UBC Theses and Dissertations

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UBC Theses and Dissertations

The external debt of Southeast Asia Switucha, Ulana Tamara 1981

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THE EXTERNAL DEBT OF SOUTHEAST ASIA by 111 ana Tamara S w i t u c h a B.A., The U n i v e r s i t y o f B r i t i s h C o l u m b i a , 1979  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS  in THE FACULTY OF GRADUATE STUDIES (Department o f P o l i t i c a l S c i e n c e )  We a c c e p t t h i s t h e s i s as c o n f o r m i n g to t h e r e q u i r e d s t a n d a r d  THE UNIVERSITY OF BRITISH COLUMBIA December 1981 Q  Ulana Tamara S w i t u c h a , 1981  In p r e s e n t i n g  t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of  requirements f o r an advanced degree at the  the  University  o f B r i t i s h Columbia, I agree t h a t  the L i b r a r y s h a l l make  it  and  f r e e l y a v a i l a b l e for reference  study.  I  further  agree t h a t p e r m i s s i o n f o r e x t e n s i v e copying of t h i s t h e s i s f o r s c h o l a r l y purposes may  be  department or by h i s o r her  granted by  the head of  representatives.  my  It i s  understood t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l gain  s h a l l not  be  allowed without my  permission.  Department of  Political  The U n i v e r s i t y of B r i t i s h 2075 Wesbrook P l a c e Vancouver, Canada V6T 1W5  D a t  DE-6  (2/79)  e  nP.r.P.mhP.r  l  r  1981  Science  Columbia  written  - ii-  ABSTRACT  In r e c e n t y e a r s t h e a c c u m u l a t i o n o f d e b t by t h e u n d e r d e v e l o p e d n a t i o n s has d e v e l o p e d i n t o a major i s s u e i n i n t e r n a t i o n a l r e l a t i o n s . The q u e s t i o n o f d e b t c o n c e r n s t h e pace and c o m p o s i t i o n o f b o r r o w i n g by the d e v e l o p i n g n a t i o n s as w e l l as t h e impact o f t h e a c c u m u l a t e d d e b t burden on t h e development  o f t h e economy. The s t r u c t u r e o f a c o u n t r y ' s e x t e r n a l  d e b t i s f u r t h e r r e l a t e d t o t h e e f f e c t o f t h i s debt on t h e n a t i o n ' s i n t e r a c t i o n w i t h o t h e r n a t i o n s , i n p a r t i c u l a r t h e d e v e l o p e d economies.  The  purpose o f t h i s t h e s i s i s t o examine t h e i s s u e o f d e b t i n l i g h t o f t h e e x p e r i e n c e o f t h e f i v e member n a t i o n s o f t h e A s s o c i a t i o n o f S o u t h e a s t A s i a n N a t i o n s (ASEAN): Thailand.  I n d o n e s i a , M a l a y s i a , t h e P h i l i p p i n e s , S i n g a p o r e , and  ASEAN's e x p e r i e n c e w i t h d e b t , w i t h p a r t i c u l a r r e f e r e n c e t o each  member-state's r e l a t i o n s h i p w i t h i t s c r e d i t o r s w i l l be t h e f o c u s o f t h e e n s u i n g e v a l u a t i o n and d i s c u s s i o n . The t h e s i s has been d e s i g n e d t o p r o v i d e a c a s e s t u d y o f d e b t f o r a group o f d e v e l o p i n g c o u n t r i e s and examine t h e s t r a t e g y used by t h o s e s t a t e s t o a l t e r t h e i r p o s i t i o n i n t h e i n t e r n a t i o n a l economic and f i n a n c i a l  system.  - iii -  TABLE OF CONTENTS  Page Abstract  "  Table o f Contents  i i i  L i s t o f Tables  iv  Acknowledgement  CHAPTER 1:  C r i t i c s o f Debt  vii  .  1  Conditionality  7  Conclusions  10  Footnotes  13  CHAPTER 2:  Debt D e s c r i b e d  16  S t r u c t u r e o f Lending i n Southeast A s i a ....  17  Indonesia Malaysia  20 •  26  Philippines  28  Singapore  32  Thailand  34  Conclusions  38  Footnotes  40  CHAPTER 3:  Debt E v a l u a t e d  43  Allegation 1  43  Allegation 2  49  - iv TABLE OF CONTENTS ( c o n t . ) Page Allegation 3 Allegation 4  59 •  61  Conclusions  62  Footnotes  69  Selected Bibliography  .  72  -  V  -  LIST OF TABLES Page 1  Sources of Lending i n Southeast Asia (U.S. $ t h o u s a n d s )  2,  18  Sources of Lending i n Southeast Asia (percentage)  3  19  E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (Indonesia)  4  22  E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (Malaysia)  5  27  E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (Phil ippines)  6  29  E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (Singapore)  7  E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (Thailand)  8  52  54  S t a t e m e n t o f Loans Approved by W o r l d Bank 1974-1980 ( P h i l i p p i n e s )  11  36  S t a t e m e n t o f Loans Approved by World Bank 1974-1980 ( M a l a y s i a )  10  .......  S t a t e m e n t o f Loans Approved by World Bank 1974-1980 ( I n d o n e s i a )  9  33  55  S t a t e m e n t o f Loans Approved by World Bank 1974-1980 ( S i n g a p o r e )  57  - vi LIST OF TABLES ( c o n t . )  Page 12  S t a t e m e n t o f Loans Approved by World Bank 1974-1980 ( T h a i l a n d )  58  13  Growth Rates o f Real P r o d u c t  . . ....  .  63  14  E x t e r n a l P u b l i c Debt Outstanding/GDP  64  15  Debt S e r v i c e R a t i o  65  - vii -  ACKNOWLEDGEMENT  I have i n c u r r e d many d e b t s o f g r a t i t u d e . My t h e s i s committee, Kai H o l s t i , Frank Langdon, and M a l c o l m G r i e v e  provided i n s i g h t ,  c o n s t r u c t i v e c r i t i c i s m and a t t e n t i o n t o d e t a i l s . the d r a f t i n t o a r e s p e c t a b l e m a n u s c r i p t . moral s u p p o r t and u n d e r s t a n d i n g .  Thank y o u , a l 1 .  Nancy Wong c o n v e r t e d  Many o t h e r s have g i v e n a d v i c e ,  - 1 -  CHAPTER 1 CRITICS OF DEBT  Economic development i s a p r o c e s s which must now o c c u r w i t h i n the i n t e r n a t i o n a l c o n t e x t o f c o e x i s t i n g r i c h and poor n a t i o n s . global interdependence  Increasing  a l o n g s i d e growing i n e q u a l i t y amongst and w i t h i n  n a t i o n s t a t e s has r e s u l t e d i n the e x p r e s s i o n o f d i s c o n t e n t by t h o s e l e s s developed  countries.  N e g o t i a t i n g s t r a t e g i e s f o r d e s i g n i n g t r a d e and mone-  t a r y a r r a n g e m e n t s t o f i t c u r r e n t and f u t u r e needs o f the i n t e r n a t i o n a l system a r e d i r e c t l y r e l a t e d t o chosen paths o f n a t i o n a l economic d e v e l o p ment.  The f u t u r e o f n a t i o n a l development o f LDC economies depends upon the  r e s o l u t i o n o f a number o f key i s s u e s such as debt which i n v o l v e s economic and p o l i t i c a l  interdependence.  The member s t a t e s o f the A s s o c i a t i o n o f S o u t h e a s t A s i a n  Nations  (ASEAN) -- I n d o n e s i a , M a l a y s i a , the P h i l i p p i n e s , S i n g a p o r e , and T h a i l a n d  --  e x e m p l i f y d e v e l o p i n g c o u n t r i e s a t t e m p t i n g to d e v e l o p t h e i r economies i n the f a c e o f c u r r e n t p o l i t i c a l and economic c h a l l e n g e s .  The a c c u m u l a t i o n  of  e x t e r n a l debt by t h e s e c o u n t r i e s and e f f e c t o f t h i s debt on t h e i r i n t e r a c t i o n w i t h o t h e r n a t i o n s , i n p a r t i c u l a r the d e v e l o p e d e c o n o m i e s , must be viewed i n the c o n t e x t o f a number o f changes t h a t have o c c u r r e d i n the i n t e r n a t i o n a l economic system.  F i n a n c i a l d i s r u p t i o n s and s t r u c t u r a l  caused by the 1973 o i l c r i s i s have f o r c e d both the d e v e l o p e d and  imbalances developing  c o u n t r i e s t o r e - e v a l u a t e the b a s i s o f i n t e r n a t i o n a l p o l i t i c a l and economic r e l a t i o n s w i t h the o b j e c t i v e o f p r o v i d i n g c o r r e c t i v e mechanisms.  The  e f f e c t o f t h e s e s t r u c t u r a l changes i n the i n t e r n a t i o n a l system and the  - 2 -  r e s u l t a n t growing volume.of both o f f i c i a l and p r i v a t e d e b t , as w e l l a s , a i d , * i s p a r t i c u l a r l y important to those developing nations attempting to expand and d e v e l o p t h e i r economies t h r o u g h t h e r e s o u r c e s p r o v i d e d by 2  i n t e r n a t i o n a l debt.  The members o f ASEAN s e r v e , i n v a r y i n g d e g r e e s , as  examples o f such d e v e l o p i n g n a t i o n s . As a consequence o f t h e 1973 o i l c r i s i s , S o u t h e a s t A s i a ' s t r a d i t i o n a l r e l i a n c e upon d o m e s t i c s a v i n g s and f o r e i g n i n v e s t m e n t i n t h e p u r s u i t o f economic development s h i f t e d t o i n c l u d e i n c r e a s e d e x t e r n a l b o r r o w i n g .  As  a r e s u l t , l o a n c a p i t a l has p l a y e d , and c o n t i n u e s t o p l a y , an i n c r e a s i n g r o l e i n development o f t h e p r i v a t e and p u b l i c s e c t o r o f each ASEAN s t a t e . ASEAN's d e v e l o p m e n t a l p r o s p e c t s and p a r t i c i p a t i o n i n t h e i n t e r n a t i o n a l economic system n o t o n l y r e f l e c t s t h e i s s u e o f d e b t , b u t a l s o sheds l i g h t on d e b t as a t r a d e and d e v e l o p m e n t a l problem o f n a t i o n a l and i n t e r n a t i o n a l proportions.  The purpose o f t h i s t h e s i s i s t o examine t h e c a s e o f d e b t i n  l i g h t o f t h e e x p e r i e n c e o f t h e ASEAN members.  The t h e o r e t i c a l framework  f o r t h i s s t u d y f o c u s e s on an argument p r e s e n t e d by c r i t i c s o f d e b t and a i d . The ASEAN members' r e s p o n s e t o t h e problem o f d e b t i n t h e form o f both i n d i v i d u a l p o l i c y and as an o r g a n i z a t i o n w i l l be c e n t r a l t o t h i s a n a l y s i s . As i t i s m i s l e a d i n g t o examine d e b t i n i s o l a t i o n from o v e r a l l  development  s t r a t e g y , ' t r e n d s i n d e v e l o p m e n t a l p o l i c y w i l l a l s o be d i s c u s s e d . Debt i s n o t a new c o n c e r n and s t r a t e g i e s t o cope w i t h i t have been advanced.  A p o p u l a r theme amongst s c h o l a r s o f p o l i t i c a l economy has been  t h e predominance o f t h e i n d u s t r i a l i z e d n a t i o n s i n s h a p i n g t h e economic r e l a t i o n s o f the T h i r d World.  In t h e f i e l d o f i n t e r n a t i o n a l f i n a n c i a l  r e l a t i o n s , t h i s theme c e n t r e s around t h e o b s e r v a t i o n t h a t t h e exchange  - 3  -  r e s e r v e s o f d e v e l o p i n g c o u n t r i e s a r e h e l d a l m o s t e x c l u s i v e l y i n Western 3  currencies.  A p a r t from a n a l y s e s o f d e b t c o n c e n t r a t i n g on the magnitude  o f d e b t , i t s e f f e c t on the monetary s y s t e m , and the e f f e c t i v e n e s s o f a i d and l o a n funds i n p u r s u i n g s p e c i f i c d e v e l o p m e n t a l o b j e c t i v e s l i e a n a l y s e s o f t h e p o l i t i c a l d i m e n s i o n s o f debt r e l a t i o n s ; s p e c i f i c a l l y , the e f f e c t s o f d e b t o r - c r e d i t o r i n t e r a c t i o n such as p o l i t i c a l i n f l u e n c e and economic c o n t r o l s w i t h i n those debtor  nations.  The c h o i c e by a "government t o a c c e p t f o r e i g n l o a n c a p i t a l i s a p o l i t i c a l d e c i s i o n based on the p r e v a i l i n g p o l i t i c a l , e c o n o m i c , and s o c i a l n a t u r e o f the n a t i o n as w e l l as on the government's w i l l i n g n e s s t o commit the c o u n t r y t o the e s t a b l i s h e d s t r u c t u r e o f the i n t e r n a t i o n a l economic system.  A f a i r l y s i g n i f i c a n t body o f o p i n i o n , based on the l e f t i s t t r a d i -  t i o n , has a d d r e s s e d  t h i s p o l i c y d e c i s i o n , q u e s t i o n i n g the v e r y e x p o s u r e to 4  f o r e i g n i n f l u e n c e t h a t r e l i a n c e on f o r e i g n d e b t e n t a i l s .  T h i s approach  to i n t e r n a t i o n a l f i n a n c i a l r e l a t i o n s i s based upon f o u r p r i n c i p l e arguments which w i l l be d i s c u s s e d a t l e n g t h below. allege that:  (1) d e b t i s a s s o c i a t e d  B r i e f l y summarized, the c r i t i c s  w i t h the i n i t i a t i v e s o f f o r e i g n c r e -  d i t o r s to s u s t a i n e x i s t i n g s t r u c t u r e s o f n e o - c o l o n i a l i s m ;  (2) d e b t b e n e f i t s  the r u l i n g e l i t e and h i n d e r s b r o a d - b a s e d economic d e v e l o p m e n t ; (3) d e b t , and i n p a r t i c u l a r , c o n d i t i o n a l l o a n s , a r e a t o o l f o r p o l i t i c a l  interference;  and (4) d e b t , and more s p e c i f i c a l l y , c o n d i t i o n a l p o l i c i e s , have a n e g a t i v e impact on the d e b t o r economy's growth r a t e .  The i s s u e o f c o n d i t i o n a l i t y  i s seen as the p r i m a r y c h a r a c t e r i s t i c o f d e b t s u s t a i n i n g the e l e m e n t s t h a t c o m p r i s e the l e f t i s t view.  C o n d i t i o n a l i t y i s u t i l i z e d by c r e d i t o r s as a  t o o l f o r economic and p o l i t i c a l i n t e r f e r e n c e i n a d e b t o r n a t i o n i n  -4 -  a d d i t i o n t o r e p r e s e n t i n g i r r a t i o n a l economic p o l i c i e s t h a t h i n d e r economic growth and d e v e l o p m e n t .  The c r i t i c s ' p r e s c r i p t i o n f o r t h e a l l e v i a t i o n o f  such a d e b t r e l a t i o n s h i p i n v o l v e s a g r e a t e r d e g r e e , on t h e p a r t o f t h e d e b t o r , o f economic and p o l i t i c a l r e l i a n c e . C r i t i c s o f a i d i n s t i t u t i o n s and o f e x t e r n a l d e b t f i n a n c i n g c o n t e n d t h a t e x t e r n a l t r a d e and f i n a n c i n g i s a s s o c i a t e d w i t h i n i t i a t i v e s on t h e p a r t o f f o r e i g n i n t e r e s t s r a t h e r than w i t h a concern f o r b r o a d l y based d o m e s t i c development u s i n g l o c a l l y a v a i l a b l e t e c h n i q u e s reliance.  and s t r e s s i n g s e l f -  The growth o f l o n g - t e r m , l a r g e - s c a l e movements o f f i n a n c i a l  c a p i t a l i s viewed as a p a r t o f t h e l a r g e r s t r u c t u r e o f e x t e r n a l l y c o n t r o l l e d i n d u s t r i a l and commercial i n t e r e s t s i n t h e T h i r d W o r l d t h a t has r e f l e c t e d a r e l a t i o n s h i p o f dependence o f t h e d e v e l o p i n g n a t i o n s on t h e developed world.  A i d a l s o h e l p s t o c r e a t e and s u s t a i n a dependence on t h e  c o n t i n u e d e x i s t e n c e o f a i d and f o r e i g n p r i v a t e i n v e s t m e n t as w e l l as adding t o t h e "burden o f d e b t c a r r i e d by t h e c o u n t r y r e c e i v i n g i t and hence t h e i r 5  dependence."  As t h e debt burden becomes more onerous t h e l o c a l economy  s u f f e r s and f o r e i g n c a p i t a l g a i n s g r e a t e r c o n c e s s i o n s  p e r p e t u a t i n g a neo-  c o l o n i a l economic p a t t e r n . The prime b e n e f i c i a r i e s o f a i d , a c c o r d i n g t o t h e c r i t i c s , a r e t h e economically  powerful  ruling e l i t e s acting i n foreign interest:  The b u l k o f t h e l o a n s a r e e x t e n d e d t h e m u l t i n a t i o n a l c o r p o r a t i o n s , l o c a l b i g c a p i t a l , ( r u r a l o r urban b a s e d ) , and t h e s t a t e . Most s t a t e i n v e s t m e n t s h e l p promote lowc o s t i n f r a s t r u c t u r a l development and f a c i l i t a t e t h e spread o f p r i v a t e a c t i v i t y . ' A l t h o u g h some o f t h e c o n d i t i o n s a t t a c h e d t o l o a n s have been j u s t i f i e d by t h e i r donors i n terms o f t h e need t o promote economic development i n t h e  - 5 -  developing debtor countries, t h i s p r i n c i p l e i s r e a l l y i n the i n t e r e s t s of the developed countries. This p r i n c i p l e has sometimes been oddly applied. For example...with the p r a c t i c e of providing a i d only f o r the d i r e c t f o r e i g n exchange costs of p r o j e c t s . More c r e d i b l y , the p r a c t i c e of t y i n g a i d to s p e c i f i c proj e c t s , whose choice and design must be negotiated and approved, has generally been regarded i n developed countries as a means of ensuring a s a t i s f a c t o r y use of resources, although i t a l s o , i n the case of b i l a t e r a l donors, provides a means of ensuring that a i d promotes a d d i t i o n a l exports from themselves, and enables them to choose v i s i b l e p r o j e c t s , on which t h e i r label can be d i s played. 8 The thrust of the c r i t i c s ' argument i s centered around the issue of conditional economic p o l i c i e s and programmes.  The conditions attached  to  foreign loans often involve p o l i c i e s beyond the scope of recommending appropriate changes i n the debtor-nation's  economic p o l i c i e s .  These pro-  grammes, p a r t i c u l a r l y i n the case of i n t e r n a t i o n a l f i n a n c i a l  institutions,  emphasize economic s t a b i l i z a t i o n ; at the expense of the economy's growth g rate.  Conditional programmes are often aimed at eroding  protective  t a r i f f s , state s u b s i d i e s , foreign exchange c o n t r o l s , r e s t r i c t i o n s on profit-remittances and.limitations on foreign investment. the c r i t i c s , these'conditions  According to  i n v a r i a b l y r e s u l t i n an. economic s i t u a t i o n  that adversely a f f e c t s l o c a l businesses and the domestic economy, while aiding foreign i n t e r e s t s . Action to reverse the d e t e r i o r a t i o n of the standards of l i v i n g and the increasing underemployment...to improve s o c i a l conditions i s postponed and neglected.10 In the f i n a l a n a l y s i s , these conditional p o l i c i e s do not advise the debtor nations on import reduction, or economic s e l f - s u f f i c i e n c y ; rather, they coach the developing country on how  to q u a l i f y f o r increased q u a n t i t i e s of  - 6 -  new c r e d i t /  1  The net e f f e c t o f t h e s e c o n d i t i o n a l programmes i s to a l t e r the s t r u c t u r e o f s o c i e t y and the s t a t e ' s p o l i t i c a l - e c o n o m i c o r i e n t a t i o n . government which attempts  A  to c a r r y o u t the c o n d i t i o n s i s l i k e l y to f i n d  domestic p o l i t i c a l o p p o s i t i o n .  A government t h a t r e f u s e s the c o n d i t i o n s  i s l i k e l y t o f i n d the funds c u t o f f and p r e s s u r e b u i l t t o meet e x i s t i n g 12 debt o b l i g a t i o n . U l t i m a t e l y , o f f i c i a l s p r e d i s p o s e d to f o r e i g n i n t e r e s t s 13  emerge i n t h e p o l i t i c a l h i e r a r c h y o f the n a t i o n .  