Republic of the Philippines · 424B4 · On 1/9/03

Filed On 1/9/03, 11:17am ET   ·   Accession Number 1145549-3-26   ·   SEC File 333-91176

Prospectus   —   Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Republic of the Philippines                          198   1.26M 

Document Table of Contents

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                                        Filed pursuant to Rule 424(b)(4) under
                                                    the Securities Act of 1933
                                                    Registration No. 333-91176

PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 11, 2002 

[REPUBLIC OF THE PHILIPPINES LOGO]

US$500,000,000

REPUBLIC OF THE PHILIPPINES 

9.00% GLOBAL BONDS DUE 2013 
----------------------
The Republic will pay interest on the global bonds each February 15 and August  
15. The first interest payment on the global bonds will be made on February 15, 
2003. The global bonds will constitute a further issuance of, are fungible with 
and are consolidated and form a single series with, the 9.00% Global Bonds due  
2013 issued by the Republic on November 25, 2002. The total principal amount of 
the previously issued global bonds and the global bonds now being issued is     
$1,000,000,000.                                                                 

The Republic may not redeem the global bonds prior to their maturity.           

The offering of the global bonds is conditional on the receipt of certain       
approvals of the monetary board of Bangko Sentral ng Pilipinas, the central bank
of the Republic.                                                                

The global bonds are being offered globally for sale in the jurisdictions where 
it is lawful to make such offers and sales. We have applied to list the global  
bonds on the Luxembourg Stock Exchange.                                         

                                                                [Download Table]

                                                     PER BOND       TOTAL    
                                                     --------    ------------
                                                                             
Price to investors(1).............................    96.75%     $483,750,000
Underwriting discounts and commissions............     0.22%     $  1,100,000
Proceeds, before expenses, to the Republic........    96.53%     $482,650,000

---------------                                                                 

(1) Plus accrued interest from November 25, 2002.                     

Neither the US Securities and Exchange Commission nor any state securities      
commission nor the Luxembourg Stock Exchange has approved or disapproved of     
these securities or determined that this prospectus supplement or the prospectus
to which it relates is truthful or complete. Any representation to the contrary 
is a criminal offense.                                                          

We expect to deliver the global bonds to investors in registered book-entry form
only through the facilities of The Depository Trust Company, Clearstream        
Banking, societe anonyme, and Euroclear Bank, S.A./N.V., as operator of the     
Euroclear System, on or about January 13, 2003.                                 

Joint Lead Managers and Joint Bookrunners 

                                                                [Download Table]
                                                                         
CREDIT SUISSE FIRST BOSTON          JP MORGAN              MORGAN STANLEY

----------------------
The date of this prospectus supplement is January 8, 2003.

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          [MAP OF THE REPUBLIC OF THE PHILIPPINES]

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TABLE OF CONTENTS 

                                                                [Download Table]

        PROSPECTUS SUPPLEMENT          PAGES
-------------------------------------  -----
                                            
INTRODUCTORY STATEMENTS..............    S-3
SUMMARY OF THE OFFERING..............    S-4
USE OF PROCEEDS......................    S-7
RECENT DEVELOPMENTS..................    S-8
DESCRIPTION OF THE GLOBAL BONDS......   S-23
GLOBAL CLEARANCE AND SETTLEMENT......   S-26
TAXATION.............................   S-29
UNDERWRITING.........................   S-31
LEGAL MATTERS........................   S-34
GENERAL INFORMATION..................   S-34

                                                                [Download Table]

             PROSPECTUS                PAGES
-------------------------------------  -----
                                            
CERTAIN DEFINED TERMS AND                   
  CONVENTIONS........................      2
FORWARD LOOKING STATEMENTS...........      2
DATA DISSEMINATION...................      3
USE OF PROCEEDS......................      3
REPUBLIC OF THE PHILIPPINES..........      4
DESCRIPTION OF THE SECURITIES........    107
TAXATION.............................    118
PLAN OF DISTRIBUTION.................    126
VALIDITY OF THE SECURITIES...........    127
AUTHORIZED REPRESENTATIVE IN THE            
  UNITED STATES......................    127
EXPERTS; OFFICIAL STATEMENTS AND            
  DOCUMENTS..........................    127
FURTHER INFORMATION..................    127
INDEX TO TABLES......................    T-1

------------------------

YOU SHOULD READ THIS PROSPECTUS SUPPLEMENT ALONG WITH THE PROSPECTUS THAT       
ACCOMPANIES IT. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR            
INCORPORATED BY REFERENCE IN THIS DOCUMENT AND THE ACCOMPANYING PROSPECTUS. WE  
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.   
THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE  
INFORMATION IN THIS DOCUMENT MAY BE ACCURATE ONLY ON THE DATE OF THIS DOCUMENT. 

------------------------

INTRODUCTORY STATEMENTS 

The Republic accepts responsibility for the information contained in this       
prospectus supplement and the prospectus that accompanies it. To the best of the
knowledge and belief of the Republic (which has taken all reasonable care to    
ensure that such is the case), the information contained in this prospectus     
supplement and the accompanying prospectus is in accordance with the facts and  
does not omit anything likely to affect the import of such information.         

The Republic of the Philippines (the "Republic" or the "Philippines") is a      
foreign sovereign state. Consequently, it may be difficult for you to obtain or 
realize upon judgments of courts in the United States against the Republic. See 
"Description of the Securities -- Description of the Debt                       
Securities -- Jurisdiction and Enforceability" in the accompanying prospectus.  

The distribution of this prospectus supplement and the accompanying prospectus  
and the offering of the global bonds may be legally restricted in some          
countries. If you wish to distribute this prospectus supplement or the          
accompanying prospectus, you should observe any applicable restrictions. This   
prospectus supplement and the accompanying prospectus should not be considered  
an offer, and it is prohibited to use them to make an offer, in any state or    
country in which the making of the offering of the bonds is prohibited. For a   
description of some restrictions on the offering and sale of the global bonds   
and the distribution of this prospectus supplement and the accompanying         
prospectus, see "Underwriting" on page S-31.                                    

Unless otherwise indicated, all references in this prospectus supplement to     
"Philippine Pesos", "Pesos" or "P" are to the lawful national currency of the   
Philippines and those to "dollars", "US dollars" or "$" are to the lawful       
currency of the United States of America.                                       

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SUMMARY OF THE OFFERING 

   The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this  
prospectus supplement and the prospectus to which it relates.                   

ISSUER........................   Republic of the Philippines.                   

BONDS.........................   $500,000,000 aggregate principal amount of     
                               9.00% global bonds due 2013. The global bonds
                            constitute a further issuance of, and upon
                                 issuance will be fungible with and consolidated
                                 and form a single series with, the 9.00% Global
                          Bonds due 2013 issued by the Republic on
                     November 25, 2002, in the amount of
                                 US$500,000,000. Upon issuance, the global bonds
                                 will rank pari passu with the previously issued
                         global bonds in all respects. The total
                           principal amount of the previously issued
                             global bonds and the global bonds now being
             issued is US$1,000,000,000.

INTEREST......................   The global bonds will bear interest at 9.00%   
                           per annum from November 25, 2002, payable
                              semi-annually in arrears commencing February
15, 2003.     

INTEREST PAYMENT DATES........   February 15 and August 15 of each year,        
                                 commencing on February 15, 2003, payable to the
                               persons who are registered holders thereof at
                                 the close of business on the preceding February
                                1 or August 1, as applicable, whether or not a
business day. 

ISSUER REDEMPTION.............   The Republic may not redeem the global bonds   
    prior to maturity.

STATUS OF BONDS...............   The global bonds will be direct, unconditional,
                          unsecured and general obligations of the
                              Republic. Except as otherwise described, the
                              global bonds will at all times rank at least
                      equally with all other unsecured and
                          unsubordinated External Indebtedness (as
                                defined in the accompanying prospectus) of the
                            Republic. The full faith and credit of the
                          Republic will be pledged for the due and
                                punctual payment of all principal and interest
                              on the global bonds. See "Description of the
                                 Securities -- Description of Debt Securities --
                      Status of Bonds" in the accompanying
prospectus.   

NEGATIVE PLEDGE...............   With certain exceptions, the Republic has      
                             agreed that it will not create or permit to
                     subsist any Lien (as defined in the
                             accompanying prospectus) on its revenues or
                               assets to secure External Public Indebtedness
                                (as defined in the accompanying prospectus) of
                                the Republic, unless at the same time or prior
                                thereto, the global bonds are secured at least
                               equally and ratably with such External Public
                             Indebtedness. The international reserves of
                                Bangko Sentral ng Pilipinas ("Bangko Sentral")
                             represent substantially all of the official
                               gross international reserves of the Republic.
                          Because Bangko Sentral is an independent
                                 entity, the Republic and Bangko Sentral believe
                                 that the international reserves owned by Bangko
                                Sentral are not subject to the negative pledge
                              covenant in the global bonds and that Bangko
                            Sentral could in the future incur External
                              Public Indebtedness secured by such reserves
                            without securing amounts payable under the
                       global bonds. See "Description of the
                   Securities -- Description of Debt
                                Securities -- Negative Pledge Covenant" in the
          accompanying prospectus.

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TAXATION......................   The Republic will make all payments of         
                                 principal and interest in respect of the global
                      bonds free and clear of, and without
                                 withholding or deducting, any present or future
                              taxes of any nature imposed by or within the
                           Republic, unless required by law. In that
                                 event, the Republic will pay additional amounts
                                 so that the holders of the global bonds receive
                              the amounts that would have been received by
                           them had no withholding or deduction been
                   required. See "Description of the
                                 Securities -- Description of Debt Securities --
                         Additional Amounts" in the accompanying
                                 prospectus. For a description of certain United
                             States tax aspects of the global bonds, see
                              "Taxation -- United States Taxation" in this
                               prospectus supplement and "Taxation -- United
                                States Tax Considerations" in the accompanying
prospectus.   

CROSS-DEFAULTS................   Events of default with respect to the global   
                                 bonds include (i) if the Republic fails to make
                             a payment of principal, premium, prepayment
                             charge or interest when due on any External
                             Public Indebtedness with a principal amount
                             equal to or greater than $25,000,000 or its
                               equivalent, and this failure continues beyond
                             the applicable grace period; or (ii) if any
                                 External Public Indebtedness of the Republic or
                             the central monetary authority in principal
                                amount equal to or greater than $25,000,000 is
                        accelerated, other than by optional or
                         mandatory prepayment or redemption. See
                               "Description of the Securities -- Description
                              of the Debt Securities -- Events of Default:
                              Cross Default and Cross Acceleration" in the
          accompanying prospectus.

LISTING.......................   The Republic is offering the global bonds for  
                               sale in the United States and elsewhere where
                                such offer and sale is permitted. The Republic
                                 has applied to have the global bonds listed and
                            traded in accordance with the rules of the
                                Luxembourg Stock Exchange. The Republic cannot
                       guarantee that the application to the
                                 Luxembourg Stock Exchange will be approved, and
                       settlement of the global bonds is not
                       conditioned on obtaining the listing.

