THE
_GPt_ENT_
_F
T_
FHZLXPPlNIKE
(DBP)
,_rm._, _. _'_._*
-STAFF PAPER SERIES HO. "84-07
_Re_earch
Felio_
_m_li, mmime Inmti_uCe M
"_
fO_° L_v_z._p._xr_;
="=_.,
The _i.ee_s e_p?_e¢_ _n _hi_ study ate those of a_,_ho_ . _n_ do no% n_c_a_iiy _'ef.l_ those of Ir_stitut e.
the the
THE DEVELOPMENT AND THEFINANCIAL
the
poor
obtain in
quality
of
auoitional
view
of
status-of aevelopment of
Tan
present
study
examines
the
control
financial
of
from An
very of
of DBP
It
relateo
DS_
in
or
iS
a
on to
the
public thiS.
this
study
to
foreign
the
to
sources financial
government-owned
to
_elation
inability
of
relation
governmenÂŁ, in
its
analysis
dependent
much
(DBP) ANALYSIS
and
domestic
important.
role
policy
status
portfolio
heavily is
THE PHILIPPINES A DESCRIPTIVE
crisis.
is-indeed
(1954)
loan
either
corporation
Study
c=eoit
its
funds
the DBP
BANK OF cRISIS=.
funds. But
the
while
A her
selective
analyzes
current
the
financial
crisis.
Section DBP.
The
Sectlon
I.
I
sources
I._.
The
ObjeCtives
The _ha_ter
briefly and
last
of
Section
uses
section
of i
of
its
the of
ob]ectives
D_P_s
concludes
Establishing
Ob3ectives I,
reviews
the
the
are
establlshing discussed
in
ouÂŁ1ined
in
stuoy.
DBP
establishing charter
funos
of
which
. DBP
ar_
states:
"To provide credit facilities for the rehabilitation and develop:,_ent and expansion of agriculture and industry, the reconstruction of property damaged by war and the broadeDing and diversification of the national ecor_o_y, and to _romote the establishment of _.rivate Gevelop_ent banks in provinces an_ citiesp there is hereby createu a body corporate to. be known as the Development Sank of the pn1!ippines, ...'_
2
Two the
observations
mandate
the
given
•efforts
of
institutions In
an
DBP the
to
can
be
the
the
Tan,
approval, into
costs does
studies the
due
inwolved.
risks
This
:has been
to
pro3ects
are in
at
will the for
be
governmentusually
creation of
cannot
in
be
and
exploited financial
difficult
if
information.
conducting
not
the.
rigorous Although loan
properly
taken
_-.,i:_IC pro3ect of
not
considering
pro3ectsbefore
oftentimes is
of
course,
externalities.
compounded
several
receiving
is,
obtaining
assessment
behest
problem financial
externalities
certain
point
inaGequate
case
the
on
invoiveO
problem
the
ma_e
this
The
it is
itsel;f
with
financial
private
in
engage
A .case
partly
support
•Unfortunately,
not
are
consideration.
failed
incurred
country,
externalities
that
but
iaenkifypro_ects
feasibility
are
market
with
the
perhaps
DBP,
there
19_4).
in
I_o5).
like
identifyprojects
DB_
to
and
of
financial
"government
capital
capital
reflective
But
short-term-oriented
prohibitive
studies
are
that
is
Fir6t,
supply-leading
(Patrick'
belief
(see to
these
it
process
problem.
real
statement.
supply-leadlng
a
institutions,
in
Unfortunately,
•this
indeed
capital-starved,
impossible
use
the
subsidies"
indivisibilities
Second,
making
government
the
institutions
to
this
development
if
financial
from
broad.
the
is
using
on
gleaned
economy,
government
premised
to
very
circumvented
government
by
is
hasten
viable
institutions, direct
be
authorities
underueveloped
institutions
can
the
which
exchange
further
if
DBP
government.
risk is
made
of
ti_e
big
pro3ects
s_]ppo_ted
by
does
look
closely
not
Indeed,
very
DBP.
3
at
the
viability
of
a certain
considerations
weigh
to
Indeed,
initiate.
supporteO
by
problems
than
problems. of
This
per io_
fo_
resources
the
PNB.
the
real
same
to
existing
projects
big
has
pro3ects
aoded
more
underdevelopment
undetermined
•we•re
the
very
objectives
_ne
at
an
period
_Oer
_rowtn
rate
As w,n_h
of
covers when
average
rate
study,
higher
for
the
the DBP' s
were
about
18
Thus_,
growth
confronts.
in
the
as
will
he
shown
25.8
than
DBP's
DBP_s is
below
total of
the
presence one
secon_i
the
banking
percent
It
country,
of
entire
ii_eceJ_.;ber 1963,
bankJ_l_,g system.
institutions
it
DEP
period
i's in<_ee<_ significant,
phenomenal
probles_s
of
parti_uiar
9rowing3
_erio_a.
t_e
status
_,ore evident,
an__al
system
its
the
_54._u._
of
financial
is
duz-in_
reached
banking
Zut
of
government
financial
became
average
resources
biggest
which
failure
of
political
DBP
the
This
•resources
percent
total
of
annually
system
behest
solutions
ef
difficulties
_ercent 2&,.u
Status
I_-S3.
DB_s
determining
present
unquestionably
analysis
financial
the
in
Oftentimes,
tE_e DBP.
