US sweet-and-sour recipe for Manila

Reform! Both politically and economically. That's what the Reagan administration and Congress are demanding of the Philippine government of President Ferdinand Marcos.

Although officials don't say it publicly quite so bluntly, they want a stop put to ''economic cronyism,'' with associates and members of the Marcos family getting special business privileges.

They are urging an end to the monopolies that friends of Marcos have in the sugar, coconut, and grain business, hoping thereby to see a working free market develop in these areas. They call for an attack on corruption. They ask that the government cease placing inept military officers in key civilian positions. They want continued movement toward a more genuine democracy.

Rep. Stephen J. Solarz (D) of New York, head of the Asian and Pacific subcommittee of the Foreign Affairs Committee, has been urging a major increase in United States aid to the Philippines as bait for such reforms. It would be offered to the Marcos government on a no-change, no-money basis.

The administration is aware of this Solarz proposal, but, considering the concern over budget deficits, is unlikely to move in such a direction before the US election.

Because it is heavily in debt, the Philippines has been getting a similar reform message from the International Monetary Fund (IMF) and some 400 commercial banks that have lent money to government and private institutions in the Philippines. These institutions want economic adjustment to put the island nation on the path to balance-of-payments equilibrium and out of its current economic distress.

Prime Minister Cesar Virata has been hearing these calls for change during a current visit to this country. In Washington last month, he agreed with the IMF on economic policy changes required for a loan of about $600 million. This is contingent on working out a rescheduling of past debts with the commercial banks.

So, in New York this week, the soft-spoken Philippine official is meeting with 12 representatives of the commercial banks to discuss terms for stretching out payments on a sizable portion of his nation's $25.6 billion in external debts. He is also trying to obtain $1.65 billion in new funds.

In Manila, an independent board investigating the assassination of opposition leader Benigno Aquino Jr. is expected to report its findings any day now. Reports from Manila indicate the findings will implicate the military officers who accompanied Mr. Aquino off the airplane on which he had just arrived.

''I don't think we can heal ourselves as a nation unless we can find a culprit,'' Mr. Virata said in an interview here last week.

If top military officers, such as Armed Forces Chief of Staff Gen. Fabian Ver , are found to have been involved in the assassination, they could be punished without danger of a military coup, he maintained. The military's ''honor and status'' are involved, he said, and thus both serving officers and retired officers and veterans would not permit a military takeover.

A State Department official noted that the Philippines has a strong tradition of civilian dominance over the military. ''The Philippines is not another banana republic,'' he said.

On the economic side, Virata hopes that confidence in the Philippines as a place for investment will return when a deal is worked out with the banks.

Both Congress and the Reagan administration are concerned about the weakening of President Marcos's leadership and the new strength of the communist insurgency in the Philippines. That is a basic reason for the push for reforms. They hope a stronger democracy and economy will ease the communist threat. Unlike foreign-policy issues in Central America, the US position on the Philippines has had bipartisan support so far.

House Democrats have sought to shift $60 million of the $180 million US aid program from the military to the economic area, with the Republican-controlled Senate considering that question this week. But this is not considered a major issue.

The Senate Foreign Relations Committee held a hearing on the Philippines Sept. 18, and last week it received a report on the Pacific nation from two staff members who recently made a 19-day visit there.

The two, Frederick Z. Brown and Carl W. Ford, did not find the Marcos regime ''to be in physical jeopardy in the short term, one or two years.'' But they held the political, economic, and security problems facing the nation to be ''fundamental.''

In the House, the Asian and Pacific affairs subcommittee of the Foreign Affairs Committee held hearings Thursday, with officials from the State Department's Southeast Asia bureau, the Agency for International Development, and the Defense Department testifying. Civilian experts were heard at a hearing last month.

Virata, who has been finance minister since 1970, expects an agreement with the banks in a week to 10 days, with a final package ready by early November. Later he will also have to deal with official creditors (foreign industrial-nation governments) in the so-called Paris Club.

Until parliamentary elections last May when he won a seat in the National Assembly, Virata had always been appointed to office by President Marcos. He has been regarded as an honest, American-educated technocrat who has not enriched himself at the expense of the public.

His specialty is economics and finance, and he talks most freely in this area. He spoke of the Philippine balance-of-payments deficit shrinking from $2.7 billion last year, when there was a massive flight of capital following the Aquino killing, to $1.5 billion this year. He hopes for balance in 1986.

One factor in this improvement, he said, will be a reduction in imported oil as new coal plants and a nuclear power station come on stream.

Hit by the foreign exchange crisis, the national output of goods and services will decline 2 percent this year, the prime minister said. Other Southeast Asian countries have all grown handsomely.

Virata predicts that inflation should shrink from the current 60 percent level to ''the low 20s'' by 1985 and ''low 10s'' in 1986. Because inflation is dropping fast, he argues that interest rates of 35 to 36 percent on government securities are attractive and should at some point tempt back flight capital. (One crude estimate is that Filipinos have stashed some $10 billion abroad over the years.) At the moment, Virata says, capital outflow is ''very low.''

The peso was allowed to fall 22 percent against the dollar in June. That was one of the measures prescribed by the IMF as a way of ending the nation's foreign-exchange crisis. The government in June also cut its spending 5 percent and raised taxes.

Virata said the government was taking steps toward restoring a floating exchange rate in which the market sets the price of the peso in dollar terms.

Peso devaluation hurts most those who live in the cities, where the government party is often regarded as weakest. It helps the rural areas, where security risks from the communist-led New People's Army are greatest, by making it easier to export farm products. Moreover, rural people are less dependent on increasingly expensive imports.

The US too has been distancing itself from the Marcos regime through various, somewhat symbolic acts. President Reagan, for example, recently met in Washington with Jaime Cardinal Sin, the country's Roman Catholic prelate and a strong critic of the Marcos government.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.