U.S.

MARSHALL PLAN FOR THE PHILIPPINES:

U.S. MILITARY BASES AND FOREIGN MONOPOLY CAPITAL*
The mini-Marshall Plan, which was initiated by US political and military circles for
the economic recovery of the Philippines, has now developed into a Multilateral
Aid Initiatives (MAI) and is officially called Philippine Assistance Plan (PAP). Some
other names have been proposed, such as the Inter-Governmental Group for the
Philippines, suggested by Ambassador Emmanuel Pelaez. The change in the name
is important. On the side of US leaders, it should dispel the impression that it is an
American-made plan, especially in the light of the fact that the mini-Marshall idea
has been closely associated with US motivation to pressure the Philippines for a
new military bases treaty beyond 1991-92. From the same viewpoint, the plan is
intended to reflect a US security thrust of burden-sharing: the economic inability
of the United States to continue maintaining a global security system compels the
US politico-military leadership to shift the burden to a collective basis among its
allies, as discussed below. Hence the mini-Marshall plan has become a multilateral
pool of assistance facilities to be contributed by the US and its security partners,
especially Japan. That the Marshall Plan for the Philippines has become a
Philippine Assistance Program is important in that it may succeed in obscuring
the US motivation to buy off the Aquino government in regard to the primordial US
strategic objective of a new bases treaty; thus, it now appears under the PAP that it
is the Aquino government taking initiative in convening the international donor
community for assistance in implementing a Philippine program to alleviate mass
poverty.
Marshall Plan Letter
In a letter dated 25 November 1987, key leaders of the US Congress proposed
to US President Reagan a Marshall Plan for the Philippines. Their Congressional
positions alone should signify the vital importance of their common bipartisan
concern to US foreign policy. The writers of the letter were Alan Cranston, chairman
of the US Senate Subcommittee on East Asian and Pacific Affairs; Richard G. Lugar,
member of Senate Foreign Relations Committee; Stephen J. Solarz, chairman of the
** Originally published in the World Bulletin as U.S. Marshall Plan for the Philippines: U.S.
Military Bases and Foreign Monopoly Capital, 5 WORLD BULLETIN 43-85 (May-August
1989).

House Subcommittee on Asian and Pacific Affairs; and Jack Kemp, member of the
House Subcommittee on Foreign Operations. The goals of a Marshall Plan,
according to them, should be:
1. To increase worldwide foreign assistance by $1 billion a year above current
levels for five years beginning in 1988;
2. To substantially increase the percentage of the grant element in such
assistance during this same period;
3. To encourage international investment in the Philippines, including the
conversion of a substantial percentage of bank loans into equity
investment in that country; and
4. To improve the terms of trade for Philippine products in the major
industrial nations.
The financial and economic character of the Marshall Plan, including the ultimate
advantages implied for US and other sectors of foreign monopoly capital, is clear
from this statement of goals. How these financial and economic interests are
combined with security considerations appears equally clear in the letter. The multinational approach of the plan is stressed by the authors, referring in particularly to
Japan. On this point, the letter explained that
the United States must make a much more vigorous effort to persuade
Japan and other countries in Asia to dramatically increase their assistance to the
Philippines Japan and other countries in the region which rely on our security
commitments to them should have a strong interest in fostering stability and
economic recovery in the Philippines. Our bases in the Philippines play an

important role in enabling us to fulfill our defense commitments to Japan

and our other friends and allies in the Asia and Pacific region. Their loss
would result not only in forced relocation to less desirable base locations at a cost well
exceeding $10 billion, but in a serious reduction in U.S. ability to secure sea lanes
vital to a forward deployed U.S. strategy in the Western Pacific. (Emphasis supplied.)

Thus, as early as this letter, the integral connection of the Marshall Plan with the
US military bases problem was assumed. Japan should be involved in the Plan
because its own security interests are tied to the US bases in the Philippines. The
letter implied that the Marshall Plan entails a cheaper cost than what it would take
to relocate the bases from the Philippines, which Newsweek has estimated at $20
billion. So why not spend for the Marshall Plan as a less expensive alternative?

Shining through the plan is the nobility of the proponents motive, as

expressed in the letter: they are deeply concerned about the fate and future of the
Philippines, [as] the future of democracy in that country [is] hanging in the
balance. But we cannot be blinded by this dazzling light of imperialist
gobbledegook. In the experience of the Filipino people at the present time, the
principal element of democracy as understood by the US military bases beyond
1991.
In the context drawn up by the proponents in the letter, Japan should be
involved in the retention of US bases in the Philippines, through its participation in
the Marshall Plan, as a means of compensating the US for the recent strains in USJapanese relations. The letter went on to state that
a dramatic increase in Japanese aid to the Philippines would provide the
Japanese government with a means to offset some recent strains in US-Japanese
relations resulting from the trade deficit, the Toshiba diversion of technology to the
Soviet Union, and Japans inability, because of constitutional limitations, to assist the
West in protecting neutral shipping in the Persian Gulf. A multilateral aid initiative
would be an excellent opportunity for Japan to demonstrate its willingness to
cooperate with the United States on an important issue.

This should emphasize the point that the Marshall Plan becomes merely the
medium by which US-Japanese relations are concretized in the problem of the US
bases in the Philippines.
The foregoing discussion should not convey the impression that the Marshall
Plan for the Philippines originated from the four Congressional leaders. Rather,
their letter to Reagan merely articulated the objective and strategy of a broader
circle of US political and military leadership concerning their bases in the
Philippines.
Secret Marshall Plan
In the early 1980s and in the wake of the call by President Marcos for a
comprehensive review of the military-security relations between the two countries,
an Inter-Agency Task Force in the Reagan administration prepared a secret

document on US policy for the Philippines. The group was composed mainly of
members drawn from the Central Intelligence Agency (CIA), the Defense
Department, the State Department, the Treasury Department, and the US
Congressional Research Services. By late 1984, the document took the form of a
National Security Study Directive (NSSD), entitled US Policy Towards the
Philippines. As stated in its Executive Summary, the NSSD formulated the
problem in terms of extremely important interests of the United States, among
which was:
Strategically, continued unhampered access to our bases at Subic and Clark
is of prime importance because of the expanded Soviet and Vietnamese threat in the
region. Fall back positions would be much more expensive and less satisfactory.

The NSSD pointed out that Our security and defense goals are to maintain U.S.
military presence, and to fulfill treaty obligations and commitments made
operational through our naval and air bases at Subic and Clark. It took the view
that political and economic developments in the Philippines threatened these
interests.
It saw the need to be able to work with him [Marcos] and try to influence
him through a well-orchestrated policy of incentives and disincentives to set the
stage for peaceful and eventual transition to a successor government, for example,
by influencing positive decisions and movement on such issues as the need for a
new presidential succession formula, a credible investigation of the Aquino
assassination, and the beginning of institution-building through an acceptable
parliamentary election.
Among the inducements to Marcos to enable the Reagan administration to
realize this policy, the NSSD provided for what it called Dramatic New
Measuresconsisting of an Enhanced Military Assistance, and a Marshall Plan
Approach which entailed a program of greatly increased economic assistance in
addition to the bases-related assistance.
Apparently, the events that led to a change of government in February 1986
did not allow this secret Marshall Plan to come to fruition. Its revival in
reconstructed form did not come as a concrete policy proposal until November 1987

as the two governments were preparing for the review negotiations on the Military
Bases Agreement scheduled in early 1988.
Marshall Plan for Europe as Model
Proponents of the Marshall Plan for the Philippines invariably refers to the
US experience after World War II in rebuilding a devastated Europe by a $13.9
billion economic assistance, which would roughly be equivalent to about $71 billion
today. They consider that Marshall Plan as crucial to Europes economic recovery.
Generally, it is in the same conception that US leaders see the prospects of economic
reconstruction in the Philippines.
It would be instructive then to clarify the US motivation in the post-war
economic recovery of Europe, from the standpoint of US capital, since the motive
power behind the US interest in the PAP would not be much different. The US
economic assistance to West European countries paved the way for military
arrangements against the Soviet Union, which US leaders sought to obtain hand in
hand with the Marshall Plan. Thus, the Marshall Plan created conditions for the
establishment of the North Atlantic Treaty Organization (NATO).
As a leading member of the influential Council on Foreign Relations, Nelson
A. Rockefeller wrote to Presidential Eisenhower in January 1956, recommending
economic assistance as a means of securing US military-strategic objectives in
Europe. In that letter he stressed a point strikingly relevant to the mini-Marshall
Plan for the Philippines:
In Europe, we started with economic aid. It is quite possible that without the
Marshall Plan, we would have found it more difficult to form NATO. What in fact
happened in this case was that a co-ordinated foreign policy using every kind of
pressure, resulted in the creation of what we hope was a solid military union. Even
critics within NATO itself say that it suffers from undue emphasis on the military
aspects at the expense of the economic factors which played such a big role in its
formation. (As quoted in Dennis & Sylvia Roberts, How to Secure Peace in
Europe. London, 1985, pp. 24.)