Financial
The
at
has
heavily the
provi_eo
establishing
If.
the
DBP
more
pro)ect.
of
the
only only
in
to
isasks
4
Ao
Sources
Of
DBP's
authorized
subscriDed
Funds
by
shareholder's
As
Tan
the
to
amounted
(1983)
has
institutions with
PNB
in
in
an
ano
base
ordinary
facing
raising
government IS82,
percent This
in was
National using
savings
of
its
total
by
their to
due
mainly
deposits
increase
the
deposits
of
rather its
total
government
in a term
S_ecial-Funos-National
of
in small
25
of
Government
only
.about
Table
i).
from
18.4
liabilities made its
was
is
was not
1983_
by
so
as
-not
debts.
placed
bearing recorded part
the
policy
oofnestic
_25
This
in
more
and
with
195_
dropped
noD-interest
_h_cn
endeavor,
Between
(see
borrowing
and
constraints
co_npriseo
changeo
years.
competed
compareo
resource
withdrawn,
form
DBP's
financial
this
_,itn(_rawa]s
external
amount the
total
_arently to
is
agencies
corporations.
huge
huge
it
government
the
of
than
its
little
it
markedly
tne
which
the
with
to
very
private
liabilities
percent
does
Recently,
deposits
share
9.5
further
to
and
an_
19_2
with
successful
due
time
<_overnment, its
However,
bank
fully
1983,
since
considerably
agencies
Interestingly,
DBP
from
quite still
private
one-fift_
to
is
December
out,
deposits. deposits
is
_5.4B.
competing
Although
Oeposit
to
of
which
unoerstandable
from
attracting
corporations. DBP's
away
is
_SB
As
pointeo
This shy
is
government.
equity
intermediation. policy
capital
of
back fixe_ as total
/5 Table
TOTAL
Liability
TCTAL
Items
LIABILITIES
Short - term Foreiqn
(ML)
1
LIABILITIES,
DBP
19S3
1982
1981
198_
_7.5
38.7
3_.2
23._
4.4
6,7
6.6
3.5
2.3
1.6
0.6
1.3
35.U
29.7
25.2
27.4
29.9
31.E
33.1
35.6
B.9
18.4
21.8
2_.8
13.7
12.6
12.7
12.2
,:,orrowings (%)
Do_:_estic
(%}
LonO-ter_L _/orrowings_ _::et of Cu_r=_nt [-iaturities Foreign
(%)
Do,nest ic Time
an¢
Others
(%)
Savings
Deposits
(%)
(%)
$OL_RCF,S" :
DBP
Annual
Reports,
158___-_3.
liabilitles part
nor
of
to
out
welcome
equity.
government
contribution 9one
of
of
since
for
liabilities
DBP
in sir_ce
without
resources.
it
government
proportion
move
This
Also,
it
was
a smart
avoided
on
increasing
corporations
which
the
previous
it
effectively
affecting
cii_ noC
to
pay
already
This
reduced
the
equity
had
years.
_eces_arily have
move
was
its
a
total
its
total
interest
on
such
aeposits.
Agid_ :-;ills
f_o_
to
raise
instrument
_...._
only
Dﾂ｣_P
its
limited
tu,r_e<J into
comprised
about
perioc
bobroofings reliance
to
note
on
over
the
Inc[easing
emp,qasis
gzowing
of
eﾃ葉eznal
leans
yeazs,
foreign debt
December
lending
re.lied
debt 1983,
._ore
its
total
on
the
_as
of
for__e_during
of
th):oug_1 DBP It a
shift
foreign
borrowings problem
The
guarantees
possible.
to
lon-_-te_m
liabilities
coursed
there
were
operat_.o,qs_
borrowings_
loans
fro_;_ do_,,estic on
tbis
.fro-.,', securities
GovernmeL't
multilateral
funos
the
It
shor[-term
iong--terf_
t,ﾂ｣o_:_
of
.its ambitious
stu<,:_:.
lon(3-ter__
to
on
As
Countryside
ij,_bilJties_
borrowin:js. less
.its
procee</_
ancl orocee<_s
sustain
uneer
that
tote!
tnree-fifth_
ane
the
_,[$
But
issu_,_
l.i,(:it=ed.
mepo,_J,ts to
ant
fun<;s.
ve_ 3-
per',:_nt, oi-
borrc_,,iDgs
the
mo_e
were
Since ve_,_,
_.q;,osit.<_,, Dﾂ｣-_-,_also
made
wort_whiie in
securin9
so_rces.
surely the
is
DBP_s
The
contributed
country.
AS
o9
December
1983,
DBP's
borrowings
comprised
liabilities
of
Sector's
2
borrowings _a_iK
v_rioa_
to
of
than
offset.
phenomenal
1563
co inci_ed
alone
be
As
_nd
over
were
I_.2
gathered
with
Government
in
_:
the te
during the
a
DÂŁ_P's
gro.up,
the Its of
(_ee
the
Sank
were
also
other
agencies
But
perio_.
in
this
net
[_ote
le_ding Thus,
was
W_.icn
contributions
3).
_orld
largest
co_.t_ibutions
_ank's
Table
DSP_s
Interestingly,
ant
same
at
Central
agei%cies
198_-_3
dec:line
of
,;be The
_ank's
loom
resources.
ADI_,
wer.e __/
oti_er
the
we
sources
oet_oc
Central
[_h_:_ D8_;
of
percent
if
to
Gove:cnment
b./ _n_ _: __ Cer,tral
rise
the. Sanking
debts,
Di_,P_s resources.
