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11 CONFIDENTIAL 99/GS/E Phili ippnes December 1973 NATIONAL INTELLIGENCE SURV-- CONFIDENTIAL APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200090003-3 7r NATIONAL INTELLIGENCE SURVEY PUBLICATIONS The basic unit of the NIS is the General Survey, which is now published in a bound -by- chapter format so that topics of greater per- ishability can be updated on an individual basis. These chapters Country Profile, The Society, Government and Politics, The Economy, Military Geog- raphy, Transportation and Telecommunications, Armed Forces, Science, and Intelligence and Security, provide the primary NIS coverage. Some chapters, particularly Science and Intelligence and Security, that are not pertinent to all countries, are produced selectively. For small countries requiring only minimal NIS treatment, the General Survey coverage may be bound into one volume. Supplementing the General Survey is the NIS sasic Intelligence Fact .,00k, a ready reference publication that semiannually updates key sta- tistical drta found in the Survey. An unclassified edition of the factliook omits some details on the economy, the defense forces, and the intelligence and security organizations. Although detailed sections on many topics were part of the NIS Program, production of these sections has been phased out. Those pre- viously produced will continue to be available as long as the major portion of the study is considered valid. A quarterly listing of all active NIS units is published in the Inventory of Available NIS Publications, which is also bound into the concurrent classified Factbook. The Inventory lists all NIS units by area name and number and includes classification and date c` issue; it thus facilitates the ordering of NIS units as well as their filing, cataloging, and utilization. Initial di3semination, additional copies of NIS units, or separate chapters of the General Sttrveys can be obtained directly or through liaison channels from the Central Intelligence ,agency. The General Survey is prepared for the NIS by the Centr,,' Intelligence Agency and the Defense Intelligence Agency under the general direction of the NIS Committee. It is coordinated, edited, published, and dissemi- nated by the Central Intelligence Agency. WARNING This document contains information affecting the national defense of the United States, within the meaning of title 18, sections 793 and 794 of the US code, as amended. Its transmission or revelation of its con "ants to or receipt by an unauthorized person is prohibited by law. CLASSIFIED BY 019641. EXEMPT FROM GENERAL DECLASSIFI- CATION SCHEDULE OF E. O. 11652 EXEMPTION CATEGOPIES 58 (1), (2), (3). DECLASSIFIED ONLY ON APPROVAL OF THE DIRECTOR OF CENTRAL INTELLIGENCE. i t r APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 f 9 b APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 E WARNING The NIS is National Intelligence and may not be re- leased or shown to representatives of any foreign govern- ment or international body except by specific authorization of the Director of Central Intelligence in accordance with the provisions of National Security Council Intelligence Di- rective No. 1. For NIS containing unclassified material, however, the portions so marked may be made available for official pur- poses to foreign nationals and nongovernment personnel provided no attribution is made to National Intelligence or the National Intelligence Survey. Subsections and graphics are individually classified according to content. Classification /control designa- tions are: (U /OU) Unclassified /For Official Use Only (C) Confidential (S) Secret ii A APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 P4iiippiaedo CONTENTS This chapter supersedes the economic cover- age in the General Survey dated October 1968. A. Economic appraisal 1 B. Structure of the economy 3 d. Forestry 9 CONFIDENTIAL 1. Agriculture, forestry, and fisheries 4 a. Crops 5 (1) Rice 5 (2) Corn 5 (3) Fruits and vegetables 6 (4) Sugar 6 (5) Coconut products 7 (6) Abaca and other fibers 7 (7) Tobacco 8 b. Livestock 8 c. Fisheries 8 rt i APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 FIGURES Page Page Page 2. Fuels and power 9 4. Manufacturing and construction 13 a. Petroleum 9 S. Domestic trade 15 b. Solid fuels 10 C. Economic policy and finance 15 c. Electric power 10 1. Policy and development 15 3. Minerals and metals 10 a. National budget 16 (map) b. Money and banking 17 a. Copper 12 2. Manpower 18 b. Gold 12 D. International economic relations 19 c. Iron ore 12 1. Foreign trade 19 d. Chromite 13 ore 2 Foreign aid gn 20 e. Nickel 13 3. Balance of payments 21 f. Others 13 Glossary 23 FIGURES ii Page Page Fig. 1 Net domestic product at factor costs, Fig. 10 National government revenue and by origin (chart) 2 expenditures (table) 16 Fig. 2 Land utilization and major crops Fig. 11 Revenue and expenditures, by sources (map) 3 and functions (chart) 17 Fig. 3 Land use chart) 4 Fig. 12 Distribution of the labor force Fig. 4 Production, areas, and yields of major (chart) 18 crops table) 6 Fig. 13 Value and composition of exports Fig. 5 Fish catches, by type table) 8 (chart) 19 Fig. 6 Production of forest products (table) 9 Fig. 14 Value and composition of imports Fig. 7 Major electric power plants (map; 11 Fig. 15 (table) Direction of foreign trade chart) 19 20 Fig. 8 Production of selected minerals and Fig. 16 Balance of payments table) 21 metals (table) 12 Fig. 17 Structure of the Philippine external Fig. 9 Industry and mining map) 14 debt table) 22 ii 7: 7� El The Economy A. Eccmomic appraisal (U /OU) Although the Philippine economy grew at a rale of only 3.5% in FY72, a the annual average rate of growth between 1965 and 1971 was 6.35b, compared to about 5.6',' per annum in 1960 -65. Because of the rapid rate of population growth (about 3% annually), however, the economic growth rate per capita has [.cell considerably lower, and per capita income in 1972 was probably still below US$200 in current prices. The modern sector of the economy is relatively small. Agriculture is the predominant economic activity, but much of the agricultural sector is characterized by subsistence -type fanning. 'file Philippines is fairly well endowed with natural resources, but attempts to develop them have been hampered by the presence of a ;mall but strong economic oligarchy, consisting of relatively few wealthy families who are more concerned with promoting their own interests than with promoting the economic development of the country. As a result, ihere is extreme maldistribution of wealth between the oligarchs and the mass of the population. Agriculture is the backbone of the economy. Over half the total labor force is engaged in farming, and agriculture accounts for the hulk of Philippine export earnings. The sector still is dominated by traditional farming techniques, however, and modernization efforts have not been vigorously pushed. Irrigation is limited, and most farmers do not use fertilizer or pesticides regularly. Use of high- yielding variety seeds has increased in recent vears but it remains limited. Because of these problems, yields of most major crops "I'he I'hilippine fiscal year ends 30 June of the sLited year are low, and farm output in general has expanded slowly. A variety of factors continue to hamper develop- ment of the agricultural sector. Most peasants arc reluctant to adopt new production techniques, and at the same time the government has been unwilling or unable to make