Tle Erosion of tle Dbtatorship

THREE 7t

ofpent.up protest against the dictatorship.

_ This urbair phenoT:ngl was unprecedented and surprising even to
those who hrd organized it. untir then, the onry open and targe-siale resist-
ance to the dicsatorship had been put up by the armed,rrderiround
The Erosion of monts: the Communisl p.rn,- of-the philippines_New people,s-Army
(Cpp.
-op"rations
move-

NPA) and the Moro Nationar Liberation hront (MNLF),'*rror,

the Dictatorship were predominantly in th6 countrysides. The noise
binage, on ihe other
hand, not only added a new rocus to the resistance
but arso succeeded in en-
Iisting open support from the hitherto *org"r,iruJ;fi;;;iil;;ffi;
Emmanuel S. De Dios classes, apart from the underground urban riuss
o.ganiltionr.lt-*oura u.
ftom these same wellsprinp of urban support that the later
events of Feb.
ruary 1986 would draw.
The Balq;q! electio-ns themserves proved to be a huge,
though for some
not totally unexpected, frustration owing to the fraud tiui
On the evening of April 6, 1978, Manila was rocked by a passive 19tqg ,""oLp*i.a it.
Despite the obvious show of support or tnr populace
barrage. At a prearranged hour, eight o'clock, residents of the metropolis for the, opposition
came out into the streets and banged on pots, pans, and washbasins, stoked
oandidates -or perhaps because of it the Marcos regm! was amxious to
-
show a i'cleaq swegp_" the Kifusang Bagong Lip"*n (xgL- Ne* society
bonfires in the middle ofthe roads, drove at random through the city in cars, .for
Movement) slate in Metro Manilu, since it'was red by Imelda
jeeps, and trucks, honking horns and shouting above the drn, "LABAN!
Marcos. It was a matter of pride; hence "rp..i"riy
even Aquino was edged oui by , no-
LABAN! " ( Fight ! Fight ! " ).
body from the KBL. In certain iegions, there were token gains
The immediate occasion for that evening's noise barrage was the {ecJ- for the oppo-
sition, for after all, the point of the whore effort ontirepirt
ion for Parliament, the Interim Batasang Pambansa llBP) the following day, of the dictator-
qhin yas to legitimize its rule by alrowing some measure ofnparticipation by
for which the legal opposition had put up candidates headed by the still disenfranchised members of the traditional political
imprisoned ex-sEnator Benigno "Ninoy" Aquino. Laban was also the acronym parties. At ihis time,
Marcos was under pressure from the cartei administration
of the Opposition party in Manila. (The fuli narne was Lokas ng Bayan, or and the u.s.
Congress to improve his human rights record.
People's Power.) Shortly'before the elections, Aquino had given the only
public interview he had been allowed from prison. Ninoy had earlier agreed MDICALIZATION
with Senators Gerardo Roxas and Jovito Salonga that the Liberal Party call
The conduct and results of the l97g elections proved the
for a national electoral boycott. He had however recanted his own position most dis-
appointing to the conservative and moderate section.s of the
and analysis of the Marcos-staged exercise and expounded during his televis- opposition.
while the radicals had long ago given up the idea of a peaceful
ion interview on his "rethink":.I believe that Mr. Marcos is moving towards irlsition,
the moderates and conseryatives had partLipated in
normalization. Because from a sifiiation where we have no parliament we will, the electionr, hdf-h.d;
that Mareos would voluntarfly share ineaningf,l power.
at least, have half a perlioment. . . But the very fact thflt he opened up o little rrr, **ifurution of
the election results convinced a large section-of these
window I think is alrudy enough . . . The fact alone that he has albwed otherwiseconservative
and moderate elements that more drastic action was in
the opposition to speak for 45 days and to come out with their leaflets is order. A peacefirl
palch of about 500 people on April 9 to protest the fraudulent erections was
already to me a trernendous opportunity. And I am taking advantage of thd
broken up and the participants, among tirem prominent
opportunity." opposition readers,
were arrested' As steve Psinakis.(r9gl:7g), who
And the people did seize that opportunity. would laier be accused by
the Marcos regime of masterminding..terrorist
One reason for the noise barrage had been "to let Ninoy Aquiro in activities,, putit,,,TheApil T
election lws made it crear to everyone trwt the
Marcoses rwve tefi the Fitipino
his pison cell know thtt the peopie hod heard his meswge." But the matter people with only one ylytlon: FORCE
' had really gone far beyond'the election; it had turned into an outpouring [8.1]. IronicrUy, ifrrr"fore, the
which Marcos had hoped *oJa
the ,l"iri, a"rp*"a
fil:,r:n ".rriorate
72 Dbtaorship ard Revol*ion
The Erosion of tlu Dictatorship 73

The resort t9 viqlggce was part of a long process of transformation against the government.[3.!1. The suppression
which affected all opposition forces under nlartial rule. The timing of social of the LAFM, however, did
not exhaust the potential for urban go.riflu activities.
radicalization, however, as well as the fonas of violence chosen, differed ac- on the contrary, the
measure of success achieved by what were
cording to the class stratum involved and the political aims it sought to obviously primitive and ama-
teurish methods merery suggested that the same
achieve. tactics shourd be attempted
on a larger, more professional, scale.
The guerilla war being waged by the Communist Party, the New Peo-
ple's Army, and later the National Democratic Front, affected largely the ApRrL SD( LTBERATTON il{OyEMENT (ASLM)
countryside and envisioned the involvemtsnt and organization of' large
numbers of people before it hoped to succeed. Hence it was a "protracted" I*aning towards a sociar-democratic ideology, the April
war. Its aim was never simply to topple Marcos but to restructue existing six uberation
(ASLM) was another group that tool the ,ri* go"riua
property rights in the rural areas. Even before martial law was declared, {ovement route
after the collapse of the LAFM
Amado Guerrero had written: "In the coune of carrying out thereyolution- t3.$]f rts name was a direct reference to the
noisg barage of April 6, 1979. Apiit from the
ary struggle for land as a way of fulfilliny the main demouatic content of attempt ut u *or" defined
ideology (its leaders being mostly products of the
the Philippine revolution, the centml task of the mtire natiorul revoht- moderate activism of the
sixties and seventies), the ASLM was distinguished
tionary movement, which is to seize power and consolidote it, is also canied _ from the LAFM by a
level of expertise in tactics and greater access to logistics.
out. The main armed contingents of the Philippine revah.ttion can be raised lshrt
fact Marcos attributed to the direction, funding, and trairiing
This latter
only by waging a peasant war. Thus it is inevitable tlwt the vast maiority of thqcadres of
the
the Red fishters of the New People's Army can only come ftom the pea- llLY were allegedly receiving rrom ttre wealthier exiles abroad, most
notallr the Lopez family and psinakis particularry. The sophistication
santry."(1970:142) of the
ASI-[{'s pipeline from abroad is described witrr some oeg.e.
The aims of yiolence were quite different, however, for the conser- otpriae uy
vatives and moderates who had become disillusioned with the elections of
flinakis' who admits supporting but denies directing ttre"movemi nt. ,,(A
'friend' of Psinakis) exproined flwt some of the expiosives'.*u
April 7. Most of them were not seeking to restructure society drasticaily but *igd"a n
by ordinary touists iy theiy very ordinnry-looking suitcas", oi portogrr.
simply to compel Marcos to negotiate a formula for the sharing of power. In He said they are inside seared cans of
food; insidi salbd cigaret:ti boxes _
turn, the choice of means differed. The groups that would emerge from this not iust sealed cartons of cigarettes but sealed packs ofiigarenes inside
period would operate mostly in the city and would rely not on the organiza- sealed cartons; seared toys of ail sorts in their oisilrot pi"t iis, ail kinds of
tion of the many but on a select few whose actions would be calculated to Stfts - sotne wrapped,
have the maximum impact - the deliberate and planned use of sabotage, _some not; food containen; medicini bottles; hi-fi
spwkers; TY sets; e/c. " @sinakis lggl:115)
kidnappings, and assassinations. The show of force by the ASLM came on August
The first group to emerge directly from the disillusionment with the months after the suppression of the LAFM. on that )2, l9gO, ei$fi
elections was the "Light a Fire Movement" (LAFM). Initially using crude
a.i.ofroi""t.a ,*pto-
- sions occurred in nine city buildilgs, for which the group
cl-aimed responsi-
incendiary devices (e.g., mosquito coil-gas rag ensembles as timing devices) bility [3.4J . surprisingly, no one was hurt. one operaiion
but later receiving support fuom anigres in the U.S., this group picked out which caused
particular embarrassment to the dictatorship
was the bombing of the con-
lngl,Iy visible and symbolic targets to be put to the torch. Between May and ference of the American Society of rravei Agents
October 1979, the LAFM posted some notable successes, among them the on octob,-br 19, 19g0,
soon after Marcos himself had delivered a welcome address.
burning of Imelda Marcos's pride, the "floating casino." In December 1979 But other bomb_
ings were not as harmless. In other exprosions, several people *rr. ,"iorrty
however, an important courier was intercepted at the Manila International Air- injured and an American woman died, Marcos seized
port and forced to reveal the identities of the movement's leaders. By the end upon these to support
his claim that the bombingp were the work of pur,
of December, most of the LAFM's key members had been captured and its And in a sense, it was true that with the fint loss of life
*d
simple ..terrorists.,,
network smashed. The revelation of the leaders' identities generated surprise and the cause of
injuries to many, the erstwhile moderates had
crossed a bridge of sorts.
both at home and abroad, for they included prominent businessmen such
. It is difficult to_specify-what makes viorence an act of mindless terror
as Eduardo Olaguer and others who, owing to their social position and ln one case, and a valid politicar alternative in another.
previous moderate views, were least expected to resort to violent action certainly, one cri-
terion would be the congruence between the ends proclaimed
and the means
 t

