2 -7.7 8.3 7.7 -7.1 -5.1 -29.7 -26.9 -136.8 -71.4 ..... 00 Exports of aoods and nonfactor services 14.1 -10.6 1.0 18.6 16.5 4.3 6.8 12.7 1.1 -1.1 9.0 7.8 -7.2 Imports of aoods and nonfactor services 3.9 16 . 8 6.4 0.8 6.7 12.6 16.8 3.2 -2 . 6 3.2 11. 8 -16.5 -23.1 Expenditure on gross domestic product 8.5 5.0 6.6 7.9 6.1 5.5 6.3 5.3 3.9 2.9 0.9 -5.7 -4.0 ------------------------------ Expenditure on eross national product 9.3 5.6 6.0 7.2 6.3 5.8 6.9 5.0 3.4 1. 9 1.1 -6.8 -3.8 ------------------------------ r = Revised p.e.=Preliainary estimate f = Forecast Source: NEDA National Accounts Staff.  Table 2.5: EXPENDITURE ON GROSS NATIONAL PRODUCT. IMPLICIT INDICES (1972 = 100) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 r p.e. Consumption 100.0 113.0 148.9 162.3 178.3 198.6 218.4 254.7 295.0 330.0 362.8 401.8 592.6 710.2 Personal 100.0 113. 9 151. 4 163.9 178.5 199.6 219 . 6 258.6 300.3 335.9 369.3 410.i 613.2 734.0 General government 100.0 105.1 132 . 8 152.1 178.4 190.7 209.1 228.8 255.4 288.4 320.9 339.1 428.9 518.3 Gross domestic capital formation 100.0 121. 2 168.9 184.7 198.7 210.1 224.0 265.5 305.0 342.6 367.5 417.2 634 . 0 772.8 Fixed capital formation 100.0 120.0 161. 4 180.7 195.9 206.8 222 . 6 264.3 299.6 337.4 362.9 414.3 636 . 1 770.9 Construction 100.0 118.9 190.0 188.7 204.6 221.7 241. 5 291.4 336.9 383.3 411.2 457.1 672.6 814.5 Government 100.0 116. 7 193.3 191. 3 207.5 220.9 240 . 9 290.0 332.7 384.6 407.4 460.5 670.0 813.0 Private 100 . 0 120 . 0 188.0 187 . 2 206.5 222.4 242.0 292.7 333.3 382.4 408.3 455.3 673.8 815.2 . Durable equipment 100.0 118.6 147 .3 175.0 184.9 192.8 204 . 2 240.2 263.8 289.6 308.9 368.5 587.3 719.0 Increase in stocks 100.0 128.0 188.6 203.0 212.8 219.4. 230.8 271. 4 338.5 378.4 403.8 378.9 685.7 650.01 .... Exports of goods and "' 1 nonfactor services 100.0 140.7 220.8 208.8 191.7 205.0 220.4 264.3 302.8 322.9 317.5 389.6 565.9 655.4 Imports of goods and nonfactor services 100 . 0 125.2 203.2 218.8 237 . 3 243.4 256 . 5 285.1 354.1 393.7 406.7 463.8 650.5 775.0 Expenditure on gross domestic product 100.2 118.1 154.7 167.3 183.0 196.5 214 . 5 247. 3 265. 7 c 317: 3 344.0 384.5 572.6 674.8 ------------------------------ Expenditure on gross national product 100.4 118.1 154.7 167.3 183.0 196.4 214.6 247.3 285.7 317.2 343.9 384.2 572.7 673.2 ------------------------------ r = Revised p.e.=Preliminary estimate Source: NEDA National Accounts Staff.  Table 2.6: Industrial Origin of Gross Domestic Product at Current Prices (Billion pesos) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 r p.e. Agriculture, fishery and foresty 16.1 21.2 29.6 33.2 37.6 42 47.4 55.5 61.8 69.4 76.7 84.5 139.5 161.4 Industry 18.1 23.9 32.8 38.1 46.1 53.1 61. 3 76.9 96.7 111.6 122.5 138.2 185.2 199.6 Mining & quarrying 1. 3 2.4 3.1 -- 2- 2.1 2.5 3.3 5.8 8.1 6.8 6.1 7 9.7 13.7 Manufacturing 14 18.2 24.3 28.2 32.9 37.4 43.7 52.1 64.6 75.2 83.1 95.2 • 137. 2 150.5 Construction 2.2 2.8 4.6 6.8 9.8 11.8 12.6 16.9 21.3 26.3 29.3 30.7 31.2 26.7 Electricity, gas, water 0.5 0.6 0.9 1.1 1. 2 1. 4 1. 7 2.1 2.8 3.3 4 5.3 7.1 8.7 Services 22.3 27.2 37.1 43.4 51. 6 59.1 69 85.1 106.2 124.3 141.3 161.4 214. 7 249 Transport, communication & storage 2.7 3.5 4.8 5.8 7.3 8.4 9.9 12.4 16.4 19.6 21. 4 24.4 33.8 38.2 Trade 7.5 9.5 13.9 15.8 18.8 22.3 26.4 33.5 42.1 49.8 56.4 66.1 99.7 118.4 Finance & Housing 4.5 5.7 7.6 9.1 10.4 11. 7 13.6 16.6 20.6 22.6 26.1 30 31.1 32.7 Other services 7.5 8.5 10.7 12.7 15.1 16.8 19.1 22.6 27.1 32.3 37.4 40.9 50.1 59.7 GDP at market prices 56.5 72.3 99.5 114. 7 135.3 154.2 177.7 217 .5 264.7 305.3 340.5 384.1 539.4 610 I _____ .:x, ------------------------- 0 Net factor income from the rest of the world -0.5 -0.1 -0.4 -0.3 -1.1 -1 -0.6 0.5 -0.1 -1. 6 -5.2 -5.3 -13.1 -14.9 GNP at market prices 55.9 72.2 99.9 114.4 134.2 153.3 177 218 264.6 303.7 335.3 378.8 526.3 595.1 ------------------------- r = Revised p.e.=Preliminary estimate Source: NEDA National Accounts Staff.  Table 2.7: INDUSTRIAL ORIGIN OF GROSS DOHlESTIC PRODUCT AT CURRENT PRICKS: PERCENT DISTRIBUTION 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 r p.e. Aariculture, fishery and foresty 28.8 29.4 29.6 29.0 28 . 0 27 . 4 26.8 25.5 23.4 22.9 22 . 9 22.3 26.5 27.1 Industry 32.4 33.1 32.8 33.3 34.4 34.6 34.6 35.3 36.5 36.7 36 . 5 36.5 35.2 33.5 Mining & quarrying 2.3 3.3 3.1 1. 7 1.6 1.6 1.9 2.7 3.1 2.2 1. 8 1.8 1.8 2.3 Manufacturing 25.0 25.2 24.3 24.7 24.5 24.4 24 . 7 23.9 24 . 4 24.8 24 . 8 25.1 - 26.1 25.3 Construction 3.9 3.9 4.6 5.9 7.3 7.7 7.1 7.8 8.0 8.7 8.7 8.1 5.9 4.5 Electricity, aas, water 0.9 0.8 0.9 1.0 0.9 0.9 1.0 1.0 1.1 1.1 1. 2 1. 4 1.3 1.5 Services 39.8 37.7 37 . 1 37.9 38 . 4 38.6 39.0 39 . 0 40 . 1 40.9 42 . 1 42.6 40.8 41.8 Transport, communication & storaae 4.8 4.8 4.8 5.1 5.4 5.5 5.6 5.7 6.2 6.5 6.4 6.4 6.4 6 . 4• Trade 13.4 13.2 13.9 13.8 14.0 14.5 14.9 15.4 15.9 16.4 16 . 8 17 .4 18.9 19.900 Finance &_H,ousin& 8.1 7.9 7.6 8.0 7.7 7.6 7.7 7.6 7.8 7.4 7.8 7.9 5.9 5 . 57 Other services 13.4 11.8 10.7 11.1 11.3 11.0 10.8 10.4 10.2 10.6 11. 2 10.8 9.5 10.0 GDP at market prices 100.9 100.2 99.6 100.2 100.8 100.6 100.4 99.8 100.0 100.5 101 . 5 101.4 102.5 102.5 ------------------------- Net factor income from the rest of the world -0.9 -0.1 -0.4 -0.3 -0.8 -0.7 -0.3 0.2 0.0 -0.5 -1.6 -1. 4 -2.5 -2.5 GNP at market prices 100.0 100.0 100.0 100.0 100 . 0 100.0 100.0 100.0 100.0 100.0 100 . 0 100.0 100.0 100.0 ------------------------- r = Revised p . e.=Preliainary estimate Source: NEDA National Accounts Staff.  Table 2.8: Industrial Ori&in of Gross Domestic Product at Constant 1972 Prices (Billion pesos) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 r p.e. A&riculture, fishery and foresty 16.1 17.1 17.6 18.3 19.8 20.8 21. 6 22.6 23.7 24.6 25.4 24.9 25 . 4 26 Industry 18.1 20.3 21. 5 23 . 3 25.7 27.9 29 . 6 32 33.5 35 35.7 35.9 32.2 28.9 Hinin& & quarryin& 1. 3 1.4 1. 4 1.4 1. 5 1. 7 1.8 2.1 2.2 2.2 2 1.9 1.8 1.8 Hanufacturina 14 16 16.7 17.3 18.3 19.7 21.1 22.2 23.2 24 24.5 25.1 23.3 2!.6 Construction 2.2 2.4 2.7 4 5.3 5.8 5.9 6.8 7.1 7.8 8.1 7.7 5.9 4.3 Electricity, gas, water 0.5 0.5 0.6 0.6 0.7 0.7 0.8 0.8 0.9 1 1.1 1. 2 1. 2 1. 2 Services 22.3 23.8 25.3 26.9 28.4 29.8 31. 5 33.4 35.4 36.6 37.9 39.1 36 . 6 35.5 Transport, communication & storage 2.7 3 3.3 3.6 4 4.2 4.5 . 4.6 4.8 5 5.2 5.3 5 4.9 Trade 7.5 8 8.5 8.8 9.3 10 10.7 11.5 12.2 12.7 13.1 13 . 9 14.1 14 Finance & Housin& 4.5 4.7 4.9 5.4 5 .7 5.9 6.2 6.6 7.1 7 7.3 7.6 5.5 4.9 other services 7.5 8.1 8.7 9.1 9.4 9.7 10.2 10.7 11. 3 11.9 12.4 12.3 12 11. 7 I OD N GDP at market prices 56.5 61. 3 64.3 68.5 73.9 78.5 82.8 88 92.6 96.2 99 99.9 94.2 90.4 I ------------------------- Net factor income from the rest of the world -0.5 -0.l 0.2 -0.2 -0.6 -0.5 -0.3 0.2 0 -0.5 -1. 5 -1. 3 -2.3 -2 GNP at market prices 55.9 61.1 64.5 68.4 73.3 78 82.5 88.2 92.6 95.7 97.5 98.6 91. 9 88.4 ------------------------ r = Revised p.e.=Preliminary estimate Source: NEDA National Accounts Staff.  Table 2.9: INDUSTRIAL ORIGIN OF DOMESTIC PRODUCT AT 1972 CONSTANT PRICES GROWTH RATES (PERCENT) 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 r p.e. Agriculture, fishery and foresty 6.2 2.9 4.0 8.2 5.1 3.8 4.6 4.9 3.8 3.3 -2.0 2.0 2.4 Industry 12.2 5.9 8.4 10.3 8.6 6.1 8.1 4.7 4.5 2.0 0.6 -10.3 -10 . 2 Mining & quarrying 7.7 0.0 0.0 7.1 13.3 5.9 16.7 4.8 -o.o -9.1 -5.0 -5.3 0.0 Manufacturing 14.3 4.4 3.6 5.8 7.7 7.1 5.2 4.5 3.4 2.1 2.4 -7.2 -7.3 Construction 9.1 12.5 48.1 32.5 9.4 1. 7 15.3 4.4 9.9 3.8 -4.9 -23.4 -27.1 Electricity, gas, water 0.0 20.0 0.0 16.7 0.0 14. 3 O.Q 12.5 11.1 10.0 9.1 o.o 0.0 Services 6.7 6.3 6.3 5.6 4.9 5.7 6.0 6.0 3.4 3.6 3.2 -6.4 -3.0 Transport, communication & storage 11.1 10.0 9.1 11.1 5.0 7.1 2.2 4.3 4.2 4 .0 . 1. 9 -5.7 -2.0 Trade 6.7 6. 3 . . 3.5 5.7 7.5 7.0 7.5 6.1 i .1 3.1 6.1 1. 4 -0.7 .., 00 Finance & Housing 4.4 4.3 10.2 5.6 3.5 5.1 6.5 7.6 -1. 4 4.3 4.1 -27.6 -10.9 Other services 8.0 7.4 4.6 3.3 3.2 5.2 4:9 5.6 5.3 4.2 -0.8 -2.4 -2.5 GDP at market pri6e1: : 8.5 4.9 6.5 7.9 6.2 5.5 6.3 5.2 3.9 2.9 0.9 -5.7 -4.0 ------------------------- GNP at market prices 9.3 5.6 6.0 7.2 6.4 5.8 6.9 5.0 3.3 1. 9 1.1 -6.8 -3.8 ------------------------- r = Revised p.e.=Preliminary estimate Source: NEDA National Accounts Staff.  Table 2.10: INDUSTRIAL ORIGIN OF GROSS DOMESTIC PRODUCT: IMPLICIT PRICE INDICES (1972 = 100) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 r p.e. Agriculture, fishery and foresty 100.0 124.0 168.2 181.4 189.9 201.9 .. 219.4 245.6 260.8 282.1 302.0 339.4 549.2 620.8 Industry 100.0 117. 7 152.6 163.5 179.4 190.3 207.1 240.3 288.7 318.9 343.1 385.0 575.2 690.7 Hinin& & quarrying 100.0 171.4 221. 4 142.9 140.0 147.1 183.3 276.2 368.2 309.1 305.0 368.4 538.9 761.1 Manufacturing 100.0 113.8 145.5 163.0 179.8 189.8 207.1 234.7 278.4 313.3 339.2 379.3 588.8 696.8 Construction 100.0 116. 7 170.4 170.0 184.9 203.4 213.6 248.5 300.0 337.2 361.7 398.7 528.8 620.9 Electricity, gas, water 100.0 120.0 150.0 183.3 171.4 200.0 212.5 262.5 311.1 330.0 363.6 441. 7 591. 7 725.0 Services 100.0 114.3 146.6 161.3 181. 7 198.3 219.0 254.8 300.0 339.6 372.8 412.8 586.6 701.4 Transport, communication & storage 100.0 116.7 145.5 161.1 182.5 200.0 220.0 269.6 341. 7 392.0 411. 5 460.4 676.0 779.6 Trade 100.0 118.8 163.5 179.5 202.2 223.0 246.7 ·291. 3 345.1 392.1 430.5 475.5 707.1 845. 7 I Finance & Housing 100.0 121. 3 155.1 168.5 182.5 198.3 219.4 251. 5 290.1 322.9 357.5 394.7 565.5 667 • 3 OD Other services 100.0 104.9 123.0 139.6 160.6 173. 2 187.3 211. 2 239 . 8 271. 4 301. 6 332.5 417 .5 510. 3 4>- I GDP at market prices 1:8:0 ::0. 117. 9 154.7 167.4 183.1 196.4 214.6 247.2 285.9 317.4 343.9 384.5 572.6 674.8 ------------------------- GNP at market prices 100.0 118. 2 154.9 167.3 183.1 196.5 214.5 247.2 285.7 317.3 343.9 384.2 572.7 673.2 ------------------------- ----- r = Revised p.e.=Preliminary estimate Source: NEDA National Accounts Staff.  - B5 - Tabie 3. I: BALANCE OF PAY"ENTS su""ARY (In "illions of US$) 1972 1973 1974 1975 1976 1977 1978 1979 1980 19B1 1982 1983 1984 1985 Current Account "erchand1se trade het) ·124 28Q -418 -1165 -1060 -7b4 -Im -154(1 -1939 -2224 -2b4b -2482 -679 -482 Exports 1106 18B5 2725 2m 2574 m1 3425 4602 5788 5722 5021 5005 5391 4629 l1pcrts 1230 1596 3i43 3459 3b34 3915 4732 1:,142 7727 7946 71:,1:,7 7487 6070 SIii Services (nefi / a -55 I) -34 -45 -259 -248 -107 -311 -399 -309 -1040 -740 -1241 2b Receipts 347 639 834 907 871 1085 1484 1655 2222 28% 2983 3127 2626 3288 Pay ■ ents 402 b39 868 95;: 1130 1333 1591 1966 2ii21 3205 4023 3B67 4311 32b2 Private transfers (net I/~ 82 96 123 lb7 14'1 148 197 229 3i)0 m 322 237 m m Receipts 99 99 124 170 151 • I52 21)0 234 305 328 324 m 428 398 Pay■ ents ii 3 1 3 2 4 3 5 5 3 2 C J 5 9 /f Official transfers Inet ;/b !Ob 150 153 151 120 112 115 126 134 147 164 235 0 Receipts 110 157 160 159 129 121 122 135 146 157 174 241 0 Pay1ents 4 7 7 B 9 9 7 9 12 10 10 6 Current account balance 9 535 -m -892 -1050 -752 -1102 -1496 -1~1)4 -20ol -3200 -275(1 -1497 -77 Capital Account Direct invest1ent (n2t) /,; -: 2 64 28 125 144 216 100 20 -102 175 ., 17 l12 17 -9 Total "LT loans i40 7: 145 357 1040 bl,2 E91 1151 1032 1332 1548 1392 47B 2787 D1sburse ■ e~ts 372 380 456 b77 1407 1242 1850 2110 '.579 2072 2533 233b 1259 3962 Repay1ents 232 309 311 320 367 580 9 95. 959 547 740 985 944 791 1175 Pri~ate "LT loan capital Inet) -P -5 3~ 120 336 101 209 lo3 496 (1 0 (I 0 i) Disburseaent l ;7 196 270 331 538 476 9\j~ 79(1 870 Repay ■ ents 154 201 243 205 2(12 375 1:,96 b27 374 Public ~LT loan capitai (net) !57 7b 112 231 704 561 1:,82 988 53i, 1) 0 (l (, t) Disburse1eots 235 184 130 34b Bo" 766 945 1320 7(Jli Repay ■ ents 78 IOE bB 115 165 205 26:, 332 173 Short-ter1 Cdpital tnet ' ic 37 -b4 7Q 70 -332 -172 -90 95 24 -28 108 -018 549 -1731 lr.flo11s SH 657 1138 1283 1391 2475 3442 Cutflows/d 542 721 1()59 1213 1713 2647 3532 Capital account Jalance 155 71 252 552 852 706 901 676 54 1479 m BBb IJ44 1047 Errors and 01iss1ons/d ··93 57 34 -181 37 210 I \5 82 12 -405 -37 1 -387 \ bl 6Z,B Allocation of SD~s 1-~ 28 29 ,~ d Nonet~r1zatton of Gold 7 '" "~ 41 128 40(, 277 m lbq 221  - 86 -· Unre1ittable arrears 561) Overall Balance /e 94 110 -521 -!bl lb4 -54 -bb9 -1681 -560 -2621 -2(>68 258 2389 /a Adjusted to reclassify withdrawals of 343/547 deposits in pesos !ro1 direct 1nvest1ent ;nfiows to other services. /b Adjusted to reclassify USVA pensions fro• private transfers to official transfe•s, /c Original 1aturity ap to and in: l~ding one year. /d Adjusted to reclass ify constr~ctive outward re1ittances of export pts receipts arising 1ainly fro ■ lag in re1ittances of export receipts fro ■ errors and 01issions to short-ter1 capital outflow. /e Overall balance for 1983 includes 11107 1illion non-1onetary foreign exthaPge arrears. /f All transfers. Source: Central Bank of Philippines.  Table 3.4_: CURllNT ACCOUNT: SDVICES Alfi> TRANSP'EltS (in millions of US$) It- 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Serrlcea (net) ~ 0 ~ -45 -259 ·.=ill_ -107 -311 -399 -309 -1 040 -740 .=ill -26 ---== Iteceipta 347 639 834 907 871 1,0;1 1,655 2,222 2,896 2,983 24 1 1 4:: 3·~M 2,~~; 3·~H Freight and inaurance 14 19 23 32 91 100 106 101 Other tranaportation 21 31 47 67 67 63 57 71 106 138 73 33 19 37 Travel 122 77 58 110 93 145 210 238 320 344 450 465 366 506 Direct inveatment inc01De 23 65 171 170 127 139 181 213 341 524 369 375 325 359 Of which: Intereat on placeaent 22 60 160 151! 125 138 179 200 336 519 365 374 321 346 Governaent (n.i.e.) 116 185 156 181 204 190 204 193 233 259 281 292 257 373 Military aervicea 41 42 48 50 53 56 71 71 85 103 101 88 Other 75 143 108 131 151 134 133 122 148 156 180 204 Peraonal incoae 5 55 118 103 111 213 291 365 421 546 1110 944 659 694 Other eervicea l.!.. 46 207 260 253 237 241 459 484 701 979 899 918 865 1, 152 Pa:,aenu 402 639 868 952 1,130 l 591 1.966 447 Freight and inaurance 109 m m 324 320 1,~~l 7TI" 11 471 2.621 568 3.~~~ 4.0~3 5 6 3,:;~ 'ffl 3,ug ..., OD Other tranaportation 13 11 IR 30 37 73 91 170 192 248 220 167 91 38 Travel 24 16 17 27 28 35 51 74 106 126 147 221 19 37 Direct inveataent expenae 153 60 80 73 68 158 85 95 159 128 158 153 2,359 2,394 Of which: Intereat on loan• and deposit• 120 125 152 234 259 236 440 626 975 1,374 1,990 l,CJR5 2,257 2,250 Governaent (n.i.e.) 32 47 63 75 80 62 104 92 121 110 107 135 45 22 Other aervicea /a 71 187 214 189 338 413 409 4311 500 686 805 711 575 431 Tranafera (net) 188 246 .fil. 318 269 ~ 312 355 434 472 486 472 ~ .ill. leceipta Peraonal reaittancea US Veteran• Adminiatration 198 sf 71 256 67' 74 284 '"iof 78 329 m 87 280 112 88 273 m 92 322 m 86 m 369 106 451 -m- 114 N 485 121 498 m 126 483 m- 110 ,.. 31\7 104 - 388 - Other• 73 115 102 114 80 56 82 72 132 110 133 193 224 Pa-,.enta 10 .!Q. .! 11 11 .ll .!Q. 14 17 .ll 12 .!!. l. 9 /a .Adjuated to include withdrawal. Source: Central lank of Philippine ■•  Table 3.3: NET INTERNATIONAL RESERVES /a (millions of US$, at end of year) - Foreign exchange Net Change Gross reserves liabilities i'nter- in Central Commercial Central Commercial national receiv- Year Bank Banks .!l!.. /c Bank ........ Banks ables 1970 251 128 367 160 -148 1971 375 148 32A 280 -85 63 1972 549 186 345 453 -63 22 1973 1,037 379 262 540 614 677 1974 1,503 475 372 812 794 180 1975 1,361 719 766 990 324 -470 1976 1,642 564 1,016 1,082 108 -216 1977 1,525 738 595 1,419 249 141 1978 J.,893 1,312 678 2,353 164 -85 1979 2,423 1,309 1,192 2,979 -439 603 1980 3,155 l,904 2,183 3,687 -811 372 1981/e 574 2, . 