Debt in the Philippines and the World Bank

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Debt,the Philippin
and ~
Uft _
the
World
Bank
Michael Ashby
After the onset of debt-
repayment problems in the early
1980s the government of the
Philippines turned to the World
Bank for funding. In return for
this assistance the country had
to follow structural adjustment
programmes. In the early 1980s
~
a recession accompanied the
e Republic of the Philippines gained the Philippines was dubbed the 'sick man
political crisis of the Marcos independence in 1946 after successive of Asia'.
dictatorship and the start of Spanish and US colonisation, followed The economic development policies of
structural adjustment. Sustained by Japanese occupation during the the Marcos government were based on a
Second World War.Since the war the US has Green Revolution in rice farming, the export
economic growth occurred in the been a dominant economic influence on the of agricultural products and massive borrow-
early and mid-1990s but the country. Such dominance is often referred to ing from banks. This last strategy aggravated
as neo-colonialism. the country's debt problem. Borrowed money
incidence of poverty remained
has to be paid back in the future, so loans
high. In addition approximately Debt and the Marcos era should be used to finance productive assets
35-40% of the government's such as businesses, infrastructure or educa-
Ferdinand Marcos was elected President in tion which will help generate a higher
budget was spent on debt 1965. Just before the end of his term of national income in the future. Some of the
repayment, leaving less for office, in 1972, he declared martial law and funds borrowed were not used for invest-
social spending, particularly on formed a dictatorship. The Marcos govern- ment but diverted by corrupt government
health and education. This ment was ousted in 1986by a 'people's rev- officials for their own personal use or trans-
olution'. Marcos fled the Philippines in a US ferred to their overseas bank accounts. For
article looks at the structural Airforce jet, and democracy was restored. example, according to the Freedom from
adjustment programmes in the He left behind political instability, a stagna- Debt Coalition, an official received a bribe
Philippines, with particular ting economy, corruption and vast inequali- of up to $80 million to accept Westinghouse's
ties of income. The majority of Filipinos offer to build a nuclear power plant at
reference to their impact on lived in poverty. 1b highlight the contrast Bataan. The plant was too unsafe to open as
education. with its economically successful neighbours, it was located on a tectonic fault line. Never-
2 -- Geography
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The economic strategy of the Marcos government,
based in part on a Green Revolution in rice
farming, has been superseded by the
development of manufacturing in Export
Processing Zones.
N
~TRALIA .
V \7
1
Rgure 1 The Pl111ippines. o km 200
I ,.-J
o miles 100
Population: 73.7 million
GDP per capita (forecast): US$848
~ -
~
SOUTHCHINA SEA
~
~
theless, in 1975 $2.2 billion was added to gov-
ernment debts to pay for the scheme.…read more

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I
.. !:!
:E 45
... Debt burden
~ 30
G)
'C
c ... Education
CI.
~ !. 40
~
25
35
20 30
25
15
20
10 15
10
5
5
Source: National Statistical Coordination
Source: National Statistical CoordinationBoard 1996. Board 1996 and INGBarings. 1996.
o
1990 1995 19'81 1983 1985 1987 1989 1991 1993 1995
Year Year
Rgure2 Spending on education as a percentage of the national Rgure 3 Government expenditure on debt service and education
budget, 1960-95.…read more

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Spending cuts in education have had an
nomic crises. Government debt began to rise adverse impact on student to teacher ratios
at this time. Debt payments as a percentage and have pushed up university fees,
of the government budget began to rise sub- prompting student protests.
stantially further in 1981 (Figure 3). With
nearly 40% of the government budget com-
mitted to debt repayment the amount avail-
able for social spending was significantly
reduced.…read more

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Budgetary
cuts were made in military spending, but
health and education spending were largely
untouched.
Banking regulation is much stricter in the
Philippines than in other countries in the
region, partly because oflonger IMF super-
vision, so excesslending by Filipino banks
never reached the extent of that by Indone-
sian and Thai banks. The Philippines is the
largest exporter of labour in the world, and
many Filipinos work in those southeast
Asian countries worst hit by the economic
crisis.…read more

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