FORM, DENOMINATION AND                                                          
REGISTRATION..................   The global bonds will be issued in fully       
                                registered form in denominations of $1,000 and
                              integral multiples thereof. The global bonds
                           will be represented by one or more global
                        securities registered in the name of a
                         depositary, its nominee or a custodian.
                               Beneficial interests in the global securities
                                 will be shown on, and the transfer thereof will
                                 be effected only through, records maintained by
                            the depositary and its direct and indirect
                           participants. Settlement of all secondary
                             market trading activity in the global bonds
                              will be made in immediately available funds.
         See "Description of the
                       Securities -- Description of the Debt
                         Securities -- Global Securities" in the
          accompanying prospectus.

FURTHER ISSUES................   The Republic may from time to time, without    
                            notice to or the consent of the registered
                              holders of global bonds, issue further bonds
                                 which will form a single series with the global
                bonds. See "Description of the
                       Securities -- Description of the Debt
                      Securities -- Further Issues of Debt
                             Securities" in the accompanying prospectus.

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USE OF PROCEEDS...............   The Republic will use the net proceeds from the
                          sale of the global bonds for the general
                         purposes of the Republic, including for
    budgetary support.

FISCAL AGENT..................   JPMorgan Chase Bank.                           

GOVERNING LAW.................   The fiscal agency agreement, the supplemental  
                              fiscal agency agreement and the global bonds
                        will be governed by and interpreted in
                              accordance with the laws of the State of New
                                York. The laws of the Republic will govern all
                               matters governing authorization and execution
                      of the global bonds by the Republic.

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USE OF PROCEEDS 

  The Republic will use the net proceeds from the sale of the global bonds
for the general purposes of the Republic, including for budgetary support.      

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RECENT DEVELOPMENTS 

    The information included in this section supplements the information about
the Republic that is included in the accompanying Prospectus dated July 11,     
2002.                                                                           

RECENT POLITICAL DEVELOPMENTS                                                   

CHANGES IN THE ARROYO ADMINISTRATION.  On December 30, 2002, President
Gloria Macapagal-Arroyo announced that she would not seek another term as       
president. The next presidential election is required, under the Philippine     
Constitution, to take place by the end of 2004. In her announcement Arroyo      
explained that she wanted to be unburdened by politics and further concentrate  
her efforts on her administration's economic reform plans. See "Arroyo          
Administration Economic Policy".                                                

    Recently, there have been several resignations among senior members of the
Arroyo administration. The Secretary of Justice, Hernando Perez, resigned on    
January 2, 2003, amid allegations that he had extorted money from a Manila      
congressman. On December 19, 2002, the Presidential Anti-Graft Commission       
charged Perez with obstruction of justice for prohibiting the Bureau of         
Immigration from divulging the travel records of high-ranking government        
officials, including himself. Since November 26, 2002, when Perez took a leave  
of absence to confront the allegations, Undersecretary of Justice Merceditas N. 
Gutierrez has served as officer-in-charge of the Department of Justice. The     
Arroyo administration has named Simeon Datumanong, former Secretary of Public   
Works and Highways, to replace Perez as Secretary of Justice.                   

   The President has also re-arranged the assignments of some of her cabinet
members. In January 2003, Ignacio Bunye, the President's Press Secretary, was   
appointed as the President's spokesperson in place of Rigoberto Tiglao, who was 
named as the President's Chief of Staff. Also in January 2003, Hernani Braganza,
Secretary of Agrarian Reform, was appointed as the new Press Secretary.         

In December 2002, President Arroyo announced several changes in her   
cabinet. In particular, the President replaced Secretary of Socio-Economic      
Planning Dante B. Canlas with Romulo Neri, former director-general of the       
Congressional Planning and Budget Office. President Arroyo also announced the   
replacement of the Secretary of Agriculture, Leandro Montemayor, with Luis      
Lorenzo, Jr., a former businessman and presidential adviser on job creation. The
President also announced the replacement of the Secretary of Environment and    
Natural Resources, Heherson Alvarez, with Elizea Gozun, an environmental        
consultant.                                                                     

     Vice-President Teofisto Guingona resigned from his position as Secretary of
Foreign Affairs, effective July 15, 2002, citing, among other things, his       
objection to the presence of US military troops in the Philippines. Education   
Secretary Raul S. Roco resigned on August 13, 2002 after learning that the      
President had endorsed a complaint accusing him of corruption. The Commissioner 
of the Bureau of Internal Revenue ("BIR"), Rene G. Banez, resigned on August 19,
2002, citing pressure from subordinates who were resisting reforms at the BIR.  
President Arroyo has appointed Senator Blas F. Ople as the new Secretary of     
Foreign Affairs, Dr. Edilberto C. de Jesus as the new Secretary of Education,   
and former Customs Commissioner Guillermo Parayno as BIR Commissioner.          

     It is unclear whether President Arroyo's decision not to seek reelection or
these recent changes in leadership positions will materially affect the         
stability or effectiveness of her administration.                               

     In December 2002, it was announced that the president and officer-in-charge
of National Power Corporation ("NPC"), Roland S. Quilala, would be replaced with
Roger Murga. The same month, the president of the National Transmission         
Corporation ("Transco"), Asisclo Gonzaga, announced his retirement from         
government service. The Arroyo administration will replace Gonzaga with Dr.     
Allan Ortiz, former chair of the Development Bank of the Philippines. The new   
appointments will take effect on February 1, 2003. It is not known whether or   
how the changes in leadership of NPC and Transco will affect the planned        
privatization of these companies. See "Recent Economic Developments --          
Privatization of the National Power Corporation".                               

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    INTERNAL CONFLICT WITH REBEL GROUPS.  Armed conflict has continued between
the Government and rebel groups, mainly communist guerillas and Muslim          
separatists.                                                                    

In the first three weeks of October 2002, the Philippines suffered six
bombing attacks which together killed at least 20 people and injured at least   
150 more. Four of the bombing attacks occurred in western and central Mindanao  
and two of the bombing attacks, one of which resulted in several fatalities,    
occurred in Metro Manila. On December 24, 2002, another explosion in the        
province of Maguindanao killed 13 people, and on January 1, 2003, a grenade     
attack in southern Mindanao killed 9 people and injured at least 32 others.     
Government officials have indicated that they suspect either Moro separatists,  
Abu Sayyaf guerillas or communist rebels are responsible for the recent attacks.
As part of the Government's response to these terrorist activities, a number of 
anti-terrorism bills have been proposed in Congress. President Arroyo has       
certified these proposed bills as "urgent" and has urged the Congress to pass a 
law quickly which would give the military and the police increased power in     
fighting terrorism. The draft bills include, among other items, measures        
increasing the state's ability to intercept communications, conduct             
surveillance, freeze bank accounts and extend detentions.                       

   In early August 2002, the United States placed the Communist Party of the
Philippines (the "CPP") and the CPP's armed affiliate, the New People's Army    
(the "NPA"), on its list of "foreign terrorist organizations", freezing the     
groups' funds and barring their members from entering the United States. On     
October 31, 2002, the European Union followed in declaring each of the CPP and  
the NPA a "terrorist organization". The Dutch government froze the financial    
accounts of Jose Ma. Sison, the founding chairman of the CPP, who currently     
lives in the Netherlands. In response to several recent bombings and kidnappings
attributed to the CPP, the Armed Forces of the Philippines (the "AFP") have     
initiated a military offensive to end the insurgency, and security has been     
fortified in all vital public facilities. The Government continues to be open to
peace negotiations with the National Democratic Front ("NDF"), the political    
organization of the NPA. The Government also announced, in early November, that 
it was willing to offer amnesty to communist rebels who surrendered to the      
Government. CPP leaders rejected the offer of amnesty. Since September 2002,    
formal peace talks between the Arroyo administration and the NDF have been in   
suspension by order of the President.                                           

   As part of the recent heightened cooperation between the Republic and the
United States in the fight against terrorism, the US sent troops and military   
advisers to assist the AFP in eradicating the Abu Sayyaf guerrilla group. Under 
a terms of reference entered into between the Republic and the US on February   
13, 2002, about 1,000 US Special Forces troops participated in joint military   
exercises with the AFP. The US Special Forces operated in the Zamboanga and     
Basilan provinces of Mindanao where the Abu Sayyaf are located. The US Special  
Forces observed and trained the AFP on counter-terrorist strategy and techniques
to improve the capability of AFP troops in combating terrorism. The terms of    
reference officially ended on July 31, 2002.                                    

    The United States and the Republic announced on July 2, 2002 that they had
entered into a sustained military cooperation agreement providing for continued 
joint military exercises, training and other cooperation between US forces and  
the AFP. This agreement has replaced the terms of reference that expired on July
31, 2002. Since the termination of joint military exercises in Basilan on July  
31, 2002, military operations by the AFP have moved to the Province of Sulu in  
response to several Abu Sayyaf kidnappings. As a result of these kidnappings,   
two Filipino hostages were killed and four Filipinos and three Indonesians      
remain in the custody of the Abu Sayyaf. Pursuant to the sustained military     
cooperation agreement, in October 2002 more than 200 US Marines arrived at Clark
Air Base, Luzon, to train with Philippine Air Force troops. The AFP has         
announced that at least 50 US military advisers will arrive in the Philippines  
in January 2003 to train Filipino soldiers in light infantry and light reaction 
tactics as part of the anti-terrorism campaign. Joint military exercises are    
also planned to be conducted in central Luzon, central Visayas, and western     
Mindanao. According to the AFP, 5,000 soldiers are currently in pursuit of the  
Abu Sayyaf, and heavy fighting between the AFP and members of the Abu Sayyaf has
continued in areas of Mindanao in the southern Philippines. On December 31,     
2002, Abu Sayyaf guerillas attacked a military outpost on the southern island of
Jolo, killing one Filipino soldier.                                             

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As of December 2002, the Moro Islamic Liberation Front ("MILF"), the  
largest Muslim separatist group in the Philippines, was continuing to pursue    
peace talks with the Government. However, the Government is also pursuing       
several MILF members who are suspected of involvement in the recent terrorist   
attacks in Zamboanga, Maguindanao and Manila. The Philippine National Police    
believe that the MILF has ties to the Indonesian group Jemaah Islamiah, which is
widely believed to be responsible for the terrorist bomb attack in Bali,        
Indonesia (see -- "Terrorist Attacks in the United States and Related Events")  
and to be linked to the al-Qaeda terrorist organization. MILF leaders have      
denied that the group is responsible for the recent bombings in the Philippines 
and have denied any link to Jemaah Islamiah or al-Qaeda.                        

   TENSIONS WITH IRAQ AND NORTH KOREA.  Increased tension between the United
States and Iraq has led to uncertainty about the world economy as a whole. US   
President George W. Bush and other US officials have indicated that the US may  
attack Iraq and attempt to remove the regime of Iraqi President Saddam Hussein  
if Iraq does not eliminate chemical, biological, and nuclear weapons programs as
required by the United Nations.                                                 

A US-led war in Iraq may affect, among other things, the stability of 
international financial markets, the Republic's imports and exports, the        
exchange rate between the peso and the US dollar, prices for energy and         
manufactured goods, foreign investment in the Republic, and remittances from    
overseas Filipino workers. In particular, the potential war in Iraq has fueled  
uncertainty about the supply of oil from the Middle East and global oil prices. 
The Government is seeking to negotiate oil assurance agreements with Indonesia, 
Russia, Iran and Saudi Arabia in an effort to ensure a stable oil supply.       