2,297 2,523 4,410 -2,062 -1,251 1982- 1,711 2,540 3,114 4,870 -3,733 -1,671 1983 865 1,655 2,690 4,526 -4,696 -963 1984 886 1,836 2,696 4,277 -4,251 445 1985 (Dec) 1,061 1,915 2,897 3,338 -3,259 992 k Revalued excludes adjustments for nonmonetary computed per NIR definition under the 1985 IMF Standby Agreement • .!l!.. Net of dollar treasury bills held by KBS. 1£. The net international reserve for 1970-81 are computed based on the old concept where the CB liabilities are already net of certain long-term yen liabilities (IBRD) rural credit liabilities, long-term yen liabilities to DECF) agreed with IMF. The NIR for 1982 to 1983 uses the new concept of NIR computation under the 1983 IMF Standby Agreement where only short-term and IMF credits are included as CB liabilities. Thus, due to the difference in concepts used, the change in net reserves for 1981 and 1982 wil not be equal to the BOP in Table 3.1. ~ Beginning in 1976 when an understanding was reached with IMF in connection with the Extended Fund Facility, change in net reserves equals overall balance in balance of payments statement (Table 3.1). je SGV adjustments are reflected from 1981 onwards. Source: Treasury and Foreign Exchange Department, Central Bank of the Philippines.  - 89 - Table 3.4: TRADE INDICES /a (1972 • 100) - Quantum index Price index :i ii Value index Net terms Year Imports Exports Imports Exports Imports Exports of trade 1972 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1973 93.6 107.7 128.8 145.9 120.6 157.1 113.3 1974 110.3 96.2 211.6 242.3 233.4 233.1 114.5 1975 115.8 101.9 21~.6 192.8 254.3 196.5 87.8 1976 122.6 130.5 217.2 168.8 266.3 220.3 77.7 1977 119.2 157.4 241.1 171.3 287.4 269.6 71.0 1978 140.9 152.6 245.8 192.1 346.3 293.1 78.2 1979 153.8 166.8 289.4 236.1 445.1 393.8 81.6 1980 155.8 201.3 358.6 246.0 558.7 495.2 68.6 1981 143.2 203.5 398.6 240.6 570.8 489.6 60.4 1982 163.4 215.0 340.5 199.9 556.4 429.8 58.7 1983 156.9 204.2 342.4 209.8 537.2 428.4 61.3 1984 112.0 199.4 386.8 231.4 433.2 461.4 59.8 1985 100.8 195.0 363.8 203.2 366.6 396.2 55.9 ~ Unit values of imports are based on c.i.f. value, while those for exports are based on f.o.b. value. Source: Central Bank of the Philippines (CBP), National Census and Statistics Office (NCSO).  - 90 - Table 3.5: l!XPORTS It CotltODITY GROUPS (f.o,b, value in llilliona of US$ at current pricea) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Coconut Product ■ 227 372 608 462 536 729 872 965 781 719 563 639 690 440 Coconut oil (crude) BJ m To ·rn 295 To ill 683 m 502 m m 543 328 Dessicated coconut 18 32 60 31 37 90 82 107 116 102 68 88 106 76 Copra •al or cake 16 23 28 33 54 58 69 86 81 81 72 72 41 36 Copra 110 166 140 172 150 201 136 89 47 34 49 4 0 0 Su1ar and Product• 217 292 765 615 451 526 213 239 590 454 396 282 272 161 Centrifugal TIT 274 m m 426 506 m m 557 416 m m m m MolaHe ■ 6 18 28 34 25 20 16 27 33 38 25 17 33 16 Other ~ricultural Product ■ 85 115 163 176 223 267 297 411 483 441 429 373 418 419 Banana• 24 7ii 45 73 76 73 84 97 m m m Tii5 ill m Pineapple, canned ~ 19 20 31 35 47 56 60 74 82 89 88 74 87 89 Fioh, freah or ■ illJ)lY pre ■ erved 11 20 17 16 26 41 57 87 107 90 71 77 68 99 Coffee, rav 2 25 45 34 44 45 39 49 47 76 70 Tobacco, unaanufactured 17 26 30 34 28 28 29 33 29 48 47 34 2R 24 Abaca fibera, unmanufactured 13 20 38 14 18 17 15 25 27 21 20 18 30 16 Rice 4 14 46 73 24 9 Mangoea 2 2 3 3 4 5 6 6 8 9 7 7 Fore ■ t Loga Product• 226 164 416 w 292 m 225 m 268 m 262 nr m 324 484 144 420 qf 344 76 290 79 ....,_ 327 265 88 193 7'J waber 10 35 30 27 68 67 85 198 181 126 124 149 107 91 Plywood 34 59 27 23 47 41 72 107 111 111 67 76 56 51 Veneer and coreatock 18 18 19 8 18 20 22 35 36 31 20 28 14 12 Mineral Product ■ 240 424 519 365 431 520 534 820 1 1 1:8 980 686 608 383 402 Copper concentrates TIT m m m 266 268 no 44() 5 m m m m T4 Gold 27 103 74 76 65 71 76 103 239 215 169 154 104 100 Nickel I 33 60 77 55 92 13R 104 49 54 12 64 Iron ore and concentrates IO 17 12 12 7 Iron ore agglo•rates 57 104 120 118 116 106 114 105 95 Chromite ore 5 9 13 13 15 25 25 23 33 25 15 10 19 12 Other 7 20 26 19 18 22 24 42 95 91 35 27 211 47 Nontraditional Manufacture• ~ ill 1Q 411 .ill. .ill 1,076 1,524 2,109 2,565 2,457 2,588 3,_136 2,857 Electrical l!quipant ■ and Component ■ 2 11 27 47 85 124 253 412 671 838 1,000 1,053 1,329 1,056 Garment ■ 2 58 94 100 185 250 326 404 500 617 539 542 600 619 Food producta and beverages 11 15 17 14 20 31 41 57 170 310 214 175 134 151 Randicrafta 13 27 46 78 95 84 100 134 154 134 139 140 137 138 Chemical• 6 11 16 21 27 53 59 113 '15 '.07 96 86 104 150 Furniture and parts 2 3 6 5 10 22 27 55 77 88 72 84 88 84 Footwear I 2 4 3 5 10 32 51 67 73 62 55 46 39 Wood unufacture1, excluding plywood, veneer and luaber 8 17 25 17 15 14 21 31 24 19 31 39 41 35 Machinery and tranaport equipant 3 3 6 IO 16 26 37 47 47 47 48 35 36 30 Textile yarn, fabrics and other related product ■ 5 17 7 9 15 13 24 31 49 43 39 29 24 25 Othera 42 88 95 107 102 142 156 189 255 269 217 350 597 530 Other 16 15 35 40 90 76 109 1511 237 219 200 188 227 157 Petroleum products 4 4 2 5 11 18 21 31 54 57 49 34 18 19 Other export ■ and re-exports 12 11 33 35 79 58 88 127 183 162 151 154 209 138 ~ 1,106 1,886 2,725 2,294 2,574 1.t.ill. 3,425 4,602 5,788 5,722 5,021 5,005 5,391 4,629  Table 3.6: VOLUMF. ANn UNIT VALUE OF PRINCIPAL COMMODITY EXPORTS Item 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 l9R4 1985 Volume ('000 mt) Coconut oil (crude) 461 427 415 606 854 714 %2 743 R74 CIR4 866 g33 555 622 Desiccated coconut 76 78 64 66 81 gg 91 86 87 R6 90 89 77 65 Copra meal or cake 352 263 271 303 4CIR 436 'i35 54R 545 f\21 .589 511 164 444 Copra 926 734 26R 761 , 823 635 365 145 121 lOR 178 16 0 0 Sugar, centrifu~al 1,224 1,470 I, 542 972 1,45/; 2,41Q 1,124 I, 150 l,Fi0 2 Q'i'.l 1,096 R42 R41 44,:. Bananas 422 466 663 823 796 693 776 859 n3 R6Q 927 643 800 785 Pineapple, canned 108 91 l ?. 5 116 118 l <;4 lli2 IRQ ·1n 174 171 146 170 185 Logs~ 7,126 7,762 4,702 4 ,59 . 5 2,332 2,045 2,210 1,248 715 707 752 786 846 454 Lumber /a lR4 427 2114 254 493 455 573 915 741 546 591 728 540 512 Plywood/a 455 535 171 175 283 221 362 393 '322 370 241 294 246 238 Copper concentrates R23 764 1130 799 942 1,007 895 1,048 l,140 1,138 1,060 788 450 344 Gold /b 501 536 541 491 535 511 412 367 420 476 473 367 295 323 Nickel 0 () () 7 12 17 13 17 21 18 11 12 3 14 Iron ore agglomerates 0 0 0 0 0 1,983 3,280 4,100 4,240 '3,551 3,752 3,285 4,047 4,022 "' Unit Value (US$ eer mt) Coconut oil (crude) 180 154 Ql 'i 171 145 517. F,OR QlQ 614 509 4 32 509 978 527 Desiccated coconut 237 410 937 470 457 'HR 902 I ,247 l, 3'.H l, 186 756 989 1,383 1,169 Copra meal or cake 45 87 1n1 lfll'l 1()8 113 J?Q I Sf, 149 no 122 131 113 81 Copra 119 226 522 226 1R2 316 371 6Hi 389 315 277 260 0 0 Sugar, centrifu~al 172 1R6 478 5911 293 210 175 181 148 4% 1111 315 284 325 Bananas 57 60 68 89 95 104 108 113 124 143 158 163 153 145 Pineapple, canner! 176 220 248 302 341 364 37() 392 43R 506 515 507 509 481 Logs .!.E.. 23 39 46 36 58 66 66 116 129 107 104 94 104 86 Lumber /c 55 82 106 106 138 147 )4Q 217 244 231 209 205 198 178 Plywood/c 75 110 158 131 166 181 199 271 322 100 278 258 228 214 Copper concentrates 232 380 473 265 ?.82 ::>66 2RO 42() 47R 377 295 316 255 244 Gold /d 54 194 137 1.55 121 13R 1R4 281 569 452 357 420 353 310 Nickel 0 0 0 4,714 4,917 4,529 4, lRO 5, 1:n 6,()09 5,77R 4,454 4,417 4,162 4,571 Iron ore agglomerates 0 0 0 0 0 n 32 ?Q 28 33 28 35 26 24 /a In thousand cubic meters. Tb In thousand troy ounces. Tc Per cubic meter. T,f Per troy ounce. Sources: Central Bank of Philippines for 1972 and 1973. ~ational Census and Statistics Office from 1974.  Table 3.7: PRINCIPAL EXPORT MARKF.TS 1972 1q73 1q74 1075 1q76 1977 1978 1q79 1qRo 1981 19R2 1983 1qs4 1985 ------------------------- Million of !TS$------------------------- United States 447 676 1,157 664 <l23 I , I 12 l , 151', 1,184 l,58R 1,7M, 1,586 1,800 2,050 l,fi54 Japan 373 674 q49 8/i.5 f.22 727 Rl<l 1, -;>OJ 1,511 l, 2 'i l l, I 4fi l, () 15 1,041 R75 European Community 162 231 323 372 484 581 li14 931 981 924 726 814 680 62q ASF.AN countries 15 39 36 Ii 1 8fl 12/i '.?()8 IRS 177 413 15<l 164 'i)li 5'H Socialist countries 1 14 12 36 14R 253 97 149 25/i 257 231 123 IHI 123 USSR T 7i TT To R7 on 40 7i3 T<in TIT 115 87 54 33 China, People's Republic 0 6 14 25 4i1 1()8 47 51 45 78 105 29 60 80 Other 0 0 ,, l -;, l 15 1n 15 21 q 11 7 4 10 Middle East I 3 1q 50 12 32 58 61 116 qq 90 114 67 71 Hongkong JI, 18 12 ?7 10 51 91 l'iR l <l2 2?2 JqR 171 232 187 Australia 8 17 30 32 45 61 75 94 <lR 122 89 7/i go RO Taiwan ?() 44 28 ;!<l 47 'J.7 41 6<l In 1 102 75 75 01 R6 Other countries 65 150 119 158 15q lRl ?.41i 166 546 566 521 4113 504 391 Total 1,1% l,RR6 2,725 2,204 2, 'i 71, l.i..!.2!. 1,425 4.601 5 71\R 5, 7?2 5,021 'i,()05 ~ 4,62q ------------------ Percent of total---------------------- '° N United States 40.4 35.8 42.5 211.q 35.Q 15.1 33.8 30.1 27.4 30.<l 31.6 36.n 38.0 35.7 Japan 33.7 35.7 34.8 37.7 24.? 23.1 23.9 26.1 26.5 21.0 22.8 20.3 l<l.1 18.9 European Col!DIIUnity 14.6 12.2 11.9 16.2 .1 R.~ 18.4 18.5 20.2 16.q Hi.I 14.5 16.3 12.6 13.6 ASEAN countries 1.4 2.1 1.3 2.7 1.1 4.0 6.1 4.1 6.5 1.2 7. l 7.1 9.6 11.5 Socialist countries 0.1 0.7 1.2 1.6 5.7 8.0 2.8 3.2 4.4 4.5 4.6 2.5 2.2 2.7 USSR o.T ""'"o:'4 0.7 n":4 3.4 4.1 TI 1.8 3.3 3.0 Ll D 1.0 0.7 China, People's Republic n.o 0.3 n.'i 1 .1 1.6 3.4 1.4 1. 1 o.s 1.4 2.1 0.6 1.1 1.7 Other o.o n.n n.o ().0 ().8 0.5 0.3 0.3 0.4 (). 2 n.2 0.1 0.1 0.2 Middle East n.1 rJ.? n.7 2.2 l. 2 1.n 1.7 1.1 2.n 1.7 1. 8 1.7 1.2 1.5 Hongkong l. 1 2.0 1.2 1.2 1.5 1.6 2.7 1.4 1.1 3.9 3.9 3.4 4.3 4.0 Australia n.1 o.q 1. l l. 1, 1.7 l.<l ~.? 2.n 1. 7 2.1 l.R 1. 5 1.7 1.7 Taiwan l.R 2.3 1.0 l.1 l. Ii n.<l 1.2 l. 5 1.7 l.R 1.5 1.5 1.7 1.9 Other countries 5.'l R.n 4.4 fi.Q fi. ~ 5. 7 7.-;, R.n 0.4 q_q 1n.4 <l. 7 9.3 8.5 Total 100.0 100.0 100.0 100.n 10n.n 10().0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Central Bank of the Philippines, 1972/73; National Census and Statistics Office, 1974 onward.  - 9l - Table 3.8: IMPORTS BY COIIIIODITY GROUPS (f .o. b. in ■1 lliona of US$) SITC Class Comm>dity group 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 0 Food & Food Pre2;arations 175 202 310 322 299 299 296 354 492 563 650 528 425 426 02 Dairy products 46 45 74 62 55 70 60 96 m ill 167 Ti8 66 72 03 Fish & fish preparations 20 20 32 ]3 30 22 24 20 26 30 38 7 1 1 041 Wheat 34 49 79 95 113 78 85 106 149 151 158 135 131 106 042 Rice 34 45 39 37 12 s 42 110 Others 41 43 86 95 89 124 127 132 205 247 287 258 185 137 Bevera1e• & Tobacco .! .!Q. 17 23 35 44 ~ 48 !! _g ~ 2! ~ ~ 2 Crude Materlala 2 Inedible 70 90 145 128 133 189 219 260 269 256 267 233 201 206 263 Cotton 19 To 34 36 7"f 30 44 36 44 34 20 29 20 25 266 Synthetic fibers 27 29 53 41 43 55 56 75 62 79 78 66 47 so Iron ore under consignment 30 45 49 74 60 74 49 62 56 Others 24 31 58 51 53 74 74 100 89 83 95 89 72 75 3 Mineral Fuels & Lubricants 149 188 653 770 890 993 1,0:g 1,385 2,248 2,458 2,105 ~ 1,453 -1 -1 -2 -2 -2 -9 1,6:~ Coal and coke 14 22 19 26 16 50 321 Petroleum, crude 134 166 573 710 801 859 907 I, 115 1,857 2,081 I, 784 I, 741 1,472 1,277 Others 14 21 78 58 87 125 108 256 369 358 295 366 136 126 4 Animal & Vesetable Oils & Fata .!. l.. 12 l.. l.. 14 18 • )2 .!l. .!! .!! .!i 11 .!l 5 Chemicals 148 219 491 380 352 432 523 670 741 765 743 771 617 584 51 Che■lcal coapounds 44 66 m 11iB m 160 203 m -m m m -m 238 219 54 Pharaaceuticals 16 21 36 34 39 43 56 61 69 72 82 76 58 52 Urea 4 10 65 46 10 29 37 51 89 57 59 45 43 62 Fertilizer, exfluding urea 12 15 84 43 11 14 11 40 50 48 49 46 45 44 Others 64 107 155 149 160 186 216 269 266 290 294 337 233 207 6 Manufactured Goods Claa ■ ified Chietlz bz Material 214 306 530 457 460 549 703 945 987 882 931 579 508 1,0:~ 64 Paper 6 paper product• 35 34 57 31 29 36 53 62 67 64 65 66 65 65 Textile yarn & fabrics 25 47 69 66 50 80 88 117 144 158 150 183 158 140 681 Iron & steel 87 115 228 176 194 237 304 438 399 325 423 356 186 135 69 Metal products 23 48 60 93 81 71 107 128 133 148 172 147 55 75 Others 44 62 116 91 106 125 151 200 244 187 219 180 114 93 Machinerl & Trans2ort 71 72 Egui2ment Nonelectrical aachinery Electric al aachinery 418 240 54 m 469 71 795 424 106 .!..ffi 157 1,288 5 187 l O22 -'-'-fil 8 138 ··m 203 ··~~~ 229 1,g6~ I, 312 1,1:7 9 5 392 ••;:: 385 1,592 902 404 1,086 420 427 727 366 293 73 Tran•port equipment 124 102 265 302 276 295 389 544 533 460 295 286 239 68 8 His ce l laneoua Manuf acturea ~ ~ 61 li ,!!_ E_ .!!! .!!!. lQQ. 200 ill. .!Z! .!!!! ~ Profeasional scientific , controlling instruments • 16 22 30 36 37 55 71 77 126 128 118 106 38 61 Others 18 23 31 38 44 42 57 64 74 72 77 72 64 45 9 Co..adltie1 and Tranaactione Not Cla11ified Elsewhere .! !Q. 129 .!!!!. 287 El 446 612 fil 954 .fil 1,033 1,343 .!..E..!! Materials for sanufacturing electric & electronic equipment 8 24 41 91 107 219 351 549 626 677 765 803 584 Material for embroidery or aanufacture of garments 45 62 58 115 95 121 125 142 188 150 140 226 196 Others 9 7 43 85 81 77 106 136 172 140 99 128 314 232 Total I ■ 2orts 1,230 1,596 3,143 3,459 3,634 3,915 4,732 6,142 1,121 7,946 7,667 7,487 6,070 .hl!!. . Source: Central Bank of the Ph111pp1nea. National Ceneu• and Stat1at1ca Office.  Table 3.9: IMPORTS OF CAPITAL GOODS BY SECTOR (f.o.b. value .in 19illions of US$) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Agriculture 15 21 35 56 31 15 19 34 28 28 16 10 3 2 Construction 13 23 43 59 40 44 58 79 100 75 83 67 15 13 Manufacturing 179 233 281 357 376 362 459 590 650 623 629 612 327 249 Energy 73 RS 119 200 211 189 262 279 290 301 377 293 147 131 ,D ~ Ti-ansportation 124 102 265 302 276 295 389 544 533 460 295 286 239 68 Others 29 26 82 175 191 173 214 258 385 438 386 430 419 325 Total 433 490 825 1 2 149 1 1 125 1 2 077 1 2 401 l 1784 11986 1 1925 11786 1 1 698 1 1 150 788 Source: NCSO.  Table 3. 10: IMPORTS OF PETROLEUM AND COAL 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 :rude Petroleum Volume (mln harrels) 64.9 67.1 61.8 66.5 69.6 69.4 72.,.. 65.q 63.9 61.4 54.4 60.0 52.6 47.5 Price ($/barrel) 2.1 2.5 9.3 10.7 11.5 12.4 12 .fi 16.9 29.1 33.9 32.8 29.2 28.0 26 •.9 Value($ mln) 134 166 573 712 1\00 861 910 1,112 I ,R59 2,081 1,784 1,752 1,473 1,277 'etroleum Products Volume (mln barrels) 1.5 2.0 6.4 4.1 7.6 10.5 7.6 14.0 13.9 11.2 9.7 n.2 5.n 5.0 Price ($/barrel) 9.i ... 10.7 12.2 13.5 11. 5 12.0 14.3 18.3 26. 5 32.0 30.0 27.8 27.2 25.0 Value ($ mln) 14 21 78 58 R7 126 109 25,; 368 358 291 367 136 125 >D V, oal VolumeT>noo mt) Price ($/mt) Value($ aln) 1 1 2 2 2 9 15 14 22 19 26 16 41 50 ource: Central Bank of the Philippines, National Census and Statistics Office.  Table 3.11: PRINCIPAL SOURCES OF IMPORTS 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 ---------------------------------------- Kil lions of US$-------------------------------------- Japan 391 c;19 841 966 976 975 1,285 1,398 1,786 1,494 1,532 1,266 814 735 United States 313 450 733 754 802 799 995 1,402 1,531 1,787 1,703 1,739 1,630 1,282 European Community 179 206 387 429 43R 469 598 851 828 819 814 880 674 425 Saudi Arabia 56 90 347 369 209 324 264 368 797 1,038 913 813 420 268 Kuwait 20 44 148 142 221 138 163 282 406 416 289 286 382 220 ASEAN countries 58 35 75 173 244 261 274 364 483 538 _ 510 671 783 754 Taiwan 16 25 79 RO 74 81 132 173 183 205 220 213 178 178 Australia 59 66 134 126 118 169 167 206 215 213 218 171 127 159 Socialist countries 2 23 47 58 • 66 86 123 152 239 212 233 156 232 301 USSR China - 2 1 21 - 24 - 49 2 54 4 78 6 112 8 121 22 206 2 195 11 206 16 122 3 220 11 276 Other Other countries - 136 138 1 23 329 11 362 · 10 405 4 613 5 731 23 746 11 1,259 15 16 1,224 1,235 18 1,292 9 R30 14 789 \0 Total 1,230 1,596 3,143 3,459 3,633 3,915 4,732 6,142 7,727 7,946 7,667 7,487 6,070 21111 a, ---------------------------------------- Percent of total------------------------ -------- ~-- Japan 31.8 32.5 27.5 27.9 26.9 24.9 27.2 22.8 23.1 18.8 20.0 16.9 13.4 14.4 United States 25.4 28.2 23.3 21.8 22.l 20.4 21.