The Private Development Corporation of the Philippines

The PDCP, founded in 1963, was originally capitalized by an A.I.D. loan of P27.5 million. Despite the adverse effects of inflation, devaluation of the peso, and constrictive government regulation of imports and interest rates, by the end of 1982 PDCP had provided assistance to 1,183 projects having a peso value of over P5 billion. This expansion is complemented by the fact that PDCP has retained a trouble-free loan portfolio and has benefited from continuity of management and very good in-house staff training. Problem areas have been in the diversity of the portfolio - originally, loans were made predominantly to large industry, although by 1983 small and medium industries were receiving more attention - and in the geographic distribution of the funds, which still go mostly to the central regions. The local currency supply has been a problem as well, although PDCP"s ability to tap the peso resources of the Industrial Guarantee and Loan Fund (a separate institution also established in part with A.I.D. funding) has alleviated the problem somewhat. The establishment of a Central Bank credit line in 1981 also increased the supply of pesos from foreign currency loans for local expenditures. The PDCP experience points up several factors which A.I.D. should heed as it draws up a new private sector development policy. For example, greater attention must be paid to analysis of the financial sector in recipient countries as a prerequisite to A.I.D. investment. Priority should be given to wholesaling rather than retailing financial assistance to the private sector. Finally, training and technical assistance should be part of every A.I.D. attempt to establish or strengthen development finance institutions. Appendices include a statement of PDCP"s current business policies and 28 tables of financial statistics. (Author abstract, modified)