At any rate, the result was, as Paul Kennedy notes in his recent book The Rise and
Fall of the Great Powers (New York, 1989, p. 422), The United States not only gave

billions of dollars of Marshall Plan aid but also provided a defense umbrella under
which the European states could shelter.
Even in the framework of the Marshall Plan for Europe as a model we can
thus find a good basis for understanding the driving force of US motivation in the
PAP.
US Bases and Mini-Marshall Plan
It is to be assumed that the Marshall Plan for the Philippines is a security
undertaking of the United States. However, in its concrete objectives it has
developed through the years. In the last years of the Marcos regime, it was
calculated to exact certain political reforms necessary to stabilize US security
interests in the period of political transition being engineered at the time by US
officials.
When the review negotiations on the 1947 Military Bases Agreement (MBA)
came in April 1988, its focus was to obtain specific points in the result. As embodied
in the Manglapus-Shultz Agreement of 17 October 1988, these points are: (1)
retention of US nuclear presence in the bases and, consequently, to set aside the
effect of the Constitutions nuclear-weapon-free policy, and (2) perpetuation of the
rent-free arrangement for the US bases, thereby diverting the compensation issue to
the Marshall-Plan assistance. Having achieved these goals so far, US authorities
continue to dangle the MAI, but this time it is addressed to a much bigger stake,
namely, the new bases treaty.
US leaders have openly articulated MAIs integral connection with the US
military bases located in Philippine territory. Among the latest to clarify this point
is Senator Richard G. Lugar, one of the authors of the Marshall-Plan letter
addressed to President Reagan, as discussed above. Writing last April in the
Washington Post on the Plan, which he now calls Multilateral Aid Initiative (MAI),
Lugar said:
Although it stands on its own, the MAI has security implications for the United
States. Last October, we signed a two-year base review agreement providing for
short-term stability in security ties and additional resources to the Philippines.
Progress in the MAI will build on this agreement. Improved economic performance in

1989-91 will create a promising atmosphere for discussions on the future of security
relations. (As reprinted in International Herald Tribune, 19 April 1989. Emphasis
supplied.)

From Lugars viewpoint the economic and political impact of the MAI is intended to
create conditions for the extension of the US military presence through a new bases
treaty beyond 1991-92.
This position does not appear to be merely a personal opinion, but an
articulation of official policy. Testifying as Assistant Secretary of Defense for
International Security before the US Senate Appropriations Sub-committee for
Military Construction on 21 March 1988 (just before the start of the review
negotiations on the MBA in Manila), Richard L. Armitage declared:
I therefore believe you will welcome the fact that initial steps have already been
taken to develop a multinational, regionally oriented consortium of Philippine donors,
and the preliminary outlook appears favorable. The generation of such a source of
assistance in the near future is particularly crucial in the light of the upcoming
formal review of the U.S.-Philippine military bases agreement, since Philippine
expectations of aid are rising significantly, and are sure to be higher than ever during
the remaining years of the present agreement and beyond.

In a recent report on the Philippines prepared by the Subcommittee on Asian

and Pacific Affairs of the US House of Representatives, dated 18 April 1989, the
political and strategic value of the MAI is emphasized. Referring to the forthcoming
bases renegotiation that is expected to begin later this year, the report explained
that the successful implementation of the Plan (MAI) would certainly be
extremely helpful in terms of creating a favorable climate in the Philippines for the
renewal of the bases agreement. (Report on the Philippines About the Mark-up on
18 April 1989.)
The interconnection between the US bases negotiations and the MAI as
Washingtons security policy was brought nearer to the knowledge of Philippine
authorities when a group of five US senators visited the country in January 1988
and had occasion to tell the press that approval of a $1 billion mini-Marshall Plan
was tied to the retention of US military facilities (Daily Inquirer, 13 January 1988.)
Moreover, in his last visit to the Philippines in July 1988, US Secretary of State
Shultz was quoted in the press as telling some senators and congressmen, If you

dont want us here, why should we talk about the multilateral aid? (Manila
Bulletin, 14 July 1988.)
The Review Negotiations on the MBA
Despite this open avowal on the part of US officials, President Aquino and her
Foreign Affairs Secretary were incredibly deaf and blind. As late as May and July
last year, she was still relying on assurances of US officials that the MAI had
nothing to do with the bases issue, in particular on the works of Ambassador
Nicholas Platt and Secretary Shultz. (Daily Globe, 23 May 1988; Malaya, 14 July
1988). On his part, Foreign Affairs Secretary Manglapus repeatedly clarified his
stand that the MAI is not linked to the bases issue, but he was more specific in his
reference to the issue of compensation. He declared that, as reported by the Manila
Bulletin (17 May 1988), he will never allow the US or other allies to use the
proposed P10 billion multilateral, five-year aid package as a bargaining chip in the
on-going review of the Military Bases Agreement.
As is well-known, the review negotiations on the MBA went hand in hand
with consultations between the two governments on the MAI. Washingtons
announcement of a $10 billion multilateral aid plan was made while the bases
review negotiation was underway. Of course, to Ambassador Platt this was, as he
said in a press interview, totally coincidental. (Manila Bulletin, 11 May 1988.) But
the pattern of events proved otherwise.
The intricate MBA-MAI interlink was exemplified in the official conduct of
Manglapus himself. As he led the Philippine panel in the bases negotiations, he
supervised the campaign for worldwide donors which become a priority function of
Philippine embassies. Manglapus took time out from the negotiations and directly
engaged in this diplomatic mendicancy.
Just as the review negotiations started, Manglapus took a recess and went to
Tokyo in connection with the MAI. Upon his return to Manila, he told the press
what he said he emphasized to Japanese officials: I made it clear that we do not
view this multilateral program as related to the bases in any way. (Daily Inquirer,
23 April 1988.) But to the Japanese, the program and the US bases were in the
same package. When Manglapus asked the then Foreign Minister Sosuke Uno for

the setting up of a multilateral institution that could provide assistance to a

distressed Philippines, he elicited support from him provided this institution would
include the World Bank. (Kyodo, Financial Post, 20 April 1988.) Two days later,
Prime Minister Noboru Takeshita told Manglapus that Japan was interested in the
future of the US military bases in the Philippines. (Malaya, 22 April 1988.)
Manglapus gave the impression, if not the boast, that he was dealing with the
Japanese on his own terms, but the reality is plain to everyone that he went to
Tokyo to beg and had no choice but to accept the Japanese terms. What must have
really transpired between Manglapus, Uno and Takeshita could be reflected in the
statement of Morihisa Aoki, minister-counselor of the Japanese Embassy in Manila,
on the eve of the signing of the Manglapus-Shultz Agreement on the US bases. Aoki
was quoted by the Daily Inquirer (16 October 1988) as saying that the extent of
Japans participation in the proposed $10 billion PAP would be determined by the
outcome of bases negotiations between Washington and Manila. He explained that
his government would fill in the financial gap that may be left by the amount of
bases-related compensation as may be agreed on by the US and the Philippine
panels.
It does not suffice to say that the US government has initiated and
maintained the MAI as integral to the necessity to keep the bases in the
Philippines. On top of this, it must be stressed that the Philippine government,
principally through Manglapus, has been fully aware all along that that has been
the essence of US policy on the MAI, and that it has been dealing with US officials
on the basis of that policy.
Prior to the creation of the Coordinating Council on the Philippine Assistance
Program by President Aquino on 13 January 1989 in Administration Order No. 105,
she set up the Presidential Task Force on the PAP (PTF), in Administrative Order
No. 81 (2 August 1988), with Executive Secretary Catalino Macaraig as chairman.
In his memorandum to the PTF, dated 1 September 1988, Manglapus informed a
meeting of that body of the following cable dated 23 August 1988, sent from
Washington by Ambassador Emmanuel Pelaez:
Embassy was also informed off-the-record that there are people in the US
government who are now less eager than before to move quickly on the PAP in view
of slow in resolving outstanding RP-US bilateral issue.