() 22.8 19.8 22.5 22.2 23.2 26.9 25.1 European Community 14.6 12.9 12.3 12.._4 12.1 12.0 12.6 13.9 10. 7 10.3 10.6 11.8 11.1 8. 3 Saudi Arabia 4.6 5.6 11.0 _ _10.1 8.0 8.3 5.6 6.0 10.3 13.1 11.9 10.9 6.9 5.2 Kuwait 1.6 2.8 4.7 4.1 6.1 3.5 3.4 4.6 5.3 5.2 3.8 3.8 6.3 4.3 ASEAN countries 4.7 2.2 2.4 --- 5.0 6.7 6.7 5.8 5.9 fi.3 6.8 6.7 9.0 12.9 14.8 Taiwan 1.3 1.6 2.5 2.3 2.0 2.1 2.8 2.8 2.4 2.6 2.9 2.8 2.9 3.5 Australia 4.8 4.1 4.3 3.6 3.2 4.3 3.5 3~4 2.8 2.7 2.8 2.3 2.1 3.1 Socialist countries 0.2 1.4 1.5 1.7 1.8 2.2 2.6 2.5 3.1 2.7 3.0 2.1 3.8 5.9 USSR - 0.1 - - O. l 0.1 0.1 0.1 0.3 - 0.1 0.2 - 0.2 China 0.2 1. 3 0.8 1.4 1.5 2.0 2.4 2.0 2.7 2.5 2.7 1.6 3.6 5.4 Other - 0.1 0.7 0.3 0.3 0.1 0.1 0.4 0.1 0.2 0.2 0.2 0.1 0.3 Other countries 11.1 0.6 10. 5 10. 5 11.1 15.7 15.4 15.4 16.3 15.4 16.1 17.3 13.7 15.4 Total 100.() 100.0 100.0 100.0 100.0 100.0 100.n 100 . 0 100.0 100.0 100.0 100.0 100.0 100.1) - -  - 97 - Tab 1e 3. I 2 : ACTUAL CURRENT ACCOUNT (US$ million) 1978 1979 1980 1981 1982 1983 1984 1985 Minerals (Net) 489 771 1,094 920 612 585 432 346 Copper exports (concentrates and refined) 250 440 545 4N 312 275 226 A4 Exports of other minerals 284 380 623 551 374 359 268 318 Imports of iron ore~ -4'i -49 -74 -60 -74 -49 -62 -56 Agriculture (Net) .!..z.lli .!.i2lZ. 1,504 .h!E. 802 865 ~ 565 Exports of Agricultural Products I, 706 2,099 2,274 1,958 1,678 ~ 1,645 !t.ill. Coconut products 872 965 781 719 563 639 690 440 Sugar products 213 239 590 454 396 282 272 161 Forest products 324 484 420 344 290 327 265 193 Other agricultural products J.:E... 297 411 483 441 429 373 418 419 Imports of: -465 -582 -770 -801 -876 -756 -604 -648 Fertili7.ers (intermediate product) -48 --=9f -139 -=ios -108 --=9f -8R -106 Agricultural products /c -398 -457 -603 -668 -752 -655 -513 -540 Capital goods for agriculture -19 -34 -28 -28 -16 -10 -3 -2 Manufacturing (Net) -1,039 -1,253 -1,008 -608 -870 -R34 362 689 Nontraditional manufactured exports /d 1,067 1,513 2,073 2,533 2,425 2,449 2,945 2,R29 Imports of intermediate goods speci-- fically for export production -340 -476 -691 -814 -827 -905 -1,029 -780 Import of raw materials and inter- mediate goods (other) (excl. wheat) -1,307 -1,700 -1,740 -1,704 -1,839 -1,766 -1,227 -1,111 Imports of capital goods for 111Snufacturing -459 -590 -650 -623 -629 -612 -327 -249 Energy (Net) -1,262 -1,622 -2,448 -2J670 -2,401 -2,269 -1,698 -1,537 Exports of petroleum products l.!. 30 42 90 89 Al 147 98 47 Imports of petroleum -1,015 -1, 371 -2,226! -2,43'9 -2:,079 -2,107 -1,608 -1,403 Imports of coals -15 -14 -22! -1'9 -26 -16 -41 -50 Imports of capital goods for energy -262 -279 -290 -301 -377 -293 -147 -1'31 Other Sectors (Net) -736 -954 -1,081 -1,023 -789 -829 -816 -. 54'i Other exports and re-exports ~ 7Tf 1R3 162 7sT 154 209 L38 Imports of nonfood consumer goods -163 -200 -246 -212 -176 -200 -352 -277 Imports of capital goods for other sectors -661 -881 -1,018 -973 -764 -783 -673 -406 Total Exports 4,601 5,788 5,722 5,021 5,005 5,391 4,629 Total Imports -4, 732 -6, 142 -7, 727 -7, 946 -7 ,667 -7 ,487 -6,070 .:1i.!.!..!. (Memo item: Total capital goods imports) -1,401 -1,784 -1,986 -1,925 -1,786 -1,698 -1,150 -788 Balance of Trade (Net) -l,'307 -1,541 -1,939 -2,224 -2,646 -2,482 -679 -482 ~ Iron ore is imported from Australia, processed into iron ore agglomerates at a sintering plant in Mindanao, and exported chiefly to Japan. J.:E... Canned pineapple, banana, ~haca fibers, raw coffee, rice, fish, fresh or simply preserved, mangoes and tobacco unmanufactured. k Food and food preparations, animal and vegetable oils and fats, cotton and beverages and tobacco. I il_ Excluding refined petroleum products and copper metal (exported starting 1983), l.!. Petroleum products for international delivery, refined and resirtual pet.:-oleum products. Source: NCSO.  Table 4.1: EXTERNAL DEBT OUTSTANDING AND DISBURSED AT END-YEAR. BY MATURITY AND BORROWER (in millions of US dollars at end of period) 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Rev. Short-Term Credits /a 331 438 715 1,009 1.357 1.813 2,548 3.664 3.993 4.013 4.179 3.036 Public sector 7T 29 147 252 ~ 559 947 1.761 2.096 1,968 2.078 1.055 Private sector 320 409 568 757 1.036 1.254 1.601 1.903 1.897 2.045 2.101 1.981 Medium-Term /b 358 398 454 506 466 524 771 842 858 1,118 1.256 1,418 Public sector 220 234 293 379 329 438 697 757 719 976 1.125 1.291 Private sector 138 164 161 127 137 86 74 83 139 142 131 127 Long-Term~ 2.037 2.567 3.928 5.013 6.443 7.478 8 .911 10.392 12.153 13 • 971 14.472 15.349 Public sector 962 1,320 2,277 3.036 4.489 5,492 6.531 7,716 9.063 10.988 11,892 12.833 Private sector 1.075 1.247 1.651 2.037 1,954 1.986 2.380 2,676 3.090 2,983 2.580 2.516 Mlt Debt - Subtotal 2.395 2.965 4.382 5.579 6,909 8.002 9.682 11.234 13.011 15,089 15.728 16.767 Public sector 1.182 1.554 2.510 3.415 4.818 5,930 7.228 8.473 9.782 11. 964 13.017 14.12{f '° OD Private sector 1.213 1,411 1,812 2,164 2.091 2,072 2,454 2.761 3.229 3 • 125 2.111 2.643 Total All Maturities 2.126 3.403 5.o97 6,558 8,266 9.815 12,230 14.898 17.004 19.102 19.907 19.803 Of which IMF drawings /d (excl. Trust Fund) (131) (238) (450) (556) (626) (718) ~36) (1,030) (908) ( 1.013) (844) (1. 115) /a ,uity of up to one year excluding Central Bank Consists of revolving credits and fixed term credit with original mat- compensatory financing. /b Original maturity of 1-5 years. Tc Original maturity exceeding S years. 7J Revalued at year-end SOR rate. Note: In this and succeeding tables. "Public" refers to debt of the Republic of the Philippines. government corporations. government financial institutions. and includes transactions with IMF. "Private" refers to all direct loans to the private sector including those guaranteed by government financial institutions. Source: Central Bank of the Philippines.  - 99 - Table 4.2: EXTERNAL MEDIUM- AND LONG-TERM DEBT TRANSACTIONS BY TYPE OF BORROWER~ (in millions of US$) Debt services Net Debt outstand- Dis bur- Amorti- In- disburse- Adjust- ing & disbursed Year sements zation terest Total ments, men~s l.!!.! at end-year Public 1972 269 L25 37 162 144 7 919 1973 228 198 6L 259 30 35 984 1974 300 186 58 244 114 84 1,182 1975 572 182 77 259 390 -18 1,554 1976 1,125 178 75 253 947 69 2,570 1977 900 190 96 286 710 135 3,415 1978 1,479 547 131 678 932 471 4,818 1979 1,916 639 300 939 1,277 -165 5,930 1980 1,502 372 420 792 _ l , 130 168 7,228 1981 1,700 406 596 1,002 ~.294 -49 8,473 1982 1,966 613 803 1,416 1,353 -44 9,782 1983 2,377 654 659 1,304 1,723 459 11,964 198'4 1,248 640 760 1,600 608 445 13,017 1985 1,794 595 933 1,528 1,199 -92 14,124 Private 1972 180 154 46 700 26 -22 983 1973 191 200 56 256 -9 67 1,041 1974 276 178 54 232 98 74 1,213 1975 307 134 65 199 173 25 1,411 1976 538 190 77 267 348 53 1,812 1977 476 188 87 275 288 64 2,164 1978 489 501 139 640 -12 -61 2,091 1979 468 487 186 673 -19 2,072 1980 472 320 239 559 152 230 2,454 1981 607 387 299 686 220 87 2,76L 1982 567 447 384 831 -60 348 3,229 1983 302 362 280 642 520 -44 3,125 1984 70 174 286 460 -104 -310 2,711 1985 27 166 260 426 -139 71 2,643 Total -m2 449 279 83 362 170 -15 1,902 1973 419 398 117 515 21 102 2,025 1974 576 364 112 476 212 158 2,395 1975 879 316 142 458 363 7 2,965 1976 1,663 368 152 520 1,298 122 4,382 1977 1,376 378 183 561 998 199 5,579 1978 /c 1,968 1,048 270 1,318 920 410 6,909 1979 Tc 2,384 1,126 486 1,612 1,258 -165 8,002 1980 Tc 1,974 692 659 1,351 1,282 398 9,682 1981 Tc 2,307 793 895 1,688 1,514 38 11,234 1982 Tc 2,533 1,060 1,187 2,247 1,473 304 13,011 1983 Tc 2,679 1,016 930 1,946 1,663 415 15,089 1984 Tc 1,318 814 1,246 2,060 504 135 15,728 1985 1,821 761 1,193 1,954 1,060 -21 16,767 /a Including IMF obligations 7b Currency revaluation adjustments and audit adjustments. Tc Amortization includes prepayments of $506 million in 1978; $492, $92, $24, $120, $66, $24 million respectively in years 1979, 1980, 1981, 1982, 1983 and 1984 disbursements includes financing of these prepayments. Note: For purposes of monitoring external debt transactions starting 1984 pesos deposited with the Central Bank for payment of external debt are considered payment by the borrower on its debt. A corresponding foreign liability is booked by the Central Bank for these deposits. Actual debt payment is recorded where the Central Bank pays the auditor on the loan account assumed. Source: Central Bank of the Philippines.  - 100 - Table 4.3: EXTERNAL MEDIUM- AND LONG-TERM BORROWINGS: COMMITMENTS BY TYPE OF BORROWER (in million of US$) New loan Total commitments~ Disbursed Undisbursed Year commitments (end-year) (end-year) (end-year) Public 1972 455 1,346 919 427 1973 369 1,552 904 568 1974 739 2,134 1,182 952 1975 803 2,844 1,554 1,290 1976 1,709 4,520 2,570 1,950 1977 1,160 5,699 3,415 2,284 1978 2,649 8,336 4,818 3,518 1979 1,954 9,483 5,930 3,553 1980 2,070 11,600 7,228 4,372 1981 1,884 12,843 8,473 4,370 1982 2,062 14,650 9,782 4,868 1983 1,391 16,140 11,964 4,176 1984 933 17,518 13,017 4,501 1985 1,155 17,830 14, 124 3,706 Private 1972 130 1,304 983 321 1973 128 1,299 1,041 258 1974 206 1,456 1,213 243 1975 283 1,676 1,411 265 1976 472 2,295 1,812 483 1977 347 2,401 2,164 317 1978 682 2,590 2,091 499 1979 583 2,824 2,072 752 1980 863 3,558 2,454 1,104 1981 515 3,931 2,761 1,170 1982 333 3,916 3,229 687 1983 96 3,426 3,125 301 1984 24 2,970 2,711 259 1985 2,787 2,643 144 Total ---y"g]2 585 2,650 1,902 748 1973 497 2,851 2,025 826 1974 945 3,590 2,395 1,195 1975 1,086 4,520 2,965 1,555 1976 2,181 6,815 4,382 2,433 1977 1,507 8,180 5,579 2,601 1978 3,331 10,926 6,909 4,017 1979 2,537 12,309 8,002 4,305 1980 2,933 15, 158 7,682 5,476 1981 2,399 16,774 11,234 5,540 1982 2,395 18,.566 13,011 5,555 1983 1,487 19,566 15,089 4,477 1984 957 20,488 15,728 4,760 1985 1,155 20,617 16,767 3,850 .I.!. As of October 14, 1983. ~ '. Net of payaments and cancellations. Source: Central Bank of the Philippines.  - 101 - Table 5.1: CASH OPERATIONS OF THE NATIONAL GOVERNMENT, 1970-85 (in billion pesos) Actual Rev. 1978 1979 1980 1981 1982 1983 1984 1985 REVENUE 24.0 29.5 34.7 35.9 38.2 45.6 56.9 69.0 Tax Revenue 20.4 25.9 30.5 31.4 33.8 39.S ~ 61.2 Taxes on income and profit 5.5 6.2 7.3 7.8 8.3 8.8 12.3 18.4 Individual 3.4 3.3 3.4 3.9 3.9 Corporate 2.1 2.9 3.9 3.8 4.4 Taxes on goods and services 6.5 9.7 10.9 11.5 12.2 13.1 18.8 23.8 Sales and business taxes 2.4 4.1 5.0 5.3 5.6 5.7 7.4 8.6 Excise taxes 4.1 5.6 5.9 6.2 6.6 7.4 11.4 14.3 Taxes on international trade 7.0 9.4 11.6 11.2 12.2 16.5 17.5 18.4 Import duties 7.4 8.7 11.2 10.9 11.9 16.2 15.2 16.0 Export duties 0.4 0.7 0.4 0.3 0.3 0.3 1.7 1.0 Other taxes o.6 o.6 0.1 0.9 1.0 1.1 0.6 1.4 Nontax Revenue 3.f: 3.6 4.2 4.5 4.4 6.1 6.9 7.8 EXPENDITURES AND NET LENDING 26.2 29.8 38.1 48 42.7 52.9 66.7 80.2 Current expenditure 19.2 20.6 24.4 26:J° 31.8 34.5 42.7 55.3 Personnel services 7.4 8.2 9.3 10.6 10.6 13.9 16.9 22.9 Maintenance/other operatinR expenditures 9.3 8.9 10.7 11.3 13.2 11 .CJ 12.4 13.2 Interest payments 1.1 l .8 2.3 2.4 3.6 5.0 10.4 14.7 Allotment to local governments 0.8 1.2 1.5 1.5 2.4 2.6 2.8 9.5 Transfer to other public sector entities 0.6 o.s 0.6 0.5 2.0 1.1 0.4 1.0 Current surplus 4.8 8.9 10.3 9.6 6.1 11. 1 14.0 11. 7 Capital expenditure 4.4 5.0 8.4 12.7 9.3 10.4 CJ.8 8.8 Infrastructure 3.6 4.3 7.3 10.0 6.0 6.9 6.3 5.3 Other capital outlays 0.7 0.7 1.1 2.7 2.5 3.5 3.5 3.3 Equity contribution and net lending 2.6 4.2 5.3 9.0 11.6 8.0 14.0 16.1 Equity contributions 2.4 3.4 4.5 8.1 9.1 5.7 3.4 3.4 Net lending 0.2 0.8 0.8 0.4 1.0 1.5 1.7 2.0 Assistance to GFis 0.5 1.2 0.8 8.9 10. 7 DEFICIT -2.2 -0.3 -3.4 -12.1 -14.5 -7.3 -9.8 -11.2 FINANCING 4.0 3.8 4.13 14.8 11.2 14.0 18.3 13.0 External (net) 2.4 "CT 3.03 6:lr 4:7i 7:4 2.0 -3.0 Gross borrowing 2.8 3.7 3.1 6.7 5.4 6.7 5.1 3.7 Amortization -0.4 -0.3 -0.07 -0.7 -0.8 -1. 3 -3.1 -4.0 Domestic (net) 1.6 0.6 1.1 8.8 6.6 8.6 16.3 13.3 Gross borrowing 2.2 1.3 1.9 9.8 7.4 7.6 17.1 15.8 Amortization -0.6 -0.7 -0.8 -1.0 -0.8 -1.0 -0.8 -2.5 /a Revenues do not include a contingency import duty surcharge of estimated P 0.2 billion and P 2.9 billion in 1984 and 1985, respectively. Source: Ministry of Finance.  - 102 - Table 5.2: DISTRIBUTION OF NATIONAL GOVERNMENT CASH BALANCES AT YEAR END, 1978-85 (in million pesos) Est. Depository Bank 1!17o J.'Jl'I 1'180 1981 1982 1983 1984 1985 Development Bank of the Philippines 3,629 4,406 5,862 7,988 8,029 5,559 5,395 5,392 Philippine National Bank 1,865 3,394 3,332 3,143 1,961 4,687 5,304 6,152 Other commercial banks 1,635 2,516 3,148 3,511 3,168 4,500 5,102 8,648 Other depositors 2,172 2,244 1,652 2,673 2,264 3,315 10,804 8,184 Total 9,301 12,560 13,994 17,315 15 1 122 18,061 26,605 28,876 Change in cash balance of which: 2,195 3,259 1,434 3,321 -1,893 2,639 8,444 1,771 Budgetary funds 2,030 2,968 1,228 2,616 -1,222 2,548 8,475 736 Budgetary transactions 1,904 3,505 403 2,633 -3,818 4,084 8,176 1,344 Nonbudgetary transactions 126 537 825 -17 2,596 1,535 299 -608 Nonbudgetary funds 165 288 209 705 -678 90 -31 1,035 Source: Bureau of Treasury.  - 103 - Table 5.3: NATIONAL GOVIIUlll!NT IIPENDITUUS, IIY FUNCTION, 1976-85 (Obligation baaia, ailliona of peaoa) Particulars 1976 1971 1978 1979 1980 1981 1982 1983 1984 1985 ECONCJIIC SERVICES Agriculture 8 1651 2,263 1,m 1H1~ .:.&.;=. = 13.¼76 ~ 14,:10 ~ •;•m •M~5 == .:.&.:.::.:. 15,587 2.960 13,846 2,949 •NP .::.a.= General administration, regulation and research 1,192 443 539 423 904 1,015 1187 1,091 1,601 2,078 Stabilization of farm price• and inco11e 3 120 127 121 4 13 159 105 116 341 Extension programs 70 77 81 140 0 0 91 25 0 0 Irrigation 700 761 1,566 259 470 1,006 1,281 888 311 262 Other agriculture 62 51 87 ' 115 86 151 280 193 464 218 Fishing 39 85 106 131 164 168 167 228 30 69 Forestry and hunting 197 187 256 277 327 407 440 430 427 477 Industry, Trade 1 Labor and Tourin 658 678 960 387 1,308 2,7~~ 2,13: 2,084 1.847 2 158f Labor, wage and employment programs 62 69° 7T 79 90 1111 126 15 Mining 26 42 44 61 48 61 59 72 58 71 Manufacturing 104 47 76 119 132 152 121 109 102 120 Conatruction 0 0 1 l l 5 8 13 11 19 Other industry 293 256 309 388 751 2,103 1,712 1,423 740 620 Touri811 55 40 90 151 67 109 160 79 80 87 eo-rce 112 157 360 132 210 214 243 244 717 1,499 Retailing and conaU11er interests 1 l 3 30 4 4 13 17 4 5 Other trade 5 6 6 6 5 6 R Cl 9 7 Utilities and Infraatructure 51 no 5 1633 9 1050 10 1198 General adainiatration, regulation and research 560 412 464 729 1,840 1,501 1,035 1,489 1,402 1,704 l!lectricity 1,171 1,081 2,196 2,939 2,568 3,060 1,802 1,140 895 694 Water supply 685 641 758 1,268 1,462 l, 746 1,450 993 735 902 Roads and road transport 2,265 2,237 2,703 4,349 3,933 5,016 4,928 5,036 4,101 4,597 Water transport 536 656 777 958 740 1,054 1,010 1,050 849 1,193 Air transport 167 210 299 81 107 100 93 107 110 237 Railways 65 100 92 128 157 158 364 322 422 156 Comainications 281 296 270 271 300 362 395 396 487 636 Other utilities and infrastructure 0 0 0 0 0 5 5 10 29 10 = ·1·m •;,m SOCIAL SERVICES Education General administration, reeulation and 3,9t; bk. ~ N:9 ~,78~ =. 