Bu-lat-lat (boo-lat-lat) verb: to search, probe, investigate, inquire; to unearth facts

Volume IV,  Number 11              April 18 - 24, 2004            Quezon City, Philippines


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IMF-WB in the Philippines: Half-Century of Anti-Development

The people of the world have little to cheer as the IMF and WB turn 60 in July. The Philippines has suffered under them for nearly that long and, with no real end in sight, will continue to be the worse off for that.


The International Monetary Fund (IMF) and World Bank (WB) were conceived at a United Nations conference convened in Bretton Woods, New Hampshire, U.S. in July 1944. From the beginning their aim has been to create an open international trading and financial order, allegedly to prevent a repeat of the supposedly protection-induced Great Depression of the 1930s.

The IMF started operations in March 1947 and the WB earlier in June 1946. Since then they have been enormously successful in prying open neocolonial economies and putting the most advanced industrial powers in a position to assert their economic dominance amidst a so-called “free market.”

Today the IMF-WB has 184 member countries. The IMF has provided loans amounting to U.S.$ 107 billion to 87 countries.  These include only loans that are currently outstanding, thus, still covered by IMF conditionalities. All in all, the IMF currently monitors 136 countries.   The WB last year provided U.S.$18.5 billion in loans and grants to over 100 countries. For foreign monopoly capital these are financial resources well-spent: they go far in making sure that neocolonies remain open to imperialist plunder.

Never mind the anti-people and anti-developmental implications that come with that plunder. The Philippines is a case in point.

Enter the IMF-WB

For nearly half a century, the IMF and WB have been vital in ensuring that Philippine economic policies hew to the needs of foreign, especially U.S., monopoly capital. These have resulted in persisting economic backwardness far removed from the development rhetoric the multilateral agencies pathologically spew.

The country’s first WB loan was for the Binga Power project in 1957 and its first IMF program was in support of Pres. Diosdado Macapagal’s foreign exchange decontrol program in 1962. All told there have so far been U.S.$11.6 billion worth of loans and U.S.$75.4 million of grants in WB “development assistance” for 176 programs and projects, and 24 IMF programs.

These IMF stabilization and WB structural adjustment programs set macroeconomic targets, demanded policy changes and influenced virtually every sector of the economy. Trade and investment liberalization, privatization and deregulation have steadily progressed under the purview of the IMF-WB.

Foreign exchange restrictions and import licensing requirements were dismantled in the 1960s.  Likewise, mounting incentives for foreign investors were started during the said decade. In the 1970s, the peso was floated and so-called export industries and export processing zones set up. Tariff rates and quantitative restrictions started to be cut back in the 1980s, especially with the tightening financial stranglehold over the country following the early 1980s debt crisis.

The 1990s in turn saw the most intense period of market-oriented measures in the country’s history. The then existing minimal and selective protectionist structures were taken down including reduction of regulated items and decreases in tariff rates. Foreign investments were liberalized starting in 1991 with 100% foreign ownership allowed in most sectors and complete freedom to repatriate capital. Foreign exchange controls were dropped in 1993.

Water transport was liberalized and deregulated in 1992, telecommunications in 1993, banking and shipping in 1994, airlines in 1995, oil in 1996, and retail trade in 2000. Over U.S.$3.5 billion worth of government assets were privatized including oil firms and water utilities. Essential road and power infrastructure was turned over to the private sector through build-operate-transfer (BOT) projects following deregulation in 1993. The Senate ratified the General Agreement on Tariffs and Trade (GATT) in 1994 and the Philippines entered the World Trade Organization (WTO) in 1995.

No development here

Philippine ruling and policy-making elites had so internalized the neoliberal model that the 1994-97 IMF extended fund facility was considered the country’s “exit program” from the IMF. Certainly, government commitments under the “last” two IMF programs, in 1994-97 and 1997-2000, are a virtual road map of Philippine economic policy: oil deregulation, banking sector liberalization, a regressive and inequitable taxation system (including the EVAT), rice and corn import liberalization, retail trade liberalization, and power “reforms.”

Working in parallel, the WB has made loans contingent on policy changes in the health, education, agriculture, telecommunications, transportation, banking, power and water sectors. Its programs also provide a “development” gloss with selective infrastructure projects in support of an export-oriented economy and towards showcase “safety nets,” poverty reduction and alleviation, social services, and environment projects.

Yet what has the headlong rush towards a utopian capitalist “free market” economy actually wrought? More to the point, what has come as a result of opening up great swaths of the domestic economy as opportunities for amassing private profit for foreign monopoly capitalists and their domestic counterparts?

After a half century of   being under the IMF-WB and its market-oriented macroeconomic and structural adjustment policies, the overwhelming majority of Filipinos remain poor, sick, uneducated and hungry.

The 3.9 million jobless last year is the highest number of unemployed the country has ever seen. The 11.4 percent average unemployment rate, consistent during these last two years, is the highest on record since the 1950s and even worse than the rates during the severe economic crises in the mid-1970s, mid-1980s and early 1990s.

Adding the 5.2 million more underemployed means that 9.1 million Filipinos, who are seeking work, are either jobless or still not earning enough to live decently. Yet half of the jobs to be had are just in irregular low-paying own-account and unpaid family work. Contrast this reality with how the government cites jobs created without mentioning that many more jobs are lost and needed by a growing labor force not to mention the dismal working conditions.

As a result the number of poor people is unprecedented. In 2000, according to the latest census data, around 75 percent of Filipinos or 58 million people were struggling to get by on just PhP82 or less a day; some 90 percent or 69 million people lived on PhP137 or less. The government routinely invokes a much lower official poverty incidence of 40 percent but this uses a poverty threshold of a measly PhP38 per person per day.  Moreover it obscures how things have gotten worse in the last three years of rising joblessness.