Thus, c o n d i t i o n a l  programmes a r e seen by t h e c r i t i c s as a form o f p o l i t i c a l i n t e r f e r e n c e which i n i t s most extreme form e f f e c t s u n f a v o u r a b l e changes i n the d e b t o r nation's p o l i t i c a l economies. A c c o r d i n g t o t h e s e c r i t i c s , the d e v e l o p i n g c o u n t r i e s a r e c a u g h t i n a "double  bind." I f t h e y seek o f f i c i a l * h e l p on s o f t e r t h a n commercial t e r m s , they have t o a c c e p t o u t s i d e s c r u t i n y , g i v e up t h e i r p r o j e c t s t h a t t h e y . . . b e l i e v e e s s e n t i a l t o t h e i r n a t i o n a l w e l f a r e , and a c c e p t c o n d i t i o n s which doom t h e i r e f f o r t s a t i n d u s t r i a l , d i v e r s i f i e d d e v e l o p m e n t . I f t h e y a c c e p t . . . [ l o a n s ] . . . o n comm e r c i a l t e r m s . . . t h e y a r e caught...when the payments come due b e f o r e they a r e a b l e to meet t h e m . ^  C o u n t r i e s r e m a i n i n g w i t h i n the system a r e "doomed to p e r p e t u a l  underdevelop15  ment...at the expense o f development f o r the needs o f t h e i r own c i t i z e n s . " The i m p l i c i t s t r a t e g y , t h e r e f o r e , i s t o reduce the T h i r d World's dependence on the i n d u s t r i a l i z e d c o u n t r i e s and the "concommitant o p p o r t u n i t i e s f o r the 16 l a t t e r t o e x p l o i t them".  Thus, i n the l o n g r u n , i t i s more r e a l i s t i c to  "withdraw from an e x p l o i t a t i v e system and s u f f e r the d i s l o c a t i o n s o f r e a d j u s t m e n t than i t i s t o  p e t i t i o n the e x p l o i t e r s f o r a d e g r e e o f r e l i e f . " ^  The c r i t i c s o f debt view the s t r u c t u r e o f the d e b t o r - c r e d i t o r  -  7  -  r e l a t i o n s h i p as t h e main p r o b l e m w i t h d e b t f o r LDCs.  External penetra-  t i o n by c r e d i t o r s and t h e c o n s e q u e n t l o s s o f autonomy c a n , however, be r e d u c e d by disengagement from t h e i n t e r n a t i o n a l economic s y s t e m and through p o l i c i e s o f s e l f - r e l i a n c e .  However, f o r n a t i o n s , such as t h e  members o f ASEAN, committed to economic growth and development u t i l i z i n g l o a n c a p i t a l as a s o u r c e o f i n v e s t m e n t , such disengagement would have d i s a s t r o u s p o l i t i c a l and economic c o n s e q u e n c e s .  F o r t h e ASEAN c o u n t r i e s  an a l t e r n a t e a p p r o a c h i s n e c e s s a r y . The d i s c u s s i o n s f o u n d i n t h i s t h e s i s may p r o v i d e some i n s i g h t s i n t o such an a l t e r n a t i v e . Conditionality The c e n t r a l r o l e t h e i s s u e o f c o n d i t i o n a l i t y p l a y s i n t h e c r i t i c s ' argument w a r r a n t s a few remarks r e g a r d i n g the n a t u r e o f c o n d i t i o n a l policies.  C o n d i t i o n a l i t y -- the a b i l i t y o f a c r e d i t o r t o r e q u i r e t h a t  i t s b o r r o w e r s a d o p t a p p r o p r i a t e changes i n t h e i r economic p o l i c i e s and programmes -- i s e v i d e n t i n v a r i o u s f o r m s , and i s most p r e v a l e n t amongst o f f i c i a l sources o f loan c a p i t a l .  The I n t e r n a t i o n a l Monetary Fund ( I M F ) ,  the W o r l d Bank, and, to a l e s s e r e x t e n t , t h e A s i a n Development Bank (ADB), a l l r e q u i r e . t h a t c e r t a i n economic c o n d i t i o n s be implemented w i t h c e r t a i n 16  forms o f l o a n c a p i t a l .  D i r e c t i n t e r f e r e n c e i n d e v e l o p i n g c o u n t r i e s by  i n s t i t u t i o n s such as t h e IMF o r t h e World Bank i s g e n e r a l l y a s s o c i a t e d with loans contracted f o r the purpose o f r e l i e v i n g trade d e f i c i t s or b a l a n c e o f payments p r o b l e m s .  According to the c r i t i c s , the c o n d i t i o n s  a t t a c h e d t o t h e s e l o a n s become an e x t e r n a l o b s t a c l e t o d o m e s t i c g o v e r n ment p o l i c y  formulation.  C o n s e q u e n t l y , .the p o l i t i c a l p r e s s u r e from domes-  t i c p r e s s u r e groups t o promote w e l f a r e - r e l a t e d p o l i c i e s a r e i n t e r r e l a t e d  - 8 -  w i t h t h e d e g r e e o f p o l i t i c a l freedom a government has i n f o r m u l a t i n g f o r e i g n economic and d o m e s t i c p o l i c y . B i l a t e r a l l o a n s from governments o f t e n c a r r y c o n d i t i o n s a b o u t the use and s p e n d i n g  o f borrowed f u n d s .  In c o n t r a s t to .the d i r e c t form o f  c o n d i t i o n a l i t y p r a c t i c e d by m u l t i l a t e r a l i n s t i t u t i o n s when c o n t r a c t i n g programme l o a n s , b i l a t e r a l l o a n s a r e o f t e n accompanied w i t h an i n d i r e c t form o f c o n d i t i o n a l i t y . T h i s type o f c o n d i t i o n a l l o a n i s " t i e d " i n n a t u r e and assumes two fundamental f o r m s :  f i r s t , the c r e d i t o r c o u n t r y  o r i n s t i t u t i o n may r e q u i r e t h a t the r e s u l t a n t p r o d u c t o f t h e i r l o a n i n v e s t ment be e x p o r t e d t o the c r e d i t o r ' s c o u n t r y ; o r , s e c o n d , the c r e d i t o r may i n s i s t that technology  and e x p o r t s r e l a t e d t o t h e l o a n i n v e s t m e n t be impor-  t e d from the c r e d i t o r ' s d o m e s t i c economy.  As a r e s u l t , e s t a b l i s h e d t r a d e  l i n k a g e s a r e r e i n f o r c e d by such l o a n c o n d i t i o n a l i t y . C o n d i t i o n a l i t y a t t a c h e d t o o f f i c i a l s o u r c e s o f l o a n s does not t h a t p r i v a t e s o u r c e s a r e exempt from p r a c t i c e s .  A c c o r d i n g t o D.O.  imply Beim,  each l o a n i s n e g o t i a t e d a t c o n s i d e r a b l e l e n g t h and each n e g o t i a t i o n i s a forum f o r d i s c u s s i n g the b o r r o w e r ' s f i n a n c i a l c o n d i t i o n and measures t h a t must be taken f o r i m p r o v e ment The more d i s t r e s s e d the b o r r o w e r , the more n a g g r e s s i v e and f o r m a l the c o n d i t i o n s a r e l i k e l y t o be. 2  A c c o r d i n g to the c r i t i c s o f d e b t , f o r e i g n i n t e r f e r e n c e may a l s o manif e s t i t s e l f i n a v a r i e t y o f a c t i o n s somewhat d i v o r c e d from a c t u a l l o a n conditions.  F o r example, i n S o u t h e a s t  A s i a , c r i t i c s o f the ADB p o i n t out  t h a t t h e e x t r a - r e g i o n a l membership o f the ADB  "complicates  the p o l i t i c a l  p i c t u r e and g i v e s r i s e to r e s e n t m e n t o v e r n o n - A s i a n s h a v i n g a m a j o r say i n 21  bank p o l i c i e s and o p e r a t i o n s . "  A l t h o u g h r e l a t i v e l y few d e c i s i o n s i n  - 9  -  m u l t i l a t e r a l i n s t i t u t i o n s a r e b l a t a n t l y based on p o l i t i c a l m o t i v e s ,  the  r e c e n t A m e r i c a n demand f o r a l o a n m o r a t o r i u m a g a i n s t V i e t n a m i s a case used t o s u p p o r t the c r i t i c s ' p o i n t . The a n t i - a i d campaign i s b e i n g d i r e c t e d a g a i n s t V i e t n a m i n p a r t i c u l a r , and o f f i c i a l s o f the World Bank and the IMF as w e l l as the A s i a n Development Bank and other.' r e g i o n a l development banks, a r e becoming i n c r e a s i n g l y c o n c e r n e d a t t h e number o f times t h e s e o r g a n i z a t i o n s are h a v i n g t o y i e l d t o the w i l l o f the US l e g i s l a t u r e i n d i r e c t c o n t r a v e n t i o n o f t h e i r r o l e as m u l t i l a t e r a l a i d and l o a n a g e n c i e s . 2 2 The r e s t r i c t i o n o r withdrawal  o f l o a n c a p i t a l from a p a r t i c u l a r  s e c t o r o f t h e d e v e l o p i n g n a t i o n ' s economy, which impedes the development o f t h a t s e c t o r , i s e x e m p l i f i e d by the c r i t i c s as p o l i t i c a l i n t e r f e r e n c e i n a n a t i o n ' s economy.  O f t e n a r e s u l t o f p o l i t i c a l m o t i v a t i o n s on the  p a r t o f the c r e d i t o r , such a c t i o n i s e v i d e n t i n the f o l l o w i n g example: The House A p p r o p r i a t i o n s Committee has c a s t i g a t e d the E x p o r t - I m p o r t Bank and t h e World Bank f o r making l o a n s v.. to the s t e e l , t e x t i l e , and shoe i n d u s t r i e s i n t h e dev e l o p i n g c o u n t r i e s which have r e s u l t e d i n the o v e r c a p a c i t y i n t h e s e i n d u s t r i e s and i n u n d e r c u t t i n g the c o m p e t i t i v e p o s i t i o n o f US m a n u f a c t u r e r s i n i m p o r t competing i n d u s t r i e s . 2 3 A l t h o u g h the o b j e c t i v e i n t h i s case d i d not succeed the example i l l u s t r a t e s the l i n k a g e between c r e d i t o r governments and l e n d i n g i n s t i t u t i o n s and the p o t e n t i a l e x t e r n a l i n f l u e n c e which may r e s u l t . C o n d i t i o n a l i t y i s a t t h e c o r e o f the c r i t i c s ' argument.  The p r i n c i p l e  o f c o n d i t i o n a l i t y i s not b e i n g d i s p u t e d ; r a t h e r i t i s the way t h a t c o n d i t i o n a l i t y i s a p p l i e d t h a t i s under a t t a c k .  C o n d i t i o n a l i t y i s seen as a  m a n i f e s t a t i o n o f f o r e i g n and d o m e s t i c e l i t e i n t e r e s t s t h a t s u p p o r t and p o l i t i c a l p o l i c i e s t h a t w i l l u l t i m a t e l y be d e t r i m e n t a l t o the f u t u r e o f a n a t i o n ' s economy and i t s p o p u l a c e .  economic long-term  Thus, t h i s i s s u e w i l l  be  - 10  -  t r e a t e d as a major c o n c e r n o f t h e a n a l y s i s p r e s e n t e d i n t h i s t h e s i s . Conclusions The r o l e o f e x t e r n a l c a p i t a l i n p r o m o t i n g economic growth and development i n t h e n a t i o n s o f ASEAN has g e n e r a l l y been o f i m p o r t a n t c o n s e quence.,  O f f i c i a l a n d , i n p a r t i c u l a r , p r i v a t e c a p i t a l has a s s i s t e d ASEAN  members t o c o r r e c t c u r r e n t a c c o u n t d i f f i c u l t i e s and p u r s u e d e v e l o p m e n t a l g o a l s as w e l l as i n d u s t r i a l i z a t i o n s t r a t e g i e s .  Even c o u n t r i e s such as  M a l a y s i a and T h a i l a n d , which have t r a d i t i o n a l l y r e l i e d l a r g e l y on t h e i r own s a v i n g s o r a c o m b i n a t i o n o f t h e s e and d i r e c t p r i v a t e f o r e i g n i n v e s t m e n t , have t u r n e d t o l a r g e - s c a l e d i r e c t government b o r r o w i n g from both o f f i c i a l 24  and p r i v a t e s o u r c e s .  As a r e s u l t , t h e volume o f i n t e r n a t i o n a l l o a n s c o n -  t r a c t e d by ASEAN members has grown r a p i d l y i n both a b s o l u t e and r e l a t i v e terms.  (See Table 1). The d e c i s i o n o f ASEAN's members t o pursue economic growth and  •  development s t r a t e g i e s t h r o u g h t h e use o f borrowed c a p i t a l has i m p o r t a n t b a r g a i n i n g i m p l i c a t i o n s between t h e o r g a n i z a t i o n ' s members and t h e i n d u s t r i a l i z e d c o u n t r i e s as w e l l as t o t h e o r g a n i z a t i o n as a whole.  For the  ASEAN members, t h e i s s u e o f d e b t has been c h a r a c t e r i z e d by a m b i v a l e n c e ; t h e commitment t o economic development b e i n g b a l a n c e d by an equal c o n c e r n f o r t h e n e g a t i v e consequences o f i n t e r n a t i o n a l b o r r o w i n g .  Thus, t h e s t r u c t u r e  o f f i n a n c i a l r e l a t i o n s between t h e members o f ASEAN and t h e i n d u s t r i a l i z e d w o r l d , arid t h e i n f l u e n c e o f such r e l a t i o n s on n a t i o n a l economic and p o l i t i c a l p o l i c y f o r m u l a t i o n i n each c o u n t r y i s c e n t r a l t o t h e a n a l y t i c a l c o n c e r n s of t h i s t h e s i s . The r e s p o n s e o f t h e ASEAN c o u n t r i e s t o t h e s t r u c t u r e o f t h e i r d e b t  - 11 -  r e l a t i o n s h i p s and t h e i m p l i c a t i o n s o f t h i s dependent s t r u c t u r e c a n be seen i n both t h e d o m e s t i c and r e g i o n a l f o r a . l e v e l s o f development  Considering the d i f f e r e n t  and v a r i e d p o l i t i c a l c o n s i d e r a t i o n s t h a t i n f l u e n c e  each government's p o l i c i e s , i t i s n o t s u r p r i s i n g t h a t e f f o r t s t o change t h e s e r e l a t i o n a l p a t t e r n s v a r y from c o u n t r y t o c o u n t r y .  Three o f the  f i v e ASEAN members -- I n d o n e s i a , t h e P h i l i p p i n e s , and T h a i l a n d -- a r e c l a s s i f i e d as c h r o n i c d e b t o r s due t o t h e i r s e v e r e b a l a n c e o f payments problems which have n e c e s s i t a t e d IMF and World Bank a s s i s t a n c e and t h e r e fore, conditional policies.  In t h e c a s e o f S i n g a p o r e and M a l a y s i a , how-  e v e r , t h e s m a l l e r s i z e d debt r e f l e c t s both t h e s t r u c t u r e o f debt dependence and t h e o f f i c i a l r e s p o n s e t o t h i s i s s u e . T h i s t h e s i s aims t o e v a l u a t e and a s s e s s t h e p a t t e r n o f debt amongst t h e f i v e ASEAN members, w i t h p a r t i c u l a r r e f e r e n c e t o each member-state's experience with t h e i r c r e d i t i o r s .  The f i r s t c h a p t e r has i n t r o d u c e d t h e  t h e o r e t i c a l framework w i t h i n which such an e v a l u a t i o n w i l l t a k e p l a c e . The second c h a p t e r w i l l d e s c r i b e t h e debt s i t u a t i o n i n t h e ASEAN n a t i o n s w i t h emphasis b e i n g p l a c e d on t h o s e elements o f each c o u n t r y ^ debt s t r u c t u r e b r o u g h t t o f o r e by t h e c r i t i c s o f a i d and d e b t .  This chapter  w i l l s e r v e as a d e s c r i p t i v e a c c o u n t o f t h e i n c i d e n c e o f b o r r o w i n g and the d i r e c t i o n o f debt p o l i c y i n ASEAN. development o f t h e member-states'  The p r i m a r y theme w i l l be t h e  r e l a t i o n s w i t h t h e i r c r e d i t o r s and t h e  p o l i t i c a l and economic i m p l i c a t i o n s ( i . e . , c o n d i t i o n a l i t y o f l o a n s ) o f these i n t e r a c t i o n s .  The f i n a l c h a p t e r w i l l a n a l y z e t h e r e l a t i o n s h i p between  t h e ASEAN n a t i o n s and t h e i r c r e d i t o r s and t h e i m p l i c a t i o n s o f t h e s e r e l a t i o n s on t h e a l l e g a t i o n s p r e s e n t e d by t h e c r i t i c s o f debt and a i d .  Itis  - 12 -  a n t i c i p a t e d t h a t t h e ASEAN member's d e b t w i l l i l l u s t r a t e a somewhat d i f f e r e n t c a s e t h a n t h a t p o r t r a y e d by t h e c r i t i c s . I t seems p r u d e n t a t t h i s time a l s o t o i n d i c a t e t h e l i m i t a t i o n s o f t h i s s t u d y and t h e i s s u e s t h a t w i l l n o t be examined.  The i s s u e o f depen-  dence and dependency as p r e s e n t e d by v a r i o u s s c h o l a r s o f i n t e r n a t i o n a l 26 p o l i t i c a l economy w i l l n o t be a d d r e s s e d . require a d i f f e r e n t approach.  These a r e i s s u e s t h a t would  Second, t h e i s s u e o f debt w i l l be examined  i n i s o l a t i o n from t h e r e l a t e d i s s u e s o f t r a d e and f o r e i g n i n v e s t m e n t . 27 an e x t e n d e d s t u d y i s beyond t h e scope o f t h i s t h e s i s .  Such  The t h e s i s has  been d e s i g n e d t o p r o v i d e a c a s e s t u d y o f d e b t f o r a group o f d e v e l o p i n g s t a t e and  to  examine the s t r a t e g y used by t h o s e s t a t e s t o a l t e r t h e i r p o s i t i o n  i n t h e i n t e r n a t i o n a l economic  system.  - 13 -  Chapter I  1.  FOOTNOTES  The term " d e b t " and " a i d " w i l l be used i n t e r c h a n g e a b l y i n t h i s t h e s i s . A l t h o u g h t h e two terms d i f f e r , i n n a t u r e , t h e i r i m p l i c a t i o n s ~ i n t h e c o n t e x t o f t h i s t h e s i s -- a r e s i m i l a r . "Debt" and " a i d " w i l l be used t o d e s c r i b e t h e f l o w o f r e s o u r c e s from c r e d i t o r to debtor, r e g a r d l e s s o f t h e i r terms. D i s t i n c t i o n s w i l l be made where a p p r o p r i a t e .  2.  The i s s u e o f d e b t has r e c e i v e d much a t t e n t i o n i n t h e n e g o t i a t i o n s f o r a New I n t e r n a t i o n a l Economic O r d e r . T h i r d World d i s s a t i s f a c t i o n w i t h t h e e x i s t i n g f i n a n c i a l o r d e r i s r e f l e c t e d i n UNCTAD d i s c u s s i o n s , and r e s o l u t i o n s . The d e v e l o p i n g c o u n t r i e s have t a k e n t h e p o s i t i o n t h a t r e f o r m s o f t h e i n t e r n a t i o n a l monetary system s h o u l d a l l o w f o r a g r e a t e r r o l e i n t h e d e c i s i o n making f o r t h e d e v e l o p i n g n a t i o n s and a l a r g e r p r o p o r t i o n o f t h e burden o f a d j u s t m e n t s s h o u l d be g i v e n t o the d e v e l o p e d n a t i o n s . More s p e c i f i c a l l y , t h e d e v e l o p i n g c o u n t r i e s have p r o p o s e d t h e a d o p t i o n o f measures o r i e n t e d t o p r o m o t i n g t h e h i g h e s t n e t t r a n s f e r t o t h e T h i r d W o r l d . The r e d u c t i o n o f t h e p r e s e n t v a l u e o f e x t e r n a l d e b t , a l t e r n a t e f a c i l i t i e s f o r development a s s i s t a n c e and the l i n k a g e o f development a s s i s t a n c e w i t h d e b t r e l i e f , have been c e n t r a l t o T h i r d World demands.  3.  F o r a d i s c u s s i o n o f t h i s i s s u e s e e : Amit B h a d u r i , " R e n e g o t i a t i o n o f T h i r d World Debt and A p p r o p r i a t e A d j u s t m e n t s i n I n t e r n a t i o n a l T r a d e , " i n J o r g e Lozoya and A.K. B h a t t a c h a r y a ( e d s . ) , The F i n a n c i a l I s s u e s o f the New I n t e r n a t i o n a l Economic O r d e r , (New Y o r k : Permagon P r e s s , 1980), p. 135.  4.  