In the 7th meeting of the PTF on 3 August 1988, held in Malacaang Palace,
Undersecretary of Finance Ernest Leung as chairman of PTFs Technical
Committee declared that the dialogue with the US is awaiting progress on military
bases discussion. The same meeting heard the report of the DFA to the effect that it

was informed that the Administration of President Reagan has been lukewarm in
pursuing with Congress the proposed aid plan in view of the prevailing Congressional
attitude regarding the military bases review.

Thus, as consultations between the two governments on the MBA review and
the MAI ran simultaneously and interconnectedly, the Aquino administration knew
by actual experience as it dealt with the US authorities, that the two questions are
closely related in the position of the US. It was aware that the actuations of the
Reagan administration were premised on that fact, and it was on the basis of this
US policy that the Aquino administration accepted the US initiative in the MAI,
and approved it as PAP for implementation on its part.
Burden-Sharing as Security Concept Behind MAI
In a press interview last May 1988, Manglapus insisted that the proposed
multilateral aid agreement was not in any way linked with the bases negotiation
which was going on at the time. In the same breath, he explained however that the
MAI would constitute a burden-sharing on the part of other countries, since the
US had made it clear that it could be expected to bear the whole burden of the plan.
(Manila Bulletin, 17 May 1988.) Does not Manglapus realize that the burdensharing approach on the part of the US government is a security arrangement
among the US and its allies? With respect to the US bases, the burden which the
US is sharing principally with Japan through the MAI is the economic cost of
security in retaining the bases in the Philippines. Since we cannot accuse a man of
Manglapus stature of ignorance, then by his own words he must have admitted
thereby the close correlation between the MBA and the MAI.
On 21 March 1988, the US Senate Appropriations Subcommittee on Military
Construction held a hearing, significantly enough, on burden-sharing and US base
rights in response to increasing challenges to US military presence abroad by US
allies. The problem presented by Senator Jim Sasser, Subcommittee chairman was,

as he said: The day is over when the United States can unilaterally assume the
lions share of the responsibility of the free world.
In his prepared testimony before the Subcommittee, Assistant Secretary of
Defense Armitage outlined an approach to this problem: There is no question that
the time has come for allies and friends of democracy to bear a greater burden in
the defense of freedom. He added that burden-sharing was not limited to military
terms. He clarified:
the true price of freedom represents a mixture of burdens: military burden
sharing, political burden sharing, foreign aid burden sharing, human rights burden
sharing, and social burden sharing,

In the effort to minimize, if not stop, the deception being inflicted on the
people as to the MBA-MAI linkage, it would be necessary for us to quote extensively
from Armitages testimony. As to the rationale of burden-sharing rooted in the
reduced capability of the US, he explained to the Subcommittee:
Fiscal realities and related hard choices have dictated that, more than ever, our
nations priorities are being set against the background of an overwhelming
preoccupation with budget reduction. This is not at all bad because the economic
cooperation and defense teamwork of our allies should in any case be a principal
component of our global efforts.

Then, responding to Congressional criticism, Armitage defended the record of

US allies in burden-sharing. Of Japan, he noted in particular its role in economic
burden-sharing for the benefit of countries which host US bases. He said:
Mr. Chairman, you have proposed the conclusion of a multilateral defense compact to
create a fund to provide economic and security assistance to less wealthy countries
which agree to the basing of allied forces and equipment on their soil. It is not likely
that Japan would be able politically to participate in a compact providing such
security assistance; however, the [Reagan] administration has urged Japan to
increase its overseas development assistance to strategically important countries
such as the Philippines, Pakistan and Turkey, and Japan has voluntarily agreed. On
consequence was a 1987 Japanese pledge of over 1,000 million dollars in aid and
loans to the Aquino government. (Emphasis added.)

Apparently to avoid friction with neighboring countries especially, Japans

role in its security partnership with the US is not so much in direct military terms
as economic and financial. This explains Japans central role in the MAI besides the
US Armitage elaborated on this point:
If the optimal defense posture for Japan, in terms of its agreed mission and
the predilections of its neighbors, requires the expenditure of only a relatively small
percentage of its wealth, then I think you would agree that we should actively

encourage Japan to increase its foreign economic assistance Japan has

doubled and redoubled its aid program since 1979, and is now engaged in a third
redoubling program.
x

Greater, untied, strategically-targeted Japanese aid programs would of

course have an immensely beneficial impact on both regional and global security, and
could do so without causing political friction between our great countries or between
Japan and its Asian neighbors [W]e should be encouraging Japan both to continue
the steady progress it is making in its defense efforts, and to build upon its
strategically oriented economic aid program. (Emphasis added.)

Bringing the Philippines into this picture, Armitage pointed out:

Japan and Korea are the only allies in the East Asia/Pacific region to whom
we can look for a sharing of our defense load. However, before shifting my geographic
focus, I feel constrained to say a few words about the Philippines, not as a source of
burden sharing but rather as a recipient of its benefits. (Emphasis added.)

Thus, Armitage drew up burden-sharing as it applies to the Philippines as a

beneficiary, which is what the MAI is all about.
In the foregoing discussion, we quoted Armitages testimony on the MBA-MAI
interconnection. His further clarification of this context should dispel any lingering
doubt on this question. He went on to explain that
The Congress has made clear, time and again, its strong support for
President Aquino and for our military presence in the Philippines. On bases there are
visible evidence of our commitment to assist in the defense of the Philippines, and
also permit the U.S. to maintain a regional presence in the air and waters of

Southeast Asia. This forward deployment directly serves our national security
interests.
[O]ur presence in the Philippines provides the added bonus of instilling
confidence in our friends and allies regarding the strength and credibility of our
combined defense. For this reason, the Philippine bases are not the exclusive

concern of the U.S.. I have already referred to Japans pledge of over 1,000 million
dollars in Philippine aid and loans in 1987. Other countries, among them Korea and
Australia, have openly supported the U.S. presence in the Philippines, and have
indicated their support directly to the Aquino government. (International Affairs,
April 1988, Order No. 88-188 as distributed by USIS, Manila. Emphasis supplied.)

The Aquino-Manglapus Burden-Sharing

To Manglapus, all this explanation is superfluous because he himself is an
expert on burden-sharing concerning the US bases in the Philippines. Testifying
before the Subcommittee on Human Rights of the Committee on Foreign Affairs, US
House of Representatives, on 22 September 1983, Manglapus said:
We are told that eventual withdrawal of the bases [from the Philippines] to
forward Pacific island positions is being contemplated and that certain negotiations
may in fact have begun in that direction. But we cannot wait until that
withdrawal becomes economically and militarily feasible.

