FTA Statement on Christian Aid’s ‘Challenging conditions: A new strategy for reform at the World Bank and IMF’

Challenging policy conditionalities in IMFWB lending

We, at the Fair Trade Alliance of the Philippines (FairTrade-Philippines), welcome the initiative of the Christian Aid asking the UK government to withdraw its material contribution to the International Monetary Fund and the World Bank in the light of their continuing failure to remove the harmful conditionalities in their lending programs for developing countries.

Such withdrawal is long overdue.

We, in the Philippines, are painfully aware how such policy conditionalities can retard and set back development. We first borrowed from the IMF for a stabilization loan in 1961-62, or 45 years ago. In exchange for this loan, the Administration of then President Diosdado Macapagal (father of present President Gloria Macapagal Arroyo) devalued the peso and removed the import and foreign exchange. The devaluation and the decontrols slowed down the growth of an economy that was hailed then as the second fastest-growing in Asia (next to Japan). In the l970s, the IMF and the World Bank co-chaired the Consultative Group of Creditor Countries for the Philippines, which imposed a wholesale program of reorienting the economy in favor of a labor-intensive export-oriented industrial policy (LIEO) bankrolled by loans from this group supposedly engaged in ‘financing development’. The martial-law government of President Ferdinand Marcos gladly allowed the group to dictate policies in industry, agriculture, investment, trade and infrastructure development. When the LIEO failed, the same creditor group led by the IMF and WB moved for a more radical economic liberalization program called the structural adjustment program (SAP) in exchange for a series of structural adjustment loans (SALs). As a result of the 25-year-old SAP-SAL program, the Philippines today is one of the most open economies in Asia and in the world.

However, the Philippines is also a disaster story in Asia. In the LIEO decade, the Philippines was overtaken by the Asian NICs – South Korea, Taiwan, Singapore and Hong Kong, countries which refused to follow the standard IMF-WB prescription. In the SAP-SAL decades, the Philippines was overtaken, on a per capita GDP/GNP basis, by Malaysia, Thailand and China. India, despite its huge population, is about to overtake the Philippines; in a few years, also by Vietnam. All these countries have refused to be under the IMF-WB policy discipline and standard neo-liberal program. Indonesia was poised in l996 to overtake the Philippines on a per capita GNP basis; but the Asian crisis and Indonesia’s subsequent surrender to the IMF program set back its development. Thus, it is ironic that the Philippines per capita GNP of $1,000 in l980 has not changed in the last two and a half decades of SAP-SAL program. In 1972, the total foreign debt of our country was $2 billion; in 1985, it was $24 billion; and today, it is up to $56 billion. And yet, through the decades, we have paid out a total of over $100 billion in interest payments and principal amortizations!

Thus, while politics is undoubtedly one of the explanations for the Philippine economic debacle, the economic recipe dished out by the IMF-WB through their standard neo-liberal policy conditionalities is also undoubtedly a major explanation too.

Hence, we welcome the Christian Aid’s initiative recommending the withdrawal by the UK government from the IMF-WB capitalization program because of their failure to remove harmful policy conditionalities. These harmful conditionalities have cost the Philippines – and presumably other heavily-indebted developing countries — decades of lost development.

In conclusion, we propose that the Christian Aid initiate a full-blown policy and theoretical review — and debate — on the development methodology and framework used by these twin sisters in justifying their harmful policy conditionalities. Development is too important to be left in the hands of a few textbook neo-liberal economic tinkerers. It is time to put people back in the center of development planning.

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  • Founded in 2001, the Fair Trade Alliance (FairTrade) of the Philippines is a broad multisectoral coalition of formal and informal labor, industry, agriculture, NGOs and youth pushing for trade and economic reforms.
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