necessary inputs available at reasonable prices. The government did initiate a program in the mid- 1960's aimed at achieving self sufficiency in rice and substantial gains were made by 1970. Since then, the government has relaxed its efforts to stimulate production, and output, affected by poor weather conditions, rose marginally in 1971 and actually declined in 1972. As a result, the Philippines has again become one of the world's largest rice importing countries. The government has just begun to implement the land reform program that was announced a decade ago, and many Philippine farmers are still sharecroppers. After declaring martial law in September 1972, President Marcos announced plans to initiate a new, wide, ranging land reform program, but as of mid-1973 the effectiveness of the new program was still in doubt. The manufacturing sector is fair!v large and well developed compare to those of most less developed countries. Besides food processing, Philippine manufacturing consists primarily of import-substitu- tion industries established as a consequence of the government's high tariff policies introduced in the 1950's. These tariffs were aimed at providing a protected market for local business, but one result has been the formation of an inefficient industrial sector that suffers from substantial overcapacity. Although the government is moving to rationalize some sections of industry, progress has been slow, and only a few 4 .u> APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 i i export- oriented firms have been established in recent years. The performance of the manufacturing sector has improved over the past half- decade or so, however, and since the mid- 1960's manufacturing output has increased by about ff/' annually. Growth of the Philippine ecOnomy has not been fast enough to absorb the rapid increase in the labor force, and unemployment and tinderemploym, ent remain serious problems. Unemployment is particularly serious among young urban workers, and tul- deremplovment is especially pronounced among rural workers. In spite of the high level of unemployment, inflation also has been serious since the start of the 1970's. In 1971, average consumer prices rose an estimated IW' Austere fiscal and monetary policies were adopted to control inflation, but the emergence of rice shortages helped boost prices by 105:r in 1972. Food shortages and other damage caused by the serious floods in tilt' summer of 1972 brought an acceleration in government spending to rehabilitate devastated areas and industries. Recover from the flood was rapid, and the increased supply of food coupled with government efforts to increase tax revenues through higher levies and improved COIICctiOrl, minimized the inflationary impact of higher government spec diner. Domestic economic problems are reflected ill recurring balance of payments difficulties. In the late 1960's the balance of payments situation deteriorated because exports stagnated while imports rose 41arply in response to heavy govt �nment spending. To help reverse these trends, the government initiated a major financial reform program in early 1970 that includeu it sharp devaluation of the peso and restrictive fiscal and monetary policies. This program helped reduce the trade deficit to manageable proportions, but the country still is burdened with a foreign debt that amounted to over $2.2 billion at the end of 1972. Much of the payments problem reflects the Philippine export structure, Which is characterized by heavy product and market concentration. Four commodity groups s(igar, coconut )roducts. I-)gs and lurnher, art(] copper concentrates account for over 70% of total exports, and the United States and Japan purchase about 75% of all exports. Dependent almost exclusively on primary products, export earnings have fluctuated Widely. Furthermore, an overvalued peso throughout the last decade reduced the Philippines' comrmtitiveness in World markets. After improving sorn.!What in 1970 and 1971, the trado balanct' deteriorated sharply in 1972 as imports rose rapidly and exports declined. Meanwhile, with foreign borrowing increasing, the debt service ratio (ratio of debt payments to foreign exchange earnings) reached an alarming 36c( in 1972. Due in part to large increases in foreign I and credits, the overall balance of payments in 1972 was favorable and the international reserves rose. Public disorder and the threat of insurrection prior to September 1972 had it deterrent effect of the infloxy of private investment capital from abroad. Uncer- tainty over the governments attitude toward foreign capital, embodied in the trend "Filipinization" implied in various Suprenw Court decisions affecting foreign ownership of land and natural resources, further deterred private capital inflo%vs. The imposition of martial laxv in September 1972 restored order in most of the country, and the adoption of it new constitution in January 1973 reassuiecl foreign investors against adverse changes in rules governing foreign investments, and foreign investment inflow has apparently ctcceierated. The Philippines continues to he heavily dependent on the United States in its foreign economic relations. "Tariff preferences and quota arrangements under the Laurel- Langley Agreement of 1955 encouraged Philippine concentration on the U.S. market. Preferential treatment of U.S. trade and investments tinder that agn.rement also encouraged heavy U.S. investments in Philippine industries and resources; the �l00%� Other services Wholesale and retail trade i Construction Transportation, communication, storage and utilities Manufacturing Mining and 1.3 quarrying 2.4 m Agriculture. forestry, and fishing NOTE: 1965 Data are based on 1967 prices. 1971 FIGURE 1. Net domestic product at factor costs, by industrial origin (U /OU) APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 F. Major fishing part C Cultivated land Comn,wcial forest Fishpond development Uncultivated land PRINCIPAL CROPS R Rice C Corn N Coconut S Sugarcane A Abaca T Tobacco i t3 502061 1273 C O 0 cues P Asa Q oCZ) e daludl/ O 9 D i FIGURE 2. Land utilization and major crops (U /OU) i impending termination of the agreement in July 1971 into the U.S. sales to the Philippines in recent years, has created Uncertainty anions U.S. investors in but the United Stites still supplies about 2Wi of all Philippine lane anal resources (mineral and logging Philippine imports. U.S. Occnomic aid to (lie country concessions), insofar as investments in those assets arc between 19.16 and 1972 totaled over U S$I.S billion.. to be restricted to 40% foreign ownership. The Uniteo States is tits largest foreign investor in the country, the B. Structure of the economy largest source of foreign aid, and the largest trading a partner. The United States takes 40 �0 of Philippine The str:icture of the Philippine econorn has t e xports. incluoitig all of its sugar exports plus a major changed little in recent vears, and agriculture has part of its exports of primary products. Japan has cut retained its position as the dominant sector. As shown ,z 3 n APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 in Figure 1, agriculture, forestry, and fisheries showed a slight decline in their percentage contribution to net domestic product (NDP) in 1972, which reached in that year approximately US-96.7 billion. The decline in that sector in 1972, however, was probably due to adverse effects of inclement weather on production of several major crops; the trend in the sector's