We must move to make de jure what is now a de facto reality in

Southeast Asia. The bases are a regional, no longer just a bilateral, arrangement.
China and the members of the Association of Southeast Asian Nations (ASEAN) want
them to stay Indeed even before that North Vietnamese victory, an expert had
already noted that the Indonesians, Thais and Singaporeans were well anxious not
to accelerate a United States withdrawal from the region
So Mr. Chairman, let China and Asean sign in. Let the responsibility for
these bases, if not the facilities themselves, be redistributed (As reprinted in
L.R. de Leon, ed., A Pen for Democracy, Washington, 1986, pp. 249-250. Emphasis
added.)

Clearly, in effect, Manglapus thus argued for the retention of the US bases in
the Philippines through burden-sharing among US allies, in the face of some
proposals to relocate them somewhere else in the Pacific.

In 1986, Manglapus reiterated this stand in a speech at the Fletcher School of

Law and Diplomacy in Massachusetts. He said Asean should now adopt the [US]
bases collectively even as it seriously negotiates for its legitimate goal of neutrality.
(Malaya, 19 December 1987.)
Before the Asean Summit Meeting on 14 December 1987, Manglapus went
around the member-countries to elicit recognition from them of this burden-sharing
rationale. While the formal document adopted by the Asean Summit made no
mention of the regional role of US bases in the Philippines for reason of propriety on
the part of the Asean heads of governments, the Aquino-Manglapus plan of
articulating the need for the bases in regional security succeeded in two counts.
In the first place, in her formal statement in the meeting, she expressed the
Manglapus position. She declared that
the Philippine factor [characterized by the US bases] is said to have contributed to
the securing of air space and sea lanes that are vital to the continued economic
stability of our neighbors in South East Asia, East Asia and the Pacific.

Later, interpreting this Aquino message in the Asean Summit, Manglapus wrote in
the Washington Post of 21 September 1988 (in response to the statement of Jeane
Kirkpatrick published earlier) as follows:
It was a diplomatically disguised invitation for all to join in the political

responsibility for US bases and rescue the Philippines from the divisive and

polarizing domestic issue of being the lone bases host in Southeast Asia. (Emphasis
supplied.)

In other words, it was a call for a regional support for US bases in the Philippines, if
only to neutralize the growing anti-bases opposition, and logically to insure the
continued existence of the bases.
Secondly, in the course of the Asean Summit, a 28-page secret document
entitled Report of Ministers to the Asean Heads of Government was leaked to
the press allegedly by the DFA. It purportedly expressed an Asean-wide concern
that the continued uncertainty over the U.S. presence in the region may pose a
threat to regional peace and security, a position attributed to Manglapus.

Observers interpreted this stand as enjoining the Philippines to allow the continued
stay of the US bases after 1991-92. (Malaya, 18 December 1987.)
US Ambassador Nicholas Platt had expressed to the Philippine audience the
meaning of burden-sharing. Speaking to Filipino veterans of World War II, he
explained:
The reality [is] that the US is no longer able to shoulder the burden of
defense alliances to the degree that it has done in the past.
We are exploring with our partners around the world new ways to more
equitably share these responsibilities, given the financial limitations the United
States now faces.

This served as a good background for him to raise questions on the role of the
Philippines in this new context of burden-sharing. After itemizing the economic
support grant and military assistance which the Philippines receives from the US in
consideration for hosting the US bases, Platt asked whether the Philippines in
deciding the future of the bases, should see the importance of its sharing the burden
of preserving regional stability and global peace. He declared: Doe the Philippines
wish the US to continue to share the burden of Philippine defense? (Daily Inquirer,
1 May 1988.)
The positive response of the Aquino administration to these questions now
takes the form of the PAP as an integral part of US security arrangements through
the bases. As the economic and political conditions of the Philippines present a
security problem, the US cannot relieve itself of the burden to continue the economic
and financial support for the Philippines as host to the US bases. That burden is
being partly shifted to the US allies through the MAI mechanism.
Expanded Burden-Sharing
The donor community participating in the MAI generally includes countries
which form part of the security arrangements led by the US, or have their own
financial and economic stake in the Philippines. The US maintains a security treaty
with South Korea. Singapore stations an airforce squadron in Clark Air Base and
has a defense link with the United Kingdom. Members of the North Atlantic Treaty
Organization (NATO), aside from the US, which are participating in the MAI are

Belgium, Canada, Denmark, Italy, Netherlands, Norway, West Germany and United
Kingdom. France still keeps its political cooperation with NATO and has bilateral
ties with the US on nuclear weapons.
Last year, in response to pressure from the US, its NATO allies reached an
agreement on burden sharing which determines how much each NATO member
would contribute to Western defenses. The burden-sharing agreement is taken by
them as an equitable sharing of the risks and costs of Western defense; they
consider this as a way of maintaining a fair partnership among the 16 member
countries. (International Herald Tribune, 14 August 1988.)
The NATO burden-sharing agreement was in the form of a report entitled
Enhancing Alliance Collective Security: Shared Roles, Risks and Responsibilities.
It was adopted in the light of US Congressional pressure for reduction of military
spending in Europe. (International Herald Tribune, 2 December 1988.) The US has
even tried to push burden-sharing in NATO further: for NATO allies to provide
more security assistance outside of NATO territory. Significant to the involvement of
NATO members in MAI was the effort of US Defense Secretary-Designate John G.
Towers to convince NATO allies to take a greater share of the burden in Third World
Debt and to provide more security assistance to small nations, friendly to the West,
with disagreeable neighbors. Tower explained his position in a two-day military
affairs conference attended by NATO defense ministers and other senior officials.
(International Herald Tribune, 30 January 1989.)
US defense officials are pressing Japan and South Korea to spend more on
security and thus reduce US defense burden. (International Herald Tribune, 12
October 1988.) The US House Armed Forces Committee issued a report last year
pointing out the strong political pressure in this country to reduce defense
commitments to our allies. It enjoined both Western Europe and Japan to rely less
on the US to defend them and more on their own forces and funds. (International
Herald Tribune, 8 August 1988.)
Burden-sharing has the prospect of urgency under the Bush administration,
amidst strong pressure to cut US military spending, which in turn creates demand
on Japan and Western Europe to increase participation in security arrangements
with the US. Brent Scowcroft, President Bushs security adviser and member of the

US National Security Council, had announced burden-sharing as his main priority.

(International Herald Tribune, 1 December 1988.)
Japans role in the US-led security system has acquired an essentially
burden-sharing character, i.e., the security arrangements between US and Japan
reflects a division of labor in the increased participation of Japan in terms of
economic and financial resources as the US concentrates on direct military means.
(US military leadership is apprehensive of Japans remilitarization if it undertakes
military role in regional security.)
Testifying before the US House of Foreign Affairs Subcommittee on Pacific
and Asian Affairs early this year, Rear Admiral Timothy W. Wright, Acting US
Deputy Assistant Secretary of Defense, described what he called the three discrete
ways by which Japan carries out its share in the defense burden in its security
relationship with the US. These are:
First, by making trained and equipped forces available for agreed military
missions in the Northwest Pacific.
Second, by providing direct and indirect financial and other support to US
forces in Japan.
Third, by providing steadily increasing overseas economic assistance.

(G. Baltazar, Japans role in Pacific Defense cited. (Manila Bulletin, 4 April 1989,
p. 12. Emphasis added.)