North Korea's recent announcement that it would reactivate its nuclear
weapons program has drawn harsh criticism and further economic sanctions from   
the United States. The government of South Korea has indicated that it hopes to 
use diplomatic efforts to defuse the crisis. It is unclear how any potential    
military action by or against North Korea will affect the international         
financial markets or the Philippine economy.                                    

  TERRORIST ATTACKS IN THE UNITED STATES AND RELATED EVENTS.  The evolving
response of the United States and other nations to the terrorist attacks of     
September 11, 2001 in New York City and Washington, D.C. has resulted in        
continuing political and economic uncertainty and in increased volatility in the
world's financial markets. The US-led military action in Afghanistan, which     
began in October 2001, successfully defeated the Taliban government and weakened
the al-Qaeda forces blamed for the September 11 attacks. However, the US        
government has indicated that al-Qaeda continues to operate in countries around 
the world and continues to threaten and plan additional terrorist attacks.      

     In October 2002, a terrorist bombing in Bali, Indonesia killed at least 190
people, including many foreign tourists. It is not known whether those          
responsible for the Bali attack were connected to previous attacks in the       
Philippines. It is unclear how the Philippine economy or the international      
financial markets will be affected in the future by terrorism-related events    
either inside or outside the Philippines.                                       

CRIMINAL CHARGES AGAINST ESTRADA.  The criminal charges for perjury,  
illegal use of an alias, and plunder filed against former President Joseph      
Estrada by the Ombudsman continue to be tried in the Sandiganbayan, a special   
court with jurisdiction over criminal and civil cases involving graft and       
corruption.                                                                     

On August 30, 2002, the Sandiganbayan issued a writ of preliminary    
attachment of all assets of Mr. Estrada, his son, Jose Estrada, and others      
accused in the P4 billion plunder case, including funds in the account of "Jose 
Velarde" which Mr. Estrada admitted publicly to owning but subsequently claimed 
to belong to a business acquaintance. In response to the writ of preliminary    
attachment, Mr. Estrada claimed that he did not purchase any property while he  
was president and denied ownership of certain funds frozen by the Sandiganbayan.

Mr. Estrada has complained about the alleged bias of the Sandiganbayan
against him. Claiming that he will not be treated fairly by the Philippine      
courts, he has dismissed all of his lawyers. Since Mr. Estrada is not in a      
position to defend himself, the Sandiganbayan appointed several counsel de      
officio for him.                                                                

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  Hearings on the perjury, plunder, and illegal alias charges are ongoing.
Government prosecutors are expected to complete presenting evidence against Mr. 
Estrada in early 2003. The defense will present its evidence after the          
prosecution rests its case.                                                     

    On November 13, 2002, the prosecution's star witness, Ms. Clarissa Ocampo,
took the stand, reprising her account at Mr. Estrada's December 2000 impeachment
trial. Ms. Ocampo, who was at the time a bank senior vice president for trust,  
positively identified Mr. Estrada as having signed as "Jose Velarde" on various 
documents for opening an investment management account.                         

RECENT ECONOMIC DEVELOPMENTS                                                    

   With respect to interim period indicators of economic performance for any
particular year set out in this section "Recent Economic Developments" for GNP, 
GDP, domestic credit growth and balance of payment indicators (including        
exports, imports, goods, services, trade and income), unless otherwise noted,   
the indicators set out are comparisons to the corresponding interim period of   
the immediately prior year; or year-on-year comparisons.                        

     BACKGROUND.  Economic growth was sustained in 2002 although growth momentum
was weakened due to a series of adverse developments such as:                   

   - the resignation of several key members of the Arroyo administration and
the ongoing trial of former president Estrada;                    

 - the rapid increase in the Government's budget deficit, which stood at
     P200.6 billion in November (compared to the original full-year forecast
  for 2002 of P130 billion), and is expected to have increased further
   through the remainder of 2002 (consistent with the Republic's revised
deficit forecast for 2002 of P223 billion), caused by higher than 
    expected expenditures and lower than expected revenue collections from
the BIR;                                                          

 - the ongoing conflict with rebel groups in Mindanao, the conflict with
  communist rebels, the bombings and bomb threats in the Republic, the
 recent terrorist bombing in Bali, Indonesia, the recent response to
       terrorism by the Government, the US and other countries and the threat of
war in Iraq; and                                                  

     - Standard & Poor's Rating Service's and Fitch Ratings' revised outlooks on
     the Republic's long-term foreign currency sovereign credit ratings from
stable to negative.                                               

    Despite these challenges and the generally weak global conditions, for the
first nine months of 2002, real GNP grew by 4.2% and real GDP grew by 4.1%,     
compared with GNP growth of 3.6% and GDP growth of 3.0% for the first nine      
months of 2001. The increased growth rates are, in part, a result of lower      
interest and inflation rates, and in the Government's view reflect the success  
of the administration's macroeconomic strategy implemented in 2001.             

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   RECENT ECONOMIC INDICATORS.  The following table sets out the performance
of certain of the Republic's principal economic indicators for the periods      
indicated.                                                                      

                                                        [Enlarge/Download Table]

                                                               2000        2001        2002      
                                                             ---------   ---------   --------    
                                                                                                 
Real GDP growth (%).........................................       4.4         3.2        4.1(1) 
Real GNP growth (%).........................................       4.8         3.4        4.2(1) 
Inflation rate (%)..........................................       4.4(2)      6.1(2)     3.1(2) 
Unemployment rate (%).......................................      11.2(3)     11.1(3)    11.8(3) 
91-day T-bill rate (%)......................................      9.86(2)     9.86(2)    5.45(4) 
External position                                                                                
  Balance of payments ($ million)...........................      (513)       (192)       751(1) 
  Trade-in-goods/GNP (%)....................................       8.7         3.7        2.1(1) 
     Export growth (%)......................................       9.0       (16.2)       8.8(1) 
     Import growth (%)......................................       3.8        (6.2)       9.3(1) 
  External debt ($ billion).................................      52.1        52.4       53.6(5) 
  International reserves                                                                         
     Gross ($ billion)......................................      15.0        15.7       15.7(6) 
     Net ($ billion)........................................      11.3        11.4       12.4(6) 
     Months of retained imports(7)..........................       4.4         5.0        5.0(6) 
Domestic debt (P billion)...................................     1,068       1,248      1,398(8) 
Domestic credit growth (%)..................................      8.55        0.89      (0.32)(9)

---------------                                                                 

(1) First nine months of 2002.                                                

(2) Full year average.                                                        

 (3) Average of the January, April, July and October applicable statistics based
on the January, April, July and October labor force surveys for the   
relevant year.                                                        

(4) Average of first eleven months of 2002.                                   

(5) As of September 30, 2002.                                                 

(6) As of November 30, 2002.                                                  

(7) Number of months of average imports of merchandise goods and payment of   
services and income that can be financed by gross reserves.           

(8) As of June 30, 2002.                                                      

(9) July-September 2002.                                                      

   ARROYO ADMINISTRATION ECONOMIC POLICY.  In October 2002, President Arroyo
outlined an eight-point work program of the Government for the following six    
months. The program includes:                                                   

- keeping transportation fares down;                                  

- reducing transport costs from Mindanao to Luzon;                    

- stimulating small- and medium-scale enterprises;                    

- stimulating housing developments;                                   

- encouraging private investments in agriculture;                     

- continuing to build infrastructure to decongest Metro Manila;       

    - ensuring that the Presidential Commission on Good Government contributes
to fiscal resources; and                                          

- making Makati City a specific tourist destination.                  

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 In addition, in December 2002, President Arroyo announced the following
additional measures to enhance productivity:                                    

   - increasing government credit for small- and medium-scale enterprises to
P10 billion in 2003;                                              

- forming a new anti-smuggling task force; and                        

- improving the oversight system for government procurements.         

   In January 2003, after announcing that she would not run for re-election,
President Arroyo announced that her administration would focus on the provisions
of the Medium-Term Philippine Development Plan, originally set out in the       
National Socio-Economic Summit of 2001, in conjunction with the eight-point     
program announced in October 2002.                                              

  GOVERNMENT REVENUES AND EXPENDITURES.  Government revenues for the first
eleven months of 2002 totaled P506.6 billion, of which P442.8 billion were from 
tax revenues and P63.8 billion were from non-tax revenues. Total revenues from  
January to November 2002 decreased 0.4% from total revenues for the same period 
in 2001. Of total tax revenues during the first eleven months of 2002, the BIR  
accounted for P356.8 billion and the Bureau of Customs accounted for P86.0      
billion. Treasury remittances accounted for P36.8 billion in revenue during the 
first eleven months of 2002, and other government offices accounted for the     
remaining P27.0 billion.                                                        

     The BIR's collection of P356.8 billion over the first eleven months of 2002
was slightly more than the P354.9 billion collected over the first eleven months
of 2001. The lower than expected amounts collected for 2002 have been mainly    
attributed to the BIR's continued difficulty of generally enforcing the         
Republic's tax laws as well as the relatively low interest rate environment.    
However, the BIR's collection of P40.8 billion for the month of November 2002   
was a 17.6% increase over the P34.7 billion collected in November 2001. Under   
the recently appointed BIR Commissioner, Guillermo Parayno, the BIR has         
implemented new technology to enable the BIR to identify, report, and prosecute 
taxpayers and companies that under-declare their value added taxes ("VAT"). A   
BIR program for voluntary assessment and availment of unpaid VAT and other      
income taxes has been put in place to collect unpaid taxes that were discovered 
by the BIR. The BIR has concluded that underreporting of income from businesses 
has resulted in P10 billion in uncollected tax revenue. The BIR is making a     
concerted effort to recover as much of this revenue as possible. In addition, in
order to encourage better tax compliance, the BIR under the new Commissioner has
simplified the filing process and the payment of taxes.                         

 Government expenditures for the first eleven months of 2002 were P707.2
billion, compared to P653.5 billion over the same period in 2001. The increase  
in expenditures from last year was due in part to higher expenditures for       
infrastructure, personal services, and allotments to local government units for 
anti-poverty programs and security measures. The deficit for the first eleven   
months of 2002 was P200.6 billion, which exceeded the Government's target of    
P130 billion deficit for the entire year. The budget deficit is expected to     
increase for the remainder of 2002. This rapid increase in the budget deficit   
has been caused by lower than expected revenue collections from the BIR, and    
higher than expected expenditures. The Government has revised its budget deficit
forecast for the full year 2002 to P223 billion.                                

