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 Switucha 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 i n 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 the 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 presenting t h i s thesis i n p a r t i a l f u l f i l m e n t of the requirements for an advanced degree at the University of B r i t i s h Columbia, I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e for reference and study. I further agree that permission for extensive copying of t h i s thesis for s c h o l a r l y purposes may be granted by the head of my department or by his or her representatives. I t i s understood that copying or p u b l i c a t i o n of t h i s thesis for f i n a n c i a l gain s h a l l not be allowed without my written permission. Department of P o l i t i c a l S c i e n c e The University of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 D a t e nP.r.P.mhP.r l r 1981 DE-6 (2/79) - i i -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 he 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 the development o f the 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 the 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 the 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 the i s s u e o f d e b t i n l i g h t o f the 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 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 (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 . 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 the 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 to 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. - i i i -TABLE OF CONTENTS Page A b s t r a c t " T a b l e o f C o n t e n t s i i i L i s t o f T a b l e s i v Acknowledgement v i i CHAPTER 1: C r i t i c s o f Debt . 1 C o n d i t i o n a l i t y 7 C o n c l u s i o n s 10 F o o t n o t e s 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 L e n d i n g i n S o u t h e a s t A s i a . . . . 17 I n d o n e s i a 20 M a l a y s i a • 26 P h i l i p p i n e s 28 S i n g a p o r e 32 T h a i l a n d 34 C o n c l u s i o n s 38 F o o t n o t e s 40 CHAPTER 3: Debt E v a l u a t e d 43 A l l e g a t i o n 1 43 A l l e g a t i o n 2 49 - i v -TABLE OF CONTENTS ( c o n t . ) Page A l l e g a t i o n 3 59 A l l e g a t i o n 4 • 61 C o n c l u s i o n s 62 F o o t n o t e s 69 S e l e c t e d B i b l i o g r a p h y . 72 - V -LIST OF TABLES Page 1 S o u r c e s o f L e n d i n g i n S o u t h e a s t A s i a (U.S. $ thousands) 18 2, S o u r c e s o f L e n d i n g i n S o u t h e a s t A s i a ( p e r c e n t a g e ) 19 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 ( I n d o n e s i a ) 22 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 ( M a l a y s i a ) 27 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 ( P h i l i p p i n e s ) 29 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 ( S i n g a p o r e ) 33 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 ( T h a i l a n d ) . . . . . . . 36 8 Statement o f Loans Approved by World Bank 1974-1980 ( I n d o n e s i a ) 52 9 Statement o f Loans Approved by World Bank 1974-1980 ( M a l a y s i a ) 54 10 Statement o f Loans Approved by World Bank 1974-1980 ( P h i l i p p i n e s ) 55 11 Statement o f Loans Approved by World Bank 1974-1980 ( S i n g a p o r e ) 57 - v i -LIST OF TABLES ( c o n t . ) Page 12 Statement 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 - v i i -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 Malcolm G r i e v e p r o v i d e d 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 . Nancy Wong c o n v e r t e d 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 . Many o t h e r s have g i v e n a d v i c e , 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 , al 1 . - 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 . I n c r e a s i n g g l o b a l i n t e r d e p e n d e n c e 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 t h e 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 d e v e l o p e d c o u n t r i e s . 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 arrangements 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 d e b t which i n v o l v e s economic and p o l i t i c a l i n t e r d e p e n d e n c e . 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 N a t i o n s (ASEAN) -- 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 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 o f e x t e r n a l d e b t 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 d e b t 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 economies, must be viewed i n t h e 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 t h e 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 i m b a l a n c e s caused by t h e 1973 o i l c r i s i s have f o r c e d b o t h the d e v e l o p e d and d e v e l o p i n g 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 t h e 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 i m p o r t a n t t o t h o s e d e v e l o p i n g n a t i o n s a t t e m p t i n g 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 d e b t . 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 the 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 the 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 the 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 de 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 the i n t e r n a t i o n a l economic system not 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 , but a l s o sheds l i g h t on d e b t as a t r a d e and dev 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 p r o p o r t i o n s . 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 deb t i n l i g h t o f the e x p e r i e n c e o f the 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 deb t and a i d . The ASEAN members' r e s p o n s e t o t h e problem o f deb 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 to 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 deb 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 the 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 the economic r e l a t i o n s o f t h e 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 he o b s e r v a t i o n t h a t t he 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 c u r r e n c i e s . 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 t h e monetary system, 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 t h o s e d e b t o r n a t i o n s . 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 t h e p r e v a i l i n g p o l i t i c a l , economic, 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 t h e 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 re 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. B r i e f l y summarized, the c r i t i c s a l l e g e t h a t : (1) d e b t i s a s s o c i a t e d 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 t o 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 development; (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 i n t e r f e r e n c e ; 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 t h e 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 elements 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 development. The c r i t i c s ' p r e s c r i p t i o n f o r the a l l e v i a t i o n o f such a deb 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 the p a r t o f the 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 the 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 c o n c e r n 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 and s t r e s s i n g s e l f -r e l i a n c e . 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 the 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 on-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 orld 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 the d e v e l o p e d w o r l d . 