12,109 6,301 1~.623 ~ ~ research 137 135 177 304 344 281 320 305 332 474 Schools Primary 1,573 1,645 2,182 2,2113 2,756 3,366 3,819 3,5112 4,575 5,746 Secondary 261 273 368 384 456 557 638 593 760 956 Universities and college ■ 473 51!2 708 384 1,010 1,383 1,413 1,529 1,793 2,196 Technical, vocational and other ■ 30 25 42 30 34 51 79 118 90 I Subsidiary services 73 80 105 110 131 164 183 174 219 267 Health 829 .ill. 2!! 1,248 1,432 1,778 l&.fil 2,525 2,352 1,001 ~ r a l administration, reeulation and research 73 82 91 103 118 152 118 105 114 154 Hospitals and clinics 386 440 431 611 697 734 463 635 621 899 Individual health service• 255 292 289 330 355 492 120 109 Ill 184 Population control 42 57 68 75 122 168 196 174 195 137 Others 73 86 83 129 140 182 1,314 1,502 1,311 1,627 Social Security and Welfare 463 !.!!. lli. 574 714 lli 1,256 ~ 1,326 General adminiatration, reeulation and research 275 236 343 359 400 504 899 982 1,015 1,016 Other public aaaistance to persona 2 3 3 3 1 5 5 4 3 13 Care of the disabled and mentally defective 4 0 4 3 0 0 6 6 0 5 Other welfare services 3 3 36 39 46 60 7 8 11 7 Other connunity and social ■ ervicea 8 16 12 33 86 79 89 100 58 55 Broadcasting and preas 135 121 128 134 167 237 229 228 222 270 Religion and related service ■ 36 32 0 3 14 36 21 114 17 69 Housing and Co11J11Unity DeveloJ'll!nt Housing Co111DUnity development 79 6T m 161 280 256 m 802 934 901 1:m 1:m I 1871 1,828 1,216 1,177 580 ill 18 18 24 33 33 39 50 43 39 43 ~ 4.273 4,554 4.542 4.975 5 1447 GENERAL PUBLIC SERVICES General adminiatration Contribution to international organiza- au tion 52 83 70 92 100 113 132 150 144 141 Public order and aafety 788 834 963 1,238 1,402 1,704 1,763 2,116 2,398 2,807 General reaearch 85 89 105 109 124 163 18R 175 179 111 Othera 1,031 1,426 1,678 2,032 2,660 3,691 2,879 3,284 3,712 6,072 DEBT SERVICE FUND Interest payment ■ el' 1,m '·Ha f: 0U 2 ,8 1 3:58l ~:m ;:::z : •• 418 14,997 10,409 11!, 751 14,652 Debt amortization 334 936 897 990 1,287 1,468 1,332 3,451 4,~88 4,099 GRAND TOTAL 22,046 22,253 27,803 33,227 37,495 48,047 48,838 53.229 63,532 81.435 Source: Office of Budget and ManageMnt, Fiscal Plannin1 Sarvica.  - 104 - Table 5.3a: TRANSFERS TO CO'IERNK!NT CORPORATIONS AMI> LOCAL CO'IIR!NtNT UNITS, BY FUNCTION, 1976-85 (Obligation baaia, llilliona of peaoa) Particulars 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 ECONOMIC SERVICES 3,192 2.53: 4 180: 4,237 5 1731 8 1 208 6,952 4.727 4,329 4.924 A1riculture 1 Forest~ & Fishinl 1,~22 5 335 501 1,oa 857 921 General adndn., regulation & research 6 ~ ~ 6 """'ff 6'f t,6i~ 1,0:~ m m PCA 7,467 18 16 13 8 9 24 3 5 140 PCC 2 20 15 14 5 15 10 17 12 9 PTSA 156 12 0 0 44 6 19 13 15 31 PVTA 91 12 75 0 0 13 10 26 96 45 NRDC 0 0 0 0 0 0 1 1 4 5 Agriculture 665 834 1,633 293 412 983 1,505 953 695 fill Stabilization of fam price• & inCOM price stabilization subsidy 3 117 124 117 0 0 153 100 105 330 Irrigation NIA 629 691 482 116 3,713 1178 1,160 760 212 149 Other agriculture 3 0 27 40 40 105 192 93 378 142 PCIC 0 0 0 0 0 32 168 56 331 94 Nat'l Fertilizer of the Phils. 0 0 0 10 7 0 0 0 0 () FSDC 20 20 22 22 34 65 23 30 39 25 PDC 0 0 0 0 0 8 l 7 7 23 Agricultural credit admin. 13 5 5 8 0 0 0 0 0 0 Fishing l 10 15 10 22 51 25 24 30 70 PFDA 1 10 15 10 22 51 25 24 30 70 Phil. Fishing Market Authority 0 0 0 0 0 0 0 0 0 0 Forestry 0 0 0 0 0 0 9 0 0 0 NALCU-Aid to local reforestation 0 0 0 0 0 0 0 0 0 0 High tree planting program 0 0 0 0 0 0 9 0 0 0 Indust~ 1 Trade 1 Labor & TouriBII 354 180 434 297 900 1,4~! 686 ~ .!.iZ!!. 94 60 102 m 2,~H Manufacturing NACIDA EPZA Tourism 23 71 20 " 25 10 3 26 34 3 40 62 0 27 96 0 33 100 0 36 60 92 87 37 50 5 76 37 39 7 86 41 46 6 PTA 20 0 0 0 0 0 89 0 0 6 BCP 0 3 3 0 0 0 3 5 7 0 Co111111erce 21 53 247 26 74 73 65 83 519 1,234 Philguarantee 0 0 20 0 50 0 0 0 500 100 NPA 21 53 47 26 24 73 65 113 19 234 Others 118 89 124 169 713 2,056 1,209 711 552 455 KICX Processing Center Authority 0 0 0 0 0 0 0 43 8 23 Phil. Veterans Industrial Dev. Corp. 0 0 0 0 0 0 0 0 0 0 PHIVIDEC Industrial Authority 23 15 10 10 10 10 10 1 2 3 MIRDC 10 11 10 13 13 18 15 12 13 10 Philsucom 44 26 44 62 74 73 200 255 376 106 Phil. Sugar Institute 41 0 0 0 0 0 0 0 0 0 NDC 0 37 60 84 616 1,955 984 400 153 305 Phil. Trade Exhibition Center 0 0 0 0 0 0 0 0 0 7 Freight Booking & Cargo Consolidated 0 0 0 0 0 0 0 0 0 0 Utilities & Infrastructure l 1417 1,4~~ 2,6~i 3 16H 4.3~~ 3,888 2,;04 2,317 2,221 General admin., regulation & research 4.8~~ 31 118 0 74 123 LLDA l 8 8 5 5 7 0 0 0 0 LSAJIOA 5 l 4 8 3 3 2 0 0 l SPDA 23 16 18 16 68 56 32 38 29 29 Central Luzon, Cagayan Valley Dev. l l l l l l 0 0 0 0 PEA 0 l l 4 0 0 85 322 45 93 Bicol Development Authority l l 0 0 0 0 0 0 0 0 Electricity 1,139 1,046 2,157 2,602 2,530 2,834 1,707 1,021 792 590 NCA 0 0 0 0 0 107 0 0 0 0 NPC 750 800 1,595 2,147 1,895 2,048 1,542 900 702 500 NEA 183 157 226 207 309 338 165 121 90 90 PNOC 206 89 336 248 326 341 0 0 0 0 Water supply 180 148 163 390 771 844 587 88 51 98 RWDC 0 0 0 0 12 34 16 28 4 20 LWUA 149 35 63 • 90 159 110 78 60 47 77 MWWS 31 112 100 300 600 700 492 0 0 0 Roat! ■ & road transport 0 0 25 463 . , 792 877 1,021 930 882 922 NMTC 0 0 25 10 90 ~ 25 0 7 7 7 NALCU-Repair & 11111int. of local road■ 0 0 0 340 585 fi06 742 763 699 822 Local road ■ construction 0 0 0 112 128 246 279 160 176 93 Water tran■ port 2 129 145 39 l 91 90 83 96 H3 Phil. Shipper ■' Council 0 0 0 l l l l 0 0 1 PNL l 9 10 19 0 0 0 0 0 0 PPA l 120 135 19 0 90 90 83 95 332 Railway ■ 65 10 92 128 157 158 364 322 422 156 LRTA 0 0 0 0 l 76 264 235 338 146 PNR 65 10 92 128 156 82 100 86 85 10  - 105 - Table 5,3a: (cont'd) (Obligation basis, millions of pesos) Particulars 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 SOCIAL SERVICES 54 121 233 476 1,018 1,187 897 754 619 394 Education 7i 0 -1 108 114 l -3 -2 -3 -2 DAP 0 0 0 0 0 0 T 0 T 0 PHSA 0 0 1 1 1 1 2 2 2 2 NALGU-Aid to local schools 0 0 0 107 113 0 0 0 0 0 Housing 47 114 222 333 829 1,085 770 467 356 218 RFC 7i 0 0 0 60 18 50 26 200 50 HSDC 0 0 2 q 5 725 336 235 4 66 NEA 47 114 120 319 214 317 361 202 124 99 NEMFC 0 0 100 0 50 25 20 0 25 0 NALGU-Town planning & zoning fund prog. 0 0 0 5 0 0 3 4 3 3 Environmental Center of the Philippines 0 0 0 0 0 0 0 0 0 0 BLISS 0 0 0 0 500 0 0 0 0 0 Health 0 0 0 33 63 80 104 267 242 155 7:cP 0 0 0 7i 7i 5 19 16 16 7o LNCH 0 0 0 0 8 13 12 13 11 10 PHCA 0 0 0 0 20 26 26 21 18 45 NICFP 0 0 0 0 0 0 10 188 165 60 NALGU-Prov. health & agric, program 0 o' 0 33 35 36 37 29 32 30 Other Social Services 7 7 9 2 11 21 21 18 18 20 Phil, Retirement Authority 0 0 0 0 7i 7i 7i 7i 7i "Io PVAC 1 1 1 1 1 1 1 l l 1 National Youth & Sports Council 0 0 5 0 0 0 0 0 0 0 CCP 6 6 3 1 10 20 20 17 17 9 National Social Action Council 0 0 0 0 0 0 0 0 0 0 GENERAL PUBLIC ADMINISTRATION 1,627 1,682 1,i~6 1,1178 2,1178 4,899 4,012 4,866 Cl,456 14,1177 General administration 894 715 538 664 2,465 1,426 1,909 6,074 10,358 CBP 10 24 53 43 76 1,255 868 1,718 6 362 PKKBP 0 0 7 9 9 10 10 11 10 15 DBP 498 438 231 276 367 700 308 0 5,400 8,280 PNB 300 300 100 100 122 355 160 150 658 1,700 LBP 95 55 100 100 90 145 80 30 0 l sss 0 0 0 0 0 0 1 0 0 0 PDIC 0 0 0 0 0 0 0 0 0 0 General research 2 7 13 27 28 42 52 23 35 25 National Research Council of the Phils, 0 0 0 5 .5 0 5 0 0 0 Science Foundation of the Phils, 2 4 3 5 5 0 5 0 0 0 PIDC 0 0 0 7 5 0 0 0 0 0 TRC 0 2 6 7 14 42 32 18 35 25 NAPHIRF. 0 0 0 0 0 0 10 5 0 0 Phil, Convention Bureau 0 2 3 4 0 0 0 0 0 0 Others 722 859 1,113 1,324 2,1116 2,391 2,534 2,934 3,347 4,495 NALGU-Apportioning to local gov't units 697 836 1,103 0 0 0 0 0 0 0 Barangay Development Fund 0 0 0 0 40 39 0 45 0 1114 Budgetary aid to LGUs 0 0 0 51 26 106 11 10 46 19 Prov. Dev. Assistance Prog. Fund 0 0 0 174 186 123 153 210 466 777 Sharing of national revenue 0 0 0 • 1,071 1,426 1,742 2,291 2,597 2,796 3,383 Repair & const. of public bldgs, 0 0 0 0 38 42 1 5 1 1 Support for local dev. projects 0 0 0 0 0 0 79 67 38 31 PADC 25 3 2 6 0 0 I 0 0 0 0 Government Corporation Support Fund 0 0 8 0 0 0 0 0 0 100 From lump-sum (no breakdown by corp,) 0 20 0 22 470 311 0 0 0 0 MIAA 0 0 0 0 0 28 0 0 0 0 GRAND TOTAL 4,873 4,338 6,651 6,642 9,636 14,293 11,961 10,347 14,403 20.195 Source: Office of Budget and Management, Fiscal Planning Service,  - 106 - Table 5,3b: NATIONAL GOVP.ll!IKENT EXPENDITURES ON ITS OWN ACCOUNT, BY FUNCTION, 1976-85 (Obligation ba1i1, lllillions of pesos) Partlculare 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1 ECONOMIC SERVICES Agriculture r.eneraf administration, regulation and 5,m 5.~~; 6,;~~ Mb~ = ~•;~~ .=.::. research 336 381 424 3'11 837 974 824 1,030 1,469 1,847 Stabilization of fan,, pricea and incoae 0 3 3 4 4 13 6 5 11 11 F.xtension progra,u 70 77 81 140 0 0 91 25 0 0 Irrigation 71 70 84 122 99 128 121 128 99 113 Other agriculture 29 26 60 75 46 46 118 100 86 76 Fishing 38 75 91 121 142 117 142 204 0 0 Forestry and hunting 197 1R7 256 277 327 407 431 430 427 477 405 438 526 691 408 493 976 692 801 Industr:,: 1 Trade, Labor and Tourisa Labor, wage and empioyaent prograu Mining ""TI" 26 ""TI" 42 ,r 44 ,'If 61 ,tr 48 1mi 61 Tt7i 59 hfil 72 nn 58 T5l" 71 Manufacturing 10 12 16 17 l'I l'I 25 22 26 34 Construction 0 0 l l l 5 8 13 11 19 Other industry 175 lli7 185 220 . 38 47 503 712 187 172 Tourism 35 37 87 151 67 109 68 74 73 71 Commerce 91 104 113 126 136 141 173 181 198 265 Retailing and conauaer lntereata 1 1 3 30 4 4 13 17 4 5 Other trade 5 6 Ii 6 5 6 II 9 9 6 Utilities and Infrastructure 4.313 4,182 4.945 7.063 6. 777 8.132 7 .195 7.739 6.733 7 .977 General adiilnlstratlon, regulation and research 529 385 431 696 l, 761 1,434 917 1,12'1 1,328 1,581 Electricity 31 34 40 337 37 226 95 119 103 104 Water supply 505 493 595 1178 691 902 863 '105 704 805 Roada and road transport 2,265 2,237 2,673 3,886 3,141 4,139 3,907 4,106 3,219 3,675 Water transport 535 527 632 919 740 964 920 967 753 859 Air transport 167 210 299 81 107 100 93 107 110 287 Railways 0 0 0 0 0 0 0 0 0 0 Communications 281 296 270 271 300 362 395 396 487 958 Other utilities and infraatructure 0 0 0 0 0 5 5 10 29 10 SOCIAL SERVICES l!:ducatlon General administration, regulation and research ~ MU 137 ~·m ~·m = .:.e.:...:.::. 135 177 1'17 Nt~ =.:.. 231 280 319 305 381 474 Schools Prl11&ry 1,573 1,645 2, 1112 2,283 2,756 3,166 3,819 3, . 582 4,575 3,746 Secondary 2/il 273 367 383 455 556 537 596 758 954 Universities and college• 473 582 708 884 1,010 1,383 1,413 1,52'1 1,703 2,195 Technical, vocational and othera 30 25 42 30 34 61 79 113 90 1 Subsidiary services 73 80 105 110 131 164 133 174 219 287 Health 829 lli 963 ..!.d!l 1.369 1.699 2,077 2,258 2,110 2.846 ---ile'neral administration, regulation and research 73 1!2 '11 103 118 152 1111 105 114 154 Hoapitala and clinic• 386 440 431 611 669 741 397 397 411 774 Individual health services 255 2'12 2119 330 355 492 120 109 11 184 Population control 42 57 68 75 122 168 196 174 195 137 Others 73 86 83 96 105 146 1,276 1,473 1,279 1,597 Social Security and Welfare .ill. 404 517 fil 703 900 1,235 l 1 394 1.308 1,416 General administration, regulation and research 275 231\ 343 359 ~00 5y: 899 9R2 1,015 1,1)07 Other public assistance to persona 1 2 2 2 0 I 4 3 2 12 Care of the disabled and 11entally defective 4 0 4 3 0 0 6 6 0 5 Other welfare service• 3 3 31 39 46 60 7 8 11 7 Other connunity and social aervlcea 10 32 76 59 611 R3 41 46 Broadcasting and pre•• Religion and related aervicea 135 36 3 121 32 128 " 134 167 14 237 229 21 228 84 222 17 270 0 3 36 69 47 469 ~:~~i Housinf and Community Develop11ent 32 58 105 303 603 860 362 Rous ng l'7i "711 ~ TIT t'l "Tii4 -no 1ITT" 'fl" Com11111nity develol'll@nt 18 18 24 28 33 39 47 39 36 40 1 DEFENSE 4.273 4.554 4. 542 4.987 4.975 5 1 447 5.951 6.526 6.341 8.335 GENERAL PUBLIC SERVICES General adiilnlatratlon Contribution to international organiza- ~:~:~ 1 •;n ~:m ~:~H ~::&~ ~:m ~:~~r, ~:~~~ ~:m ;:~~g tion 52 1!3 79 92 : .I 100 113 132 150 144 141 Public order and safety 788 834 963 1,238 1,402 1,704 l, 763 2,116 2,398 2,807 General research 83 1!3 86 85 96 121 136 152 144 86 Othera 309 565 562 705 474 1,300 345 350 365 1,577 l DEBT SERVICE FUND interest payaents Debt amortization 1,~n 1,m 334 836 ~ml 1197 ~:m ~:m ~::n ~:m ::::1 rn::i~ rn:ui 990 1,387 1,4611 1,332 3,451 4,588 4,099 GRAND TOTAL 11,113 1'7.'114 21.158 26,585 37.870 33.754 36.978 , 43.8111 43.128 61.240 Notes: (1) Bureau of the Treaaury' ■ figures for debt aervice were adopted, (2) Sectoral allocation of MPWI-0.in v■e baaed on the 1985 infraatructure diatribution per 1986 BRI!. (3) Transfer ■ to governaent corporation• and local government unite are actual obligationa. Source: Office of Budget and Manageaent, Fiacal Planning Service,  Table 5.4 - 107 - Page 1 of 2 Table 5.4: NATIONAL GOVERNMENT EQUITY CONTRIBUTION BY RECIPIENT, 1978-85 (in million pesos, cash basis) Actual Particulars 1978 1978 19M 1981 1982 1983 19847a 19857a Agricultural Sector 120 196" 359 859 1.370 1,oa1 797 501 Agricultural Credit Administration -5 -8 -0 -0 0 0 0 0 ASEAN-ASEH Fertilizer 0 12 7 0 0 0 0 0 Farm System Deve. Authority 10 32 36 47 49 30 39 25 Natural Resources Dev. Corporation 0 0 0 l 0 l 4 5 National Food Authority 0 0 0 44 41 48 19 234 National Irrig. Administration 38 84 249 706 1,116 891 205 149 Philippine Coconut Authority 0 0 0 1 0 0 0 0 Philippine Cotcdn Corporation 19 5 16 5 IO 4 0 0 Philippine Crop Insurance Corporation 0 0 0 8 75 25 375 1 Philippine Dairy Corporation 0 0 0 3 4 9 7 13 Philippine Fisheries Dev. Authority 6 0 0 29 23 34 37 68 Philippine Sugar Commission 0 0 0 0 0 0 0 0 Philippine Tobacco Administration 5 5 7 8 18 13 15 6 Philippine Virginia Tobacco Administration 37 50 44 7 34 26 96 0 Transeortation Sector 70 191 195 183 376 296 446 156 Light Rail Transit Authority 0 0 0 62 274 :no 363 149 Metro Manila Transit Corporation 0 35 65 15 0 7 7 7 Philippine Aerospace Deve. Corporation 2 1 0 0 0 0 0 0 Philippine National Lines 10 19 0 0 0 0 0 0 Philippine National Railways 58 136 130 106 102 7Q 76 0 Philippine Ports Authority 0 0 0 Oi 0 0 0 0 Others 8 0 119 37 113 330 128 - 125 Environ111ental Center of the Philippines 3 0 -0 0 0 0 0 -0 National Kidney Foundation 0 0 0 0 10 0 0 0 Philippine Convention Bureau 3 0 0 0 0 0 0 0 Philippine Amusement & Gaming Corporation 0 0 0 0 0 0 71 o Philippine Retirement Authority 0 0 0 0 0 0 0 10 Philippine Veterans Investment Dev. Corp. 0 0 15 8 0 0 0 0 Public Estates Authority 2 0 0 0 85 322 45 93 Technology Resource Center 0 0 4 29 18 8 12 22 Others (unallocated) Grand Total 2,438 3,398 4,'i22 8,os1 9,368 5 2739 3,945 3,343 ~ Net of assistance to GFis released as equity: 1984 1985 Development Bank of the Philippines 5,400 8,356 Philippine ~ational Bank 0 1,700 Philguarantee 500 ll,056 5,900 11,056  Table 5.4 Page 2 of 2 - 108 - Actual Particulars 1978 197B 1980 1981 1982 1983 19847a 19857a Government Financial Institutions and Credit Programs 469 447 394 li!.!2. 