[_ational
iinc_eased
the
National
the
de ci_neC
consistently
percent
9.1
[_;_P's ___,,,_-<._ _)o_rowi,_g_
the
moze
and
cred ito_:s
_-_atio_ai: Goveri-u_e_
consiste_.tiy
of
institutional
to
exchange
percent
iostitutions
private
cc_ntri_)utors
long-term
foreign
external
also
de_f_o_J, tS_
si9nifica._ s_are
can
in ciuoin_ other
and
eeb ....o._ tt_e country.
t_ie
an_
t_e
borrowings
present_
cor_t_ib._tors and
of
total
outstanding
_r_i_i!ht.._
cont.ribUtic[_
of
debts,
f_xed-.tet_
impcatant
Table
s
short-
24.5
external
!ong-term
out-standing
percent
Philippines,
Sector'
outstan_/J, ng
the
6.6
outstanding
[-!on-_anking
total
the
outstanding
that in
by
the
although
Since D_P does not cO_:;pete w_th the private financial institutions iP raising domestic funos, the "other private creditors" refezreC to above must have been composed mainly of foreign private creditors. }_ete that D_P is authorized to incur obligations with or without governme6t guarantee.
/8 Table
SOURC.=:S OF
Institutional
Central
and
BORNOWINGS, BY INSTITUTION, (In Percent)
Source
Ba_k
(•,ationa I <overnmen other
t
Svstem
(SSs) _.;_
Asian Oeve!c:ment _:,_nk (A•D}_) Worl<_ 6an_ ant: Prfvase Credi to,rs
e Inclu¢_es
O_
*::SSS bon_s,
SOURCES
DBP*
1983
1982
1981
1980
33._
_o_.
21._
18._
21.0
23._
2[_._
29._
_},_
i_.0
12._
14._)
36, _
41 ,_
39. £:
25
of
•
Agencies
SOC:{a]. Security
.2
39.
c:eposits.
is
re_,_u[_,ci by
:
D_:,_ Annual
law
tO
Reports,
_nvest
198_-83.
percent
its
investible
funds
in
/9 Table
NATIONAL
GOVERNMENT'S
3
NET
'
.nE_DING
TO
DBP
(:n _)
'..
..
[.Oar: Outle? •.
Ac:vance:% .--_-Or Secu_.i-_.g •Gu_._&p._e_.d Loa_::.,,
1,982
.. +" "
l_.4g
82.55
.. _ 6,ZS&._
•_.}_zeakdc)_n _e
not: av_.ilable.,
5-_}mist,--.v of
,
1981
..
.
t :,-., t Ler_i i_._3
:
1.9|_
_
I_.=_:,ayc'_ei_t .c>_Adv_c,-cea
SOUF.CE
}.9_.4
the
?.u_get.
_77=_3 4_6._5 26.88
"_
5f>
342
64
81.94
_3.35
(_¢I. i I
259..26
Ii
put
more
pressure
9overnment
is
substantially that
raising
allow
unacceptable out
hig_
Anotne_ by
woulO
issue
it
improving
assets.
5ut
issue
B.
Oses
is
of
just
by
the
bank
is
to
Oealt
with
market
with
DBP
raise
no_
section.
to
migh_
be
crowding
the
p_esence
selling
in
next
choices
the
funds
is
t_e
seems
treasury
alternative
can
is
this
aggravate
ann
of
set
but
and
let
It
alternative
bills
collections
everl this
limited
the
it
areas.
possible
would
C_ntral
loan
very
which
unless
other
securities,
felt
choice
a
deficits
reduce,
in
One
more
currently
possible
to
have
funds.
yieloing
ThiS
trying
because
problem
of
DBP
to
budget
expenditures
more
DBP
government
also cut
therefore for
on
bills.
internally
unprofitable
very
promising.
Loans
outstanding
Funds
m
Table
4 presents
comprised
a
investments, items
conspicuous
in
foreclosing
A
shift
is
noticeable.
in
1563
from
assets total
19_2 baa
in
one-half
of
its
total
shares
of
the
assets, these period
relatively
the
i_
their
itself
most
engaged
asset
198_-83_
a
rise
while
two
constit_ted
D_P
small
share
was
extensively
accounts.
the
compositio_
Outsta_Cin9 _I2D
D_P.
during
assets,
when
of
The
constant
acquireo of
assets
one-fifth.
relatively
proportion
in
over
about
were
Although
little
the
in
the
of
the
incustrial
previous
year,
loan loans
portfolio _umped
whereas
of tO
DBP _21B
outstanding
â&#x20AC;˘
/12 T_ble
4
DBP
ASSETS,
TOTAL
ASSETS
Investments Loans
(%)
(%)
Acquired Other
(_B)
1983
1982
1981
198¢
54.9
44._J
34.7
27.1
2@.4
22.9
56.3
52._
53.3
53.7
22.8
21.1
Assets
(%)
6.1
6.1
2.9
3.6
Resources
(%)
17.2
19.b
21._
21.6
r
SOU_CgS
_
DEP Annual
_eports,
198¢-83.
13
agricultural Table for
loans
5). the
1983
Also,
The
_g._47_
markedly
firms, facing
amount
sector
slightly
i_2,
increased
of
at
which
acute
economic
the
time
were
that
adaitional
industrial
loans
DBP
the
is
expense
given
rehabilitation used
more
firms
show
An
the of
some
can
DBP
is
given
ana
provide
key
industrial
comprised
45 6).