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 a d d i n g t o t h e "burden o f d e b t c a r r i e d by the 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 the 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 to t h e c r i t i c s , a r e the e c o n o m i c a l l y p o w e r f u l r u l i n g e l i t e s a c t i n g i n f o r e i g n i n t e r e s t : The b u l k o f the l o a n s a r e extended the 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 low-c 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 s p r e a d 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 the 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 the need t o promote economic development i n the - 5 -developing debtor countries, this p r i n c i p l e i s r e a l l y in the interests of the developed countries. This p r i n c i p l e has sometimes been oddly applied. For example...with the practice of providing aid only for the direct foreign exchange costs of projects. More credibly, the practice of tying aid to s p e c i f i c pro-j e c t s , whose choice and design must be negotiated and approved, has generally been regarded in developed countries as a means of ensuring a satisfactory use of resources, although i t also, in the case of b i l a t e r a l donors, provides a means of ensuring that aid promotes additional exports from themselves, and enables them to choose v i s i b l e projects, on which their 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 policies and programmes. The conditions attached to foreign loans often involve policies beyond the scope of recommending ap-propriate 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 in the case of international financial i n s t i t u t i o n s , 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 subsidies, foreign exchange controls, r e s t r i c t i o n s on profit-remittances and.limitations on foreign investment. According to the c r i t i c s , these'conditions invariably result in an. economic situation that adversely affects local businesses and the domestic economy, while aiding foreign interests. Action to reverse the deterioration of the standards of l i v i n g and the increasing underemployment...to improve social conditions i s postponed and neglected.10 In the f i n a l analysis, 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 qualify for increased quantities of - 6 -new c r e d i t / 1 The n e t 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 t o 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 . A government which attempts t o c a r r y o u t t h e c o n d i t i o n s i s l i k e l y t o f i n d d o m e s t i c 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 d e b t 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 t o 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 t h e 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 n a t i o n ' 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 , t h e 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 b i n d . " 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 evelopment. I f t h e y a c c e p t . . . [ l o a n s ] . . . o n com-m 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 t h e y a r e a b l e t o 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 t h e system a r e "doomed to p e r p e t u a l u n d e r d e v e l o p -15 ment...at t h e 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 r e d u c e the T h i r d World's dependence on 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 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 t h e l o n g r u n , i t i s more r e a l i s t i c t o "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 degree o f r e l i e f . " ^ The c r i t i c s o f d e b t 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 problem w i t h d e b t f o r LDCs. E x t e r n a l p e n e t r a -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 the i n t e r n a t i o n a l economic system 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 approach 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 . C o n d i t i o n a l i t y The c e n t r a l r o l e t he 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 the 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 p o l i c i e s . 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 adopt 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 s o u r c e s o f l o a n 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 rld 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 w i t h l o a n s c o n t r a c t e d f o r t h e purpose o f r e l i e v i n g t r a d e d e f i c i t s o r b a l a n c e o f payments problems. A c c o r d i n g t o t h e c r i t i c s , t h e 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 f o r m u l a t i o n . 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 egree 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 about 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 t o .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 t y p e 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 forms: f i r s t , t he 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 t h e 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 t h e 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 t h a t t e c h n o l o g y 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 t h e 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 n o t i m p l y 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. 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 t h e 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 t a k e n f o r improve-ment The more d i s t r e s s e d the b o r r o w e r , the more 2 n a g g r e s s i v e and f o r m a l t h e c o n d i t i o n s a r e l i k e l y t o be. A c c o r d i n g t o t h e 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 mani-f 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 c o n d i t i o n s . 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 o u t 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 " c o m p l i c a t e s t h e 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 t o r e sentment o v e r n o n - A s i a n s h a v i n g a major 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 American 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 Vietnam i s a c a s e 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 Vietnam i n p a r t i c u l a r , and o f f i c i a l s o f t h e World Bank and t h e IMF as w e l l as t h e 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 t i m e s t h e s e o r g a n i z a t i o n s a r e 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 w i t h d r a w a l 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 t h e 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 t h e 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 t h e 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.. t o t h e 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 de-v 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 t h e 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 c a s e d i d n o t s u c c e e d the example i l l u s t r a t e s t h e 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 t h e 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 n o t b e i n g d i s p u t e d ; r a t h e r i t i s t h e 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 economic 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 t h e l o n g - t e r m 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 . 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 the 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 . C o n c l u s i o n s The r o l e o f e x t e r n a l c a p i t a l i n pro 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 and, 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 pu 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 t e r m s . (See T a b l e 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 through 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 the 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 the o r g a n i z a t i o n as a whole. F o r the ASEAN members, t h e i s s u e o f deb 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 ; the 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 the members o f ASEAN and the 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 the a n a l y t i c a l c o n c e r n s o f 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 the 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 the 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 can 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 . C o n s i d e r i n g t he d i f f e r e n t l e v e l s o f development 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 . T h r e e o f t h e 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 -f o r e , c o n d i t i o n a l p o l i c i e s . In the 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 d e b t r e f l e c t s b o t h t h e s t r u c t u r e o f deb t dependence and t he 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 deb t amongst th 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 e x p e r i e n c e w i t h 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 he deb t 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 ^ d e b t 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 . T h i s 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 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 deb t p o l i c y i n ASEAN. The p r i m a r y theme w i l l be t h e development o f t h e member-states' 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 t h e s e 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 he 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 the 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 deb t and a i d . I t i s - 12 -a n t i c i p a t e d t h a t t h e ASEAN member's debt 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 he l i m i t a t i o n s o f t h i s s t u d y and the 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 ot be a d d r e s s e d . These a r e i s s u e s t h a t would r e q u i r e a d i f f e r e n t a p p r o a c h . Second, t he 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 the 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 . Such 27 an e x t e n d e d s t u d y i s beyond t he scope o f t h i s t h e s i s . 