    A plan by the Government to sell a 10% stake in Manila Electric (Meralco),
the Republic's largest power distributor, is in jeopardy due to a Supreme Court 
order for Meralco to return an estimated P11 billion of excess charges to       
customers. The Government planned on the sale of an interest in Meralco to      
reduce the deficit.                                                             

    CREDIT RATINGS.  On January 8, 2003, Moody's Investors Service changed its
rating outlook on the Republic's local-currency rating for government bonds to  
negative from stable, while affirming each of the Republic's foreign-currency   
ratings. Moody's recognized that revenue collections have improved in recent    
months, but noted that poor revenue collection in prior periods has weakened    
long-term fiscal prospects. On November 25, 2002, Fitch Ratings downgraded the  
Republic's ratings outlook from stable to negative. Fitch indicated that further
evidence of falling tax revenues had undermined the Government's fiscal         
credibility and raised concerns about rising public indebtedness. Fitch noted   
that the persistence of the current account                                     

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surplus has prevented the appearance of an external financing gap. On October   
29, 2002, Standard & Poor's Rating Service revised its outlook on the Republic's
long-term foreign currency sovereign credit ratings from stable to negative.    
Standard & Poor's focused on the growing fiscal deficit, the Government's high  
debt burden and poor revenue collection by the BIR (which Standard & Poor's     
noted must be strengthened to meet the Government's long-term fiscal goals). The
increased budget deficit has put pressure on the value of the Peso, which will  
raise debt servicing costs, as more than half of the Republic's debt is         
denominated in foreign currencies. Standard & Poor's explained that the change  
reflects diminishing prospects for the fiscal consolidation that is necessary to
stabilize and reduce the Government's high debt burden and sustain investor     
confidence.                                                                     

  PHILIPPINE STOCK EXCHANGE.  From its close of 1,156.4 at the end of June
2002, the Philippine Stock Exchange declined to 1,018.4 at the end of December  
2002. The Stock Exchange closed at 1,040.4 as of January 8, 2003. The higher    
budget deficit, concerns of a global economic slowdown, increased crime and     
kidnappings, the accounting scandals that affected certain large corporations in
the United States and the proposed partial sale by First Pacific Company Limited
of its 24.4% controlling stake in Philippine Long Distance Telephone Company to 
the Gokongwei Group contributed to a decline in the composite index.            

  GNP/GDP.  For the first nine months of 2002, real GNP grew 4.2% and real
GDP grew 4.1%, compared with GNP growth of 3.6% and GDP growth of 3.0% for the  
first nine months of 2001. The increased growth rates are, in part, a result of 
lower interest and inflation rates, and in the Government's view, reflect the   
administration's macroeconomic strategy implemented in 2001.                    

     Growth in the first nine months of 2002 was driven primarily by the service
sector which grew 5.1% compared to 4.2% in the first nine months of 2001. All   
subsectors of the service sector, except finance and real estate, showed strong 
growth during the first nine months of 2002, particularly transportation,       
communication and storage, which grew primarily because of increased            
computerized operations for Government services, and trade, which grew primarily
because of increased regional operations by the larger domestic retailers.      
Growth in the finance subsector was sluggish during the first three months of   
2002, but improved significantly in the second and third quarters because of    
increased earnings by banks from fee-based services.                            

    Agriculture, Fishery, and Forestry.  In the first nine months of 2002, the
agriculture, fishery, and forestry sector grew 2.3%, compared to 2.8% for the   
first nine months of 2001. Favorable weather conditions in the first three      
months of 2002 and the Government's efforts to improve productivity,            
particularly for palay and corn, improved performance in the poultry, livestock 
and fishery industries, and the elimination of tariffs on fertilizer helped     
offset weather-related declines in food production during the second and third  
quarters of 2002. Meteorologists have reported that the weather system effect   
known as E1 Nino could extend into and worsen in the first part of 2003, leading
to drier weather conditions, which could have an effect on crop harvests. The E1
Nino effect is expected to be moderate compared to the prolonged drought of     
1997.                                                                           

Industry.  For the first nine months of 2002, the industry sector grew
3.8%, compared to growth of 1.5% for the first nine months of 2001. The growth  
in industry was driven by substantial increases in the mining and quarrying and 
construction subsectors. All industry subsectors except for electricity, gas,   
and water experienced sustained or increased rates of growth from the previous  
year.                                                                           

In the first nine months of 2002, the mining and quarrying subsector  
rebounded from previous declines, with growth of 39.8%. Most of the growth in   
the mining and quarrying subsector was attributable to production from the      
Camago-Malanpaya Gas Project. The annual growth rate in the manufacturing       
subsector was 2.8% for the first nine months of 2002, the same annual growth as 
for the first nine months of 2001. Food processing, textiles, footwear and      
apparel, non-metallic mineral products and electrical machinery showed improved 
results while output declined in cosmetics, plastic products, rubber products,  
leather products, petroleum and coal products and non-electrical machinery      
products. Growth in the construction subsector rebounded to grow 2.8% during the
first nine months of 2002 compared to a contraction of 4.2% for the first nine  
months of 2001. The electricity, gas and water subsector grew by 1.8% for the   
first nine months of 2002, compared to growth of 3.6% for the first nine months 
of 2001.                                                                        

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Services.  The service sector remains the largest contributor to GDP, 
having contributed approximately 45.1% of GDP at constant market prices from    
1997 to 2001. In the first nine months of 2002, the services sector grew by 5.1%
and contributed approximately 44% to the GDP for the period. Growth in the      
service sector was driven mainly by expansion of the transport, communications  
and storage subsector.                                                          

   The transport, communications and storage subsector posted 8.9% growth in
the first nine months of 2002 compared to 8.2% growth for the first nine months 
of 2001. The trade subsector grew 5.5% for the first nine months of 2002,       
compared to growth of 5.5% for the first nine months of 2001. Growth in the     
trade subsector decreased from the second to third quarter of 2002 due to the   
decline in agricultural production. The finance subsector grew by 2.6% for the  
first nine months of 2002 compared to growth of 1.7% in the first nine months of
2001. The ownership of dwellings and real estate subsector grew by 1.4% for the 
first nine months of 2002 compared to a contraction of 1.1% during the same     
period of 2001. The private services subsector grew 5.1% in the first nine      
months of 2002 compared to growth of 4.3% in the first nine months of 2001. The 
Government services subsector grew by 3.8% for the first nine months of 2002    
compared to growth of 2.4% for the first nine months of 2001.                   

   DEBT PROCEEDS.  In November 2002, the Republic received the proceeds from
the issuance of $500 million 9.00% global bonds due 2013. In September 2002 the 
Republic received the proceeds from the issuance of $300 million 7.5% bonds due 
2007. In June 2002, the Republic received the proceeds from the issuance of $300
million 8.375% global bonds due 2009.                                           

     In November 2002, the Republic received P11.52 billion through the issuance
of three- and five-year peso-denominated notes. These proceeds are intended to  
finance the budget deficit. The Government is also planning to sell at least    
P500 million in small denominations of treasury bills in January 2003 to finance
the budget deficit.                                                             

  EXTERNAL DEBT OF THE REPUBLIC.  The Republic's external debt amounted to
$53.6 billion as of September 30, 2002, a 2.4% decrease from the $54.9 billion  
recorded as of June 30, 2002 and a 2.3% increase from the $52.4 billion recorded
as of December 31, 2001. The decrease in external debt in the third quarter of  
2002 was attributed to an increase in the purchases by Filipinos of Government  
dollar-denominated bonds, currency revaluation adjustments and direct repayment 
of debt. The increase in debt in the first nine months of 2002 was due to upward
foreign exchange revaluation adjustments on third-currency denominated debt     
resulting from the continued depreciation of the US dollar against              
third-currencies, net loan availments, upward adjustments to reflect audited    
results and late reporting of transactions which occurred in prior periods. The 
Government has also borrowed to pay for financial and economic reforms, power   
and energy development projects, and manufacturing, transportation, and         
communications infrastructure.                                                  

   The average cost of fixed rate credits was about 6%. For liabilities with
floating interest rates, the margin over base rate ranged from 3.5% to 4.4%. The
average interest rates for 91-day Treasury bills decreased from 6.4% as of March
31, 2002 to 4.8% as of June 30, 2002, following the decline in global interest  
rates, then rose to 5.32% as of January 7, 2003. As of September 30, 2002,      
approximately 56% of the country's external obligations were denominated in US  
dollars while 26% were denominated in Japanese yen. As of March 31, 2002,       
multi-currency loans from the World Bank and the Asian Development Bank         
accounted for 11.9% of national debt.                                           

   INFLATION.  The national inflation rate averaged 3.1% in 2002 compared to
an average inflation rate of 6.1% in 2001. Inflation for the month of December  
2002 was 2.6%, compared to 3.0% for June 2002. Inflation continues to be benign 
despite the recent adjustments in domestic oil prices, which have increased by  
more than 10% (in part because the adjustments have not been passed on to       
transport charges), and despite an increase in food prices due to               
weather-related reductions in supplies of rice, fruits, and vegetables.         
Reductions in Bangko Sentral's policy interest rates and efforts to maintain    
fiscal discipline, which have led to lower market lending rates and lower costs 
of capital for businesses, also had a favorable impact on inflation. Equally    
important, inflationary pressures caused by more demand than supply continue to 
be subdued due in part to current levels of unemployment and spare capacity as  
well as restrained, though increasing, domestic demand. The reduction in the    
Purchased Power Adjustment of National Power Corporation, effective May 2002,   
and                                                                             

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the decision of the Manila Waterworks and Sewerage System to delay petitions for
water rate increases have also helped to keep inflation rates relatively low.   

    EMPLOYMENT.  In October 2002, the unemployment rate rose slightly to 10.1%
from 9.8% in October 2001. In October 2002, Metro Manila had an unemployment    
rate of 16.7%, the highest of any region in the country. The total number of    
unemployed persons in the country increased to 3.1 million in October 2002, a   
6.0% decline from 3.3 million unemployed in October 2001.                       

    INTEREST RATES.  Currently, the Bangko Sentral overnight borrowing rate is
7.0% and the overnight lending rate is 9.25%. These are the lowest interest rate
levels in ten years. After being cumulatively lowered by the Monetary Board of  
Bangko Sentral by 800 basis points starting December 2000, the rates have       
remained unchanged since March 15, 2002. Although market interest rates followed
a steady downtrend in the first six months of 2002, they rebounded slightly over
the next three months. From an average of 8.9% in December 2001, the 91-day     
Treasury bill rate decreased to 4.8% in June 2002 and then increased to an      
average 5.3% in the January 7, 2003 auction. Following a similar trend, the     
lending rates of commercial banks declined from a range of 12.7%-14.2% in       
December 2001 to a range of 7.9-9.6% in June 2002 and then increased to a range 
of 8.2%-10.0% in October 2002.                                                  

     BALANCE OF PAYMENTS.  The Republic's overall balance of payments recorded a
surplus of $751 million for the first nine months of 2002, compared to a $1.3   
billion deficit for the first nine months of 2001. The year-on-year turnaround  
was mainly attributed to higher remittances from overseas workers and the growth
in exports.                                                                     

     The Republic has disclosed that the reported current account surplus likely
has been overstated due to monitoring problems giving rise to underreported     
imports. An inter-agency task force on the balance of payments has been         
considering the effects of this problem on the Republic's consolidated financial
position, specifically the Republic's current account and capital and financial 
account. The inter-agency task force is reviewing years 2000 to the present, but
is not reviewing prior years due to incomplete information. The inter-agency    
task force includes representatives of the Bangko Sentral, the National         
Statistics Office, the National Economic and Development Authority, the National
Statistics Coordination Board, the Bureau of Customs and the Philippine Export  
Zone Authority. The task force has evaluated a number of methodologies for      
calculating the level of imports and is in the final stages of its evaluation.  
The inter-agency task force is working within the guidelines of the IMF's       
reporting system. It expects to release revisions to the Republic's balance of  
payments data in the near term.                                                 

   Although the preliminary results of the task force's review indicate that
the current account surplus likely has been overstated, the Republic believes   
this will not have any effect on its overall balance of payments, because the   
increase in reported imports has an offsetting effect on the Republic's capital 
and financial account, since there will be a lower outflow of short-term        
capital. Accordingly, the statistical revisions should have no impact on the    
gross and net international reserves level of the Republic.                     