74 Dbtawship and Revoluion Thc Erosion of tle Dictaarship ZS

was suhg for a morarolr*-h.y.l* guerilla

chosen. That is, if violence is used at all, it is not sufficient that the
to be operations in exchange for poli_
cause be noble; in addition there must be scimc presumption of likelihood tical changes, chief among'which *;;r-rh;
Iifting of martial law and the
of success. It is not entirely evident by what sequence of events the ASLM holding of presidentiar elections. By desigr
r"r,
""iiino,il,ail.riry
otr,, uru*
irr,
believed it would come to power. The first phase of the "Destabiltlation guerillas did not directly benefit these "r themselves,
gioups ,rr*o
Flan" called initially for the blowing up of buildinp and establishments; their ostensibie ideological aims. on thJ
other hand, the! ao to
the second phase called for assassinations and kidnappings of high gorrern- the cadse of the traditionar poritician*. roiiJ** "oairiuut,
the ratter, hitherto shut out
ment officials and their relatives. For the most part, the efficiency of violence by martial rule, w-ho wete ihe most able and
arxious to tate aJmantage of
whatever chinks of concession were opened
was intendedito work by eroding foreigrr confidence inthe regime, i.e., by in the armor of the diciatonhip.
affecting the flow of fbreign investment, foreigrr lending, and tourism. It
was hoped that through this, the dictatorship would then be "brought to its TRADTilONAL OPPOSTTION
kfiees" and it$ resistance to a settlement broken. In all this, however, iro )
active and significant role was foreseen for the m:rsses. - The argurnents and efforts of the traditional opposition leaders had
always centered on the^need for Marcos
But not' all moderates who saw the need for violent resistance to the to agree ro an "otderry tmn,ition,,,
dictatorship, were in accord with the tactics of the LAFM and ASLM. Others or aI least a sharing of power through erectiions,
to forestarl"rror" viorent
like the Panido Sosyalista Demokratiko ng Pilipirws (PDSP - Philippine confrontation. The activities of the raFrra and
ASLM were, of course, ob-
Social Democratic Party) disagreed with the destabilization plan because it vious examples of the danger. But a more
worrying possibirity in the rong
"did not give sufficient concrete importance to preparations for popular term was an irreversible increase in the infiuence
of the atmed rebellion led
participation in the process of change. " Instead the PDSP proposed to adopt by the Communist p1ry the philippines. The same line of reasoning was
"anned struggle in the form of people's war as the pimary means of strug- "f in theii-l0bbying efforts in
used by the traditional leaders
the united states.
g/e, " and had been attempting to put up an army called Sandigan (Shield) in The u.S. administration and congr.r, ,"r.
obviously sensitive to at reast
the process. At least partly because many of its key members came from two things in the Philippines: that ihe country
remain an arly of the u.s. in
strongly religious backgrounds, or were themselves members of the clergy, the the "free world " and more narrowly, that
continued access to the m,itary
PDSP was strongly anti*ommunist in sentiment. Ironically,however, intheir bases be assured. These policy imperatives would, of
cgurse, Ue piaceO in
earnest search for a social outlook and a political strategy relevant to the serious doubt if the insurgency were to
grow beyond contror. Nowhere wa.s
conditions of
dictatorship, the social democrats in the PDSP found them- this more evident than in Aquino's testilnony before
the join; H;;se sub-
selves adopting positions and espousing processes (indeed even using committees on Asia-Pacific Affairs and Human
Rights which never sounded
Maoist terms) with uncanny similarity to those of their erstwhile rivals, the more anachronistic--the drift of the hearings fo-cused
on the security or
national democrats. bases and the threats posed by the insurgency.
sensing the obvious concerns
of the U,S. Congress, Aquino emphasized ihut *or.
Ultimately, however, the use of urban guerilla tactics by the LAFM and Filipinos *.;;;;;
the ASLM, while violent in method, posed relatively moderate airns. It more csnvinced that the u.s..bases_ were the price
for mainiaining Marcds in
power [3.6]. Hence, the traditional opposition
sought, after all, merely to compel the dictatorship to grant concessions
u'S interest to look beyond Marcos, especiafly since the dictatorshipin tt,
leaders argued, it'*u,
to the legal political opposition. The efforts of urban guerilla groups are was
itself the most efficient recruiter for the insurgency.
incomprehensible unless considered in connection with the bargaining of the
self and to the u.s. government, therefore,
B"th;; M;;;;s him-
traditional opposition for electoral opportunities. As distinct from the drama' the traditionar leaders of the
opposition sought to present themselves
tic pronouncements in the urban guerillas' manifestos, their political aims as the alternative to ..communism ,,
and elections as the alternative to revorution.
had always been articulated by the traditional opposition leaders, most no' They *... ir"*p.rralin this
aspiiation, however, not only by Marcos's
tably Ninoy Aquino himself. Aquiao, who had been sentenced to death by ,riul"rtrur." uno *r.'ui. goyern-
ment's reluctance, but also by their own
a military court, had been allowed to leave the country for health reasons, fractiousness.
The divisioris within the traditionar opposition
but resumed his political activities in the United States soon after [S.5]. were something Marcos
knew how to play upon well and deviqusly
In one interpretation (Psinakis 1981), the rash of bombings and threat- expfoit to his advant"gr. M;;;;;
these leaders were true products or tte
ened assassinations and kidnappings (especially of Ferdinand "Bongbong" ndn-idlorogicar realpolitik of the pre-
martial law era. They were not cut out to
Marcos, Jr.), had sufficiently undermined the dictatorship that by late 1980 it oe puriiying;[;';;'w,der-
 76 DictUorship and Ranolution
ness and only a few (e.g., Taiada, Diokno, and to a certain extent, Aquino)
would eventually make the transition to cause-oriented politics. The majority,
however, had always found their raisort d,'etrein occupying or aspiring for
some goverrullent position, frorn which they cor-rld dispense privileges and
favors tr: their constituents. sucir politicians would not long survive the
drought in public office that a policy of non-participation or boycott im-
plied. The dictatorship was quite aware and ma.de use of the possibility that
even by offering the most minimal concessions, a fraction of the traditional
opposition would be t€mpted to strike a separate deal with it. It was the
classic case of the "prisoner's dilernma" in game theory. ,A, great cleal of the
efforts of the senior opposition leariers were spent, therefore, in o.unifying"
the various factions, preventing them from g,cing it alone in the hope that a
greater concession might be offered for all. such statements as tJre ..National
Covenant for Freedom" [3.7] and similar others which set conditions for
participations in elections under the dictatorship must be viewed not merely
as a bold front against the enemy, but also as attempts to enforce sanctions
within the ranks of the opposition agailst rnaking separate deal.s.
Even as the traditional opposition leaders looked forward to Marcos,s
promise to lift martial law and call for presidential elections in tr981, some
of the pressr.rre to do so had abated. The urban guerillas had been decirnated
particularly and, perhaps more important in the dictatorship's estirnate
H,onald Reagan was the Republican U.S. presidential candidate.
CAR.T ER..ft4AR.COS PSY.WAR.
Marcos's scheme in dealing with the trad"itional opposition involved a
elelicate balancing in his position with the carter administration. Correctly
assessing the new democratically oriented ad"ministration, Marcos seized the
idtiative, opted for a military gambit, and fired a broadside threatening to
abrogate Philippine-u.s. relations. The timing could not have
been more per-
fect: it came on the heelsof carter's preparations for presidential oath-taking
and amid the re-negotiations of the u.s. bases and n.p-u.s. military
agree--
rnents.
That the carter administration countered by publicly declaring its
abhorrence for dictatorial governments and human rights abuses escalated
the u's.'Marcos psy-war. using its military and economic assistance as supreme
leverage, the U.s. stepped up its public censure of the dictator. Marcos knew
that these were intended for the u.s. to gain an upper hand in the bases
negotiations while . at the same time impressing upon the American public
that carter was somehow fulfiiiing his campaign promises. That the u.s. con-
sistently used its military assistance as a political counterweignt to wangle
ooncessions from its security allies was nothing new to Marcos. The issue at
The Erosion of thc Dictatorship ZT
stake was how he would emerge from this buflying bv big-power
chauvinism.
He also knew that the u.s. posturing on relocating its bases
was more form
than essence, bluff than belligerence, and that eventualry it too would pray
along with his game of limited normalization.
Fresh from his successful diplomatic sorties to china and Russia, Mar-
cos further sensed that he had the edge against carter who, for
one, had
peculiar views on U.s. woird supremacy and dominance
-detrimental even
to the interest itself of his own country.His position onhuman
rights was
further rendered ineffective by policy differences within the cabinet and
the
bipartisan opinion in congress. For whire on the one handtthe state Depart-
ment opted to predicate continued u.s. military assistancb in exchange
for
an improved Philippine political situation, the Defense Deirartment
strongly
cautioned against a reduction of its security commitmenis: the u.s. basis
should not be a leverage on the diplomatic chopping block as this would
effectively cripple its Pacific "forward defense,, perimeter.
carter's policy on human rights further mn aground his own half.
hearted efforts to push Marcos to a corner after realizing the
disastrous
trade'offs in u.s. global superiority in dealing with the dictator. Not surpri-
singly, carter's numerous exhortations for liberal-democratio reforms,became
empty rhetoric, as his basic policy shifted from
an all-out to a watered-down
leverage' when the u.S. congress voted for
a token eight percent reduction of
the carter-sponsored $40 milrion aid package
in oct;be;197g, Marcos knew
he had prevailed. In what was clearry a Marcos coup de gtce,
carter,s sub-
sequent human rights issues were obfuscated by a sustainea
rather than ter-
minated military assistance package. Marcos, for his part, had impressed
upon the Americans that he would deal with his
internal affairs
with the least interference from them. In his own"ourtry,,estimation,,he for one
was no third-rate, pushover dictator who would easily succumb to
us pres-
sure and dictation - the u.S. would have to deal with him on his own
terms.
The Marcos ga.me was played out at a period preparatory
to and
during the bases re-negotiation. Assuming an anti-American
posture, Marcos
propaganda churned out policy statements
that projected the philippines as
getting the short end in its relations with the
u.s., risking its own survival
and prejudicing its national sovereigrty for selfisrr.
*up!rpo*r, interests
t3.8]. The carter administration evintually soft-pedalled ir
rru** ,ight,
issues against Marcos by touting a compromise
iompensation package of
$500 million from 1980 to 1984 for its bases. Marcos acceded to the
1979
accord, politically capitalizing on the supposed lease pay/nent
a,,d inter-
nationally projecting'himself as an independent, non-aligned
ruler showing
hoy t_o deal with a superpower t3.gl. The hidden agend-a, however,
was the
underlying swap deal with carter who by then had b""om" ,"lurtuntly
"on-
 78 Dbtuorship and Revolaion
viaced that strategic u.s. interests were non-negotiable items. As a U.S.
defense official bluntly implied, "Just because a poor bastard got his head,
blown off in a crossftre doesn't mesn we're near letting go of those focitities.,'
By 1981, a U.S. congressional study pointedly revealed that State De-
partment officials had shifted the focus of potcy'from the issues of human
rights and political prisoners to the broader political developments in the
Philippines.
LIFTING OFMARTIALLAW
If Carter had chosen to de-emphasize the Marcos regime,s human rights
violations, international and ohurch organizations were alarme{ at the nume.
rous cases of salvaging and kidnapping. From 1978 to 1980, these had
reached a staggering figure of over 8,000 salvagings and kid.nappings and more
than 50,000 persons arrested on mere suspicion ofsubversion based on the re-
ports of Amnesty International. To offset the international negative global
propaganda, Marcos formally lifted martial law on January 17,lg8l
tS.I0].
It was a brilliant but cosmetic move designed to achievq political mileage, re-
furbish a tarnished global image, and provide favorable conditions for econo-
rnic breathing space. First, it was timed a month before pope John paul II's
arrivai, thereby giving a pontifical imprimatur to his rule, neutraiizing the noisy
catholic minority critical of his regime, and effectively deodorizing his oppres-
sive government, church groups protested this move, warning the faithful of
Marcos' deyious scheme [s.11]. second, the announcement was also timed
with Reagan's presidential oath-taking, underlining Marcos,s sincerity in imple-
menting reforms even before the new administration couid diplomatically re.
assess its policies towards his regime. The political gesture was also a subtle re-
affirmation of the personal relationship between the two presidents
- that
neither one wsuld put the other in a compromising situation. Third, the proc-
lamation likewise in{gnded to pacify liberal-democratic u.s. legislators who
were beginning to pay attention to Aquino then the emerging syrnbol of
- (and) further failure to rep.ort . . . shall constitute-a
overseas opposition
- and preempt their eft'ective lobbying for reduced mili-
tary assistance. In fact,less than six months iater, the u.s. congress approved
House resoiution 133 commending the lifting of martial law, and as for his
international creditors, Marcos's announcement removed the politicaL stigma
and apprehension of the world Bank about his iegime's instability and risk-
worthiness that was contained in its first highly critical and confidential ap.
praisal of his regime [3.12]. The "tfting" of martial law also coincided with
the Bank's preparation for rts Phlkppine consultative Group meeting in paris.
It also re-affirmed the local business community's confidence and raised their
hopes for a reinvigorated economy, not to mention a plebiscite in April and
a hastened presidential election in June. They were all synchronized to out.
The Erosionof thc Dictatorship 79
flank the opposition, project a democratization process,. and forestall inter;
national criticism of the Marcos regime.
,
"lifting" of martial law, however, did not stop the philippine
Marcos's
opposition from persisting in its anti-dictatonhip struggte. The issuance of
the Public order Act (pD 1737) and the NationJ security code (pD
1498) were virtually a carte btarrche for political repression.'under these
decrees, persons coelld stfu be detained indefinitely under the socalled presi.
dential commitment order @o), signed by the president, and be
denieb
recourse to the courts. The effects of martial law continued.
Even worse, the
overriding and objectionable power of the president to punish
dissenters
was now delegated to petty rocal lyrants and miritary om"iut,
through
"blank" Pcos which were then used to harass and terrorize even ordinary
citizens. ln 1983, these would again be replaced by the prercntive Detention
Action (PDA) whose function and scope were almost identical to
those oi tt e
former.
fiIREATS AND DEFIANCE
The plebiscite of April r7, rg}l confirmed the view that the coming
presidential election would be a sham and that Marcos could
even brazenly
play the segurista [9.L3]. The results of the plebiscite ..overwhelminglyi,
favore*{exciuding those charged with high crimes from holding public
office
(an amendment that, effectively disquarified all opposition
uni*", designed
specilically tO exclu{g Ninoy Aquing) and a guarantee,of immunity
from
suit for Marcos and his followers [B.i+1. rr," p-lebiscite ,rro ,.*"Jus
atest
'run for the dictatorship's electoral machinery
and as a gauge of the people,s
susccptibility to threats. A. boycott of the plebiscite as *.l1 ., of the coming
*presidential election was to be treated as a serious crime. presidential Decree
No' 1053 provided for the conviction of a person ',for
faihre to cust his
vote . . . (and) slwll serve the sentence imposed upon itm by
the courts
new offense and the
offender shall be confined in the municipal or city
iail.,,
Aquino, Tafrada, and Laurel had met in Tokyo on April 17, l9g0 to
,form a common stance on the coming presidential electiori.
As conditions
for their participation in the .election,. they demanded a minimum cam.
paign period, I purit'ng of the voters' lists, equal time and space
for the op-
position, and a reorganization of the coMELEC. These .were demands for
electoral reform the opposition would repeatedly make,'rnd Marcos would
repeatedly ignore, until the last [3.15]. Marcos's obstinate refusal to effect
electoral reforms left the opposition leaden no recou$e but to boycott
the presidential election. This move completely foiled the dictatorship,s
effort to legitimize itself at home and before the world. How severely the
80 D btaors$p and. Revol*ian
boycott decision affected the dictatorship's plans was evident in the inten-
;ification of the threat campaign in the rnedia against woulcl.be boycdt-
ters. A boycott march in Daet was broken up and six people were killed.
The boycott decision was noteworthy in ihat it revealed, especially to the
traditional political leaders that it was at times necessary and more effective,
not to mention morally just, to seek forms of resistance outside the realm
of electoral politics. The display of unity among all opposition forces, from
the old political parties to the Communist Party, in rejecting the election
was also unprecedented. Militant church organizations openly defied the
dictatorship's threats of incarceration and actively called on all the faith-
ful not to be duped by the illusion of democratization under Marcos [3.16].
the confrontation with Marcos seemed to vindicate the need for a radical
solution, as proposed by the Communist Party.
Not all opposition groups boycotted the June 16, 1981 presidential
election however. As Marcos desperateiy cast about for an opponent to
lend legitimacy to the otherwise obvious charade, the Nacionalista Party
headed by Jose Roy, which had by then been reduced to an anemic aggrupa-
tion, comically obliged by trotting out an evsn more obscure personality,
AJejo Santos, as its "standard bearer". Nevertheless this collaboration was all
that was needed. Marcos had his election, the results of which showed,
of course, that he had won "overwhetrmingly"
Amid jingoistic slogans and platitudes (e.g., "lsang Bansa.Isang Diwa"
- One Nation , One Spirit), Marcos was inaugurated at the Quirino Grand-
stand on .Iuly 2, X981, and the "New Republic" was proclaimed to replace
the "New Society." In the legai facatle carefuily constructed by the dictator-
ship, Marcos had until then been governing either under the martial law
provisions of the 1935 Constitution, or under the transitory provisions of
the 1973 Constitution. The "New R.epublic" was supposed to mark the
beginning of Marcos's term unfur the normal operation of the 1973 Consti-
tution. For the majority of Filipinos, however, such legal niceties were largely
irrelevant, as they perceived themselves to be in one 1ong, dark tunnel that
was life under a dictatorship.
REAGAN-MARCOS DEAL
Frorn a political viewpoint, however, Marcos had gocid reason to be
content with his "inauguration." All immediate threats to the regime had
by then passed or subsided. The worst of the Moro problem was over with the
signing and the dictatorship's half-hearted implementation of the Tripoli
Agreement. The New People's Army's guerilla war did not as yet pose an im-
mediatg danger. The urban guerillas of the LAFM and ASLM had been tho-
roughly smashed. His electoral opponents had defaulted in the only arena ac-
The Erosion of tle Dictatorship
ceisible to them. There was of course, adverse publicity in other parts of the
world, but on the other hand, the discomfort of having io deal witir a difficult
u s. administration was over: Ronald Reagan was president of the united
states. Atthe reception following the "inauguration," u.s. vice-hesident
George Bush would express the flavor of the official u.s. attitude towards the
dictatorship in the immortal toast:". . . . lue stand with the philippines, we
stand with you, sir. lile love your adherence to demuratic processes, and
we will not leave ysrl in isctlatian." .
This supportive official u.s. attitude was not simply a quirk originating
from the cl.ose personal relationship between Marcos andReagan, although ii
did play a particular role. Rather, it was due more generally to tr,r prevailing
pragmatic thrust of u.S. foreign policy at the time, as expressed in the
so-
called "Kirkpatrick Doctrine" which unequivocally placedrthe strategic inte-
rests of the u.s. above all considerations in dealing with other countries.
Needless to say, even in the carter years, moral prororo"r*ents notwith-
standing, u.s. strategic interests had never taken a back seat. But perhaps
more aggressively, the view of the Reagan ad.ministration sought to end
this
policy schizophrenia that had terribly diminished u.s. gtouat
supremacy
and by also lending morar regitimacy tb the dictatorial rJgimes
it ias sup-
porting anyway. Hence, it did not matter that a regime suppressed
its people
as it stood with the u.s. in trrr ngnt uguLrt
brutally as long ..world
com-
munism" by the "free world." or, as it was put much earlier
on in relation
to Somoza, "He may be an s.o.b., but he,s oui s.o.b.,,
At the time of his inauguration, Marcos seemed to have found a com-
fortable niche in the u.s. scheme of things, for it did appear that
the choice
was between the dictatorship and the armed rebeh oi trr"
New people,s
Army. As long as it remained so, the dictatonhip co,la count
on continued
u.s. support. such a support was nowhere more ably manifested than
in the
political hoopla that Marcos ingeniousry stage-managed.
Exuberant over
Reagan's election and personal invitation, Marcos Imrldu packaged.an
elaborately orchestrated production: a state visit to"rrd
the u.s. up'on Reapn,s
insistence to coincide with the dictator's birth month
and the tenth anni-
versary of his martial law declaration in 19g2. with Imelda
at the helm of
preparations, the cost reached a staggering amount of
close to $30 miltion.
The visit was unmistakabry charact e*ea by fimelight
hugging between
-
Marcos's glib explanations evading pointed questions froin
the American
media and Imelda's indefatigable discussion of bilateral, economic
and diplo-
matic problems with higfr U.S. officials.
The visit would hightight the culmination of a white House-Malacaiang
accord on both personal and political fronts, a development that
would com-
pletely permeate and dominate future u.s. philifpine relations. Marcos
-
substantially got the better end of the visit: on toporcementing
Reagan's
82 Dbtatorship and, Revolution
personal friendship, the U.S. comrnitted a compensation assistance package
more than doubling Carter's four-year $500 million package to $900 million
from 1985 to 1989 [3.17]. In the words of a State Department official:
"Marcos begged for military assistance und.er Carter - with Reagan, he was
spoon-fed. " It was the fastest deal ever in the history of RP-US relations.
ECONOMIC CRISTS
But while the dictatorship appeared to have weathered the political
crisis for the moment, the economy began to show signs of faltering. A
shock to the economy had already been dealt by the oilprice increase of
1979. The regime sought to adjust to this in the manner it had been ac.
customed to - by borrowing from abroad to accommodate the higher import
bills and sti11 sustain economic activity. This was, after all, a maneuver that
had worked well during the first oil price hikes in 1973.
.'In 1979 and thereafter, however, there was a crucial difference: low-
interest loans were no longer easy to come by. At this time.,the ceniiit
banks of the more developed countries perceived inflation to be the main
danger arising from the oil price increases. Consequently, they pursued tight.
money policies which drove up their domestic interest rates, choked off
investment, and sent theit econornies into a prolonged recession by 1981.
In the pr@ess, of course, their own inflation was tamed.
The economic interdependence between the more-and the less-
developed countries enforced by capitai markets was never more apparent
than in the heavy toll these events took on large borrowers such as the
Philippines. High interest rates in the developed countries siphoned funds,
deposited mostly in large transnationai banks, away from would-be
developing country borrowers. To continue to obtain new loans from abroad,
these developing countries would have to be willing to pay high interest
rates comparabJe to those prevailing in the developed countries, often on
o'floating"
a basis.
In the Philippines, ibi example, the proportion of medium.and long-
term debt that came under "floating interest rates" rose from26.9 percent
to 4l .0 per cent between 1978 and 1982. This meant that every time interest
rates rose abroad, the country had to pay more to service not only new loans
but alss ;"nl*l'iously eontracted ones. In the same period, debt service in-
creaseci trorn 5786 million to $2,159 millioir annually as implicit interest
rates more than doubled, trn additjon to the higher interest rates, the deve-
troping countries also suffered fiom the contraction of their export markets
as a result of the recession abroad. Ironically,.therefore, the same circums.
tances that hindered them from repaying previous debts (i.e., high interest
rates and weak export demand) pressured them into incurring new ones.
The Erosion of tle Dictatorship gj
Difficult as the situation was for an developing countries, it would
nonetheless be an oversimplificationto attribute thi later outbreak or,iri,
entirely to unequal relations between the more-and the less-developed
countries. The theme that the country was not unique in experiencing
eco-
nomic difficulties was one that the r"gr*r would continu"uy t u,f-on
t"tu,
to exculpate itself. It was, equalry easy to meet this facfle argument, how.
ever, by merely citing otrier deveroping countries which despite
their pro-
blems were in a better positio,n than the philippines for exairple,
Thailand
the other ASEAN countries, or Taiwan and south Korea. tnoeee, uasea
on
s9lpe relative indicators such as the ratio of total debt to
income, iu. Elip_
pines was in a worse state than even some rarge Latin
American bo*o*r.r.
'
;
C0UNTERCYCLICAL poLICy: suBsIDIEs AND DEFIcrr spgNutrrc
what needs to be explained is the inordinate build-up of debt during
this
'period (Table 3.1). ,The most proximate and visible re.son was
the govem-
ments's conscious decision to embark on a "countercyclical,, policy,
that is,
to- expand government expenditures to sustain economic
activity in the hope
of riding out the world recession. As a result, the deficits of the nationar
government rose from 1.2 per cent to 4.3 per cent of GNPbetween
t97g and.
1982' As a matter of course this was also reflected in current account
defi-
cits, which ballooned from $l.l billion to $3.2 billion in the same period
(Table 3.2).
The decision to hold back on spending and tolerate a contraction in
economic activity, or a large growth, is always one taken reluctantly
by
any govemment. That it is possible to do so, however, is shown by the
expe-
rience of other countries during that period, such as Thailand which also
slowed down its accumulation of foreign debt. possibly, however, the pres-
sure to run a large deficit is the greater for a regime which had just pro-
claimed a "New Republic " but whose claims to political legitimacy were
widely disbelieved. A creditable economic performance could, after all, blur
the 'question of moral legitimacy, especialy among the business classes.
on the other hand, a poor economic showing could sufficiently weaken the
regime especially from the point of view of business.
CROMES AND FINANCIAL GOVERNMENT INSTITUTIONS
A deeper reason for trre large deficits, and consequently the unabated
accumulation of debt, during this period was the regime's need to preserve
jts e,cgnomic basis, which was crony capital, and to placate the
domestic
 84 D ic t at or s hip and R arclut ion The Erosion of tla Dbtayorship g5

TABLE 3.1 MEDII.IM AND LONG.TERM EXTERNAL TABLE 3.2 NATIONAL GOVERNMENT BUDGETARY
DEBT COMFOSITtrON, 1976. 1982 EXPENDITUBES AND NET LENDING,
(in per cent of total, end-of-period) i.980 _ 1986
1976 t977 1978 1979 1980 1981 1982
Creditors 100.0 100.0 i00.0 100.0 100.0 100.0 100.0
Multilateral institutions 1
10.4 11.9 t3.3 15 .l t6.2 18.9 19.0 1980 1981 1982 1983 1984 1985 1985
Governments 7.t 12.0 12.8 10.s 9.4 10.5 10.0
Bonds 9.4 10.0 12.4 t2.? 11.0 9.9 8.5
Banks 44.8 . (In milllons of pesos)
.3 42.L
Other financial institutions 41 42.8 50.3 50.9 50.3 1)
Suppliers'credits 31.8 24.0 18.7 11.9 L2.S 10.4 10.5
Currentexpenditarc 24,516 26,390 30,980 34,522 4?,gj3 SS,Z75 67,100
Wages and salaries 9,331 10,631 10,g47 t3,Bi7 16,g34 Z2,B9O 25,600
Borrowers , 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Other expenditures on
Public Sector- 53.9 56.9 66.7 7L.s 71.9 13 .A 72.s
g<rods and services 10,739_ LL,263 ll,4l7 ll,g42 12,405 13,196 18,g00
Central Bank 8.9 7.1 Interest payments 2,296 2,429 3,560 4,996 l0,41g 14,652
11..4 tT.l 9.6 10.1 13.0
to local
1g,300
NationalGovernment 13.4 32.1 35.9 2't.4
Transfers
governments 1J28 1,544 2,377 2,603
public 31.6 49.8 j .3 29.6 Subsidiaries 622 SZ3 L,g7 g 1,1042,776 3,552
Other 5 59 .4 26.9 32.1 3,500
(direct)
Private sector 46.1 O?, 33.3 28.5 28j 27.t 2"t.s 42g f ,OOS 900