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 deb t f o r a group o f d e v e l o p i n g s t a t e and t o 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 -C h a p t e r I FOOTNOTES 1. The term "debt" 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 the 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 the f l o w o f r e s o u r c e s from c r e d i t o r t o d e b t o r , 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 the 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 the 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 the 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 proposed 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 the 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 the 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 York: 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 the 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 the 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 the 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 rld. ( 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. Aronson ( 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 the 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. Krause, " 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 the need f o r economic a d j u s t m e n t and the 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 borrowers adopt 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 the 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 World 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 t h e 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 ad-j 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 the 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 d o m e s t i c p o l i c y . - 15 -F o r more i n f o r m a t i o n on t h e 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 A d j u s t m e n t , " 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, "R e s c u i n g 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. 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. 18. F a r E a s t e r n Economic Review, (FEER) A p r i l 22, 1977, p. 43. 1 9• 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. N o r t h - S o u t h I n s t i t u t e , p. 2. 2 2- FEER, A p r i l 23, 1976, p. 39. 23. F o r a t h o r o u g h r e v i e w o f t h e 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 N o r t h - S o u t h 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. Crone, "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 C olumbia, 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 . T h i s c a p i t a l , i n 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 a t 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 p r o j e c t s l i n k e d w i t h n a t i o n a l i n d u s t r i a l i z a t i o n o b j e c t i v e s . 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 development. As d i s c u s s e d i n the p r e v i o u s c h a p t e r , 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 debate 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 ex-t e r n a l b o r r o w i n g u l t i m a t e l y i n v o l v e s . 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 t h e d o m e s t i c a f f a i r s o f t h e 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 t h e 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 - and development - o r i e n t e d g o a l s . B o r r o w i n g by the f i v e members o f ASEAN 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 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 c o n c e r n f o r t h o s e n e g a t i v e consequence 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 as 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 i n t e r f e r e n c e . The i s s u e s s u r r o u n d i n g 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 , t he 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 , t he 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 o f t h e s e i n t e r a c t i o n s . S t r u c t u r e o f L e n d i n g i n S o u t h e a s t 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 t he 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 de-c r e a s e d w i t h a c o r r e s p o n d i n g i n c r e a s e i n p r i v a t e b o r r o w i n g . 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 t a k e 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 S o u r c e s o f L e n d i n g i n S o u t h e a s t A s i a (U.S. $ thousands) * T o t a l O f f i c i a l L e n d i n g C o u n t r y 1970 1972 1974 1976 1978 M a l a y s i a 449.2 634.9 1099.8 1505.7 2134.8 T h a i l a n d 429.6 606.4 1059.8 1462.7 2821.9 I n d o n e s i a 2756.9 • 4393.7 6266.3 8949.7 12710.0 P h i l i p p i n e s 405.5 978.0 1528.0 2428.7 4143.4 S i n g a p o r e 275.6 381.3 473.1 448.9 505.0 T o t a l P r i v a t e L e n d i n g C o u n t r y 1970 1972 1974 1976 1978 M a l a y s i a 105.6 385.1 1181.7 1607.3 2225.0 T h a i l a n d 53.1 46.8 62.2 155.8 858.4 I n d o n e s i a 268.5 735.1 2903.6 5505.3 5844.0 P h i l i p p i n e s 345.4 352.9 534.8 1589.6 3233.3 S i n g a p o r e 24.2 123.1 204.0 490.5 809.6 S o u r c e : World D e b t - T a b l e s . C u m u l a t i v e - 19 -TABLE 2 S o u r c e s o f L e n d i n g i n S o u t h e a s t A s i a % O f f i c i a l L e n d i n g o f T o t a l L e n d i n g C o u n t r y 1970 1972 1974 1976 1978 M a l a y s i a 81.0 62.2 48.2 47.5 48.9 T h a i l a n d 89.0 92.8 94.4 90.4 77.0 I n d o n e s i a 91.1 86.0 68.3 61.9 68.5 P h i l i p p i n e s 53.9 73.4 74.1 60.4 56/2 S i n g a p o r e 92.0 75.6 69.9 47.8 38.4 % P r i v a t e L e n d i n g o f T o t a l L e n d i n g 1970 1972 1974 1976 1978 M a l a y s i a 19.0 37.8 51.8 52.5 51.1 Tha i 1 and 11.6 7.2 5.6 9.6 23.0 I n d o n e s i a 8.9 14.0 31.7 38.1 31.5 P h i l i p p i n e s 46.1 26.6 25.9 39.6 43.8 S i n g a p o r e 8.0 24.4 30.1 52.2 61.6 S o u r c e : 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 t h e ADB f i g u r e p r o m i n e n t l y 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 t a k e 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 t h e A s i a n D o l l a r M a rket, 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 t o be r a i s e d i n A s i a . The A s i a n D o l l a r Market 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 t h e e s t a b l i s h m e n t o f p r i v a t e i n t e r n a t i o n a l banks i n t h e 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 l e n d i n g . I n d o n e s i a The development o f I n d o n e s i a ' s economy i n t h e 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 d o m e s t i c p o l i c y f o r m u l a t i o n . The g o v e r n -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 t h e IMF, and has been based upon r a p i d o i l p r o d u c t i o n and t h e maintenance o f monetary s t a b i l i t y . 1 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 p o l i t i c a l c o n s i d e r a t i o n s : economic p o l i c y has been t a i l o r e d t o f i t expec-2 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 d e b t c r i s i s . A t t h a t time a m o ratorium 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 d e b t and w i t h the a s s i s t a n c e o f t h e I n t e r n a t i o n a l Monetary Fund and t h e World Bank, a d o m e s t i c economic 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 . 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 t h r o u g h 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 — p r i -m a r i l y f u n c t i o n t o 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 I n d o n e s i a . 