Overall, the Philippines remains backward, agrarian and pre-industrial, unable to provide the livelihoods, goods, and services needed by the broad masses of the Filipino people. It has no real industry to speak of and is barely able to produce even basic consumer goods, much less the intermediate and capital goods of a modern industrial economy. Agriculture remains grossly underdeveloped and, with the recent rush of cheap agricultural goods imports from abroad, is deteriorating rapidly.

The domestic situation is so bad that over 7.5 million Filipinos have been forced to migrate overseas in search of livelihoods. Remittances of U.S.$7.6 billion in 2003 (not even counting perhaps U.S.$4-5 billion more unrecorded) are already over 10 percent of Gross Domestic Product (GDP) – making the Philippines the most overseas worker remittance-dependent economy of any significant size in the world. Overseas Indian and Mexican workers send back about U.S.$10 billion yearly but their economies are much larger so the equivalent figure is less than 2 percent of their GDP.

At around 72 percent of GDP, the country’s public and private foreign debt stock of U.S.$56.3 billion, as of September 2003, is possibly the highest level in Asia. Levels in Thailand, Malaysia, Taiwan, Korea, India and China by the same measure range from around 10-50 percent of their respective GDPs. Only Indonesia, with its foreign debt stock of  69 percent of GDP,  comes close. Yet some U.S.$85 billion has already been paid in foreign debt servicing since 1970. The exchange rate is hitting record highs and scraping PhP57 to the U.S.$1.

It is also notable that the unraveling disasters in the power and water sectors are the result of their privatization since the mid-1990s. The IMF, WB and the Asian Development Bank (ADB) were all threatening to withhold loans unless the National Water Crisis Act of 1995 and the Electric Power Industry Reform Act of 2001 (EPIRA) were passed.

It will be recalled that the WB and ADB hailed the use of independent power producers (IPPs) as models for all of Asia and the entire underdeveloped world. The WB in particular also pushed for water privatization through such small efforts as sending Filipinos to study water privatization in Argentina to actually drafting the concession agreement and designing the bidding process for selecting two private utility operators.

The long exit

All these problems abound because the IMF and WB have never been interested in promoting Philippine development. From the beginning, they have been instruments for manipulating the domestic economy according to what would best ensure foreign monopoly capital’s super profits. In particular, they have been about imposing “free market reforms” that create the economic conditions that will be advantageous only to those who are best positioned to dominate it – the foreign monopolies and their junior partners among the richest fractions of the domestic population.

Certainly the value of import-export trade since 1996 has been around 90-100% of gross domestic product, or double the level since the first WB policy-oriented structural adjustment loan in 1980. For the IMF-WB, this is a triumph of opening up the economy.

Tight fiscal and monetary policies and an ever-devaluing peso are used to create an economic environment conducive to the fickle operations of foreign capital. Public responsibility for health, education and other social services is foregone for the sake of fiscal discipline; yet debt payments to big creditors and military spending to put down domestic dissent continue. Higher revenues are sought through increasingly regressive taxes. The domestic economy is choked by prohibitively high interest rates.

What happened to the supposed “exit” of the Philippines from IMF supervision in 1998? So far this hasn’t even materialized. Following a two-week visit last December, the IMF recommended that the Philippines remain under the IMF’s non-loan post-program monitoring (PPM) scheme indefinitely. This obliges the government to allow regular semi-annual monitoring visits by an IMF team which, in turn, would officially determine whether to give its “seal of good housekeeping” or not.

The IMF’s findings are conventionally taken as an indicator of a country’s creditworthiness. With the availability of foreign loans hinged on the IMF’s “seal of good housekeeping” and the country’s dependence on foreign loans to fund its deficits and prop up the economy, the IMF remains in a powerful position to influence domestic economic policy.

As it is, the last IMF mission in March has, among others, explicitly asked for higher power rates and the implementation of a universal charge; pushed for intensified power sector privatization; called for higher excise taxes for cigarette, alcohol, and petroleum and higher value-added taxes; and discouraged trade protectionism.

Which way out?

In any case, it’s important not to overstress the problem of Philippine underdevelopment as rooted in the IMF-WB.

The course of Philippine (under)development has for over a century been profoundly determined by the interests and demands of foreign monopoly capital. The country has been used as a source of cheap human and material resources, a dumping ground for surplus goods, and a captive outlet for recycling surplus capital. Local elites have collaborated in this neocolonial plunder for a share of its spoils. The vast majority of Filipinos, on the other hand, has been exploited as mere fodder for generating monopoly super profits and remains inhumanly poor.

The IMF-WB is just a detail in this picture. The real root of the Philippines’ chronic crisis lies in foreign domination and elite rule intrinsic to monopoly capitalism, or imperialism. As such, the solution is only incidentally about “reforming” or doing away with or coming out from under the IMF-WB. More important is the implementation of a comprehensive socio-economic program. The socio-economic program to be implemented must be free from the oppressive and retrogressive constraints of foreign monopoly interests whether under the auspices of the IMF-WB or any other multilateral institution such as the WTO, as well as through the binds of bilateral agreements. 

The interests of the Filipino people come first: there must be a genuine agrarian reform, which breaks the feudal constraints of land monopoly, peasant poverty, and rural backwardness; then national industrialization as the essential and leading factor in economic development.

The surging of popular protests around the world and the little victories won – such as momentarily stymieing the WTO – prove that the bastions of elite power and privilege are not invincible. The surging too of people’s struggles in the Philippines shows that the Filipino people are grasping the only truly liberating alternative. Bulatlat.com

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