End-users/purposes 100.0 100,0 100.0 100.0 100.0 100.0 100.0

Capital expenditure 8,405 12,679 9J86 8,796 13,900
10,044 10,409
Public 43.0 43.1 52.4 56.9 5 .9 56.1
5 54.8
Infrastructural
Power & electrification 2A 3 19.5 21 .4 24.8 21.3 2t.8 21.1
lnvestment 7 ,346 9,973 7,538 6,945 6,26t 3,s0s 5,900
Transport 5.1 5.9 6.0 j.O 6.3 8.3 8.6 Other capital
Agriculture 2.5 2.3 3.0 3 7 3.9 4.5 4.8 expenditure 1,059 2,706 2,506 3,464 3,s25 3,921 8,000
Industry 0.1 0"4 1.5 ?.t 3.8 4.4 Equity and net
Other l5.l 15.3 20.8 t9.9 22.3 17.8 15.8 Iending S,lg't 9,010 11,586 8,132 14,030 16,077 34,200
Equity contributions 4,522 8,0g1 9,368 5,139
Ptivate relent by public 9,844 14.399 ,r. {. *
sector 10.9 13.8 t4.3 14.6 i6.0 16.9 t7 .7 Loans less repay-
Private (direct) 46.t 43.1 33.3 28.5 28.1 27.A 27 .5 ments 675 929 2,218 2,398 4,186 1,678 !r! * *
Manufacturing 19.1 18.6 1s.0 13.2 tz.s ro.2 1,0.2 Assistance to GFIs (1s7) (630) (1,408) (177) (8,389) (t},74s') (22,900)
Transport, utilitie$ 12.5 10.2 8.1 6.? 8.3 8.4 8.2 Total expenditure
Mining 8.2 9.0 6.1 5.8 4.8 5.'1 6.2 and net lending 38,118 48,079 52,160 s3,063 66,689 80,148 1i5,200
Other3 6.3 5.2 4.1 3.2 2.5 2.7 2.9
(In percent of total)
Maturities 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Over 1 to 5years 7.2 6.1 4.1 2.5 1.9 1.1 1.3 Current expenditure 64,3 54.9 58.9 65.1 64.3 59.0 58.2
Over 5 to 12yews 53.4 58.2 57.2 56J 57.1 53.9 50.6 Wages and salaries 24.5 22.r 24.2 26.2 25.3 28.6 2?.2
Over 12 years 39.4 35.7 38.7 40.8 41.0 45.1 48.1 Other expenditures on
goods and services 28.2 23.4 23.6 22.s 18.6 16.5 r 6.3
Interest rates 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Interest payments 6.05.0 6.8 9.4 ts.5 18.3 15.9
Floating 17 .2 25 .1 26 .9 3 .6 36.6 39.0
1 41.0 Transfers to local
Fixed 82.8 '.14.9 13.1 68.4 63.4 61.0 59.0
goyernments 4.0 3.2 4.s 4.9 4.2 4.4 3.0
lExcluding
Subsidiaries 1.6 1.1 3.8 2.1 0.6 .1.2 0.8
IMF except Trust Fund Loans.
'Including amounts relent to privatc sector, Capital expenditure 22.A 26.4 i9.1 19.6 t4 .7 I 1 .0 Lz.t
' Mainly construction, agricult ure, services, and bankrng. Infrastructural

Sourcs: The Acting Secretary, Recent Ecanomic Developmentr, International Monetary

investment 19.1 20.7 14.3 13.1 9.4 6.9 5.1
Other capital expen-
Fund: Washington D.C., 1984, p. 128. diture 2.8 5.d 4.g 6.s 5.3 4.1 6.s
 t
D b t at or ship and R ao lw iut
86 The Erosion of the Dbtatorship , '87
Equity and net lending 13,6 L8.7 22.0 15.3 ZL.o 20.0 29.7 TABLE E.3 MAJOR CORPOBATIONS BAILED-OUT
Equity contributions 11.9 16.8 17.8 ,10.8 14.7 18.0 **'l'
*** BY
Loans less repayments 1.8 L.9 4.2 4.5 6.3 2.0 THE PHILIPPINE GOVERNMNNi, ig8g

Total expenditure and Company Bail.Out

100.0 100.0 100.0 100.0
.i
net lending 100.0 100'0 100.0 Amount (% ownership) by Gov,t Alency
Original
Family
(In percent of GNP) i Control
l. Atrium Capital Corp.
Current expenditure 9.2 9.2 8.'l 8.0 9.1 10'4 *** ,)
Asia Pacific Finance Formed Interb ank (7OTo) DBp (AWS
3.8 7l23llt)
Wages and salaries 3.5 3.5 3.2 3.7 3.2 4.0 5. International Corp. Banking
(2i%) NDC
Other expenditures on
goods and 4.0
services 3 .7
4. Asia Industries (10070) NDC
L.9 2.4 Disini
Interest payments 0.9 0'8 1'1 1.3 2.8
Transfers to local 5. Bancom Development l

governments 0.6 0.5 0.7 0.7 0.5 0.6 0.5 6. Bancom Finance Formed Bancom Union Bank
Subsidies 0.2 0.2 0"5 0.3 0.1 A.2 0.1 7. First Countryside Credit
Q0%) LandBank (AwS) 7l23lSt
8. Union Savings Bank
expenditure 3.2 4.2 3.0 2.7 1.8 1'4 2'2 9.
Capital
Infrastructure
Construction & Dev't Corp
Incl. Rdsort Hotels
p2 birrion pNB (40%)
tswsr
Pl e_b_illion ND c (19 %) {FEER
2rz4rt3, 3ilTl"
24 l:8l)
investment 2'8 3.3 2.2 1'B l'2 0 '9 0 '9 Galleon Shipping DBP, GSIS, pLB, etc. (31%)
2I

Other capital 10. Delta Motors Pl.S^billion pNB (FEER glt4lgt)

expenditure 0.4 0.9 O'7 0'9 0'7 0'5 l'2 11. Marinduque Silverio
$820 mi[ion (t}O.yo) prvs a bsp (AWSJ " 9/4/;4)
t2. Paper Industries Corp. P150 mitlion (26.5o/.) NDC (AWSJ Bllsl})i)'ioriuno
Equity and net 13. Phil. Underwriter Finance
f.naing 2.0 3.0 3'5 2 '1 2'6 2'T 5 '3 t4 Filipinas Bank
P}VB (FEER 8lt4l91) Silverio
2.8 1'5 1'8 2'4 ***
Equiticontributions t.7 7.7
Loans less
repayments 0'3 0.3 O'7 0'6 0'8 0'3 * ir *
Abbreviations AWSJ Asian WaIl Street Journal
Total expenditure and DBp _ Development Bank of the ihilippines
net lending L4.3 15.8 ls.7 14.0 12.4 t3.2 l'1 .9
FEER _ Far East Economic Review .

GSIS _ Government Service Insurance

System

NDC _ National Dbvelopment Corporation

1
Includes special assistance to local governments of P0.3{.4 billion annually'
LBp _ tand Bank ofthe philippines
pNB philippine Nationat
2
Government financial institutions'
- B;i--,--
Source: John E' Lind, phitiwine Debt to Foreign Bonks, rilefi-th
Source: World Bank, P& ilippines Economic Report: A Framework for Economic on Corporate Responsibility: California,
committee
Recovery,CountryProgramsDepaltmerfEastAsiaPacilicRegion.Washing.
L9ga, p,ll.
ton D.C.: 1986, Report Number 6350'PH'

' rations outstripped the infrastructure share from 36.3 percent

, percent of total capital outlay. A common,scheme- to 464
was t; pump equity
business classes. To a significant degres, the higher level of Soveflrment ,:.investments as -government financiar
contdbutions into pubric corpora-
spending was bound up with the rescue or "bail.out" of firms with close ,''tions' During this period,,ihirteen such corporations
averaged 3.g percent of
connections to the dictatorship (Table 3.3). Further, from 1981 to 1983, : O}.IP,which wer€ eventually
n"*rrO ttuo"if,
ioreign borowings and became
goyemment eguity inyestments (subsidies) in nonfinancial public sorpo. ;,g,nrt of the country,s external debt (Tabilt;).
i
 bt at or ship and Rev olutiqt
88 D The Erosionof the Dbtatorship iC
TABLE 3.4 CAPITAL OUTLAYS OF THE NATIONAL In. January 198.1, Dewey Dee, a Firipino{hinese businessman with
GOVERNMENT, 1970 _ 1983 interests in the textile industry, fled the country, leaving behind some
$100
million in debts. This incident shook the foundations. oithe financial s)atem
Corporate Other since many banks and financial intermediaries foolishly, as it would tum
hfra Equity Capital - Total
out, were heavily exposed to Dee. Bello et. al. (19s2) conjecture that Dee,s
structurel Inveitment Outlays2 flis.ht was not some bolt from the blue but was prompted by the impendiag
implementation of a tariff-lowering program in the context of a lgg0lyorld
FY 1970 433 293 726
Bank loan. In any orrent, both crony and non{rony estabrishrnents
FY 1971 425 392 664 were
affected by Dee's caper, and the cential Bank reactedby exteoding
FY 1972 679 s32 lJ2ll ryverely
loans to troubled institutions, or facilitating the take over of the
1,172 2,288 weaker by
FY 1913 1,111 the stronger, thus reinforcing the trend towar& concentration in the
FY 1974 1,877 2,981 6; 5,336
s)'stem'
financial
FY 1975 4,089 1,693 978 6,760
The Dewey Dee incident had set a pattern, however, for massive govern-
FY 1976 2,700 2,000 500 5,200
ment intervention. As the effect of the world recession and the high interest
rates on foreign loans began to make themselves felt, several large domestic
Average Strare (50'2) (4e.8) (loo)
firms encountered difficulties in payments on loans owed eithei to govern-
for 1970-1976
ment financial institutions (GFIs) such as the phflippine NationJ Bank
(Percent)
(PM), Development Bank of the prrilippines (DBp), and
rsociar security
System (SSS), or directly to foreign banks. A*o"g thLm were
cY t977 2,900 2,300 1,200 8,400 firms
8,576
widely known to have been owned by Marcos cronies, zuch as Rodolfo
cY t978 3,919 2,770 1,887
cuenca's construction and Development corporation of the phflippines
cY 1979 5,229 3,907 t,3s6 1r,492
(cDcP) and Galleon shipping, which owed enormous debts to DBp;
cY 1980 8,956 5,351 2,991 t5,298 Ricardo
Silverio's Delta Motors corporation which was indebted to pNB
u, ,.u ds Her-
Average Share (45.5) (34.3) 20.2\ (100.0) minio Disini's cellophil Resources, whose logging operations in the
(1977-1980) rr cordil'leras were eventually taken over by the government-owned
for National
(Percent) Development Corp oration.
The regime set aside an initial "rescue fund" of pl billion for ..dis-
I 981 6,148 10,809 2,385 t9,342 tressed" corporations, justifuing its move
with the need to preserve employ-
1982 5,447 8,742 2,245 16,394 ment in the face of a recession. The money was then re-Ient
4,346 3,749 14,441
to the corpora-
cY 1983 6,348 tions through the GFIs, chiefly the DBp and the pNB.
In addition, the gov-
emment relped some of trese corporations obtain foreigr loans by gua;-
Average Share (36.3) (46.4) (17.3) (100,0)
toening the debts so that what strould have been private
became public-obliga-
lFo, FY lg1O-1g73 infrastructure outlays expenditures of MPWTC and 'tions, Despitri these, however, uuny of these firms
wourd ultim;tely be fore-
MPH equity contributions of the national govemment corporations engaged ylosed (e.q., all those mentioned above) and taken over by the ius. rne
in infrastruiture projects. After 1974, this includes only MPWTC and MPH latter would in tum be sadtlled additionally with the costs
of *r*ing tho.
capital expenditures. e corporations and require additional infusions from the
2Fo, FY 1970-1983, this is called "non-infrastructure outlays" and in' ment. From 1978 to 1982 therefore, the 'het lending,, item
national io**-
cluJes equity contributions to SoYelnment corpolations .involved- in activi' in the i'udget,
which represents governrnent loans or equity infusiori into
ties othei tiran infrastructure and capital expenditures; and capital expend! DBp, pNB, and
tures of ministries other than MPH and MPWTC, From 1974, non-infrastruc' ,.",*:l r-::y:f
wrucn ran the $1.1.c9g9ratiory
(notablv alsoih" Notional power iorporation
tures projects were broken down into "capitalization" and other capital outlays, billion nuclear plant), rose from g.g percent to iz.o per_
Source: U.P. School of Economics,,4 n Anatysis of the Philippine Economic Crisis. cent of total government expenditures, or almost
tenfold from p2.6 bilion
University of the Philippines Ptess: Quezon City' 1984' p' 33' toY22.O billion (Table 3.5).
90 Dbtatorship ard Revolution The Erosion of tle Dictatorship
9t
TABLE 3.5 FINANCIAL OPERATIONS OF MAJOR The desperate condition of the government
financial institutiors was
NON.FINANCIAL PUBLIC ENTERPRISES, summarized in the rMF report (l984fon their pr;i;U;;;t
1981-1986 (In billion of pesos) 1983' to wit: ten accounts or tire pNg in sug,, irr".ru
more than 40 per cent of its portforio;
and mining accounted for ",
uui or tn ., ten, nine were crassified
1981 1982 1983 1984 1985 1986 as nonperforming. Of *._e
hrgest nonperforming assets, orily
considered viable. At ,T.Dpplo-Iy three were
Internal cash generation 0.7 4.7 1.8 4.2 1.6
ta oiST accounts exceeding $5 million
-0.3 each were considered viable. co,ection
National Power Corporation2 0,7 -0.5 2.2 0.3 t.4 2.3 rates on Ioans were 24 percent
on
Philippine National Oil Corporation -1.3 0.5 2.1 1.9 1.4 0.6 lrincinal-and 39 per cent on interest. The collection rate on ihe central
Metropolitan Water and Sewerage System 0.2 0.2 0.1 0.3 0.4 0.8 Bank's "Co4soliclated progr"r, ;i*iere
total borowings reached
National Irrigation Administration 0.1 0.1 -0.2 -0.3 -0.7 $2.3 billion from 1978l*1"^llS
? l9:3lwa$ffi:otia eent (Table 3.6). Under this
National Devolopment Company o; o: 0.1-0.1 latter program, the central Bank contracira?rrig, debt directry
Light Rail Transit Authority -0.1 -0.2
0.3 -0.3
-0.2 reJent the peso proceeds to private and then
or gor.**rnt end-users. Einalty, g0
National Electrification Administration 0.1 - -0.3 per cent of the guarantelmlde pinippine Export
National Housing Authority 0.1 0.1 g.I
ty lh, --rE
and Loan Guaran_
National Food Authority 0.1 0.1 tee Corporation were overdue
tlSS.
Other3 -oi oi 0.2 0.1 0.4 0.1

3.3 11.8 18.1 t3.4 12.3 15.8 CROI{Y LOAr{S AND COMMISSIONS
Capital expenditure 1

National Power Corporation 5.8 4.9 7.3 7.t 5.3 8.9

Philippine National Oil Corporation ^' 1.9 -0.1 3.0 9.0 -0.5 -0.4 Foreiga loans were guaranteed.
by either the government or the central
Metropolitan Water and Sewerage System 0.8 1.0 1.4 t.2 1.3 1'.) Bank under the prausibre
National Irigation Administration 1.2 r.6 1,7 1.9 1,7 1.8 iurtinrutior-i";;;
grant the private sector b;tter
doing so the authorities could
National Development Compaay 1.4 2.0 1.1 0.2 0.5 0.3 terms than
its own. This was true, of course,
iriL
ur,r, were to secure loans on
Light Rail Transit Authority - 0.4 1.6 0.6 0,2 0,1 b;;;;;her
hand, the scope for the
National Electrification Administration 0.6 0.7 0.8 0.s 0.3 0.6 misuse of such loans was_also
gre;try rr*on;ro, as the burden
of both moni-
National Housing Authority 0.6 0.5 0.7 0.s 0.6 0,6 toring and risk was shifted
to tr,. uro away from tr* ror.ig,
National Food Authority 2.r 0.3 banks and "utrroiiio
the end'users. unde* guuiunr.r'lrhrm.,
Other 1.0 0.8 0.5 0.5 0.8 1.4
no compelling reasor to screen the foreign bantcs had
specific roan proposals carefully
government or the centrar since the
Overall deficit -13.6 -11.1-13.6 -11.6 -8.1 -14.2 Bank would be committed to
repay the roans,
National Power Corporation -5.4 -5.1 -6,8 -3'9 -6.6
-5.1
Philippine National Oil Corporation -3.2 0.6 -0'9 1.0 1.9 0.9 i ;ffif::1,T
banks *:,T:j::r"XIj:y:
co,ld then fr-nii,i",u."",,n
clearty afford *r;r#-;;
r o, not. n.
ro,.ig,,
Metropolitan Water ald Sewerage
.Up .orrporr" o;;;;;*rli.rH
System F
-0.6 -0.8 -1.3 - 1.0 -0.8 -1.6 . il"1ffl,:::1jl"f::1 ', s;u;;;;i-co.porutions,
and to overbo,ow was.clearly
use
present; ,Jrf,.
the incentive to mis-
National Irrigation Administration -r.2 -1.5 -1.6 -2.0 _ro _?5
of some of the foreigrr exchango-risk "*t"rr,fr./*r;#i#*;
Nationa-l Development Company -t.2 -1 .0 -0.3 -0.s -o.s ano to ttre extent the loan criteria
Ught Rail Transit Authority * -1,8
-0,4 -r.7 -0.8 -0.2 -0.3
the local authorities were less
stringent and more malleable than
of
National Electriflcation Administration -0.6 -0.7 -0.8 -0.8 -0.5 -:0.9 the foreign banl$. those of
National Housing Authority -0.s -0.3 -0.7 -0.s -0.5 -0.5
National Food Authority -1.1 -1.4
Other -1.2 -0.6 -0.3 -0.4 -0.s -0.8 aI payments.