contribution to NDP between 1965 and 1971 had been generally upward. The manufacturing sector showed a slight increase in relative importance. The services, including trade, transportation, comma: ;ications, I storage, and utilities, and other services all declined i slightly in relative mportance. (U /OU) 1. Agriculture, forestry, and fisheries (U /OU) Agriculture is by far the :lost important sector of the economy (Figure 2). The hulk of the population is engaged in farming, and about one -half of the country's exports consist of agricultural products; exports of agricultural products ill 1972 amounted to about USS330 million. The major exports of agricultural origin are sugar, coconut products, pineapples, abaci, and tobacco. Rice and corn are the major food crops. The bulk of the food crops are produced by subsistence farmers, most of the export crops, especially sugar and pineapples, ire produced by it few large plantations. Agricultural output grew at an average annual rate of about J %7So during the decade of the 1960's, but the growth was heavily concentrated in the second half of the decade, during which period the government actively encouraged the sector to expand its production� largely through the widespread plantin of high- vielding varieties of grain and increased application of fertilizers. In 1971, folloxvinl; a relaxation in government efforts, and partly in response to rising prices of imported fertilizer following the devaluation in 1970 and increasing incidence of tungro disease in rice areas, agricultural growth slowed perceptibly; typhoons .,nd drought also appear to have affected the sector's ')utput that vear. In 1972, the sector was further affected b severe floods in several major crop areas, but as of mid 197:3, rehabiliiation and recovery from the flood damage were reportedly about complete, and government planners anticipated a resumption of growth in the sector. Yields of several major crops improved perceptibly during I-I'c period of rapid growth between 1965 -69, but they are still below regional and world norms. Government efforts to raise v ?clds have met only. limited and temporary success. Public investment in agriculture has traditionally been lo%v and has al%vays been among the first items cut during the frequent periods of belt- tightening. New methods of farming introduced by the government have been adopted half- heartedly by farmers, and they have generally reverted to traditional methods Nvhen government pressure lapsed. An antiquated system of land tenancy exists, reducing the incentive for private investment except in the else of a. fexv majo, export crops. Philippine agriculture is strongly influenced by a tropical, humid climate. Rainfall is abundant throughout much of the country, but a pronounced dry season occurs is the Central Luzon Valley, on be flows coast in northwest Luzon, in parts of Negros, and on Panay and Cchu. In these major producing areas, vear -round cultivation requires irrigation. About 305'j. of the total land area is arable -22 ;n seasonal crops and 8 in permanent crops hut double cropping on the area planted to seasonal crops raises the harvested area about 7i annually (Figure 3). Most of the cultivated area is on coastal plains and several inland plains. TYPItoons, floods, and droughts affect agricultural production; -'ed ;,aye caused major crop losses in recent years. Most Philippine farmers are sharecroppers engaged primarily in growing rice and corn. The government has initiated several land reform programs aimed at eliminating sharecropping, but so far little has he�en "ecomplis" 'd because of opposition from the powerful Permanent meadows pasture Land in permanent crops 8 1 i4 Philippines a FIGURE 3. Land use, 1970 (U /OU) APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 TOTAL LAND AREA 29,801,000 hectares economic and political oligarchy. Attempts at 11111(1 reform go hack at least to the 1950 'khen. Congress, under prodding frorn then: President Nlagsaysay, approved a program requiring 1 that harvests be u- apportioned 7 1W(' to the tenant and 305 to the landowner. instead of the 50 -30 division that had been 6:. common. That re(Inirement was never fully enforced, however, and the program was virtuall scrapped following ilagsaysay's death in 1957. In 1963 it new program was I)egun under which tenants were to become leaseholders and eventually landowners, with the government providing financing and technical assistance. That program, however. never got mach heyond the exile imental stage. The most recent land reform) proposal syus aunouneed if) late 1972, when President Marcos imposed martial law. While some significant details of the reform program are still ender consideration, its h general airn is to turn over title io all land under rice and corn to the tenants presently tilling it. h tenants would he required to pa} for the land a sum k equivalent to two and one -half times the average t` :11nnual harvest in three normal years inunediately I; Preceding the umunnncemc'rnt of the reform decree; the g 'J 'fits are to be spread over a period of 1.5 y ears. About 2 million hectares -1.7 million in rice nd 0.3 a Million in corn �ancl more than 1 million tenant families reportedly wooId he irwolved in the program. Opposition to the reform remains strong, however, particularly among; the small landlords. As of n)id- 1973, however, the government had made consider- able progress in breaking up large estates, i.e., those 50 hectares or more in size. \""le the tenancy sy hampers modernization of this agricultural sector, other factors in the poor perforniancr of recent years have been the inciciccluate irrigation system and the lack of credit facilities. Despite numerous government programs aimed at t expanding the area under cultivation, most major crops are grown on foul With little or no depen(Iul)Ic irrigation. Aln)ost ali the land devoted to sugar, for example, is unirrigated. Farmers lack sufficient -redit to finance expansion or improvement of the existing irrigation systern. The government extends credit to the agricultural sector through the Philippine National Bank, the Development Bank of tilt� Philippines, the Agricultural Credit Administration, and numerons rural hanks, but by and large the funds extended to the farm sector have increased only slowly and are not B sufficient to finance any significant development effort. a. Crops (1 Rice� ilic�e is by far the most important crop. Over if third of the total crop area and almost 5ffi of all farms are dex -)led to c�ultkation of rough rice (palay). Rcrnghly 2051 of the rice is harvested frcrn upland cultivation, -ith the balance coming mainly from nonirrigated lowland culti y vation. '1'hc main lowland crop is planted during the rainy season, mostly in June, and harvested in December and January. Although rice is grown throughout the c�ountr, the island of Luzon accounts forayer half the total crop area: the (ventral Luzon Valley is the naLon's single most important rice producing region. Between 1965 and 1970, rice production increased rapidly as it result of government efforts to make the country self sufficient in rice (Fignre 4). The government promoted the use� of high yielding seeds, and by 1970 about Y' of tile a e creage Planted to rice in; central Luzon %vas planted to high- yicldiicg y: The government also increased the supply of funds available to finance irrigation and increased the yolunx' of rinral credit to fi nce purchases of fertilizers and pesticides. Xlorc import,nntly, i)owever, the government raised the price of rice to stinnnlatc production. As if result of these treasures� rice owput in 1968 rose mer that of 1967, and by 1 971 output reached an all tin)(� peak of approximately 5.3 Million tons, making the Philippines nearly srlf- >nlfficienl in rice that year. In 197 production de- clincd to 5. I million tons doe inn large part to danrnge canlscd by tungro disease; if further decline occurred in 1973 as it result of extensive Ilooding in nraior producing areas. Other factors affecting production since 1971 were civil disorders in the country crud the decline in .application of fertilizers a pesticides, the latter probably doe to rising prices of imparted materials follMying the 1970 devaluation. In 1970 tine government also adopted a tight fiscal and man1ary ),olicy, sharply cutting the funds available to finwic�e purchases of fertilizers and seeds. 