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 b i l a t e r a l s o u r c e s ( p r i m a r i l y members o f t h e IGGI). (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 t h e P e r t a m i n a c r i s i s ( d i s c u s s e d b e l o w ) . I n i -t i a l l y , most o f t h e a i d g r a n t e d by t h e IGGI was i n the form o f g e n e r a l p r o -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 t h e decade t h e r e was g e n e r a l 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 b o r r o w i n g . The W orld 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 i n recommen-d i n g c o n d i t i o n s f o r annual IGGI l e n d i n g . In a c o n f i d e n t i a l r e p o r t t o the IGGI me 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 about the I n d o n e s i a n economy: t o g e t t h e 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 t h e 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 t h e 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 5 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. - 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 ( p e r c e n t a g e ) I n d o n e s i a 1970 1972 1974 1976 1978 T o t a l O f f i c i a l L enders 91 86 68 62 68 Government Lenders 85 78 58 48 51 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 6 8 10 14 17 T o t a l P r i v a t e L e n d e r s 9 14 32 38 32 S u p p l i e r s ' C r e d i t s 3 9 21 12 8 T o t a l F i n a n c i a l Lenders 0.1 . 1 8 25 23 O t h e r P r i v a t e L e n d ers 6 4 3 1 1 T o t a l A l l Lenders 100 100 100 100 100 S o u r c e : 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 Development. World Debt T a b l e , 1976, p. 70-71; 1979, pp. 80-81. - 23 -Many o f t h e 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 t o be p r e s e n t e d a t t h e annual a i d meeting o f the IGGI, was p r e m a t u r e l y l e a k e d t o t h e p u b l i c . T h i s document s t r e s s e d t h a t ' p o l i c y measures ado 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 . ' C o r r u p t i o n ...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 system. T h a t 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 d o m e s t i c market, 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 b a n k i n g 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 d o m e s t i c economic p o l i c y . As m entioned 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 . 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 v a r i o u s d o m e s t i c i n t e r e s t g r o u p s , I n d o n e s i a ' s government l e a d e r s , i n i m p l e m e n t i n g 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 d o m e s t i c a l l i e s , t he 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 i n d i g e n o u s m a n u f a c t u r e r s 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 . Moreover, 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 b u d g e t a r y sub-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 s t u d e n t 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 p r o v i d i n g p o l i t i c a l d i s s e n t . 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 S u h a r t o 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 g o v e r n -ment s u b s i d i e s i n 1980.^ 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 t o 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 and debt p o l i c i e s . 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 d e b t 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 o f f i c i a l 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 . 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 d e b t 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 s h o r t - t e r m l o a n s o r d e l a y i n g t h e i m p l e m e n t a t i o n o f s e v e r a l i n d u s t r i a l p r o -g j e c t s . 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 -t e e n m o n t h s . 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 might have c o l l a p s e d as a l l the American banks 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."''' 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 , t he 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 . A l t h o u g h G e n e r a l 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 t h e m i l i t a r y f a c t i o n t o t h e 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 Pertamina 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 "Indo-n 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 t h r o u g h 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 i n t e r n a t i o n a l c r e d i t o r s r e g a i n e d c o n f i d e n c e i n I n d o n e s i a . M a l a y s i a 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 t o 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 d e b t s e r v i c i n g p r o b l e m s . S i n c e i n d e p e n d e n c e , 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 c o m f o r t a b l e 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 expen-16 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 t o 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 bene-f 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 t o e x p o r t markets.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 d e b t has shown an i n c r e a s i n g t e n d e n c y towards p r i v a t e 18 l o a n s o u r c e s . 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 o f f i c i a l s o u r c e s . 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 o f 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 t o 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 ( p e r c e n t a g e ) M a l a y s i a 1970 1972 1974 1976 1978 T o t a l O f f i c i a l L enders 81 62 48 47 49 Government Lenders 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 T o t a l P r i v a t e L e n d ers 19 38 52 53 51 S u p p l i e r s ' C r e d i t s 3 2 1 1 1 T o t a l F i n a n c i a l Lenders 16 36 51 52 50 O t h e r P r i v a t e L e n d ers - - - - -T o t a l A l l Lenders 100 100 100 100 100 S o u r c e : 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 t o 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 s o u r c e s i n M a l a y s i a n p o l i c y - m a k i n g . 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 d e m o n s t r a t e s . 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 t o 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 r e d u c e 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 t o t h e s e two m a r k e t s . ^ P h i l i p p i n e s 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 d e v e l o p m e n t a l e f -f o r t s i n the l a t e 1960s. 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 t o d e a l w i t h the immediate n a t u r e o f the problem. Governmental a c t i o n , however, was supplemented 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 major b i l a t e r a l and i n s t i -t u t i o n a l s o u r c e s . T a b l e 5 i l l u s t r a t e s t h e r e l a t i v e l y h i g h 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 ( p e r c e n t a g e ) P h i l i p p i n e s 1970 1972 1974 1976 1978 T o t a l O f f i c i a l L e n d e rs 54 73 74 60 56 Government Lenders 24 48 36 29 22 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 30 25 38 31 34 T o t a l P r i v a t e L e n d e r s 46 27 26 40 44 S u p p l i e r s ' C r e d i t s 8 4 4 4 8 T o t a l F i n a n c i a l L e n d ers 38 23 22 36 36 O t h e r P r i v a t e L e n d ers - - - - -T o t a l A l l L e n d e r s 100 100 100 100 100 S o u r c e : 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. 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 . In the r e -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 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 d e b t - s e r v i c e r a t i o 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 p r o j e c t s . 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 1 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 - 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 ca s e s even 24 a c u r r e n c y d e v a l u a t i o n " t o 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 s e c t o r . Ihe f o l l o w i n g y e a r , t h e 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 World Bank l o a n . ( F o r 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 . ) A l t h o u g h 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 c a s e o f t h e 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 t h e 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 t h e e x p o r t s e c t o r by s e e m i n g l y complementing e x i s t i n g P h i l i p p i n e p o l i c y . F i n a l l y , i t i s d i f f i c u l t n o t t o heed the, World B a n k ' s : s t r o n g l y ex-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 t h e P h i l i p p i n e s . A c c o r d i n g t o one commentary, a 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 t o 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 i n t h e U.S. Congress ( t h a t i s e f f e c t i v e l y [ o p p o s i n g ] New S o c i e t y i n e q u a l i t i e s ) and d e monstrate i t s own c o n c e r n f o r 26 m eeting t h e needs o f the p o o r e s t . " 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 t h e 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 p r o -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 m a t i c s o l u t i o n s . " - 32 -S i n g a p o r e 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 unique 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 -n i f i c a n t . 