   Certain rating agencies have cited the Republic's current account surplus
as a key strength supporting the Republic's current ratings. The Republic has   
discussed the underreporting and ongoing efforts to improve reporting of imports
with the credit rating agencies. The revisions to the reported historical       
current account surplus could lead to an increased perception of risk by rating 
agencies and investors.                                                         

Current Account.  Subject to the likely adjustment due to the         
underreporting of imports, the Republic's current publicly available information
indicates that the current account recorded a surplus of $3.9 billion for the   
first nine months of 2002, nearly twice the $2.1 billion surplus of the first   
nine months of 2001. Largely contributing to this development was the higher    
surplus in the trade-in-goods account and the higher net inflow in the income   
account. The trade-in-goods and services accounts posted a combined surplus of  
$361 million for the first nine months of 2002. The increase in the net income  
account surplus to $3.2 billion for the first nine months of 2002 also helped   
strengthen the current account balance.                                         

      Exports.  Total exports of goods for the first nine months of 2002
   were $25.4 billion, or 9.3% higher than in the first nine months of 2001.
     Higher demand for Philippine goods from the Netherlands, Singapore, Taiwan,
Hong Kong, South Korea, Malaysia and China made up for a decrease in  
exports to the United States and Japan, which together account for    
approximately 41% of the country's export                             
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market (26% for the United States and 15% for Japan in the first nine 
months of 2002). The Republic's exports were led by solid growth in   
overseas shipments of electronics products, clothing accessories and  
apparel. Overall, the Government has maintained its growth target for 
exports of 4% for 2002.                                               

       Imports.  In September 2002, imports of goods climbed for the ninth
   consecutive month due to increased purchases of raw materials and capital
  goods, which, taken together, account for more than four-fifths of total
  imports. Imports for the first nine months of 2002 were up 9.2% at $24.2
 billion. This was a reversal of the 2.9% decline for the same period in
2001. The import growth reflected sustained domestic demand.          

        Services.  The trade-in-services account in the first nine months of
2002 posted a net outflow of $857 million. The 40.9% narrowing of the 
   deficit from the same period in 2001 was caused by lower net payments for
  transportation services and for miscellaneous business, professional and
    technical services. Net receipts from travel services were $581 million in
the first seven months of 2002, due to a relative decline in travel   
   payments. Lower travel payments reflected in part the weaker peso and the
government program to promote domestic tourism among local residents. 

        Income.  Remittances from overseas Filipino workers amounted to $5.4
 billion in the first nine months of 2002, an increase of 21.2% from the
     same period in 2001. The income account recorded a surplus of $3.2 billion,
 or an increase of 54.0% from the first nine months of 2001. Behind this
   development was the 3.5% rise in the number of overseas Filipino workers,
especially in the Americas, Europe, and Asia. However, as the global  
economic slowdown affects some of the countries where Filipinos are   
   working, the Government has intensified its marketing efforts to increase
hiring of Filipinos abroad.                                           

     Capital and Financial Account.  Subject to the likely adjustment due to the
underreporting of imports, the Republic's current publicly available information
indicates that the net outflow in the capital and financial account was $3.7    
billion during the first nine months of 2002. This was caused by higher net     
outflow of other investments and lower net inflows of direct investment, despite
the reversal of the portfolio investment account to a net inflow of $692 million
for the first nine months of 2002 from a net outflow of $208 million for the    
first nine months of 2001.                                                      

   Portfolio investments for the first nine months of 2002 reversed to a net
inflow of $692 million, from a net outflow of $208 million in the first nine    
months of 2001, following increased non-residents' investments in               
resident-issued foreign denominated debt securities, particularly               
government-issued medium-term bonds.                                            

Non-residents' investments in equity capital more than doubled to $903
million during the first nine months of 2002 due mainly to the investment of    
$544 million worth of shares by a Japanese firm in the San Miguel Corporation, a
local brewery company, in March 2002. The remaining investment was directed to  
other manufacturing companies, financial institutions and transport and storage 
services. Other major sources of direct investments were the United States,     
Singapore, the United Kingdom and the Netherlands.                              

   The net outflow in the other investment account expanded by 12.6% to $5.1
billion during the first nine months of 2002. This was due in large part to the 
higher net deposits abroad by resident non-banks, a majority of which were      
corporations involved in build-operate-transfer arrangements, to cover          
foreign-related obligations.                                                    

 INTERNATIONAL RESERVES.  Bangko Sentral's gross international reserves,
including the reserve position in the International Monetary Fund, decreased to 
$15.8 billion at the end of November 2002 from $17.1 billion at the end of May  
2002, and compared to $14.8 billion at the end of November 2001. The end-October
level is equivalent to 4.9 months of imports of goods and payments of services  
and income and was 1.3 times the amount of short-term external obligations of   
the Republic based on residual maturity or 2.7 times the amount of short-term   
external debt of the Republic based on original maturity. Bangko Sentral's net  
international reserves decreased to $12.5 billion at the end of November 2002   
from $13.7 billion at the end of May 2002.                                      

  PESO/US$ EXCHANGE RATE.  After reaching P49.48 on May 20, 2002, the Peso
began depreciating to an average of P50.60 per US dollar in July 2002 and       
further to P51.79 per US dollar in August 2002. This two-                       

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month depreciation was due mainly to increased corporate demand for dollars (to 
service foreign obligations arising from increased imports) as well as banks'   
covering their short dollar positions in anticipation of a slowdown in dollar   
remittances. For the month of September 2002, the average exchange rate declined
further to P52.13 per US dollar and for the month of October 2002, the exchange 
rate averaged P52.91 per US dollar. The depreciation of the Peso in September   
and October 2002 has been attributed to the devaluation of Asian currencies and 
to increased demand from banks for US dollars.                                  

The Peso depreciated further to an average of P53.30 per US dollar in 
November 2002. On January 8, 2003, the exchange rate was P53.45 per US dollar.  
The recent weakness of the Peso was also generally attributable to uncertainty  
over a potential war in Iraq, declining investor confidence due to concerns over
the rising fiscal deficit, recent terrorist attacks in the Philippines and      
Indonesia, the possibility of war in Iraq and the vulnerability of emerging     
markets, including the Philippines, to the South American debt contagion.       

   BANKING SYSTEM NON-PERFORMING LOANS.  As of September 30, 2002, the ratio
of non-performing loans to total loans in the commercial banking system had     
decreased to 16.5% from 17.6% as of August 31, 2002 and 17.9% as of September   
30, 2001. The improvement in the NPL ratio was due in part to a redefinition of 
"non-performing loan" which took effect September 19, 2002 and authorized banks 
with certain unsound valuation reserves and capital adjustments to exclude from 
their non-performing loan classification loans that meet certain conditions,    
provided interest is not accrued on such loans and such loans are deducted from 
the banks total portfolio computation. However, even under the previous         
definition of "non-performing loan", the NPL ratio at the end of September would
have decreased to 17.0%. The decrease in the non-performing loan ratio was also 
attributable to increased foreclosure, restructuring proceedings, and generally 
improving performance of the commercial banking sector. The non-performing loan 
coverage ratio (loan reserves to non-performing loans) declined to 48.2% in     
September 2002 from 49.2% in August 2002, but increased from 43.5% in September 
2001.                                                                           

In December 2002, Congress approved the Special Purpose Asset Vehicle 
("SPAV") bill. The SPAV bill provides the legal framework for the creation of   
private asset management companies that are expected to relieve a major portion 
of the banking system's non-performing assets and thereby promote bank lending  
to support economic growth. President Arroyo is expected to sign the bill into  
law in January 2003. The SPAV bill's implementing rules and regulations are     
expected to be passed by Congress in February 2003.                             

     THE ELECTRIC POWER INDUSTRY AND REFORM ACT.  On February 27, 2002, pursuant
to the Electric Power Industry Reform Act of 2001 (the "EPIRA"), the Joint      
Congressional Power Commission approved the EPIRA's implementing rules and      
regulations (the "IRRs") which currently govern the restructuring of the        
electric power industry and the privatization of NPC. NPC's privatization will  
occur following (i) the restructuring of the electric power industry's various  
sectors, (ii) the creation of a new regulatory framework for the electric power 
industry, (iii) the establishment of certain transition mechanisms to minimize  
economic dislocation, and (iv) the establishment of various open market devices 
to promote free and fair competition.                                           

  Universal Charge.  Under the EPIRA, NPC will be allowed to impose on all
end-users of electricity, subject to certain exceptions which are not expected  
to be material, a "Universal Charge" to cover the payment of stranded debt and  
stranded contract costs. Stranded contract costs of NPC refers to the excess of 
the contracted cost of electricity under eligible contracts (including contracts
with distribution utilities as well as contracts with independent power         
producers) over the actual selling price of the contracted energy output in such
contracts in the market, to the extent such stranded costs are not assumed by   
the Government under the EPIRA; and stranded debt costs refers to NPC's unpaid  
financial obligations which have not been liquidated by the proceeds from the   
sales of NPC's assets and will include unpaid financial obligations which are   
refinanced by Power Sector Assets and Liabilities Management Corporation        
("PSALM"). Stranded contract costs will consist of costs associated with        
contracts with independent power producers that were approved by the ERC as of  
December 31, 2000. The Universal Charge, which will be calculated by the Energy 
Regulatory Commission ("ERC"), will effectively replace the Purchased Power     
Adjustment ("PPA"). The PPA is an automatic cost adjustment mechanism that      
allows NPC to pass on increased costs associated with its US dollar obligations 
under its contracts with independent power producers. Costs associated with     
power purchased from independent power producers have increased significantly   
because of the devaluation of the                                               

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Peso and the fact that NPC's price for such power is based in US dollars while  
NPC's income is principally received in Pesos.                                  

    Proposed Amendments to the EPIRA.  On May 21, 2002, the majority coalition
introduced a bill in the Senate which would amend various provisions of the     
EPIRA. This bill, if passed by Congress, would among other things:              

 - clarify that the Universal Charge would not be imposed on electricity
    output produced by a self-generation facility owned and operated by an
end-user solely for its own consumption;                          

     - exempt certain of NPC's customers from imposition of the Universal Charge
and limit the Universal Charge to P0.42 per kWh;                  

- clarify that NPC, PSALM, Transco, and any other entity created to   
    privatize NPC's assets will not be subject to national taxes, charges,
fees or other assessments arising from the privatization;         

- extend the life of PSALM from 25 years to 35 years; and             

    - clarify that the Republic may guarantee the payment of NPC's obligations
       assumed by PSALM from NPC and that such guarantees will not count against
   the maximum amount that the Republic is authorized to guarantee under
existing laws.                                                    

The majority coalition's bill to amend the Act remains pending in Congress.     