2,245 1,124 927 540 Amanah Bank 0 -0 -0 0 0 0 0 0 Asian Development Bank 8 9 9 19 8 19 26 27 Central Bank of the Philippines 26 43 38 583 325 925 7 362 Development Bank of the Philippines 105 75 85 300 607 0 0 0 Home Financing Corporation 0 0 0 78 50 0 226 50 KXK Livelihood Program 0 0 0 150 950 0 0 0 Land Bank of the Philippines 30 110 140 0 125 30 0 1 National Home Mortgage Finance Corporation 0 100 50 25 20 0 0 0 Phil guarantee 200 0 0 0 0 0 0 0 Philippine Deposit Insurance Corporation 0 0 0 0 0 0 15 100 Philippine National Bank 100 100 72 210 160 150 653 0 Philippine Veterans Bank 0 10 0 0 0 0 0 0 Rural Bank Trust Fund 0 0 0 0 0 0 0 0 Nonfinancial Government Cor2orations 1 • 969 2,951 4,128 6,666 7,123 4,615 3,018 2,803 Energy Sector 1,474 2,004 2,408 2,443 2,971 1,497 802 590 National Coal Authority 0 0 0 107 126 0 0 0 National Electrification Adm.in. 230 220 273 302 199 137 90 90 National Power Corporation 1,195 1,628 1,983 1,834 2,504 1,060 712 500 Philippine National Oil Company ,49 156 152 200 142 300 0 0 Industrial Sector 89 186 739 2,020 1,032 542 253 437 Export Processing Zone Authority ri 64 81 78 106 50 39 46 KKK Processing Center Authority 0 0 0 0 0 40 11 23 Laguna Lake Development Authority 7 0 2 8 0 2 4 29 Leyte Sab-A Basin Development Auth. 3 4 3 3 2 0 0 1 Maritime Industry Authority 0 0 0 0 0 0 0 0 National Cottage Industries Deve. Autlt. 0 0 0 0 7 3 3 0 National Development Company 38 94 618 1,873 893 406 171 305 Philippine Trade Exibition Center 0 0 0 0 0 0 0 7 PHIVIDEC Industrial Authority 9 16 5 () 10 0 2 3 Southern Philippines Development Auth. 5 8 50 58 14 41 23 23 Housing Sector 80 220 159 705 868 436 241 211 Human Settlements Dev. Corporation 0 12 -5 342 513 268 -7 0 National Housing Authority 80 208 154 363 355 168 234 211 Water Supply 128 154 249 419 393 433 351 783 Local Water Utilities Admin. "67 75 115 135 80 60 47 65 Metro. Waterworks & Sewerage System 61 79 122 265 301 346 300 700 Rural Waterworks Development Auth. 0 0 12 19 12 27 4 18  - 109 - Table 5.5: CONSOLIDATED REVENUES AND EXPENDITURES OF LOCAL GOVERNMENTS, CASH BASIS 1978-85 Rev. Actual est. 1978 1979 1980 1981 1982 1983 1984 1985 REVENUES 3,278 3 1 997 4,311 5,431 6 1 215 6 1915 7 1 468 8,240 Local Source Revenue 2,230 2,523 2,778 3,453 3,650 4,090 4,381 4,815 Business taxes 615 736 744 780 8l9 961 1,032 1,146 Property taxes 674 797 821 1,068 1,125 1,229 1,357 1,471 Nontax revenue 941 988 1,213 1,605 1,694 1,900 1,995 2,198 Allotments from National Government 774 1,186 1,238 1,650 2,203 2,468 2,676 2,974 Special aids from National Government 274 288 295 328 354 357 406 451 EXPENDITURES 3,237 3,781 4 1 181 5 1078 5,828 '6,617 7,396 8,119 Current expenditure 2,847 3,332 3,649 1,419 5,131 5,780 6,505 7,140 Capital outlays 390 147 532 659 697 837 891 979 SURPLUS 41 216 130 353 387 298 72 121 .L!. Based on partial reports submitted by _the local governments to the Ministry of Finance. Hence, the amounts may not tally with National Government Cash Budget (Table 5.1) reports. Source: Ministry of Finance.  Table 5.6: MAJOR NONFINANCIAL GOVERNMENT CORPORATIONS: CAPITAL EXPENDITURES BY SECTOR, 1978-85 (Million pesos) Government corporations Actual Revised Estimate by sectors of activity 1978 1979 1980 1981 1982 1983 1984 1985/a Economic Services Agriculture 784 629 1 2432 1 2 521 1 2947 1 1 990 2 2656 3 1 895 NFA (156) 61 (54) 25 (86) (45) 801 2,128 NIA 940 568 1,486 1,496 2,033 2,035 1,855 1,731 Indust:!1: 76 215 770 3 2003 4 2825 2 2 401 197 512 EPZA 74 79 171 135 56 71 45 30 NDC 2 136 599 2,868 4,769 2,330 152 482 Energz 5 2 530 7,925 7 2681 7 2 905 5 2 530 11,114 8 1 235 5 2060 NEA 483 387 511 595 946 872 529 263 NPC 4;766 5,116 4,784 - 5,562 5,049 7,738 6,726 5,291 PNOC 281 2,422 2,386 1,748 _ (465) 2,504 980 (494) .... .... 0 Transportation 102 302 297 498 1 2000 1 2 912 1 2 387 795 LRTA -0 -0 -0 -6 441 1,503 725 -166 MMTC 9 10 (1) (19) 95 31 0 0 PNR 78 103 122 128 123 53 43 64 PPA 15 189 176 383 341 325 619 565 Water Supply 667 290 515 932 1,075 1!297 1,231 1.., 378 LWUA 257 129 183 208 164 229 114 159 MWSS 410 170 332 724 911 1,068 1,117 1,219 Social Services Housing 122 148 384 1 2 434 651 735 642 718 HSDC -0 -0 -1 921 205 28 322 165 NHA 122 148 383 513 446 707 320 553 Total 7 2 281 9,518 11 2079 15 1 293 15 2028 19 2 449 14 2 350 12 2 322 k As of April 8, 1986. Sources: OBM, OPM, 15 Major Corporations, GCMCC.  Table 5. 7: MAJOR NONFINANCIAL GOVERNMENT CORPORATIONS: INTERNAL CASH GENERATION BY SECTOR, 1978-85 (Million pesos) Government corporations Actual Revised Estimate by sectors of activity 1978 1979 1980 1981 1982 1983 1984 1985/a Economic Services Agriculture 76 144 (345) (170) ( 109) (389) 324 761 NFA 50 149 (218) (82) 8 (253) 568 1,073 NIA 26 (5) (127) (88) (117) ( 136) (244) (312) Industrr 3 6 23 61 131 149 (32) 6 EPZA CT) CT) -1 (2) (6) ( 45) (19) NDC 4 7 23 60 133 155 13 25 Energy 713 386 209 (79) (643) 2 1 751 2 1 266 2~535 NEA 10 7T -4 -3- 2 (141) (263) 279) NPC 308 (134) 23 707 (549) 1,943 513 1,401 PNOC TransEortation 395 62 509 98 182 122 (789) 134 (96) 129 949 1 2,016 36 1,413 334 - - LRTA (2) (162) (144) (48) MMTC (37) (40) ( 23) 9 2 6 18 17 PNR (24) (40) (23) (38) (57) (41) (45) (52) PPA 123 178 168 181 186 198 207 417 Water SuEEll 69 140 135 131 169 166 64 432 LWUA Ts -6 (6~ (15) (3) -2 (63) 50 MWSS 54 134 141 146 172 164 127 382 Social Services Housins 0 10 17 0 18 36 30 134 HSDC 0 -1 -1 0 <TI) TI 48 7T NRA 0 9 16 0 29 23 (18) 103 Total 923 784 161 77 (305) 2 2 714 2 2688 4 2 202 k As of April 8, 1986. Sources: 15 Major Corporations, GCMCC.  Table 6.1: THE MONETARY SYSTEM AT YEAR'S END (in billions of pesos) Jul 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 Net foreign assets 2.9 0.8 -0.4 -1 .2 -2.2 -7.0 17.3 22.8 -41.6 -74.5 -100.0 -121.7 -127.8 Domestic Credit 2 Net 26.3 34.8 42.7 50.8 63.1 79.5 93.8 115.3 139.1 170.8 166.1 156.7 143.5 Credit to Government 1 .6 0.1 1.4 3.1 3.3 3. 1 5.2 9.6 16.9 15.9 123.0 14.3 7.4 Credit to other public sector 1 .8 4.8 6. 1 6.0 4.7 5.5 2.5 2.0 4. 1 11.0 14.5 17.8 17.6 Credit to private sector 26.1 30.1 35.2 41.4 54.9 70.9 86.1 103.7 118.1 144.1 138.3 124.6 118.5 Net unclassified assets 2.5 2.3 2.8 5.9 4.9 2.4 9.5 -12.2 22.6 55.4 99.9 139.7 158.0 Total Assets - Total Liabilities Total Li9.uidity 31.7 24.3 37.9 28.8 45.1 35.9 55.5 13.9 65.8 51.8 74.9 57.1 86.0 67.8 104.7 120.1 - 151.7 166.0 174.7 173.7 - .... N 82.1 95.3 113.0 121.2 132.9 124.2 Money supply 9.0 10.3 12.1 14.9 16.9 18.8 22.5 23.5 23.5 32.5 33.6 35.8 32.5 Time and savings deposits 7.8 8.9 12.9 17.6 23.4 26.6 32.9 12.1 55.2 63.4 76.3 88.5 84.2 Deposit substitutes 7.5 9.6 10.9 ll.4 ll.5 12.0 12.4 16.5 16.6 17. 1 11.3 8.6 7.5 Other liabilities and capital accounts 7.4 9. 1 9.2 11.6 14.0 17.5 18.2 22.6 24.8 38.7 44.8 41 .8 49.5 Source: Central Bank of the Philippines.  Table 6.2: RESERVE HONEY Nr YEAR'S END (in millions of pesos) Aug 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 Total Reserve Honey 9,814 12,093 14,629 16,192 17,798 18,644 27,723 33,445 37,986 37,635 Net Forei~n Assets 4,452 6,007 5,650 3,505 -4,023 •-18,070 -34,784 51,622 -84,502 -93,477 Assets 11,437 14,106 18,146 23,609 21,123 15,694 12,107 17,516 20,163 34,162 Liabilities 6,985 8,099 -12,496 -20,104 -25,146 -33,764 46,871 69,138 -104,665 -127,639 Net Claims on Government 2,030 3,097 3,948 5,254 8,696 12,058 13,029 8,768 13,024 6,768 Claim on government 1,316 5,727 6,247 6,827 11,381 14,500 10,582 20,715 21,296 20,820 Government deposits -1,486 -2,630 -2,299 1,573 -2,685 -2,442 5,553 -11,947 -8,272 -14,052 Claims on official entities 806 711 682 556 460 132 1,081 580 4,575 4,773 .... .... \.,) Claims on commercial hanks 2,727 3,466 6,114 10,027 13,129 13,517 8,258 4,736 5,886 - 5,836 Claims on other financial institutions 2,624 3,266 4,131 4,860 6,072 7,288 9,707 13,035 12,661 10,950 Bonds (CBCis) 7,998 9,907 -11,941 -11 ,440 10,062 8,155 5,030 4,766 -1,311 -338 Other items (net) 4,373 5,423 6,045 3,430 3,526 11,511 35,262 62,714 87,653 103,128 Source: Central Bank of the Philippines.  Table 6.3: FINANCIAL SECTOR: LOANS AND INVESTMENTS OUTTANDING BY TYPE OF INSTITUTION Jul 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 -------------------------------- (In billions of pesos) --------------------------------- Commercial banks 31.1 38.2 14.9 53.7 69.6 86.9 102.1 119 .2 136.6 176.3 177 .4 162.7 161.6 Development banks 5.3 7.3 10.5 13.1 15.0 18.5 23.5 33.9 40.7 51 .o 53.7 41.4 57.1 Rural banks 1.8 2.4 2.7 2.8 3.5 4.3 4.8 5.6 6.9 7.4 7.1 7.1 Savings banks 1.0 1.2 1.7 2.4 3.3 4.2 5.5 5.3 4.6 5.7 5.5 4.8 5.6 Private nonbank financial institutions 10.4 13.9 17.0 16.6 19.9 24.4 29.2 27.5 27.9 27.4 26.1 33.5 32.3 Government nonbank financial institutions 5.6 6.0 8.8 10.5 11.9 11.5 17.2 22.0 26.9 42.5 19.1 52.3 56.4 Total 55.2 70.4 85.6 99.1 123.2 152.8 182.3 213.5 243.6 310.9 319.2 301.8 320.1 Commercial banks Development banks --------------------------------- 56.3 9.6 55.1 10.4 52.5 12.3 54.2 13.2 56.5 12.2 (As percent of total) 56.9 12.1 56.0 12.9 55.8 15.9 --------------------------------- 56 .1 16.7 56.7 16.4 55.6 53.9 50.5 - ""' 16.8 13.7 17.8 Rural banks 3.3 3.4 3.2 2.8 2.8 2.8 2.6 2.6 2.8 2.6 2.3 2.4 2.2 Savings banks 1.8 1.7 2.0 2.4 2.7 2.7 3.0 2.5 1.9 1 .8 1.7 1.6 1 .8 Pri~te nonbank financial institutions 18.8 19.7 19.9 16.8 16.2 16.0 16.0 12.9 11.5 8.8 8.2 11.1 10. 1 Government nonbank financial institutions 10. 1 9.7 10.3 10.6 9.7 9.5 9.4 10.3 11.0 13.7 15.4 17.3 17.6 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 - - - - -- -- -- Source: Central Bank of the Philippines.  - 115 - Table 6.4: TOTAL ASSETS OF THE FINANCIAL SYSTEM (in billion of peaoa) Jul 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 Central Bank 21 .3 26.0 29.0 29.0 38.4 51.0 65.4 71,6 91,7 130,4 206,0 251,6 303,4 Bankinl s2:ste11 54,1 69.9 80.0 95.3 E.!.:l 154.0 188.8 ~ 269,8 331.5 391, 7 1!1.:1. 393.9 ' Co11111ercial Bank• 42,4 53.2 58.7 68,7 89.8 113.9 130.4 164,6 195.8 240,6 289,2 283,3 282.8 Private 29.9 ET 4<CT 42,6 56.4 7o.o 85.l 103.4 Tis.o 134.4 17io.6 168.0 159.6 Government 12.5 18.l 18.5 • 18.6 22.3 28,9 34.6 40,6 53,3 65,2 80,4 70,3 75,3 Foreign banks 7.5 H,l 15,0 18,7 20.6 26,7 41,0 48,2 45,0 47.9 Thrift Bank• 1.1 2.1 3.0 4.1 5.6 1.1 10.6 11.6 12.6 16.1 14,9 15,1 16.4 Saving• T.2 "i":4 T.o 2.8 3.9 s.T "T.4 ""T-9" """"s:9 ~ ~ 6:ii --r:s Private development banka 0.3 0.4 0.5 o.6 0.8 1.0 1.6 2,6 3,7 4,6 4.5 5,1 5,4 Saving• & loan aasociationa 0,2 0,3 0.5 0.1 0,9 1,3 1,6 2,1 3,0 4, I 2,8 3,2 3,5 I Rural Banks hl 2.8 .hl .hl .i:! 5.0 .hl hl !..:l hl 9,0 .!:! 9,0 Sl!!cialized Government Banke 1.!! .!!.:! .!hl. .!!:l l!d. 27.4 1!.:l 43.2 53.3 .ll:l 78.6 88,0 90,7 Development Bank of the Philippines 6,7 9.6 12.7 15.8 18,2 22,3 28.0 35,9 45.2 56,5 68.2 74.4 76,0 Land Bank 1,2 2.1 2,4 3.2 3.4 5.0 6.1 7,1 7,9 8,5 10, 1 13,3 14,4 Philippine Aalanah Bank 0,1 0,1 0.1 0, l o. 1 0,1 0.2 0.2 0,3 0,3 0.3 0.3 Nonbank Financial Intenaediariea ~ ~ 33.9 .lli!. 41,3 49.6 58,7 ~ 2!d 92,4 ~ .lQZ.:1 109.4 Insurance co aniea 10,0 11.9 15.2 17.5 21.6 24.6 29,5 33.3 40.7 45,0 54.0 60,8 65,1 Government a Private J.!. 7 63 3.5 T:r 1o.o Ti:3 4.2 5.2 6.2 13.8 7.8 TI:& 9.0 19.5 10.0 22.0 V:-0 11.3 13,7 30,9 14. 1 35.9 18. 1 7;f';f 18, l 47.0 18. 1 Investment Institutions 6.9 10.3 13,2 14,5 16.0 20,4 25.6 23,5 25,6 25,2 19,7 23,8 22.2 Financing companies w "T.s" 4.6 5.8 6:i 9:-f 11:9 TI:T l2.9 1Di 9.6 6.2 5.8 2,0 3,8 Inveat-nt coapanies 0.7 3.9 4.4 4.1 5.0 5,5 5.9 6,2 2.6 11.0 CJ.8 Investaent houses 3,9 4.8 4.0 4.8 4,8 6.6 8.7 5,9 6,8 7.2 7,5 6,6 6,6 Trust 02erationa (Fund Kanaaera l:.Q. 1.:! .hl hl 0.8 l:l .!.:Z. .Q:I. 1,1 1,5 0.9 1,6 1,0 Other Financial Inter- ■ediariea .!.:2. 1.:.Q. 2,2 1.:! 2.9 3.4 hl hl 6,8 20.7 1!:2. 21,0 21,1 Total 1hl 122.7 142,9 159.4 200,9 254.6 313. 1 ~ 435,7 554,3 697.2 754.0 811.7 ,-- /a Include Government Service Insurance Systeu (OSIS) and Social Security Systeffls (SSS), /b For 1985, data of end-1984 have been uaed. ;ource: Central Bank of the Philippinea.  Table 6.5: STRUCTURE OF DEPOSITS OF COMMERCIAL BANKS End of Demand . Savings Time Total year deposits deposits deposits deposits (Million pesos) 1972 3,735 4,670 2,559 10,964 1973 5,276 6,865 3,044 15,185 1974 6,062 8,281 4,032 18,375 1975 6,665 8,951 5,131 20,747 1976 7,482 ll,022 7,558 26,062 1977 9,045 13,262 11,470 33,777 1978 9,602 .it 17,314 16,737 43,653 1979 ll,397 20,884 23,717 55,998 1980 12,792 23,047 36,791 72,630 1981 13,106 27,017 38,406 78,529 1982 11,991 33,445 48,227 93,669 1983 19,139 40,940 56,148 116,227 1984 15,268 47 ,2ll 72,068 134,547 1985 (Dec) 14,753 56,268 71,997 143,018 1986 (Jul) 12,827 58,980 58,600 130,407 (% of total) 1972 34.1 42.6 23.3 100.0 1973 34.7 45.2 20.0 100.0 1974 33.0 45.1 21.9 ~oo.o 1975 32.1 43.1 24.7 100.0 1976 28.7 42.3 29.0 100.0 1977 26.8 39.3 34.0 100.0 1978 22.0 39.7 38.3 100.0 1979 20.4 37.3 42.4 100.0 1980 17.6 31.7 50.7 100.0 1981 16.7 34.4 48.9 100.0 1982 12.8 35.7 51.5 100.0 1983 16.5 35.2 48.3 100.0 1984 11.3 35.1 53.6 100.0 1985 (Dec) 10.3 39.4 50.3 100.0 1986 (Jul) 9.8 45.2 45.0 100.0 Source: Central Bank of the Philippines.  .. ~. - ·117 - Table 6.6: STRUCTURE OF CREDITS OUTSTANDING BY COMMERCIAL BANKS BY MATURITY /a End of Short Interme- Long year Demand term diate term term Total -------------------- (million pesos)-------------------- 1977 7,490 26,767 4,234 1,682 40,173 1978 9,163 35,227 5,549 4,139 54,078 • 1979 10,637 37,601 9,389 10,637 68,264 1980 10,458 49,844 7,747 9,149 77,198 1981 10,667 52,823 14,577 8,038 86,505 1982 9,308 58,478 17,778 12,675 98,239 1983 10,434 66,792 16,858 17,304 111,388 1984 8,322 62,652 28,226 17,182 116,382 1985 8,061 50,038 14,668 14,806 87,573 1986 (Mar) 8,948 47,069 17,528 14,124 87,669 --------------------- (% of total) ---------------------- 1977 18.7 66.6 10.5 4.2 100.0 1978 16.9 65.1 10.3 7.7 100.0 1979 15.6 55.1 13.7 15.6 100.0 1980 13.5 64.6 10.0 11.9 100.0 1981 12.3 61.1 17.3 9.3 100.0 1982 9.5 59.5 18. 1 12.9 100.0 1983 9.4 60.0 15.1 15.5 100.0 1984 7. 1 53.8 24.3 14.08 100.0 1985 9.2 57.1 16.8 16.9 100.0 1986 (Mar) 10.2 53.7 20.0 16.1 100.0 l.!. Data prior to 1977 not available. Source: Central Bank of the Philippines.  Table 6.7: CREDITS OUTSTANDING BY COMMERCIAL BANKS - BY INTEREST RATES /a End of Up to 19% and year 4% 5-7% 8-10% 11-12% 13-14% 15-16% 17-18% above Total ----------------------- (in million of pesos) ----------------------- 1977 1,641 599 3,133 17,339 14,461 5'46 677 1,777 40,173 1978 2,302 404 4,238 22,367 21,552 1,108 781 1,326 54,078 1979 3,083 1,714 7,947 23,879 18,350 9,112 21,119 2,060 68,264 1980 3,786 3,938 9,849 13,739 15,056 21,768 3,977 5,085 77,198 1981 3,620 2,480 4,512 9,777 17,679 21,042 15,306 12,089 86,505 1982 3,298 5,093 6,152 10,355 20,102 16,346 19,034 17,859 98,239 1983 3,321 4,783 4,530 11,835 19,161 12,669 14,349 40,740 111,388 1984 4,353 2,519 ),304 10,111 21,716 11,391 13,453 49,535 116,382 1985 1,707 2,893 6,247 6,852 11,794 13,560 11,136 33,384 87,573 1986 (Mar) 4,752 1,213 3,627 7,581 9,633 10,841 6,781 43,211 87,669 ---------------------------- (% of total)--------------------------- 1977 4 .1 1 .5 7.8 43.01 36.0 1 .4 1.7 4.4 100.0 1978 4.3 0.1 7.8 41 .4 39.9 2.0 1.4 2.5 100.0 1979 4.5 2.5 11.6 35.0 26.9 13.4 3. 1 3.0 100.0 1980 4.9 S. 1 12.7 17.0 19.5 28.2 5.2 6.6 100.0 1981 4.2 2.9 5.2 11.3 20.4 24.3 17.7 14.0 100.0 1982 3.3 s.2 6.3 10.5 20.5 16.6 19.4 18.2 100.0 1983 6.0 4.3 I 4.0 10.6 17.2 11.4 12.9 36.0 100.0 1984 3.7 2.2 2.0 0.7 18.7 9.8 11.5 42.6 100.0 1985 2.0 3.3 7.1 7.8 13.5 15.5 12.7 38. 1 100.0 1986 (Mar) 5.4 1.4 4 .1 8.7 11.0 12.4 7.7 49.3 100.0 /a Data prior to 1977 not available. Source: Central Bank of the ,Philippines.  