'I'hc decline in production since 1971 has created suhstantial shortages in the nations rice supply, and the Philippines again has became one of the major importers of rice. (2) C �'I'hc second most important food crop is corn, which is planted on about 27 of the total crop area. Production exceeded 2 million tons annually in 1970 72. Corn is the staple food for about 20 '0 of the population and is also used as livestock feed. Production is concentrated in the Visayan Islands and in the lower elevations of Mindana Although groi n as a rotation crop in many places, corn is commonly 5 APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 FIGURE 4. Production, area, and yields of major crops (U /OU) (Production in 1,000 tons; area in 7,000 hectares; yields in tons per hectare) CROP YFea* 1965 1966 1967 1968 1969 1970 1971 1972 Production (rough basis) 3,99 4,073 4,094 4,561 4,445 5,233 5,343 :1,168 Area 3,200 3,109 3,096 3.304 3,332 3,113 3,175 3,246 Yield 1.15 1.31 1.32 1.38 1.33 1.68 1.68 1.59 Corn: Production........... 1,313 1,380 1,490 1,610 1,733 2,008 2,005 2,0:39 Area 1,923 2,016 2,158 2,248 2,256 2,420 2,437 2,4:32 Yield 0.6s 0.68 0.69 0.72 0.77 0.83 0.82 0.84 Sugar: Production........... 1,557 1,402 1,560 1,595 1,596 1,927 2,058 1,997 Area 351 315 :309 318 321 366 400 4:37 Yield 4.49 4.45 5.05 5.02 4.97 5.27 5.07 4.07 Coconut: Production........... 1,534 1,557 1,660 1 �593 1,560 1,726 1,679 2,100 Arer 1,6705 1,611 1,820 1,800 1,846 1,884 2,049 nn Yield 0. 9(i 0.97 0.91 0.89 0.85 0.92 0.82 nn A baca: Production.... 134 135 118 103 106 122 105 95 Area 199 198 1867 171 176 178 105 nn Yield 0.67 0.68 0.63 0.60 0.60 0.69 0.68 na Tobacco: Production........... 46 58 51 65 57 61 56 4:5 Area 76 85 83 94 89 87 76 na Yield 0.60 0.68 0.61 0.69 0.64 0.70 0.74 7111 na Data not available. *Crop years end 30 June of years shown for all crops, except sugar, which ends 30 September "Preliminary. *Estimate. double cropped, and in parts of the Visayans a third crop is pl inted. The government maintains a price support program for corn. The government has tried to raise corn production through a program similar to but less intensive than that applied to rice. Production rose by almost 9Si annually between 19G5 and 1970, but it Icvcled off in 1971 and 1972. About half the 1965 -70 increase was attributed to expansion of the area devoted to the crop and the rest to greater productivity. Fields remain extremely logy by international standards, however, with auverage yields in 'I'haililn -1 and Taiwan being more than three times greater. Despite production gains, the country s'ili depends ono imports to rneet more than 5S( of its reyuirenients. (3) Fruits and veger lh!,:,, -Other food crops, including fruits, nuts, roots, tuhers, legiunes, and other vegetables, are grown throughout the islands, primarily for local consumption. 1'ielcls of these secondary food crops generally are low compared to those obtained in other Southea..t Asian countries. 'I'll(- chief exceptions are the crops raised in 'he La 'Trinidad 6 a area of Luzon. This srnall area produces about .3 1' of the cabbage, about 4Wr' of the potatoes, and almost all of the c�anliflovyer, celery, and shawberries gro%yn in the Philippines. Labor- intensive cultivation. combined With hcayy application of fertilizers. herbicides, and insecticides, results in high yields from the area's truck farms, many of which are operated by families of Japanese or Chinese extraction. Most of the produce from La Trinidad is marketed through nearby Baguio or is trucked to Manila. Pineapple yields on the Bukiclnon plantation, wbic�h accounts for almost half Of the total Philippine production, are about four limes higher than the average for other pineapple producing areas in the country. Exports of cmined pineapple products from Bukiclnon are an increasingly important source of foreign exchange. (4) Sugar -Sugar is the Philippines' principal export of agricultural origin; exports in 1972 were valued at USS209 million. Virtually all of the sugar crop is processed in the country's sugar mills. Production of c�cntrifugal sugar averaged about 2 million tons annually during 1970 -72, about one -third of which was consumed domestically and the renminder APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 IL J M allocated to the export market. Production of sugarcane is highly concentrated, with over 60% of the crop being grown in Negros Occidental Province and most of the remainder oil L.uzon in Batangas and Tarlac provinces. Most of the production of sugarcane is done on large plantations. Cane yields are generally low and the sugar content of the cane is low; thus, sugar produced in the Philippines is high -cost sugar which cannot compete effectively against sugar from other producing areas in the international market. Production of sugar is no longer controlled by the government, but sugar marketing is regulated. The g::v ^rnment, through the Sugar Quota Administra- tion, determines and allocates the quantity of sugar that can be sold in each crop year in the export market ,md in the domestic market, the main purpose of the 0ocations being to insure adequate domestic supplies. Sugar is highly protected in the domestic market, and all sugar exports go to the United States under the U.S. sugar quota at relatively high prices. The Philippines has had it basic quota in the U.S. market slightly in excess of 1.1 million short tons (raw value) of sugar, plus a significant share of the deficit in the U.S. supply arising from the inability of other countries to fill their share of the total quota. The increasing difficulty of the Philippines in meeting its total quota (basic quota plus deficit share) has led in very recont vears to it reduction in its deficit share and therefore in its total quota. In part, the difficulty in expanding production to fill its export and domestic market requirements is due to the lack of irrigation facilities in most of the cane growing areas. Poor weather conditions in any growi�,g season also affect output adversely. In spite of the indicate problems, however, the Philippines is still s--cond only to Cuba as a sugar exporter. (5) Coconut products �The Philippines is the world's leading producer and exporter of coconut products. Coconut production in 1972 exceeded 2.1 million tons, an increase of about 20% over the preceding years output. Most of the output was processed into copra, coconut oil, desiccated coconu', coconut charcoal, and coir. Coconuts are grown throughout the Philippines, but most of the coinunercial crop comes from southern Luzon, the eastern Visayan Islands, and along the