    The minority coalition has introduced legislation which differs in certain
material respects from the majority party's bill introduced on May 21, 2002.    
Most importantly, the minority coalition's bill would eliminate the Universal   
Charge altogether. While we expect an amendment to the EPIRA to be passed in the
future, neither the Republic nor NPC can predict the final form of the amendment
or its effects on the restructuring of the electric power industry, or on the   
results of operations of NPC.                                                   

Wholesale Electricity Spot Market.  Under the EPIRA, the Department of
Energy ("DOE") is required to establish the Wholesale Electricity Spot Market   
("WESM"), which is expected to provide an efficient, competitive, transparent   
and reliable market for the sale and purchase of electricity in the Philippines.
A working group chaired by the DOE recently determined that an interim spot     
market, which is intended to test WESM systems and procedures, educate energy   
industry participants, and establish bid benchmarks, can be established by April
2003. Transco expects the WESM to be fully implemented by the fourth quarter of 
2003.                                                                           

 In October 2002, the PSALM Board of Directors approved the provision of
financial and project-management assistance to the DOE in establishing the      
interim market, and approved the establishment of an electricity trading and    
risk management group. PSALM has requested that the interim WESM and the trading
group be financed from a development project fund from Kreditanstalt fur        
Wiederaufbau ("KFW"). An endorsement from the Department of Finance and approval
from KFW are both necessary for the KFW funds to be used for the interim WESM.  

     PRIVATIZATION OF THE NATIONAL POWER CORPORATION.  Pursuant to the EPIRA, on
December 14, 2001, PSALM submitted a privatization plan for both the            
transmission and generation businesses for endorsement by the Joint             
Congressional Power Commission. The plan to privatize the transmission business 
was endorsed by the Joint Congressional Power Commission in March 2002 and the  
plan to privatize the generation business was endorsed by the Joint             
Congressional Power Commission in August 2002. The President approved the       
transmission and generation privatization plans in October 2002. The current    
target dates for finalizing the privatization processes are the mid-2003 for the
transmission business and the late-2003 for the generation business.            

     Transfer of Transmission Franchise.  The EPIRA provides for the transfer of
NPC's nationwide franchise for the operation of the transmission system and the 
grid to Transco. However, the EPIRA is silent on whether Transco could transfer 
the franchise to the concessionaire, or private investor, without Congressional 
approval. The uncertainty in obtaining Congressional approval for the transfer  
of the franchise may affect the price of the bids that will be submitted and may
affect the winning concessionaire's ability to source financing. On September 3,
2002, the House of Representatives passed a bill that would grant a separate    
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franchise to Transco and allow Transco to assign its franchise rights to the    
winning concessionaire without Congressional approval. The bill is currently    
awaiting approval in the Senate. Although the Arroyo administration has strongly
supported this bill, it has faced opposition from some Senators in initial      
hearings because it would constitute delegation of the Congressional power to   
grant franchise. There is no assurance that the bill will be passed by the      
Senate in its current form or at all.                                           

   NPC Restructuring Plan.  On November 18, 2002, the NPC Board of Directors
passed a restructuring plan that is expected to reduce the NPC workforce by     
approximately 40% in early 2003. In December 2002, a group of NPC employees     
announced that they would seek an injunction from the Supreme Court to stop the 
implementation of the restructuring plan, which the group alleges was approved  
in violation of procedural provisions of the EPIRA.                             

   Separation Pay to NPC Employees.  NPC has agreed to provide its employees
with a separation package in connection with its privatization. NPC expects the 
total cost of separation pay to be approximately P13 billion, all of which will 
be paid by NPC.                                                                 

  Consents from NPC Creditors.  NPC has commenced discussion with its bank
creditors and bondholders (including the World Bank, the Asian Development Bank 
and the Japan Bank for International Cooperation ("JBIC")) regarding a number of
contractual provisions that restrict NPC's ability to carry out the             
privatization. These can be broadly categorized as (i) provisions restricting   
the transfer of NPC's debt obligations to PSALM, (ii) covenants restricting     
NPC's ability to transfer NPC's generation and transmission assets to PSALM and 
Transco (and therefore also restricting PSALM's ability to sell such assets to  
private investors) and (iii) project-specific covenants relating to the         
construction and operation of particular generation and transmission facilities 
that NPC's creditors have funded. As a result, to allow for the transfer of     
NPC's assets and liabilities to PSALM and Transco, NPC will need consents from  
its lenders to either waive any defaults or amend the relevant provisions.      

    Consents to waive or amend the relevant restrictions on privatization will
have to be obtained from NPC's creditors including public bondholders,          
commercial banks and bilateral and multilateral creditors and bondholders. The  
process of obtaining these consents is underway. On December 13, 2002, PSALM    
announced that NPC's commercial lenders, which together account for             
approximately 20% of NPC's debt, had approved the transfer of debt to PSALM.    
NPC's other lenders have yet to consent to the transfer of NPC's debt to PSALM. 
If and when the consents have been obtained, NPC's assets and debt obligations  
will be transferred to PSALM. To the extent that consents from the transfer of  
certain assets or liabilities cannot be obtained, such assets will remain on    
NPC's balance sheet, and such liabilities will be treated as stranded debt.     

Issues Relating to the Purchased Power Adjustment and the Universal   
Charge.  Recently, the PPA and the proposed Universal Charge have come under    
intense public and political scrutiny as electricity rates in the Philippines   
have risen to among the highest in Asia. This scrutiny led President Arroyo, by 
presidential directive, to reduce the current average PPA charge from P1.25 per 
kWh to P0.40 per kWh, effective May 8, 2002. The ERC, through an order issued on
September 6, 2002, affirmed the presidential directive. Unless the ERC issues a 
superseding order or the legislature changes electricity rates by law, the PPA  
will remain at P0.40 per kWh. The reduction of the PPA contributed P9.3 billion 
to NPC's revenue losses from May 8, 2002 to August 31, 2002.                    

 While the Arroyo administration has announced that the Universal Charge
needs to be implemented as a matter of policy, various members of Congress and  
of the public continue to oppose the imposition of any Universal Charge. If the 
Universal Charge is significantly lower than the expected P0.40 per kWh, or if  
it is eliminated, NPC's financial condition will continue to deteriorate and NPC
will need to obtain additional financing to continue operations.                

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OTHER RATE REDUCTIONS AFFECTING NPC'S REVENUES.  In addition to the   
reduction of the PPA from P1.25 per kWh to P0.40 per kWh mandated by the        
President in May 2002 and affirmed by the ERC in September 2002, the following  
reductions in NPC's basic electricity rates have been imposed:                  

The EPIRA.  The Electric Power Industry Reform Act of 2001 mandated an
overall rate decrease of P0.30 per kWh in June 2001.                            

 ERC Orders.  In June 2002, the ERC, in connection with NPC's unbundling
rate petition, denied NPC's request to revise NPC's rates upward by P0.17 per   
kWh, and instead ordered NPC to reduce NPC's rates by P0.07 per kWh before      
September 26, 2002. On September 6, 2002, the ERC ordered NPC to disregard its  
June 2002 ruling and to reduce generation rates by P1.10 per kWh in Visayas,    
P0.27 in Luzon and P0.40 in Mindanao. The ERC also stated in the September 6th  
order that a ruling on transmission rates would follow. The September 6th order 
has also called into question NPC's ability to charge for foreign exchange and  
fuel and purchased power costs not recoverable through the PPA that NPC has     
traditionally been allowed to recover from its customers. NPC has filed a motion
for reconsideration and clarification of this order.                            

   ISSUES RELATING TO INDEPENDENT POWER PRODUCER CONTRACTS.  Pursuant to the
EPIRA, an inter-agency committee was formed to review each of NPC's 35 contracts
with independent power producers. On July 4, 2002, this inter-agency committee  
submitted a report to President Arroyo identifying independent power producer   
contracts with financial and legal provisions which are onerous or grossly      
disadvantageous to the Government. With respect to the independent power        
producer contracts which contained financial issues, NPC has commenced          
renegotiation of the financial terms. Although NPC does not plan to impose      
unilateral changes to the contracts with financial issues, NPC expects to reduce
certain of its obligations under these contracts through the renegotiation      
process.                                                                        

ANTI-MONEY LAUNDERING EFFORTS.  In June 2002, the Republic presented a
progress report to the Financial Action Task Force (the "FATF"), which was      
established by the Organisation for Economic Cooperation and Development to     
combat money laundering, to demonstrate how the Anti-Money Laundering Act of    
2001 was being administered in the hope of being removed from FATF's list of    
"non-cooperative countries and territories". Despite recognizing that the       
Republic has made progress in combating money-laundering, the FATF, in its      
report identifying non-cooperative territories dated June 21, 2002, decided that
the Republic should remain on the list for further monitoring. The FATF asked   
the Republic's Anti-Money Laundering Council to consider reducing the threshold 
amount for bank deposits subject to inspection, which currently stands at P4    
million, as a prerequisite to being removed from the blacklist. A bill to amend 
the Anti-Money Laundering Act to address the FATF's concerns is currently       
pending in Congress. The FATF did not remove the Republic from its              
"non-cooperative" list at its November 2002 meeting. The president of the Senate
has expressed his hope that the bill to amend the Anti-Money Laundering Act will
be passed in January 2003, and the Republic hopes to be removed from the        
"non-cooperative" list in February 2003.                                        

THE CONSOLIDATED FINANCIAL POSITION.  For the first half of 2002, the 
consolidated financial position of the Republic (not including Bangko Sentral)  
recorded a deficit of P117.5 billion, 60.7% higher than the P73.1 billion target
for the period. The Government recorded a P119.7 billion deficit, the Central   
Bank restructuring accounted for an P8.4 billion deficit, and the monitored     
Government-owned corporations accounted for a P7.1 billion deficit. The total   
public sector borrowing requirement of P131.1 billion was offset in part by a   
combined surplus of P13.6 billion for the other public sector entities during   
the first six months of 2002. Of the surplus, P10.6 billion was attributable to 
the social security institutions.                                               

GOVERNMENT BUDGET FOR 2003.  In August 2002, the Arroyo administration
submitted to Congress its proposed 2003 budget. The 2003 budget submitted in    
August sought a 3.0% increase in appropriations to P804.2 billion from the      
P780.8 billion budgeted for 2002. The most recent version of the budget calls   
for P804 billion in expenditures, revenue collections of P602 billion, and a    
deficit of P202 billion. The 2003 budget is currently under consideration in    
Congress and is expected to be approved in early 2003.                          

     RELATIONSHIP WITH THE ADB.  The Asian Development Bank ("ADB") announced in
November 2002 that it plans to pay up to $815 million in loans to the           
Philippines over the next three years for projects focused on alleviating       
poverty. The priority sectors are education, urban development, power, roads,   
environment                                                                     

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management, financial markets, and small and medium-sized enterprise development
and focuses on Mindanao and the southern Philippines. The ADB noted that the    
current budget deficit could affect the release of the proposed loans.          