Table 6.8: CREDITS OUTSTANDING BY COMMERCIAL BANKS - BY INDUSTRY /a Mar 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 ---------------------------- (in millions of pesos)---------------------------- Agriculture 5,448 5,770 8,120 12,010 11,120 12,691 14,790 9,478 9,453 10, 132 Mining 1,578 3,610 5,508 7,334 7,068 9,744 13,145 19,227 9,238 8,920 Manufacture 13,126 17,490 22,104 27,053 26,347 29,958 35,410 32,136 21,857 26,384 Construction 887 1,556 2,044 2,722 4,050 5,076 5,818 7,119 6,184 6,635 Public utilities 115· 315 764 645 976 1,077 518 2,500 1,596 1,487 Trade 11,830 14,156 14,046 11,211 15,561 16,596 14,573 20,265 14,110 11,-926 Transport 798 1,084 1,746 1,966 2,786 -3,408 3,.886 4,781 3,711 4,084 Financial institutions 2,576 3,300 6,141 7,914 10,620 10,590 12,886 11,580 14,492 11,985 Real estate 1,816 2,042 2,620 2,298 3,808 4,150 4,145 4,608 2,633 2,269 Services 2,005 4,755 5,171 4,045 4,169 4,949 6,217 4,688 4,299 3,847 Total 40,173 54,078 68 2 264 77,198 86,505 98,239 111,388 116 2 382 87,573 87 2669 --------------- - ------------- .... .... ------------------------------ (percent of total) 1.0 Agriculture 13.6 10.6 11.9 15.6 12.8 12.9 13.3 8. 1 10 .. 8 11.5 Mining .J 3.9 6.7 8.0 9.5 8~'2'""'' 9 .9. 11.8 16.5 10.0 10.2 Manufacture 32.7 32.3 32.4 35.1 30.5 30.5 31.8 27~6 25.0 30.1 Construction 2.2 2.9 3.0 3.5 4.7 5.2 5.2 6 .1 7.1 7 .6 Public utilities 0.3 0.6 1.1 0.8 1.1 1.1 0.4 2.2 1.8 1.7 Trade 29.4 26.2 20.6 14.5 18.0 16.9 13.1 17.4 16.1 13.6 Transport 2.0 2.0 2.6 2.5 3.2 3.5 3.5 4-. 1 4.2 4.6 Financial institutions 6.4 6.1 9.0 10.3 12.3 10.8 11.6 10.0 16.5 13.7 Real estate 4.5 3.8 3.8 3.0 4.4 4.2 3.7 4.0 3.0 2.6 Services s.o· 8.8 7.6 5.2 4.8 5.0 5.6 4.0 4.9 4.4 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.(j 100.0 100.0 100.0 /a Data prior to 1977 not available. Source: Central Bank of the Philippines.  - 120 - Table 6.9: CREDITS 'OUTSTANDING BY FINANCIAL INSTI1u:''IONS J.!. BY MATURITY AS OF END OF 1985 (Million pesos) Intermediate Short term term Long term % of % of % of Alnount total Alnount total Alnount total Commercial banks /b 56,017 63.9 17,528 20.0 14,124 16.1 Savings banks iJ!.. 532 23.8 1,022 45.6 686 30.6 Stock S&L associations /b 1,049 59.3 613 34.6 108 6 .1 LBP and PAB /b 2,013 54.8 843 22.9 818 22.3 PDBs .f.!::.. 1,709 61.1 616 22.0 472 16.9 Investment houses 1.2.. 2,027 44.6 2;514 55.4 Financing companies 1.2.. 2,919 73.0 1,081 27.0 Investment companies 1.2.. 3,629 85.8 601 14.2 Security dealers/brokers 1.2.. 252 97.7 6 2.3 Others 1.2.. 2,062 26.2 5,850 73.9 Total 72,209/e 60.6 20 2622/e 17.3 26 2 260/e 22.1 ~ Breakdown of data in the case of institutions like DBP, OSIS, SSS and pri- vate insurance companies are not available • .. iJ!.. As of March 1986. l.!:.. As of June 1986. 1.2.. Long-term loans include intermediate-term loans. ft As of July 1986. Source: Central Bank of the Philippines.  - 121 - Table 6.10: ' DEPOSITS AND DEPOSIT SUBSTITUTES, SHORT- VERSUS LONGER-TERM FINANCIAL SAVINGS ~ (Million pesos) Short-term savings Deposit Longer-term savings End of Demand substi- Savings Time ,year deposits tutes Total deposits depo~its Total 1973 5,291 7,471 12,762 8,587 3,634 12,221 1974 6,079 12,681 18,760 10,715 5,086 15,801 1975 6,686 16,248 22,934 14,063 6,820 I 20,883 1976 7,501 17,454 24,955 16,134 10,247 26,381 1977 9,065 18,155 27,220 10,990 14,748 33,738 1978 9,760 19:363 29,131 24,539 20,676 45,215 1979 11,550 23,303 31,853 29,952 28,680 58,632 1980 13,099 23,699 36,798 34,466 42,799 77,265 1981 12,666 20,763 38,429 40,099 46,634 86,733 1982 12,376 26,215 30,591 47,610 57,113 104,723 1983 19,594 25,872 45,466 54,111 67,334 121,448 1984 12,384 17,734 30,118 41,058 57,339 98,397 1985 15,162 14,062 29,224 66,696 85,784 152,480 1986 (Jul) 12,609 12,642 25,251 62,006 55,115 117,121 l.!!.. Includes banking institutions and NBQBs. Source: Central Bank of the Philippines.  - 122 - Table 6.11: INTEREST MARGIN BETWEEN CENTRAL BANK REDISCOUNT RATES AND LENDING RATES OF BANKS i.!.. Maximum Interest margin /b Discount lending Agriculture Production Eligible papers , rate rate credits credits Agricultural production, cottage and small industries credits, general-purpose working capital financing and other short-term credits 11.75 Lifted i.!.. 4.7-10.8 3.5-6.0 l.!.. Effective November 29, 1985 under CB Circular No. 1086, lending rate ceil- ings and fixed spreads were lifted. /b Refers to the weekly average spread on rediscounted loans for the period January-June 1986. Source: Central Bank of the Philippines.  Table 7.1: COCONUTS: AREA, PRODUCTION, YIELD AND DISPOSITION ('000 metric tons) Ex;2orts Domestic users Copra Yield .o f Coco- Dessi- Coco- Calendar Area pro- harvested nut cated nut Food- year Planted Harvested duction area Copra oil coconut Total oil nuts Total ---- ('000 ha)---- ('000 mt) (mt/ha) --------- ('000 mt in copra equival~nts).L!. ---- 1972 2,126 1,791 2,174 , 1. 21 968 757 95 1,820 313 40 353 1973 2,133 1,633 1,871 1.15 728 691 95 1,514 320 38 358 1974 2,206 1,750 1,424 0.81 309 699 77 1,085 296 43 339 1975 2,280 1,890 2,199 1.16 833 954 80 1,867 288 44 332 1976 2,521 1,985 2,742 1.38 867 1,373 98 2,338 349 55 404 1977 2,728 2,091 2,440 1.17 560 1,276 119 1,955 I . "'' 49 485 1978 2,890 2,168 2,517 1.16 380 1,596 110 2,086 .10U 50 430 1979 1980 1981 3,064 3,126 3,105 2,172 ~,290 2,211 1,912 2,076 2,316 0.88 0.91 1.05 145 123 106 1,282 1,451 1,661 100 136 136 1,536/b 1, 7187h 1,9137h 326 307 353 50 50 50 376 357 403 - N w 1982 3,-162 2,301 2,192 0.95 192 1,506 138 1,8717h 271 50 321 1983 3,188 2,265 2,264 0.95 12 1,619 131 1,8137h 400 51 451 1984 3,217 2,310 1,435 0.62 /d 936 106 1, 1287h 257 50 307 1985 (rev) n.a. n.a. 1,8001£. n.a. Tcf 655 61 1, 1487h 252 50 302 k The conversion factors used in Philippines are as follows: coconut oil, 52% of copra equivalents; dessicated coconut 83%. From 1980 onwards, conversion factor used is coconut oil 63%; and desiccated coconut 64.68%. Jl!.. Including the copra equivalent of coconut oil processed for fatty chemicals mianly for exports. 1£. Including the copra equivalent of coconut producers held as stocks at year-end. Jj_ No exports due to the copra export ban which was imposed September, 1982. Source: United Coconut Associated of the Philippines.  - 124 - Table 7.2: SUGAR: AREA, YIELD, QUALITY RATIO, PRODUCTION AND EXPORTS Crop Area Yield Quality/ Sugar year k planted Cane Sugar ratio £E.. production Exports 1.£. --- (mt/ha)--- 1972 441 44.2 4 .1 10.6 1,011 1,262 1973 422 53.8 5.3 9.9 2,246 1,455 1974 463 56.2 5.3 10.6 2,446 1,636 1975 473 52 5.0 10 .1 2,396 1,006 1976 540 53 5.2 10.1 2,880 1,515 1977 514 53 5.2 10.0 2,685 2,575 1978 451 49.9 5.2 9.5 2,335 1,142 1979 483 42.3 4.3 9.7 2,289 1,157 1980 442 47.2 4.8 9.8 2,267 1,793 1981 382 53.8 5.5 9.6 2,315 2,278 1982 496 50 .1 4.9 10.1 2,447 1,301 1983 464 50.2 5.1 9.5 2,465 999 1984 427 56.1 s.s 11.2 2,335 877 1985 383 48. l 4.6 10 .(., 1,742 572 k September to August . .fr Ratio of sugar to sugarcane . ./s;_ Metric tons commercial weight (MTCW) 8£! of August 1985. Sourec: Philippine Sugar Commission.  Table 7.3 RICF.: AREA, YIELD, SUPPLY AND USE Rice SUJ?J?lI and use Total Beginning Avail- Ending Crop- Harvested Mean yield pro- inventory Net able stock Domestic year area of palay /a duction as of 07/01 imports /b supply 06/30 use 1.E. ('000 ha) (tons/ha) --------------- ('00Ometric tons) ---------------- 1971/72 3,332.3 1.598 3,248 632 633 4,513 698 3,815 1972/73 3,194.2 1.443 2,834 698 238 3,770 445 3,325 1973/74 3,527.8 1.656 3,621 445 311 4,377 837 3,540 1974/75 3,632.5 1.627 3,693 A37 238 4,768 929 3,839 1975/76 3,674.0 1.751 4,032 929 71 5,052 777 4,275 1976/77 3,641.4 1.851 4,280 777 24 5,081 841 4,240 1977 /78 3,601.7 1.977 4,607 841 -39 5,109 1,212 4,197 1978/79 3,560.7 2.110 4,&47 1,212 -38 6,021 1,540 4,481 1979/80 3,636.8 2.154 5,093' 1,540 -236 6,397 ~,575 4,822 1980/81 · 3,459.1 2.233 5,020 1,575 -175 6,420 1,330 5,089 1981/82 3,442.8 2.359 5,279 1,331 -10 6,600 1,520 5,080 1982/83 3,239.6 2.386 5,040 1,520 -11 6,549 1,478 5,071 .... N 'JI 1983/84 3,140.7 2.497 5,841 1,478 -30 6,576 990 5,586 1984/85 3,221.8 2.540 5,363 990 389 6,742 999 5,743 /a Paddy with about 6.7% rice content. Tb Negative figure indicates net exports /c Refers to all uses including feed, losses and seed. Note: Data for harvested area and production have been revised for 1971/72 - 1979/80. Source: Statistics Division, Bureau of Agricultural Economics.  - 126 - Table 7.4 CORN: AREA, PRODUCTION, SUPPLY AND DISAPPEARANCE Rice su22lz and use Beginning Avail- Ending Crop Harvested Average Pro- stock as Net able stock Domestic year area yield~ duction of 07/01 imports supply 06/30 use ('000 ha) (tons/ha) (stocked ----------- ('000 metric tons)------ ·- corn) 1971/72 2,454.3 0.825 2,024 148 193 2,365 241 2,124 1972/73 2,350.6 0.781 1,843 241 90 2,174 96 2,078 1973/74 2,726.4 0.828 2,258 96 94 2,448 257 2,191 1974/75 3,009.9 0.835 2,514 257 159 2,930 243 2,687 1975/76 3,193.2 0.851 2,717 243 54 3,014 153 2,861 1976/77 3,242.5 0.856 2,775 153 160 3,088 154 2,934 1977/78 3,158.1 0.885 2,796 154 131 3,084 153 2,931 1978/79 3,252.4 0.930 3,090 153 56 3,299 264 3,035 1979/80 3,201.1 0.976 3,123 264 93 3,480 148 3,332 1980/81 3,238.7 0.96 3,110 148 351 3,609 175 3,434 1981/82 3,360.7 0.979 3,290 175 275 3,740 172 3,568 1982/83 3,157.5 0.99 3,126 172 406 3,704 104 3,600 1983/84 3,270.2 1.023 3,346 104 321 3,771 181 3,590 1984/85 3,314.6 1.037 3,439 181 342 3,962 252 3,781 Source: Statistics Division, Bureau of Agricultural Economics.  - 127 - Table 7.5: MINOR CROPS: HARVESTED AREA, PRODUCTION AND YIELD Crop year J.!. 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983/b 1984/c 1985/c Area Harvested ( '000 ha) Abaca 145 163 170 180 244 250 244 235 236 230 207 170 171 169 Banana ■ 244 250 212 233 298 300 284 312 318 312 331 326 318 328 Coffee 55 61 65 65 77 76 85 95 101 119 136 137 140 145 Cotton 0.3 0.4 0.5 2 1 4 9 10 6 6 5 Mango 41 44 44 47 36 36 35 39 39 42 41 42 43 45 Pineapple 30 28 28 31 35 36 45 55 63 67 60 62 63 54 Rootcrop• J.j__ 258 266 314 351 401 451 461 481 486 177 4110 423 419 422 Tobacco 78 84 117 85 86 76 74 67 61 55 57 54 67 •51 Vegetable k 52 54 52 55 51 56 57 53 53 51 53 49 48 50 Production ( '000 at) Abaca 110 119 126 131 139 151 130 148 157 128 120 119 89 84 Banana ■ 980 . 1,013 1,240 1,690 2,271 2,447 3,156 3,582 3,977 4,073 4,077 3,886 3,1119 3,698 Coffee 52 51 53 91 81 105 119 115 125 147 171 147 117 133 Cotton 0.1 0.1 0.2 0.8 0.7 5 7 7 6 8 6 Mango 143 188 192 239 293 308 335 363 377 367 426 373 3711 384 Pineapple 282 293 · 338 424 420 422 465 605 1,281 1,293 1,242 1,6113 1,719 1,449 Rootcrop■ J.j__ 1,218 · 1,220 1,411 1,807 2,143 2,774 3,004 3,5611 3,470 3,407 3,174 2,102 2,216 2,453 Tobacco 56 65 63 57 59 50 57 51 42 39 47 45 66 47 Vegetable k 240 272 311 337 359 370 381 358 385 386 390 330 352 342 !!!,!! (at/ha) Abaca 0.76 o. 73 0.74 0.74 0.57 0.60 0.53 o.63 0.67 0.56 0.58 0.52 0.52 0.49 Banana ■ 4.02 4.05 5.85 7.25 7.62 8.16 11.ll 11.31 12.51 13.05 12.32 11.92 12.02 16.27 Coffee 0.95 0.84 0.82 1.40 1.05 1.38 1.40 1.21 1.21 1.24 1.26 1.07 0.23 0.92 Cotton 0.33 0.25 0.40 0.40 0.10 1.25 0.711 0.10 1.00 1.33 1.14 Mango 3.49 4.27 4.36 5.09 8.14 8.56 9.57 9.31 9.67 8.74 10.37 8.88 11.83 8.47 Pineapple 9.40 10.46 12.07 13.68 12.00 11.86 10.33 11.00 20.33 19 . 30 20.70 27.15 27.29 26.77 Root crop ■ J.j__ 4. 72 4.27 4.49 5.15 5.34 4.111 6.52 7.42 7.14 7. 14 6.61 4.97 5.45 5.Rl Tobacco 0.72 0.77 0.72 o.67 0.69 0.68 0.77 0.76 0.69 0.11 0.111 0.83 0.99 0.92 Vegetable k 4.62 5.04 5.98 5. 18 6.65 6.61 5.74 6.75 7.26 7.57 7.47 6. 73 7.42 6.85 /a July-June /b Revbed. /c Preliminary t.! Include ■ caaote, ca ■■ ava, gabi, paogaliang, tugui and ubi. /e Include■ cabbage, eggplant, garlic, pechay, radish and tomato. Source: Bureau of Agricultural Economic ■•  Table 7.6: PRODUCTION OF SELECTED LIVESTOCK AND FISHERY PRODUCTS Calendar year 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Livestock Production (mln of heads) C\lickens 50.10 49.96 /a /a 45.fi7 45.29 58.89 49.32 52.76 57. 72 59.71 62.25 • 59.20 52.10 Hogs 7.74 R.63 Ta Ti 6.49 5.10 6.91 7.44 7.93 7.76 7.79 7.98 7.61 . 7. 16 Cattle 1.93 2.10 Ta Ta 1. 74 1. 72 1.82 1.83 1.88 1.94 1.94 1.94 1.85 1.98 Carabao 4.71 4.94 Ta Ta 2. 72 2.90 2.96 2.80 2.87 2.85 2.90 2.95 3.02 2.98 Fisheries ('000 mt) Commercial (marine) 425 465 471 499 508 518 506 501 488 495 526 519 513 512/b Municipal (coastal)/c 599 640 684 732 726 827 858 839 895 939 978 1,146 1,089 1,038- Fishponds jj__ - 99 100 113 106 159 164 217 241 289 339 392 44'5 478 487 .... N 0) ~ No survey in 1974 and 1975. Lg, Estimates _£!=_ Since 1976 adjustments were made and municipal fisheries include fishing done in coastal and inland areas with or without boat of 3 gross tnnage or less. jj__ Since 1976 adjustments were made and aquaculture include - three subsectors (namely mariculture for oyster, mussel and seaweeds; bracksih water culture for fishpond; and freshwater culture for fishpen, fish cage and fishpond. Source: Bureau of Agricultural Economics, Bureau of Fisheries and Aquatic Resources.  - 1.29 - Table 7.7: FORESTY PRODUCTS: PRODUCTION AND EXPORTS (millions of cubic meters) Production Production E!Eorts year /a Logs Lumber Plywoo4 Veneer Logs Lumber Plywood Veneer 1972 8,420 598,000 1,089,000 1,587,000 7,130 77 ,ooo 736,000 2,368,000 1973 10,450 449,000 1,241,000 1,431,000 7,760 181,000 904,000 1,913,000 1974 10,190 472,000 1,196,000 1,167,000 4,700 119,000 .276,000 1,126,000 1975 11,160 964,000 789,000 1,404,000 4,590 108,000 268,000 672,000 1976 8,650 612,000 705,000 2,734,000 2,330 209,000 444,000 1,126,000 1977 7,870 1,570 489 496 2,050 455 221 155 1978 7,170 1,780 490 546 2,210 573 362 154 1979 6,580 1,630 503 634 1,250 915 393 186 1980 6,350 1,530 553 660 715 741 322 164 1981 5,400 1,220 457 553 706 547 370 138 1982 4,510 1,210 422 428 752 591 241 98 1983 4,430 1,220 459 445 786 728 294 123 1984 3,870 1,230 438 840 846 540 250 710 1985e 3,500 1,200 443 770 454 512 238 690 e • estimates. k July-June for 1Q72-75, from 1976 onwards production year equals calendar year. Source: Bureau of Forest Development and NCO.  Table 7.8: GROSS VALUE ADDED IN AGRICULTURE, FISHERY AND FORESTRY BY SUBSECTOR IN CURRENT PRICES (in billion pesos) Rev. 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Agriculture 9.0 12.4 17.0 20.8 23.6 25.6 28.6 34.2 37.6 40.3 44.0 47.8 83.5 97.7 Paddy 2.7 3.8 4.7 5.6 6.3 6.3 7.0 7.7 9.0 10.9 11.9 12.2 21.4 29.4 Corn 1.0 1.2 1.8 2.0 2.3 2.7 2.7 2.8 3.3 4.0 4.6 4.3 7.8 10.9 Coconut, including copra 1.2 2.2 3.0 2.8 3.1 3.8 4.0 5.8 3. l 3. l 3.0 5.2 11.2 8. l Sugarcane 1 .1 1.2 2.0 2.6 2.5 2.1 2.1 2.5 2.7 3.2 4.0 3.3 5.4 3.4 Banana 0.6 0.1 l .O 1.9 2.2 2.6 3.2 3.9 4.8 5.1 5.2 7.3 11.4 12.7 Other crops 2.4 3.3 4.4 5.8 1. 1 8.4 9.4 11.4 14.0 14.0 15.3 15.5 26.4 32.8 .... w 0 Livestock 1.8 2.2 3.1 2.7 2.9 3 .1 3.4 3.9 3.9 4.2 4.6 5.3 9.4 10.0 I PoultrI_ 0.1 0.8 1.1 1.3 1.5 1.8 2.2 2.8 3.6 4.8 5.8 7.1 11.4 14.8 FisherI_ 2.6 3.1 5. l 5.6 6.3 7.5 8.4 9.6 11.2 13.8 15.3 16.8 23.l 28.0 Forestrr_ 2.0 2.6 3.3 2.8 3.3 3.7 4.7 5.1 6.7 6.2 7.4 7.5 12.0 10.9 Total 16. l 21.2 29.6 33.2 37.6 41. 7 47.3 55.5 63.0 69.3 77.1 84.5 139.5 161.4  Table 7.9: GROSS VALUE ADDED IN AGRICULTURE, FISHERY AND FORESTRY BY SUBSECTOR AT 1972 CONSTANT PRICES (in billion pesos) Est. 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 ~riculture 8.9 8.9 9.9 11.2 12.1 12.6 13.2 14. 1 15.2 15.3 15.7 15.0 15.6 16.2 Paddy 2.1 2.8 3. 1 3.4 3.4 3.8 3.7 4.0 4.1 4.3 4.5 3.9 4.2 t,, •• 7 Corn 1.0 0.9 1.1 1.2 1.2 1.3 1.4 1.4 1.4 1.5 1.5 1.4 1.5 1.7 Coconut, including copra 1.2 1 .o 0.8 1. 1 1.4 1.3 1.3 1.2 1.3 1.4 1 .4 1.3 1.0 1.3 Sugarcane 1.1 1.1 1.4 1.4 1.6 1.3 1.2 1.3 1.3 1.3 1.4 1.2 1.4 o.8 Banana 0.6 0.7 0.9 1.3 1.4 1.7 2.0 2.1 2.4 2.3 2.3 2.4 2.4 2.4 Other crops 2.4 2.5 2.8 3.0 3 .1 3.3 3.4 4.0 4.7 4.5 4.7 4.8 5.0 5.4 Livestock 1.8 2.0 2.0 1.7 1.7 1.8 1.9 1.9 1.9 1. 9 2.0 2.2 2.2 2.1 Poultrz. 0.1 0.8 0.8 0.9 1.0 1.1 1.3 1.4 1.6 1.9 2.2 2.5 2.6 2.6 .... .... 1.-) Fisherz 2.6 2.9 3.0 3.1 3.3 3.5 3.7 3.8 3.9 4. 1 4.3 4.4 4.3 4.4 Forestrz. 