T e r e s a H a y t e r a n a l y z e s t h e p o l i t i c a l d i m e n s i o n o f a i d r e l a t i o n s and views t h e p o l i c y o f a c c e p t i n g a i d as a s t r a t e g i c c h o i c e t h a t commits t h e s o c i e t y and t h e economy o f t h e b o r r o w e r t o a p o s i t i o n o f dependence upon t h e c r e d i t o r . C h e r y l P a y e r , i n a f o r c e f u l c r i t i q u e o f t h e I n t e r n a t i o n a l Monetary Fund, c o n t e n d s t h a t a i d i s t h e c o u n t e r p a r t o f the l i b e r a l i z a t i o n o f i m p o r t s which she b e l i e v e s i s a t t h e h e a r t o f t h e IMF's s t a b i l i z a t i o n p o l i c y . F i n a l l y , R.P. DeWitt and J . F . P e t r a s , i n t h e i r a n a l y s i s o f t h e dynamics o f d e b t "peonage" argue t h a t e x t e r n a l d e b t i s i n t i m a t e l y t i e d t o t h e dependent s t r u c t u r e s o f T h i r d World p r o d u c t i v e s y s t e m s . F o r c r i t i q u e s o f d e b t and a i d as w e l l as c r i t i q u e s o f DC e x p l o i t a t i o n i n ASEAN s e e : T e r e s a H a y t e r , A i d as I m p e r i a l i s m . ( G r e a t B r i t a i n : Penguin Books L t d . , 1971); C h e r y l P a y e r , The Debt T r a p — The IMF and t h e T h i r d W o r l d . ( B a l t i m o r e : Penguin Books, 1974); R.P. DeWitt and J . F . P e t r a s , " P o l i t i c a l Economy o f I n t e r n a t i o n a l Debt: The Dynamics o f F i n a n c i a l C a p i t a l , " J.D. A r o n s o n ( e d . ) , Debt and t h e L e s s Developed C o u n t r i e s . ( B o u l d e r : Westview P r e s s , 1979); N o r t h - S o u t h I n s t i t u t e , "The IMF and t h e T h i r d W o r l d , " B r i e f i n g . A p r i l 1981; F. W e i n s t e i n , " M u l t i n a t i o n a l C o r p o r a t i o n s and t h e T h i r d W o r l d : The Case o f Japan and S o u t h e a s t A s i a , " I n t e r n a t i o n a l O r g a n i z a t i o n  - 14 30 (Summer 1976), pp. 373-404; S. S e k i g u c h i and L.B. K r a u s e , " D i r e c t F o r e i g n Investment i n ASEAN by Japan and t h e U n i t e d S t a t e s , " R. G a r n a u t ( e d . ) , ASEAN i n a Changing P a c i f i c and World Economy. ( A u s t r a l i a : A u s t r a l i a n N a t i o n a l U n i v e r s i t y P r e s s , 1980). 5.  T. H a y t e r , pp.  9=10.  6.  C h a r l e s K. W i l b u r ( e d . ) , The P o l i t i c a l Economy of.Development and Underdevelopment. (New York: Random House, 1973).  7.  R.P. DeWitt and J . F . P e t r a s , p. 203.  8.  T. H a y t e r , p. 17.  9.  I b i d . , p. 157.  10.  I b i d . , p. 158.  11.  C. P a y e r , p. 46.  12.  I b i d . , p. 45.  13.  R.P. DeWitt and J . F . P e t r a s , p. 205.  14.  C. P a y e r , pp. 39-48.  15.  I b i d . , p. 49.  16.  The I n t e r n a t i o n a l Monetary Fund p r o v i d e s f i n a n c i a l s u p p o r t t o a l l member n a t i o n s f o r b a l a n c e o f payments a d j u s t m e n t purposes t h r o u g h a v a r i e t y o f f a c i l i t i e s ( t h e m s e l v e s s u b j e c t to v a r y i n g d e g r e e s o f c o n d i t i o n a l i t y ) . A common f e a t u r e o f programmes s u p p o r t e d by Fund r e s o u r c e s i s t h e need f o r economic a d j u s t m e n t and t h e e s s e n c e o f c o n d i t i o n a l l y i s t o e n s u r e a commensurate a d j u s t m e n t e f f o r t . The IMF, t h u s , r e q u i r e s t h a t i t s b o r r o w e r s a d o p t economic p o l i c i e s t h a t w i l l r e d u c e b a l a n c e o f payments i m b a l a n c e s and t h a t w i l l i n s u r e t h a t t h e b o r r o w e r ' s e x t e r n a l f i n a n c i a l a f f a i r s a r e m a i n t a i n e d i n good o r d e r . In c a r r y i n g o u t t h e s e o b j e c t i v e s , t h e c o n d i t i o n a l programmes a r e p a r t i c u l a r l y d i r e c t e d a t monetary and f i s c a l p o l i c i e s , f o r e i g n b o r r o w i n g , and exchange r a t e management. The W o r l d Bank p r o v i d e s a s s i s t a n c e f o r d e v e l o p i n g c o u n t r i e s and f o c u s e s on p r o j e c t and programme l o a n s t h a t a r e d e s i g n e d t o f i t i n t o the l o n g e r - t e r m development o f the economy. The World Bank was i n i t i a l l y s e t up f o r development p r o j e c t l e n d i n g w i t h a minimal amount o f programme l e n d i n g ; however, i n 1979 a programme f o r s t r u c t u r a l adj u s t m e n t l e n d i n g was i n t r o d u c e d . T h i s programme i s t i e d t o both i m p o r t s and p o l i c y r e f o r m s . Thus, b o r r o w i n g from t h e World Bank c a r r i e s two t y p e s o f c o n d i t i o n a l i t y : p r o j e c t l o a n s -- t i e d t o s p e c i f i c p r o j e c t s -- and programme l o a n s , which may r e q u i r e changes i n domestic p o l i c y .  - 15 F o r more i n f o r m a t i o n on the c o n d i t i o n a l i t y o f o f f i c i a l l o a n s r e f e r t o : B e t i n a S. H u r n i , The L e n d i n g P o l i c y o f the World Bank i n the 1970s: A n a l y s i s and E v a l u a t i o n . ( C o l o r a d o : Westview P r e s s , 1980); E.P. W r i g h t , "World Bank L e n d i n g f o r S t r u c t u r a l Adjustment," F i n a n c e and Development, 17 (September 1980): pp. 20-24; Bahrain Nowzad, "Managing E x t e r n a l Debt i n D e v e l o p i n g C o u n t r i e s , " F i n a n c e and Development, 17 (September, 1980); pp. 24-28. 17.  D.O. Beim, "Rescuing the LDCs," F o r e i g n A f f a i r s 55 ( J u l y 1977), p. 724. See a l s o : J.D. A r o n s o n ( e d . ) , Debt and the Less Developed C o u n t r i e s . ( B o u l d e r C o l o r a d o : Westview P r e s s , 1979), pp. 286-87.  18.  Far E a s t e r n Economic Review, (FEER) A p r i l 22, 1977, p. 43.  19  •  FEER, May 9, 1980, p. 48.  20.  Such p r e s s u r e has a l s o been noted by governments on p r i v a t e l e n d i n g i n s t i t u t i o n s . Jane D ' A r i s t a , " U n i t e d S t a t e s C o n g r e s s i o n a l R e s t r a i n t s : T i e s T h a t B i n d , " L.G. Franko and M.J. S e i b e r ( e d s . ) , D e v e l o p i n g C o u n t r y Debt. (New York: Permagon P r e s s , 1979), p. 224.  21.  North-South  22  -  I n s t i t u t e , p. 2.  FEER, A p r i l 23, 1976, p. 39.  23.  F o r a thorough r e v i e w o f the two t h e o r i e s s e e : R.D. W a l l e r i , "The P o l i t i c a l Economy L i t e r a t u r e on North-South R e l a t i o n s , " I n t e r n a t i o n a l S t u d i e s Q u a r t e r l y , 22 (December 1978), pp. 587-624; J . C a p o r a s o , "Dependence, Dependency and Power i n the G l o b a l Stem: A S t r u c t u r a l and B e h a v i o r a l A n a l y s i s , " I n t e r n a t i o n a l O r g a n i z a t i o n 32 ( W i n t e r 1978), pp. 13-43.  24.  F o r a d i s c u s s i o n on ASEAN's dependence on t r a d e and i n v e s t m e n t s e e : D.K. C r o n e , "Dependence, D i v e r s i f i c a t i o n and R e g i o n a l i s m : The A s s o c i a t i o n o f S o u t h e a s t A s i a n N a t i o n s . " (Ph.D T h e s i s , U n i v e r s i t y o f B r i t i s h Columbia, 1981).  - 16  -  CHAPTER 2 DEBT DESCRIBED  F o r e i g n l o a n c a p i t a l has been employed by the n a t i o n s o f ASEAN i n t h e i r commitment t o n a t i o n a l d e v e l o p m e n t a l g o a l s .  This c a p i t a l , in  i t s b r o a d e s t s e n s e , has been used t o f i n a n c e a v a r i e t y o f p o l i t i c a l  and  economic o b j e c t i v e s , dependent upon l o c a l i n f r a s t r u c t u r e , the e f f i c i e n c y o f d o m e s t i c p o l i c y , and r e s o u r c e a p p l i c a t i o n .  E x t e r n a l l o a n , c a p i t a l has  been a s o u r c e o f i n v e s t m e n t c a p i t a l f o r f u t u r e economic growth and has been p r i m a r i l y d i r e c t e d at f i n a n c i n g c a p i t a l - i n t e n s i v e projects l i n k e d with national i n d u s t r i a l i z a t i o n objectives. E x t e r n a l b o r r o w i n g has, however, been c r i t i c i z e d as a d e t e r r e n t t o a n a t i o n ' s autonomous d e v e l o p m e n t .  As d i s c u s s e d i n the p r e v i o u s  chapter,  m u l t i l a t e r a l f i n a n c i a l i n s t i t u t i o n s as w e l l as b i l a t e r a l c r e d i t o r s a r e the f o c u s o f a d e b a t e t h a t i s c e n t e r e d around the p o l i t i c a l i n f l u e n c e t h a t external borrowing u l t i m a t e l y involves.  The p r o s p e c t o f p o l i t i c a l i n t e r f e r -  ence i n the d o m e s t i c a f f a i r s o f the d e b t o r  has been a fundamental f a c t o r  i n each ASEAN c o u n t r y ' s economic d e c i s i o n - m a k i n g  even though the a i d i s  seen by t h e s e c o u n t r i e s as a means o f a c h i e v i n g i n d u s t r i a l -oriented goals.  and development  B o r r o w i n g by the f i v e members o f ASEAN has been  charac-  t e r i z e d by a m b i v a l e n c e to the i n f l o w o f p r i v a t e and o f f i c i a l l o a n c a p i t a l . Thus, the commitment to economic growth i s b a l a n c e d by an equal  concern  f o r those n e g a t i v e c o n s e q u e n c e o f i n t e r n a t i o n a l b o r r o w i n g m a n i f e s t e d c o n d i t i o n a l p o l i c i e s and d i r e c t p o l i t i c a l The i s s u e s s u r r o u n d i n g  as  interference.  the r o l e o f f o r e i g n l o a n c a p i t a l as i t a f f e c t s  - 17 the economies o f ASEAN a r e :  t h e s o u r c e o f t h e c a p i t a l , the terms o f the  l o a n s and, u l t i m a t e l y , the manner i n which t h e funds a r e employed.  The  c o n c e r n , t h e r e f o r e , f o c u s e s upon the e f f e c t t h a t a c o o p e r a t i v e e f f o r t between c r e d i t o r and d e b t o r a c t o r s -- s p e c i f i c a l l y , the n a t u r e o f the c r e d i t o r ' s p r e s e n c e -- b r i n g s t o b e a r on d o m e s t i c p o l i c y .  The f o l l o w i n g  c h a p t e r w i l l examine t h e s t r u c t u r e o f b o r r o w i n g amongst the ASEAN members w i t h p a r t i c u l a r emphasis b e i n g p l a c e d on the i s s u e o f c o n d i t i o n a l i t y .  The  c h a p t e r w i l l s e r v e as a d e s c r i p t i v e a c c o u n t o f the ASEAN members' r e l a t i o n s w i t h t h e i r c r e d i t o r s and any c o n s e q u e n t p o l i t i c a l and economic i m p l i c a t i o n s of these i n t e r a c t i o n s . S t r u c t u r e o f Lending i n Southeast A s i a Through e x t e r n a l b o r r o w i n g i n the p a s t decade, t h e members o f ASEAN have been a b l e t o s u p p o r t t h e i r b a l a n c e o f payment a c c o u n t s d e s p i t e t h e e f f e c t s o f t h e o i l c r i s i s , w h i l e m a i n t a i n i n g r e l a t i v e l y s t a b l e economic  growth  r a t e s and f i n a n c i n g a m b i t i o u s i n d u s t r i a l i z a t i o n p r o j e c t s . T a b l e s 1 and 2 i l l u s t r a t e the volume and s t r u c t u r e o f b o r r o w i n g by the ASEAN n a t i o n s . Over the p e r i o d 1970-78 t h e t o t a l amount o f b o r r o w i n g by the ASEAN n a t i o n s from both p r i v a t e and o f f i c i a l s o u r c e s has grown s t e a d i l y .  In a l l c a s e s ,  e x c e p t f o r t h e P h i l i p p i n e s , t h e p e r c e n t a g e o f o f f i c i a l b o r r o w i n g has decreased with a corresponding increase i n p r i v a t e borrowing.  Near the end  o f t h e decade the s t r u c t u r e o f l e n d i n g v a r i e d between c o u n t r i e s but i n e v e r y c a s e both p r i v a t e and o f f i c i a l s o u r c e s r e p r e s e n t e d s i g n i f i c a n t s h a r e s o f t h e o v e r a l l t o t a l amount o f b o r r o w i n g . The o f f i c i a l s o u r c e s o f ASEAN's e x t e r n a l f i n a n c i n g take t h e form o f b i l a t e r a l o f f i c i a l a s s i s t a n c e ( m a i n l y from the O r g a n i z a t i o n o f  Economic  - 18 -  TABLE 1 Sources o f Lending i n Southeast Asia (U.S. $ t h o u s a n d s ) * Total O f f i c i a l Lending Country  1970  1972  1974  1976  1978  Malaysia  449.2  634.9  1099.8  1505.7  2134.8  Thailand  429.6  606.4  1059.8  1462.7  2821.9  Indonesia  2756.9  • 4393.7  6266.3  8949.7  12710.0  Philippines  405.5  978.0  1528.0  2428.7  4143.4  Singapore  275.6  381.3  473.1  448.9  505.0  Total P r i v a t e Lending Country  1970  1972  1974  1976  1978  Malaysia  105.6  385.1  1181.7  1607.3  2225.0  Thailand  53.1  46.8  62.2  155.8  858.4  Indonesia  268.5  735.1  2903.6  5505.3  5844.0  Philippines  345.4  352.9  534.8  1589.6  3233.3  24.2  123.1  204.0  490.5  809.6  Singapore  Source:  World D e b t - T a b l e s .  Cumulative  - 19 -  TABLE 2 Sources o f Lending i n Southeast Asia  Country  % O f f i c i a1972 l L e n d i n g 1974 o f T o t a l 1976 Lending 1970  Malaysia  81.0  62.2  48.2  47.5  48.9  Thailand  89.0  92.8  94.4  90.4  77.0  Indonesia  91.1  86.0  68.3  61.9  68.5  Philippines  53.9  73.4  74.1  60.4  56/2  Singapore  92.0  75.6  69.9  47.8  38.4  1978  % P r i v a t e Lending of Total Lending 1970  1972  1974  1976  1978  Malaysia  19.0  37.8  51.8  52.5  51.1  Thai 1 and  11.6  7.2  5.6  9.6  23.0  Indonesia  8.9  14.0  31.7  38.1  31.5  46.1  26.6  25.9  39.6  43.8  8.0  24.4  30.1  52.2  61.6  Philippines Singapore  Source:  Compiled from World Debt T a b l e s .  - 20 C o o p e r a t i o n and Development (OECD) and OPEC member n a t i o n s ) and m u l t i l a t e r a l ( i n s t i t u t i o n a l ) l o a n s and c o n c e s s i o n a l a s s i s t a n c e .  Of the o f f i -  c i a l i n s t i t u t i o n s , the IMF, the World Bank, and the ADB f i g u r e  prominently  i n the r e g i o n . P r i v a t e s o u r c e s o f c a p i t a l take the form o f e i t h e r b i l a t e r a l o r s y n d i c a t e d l o a n s from i n t e r n a t i o n a l banks.  The growth o f the A s i a n  D o l l a r M a r k e t , w i t h c e n t r e s i n S i n g a p o r e , and more r e c e n t l y , Hong Kong and the P h i l i p p i n e s , a l l o w s an i n c r e a s i n g amount o f p r i v a t e c a p i t a l to be raised in Asia.  The A s i a n D o l l a r M a r k e t i s the c e n t r e from which many  s y n d i c a t i o n s and l e n d i n g a c t i v i t i e s o r i g i n a t e .  Indeed the e s t a b l i s h m e n t  of  p r i v a t e i n t e r n a t i o n a l banks i n the S o u t h e a s t A s i a n r e g i o n d u r i n g the 1970s r e f l e c t s an atmosphere o f r e g i o n a l p o l i t i c a l and economic s t a b i l i t y , and has a l l o w e d ASEAN t o r a i s e l a r g e sums from p r i v a t e i n t e r n a t i o n a l s o u r c e s o f t e n t o complement o f f i c i a l  lending. Indonesia  The development o f I n d o n e s i a ' s economy i n the 1970s has been c h a r a c t e r i z e d by a heavy r e l i a n c e on f o r e i g n c a p i t a l i n f l o w s and the v i s i b l e i n f l u e n c e t h a t f o r e i g n c r e d i t o r s have had on domestic p o l i c y f o r m u l a t i o n .  The  govern-  ment's economic development s t r a t e g y f o r the 1970s was a d o p t e d upon the recommendation o f t h e I n t e r g o v e r n m e n t a l  Group on I n d o n e s i a ( I G G I ) ,  the  World Bank, and the IMF, and has been based upon r a p i d o i l p r o d u c t i o n the m a i n t e n a n c e o f monetary s t a b i l i t y .  1  and  As a c h r o n i c d e b t o r n a t i o n , Indo-  n e s i a ' s development t a r g e t s and t r e n d s have b e e n . l a r g e l y i n f l u e n c e d by political considerations:  economic p o l i c y has been t a i l o r e d t o f i t expec2 t e d i n f l o w s o f f o r e i g n a i d and l o a n s . The n a t u r e o f I n d o n e s i a ' s r e l a t i o n s w i t h i t s f o r e i g n c r e d i t o r s can be  - 21 -  t r a c e d back to the 1966 debt c r i s i s .  At t h a t time a m o r a t o r i u m was  d e c l a r e d on I n d o n e s i a ' s e x t e r n a l debt and w i t h the a s s i s t a n c e o f the I n t e r n a t i o n a l Monetary Fund and  the W o r l d Bank, a domestic  p o l i c y o f s t a b i l i z a t i o n and r e h a b i l i t a t i o n was u n d e r t a k e n .  economic The IGGI was  e s t a b l i s h e d t o work w i t h t h e I n d o n e s i a n government to s e t up and f o l l o w through w i t h t h e n e c e s s a r y economic programmes.  The members o f the IGGI  -- t h e P a r i s .Club c o u n t r i e s and i n t e r n a t i o n a l a s s i s t a n c e a g e n c i e s —  pri-  m a r i l y f u n c t i o n to d e t e r m i n e the need f o r f o r e i g n a s s i s t a n c e i n terms o f both l o a n s and a i d .  Whenever n e c e s s a r y , t h i s group i s a l s o r e s p o n s i b l e  f o r s e t t i n g o v e r a l l g o a l s t h a t each member may work towards i n i t s b i l a 3  t e r a l l o a n and a s s i s t a n c e agreements w i t h  Indonesia.  The m a j o r i t y o f I n d o n e s i a ' s l o a n s o r i g i n a t e d from o f f i c i a l s o u r c e s ( p r i m a r i l y members o f the IGGI).  bilateral  (See T a b l e 3) O f f i c i a l m u l t i -  l a t e r a l l e n d i n g and p r i v a t e l e n d i n g i n c r e a s e d i n the mid-1970s and can be l i n k e d t o e v e n t s s u r r o u n d i n g the Pertamina  c r i s i s ( d i s c u s s e d below).  Ini-  t i a l l y , most o f t h e a i d g r a n t e d by the IGGI was i n the form o f g e n e r a l gramme g r a n t s .  However, i n t h e l a t t e r h a l f o f the decade t h e r e was 4  t r e n d towards i n c r e a s e d p r o j e c t e d - o r i e n t e d IGGI l e n d i n g .  general  borrowing.  The W o r l d Bank, i n two r e c e n t c a s e s , f i g u r e d p r o m i n e n t l y d i n g c o n d i t i o n s f o r annual  pro-  i n recommen-  In a c o n f i d e n t i a l r e p o r t to the  IGGI m e e t i n g i n 1979, the World Bank put f o r t h t h e f o l l o w i n g view a b o u t the I n d o n e s i a n economy: t o get the i n d u s t r i a l s e c t o r g o i n g on a sound b a s i s w i t h as l i t t l e p r o t e c t i o n as p o s s i b l e and w i t h c o n s i d e r a b l e u e x p o r t o r i e n t a t i o n i s now perhaps the s i n g l e most i m p o r t a n t o v e r a l l p o l i c y r e q u i r e m e n t from a s t r u c t u r a l macro-economic p o i n t o f view...a s i g n i f i c a n t i n c r e a s e i n the l e v e l o f p r i v a t e i n d u s t r i a l i n v e s t m e n t w i l l r e q u i r e an i n c r e a s e i n p r i v a t e f o r e i g n c a p i t a l i n f l o w s . . . . M a n y new i n d u s t r i e s w i l l need f o r e i g n t e c h n o l o g y and a t l e a s t , i n i t i a l l y f o r e i g n management.  5  - 22 -  TABLE 3 E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (percentage)  Indonesia  T o t a l O f f i c i a l Lenders Government  Lenders  International Organizations  Total P r i v a t e Lenders Suppliers'  Credits  T o t a l F i n a n c i a l Lenders Other P r i v a t e Lenders  T o t a l A l l Lenders  Source:  1970  1972  1974  1976  1978  91  86  68  62  68  85  78  58  48  51  6  8  10  14  17  9  14  32  38  32  3  9  21  12  8  0.1 .  1  8  25  23  6  4  3  1  1  100  100  100  100  100  Compiled from I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and World Debt T a b l e , 1976, p. 70-71; 1979, pp. 80-81.  Development.  - 23  -  Many o f the r e p o r t ' s o b s e r v a t i o n s were l a t e r i n c o r p o r a t e d as p o l i c i e s i n t h e c u r r e n t f i v e y e a r development p l a n -- R e p e l i t a I I I -- ( d i s c u s s e d below) and t h e i r i m p l e m e n t a t i o n  became a q u i d pro quo f o r f o r e i g n a i d p l e d g e s .  A s i m i l a r s i t u a t i o n a r o s e i n 1981 when a c o n f i d e n t i a l document s c h e d u l e d to be p r e s e n t e d a t the annual a i d m e e t i n g o f the IGGI, was l e a k e d to the p u b l i c .  