coast of Mindanao. Coconuts, whose cultivation requires less labor than other major Philippine crops, are grown both on plantations and on smallholdings. Over 1VC' of the area planted to coconuts is in small farms, and the remainder is On large plantations. Coconut production had generally stagnated from the mid- 1960's until 1971, and output actually declined in the latter year because of poor weather conditions and typhoon damage to bearing trees. In 1972, however, the number of bearing trees rose about 7%, as trees planted in the mid- 1960's began to come into production. The increase in tilt: number of bearing trees, which are located la.gely in the Visayas and Mindanao where yields are higher than average, coupled with adequate ruinfali, resulted in the sharp increase in the coconut harvest in 1972. Further increases in the number of trees coming into production within the nest few veers are expected to result in still greater output. Copra, coconut oil, desiccated coconut, and copra meal are among the Philippines' major exports. Exports of these products reached USS227 million in 1972 almost a quarter of total exports. Their relative importance, however, has declined steadily since 1965, wile i they accounted for over a third of export earnings. World market prices for coconut products tend to fluctuate widely, largely in response to changes in Philippine supplies, since the country accounts for such a large share of total world exports. Since 1970, when Philippine production and exports reached record levels, world prices had tended to decline, but as of early 1973, coconut product prices had reportedly risen sharpl (6) Abaca and other fibers� Abaca, known commercially as Manila hemp, is the country's mast important ibcr crop, but it accounts for only about 2% of the total crop arc� harvested. Although abaca ranks among the top 10 exports of the nation, it accounts for less than 25 of the total annual value of exports; in 1972 exports of ahaca and abaci products were valued at USS13 million. Nevertheless, more than 90% of the world's supply of abaci fiber comes from the Philippines. Used in the manufacture of rope and regarded as ar excellent fiber for marine cordage, ahaca has encountered stiff international competition from lower priced sisal ant! from synthetics such as nylon. As a result. production has fluctuated widely since the early 1960's, generally remaining; above 100,000 tons annually. Domestic usage of abaci, including the manufacture of cordage, cloth, and a variety of other products, accounted for one- fourth of the 1971 output. The Davao provinces cm Mindanao and the I;icol River area of southeastern Luzon together account for over 70% of total ahaca production. The leaves of the� banana -like ahaca plant are stripped to make ahaca fiber, which is then shipped to market. Maintenance Of the ahaca stand and the handstripping process common in southeastern Luzon and in the eastern Visayan Islands require considerable labor. Lack of in 1. :E 1 S APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 experience among many of the smallholders who entered abaci farming after the war and neglect of the plantings during the war contributed to the spread of damaging plant disease: and insects. Other fibers produced include cotton, ramie, kapok, jute, kenaf, and sisal. None of these accounts for it significant share of total agricultural production, however, and cotton and jute must be imported to satisfy the demand of the domestic textile industries. Most of the small annual output of ramie is exported. (7) Tobacco Production of leaf tobacco has stagnated since the mid 1960'x, and it dropped sharply in 1972 due to market uncertainty and to extensive `loud damage to the crop. Of the total output of 45.300 tons in 1972, about one -half was Virginia tobacco to be used principalh' in the domestic production of cigarettes. The remainder was native leaf for use in the manufacture of cigars. The Philippines exported about USS15 million worth of mostly raw tobacco in 1971. Commercial production of tobacco occurs principally on small Luzon farms. The Cagavan Valley is an important center of production of native leaf, and most Virginia tobacco is grown on the llocos coast. Native tobacco is aircnred before marketing; Virginia tobacco is flue cured. Government support prices have had little effect, since market prices have teen above the support prices. The poor qualit of domestic cigarette tobacco has meant continued imports of U.S. tobacco �sonic USS5 million worth in 1971 �and has left the government %with large stockpiles of Icw -grade leaf. b. Livestock In spite of steady rises in the number of livestock, the Philippines remains dependent on imports to satisfy it small portion of its meat requirements and the majority of its dairy needs. Total livestock population in early 1972 was estimated at over 20 million head. Hogs constituted two thirds of this total and the largest single source of nonpoultry meat. Major deterrents to greater hog output include a lack of efficient transportation facilities betWeen the principal producing areas and the Manila market and a scarcity of quality feeds. Cattle and carahou, which nrlmberccl over 2 million and 4 million, respectively, in early 1972, are. used as draft animals as well as a source of meat. The output of animal products has increased in recent years, but not enough to satisfy domestic demand. imports have grown faster. c. Fisheries Fish provide a majorshare of the protein consumed, and fishing is an important economic acti,ity for the rural population. The fish catch increased by more than 8 annually between 1965 and 1970 and exceeded 1 million tons in 1971 (Figure 5). 111 1970. suhsistcnce fishing, including fishing from small vessels licensed 1>v municipalities, accounted for 525 of the total catch as opposed to W in 1965. Commercial fishing lagged, gro\\ing at only 5c annually, and in 1970 accounted for '395i of tile' total catch. Harvests from fishponds provided jus under of the total catch in 1970, little changed since 1965. A small quantity of fish mainly shrimp �is exported, while imports of fish and fish products principally canned mc: �have averaged about US$20 million annually in recent years. Introduction of ncvV fish varieties, improved management, expansion of the inland fishpond area, and motorizt of small fishing craft in mu fisheries arc among the measures that have FIGURE 5. Fish catches, by type (U /OU) (Quantity in thousand metric tons and value in millions of U.S. dollars) 1965 1960 1 vu 7 1968 1969 1970 965 Commercial fishing: Quantity Value Fishponds�: Quantity Value Subsistence fishing: Quantity Value Total: Quantity Value 8 300 315 331 407 :367 382 76.7 93.8 107.9 139.4 143.9 95.6 133 64 64 87 95 96 16.1 33.3 34.4 46.3 48.5 39.3 304 320 351 444 477 51, 77.7 84.6 102.3 106.8 180.2 133.4 667 705 746 938 940 989 170.5 211.7 244.6 346.5 372.6 268.3 t i APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 -Irmo me In c. F2 t i =�r,' `f 3p! ro= t s, j .trv"ry3+:Lj`'Cs ritu�"t. contributed to the increased catch. Nevertheless, yet been discovered in the Philippines. Manila, much of the fishing industry still relies on antiquated hc,.vever, is trying to encourage major l,etrolcum methods and equipment. companies to undertake: more vigorous exploration in d. Forestry offshore areas. (U /OU) The PI lippines is a major producer and exporter of tropical wood products, but years of wasteful logging practic:s and recent government conservation rneas,;ros have