White House Announcement of United States Assistance for the Philippines

White House Announcement of United States Assistance for the Philippines

April 23, 1986 The President announced today a major program of economic and military support for the Philippines. This program is based on an assessment of Philippine economic and military needs by a U.S. assistance team headed by the Agency for International Development Administrator M. Peter McPherson and including senior Treasury, State, and Defense Department officials, which has recently concluded a visit to the Philippines. During their stay in Manila, the delegation members met with President Aquino and conducted extensive discussions with senior economic and military officials of the Aquino government. The purpose of these discussions was to assess how the U.S. Government might be helpful in supporting the new government in its efforts to address Philippine economic and military problems.

The Philippine economy faces a number of severe problems which, if they are to be resolved, will require a sustained effort by the Philippine people and government and the support of the international financial community. This effort will involve both people-to-people programs designed to meet the immediate needs of the poorest segments of the population and policy changes that will lay the basis for lasting job creation and growth. With respect to policy changes, the Philippine economic officials outlined the sound, market-oriented economic policies, both macroeconomic and structural, which the government intends to pursue in order to restore sustainable, job-creating, and noninflationary growth in the Philippine economy. The U.S. team welcomed these policy directions and noted that in recent weeks confidence in the financial community regarding Philippine economic policies and prospects had increased. The U.S. team shared that increased confidence.

In response to this new and promising economic situation, the U.S. Government intends to support the efforts of the Philippine Government to meet its pressing financial needs through bilateral assistance programs, trade and investment policies, and participation in the multilateral financial institutions.

Bilateral Economic Assistance

The United States plans to increase its bilateral economic assistance to the Philippines in both quantitative and qualitative terms. The elements of the foreign assistance package include a higher level of funding, acceleration in the disbursement of funds already appropriated, and better terms under which funds are made available:

-- a request to Congress in FY 1986 for authorization and appropriation of an additional $100 million in Economic Support Funds (ESF);

-- acceleration of disbursement, as feasible, of the currently authorized pipeline of about $200 million in ESF funds;

-- conversion of $100 million of development assistance funding from loan to grant, thus providing a total of $140 million of grant development assistance; and

-- an expansion of food imports under Public Law 480, title I and the President's sugar compensation program, as authorized by section 416 of the Agricultural Act of 1949 (as amended), from $35 to $50 million.

This funding, which totals about $500 million, will all be on a grant basis except the P.L. 480, title I, which is on a highly concessionary loan basis. Thus our assistance will provide economic support without adding appreciably to the large external debt burden inherited by the Aquino government.

In addition the United States is developing, on an urgent basis, a substantial increase in people-to-people assistance, such as school and child feeding, food for work, and health programs to reduce infant and child mortality. These programs are generally administered by private voluntary and church organizations. We also expect to work closely with the Peace Corps program in the Philippines. One target for this expanded effort is the severely depressed sugar-producing region on Negros Island. The increased funding for these programs will come from P.L. 480, title II, and section 416, and will approximately double the currently programmed level of $7.7 million.

Finally, the U.S. assistance program will seek, to the extent feasible, to give direct support to private sector development, utilizing various funding sources including new authorities for the P.L. 480 title program contained in provision 1111 of the Food Security Act of 1985.

Trade and Investment

The U.S. will take the following measures in the area of trade and investment policy in support of the Aquino government's economic program:

GSP -- $219 million of Philippine exports benefited from the U.S. Generalized System of Preferences in 1985, and the Philippines was the 12th largest user of the program. We will be working with the Philippine Government on ways to expand and improve their use of this program.

Textiles -- Philippine textiles exports totaled $431 million in 1985 under the existing bilateral agreement that expires at the end of this year. We will approach the forthcoming negotiations for a new agreement with a view to assuring continuing reasonable growth of textile exports during the critical period of Philippine economic recovery ahead.

Eximbank -- All Eximbank programs are available to support Philippine imports from U.S. suppliers. Short-term financing for recent shipments amounts to $90 million. Support for $230 million remains available, and this is expected to meet current Philippine needs.

OPIC -- The Overseas Private Investment Corporation is prepared to expand its insurance and guarantee programs in the Philippines as new investment projects develop. It also has available direct-lending resources, particularly for joint ventures engaged in by small- and medium-size companies. We will be discussing with the Philippine Government and the U.S. private sector the possibility of an OPIC investment mission before the end of the year.

Department Of Commerce -- The U.S. Department of Commerce is in touch with the Philippine Government regarding resumption of trade and investment missions to the Philippines and a series of Philippine trade/investment seminars to be held in the U.S.

The Multilateral Economic Framework

The Philippine Government has expressed strong interest in exploring the possibilities of taking advantage of the Program for Sustained Growth, the initiative taken last fall by Secretary of the Treasury Baker to strengthen the international debt strategy and support sustained growth in middleincome debtor countries.

The U.S. economic team welcomed the Philippine Government's interest in the Baker plan and expressed the view that the broad policy directions of the Philippine authorities should position it well to take advantage of the opportunities provided in the Baker plan to achieve sustained economic growth.

In this connection, the Philippine Government stated it was engaging in early discussions with the following in order to develop support for its macroeconomic policies and structural reforms: the International Monetary Fund (IMF), the World Bank (IBRD), the International Finance Corporation (IFC), the Asian Development Bank (ADB), and commercial banks.

The Philippine Government has also expressed its interest in an early meeting with other bilateral, as well as multilateral, donors in order to mobilize their support for Philippine economic recovery. The U.S. agrees to participate in such a meeting and will work actively to assist the Government of the Philippines in arranging an early meeting.

Military Assistance

Additional military assistance is urgently needed for basic requirements -- logistics, communications, transportation, and troop support -- and to help promote military reforms. Our support package contains:

-- a request to Congress in FY 1986 for authorization and appropriation of an additional $50 million in the Military Assistance Program (MAP);

-- conversion of approximately $24 million of prior year, unused Foreign Military Sales (FMS) credits to MAP grants and replacement of $50 million FMS credits with MAP grants in the FY '87 budget request.

The Aquino government has clearly demonstrated the intention to carry out needed economic and military reforms. President Aquino has also promised that a constitutional commission will draft a new constitution to be submitted to the people for ratification and that there will be elections for local officials and members of the legislature under the new constitution. The economic and military assistance contained in their package will serve as an important manifestation of support from the American people to the Philippine people as they face the very difficult challenges ahead.

Budget Impact

The President's request includes provision for offsets for the additional $100 million in Economic Support Funds and $50 million in MAP funds to remain within overall budget totals.