  The ADB also agreed to extend the terms of its $174 million grain sector
development program with the Philippines government until December 2003. The    
program, aimed at liberalizing the pricing and importation of rice and corn and 
restructuring the National Food Authority, is tied to the implementation of a   
number of reforms by the Government.                                            

RELATIONSHIP WITH IMF.  The IMF maintains a close dialogue with the   
Government, within the framework of a post-program monitoring arrangement       
("PPM"). The PPM involves program assessments which are based on a regular      
review of economic developments and policies rather than the attainment of      
specific quantitative targets. This arrangement does not involve a financing    
component. On September 25, 2002, the Executive Board of the IMF concluded an   
Article IV consultation with the Republic. The report explained that although   
over the past 15 years the Republic made progress in establishing a             
market-oriented economy, underlying policy progress recently has begun to slip. 
The report cites problems with the implementation of the power sector reform and
passage of the Asset Management Corporations bill, low revenue collection, the  
budget deficit and asset price volatility.                                      

   On December 15, 2002, the IMF completed a 10-day review of the Philippine
economy as part of the PPM. The IMF emphasized the need for the Philippines to  
reduce the fiscal deficit through increased revenues. In particular, the IMF    
recommended additional taxes on telecommunications, "sin" products, and         
automobiles, and measures to improve the efficiency of tax collection. The IMF  
also recommended improvements in energy regulation, including a stronger and    
more independent ERC and the passage of the Transco franchise bill.             

MONETARY POLICY.  The Republic's money supply, as measured by domestic
liquidity, expanded 9.5% in October 2002, up from 9.0% in October 2001. Domestic
liquidity in October 2002 was P1.596 trillion, up from P1.587 trillion in       
September 2002.                                                                 

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DESCRIPTION OF THE GLOBAL BONDS 

GENERAL                                                                         

   The global bonds will be issued under a fiscal agency agreement, dated as
of October 4, 1999, as amended by a supplement to the fiscal agency agreement to
be dated as of January 13, 2003, between the Republic and JPMorgan Chase Bank,  
as fiscal agent. The global bonds and the previously issued global bonds due    
2013 referred to below constitute a single series. The global bonds are a series
of debt securities more fully described in the accompanying prospectus, except  
to the extent indicated below. The following statements are subject to the      
provisions of the fiscal agency agreement, the supplemental fiscal agency       
agreement and the global bonds. This summary does not purport to be complete and
the description below may not contain all of the information that is important  
to you as a potential investor in the global bonds. The Republic has filed forms
of these documents as exhibits to the registration statement numbered 333-91176.
You should refer to the exhibits for more complete information. Capitalized     
terms not defined below shall have the respective meanings given in the         
accompanying prospectus.                                                        

The global bonds will:                                                

- be issued in an aggregate principal amount of US$500,000,000;       

- bear interest at 9.00% per year from November 25, 2002;             

- mature at par on February 15, 2013;                                 

- pay interest on February 15 and August 15 of each year, commencing  
February 15, 2003; and                                            

- pay interest to the persons in whose names the global bonds are     
  registered on the record date, which is the close of business on the
      preceding February 1 or August 1 (whether or not a business day), as the
      case may be. Interest will be calculated on the basis of a 360-day year,
consisting of twelve 30-day months.                               

  The global bonds constitute a further issuance of, are fungible with and
are consolidated and form a single series with, the 9.00% Global Bonds due 2013 
issued by the Republic on November 25, 2002 in the amount of $500,000,000. Upon 
issuance, the global bonds will rank pari passu with the previously issued      
global bonds in all respects. The total principal amount of the previously      
issued global bonds and the global bonds now being issued is US$1,000,000,000.  

   The Republic has applied to the Luxembourg Stock Exchange for listing of,
and permission to deal in, the global bonds in accordance with the rules of the 
Luxembourg Stock Exchange.                                                      

BOOK ENTRY                                                                      

  The Republic will issue the global bonds in the form of fully registered
global securities. The Republic will deposit the global securities with DTC, and
register the global securities in the name of Cede & Co. as DTC's nominee.      
Beneficial interests in the global securities will be represented by, and       
transfers thereof will be effected only through, book-entry accounts maintained 
by DTC and its participants.                                                    

CERTIFICATED SECURITIES                                                         

    In circumstances detailed in the accompanying prospectus (see "Description
of the Securities -- Description of the Debt Securities -- Global Securities -- 
Registered Ownership of the Global Security"), the Republic could issue         
certificated securities. The Republic will only issue certificated securities in
denominations of $1,000 and integral multiples of $1,000. The holders of        
certificated securities shall present directly at the corporate trust office of 
the fiscal agent, at the office of the Luxembourg paying and transfer agent or  
at the office of any other transfer agent as the Republic may designate from    
time to time all requests for the registration of any transfer of such          
securities, for the exchange of such securities for one or more new certificated
securities in a like aggregate principal amount and in authorized denominations 
and for the replacement of such securities in the cases of mutilation,          
destruction, loss or theft. Certificated securities                             

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issued as a result of any partial or whole transfer, exchange or replacement of 
the global bonds will be delivered to the holder at the corporate trust office  
of the fiscal agent, at the office of the Luxembourg paying and transfer agent  
or at the office of any other transfer agent, or (at the risk of the holder)    
sent by mail to such address as is specified by the holder in the holder's      
request for transfer, exchange or replacement.                                  

REGISTRATION AND PAYMENTS                                                       

     The Republic will pay the principal amount of a global bond on its maturity
date in immediately available funds in the City of New York upon presentation of
the global bond at the office of the fiscal agent in the City of New York or,   
subject to applicable law and regulations, at the office outside the United     
States of any paying agent, including the Luxembourg paying agent (if the global
bonds are accepted for listing on the Luxembourg Stock Exchange and the rules of
the exchange so require).                                                       

   The Republic will appoint the fiscal agent as registrar, principal paying
agent and transfer agent of the global bonds. In these capacities, the fiscal   
agent will, among other things:                                                 

   - maintain a record of the aggregate holdings of global bonds represented
 by the global securities and any certificated securities and accept
global bonds for exchange and registration of transfer;           

   - ensure that payments of principal and interest in respect of the global
       bonds received by the fiscal agent from the Republic are duly paid to the
     depositaries for the global securities or their respective nominees and
any other holders of any global bonds; and                        

  - transmit to the Republic any notices from holders of any of the global
bonds.                                                            

If the global bonds are accepted for listing on the Luxembourg Stock  
Exchange, and the rules of the Luxembourg Stock Exchange so require, the        
Republic will appoint and maintain a paying agent and a transfer agent in       
Luxembourg, who shall initially be Dexia Banque Internationale a Luxembourg     
societe anonyme. Holders of certificated securities will be able to receive     
payments thereon and effect transfers thereof at the offices of the Luxembourg  
paying and transfer agent. For so long as the global bonds are listed on the    
Luxembourg Stock Exchange, the Republic will publish any change as to the       
identity of the Luxembourg paying and transfer agent in a leading newspaper in  
Luxembourg, which is expected to be the Luxemburger Wort.                       

REDEMPTION AND SINKING FUND                                                     

The Republic may not redeem the global bonds prior to maturity. The   
Republic will not provide a sinking fund for the amortization and retirement of 
the global bonds.                                                               

REGARDING THE FISCAL AGENT                                                      

    The fiscal agent has its principal corporate trust office at 450 West 33rd
Street, 15th Floor, New York, New York 10001-2697. The Republic will at all     
times maintain a paying agent and a transfer agent in the City of New York which
will, unless otherwise provided, be the fiscal agent. The Republic may maintain 
deposit accounts and conduct other banking transactions in the ordinary course  
of business with the fiscal agent. The fiscal agent will be the agent of the    
Republic, not a trustee for holders of any global bonds. Accordingly, the fiscal
agent will not have the same responsibilities or duties to act for such holders 
as would a trustee, except that monies held by the fiscal agent as payment of   
principal, premium or interest on the global bonds shall be held by the fiscal  
agent in trust for the holders of the global bonds.                             

  The fiscal agency agreement and the supplemental fiscal agency agreement
are not required to be qualified under the US Trust Indenture Act of 1939.      
Accordingly, the fiscal agency agreement and the supplemental fiscal agency     
agreement may not contain all of the provisions which could be beneficial to    
holders of the global bonds which would be contained in an indenture qualified  
under the Trust Indenture Act.                                                  

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NOTICES                                                                         

     All notices will be published in London in the Financial Times, in the City
of New York in The Wall Street Journal and, so long as the global bonds are     
listed on the Luxembourg Stock Exchange, in Luxembourg in the Luxemburger Wort. 
If the Republic cannot, for any reason, publish notice in any of these          
newspapers, it will choose an appropriate alternate English language newspaper  
of general circulation, and notice in that newspaper will be considered valid   
notice. Notice will be considered made as of the first date of its publication. 

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GLOBAL CLEARANCE AND SETTLEMENT 

 DTC, Euroclear and Clearstream, Luxembourg have established links among
themselves to facilitate the initial settlement of the global bonds and         
cross-market transfers of the global bonds in secondary market trading. DTC will
be linked to JPMorgan Chase Bank, a New York banking corporation, as depositary 
of the Euroclear System ("Euroclear"), and Citibank, N.A. as depositary for     
Clearstream Banking, societe anonyme ("Clearstream, Luxembourg") (the "Clearing 
System Depositaries").                                                          

Although DTC, Euroclear and Clearstream, Luxembourg have agreed to the
procedures provided below to facilitate transfers of global bonds among         
participants of DTC, Euroclear and Clearstream, Luxembourg, they are under no   
obligation to perform such procedures. In addition, such procedures may be      
modified or discontinued at any time. Neither the Republic nor the Fiscal Agent 
will have any responsibility for the performance by DTC, Euroclear or           
Clearstream, Luxembourg or their respective participants or indirect            
participants of the respective obligations under the rules and procedures       
governing their operations.                                                     

THE CLEARING SYSTEMS                                                            

THE DEPOSITORY TRUST COMPANY.  DTC is:                                

     - a limited-purpose trust company organized under the New York Banking Law;

- a "banking organization" under the New York Banking Law;            

- a member of the Federal Reserve System;                             

    - a "clearing corporation" under the New York Uniform Commercial Code; and

 - a "clearing agency" registered under Section 17A of the US Securities
Exchange Act of 1934.                                             

    DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between its participants. It
does this through electronic book-entry changes in the accounts of its direct   
participants, eliminating the need for physical movement of securities          
certificates. DTC is owned by a number of its direct participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National   
Association of Securities Dealers, Inc.                                         

   DTC can act only on behalf of its direct participants, who in turn act on
behalf of indirect participants and certain banks. In addition, unless a global 
security is exchanged in whole or in part for a definitive security, it may not 
be physically transferred, except as a whole among DTC, its nominees and their  
successors. Therefore, your ability to pledge a beneficial interest in the      
global security to persons that do not participate in the DTC system, and to    
take other actions, may be limited because you will not possess a physical      
certificate that represents your interest.                                      

EUROCLEAR AND CLEARSTREAM, LUXEMBOURG.  Like DTC, Euroclear and       
Clearstream, Luxembourg hold securities for their participants and facilitate   
the clearance and settlement of securities transactions between their           
participants through electronic book-entry changes in their accounts. Euroclear 
and Clearstream, Luxembourg provide various services to their participants,     
including the safekeeping, administration, clearance and settlement and lending 
and borrowing of internationally traded securities. Euroclear and Clearstream,  
Luxembourg participants are financial institutions such as underwriters,        
securities brokers and dealers, banks, trust companies and other organizations. 
The underwriter for the global bonds may be a participant in Euroclear or       
Clearstream, Luxembourg. Other banks, brokers, dealers and trust companies have 
indirect access to Euroclear or Clearstream, Luxembourg by clearing through or  
maintaining a custodial relationship with a Euroclear or Clearstream, Luxembourg
participant.                                                                    

INITIAL SETTLEMENT                                                              

    If you plan to hold your interests in the securities through DTC, you will
follow the settlement practices applicable to global security issues. If you    
plan to hold your interests in the securities through Euroclear or Clearstream, 
Luxembourg, you will follow the settlement procedures applicable to conventional
Eurobonds in registered form. If you are an investor on the settlement date, you
will pay for the global bonds by wire transfer                                  
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and the entity through which you hold your interests in the global bonds will   
credit your securities custody account.                                         

SECONDARY MARKET TRADING                                                        

   The purchaser of securities determines the place of delivery in secondary
market trading. Therefore, it is important for you to establish at the time of  
the trade where both the purchaser's and seller's accounts are located to ensure
that settlement can be made on the desired value date (i.e., the date specified 
by the purchaser and seller on which the price of the securities is fixed).     