resulted in declining production. Ali but about 3S of the forest area of the Philippines is government owu.ed. Forests arc concentrated on Mindanao, Luzon, wid Negros. Logging operations are conducted by individnals and corporations under timber licenses that must he renewed periodically and have a maximum tenure of 50 years. Log production grew rapidly through 1969, when output reached nearly 5 pillion board feet, but has declined steadil since; 1972 production 11110 (111411 to only about 3.6 billion board feet (Figure 6). The Philippine wood industry is basically oriented to the export of unprocessed timber. In 1970, for example, only 225 of the total timber harvested was processed locally, and the balance was exported as logs. About 905i of the lumber produced is consumed locally, while 90% of the veneer and 65% of the plywood are exhorted. Export earnings have been dec�!;n."ng in recent years, but timber and timber products still account for J)out 20% of total exports. A 9% decline in receipts from log exports in 1971 was attributable chiefly to a 25% decline in the volume of exports to Japan. The bulk of exports consists of hardwoocJ logs. 2. Fuels and power As much as 90Sb of the commercial energy supply of the Philippines is derived from petroleum, all of which is imported. Domestic supplies of fuelvood and bagasse (sugarcane residne) are used primarily as noncommercial fuels. Donustic� coal output is small, and no coin nercially exploitable oil or gas fields have a. Petroleum W100 The demand for petroleum has increased steadily in recent vears, the rate of incre averaging about 9% per year in 1966 -71. Petrole(m imports increases] at about the same rate, and in 1971, petroleurn and petroleum products (fuel, lubricants, and related products) accounted for about 12% of total imports. The composition of petroleum imports has changed little, and in 1971 crude oil imports of almost 9 million metric tons comprised abon, 989 of :ill petroleum and petroleum products imported, compared to about 91 in 1966. The Philippines' four oil refineries (Figure 9, below,, which are predominantly foreign owned, have it coo,bined capacity of 272,200 barrels per day (b.p.d. 'I'hc largest refinery, the Bataan refinery, has it 100,000- b.p.d. capacity and is owned jointly by Esso told Mobil, holding 57 S an(] 43% interest, respectively. The Caltex refinery at Batangas is owned by C alifornia "Texas Company and has a 74,000- b.p.d. capacity. The Shell refinery at Tabangao, which has a 7 10,000 b.p.d. capacity, is a joint venture, with Shell owning 75 and Philippine private interests 25 /r. The smallest refinery is the Filoil refinery at Rosario, Cavite Province, with a 28,200- b.p.d. capacity. 'nterest in oil exploration has varied over the but in spite of past failures it has been revived once again under prodding from President Marcos. The President has outlined tentative plans to set aside 1.5 million hectares offshore and 750,000 hectares onshore for exploration. Foreign participation will he encouraged through incentives. Heretofore, major foreign oil companies have peen deterred from investment in oil exploration because of an unfavorable exploration law. A further deterrent to FIGURE 6. Production of forest products (U/OU) (Million board feet) 196715 1966 196717 19658 1969 1970 1971* 1972 LoR; 2,(7118 :3,412 3, 325 Lumber... 531 397 322 Plywood 57197 .540 522 Veneer 7 786 831 4,711 433 695 1,206 4,911 67121 524 627 4,(if6 568 573 305 4,528 370 nn na 3,577 y 3 nn na na Data not available. *Preliminary. t) f n APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 yi@rn -1121 Offc i expansion %vas the government's pricing police for oil products, which froze prices at unremunerative levels. b. Solid fuels (U/OU) Solid fuels generally are used where they are produced and have little commercial significance. The primary solid fuel is fuel%vood, most of which is used for household cooking. Some is used by bakeries and restaurants and by tobacco fanners for flue curing. Bagasse is used by sugar mills to generate steam for mill machinery. The country's small output of coal is consumed almost exclusively by several cement plants and electric power facilities on Cebu, %where practically all coal production is concentrated. c. Electric power (C The electric %ver industry in the Philippines is poorly developed. The (list rubution of installed capacity is extremely uneven, being concentrated around a few principal industrial and urban areas (Figure 7). Over four fifths of the total generating base is on Luzon; most of the remainder is on Mindanao and on several larger islands of the Visayan group. Only about one -fifth of the population has access to electric power. Na'ionai installed capacity totaled almost 2.9 millic-I kilowatts (k%v.) at the end of 1972, about three fourths of which was in thermal plants and the remainder in hydroelectric stations. I'roducti(m of electricity in 1972 amounted to approximately 10 billion kilowatt -hours (k"-.-hr.). More than three fourths of the national capacity is concentrated in t%vo major utility companies, the privately -owned Manila Electric Company (MI ERALCO) and the state -owned National Power Corporation (NP(:). The remainder is in a large number of small private and municipal enterprises and industrial powerpla tits. MERALCO produces and distributes electricity within its franchise area, comprising Manila and nearby communities. NI'C is it predominantly hydroelectric utility with exclusive rights over the development of all national public water resources. The electric power industry is under strict governmental control, which includes supervision of operations, determination of rates, and approval of plans. The private and public sectors are supervised by the E'ublic Service Commission, %vhich is also responsible for granting operational franchise The state owned facilities are controlled I,y the National I'mver Board. 13ural electrification is largely the responsibility of the National Electrification Administration, created in 1969 to stimulate and accelerate development of rural power supply. In order to provide ceniral coordination, the Power Development Council was established in 1970 to supervise all aspects of power development. The bulk of electric power capacity is concentrated in seven major plants. Four of these are MERALCO- o%wned thermal installations in the Manila met- ropolitan area: the 550,000 -kw. Snyder plant, completed in 1972; the adjacent 385 ,000 -k%v. Gardner plant; the 315,000 -kw. Rockwell plant; and the 220,000 -k%v. Tegen plant. Together they account for about two thirds of the total thermal capacity. The remaining three large powerplants are NPC- o%vned hvdroclectric installations: the 212,000 -k%v. Angat plant and the 100 ,000 -k%v. Binga plant, supplying most of their output to the capital city; and the 150,000 -k%v. Maria Cristina plant, which %vas expanded to its present capacit\1 in 1971. The Maria Cristina plant is locoed on Mindanao and is the on!