Recession sets back growth plan, but groundwork is laid

Three years ago on Sept. 21, Ferdinand E. Marcos scrawled his signature at the bottom of a presidential decree promulgating a five-year social and development plan for 1978 ti 1982, a ten-year development plan for 1978 to 1987, and a long-term development up to the year 2000.

It was an ambitious plan, envisaging a growth in gross national product (GNP) -- the total output of goods and services -- of 7.7 percent per year in the first five years, a period more than half past now.

"We were somewhat optimistic," admits Gerardo P. Sicat, secretary of economic planning. "We did not anticipate the energy crisis being as large. No one predicted the the difficulties in supply and price."

Actual growth has not met that goal. It was 5.8 percent last year, somewhat slower than the year before, about 6.5 percent over the last decade, and could exceed 6 percent this year, noted Mr. Sicat in an interview.

"Our own assessment is that we have done rather well considering the problems we have had," maintained Mr. Sicat. "These have been difficult times. The world economy was not a source of encouragement. We have suffered tremendously from terms of trade losses. We were the worst affected of the ASEAN [ Association of Southeast Asian Nations] countries."

Prices of sugar, copper, and coconut oil, leading exports of the Philippines, dropped during part of the last three years. The picture has improved somewhat more recently.

"Nonetheless," says the queit-spoken and almost academic minister, "we have a good foundation for growth."

The plan, as he sees it, has three major thrusts:

* Instead of merely shipping out raw materials or commodities, process these resources further within the Philippines.

"This is the most important effort long-term in the development of the country," Mr. Sicat reckons.

For instance, sell plywood and boards rather than logs; export pure copper instead of copper concentrate.

* Develop more labor-intensive activities in industry and agriculture.

Such industries might include textiles and electronics in the cities; or cottage industries in rural areas, such as rattan furniture and woodwork.

* Establish certain basic industries. These are the 11 projects that are highly publicized by the government (See article elsewhere in this section).

Since the plan was launched, the government has moved in somewhat of a new direction to make industry more efficient. "We have to reduce the rate of protection given industry in this country," said Mr. Sicat.

Much of industry in the nation was established on the basis of "import substitution" -- encouraging domestic firms to set up plants to produce manufactured goods imported into the country. Tariff barriers or simple prohibitions eliminated or reduced the competition from imports. This helped push manufacturing up to 25 percent of total national output, or 34 percent if such activities as mining, construction, and public utilities are included.

However, such industries tend to be high cost.

Minister of Industry Roberto V. Ongpin outlined some of the government measures or plans "to dismantle protective devices, to promote a free and more competitive system:"

1. REduce tariffs gradually starting Jan. 1, 1981.

2. Trim the list of so-called "overcrowded industries" which prohibits new firms from entering these activities. Some 20 manufacturing activities were removed from the original list, leaving only eight still protected.

In other words, the bulk of manufacturing has been opened to new competition and growth. The intention is for the eventual abortion of the entire list.

Delisted were household refrigerators and freezers, room air conditioners, radios, record players, electric fans, electric and gas ranges and household ovens, electric and gas stoves, lead acid storage batteries, assembly of cars and trucks, four-wheel tractors, cement, cold rolling, steel bars, tin plate, steel pipes and tubes, meat processing, flour milling, manufacture of tin cans, soft drinks. Somewhat earlier beer brewing had been removed from the lsit, presumably ending the monopoly of giant San Miguel Corporation.

Remaining on the list are fluorescent ballasts, light bulbs, pencils, printing ink, household sewing machines, paints and varnishes, leather tanning, and nonintegrated paper plants.

New firms wanting to enter the delisted industries, however, will still have to get approval of the Board of Investments and will not automatically get government financial support.

3. Review each industry with the objective of "developing a more modern, more competitive industry." Said Mr. Ongpin: "In determining plant size, we have changed our concept from the basis of a domestic market, import substitution objective to installing the most efficient, world competitive-sized plant."

4. Increase the emphasis on small-and medium-scale industry. The private commercial banking systems is being encouraged to establish venture capital corporations to provide equity capital to such industry. Some 22 such banks have agreed to establish such venture capital firms with 5 million peso ($675, 000) in authorized capital (three-fifths from the government) apiece and 220 million pesos lending power altogether.

5. Accelerate the location of industry outside metropolitan Manila. Special tax and other incentives go to firms locating plants in less developed areas of the country. Export processing zones are being located in other parts of the country.

6. Increase the emphasis on plantation agriculture, such as pineapples and bananas, because they generate many jobs and diversify export earnings. They also can mean replanting of logged-over and denuded areas.

7. Give the mining industry a boost. Restrictions on the expansion of mining firms were recently eased to encourage new mines. "We have at least half a dozen major mining properties just awaiting development," said Mr. Ongpin.

Planning Minister Sicat emphasized a need for flexibility in government policy. He noted how Tolstoy in his epic novel, "War and Peace," had an army lose a battle because it had a fixed plan. "You have to adjust as experiments evolve," said Mr. Sicat. "The real world is made up of a lot of pulls and pushes. This is really a political economy."

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