Japan increasingly feels the US pressure to take up the burden of foreign

assistance from the US. (Malaya, 2 January 1989.) This is not to suggest that Japan
is merely a passive object of US security initiative. In its annual report on defense
last year, the Japanese government noted that in view of the decline in the US
economic position, Japan will be increasingly expected to play a role commensurate
with its position as the second-largest economic power among Free World nations
next to the United States, stressing that Japan could contribute in political,
economic and cultural terms while increasing its defense capability in its security
arrangement with the US. (Manila Chronicle, 24 August 1988.) On a visit in
Singapore last year, Director General Tsutomu Kawara of Japans Defense Agency
mentioned his countrys economic assistance, investment, and trade as means to

reinforce stability in Southeast Asia if the US scaled down its military presence.
(International Herald Tribune, 4 July 1988.)
On their own, Japans leading figures in big business, media, academic and
official circles recently crystallized their collective thinking on Japans security role
in the latest policy report of Japan Forum on International Relations, Entitled
Long-Term Political Vision for Stabilization and Cooperation in Northern Asia, the
report explicitly recognized the necessity for US and Japan to reach an equitable
division of labor in global security. It enjoined Japan to give assistance to the
development of countries which play an important part in Western alliance. It
viewed the recent increase of Japans official development assistance (ODA) to more
than $10 billion as a first step along this security orientation. The report placed
emphasis on the complementarity of the security policies of the US and Japan.
The report considered the problem of the US military bases in the Philippines
in the context of that security division of labor between the US and Japan. It took
the political and economic instability of the Philippines as a critical weakness in
the Wests position in Asia, and it considered the US bases in the Philippines vital
to Western alliance, especially because they are the only sizeable US military
installations in Southeast Asia.
Last year, Japanese Finance Minister Kiichi Miyazawa, told US State
Secretary George Shultz in their Tokyo meeting that Japan wanted to increase aid
to the Philippines based on proposals of shared US and Japanese interests. Shultz
stressed the strategic importance of economic aid for the Aquino government in view
of the Philippines importance to stability in Asia-Pacific region. He then urged
Japan to increase its assistance to the Philippines. In a separate meeting with
Shultz, Prime Minister Noburu Takeshita told him: For Japan also, aid to the
Philippines is an important issue, we wish to support the Philippines after adequate
consultations with the United States. (Manila Bulletin, 20 July 1988.)
With the advent of the Bush administration, there has been expectation that
the US, as noted by Prof. Roger Buckley of International Christian University in
Tokyo, will urge Japan to boost strategic aid to pro-Western regimes in the AsiaPacific region. Prof. Buckley cited assistance to the Aquino government in the
Philippines as an important example of such strategic aid. (International Herald

Tribune, 5 December 1988, p. 9.) The US-Japan burden-sharing in the MAI

exemplifies this foreign-assistance orientation.
Inside the Aquino Administration: Burden-Sharing and PAP
Let us now telescope these general considerations into concrete events in the
Aquino government.
It should be clear from the foregoing discussion that the US security strategy
of burden-sharing is the framework in which the function of the MAI or PAP can
clearly be seen in relation to the US objective of retaining the bases in the
Philippines. In particular, we have discussed the report of the US House
Subcommittee on Pacific and Affairs as it bears on the annual $200 million US
contribution to the MAI for five years and on the renewal of the bases agreement.
Further, the Subcommittee report described the MAI as follows:
If successfully implemented, the MAI will be an outstanding example of
effective burden-sharing with our allies. We will have leveraged a relatively small
U.S. contribution of $200 million annually into $2 billion worth of multilateral
assistance for the Philippines in each of the next five years.

The proceedings of the Subcommittee are well-known to the Aquino

administration and it is closely acquainted with the interconnection of the MAI and
the burden-sharing for the US bases in the Philippines. The Coordinating Council
on the Philippine Assistance Program (CCPAP), the PAP governing body, are
principally composed of the members of the Presidents Cabinet, together with
representatives from both Houses of Congress.
The Fifth Meeting of the CCPAP, held at Malacaang on 29 March 1989, was
presided by no less than President Aquino. The President invited the CCPAP
members and guests to view a video tape of the hearings on the MAI or PAP
conducted by the said US House Subcommittee, which was shown during the
meeting. After the video showing, the CCPAP members took opportunity to express
their reactions. Foreign Affairs Secretary Manglapus, as recorded in the confirmed
minutes of the meeting, responded as follows:

DFA Secretary Raul Manglapus noted that one major point stressed
throughout the hearing was the concept of burden sharing particularly with respect
to Japan. He explained that there are two aspects of burden sharing namely: military
and civilian or non-military. He suggested that we should discourage Japan from
supporting the former type of burden sharing as this may lead to renewed presence of
the Japanese military and naval forces in, and might result to, destabilization in
Southeast Asia. He, therefore, proposed that we encourage Japan to

participate instead in non-military form of burden sharing such as the PAP.

(Emphasis added.)

Congressman Margarito Teves, representing the House of Representatives in

the CCPAP, felt the connection between the PAP and the US military bases issue.
He said, again as recorded in the minutes of the meeting:
Council Member Margarito Teves raised the issue of the need to seriously
consider the concessions which the continued US support to the Philippines to decide
before 1991 on whether or not the US military facilities shall be retained. He
observed that the issue of US military facilities in the Philippines was brought up in
several occasions during the hearings [shown in the video tape]. He added that the
more support we get from the US, the more difficult it is for us to withstand
American pressure.

The impression which the Subcommittee hearings conveyed on the MAI-MBA

linkage must have been clear also to Congressman Jose de Venecia. The minutes of
the meeting reflected his reaction on this point, thus:
Congressman Jose de Venecia expressed pessimism in the possibility of
dissociating the issue of US military facilities from the PAP. He opined that the
earlier the political leadership makes a real serious look at the US military facilities
issue as it relates to the PAP, the better it would be for the country.

Significant is the stand expressed by President Aquino on issues such as the

PAP and US military facilities. On record, she reminded everyone in the same
meeting that on such issues all concerned should think first of the Filipino
interests. But how should Filipino interests be carried out? President Aquino
gave a revealing position:
On the US military facilities the President stressed that it would be necessary for the
Americans to show how much they value said bases and that they have to prove to the
Filipinos that they are deserving and worthy of the facilities.

In the context of the PAP-MBA interconnection, this means that the President may
have arrived at an option on the question of the renewal of the MBA, namely: to
allow the US to buy off the Filipino people by means of the MAI. Is this another way
of saying, as the US House Subcommittee on Pacific and Asian Affairs declared in
its report, that the MAI would certainly be extremely helpful in terms of creating a
favorable climate in the Philippines for a renewal of the bases agreement?
Apparently, President Aquinos remarks, as cited above, take the MAI in the
concept of compensation vis--vis the retention of the US bases. This should explain
further the stand of the US House Subcommittee, as stated in its report, that the
infusion of MAI funds into the Philippines should remove the compensation issue
from its current status as a primary issue in the bases negotiation. Thus, obviously,
what is meant is that such funds are intended to take the place of compensation or
rental for the US bases.
MAI and the Bases Compensation Question
As in previous review negotiations, the compensation issue on the bases
question proved to be the point of sharpest differences between the two governments
in the 1988 review. While opinion surveys showed a high rating for the retention of
the bases, the majority of respondents reacted favorably on the condition that rent
would be paid by the US. One opinion poll, for example, indicated that 54 percent of
the survey sample wanted the US bases to stay as long as the Philippine
government is properly compensated. (Pacific Stars and Stripes, 9 August 1988.) In
the bases controversy last year, Senate President Jovito R. Salonga may have
crystallized the opinion that prevailed then that compensation was the common
denominator that could settle the differences between the two negotiating panels.
Salonga was interpreted in the Daily Globe as indicating the possibility of extension
for the bases agreement if the price is right. (Daily Globe, 10 July 1988.)
In a position paper prepared for the Philippine panel in the 1988 review
negotiations, the Department of Foreign Affairs declared that the US government
was not giving the Philippines just compensation for the use of six bases despite the
strategic function which these bases served in the US global security system.
Showing a comparative study of US assistance to other countries, the paper