prematurely  T h i s document s t r e s s e d t h a t  ' p o l i c y measures a d o p t e d by the government have o f t e n been ad hoc and o c c a s i o n a l l y u n c o o r d i n a t e d . ' Corruption ...has been i n p a r t due t o the government's own c o n v o l u t e d r e g u l a t o r y s y s t e m . That s y s t e m . . . a l o n g w i t h t r a d e b i a s e s f a v o r i n g development o f the domestic m a r k e t , f i n a n c i a l p o l i c i e s used f o r macro-economic c o n t r o l and i n c r e a s e d s t a t e " i n t e r v e n t i o n " i n banking and i n v e s t m e n t , must be changed r a d i c a l l y b e f o r e I n d o n e s i a ' s i n d u s t r i a l s e c t o r can d e v e l o p . . e f f i c i e n t l y . 6 Both o f t h e s e r e p o r t s a r e examples o f how e x t e r n a l a c t o r s have had a d i r e c t impact on domestic economic p o l i c y . As m e n t i o n e d above, the IGGI s t r o n g l y i n f l u e n c e d government p r i o r i t i e s i n t h e c u r r e n t development p l a n . domestic  D e s p i t e v i s i b l e r e s i s t a n c e from  i n t e r e s t groups, I n d o n e s i a ' s  government l e a d e r s , i n  various  implementing  R e p e l i t a I I I were p r e s s u r e d by the IGGI, and i t s domestic a l l i e s , the economic t e c h n o c r a t s .  T r a d i t i o n a l p r o t e c t i o n f o r indigenous  manufacturers  through l i c e n s i n g and t r a d e p o l i c i e s has been t h r e a t e n e d by the new p o l i c y . M o r e o v e r , the i s s u e o f e x p o r t e n c l a v e s and the r e d u c t i o n o f budgetary s i d i e s on d o m e s t i c o i l consumption a r e p o t e n t i a l l y s e n s t i v e w i t h o p i n i o n and s m a l l s c a l e e n t r e p r e n u e r s  providing political dissent.  sub-  student Regard-  l e s s o f t h e s e d o m e s t i c p r e s s u r e s , as a c o n d i t i o n o f f o r e i g n a i d p l e d g e s , the Suharto government i n c r e a s e d d o m e s t i c o i l p r i c e s by r e d u c i n g ment s u b s i d i e s i n 1980.^  govern-  O t h e r e x t e r n a l recommendations such as e x p o r t -  - 24 -  o r i e n t e d i n d u s t r i a l i z a t i o n and a s h i f t from p u b l i c t o p r i v a t e s e c t o r i n v e s t m e n t , were a l s o i n c o r p o r a t e d i n t o R e p e l i t a III  by t h e government.  One c r i t i c o f d e b t o b s e r v e d , " [ i ] t i s u n c e r t a i n whether the I n d o n e s i a n p o p u l a t i o n o r t h e IGGI n a t i o n s w i l l b e n e f i t more from the new  development  s t r a t e g y which i s tantamount to a r e v e r s a l o f p r e v i o u s IGGI p o l i c i e s t o o  wards I n d o n e s i a . " The IMF has a l s o p l a y e d a v i s i b l e r o l e i n I n d o n e s i a ' s economic debt p o l i c i e s .  and  The I n d o n e s i a n government, h a v i n g drawn from t h e Fund's  s t a n d - b y f a c i l i t y a n n u a l l y , undertook a commitment to the IMF e a r l y i n the 1970s c o n c e r n i n g t h e management, nature, and s i z e o f the c o u n t r y ' s d e b t . With IMF a s s i s t a n c e , a more comprehensive  system o f debt c o n t r o l was c r e a t e d  o u t s i d e the j u r i s d i c t i o n o f the e x i s t i n g F o r e i g n C a p i t a l Investment A c t . F i n a l l y , t h e P e r t a m i n a c r i s i s s e r v e s as an example o f how and p r i v a t e c r e d i t o r s were i n f l u e n c i n g f a c t o r s i n I n d o n e s i a .  official  U n t i l the  1975 c r i s i s , t h e government o f I n d o n e s i a and Pertamina were c o n s i d e r e d by some o b s e r v e r s t o be a d e m o n s t r a t i o n o f h e a l t h y and l a r g e l y s e l f - i n d u c e d growth by t h e u t i l i z a t i o n o f p e t r o - d o l l a r s .  However, the c o s t o f P e r t a m i n a ' s  d e v e l o p m e n t - o r i e n t e d p r o j e c t s soon outweighed t h e a v a i l a b i l i t y o f p e t r o d o l l a r i n f l o w s and t h e head o f P e r t a m i n a , G e n e r a l Sutowo, began t o borrow d i r e c t l y from t h e p r i v a t e i n t e r n a t i o n a l market.  The debt r e g u l a t o r y system,  s e t up w i t h t h e h e l p o f the IMF, d i c t a t e d t h a t medium-term l o a n s ( t h o s e m a t u r i n g between one and f i f t e e n y e a r s ) r e q u i r e d government a p p r o v a l . In an attempt t o a v o i d the u n c e r t a i n t i e s o f government a p p r o v a l , and l i k e l y o p p o s i t i o n from t h e t e c h n o c r a t i c c i r c l e s , t h e m i l i t a r y l e a d e r s o f P e r t a m i n a r e s o r t e d t o s h o r t - t e r m l o a n s o f l e s s than one y e a r -- such l o a n s b e i n g  - 25 -  exempt from d e b t r e g u l a t i o n s . F o r P e r t a m i n a , i t was a m a t t e r o f b o r r o w i n g short-term loans or delaying the implementation of several i n d u s t r i a l prog jects.  As a r e s u l t o f the d e c i s i o n t o borrow s h o r t - t e r m l o a n s , P e r t a m i n a ' s  s h o r t - t e r m d e b t t r i p l e d d u r i n g 1973, and more than d o u b l e d i n the next s i x teen months. ^ 1  Upon r e a c h i n g m a t u r i t y t h e s e l o a n s were r o l l e d o v e r , t h e  amounts owed a c c u m u l a t i n g w i t h e a r l y repayments o f l o n g e r term l o a n s .  By  1975, the o i l company had a c c u m u l a t e d US $1,500 m i l l i o n o f s h o r t term d e b t t h a t c o u l d n o t be p a i d o f f o r r o l l e d o v e r .  I t was o b s e r v e d t h a t i f "any  bank had a c t u a l l y c a l l e d i t s l o a n a t t h a t p o i n t , the whole e x t e r n a l f i n a n c i a l framework o f I n d o n e s i a m i g h t have c o l l a p s e d as a l l the American had i n s e r t e d ' c r o s s - d e f a u l t ' c l a u s e s i n t h e i r loans."'''  banks  1  P e r t a m i n a ' s de f a c t o - b a n k r u p t c y l e d t o immediate government a c t i o n . In o r d e r t o s a f e g u a r d the c o u n t r y ' s economic c r e d i b i l i t y , the C e n t r a l Bank was i n s t r u c t e d t o g u a r a n t e e a l l o f P e r t a m i n a ' s d e b t s .  Although General  Sutowo remained t h e head o f P e r t a m i n a , a c t u a l c o n t r o l was t r a n s f e r r e d from the m i l i t a r y f a c t i o n to the t e c h n o c r a t i c f a c t i o n .  Loans were s e c u r e d from  o f f i c i a l and p r i v a t e s o u r c e s t o r e p a y the d e b t s i n c u r r e d by P e r t a m i n a . G i v i n g i n t o c r e d i t o r ' s demands, f u t u r e r e g u l a t i o n o f P e r t a m i n a as w e l l as a l l o t h e r p u b l i c e n t e r p r i s e s ' d e b t s became the r e s p o n s i b i l i t y o f the Bank 12 o f I n d o n e s i a and the M i n i s t r y o f F i n a n c e . In r e c o v e r i n g from t h e P e r t a m i n a c r i s i s t h e t e c h n o c r a t s c o n c u r r e d w i t h i n s t i t u t i o n s such as the World Bank and the IMF i n s a y i n g t h a t "Indon e s i a needs a c o n t i n u e d i n f l o w o f f o r e i g n money t o m a i n t a i n the momentum 13 o f i t s development programme."  I n i t i a l l y , t h e r e was a downturn i n t h e  volume o f b o r r o w i n g b u t , as the s t i g m a o f Pertamina wore o f f and i t s economic  - 26 -  consequences  were b r o u g h t under c o n t r o l through t h e a i d o f e x t e r n a l f i n a n c i a l and  international c r e d i t o r s regained confidence i n Indonesia. Malaysia In t h e p a s t decade M a l a y s i a has had r e l a t i v e l y easy a c c e s s t o f o r e i g n l o a n s and to d a t e , i t has e x p e r i e n c e d no s e r i o u s debt s e r v i c i n g problems. S i n c e independence,  M a l a y s i a ' s r e s o u r c e s p o s i t i o n has remained  comfortable  r e f l e c t i n g t h e economy's s t r o n g e x p o r t p o s i t i o n and a r e l a t i v e l y s t a b l e 14 economy, c h a r a c t e r i z e d by a r a p i d annual growth r a t e .  Due t o the ade-  quate l e v e l o f f o r e i g n r e s e r v e s a v a i l a b l e f o r i m p o r t and development f i n a n c i n g , f o r e i g n b o r r o w i n g has been l i m i t e d and has been g e n e r a l l y c o n s i d e r e d 15 to be a s u p p l e m e n t a r y . s o u r c e o f c a p i t a l ; o n l y 15.7% o f development expen16 d i t u r e d u r i n g the Second M a l a y s i a P l a n was p r o v i d e d by f o r e i g n l o a n s . T h i s i s n o t to say t h a t t h e government d i s c o u r a g e s f o r e i g n l o a n c a p i t a l ; on the c o n t r a r y , f o r e i g n l o a n c a p i t a l i s much sought a f t e r , f o r the [ M a l a y s i a n ] government has l o n g r e c o g n i e d t h e benef i c i a l a s p e c t s o f f o r e i g n c a p i t a l not so much i n f i l l i n g the s a v i n g - i n v e s t m e n t gap as i n s e r v i n g as a c a r r i e r f o r t h e t r a n s f e r o f advanced t e c h n o l o g y o r a s p r i n b o a r d to e x p o r t m a r k e t s . 1 ? M a l a y s i a ' s e x t e r n a l d e b t has been c h a r a c t e r i z e d by a s i g n i f i c a n t r a t e o f b i l a t e r a l o f f i c i a l b o r r o w i n g d e n o t i n g l o a n s o f a t i e d n a t u r e , but the c o m p o s i t i o n o f i t s debt has shown an i n c r e a s i n g tendency towards p r i v a t e 18 loan sources. o f f i c i a l sources.  In 1970, 81% o f M a l a y s i a ' s t o t a l b o r r o w i n g o r i g i n a t e d from T h i s f i g u r e dropped to 49% i n 1978.  (See T a b l e 4 ) .  T h i s t r e n d may be e x p l a i n e d by the n a t i o n ' s s t r o n g economic performance  of  t h e p a s t decade which has made s o f t term funds from o f f i c i a l m u l t i l a t e r a l s o u r c e s d i f f i c u l t to s e c u r e .  M a l a y s i a has a r e s e r v e p o s i t i o n w i t h the IMF  - 27 -  TABLE 4 E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (percentage)  Malaysia  1970  1972  1974  1976  1978  81  62  48  47  49  32  24  16  18  19  I n t e r n a t i o n a l O r g a n i z a t i o n s 49  38  32  29  30  19  38  52  53  51  3  2  1  1  1  16  36  51  52  50  -  -  -  -  -  100  100  100  100  100  T o t a l O f f i c i a l Lenders Government  Lenders  Total P r i v a t e Lenders Suppliers'  Credits  T o t a l F i n a n c i a l Lenders Other P r i v a t e Lenders Total A l l Lenders  Source:  Compiled from t h e I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development. World Debt T a b l e s , 1976, p. 93-94; 1979; p. 108-09.  - 28 -  and i s a n e t l e n d e r to t h a t i n s t i t u t i o n . A p a r t from t h e i m p l i e d t y i n g o f b i l a t e r a l a i d t h e r e has been no e v i dence o f d i r e c t c o n d i t i o n a l p o l i c i e s o r p o l i t i c a l i n t e r f e r e n c e by c r e d i t o r sources i n Malaysian policy-making.  T h i s p a t t e r n , however, does not p r e -  v e n t M a l a y s i a from b e i n g v u l n e r a b l e t o p o l i t i c a l o b j e c t i v e s i n c r e d i t o r c o u n t r i e s , as t h e f o l l o w i n g example  demonstrates.  F o l l o w i n g s h o r t l y a f t e r the European Economic Community's r e c e n t p r o p o s a l to i n c r e a s e i m p o r t t a r i f f s f o r v e g e t a b l e o i l s , t h e US Senate approved a r e s o l u t i o n which would put p r e s s u r e on t h e World Bank and o t h e r m u l t i n a t i o n a l development a g e n c i e s t o reduce a i d t o palm o i l programmes i n d e v e l o p i n g c o u n t r i e s . H a l f o f M a l a y s i a ' s d i r e c t e x p o r t s o f palm o i l a r e s h i p p e d to t h e s e two markets. ^ Philippines The P h i l i p p i n e r e l a t i o n s h i p w i t h i t s f o r e i g n c r e d i t o r s d e v e l o p e d from the 1970 d e b t c r i s i s .  A t t h a t t i m e , the economy was f a c e d w i t h a  b a l a n c e o f payments c r i s i s , p r e c i p i t a t e d by t h e need t o s e r v i c e s h o r t - t e r m f o r e i g n c r e d i t which had f i n a n c e d the t r a d e d e f i c i t s and developmental f o r t s i n the l a t e 1960s.  ef-  By r e s t r u c t u r i n g e x i s t i n g C e n t r a l Bank l o a n s ,  r e g u l a t i n g l o n g - t e r m d e b t , and d i s c o u r a g i n g s h o r t - t e r m c r e d i t s , the g o v e r n ment was a b l e to deal w i t h the immediate n a t u r e o f the problem. a c t i o n , however, was supplemented  Governmental  by the s u p p o r t o f the C o n s u l t a t i v e Group  f o r t h e P h i l i p p i n e s . C h a i r e d by t h e World Bank, t h i s i n f o r m a l group o f 20 s t a t e s and m u l t i l a t e r a l i n s t i t u t i o n s  has a c t e d and c o n t i n u e s t o a c t as  a c o o r d i n a t o r o f e x t e r n a l a i d t o t h e P h i l i p p i n e ' s m a j o r b i l a t e r a l and i n s t i tutional sources.  Table 5 i l l u s t r a t e s the r e l a t i v e l y high r a t e o f o f f i c i a l  l e n d i n g t o the P h i l i p p i n e s . The World Bank and the IMF have p l a y e d a prominent r o l e i n t h e  - 29 -  TABLE 5 E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (percentage)  Philippines  Total O f f i c i a l Lenders Government  Lenders  International Organizations  Total P r i v a t e Lenders Suppliers'  Credits  Total F i n a n c i a l Lenders Other P r i v a t e Lenders Total A l l Lenders  Source:  1970  1972  1974  1976  1978  54  73  74  60  56  24  48  36  29  22  30  25  38  31  34  46  27  26  40  44  8  4  4  4  8  38  23  22  36  36  -  -  -  -  -  100  100  100  100  100  C o m p i l e d from t h e I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development. World Debt T a b l e s , 1976, p. 121-22; 1979, p. 142-  - 30 -  P h i l i p p i n e s p r i m a r i l y as a r e s u l t o f p r e v a i l i n g economic c o n d i t i o n s t h a t n e c e s s i t a t e d b o r r o w i n g f o r b a l a n c e o f payments d i f f i c u l t i e s . c e s s i o n a r y economic c l i m a t e o f the mid-1970s t h e P h i l i p p i n e  In the r e government  borrowed h e a v i l y from p r i v a t e and o f f i c i a l s o u r c e s i n o r d e r t h a t e x i s t i n g p u b l i c programmes be c o n t i n u e d and the c o u n t r y ' s c u r r e n t a c c o u n t d e f i c i t 21 be s u p p o r t e d . The b a l a n c e o f payments d i f f i c u l t i e s , however, were o n l y compounded i n 1975 by t h e f a l l o f s u g a r p r i c e s .  Burdened by an unmanageable d e b t , the  P h i l i p p i n e government r e s o r t e d t o IMF a s s i s t a n c e . As a c o n d i t i o n o f the l o a n from t h e IMF's Extended Fund F a c i l i t y , a c e i l i n g on t h e P h i l i p p i n e 22 debt-service ratio  was imposed.  The e x i s t e n c e o f t h i s b o r r o w i n g c o n s t r a i n t  p l a c e d t h e economy i n the f o l l o w i n g s i t u a t i o n : due t o the l i m i t o f the d e b t - s e r v i c e r a t i o , t h e P h i l i p p i n e s were a b l e t o m a i n t a i n a l e v e l below t h e c e i l i n g and as a r e s u l t , e a r n the r e p u t a t i o n o f a good c r e d i t r i s k . However, f u r t h e r b o r r o w i n g s c o u l d not be made once the annual b o r r o w i n g l i m i t was r e a c h e d .  A prime example o f t h i s s i t u a t i o n took p l a c e i n 1977  when t h e Monetary A u t h o r i t y t u r n e d down a l o a n a p p l i c a t i o n by a l e a d i n g 23 g o l d m i n i n g company because t h e annual d e b t l i m i t had been r e a c h e d . Thus, t h e r e g u l a t o r y system o f the government  and the IMF k e p t t h e economy  i n good s t a n d i n g w i t h the i n t e r n a t i o n a l l e n d e r s , but p l a c e d a c o n s t r a i n t on t h e a v a i l a b i l i t y o f l o a n c a p i t a l f o r new i n c o m e - g e n e r a t i n g  development  projects. As a consequence o f IMF and World Bank b o r r o w i n g t o s e r v i c e t r a d e d e f i c i t s and meet development o b j e c t i v e s the P h i l i p p i n e government  has  commited t h e economy t o a s e r i e s o f p o l i c i e s i n a c c o r d a n c e w i t h IMF and  1  - 31 -  World Bank recommendations.  As a c o n d i t i o n o f the 1979 IMF Extended Fund  F a c i l i t y " . - l o a n , the IMF has r e q u i r e d the i m p l e m e n t a t i o n o f a programme "with s p e c i f i c t a r g e t s t o be met, such as p r e d e t e r m i n e d revenue-GNP r a t i o s , p r e d e t e r m i n e d growth r a t e s , a b o l i t i o n o f p r i c e c o n t r o l s , and i n some cases even 24 a currency devaluation"  to r e h a b i l i t a t e the P h i l i p p i n e e x t e r n a l  sector.  Ihe f o l l o w i n g y e a r , the P h i l i p p i n e government f o r m u l a t e d a t a r i f f m o d i f i c a t i o n p l a n t h a t formed the b a s i s o f an a p p l i c a t i o n f o r a W o r l d Bank l o a n . (For p o l i t i c a l  r e a s o n s , however, the government r e f r a i n e d from making any 25  c o n n e c t i o n between the t a r i f f p l a n and the World Bank l o a n . )  Although  t h e s e IMF and World Bank p o l i c i e s have been, as a r e s u l t o f t h e i r c o n d i t i o n a l n a t u r e , p o l i t i c a l l y u n p o p u l a r , t h e i r c o n d i t i o n s , e s p e c i a l l y i n the case o f the t a r i f f m o d i f i c a t i o n p l a n , were d e s i g n e d by the r e s p e c t i v e c r e d i t o r s t o improve e f f i c i e n c y i n the e x p o r t s e c t o r by s e e m i n g l y complementing existing Philippine policy. F i n a l l y , i t i s d i f f i c u l t not to heed the, World B a n k ' s : s t r o n g l y p r e s s e d view on t h e s t a t e o f p o v e r t y i n the P h i l i p p i n e s . commentary,  a  ex-  A c c o r d i n g to one  r e p o r t , r e l e a s e d i n e a r l y 1981, was c o n d u c t e d " p a r t l y a s a  r e s u l t o f t h e Bank's d e s i r e to ward o f f a t t a c k s from US-based Marcos opponents and t h e i r s u p p o r t e r s [opposing]  i n t h e U.S. C o n g r e s s ( t h a t i s e f f e c t i v e l y  New S o c i e t y i n e q u a l i t i e s ) and d e m o n s t r a t e i t s own c o n c e r n 26  m e e t i n g t h e needs o f the p o o r e s t . "  for  The r e p o r t was c r i t i c a l o f the  P h i l i p p i n e government and a p p e a r e d t o show t h a t p o v e r t y i n the P h i l i p p i n e s was not o n l y v e r y e x t e n s i v e but r i s i n g .  