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 w i s h i n g t o r a i s e f u n d s , i n t e r n a t i o n a l i n v e s t o r s w a n t i n g 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 con-c 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 . 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-l i e s 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 c o n t r a c t . 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 exposure 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 o f d e b t . (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 ( p e r c e n t a g e ) S i n g a p o r e 1970 1972 1974 1976 1978 T o t a l O f f i c i a l L e n d e rs 91 76 70 48 38 Government L e n d e r s 39 35 35 22 20 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 53 41 35 26 18 T o t a l P r i v a t e L e n d ers 8 24 30 52 62 S u p p l i e r s ' C r e d i t s 6 7 11 24 17 T o t a l F i n a n c i a l L e n d ers 2 17 19 28 45 O t h e r P r i v a t e L e n d ers - - - - -T o t a l A l l L e n d e r s 100 100 100 100 100 S o u r c e : 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. 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. P r i v a t e . l o a n s 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 d e v e l o p m e n t a l 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 pr o b l e m s . 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 M a r k e t . T h a i l a n d 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 d e b t 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 f o r e i g n l o a n 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 o f 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 de-c 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 , t o 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 pr o b l e m s . 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 t o f i n a n c e t r a d e de-f i c i t s and d e v e l o p m e n t a l 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 t o $3680 m i l l i o n i n 1978. 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 C l u b 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 ) . World 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 major 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 a g r e e d upon i n mid-1980. T h i s programme i n -c l u d e d a comprehensive 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 element o f t h i s programme, as c o n c e r n s 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 a t t e m p t s t o ease 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 o p e r a t e 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 , highways, and u t i l i t i e s . Thus, t h e d e b t 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 t h e 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 t h e o wnership o f p u b l i c e n t e r p r i s e s was t u r n e d 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 d e b t 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 T h a i p o l i c y . I n c o r p o r a t e d i n t o t h e c u r r e n t T h a i f i v e y e a r p l a n , t h e p r i m a r y t e n e t s o f t h e World Bank programme a r e based . upon i n d u s t r i a l development, an e n e r g y a d j u s t m e n t programme, and the deve-32 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 t h e f o c u s on e x p o r t development has i n c l u d e d t h e p r o -m o tion 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 ( p e r c e n t a g e ) T h a i l a n d 1970 1972 .1974 1976 1978 T o t a l O f f i c i a l L e n d e r s 89 93 94 90 77 Government Lenders 30 30 36 27 32 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 59 63 58 63 45 T o t a l P r i v a t e L e n d e r s 11 7 6 10 23 S u p p l i e r s ' C r e d i t s 9 6 3 1 0.2 T o t a l F i n a n c i a l L e n d ers 2 1 3. 9 23 O t h e r P r i v a t e L e n d ers - - - - -T o t a l A l l Lenders 100 100 100 100 100 S o u r c e : 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 t h e 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 d e b t 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 produced 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 t h e government t o withdraw i t s r e q u e s t f o r a s s i s t a n c e . A c c o r d i n g t o 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 t h e 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 t h e Bangkok Bank and f o r m e r 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 unique c a s e 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 t h e 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 o u t 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 uncom-36 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 t h e 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 c a s e the p o l i c i e s recommended e a r l i e r i n the 1970s had l e a ^ * " t " o n e g a t i v e consequences on t h e d o m e s t i c 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 t h e c r i t i c s ' argument. - 38 -C o n c l u s i o n s The ASEAN s t a t e s d e monstrate-an economic r e l i a n c e on deb 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 p a s t decade. (See T a b l e s 1, 2, 14, and 15). 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 . T h us, t h e c o o p e r a t i v e r e l a t i o n s h i p s between th e 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 the argument put 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 put f o r t h by d e b t and a i d c r i t i c s -- i n p a r t i c u l a r , t h e i s s u e 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 debt 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 to 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 . In t h r e 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 c r e d i t o r s 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 pro b l e m s . Thus, 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 World 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 s o u r c e s 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 was 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 . 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 ex-t 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 p o l i c y . 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 a d o p t e d 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 t o 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 and i s n o t the i s s u e i n doubt. 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 d e b t 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 , s c e n a r i o w i l l b r i n g f o r t h c o n c l u s i o n s i n d i r e c t c o n t r a s t t o t h o s e t e n e t s o f t h e c r i t i c s ' t h e s i s . - 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. I b i d . 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. S e v i n c C a r l s o n , I n d o n e s i a ' s O i l ( B o u l d e r C o l o r a d o : Westview P r e s s , 1977), p. 64. 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: M a c M i l l a n P r e s s . L t d . , 1979), pp. 88-89. 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 t h e 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, August 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 , J a p a n , 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 t h e 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 n e t c a p i t a l i n f l o w was d i r e c t e d a t s u p p o r t i n g t h e c o u n t r i e s c u r r e n t a c c o u n t 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, August 19, 1977, p. 38. 24. FEER, September 14, 1979, p. 52. 25. FEER, August 8, 1980, p. 50. 26. FEER, March 27, 1981, p. 125. 27. I b i d . 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, which must, i n t h e 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 t o a c omprehensive 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 t h e 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 c o v e n a n t s 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 . - 42 -33. I b i d . , p. 41. 34. FEER, F e b r u a r y 22, 1980, p. 40. 35. I b i d . 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 ex-t e r n a l i n c h a r a c t e r . The economies' r a t e o f growth, 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 equ a l c o n c e r n f o r t h o s 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 m a n i f e s t e d 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 -f e r e n c e . C h a p t e r Two de 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 deb 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 deb t and a i d . T h i s f i n a l c h a p t e r 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 s t u d y o f d e v e l o p i n g c o u n t r y d e b t . A l l e g a t i o n 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 v a r i o u s a s p e c t s o f N o r t h - S o u t h 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 r e l a t i o n s h i p s . The e x t e n t t o which ASEAN i s i n v o l v e d i n dependence r e l a t i o n -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 e l s e w h e r e . 