deplored the unequal treatment for the Philippines. It concluded that the
Philippines should be getting a similar level of US assistance, referring to Israel
and Egypt which were then receiving an annual outlay of $3 billion and $2.1 billion,
respectively. (Daily Globe, 11 June 1988; International Herald Tribune, 6 September
1988.)
On the other hand, the US has persistently ruled out the concept of rental
payment for the bases. (Daily Globe, 22 June 1988.) Instead, the US government has
undertaken to provide economic and military assistance, based on best efforts
commitment of the US President, not involving the US Congress. Legally, however,
this assistance cannot be considered as payment for the use of the bases. Its terms
and conditions are governed independently by US federal laws which do not
contemplate at all rental or compensation for US bases located in foreign countries.
Moreover, the disposition of funds under this assistance program is left completely
to the unilateral discretion of the US government and is outside the operation of the
bilateral consent of the two governments under the MBA. Thus, the economic
military assistance does not come to the Philippines as a matter of legal obligation
arising from mutual agreement in the MBA. In other words, the Philippines does
not hold a legal claim to compensation for the bases use, not even a legal right to
economic military assistance under the MBA or its amendments. If the original
1947 MBA is to be the basis in considering the compensation question, we are led to
the explicit premise of the Agreement that the use of the bases shall be free of rent
(See second preambular paragraph of the 1947 Military Bases Agreement.)
However, the 1987 Constitution has introduced a change in the conditions for
a bases treaty, in the event that a new one would be concluded. It is expressly
provided in Section 25, Article XVIII of the Constitution that such an agreement be
recognized as a treaty by the other contracting State. On the part of the US, this
would require the advice and consent of the US Senate. If by itself a new bases
treaty would be truly an expression of mutual benefits, then it would be logical that
the terms of the treaty define the quid pro quo, and thus express the widespread
popular sentiment for compensation or rental payment. Hence, the compensation
question may have to be settled by action of the Senate on both sides, and will not be
left to an exchange of notes or executive agreements, between the two
governments. In this way, the compensation or rental for the use of the bases will
not be left to the best efforts or discretion of the US President and, on the part of

the Philippines, compensation will become a demandable legal claim arising from
the new bases treaty.
This new procedure would involve a Congressional appropriation on the side
of the US. Taking into account its acute budgetary deficit problem, the US
administration would thus stand the risk of scrutiny by the whole US Congressa
hazard which Pentagon would like to avoid. This is likely to be complicated by a
strong public demand in the Philippines that the new bases treaty must provide for
mutual benefits and thus contain a definite compensation arrangement.
It is in this light that we can understand better the US Subcommittee report
when it declared that the US fund for MAI should remove the compensation from
its current status as the primary issue in the bases negotiation. Here, there is an
anticipation that the economic effects of the PAP and its political implications
(including its psychological impact) would placate the demand for compensation
and, therefore, a new bases treaty could be acceptable even if it would not provide
for compensation. In brief, the MAI serves the function of compensation
arrangement in relation to the new bases treaty, although, designedly, it does not
form part of the treaty.
Yet in this concept, the MAI entails a relatively small appropriation on the
part of the US. Compared to the total economic-military assistance under the MBA
worth $180,000 a year, or $900,000 spread over five years between 1983 to 1989,
under the MAI the difference would be negligible; it would cost the US only $200
million annually in a five-year period. In the language of the US Subcommittee
report, the US will have leveraged a relatively small U.S. contribution of $200
million annually into $2 billion worth of multilateral assistance for the Philippines
in each of the next five years. This is much lower than the US commitments under
the Manglapus-Shultz Agreement of 17 October 1988 which total $962 million for
two years starting 1 October 1989. Owing to burden-sharing, however, the whole
economic-financial arrangement is magnified by the participation of the US allies in
the MAI. Incidentally, it should call to mind that the US assistance which the
Philippine panel negotiated for in the 1988 bases negotiations was in the level of $2
to $3 billion a year, which is substantially the value of assistance the MAI seeks
from the donors.

Whose Program? Or, Are We Being Programmed?

Discussing the MAI last February 24 with the Rotary Clubs of Makati, US
Ambassador Nicholas Platt emphasized: I think the most important thing to
remember is that this is a Philippine program. (Phil-Am. Focus, USIS, Metro
Manila, April 1, 1989).
We should now take a close look and find out whether the MAI/PAP is indeed
a Philippine program. At the same time, this effort entails an examination of the
conditions which are clearly spelled out or implied in the commitments of the
donors, especially the US and Japan. The nature and extent of the conditionalities
required by the donors, together with the political and economic impact of the PAP if
implemented, could be decisive in determining the main directions and content of
Philippine policies both on short-run and strategic considerations. Propelled by a
concentration of capital from foreign sources, the application of the terms and
conditions of the MAI on our national life would spell out the grim prospect that the
collective interests of the so-called international community of donors will become
the fulcrum around which the destiny of the Filipino nation will revolve. In this
light, and as discussed below, the Philippine Assistance Program or PAP does not
so much mean a Philippine program in the sense that a national economic plan
has been decided by the Filipino people based on their own genuine interests, for
which they are in search of financial resources for implementation; rather, it
signifies that the Philippines is being programmed to meet the schemes and
objectives of foreign monopoly capital.
So far, the MAI has succeeded in the following efforts and results:
1. It has mobilized the entire government in the preparation of conceptual
and material requirements of the PAP. Through the Presidential Task
Force and the Coordinating Council on the PAP, the MAI has created a
central coordinating mechanism by which decision-making in the whole
government bureaucracy can be aligned with the requirements of the PAP.
This effort has absorbed the House of Representatives of the Congress
which has initiated a nationwide canvass of economic projects for possible
pork-barrel funding by MAI funds. Even the Senate, known for its

nationalist stand on the US bases and nuclear weapons, stands in the

danger of being absorbed by the pro-bases momentum of the PAP.
2. It has moved the Department of Foreign Affairs to pursue officially a
diplomacy of mendicancy.
3. It has succeeded in determining the prime motivation of no less than the
Head of State herself on a program of global peregrination in search of
PAP funding.
4. It has resulted in a massive infrastructure program in preparation of the
country for increased flow of foreign private investments.
5. It has motivated the formulation of a national recovery plan, involving a
nationwide anti-poverty, agrarian and rural development programwhich
implies that an extensive complex of economic and political decisionmaking has been taken over by an international consultative group which
represents on the whole the interests of transnational capital.
There is no underestimating the political and economic impact of the
MAI/PAP on the lives of our people. Precisely, its tremendous consequences and
implications on our national life indicate the extent to which collective
neocolonialism dominated by the US and Japan has dislodged the Philippine
presidency as well as the Congress from the center of policy-making. We should all
meditate on the magic spell of the four American legislators who proposed to US
President Reagan a Marshall Plan for the Philippines and wonder how such a
brilliant stroke of imagination could deliver the whole country on the road to
economic miracle, as President Aquino envisions. More seriously now, we have not
known a more extensive usurpation of the peoples sovereign powers; on the other
side of the picture, we have not known a greater betrayal of our national
independence and dignity.
1. The U.S. Program

We have discussed above the interconnection between the MAI and the MBA
as central to the US motivation. It remains for us now to consider other conditions
involved in the MAI.
The report of the US House of Foreign Affairs Subcommittee on Asian and
Pacific Affairs, referred to above, had made clear what the MAI is all about. It
declared:
The Subcommittee wishes to emphasize that the MAI is not intended to be a
cash transfer program, in which the United States and other donors have absolutely
no say as to how the funds will be utilized by the Government of the Philippines. To
the contrary, the Subcommittee views the basic concept behind the MAI as a quid

pro quo [R]ather than being a blank check, the MAI is designed to give the donor
community enhanced leverage to ensure that the Philippine government enacts
necessary economic and administrative reforms. (Reports on the Philippines
About the Mark-up on 18 April 1989, p. 29.)