I t f u r t h e r s t a t e d how p o v e r t y  pro-  blems m o s t l y have p r a g m a t i c c a u s e s "and hence may be s u s c e p t i b l e t o p r a g 27 matic s o l u t i o n s . "  - 32  -  Singapore S i n g a p o r e , c o n s i d e r e d by some o b s e r v e r s as a d e v e l o p e d c o u n t r y , p l a y s , because o f i t s r e l a t i v e l y s m a l l s i z e and s u c c e s s f u l e x p e r i e n c e w i t h i n d u s t r i a l i z a t i o n , a r a t h e r u n i q u e r o l e among the ASEAN n a t i o n s . L a c k i n g a n a t u r a l r e s o u r c e base, S i n g a p o r e has m a i n t a i n e d a r e l a t i v e l y outward l o o k i n g approach toward f o r e i g n economic r e l a t i o n s a l l o w i n g i t s economy t o be t r a n s f o r m e d i n t o a modern m a n u f a c t u r i n g and f i n a n c i a l c e n t r e . The r o l e o f e x t e r n a l d e b t i n S i n g a p o r e ' s development has been minimal but n o t i n s i g nificant.  R a t h e r , S i n g a p o r e ' s p l a n n e r s a r e " a c t i v e l y s e e k i n g ways t o de-  v e l o p S i n g a p o r e ' s c a p i t a l market i n t o one t o which i n t e r n a t i o n a l  companies  wishing to r a i s e funds, i n t e r n a t i o n a l i n v e s t o r s wanting o u t l e t s f o r t h e i r funds and i n s t i t u t i o n s s t a n d i n g between the two groups t u r n i n c r e a s i n g l y t o 28  s a t i s f y t h e i r needs."  The r o l e o f the Asian D o l l a r Market (ADM) has been  o f p r i m a r y i m p o r t a n c e i n S i n g a p o r e ' s development a l l o w i n g the  prominence  t h a t S i n g a p o r e has d e r i v e d i n r e g i o n a l f i n a n c e as a s o u r c e o f c a p i t a l and as a c e n t r e o f the  ADM.  S i n g a p o r e ' s " d e v e l o p e d " s t a t u s makes the c o u n t r y i n e l i g i b l e f o r conc e s s i o n a r y f i n a n c i n g from the World Bank and o t h e r i n t e r n a t i o n a l d e v e l o p ment i n s t i t u t i o n s . lies  Thus, any e v i d e n c e o f c o n d i t i o n a l i t y o f o f f i c i a l loans-  i n the t i e d n a t u r e o f p r o j e c t i o n ' e n t e d l o a n s t h a t S i n g a p o r e may  contract.  T h e r e has been no e v i d e n c e o f d i r e c t p o l i t i c a l i n t e r f e r e n c e .  In t h e p a s t decade, w i t h t h e d e c r e a s e o f o f f i c i a l l o a n s , S i n g a p o r e ' s e x p o s u r e t o commercial s o u r c e s o f l o a n s has r i s e n w i t h the a c c u m u l a t e d volume of debt.  (See T a b l e 6).  S i n g a p o r e ' s sound f o r e i g n r e s e r v e s p o s i t i o n ,  b a l a n c e d o f payments and p o l i t i c a l s t a b i l i t y have made the c o u n t r y c r e d i t  - 33 -  TABLE 6 E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (percentage)  Singapore  1970  1972  1974  1976  1978  91  76  70  48  38  39  35  35  22  20  53  41  35  26  18  8  24  30  52  62  6  7  11  24  17  Total F i n a n c i a l Lenders  2  17  19  28  45  Other P r i v a t e Lenders  -  -  -  -  -  100  100  100  100  100  Total O f f i c i a l Lenders Government  Lenders  International Organizations  Total P r i v a t e Lenders Suppliers'  Credits  Total A l l Lenders  Source:  C o m p i l e d from t h e I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development. World Debt T a b l e s , 1976, p. 131-32; 1979, p. 152  - 34 -  worthy i n t h e p r i v a t e i n t e r n a t i o n a l f i n a n c i a l system.  Private.loans  taken o u t by the government and l o c a l c o r p o r a t i o n s have been d e s i g n e d f o r developmental  g o a l s and c a p i t a l i n t e n s i v e i n v e s t m e n t p r o j e c t s  r a t h e r than b a l a n c e o f payment's problems.  The Development Bank o f  S i n g a p o r e , f o r example, has f i n a n c i e d l o n g - t e r m f u n d i n g needs from the 29 A s i a n D o l l a r Market. Thailand S u p p l a n t i n g a r e c o r d o f f i n a n c i a l c o n s e r v a t i s m and a r e l a t i v e l y low debt e x p o s u r e , T h a i l a n d ' s economy i n the 1970s has i n c r e a s i n g l y r e l i e d on foreign loan c a p i t a l .  T h i s t r e n d began w i t h t h e g r a d u a l w i t h d r a w a l  of  American t r o o p s from the r e g i o n i n the e a r l y 1970s, and the r e s u l t a n t dec r e a s e i n American m i l i t a r y e x p e n d i t u r e and b i l a t e r a l a i d , c o u p l e d w i t h the 1973 energy c r i s i s , prompting the T h a i government t o a t t r a c t "an i n f l o w o f f o r e i g n i n v e s t m e n t t o f i l l t h e gap caused by t h e d e c l i n e i n a i d ; a n d . . . l a r g e l y w i t h t h e h e l p o f f o r e i g n f u n d s , to recoup some o f t h e 30 f o r e i g n exchange l o s t i n t h e d e c l i n e o f the c o u n t r y ' s terms o f t r a d e . " However, T h a i l a n d ' s f a s t growing r a t e o f i m p o r t s , l i n k e d w i t h the i n d u s t r i a l i z a t i o n e f f o r t a f f e c t e d t h e economy's t r a d e b a l a n c e r e s u l t i n g i n c o n t i n u e d t r a d e d e f i c i t s and b a l a n c e o f payments problems.  As a r e s u l t  o f T h a i l a n d ' s c o n t i n u e d dependence on the e x p o r t o f commodities  and the  l a c k o f a d o m e s t i c energy programme, f o r e i g n l o a n s to f i n a n c e t r a d e def i c i t s and developmental t o $3680 m i l l i o n i n 1978.  o b j e c t i v e s i n c r e a s e d from $482 m i l l i o n i n 1970 These l o a n s p r i m a r i l y o r i g i n a t e d from the mem-  bers o f T h a i l a n d ' s a i d c o o r d i n a t i o n group -- which i n c l u d e s the P a r i s Club n a t i o n s as w e l l as the World Bank," t h e IMF and t h e ADB -- and i m p l y  - 35 a h i g h l e v e l o f t i e d and c o n d i t i o n a l l o a n s .  (See T a b l e 7 ) .  W o r l d Bank i n f l u e n c e and c o n d i t i o n a l i t y can be seen i n c o n j u n c t i o n w i t h two m a j o r l o a n s .  The f i r s t , a f i v e y e a r US $1 b i l l i o n s t r u c t u r a l  a d j u s t m e n t programme, was agreed upon i n mid-1980.  T h i s programme i n -  c l u d e d a c o m p r e h e n s i v e r e d i r e c t i o n o f T h a i economic p o l i c y i n t h e i n d u s t r i a l , e n e r g y and a g r i c u l t u r a l s e c t o r s and was i n c o r p o r a t e d i n t o the F i f t h F i v e Year P l a n .  The most i m p o r t a n t e l e m e n t o f t h i s programme, as  d e b t , was t h e announcement i n 1980 o f a p o l i c y t h a t attempts  concerns  to e a s e the  debt burden by i n v i t i n g m u l t i n a t i o n a l c o r p o r a t i o n s t o c o n s t r u c t and under f r a n c h i s e v i t a l p u b l i c s e r v i c e s such as t e l e c o m m u n i c a t i o n s , and u t i l i t i e s .  operate  highways,  Thus, the debt burden c o u l d be eased and s h a r e d w i t h the  p r i v a t e s e c t o r i f the more p r o f i t a b l e i n f r a s t r u c t u r e ! i n v e s t m e n t s  were made  by p r i v a t e companies and i f the o w n e r s h i p o f p u b l i c e n t e r p r i s e s was  turned  o v e r t o the p r i v a t e s e c t o r . T h a i l a n d ' s dependence on debt and i t s c h r o n i c b a l a n c e o f payments d e f i c i t f o r c e d t h e government, i n 1980, t o n e g o t i a t e a US $580 m i l l i o n 31 programme l o a n ; a g a i n from the World Bank.  The r e c e i p t o f t h i s l o a n was  c o n d i t i o n a l upon the a d o p t i o n o f a t h r e e p a r t economic programme e n t a i l i n g a complete r e d i r e c t i o n o f Thai p o l i c y .  I n c o r p o r a t e d i n t o the c u r r e n t T h a i  f i v e y e a r p l a n , the p r i m a r y t e n e t s o f the World Bank programme a r e based  .  upon i n d u s t r i a l d e v e l o p m e n t , an e n e r g y a d j u s t m e n t programme, and the deve32 lopment o f a l a r g e a g r i c u l t u r a l s e c t o r .  The e x i s t i n g s t r u c t u r e o f  i m p o r t - s u b s t i t u t i o n i n d u s t r i e s i s b e i n g r e p l a c e d by a more e x p o r t - o r i e n t e d i n d u s t r i a l s e c t o r and the f o c u s on e x p o r t development has i n c l u d e d the p r o m o t i o n o f e x p o r t - o r i e n t e d i n d u s t r i a l s e c t o r and the f o c u s on e x p o r t development  - 36 -  TABLE 7 E x t e r n a l P u b l i c Debt by Type o f C r e d i t o r 1970-78 (percentage)  Thailand  1970  1972  .1974  1976  1978  89  93  94  90  77  30  30  36  27  32  59  63  58  63  45  Total P r i v a t e Lenders  11  7  6  10  23  Suppliers' Credits  9  6  3  1  0.2  Total F i n a n c i a l Lenders  2  1  3.  9  23  Other P r i v a t e Lenders  -  -  -  -  -  100  100  100  100  100  Total O f f i c i a l Lenders Government  Lenders  International Organizations  Total A l l Lenders  Source:  Compiled from t h e I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development. World Debt T a b l e s , 1976, p. 147-48; 1979, p. 168  - 37 -  has i n c l u d e d the p r o m o t i o n o f e x p o r t - p r o c e s s i n g z o n e s .  In a d d i t i o n ,  T h a i l a n d ' s e x t e r n a l debt has p l a y e d an i m p o r t a n t r o l e i n t h e f o r m u l a t i o n o f t h i s economic r e f o r m .  W i t h o u t the i m p l e m e n t a t i o n  o f c e r t a i n recommended  p o l i c i e s , i t i s f e a r e d t h a t "by 1990 t o t a l debt o u t s t a n d i n g c o u l d be US  $40  b i l l i o n -- n e a r l y h a l f t h e v a l u e o f the goods and s e r v i c e s p r o d u c e d by the 33 economy." The p r e v i o u s y e a r , d u r i n g n e g o t i a t i o n s f o r emergency a s s i s t a n c e from t h e IMF, the i s s u e o f c o n d i t i o n a l l y , o f IMF a s s i s t a n c e i n g e n e r a l , q u i c k l y became a p o l i t i c a l i s s u e f o r c i n g the government t o withdraw i t s r e q u e s t f o r assistance. A c c o r d i n g to one commentator, The i s s u e o f c o n d i t i o n a l i t y and o f IMF a s s i s t a n c e i n g e n e r a l q u i c k l y became p o l i t i c i z e d , w i t h the T h a i l a n guage p r e s s and o p p o s i t i o n p o l i t i c i a n s s e i z i n g on t h i s i s s u e r a t h e r than t h e causes and l o n g - t e r m s o l u t i o n s f o r the payments d e f i c i t . . . B o o n c h u R o j a n a s a t i e n , p r e s i d e n t o f the Bangkok Bank and former f i n a n c e m i n i s t e r . . . c l a i m e d t h a t the l o a n would p l a c e the IMF ' i n c o n t r o l o f T h a i l a n d ' s economy, l i k e the c a s e o f S r i Lanka'. 34 F i n a l l y , T h a i l a n d e x e m p l i f i e s a u n i q u e case o f c o n d i t i o n a l i t y . In a c o n f i d e n t i a l s t u d y p r e p a r e d by the World Bank i n 1981, the World Bank a d m i t t e d t h a t " p a r t o f T h a i l a n d ' s problems a r i s e out o f i t s own bad a d v i c e t o the government i n the p a s t . . . ' t h e s e measures c o n t r i b u t e d t o w o r s e n i n g s e v e r a l s t r u c t u r a l d i s e q u i l i b r i a [and] l e f t the economy uncom36 f o r t a b l y exposed t o e x t e r n a l s h o c k s . ' "  A l t h o u g h the i n t e n t i o n s o f  c o n d i t i o n a l p o l i c i e s recommended by i n s t i t u t i o n s such as the World Bank a r e d e s i g n e d t o b r i n g about economic s t a b i l i t y , i n t h i s p a r t i c u l a r case the p o l i c i e s recommended e a r l i e r i n the 1970s had lea^*"t"o n e g a t i v e c o n s e q u e n c e s on the domestic economy.  Thus, t h i s example p r o v i d e s some e v i d e n c e i n  s u p p o r t o f the c r i t i c s ' argument.  - 38 -  Conclusions The ASEAN s t a t e s d e m o n s t r a t e - a n economic r e l i a n c e on d e b t by v i r t u e o f t h e f a c t t h a t t h e i r a c c u m u l a t e d debt has r i s e n d u r i n g t h e past decade.  ( S e e T a b l e s 1, 2, 14, and 1 5 ) . In as much as d e b t manage-  ment and e f f i c i e n t economic p o l i c i e s have f u n c t i o n e d t o a t t r a c t t h e l o a n c a p i t a l , t h e p r a c t i c e o f c o n d i t i o n a l i t y and o t h e r t y p e s o f p o l i t i c a l i n f l u e n c e has c r e a t e d a r e l a t i o n s h i p i n which government c o n t r o l o f economic p o l i c y i s i n f l u e n c e d by t h e v e r y e x t e r n a l a c t o r s g r a n t i n g a i d and l o a n c a p i t a l t o t h e ASEAN n a t i o n s .  Thus, the cooperative  r e l a t i o n s h i p s between  the ASEAN d e b t o r s and t h e i r c r e d i t o r s may be examined i n l i g h t o f t h e argument p u t f o r t h by t h e c r i t i c s o f d e b t . The p o l i t i c a l i m p l i c a t i o n s o f f o r e i g n b o r r o w i n g by ASEAN n a t i o n s r e f l e c t s some o f t h e a l l e g a t i o n s p u t f o r t h by d e b t and a i d c r i t i c s -- i n particular, the issue o f c o n d i t i o n a l i t y .  In t h i s c h a p t e r , examples o f con-  d i t i o n a l i t y and o t h e r forms o f p o l i t i c a l i n f l u e n c e i n each ASEAN s t a t e ' s r e l a t i o n s w i t h i t s c r e d i t o r s has been i l l u s t r a t e d and t h e c h a r a c t e r o f each ASEAN n a t i o n ' s r e l a t i o n s h i p w i t h i n d i v i d u a l c r e d i t o r s d i s c u s s e d .  The  d e b t r e l a t i o n s o f each ASEAN member c l e a r l y exposed t h e i r economies t o v a r y i n g d e g r e e s o f c o n d i t i o n a l p o l i c i e s . The scope o f c o n d i t i o n a l i t y tends t o v a r y a c c o r d i n g t o each n a t i o n ' s b o r r o w i n g s t r u c t u r e . c a s e s -- I n d o n e s i a ,  t h e P h i l i p p i n e s and T h a i l a n d -- o f f i c i a l  In t h r e e creditors  were c l e a r l y dominant a c t o r s i n t h o s e n a t i o n s ' d e b t t r a n s a c t i o n s .  In  a d d i t i o n , a n o t i c e a b l e p a r t o f t h e b o r r o w i n g was f o r b a l a n c e o f payment problems.  T h u s , t h e economic c o n d i t i o n s t h a t t h e s e o f f i c i a l l o a n s  p r i m a r i l y W o r l d Bank and IMF s o u r c e d  —  -- c a r r i e d tended t o a f f e c t t h e  -  39  -  c o u r s e o f economic p o l i c y - m a k i n g w i t h i n each n a t i o n .  In two c a s e s  --  S i n g a p o r e and M a l a y s i a . - - t h e r e e x i s t e d a more b a l a n c e d d i s t r i b u t i o n o f c r e d i t o r s r e p r e s e n t i n g both p r i v a t e and o f f i c i a l s o u r c e s .  P r i v a t e sources  c a r r y low d e g r e e s o f c o n d i t i o n a l p o l i c i e s and t h e o f f i c i a l b o r r o w i n g g e n e r a l l y f o r purposes o t h e r than economic a d j u s t m e n t .  was  Thus, the i n c i -  dence o f c o n d i t i o n a l p o l i c i e s was low and t h e r e was l i t t l e e v i d e n c e o f ext e r n a l i n f l u e n c e i n d o m e s t i c economic  policy.  W i t h i n t h e c o n t e x t o f t h e c r i t i c s ' argument t h e r e was o n l y one example where a c o n d i t i o n a l p o l i c y adopted p r o v e d to have a n e g a t i v e impact on the economy --  i n t h i s c a s e , T h a i l a n d . Moreover, no e v i d e n c e was uncovered t o  p r o v i d e any s u b s t a n c e to t h e argument t h a t t h e c o n d i t i o n a l p o l i c i e s would u l t i m a t e l y e f f e c t p o l i t i c a l changes i n t h e n a t i o n .  Thus, based on t h e s e  o b s e r v a t i o n s , one may q u e s t i o n the v a l i d i t y o f the c r i t i c s ' a l l e g a t i o n s . The e x i s t e n c e o f c o n d i t i o n a l p o l i c i e s has been acknowledged i s s u e i n doubt.  and i s n o t the  R a t h e r , i t i s t h e e f f e c t t h a t t h e s e p o l i c i e s have a c t u a l l y  had i n t h e f i v e n a t i o n s under r e v i e w t h a t i s the d i s p u t e d p o i n t .  In r e s -  ponse t o t h i s i s s u e , the t h i r d , and f i n a l , c h a p t e r w i l l a n a l y z e the debt r e l a t i o n s h i p s o f the ASEAN members and t h e i r i m p l i c a t i o n on t h e c r i t i c s ' arguments.  I t i s a n t i c i p a t e d t h a t t h i s e v a l u a t i o n o f the ASEAN d e b t ,  scenario w i l l b r i n g f o r t h conclusions i n d i r e c t c o n t r a s t to those tenets of the c r i t i c s '  thesis.  - 40 -  CHAPTER 2  FOOTNOTES  1.  F a r E a s t e r n Economic Review ( F E E R ) , A p r i l 27, 1979, p. 93.  2.  Ibid.  3.  P.A. W e l l o n s , B o r r o w i n g by D e v e l o p i n g C o u n t r i e s on t h e E u r o - C u r r e n c y Market ( P a r i s : O r g a n i z a t i o n f o r Economic C o o p e r a t i o n and Development, 1977), p. 199.  4.  FEER, May 39, 1981, p. 45.  5.  FEER, A p r i l 27, 1979, p. 87.  6.  FEER, May 29, 1981, p. 44.  7.  FEER, May 9, 1980, p. 51.  8.  FEER, A p r i l 27, 1979, p. 86.  9.  Sevinc Carlson, Indonesia's O i l (Boulder Colorado: 1977), p. 64.  Westview P r e s s ,  10.  W e l l o n s , B o r r o w i n g by D e v e l o p i n g C o u n t r i e s on the E u r o - C u r r e n c y Market, p. 212.  11.  FEER, December 23,:1977, p. 44.  12.  J.D. Aronson ( e d . ) , Debt and the L e s s Developed C o u n t r i e s ( B o u l d e r C o l o r a d o : Westview P r e s s , 1979), pp. 286-87.  13.  FEER, June 9, 1978, p. 79.  14.  M a l a y s i a ' s annual a v e r a g e growth r a t e o f GDP between 1970-77 was 7.8%. I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development, World Development R e p o r t , 1979 (The World Bank, 1979), pp. 128-29.  15.  Abdul Ghani b i n Othman and Mohamed I q b a l , "Some I s s u e s on D e v e l o p ment F i n a n c e , " The New I n t e r n a t i o n a l Economic O r d e r and UNCTAD IV: The I m p l i c a t i o n f o r M a l a y s i a ( K u a l a Lumpur: M a l a y s i a n Economic A s s o c i a t i o n and M a l a y s i a n C e n t r e f o r Development S t u d i e s , 1975), p. 109.  16.  Loh Wei Leng, " F i n a n c i a l and T e c h n i c a l A s s i s t a n c e i n M a l a y s i a , " S o u t h e a s t A s i a n P e r c e p t i o n s o f F o r e i g n A s s i s t a n c e , Lim Joo J o c k and C h r i s t i n e Tan ( e d s . ) (Bangkok: I n s t i t u t e o f S o u t h e a s t A s i a n S t u d i e s and I n s t i t u t e o f A s i a n S t u d i e s , C h u l a l o n g k o r n U n i v e r s i t y , 1977), p. 21.  - 41 17.  J . Wong, ASEAN Economies i n P e r s p e c t i v e , (Hong Kong: P r e s s . L t d . , 1979), pp. 88-89.  MacMillan  18.  M a l a y s i a has become one o f A s i a ' s b e s t l e n d i n g r i s k s . In the p r i v a t e market M a l a y s i a i s a b l e t o g e t l o a n s a t 0.375 - 0.5 p e r c e n t a g e p o i n t s above LIBOR on l o a n s f o r a term o f 10 y e a r s . FEER, A p r i l 24, 1981, p. 90.  19.  FEER, A u g u s t 27, 1976, p. 44.  20.  E l e v e n c o u n t r i e s a r e r e p r e s e n t e d : A u s t r a l i a , Canada, West Germany, I n d i a , Japan, the N e t h e r l a n d s , New Z e a l a n d , S p a i n , S w i t z e r l a n d , the U n i t e d Kingdom, and the U n i t e d S t a t e s . The f o l l o w i n g i n s t i t u t i o n s a r e a l s o i n c l u d e d : IMF, U n i t e d N a t i o n s Development Programme, A s i a n Development Bank, 0ECD, and the World Bank.  21.  