Big Nations Pledge Aid of $3.5 Billion to Philippines

A 25-member group of nations led by the United States and Japan on Wednesday pledged $3.5 billion in aid this year to help the Philippines salvage a poverty-ridden economy and prop up its fragile democracy.

The amount was far more than had been expected.

The surprise announcement, made by the World Bank acting as chairman of the international aid consortium, was followed by another unexpected pledge from Japan to offer a $600-million Export-Import Bank loan. The new Japanese offer, made in addition to its $957.8-million pledge to the so-called multinational aid initiative, would help the Philippines reduce its $28-billion foreign debt.

In announcing the $3.5 billion pledged for 1989 by 19 nations and six international financial organizations, the World Bank noted that the aid, “if maintained over a four-year period” until 1992, “would yield . . . $14 billion” to the government of President Corazon Aquino. Her term ends in 1992.

Roberto Villanueva, chairman of the Philippines’ aid coordination council, acknowledged that the four-year figure was not firm. But he said “we now have a mechanism in place to mobilize the external assistance the Philippines needs to carry out its mid-term economic program . . . and sustain democracy.”

In a news conference, Villanueva warned the Philippines that its ability to use the 1989 aid would determine whether it could continue to receive $3.5 billion, or larger amounts, in later years.

Reform Is Key

The United States, Japan, the World Bank, and others represented at the news conference expressed concern about the Philippines government’s inability to decide how to use the aid.

Villanueva also warned Filipinos that the program “will be successful only if we implement the (reform) policies we have declared.” Among those, he said, agrarian reform holds priority. A special donors conference to discuss only land reform, he added, will be held in Manila “as soon as we can set a date.”

“From now on,” said Kenzo Oshima, policy chief of the Economic Cooperation Bureau of Japan’s Foreign Ministry, “the Philippines will be committed to explaining (to the donors) how it is carrying out reforms” it promised in Tokyo.

Until Wednesday, officials of both the Philippines and the World Bank, including President Barber B. Conable Jr., had described goals for the multinational aid initiative as a five-year commitment by governments and international financial institutions of only $5 billion, with another $5 billion as a goal for foreign investment.

The bank refused to reveal a breakdown of the pledges but said this year’s $3.5 billion represents “a doubling of commitment levels” made at the previous meeting of donors to the Philippines two years ago.

As such, the one-year commitment represented an annual increase of about $1.75 billion, compared to Conable’s goal of $1 billion a year.

Only the United States, Japan and the European Economic Community made public their pledges. On Tuesday, Secretary of State James A. Baker III told the group that the United States would make an annual contribution of $680 million for two years--$200 million a year above existing commitments.

Biggest Aid Conclave

Japan announced its one-year pledge of $957.8 billion and the European Economic Community said it would commit about $350 million. The Japanese pledge represented a 25% increase over 1988 aid, while the community tripled its average over the last four years.

Villanueva said the Tokyo meeting was “the biggest aid conclave for one country ever assembled by the World Bank” and said it represented “the large reservoir of good will that exists in the international community for the Aquino government.”

The meeting also represented a significant diplomatic move for Japan. Although Japan is expected to surpass the United States this year and become the world’s No. 1 aid donor, it never before has taken the lead in organizing an international aid program.

After the plan for the Philippines was proposed by four U.S. congressmen in 1987, Japan joined the United States in co-sponsoring it.

For South Korea and Singapore, the Tokyo conference also marked a historic turning point. It is the first participation in an aid-giving project by the former aid recipients.

Japan’s offer of an extra $600-million loan from its Export-Import Bank, Oshima said, is contingent upon the Philippines reaching agreement with a consortium of commercial banks on its debt payments. In its announcement, the World Bank said it hoped the commercial banks would agree to provide the Philippines with new loans as a result of “the confidence displayed by the international community” at the Tokyo meeting.

Villanueva said the issue of whether the Philippines would allow the United States to maintain military bases in the Philippines beyond 1991, when the current base agreement expires, was “never discussed at any stage of the negotiations” leading up to the multinational package.

But officials of both the United States and Japan, which is dependent for much of its imports of natural resources upon sea lanes that pass by the Philippines, have said privately that they hope the aid program will persuade Manila to extend the base agreement.