\- large generating facility outside: Luzon. Transmission facilities are poorly developed and are confined to it net%vork serving the Manila met- ropolitan area and a small tor.,; grid on Mindanao. in areas other than those included in the networks, electricity is sopplicd by numerous small, isolated powerplants. Scheduled development of the power industry through 1976 calls for expansion of the MEIIALCO system by 660,000 kw. and the NPC by 380.000 kw. MERALCO's major project will he the construction of the Montelibano thermal powerplant near Manila, which will include t%vo :310,000 -k%v. units. The NI'C development program calls for expanding the Bataan thermal po%verplant on Luzon by 130,000 k%w. and adding 875 miles of high- tension lines to the Luzon net%vork. Financial assistance for these t%vo projects includes it U.S. US$22 million loan and'a $10 million credit from the International Bank for Reconstruction and Development (113131)). The NPC also plans to expand the Maria Cristina hydroelectric po%verplant bw 50,000 kw. and the Mindanao transmission network by over 00 miles. The 113131) will provide a $23.-1 million loan to help finance� these projects. 'I'll( 113131) is also to provide $21 million in loans to help finance construction of the 130,000 -k%%. Agus If hvdroelect.ic po%verplant on Mindanao. :3. Minerals and metals (U /OU) Mining accounted for only 2.4(') of net domestic product in 1972, but it is an important source of foreign exchange. Mineral exports %worth US$217 million accounted for almost 20'0 of total exports in 1971. Although a %vide variety of metallic and APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 11 i :n..y. -n r rr� ;s- 5 f I 120 124 128 qE 4` D Major Plants. o SATAN SLANDS uic Thermal o 9 t FIGURE 7. Major electric power plants (C) -Irmo me rn c. I I.1,"'.: nonmetallic minerals are produced (Figure 9 below), copper accounts for two thirds of the total value of mineral output, and copper concentrates are the principal mineral export. Between 1965 and 1971, mineral output increased by about 15 per year (Figure 8), making mining the fastest growing economic sector; in 1972, however, the rate of growth declined to 1.7 Most mines now employ modern technology and equipment, and the Philippines mineral reserves are beginning to attract substantial amounts of foreign investment. Furthermore, much of the country remains unexplored, and the government is optimistic about potential mineral resources. The Surigao Mineral Reservation, which comprises part of the northeast coast of Mindanao and the offshore islands is one mineral -rich area soon to be tapped for nickel Reserves there are estimated at 48.5 million tons of iron, 1.4 million tons of nickel, and 99,060 tons of cobalt. a. Capper The volume of copper metal production increased by an average of slightly over 18% annually between 1965 and 1971 and approached 200,000 metric tons in the latter vear, in 1972, output rose to 21 1,000 tons, or by 7.1 e r. The principal copper mining companies are Atlas Consolidated, Marcopper, Lepanto, and Marinduque Mining. Atlas is controlled by U.S. interests, but in 1972 the firm was in the process of reducing its American equity to 4W r' to meet legal requirements before termination of the Laurel Langley Agreement in slid -1974. Copper smelting and refining have been accorded preferred status under the Investment Incentives Act, and the government is studying plans to set up a copper smelter with industrywide }participation. Practicall all Philippine copper production is exported; in 1971 copper concentrate exports were valued at USS186 million. about 171r of total exports. About 85 >c' of copper exports went to Japan and most of the rest to the United States. b. Gold The Philippines' second most important metallic mineral, gold, accounts for 4bout 8% of total mineral output by value. The country remains among the werld's top gold producers, with total production of about 637,000 fine ounces in 1971, compared to 4 fine ounces in 1965; in 1972 gold production declined about 5.4%. Although sonic mines produce gold as a primary product, much of the gold output cones as a byproduct of copper mining. Prior to 1971, most of the gold was sold to the Central Bank at the Official subsidized price, but in 1972 the producers waived their subsidy rights and sold their gold in the world free market. c. Iron ore Iron ore, the third most important metallic mineral, accounts for about 5% of the gross value of mineral production. Output since 1965 has increased by about 6% annually, and in 1971 2.2 million metric tons of ore (55 -60 r Fe) were mined. The most important producing deposits are located in the Provinces of Camarines Norte, in southern Luzon, and Zamboango dvi Stir, on Mindanao. Philippine Iron Mines, Inc., based on the Larap Peninsula of Luzon, produces almost 40% of the iron ore, with the remainder being produced by a number of smaller operations. Practically all of the ore produced is exported, most of it to Japan. FIGURE 8. Production of selected minerals and metals (U/OU) APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 1965 1966 1967 1968 1960 1070 1071 1972* Coal (thousand nnctric tons 94 90 70 32 53 42 4o 22 Iron ore (.55 -60 (thousand metric tons) 1,438 1 475 1,478 1 353 1,561 1,870 2,248 1,692 Chrornite ore (thousand metric tons) 555 560 420 439 �169 566 430 286 Copper metal (thousand metric toms) 6:3 74 86 110 131 160 197 163 Manganese ore (thousand metric tons) 52 58 80 66 20 5 5 3 Zinc metal (thousand meP is tons) 2.1 1.6 1.5 2.2 3.3 3.2 3.9 3.1 Gold (thousand fine ounces) 437 454 498 527 571 603 637 4.18 Silver (thousand fine ounces) 934 1,163 1,384 1,775 1,561 1,702 1,940 1,360 Mercury (thousand fl asks 2.4 2.4 2.6 3.5 3.5 4.6 5.0 ;3.1 Gravel and sand (thousand cubic, meters) 1.3 1.3 2.7 3.3 4.3 4.6 3.7 no Salt (million cavans)** 5.1 :3.7 2.:3 4.3 4.6 4.2 5.1 an Silica (thousand metric, tons 280 235 311 429 638 02 498 na no Data not avaiiable. *January- September. *One Cavan equals 2.13 bushrls.,, 12 APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 W im d. Chromite The Philippines is a distant fourth in world output of chromite. Most of the Philippine ore is refractory rather than metallurgical grade. Total production of all grades of chromite ore was about 430,000 metric tons in 1971, down almost 15 from the average annual output between 19f5 and 1970. In 1972 the index of chromite produ -,ion declined nearly 21% from 1971. Virtually all chromite output is sold abroad, and the country is a substantial supplier to the U.S. market. In 1'- 71 the Philippines accounted for nearly 10% of total U.:). chromite imports, compared to nearly 20 in 1965. P. Nickel Nickel is likely to become a major metallic mineral product of the Philippines. In 1958 a contract was awarded to a Philippine- Canadian combine to establish the country's first nickel mine and refiner at the Surigao Mineral Reservation. Financing for the operation was not secured until late 1972, however, when the Philippine Development Bank and two other government financial institutions agreed to take equity positions in the venture. Foreign loans will finance about two- thirds of the US$245 million cost of the project. Nickel production is expected to begin in mid -1974 and to generate net foreign exchange earnings of about $20 million by 1976 and $62 million annually by 1986. Annual output is proje to reach 75 million pounds by 1975. Long -term contracts have been negotiated for the sale to the United States and Japan of a major part of the expected output. f. Others The Philippines produces a variety of other minerals, but in very small quantities. Silver extracted mainly in the Baguio region on Luzon, is the moat t important of these. Silver production has increased steadily since 1965, reaching almost 2 million fine r ounces in 1971. Production of mercury and zinc also has been increasing fairly rapidly in recent vears, 1 though the Philippines remains an insignificant world producer. Production of manganese ore, on the other hand, dwindled from 52,000 tons in 1965 to only 5,000 tons in 1971. The Philippines also produces salt, silica, gg and sand and gravel in large quantities for domestic j risers. 