Marketable treasury
of
further
from
of
to
help
powers
to
funas
over
securities bonds, CBCIs
total the
in
private
of
by
DBP,
were highly
of
the
sector. loans could
Although for have
t_e been
whenever
difficulties.
invest
percent
loan
financially-strapped
of
understanding
Investments
1982.
industrial
auto_atically
composition
to
in
seems
manaate
than
DBP in
DBP's
proportion
extend
such
in
_2M
big
It
by
industrial
supported
to
(see
_._41M
the
of
lot
great
firms.
But
1983
a
financial
the
to
for
agricultural
firms,
of
equity
when
rather
signs
the
in
went
the
ailing
examination
that
_3.2B
approved
composition
a
manuate
selectively
portfolio
Table
of
from
loans
difficulties.
therefore,
at
_3B
decreased
financially
probable,
firms
of
_6.6M
in the
to
while
to
shift
occurred some
declined
average
in
perceptible
portfolio
bonds,
the
agricultural
from
sector
slightly
in
its
investment direction.
marketable
securities
development
banks
marketable
investments
years,
DBP's
their
are composed of and other government
and
securities
in
1980
(see
share
had
been
treasury capital securities.
/14 Table
LOAN
5
PORTFOLIO,
DBP
(In _M)
1983 ,|
,,
Agricultural
Loans
Industrial Advances Real
Loans on
Estate
Guaranteed
Loans
Loans
Government
Loans
AdvancesPrivate Development Banks
1982
1981
198_
,_
--
2,_63.2
3,145.8
3,683.2
21,@i_.%
12,_08.1
i_,438.8
1,472.7
1,674.4
4,413.4
4,541.3
3%3.7
365.6
473.5
443.9
2.,766.9 7,768.2
425.1
2_4.7
3,896.2
3,246.7
313.1
3_6.6
349.%
252.8
•
or.e= Loa.s •,, Less
Reserve Possible
Net •[
523.2
e64.6
24_.8
165,2
3G,919.7 •"
,,
:
59,7
for
5osses
Loans
SOURCES
68.3
DBP
Annual
57'2
22,8?5.4
18,516.5 r
Relports_
198g-83.
58,7
1 _l i
ri
r-
14,546.8 r- _
._r
-
"
/15 Table
INVESTMENTS,
1983
Investments
in
Securities
Equity
DBP
1982
1981
1980
Marketable (_M)
Investments
Private
6
(_b_)
Corporations
_
2,_12._ (!719)
2,168.g9 (21.5)
2,415._4 (30.5)
2,573.52 (45.8)
9_212_66 (82.1)
7,923.70 (78.5)
5,496.77 (69.5)
3,14_.85 (55._)
87.9
83.4
76.9
82.6
Commercial
Banks*
6_8
18.7
15.2
4.5
Government Controlled
Owned/ Corporations*
4._
4.6
6.4
In.9
1.3
1.3
1.5
2.0
10,_92.7Z
7,911.81
5,714.37
Private
T
O
*Percen[
$O[iRCES
Development
T
A
of
_
L
total
DBP
Banks*
(_)
equity
Annual
11,225.46
investments.
Reports,
198Z-@3.
16
consistently
declining.
securities
constitute_
investments. has
In
been
look
at Annex
of
the
to
the A
converted
loans
from
place,
recoup
more
shoulc_
by
its
with
DbP
in be
help
losses.
new
like
hotels
to
proportion to
seemingly
these
But
so
that
went
to
the
expense
not
equity and
obtain
these chea_
ailing
funds mining,
maturing
that
it
DBP
in
viable
capital.
far,
loans
additional
was
firms,
A shown
banks,
DBP,
noted
to
equity
went
facility,
order
providing
firms.
D_P all
the firms
Thus,
by
hopes
to
indications
otherwise.
been
investments increasing
government
at
owned/controlle_
aevelopment banks
of
loan
e<_uity
more
commercial
firms,
DBP
financial
some
Equity had
other
provided
a significant
by
total This
ailing
like
encouraged
externalities
extending
_oint
who
companies
of
1983.
to
fir;_s,
of
It
or
investments
for
into
DBP.
firms
D_P
total
investments
percent in
whether
that
marketable of
equity
55
of
supported
availing
were
from
e_uity
financially
previously
with
some
But
of
intricate
in
infused.
first
to
For
previously
list
of
percent
question
in
percent
share
87.9
promising
partial
companies.
were
new
increase
i7.9
the
to
the
seems
investments
increasing
198_
raises
funds
in
contrast,
in
development
1983,
only
consistently
investments
equity
In
banks. in
DBP_S
of
e_uity
the
corporations
com_:ercial
corporations
Interestingly, total
private
and snare
investments
of
banks, private
commercial was
quite
17
significant, banks.
even
In
to
have
"to
promote
its
equity
DBP
A,
private
since
ease
the
private
financial
are
mandate
private
commercial
development
banks
explici_
of
in
of
commercial
the
establishment
investments to
thanthat
seven
equity, the
designed these
Annex
greater
of
DBP
development
banks
is
banks,,
must
difficulties
shown
have
been
encounterea
by
banks
in
banks. Equity
large
contributions
lots
zeceived
(see
equity
Table
by 7).