'.u,11?."1t*:.sing Zone.Auth-ority, Local water utilities Admrnistrdtion,

Manfla Transit Corporation, philiip."
Source: Data provided by the Philippine authorities, iir.ti"ri rirrr*uvr, purippin"-i"i Metro
ir*rnrr,
,and
Housine and Settlement Drr;;p.;;;;;;;";"".
1D"to through 1984 cover 13 major non-financial public enterprises, and since 1945 'PNOCinventories
rose substantially in 19g3.
tho reporting is based on major enterprises.
- 2NpC Source: I{orld Bank,L9g6,op,
eccounts payable rose substantially ia 1983 partly because of arrears on extsm' cit.
92 ictuuship atdRevolaion Tle Erosion of the Dbtatorship 93
TABLE 3.6 CENTRAL BANK CONSOLIDATED BOBROWING
,i
Ironically' in defendinc the use of loa, proceeds
PROGRAM, 197&1983 '(In rnillisa of U.S. dollars) publcly insist on the soundness of its bonowing
rater, the regime would
poliry by citing ttre ffi.;
Date of Spread Over Six- Mafurity Grace Period ing aiquiescence of the foreign trrra".r. ii pl*err"ly,
perhaps even delibe_
Commitnent Amount Monthr I"IBOR 1 in Years in Year ' rately, neglected the
f'act that the decisions or roreign i*d..r'*"r"
no longer
completelv based on ttgfeasililitv of projects
but oi go"rrrr*rrriguarantees.
,Between 1978 and 1982,-the proporti* of total
1.978
March
510
465 1.00 10 debts re'lent
;rt;-;#iJrrr-,.r*
3 puUic-sector to the private sector
May 451-103 ,bv 1tu incfedsed from l4.g
per cent ($901 mil,on) to 24.0 per
cent 1$i,tOS ,rflli;;) Arbi."::ri:,"
1979 495
January 250^ 0.75 103
January 45r a 104 TABLE 3.? MEDIUM.AND LONG.TERM EXTERNAL
February 100 0.'75' 104 OUTSTANDING,1976-1982 , - --' DEBT
April 100 0.75 104
(In millions of U.S. dollars, end of periodj
1980 400
February 204 0.75 10 4 t976 1977 1978 tg7g 1980 1981 tg82
August 100 0.75 I 4
November 100 0.875 8 4 Creditors 3,932 5,023 6,279 ,1,277 8,745 1020g
Multilateral institutions I 4L0 598 . LL3g7
r981 3504 840 1,099 1,4t3 L',g3L 2,260
February 200 0.875 I 4
Governments 280 605 801 763 820 r,oog 1,186
May 50 0.875 I 4
Bonds
Commercial bar*s
37t sol 177 8e0 s66 fiii 1,0t3
October 100 0.75 l0 4
Other financial 5,332

1982 3255
institutions)
\,9?? 2,t16 2,68s 3,663 4,4s7 s,138 861
February 32s 0.7s 10 4
Suppliers' credits t,249 t,203 1,172 862 r,oas i,;;; 1,245
300 }3j::_*.*r.2 3,s32 s,023 6,27s 7,277 8,745 70,208
1983
300 0.8?s 8 rubuc Sectot- 2,L20 2,g5g e,tAe 5,206 7,447 g,619
lL,8g'1
3SO 3SS 'iti
February 3
Central Bank
6,29L
National Government 52g
88s 839 1,033 L,549
Memorandum 1978 t979 1980 1981 1982 Other public t,242 2,503 3,471 4,321
2,860 3,66g 3,255
* (Outstaading at end ofperiod)
2$Sl 2,746 3,815
Private sector (direct) 1,812 2,165 z,Ogt 2,071 2,4Q4 2,761
Relending by Central Baak 267 561 808 1,054 1,966
3,278
Public sector 6 l8r 336 505 734 End-us'ers/purposes
1,92_1 6,27s 7,27,1 8,74s 10,208
1,301
Private sector 86 225 303 320 66s Public ?,213,
2,167 3,287
t,g9^3- 4',8s1 ;,i;;
11,8e7

tgg e77 1,343 !,!40

6J14
llupan"r, loan of Y-10 bilton at 7,4 per cent.
Power & electrification
1,810 r,eos i"zir
'sii
Transport 2oo z9g 42s soz sso 2,50s
2spr*d over 12 months' LDOR.
Agriculture 100 tt7 187 267 340 , iia t,027
3Japanese
loan of Y-10 billion at "1 .25 percent.
Industry & 25 r08 L87 388 s68 szo
4spre.d
Other 593 768 1,304 t,448 1,949 " 1,8i; 1,894
of0.625 petcent for first three years. Private relent by public
5Sprod of 0.5 percent over U.S. prime rate for 40 percent of loan. sector 427 691 901 1,065 1,400 t,72L 2,105
Private (direct) L,812 2,L65
6lncluding 2,09t 2,07L 2,454 2,76L 3,279
Development Bank of the Philippine. Manufacturing 752 936 944 9s7 1,090 1,041 1,210
Source: Tho Acring Secretary, Philippines, - Recent Economb Darclopments
Transport, utilities 49L 51s s08 459 726 858 976
Intemational Monetary Fund: Washington D.C., L984,p. L29.
Mining 321 451 379 422 417 580 746
Otherr 248 263 260 233 221 282 246

;
 D ict at or s hip and R * olution The Erosion.of the Dictatorship

Maturities 3,932 5,023 6,279 7,277 8,745 10,208 LL,B9,I TABLE 3.8A CROSS BORDEE DEBT OF PHILIPPINE
Over 1 to 5 years 284 308 258 181 158 ll3 155
Over 5 to 72 years 2,097 2,922 3,593 4,123 4,993 5,488 6,0L'1. CORPORATIONS TO FOREIGN BANKS
Over 12 years 1,551 1,793 2,428 2,972 3,584 4,607 5,725 (suRvEY OF MEDTUM AND LONG-TERI,r
Average maturity L3.4 12.9 12.8 13.'l 13.2 14.5 14.0 LENDTNG) END 1983
in years
Interestrates 3,932 5,023 6,279 7 ,27't '8,745 10,208 L1,8gl. Number of Millions
Floating 675 1,263 1,590 2,?AZ 3,203 3,982 4,87$ Loans us$
Fixed 3,257 3,76A 4,589 4,975 5,542 6,226 't,019
Apex Mining Co. 1 2.4A
Argomant Mineral Exploiation Inc 1
I 3.00
Exciuding IMF except. trust fund loans . Asia Brewery I 60,00
2 Asia Industries Inc. 2
Including amounts re-ient to private sector, 50.00
Asia Reliability Co., Inc.
3 1 17.00
Muirly construction, agnculture, services, and banking. Atlantic Gulf & Pacific Co. I 49.71
, At1as Consolidated
Mining 6 380.00
Source: The Acting Secretary, IMF, op. cit., p. 127 Basic Petroleum 1 2.L0
$enguet Corp. 3 I 13.1 0
dentral Bank of the Philippines
Actually the "public vs. private" distinction misses the key charac- Chico Mines Inc.
19 2943.76
teristic of the economy that was developed to the utmost under the {icta. 1 9.50
torship, i.e., the systematic llse of the state ma€hinery as means for p-{v-{,e
Consolidated Indu strial Cases i 4.50
Consolidated. Mines Inc. 2 120.06
accruxlrlatiojl. Nor does the term 'oprivate sector" captuie the division witfn Construction & Dev, Corp. 11 323.7s
the big-busine$s class that was developing owing to the continuing advantage D.O, Plaza Enterprises 1 6.s0
Davao Union Cement I
enjoyed by the cronies during the recession. 12.03
Development Bank of the Philippines 12
A comprehensive list"of those who availed themselves of foreigp loans Erectors Inc.
694.4s
I 29.41
during the Marcos years is not yet available. A glance at the partial listing Filipinas Synthetic First 4 s5.59
made by Lind' (1984), h-owever, indicates the large share enjoyed by known First Philippine Holding Corporation 4 100.17
Marcos cronies at the time as weU as corporations which were later known Forest Products Corporation 1 3.78
Galleon Shipping Corporation ,,
to have Marcos money (Table 3,8A). The apparent favoritism shown to crony Gteater Manila Land Corp.
81.90
corporations during this period met increasing rcsentment and, ultimately, L 30.00
Invest & Underwriting Corporation of philippines 1 5.00
resistance from the rest of the big-business community. It was not the fact of Lakeyiew Industrial Corporation 1 7.00
cronyism per se, for that stafe of affairs had been implictly accepted by the Landoil Resources Corporation J 32.10
big-business community as part of a modus vivendi with the dictatorship Light Rail Transit Authority 1 34.00
Manila Eleclric Co. 5
since martial law was declared. Rather, what was galling was the continuing 277.s3
Marcopper Mining Corp. 5
enrichment of a few privileged firms and persoos under difhcult c.onditions 102.1:t
Marinduque Mining 8 56s.20
for the rest, and their exclusion from the spoils. When world economic Menzi Corporation 1 12.67
conditions were more favorable, especially during the years of low interest Metropolitan Manila I 38.40
National Development Co. I
rates before 1978, the interests of both cronies and non+ronies could be s0.00
National Invest and Development Corporation 4
accommodated. This tirne, however, when the pie had shrunk, as it were, National Power Corporation
107.00
20 79s.42
the less fortunate had to be "crowded out." National Steel Corporation
231.r2
The record of the magnitude and mechanism of corruption during National Sugar Tra4ing Corp
250.00
t}re Marcos dictatorship is still incomplete, although there can be no doubt Nobel Philippines
14.00
Ocean Transport & Trading Ltd
as to its extraordinary scale and the thoroughness -
one is almost tempted 2s.00
Oriental Petroleum & Minerals
to say "professionalism" with which it was accomplished. The vast hold"
- Paper lndustries Corporation
13.90
4 i90.00
ings amassed by Marcos and his associates are only now coming to full light. Philippine Airlines 12 321.00
96 D b t at or s hip and R aolu ian Tlu Erosion af tle Dbtatorship
97
Philippine Association Smetting & Refining Corp
PhiJippine Govemrnent
1 85.00 Consolidated Mlnes Inc, 78D 86D 62.06 s.9: 2.2 1.4
Philippine Hospitals & Health SVC
3 213.30 Construction & Dev. Corp 798 898 31.95 7.9 4.3 3.5
Philippine Long Distance Tel. Co.
1 5-00 Conskuction & Dev. Corp, 798 898 31.9s 7.9 4.3 3J
Philippine National Bank
5 654.60 D.O. Plaza Enterprises 77C 82C 4.50 ?) 0.0 0.0
Philippine National Oil Company
5
)
267.00 Dev. Bank ofthe phflippines 77A 84A 75.00 5.3 , 0.1 0.0
Philippine Overseas Drilting & Oil Dev.Co.
123.33 Dev, Bank of the Philippines 77C 84C 7s.00 10.7 1.1 0.0
1 1.90 Dev. Bank of the Philippines 78C 88C 150.00 8.5 4.0 3.2
Philippine Phosphate & Fertilizer Corporation 179.00. Dev. Bank of the Philippines ' 828 928 75.00 6.5 5.s 4.8
Philippine Shipyard & Engineering 1 3.00 Dev. Bank of the Philippines 83C 9lC 200.00 10.0 0.6 8.4
Philippine Steel Coating Corporation 3 9.13 Filipinas Synthetic Fiber 788 878 12.90 6.4 2.5 L.7
Philippine Sugar Commission I 15.00 Filipinas Synthetic Fiber 82C 98C 28.70 5.7 5.2 4.9
Philippine Telegraph & Telephone Corp. 2 13.60 First Philippine Holding Corp. 798 878 48.80 t7.7 7.7 5.5
Philippine-Singapore Ports Corp 2 38.62 First Phfippine Holding Corp. 83A 91A 32.60 7.2 6.5 5.6
Piso Leasing Corporation 1 3.00 Landoil Resources Corp 78D 83D 2.$ 0.0 0.0 0.0
Planters Products 6 1s9.00 Manila Electric Company 778 83D 28.21 L4.L 0.0 0.0
Republic Glass Corporation 1 2-80 Manila Electric Company 78D 88D 35.00 10.0 s.0 4.0
Republic Telephone Col Inc. I r0.00 Manila Electric Company 't9A 87A 77.24 18.1 7.3 s.l
Rubberw orld-Philippines Inc, 2 8.00 illanila Electric Company 808 908 47.0A 9.4 6.1 5.1
San Miguel Corporation
Sarmiento Indqstries Inc.
4 531.20 Marinduque Mining 80D 88D 83.00 7.5 4.7 3-7
Shell Gas Philippine Inc
2 8.00 Menzi Corp. 83C 91C 12.67 2.5 2.4 2.1
I 60.00 National Power Corporation 84A 5.60
Sold Mills Inc.
77A 1.4 0.0 0.0
U,S.I. Philippines Inc.
2.40 Nadonal Power Corp. 78C 88C 70.00 9.3 4.3 3.5
Union Bank of the Philippines
3.00 Oriental Petroleum & Minerals 78D 83D 13.90 6.9 0.0 0.0
United Coconut Chemicals
15.00 Paper Iadustries Corp. 77.D 79D 60.00 7.5 0.0 0.0
Varian Industrial Corporation
42.23 Paper Industries Corp 't9D 82C 60.00 s.0 0.0 0.0
Various Philippine Conkactors
13.00 Paper Industries Corp. 82C 92C 60.00 5.0 4.3 3.8
Visayan Electric Co. Inc.
?0.00 Philippine Airlines 77A 87A 18.40 3.6 1.1 0.8
20't
3.90 Philippine Airlinis ?8C 88C 75.00 't.5 3.5 2.5
310,s87.92 Philippine Airlines 834. 9IC 25.00 1.5 0.9 0.8
Source: John E. Litd, op. cit, p.2, Passim. Philippine Long Distance Tel. Co. 78D 83D 26.00 3.2 0.0 0.0
Philippine Long Distance Tel. Co. 79C 89C t26.00 6.5 3.5 3.1
Phi[ Long Distance TeL Com 79C 89C 181.00 9.4 s.4 4.4
TABLE 3.88 MEDIUM AND LONG.TERM CROSS.BORDER
PhiL Long Distance Tel. Co. 8lD 89D 76.60 6.5 4.4 3.6
Phil. Long Distance TeI. Co. 82D 92D 110.00 9.8 8.4 7.4
LENDING IN THE PHILIPPINES. END 1983 Phil National Bank 79C 91C 7s.00 7.t 4.6 4-0
(In $ Millions)
Phil. Overseas Drilling & Oil
Estimated Out
Borrower Date Date Original Original IT$-lc !?-B
Dev. Co. 78D 83D 1.90 0.9 0.0 0.0
signed Due roan Amt il;?;- Planters Products .l7A 82A 60.00 8.5 0.0 0.0
lb"Jl$""ri*u San Miguel Corp. 78A 88C 130.00 18.5 8.4
Mat. )l year Sarmiento Indu strial Inc. 82C 4.OO
6.6
77C 4.0 0.0 0.0
Atlas Consolidated Mining 78D 82D 80.00 8.0 0.0 0.0
U.S.I. Philippines tnc 8lC 9tc 3.00 1.5 1.1 1.0
Atlas Consolidated Mining 79D 89C 27.A0 6.7 3.8 3.2
United Coconut Chemicals 828 92B 42.23 6.0 5.1 4.t
.Atlas Consolidated Mining 818 9lC 1s5.00 15,8 r2.0 10.4
Visayan Electric Co. Iac. 79D 89D 3.90 3.9 2,L 1.7
Atlas Consolidated Mining 82D 93A 73.00 8.1 ?.3 6.5
Basic Petroleum 78D 83D 2.t0 1,0 0.0 0.0
Benguet Corp. 78A 85A 46.10 4.1 0.7 0.0 TOTALS IN US$ 3,60',t .54 378.0 184-4 151.4
Central Bank of the Phil 78C 88C s00.00 15.5 7.3 5.8 llhu l"tt., after
Central Bank of the Phil 80A 90A 200.00 i5.t t3.7 I1.8 the date refers tc the quarter of the year
Central Bank of the Phil. 834 9rA 300.00 15^ 1 13.7 11.8
 D bt u or s hip and Rarclwion
The Presidential commission on Good Government,s 19g6 estimates. of
Swiss bank holdings of Marcos alone range,from g2 biliion to $5 billion.
U,s' Ambassador to the Philippines stephen Bosworth remarked in the
llall street Journal (1984) that the philippines would be better off ,,if cer-
tain Filipinos brought back some of $ I 0 biilion in sssets that they reportedly
have sent abroad to safety." what is most important in connection with this
period, however, is the capital flight which had been occurring all throughout
and its combined disastrous impact on the emerging debt crisis.
'-:-i "Dollar salting"
was, of iourse, nothing new. It could be accomplished
through a techdque long-known to (and used by) many a Filipino trader,
namely undervaluing exports (e.g. logs) or overvaluing imports (e.g. machi-
nery), the difference being deposited in some ovemeas bank account.It goes
without saying that some connivance with the foreigr partners and the perti-
nent local authorities was required. Two factors distinguished "dollar salting"
under the dictatorship. First, the greatly enlarged potential for th-is activity,
owing to the access to huge amounts of foreign borrowing for projects re.
quiring foreign purchases (e.g. ships, construction equipment, petroleum,
machinery, and consultancy services). second, the total control exercised
by the dictatorship over the instrumentalities of the state converted what had
hitherto, been the risky ventures of a few individuals into an organized, almost
parallel, activity of government. An involved example is given in an agreement
between a Japanese firm and a Filipino investment corporation in which rele-
vant commission of 15 per cent would be paid by the firms in consideration
of awards of contract [3.L8]. The same basic principle of drawing hidden
commissions was apprrently involved in the westinghouse contract for the
Bataan nuclear plant [3.19] in which a former westinghouse-Philippines head
revealed a $50 million commission to Marcos and another $17 million to
Disini for facilitating the contract award (Fortune 1986).
Again, commission-taking is nothing but the more straightforward
variant of import overvaluation. Both are connected with the purchase of
Some good or service whose real value is less than that stated by at least
the amount of the commission or the overvaluation. In the case of a private
individual using his own funds to purchase some equipment for his own use,
the motive for overvaluation is presumably simply to bypass Central Bank
regulations on dollar remittances. Presurnably, however, the individual
still intends to use the imported equipment to make a profit, and, other
things being equal, he would seek the lowestcost supplier. The situation is
entirely different, however, if the individual is using Government funds, or
if his' firm is heavily leveraged with the Government. Here the motivation
is simply to obtain the highest commission, regardless of whether the equip-
ment turns out a profit or not, after all, it is the govemment and not the pri-
vate individual which will bear the burden of repayment. The private indi-
Tle Erosion of tle Dictatorship
li
lidual could in effect become wealthy even if his firm event'ually collapsed.
This was known u "rnaking maney on the front end." The aim wAs not to
maximize profits of the firm but to maximize the transactions or which a
commission could be eamed. The same behavior might be manifested by a
bureaucrat in charge of a Government corporation,
It is difficult to
exaggerate the overall effect ofthis practice on the eco-
nomy; The country was, in effect, contracting liabilities whosb corresponding
assets were overvalued to begin with. Earninp from these assets could there-
fore hardly be expected to ever suffice to repay the obligations, especially
with the downturn in world econoniLic conditions. The extreme exarnple of
the practice is provided by the loan made to the Asian Reliability Coqpora-
tion, Inc. (ARCD, in which officers of the Technology Resource Center
and the Human Settlements ministry were heavily involved. The foreign
loan of $25 million guaranteed by the government was incirrred ostensibly
to develop the computer industry in the Philippines. However, the loan
proceeds never even reached the country and were diverted instead towards
the purchase of three companies in Silicon Valley in the U.S. onbehalf of
private individuals. In a sense, this diversion represented a"higher"levelof
corruption' which had transcended the simple movement of goods. h'or here".
no import transactions or purchases were needed to occur on which to earn a
commission: the entire loan was simply hijacked" Jhe economic effect was
the same, however, if not worse: debts were incurred and piled up without
the prospect of repayment.
CROMES TN AGRICT.JLTI,]RE
Resistance was also being encountered by the cronies whose interests
were in agriculture. In the coconut industry which ambassador-at-large
Eduardo Cojuangco dominated, there arose a strong lobby among coconut
pl'anters, including the larger ones like former vice-president Emmanuel
Pebez, to remove the levy on coconut oil exports in the face of depressed
prices abroad. The levy, which had been in effect in one or another form
since 1974, was clearly a public impost, implemented by a presidential
decree (P.D. 276) and collected by a public authority, the Philippine Coco-
nut Authority, yet the use of its proceeds benefited private individuals
transparently. Cojuangco had used the lely proceeds to acquire succes-
sively morg than 70 per cent of the country's coconut oil qrilling capacity, .
a large commercial bank, a seed-nut corporation with monopoly privilege
over the entire coconut replanting progmm, and finally a cocochemical
complex, all ostensibly in the name of thousands of coconut farmers, but
effectively controlled by a small clique.
When the levy was first imposed in 1974, there was fittle resistance
 D ict at or s hip and R* olwion Tlu Erasion of tlc Dictatorship rul

