Section 4April 17, 1989, Sec./Art. 4

Policy Options. - In the discharge of its responsibilities, the Council may consider and develop the following options:

(1) Debt-to-Equity Program. - To expand the volume and coverage of the Central Bank Debt-to-Equity Swap Program by converting $5 billion, more or less, in the Philippine foreign debt instruments into equity investments in Philippine agriculture and industry under a 5-year program of $1 billion, more or less, per year with emphasis on new foreign exchange-earning and labor-intensive productive projects in various parts of the country, including factories operating below rated capacity or which have been closed down for lack of capital, under terms that will not unduly trigger inflation;

(2) Debt-for-Bonds Swap. - To retire $1.5 billion to $2 billion, more or less, of foreign debt by Philippine issuance of $1 billion, more or less, of Philippine dollar bonds collateralized by 20-year Zero Coupon U.S. Treasury Bonds or other suitable U.S. Government Bonds. The amount of $1 billion in Zero Coupon U.S. Treasury Bonds with twenty (20) years maturity can be purchased by using $200 million, more or less, from Philippine international reserves or anticipated inflows from foreign aid;

(3) Partial Use of U.S. Facilities Compensation. - To utilize a portion of the possible U.S. Facilities Compensation Package to acquire more U.S. Treasury Bonds or accept part-payment for the U.S. Facilities in U.S. Treasury Bonds for further exchange with Philippine debt instruments as indicated in Item (2) above;

(4) Japanese Bonds and other Foreign Currency Denominated Bonds. - To utilize a portion of Japanese and other foreign economic development assistance funds to acquire Japanese and other foreign currency denominated bonds to collateralize issuance of Philippine currency denominated bonds similar to the U.S. Bonds formula, as explained in Items (2) and (3) above;

(5) Use of Official Aid. - To use a portion of official aid from other sources to fund Philippine purchases of U.S. Treasury Bonds or Japanese Bonds to further enlarge the Debt-for-Bonds Swap Program;

(6) Co-Guarantors. - To request the World Bank or other official multilateral financial institution to co-guarantee the coupon rate or interest rate of Philippine dollar bonds in support of the Debt-for-Bonds Swap Program. Foreign buyers are then assured of payments not only on the principal but also on the interest;

(7) Interest Cap. - To reduce interest rate payments to four percent (4%) to five percent (5%) of principal, more or less, per year on the loans granted by the foreign commercial banks to the Philippines;

(8) Capitalization of Interest Balance. - Under the Interest Rate Reduction Scheme in Item (7), the unpaid interest portion in this proposal, shall be added to the principal amount to be repaid when the loan matures. Further, the Philippines may issue to international creditors a new dollar-denominated instrument corresponding to the unpaid interest balance with incentive features;

(9) Interest Waivers. - In lieu of or complementary to Items (7) and (8), to negotiate with the foreign commercial banks for interest waivers of two percent (2%) to four percent (4%), which the World Bank is considering to endorse;

(10) Condonation of a Portion of Commercial Loan. - To request the foreign commercial banks to condone at least fifteen percent (15%) of their loans to the Philippines since some of these institutions have already announced loan-loss provisions of twenty percent (20%) to thirty-five percent (35%);

(11) Restructuring Terms of the Paris Club Debt. - To lengthen the payment period of the Paris Club debt from ten (10) years to twenty (20) years, considering that the foreign commercial banks have already agreed to restructure their loans to the Philippines to seventeen (17) years;

(12) Converting a Portion of the Paris Club Debt to Grants. - To convert a portion of the Paris Club debt to grants, considering as an example that a significant segment of the Philippine official debt to Japan was caused by Japanese yen revaluation;

(13) Conversion of Foreign Military Sales to Grants. - To convert Foreign Military Sales (FMS) credits to the Philippines under bilateral agreements, principally with the United States, into grants;