banks
and
respectively.
after
D_P
banks,
it
DBP'S
e{_uity
larger,
turned
commercial gatherea
strappeO
tO
the
of rural
was
to
_267h,
_ank
advances
four
private
received
only
_12.9M
for
using
ailing
grew
DDP
as
that
oommercial
Central bigger
19_3
which
is
re_iscounting.
the
- _0.2B. Eank
noting
commercial
figures: 195_
banks
whereas
worth
from
were
commercial
to
also
Central
banks,
is
ailing
follo_ing
the
two
capital
Central
and
commercial
banks
capitalization
the
commercial
It is to private development from DBP. A_)proved
i_83,
I_hat
exposures
- _.7D; it
In
a6aitional
banks
19_I
analysis,
ten
outstanding
from
_0.9_;
and
provided
its
to
contributions
_evelopment _5.b_,
DBP
As
banks
got
Bank
for
as
may
- _I.6B; So,
in
hel_ed
be
1982
the
-
final
financially
a conduit.
Indeed.
be
noted that aside from equity investments, banks ana rural bani:s also receive advances aavances in 1593 amounted to _158M.
J The unfortunately commercial
figure for 1583 includes cannot be separated banks capitalization.
regul_r from
reuiscounting reaiscounting
which for
/18 Table
EQUITY
INVESTMENTS (Amount
NO.
1983 Amount
7
APPROVED, = _M)
No.
DBP
1982 Amount
No.
1981 Amount
No.
1980 Amount
Banking Rural
Banks
P_ivate Banks
"
10
5.6
12
11.4
24
8.6
46
10.9
4
12.5
3
16.6
ii
32.8
15
2@.i
2
267.Z
2
153.8
4
57@.0
1
15.3
60
649.6
Development
Commercial
Banks
IndustrialReal Firms
Estate 114
2,649.4
4_
2,12_.3
30
_OT5
:
In addition to equity investments, DBP also provided the following advances to private development and rural banks: 1983 - _158.0M; 1982 - F22Z.2M; 1981 - FI_4.3M} 1988 - _ISI.IM.
SOURCES
:
DBP
Annual
RepOrts,
198[_-83.
1,121.8
19
this
has
far
financial
reaching
system.
First,
facing
financial
equity
contributions
compares the
implications
well
Central
on
Bank,
workings
inefficient
aifficulties
are
from
with
the
directly
This
obtaining
which
sometimes
Moreover,
e_uity
loans
the
commercial
rewarded
DEP.
of
by
form
charges
the
banks obtaining
of
emergency
the
subsidy
loans market
from rate
of
ÂŁ/ interest. maturity the
while
inefficient
paying
the
from
banks
onerous
helped
investments
Central by
penalty.
DBP
ailing
co_n_ercial
current
of
Central
policy
through
mergers.
motivated
to
alreaay
got
extent
the
banks
undermining
its
opportunity
of
it
banks
use_ as
a
tnore
from
DBP
Central
very helping
facility
at
the
exposures
lever
DBB's
at
to
pull
access
liberal
to
discount
the Central _ank from Central
it
to them the
banks
cost.
aavances
to
seven
rates
only Bank
is
an
4
more
they To
DBP
its
the for
had
in the
policy
commercial
forge
Bank's
exerts
anymore
DBP
pursue
to
banks
accomplice
aillng
together Central
in
since
lower
Bank
the
from
the
not
Actually,
Central
escape
consolidate
too
policy.
Clearly,
undermines
are
a much
allows
to
have
participation
banks
efficient
Bank
own
DEP's
to
not
have.
able
banks
capitalization,
its
Finally,
DHP pays for aavances capitalization.
with
support
were
Bank
Inefficient
merge
that
co_nercial
naa
the
Bank
_econ_,
rehabilitating
do
a
merger.
rediscounting pressure
to 9.5 percent for commercial
on
annually banks
!/ money
supply.
when
the
Support
This
funds
problem
borrowe_
inefficient
from
with
rehabilitating
co,_.mercial
by
Lank.
Central
resort.
new
will
be
Another guarantees either
to
Since
to loans
3umped
in
1983
on
the
guara|_teed
(see
the
Table
country's loans
Central
to
in
1982
obligations, to
_1.7i5
This
external foreign
and
eebts
no
loans December foreign
94.3
not
Table
b_rden
lot
of
6). their
of
firms
on
remained
high
added
percent
repay
advances
since
currency
of
(see
the a
inevitably
is
providing
obtain
_I5B,
coulu
when
last
that
(both
denominated
Dear
of
As
guarantees
to
better of
so
that
market.
guarantees
of
Bank.
cannot
amounted
task
banks
funds
otherwise
loan
to DBP's
done
ailing
excess
foreign
of
lender
which
5).
were
the
iS
Thus,
four-fold
be
Operation
D}SP nau
maturing
is
used
the
DEP's
given
obligations.
own
currency
obligations,
their
its
dominated)
firms
it
rehabilitate
or
foreign
F.rivate
pay
perhaps
were
view
In
could
outstanding peso
banks.
all,
accentuateO
Bank
banks
by
domestic
were
maturing these
the
and
which
of
Central
accounts,
uses
created
been
loan
to
companies
total
currency
it
aspect
from
1963,
if
have
ma3or
_fter DDP
only
Honey
of
other
Allowing
desirable
the
commercial
preoccupation
the
could
failed
guaranteed
L_ore
almost
paying
all
at
_I.BE
pressure of
the
denominated.