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 t h e i r c r e d i t o r s . 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 -t r i a l i z a t i o n o b j e c t i v e s . 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 , t he 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 t he 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 r e g u l a t o r y r o l e . 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 . T h i s 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 d e b t 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 w i t h t h e s e o f f i c i a l l o a n 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 d e b t 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 commer-c 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 l o a n 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 — r a i s e d t o t a k e i n t o 5 a c c o u n t t h e i n t e r n a t i o n a l r a t e o f i n f l a t i o n . 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 f o r s o f t l o a n s . 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. T h e r e i s no overwhelming e v i d e n c e t o i n d i c a t e t h a t t h e i n f l u e n c e o f t h e 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 t h a n a r e g u l a t o r y r o l e . T h e r e f o r e , t h e 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 . T h i s s t r u c t u r e 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 c o n c l u s i o n o f C h a p t e r Two, 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 t h o r o u g h , s t a t i s t i c a l l y b a sed, g e o g r a p h i c 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 a r e d i f f i c u l t t o o b t a i n . F i g u r e s 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 n o t a v a i l a b l e i n a comprehensive form. 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 g e o g r a p h i c 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 t e n d 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 ckages. 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 t h e 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 t h e y 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 t h e 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 a c t o r s , 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 , t o 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 the 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 re 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 r e s p e c t i v e d o m e s t i c m a r k e t s . With the 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 Bumiputra 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 not 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 ope 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 to 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 the f o r m a t i o n o f r e g i o n a l agreements, 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 the f i v e economies, 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 , the 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 purpose 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 the 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 the - 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 f i n a n c e i n s t i t u -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 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 the A s i a n Development Bank. 1^ 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 do m e s t i c b u s i n e s s 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 he economic development o f the r e g i o n and, 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 the p o l i t i c a l and economic i n t e g r a t i o n o f the o r g a n i -11 z a t i o n . The c o n c e p t o f the 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 the 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 he 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 n a t i o n s ) . 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 , c a n not 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 consequences 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 . - 49 -A l l e g a t i o n 2 Debt h i n d e r s economic development and i s i n the i n t e r e s t s o f t h e l o c a l 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 d o m e s t i c i n v e s t m e n t . " 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 borrower 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 use; 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 time 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, the 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 then 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 the 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 degree t o which b o r r o w i n g c o n t r i -b u t es 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 frame-work 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 . T h i s r e l a t i o n o f i n d i v i d u a l 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 the - 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 s u s -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 t o 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 o u t t h a t t o 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 t h e 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 com-p 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 Moreover, 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 o r 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 . 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 f u n d t h e development o f an i n t e -g r a t e d n a t i o n a l economy. On t h e 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 t h e 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 con-sensus embracing t e c h n o c r a t s , b usinessmen, 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, t o n a t i o n a l s e c u r i t y t o e n t r u s t t o f o r e i g n e r s . Y e t 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 used t o e s t a b l i s h o r expand d o m e s t i c a l l y c o n t r o l l e d p u b l i c o r p u b l i c a l l y - s u p p o r t e d e n t e r -p 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 -p r i o r i t i e s . 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 t o 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 d e v e l o p m e n t a l p r i o r i t i e s . In t h e 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 i m p a c t . A s u r v e y o f W orld Bank l o a n s t o t h e ASEAN c o u n t r i e s between 1974 and 1980 i n d i c a t e s t h a t an overwhelming 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 p r o j e c t s , 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 b e n e f i t t e d . ( s e e T a b l e s 8 t o 12). The d e v e l o p m e n t a l 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 major 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, dem o n s t r a t e d 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 t o t h o s e p r o j e c t s i n t h e d e v e l o p m e n t - o r i e n t e d s e c t o r s . 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 t o 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 m e e t i n g 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 -l o g y . 1 8 Moreover, i n two ASEAN n a t i o n s t h e s u p p l y o f l o a n c a p i t a l has 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. In S i n g a p o r e , the 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 b u s i n e s s e s , too s m a l l t o g a i n a c c e s s t o t h e European f i n a n c i a l market, t o r a i s e c a p i t a l r e g i o n a l l y . 