(14) Debt-for-Nature Swap Program. - To convert limited amounts of Philippine foreign debt into grants for nature, environment and wildlife conservation projects in the Philippines to be undertaken by international conservation groups;

(15) International Institute of Debt and Development. - To support the establishment of an International Institute of Debt and Development or any international finance organization that will acquire the debt instruments of the Philippines and other Third World countries at substantial discount, which benefits shall be shared by the debtor countries;

(16) Selective Debt Repudiation. - To consider the option of selective debt repudiation on foreign loans attended by fraud, bribery, and corruption between foreign lenders and Philippine borrowers;

(17) Moratorium. - To consider the option declaring a moratorium for a temporary and limited period of payment of principal and interest; Provided, That foreign exchange savings shall be utilized exclusively for productive, labor-intensive and dollar-earning export industries. Fifty percent (50%) of export earnings created by this forced savings shall be escrowed in interest-earning deposits to be earmarked for foreign debt service upon expiry of the moratorium thus increasing further the nation's debt service capability and helping project an image of a good debtor. Such options shall include selective moratorium on debts or obligations which are under litigation;

(18) Merchandise Export Receipts. - To negotiate that the debt service per annum shall not exceed fifteen percent (15%) of merchandise export receipts of the previous year;

(19) Repeal of Automatic Appropriations. - Repeal of automatic appropriations for foreign debt service except for new loans or other credit accommodations;

(20) Debt-for-Commodities Program. - For the Philippines to consider paying part of its foreign debt with Philippine products at levels from $250 million to $500 million, more or less, per year;

(21) Mixed Credits. - Negotiate for "mixed credits" that will include a long-term cash portion, long-term export credits, low interest and grants equivalent to five percent (5%), more or less, of project cost. Maturity should be between twenty-five (25) to thirty (30) years. New money facilities should only be used for purposes of economic growth and development, unless otherwise specified;

(22) Petroleum Credits. - Negotiate a program of petroleum credits with petroleum-exporting states with twenty-five (25) to thirty (30) years maturity, more or less, linked to the United States bases support for oil tanker traffic in the Persian Gulf. The proceeds of this petroleum credits shall be exclusively used for southern Philippines, including the establishment of an oil refinery there. In addition, the Philippines should also target $100 million per year of oil-exporting states' investment in the Philippines including their support for the proposed Philippine Islamic Bank.

Undertake bilateral agreements for skilled Philippine manpower programs with friendly oil-exporting states to generate labor-related foreign exchange earnings of US$ 1 billion to US$ 1.5 billion, more or less, per year;

(23) Investments Policy and the Philippine Assistance Program. - Without prejudicing Filipino entrepreneurs in certain industrial sectors, establish a liberal foreign investments program aimed at attracting to the Philippines the four (4) newly industrializing economies of South Korea, Taiwan, Singapore and Hongkong.

Further, support simultaneously multilateral programs of the United States, Japan, Canada, Australia, European Economic Community (EEC), Association of Southeast Asian Nations (ASEAN) and other countries for Philippine economic reconstruction under the proposed Philippine Assistance Program (PAP) involving a mixture of equity investments, debt-to-equity conversions, long-term loans, aid, and grants;

(24) Countertrade. - Organize a countertrade program of up to US$1 billion a year, more or less, with the Union of Soviet Socialist Republics, People's Republic of China, the Socialist States of Eastern Europe, and any other country with centrally-planned economies to balance and diversify Philippine foreign trade and move non-traditional products with a view to ensuring incremental exports and reducing the Philippine need for trade credits;

(25) International Debt Conferences. - Actively join and participate in Latin America, African, Socialist and other international conferences dealing with foreign debt;

(26) Diplomatic and Information Campaign. - Launch a diplomatic and information campaign outlining the Government's economic program for the international and financial community to illustrate Philippine will to face up to its debt problems;

(27) Other Options. - The foregoing shall not preclude the formulation and consideration of other options and principles in dealing with the Philippine external debt, consistent with the national interest.