..... !/.... of the .,, t0_tne
This StUdy: i_3-_4
issue is relate_ to the one discussec_ in Section IV "A Review anG A_raisal of the Government Response |! PIDS Balance-of-payments Crisis, (forthcoming).
/21 Table
GUARANTEES __
TOTAL
_
OUTSTANDING, _
(_._)
Foreign Domestic
Guarantees Guarantees
8
(US$_) (_M)
4 _
1983
1982
1981
1980
15,97_
8,_45
5,21_
3.605
1,076
847
629
467
904
275
56
55
NOTE
:
Exchange rate used are: 1983 _9.171 to $1.0@; 1981 - 98.2@ to $I._.
SOUkCES
:
DBP
Annual
Reports,
DBP
!98M-83.
- _14.0_2 to $1.0@;
to $1.00; 1982 and 1980 - _7.6_
22
As
DBF
viable
was
an_
oragged
inefficient
financial
Qifficulties.
were
and
slow
worse
over
to
hard the
guarantee stoou
a
12.45
low
harLly
able
to
quality
of
its
_.67
borrowings,
anu
buuget
_ith
funds
sources,
since
trickles,
Qernaps scale
loans
in
the
desire
DEP
internally loan
greater
turnover
of
course,
re,_uires
a
with linited raaical
in
Central of
the
rather
than
be
funds shift
and
to
can
foreign
and
government learn on
finance
gestation
in
of
repayments
used
shorter
availability
aepend
guarantee
can
bad
generating
must
and
the
to
Bank
eventually
and
they
pro3ects
on
1982,
was
due the
further
DDP
su_;port
serious
ca_
down in
and
already
Clearly,
Perha@s,
less
went
internally
own
loan
outstanding
I_3.
Lank
its
of
percent
non-
weregetting
ratio
it
11.15
of
repayments
they
percent,
funus
_eficits,
fact,
total
then
the
guarantee
the
Central
_<ith
and
the
percent
D_P
encountereo
198_,
16.64
thicket
too
In
portfolio.
_ade
internally.
loans
the
In
generate
loan
it
by.
1561,
supvort,
borrowings
_aediu_
of
in
only
budgetary
to
level
to
generate
come
years.
percent
finally
its
to
into
firms, Its
repayments
at
deeper
period
be
assured.
D_P'S
lending
funds foreign to how
curb to
external come
in
small
ano
so
that
This, policy.
of
23
III.
Concluding
The to of
the the
Remarks
study:
"A
1_83-54
BOP
economy
for
the
very
little
external
loan
believed
to
acceleration
run
financial
The create DSP
more
a&versely difficulty
guarantee
are
facing
cannot
be
_eneral
present that
the
consioerin
quality 9
the
the
positively
to
significant
and
increasing_ as
ano
rates
on
support. of
granting
to
certain
contributeo
the
it
heavily
budgetary
country,
firms to
this
did
Oevelo_i_ent
the not
process.
number
of
D_P-supported
in
a
â&#x20AC;˘crisis
_ic_
affected
D_P
four
in
raising are
acute
at
of
crisis_ of kinds
in
funds their
economic
ais_ose_
slo_,down
economic
been
the
discernible,
haO
in
that
relied
generous
economic
repayments
clients
the
a
observed
contriDution
externalities
performance
firms
trouble°
attendant
has
assets
very
that
quite
Response
the
have
support
at
investment
is
instead,
Bank
guarantees some
It
is
ano
equity
shows
into
problems
Government
reviews
deficits
of
contribute
Experience
budget
giving
of
necessarily
and
Central
have
of
years.
intermediation
OEP's
and
few
these
borrowings,
Although, loans
to
Appraisal
(forthcoming)
past
gap
contribution
_iG
and
Crisis"
savings-investment DBP's
Review
of
as
the there
DbP's of
internally.
Its
as
were
loan project
First,
levels
problems.
economy.
DB_ _ut
portfolio supported
nelpeo it
loans
because
_oreover
alreacy
it
DBP
_vays.
lowest
fast
way
wants
tO
even strong woulc: even
gives a_d their
acquired because
without
of the
inoications deteriorate before
the
24
onset
of
sources
the of
funds
restriction cannot
on
â&#x20AC;˘ be
curbed.
budget
. The are
least, can
con_itions
turn
necessaril_ raising bau
sha_e.
i_4
be
the
crisis
out
earlier,
at by
D}..P'_._
the
an
a
auto__atic
_eaknesses
economic
retu_
are
Government
is
financ.ial
p[esept
fund in:_5
to
r_ormal
lmf_,rovement _irst
as
on
cor_ecteu.
merely economic
of
economic
t_lat does
no_:
lending
is
a._d
still
last
well
_
January
D}SP's
a&
_ts
.o. _ is
difficulties. crisis
choose.
responslbilitie3
ant:
!:[emised
T.he[e
the
effec<e_
.... _c, verna%ent_
course,
to reduce
can
u_til
accounts_, of
_atioDal
_J.'his, of
Hence,
.-,or guarantee
-_Le_ Denest
DLP
_._o!icy of
DLP
is
DBPo
tt_e econo,_},
of
u.,%.,
tn_t
non_.e_fo_:inQ
tDe
causee
_<ia_
money
difficult
orogram
its
im[Jla.,_,ente_ while
ze_abiii, tahion
fundec
weaknesses.