4. Manufacturing and construction (U /OU) P Manufacturing (Figure 9) accounted for about 20% of net domestic product in 1972; its share of NDP has changed little in recent years. Manufacturing output expanded at an average rate of about 65c a year during the 1960's; in 1972, the index of output in manufacturing rose 5.8 The sector is heavily weighted in favor of import substitution industries, reflecting high tariff policies aimed at providing a protected market for local business interests. The net result of these policies, however, has been the formation of many inefficient industries and an industrial sector with considerable overcapacity. In addition to these problems, the manufacturing sector has been adversely affected by the country's past political instability. All but a few firms in the manufacturing sector are privately owned, and direct government involvement in manufacturing is minimal. Production of nondurable goods is by far the most important part of PhOlippine manufacturing, accounting for about three fourths of the value added by manufacturing. Several industries in this group, notably thy� food and beverage industry (including the export sugar and rice processing industries) and some of tuc intermediate goods industries utilize domestic raw materials, and their contribution to the value of th.; finished products is relatively large. The largest manufacturing industry by far is the food and beverage industry, ..�hick includes some 6,000 rice mills, 600 corn mills, and 26 sugar mills. The efficiency of these plants varies widely. Most sugar mills are large and relatively modern, while the milling of domestically grown grains is for the most part a small -scale operation performed by crude and inefficient methods. A large percentage of the rice ti hulling and polishing and corn milling and grinding is .lone at the farm sites by manual labor, using stone or wooden mortars, wooden pestles, and stone handmills. The most important categories of durable goods manufactured are metal products, transport equip- ment, and electrical machinery. Many of the plants in these industries engage in simple assembly operations .which add little to the value of the finished products. Typical is motor vehicle manufacturing. In 1967, the motor vehicle industry had 40 assembly plants which produced 80 to 100 different models for it market that absorbed only abort 20,000 units a yea Most of the plants utilize some form of assembly line, but because of the widely differing makes and models produced, tools and equipment tend to be general and much ha. is required. The government has been trying to rationalize the industrial sector, a ApA d and a rapid rise in imports resulted in trade deficits but in I'01 it widened again to $42 million, and in averaging $250 million annually in the late 1960'x. 1972 it reached $122 million. The deterioration in the The net services account also worsened in those years, trade account in 1972 was attributed to depressed largely because of growing outflows of investment prices of some Philippine exports in world markets, r income and heavy debt- service payments. The basic reduced shipments of others resulting from weather I balance was kept from deteriorating further by large damage to major crops, and 'a probable deterioration d inflows of long -term capital mainly on private in Philippine terms of trade following the currency account. Short -term private capital also flowed into realignments of Decembe. 971. Nonmerchandise the country in relatively large amounts during the g (invisible) trade transactions, however, with .let period, reflecting large net receipts of trade (supplier) positive balance of $107 million, offset a large part of credit. the 1972 trade deficit. Other net inflows included $81 In an attempt to cope with its rapidly deteriorating million in private transfers, $170 million in official balance of payments situation, and under th grants and long -term capital movement, and $56 1 prodding and guidance of the International Monetary million in private short -term capital movements, all of Fund, the Philippines in February 1970 initiated a which more than compensated for the deficit on the number of corrective measures, including restrictive combined trade and services account. With the I :F's monetary and fiscal policies and a floating exhange allocation of $16.4 million of SDR's in 1972 and the rate. The exchange rate initially went from 3.90 pesos net inflow of capital on other balance of payments to the U.S. dollar to 5.80, and in March 1970 it settled transactions, Philippine international reserves rose to at 6.43. Following the Smithsonian realignment in $281.9 million in December 1972, from $244.2 million December 1971, the peso's par value was reduced to at the end of 1971. $0.1475 (6.78 per dollar), and it was still at that level The Philippine external debt rose about 370% as of mid 1973. between 1965 and 1972, reaching a level slightly over The reform brought quick improvment, although it $2.2 billion in the latter year (Figure 17). Although the was temporary. The trade deficit shrank in 1970 as magnitude of the debt has imposed a serious burden imports declined and exports registered a healthy gain, on the country (servicing the debt in 1972 required .t 9 FIGURE 17. Structure of the Philippine external debt* (U /OU) (Millions of U.S. dollars) 1985 1989 1970 1971 1972 Short- term: Public sector 73.3 198.4 82.8 38.5 31.5 Private 51.2 278.4 288.9 301.1 308.3 Total....... 124.5 472.8 349.7 339.8 339.8 Medium- term-Public sector 135.9 224.1 248.4 239.8 254.2 Private 100.4 399.4 388.9 259.9 214.7 Total 238.3 623.5 817.3 499.7 488.9 Long- term:t Public sector 149.8 255.8 490.0 523.4 853.0 Private 80.1 559.8 880.2 719.8 788.5 Total 238.7 815.4 1,170.2 1,248.2 1,421.5 Total: Public sector 358.8 878.1 801.2 808.7 938.7 Private sector 240.7 1,235.8 1,338.0 1,280.8 1,291.5 Grand total 599.5 1,911.7 2 2,087.5 2,230.2 *All data are on a disbursements basis as of year -ends *Less than 1 year to maturity. *1 to 5 years maturity. tOver a 5 ,years maturity. ,r 22 f s APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3 F t a &t �Jr of exchange earnings from trade and services), the structure of the debt has probabl been more troublesome. The high proportion of the debt represented by short -term Obligations (25% of the total in 1969) left little leeway for debt managers to service the maturing obligations. Efforts to modifv the structure of the debt were part of the economic reforms CONFIDENTIAL initiated in 1970. New foreign borro%vings were subjected to Central Bank approval, and emphasis %vas placed on credits of more than 5 years' maturity. The effects of the reforms are shown in a decline in sbort- term external Obligations to 15% of total external obligations and a rise in the proportion of long -term obligations to nearly 64% of the total in 1972. Glossary ABBREVIATION ENGLISH ACA Agricultural Credit Administration DBP.................. Development Bank of the Philippines IBI:D International Bank for Reconstruction and Development IMF International Monetary Fund MERALCO........... Manila Electric Company NEDA National Economic Development Authority NPC National Power Corporation PNB.................. Philippine National Bank CONFIDENTIAL 23 i f I APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200090003 -3