Between 1974 and 1976, 83% o f the t o t a l net c a p i t a l i n f l o w was d i r e c t e d a t supporting the c o u n t r i e s current account d e f i c i t . M.J. S e i b e r , "The P h i l i p p i n e s : Land o f t h e M o r n i n g , C h i l d o f Debt," Franko and S e i b e r , D e v e l o p i n g C o u n t r y Debt, p. 110.  22.  The d e b t - s e r v i c e r a t i o i s d e f i n e d as s e r v i c e payments on e x t e r n a l p u b l i c d e b t as a p e r c e n t a g e o f e x p o r t s o f goods and s e r v i c e s .  23.  FEER, A u g u s t 19, 1977, p. 38.  24.  FEER, September 14, 1979, p. 52.  25.  FEER, August 8, 1980, p. 50.  26.  FEER, March 27, 1981, p.  27.  Ibid.  28.  FEER, J a n u a r y 25, 1980, p. 44.  29.  FEER, September 17, 1976, p. 61.  30.  Pasuk P h o n g p a i c h i t , "The Open Economy and I t s F r i e n d s : The 'Development' o f T h a i l a n d , " P a c i f i c A f f a i r s , 53, ( F a l l , 1980), p. 453.  31.  U n l i k e p r o j e c t l o a n s , which a r e l i m i t e d t o s p e c i f i c p r o j e c t s , p r o gramme l o a n s can be d i s b u r s e d a t w i l l by r e c i p i e n t governments, w h i c h must, i n the c a s e o f s t r u c t u r a l a d j u s t m e n t J o a n s , s u b s c r i b e to a c o m p r e h e n s i v e economic programme complete w i t h t a r g e t s o u t l i n e d by t h e bank." FEER, May 23, 1980, p. 43.  32.  A s s u r a n c e s t h a t T h a i l a n d w i l l f o l l o w the World Bank p o l i c y have a l s o been sought by o t h e r c r e d i t o r s . Loan covenants from t h e s e s o u r c e s have s t i p u l a t e d a commitment to implement the World Bank economic r e f o r m s . FEER, i b i d .  125.  - 42 33.  I b i d . , p. 41.  34.  FEER, F e b r u a r y 22, 1980, p. 40.  35.  Ibid.  36.  FEER, F e b r u a r y 13, 1981.  - 43 -  CHAPTER 3 DEBT. EVALUATED  The ASEAN n a t i o n s ' f o r e i g n b o r r o w i n g i n t h e l a s t decade was d e t e r mined by a number o f p o l i t i c a l and economic f a c t o r s , both d o m e s t i c and external i n character.  The e c o n o m i e s ' r a t e o f g r o w t h , t h e i r a b i l i t y t o r e -  c o v e r from t h e 1974 w o r l d r e c e s s i o n , and t h e i r a c h i e v e m e n t o f i n d u s t r i a l and d e v e l o p m e n t -  o r i e n t e d g o a l s have been p r i m a r y c o n s i d e r a t i o n s i n each  c o u n t r y ' s d e c i s i o n t o borrow a b r o a d .  These c o n s i d e r a t i o n s , however, have  been b a l a n c e d by an equal c o n c e r n f o r t h o s e n e g a t i v e c o n s e q u e n c e s o f i n t e r national borrowing manifested  a s : ; c o n d i t i o n a l p o l i c i e s and p o l i t i c a l i n t e r -  ference. C h a p t e r Two d e m o n s t r a t e d t h a t t h e development o f r e l a t i o n s between the n a t i o n s o f ASEAN and t h e i r c r e d i t o r s has r e s u l t e d i n r e l a t i o n s h i p s c h a r a c t e r i z e d by c e r t a i n a s p e c t s o f dependence.  The e x a m i n a t i o n o f t h e s e  r e l a t i o n s i l l u s t r a t e d s i t u a t i o n s where c o n d i t i o n a l p o l i c i e s have had t o be a g r e e d t o by ASEAN d e b t o r s i n r e t u r n f o r t h e r e c e i p t o f f u n d s .  Having  d e s c r i b e d t h e development o f ASEAN's d e b t r e l a t i o n s , i n p a r t i c u l a r t h e i r most v i s i b l e e f f e c t s i n t h e form o f c o n d i t i o n a l p o l i c i e s , we now t u r n t o an a n a l y s i s o f t h e s e r e l a t i o n s h i p s and t h e i r i m p l i c a t i o n s f o r t h e a l l e g a t i o n s p r e s e n t e d by t h e c r i t i c s o f d e b t and a i d .  This f i n a l chapter w i l l  then  p r o v i d e some c o n c l u s i o n s f o r t h i s c a s e study o f d e v e l o p i n g c o u n t r y d e b t . Allegation 1 Debt i s a s s o c i a t e d w i t h t h e i n i t i a t i v e s o f f o r e i g n c r e d i t o r s t o s u s t a i n e x i s t i n g dependence s t r u c t u r e s .  - 44 -  The i s s u e o f dependence has emerged as an i m p o r t a n t p e r s p e c t i v e o f various aspects o f North-South r e l a t i o n s .  Many s c h o l a r s have a d d r e s s e d  the i s s u e o f dependence, but few have a g r e e d on i t s n a t u r e and e f f e c t s .  1  Predominant amongst t h e . a s p e c t s o f dependence have been t h e i s s u e s o f t r a d e and i n v e s t m e n t .  The c r i t i c s o f d e b t m a i n t a i n t h a t e x i s t i n g  dependence  s t r u c t u r e s borne i n t r a d e and i n v e s t m e n t l i n k a g e s a r e p e r p e t u a t e d by d e b t relationships.  The e x t e n t t o which ASEAN i s i n v o l v e d i n dependence  relation-  s h i p s w i t h i t s t r a d e and i n v e s t m e n t p a r t n e r s however, i s not an i s s u e t h a t 2 w i l l be t r e a t e d i n t h i s t h e s i s -- t h e s u b j e c t has been examined  elsewhere.  The c o n c e r n l i e s w i t h the q u e s t i o n o f whether the d e b t l i n k a g e s o f ASEAN's members have been the r e s u l t o f c r e d i t o r i n i t i a t i v e s and t o what e x t e n t the ASEAN n a t i o n s have t r i e d t o d i v e r s i f y away from t h e s e c r e d i t o r s -- many o f a  which a r e t h e ASEAN n a t i o n ' s p r i m a r y t r a d e and i n v e s t m e n t p a r t n e r s . C h a p t e r Two p r o v i d e d a b r i e f s u r v e y o f the b o r r o w i n g o f each ASEAN n a t i o n and t h e development o f r e l a t i o n s between the ASEAN d e b t o r s and their creditors.  Each c o u n t r y borrowed t o f u l f i l p r i m a r y economic and  p o l i t i c a l o b j e c t i v e s r a n g i n g from f i n a n c i n g t r a d e d e f i c i t s t o p u r s u i n g i n d u s trialization objectives.  A l t h o u g h t h e r e was e v i d e n c e t h a t the c r e d i t o r s ,  such as t h e IGGI, the World Bank, as w e l l as o t h e r a c t o r s , i n f l u e n c e d d e b t p o l i c y , the r o l e o f t h e s e c r e d i t o r s has n o t been one o f i n i t i a t i n g the debt  s t r u c t u r e . On t h e c o n t r a r y , i n a l m o s t a l l c a s e s , the d e c i s i o n to b o r -  row was the d o m e s t i c government's;  the e x t e r n a l a c t o r s tended t o p l a y a  regulatory role. A number o f examples may be used t o d e f e n d t h i s argument.  F i r s t , as  p r e v i o u s l y m e n t i o n e d , the IMF imposed a c e i l i n g on the P h i l i p p i n e ' s annual  - 45 b o r r o w i n g as a c o n d i t i o n o f a l o a n from the Extended Fund F a c i l i t y .  This  r e g u l a t o r y l i m i t was viewed as means o f c o n t r o l l i n g the P h i l i p p i n e s ' e x t e r n a l d e b t and, c o n s e q u e n t l y , r e l i e v i n g f u r t h e r burdens on the economy which might have r e s u l t e d had the debt grown t o unmanageable p r o p o r t i o n s . Moreover, t h e P h i l i p p i n e P r e s i d e n t , F e r d i n a n d Marcos, r e c e n t l y took s t e p s to m a i n t a i n c l o s e t i e s w i t h the IMF, the World Bank, and the ADB.  In J u l y  1980, Marcos a p p o i n t e d C e s a r V i r a t a , a s u p p o r t e r o f the World Bank, as Prime M i n i s t e r , and s u r r o u n d e d him w i t h t e c h n o c r a t s who have c l o s e t i e s 3  with these o f f i c i a l loan i n s t i t u t i o n s . A second example to s u p p o r t t h e s t a t e d argument can be found i n T h a i l a n d ' s d e p a r t u r e from a t r a d i t i o n o f f i n a n c i a l c o n s e r v a t i s m and low debt e x p o s u r e .  In t h e mid-1970s t h e new K u k r i t Pramoj government (1974-76)  f i r s t , t r a n s f o r m e d the n a t u r e o f the government's r o l e i n the economy to i n c l u d e g r e a t e r government p a r t i c i p a t i o n and s e c o n d , borrowed from commerc i a l banks r a t h e r than depending l a r g e l y on o f f i c i a l s o u r c e s f o r f o r e i g n loan c a p i t a l .  T h i s p o l i c y r e f l e c t e d a change i n the government and d i d  not i n v o l v e t h e i n f l u e n c e o f e x t e r n a l a c t o r s . F i n a l l y , M a l a y s i a has made a p o l i c y d e c i s i o n t o m a i n t a i n a c e r t a i n l e v e l o f b o r r o w i n g from the World Bank.  In 1980, the M a l a y s i a n government  s u c c e s s f u l l y l o b b i e d the World Bank t o have the per c a p i t a income r a t e used as a d e t e r m i n a n t o f s o f t l o a n e l i g i b i l i t y — 5 account the i n t e r n a t i o n a l r a t e of i n f l a t i o n .  —  r a i s e d to take i n t o  M a l a y s i a ' s per c a p i t a  income  had i n c r e a s e d c l o s e t o a l e v e l where the n a t i o n would no l o n g e r be e l i g i b l e for soft loans. The s t r u c t u r e o f l e n d i n g among the ASEAN n a t i o n s has been a r e s u l t o f  - 46 -  t h e i r own i n i t i a t i v e s t o borrow. indicate  T h e r e i s no overwhelming e v i d e n c e  to  t h a t the i n f l u e n c e o f the n a t i o n ' s c r e d i t o r s has been a n y t h i n g  more than a r e g u l a t o r y r o l e . T h e r e f o r e , the r e s u l t a n t d e b t s t r u c t u r e has been e f f e c t e d by d o m e s t i c r a t h e r than e x t e r n a l d e c i s i o n .  This structure  has v a r i e d from c o u n t r y t o c o u n t r y , and, as e s t a b l i s h e d i n the o f C h a p t e r Two,  conclusion  r e p r e s e n t s a c e r t a i n s t r u c t u r e o f dependence.  A thorough, s t a t i s t i c a l l y based, geographic  a n a l y s i s o f the ASEAN  n a t i o n s ' s t r u c t u r a l dependence on t h e i r c r e d i t o r s would e n c o u n t e r d i f f i c u l t i e s ; r e l i a b l e s t a t i s t i c s are d i f f i c u l t to obtain.  Figures i d e n t i f y i n g  o f f i c i a l and p r i v a t e c a p i t a l by n a t i o n a l o r i g i n a r e not a v a i l a b l e i n a comprehensive form. geographic  The m u l t i l a t e r a l i z a t i o n o f o f f i c i a l a i d p r e v e n t s  the  i d e n t i f i c a t i o n o f the l o a n s ' sources, l e a v i n g b i l a t e r a l l o a n s as  the s o l e i d e n t i f i a b l e s o u r c e o f o f f i c i a l c a p i t a l .  Howover, a comprehen-  s i v e c o m p i l a t i o n o f p r i v a t e bank l e n d i n g does not e x i s t .  Loan s y n d i c a t i o n s  by p r i v a t e banks tend to c o m p l i c a t e a s t a t i s t i c a l c o m p i l a t i o n f u r t h e r as i t i s d i f f i c u l t t o d e t e r m i n e the n a t i o n a l o r i g i n s o f the l o a n p a c k a g e s .  Such  e v i d e n c e would be i n s u f f i c i e n t as a base f o r an a n a l y s i s o f the ASEAN n a t i o n s ' s t r u c t u r a l dependence on t h e i r c r e d i t o r s .  However, i n d i s c u s s i n g  f u l l y the i s s u e o f d e b t s o u r c e s , one c a n n o t n e g l e c t c e r t a i n e f f o r t s made by t h e f i v e n a t i o n s t o d e v e l o p r e g i o n a l s o u r c e s o f f i n a n c i n g .  These e f f o r t s  have y e t t o have any s u b s t a n t i v e impact on the d e b t p r o s p e c t s o f ASEAN n a t i o n , however they r e p r e s e n t a c o n c e r n f o r the i n c r e a s i n g s e l f - r e l i a n c e i n f i n a n c i a l m a t t e r s i n the f u t u r e . The ASEAN c o u n t r i e s have l a r g e l y depended on e x t r a - r e g i o n a l  actors,  r e p r e s e n t i n g both o f f i c i a l and p r i v a t e s o u r c e s o f l o a n c a p i t a l , to meet  - 47 -  t h e i r economic needs.  F i n a n c i a l i n s t i t u t i o n s i n each o f t h e f i v e c o u n t r i e s  have had l i m i t e d e x p o s u r e t o r e g i o n a l o f e x t r a - r e g i o n a l t r a n s a c t i o n s and they have l a r g e l y been c o n f i n e d , i n terms o f s c o p e , t o s e r v i n g t h e i r respective domestic markets.  With t h e e x c e p t i o n o f a few banks i n S i n g a p o r e  and t h e Bank B u m i p u t r a i n M a l a y s i a , ' ' ASEAN f i n a n c i a l i n s t i t u t i o n s a r e n o t e q u i p p e d t o h a n d l e the d i m e n s i o n s t h a t r e g i o n a l t r a n s a c t i o n s encompass. A c c o r d i n g t o one o b s e r v e r , t h e l i m i t e d s c o p e o f e x i s t i n g ASEAN f i n a n c i a l i n s t i t u t i o n s i s " e v i d e n t i n the d i r e c t c o r r e s p o n d e n t b a n k i n g r e l a t i o n s h i p o f which t h e r e a r e so few among ASEAN banks t h a t , i r o n i c a l l y , i n t r a - A S E A N Q  •  t r a d e i s s t i l l o f t e n c o u r s e d t h r o u g h extra-ASEAN i n t e r m e d i a r i e s . " S i n c e t h e f o r m a t i o n o f ASEAN i n 1967, t h e r e has been a p o l i t i c a l e f f o r t on t h e p a r t o f a l l f i v e members t o e f f e c t i n d i v i d u a l and r e g i o n a l p o l i t i c a l and economic b e n e f i t s t h r o u g h c o o p e r a t i v e a r r a n g e m e n t s . A l t h o u g h the growth o f t r a d e and t h e e x p a n s i o n o f i n v e s t m e n t a l l o w e d t h e f o r m a t i o n o f r e g i o n a l a g r e e m e n t s , such as t h e ASEAN P r e f e r e n t i a l T r a d i n g Arrangements (1977) t h a t b r o u g h t t a n g i b l e b e n e f i t s , b o t h p o l i t i c a l and economic, to each o f t h e f i v e e c o n o m i e s , p a r a l l e l development i n t h e r e g i o n ' s f i n a n c i a l s e c t o r has been m i n i m a l . To d a t e , t h e most i m p o r t a n t r e g i o n a l s o u r c e i n t h i s r e s p e c t has been the A s i a n D o l l a r Market (ADM).  The market i s seen  as a means o f m o b i l i z i n g f o r e i g n c u r r e n c y " f o r the p u r p o s e o f p r o v i d i n g 9 medium-term development l o a n s to ASEAN e n t e r p r i s e . "  Over the p a s t decade  the ADM has assumed a g r e a t e r i d e n t i t y o f i t s own and, i n as much as i t i s a b l e t o a t t r a c t i n c r e a s i n g amounts o f r e g i o n a l f u n d s , i t w i l l enhance t h e s e l f - f i n a n c i n g c a p a c i t y o f the r e g i o n . A more r e c e n t development i n ASEAN f i n a n c i a l c o o p e r a t i o n has been t h e  - 48 -  e s t a b l i s h m e n t o f a p u b l i c and p r i v a t e s e c t o r development  finance institu-  t i o n t o a s s i s t ASEAN r e g i o n a l p r o j e c t s and o t h e r f i n a n c i n g e f f o r t s i n a manner c o m p l i m e n t a r y Bank. ^ 1  t o t h e e s t a b l i s h e d p r a c t i c e s o f t h e A s i a n Development  E s t a b l i s h e d i n mid-1981, t h e ASEAN F i n a n c e C o r p o r a t i o n (AFC) i s  d e s i g n e d t o narrow t h e gap i n ASEAN between m u l t i n a t i o n a l c o r p o r a t i o n s and domestic business i n f r a s t r u c t u r e .  The AFC i s i n t e n d e d t o encourage t h e  economic development o f t h e r e g i o n a n d , by promoting c r o s s - b o r d e r i n v e s t m e n t s , i s i n t e n d e d t o enhance t h e p o l i t i c a l and economic i n t e g r a t i o n o f t h e o r g a n i 11 zation.  The c o n c e p t o f t h e AFC took shape as ASEAN's b u s i n e s s and g o v e r n -  ment l e a d e r s r e c o g n i z e d t h e i r need f o r more t r a d e f i n a n c i n g and b r o a d l y based i n d u s t r i a l i z a t i o n i n t h e r e g i o n ; p a r t i c u l a r l y , t o s m a l l e r b u s i n e s s 12 men w i t h l i m i t e d a c c e s s t o f u n d s .  In each ASEAN c o u n t r y , c o n t i n u a l de-  velopment o f commodity e x p o r t s f o r a growing number o f market and t h e g o a l o f i n d u s t r i a l i z a t i o n w i t h i t s need f o r c a p i t a l , has a l l o w e d t h e e s t a b l i s h ment o f t h i s f u n d as a means o f d e v e l o p i n g a v i a b l e f i n a n c i a l s e c t o r i n the ASEAN r e g i o n w i t h ASEAN i n t e r e s t s . The ASEAN members' debt l i n k a g e s have l a r g e l y been e s t a b l i s h e d t h r o u g h b o r r o w i n g p a t t e r n s i n i t i a t e d by each ASEAN government.  The r e s u l t has been  a s t r u c t u r a l dependence on c e r t a i n c r e d i t o r s -- many o f which a r e t h e ASEAN n a t i o n s ' p r i m a r y t r a d e and i n v e s t m e n t p a r t n e r s ( t h e d e v e l o p e d i n d u s t r i a l i z e d nations).  U n f o r t u n a t e l y , due t o t h e l a c k o f d a t a , a thorough s t u d y o f t h i s  s t r u c t u r e , i n t h e hope o f d i s c e r n i n g a p a t t e r n o f c r e d i t o r d i v e r s i f i c a t i o n , cannot be c o n d u c t e d .  However, e f f o r t s made by t h e f i v e n a t i o n s t o e f f e c t  a r e g i o n a l s o u r c e o f f i n a n c i n g does i n d i c a t e a c o n c e r n f o r t h o s e t h a t have r e s u l t e d from t h e p r e s e n t d e b t s t r u c t u r e .  consequences  - 49  -  Allegation 2 Debt h i n d e r s economic development and i s i n t h e i n t e r e s t s of the local e l i t e . In p u r e l y economic t e r m s , t h e c a s e f o r e x t e r n a l b o r r o w i n g r e s t s upon i t s c o n t r i b u t i o n t o economic development.  S i m p l y summarized, d e b t , r a t h e r  than h i n d e r i n g economic development i s r e l a t e d to "a l o n g - r u n development p e r s p e c t i v e i n which a s u s t a i n e d i n f l o w o f e x t e r n a l r e s o u r c e s adds t o 13  domestic investment."  E x t e r n a l c a p i t a l i n f l o w s i n c r e a s e the amount o f  r e s o u r c e s f o r c a p i t a l f o r m a t i o n by s u p p l e m e n t i n g d o m e s t i c s a v i n g s , w h i l e p r o v i d i n g t h e b o r r o w e r w i t h a d d i t i o n a l f o r e i g n exchange.  The e f f e c t o f  l o a n c a p i t a l on development u l t i m a t e l y depends upon i t s u s e ; borrowed c a p i t a l can be used f o r i n v e s t m e n t i n p r o d u c t i v e v e n t u r e s , as a means t o i n c r e a s e t h e r e c i p i e n t ' s c a p a c i t y t o i m p o r t goods, o r as a s o l u t i o n t o p o t e n t i a l b o t t l e n e c k s o f s k i l l s o r f o r e i g n exchange.  In t i m e o f economic  h a r d s h i p , e x t e r n a l b o r r o w i n g may be used i n p l a c e o f c o r r e c t i v e d o m e s t i c measures, t h e e f f e c t o f which may h i n d e r l o n g range development programmes. More e f f i c i e n t use can t h e n be made o f d o m e s t i c r e s o u r c e s , so t h a t t h e growth o f o u t p u t may be h i g h e r than would be p e r m i t t e d by t h e r a t e o f i n 14  c r e a s e o f t h e most r e s t r i c t i v e d o m e s t i c f a c t o r . The e f f e c t o f e x t e r n a l d e b t on economic development s t r a t e g i e s i n c l u d e s many f a c t o r s t h a t c r i t i c s o f d e b t do n o t t a k e i n t o a c c o u n t . Of key i m p o r t a n c e a r e sound economic management and c a l c u l a t e d economic r e t u r n s from l o a n c a p i t a l i n v e s t m e n t s . Thus, t h e d e g r e e t o which b o r r o w i n g c o n t r i b u t e s t o growth and d e b t - s e r v i c i n g c a p a c i t y , depends on t h e economic framework w i t h i n which t h e b o r r o w i n g t a k e s p l a c e .  