‘Plenty of Hurdles’ Remaining for Philippines : U.S. Executives Ready to Invest, but $26-Billion Debt Could Stand in Way

A press conference of 27 American corporate executives here last week was starting to sound more like a chamber of commerce rally.

One by one, the executives stood up to give testimonials of their convictions about the stability of the Philippine economy a year after President Corazon Aquino took power from a corrupt and aging regime.

“The danger and risk lies in not making an investment in the Philippines now,” declared an ebullient Tony DePhillips of Team Holdings Ltd., a San Jose microelectronics firm. “The businesses that come in now are going to get the cream of the investment crop.”

Peter H. Walker, chief executive officer of Amerasian Development Corp. of Westlake Village, Calif., was equally upbeat.

“The Philippines is readier than it ever was for new investment,” he said, announcing plans to invest $16 million in two rural mining projects. “I believe great opportunities do exist in the Philippines.”

Perhaps the most enthusiastic of all was the co-leader of a delegation of the Overseas Private Investment Corp. that spent last week meeting government leaders here and assessing the business climate a year after the fall of former President Ferdinand E. Marcos.

“The Philippines is on the brink of an economic miracle itself, and the time to get into it is probably right now,” said Craig Nalen, president of the Commerce Department’s corporate arm. “We see the Philippines as a place of stability . . . potentially a very excellent place to do business.”

Beneath the surface that day, however, skepticism lingered, and few voiced it better than Alexander B. Trowbridge, private-sector co-leader of an American delegation that President Reagan personally sanctioned in an bid to help the battered Philippine economy recover from 20 years of stagnation and corruption under Marcos.

Trowbridge, a former secretary of commerce secretary and now president of the Washington-based National Assn. of Manufacturers was asked at the press conference if anyone in the room that day was less than 100% enthusiastic about future investment here.

“We all are,” he said. “I hope that we haven’t painted too rosy a scenario here. It is still early on, and there are plenty of hurdles to be overcome.”

One of the biggest hurdles in Aquino’s battle to resolve the Philippines’ worst economic crisis since World War II is $26 billion in debts with U.S. creditor banks, and Finance Secretary Jaime Ongpin arrives in New York City today for negotiations to reschedule about half of that sum.

If the talks fail, as they did last November when Citibank blocked a rescheduling agreement approved by the other nine representative banks, the psychological effect on the drive for much-needed private investment here will be enormous, Ongpin told reporters Saturday.

“It is very important for us to settle this problem on rescheduling right now--the psychology is critical,” he said. “We’ve got to get moving, and if we cannot settle this, that’s going to be a drag on the whole recovery, and there’s a price to that.

“It just creates one more area of doubt that you don’t need. I’m not an economist, but, to the average businessman, the psychology is very important.”

Ongpin said he believes the Philippines’ position was strengthened by Brazil’s recent announcement of a moratorium on payment of interest on its billions of dollars in commercial foreign debt.

“It has put much more pressure on the banks,” he said, adding that a debt rescheduling agreement reached last week between Chile and its creditor banks also helped the Philippines because “it is a reflection of an increasing tendency on the part of the banks to be far more realistic.”

But Ongpin clearly stopped short of optimism.

“I have learned that when you’re dealing with bankers, it’s not always healthy to be optimistic,” he said. “One must be realistic. We expect a very tough time at the table, because the banks are under tremendous pressure in terms of their bottom line right now.”

Trowbridge and other members of the U.S. investment delegation interviewed separately last week sounded similarly realistic in their appraisal of the Philippine economy. And they agreed that not all of the economic developments under Aquino have been positive.

An increasingly restive and militant labor sector staged a record number of strikes during the past year, frightening away many conservative private entrepreneurs, both foreign and Filipino. Trowbridge did note, however, that most businessmen lauded Aquino’s decision to remove her leftward-leaning labor secretary late last year, but the government has yet to articulate a comprehensive labor policy.

The nation’s armed Communist insurgency is escalating, further destabilizing rural regions where jobs and private investment are needed most. Perhaps the biggest deterrent to rural investment is an escalation in the rebels’ practice of extorting “revolutionary taxes” from businesses operating in regions where the Communists have consolidated their control.

Corruption still plagues the nation’s customs service and other departments that deal with foreign investment, and even Amerasian Corp.’s Walker declared angrily at the press conference that “sweeping changes” are “extremely urgent.”

Taken together, Trowbridge said, the danger signs have left private business with “a wait-and-see attitude following the change from a year ago.”

But Trowbridge was quick to add Aquino has “passed a number of tests” in the past year, chief among them her ability to create at least the appearance of returning stability after a year in which her government was challenged at least three times by military coup plotters.

Citing the voters’ approval of a new constitution last month and scheduled national assembly elections in May, Trowbridge said, “My guess is that we’ve crossed a pretty big threshold of assurance on the political side, and now it’s time to address the economic side.”

The most crucial steps, he said, lie ahead.

In addition to the debt rescheduling, Trowbridge said Aquino must stop delaying approval of a comprehensive Overseas Investment Act that will, for the first time, lay down ground rules and policies for foreign investment under her government for the next five years.