Manila slowly creeps out of IMF cage

Manila slowly creeps out of IMF cage

By Jonathan Thatcher

MANILA (Reuters): Just when the International Monetary Fund is
putting Asia's tiger economies back in the cage, it is getting
ready to let the one-time runt of the litter, the Philippines,
roam alone in the woods.

Philippine officials boast that their economy, once Asia's
basket case, is in better shape than its neighbors after the
ravaging of regional financial turmoil.

They point to the expected exit from more than 30 years of IMF
economic policing as proof that the Philippines can finally hold
its head up among Asian economies.

On Monday, Congress helped the process when after weeks of
horse-trading it passed a tax reform bill, essential for the
Philippines to "graduate" from IMF supervision.

"The IMF exit is a landmark. It sends out a very strong signal
that while everyone is going in, we're going out," Dharmala
Securities economist Manual Goseco said on Tuesday.

Much of those years under the tuition of the IMF -- and
several times Manila played truant -- the Philippines has had to
stand by as other Asian economies were applauded for their
glittering successes.

Now many are facing their toughest time in years and some,
most recently South Korea, have been forced to turn for help from
the IMF which in return is demanding painful changes.

"The Philippines proved to its international creditors that it
can manage its economy and could exit from IMF prescriptions,"
House Speaker and now ruling party presidential candidate, Jose
de Venecia said after the tax bill was passed.

But analysts said the bill in itself means relatively little
in economic terms because it was so watered-down in the
negotiations to get it past opposition politicians.

Raffy Manalaysay, director at SocGen Crosby, said on the face
of it the impact on the economy would be neutral to slightly
negative.

"Overall I don't see much for the corporate sector...there was
a lot of dilution, a lot of compromise," he said.

But apart from the tax, the Philippines still needs a new oil
deregulation law to complete its IMF graduation.

The oil law in place since February was thrown out by the
Supreme Court in October which said it was constitutionally
flawed and encouraged oligopoly rather than a free energy market.

And the Philippine government has indicated it would be quite
happy to have some sort of IMF safety net in place next year in
the country which has only recently got used to the concept of
sustained economic growth after decades of boom and mostly bust.
Several economists said that the Philippines probably has a
better chance of pulling out of the regional crisis ahead of its
neighbors, even if fairly slowly.

Several are predicting gross domestic product growth next year
of around 3.5 percent, compared to the government target for this
year of up to 5.5 percent.

"1998 will still be tough year," Indosuez W.I. Carr research
director Alex Connor said.

She forecast some recovery during 1999, a little earlier than
others in the region.

One advantage for the Philippines is that it has so lagged
behind the economic boom of its neighbors, that it has not had
the chance to overstretch itself to quite such a degree, some
analysts said.

They added that the country had also been through much worse
and so was better prepared for catastrophe.

But the financial and agricultural sectors will see a slow
down, especially earlier in the new year, Dharmala's Goseco said.
"Hopefully we won't contract. We're just slowing down. That is a
feat in itself," he added.