.since
coconut prices were buoyant. But the prices of coconut ofl had
since
Table 3.9 cAINs-(LossEs) oF sucAB pRoDUcERs
DuE
fallen- drastically, and the critics of the levy argued that especially TO MON-O?OLY OF EXPOBT rRADE;CilO;
in such Y'WV'
situations the levy could not be "passed on" to the foreigniuy"r,
brt hud YEAB I.9?4 TO 1983 ASSUMPTIONI -'
in effect to be paid by the producers (many of whom were smafl farmers
and tenants) in the form of rower farmgate prices. The politicar
tug-of-war Period2 Free- TradeMonopoly fotai Cain
over the levy resulted in its initial suspension but its evJntual reimposition. PriceJ price4 Difference (Loss)
At the height of the controversy an assassination attempt (per picul) (per picul)
was *ad" on for- (miltion pesog
mer vice-President, Emmanuer peraez,, kno*,
critic of the levy. He was
seriously injured and would subsequently
tone down his criticismsi The inci. PHI LEX
dent ordy illustrated that the split among the t0lL7174-slslTs P334.23 P180.00
coming to a head. In the meantime, workers on
more affluent landed classes ri,as (Pls4.23) . (PL,941.7)
coconut plantations, tenant- slslTs - 3122176 138.65 130.00 130.00 I (136.7)
farmers,_ and the poorer farmers had
found a more accessible means of resist. 'i
ance' The coconut-growing areas in the Bicol area
and in Mindanao were 3122178 - t212176 108.03 125.00 t6.9"t
itr

291.6
Tgng the rapidly expanding fronts of the New people,s a"ry. ffr. fVfat t2l2l76 - 6113177 81.77 90.00 8.23 175.7
policy of reducing land rents and raising wages
areas where it operated certainly reduced
through urrnui*igt t ir, ,t. NAS UTRA
thJ rstums derived by ridowners 6lt3l77 -3130179 71.88 90.00 18.14
from their coconut farms and gave them more reason B3.O
to criticize the cronies 3l3ll79 - 8l3t l7e 78.48 90.00 13.52
openly. In thir manner, the effects of the rebellion 114.8
were passed al,ong and Crop Year 1979-t9BO tgg.l7
reflected in elite politics. 135.00 64.17 r (1,638.2)
Crop Year 1980-1981 239'Sg 172.50 67.19 * (1,647.4)
The accommodation between the cronies and the
elite in the sugar industry rasted somewhat ronger than in
other factions of the Crop Year l98t-1992 107.30 168.00 60.70r t,os8.8
.o.or,ut, but it Crop Year 1982-1983 t45.g3s
followed the same trend of a worsening split as the downward
trend in world
168.00 22.07 422.7
prices of sugar became obvious. RobertoBenedicto
was the principal crony cArN (Loss) (pHrLEx & NASuTRA)
in sugar and he headed the trading monopory, National
sugar Traaing Au-
ISIA!
TOTAL
(y2,s67.4)
GAIN (LOSS) (Under NASUTRA operations onty) , i
thoritv (NASUTRA) created under pD u1r iiSA.Zl
1s.zo1. whenit firsi came into
operation ,n 1976, Nasutra seemed to f*lfiII its promise
of providing a more 1
'This assumes that producers
would have sold at the average of u.S. spot prices.
stable outlet that what the farmers could secure
on their own. -Periods are divided
Frcm 1977 to L979, Nasutra was able to enter into long-term contracts according to eitbctivity dates ofliquidation prices per sugar
ordersl-
from the relevant goyemment agency (pHILEX ana ine
which brought higher.export prices for sugar than those pievailing in the NaSUfde),
3u.s.
tr spot prices as taken from.Lio sugar yearboo&, less 10 anowance
for trading
spot-markets. In all succeediag years, however, Nasutra's contracted pri- charges,
ces were consistently lower than spot and sugar producers suffered a net 4Before.July
t9-77:glj_"r_rjt by Sugar euota Administration for pHILEX;
I

loss of P2.6 biilion from 1977 to 1983 (Tabre 3.9). This led to a growing 1977 prices set by NASUTRA.
after JuIy
be-
lief among planters that Nasutra was either inefficient in trading oicorupt sw.ight"a
a damning opinion in either case. In domestic trading, on the other hand,
- tons.
average of U.S. spot and U.S. quota plices of $0.Z1204llb.for 343,000
metdc

to sell sugar only to a few domestid traders ..licensed',

Itlasutra's practice was Source: U.P. School of Economics, sp. cit., p.44.
by Nasutra itself. later sugar planters would contend that many ofthese tra-
ders were simply "paper traders," tJrat is, unnecessary middlemen whose pro-
fits reduced the price paid to producers or raised the price to consumers, or
- It was the gnawing suspicion that indeed more was possible without
both. Another cause for complaint by the planters was the huge arrears tne mongro{- The sugar planters, historicafiy
one of the most conservative
owed them by Nasutra, which hampered their replantingi the pNB, which sectors inPhilippine society, became increasingly restive and pianters'
traditionally extended them crop loans, was also financially strapped owing associations independent
to its portfolio ofbad loans. such as Hortensia starke's F: Benedicto
.rlNational clique were subsequently formed
Federation of Sugar n*trrr. rre+, iy
102 Dbtatorship atd Raolution Tlu Erosionof tle Dbtatorship
103

criticisrn had become so strident that the Batasang pambansa stepped tn and corruption, and cronyism; the
with an investigation of the industry definition and pull-out uof governmeni
roles from private sector 'concerns
and business; the remoral ii
The sugar planters tended to ascribe all the ills ofthe sugar industry to competition from government; and topsioed
the existence of the monopoly, in the unrealistic almost pathetic expect- the protection of media in its crusad.
- - against injustice and curtailment
of human'freedom p.nl.
ation that the industry could otherwise regain the preeminent position it had
held before the end of the Iaurel-Langley Agreement. while the crony confrontation between Marcos and philippine
business took prace at
the Eighlhphilippine Business conferenc. on g.3
monopoly was a further unnecessary aggravation, however, the sugar industry N;uu*u., ,gsi-i"" ffi"h n
uas invited as guest speaksr..It was tfueatened
confronted more long-term problems that contributed to its decline. Many of by a a"gr"" oi *ri.ony, as
businesmen sought to present a list of their
these problems were the planters' own making. grper.ugni*t-the regim;.
Through the past decades the planters had failed to improve methods of Instead of heeding their prescriptions,
Marcos castigatedlhe busines-
production (theirs were still based on the age-old use of unskilled, low-*age men as responsible for causing tre crisis
and accused them oiueingiie
cutprits
manual labor); they had refused to diversify into other crops (mostly out of be'hind "dollar'salting," unscrupurous profiteering,
and connivange with
fear of land reform) and had in fact expanded sugar cultivation into marginal those who seek "ro destabitize th" Goir**ent
and the Repubrb. This
govemment," he said, ,,uiill, and lws
areas during the heyday of the u.S. sugar quotc. In the meantime, the expoft the cqdiW to ptottrt tlself. Ihe
market on which they depended heavily was changing irrevenibly: the U.S. country is presentry reering {tom worrdwirre
reession'ora-"ion p*"
sugar quota had been rnuch reduced; the growth of world consumption had Y*p, belt-ttghtenfug y bu resorted to, lf n@essary . . . but ld me warn
tlose who opt to further cause misery'ti
slowed; artificial sweeteners and corn synrp were coming into favor, partly ou, peopre: tax evasionand
because of subsidies the developed countries gave their own agriculture. The .fruds in remittances of etcport eorniigs wilt b[ ,ri*rt rii'arii
the fuil
days of the great sugar barons were over, but not all sugar planters were wil- force of the law. These peopre are rotowi to me and I haoe a
tist of companies
right here with me.,'
ling to accept reality. From hindsight, the greatest crime of Nasutra was that
Objectively, however,
it continued to encourage and expand a backward, dying industry beyond its - the orty list contained businessmen,s demands in
which everyone's interest courd bi accommodated.
useful economic life simply because profits from corruption could stiil be The desire was not so
much to remove or to hum,iate Marcos
extracted from it. uut vainty
image'_Their supp{icant and subordinate posture
;;;;#'in their
The final collapse of the sugar industry would tum Negros into a exemplilied bv Jose concepcion, Jr.,
could not have been better
human wasteland tS.zU. Marcos, for one, had virtually lost the support of rater NAMFREi
for Free Erections) chairman and now toar o;ilt M"vement
the traditional sugar bloc which by then had already been discreetly support' ioa"l-o, ,ilr-i., ,*r.
Aquino govemment who "na that
ing the human rights cause of an awakened church against military abuses -e:rpressed
candidness could can forth "the dans;
apprehension "
the businessmen,s
and "protection rackets." of prnitive action of ,o*"-iirra.i
concepcron's flour mfling inierests *.r. prrti"rrtarry
vulnerabre since at trre
time the National Food Authority (NFA)
.RESISTANCE OF PHILIPPINE BUSINESS had a monopoly of wheat imports.
If Philippine business had a groomy vierv of that Lggz-rgg3 p.rioa,
foreign investment houses *.ru pessimistic in trreir-potiticJ*a r"o-
The modus vivendi which the regime had hitherto enjoyed with the
nomic assessments. worse, they "qu"[y
urban big-business community had fikewise started to wear thin once the had begun to ca, for more risk-guarantees,
dissatisfied even hith Marcos's-own
economic crunch began. To the extent the pronouncements of the IMF and
the.speech of Joseph Longobardi,
hgiil;; irxurances. A cra$sic case was
the World Bank (as echoed through some technocrats) hit at the cronies and
Bankers Association. on its
rfirn,* of the lnternational offsrrore
at government intervention, they found sympathy among the landowning
PD 1034 he noted, was hardly "ont.itriion-to nuippi* ar*ui.r ,Jroyery,.
classes and the big-business community. ln its plenary conference paper in ,u""rrrful i, offshore banking
units to establish regional opeiations _ "ncorogng
August 1982, the influential Makati Business Club composed of the top
"glorified representative offuis of
*A Uy- ana firgl ,frru *.r, *fy
1,000 Philippine Corporations extensively outlined its '?ssues and Pres- foreiffi iiir." ,.
the changed intemaiional-conditions,
criptions" to the Marcos dictatorship, calling for among others: an environ. .. F9* it had become less and les
possible for the dictatorship
ment of honesty, integrity, peace, and greater confidence in government; to presenre trr. fi*rious conseruus
various factions of the nrling riite. among the
a curb to military abuse and government corruption; a stop to red tape, graft . rh. *.*-ri", corporate failures and the
144 Dbtatorship and Rqolaion
The Erosion of the Dbutorship
105
consequent take-overs by the Government -a source of complaints for the
nouncements that seemed to disfavor the coconut
nonsony businessmen - were both caused by the prior dominance of crony levy and the bail0uts,
as well as his rumored "'issenlsnt"
capital and provided the means for its survival. The infusion of massive witrl the regime. The technocrats had
always been a disembodied phenomenon
arnounts of public funds into the failed projects, as well as direct intrusions iri society since they represented
no obvious sirial class. At one point
by the government. and the cronies into lucrative areas,.represented huge however, the big-busin"r,
would hold itself out as a possible
burdens on the currently productive sectors of the economy, since massive "oir**iry
constituency for the t""too".ui,
the cronies. This would_rer"t ." prrt against
foreigr commercial borrowing wuu no longer possible. By the same token,
a standing ovation b,
inlgSs,-*h"r, Vid;;;ilie given
the resort to "official sources" such as the IMF and the World Bank entailed i.lTrg assembly
was resigning' Tlre implicit
oru*in*r*;" ;;;;l,ffi that he
conditions which threatened to remove the protectionist barriers on which demand oi rn.
without the cronies, in which they
U*inor*r" ;; d"rr* regime
the large social capitalists - both crony and noncrony - had long relied.
reforming rore' rhis was a vain
saw tt, tit rorruts as taking a leading and
As economic conditions deteriorated in the early eighties and ivith the hope, however,
- for a Marcos regime without
cronies was a Marcos regime without
regime's legitimacy eroding in terms of both its economic and political leader- ii{;;.
Furthermore, the technocrats were
ship, the sector which fust extolled the imposition of martial law a decade most reluctant and timid champions.
Virata, in particular, was able
ago joined the anti-dictatorship mainstream. This would further swell the to rationalize his staying with the,regime
tre end' Actualry the technocratr r.o", untir
following year as the extent of the regime's flawed economic policies becalne any real reverage on their
own' so long as they remained ""r.osed
inextricably bound to an equally deterioratilg political situation. And to the
tueflcy, they remained. in office
technocrats- Lacking *y ;l#;consti-
extent that international creditors, the IMF and the World Bank hit at Mar- only on ,rff
of them eventuany graduated i"to poriu"i*i-or.were
r*r" of the *"r"ro'io_"
cos and his cronies, they found sympathetic support among the traditional in the proces of doing
so. Even as techaocrats, however,'th*
landowning elite and the big-business community. po;,;iUrirs were not without remu_
neration. Especialry after- the takeover
or airtr"r..a firms by the governxnent,
many technocrats would draw honoraria
THE TECHNOCRATS from sitting as ex-of{icio board
members in these corporations,
apart from the corporations set
government itself. For up by the
example, as of 19g5, fr* ion",
The resistance of the big-business community and the landlord. classes sat on the board of frrrif.li"f"or";
to the cronies seemed at first to have found champions, albeit moderate,
1l
corporations; Geronimo Velasco (energy)
Jose conrado Benitez (hu1an on 43;
settlements) on 23 ;ana rmelaarul#iirrrrot
almost reluctant, in the so*alled "technocrats". Gerardo Sicat (economic who was not by any stretch of
plaruring), Roberto Ongpin (trade and industry); Placido Mapa (PNB and the imaginaltion a technocrat, sat on
51, ex-
later, economic planning), Jaime Iaya (Central Bank), and Cesar Virata :I|ip _her chairing ?l th! M*ug.;;t--.laoirory Committee of the
U'AID'E'F Bases Rentar.una urraeritreffi; president.
(ptu" minister and finance);and others like them had been part of.the of the
Given the blurred. distinction U.tw."rr-gourrnment
Marcos regime for sometime. What distinguished them was that they had comrption became inevitable. on and private funds,
originally been tapped to the Government not because of political following the otherhaird, thr,oor";;;;;ilu,
technocrats would reave the government- ortrr"
of which they had none, but because of their possession of advanced academic sooner or rater, as did
vicente
degrees. They projected the ethos, whether realized in practice or not, of :*:::,9::*"3ryi^) -h, *ry:;J i" ;;* to pressures rrom Marcos
cronies for infrastructure contricts. ffr ruUirlurrri,
being "honest" and being interested only in making things run efficiently. anti'dictatorship struggre. ln ;lrr".? r?r':;iilil:::
In l98l Marcos appointed Virata, already the minister of finance, as any event, th; l"urirurion ,,rruro a'"ir,-,
anong the businesmen, that the'technocrats ur*r,
prime minister under the "New Republic". Virata was also appointed chair' themserves possessed no inde_
pendent significance, that they
man of the l4-member Executive Committee in a concurrent position' were themserves products of the regime
hence could not be its guardians. and
,
This powerful cabinet committee was Matcos's transitional governing body
to administer government and econornic affairs in his absence or upon his YIMTA: "THE LONE RANGER,,
demise. Virata's appointment appeared to place the technocrats in a position
of influence they had never before enjoyed. The business community sought Marcos's attitude towards the technocrats
to etrcourage what they perceived as a measure of independence between often utilitarian. Despite occasional,
was genera,y ambiralent and
the technocrats and the cronies, vaguely hinted at in some of Virata's pro. at times serious, conflicts with trre tech.
nocrats, politicians had to grudgndy appreciate th, f;;;;,i. ,o t
fl. "n*,
t,
106 DictatorshiP andRevolaion Tlu Erosion of tlu Dbtuorship . 107

the regime,s.economy and programs on keel for the past decade: no mean . More significantly, if Imelda eventuafly took over from Marcos, as she
feat considering the systematic strains indubed by inflationary campaigrt herself insinuated she would during her u.s. visit, virata
wo*rd pose a stumb-
spending and bureaucratic corruption. Furthermore, virata and cornpany ling block. worse, as an uncooperative economic technocrat,
he co,ld bring
iere miuable in justifying the continued flow.of international lending to the to bear the tremendous pressure of the international
lending institutions on
country. her future policies and programs. virata had to be tempered
Ir,J raeg"teo to
which the position oflow ranking fu-nctionary vis-a-vis his influence on ilIarcos
Together with the croniqs, the technocrats formed the other 1e5i
a
and
their relationship with the cronies the unlikely possibility of lus sricceedinjthe latter.
propped-up the dictatorship. However,
iurn.o ,o* drring the 1gg2 to 1gg3 crisis. Marcos could not personally
financial TIIESHOWDOWN
berate his cronies because of his collusion in various corporate and
of dollars abroad. Nor could he blame ver and
scams involving the siphoning
and abust of power, much less Imelda' who liad Imelda was not alone in her personal antipathy and subjective
his generals' corruption asess-
of "technocrats" with their high'sounding and ment of the "virata problem," as it same to be known in the palace study
devJoped her own coterie
projects, essentially political image-buidling and futile Room. The cronies had their own gripes against the
"lone rang8r,,, priacipar-
spotty, often ridiculous
ly regarding the IMF's stringent conditionsdircglsd egarnst thiir'fiims:
ott.*pt, at projecting her "capability" of assuming the reins of government' they
Marcos had piactically entrusted ihe country's
economic and financial ftlt discriminated against b.v virata's policies and his management of the
committee under virata who, with Imelda and c,mmittee, particularly in the strict screening of the negotia:teJ ciony go-
*r"ugr*.nt to the nxecutive
yernment contracts.
Bnrili had virtual operational control over all departments, from definition
of policy to approvai of contracts in the super.committee. It was also during virata had been,at loggcrheads particurarly with the Benedicto group,
as then labor minister Blas ople termed.it, that blaming it for the Philippine Exchangi disaster. As u an*"ia .iprrt,
this cabinet intenegnum he be.
himself with the political transition and Ninoy Aquino, lieved that the inefficiency of the sugar industry was spawned uv ttre phil-
Marcos preoccupied
But des'
who hai caughi the e4r of liberal democrats in the u.s. congress. sucorn monopoly. Furthermore, as a member of the central
Bank,; Monetary
pite being shored upty a 1980 IMF adjustment loan' the emerging
crisis Board, he was aware of the huge nonperformingi roans of the pNB
and the
to hisleaders and their Benedicto-owned Republic planters Bank whose financial build-up
confronted Marcos and needed a plausible explanation osten-
constituents who were not only reeling from the hardships and sufferings sibly was to support the sugar planters.
caused by high prices but had also, together with the opposition'
become In 1982, through his influence in the Monetary Board, virata calred for
of Marcos's economic and financial pro$am a stop to central Bank rediscounting fundsforthe
more militant-. Tfie foundations sugar industry on grounds
had started to give waY. that iti regulations prohibitecl ,urh-lou* when these had reached
a certain
Marcossawaconvenientscapegoatinhistechnocrats-andtheirhelms- ceiling' Effectively, the decision turned off the faucet for the
sugar elite
man was Virata. He, for one, had chosen the image of a non'politician'
at a time when the world sugar prices had prummeted and
the fiveylar phil-_
preferring a backstage role and with his self-effacing mannel lrp easily earned sucom international contracts had also expired the year
uerore. As the
o'the
lone ranger" in the Marcos cabinet' sources of their income dwindred, the sugar planters
the monicker blamed Benedicto and
mounted an attack on his trading monopoly. Indeed; the
ButVirata,spositionhadbeenseriouslyunderminedbyhisconstant economic impaet
tussles and disagreements within the Executive committee
and with Imelda of the monopoly had been clearly adiudgid as adverse
even by Nrpa,o trr.
splees the Heart - exteot that the IMF and the world Bank
and her technocrats' excessive and wasteftrl building -
institutions whichhadpreviousiy
the International Convention Center complex' the glossed over the deleterious impact of the
Cu",tr, the Lung Center, monopory in their reports
made its dismantling a major precondition for ihe - fi"rd
approvar of the stand-by
FilmCenter,thepamperedHumanSettlementsministry,MetroManilaCom.
..aquarium fish.production" (to solve pro- agreement in 1984.
mission and inane piojects like
blems of low iodine intake and malnutrition). within
the cabinet itself, ' The showdown finally came during a KBL caucus on April 14,
rgg3
in Malacarang. Marcos called for the meeting in preparation for the
Viratawasbecomingisolated.Asfaraslmeldawasconcerned,Virataafter review
out," became of the country's performance by creditor b;nks. o, tt rt occasion,
years as finance o.rf,httr prime minister was already "burned Marcos
own allowed his political overlords to mount virulent salvos on virata's
ineffective, and could no longer "delivet"' compared with
her emerging
economic
mismanagement, subservience to IMF-WB and American interests,
technical sYcoPhants. and incom-
108 D btat u s hip and Rev olwiot Tlu Erosion of tlu D btatorship
109
petence in handling the country's economic plunge. The strong[y worded consultants.
criticisms centered on the hardships suffered by KBL constituents in view of
high taxes and costs of agricultural inputs, the negotiations with intemational CEMRAL BANK OVERSTATEMENT
creditors, and the apparent helplessness of the technocrats in putting up a
strong position. The cronies in particular directed their fusillades directly at Perhaps the most ambitious and spectacurar.effort
Virata whom they accused of being incapable even of running a vi-sai at deception :-suc-
cessful and only beratedry rliscovered
(small variety) store. Benedicto's accusations harped on the devastating -
try's international reserves through manipulated
was the overstatement of the coun-