To strengthen the leverage of the US in the use of MAI funds, the Subcommittee
recommended an amendment to the MAI bill by requiring that before MAI funds are
obligated, the relevant committees of the US Congress be informed as to how the
funds will actually be utilized. (Report on the Philippines About the Mark-up on 18
April 1989, p. 30.) In other words, a US Congressional supervision over the use of
MAI funds by the Philippine government.
But even without the changes proposed by the Committee, the MAI bill as
introduced in the US House of Representative in the form of an amendment to the
Foreign Assistance Act of 1961, already provides for a strict requirement. In making
his report to the Congress on the implementation of the MAI, the US Secretary of
State is mandated to include a review of the actions of the Government of the
Philippines to achieve the objectives for which assistance under this chapter has
been provided, including implementation of economic, structural, judicial, and
administrative reforms.
The MAI bill provides for authorization of appropriation to the US President
in the sum of $1 billion. But this is restricted by the condition that not more than
$200,000 may be appropriated for fiscal year 1990. (Emphasis supplied.) Note,
therefore, that within the 5-year period beginning 1990 the amount of the US

contribution to the MAI cannot be certain since it is subject to the authority of the
US Congress to determine the amount of appropriation or whether to make the
appropriation each year or not at all.
As it turned out, when the MAI bill was passed by the US House of
Representatives last Friday, July 21, the amount was reduced to $160 million on
recommendation of the US House Committee on Appropriations. The Committee
report said that the Committee is deeply concerned about the management crisis in
the Philippine assistance program, referring to the failure of the Philippine
government to utilize a large part of aid funds already provided by the US and other
donors. The Committee warned that further reduction will be made if such funds
would not be used or if they are misused. (Daily Inquirer, 23 July 1989.) Thus, even
before the MAI bill is passed into law by the US Congress, the Philippine
government is already subjected to indignities.
Hence, clearly the PAP, on the side of the Philippine government, hangs on a
contingency and thus enhances the power of the US to enforce its demands in the
form of conditionalities set forth in the MAI bill, as follows:
(b) Progress of Reforms Necessary for Provision of Assistance. The
provision of assistance under this chapter shall be linked to progress by the
government of the Philippines in the implementation of its economic, structural,
judicial, and administrative reform program.
(c) Uses of Assistance. Assistance under this chapter may include support
for
(1) Economic, structural, and administrative reforms, and voluntary
debt reduction programs that are necessary to stimulate growth
led by the private sector, import liberalization, export growth and
diversification, and the privatization of enterprises owned or
controlled by the government;
(2) Infrastructure needed by the private sector, particularly in rural
areas;
(3) Strengthening the private sector in the development of the
Philippines;
(4) Such other programs as are consistent with the purposes of this
chapter.

Apparently, item (c) (4) above, on the uses of assistance, includes counter-insurgency
programs because in its statement of findings and policy, the bill declares that The
Philippines is currently facing a domestic insurgency which threatens the efforts of
the Government of the Philippines to broaden the participation of the people in the
development of their country.
This is not the place for an extended discussion of the conditions provided in
the MAI bill. It should suffice to invite attention to the fact that on the whole they
are essentially the same conditionalities imposed by World Bank loans and the IMFimposed Letter of Intent, which constitute the key policy elements responsible for
the pauperization of our people. Now, the World Bank and IMF conditionalities are
to be reinforced by the imperial mandate of the US government. Once again, the
colonial modalities that the Filipino people experienced in the US War Damage Law
and the Parity Amendment are inflicted on us.
The unwritten conditionality, of course, is the extension of the US military
presence by means of a new bases treaty, as explained above. Considering the
contingency of the appropriation of funds in the MAI bill, the MAI will become a
giant sword of Damocles that is poised to fall on the head of President Aquino, in
the event that the US government is precluded from obtaining a renewal of the
bases treaty. The PAP has become a centerpiece of a national recovery plan. It
involves a total mobilization of government bureaucracy as well as material
resources. Thus, the Aquino administration has placed its fortune at stake in the
PAP, dragging the future of the Filipino nation with it. The Aquino government
cannot afford to fail with the PAP, and to succeed, it must comply with the twist and
turn of the US diktat. It has started a process that inexorably leads the entire
country into one gigantic trap where it becomes most vulnerable to the economic
blackmail of US imperialism. This is how we may interpret the US Subcommittee on
Asian and Pacific Affairs when it declared in its report that the successful
implementation of the [MAI] would certainly be extremely helpful in terms of
creating a favorable climate in the Philippines for the renewal of the bases
agreement.
2. The Japanese Industrial Strategy

In the discussion on the PAP between Japan and the Philippines on 16

August 1988 in Manila, the head of the Japanese delegation, Minoru Kubota,
Deputy Director General of the Economic Cooperation Bureau of Japans Foreign
Affairs Ministry, stressed in his meeting with Secretary Raul S. Manglapus that
through the PAP, Japan would contribute to Philippine efforts of creating a climate
conducive to increased foreign investments and economic activities of the private
sector in the Philippines. (As stated in the Aid-Memoire on the Discussions on the
Philippine Aid Plan between Secretary Raul S. Manglapus and Deputy DirectorGeneral Minoru Kubota, p. 1.) To be more precise, Kubota had in mind Japanese
financial-economic assistance to the Philippines that can be used for building
infrastructure and other socio-structural pre-conditions for the increased flow of
Japanese investments in the Philippines.
Taking place in the Philippines is an extensive relocation of Japans
manufacturing facilities, in particular those which are labor-intensive and energyintensive.
The transfer of Japans industrial processes to other countries, for example to
the Philippines and other Asean countries, has accelerated in recent years on
account of the revaluation of the yen in relation to the dollar. This precipitated
higher costs of production and reduced profitability of export-oriented companies in
Japan. To take advantage of lower labor cost and more favorable exchange rates in
other countries, Japanese companies cut down production in Japan and increase
their investments in Southeast Asia from where they import basic components and
parts, or complete products. One author has described this as developmental
imports where Japanese companies commission or subcontract producers in
developing countries to make goods for the Japanese market using Japanese
machinery, technology and expertise. This Japanese strategy has accounted for the
high growth of manufacturing in East and Southeast Asia. (P. Maidment,
Manufactured Imports Becomes a Political Priority, International Herald Tribune,
5 December 1988, p. 7-Special News Report.)
For sometime now, Japanese capital has made use of cheap-labor countries
like the Philippines as export platform or springboard for penetration of world
export market such as the European Economic Community or the US. A more recent
shift in Japans economic strategy is Asia manufacturing by Japanese capital in the

Philippines and other Asean countries, Taiwan, South Korea and Hongkong for
export to Japan itself. Present expansion of Japanese investments in the region
takes this thrust. Existing investments are expanded and new factories are opened
by Japanese capital in Southeast Asia with production intended for Japan as the
export market. This would explain the increasing volume of manufactured exports
to Japan from the Asean countries, which have doubled between 1986 to 1988 and
now stand at more than $4.5 billion. As in the case of the Philippines, major exports
to Japan include electronic components, motor vehicle parts, bearings, chemical
products, food and beverages, garments, wood products, glass, steel products, and
business machines. Most of these exports are manufactured by subsidiaries of
Japanese firms or joint ventures established by them with local corporations.
(International Herald Tribune, 15-16 July 1989, p. 9.)
Japans manufacturing industry is a subcontracting system which has been
described as a multi-tiered pyramid, as follows:
The makers of finished products are at the top of the heap of Japan.
Typically, they will rely on about 200 primary subcontractors (primary parts
manufacturers). Primary subcontractors themselves employ between 4,000 and 5,000
secondary subcontractors, which in turn farm out work onto a further 20-30,000
tertiary subcontractors. (M. Ikeda, Pyramid Power, Look Japan, Tokyo, June 1989,
p. 11.)