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 o b j e c t i v e s : f i r s t , how t h e chosen p r o j e c t s f u n d e d 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 t h e Second and T h i r d M a l a y s i a P l a n s ; and s e c o n d , how - 52 -TABLE 8 Statement o f Loans Approved by World Bank 1974-1980 I n d o n e s i a Purpose ; Year R a i l w a y s 1974 J a k a r t a urban development 1974 Water s u p p l y 1974 Development f i n a n c e company 1974 I n d u s t r y 1975 I r r i g a t i o n 1975 A g r i c u l t u r a l r e s e a r c h 1975 Power 1975 S h i p p i n g — F e r t i l i z e r d i s t r i b u t i o n 1975 T e c h n i c a l a s s i s t a n c e • 1976 Highways 1976 E d u c a t i o n " 1976 S h i p p i n g 1976 ' F e r t i l i z e r 1976 E l e c t r i c power 1976 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 Rura l Development 1976 Urban Development 1976 T r a n s p o r t a t i o n -- P o r t s 1976 Development F i n a n c e Companies 1977 Power 1977 P o p u l a t i o n s : N u t r i t i o n Development 1977 A g r i c u l t u r e : I r r i g a t i o n 1977 A g r i c u l t u r e : I r r i g a t i o n 1977 E d u c a t i o n : T e a c h e r T r a i n i n g 1977 Development F i n a n c e Companies 1977 P o p u l a t i o n : F a m i l y P l a n n i n g 1977 E d u c a t i o n Non-Formal E d u c a t i o n 1977 A g r i c u l t u r e and R u r a l Development 1977 Power ' 1978 I n d u s t r y : Coal 1978 A g r i c u l t u r e and R u r a l Development 1978 A g r i c u l t u r e and R u r a l Development 1978 A g r i c u l t u r e and R u r a l Development 1978 A g r i c u l t u r e and Rur a l Development 1978 Urban Development 1979 A g r i c u l t u r e and R u r a l Development 1979 E d u c a t i o n 1979 T r a n s p o r t a t i o n 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 1979 A g r i c u l t u r e and R u r a l Development 1979 Power 1979 Water S u p p l y and Sewerage 1979 A g r i c u l t u r e and R u r a l Development 1979 A g r i c u l t u r e and R u r a l Development 1980 A g r i c u l t u r e and Rural Development 1980 A g r i c u l t u r e and R u r a l Development 1980 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 1980 Energy 1980 S o u r c e : World Bank Annual R e p o r t , 1974-1980. - 54 -TABLE 9 Statement o f Loans Approved by World Bank 1974-1980 M a l a y s i a Purpose.. Year Land s e t t l e m e n t 1974 Area development 1974 E d u c a t i o n 1974 Highways 1974 Land s e t t l e m e n t 1974 A g r i c u l t u r e 1975 Power 1974 Water s u p p l y and sewerage 1976 Urban t r a n s p o r t 1976 Rura l development 1976 E l e c t r i c power 1975 E d u c a t i o n 1976 A g r i c u l t u r e 1977 Power 1977 A g r i c u l t u r e and R u r a l Development 1977 A g r i c u l t u r e and Rur a l Development 1977 A g r i c u l t u r e and Rur a l Development 1978 T r a n s p o r t a t i o n 1978 Energy 1980 S o u r c e : World Bank Annual R e p o r t , 1974-1980. - 55 -TABLE 10 Statement o f Loans Approved by World Bank 1974-1980 P h i l i p p i n e s Purpose Year I r r i g a t i o n 1974 Development f i n a n c e 1974 Highways 1974 P o r t s 1974 P o p u l a t i o n 1974 S h i p p i n g 1974 I r r i g a t i o n 1975 Rural development 1975 I n d u s t r y 1974 Power . 1974 Development f i n a n c e company 1975 I r r i g a t i o n 1975 Development f i n a n c e company 1976 E d u c a t i o n 1976 L i v e s t o c k 1976 I r r i g a t i o n 1976 G r a i n P r o c e s s i n g 1976 F i s h e r i e s II 1976 U r b a n i z a t i o n 1976 U r b a n i z a t i o n 1976 T r a n s p o r t a t i o n 1977 A g r i c u l t u r e 1977 E d u c a t i o n 1977 A g r i c u l t u r e 1977 Water S u p p l y and Sewerage 1977 A g r i c u l t u r e 1977 A g r i c u l t u r e 1977 Power 1977 A g r i c u l t u r e and Rur a l Development 1978 A g r i c u l t u r e and R u r a l Development 1978 E d u c a t i o n 1978 A g r i c u l t u r e and Rur a l Development 1978 I n d u s t r i a l Development and F i n a n c e 1978 I n d u s t r i a l Development and F i n a n c e 1978 Power 1978 I n d u s t r i a l Development and F i n a n c e 1979 A g r i c u l t u r e and Rur a l Development 1979 E d u c a t i o n 1980 - 56 -TABLE 10 ( c o n t . ) Purpose Year A g r i c u l t u r e and Rural Development 1980 Water S u p p l y and Sewerage 1980 A g r i c u l t u r e and R u r a l Development 1980 U r b a n i z a t i o n 1980 T r a n s p o r t a t i o n 1980 T r a n s p o r t a t i o n 1980 S o u r c e : World Bank Annual R e p o r t , 1974 r1980. - 57 -TABLE 11 Statement o f Loans Approved by World Bank 1974-1980 S i n g a p o r e Purpose Year E d u c a t i o n 1974 Water S u p p l y 1974 E n v i r o n m e n t a l C o n t r o l 1975 S o u r c e : World Bank Annual R e p o r t , 1974-1980. - 58 -TABLE 12 Statement o f Loans Approved by World Bank 1974-1980 T h a i l a n d Purpose Year Development F i n a n c e 1974 Power 1974 Water S u p p l y 1974 I r r i g a t i o n 1975 L i v e s t o c k 1976 R u r a l Development 1976 Rubber r e p lanting 1976 E d u c a t i o n 1976 T e l e c o m m u n i c a t i o n s 1976 A g r i c u l t u r e 1977 A g r i c u l t u r e 1977 Development F i n a n c e Companies 1976 T r a n s p o r t a t i o n 1978 Urban Development 1978 Power 1978 I n d u s t r y 1978 Power 1978 A g r i c u l t u r e and R u r a l Development 1979 A g r i c u l t u r e and R u r a l Development 1979 A g r i c u t t u r e and R u r a l Development 1979 U r b a n i z a t i o n 1980 Energy 1979 Energy 1979 Energy 1979 Water S u p p l y and Sewerage 1980 Energy 1980 S o u r c e : World Bank Annual R e p o r t , 1974-1980. - 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 t h e 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 t h e i n t e r e s t s o f the u n d e r p r i v i l e g e d Malay e t h n i c group. 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 t h e 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 e x e m p l i f i e s t h i s p o l i t i c a l c o n c e r n . 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 t h e 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 p e o p l e l i v e ; From t h e e v i d e n c e p r e s e n t e d 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 t h e 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 . F u r t h e r e v i d e n c e , i n t h e 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 ) . A l l e g a t i o n 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 t h e s c ope 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 i n t e r f e r e n c e . C h a p t e r Two, d e a l i n g w i t h t h e 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 t h e 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 t h r o u g h c o n d i -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 t o t h e 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 o f b l a t a n t p o l i t i c a l c o n t r o l . R a t h e r , t h e 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 development 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 not t o a c c e p t t he 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 t h e 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 dvantages 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 the Bank's c o n d i t i o n a l i t y w i t h 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 the 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 c i r c l e s . " 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 the p o l i t i -c a l u n r e s t t h a t t h a s 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 s t r e n g t h . 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 World 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 impor-t 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 the p r i v a t e banks. T h i s may be e x p l a i n e d by t h e 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 coun-t 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 he - 61 -h o s t government; i n v o l v e m e n t i n d o m e s t i c p o l i c y c o u l d t h r e a t e n t h e s e 23 r e l a t i o n s . Second, t h e borrower has t h e o p t i o n t o choose not 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 t a k e 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 c r e d i t o r s . 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 the s u p p o r t o f most 24 o f t h e o t h e r major 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 mea-s u r e s . 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 i „25 p r e v i o u s l o a n s . 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 main-t 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 the p r i n c i p l e o f " u n i f o r m i t y o f t r e a t m e n t . " T h i s p r i n c i p l e r e q u i r e s t h a t f o r any g i v e n degree o f need, the e f f o r t economic a d j u s t m e n t sought 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. Thus, both d e v e l o p e d 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 . A l l e g a t i o n 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 development 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 . These 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 : o v e r a l l economic growth and deb t repayment. In a d d i t i o n , t h e r e can be o b s e r v e d a g e n e r a l - 62 -c o n c e r n 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 t o r e d u c e 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 he 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 not s t u n t e d economic growth. R a t h e r , t he 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 the growth o f deb t as a p e r c e n t a g e o f t h e 28 growth o f GDP and 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 but 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 deb 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 debt s e r v i c i n g ( T a b l e 15). In both t a b l e s , t h e s t a t i s t i c s d e m onstrate t h a t t he l e v e l o f deb 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 " s t u n t e d . " ' C o n e ! u s i o n s 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 the ASEAN n a t i o n s . 