effects of his prescriptions for the sugar industry, while Ople reminded transactions between the
Central Bank, the py_Td its subsidiai,
Virata of the utmost need for a shared policy formulation process and a tho National Investment Deve-
' kyl Company (NIDC), ;h;;;;ippine Nationat oit Corporation
Eteate r accountability for the decisions of the Executive Committee. (PNOC). ""d
Virata, together with then Central Bank Governor Laya, sat nurirbly To the arnazement of the international banking
community and of
economic ilil-;"* A;#J.
through the stage-managed scenario, preferring to explaia meekly and patient-
ly the crisis in his droll economic terms. Having not too subtly warned l['"',:Y,#',:_"1r]i:king
yl the accounts of the Centrai
1T_r-1"1insp.ected Bank late
il ii
in
r J an:t

him not to overstep his authority, Marcos "settled" the debate by instruct- 1983
ing Virata to refer future economic policies to a KBL consultative group reseryes by $600 to $g00 m,rion, or 42 percent to 5g percent of the
before these were sent out for his approval. Hp also advised the premier to Ieseryes.
"leam to defend himself." Virata's reported offer to resign was however, The fint phase of the overstatement, which
existed at least as early as
declined by a non-committal Marcos who suggested instead that he take 1982, involved a rerativery simpre maneuyer
which virata termed ,,window
a much deserved rest in the U.S. The cosmetic value of the technocrats dressing," a routine, legitimate and harmless b"rt pr*ilr;.;;;,this ar-
was evident to Marcos personally and it was an important reiuion for Vira- rangement the PNOC, which regularly
availed itself of short term loans for
ta's retention. The audience was not only the domestic population but per' imports, would draw on its existing credit oil
haps more important, the international banking commrmity. This was a recog- immcdiately- for oil purchases, deposited
rines but instead or*ir,girr. ma
these for a period of-time with
nition of the more difficult capital-flow situation in which the regime found the central Bank. These placementi were
timed to coincide with the central
itself since the era of high interest rates began. With the period of easy loans Bank's end-of-the'month statements so
that the reserves *erd ,t,rutty ourr-
behind it, the dictatorship's independent capacity to raise new capital from stated by the amount of the pNoc,s ..deposits,,.
The pNoc *oJJ it er, *itrr-
abroad was greatly circumscribed; it had to rely increasingly on the gnrantee draw the placement before the roan
matured and use the funds to pay for oit
and goodwill (the so-called "sul of good housekeeping') of multilateral imports' At first the central Bank would
ask the pNoc to obtain g13g
institutions such as the IMF and the World Bank to obtain loans in the million under this scheme; a further amount
of from $200 to $ZSO miUian
open market. The presence in the government of technocrats such as Virata would again be requested in late 19g2.
was meant as additional reassurance to these multilateral ilstitutions that The magnitude of these operations, however,
tfueatened to distbrt
the regime would "behave" and thus lend credibfity for foreign investors. even the PNOC's 1982 statemenis, which ;;;
The near falling-out of Virata and the techlocrats allied with him and .ye,ar*nd h,i*-rhJwn frigh
debts unmatched by oil inventories. Geronimo v"r*r", *lro r,r'r?u
Marcos' perception that this group could only apply a "by-the-book" ap' PNOC, becagre apprehensive that ,,the ,n"
proach in salvaging the regime's financial collapse led to more brazen and
airtrrtiri ,i-;;';;;;l $ate
ments might undermine our credibility
and therefore'ou, iir'ionnino,
nearly desperate means to salvage the dictatorship's sinking economy, While 'tvith our
foreign bankers, particuhrly the l4lorld Bank,,, and said so in a
the technocrats' roles were clearly defined to eke out "breathing spells" in letter to Virata.
their IMF-WB negotiations, the parameters of confidence bestowed on them The precarious
by Marcos had already been eroded. It was as good a time as any for Marcos of the country,s international,,reserves, how-
ever, emboldened the 1ndifi.o1
centrar Bank
to take a more direct hand in the country's finaacial and economic problems to take eien more brazen measures than
especially those that required more aggressive and quicklygestating results Trrl -hT_d9w-dresing." In the case of sdcafled ,,p*t_thru,s,, the Central
Bank itself lent funds to an oyerseas
and impact on the foreigrr exchange crisis. lYith his trusted close-in cronies branch of the pNB (e.g., Singapore,
or London), which turnea *o*A and lent
and Ver's spy and military network, Marcos did not have to look too far for I":,U{lg:
to the PNB head office in Manira
the same arnount
:,-a, |,-The ratter then proceeded to regard
It0 Dbtaorship and Revoluiqr Tlu Erosionof thc Dictatorship A ttt
the money as if it had been a loan from p foreigrr bank, and when PNB It was rejected by the newspape$ Is.rrl. with the discovery
of the ..sfarrs-
Manila finalty deposited the money with the Central Bank, it became part of ticd divrepancy" IMF subsequenfly dilayed the standby
credit of $6ib
the reserves, an obvious instance of double-counting. million for debt restructuring
In a variation of the above scheme, called the "swo7)", the Central Bank
TTIE "BINONDO CENTRAL BANK'(BCB)
again initiated the traruaction by relending to a PNB overseas branch. To add
t
one morc layer to the laundering operation, PNB oveneas would lend to col-
luding non-financial corporations such as the PNOC or the NIDC [3.241. Barely three months after the.,overstated do[* ,rr"rrls,,,
Marcos crea-
These would then sell the dollars to PNB Manila for pesos, and the PNB ted yet another ecrrnomic monster to na'ow the
differenc. ti.i*r"i ti" offi.
would in turn sell these to the Central Bank. The dollars would then becomE- cial dollar exchange and tho "brackmarket', ,ut.r.
ftri. srp Li-i""o r.ry
part of international reserves. This operation was particular$ pernicioui variable of interest to the IMF since it "
was a rough uaromete, of the peso,s
since apart from overstating the reserves, it automatically increased the degree of overvaluation (Figures 3.I and
3.2). Due to scarcity of doflan and
money supply by the amount of the overstatement. In all three cases, the
Central Bank absorbed all the expenses of the PNOC or PNB loan, including FIGURE 3.1 OTFICIAL AND BLACK.MABKET EXCHANGE
the foreign exchange risk.
BATES, 1983 - 1986 (PESOS PER US
By going through several cycles of these operations, the Central Bank $)
could overstate the reserves alrnost at will. By the end of March 1983, the
overstatoment had reached $850 million;by 24 May 1983, it was.$935 mil-
lion and was expebted to reach $ I .2 billion by the middle of that year.
The actual dimensions of the crisis were made knqwn to the public
only in October 1983 when for the first time. the Philippine governrnent
applied for a 90-day moratorium on external debt payments starting the
17th of that month. Until that date, the official fi.gure on the foreign debt
had been $14 billion. Two months later, the Central Bank governor, Jaime
Laya, was forced to disclose that the total foreign debt had reached $24.6
billion. Ol that amount, 60.9 percent was owed by the Government, one,
fourth of it by the Central Bank and 39.1 percent by the private sector, one-
half of it by private commercial banks. A considerable portion of the total 19
debt was payable in one year or less. Furthermore, the country's gross inter-
t8
national reserves, which stood at $2.54 billion at the start of. the year,
dropped to $1.43 billion by the end of September. Before the end of Octo-
ber, Virata announced that they had fallen to $430 million, a mere 3 per 16

cent of what they had been less than a month earlier.

By November 1983 a Central Bark aide memoire ironically traced the
roots of the financial crisis since 1970, citing the huge public sector and in-
frastructural loans and expenditures [3.25]. Four more successive extensions
of the 90-day debt moratorium were made: clearly, the country was bank'
rupt. ln January 1984, Laya submitted to Marcos his annual report and
effectively, his resignation as Central Bank governor. Taking great pains to
exculpate his tfuee-year incumbencY, I.;ya vaguely referred to the conduit
transactions as mathematical errors and noted that some of these activities
had taken place before his term t$.uil. Ex-senator Jose til. Diokno, chairman
of KAAKBAY, issued a press statement calling for public accountability.
112 Dictaorship ard Revolwion Tle Erosion of tfu D btatorship 113

FIGURE 3.2 REAL EFFECTIVP EXCHANGE RATES, agents of the chinese blackmarket operators were gathered together and
told
1983 - L986 (r.980 TRADE WETGHTED) that they could continue their dealinp provided they followed the rates
dictated by the govemment. The participants, originary eight (but eventually
124
reduced to five because, it was said, they had become utoa many rnouths to
122
feed"), set up a "corporation.".They contributed about p106 mfllion in
120 capital.
118 Their operations began in March 19g4. Each "corporation,n member
116 was a110wed to build his own chain of buyrng outlets, numbering a hundred
throughout the country. The ..bank,, advanced these outlets peios in
114 ordgr
to buy greenbacla mainly from tourists, American militagy personnel in
112 - -
Clark and Subic, and relatives ofoyerseas Filipinos.
110 The purchased dollars were then flown to Hongkong. There they were
108 deposited in banl$ so'that they could later be sold in the philippines as tele-
106
graphic transfers. Buyers of these transfers went to the yuchengco Building
Binondo with pesos in cash or inanager's checks. The transferi were depo-
in.
104
sited-in {esignated dollar accounts or, in the case of importers, paid to their
102 suppliers. Dollars which were nqt sold in this manner were sgld to the philip-
100 pine Associated smelting and Refining corporation (pAsAii.i, a suusiaiary
98 of the National Development co. (NDc) a government-owned corporation
96
under the Ministry of rrade and Industry, of which ongpin was the head.
PASAR in turn sold these dollars to the central Bank. These dollars were also
94
sold back by PASAR to the BCB when the demand for dollars outstripped
92 the supply.
Qr Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql PASAR's role in these transactions was apparently sanciioned by Mar-
1983 1984 1985 1986
cos. The Philippine News Agency reported that Marcos instructed ongpin
Sourco ol b6ic data: Vailous financial updates ot the Makaii Stock Exchange, Bankes'Association oI tho
Philippinss, and tho Makati Businoss Club lrom 1982 to 1 985. to undertake stabilization measures utilizing the facilities of various NDC
subsidiaries such as the National Steel Corp. and pASAR.
Business Day (1987) reported that the Ir{DC and four of its subsidiaries,
currency speculations, blackmarket exchange rates reached as high as P27:$1
namely, PASAR, the National steel corp., philippine phosphate Fertilizer
compared to the official rate of Pl4:$i. In March 1984, the Presidential
corp. and International corporate Bank sold atotal of $426.4millionto.the
AntiDollar Salting Task Force, which would operate what was known as
BCB from March 1984 to February 1986. During the same period, these
the "Binondo CentroJ Bank (BCB)," was organized [3.28]. Binondo is a
firms (except Philphos) bought back about $36 million from the BCB.
district in Manila's Chinatown where most illegal foreign exchange trading
ongpin claimed that these operations were needed to influence the exchange
takes place. Under the scheme and legal cover of the Task Force, the minister
rate but in the entire procedure no mention was eyer made of therut".rrqd.
of trade and industry "officially organized" and o'regulated" the dollar blackl
market trade to the extent of setting its daily exchange rate and threatening ongpin's function in the Binondo affair was to set uniform buying and
selling rates and to impose disciptine on "bank" memben who did not
the arrest of non-complying traders. In a statemenl (Business Day 1986),
Onpin explained how the bank operated: "In simple terms, the tasl; force follow the rates. If the chinese participants were obedient, they stood to
was a pragmatic approach and an undoubtedly successful exercise in make a maximum profit of twenty centavos per dollar. ongpin estimated
cutrency stabilizotion duing the peiod of severe speculative attack on the that the BCB made about p200 million in profit in two yru$ of operation.
peso. Without it, the Philippine economy would hsve been ruined beyond A rejoinder to ongpin's craims on the BCB's beneficiar impact on the
repair."l}.Nl Philippine financial situation was made by professors
from the university
Through the National Intelligence and Security Authority (NISA) the of the Philippines school of Economics wtro iaised the question
whether the
 It4 Diaauship atd Revoluion
true function of the BCB was not to facilitate capital flight out of the
country t3.30].
The Binondo transactions, horvever, would not have succeeded without
the participation of the MSA under ver. The task of providing,security for
this massive operation, and of carrying out disciplinary action on erring
participants, fell upon Marcos's intelligence agency. post.Marcos investiga.
tions into graft in the military establishment revealed that the involvement
of Ver and his cronies began sometime after the Holy Week in 19g3.
As reported by Business Day, Yer and Col. Balbino Diego, former legal
officer of the Presidential security command (psc), together with some
,it,
chinese businessmen, put up operation sunflower with a starting capital of
PlO million. But the loss of P360,000 in one hold up and $700,000 in ano-
ther caused the group to calt off the operation. It was soon replaced by Task
Force Luntian
'This
time military participation ia the task force was led by Gen. Re-
nato Ecarma, commander of Regional uni{ied command 4. The intelligence
officer was col, Irwin ver, a son of the general and head of the presidential
security command (Psc), while the chief operations officer was col. Gerardo
Flores of the NISA. It now appears that the buying outletsof theBCB were
handled mainly by regional officers of the NISA. Ecarma who was eased out
and subsequently transferred to the southern province of cebu, allegedly
set up his own operation there.
The security for these extremely lucrative transactions was ela.
borate. suitcases of dollars were accompanied by heavily armed security escorts
all the wav to the plane site. others in the entourage carried identical but empty
suitcases to deceive potential thieves. payments for these services were like-
wise huge. ongpin said that the NISA received weekly sums of p70,000 from
the BSB. Business,Day (June 4, 1986) reported that escorts of couriers re-
ceived Pl,000 each; and couriers, from P5,000-p7,000 each per trip. The
same newspaper stated that high ranking military officers (from the rank of
major up to general) were paid Pl 12,500 each a month, pSC penonnel
P81,000 each, GIS personnel P47,5oo each, and the personner oia speciai
gr oup caTle d Paraiso (Paradise), P27,9 0O each.
The BCB also used some NDC subsidiaries to salt away dollars. A spe-
cial task force from the commission on Audit recently discovered that from
March to september 7984 a total of $12s.9 rnillion was remitted to the pNB
in Hongkong by PASAR ($83 million), NDC ($zz9 million), and philphos
($23 million). This amounr was not repatriated to the pNB in ihe philippines,
as was the practice. but instead sent to the Hang Seng Bank in Hongkong
($1i6.9 nrillion), NSC ($10 million), and Interbank ($t mi[ton). Betvreen
october 1984 and 1985, another $817.9 million were deposited in pNB-
Hongko'g by PASAR, Philphos, NSC, and Intqrbank. It was the supreme
Tle Erosion of tlu Dictatorship It5
irony that the task force against dollar smuggling became iir" ,"ry medium
for stashing dollars abroad.
Funds were also mysteriously transferred within the country, from
PM-Manila to PNB'Buendia, allegedly upon the instructions of Philphos
president Miguet Zosa, without being recorded in the firm's accounting
department. About $6 million were also transferred from the firm's account
at the London branch of Arnerican Express Bank to PNB.Buendia and were
recorded as short.term investments. Such transfeis apparently caused the
company a loss of some P8 million.
A final note to all these was Ongpin's claim that the IMF was aware of
the Binondo transactions and did nothing about them: "It is noteworthy
tlat the Intemational Monetary Furd (IMF), from the outset, was informed
of the operations of the task force by myself, fully urderstood the stobiliza-
tbn objectives of the operations, and never posed any obietiora during its
entire existence."
In this manner the tMF with full knowledge, had intentionally con-
doned, if not abetted, the flight of millions of dollars out of the corintry.
lvithout denying the importance of the dictatonhip's active attempts
to deceive the multilateral lending institutions such as the IMF, it may be
asked whether these very institutions are not politically permeable: To what
extent were rules applied blindly with respect to political implications ano
opportunities? To what extent do bureaucratic choices reflect, consciously
o! not, the political priorities and interests of the more important donor
countries, especially the United States? l
THE IMF ANDTHE DICTATORSHIP
By 1981, when the IMF and the World Bank began to apply gradual
pressure on the regime, political circumstances had perceptibly changed.
First, the bargaining power of the dictatorship vis.a-vis ttre international
banking community had been ionsiderably weakened, its credit.worthiness
eroded. More importantly, the elite was intemally divided on clear economic
grounds on the issue of the cronies and corruptron (as distinct from the pola.
rization which had always existed according to personal loyalties) a more out-
spoken conservative opposition to the regime was emerging, whose outlines
would become more distinct after the Aquino assassination.
There are those among the Left who perceive the IMF and the World
Bank as enforcers of global capitalist efficiency, seeking to impose a parti-
cular intemational division of labor over all forms of national resistance.. In
this view the particularist ambitions of the cronies and the dictator himself,
to the extent they deviated from the sought-after division oflabor, represent
hindrancss to be overcome by international capital; hence, the contradiction
 116 Dictatorship and, Revolaioa Tle Erosion of t he D ic aUrship
t
,, 117
between the two. some on the Right view the same institutions as putting TABLE S.1O WORLD BANK AND INTERNATIONAL
benevolent and rational forces, trying to put'order in the country, and DEVE.
come LOPMENT ASSOCTATToN (IDA) LOANS
to the same conclusion. TO--
THE By YEAR aNO rUrr,nmrcNr_
It is evident, however, that the IMF and the wB cannot be liberating fElLIpprNEs,
ING AGENCY, 19?1.1982
institutions. Nor. can they effectivery deal with reform to control extensively
both external and internal factors of borrower countries such as the phili;- Fiscal Year Number Project IlIe
i,
Implemeariing Anount
pines. what was apparent from r9g2 onward was a poricy shift of Loans
in the insti- Agency ($ Million)
tutions that coincided with Reagan's assumption to ths u.s. presidency.
Trea. As of 1971 (17 project loans and 2 credits)
sury secretary Donald Regan, testifying before the u.s. senate i" aprit
1981, stressed in a policy statement that "banlcs are essenltial to 1972 (2)
strutegic interests around the world and should contirue to reeive
America,s Rice processing and srorage
power
NFA 290.5