The tiers of this industrial pyramid have expanded overseas, with the proliferation
of local subcontractors built up by Japanese financial resources and technology.
With the rapid pace of Japanese investment invasion, the Philippines is fast
becoming a part of that pyramidJapans subcontracting satellite.
In this light, manufacturing sectors of the Philippine economy which are
dominated by Japanese capital and technology are virtually extension of Japans
industrial system. Thus, when the Japanese government applies public funds to
Philippine infrastructure projects through its foreign assistance program, this is not
much different from utilizing capital outlay in Japans budget for the development of
a segment of the Japanese economy.
As the demand of Japanese investors for industrial sites expand for the
transfer of manufacturing operations overseas, it is significant that the initial list of

projects for funding under the PAP contemplates the expansion of existing export
processing zones in Baguio, Mactan and Cavite, and the development of new
industrial zones and estates in Batangas, Misamis Oriental and Lanao del Sur. The
Cavite, Mactan, and Bataan processing zones are proposed to be funded from the
Overseas Economic Cooperation Fund (OECP) of Japan. (Manila Bulletin, 9 June
1989.) The proliferation of industrial estates and export processing zones to meet
the needs of increased Japanese investments is expected from the program of the
Board of Investments (BOI) to open industrial-zones building as an investment
priority area for private capital. The joint venture of Ayala Development
Corporation with Mitsubishi Corporation and Kawasaki Corporation in establishing
a 150-hectare industrial estate in Dasmarias, Cavite takes the lead along this
undertaking. (Malaya, 25 July 1989.)
The industrial restructuring of Japan outlined above is expected to be
sustained by a steady rise of Japanese foreign investments. The strategy of shifting
manufacturing operations overseas is considered as a key factor in propelling
Japans export power and in maintaining its economic miracle, despite the
appreciation of the yen and increasing labor costs. (Financial Times, London, 15
July 1987; International Herald Tribune, Special News Report, 9 December 1987.)
Hence, it would be inevitable for Japan to sustain a strong interest in developing the
Philippines along the requirements of this industrial relocation and subcontracting
system.
From our discussion of the Japanese economic strategy in Southeast Asia,
two points are worth emphasizing, namely:
1. The increasing integration of the Philippine economy into Japans
industrial structure becomes the very basis of its security considerations,
including its interest in the continued US military presence in the
Philippines.
2. For Japan to be heavily involved in giving direction to Philippine economic
development through official foreign assistance and private investments, it
does not need the PAP. Dramatizing Japans financial and economic means
in developing the Philippine economy under the name of the MAI may be
more useful to the US and to the Aquino government than to Japan,

especially on account of the timing in relation to the negotiations for a new

bases treaty.
3. The IMF World Banks PAP
The decisive role of the two multilateral institutionsthe World Bank and
the International Monetary Fund (IMF)should be assumed. A major policy
undertaking such as the PAP cannot be left to sub-altern policy-making organs like
the Senate or the Office of the President.
As early as January 1989, President Aquino gave a good indication as to how
the PAP is linked to IMF plans. In her press statement related to the visit of IMF
officials to Malacaang Palace, she said that the successful conclusion of an IMF
agreement and program will certainly help speed up the progress of the Philippine
Aid Plan (PAP); at the same time she expressed the hope that there should really
be no linkage between these two. (Manila Bulletin, 1 February 1989.)
Pointing out the necessity to attract PAP donors on the basis of a country
program containing PAPs policy framework, Roberto T. Villanueva, chairman of the
Coordinating Committee on the PAP, explained last February that the preparation
of this basic policy paper was now the subject of an ongoing two-week-discussion
between Philippine economic officials and a visiting IMF mission led by Ulrich
Baumgarter of the Funds Asia department. (Manila Chronicle, 18 February 1989.)
On his part, Finance Secretary Vicente R. Jayme was more specific in pointing out
that the said country program would reflect components of economic plans and
administrative reforms that the Aquino government had already committed to the
IMF and the World Bank. (Manila Bulletin, 15 May 1989, p. 49; Manila Bulletin, 1
May 1989.)
This comprehensive country program became the basis of discussion in the
Pledging Session at Tokyo early this month. Entitled The Philippine Agenda for
Sustained Growth and Development, (PASGD), it merely replicates the policy
prescriptions contained in the IMF-imposed Letter of Intent (LOI). The policies on
import liberalization, privatization, deregulation and other thrusts for a profitoriented economy, emphasis on the private sector as the growth mechanism,

investment incentives, and cost recovery in water, power, and irrigation services.
In short, the LOI and the PASGD are identical twins.
This should occasion no surprise because this document was based on the
draft prepared by the World Bank. If the Table of Contents in the World Banks
draft, for example, appears identical with that of the PASGD as presented to the
Tokyo Session, this is not coincidental. Taking a closer look as to how the PASGD
evolved, we find the following relevant points from the minutes of the meetings of
the CCPAP.
1. From the Meeting of 19 April 1989:
The Chairman agreed to advise the TechCom [Technical Committee of the
CCPAP] on the suggestions that he might get from the US and Japan on the
[country] paper should be presented in the final form, particularly on what part
of the paper should the PAP be given emphasis.

2. In the meeting of 26 April 1989, the record states:

Deputy Director General Filologo Pante Jr. of the MEDA Secretariat informed the
Meeting on the two versions of the revised drafts of the Country Paper which
were circulated to the Council Members. The second version was transmitted
by Undersecretary Ernest Leung from Washington and contains the comments of
the World Bank and the US Treasury.

3. The minutes of the June 7, 1989 Meeting, the following discussion

transpired:
9. Undersecretary Ernest Leung, Chairman of the Technical Committee, presented
general comments of the members of the Working group on the draft Country
Program. It was noted that the comments of the World Bank have already been
incorporated in the revised draft.
x

10. Undersecretary Leung also presented the specific comments made by the US, as
follows:
a. Deletion of the section on trade, particularly export quotas.

b. Strengthening of the section on investments, to include provisions of

more incentives.

c. The debt equity conversion program should be pushed.

x

11. The following comments by the Japanese were also reported out by
Undersecretary Leung:
a. Deletion of any reference on the misuse or squander of foreign aid in the
past.
b. The need to flesh out the policy commitment for the section on Program
and Sector Priorities. It was informed, however, that the revised draft which
incorporates the WB [World Bank] comments already fleshed out the policy
commitments by the agencies.
c.

Amendment of the section on the role for donors. It was informed that the
Japanese does not want to be directed on the modalities in the types of assistance
extended to the Philippines. It was explained that the Japanese may view this as
more pressure to give more grants than loans. However, it was noted that the WB
concurs with this statement.

d. Strengthening of the section on absorptive capacity

x

This should give us sufficient basis to suspect that the Aquino government
may have also contributed to the making of the country paper. By the nature of the
whole mendicant PAP expedition, this document could succeed only if it is
acceptable to the donors. Obviously, the PAP is a program of the donors for the
Philippines. That is not the worse part of it. Since the PAP funds consist of loans
which the Philippines must pay and grants which are keyed to projects acceptable to
the donors, then the Filipino people have the unusual burden of paying for the
implementation of the donors prescriptions as to how Filipinos manage their

national life. Through the PAP, we are made to pay the IMF, the World Bank and
the donor-creditor countries for their usurpation of our peoples sovereign power.
4. Creditors Program
We should not lose sight of the fact that the so-called international
community of donors involved in the PAP is largely a band of creditors. Hence, the
political, economic, and moral standing of the Philippines is not only heavily
conditioned by its being a mendicant; it also deals with the diktat of the donors as
their helpless debtor. But this time in dealing with the Philippine government as
donors, the creditors have enhanced their moral position in exacting more policy
concessions.
5. Nature of MAI Pledges
It should be stressed that the pledging session in Tokyo early this month is
only the first of pledging sessions, each scheduled annually within 1989 to 1992.
While the donors involvement is on a multi-year basis within this period, there is no
firm commitment for each donor to pledge every year or by what amount should its
pledge be fixed. Apparently, the donors would decide on their pledge from year to
year, taking into account how the Philippines has performed in accordance with the
conditionalities required the previous year. This process enhances no doubt the
authority of the donors over the Philippines and measures the highly contingent
character of the funding for PAP projects.
The far-reaching implications of the PAP should serve to clarify our vision as
a people that we are no in command of the main directions of our national life, and
our political function as a people has thus been nullified. On the whole, a patriotic
view of the PAP should strengthen our collective and organized will to seize rightful
control of the levers of economic and political life from the domination of foreign
monopoly capital and its agents who administer political power in the service of this
alien interest.