the
be
of
support
to
which]
certain
restr_;ctu_:ing
Bank's
cjo fro,_ _ere?
attituee
Perhei,_-s_ a
a
..... _._
trois _.ost,_re.
unless
a %_ai. __-anu-â&#x20AC;˘_ee " :"
current
drastically
_riori_y
fro,?,
the
be
to
external
reserve
will
wou___c D_P
ado_,t
of
Qf
aims top
aiternat_..ves
to
assumec
gives
_<nere
st i_ulate_
DBP
it
is:
bet._er.
growth
government
the
Central
soFport
three
The
eorrest_on&ing
will
non
can
_hicn
which
ut_iess
require funds
the
to
because
Third,
since
since
access
impaired
buogetary
future
Qefic_t,.
DSP's
borrowings.
finally_
the
it
greatly
anymore
<._estion
at
First,
is
expecteo
in
SeconO,
foreign
And
obtain the
cris_s.
Bqenci_-__ _
in
the Eut
accoant_
line
belief as
_ ' _,_t_ that
pointec_
exposes.
D_JP_s
conoitior_
will
financial
status
25
The
second
s_ggests
going
_iscussed loan
alternative Qirectly
above,
portfolio
therefore,
an_
IQans
._ucce:_sfu•! • as
to
way
will
to
iendin9
p_o]ect_
of
it
of
of
Acquire:L
assets
DdP's
_romisso_y view. to
p¢,s_imle
support
_;ay be
DSP's
weaknesses.
As
the
it
poor
of
_._:essu[ing
it
D:_P-to
if
its
infiow
of
It
by
it
to
{:ay.:nent is
cefeats
the
i:oreover,
so
aS
in
,nandate
r_..u_e_
te
additional
exerciseu
certain
more
fires
ulti_nate
sell
aim
show
is
UDC,
fo.c
th_: sale
m
/zomissory
the
is_ce., not
of not
borrowings,
issuing
in
line
•selling free
compro_uise
not
to
must
be
no,re. long-term
with
ac.-_uired
the t_e
would
asset_.
sector_
_n&
long-tar
to
ac_/ui _ e_
private
a
favorea
interna_iy.
does
not
This
generated
pur_-ose
_._tb re_,ar:_ to
so
funGs
certain_y
i_
a
that
the-
_¢DC _itn
For
.[2oztfeiio
to.
c,ot
iD
lean
like
.for DLF _,
D}3P
support
be
is,
necessary
DL?_s
wbeneve;:,
exalted
so l.u tO
its
i_n_,zovement.
The
<_
19e
mini_,%izeu
usee
l._oreover,.
corporation,
a_
of
funds.
info_._at..ior_ is
G!ff_culties.
_nt.erba_k
quality
sources
_reas
fir__:_{., esi?eciall.y
cash
fur,ds. assets.
Tt
_._:oj_.ct_ _,_itn externalities.
_T_-ust be
n,ote
un_ante¢_
compelling.
tile criteria
viability,
_._st
_nstea.u, raise
w_,ich
i_to
¢.h_ <uaiity
I_ara of
in
_"_,_a_auto__a_.icaily_
gover:_ment
sa_e
ioo_
a co_t:iDuous
effer_s
generate_
by
out
finar_ciai
V_gorous
anoth£):
fine
of
more
C_.'_<c¢_J..:[:a;3}< -_u!--_.orts_ou,_ ....... "
im_,rove
assu_e
to
heart lie
<_4ove_::._._ntf[oi_
_nc_
si_gns to
manner
v._ble
-:i_'_iectJ.vei_ratne_
[)_
the
aii in_
nocwetary_
se_:ie
weaknesses
deubtf'al
zei'_bilitate
the
perhaps•
_._.oq4_:am_ ao_,=uate
_istinguis_% deter
to
its
necessary
a_rOVing
is.
tt_sasse£_
government
use
of
its
of
bt_dgetaT:y operatien
26
with
the
funds
and
these,
of
and
possibility DBP_s aoe_uate
aria
for
" _ t t_a:
oD3ectives its
[_y granting big
The
last
carefully.
sectors be
it of
the
%uantified.
issue
mor_
_n_
correcti,
_ro_le_ to
economy, Perhaps,
extensively.
of
. All
DBP's
policy
of
and
effect very
externalities. expeY, iencing firms
support.
the
entire
financial create_
more
DS_' _,ay be
more
Also,
its
effects
the
research
a
lot to
a
market
ones.
out
future
to i]elp
pbs_in%
one
its
economy.
rates
no,ever,
especially
are
government
must,
be.
now
out
ge[_ecous
existir,_g
of
.i._, carlying
cn
has
tnat
•absence
Di_P-._u_.oi:Led
b,/ exte_ding
ng
is
This
noted
the
witB it
Sank
DSP
DB_.
been
with
successf_i
at
first,s,
of
appears
Central
seriously.
has
unclear
• big,
•loaDs
alternative
The
what
aD6
I_
_hich
p_-ofound
firn_s,
instead
raising
through
closlng
pro_ects
C-ent_al
a
inefficient
distortions
than
of se_era_
guarantees
• of
ma-ae
ciJffic:ulty
I:,a$
of
look.
viable
massive
non-viable
than
cons iderea
_nat
_erious
about
f_il_re
addition,
restructuring
_.t hai_ z_.c)_be_[_
despite
indeed_
be
is
_._-_xisteBce is
p_ee_.c_ment
_ indJ.ca_,o_
number
a
the fi_anciai
t_e
rather
radical
alternative
i_fo_nstion
_loreover_
a
In
func_s.
deserves
leason
power.
should
re(_ulre
raising
•third
in
mobilization
borrowings
course,,
••The
party
savings
foreign
lending
of
of the
through
Bank
of
wishes
be
examineo
on
financial stucly
system_ can
deal
more complex
different neec: with
to
th_s
Annex
PARTIAL
LIST
OF
COMPANIES
A
WITH
DBP
•. •"
Firms
A.