port. lae lwve to do something for those countries whose minds we lwve to
u.s. iup- 1973 (3) NPC L4.3
Education II (IDA) DEC i 22.0
capture and whose social structures we are trytng to preserlte . . .', Ports PPA 12.7
whether u.s. policy on the international lending operations bore on (6)
Second Highway (..Jumbo,') DPH 6.1
Aurora pefiaranda Irrigation NrA
the credit schemes availed ofby the dictatorship would be better appreciated 68.0
in terms of the nature,frequency, and amount of successive nnanclat agree-
Development Finance Corp. DFC 9.5
National power Corp. Nrc 50.0
population
ments concluded with both institutions by the dictatorship. what would be POPCCM 61.0
more revealing are the policy packages of IMF conditionally attached to Shipping MARINA 25.0
such lending activitiss to the country.
Development Finance Corp, DBP rI 20.0
(3) Tarlac lrrigation NrA 30.0
From 1971 to 1982, for example, the world Bank and the Interna- Rural Development MTNDORO IAD 17.0
tional Development Assistance approved a total ofeighty seven project loans Small and Medium Industries DTr 25.0
and credits amounting to some $3.4 billion (8) Magat Irrigation NrA 30.0
-an average of almost $390
million annually (Table 3.10). This rending pattern, irowever, exhibiied a Development Finance Corp. DBP rI 42.0
Education III DEC 75.0
downward turn starting in 1980. The dictatorship had been entering into
high'conditionality agreements with both the IMF and the world Bank;
Livestock II DA 25.0
Chico Irrigation NIA 20.5
. s0.0
it also signed a socalled Extended Fund Facility with the IMF in 19?6 antl Manila Urban NHA
successive standby agreements in 1980 and 1983. The Philippines ranked
Second Grain processing NFA 10.0

high among the countries which had sigrred the most number of standby (9)
Manila Urban II NHA 11.5
Second Fisheries BFAR 22.0
agreements with the IMF (18 agreements in all from 1970 to 1984). In 1980, Third llighways (,.Jumbo") DPH r2.0
the dictatorship toolC out a highconditionality "structural adjustment loan" Jalaur Irrigation NIA ,95.0
(SAL) with the World Bank. The most salient component of the 1980 struct- Education IV DECS 15.0

ural adjustment loan was a five-year program (1981-1985) to eliminate

Fourth Rural Credit DA 25,0

non-tariff measures affecting imports and to lower average tariffs and make
National Irrigation System NrA 36.5
. s0.0
Improvement I
them more uniform across all commodities. The intention was to make Provincial Cities Water Supply DPWTC 23.0
domestic prices similar to those prevailing abroad and to induce enter-, Second Rural Development SAMAR IRD 15'o
prises to compete in markets at home and overseas. This was a measure which (9)
Power VII Nrc s8.o
would potentially affect not only the cronies' interests but most of the big
Smallholder Tree Farming MNR 8.0
Development Finance Corp, pDCp 30.0
busiaesses (including some transnationals) which had growh under the protec- National Irrigation System NIA 65.0
tion and monopolistic opportunites afforded by the hitherto existingimport- Improvement II
substituting regime, The effect on mo6t big business would resurface after Rural Infrastructure (IDA) pRlp/Dpwrc - 28.0
Education MECS
Marcos and the cronies had left, More pertinent to the cronies, particular 2.0
. Ruralelectrilication NEA 60.0
interests was the recomrnendation to dismantle the monopolies in agriculture, :
il
 118 D bta or ship arid R ev olution
The Erosion of the Dbtatorship
119
- Development Finaace Corp, PISO 15.0
o Magat II NPC/NIA 1s0.0 pressures on the building crisis.
In its March rgg2 staffappraisar report, the
o Industrial Investment III DBP 80.0 IMF noted tr,o,t "budgetary. acpenattuie
1979 (8) o Manila Water Supply II MEWASS 88.0
potuies in 1gg1 were influenid
by the divaption of firwnciat isk*s
r National Extension MAF 35.0
economic acttvities." To assist in the
iri ir rto*er-trwn-acpected fa, of
r Magat Multipurpose NPC/NIA 21.0 rehabilitation of aistressed
o Small Farmer Development
T rF
LAND BANK 16.5 the Government stepped "rt"rprirrr,
ply itr equity contributions and rending
. Second Urban Development MMC 32.0 in an effort to compensate rp. i.prrrrri fir** investment accelerated
and
o Highway ("Jumbo") MPTI 100.0 implementation of the.infrastructire the
r Water Supply Il MPW 16.0 pr;gr;
ts^,u. The current external
account deficit furtherintreased to per.i"t
o Water Supply II (IDA) MPW 22.0 5 in 19g2 and continued reliance
(6) on foreign resources under less ravorautomart;
1980 o Small and Medium Industry MTI 25.0 ;;;-i"*lJrirrlo'rr, rn*
shift to short'term maturity categories
o Population II (IDA) MECS 40.0 ;i h;; turth";;r;"r,i;Ji n"
o Samar Island Rural Dev. MPW 27.0 temal debt. By year's end virata ana
the ce-Jral Bank,s Jose Fprnand "*-
r Medium Scale Irrigation NIA 71.0 applyrng for another standby arangement ez were
e Rainfed Agricultural MAF 12.0 of sDR 164.7 million. Tacked
on was the periodic reviey an!
o Rural Roads Improvement MPH 62,0 by rhe IMF of ,fr.?*r**rrrt
compliance in implementing the"ppiairal
198 I (6) o Ports III PPA 67.0
performance.
liogr"* and its economic and financial
o Urban III MMC 72.0
r Watershed Management MAF 38.0
o Livestock Fisheries II MAF 45.0 MAJOR INDUSTRIAL PROJECTS AND
o Apex I (Industrial finance) MOF 150.0
DOORT-ORIENTED
r Structura-l Adjustment MOF 200.0
1982 (8) r Education VI MECS 100.0
o Agricultural Support Senices MAF 45.0
Apart from the ,structural reforms and ad,iustmenrs,,
promised in the
r Urban Engineering MPWH 8.0 virata'Fernandez retter
of intent, tiie ereven majo, L,rdustrial projects
o Textile/Structural Adju stment MTI to be dropped. Because of the favorable climate had
5 8.0

I National Fish Development BFAR )1 n in internatiorur- capital

markets between 1973 and 197g, there
r Communai Irrigation NIA 7 t.t was no particular urgency for the
dictatorship to revamp the protective
r Coal Exploration MTI 16,3 structure ani shift,o *a*pJn-orient-
o Small-medium Industry MTI ed strategy. Despite some token moves
Dev, 132.0 towards export orientation
the establishment of export'processing zones, bonded warehouses, - e.g,,
TOTAL (87) 3,389.0 tax privileges for exporters and some
$

nature of most industries

- the import*ubstitutrng, ,nporilolp"narnt
yas qr::erveO, helpeO ,rong coisiOr.iUiv iv.rgr.ig,
borrowings which made the dollar urtinciitiv
cheap. The dictaiorship had
Source: Programs and Projects Afftce, Vaious Annual Reports, National Economic instead shifted to a strategy of
"debt-powered" growth. And one of the late-
and Development Authority: Metro Manila, 1974 - 1985. breaking components of this stratery was
the much-vaunted. ,.ereven major
industrial projects," heralded as the country's
leap to industrialization. By the
time they were to be impremented, however,
the accumuration of debt had
already reached dangerous levels, and the
including the National Food Authority's monopoly on grain imports, since implementation of most was either
cancelled or postponed
they made domestic prices diverge considerably from world prices. The sub- ts.s2l. It was perhaps no coincidence that the years
of easy foreign money were arso the years
jective moment in all these was, of course, to adjust minimally in order to auring which the dictatorship was
able to consolidate its rule: on the contrary, the end
continue as usual, i.e., to have continued access to foreign commercial credit.l of that period was asso-
ciated with its weakening and the endofitsielative,.indepenorr*" rro*rrr.
On the face of it, however, the conditions required by the IMF and the World
IMF and the World Bank.
Bank would, if fully implemented, compel the regime to change the develop.
Even if international capital markets had
ment strategy'it had so far been pur$uing. not been as conducive, how-
ever,the introduction of the export-oriented
But the internal domestic adjustments did Uttle to contain the surging strategy i"t";h;;;;;;ry-wouto
have been beset !y another ,"riou,
proutem, it ,,social
had no bea'rers,,; it
 D ic t at or s hip ard R ev olwi on 'tTle Erosion of tle Dictatorship
121
dtd not represent the interests of any socially significant class. Much of the bankrupt and on October 14 requested
time it was only the technocrats - but again not all of them, as only Ongpin an initial 90-day standstill
international banlis on its maturing from
favored the eleven major industrial projects and consistently advocated prirr"ipA payments.
this strategy. As previously mentioned, however, the technocrats were hardly
'.!i(:.,i:::::!'. h"..1ictato:shiPt' roieign exchange reserves
onry
a decisive influence on the actual policies of the dictatorship, precisely itsinte;;;il;#1fi ;",iii
l#*:"1,1: j,::ily":l'i"cotiationof
because they themselves had no constituency. The more important social
classes with which the dictatorship had to contend (either to win over or to
3::j::, j""11"Tt1.*;qeandtogeth;;;il;;;;;'";l;lil,;:::
i;o;ffi;;ili",ilTIII;
peso sank to p20.73 to
fhe
the naa^ eanL +^ DnA aa r - a US
dollar.
neutralize) remained the landowning classes and urban big business, which
was closely linked to import.substitution or to natural-resource and extractive
The IMF's conditionarity requirements,
which referred mainly to ma-
croeconomic targets, complemented the''structural
activities chiefly in exports, logging and mining. These classes were either adjustment.,;'ceilings
were set on allowabl.e money supply, fiscal
indifferent or hostile to the tariff reform program, for example. In contrast,
and a commitment to flexible exchange
deficits, urrO iorrig,;rr";;;
the sectors which stood to benefit immediately from an export-oriented rates was required. Artogether,
these meant the govemment would noi
strategy, such as garment exporters, eleclronic manufacturers, and handi- b. allowed to borrow as much as
before; hence economic activity would
craft producers, were either small subcontractors or large multinationals have to be sustain.a u/ r*port,
ura
content to live in the privileged enclaves carved out for them by the dicta- delermined by the flow and .tu or worrd
economic activity. The commit-
ment to flexible exchange rates was an
torship. Ford's former body-stamping plant in the Bataan Export-Processing assurance that any .*p*rio., tf,, i,
government deficit or the money
Zone, for example, received heavily subsidized credit. suppry, if it
resulted ,r irn"ii"r, *outd be
Bello e/ at. (1982) have extensively discussed the content of the "ex- reflected-in a depreciation of tire prro, un
unpleasant b.rt orre
port-oriented industrialization" strategy being advanced by the World Bank. that would benefit the exporting ,uCtor. "onr.qu.n*
In themselves these measures were hardly new. They had been advocated coinciding with the october devaluation, the
government concruded
by some technocrats since the sixties, most notably G. Sicat (1972) negotiations with the IMF for a standby program
of sdn 615 mirion after ar-
and by several international "missions" to the Philippines in the seventies most four successive 90'day moratoria tn lts
payments to creditor banks.
In what was known as the November 19g4 pirilippine
[the ILO Ranis Mission (197a) and the World Bank mission report (1976)], Economic Memo-
randum, the government arso outlined
The "export.oriented industrialization" strategy was evolved - and later the "pior actions,,it had accom-
plished a set of fiscal andjinancial parameters
^;ra )rilia
became the reigning orthodoxy in development thinking - in response to - house-
the accepted failure of protectionism in the fifties. The strategy seemed to keeptng" from the Fund [B.BB]. rvhire
the approval^triggered the extension
offer a way to resume economic growth with the added bonus, as Diokno in new money of $925 milion by the dictaiorship's
,"ign, tl* IMF wo,rd
(1987) pointed out, that it did not require a radical redistribution ofwealth strictly monitor agreed structural reforms
by Governmer,t b"for. the
stag-
gered releases would be made. In
and incomes. The latter was of course a valuable feature for a strategy to be an uncanny coincidence, this last IMF
Marcos bailout scheme was timed with
serviceable in such bureaucracies as the IMF and the World Bank, which dealt the ,,no sale, no feasance,, policy of a
with the worst dictatorships and most iniquitous govemments neutrally as state Directiye (NssD) on the di;t;;;;*"i"_rf.,ru
clients. H.,,H;Lffcurity
A puzzle of sorts is raised by the observation (Thompson
and Slayton
1985)-that despite repeated viorations of conditionalty
THE 45O.DAY STANDSTILL by trre aictatorstrip,
the IMF continued to provide its
"sear of good housekeeping,, to the ph,ip-
pine government and did.not apply
Despite two exchange rate depreciations that imputed further economic the co-*esponding penalties. unt, lgg3,
the world Bank also took a toterant view
hardships, a reduction in capital expenditures and control over current opera-
dium of guidelines for the preparation or
of tt,
,.gi*;. a NEoa compen.
tions predicated on the approval of the February 1983 IMF arrangemeni, wB-"ssist?;-;r;;;';;ri"ur,d"r-
lined criteria of "bankabitJV'l with emphasis
these were offset by the substantial contributions to public corporations. on ,.capitil intensive,, compo_
nents "ro offset unfovorabre,.barance o| paymen*
The darkest period in 1983 for the dictatorship was the third quarter. Not clwnge in the rurar sector." However,
and generate foretgn ex-
only did Marcos confront Aquino's tredcherous assassination and the conco. a nu-urr of world Bank projects
were in fact also vehicles corruption of political ,fror."r"rl*[
mitant popular indignation, but also with equal impact he declared his regime so'called _of as tr,"
) "toilet village," Imeld.a liarcos,s ionao porrst o* rt;;iog prr-
122 D bt aor s hip and R evolution Tlv Erosion of tle Dictatorship , 123
E

ject or the school supplies scaudal. It would be too simplistic to paint Table 3.11 PHYSICAL AREA Ot' FARMS, By TypE AND
the relationship between the multilateral institutions and the dictatorship as TENUBE_OF OPEBATOR, pHiLrppINEs, 1981
being one of constant friction - a view ironically held by people both on the (PERCENTAGE' DTSTBTBUTTON)
I*ft and on the Riglrt; or that corruption and excesses were the sole province
of the dictatorship, especially the cronies, which the lending institutions Tenure of fare
constantly sought to eradicate. There were many instances when the more %of Owned Rendet or kased Other forms
Type of farm total Fullf Owner-Iike For share For
"irrational", "inefficient"" at times blatantly corrupt, aspects of the dicta- lixed f{*t fro On".,
torship were countenanced or accommodated by these institutions, parti.
physical Ovned possession account of
,:
farm ntomreyl
cularly its net lending operations and crony bail-outs. The same may be said, xEea
producer
perhaps more obviously, of ofhcial bilateral assistance. In the case of U.S.
assistance, one might cite the U.S. auditor general's report on the use oithe
bases rental or economic support fund by the dictatorship where an outs'
All types 100.0 61.2 LL.z 20.5 4.g 1.4 t.4
Falay 38.5 55.2 t2.9 Zt.g .S 11.3
tanding unliquidated amount of $18 million to the U.S. Treasury merely 243 65.1 10.2 7 1.2
Corn
18.3 1.3 ''2.4 2.6
led to stricter monitoring of disbursernent procedures and greater control by ftconut 29.2 64.5 9.3 24.0 0.9 0.7 0.6
the United States Agency for Intemational Development (USAID) 13.341. Tobacco 0.1 49.4 8.6 34.6 3.7 Z.S N.S
One explanation that has gained some plausibility is that the d.ictator'
Sugarcane 3.2 6s .2 Ll.t t3.g 7 .6 o.s 1.0
ship was simply too sluewd and cunning, even for the Fund and the Bank, so
Citrus 0.2 60.1 l3.r 18.5 6.5 L.2 1.2
Vegetable 0.5 56.0 17.0 15.1 s.2 4.0 2.7
that it was able ts effoctively deceive the latter. Tuber,root and
However, it would be very unlikely that the relative leniency or strin- bulb-crops 1.3 63.7 14.1 12.4 1.4 5.5 3.0
gency of the multilateral institutions' policies could have remained unaffected Banana 0.8 55.8 10.8 7.3 21,.,1 2.s 1.8
by the degree of consolidation of the Marcos regime vis-a-vis its domestic
Piaeapple 0.2 6.8 1.4 28.1 62.4 0.7
opponents, or by the evolving U.S. attitude towards the dictatorship.
Coffee 1.2 78.9 11.5 4.4 0.5 1.8 3.0
Mango 0.1 66.7 13.3 8.9 2.2 6.7 1.1
Fisher crops 0.6 70.0 12.3 14.s o..t 1.0 1.s
POPIILAR RESISTANCE Other permanent
crops 0.9 7t.3 11.6 lo.5 1.5 i.3 3.7
0ther temporary
As the more conservative sectors of society were being estranged from
the dictatorship, however, it was facing more escalated resistance from those
crops 0.5 59.1 lo.s 20.7 6.s 2.r 1.0
Other temporary
sectors which had never been fully reconciled to it to begin with, namely crops 0.5 59.1 10.5 2A.7
1.3 .5 10.0 6.s 2_L 1.0
the people. Cattle 7',1 0.9 7 .7 o.s
The regime's policies (or lack of them) had been especiaily prejudicial ' Hog 0.2 '.12.7 r2.3 8.8 0.9 2.6
2.g
2.6
to the rural fslk. There had been no serious effort at asset redistribution, es' 4.2 66.3 15.4
pecially agrarian reform (Table 3.I 1). Even the limited land reform promised
Other livestock
LO.7 2.4 1.8 1.1
Chicken 0.1, 75.4 11.9 7.1 2.3 i.t i.6
in the rice-and-corn-producilg areas had come to a grinding i'ialt, with only Othor poultry 0.50 7t.4 14.3
Others not elsewhere
a small tiaction of the target hectarage being actually transferred to their
cuitivators. After twelve years of the regime's own limited land reform
classified 0.3 75.2 15.2 3.3 0.9 1.8 3.6
program, less than a fourth of the 438,893 eligible tenants had become
actual owners of their lands. Of the total 752,927 hectares slated for redis' 't1 As a percentage of total farm area devoted to specific crop.
tribution, iess than 17 percent had been actually transferred (Table 3.12). -7 n.S. means less 0.09 percent.
Rather than carry out land reform, the regime opted to emphasize increasing
riceJand productivity, and only in the limited sense of using high'yielding va" source ofbasic data: National census and statistics office, censas ofAgticulture,
rieties (HYVs) and intensifying the use of fertilizer and chemical inputs. In National Economic and Development Authority
19g0,
this the regime"depended fully and uncritically on the foreign International Manila, 19g1.
124 D btatorship and Ranlwion The Erosioa of the Dictatorship
r25