This relation of individual  b o r r o w i n g t o g e n e r a l economic management i s t h e key t o u n d e r s t a n d i n g t h e  - 50 d i f f e r e n c e s found i n the a b i l i t y o f d e v e l o p i n g c o u n t r i e s t o manage t h e i r d e b t , whether from o f f i c i a l o r p r i v a t e s o u r c e s , i n an e f f i c i e n t and  sus-  t a i n a b l e manner. C o n t r a r y t o the c r i t i c s ' view, d e b t i n ASEAN has been a p o s i t i v e f o r c e t h a t has c o n t r i b u t e d to the economic development o f the whole economy i n each c o u n t r y .  In a d i s c u s s i o n o f p r i v a t e l e n d i n g i n the A s i a - P a c i f i c  r e g i o n , A.K. B h a t t a c h a r y a  p o i n t s out t h a t  to the e x t e n t t h a t o f f s h o r e funds a r e s u p p l i e d f o r c a p i t a l p r o j e c t f i n a n c i n g ( f o r example, a g r i c u l t u r e , mass t r a n s i t , o i l e x p l o r a t i o n , m i n i n g , s t e e l , e l e c t r i c i t y , c h e m i c a l s , and p e t r o c h e m i c a l s ) bank l e n d i n g c o n t r i b u t e s t o the economic development o f the a r e a by e i t h e r i m p r o v i n g the e x p o r t comp e t i t i v e n e s s o f i n d u s t r i e s o r by a s s i s t i n g i m p o r t - s u b s t i t u t i o n p o l i c i e s o f c o u n t r i e s i n the r e g i o n . 1 5 M o r e o v e r , most commercial b o r r o w i n g by the ASEAN n a t i o n s i s c o n t r a c t e d g u a r a n t e e d be t h e p u b l i c o r s t a t e s e c t o r .  or  J e f f F r i e d e n , o b s e r v e s t h a t such  b o r r o w i n g by the s t a t e s e c t o r r e p r e s e n t s growing d e v e l o p m e n t a l i s t  and  n a t i o n a l i s t demands i n LDCs". But the e a r l i e r r e l i a n c e on m u l t i n a t i o n a l c o r p o r a t i o n s i s no l o n g e r s u f f i c i e n t t o fund the development o f an i n t e g r a t e d n a t i o n a l economy. On the one hand, f o r e i g n c o r p o r a t i o n s a r e o f t e n u n w i l l i n g t o i n v e s t i n key heavy i n d u s t r i a l s e c t o r s where c a p i t a l r e q u i r e m e n t s a r e h i g h and r a t e s o f r e t u r n low. On the o t h e r , t h e r e i s g e n e r a l l y a l o c a l consensus embracing t e c h n o c r a t s , b u s i n e s s m e n , m i l i t a r y men, and l a b o u r t h a t some i n d u s t r i e s a r e too p o l i t i c a l l y s e n s i t i v e o r too important, to n a t i o n a l s e c u r i t y to e n t r u s t t o f o r e i g n e r s . Yet t h e o n l y a v a i l a b l e a l t e r n a t i v e to f o r e i g n d i r e c t i n v e s t ment i s f o r e i g n i n d i r e c t i n v e s t m e n t , bank l o a n s c h a n n e l e d t h r o u g h the p u b l i c s e c t o r and u s e d t o e s t a b l i s h o r expand domestically controlled public or publically-supported enterp r i s e s .16 Thus both the d e b t o r s and the c r e d i t o r s have " s t a k e d t h e i r f o r t u n e s " on r a p i d economic d e v e l o p m e n t . ^ 1  Loans from o f f i c i a l s o u r c e s a r e a l s o d i r e c t e d a t d e v e l o p m e n t a l  - 51  priorities.  -  Loans f o r s t r u c t u r a l a d j u s t m e n t  a r e c o n t r a c t e d to h e l p members  a t t a i n v i a b l e payments positions and s u s t a i n a b l e l e v e l s o f economic growth w h i l e m a i n t a i n i n g developmental  priorities.  In the c a s e o f the ASEAN n a t i o n s ,  e v i d e n c e t o s u p p o r t t h i s p o i n t i s d i f f i c u l t t o come by.  P r o j e c t l o a n s , on  t h e o t h e r hand, have a more v i s i b l e impact.  A s u r v e y o f W o r l d Bank l o a n s  t o t h e ASEAN c o u n t r i e s between 1974  i n d i c a t e s t h a t an o v e r w h e l m i n g  and 1980  number o f p r o j e c t s which i t f i n a n c e d s u p p o r t e d d e v e l o p m e n t - o r i e n t e d  projects,  p a r t i c u l a r l y i n t h o s e s e c t o r s where the u n d e r p r i v i l e g e d p o p u l a t i o n i s benefitted. (s  e e  T a b l e s 8 to  The developmental  12).  impact o f o f f i c i a l b i l a t e r a l l o a n s c a n n o t be as  e a s i l y d i s c e r n e d due t o the l a c k o f a v a i l a b l e s t a t i s t i c s and i n f o r m a t i o n . The U n i t e d S t a t e s , a m a j o r b i l a t e r a l donor t o many o f the ASEAN n a t i o n s , has, however, demonstrated  a p o l i t i c a l c o n c e r n t o p r o v i d e a i d to t h o s e  projects i n the development-oriented  sectors.  The US Congress  has  e x p r e s s l y d i r e c t e d , t h a t b i l a t e r a l a i d be g i v e n o n l y to the p o o r e r p o p u l a t i o n s i n d e v e l o p i n g c o u n t r i e s . R e c e n t l y i t expanded i t s 'New D i r e c t i o n s ' p o l i c i e s t o r e q u i r e t h a t U n i t e d S t a t e s o f f i c i a l s g i v e p r i o r i t y t o meeting b a s i c human needs as opposed t o i n v e s t i n g i n i n f r a s t r u c t u r e o r e x p o r t - o r i e n t e d i n d u s t r y , and f o c u s on development p r o grams which promote l a b o r - i n t e n s i v e l i g h t c a p i t a l t e c h n o logy. 18  M o r e o v e r , i n two ASEAN n a t i o n s the s u p p l y o f l o a n c a p i t a l e x p r e s s l y b e n e f i t e d n o n - e l i t e members o f the economy.  has  In S i n g a p o r e ,  p r e s e n c e o f i n t e r n a t i o n a l banks i n t h a t c o u n t r y has h e l p e d l o c a l  the  businesses,  too s m a l l t o g a i n a c c e s s to the European f i n a n c i a l m a r k e t , t o r a i s e c a p i t a l regionally.  Second, the M a l a y s i a n government's c o n c e r n i s d i r e c t e d a t two  objectives:  f i r s t , how t h e chosen p r o j e c t s funded by f o r e i g n c a p i t a l f u l f i l l  growth t a r g e t s s e t under the Second and T h i r d M a l a y s i a P l a n s ; and second,  how  - 52 -  TABLE 8 S t a t e m e n t o f Loans Approved by World Bank 1974-1980  Indonesia Purpose  ;  Railways J a k a r t a u r b a n development Water s u p p l y Development f i n a n c e company Industry Irrigation Agricultural research Power Shipping — F e r t i l i z e r d i s t r i b u t i o n Technical assistance • Highways Education" Shipping ' Fertilizer E l e c t r i c power A g r i c u l t u r e : T r a n s m i g r a t i o n and Rural Development Urban Development T r a n s p o r t a t i o n -- P o r t s Development F i n a n c e Companies Power P o p u l a t i o n s : N u t r i t i o n Development Agriculture: Irrigation Agriculture: Irrigation Education: Teacher Training Development F i n a n c e Companies Population: Family Planning E d u c a t i o n Non-Formal E d u c a t i o n A g r i c u l t u r e and Rural Development Power ' I n d u s t r y : Coal A g r i c u l t u r e and Rural Development A g r i c u l t u r e and Rural Development A g r i c u l t u r e and Rural Development A g r i c u l t u r e and Rural Development Urban Development A g r i c u l t u r e and R u r a l Development Education Transportation  Year 1974 1974 1974 1974 1975 1975 1975 1975 1975 1976 1976 1976 1976 1976 1976 1976 1976 1976 1977 1977 1977 1977 1977 1977 1977 1977 1977 1977 1978 1978 1978 1978 1978 1978 1979 1979 1979 1979  - 53  -  TABLE 8 ( c o n t . ) Purpose  Year  I n d u s t r i a l Development and F i n a n c e A g r i c u l t u r e and Rural Development Power Water S u p p l y and Sewerage A g r i c u l t u r e and Rural Development A g r i c u l t u r e and Rural Development A g r i c u l t u r e and Rural Development A g r i c u l t u r e and Rural Development P o p u l a t i o n , H e a l t h and N u t r i t i o n Energy  1979 1979 1979 1979 1979 1980 1980 1980 1980 1980  Source:  World Bank Annual R e p o r t , 1974-1980.  - 54 TABLE 9 S t a t e m e n t o f Loans Approved by World Bank 1974-1980  Malaysia Purpose..  Year  Land s e t t l e m e n t A r e a development Education Highways Land s e t t l e m e n t Agriculture Power Water s u p p l y and sewerage Urban t r a n s p o r t Rural development E l e c t r i c power Education Agriculture Power A g r i c u l t u r e and Rural Development A g r i c u l t u r e and Rural Development A g r i c u l t u r e and Rural Development Transportation Energy  1974 1974 1974 1974 1974 1975 1974 1976 1976 1976 1975 1976 1977 1977 1977 1977 1978 1978 1980  Source:  World Bank Annual R e p o r t ,  1974-1980.  - 55 TABLE 10 S t a t e m e n t o f Loans Approved by W o r l d Bank 1974-1980  Philippines Purpose  Year  Irrigation Development f i n a n c e Highways Ports Population Shipping Irrigation Rural development Industry Power Development f i n a n c e company Irrigation Development f i n a n c e company Education Livestock Irrigation Grain Processing F i s h e r i e s II Urbanization Urbanization Transportation Agriculture Education Agriculture Water S u p p l y and Sewerage Agriculture Agriculture Power A g r i c u l t u r e and Rural Development A g r i c u l t u r e and Rural Development Education A g r i c u l t u r e and Rural Development I n d u s t r i a l Development and F i n a n c e I n d u s t r i a l Development and F i n a n c e Power I n d u s t r i a l Development and F i n a n c e A g r i c u l t u r e and Rural Development Education  1974 1974 1974 1974 1974 1974 1975 1975 1974 1974 1975 1975 1976 1976 1976 1976 1976 1976 1976 1976 1977 1977 1977 1977 1977 1977 1977 1977 1978 1978 1978 1978 1978 1978 1978 1979 1979 1980  .  - 56  -  TABLE 10 ( c o n t . ) Purpose  Year  A g r i c u l t u r e and R u r a l Development Water S u p p l y and Sewerage A g r i c u l t u r e and R u r a l Development Urbanization Transportation Transportation  1980 1980 1980 1980 1980 1980  Source:  World Bank Annual R e p o r t ,  1974 1980. r  - 57 -  TABLE 11 S t a t e m e n t o f Loans Approved by World Bank 1974-1980  Singapore Purpose  Year  Education Water S u p p l y Environmental Control  1974 1974 1975  Source:  World Bank Annual R e p o r t , 1974-1980.  - 58 TABLE 12 S t a t e m e n t o f Loans Approved by World Bank 1974-1980  Thailand Purpose  Year  Development F i n a n c e Power Water S u p p l y Irrigation Livestock R u r a l Development  1974 1974 1974 1975 1976 1976  Education Telecommunications Agriculture Agriculture Development F i n a n c e Companies Transportation Urban Development Power Industry Power A g r i c u l t u r e and R u r a l Development A g r i c u l t u r e and R u r a l Development A g r i c u t t u r e and R u r a l Development Urbanization Energy Energy Energy Water S u p p l y and Sewerage Energy  1976 1976 1977 1977 1976 1978 1978 1978 1978 1978 1979 1979 1979 1980 1979 1979 1979 1980 1980  Rubber r e p l a n t i n g  Source:  World Bank Annual R e p o r t , 1974-1980.  1976  - 59  -  the p r o j e c t s funded by f o r e i g n l o a n c a p i t a l s a t i s f y the o b j e c t i v e s o f r e s t r u c t u r i n g s o c i e t y t o a l l o w a l a r g e r r o l e i n i n d u s t r y and commerce f o r 19  the e t h n i c Malay p o p u l a t i o n .  The p o l i t i c a l r e a l i t y i n M a l a y s i a i s such  t h a t the r u l i n g e l i t e r e p r e s e n t the i n t e r e s t s o f the Malay e t h n i c g r o u p .  underprivileged  F o r example, t h e p r e s s u r e t h a t M a l a y s i a put on the  World Bank to m a i n t a i n the f l o w o f s o f t l o a n s t o t h a t c o u n t r y t h i s p o l i t i c a l concern.  exemplifies  These s o f t l o a n s have been p r i m a r i l y d i r e c t e d a t  the r u r a l s e c t o r where t h e m a j o r i t y o f the Malay people From the e v i d e n c e p r e s e n t e d  live;  i n t h i s d i s c u s s i o n , the l e f t i s t a l l e g a t i o n  t h a t debt h i n d e r s economic development and b e n e f i t s t h e i n t e r e s t s o f the l o c a l e l i t e c a n n o t be a p p l i e d i n the ASEAN c a s e .  A t both the d o m e s t i c and  t h e e x t e r n a l l e v e l s , e f f o r t s have been d i r e c t e d a t p r o v i d i n g l o a n c a p i t a l t h a t would be used e f f i c i e n t l y and a c c o r d i n g t o development p r i o r i t i e s . Further evidence,  i n the form o f a d i s c u s s i o n on ASEAN's economic growth,  w i l l be p r e s e n t e d below ( i n the d i s c u s s i o n o f A l l e g a t i o n 4 ) . Allegation 3 C o n d i t i o n a l l o a n s o f t e n i n v o l v e p o l i c i e s beyond the s c o p e o f recommending a p p r o p r i a t e changes i n a n a t i o n ' s economic p o l i c i e s and a r e used as a t o o l f o r p o l i t i c a l interference. C h a p t e r Two,  d e a l i n g w i t h the development o f d e b t o r - c r e d i t o r r e l a t i o n s  amongst the ASEAN n a t i o n s , i n c l u d e d a number o f examples o f how t h e s e r e l a t i o n s have i n c l u d e d c r e d i t o r i n f l u e n c e i n p o l i c y - m a k i n g  through condi-  t i o n a l l o a n s and o t h e r forms o f p o l i c y recommendations.  C o n t r a r y to the  a l l e g a t i o n put f o r t h by t h e l e f t i s t c r i t i c s , t h e r e was no e v i d e n c e blatant political control.  of  R a t h e r , the c o n d i t i o n a l p o l i c i e s o u t l i n e d  were c h a r a c t e r i z e d p r i m a r i l y as v i a b l e development and t r a d e programmes.  - 60 P o l i t i c a l i n t e r f e r e n c e , such as t h a t d e s c r i b e d by t h e c r i t i c s , i n v o l v e s a c t i o n s such as a d o p t i o n o f f o r e i g n , m i l i t a r y , o r d o m e s t i c p o l i c i e s t h a t would b e n e f i t t h e c r e d i t o r p o l i t i c a l l y o r e c o n o m i c a l l y .  The ASEAN n a t i o n s ,  on t h e o t h e r hand, were p a r t i c i p a n t s i n p o l i c y changes t h a t would u l t i m a t e l b e t t e r t h e i r f u t u r e economic d e v e l o p m e n t and were a b l e t o make t h e i r own 20 d e c i s i o n i n so f a r as whether o r n o t t o a c c e p t t h e terms o f t h e l o a n s . C o n d i t i o n a l p o l i c i e s have a l s o been a means o f i m p l e m e n t i n g p o l i t i c a l l y d i f f i c u l t p o l i c i e s . The T h a i government i n 1980, s u p p o r t e d  the  c o n d i t i o n a l economic programme a t t a c h e d t o World Bank l o a n by e m p h a s i z i n g the a d v a n t a g e s o f d i s c i p l i n e " i f T h a i l a n d i s to r e v e r s e i t s economic s l i d e . In a d d i t i o n , T h a i l e a d e r l i n k e d t h e i r s u p p o r t o f t h e Bank's c o n d i t i o n a l i t y with s p e c i f i c p o l i t i c a l o b j e c t i v e s .  F i r s t , t h e government saw t h e bank  as a " u s e f u l and i n f l u e n t i a l a l l y i n t h e i r [the government's] f i g h t t o 22 overcome v e s t e d i n t e r e s t s w i t h i n T h a i b u s i n e s s and b u r e a u c r a t i c  circles."  Second, c o n t i n u e d economic i n s t a b i l i t y would o n l y c o n t r i b u t e t o t h e p o l i t i c a l u n r e s t t h a t thas been a d e s t a b i l i z i n g f a c t o r i n T h a i l a n d ' s economic and p o l i t i c a l strength.  In M a l a y s i a ' s c a s e , t h e government made a c o n c e r t e d  e f f o r t t o r e t a i n i t s e l i g i b i l i t y f o r s o f t l o a n s from t h e W o r l d Bank b a l a n c i n g t h e c o n d i t i o n a l l y a g a i n s t c o n s i d e r a t i o n o f p o l i t i c a l l y import a n t o b j e c t i v e s r e l e v a n t t o t h e e t h n i c Malay community. Amongst t h e ASEAN n a t i o n s , t h e r e e x i s t s l i t t l e e v i d e n c e o f p o l i t i c a l o r economic i n t e r f e r e n c e by t h e p r i v a t e banks.  T h i s may be e x p l a i n e d by  the f o l l o w i n g c o n s i d e r a t i o n s t h a t t h e banks must make.  F i r s t , most  i n t e r n a t i o n a l banks have a v a r i e t y o f f i n a n c i a l i n t e r e s t s i n b o r r o w i n g count r i e s making i t i m p o r t a n t  f o r t h e banks t o m a i n t a i n good r e l a t i o n s w i t h t h e  - 61  h o s t government; i n v o l v e m e n t 23 relations.  -  i n domestic p o l i c y c o u l d t h r e a t e n t h e s e  S e c o n d , t h e b o r r o w e r has t h e o p t i o n t o c h o o s e n o t t o a c c e p t  a bank's l o a n , e s p e c i a l l y i f i t i s c o n d i t i o n a l on c e r t a i n economic p o l i c i e s , and take i t s b u s i n e s s t o a n o t h e r bank o r even t o one o f t h e o f f i c i a l creditors.  I f c o n d i t i o n s a r e a c c e p t e d , t h e y must have t h e s u p p o r t o f most 24  o f t h e o t h e r m a j o r i n t e r n a t i o n a l banks b e f o r e they can be e f f e c t i v e . However, few banks have the r e s o u r c e s t o d e t e r m i n e and r e g u l a t e such measures.  F i n a l l y , a bank's i n d i r e c t p o t e n t i a l t o undermine a n a t i o n ' s economy  i s o n l y e f f e c t i v e " t o t h e e x t e n t t h a t banks a r e w i l l i n g t o w r i t e o f f t h e i r p r e v i o u s l o a n s . „25 i  F i n a l l y , t h e a l l e g a t i o n t h a t c o n d i t i o n a l p o l i c i e s a r e a key i n maint a i n i n g an e x p l o i t a t i v e p a t t e r n o f LDC dependence can be c h a l l e n g e d by a p r i n c i p l e o f t h e IMF's r o l e i n i n t e r n a t i o n a l f i n a n c i a l m a t t e r s .  The IMF,  c r i t i c i z e d f o r i t s c o n d i t i o n a l l o a n s , bases i t s d e c i s i o n s t o l e n d on t h e p r i n c i p l e o f "uniformity o f treatment."  This p r i n c i p l e requires that f o r  any g i v e n d e g r e e o f need, t h e e f f o r t economic a d j u s t m e n t s o u g h t i n c o n d i t i o n a l programmes be b r o a d l y e q u i v a l e n t among members.  T h u s , both  developed  and d e v e l o p i n g c o u n t r i e s a r e e q u a l l y s u b j e c t e d t o c o n d i t i o n a l programmes when they r e q u i r e IMF f u n d i n g . Allegation 4 Debt, and i n p a r t i c u l a r , c o n d i t i o n a l p o l i c i e s , have a n e g a t i v e impact on an economy's growth r a t e . The ASEAN n a t i o n s have g e n e r a l l y f o l l o w e d economic d e v e l o p m e n t 27 s t r a t e g i e s t h a t have emphasized i n d u s t r i a l i z a t i o n and e x p o r t s . s t r a t e g i e s have been geared t o e f f e c t two economic t r e n d s : growth and debt repayment.  