_
F inancia_l A ssoc_ated
2.
Znterna_ional
3.
Merchants
4.
PCIB
5.
Pilipinas
6.
PZSO
7.
P;:oducer
Bank Corporate investment
Deveiopmenr.
B.
Corp.
_-%ank
s Bank
Tra_ers Urban
T6tal
E:gui y__
Royal
212.(_
30.0
*
88.0
4Q._
35.8
*
30.0
280.0
6.0
Bank
Sank
• ._=_._;b_ic Pl_nters
16o_
....
Institutions
I,
9.
•
Exposure (_M) _ of
Amount
•......................
EQUITY
Bank
50.0
*
10,_
7.6
36.._
3.2
B_Lnk
De_[elopment
* *
fSank
*
_{ostei r_ i
Ii,
Hotel
t-_i [ ado_
12.
_ani]a
_r_(_riP,
13,
_!aniia
Peninsula
14.
:Xi_rana,_ i!onels Co_'p o
hotel,
In(:.
i{etel
._
48.0
_
49.9
163.r,
68.4
/. 13.8
54.2
.!2_5.£_
6'7.8
*
54.0
:
_n</ Resort !
,
15..
Phiii_pine
l:_OteJ, ie_[_
16.
_esort
Hotels
17.
Silan_s Hotel,
internatio;_al IrJc.
Znc.
Co_p.
__0!-(_
42.0
t
;
18
Ma_,,ila Mandarin
19.
_entur_
P_rk
Hc_cl Sheraton
56 180_
0
* *
,
/27
--
v
Firms
C.
Alfa
21.
Continental
22.
nakeview
23_
Redson
Textile
Industrial Textile
24.
Solid/
25.
Synthetic
Mills
Manufacturing
Corp.
Mills,
28.
.Textfiber
Corp.
3!:. E.
PUI_
and
Industries
*
IM(_. 0
66.fa
10E)._
*
2z3._.
Corp.
i@@.0
,_._:_
213.Q
*
2_J8,_
,
Co.
Paper
*
Philippines
Paragon
Paper
I_.0
Cor_,oraxion 388._
industries,
i_c.
40g.(_
16.83 !0_._
Mining
B atong
33.
_iarinduque
_4ining
Industrial
Corp.
Buhay
Mining
34.
Sabena
35.
__ester n Minolco
3_.
95.47
.Pu__l_p Manufacturi_
and
32.
F.
I(_0.O
Corp.
Mills
the
I09.(_
Textile
Riverside
of
l_O.g
•
Inc.
.: 27.
Faper
T'otaf
241.0
Corp.
25: L,:_: _'e._t i 1_.:,_ __.
3_.
Exposuze ' (_M) % -of
Corp.
Manufacturing
Isarog
.....
Bnd
Manufacturing
29.
t
inn
•Integrated
2_.
P_er.,
\
Amount
Tex t i!e•_Manufac•tur
D.
=1
Cemeyt :;}l.CianO
V_ining
C'orp_
*
24.8
ac,_
Corp.
1_98._
19._8 *
17.0
,
,
.. C_':,:__r_*z CC.k'._.._
,. AII_
e.$ ¢ I[/
f28
• Firms .....
.. •
37. G.
•
L
_,
,
Equity
4 •
Pacific
Cement
Co.,
Inc.
*
32.2
Other s
38.
CDCP
39.
DBP
4_.
PLDT
41.
Philippine
42.
DBP
43.
Hotel
_:
744.94 Management
Data
..
*Data
SOURCE
Exposure (YM) % of Total
Amount
:
Co.
Blooming
are
R,.G. i982: Staff
2.5
I_0._)
*
22.0
I,i_)_._
Center
Develop_,_ent _. _:=.-
Miiis
Corp.
13.8
*
1.25
i_.9
2._
I_)8.0
.....................
not
available.
_anasan, Pub kit Enterprise A Definitional _nd_x0nomical Paper Series _o. 84-g_.
in
the,Philippines in E)(_icise, = P!OS"
REFERENCES
DBP,
Annual
Report,
i980-83.
Manasan, R.G., Public_Enterprise in the Philippines _efinitional:--and • Taxonomical Exercise, P_iD_ Series No. 8_-_2,_1984. ........ •Patrick, H.T., "•Financial Development Underdeveloped Countries," Ecanoai.c Cha_, Vol. 14 (January !966). PIDS,
Tan,
A Revi@w an_ Appraisal of t_e !983-84 •Balance&of-Paym6n6{-Crlsis E.A.,
Dgve!_pment
Finance
and
in !982: Sta_ Pape.
and Economic Growth in Developme_nt and.._Cu!tura! _ -
Government Response _ [forthc6mlng). State
Banking:
to
the
A Survey
of