2.0 2.4 1.8 1.3 1.6 1.6 1.5 1.4 1.1 1.2 0.9 0.8 0.8 0.1 Total 16.0 17.0 17.5 18.2 19.7 20.6 21.6 22.6 23.7 24.4 25.1 24.9 25.4 26.0 Note: Totals may not add up to rounding. Source: National Accounts Staff, NEDA.  Table 7.10: AGRARIAN REFORM PROGRAM: OPERAT~ON LAND TRANSFER AT END-YEAR (in thousands) 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Land Transfer No. of CLTs issued 207 269 295 323 359 397 444 478 551 597 640 658 658 No. of tenant recipients 145 189 209 231 258 286 320 366 417 393/a 428 440 440 Hectares 259 311 367 401 445 492 545 572 647 680- 735 755 755 Land Co!!J?ensation .!J!. No. of landowners 0.09 0.7 1.5 2.5 3.5 5.1 6 7.3 8.8 9.8 11 .3 13.3 No. of tenants 3 18 31 46 57 77 88 98 109 117 127 177 Hectares 6 34 59 88 . 111 149 171 188 209 224 246 284 1.2.. Adjustments were made due to cancellation of some CLTs. ... I,,.) N 11!. Land compensation started in February 1974. Source: Ministry of Agrarian Reform.  Table 7.11: SELECTED AGllICULTURAL PRICES 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Coconut Product• 1. Coconut oil export unit value ($/MT) 381 346 535 610 924 618 513 435 517 988 532 2. Cooking oil doaeatic retail price (P/lpt)/a 2.27 2.05 2.05 2.47 3.60 3.48 3.33 3.32 4.20 11.15 9.72 3. Copra export unit value (f.o.b.) - ($/MT) 226 182 316 372 616 . 389 311 277 275 4. Copra domestic procureaent price (mill-gate) (P/kg) 1.47 1.68 2.56 3.04 4.06 2.56 2.33 1.76 3.51 8.83 4.29 Sugar (Refined) 5. 6. Rice Export unit value (f.o.b.) ($/MT) Domestic wholesale price (P/kg) l.!... 1.69 271 1.73 237 2. 17 2.30 2.68 502 3.08 559 3.40 299 4.10 ..... -.. ~ 286 4.63 201 6.47 189 7.65 - I.» I.» 7. Price received by farmer (P/kg of palay) 48.84 49.72 50.04 49.08 52.14 57.49 65.05 68.25 76.25 123.92 162.20 8. Domestic retail price (P/50 kg of rice) 97.00 102.00 106.00 104.50 114.50 122.50 136.00 148.00 159.50 240.41 350.00 .£2!!!. 9. Price received by farmer (P/50 kg of white shelled corn) 46.96 48.42 50.54 48.42 48.06 53.41 58.84 62.26 67.36 117 .35 139.85 10. Domestic retail price (P/50 kg of white milled com) 73.00 76.00 79.50 79.00 81.50 92.00 106.00 112.50 117.50 202.50 268.50 /a Prices for Manila Sources: Central Bank for l 1 3 and 5 1 NCSO for 2 and 6; United Coconut Association for 4; BAEcon for 7-10.  - 134 - Table 7.12: PRICE STRUCTURE OF PESTICIDES, 1986 (Percent of total cost) Imported as Imported as technical fished goods material & intermediaries ------------------- (r.) ------------------- Retail price to farmer 100.0 100.0 FOB 41.0 35.2 Customs duties (10-201. of 110% of HCV) 9.0 3.9 Insurance freight 1.6 1.4 Landing charges 1. 2 1.1 Bank charges o.4 0.4 Total Landed Cost 53.3 Other costs 5.3 4.2 Cost of goods 58.6 5R.6 Market-up 23.5 23.5 Sales tax 16.4 16.4 Turnover tax 1.5 1.5 Total Taxes and Duties - 26.9 21.8 Source: FPA.  - 135 - Table 7.13: UR.EA PRICE STRUCTURE - APRIL 1986 (cost per ton) Financial Economic CIF Manila (bagged) In US$ 110 110 In peso .f.!. 2,200 2,200 Port handling and importer's cost 597 545 Capital recovery component Jl!. 200 0 Ex-warehouse price 2,997 2,743 Transport and handling to farmgate 1.£. • 320 265 Farmgate price 3,317 3,008 .f.!. Converted at US$1 = P 20.00 • .!J!.. A levy of P 50 per bag. (1 bag• 50 kg). l.E.. Including retail and dealer margins.  . - 136 - Table 7.14: INDEX OF REAL PESO VALUE OF SELECTED AGRICULTURAL COMMODITIES 1975-85 (1980 • 100) Coconut Year Rice Corn oil' Sugar Coffee Bananas Tobacco 1975 138.6 157.2 100.4 276.1 79.5 108.2 120.6 1976 90.9 138.9 86.1 126.9 146.3 107.2 115.2 1977 89.2 108.0 .122.6 76.4 216.2 108.4 114.8 1978 110.9 105.0 125.9 66.2 134.6 100.0 113.7 1979 87.3 104.6 169.6 • 53.4 127.8 98.5 107.3 1980 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1981 105.9 98.9 79.0 121.2 73.1 101.9 107.3 1982 63.9 81.3 66.6 88.0 79.0 94.5 121.2 1983 70.3 119.2 94.8 91.3 93.6 126.1 143.4 1984 64.4 119.6 176.8 86.7 103.7 109.0 144.1 1985 52.2 93.6 qo.3 88.9 92.8 106.0 135.9 Average 1975-80 102.8 119.0 117.6 116.5 134.1 104.R 112.0 Average 1981-85 71.4 102.5 101.5 95.2 - 88.4 107.4 130.0 Source of basic data: ISF 19R2 and 1985.  - 137 - Table 7.15: AVERAGE 1 IMPORT PRICE OF SELECTED FERTILIZERS ($/MT CIF) Grade: Urea 21-0-0 18-46-0 14-14-14 1973 105.53 57.87 153.60 147.30 1974 277.98 168.03 149.22 282.38 1975 371.37 219.34 1976 122.36 67.87 1977 130.14 90.02 1978 158.18 103.41 172.60 170.50 1979 . 176.42 111.57 203.75 176.75 1980 232.36 136.83 317.48 263.19 1981 275.08 153.14 300.50 235.97 1982 195.07 99.76 258.98 179.42 1983 136.67 88.73 222.94 169.16 1984 191.59 107. 71 266.11 179.79 1985 187.00 102.55 184.40 Note: 1973-77 - weighted average; 1978-85 - straight average. Source: Fertilizer and Pesticide Authority.  Table 7.16: FERTILIZER CONSUMPTION, 1972-84 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 MT ( '000) 492.5 676.9 738.3 577.6 643.9 685.6 791.6 848.9 819.6 785.4 845.9 878.3 665.1 701.4 Urea 132.7 153.0 212.2 143.R 174.8 229.3 287.1 320.0 329.2 307.3 342.2 37T:s 256.3 TcIT:7 Ammosul/CAN Amchlor 134.6 210.0 200.5 167.5 185.4 177. 7 171.2 175.4 143.6 126.5 140.3 137.7 118.6 126.2 NP & p 89.2 129.4 130. 7 105.5 116.0 106.1 125.3 124.2 131.8 124.2 143.1 145.2 121.9 113.6 NPK 88.6 116.3 126.9 1oi~·1 108.0 124.1 147.2 159.5 158.2 163.7 161.6 150.5 134.3 134.4 Potash 47.4 68.2 68.0 58.7 59.7 48.4 60.8 69.8 56.R 63. 7 58.7 73.4 34.0 28.5 Nutrient MT ('000) 216.0 258.5 285.2 221.l 245.8 260.5 311 .8 342.3 334.0 321.7 346.6 363. 7 262.0 279.3 I N 132.8 Tir.9 177.5 TI'2.if TI'i':T 174.2 205.4 226.7 224.8 209.9 232.8 244.3 Tis.o zoT:T ..... p 35.0 51.0 47.7 38.6 38.3 40.4 49.8 51.9 53.4 51.2 56.4 54.8 45.3 42.8 w JO K 48.2 55.6 60.0 49.7 55.1 45.9 56.6 · 63.7 55.8 60.6 57.4 64.6 38.6 35.1 Note: Data are based on sales to dealers. Source: Fertilizer and Pesticide Authority.  - 139 - Table 7. ln PRINCIPAL AGRICULTURAL IMPORTS, 1979-85 (import value in$ million) Comaodity ICJ7CJ t980 1981 1982 1983 1984 1985 Meat of bovine animals 12.6 9.0 12.2 14.7 10.8 l .8 2.A Milk and cream 78.8 92.6 106.2 138.5 102.8 47.9 59.8 Butter 11.2 13.1 lCJ.6 lA.5 17.4 13.5 7.8 Cheese and curd 5.7 ,6. 7 9.1 CJ.6 8.0 4.1 4.2 Fish and fish preparations 19.7 26.5 29.5 38.l 6.A 1.0 1.4 Wheat, unmilled 105.9 148.6 105.8 157.7 134.6 131.1 106.1 Maize, unndlled 3.9 35.1 42.1 42.7 70.7 28.9 33.4 Malt 24.5 21.4 24.7 28.6 32.1 36.2 17.9 Cocoa beans A.I 7.1 26.4 26.9 13.4 3.4 3.CJ Cocoa paste 15.5 23.5 42.7 38.1 3.6 0.048 o.o Oil cake of soya beans 22.:5 52.4\ 62.4 78.6 59.9 81.CJ 35.6 Flours and meals of meat 8.0 16.3 9.9 14.9 9.8 3.1 4.3 Flours and meals of fish 8.3 10.0 6.CJ 14.2 4.3 1.7 4.9 Tobacco, unmanufactured 33.1 33.3 39.2 49.5 53.4 26.2 59.2 Pulp and waste paper 31.1 135. 1 32.0 29.8 28.0 30.0 19.0 Cotton 35.8 44.0 33.6 19.9 29.2 19.8 25.1 Total 424.7 574.7 647.3 720.3 584.8 430.648 385.4 Source: National Census and Statistics Office.  Table 8.1: MINING PRODUCTION, VOLUME OF MAJOR PRODUCTS 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Gold metal 18.9 17.8 16.7 15.6 15.6 17.4 18.2 16.6 20.0 23.6 25.9 25.4 25.7 35.0 (thousand kg) Silver metal 57.5 58.8 53.9 50.4 46.0 50.4 51.0 57.2 60.7 62.9 61. 7 56.7 49.0 53.0 (thousand kg) Capper metal 213.7 221.2 225.5 225.8 237.6 272.8 263.6 298.3 304.5 302.3 292.1 271.4 233.4 237.7 (thousand mt) Chromite ore 268.3 484.6 429.1 423.0 346.3 443.1 438.0 420, 1 378,6 300,7 208.~ 155.1 148.5 165,4 ... ~ (thousand dmt) 0 Iron ore 2,204.8 2,254.6 1,608.1 1,351.4 571.0 1.7 6.3 5.7 5.6 2.6 (thousand dmt) Nickel metal 0.4 0.4 0.3 9.5 15.2 36.8 29.5 33.3 47.1 29.2 19.6 13.9 13.6 27.6 (thousand mt) Coal 38.9 39.0 50.7 105.1 120.8 284.6 255.0 263.1 325.0 318.2 556.8 1,019.6 1,216.4 1,294.0 (thousand at) Source: Bureau of Mines and Geo-Sciences, Ministry ~f Natural Resources (MNR).  TAIL! 8.2: MAJOJl "11'11'G PJlODUCTIOlf, VALU! Ilf CUJlll1ff PRICES (in ailllon peeoe) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983.L!, 1984/b 1985 Precious Metals 243 388 606 625 490 636 857 .!.d!1 3,op 2.773 s·039 :,972 6.269 Gold m 360 m m 446 m 'ffl" 1,180 2,?; I I 2,651 •217 ,7 6, 2 Silver 18 28 52 50 44 49 58 133 268 152 122 199 186 2; ~,gsI ;•;r Nonoaetalica 467 639 902 1,166 1,516 1.910 3.043 3.542 8 ee-nt Sand and gravel m 38 m 40 720 43 900 103 l,l48 7 157 1,071 230 1,192 432 2,~;6 1. 491 2,002 613 2,107 691 2·160 •858 i' • 1,022 • 1,142 • 1,087 Salt 30 30 44 68 87 77 81 161 204 213 219 318 341 365 Silica sand 7 7 11 10 9 9 14 11 18 21 28 56 47 48 Coal 2 2 8 13 19 46 42 47 58 64 189 393 1,134 1,553 Other nonmetallic• 78 13 26 61 86 86 131 166 148 446 479 434 1,402 330 ... ... ~ Base Metals 1.532 2,503 2.990 2.158 2.586 3.252 3.303 5,558 6.724 5.541 4i369 4.736 5.832 8.404 ChrOllit 48 75 79 117 148 240 · - 251 291 277 271 229 254 237 256 Copper 1,360 2,296 2,794 1,640 1,842 1,927 2,164 3,690 4,409 3,782 3,446 4,047 4,970 5,967· Iron ore/cone. 105 111 82 91 39 1 1 1 Nickel 4 5 7 263 484 927 635 922 1,437 1,109 577 400 466 1,686 Others k_ 15 16 27 47 73 158 252.7 644 601 378 115.0 34 153 494 ~ 2.242 3,530 4.498 3.949 4.424 5.404 6.070 9.107 12.820 11.877 11.302 13.641 17.886 21.708 .L!. Revised • .!J! Eet:laatea k Zinc, lead, aanganeae, cobalt, pyrite and others. Source: Bureau of Mine• and Geo-Sciences, HNJl.  Table 8,3: GROSS VALUE ADDED IN MANUFACTURING BY INDUSTRY GROUP AT CURRENT PRICES (in aillion pesos) Industry group 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985/a Manufacturins 14,014 18,156 24,252 28,248 32,931 37,392 43,688 52,144 64,555 75,151 83,133 95,172 137,251 150,523 Food aanu- factures 5,186 6,411 8,090 8,827 10 , 298 11,633 13,608 15,800 19,397 23,694 27,189 31,388 49,745 56,062 Beverage industries 448 590 1313 948 1,311 1,634 1,839 2,014 2,388 2,818 3,083 3,471 4,544 5,254 Tobacco manu- factures 568 891 1,137 1,380 1,576 1,771 1,946 2,136 2,419 2,806 2,973 3,277 4,394 5 , 890 Textile manu- factures 782 1,029 1,673 2,076 3,034 3,083 3,320 4,008 4,453 5,161 5,261 5,794 7 , 586 7,551 Footwear, wearing apparel 512 745 1,064 1,324 1,574 1,878 2,120 2,661 3,505 4,567 4,983 5,852 8,672 10,140 Wood and cork products 459 578 798 745 952 1,153 1,876 2,0 ' 2,352 2,882 3,042 3,431 3,923 4,076 Furniture and fixtures 104 121 154 178 214 282 301 210 327 375 404 435 599 606 Paper and paper products 107 141 231 i67 324 348 647 729 919 967 921 1, 115 1, 865 1,864 Publishing and printing Leather and leather products 162 37 218 43 283 59 336 69 372 398 97 447 115 541 632 747 827 936 1,505 1,887 - ... " " 82 140 172 191 201 208 336 356 Rubber products 252 380 523 575 572 619 805 706 782 900 1,029 1,125 1,766 1,745 Chemical & chemical products 1,256 1,510 2,104 2, 419 2,918 3,770 4,481 5,141 5,919 5,983 6,105 7,227 10,334 10,424 Products of petro- leua and coal 1,063 1,1133 2,809 3,743 3,849 3,907 4,026 6,051 9,535 10,651 11,617 13,000 19,184 18,304 Nonaetallic mineral products 329 423 534 710 828 968 1,220 1,427 1,832 1,978 2,289 2,506 2.,956 2,668 Basic aetal industries 377 538 713 949 1,126 1,380 1,658 2,079 2,237 2,217 2,614 3,126 5,068 6,459 Metal products 713 795 913 939 963 1,179 1,369 1,686 1,919 1,945 2,283 2,639 2,768 3,638 Machinery except electrical 498 583 630 663 721 821 965 l, 134 1,377 1,610 1,824 2,043 1,916 2,333 Electrical aachinery 538 608 733 835 836 974 1,206 1,529 2,006 2,844 3,383 4,471 6,405 6,097 Transport equipaent 456 511 686 902 950 1,059 1,249 1,381 1,530 1,757 1,841 1,667 462 647 Miscellaneous aanufactures 167 208 305 363 431 438 490 644 854 1,058 1,264 1,461 3,223 4,522 ~ Advance estiaates, Source: National Econoaic and Development Authority (NEDA),  Table 8.4: GROSS VALUE A.ODED IN MANUFACTURING BY INDUST~Y GROUP AT CONSTANT 1972 PRICES (in 11i llion pesos) Industry group 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985/a Kanufacturins 14,014 15,976 16,727 Q.l!l 18,299 19,672 21,108 22,239 23,175 23,959 24,535 25,108 23,319 21,625 Food iaanu- factures ~.186 5,'174 6,064 6,234 6,696 7,085 7,622 7,865 8,419 8,803 9,099 9,246 9,344 8,646 Beverage industries 448 455 487 501 531 636 694 717 732 730 747 763 805 796 Tobacco nianu- factures 568 802 R93 945 955 962 987 1,029 1,039 1,100 1,114 1,117 890 970 Textile manu- factures 782 836 865 R83 1,051 1,038 1,060 1,061 1,049 1,()95 1,053 1,050 949 734 Footwear, wearing apparel 512 658 665 722 768 813 867 932 1,019 1,189 1,224 1,247 l,29'l l,2'l7 Wood and cork products 459 509 523 434 463 593 622 677 665 707 704 716 588 536 Furniture and fixtures 104 108 111 101 108 114 117 124 132 U9 140 142 142 109 .Paper 11nd paµer product,; 107 134 152 156 173 176 187 193 191 188 172 196 182 158 Publishing and printing Leather and leather products 162 37 20'> 42 258 45 269 52 278 53 274 57 281 61 301 67 324 68 341, 70 359 71 368 66 370 63 389 69 - .... .c- Rubber products 252 273 295 302 275 237 280 311 302 311 324 316 334 281 Chemical & chemical products 1,256 1,153 1,423 1,485 1,688 2,025 2,234 2,321 2,165 2,117 2,273 2,315 1,797 1,704 Products of petro- leum and coal 1,063 1,459 I, 323 1,135 1,319 1,303 1,137 1,398 1,173 1,287 1,113 1,351 1,259 1,153 Nonmetallic :nineral products 329 449 427 472 485 495 520 535 574 540 569 587 481 375 Basic metal industries 377 483 498 57'J 630 725 785 865 853 791 856 947 1,121 1,070 Metal products 713 756 774 727 713 846 929 1,040 1,041 977 1,052 1,091 740 746 Machinery except electrical 498 548 521 515 528 561 620 670 726 764 787 797 442 409 Electrical machinery 538 570 6111 671 635 7()4 846 1,005 1,153 l ,4'll 1,475 1,717 1,964 1,600 Transport equipment 456 486 593 72f, 736 796 861 898 885 910 883 742 124 136 :-Ii see llaneous manuf-tctures 167 175 190 204 l14 196 198 230 265 296 320 334 425 447 !..!. Advance estimates. Source: National Economic and Development Authority (NEDA).  Table 9.1: PRIMARY ENERGY BY SOURCE (in million of barrels of fuel oil equivalent 1978 1979 1980 1981 1982 1983 1984 1985 Indigenous Energy 18.8 26.9 27.4 26.6 30.2 34.0 39.3 42.0 Conventional 5.6 13.9 13.9 13.4 17.0 19.4 24.4 25.0 Oil ~ 33 1.4 ""T.o 4-:f """'1:5 -r:;- Coal 0.9 0.8 1.0 0.9 1.1 2.6 4.1 4.4 Hydro 4.6 4.8 5.9 6.4 6.7 5.1 9.0 9.4 Geothermal 0.1 1.1 3.5 4.7 6.2 7.0 7.8 8.4 Nonconventiona1 B.2 13.0 13.5 13.2 13.2 14.5 15.0 16.8 Bagasse --v;- °"'"'6.3 7:9 ""T.2 7.3· 5.5 6.6 ~ Agri-industrial wastes 6.4 6.3 7.1 6.3 5.5 8.6 8.~ 11.4 I-" Other 0.4 0.4 o.5 0.7 0.4 0.5 0.5 0.8 .i::- .i::- I Imeorted Energy 75.3 70.5 69.5 67.2 65.5 64.5 54.3 50 ..,;r. Oil 75.3 70.5 69.5 67.2 65.4 63.5 53.0 46.8 Coal 0.9 1.6 3.9 Total Energy 94.1 ~ 96.9 93.8 95.7 98.4 94.0 92.4 Source: Ministry of Energy  Table 9.2: PITROL!UH PRODUCT COISUMPTIOlf (thou■and barrel■ ) 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 vga ■ e 158 172 185 176 151 140 112 62 59 59 51 39 36 vturbo 2.035 I.992 2. 165 2. 145 2.320 2.597 2.668 2.605 2.5R8 3.436 2.658 2.824 2.110 rem.um ga■ollne 4.171 4.177 5.124 s.S30 6.102 6.832 6.652 5.866 s.100 s.941 6.206 S.9S4 5,885 egular gasoline 12.290 10.436 10.132 9,268 8,791 8,395 7.805 5.299 3.942 3,270 2,971 2,717 2,578 lesel 12,753 12,216 13,227 14.027 14,836 15,582 16,952 17,428 17,787 18,568 18,879 17,090 IS, 71S uel oil 28,257 26,987 29,829 31,418 35,784 36,838 36,659 37,129 34,385 32,875 33,690 24,390 19,786 erosene 3.320 2,878 3,154 3,236 3,393 3,683 3.463 3.179 2,860 2,803 2.569 2,269 2,074 PG 1,842 • 1,839 2,086 2,177 2,407 2,593 2,734 2.411 2,437 2,478 2,533 2,225 2,142 ropylene .,. 10 3 l 1phalts 435 295 425 458 377 397 418 343 359 462 538 347 293 efinery process gas 212 240 262 204 183 211 236 233 210 10S 185 147 olvents 221 221 244 237 214 230 371 311 312 297 270 155 150 1phtha 145 282 748 676 866 709 792 813 80S 476 349 206 617 11bes 1,102 907 912 900 90S 999 1,064 96S 903 914 1,038 77S 710/a rease 33- 31 30 29 28 30 33. 