TABLE 3.12 EMANCIPATION PATENTS ISSUED BY REGION, high cost sf these items
AREA, AND NUMBEB OF TENANTS AFFECTED AS -
ag$avated by oil price increases and the
ciency of the domestic monopolies
ineffi-
PROPORTION OT TOTAL AREA AND NUMBER OF them prey to usurers and middlemen. The
-
were a cash drain for farmers and made

TENANTS ELIGIBLE (As of June 1984)

result was *;rk;;;or
rrrri,
independence vis-a-vis traders and, in "
some cases, effective.dispissessiorr.
were they aided by the regime's poricy
]t{either of keeping the pri".-or ri..
Region Patents lssued Tenants Affected Tenants Eligible Area Affected Area Eligible low for the benefit of urban ,orrirnurr. The
(%o of etigible) (has, % of eligible) Sas) (has.) aggravation of inequarities in
the countrysides and their oriljns in national
policies stimulated
tion of a militant nationar peasant organizatiin, the Kirusang the forma-
r 11,537 9,414 3 3,3s6 5,366 37,630
Pilipinas (KMP
uigtuuu*id
Philippine peasant Movement). The KMp ,i.rt .rirv articu-
{28.22) (14.26)
ng
-
u 15,294 14,5 33 46,3t5 7,687 82,757
lated the peasants' stand on particular issues but
became known for its uncom-
(3 1,38) ( e.29) promising demand for comprehensive agrarian
reform. I
rItr 29,518 2',1 ,257 1t7,t33 3 3,518 25?,0L3 On the other crops, the regime,s policies were
moredcynical. The
(23.27) (12.30 exemption of the coconut and sugar lands -from
tv 5140 4,261 25,888 4,988 39,999
trusting of these two important sectors to
agrarian reform and the en-
(16.46) (t2.47) cronies (cojuangco urd n.rr"-
dicto) were a simple reaffirmation of feudar tanolordism
v 11,110 10,198 5 1,445 9,390 64,704
tation to depredation' By depressing prices
uri;; op"n invi-
(19.82) (14.s l) received by producer, *'Jrumng
vI s,5 14 4,709 44,422 s,487 63,"t82 to support innovation, the agricurturar
monopolies aso p'rrrrJ;;;;ine ,eut
(10.60) (8.60 incomes of farm workers and small peasants, indirectly p.rf,upu
vli '1,093 5,02s 24,488 4,780 25,24't palpably. Real wages showed u .yrli"rl
tui ,ro f.r,
(20.52) (18.90 decrine, ;rJ;"d,,iHrr"r*r* *-
vm 7,066 6,06',1 21,449 5,022 29,140
mained high, and poverty increased. r.

(28.28 (r7.23) In addition to the e.qo1o1ic burdens, however, the rural

x population
4,094 3,9s2 10,605 2,482 r5,996 also had to endure the political opprerrio, und terror
encouraged by large-
(17.26) (15.51) iandownership. private armies or ;*"rrity
x 11,703 10,521 21,387 27,200 40,790
the local military and.police authorities,
forces',, as well as control over
(49.19) (66.68) wer. tt e inevitable accessories to
ownership or acquisition of
xr 10,097 9,789 18,779 16,092 39,268
fiontier had been
vast lands. In a country wheie
the land-
(s2.13) (40.98) reached and onry few lands remained
unoccupied, though
XII 2,848 2,670 23,626 4,968 6L,374 perhaps untitled, viorence was
the consequence of a redivisiori. Especiarly
(1 1.30) ( 8.09) provocative were the grants of
TOTAL 123,2s4 108,396 438,893 126p83 1<) Q11 u* o, o*rrohip over wid;"#;il.cupied
iand to large corporations, uotrr
(24.7 0) (36.86) transnaJionar and domestic, both private
and public. In the process, settlers
Source of basic data: Ministry of Agrarian Reform' Summary: Operation Land by threat.
or tribJ feoplr, *"r"
'rvrw ruirrlii,
vvrvlEu uY rfor." o,
Land Ttansfer hogram Accomplishment as of June 30, 1984. Even when rand acquisition was
Typescript: Quezon City, 1984 not directly for private benefit but
served some ostensible public purpose,
the u*i" nr*
making provoked resistance. the
chico River Dam project (funded"i;;;;ffi"cision.
by a
toan) sought to construJ-iouior*,
Rice Research Institute as the Philippines did not have a well+quipped forJ{iant
electrification and irrigation without
on the chico River for
prior- consurtation with the local
institute that could pass on the suitability ofadopted rice varietie* population' one of the dams would
encroach on the ancestral lands
The introduction of IfYVs, while raising productiyity, was fraught with a tribal community, the Raringa, of
which resisted the construciion ,ior.ntry.
complications for farmers, including those who benefited from land reform. In the end, owing to stiff resistan.r,
,rr" .onr,ruction of the dam was can.
, Unlike traditional varieties, HYVs required heavy and regular doses of'che- celled but nor before Macri-ing oulag,
mical fertilizers and application of other inorganic inputs, most of which were
tni iafusa chieftain who had been
in the forefront of opposition,-was
produced by transnational corporations or large domestic monopolies. The re80 [3.35]..
rr,"t
",,JL,r"i
i, rrir ii"*.'"i or* ,0,
?
126 Dictaorship ard Revolution The Erosion of the Dictaorship
t27
In the oftheirland through fraud
cases where people were dispossessed
atrocities committed by paramititary ururs,
or terrror, or where "development" was rammed through, it was not sur- f,:l.tj:l.:]^1b_l-r-.r:..orTrlion,
prising that the population responded in kind through force. Support for i:::r.y:"1_"i:.r:t:i1.andp:ojects,o."iii"ir.Jir,r'*;ffi
or. simply toid to rtrui ,p.
;i,in;:;
the New People's Army expanded rapidly in those areas. Popular retaliation :1tT1_*T..d A host ,rr.-rijrro*
was carried out through sabotage of equipment and the ambush of soldiers,
security code, the public order Act, "iar**r, ig34 and
and presidential issgances
paramilitary units, and abusive local officials. The introduction of more
1835 were foisted on the media to ensure,trirt.o*fti*;;;fi;; regime,s
policy of "self-censorshlp" and, ,,responsible
troops to fight the insurgency - without directly addressing the causes of ,"poiing,, _ the hackneyed
synonyms for suppression.
that insurgency - often worsened the situation of the rural folk who were
so effective was this ironclad control over the tri-media that
further burdened by the conditions of an expanding wilr: production wap dis- point no less than then defense minister Enrfle
at one
rupted, hamletting was practised, military abuses multiplied, non.cornbatants urged the press to-;rnop out
of its timidity and sycophancy.,,
were caught in the crossfire or became victims of mistaken identity on either
The press finalry found its voice in a series of exposes on human rights
side. Despite appeals and exhortation from Church officials, the dictatorship
abuses and atrocities documented by the Association of Major
abetted the military atrocities and exculpated the perpetrators, particulary Religious
superiors in the philippines (AMRSp) and rask Force Detaine; (TFD). The
in Mindanao.
murder of Macli-ing Dulag would have been onry
one among thousands of
cases of cold-blooded killings that became the
THE FOURTH ESTATE miitary,s notolious standard
operating procedure. what set it apart was a piece
on iris brutal murder writ.
The relegation of human rights and the freedom of expression by the ten by Ma. ceres Doyo and publishe d,inpanoramamagazine
(June 29, r9g0)
U.S. as an internal problem of the Philippines further emboldened the and her subsequent interrogation on the article
by trrl *mt*yl" i,rry rlso.
Marcos regime to extend political repression to the Philippine media. The re- Before then, the government courd etfectively
deal with isolaied harassment
gime had always held a tight grip on its controlled media establishments, de- and intimidation.
monstrably to destory its "oligarchic" structure. Though Marcos sequ.estered Another cquse cerebre in the press was the forced. resignation
ofLeticia
the pre-martial law papers and broadcast stations, he had in fact appropriated Magsanoc, editor of the same magazine, occasioned
by her-criticar fieces on
and monopolized media through intimidation and outright confiscation since Marcos's ' New society" and Imelda Marcos and in retaliation
for her unflin-
1972. Through his cronies, the media during the martial law period became ching support of the Doyo article. The pattern of
media harassrqent stepped up
outright Marcos propaganda mouth.pieces for his New Society. Gen. Hqrs- with the military inquisition of wtio magazine writers
Roberto boroma,
Menzi, his former aide de camp, together with Eduardo Cojuangco and Mar- Alex Dacanay, and Alex Magno (the latter refused
to honor the military,s
cos's son Ferdinand Jr., as silent stockholders, was owner and publisher of "invitation")' Apparentry sensing ihat the media had not ret
up in tireir anti
Butletin Today n wiell as Tempo, Balita and Panoramamagazine. $qperto ' dictatorship propaganda and had not heeded his wamings, M'arcos
ordered
Benedicto owned and controlled the Philippine Daily Express, lleekend the immediate arrest of Jose Burgos, owner and publishor
of we Forum,
magazine and TV channels 2,9, and 13. Benjamin Romualdez, Imelda's" together with its 13 staffers, on grounds of "subversion".
The paper,s faci.
brottier and Philippine ambassador to the U.S., coniiotteO*?fna Journal, lities were closed and confiscated after it published
a scathini expose of
Times Mino,r, and the People's Jourutnl. P:esidential Executive Apfs_t-a.n!* Marcos's controversial war records. The internationd
against the clamp'down
*a 6;i;; outcry
Juan Tuvera and his wife, Kerima Polotan, owned The Evening Post, Focus then onry anti-fascist national newspaper did
?n lhe
not deter the dictatorship
magazjne, and Oient /y'ews. Clearly, the dictatorship's tentacles controlled from furthei intensifying its press ."nrorrhip on
not only the facilities but more strategically, the news and the shaping of the pretext of national security..
public opinion. Pouncing on the women journalists in the berief that they
could be
Government guideline$ also bolstered the Marcos media machinery: all cowed more easily, the dictatcrrship's National Intelligence
Board ihen .lnvi-
of them were no-nonsense censorship rules for all reporters, journalists, and ted" eight women journalists to a "dialogue" on confidential matters . pano-
columnists to obey strictly. Articles and news items were monitored and ruma edrtor Domini rorrevillas Suarez, Lorna Kalaw
Tirol, Jo-Ann Magripon,
those critical of the first family, government, and the military were lumped fulene Babst, Ninez Cacho-Olivares, Ceres Doyo, Eugenia Apostol,
and
together as "nationnl security nlatters endangeing military operations " or Doris Nuyda each underwent a three.hour interrogation
session about the
"interfered with the business of state. " Courageous journalists who wrote on the articles they had written
ts.B6l. The Gestapo-style intimidation appaned
128 D ic t at or s hip and R ev o I a iot Tlu Erosion of thc Dbtatorship
129
,]

even tho most apolitical.
The dictatonhip's persistent repressive tactics against the media only
strengthened the resolve of the Fourth Estate and consolidated its rants.
Protesting the military action, the women writers and 2I other jourrralists
filed before with the Supreme Court,an action seekiag an end to media inter.
rogations by the military [3.37]. The historic Supreme Court injuction
filed on the journalists' behalf by lawyer Joker Arroyo led to the disrnant-
ling of the government's special media committee. The military countered
with a series of libel suits against the women writers. Failing to achieve his
objectives and contain the irrepressible Fourth Estate, Marcos ordered the
arrest of Antonio Nieva, Bulletin Today senior editor and president of its
workers' union, on charges of rebellion. Worse, a number of provincial
journalists and broadcasters were svstematically kidnapped and salvaged
with impunity. These incidents enraged an already restive people who were
simultaneously reeling from economic and financial difficulties. The "bum-
ald'boycott" campaign of crony-owned and controlled newspapers by anti-
dictatorship forces snowballed into higher forms of struggle as a now militant
media courageously stood up for the people and crystallized the propaganda
of the anti-dictatorship struggle. By the time of Aquino'd assassination, the
media had already laid historic claim to its catalytic role in the struggle of
the country from the Marcos tyranny.
served to underline the commonality of the anti-dictatorship struggle that
now included a ranking and outspoken Filipino cardinal criiiclzing Marcos
without qualms in a country 80 percent catholic. cautious catholic bishops
were emboldened to make more direct indictments agairst the political
order from their pulpits.
By mid'1983, both Protestant and catholic churches had developed
another ecumenism
- the Cluistian resistance to the dictatorsfip.
URBANWORKERS
If the regime's policies did not benefit the rural areas, neither did it
do much for the masses in the urban areas. Real wages of urban workers
showed a monotonous downward trend as nominal increases, in wages failed
to keep up withinflation (Figure 3.3). Manufacturing had lofig ceased ro pro,
vide jobs at a rate sufficient to absorb the labor force. It catered to a narrow,
protected domestic market, was dominated by monopolies and transnationals
uninterested in innovation, and its structure was determined by the purcha-
sing patterns of the elite. The share of.manufacturing in value-adtled had
stagnated to about one-fifth for sometime. Instead the excess labor was being
absorbed in the informal services sector composw largely of peddlen, hawk-
ers and food vendors where prrrductivity and incomes were low. The rate of

THE CHURCH RESISTANCE FIGURE 3.3 INDEX OF REAL WAGE RATES,

1983 (1972 = 100)
If church leaders seemed siow to distance themselves from the dicta-
torsh-ip, they did so not out of fear but because of their ground work with
the Filipino people. Thg-P;,01_eStEt -S-hUrch- bad embarked on a consistent
anri-,d:s-tetqt$p*:lf gg*ggif zra"q,r_qe'rffii'nea-it-mf-r'"*Tfr A-m"i.
conservative G$offiEer;rcff w1i-C[ a gop1eA- e p]Ecy il-c-rliian collabo-
rgfio"*itll.l"h-.-liiiff. B', 1 978 ; in. proLsiant community had launched
militant mass actions'hd actively mobilized for the boycott campaigns
of the 1981 April plebiscite and the June presidential electiont. A militant
policy statement of the Protestant ecumenical groups warned the Filipino
people of the fundamental oollusion between U.S. imperialism and the
Marcos dictatorship.
But the militarization of the country could no longer prolong the si
lence of the Catho.lic bishops whose unofficial spokesman was Jaimg Cardinal rvou rens 1970 1975 1980 19821988
19821983
L. Sin. In a letter to the American Bishops Conference, subsequently read at
irEileo laDouterE
a U.S. House subcommittee testimony in November 1984, Sin drew atten" Unskilhd l&ouids
tion to the growing political repression and human rights abuses [3.38]. In
1982 rhe British Broadcasting Corporation (BBC) inteniewed Sin. Doicno, source:
- central Bank, various Statistical Bulletins, central Bank, Manila, 1975.19g3.
and National Democratic Front spokesman Horacio Morales. The program
 130 D ictator ship and Revolution
The Erosion of tle Dictatorship
13r
underemployfiIent was high, and as the recession took hold, open unemploy-
qhv of the insurgency threat and the growing opposition to his regime: all
ment inched up as well.
these were designed to u.s. policy into sustaining his shaky reign.
It was not simply slack employment that kept wages down, however. It About the same time, in lisreld
fact, tlre cfp-MAluantified rts geigraphic ana phy-
was also oppressive labor laws which severely curtailed the workers' right to sical expansion and organizational growth since
organize and bargain for higher pay. Decrees and issuances such as Letter of ttre imposltion of martiar
law' The statement ca,ed on its revolutionary forces
Instruction 1458 prohibited strikes completely then in so-called "vital and to pr"pu* for the
"advance to a higrrcr stoge of revorutionory struggre
strategic" industries, virtually exhausting all sectors, and their contents could
. . . with thi
united front
armed struggle (now becoming) a nationwide campaign agoinst the U.S.-
be redefined by Marcos t3.39]. Dsputes could be certified for "compulsory Marcos regime" 13.401. The National Democratic Front,
arbiiration", an unwarranted intervention by the Governmeut in the bargain- its poriticar arm,
even achieved internationar propaganda and
ing process that diminished the efficacy of a strike threat. The Batasang broad support at trie permanent
People's Tribunal in Antwerp in october
Pambansa (Parliament) continued this trend of anti-labor legislation. Such
19g0 where ther crimes of the
dictatorship were tried by an international people,,
laws were in addition to the customary collusion between owners of capital
.orrt. i
By the middle of r9g3, the p_oritical opporitio., to
and the police or military. Workers' peaceful pickets were broken up violently, the regime had swept
across almost all strata of the phirippine society * , .orrlquence
labor leaders were harassed or hunted down as 'osubversives." Outstanding worsening effects of the economic crisis. poritical
of the
labor leaders, including the aging Felixberto Olalia, were arrested on trumped- instabirity ,ggru*tra uv
the economic and financiar corapse since
up charges in 1982 and detained. Olalia was so weakened by his detention 197g was further higrrlighted by
Marcos himself before he reft foi
that he subsequently died while under house arrest. sauo Arabia in April r9g2. In a memo-
randum to key cabinet, KBL, and Batasan
Despite such obstacles, labor was able to break through the blockade officials, Marcos informed them
that he had left certain instructions for
imposed by the dictatorship. Even before the lifting of martial rule, the first ver to carry out if anyt,iring untoward
happened to him while abroad "o"sign"tirg
significant strike occured at the La Tondeila factory in 1975. ln 1979
ver as his caretaker "presidenr;', t8.4,u. Despite Marcos's aerhrr
workers struck at the Ford body stamping plant in the Bataan Export Pro. the politicar impact of the incident could
not be underplayed. It starkly reveared that it was
cessing Zone. As conditions worsened with the recession, workers' actions only the miritary under
ver whom Marcos could trust absorutery. That shut
became more frequent. The reassertion of rvorken' rights was associated with him off from the rest of
the country and sealed the erosion ofhis dictatorship.
the loss of prestige and credibility of the Trade Union Congress of the philip.
It was this phenomenon which aquino was observing when he
pines (TUCP) which was established under the sponsorship of the regime as decided
to return home a learlater.
a form of accommodation vrith some labor leaders in exchange for supporting
the dictatorship. The timorous trade unionism and political conservatism
of the TUCP at the time were perceiveci by many unions as unresponsive tc
the real conditions. Man-y of these independent unions and federations, which
had been among the first to defy the dictatorship's strike ban, banded toge-
ther to form the KilusangMayo Uno (KMU - May First Movement) on May
l, 1980. The KMU would gain in influence and become a symbol of militant,
uncompromising unionism.
Marcos, however, could still convincingly bluff his way with the U.S.,
particularly with Reagan. Towards the end of 1980, though, both state
and defense departments had become seriously perturbed by their own inde.
pendently conducted inteliigence findings on the geometric expansion of the
CPP-NPA. Both departments, though differing in their perceptions, none-
theless were agreed on the preservation of U.S. global supremacy and
uncomprofiisingon continued access and security of the bases, the precon-
ditions for which were a stable political environment. Their security assess.
ment found common groundlin Marcos's deliberate falsification of and down.