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 e x a m i n a t i o n 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 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 ystem 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 the 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 ( p e r c e n t a g e ) C o u n t r y 1972 1974 1976 1978 I n d o n e s i a 9.4 7.6 6.9 7.2 M a l a y s i a 9.4 8.3 11.1 7.4 P h i l i p p i n e s 4.8 5.3 6.7 5.8 S i n g a p o r e 13.4 6.3 7.5 8.6 T h a i l a n d 4.7 5.4 9.0 11.7 S o u r c e : 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 ( p e r c e n t a g e ) C o u n t r y 1972 1974 1976 1978 I n d o n e s i a 38.2 24.6 26.9 37.5 M a l a y s i a 13.5 8.6 14.8 16.3 P h i l i p p i n e s 10.4 7.8. 11.9 17.7 S i n g a p o r e 10.3 9.9 11.9 14.0 T h a i l a n d 4.9 3.9 5.0 7.6 S o u r c e : 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 ( p e r c e n t a g e ) C o u n t r y 1972 1974 1976 1978 I n d o n e s i a 6.9 3.9 11.2 12.4 M a l a y s i a 2.7 2.5 4.5 8.8 P h i l i p p i n e s 10.1 5.2 7.1 13.7 S i n g a p o r e 1.0 0.6 0.8 2.3 T h a i l a n d 2.7 1.9 2.4 3.4 S o u r c e : Compiled f r o m . 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 , 1980, p. 32. - 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 debt 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 t h r o u g h 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 i n t h e c a s e s t u d y . 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 attempt by t h e d e v e l o p e d n a t i o n s t o p e r p e t u a t e a p a t t e r n o f n e o - c o l o n i a l i s m . T h i s . a p p r o a c h t o 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 on f o u r major arguments: f i r s t , t h a t d e b t 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 h e d e v e l o p e d n a t i o n s ) 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 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 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 under-development. Withdrawal from t h e system i s viewed as the 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 , been accompanied by c r e d i t o r i n f l u e n c e . 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 the c r e d i t o r s . 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 t h e y 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 underdevelopment. 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 the 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 osure 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 the P h i l i p p i n e s have had t o borrow from t he 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 impor-t a n t f a c t o r i n d e t e r m i n i n g 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 re 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 c r i t e r i a 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 the ASEAN members and p r i v a t e and o f f i c i a l l o a n s o u r c e s . S h o r t o f a s t a t i s t i c a l a n a l y s i s p r o v i d i n g e v i d e n c e 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 the c r i t i c s and th e 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 the 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 o f t h e s e p o l i c i e s . On the 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 , t h e 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 bene-f 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 -t i e s . 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 -i n g 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 the economy. The d i v e r s i t y found 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 debt 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 eco-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 ex-t 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 the 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 system 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 demonstra-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 . U l t i m a t e l y , t h e 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 egree 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 f o u n d i n : J.A. C a p o r a s o , "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 N o r t h - S o u t h 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. Crone, "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 C o l u m b i a , 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 . " The G u a r d i a n , 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 Economics, U n i v e r s i t y o f B r i t i s h C olumbia, A p r i l 2, 1981. 6. "Another s o u r c e o f d a t a would be t h e banks t h e m s e l v e s , but t h e y 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 might 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 t h e ' 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 might 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 . " 1 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 , (Wash i n g t o n , 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. 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 government-sponsored 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 , t he 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 a t t e m p t to f i n d new s o u r c e s f o r t h e 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 t h e 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 Ba n k i n g i n the F a r E a s t . (London: F i n a n c i a l 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. - 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 Banking 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. I b i d . 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 the  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 Indebted 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. I b i d . 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 complete d i s c u s s i o n o f t h e p o l i t i c a l elements 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 Govern- 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. I b i d . 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. I b i d . 25. " U n l e s s the 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 sub-s 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 than t a k e a c o m p l e t e l y hard 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. Aronson ( 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 , 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 the p e r c e n t a g e o f debt t o e x p o r t s : s p e c i f i c a l l y , t he 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 debt 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 I n d e b t e d n e s s and t h e D e v e l o p i n g C o u n t r i e s , London: Croon Helm, 1979. 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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. Ingram, J.C. Economic Change i n T h a i l a n d 1850-70, S t a n f o r d , C a l i f o r n i a : S t a n f o r d U n i v e r s i t y P r e s s , 1970 J a c k s o n , K a r l D., and Pye, L u c i a n W., P o l i t i c a l Power and Communications i n  I n d o n e s i a , B e r k e l e y : U n i v e r s i t y o f C a l i f o r n i a P r e s s , 1978. K l e i n , T.M. "The E x t e r n a l Debt S i t u a t i o n o f 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 13 (December 1976): 21-25 Lim Joo Jock and Tan, C , eds. 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 , 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 , 1977. - 74 -L o z o y a , J o r g e , and B h a t t a c h a r y a , A.K., eds. 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Othman, Abdul Ghani b i n and I q b a l , Mohamed 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 , Kuala 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 a r i n g a u x , R o l a n d - P i e r r e "A N a t i o n D i s p o s s e s s e d . " The G u a r d i a n , 1 November 1981. P a y e r , C. The Debt T r a p -- The IMF and t h e T h i r d World, B a l t i m o r e : Penguin Books 1974. P h o n g p a i c h i t , Pasuk "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): 440-60. S e i r a , A r i e l B u i r a "The World Economy, E x t e r n a l Debt and P r o s p e c t s f o r D e v e l o p i n g F i n a n c i n g " World Development 7 ( F e b r u a r y 1979): 125-33. 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