28 24 25 29 21 l:iteS and petroleum 16. ss 69 105 128 137 2 1 2 2 1 Total Products 66.990 62,728 6,8592 70.586 76,485 79.373 79.971 76,676 72.374 l.!.,ll! 71,967 59,159 52.696 .- ~ Id: VI Refinery fuel and loss 4.036 3,759 3,533 3,314 3,639 3,608 3,569 3.283 2,847 2.993 2,853 2,479 2,098 Total Petroleum Consum2tion 11,026 66.487 12,12s 73,900 80,124 82,981 83.540 79,959 75.221 74,704 74,820 61,638 54.794 ~ For the period 1985, figure includes data for lubes and grease. ,urce: Mini ■ try of Energy.  Table 9 .3 : ENERGY INVESTMENT PllOGllAM (in llillion1 of pe101) llev. Preli•inary 1978 1979 1980 1981 1982 1983 1984 1985 National Power Corporation 4,761 4.959 6,623 6.303 8 1225 9.410 5.388 Luzon Grid 3,281 2.971 4,068 4.419 5,579 6,1011 3.424 Oil-fired /a 855 Coal-fired- 2 238 284 1,631 709 410 Hydroelectric 160 532 756 686 425 308 149 41 Geothermal 737 l,386 800 726 502 577 332 12 Nuclear 1,194 1,969 1,290 1,798 2,716 2,419 4,037 1,723 Tranni11ion 90 2411 123 620 492 644 1,081 1,2311 ViHYH Grid 286 208 689 650 975 395 730 427 Oil-fired TI4 33 m Ti9 92 m 65 Coal-fired 84 137 252 132 101 153 426 335 Geothenul 3 1 911 335 716 37 2 12 Tran1mission 45 35 26 64 66 205 125 15 Mindanao Grid 128 2511 875 705 830 .lli 1,4~g S88 Oil-fired 23 36 m 7T Coal-fired Geothermal 55 199 450 612 602 714 1,173 531 TranniHion 50 23 · 1411 72 228 278 234 57 Other Capital Outlay /!_ 1,066 403 .ill. 1,200 79 1,259 952 949 National Electrification Admin. 483 187 511 595 946 803 1,4:7 496 Rural electrification /c 483 387 m m 384 m 8 3 389 Dendro-thermal - 28 350 100 358 20 Mini-hydro 14 212 251 246 87 Philippine National Oil Comp1ny 262 852 1,044 1,209 1 .250 2,010 hill 905 PNOC Coal Corporation 23 7i 55 101 127 451 356 344 PNOC Energy Developaent Corporation 73 125 256 408 687 1,170 212 348 PNOC Exploration Corporation 29 36 57 35 52 161 185 48 Other subsidiaries 137 672 67fi 665 384 288 519 165 Total 5 506 7 098 6.514 4:406/e T,m"/e Hemorandwa Iteu (%) Share of public investment 46.8 50.l 30.4 30.2 30.8 35.3 30.11 Share of GNP 3.1 3.2 2.5 2.8 2.5 2.8 2.3 l .1 /a Purchase of generating plants of the Manila Electric Company. Tb Difference between 'Capital Expenditure' in financial 1tateaent1 and 'Capital Expenditure by Energy Source and Major Project'. Includes 1urveya and investigations, engineering admini1tration and i ■prove.ent plant,. /c Includes 1111111 amount, for NEA in-house capital expenditures. Td Principally expenditure on tanker, and refinerie1. Te Excluding purchase of generating plants of Manila Electric Company. Source: June 1985 PIP.  Table 9. 4: DEPENDENCE OF ENERGY CONSUMPTION ON IMPORTED ENERGY (in millions of barrels of oil fuel equivalent) 1978 1979 1980 1981 1982 1983 1984 1985 Energy Consumption 94.13 97.42 96.88 93.46 95.58 98.47 93.58 92.39 Petroleum Used for Energy k 75.34 77.68 72.96 68.53 68.32 68.19 56.21 49.52 From imports 75.34 70.50 69.45 67 .16 65.37 63.54 52.67 46.82 From domestic production 7 .18 3.51 1.37 2.95 4.65 3.54 2.70 Coal Used for Energy~ 0.93 0.82 0.96 0.90 1.11 3.54 5.67 8.28 From imports 0.91 1.61 3.90 From domestic production 0.93 0.82 0.96 0.90 1.11 2.63 4.06 4.38 Total Imported Energy (MBOE) 75.34 70.50 69.45 67.16 65.37 64.45 54.28 50.72 - . i,- -..J Dependence on total imported energy ( %) ls:.. 80 72 72 72 68 65 58 55 k Excludes nonenergy petroleum consumption which has been about 2.8 million barrels annually. It is assumed that all domestic petroleum production is used for energy. ~ One MT coal (at 10,000 BTU/lb) is equivalent to 3.53 BOE. ls:.. Ratio of total imported energy to total energy consumption. Sources: Ministry of Energy.  Table 9. 5: ELECTRICITY GENERATION BY ENTITY (in gigawatt hours) 1978 1979 1980 1981 1982 1983 1984 1985 National Power Corporation 12,497 13~893 15,086 15,988 17,413 18,682 18,663 18,706 National Electrification Administration 12_ 361 280 289 221 93 102 243 n.a. Others £E.. 1,836 3,619 2,630 2,374 2,006 2,662 2,390 n.a. Total (GWh) 14,694 17,792 18 2005 18 2 583 19,512 21 2 446 21,299 n.a. .... ~ Total (MBOD) 24.49 29.65 30.35 31.84 34.42 36.98 36.72 n.a. 00 Implicit conversion factor (kWh/BOE) 600.0 600.0 593.2 583.6 566.8 580.0 580.0 n.a. k Self-generating cooperatives. £E.. Private utilities ~nd self-generating industries. Source: Ministry of Energy, NPC and NEA.  .. 149 - Table 10._: TOURISM: TRAVEL RECEIPTS AND VISITORS BY COUNTRY OF ORIGIN Number of Visitors ('000) UK & Travel Other United West Year receipts Total Japan Asia States Europe Australia :Other (US$ mln).L!. 1972 122 166 26 24 49 16 13 38 1973 77 243 50 30 63 22 14 64 1974 58 410 151 46 57 23 18 115 1975 110 502 158 67 75 30 29 143 1976 93 . 615 138 97 88 43 33 216 1977 145 730 185 151 106 56 39 193 1978 210 859 222 198 159 75 52 153 1979 238 967 254 202 179 100 53 179 1980 320 1,008 260 217 177 114 69 171 1981 344 939 193 220 174 116 64 172 1982 450 891 160 203 178 110 64 176 1983 465 861 179 178 185 109 54 156 1984 366 817 161 161 197 97 50 151 1985 507 773 154 139 199 89 49 143 ~ Travel receipts in balance of payments (Table 3.2). Source: Ministry of Tour~sm, Central Bank.  Table 11.1: CONSUMER PRICE INDEX FOR THE PHILIPPINES (1978 • 100) Weight % 1972 1973 • 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Indicea Pood, beverages, .... tobacco 58.06 48.1 5S.4 74.5 78.5 86.0 94.0 100.0 115.6 132.9 149.8 162.5 176.5 271.4 332.0 ~ Clothing 7.92 42.4 48.6 72.5 79.5 83.0 91.6 100.0 117 .9 144.2 162.0 178.2 194.5 303.7 387.3 Rouaing &·repair• 10.49 44.4 57.0 68.2 71.0 80.5 91.4 100.0 118.3 137.4 154.7 180.5 200.3 266.6 334.3 Puel, light & -ter 5.23 43.4 47.4 68.8 75.4 83.6 89.7 100.0 127.6 173.8 211 .5 240.0 281 .6 426.8 548.3 Service■ 10.66 46.7 53.8 68.5 76.6 83.1 92.3 100.0 121.1 152.1 171.2 192.9 216.8 311.9 366.0 Miacellaneoua 7.64 42.0 48.4 70.91 80.0 89.0 94.1 100.0 119. 1 139.8 153.~ 165.9 180.6 278.0. 345.6 All I t - 100.0 46.4 ~ 72.5 77.5 85.0 93.4 100.0 117 .6 139.0 157.1 173.2 190.5 286.4 ~ Annual Otarae (%) .f.!.. Pood, beverage ■ , tobacco 15.2 34.5 5.4 9.6 9.3 6.4 15.6 15.0 12.7 8.5 8.6 53.8 22.3 Clothing 14.6 49.2 9.7 4.4 10.4 9.2 17.9 22.3 12.3 10.0 9.1 56.1 27.5 Rouain6 & repair• 28.4 lCl.6 4.1 13.4 13.5 9.4 18.3 16.1 12.6 16.7 11.0 33.1 25.4 Fuel, light & water 9.2 45.1 9.6 10.9 7.3 11.5 27.6 36.2 21 .7 13.5 17 .3 51.6 28.5 Service ■ 15.2 27.3 ll.8 8.5 11. 1 8.3 21.1 25.6 12.6 12.7 12.4 43.9 17.4 Miacellaneoua 15.2 46.5 12.8 11 .3 5.7 6.3 19. 1 17.4 9.7 8.2 8.9 53.9 24.3 All Iteu ~ 34.4 7.0 .!.& 9.9 2d 17.6 18.2 13.0 10.3 ~ 50.3 23.1 .l.!.. Percentage change froa previous year. Source: National Census and Statistics Office.  Table 11.2: WHOLESALE PRICE INDICES FOR METRO MANILA (1978 ~ 100) 1978 1979 1980 1981 1982 1983 1984 1985 Indices Food 100.0 116.2 133.2 156.5 178.4 207.2 357.3 457.9 Beverages and tobacco 100.0 115.0 134.6 147.2 160.2 178.2 265.9 322.1 Crude materials, inedible except fuel 100.0 125.3 137.9 139.6 164.9 217.7 356.0 325.3 Mineral fuels 100.0 128.4 203.0 255.1 260.9 331 .o 503.7 562.4 Chemicals 100.0 121.1 135.4 137.7 147.5 183.2 333.9 337.5 Manufactured goods 100.0 121.0 146.1 162.8 170.3 184.3 294.6 356.3 Machinery & transport equipment 100.0 110.7 123.9 136.9 155.2 173.3 274.1 351.n Miscellaneous manufactured articles 100.0 115.3 140.0 157.7 173.6 189.8 333.1 441.0 All Items 100.0 119.0 140.8 159.2 176.3 208.0 346.5 409.3 - - 1.11 Annual Chanse (%) k Food 16.2 14.6 17.5 14.0 16.1 72.4 28.2 Beverages and tobacco 15.0 17.0 9.4 8.8 11.2 49.2 21.1 Crude materials, inedible except fuel 25.3 10.1 1.2 18. 1 32.0 63.5 -8.6 Mineral fuels 28.4 58.1 25.7 2.3 ~~·s 26.9 52.2 11 .6 Chemicals 21.1 11.8 1.7 7.1 24.2 82.3 1.1 Manufactured goods 21.0 20.7 11.4 4.6 8.2 59.8 20.9 Machinery & transport equipmenc 10. 7 11.9 10.5 13.4 11. 7 58.2 28.0 Miscellaneous manufactured articles 15.3 21.4 12.6 10.1 9.3 75_.5 32.4 All Items 19.0 18.3 13.1 10.7 18.0 66.6 18.1 k Percentage change from previous year. Source: National Census and Statistics Office.  Tahle 11. 3: RETAIL PRICES OF SELECTED COMMODITIES IN METRO MANILA (P per kg) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Rev. Est. Rice 1.28 1.72 2.02 1.90 2.03 2.10 2.10 2.36 2.51 2. 73 2.98 3.20 5.28 Corn (Milled) White 0.94 1.08 1.45 1.47 1.55 1.60 1.60 1.70 1.96 2.31 2.34 2.44 3.79 Yellow 0.82 0.91 1.39 1.53 1.46 1.60 1.60 1.67 2.00 2.23 2.35 2.49 4.07 Sugar (~fined) 1.35 1.34 1.58 1.69 1. 73 2.17 2.30 2.68 3.08 3.40 4.10 4.63 7.12 Meat (beef) 8.94 9.62 12.89 16.1'6 16.62 18.32 21.36 25.75 31.24 33.39 35.71 38.18 50.64 Chicken Live Dressed 7.24 5.78 R.10 6.98 11.33 8.89 12.53 9.98 13.28 9.59 15.39 12.16 14.89 13.23 17.88 14.57 20.58 15.70 21.20 17.65 22.12 17.93 20.88 18.93 26.96 28.79 - VI N Pork 7.61 R.. 12 12.01 12.92 12.51 14.02 14.66 16. 78 18.08 19.66 21.01 22.53 37.98 Pineapple (P/piece) 2.32 2.16 2.33 2. 71 3.45 3.00 4.17 3.94 4.69 6.75 Mango (P/dozen) 8.9Q 8.20 14.26 16.83 15.29 16.02 18.88 26.33 24.59 n.a. 30.30 35.38 54.64 Tomatoes 1.96 1.94 2.59 2.80 2.97 2.94 3.41 3.50 4.54 4.74 4.63 5.75 8.43 Potatoes Irish 1.40 1.42 2.48 2.72 '2.30 3.01 3.42 4.01 3.99 5.71 4.99 5.46 8.48 Sweet 0.71 0.75 1.02 1.02 1.29 1.37 1.46 1.82 1.56 2.10 2.13 2. 71 3.39 Coconut oil (P/1 pt) 1.21 1.46 2.21 2.27 2.05 2.05 2.47 3.60 3.48 3.33 3.32 4.20 12.15 Source: NCSO and Central Bank.  - 153 - ' Table 11.4: LEGISLATED EFF.t.".a. ... vE MINIMUM MONEY AND REAL DAILY WAGE RATES~ Metro Manila: Agriculture: highest minimum /b lowest lliinimu■ /c Money wage Real wage /d Money wage Real wage H 1972 8.oo 16.25 4.75 10.34 1973 8.oo 14.04 4.75 8.91 1974 8.82 11.59 5.57 7.77 1975 10.65 12.94 7.13 9.31 1976 12.09 13.94 8.03 9.48 1977 14.40 15.40 10.07 10.79 1978 15.74 15.74 11.40 11.40 1979 20.48 17.17 14.16 12.08 1980 27.39 19.36 17.03 12.31 1981 31.37 19.77 19.43 12.39 1982 31.82 18.06 19.65 11.38 1983 34.22 17.52 20.95 11.05 1984 48.47 16.63 29.92 10.48 1985 57.08 16.22 35.67 10.11 1986 (April) 57.08 15.54 35.67 10.07 .I.!!. Reflects weighted average by duration of the minimum wage rates legislated during the year. Minimum wage rates are set for 12 different categories -- by location, type of activity and size of firm. 'nlis table present• only· the highest- and lowest-paying categories. /b Minimum wage payable by a large firm (capitalization of over P 1 million) in Metro t;anila. 1.£.. Minimum wage payable by a small-scale employer in nonplantation agricul- ture. ft Money wage deflated by the Consumer Price Index (1978 • 100) • Sources: .Money wages: National Wages Council. Real wages: Economic Planning and Research Staff, NEDA.  Table 12 .1 : 'POPULATION RY RF.GION (In thousands) 1970 1975 1980.L!. 1981 /a 1982 .L!. 1983 .L!. 1984 ~ National Capital Region 1,%7 4,970 5,970 6,155 fi ,345 6,540 6,740 I (Ilocos) 2,991 3,269 3,543 3,612 3,682 3,754 3,82A II (Cagayan Valley) I , 691 1,933 2,227 2,283 2,340 2,399 2,460 HI U:entral Luzon) 1,f,15 4,210 4,827 4,947 5,070 5,196 5,325 IV (So-.1th~rn Tagalog) 4,457 5 ,2111 6,155 6,333- 6,516~ 6,703 6,895 v (Bicol) 2,%7 3,194 3,4A9 3,572 3,658 3, T44 3,832 VI (Western Visayas) 3,618 4,146 4,538 4,646 4,755 4,866 4,979 .... IJ1 VII (Central Visayas) 3,033 3,387 3,796 1,873 3,952 4,032 4,113 -""' I VIII "(Eastern Visayas) 2,381 2,600 2,805 2,857 2,910 2,963 3,0lA IX (Western Mindanao) 1,869 2,048 2,547 2,608 2,671 2,734 2,798 X (Northern Mindanao) 1,953 2,314 2,773 2,851 2,931 3,012 3,094 XI (Southern Mindanao) 2,201 2,715 3,368 3,459 3,551 3,645 3,740 XII Central Mindanao) 1,941 2,070 2,278 2,340 2,403 2,467 2,532 Total 36.684 42.011 48.316 49.536 50 1 1a3 52 1 055 53.351 la Projections based on moderate fertility and moderate mortality decline assumption, 'Projections: Series 2. Source: National Census and Statistics Office.  Table 12.2: GROSS DOMESTIC PRODUCT BY REGION (REVISED) 1972-84, AT CURRENT PRICES (in million pesos) Region 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983/a 1984/a 1985/a NCR Metro Manila 16,690 21,342 28,252 33,116 39,586 45,435 52,573 63,536 79,698 93,826 105,719 120,198 165,393 188,312 !locos Region 2,392 3,330 4,363 4,540 5,017 5,738 6,540 8,394 10,712 11,844 13,028 14,965 21,647 26,748 Cagayan Valley 1,805 2,408 3,144 3,028 3,832 4,297 5,103 6,310 7,665 8,800 9,533 10,819 14,561 16,739 Central Luzon Southern Tagalos 4,824 7,666 6,094 9,582 8,665 13,542 10,202 16, 14'9 11,950 -19,341 13,391 22 ,44"2 15,324 -27 ,031 19,098 32,491 ]4,563 39,652 . 29,803 44,06~ 33,169 49,815 37,311 57,399 53°,664 82,934 62,490 91,814 Bicol Region 2,040- 2,552 3,608 4,073 4,972 5,860 6, 17l 1,373- - 9,080 10,422 10,551 12,158 16,956 19,863 Western Visayas 5,552 6,920 9,796 11,151 12,349 13,246 14,423 17,231 20,266 23,383 26,405 29,617 42,542 45,272 Central Visayas 4,013 5,394 7,616 8,154 9,516 10,693 12,029 15,358 18,471 20,797 211,643 25,655 37,644 42,556 ... I Eastern Visayas 1,687 2,248 2,999 3,463 3,753 3,984 4,498 5,500 5,227 7,019 7,701 8,242 11,710 13,245 "' "' Western Mindanao 1,437 1,849 2,594 3,908 3,925 4,677 6,039 7,501 9,099 10,798 11,722 13,202 18,206 20,606 I Northern Mindanao 2,583 3,265 4,881 5,372 8,472 7,869 8,900 11,410 12,789 14,307 16,821 17,736 26,414 30,108 Southern Mindanao 3,817 4,999 7,031 8,529 10,410 11,888 13,284 16,257 18,438 20,397 22,011 24,755 37,953 42,764 Central Mindanao 1,958 2,339 3,042 3,702 4,150 4,705 5,754 7,064 8,032 9,031 11,476 12,631 20,048 22,580 Total 56,464 72,322 99,533 114,587 137,273 154,225 177,669 217,523 263,692 304,490 340,594 384,687 549,672 623,100 ~ The National Accounts have not been revised on a regional basis. Source: NEDA National Accounts Staff.  Table 12,3: GROSS DOMESTIC PRODUCT BY REGION (REVISED) 1972-84, AT CONSTANT 1972 PRICES (in million pesos) Re'1tion 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 -1982 1983.L.!_ 1984/a 1985/a NCR Metro Manila 16,690 18,071 18,262 19,794 21,632 23,122 24,498 25,692 27,896 29,570 31,511 32,359 30,435 28,840 llocos Region 2,392 2,820 2,820 2,714 2,742 2,920 3,048 3,394 3,749 3,733 3,760 3,902 3,806 3,823 Cagayan Valley 1,805 2,039 2,032 1,810 2,094 2,187 2,378 2,552 2,683 2,773 2,640 2,602 2,370 2,324 Central Luzon 4,824 5,160 5,601 6,098 6,530 6,815 7,141 7,723 8,597 9,393 8,795 8,788 8,358 8,093 Southern Tagalos 7,866 8, l 13 8,754 9,659 10,569 11,421 12,596 13,138 13,879 13,887 13,521 13,902 13,457 12,943 Bicol Region 2,040 2,161 2,332 2,435 2,717 2,982 2,876 2,981 3,178 3,285 3,045 3,197 3,098 3,092 Western Visayas 5,552 5,859 6,332 6,665 6,748 6,741 6,721 6,968 7,093 7,369 8,410 8,187 7,833 7,104 Central Visayas Eastern Visayas 4,013 1,687 4,567 1,903 4,923 1,939 4,874 2,070 5,200 2,051 5,442 2,027 5,605 2,096 6,210 2,224 6,465 1,830 6,554 2,212 6,999 2,422 7,115 2,273 6,849 2,124 6,541 2,098 ... V, 3,148 0\ Western Mindanao 1,437 1,566 1,677 l ,852 2,145 2,380 2,814 3,033 3,185 3,403 3,294 3,372 3,181 Northern Mindanao 2,583 2,765 3,155 3,211 4,630 4,005 4,147 4,614 4,476 4,509 4,707 4,506 4,370 4,301 Southern Mindanao 3,817 4,233 4,545 5,098 5,689 6,050 6,190 6,574 6,454 6,428 6,336 6,356 6,202 6,211 Central Mindanao 1,958 1,981 1,966 2,213 2,268 2,394 2,681 2,856 2,811 2,846 3,563 3,507 3,501 3,496 Total 56,664 61,238 64,339 68,492 75,013 78,486 82,791 87,959 J2,297 95,963 99,003 100.068 95,555 92,048 .L.!. The National Accounts have not been revised on a regional basis, Source: NEDA National Accounts Staff, DISTillBUTORS OF WORLD BANK PUBLICATIONS ARCENTINA FllANCE KENYA SPAIN Carte. Hinch, SRL World Bank Publications Africa Book Serva (E.A.) Ltd. Mundi-~11111 Ubcae, S.A. c.JffiaGuemn 66 Avenue d'lena P. 0 . 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