In a d d i t i o n , t h e r e  These  o v e r a l l economic  can be o b s e r v e d a g e n e r a l  - 62 -  concern f o r g r e a t e r s e l f - s u f f i c i e n c y to reduce i n c r e a s i n g c o s t s o f o i l i m p o r t s r e s u l t i n g from i n c r e a s e d l e v e l o f i n d u s t r i a l i z a t i o n and h i g h e r r e s o u r c e c o s t s . Many o f t h e s e s t r a t e g i e s , as p o i n t e d o u t i n C h a p t e r Two, have been i n i t i a t e d f o l l o w i n g recommendations  made by ASEAN . c r e d i t o r s ;  I n d o n e s i a , t h e P h i l i p p i n e s , and T h a i l a n d d i s p l a y t h e s t r o n g e s t examples. To t h e e x t e n t t h a t s t a t i s t i c s i n T a b l e 13 may be used as an a c c u r a t e measure o f t h e e f f e c t o f such p o l i c i e s ,  d e b t and c o n d i t i o n a l .  p o l i c i e s have n o t s t u n t e d economic growth.  R a t h e r , t h e ASEAN n a t i o n s  have a l l m a i n t a i n e d p o s i t i v e , and i n some c a s e s , r e l a t i v e l y h i g h r a t e s o f economic  growth.  T a b l e s 14 and 15 i l l u s t r a t e t h e growth o f d e b t as a p e r c e n t a g e o f t h e 28  growth o f GDP a n d e x p o r t s  r e s p e c t i v e l y . These measures a r e f a i r l y weak  i n d i c a t o r s o f a l l a s p e c t s o f t h e economy b u t t h e y do p r o v i d e a means o f i l l u s t r a t i n g t h e r o l e o f d e b t i n a n a t i o n ' s o v e r a l l economic s t a n d i n g ( T a b l e 14) and t h e e f f e c t t h a t t r a d e has had on d e b t s e r v i c i n g ( T a b l e 1 5 ) . In both t a b l e s , t h e s t a t i s t i c s d e m o n s t r a t e t h a t t h e l e v e l o f d e b t has i n c r e a s e d as a p e r c e n t a g e o f GDP and as a p e r c e n t a g e o f t r a d e . D e s p i t e t h i s i n d i c a t i o n o f an i n c r e a s i n g debt burden r e a l economic growth has n o t been "stunted."' Cone!usions T h i s t h e s i s has examined i n some d e t a i l t h e e x t e r n a l d e b t o f t h e ASEAN nations.  The t h e o r e t i c a l framework f o r t h i s s t u d y f o c u s e s on t h e argument  p r e s e n t e d by t h e c r i t i c s o f debt and a i d . T h i s argument i s based on an examination o f d e b t o r - c r e d i t o r r e l a t i o n s i n the international f i n a n c i a l system and t h e i r p o l i t i c a l and economic i m p l i c a t i o n s on t h e d e b t o r n a t i o n .  - 63 TABLE 13 Growth Rates o f Real P r o d u c t (percentage)  Country  1972  1974  1976  1978  Indonesia  9.4  7.6  6.9  7.2  Malaysia  9.4  8.3  11.1  7.4  Philippines  4.8  5.3  6.7  5.8  Singapore  13.4  6.3  7.5  8.6  Thailand  4.7  5.4  9.0  11.7  Source:  Compiled from A s i a n Development Bank. Key I n d i c a t o r s o f D e v e l o p i n g Member C o u n t r i e s o f ADB, O c t o b e r 1980, pp. 119-211.  - 64 -  TABLE 14 E x t e r n a l P u b l i c Debt  Outstanding/GDP  (percentage) Country  1972  1974  1976  1978  Indonesia  38.2  24.6  26.9  37.5  Malaysia  13.5  8.6  14.8  16.3  Philippines  10.4  7.8.  11.9  17.7  Singapore  10.3  9.9  11.9  14.0  Thailand  4.9  3.9  5.0  7.6  Source:  Compile from A s i a n Development Bank. Key I n d i c a t o r s o f D e v e l o p i n g Member C o u n t r i e s o f ADB, O c t o b e r 1980, pp. 110-211.  - 65 -  TABLE 15 Debt S e r v i c e R a t i o (percentage)  Country  1972  1974  1976  1978  Indonesia  6.9  3.9  11.2  12.4  Malaysia  2.7  2.5  4.5  8.8  10.1  5.2  7.1  13.7  Singapore  1.0  0.6  0.8  2.3  Thailand  2.7  1.9  2.4  3.4  Philippines  Source:  Compiled f r o m . A s i a n Development Bank. Member C o u n t r i e s , 1980, p. 32.  Key I n d i c a t o r s o f D e v e l o p i n g  - 66  -  The ASEAN n a t i o n s have been used as a c a s e s t u d y t h r o u g h which t o examine d e b t w i t h i n t h i s t h e o r e t i c a l framework.  I t has been a r g u e d t h a t the f i v e  ASEAN members do d i s p l a y some c h a r a c t e r i s t i c s o f debt dependence  through  r e l a t i o n s h i p s w i t h t h e i r c r e d i t o r s b u t , i n the f i n a l a n a l y s i s , the o v e r whelming e v i d e n c e has i n d i c a t e d t h a t the e x p e r i e n c e o f the ASEAN s t a t e s does not s u p p o r t t h o s e a l l e g a t i o n s found i n c r i t i q u e s o f d e b t and a i d . In o r d e r t o c l a r i f y the o b s e r v a t i o n s and t h e c o n c l u s i o n s i n t h i s t h e s i s , I w i l l r e view the argument found i n C h a p t e r One, and then put f o r t h the f i n d i n g s made in the case study. The i n c r e a s i n g f l o w o f l o a n c a p i t a l and a i d from t h e d e v e l o p e d t o the d e v e l o p i n g w o r l d has prompted c o m p l a i n t s t h a t t h e s t r u c t u r e o f t h e i n t e r n a t i o n a l f i n a n c i a l system r e p r e s e n t s an a t t e m p t by t h e d e v e l o p e d n a t i o n s t o perpetuate a pattern of neo-colonialism.  This.approach to international  f i n a n c i a l r e l a t i o n s i s based on f o u r major arguments:  f i r s t , that debt i s  associated with the i n i t i a t i v e s of foreign c r e d i t o r s (the developed nations) t o s u s t a i n e x i s t i n g n e o - c o l o n i a l s t r u c t u r e s o f dependence; s e c o n d , t h a t debt h i n d e r s economic development and i s r e a l l y i n t h e i n t e r e s t s o f the l o c a l e l i t e ; t h i r d , t h a t d e b t , and i n p a r t i c u l a r , c o n d i t i o n a l l o a n s a r e a t o o l f o r p o l i t i c a l i n t e r f e r e n c e ; and f i n a l l y , t h a t debt and i n p a r t i c u l a r , c o n d i t i o n a l p o l i c i e s , have a n e g a t i v e impact on the d e b t o r economy's economic rate.  growth  The i s s u e o f c o n d i t i o n a l i t y assumes c e n t r a l i m p o r t a n c e i n the a r g u -  ment as i t i s viewed as t h e b a s i c c u l p r i t s u s t a i n i n g the elements t h a t a r e f o c u s e d on i n the c r i t i c s ' argument:  a t o o l f o r p o l i t i c a l and  economic  i n t e r f e r e n c e s u p p o r t i n g a dependent s t r u c t u r e and a r e p r e s e n t a t i v e o f i r r a t i o n a l economic p o l i c i e s t h a t h i n d e r economic growth and  development.  - 67 -  C o u n t r i e s r e m a i n i n g w i t h i n t h e system a r e doomed t o p e r p e t u a l development.  under-  Withdrawal from t h e system i s viewed as t h e o n l y p r e s c r i p t i o n .  The d e b t o f t h e ASEAN c o u n t r i e s h a s , i n v a r y i n g d e g r e e s , accompanied by c r e d i t o r i n f l u e n c e .  been  The ASEAN s t a t e s a r e dependent on  t h e i r c r e d i t o r s by v i r t u e o f t h e f a c t t h a t t h e i r a c c u m u l a t e d volume o f debt has r i s e n i n g r o s s and r e l a t i v e terms ( s e e T a b l e s 1 and 4 ) . The p r a c t i c e o f c o n d i t i o n a l i t y has been c l e a r l y e v i d e n t i n c e r t a i n c a s e s , r e s u l t i n g i n r e l a t i o n s where d o m e s t i c economic p o l i c y was i n f l u e n c e by t h e creditors.  However, t h e p r o o f t h a t t h e ASEAN s t a t e s have been i n v o l v e d i n  such a r e l a t i o n s h i p i s h a r d l y e v i d e n c e t h a t they a r e c o n t r o l l e d p o l i t i c a l l y by e x t e r n a l a c t o r s and a r e u l t i m a t e l y committed t o u n d e r d e v e l o p m e n t . C o n s i d e r i n g t h e d i v e r s e c h a r a c t e r o f t h e f i v e economic and p o l i t i c a l systems found amongst ASEAN's members, each n a t i o n ' s d e b t e x p o s u r e i n both p o l i t i c a l and economic terms r e f l e c t e d e x i s t i n g economic c o n d i t i o n s , p r o j e c t e d development t a r g e t s , and d o m e s t i c p o l i t i c a l p r e s s u r e .  C o u n t r i e s such as  I n d o n e s i a , T h a i l a n d , and t h e P h i l i p p i n e s have had t o borrow from t h e World Bank and t h e IMF p r i m a r i l y because o f t h e i r economic c o n d i t i o n -- an important f a c t o r i n determining  t h e c r e d i t o r s o u r c e and, i f a p p l i c a b l e , c o n d i -  t i o n a l p o l i c i e s . What remains c l e a r i s t h a t t h i s e x p o s u r e has been s u s t a i n e d by d o m e s t i c p o l i c y d e c i s i o n s based on economic and p o l i t i c a l  criteria  r a t h e r than i n i t i a t i v e s on t h e p a r t o f t h e c r e d i t o r s . The r e s u l t has been a c o n c e n t r a t i o n o f debt l i n k a g e s between t h e ASEAN members and p r i v a t e and o f f i c i a l loan sources.  Short of a s t a t i s t i c a l analysis providing  evidence  o f c r e d i t o r s o u r c e d i v e r s i f i c a t i o n , t h e ASEAN n a t i o n s ' c o n c e r n f o r t h e e x i s t i n g d e b t s t r u c t u r e has been i n d i c a t e d d e s p i t e t h e minimal immediate  - 68  -  e f f e c t , t h r o u g h t h e development o f r e g i o n a l s o u r c e s o f f i n a n c i n g such as t h e AFC. D e s p i t e t h e s t i g m a a t t a c h e d t o c o n d i t i o n a l i t y by t h e c r i t i c s and the overwhelming e v i d e n c e t h a t such p o l i c i e s have been implemented i n t h e ASEAN c a s e s , t h e r e was no e v i d e n c e o f p o l i t i c a l i n t e r f e r e n c e l i n k e d w i t h any of these p o l i c i e s .  On t h e c o n t r a r y , e x c e p t f o r one c a s e c o n c e r n i n g T h a i l a n d ,  the ASEAN n a t i o n s were p a r t i c i p a n t s i n p o l i c y changes t h a t u l t i m a t e l y benef i t e d economic growth and s u p p o r t e d t h e n a t i o n s ' economic development p r i o r i ties.  E f f o r t s from b o t h i n t e r n a l and e x t e r n a l a c t o r s were d i r e c t e d a t a s s u r -  ing t h a t l o a n c a p i t a l , and any c o n d i t i o n a l i t y a t t a c h e d t o i t was used i n an e f f i c i e n t manner e f f e c t i n g p o s i t i v e changes i n t h e economic growth o f t h e n a t i o n as w e l l as s u p p o r t i n g t h e development o f t h e economy. The d i v e r s i t y f o u n d i n t h e ASEAN members' economic and p o l i t i c a l systems as w e l l as i n t h e i r d e b t e x p e r i e n c e a l l o w s f o r a c r o s s - s e c t i o n o f LDC d e b t c a s e s . The a b i l i t y o f each ASEAN n a t i o n t o m a i n t a i n a s t a b l e e c o nomy, s u s t a i n a manageable d e b t and p r e v e n t p o l i t i c a l m a n i p u l a t i o n by ext e r n a l c r e d i t o r s e x e m p l i f i e s a c a s e a g a i n s t t h e c r i t i c s ' argument and p r o v i d e s an example o f how f i v e n a t i o n s which a r e a c t i v e l y i n v o l v e d i n t h e i n t e r n a t i o n a l f i n a n c i a l s y s t e m cope w i t h t h e i m p l i c a t i o n s o f d e b t .  Domestic  e f f o r t s have been, t o a minimal e x t e n t , supplemented by r e g i o n a l d e m o n s t r a t i o n s o f f i n a n c i a l c o o p e r a t i o n f o c u s e d on common o b j e c t i v e s .  Ultimately,  the combined e f f o r t s n a t i o n a l l y , r e g i o n a l l y , and, t o a c e r t a i n d e g r e e , e x t r a r e g i o n a l l y , c o u p l e d w i t h c o n t i n u e d economic and i n d u s t r i a l growth, w i l l a l l o w f o r a g r e a t e r d e g r e e o f p o l i t i c a l and economic s t r e n g t h i n the n a t i o n a l , r e g i o n a l , and i n t e r n a t i o n a l s y s t e m s .  - 69 -  CHAPTER 3  FOOTNOTES  1.  Reviews o f t h i s i s s u e a r e found i n : J.A. Caporaso, "Dependence, Dependency and Power i n t h e G l o b a l System: A S t r u c t u r a l and . B e h a v i o u r a l A n a l a y s i s , " i n I n t e r n a t i o n a l O r g a n i z a t i o n , 32 ( W i n t e r 1978) pp. 13-43; R.D. W a l l e r i , "The P o l i t i c a l Economy L i t e r a t u r e on North-South R e l a t i o n s , " i n I n t e r n a t i o n a l S t u d i e s Q u a r t e r l y , 22 (December 1978), pp. 587-624.  2.  F o r a d i s c u s s i o n on ASEAN's dependence on t r a d e and i n v e s t m e n t s e e : D.K. C r o n e , "Dependence, D i v e r s i f i c a t i o n and R e g i o n a l i s m : The A s s o c i a t i o n o f S o u t h e a s t A s i a n N a t i o n s , " (Ph.D T h e s i s , U n i v e r s i t y o f B r i t i s h Columbia, 1981).  3.  R o l a n d - P i e r r e P a r i n g a u x , "A N a t i o n D i s p o s s e s s e d . " November 1, 1981, p. 12.  4.  F a r E a s t e r n Economic Review ( F E E R ) , F e b r u a r y 4, 1977, p. 39.  5.  T h i s i n f o r m a t i o n i s based on a c o n v e r s a t i o n w i t h Dr.. G. H a i n s w o r t h , Department o f E c o n o m i c s , U n i v e r s i t y o f B r i t i s h Columbia, A p r i l 2, 1981.  6.  "Another s o u r c e o f d a t a would be the banks t h e m s e l v e s , but they a r e r e l u c t a n t t o r e p o r t such i n f o r m a t i o n on the grounds t h a t d i s c l o s u r e m i g h t a d v e r s e l y a f f e c t . . . [ t h e ] bank's ' c o m p e t i t i v e p o s i t i o n o v e r s e a s ' ...such d i s c l o s u r e would [ a l s o ] i n t e r f e r e w i t h the ' c o n f i d e n t i a l i t y o f . . . c u s t o m e r ' s a f f a i r s ' and t h a t d i s c l o s u r e m i g h t have a n e g a t i v e impact on ' f o r e i g n banks' s e c r e c y l a w s . " H.H. W a c h t e l , The New Gnomes: M u l t i n a t i o n a l Banks i n the T h i r d W o r l d , (Washington, D.C.: T r a n s n a t i o n a l I n s t i t u t e , 1977), p. 18.  The  Guardian,  1  7.  M a l a y s i a ' s s t r o n g f o r e i g n r e s e r v e p o s i t i o n has a l l o w e d t h e c o u n t r y t o assume the r o l e o f a r e g i o n a l f i n a n c i e r and i n t e r n a t i o n a l l e n d e r . In F e b r u a r y o f 1980, the g o v e r n m e n t - s p o n s o r e d Bank Bumiputra e s t a b l i s h e d a r e g i o n a l p r e s e n c e by l e a d i n g an i n t e r n a t i o n a l l o a n s y n d i c a t i o n o f US $550 m i l l i o n ( f o r the B i n t u l u ' l i q u i d n a t u r a l gas p r o j e c t i n Sarawak) w i t h the c o o p e r a t i o n o f s i x t y - o n e i n t e r n a t i o n a l banks and f i n a n c i a l i n s t i t u t i o n s . One month l a t e r , the same bank a g r e e d t o l e n d C. I t o h o f Japan US $8.7 m i l l i o n . The purpose b e h i n d t h i s move i s r e p o r t e d t o be an attempt to f i n d new s o u r c e s f o r the Bank's US d o l l a r d e p o s i t s i n a d d i t i o n t o s e e k i n g f o r i t s e l f and M a l a y s i a a g r e a t e r f i n a n c i a l p r e s e n c e as an o i l bank f o r the r e g i o n . FEER, A p r i l 18, 1980, p. 64.  8.  FEER, September 22, 1978, p. 62.  9.  M i c h a e l T. S k u l l y , Merchant Banking i n the F a r E a s t . Times B u s i n e s s P u b l i s h i n g L t d . , 1980), p. 362.  (London:  Financial  - 70 -  10.  M i c h a e l T. S k u l l y , ASEAN R e g i o n a l F i n a n c i a l C o o p e r a t i o n -- D e v e l o p ments i n B a n k i n g and F i n a n c e , ( S i n g a p o r e : I n s t i t u t e o f S o u t h e a s t A s i a n S t u d i e s , 1979), p. 23.  11.  FEER, J a n u a r y 30, 1981, p. 46.  12.  Ibid.  13.  P i e r r e Dhonte, Clockwork Debt, ( T o r o n t o : L e x i n g t o n Books, 1979), p. 49. . •  14.  H.B. Chenery and A.M. S t r o u t , " F o r e i g n A s s i s t a n c e and Economic Development," American Economic Review, 56 (September 1966), p. 681.  15.  A.K. B h a t t a c h a r y a , " F i n a n c i a l A i d and P r i v a t e B a n k i n g I n s t i t u t i o n s . " J . Lozoya and A.K. B h a t t a c h a r y a ( e d s . ) The F i n a n c i a l I s s u e s o f t h e New I n t e r n a t i o n a l Economic O r d e r (New York: Permagon P r e s s , 1980), p. 165.  16.  J e f f F r i e d e n , " T h i r d World I n d e b t e d I n d u s t r i a l i z a t i o n : I n t e r n a t i o n a l F i n a n c e and S t a t e C a p i t a l i s m i n M e x i c o , B r a z i l , A l g e r i a , and South K o r e a , " I n t e r n a t i o n a l O r g a n i z a t i o n , 35, (Summer 1981), p. 412.  17.  Ibid.  18.  Jane D ' A r i s t a , " U n i t e d S t a t e s C o n g r e s s i o n a l R e s t r a i n t s : The T i e s T h a t B i n d , " Lawrence G. Franko and M a r i l y J . S e i b e r ( e d s . ) , D e v e l o p i n g C o u n t r y Debt (New York: Permagon P r e s s , 1979), p. 217.  19.  F o r a c o m p l e t e d i s c u s s i o n o f t h e p o l i t i c a l e l e m e n t s o f M a l a y s i a ' s New Economic P o l i c y s e e : R.S. M i l n e and D.K. Mauzy, P o l i t i c s and G o v e r n ment i n M a l a y s i a ( V a n c o u v e r : U n i v e r s i t y o f B r i t i s h Columbia P r e s s , 1978), C h a p t e r 10.  20.  In 1979 T h a i l a n d withdrew i t s r e q u e s t f o r IMF emergency a s s i s t a n c e . (See C h a p t e r Two f o r d e t a i l s ) .  21.  FEER, F e b r u a r y 13, 1981, p. 40.  22.  Ibid.  23.  C a r l C. Neu, "The I n t e r n a t i o n a l Monetary Fund and LDC Debt." Lawrence G. Franko and M a r i l y J . S e i b e r ( e d s . ) D e v e l o p i n g C o u n t r y Debt, p. 240.  24.  Ibid.  25.  " U n l e s s t h e d e b t o r n a t i o n n a t i o n a l i z e s f o r e i g n bank b r a n c h e s and subs i d i a r i e s w i t h o u t c o m p e n s a t i o n and r e f u s e s t o meet i t s e x t e r n a l o b l i g a t i o n s , banks a r e l i k e l y t o seek a compromise s o l u t i o n r a t h e r t h a n t a k e a c o m p l e t e l y h a r d l i n e . " J.D. A r o n s o n , "The P o l i t i c s o f P r i v a t e  - 71 Bank L e n d i n g and Debt R e n e g o t i a t i o n s " J.D. A r o n s o n ( e d . ) , Debt and the L e s s D e v e l o p e d C o u n t r i e s , ( B o u l d e r , C o l o r a d o : Westview P r e s s , 1979), p. 307. 26.  Manuel G u i t i a n , "Fund C o n d i t i o n a l i t y and t h e I n t e r n a t i o n a l A d j u s t m e n t P r o c e s s : The E a r l y P e r i o d , 1950-1970." F i n a n c e and Development, December 1980, p. 25.  27.  Ross G a r n a u t , ASEAN In A Changing P a c i f i c And World Economy ( C a n b e r r a , A u s t r a l i a : A u s t r a l i a n N a t i o n a l U n i v e r s i t y P r e s s , 1980).  28.  In g e n e r a l economic t e r m s , t h e c a p a c i t y o f a n a t i o n t o borrow i s d e t e r m i n e d by t h e p e r c e n t a g e o f d e b t t o e x p o r t s : s p e c i f i c a l l y , t h e h i g h e s t l e v e l o f b o r r o w i n g s r e l a t i v e t o e x p o r t s t h a t can be m a i n t a i n e d i n d e f i n i t e l y w h i l e the d e b t s e r v i c e r a t i o i s d e b t below a s t a t e d l i m i t . The o f f i c i a l d e b t s e r v i c e r a t i o l i m i t s e t by t h e World Bank i s 20%.  - 72 -  SELECTED BIBLIOGRAPHY  Books and A r t i c l e s A b b o t t , George C , I n t e r n a t i o n a l Indebtedness London: Croon Helm, 1979.  and t h e D e v e l o p i n g  Countries,  A l i b e r , Robert Z., The I n t e r n a t i o n a l Money Game, New York: I n c . , 1976.  B a s i c Books,  Aronson, J.D., ed. Debt and t h e L e s s Developed C o u n t r i e s , Westview P r e s s , 1979.  Colorado:  B a l d w i n , W. Lee, and M a x w e l l , W. 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