     TRADING BETWEEN DTC PURCHASERS AND SELLERS.  DTC participants will transfer
interests in the securities among themselves in the ordinary way according to   
the rules and operating procedures of DTC governing global security issues.     
Participants will pay for these transfers by wire transfer.                     

TRADING BETWEEN EUROCLEAR AND/OR CLEARSTREAM, LUXEMBOURG              
PARTICIPANTS.  Euroclear and Clearstream, Luxembourg participants will transfer 
interests in the securities among themselves in the ordinary way according to   
the rules and operating procedures of Euroclear and Clearstream, Luxembourg     
governing conventional Eurobonds. Participants will pay for these transfers by  
wire transfer.                                                                  

 TRADING BETWEEN A DTC SELLER AND A EUROCLEAR OR CLEARSTREAM, LUXEMBOURG
PURCHASER.  When the securities are to be transferred from the account of a DTC 
participant to the account of a Euroclear or Clearstream, Luxembourg            
participant, the purchaser must first send instructions to Euroclear or         
Clearstream, Luxembourg through a participant at least one business day before  
the settlement date. Euroclear or Clearstream, Luxembourg will then instruct its
depositary to receive the securities and make payment for them. On the          
settlement date, the depositary will make payment to the DTC participant's      
account and the securities will be credited to the depositary's account. After  
settlement has been completed, DTC will credit the securities to Euroclear or   
Clearstream, Luxembourg, Euroclear or Clearstream, Luxembourg will credit the   
securities, in accordance with its usual procedures, to the participant's       
account, and the participant will then credit the purchaser's account. These    
securities credits will appear the next day (European time) after the settlement
date. The cash debit from the account of Euroclear or Clearstream, Luxembourg   
will be back-valued to the value date, which will be the preceding day if       
settlement occurs in New York. If settlement is not completed on the intended   
value date (i.e., the trade fails), the cash debit will instead be valued at the
actual settlement date.                                                         

 Participants in Euroclear and Clearstream, Luxembourg will need to make
funds available to Euroclear or Clearstream, Luxembourg in order to pay for the 
securities by wire transfer on the value date. The most direct way of doing this
is to preposition funds (i.e., have funds in place at Euroclear or Clearstream, 
Luxembourg before the value date), either from cash on hand or from existing    
lines of credit. Under this approach, however, participants may take on credit  
exposure to Euroclear and Clearstream, Luxembourg until the securities are      
credited to their accounts one day later.                                       

   As an alternative, if Euroclear or Clearstream, Luxembourg has extended a
line of credit to a participant, the participant may decide not to preposition  
funds, but to allow Euroclear or Clearstream, Luxembourg to draw on the line of 
credit to finance settlement for the securities. Under this procedure, Euroclear
or Clearstream, Luxembourg would charge the participant overdraft charges for   
one day, assuming that the overdraft would be cleared when the securities were  
credited to the participant's account. However, interest on the securities would
accrue from the value date. Therefore, in many cases the interest income on     
securities which the participant earns during that one-day period will          
substantially reduce or offset the amount of the participant's overdraft        
charges. Of course, this result will depend on the cost of funds to (i.e., the  
interest rate that Euroclear or Clearstream, Luxembourg charges) each           
participant.                                                                    

Since the settlement will occur during New York business hours, a DTC 
participant selling an interest in the securities can use its usual procedures  
for transferring global securities to the Clearing System Depositaries of       
Euroclear or Clearstream, Luxembourg for the benefit of Euroclear or            
Clearstream, Luxembourg participants. The DTC seller will receive the sale      
proceeds on the settlement date. Thus, to the DTC seller, a cross-market sale   
will settle no differently than a trade between two DTC participants.           

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     Finally, day traders that use Euroclear or Clearstream, Luxembourg and that
purchase global bonds from DTC participants for credit to Euroclear participants
or Clearstream, Luxembourg participants should note that these trades will      
automatically fail on the sale side unless one of three steps is taken:         

     - borrowing through Euroclear or Clearstream, Luxembourg for one day, until
the purchase side of the day trade is reflected in their Euroclear
account or Clearstream, Luxembourg account, in accordance with the
clearing system's customary procedures;                           

     - borrowing the global bonds in the United States from a DTC participant no
       later than one day prior to settlement, which would give the global bonds
    sufficient time to be reflected in the borrower's Euroclear account or
     Clearstream, Luxembourg account in order to settle the sale side of the
trade; or                                                         

 - staggering the value dates for the buy and sell sides of the trade so
      that the value date of the purchase from the DTC participant is at least
       one day prior to the value date for the sale to the Euroclear participant
or Clearstream, Luxembourg participant.                           

 TRADING BETWEEN A EUROCLEAR OR CLEARSTREAM, LUXEMBOURG SELLER AND A DTC
PURCHASER.  Due to time zone differences in their favor, Euroclear and          
Clearstream, Luxembourg participants can use their usual procedures to transfer 
securities through their Clearing System Depositaries to a DTC participant. The 
seller must first send instructions to Euroclear or Clearstream, Luxembourg     
through a participant at least one business day before the settlement date.     
Euroclear or Clearstream, Luxembourg will then instruct its depositary to credit
the securities to the DTC participant's account and receive payment. The payment
will be credited in the account of the Euroclear or Clearstream, Luxembourg     
participant on the following day, but the receipt of the cash proceeds will be  
back valued to the value date, which will be the preceding day if settlement    
occurs in New York. If settlement is not completed on the intended value date   
(i.e., the trade fails), the receipt of the cash proceeds will instead be valued
at the actual settlement date.                                                  

If the Euroclear or Clearstream, Luxembourg participant selling the   
securities has a line of credit with Euroclear or Clearstream, Luxembourg and   
elects to be in debit for the securities until it receives the sale proceeds in 
its account, then the back-valuation may substantially reduce or offset any     
overdraft charges that the participant incurs over that one-day period.         

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TAXATION

GENERAL                                                                         

   The Republic urges you to consult your own tax advisors to determine your
particular tax consequences in respect of participating in the offering, and of 
owning and selling the global bonds.                                            

PHILIPPINE TAXATION                                                             

    The following is a summary of certain Philippine tax consequences that may
be relevant to non-Philippine holders of the global bonds in connection with the
holding and disposition of the global bonds. The Republic uses the term         
"non-Philippine holders" to refer to (i) non-residents of the Philippines who   
are neither citizens of the Philippines nor are engaged in trade or business    
within the Philippines or (ii) non-Philippine corporations not engaged in trade 
or business in the Philippines.                                                 

 This summary is based on Philippine laws, rules, and regulations now in
effect, all of which are subject to change. It is not intended to constitute a  
complete analysis of the tax consequences under Philippine law of the receipt,  
ownership, or disposition of the global bonds, in each case by non-Philippine   
holders, nor to describe any of the tax consequences that may be applicable to  
residents of the Republic.                                                      

   EFFECT OF HOLDING GLOBAL BONDS.  Payments by the Republic of principal of
and interest on the global bonds to a non-Philippine holder will not subject    
such non-Philippine holder to taxation in the Philippines by reason solely of   
the holding of the global bonds or the receipt of principal or interest in      
respect thereof.                                                                

     TAXATION OF INTEREST ON THE GLOBAL BONDS.  When the Republic makes payments
of principal and interest to you on the global bonds, no amount will be withheld
from such payments for, or on account of, any taxes of any kind imposed, levied,
withheld or assessed by the Philippines or any political subdivision or taxing  
authority thereof or therein.                                                   

     TAXATION OF CAPITAL GAINS.  Non-Philippine holders of the global bonds will
not be subject to Philippine income or withholding tax in connection with the   
sale, exchange, or retirement of a global bond if such sale, exchange or        
retirement is made outside the Philippines or an exemption is available under an
applicable tax treaty in force between the Philippines and the country of       
domicile of the non-Philippine holder. Under the Philippine Tax Code, any gain  
realized from the sale, exchange or retirement of securities with an original   
maturity of more than five years from the date of issuance will not be subject  
to income tax. Since the global bonds have a maturity of more than five years   
from the date of issuance, any gains realized by a holder of the global bonds   
will not be subject to Philippine income tax.                                   

DOCUMENTARY STAMP TAXES.  No documentary stamp tax is imposed upon the
transfer of the global bonds. A documentary stamp tax is payable upon the       
issuance of the global bonds and will be for the account of the Republic.       

ESTATE AND DONOR'S TAXES.  The transfer of a global bond by way of    
succession upon the death of a non-Philippine holder will be subject to         
Philippine estate tax at progressive rates ranging from 5% to 20% if the value  
of the net estate of properties located in the Philippines is over P200,000.    

  The transfer of a global bond by gift to an individual who is related to
the nonresident holder will generally be subject to a Philippine donor's tax at 
progressive rates ranging from 2% to 15% if the value of the net gifts of       
properties located in the Philippines exceed P100,000 during the relevant       
calendar year. Gifts to unrelated donees are generally subject to tax at a flat 
rate of 30%. An unrelated donee is a person who is not a (i) brother, sister    
(whether by whole or half blood), spouse, ancestor, or lineal descendant or (ii)
relative by consanguinity in the collateral line within the fourth degree of    
relationship.                                                                   

  The foregoing apply even if the holder is a nonresident holder. However,
the Republic will not collect estate and donor's taxes on the transfer of the   
global bonds by gift or succession if the deceased at the time of death, or the 
donor at the time of donation, was a citizen and resident of a foreign country  
that provides certain reciprocal rights to citizens of the Philippines (a       
"Reciprocating Jurisdiction"). For these purposes, a Reciprocating Jurisdiction 
is a foreign country which at the time of death or donation (i) did not impose a
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transfer tax of any character in respect of intangible personal property of     
citizens of the Philippines not residing in that foreign country or (ii) allowed
a similar exemption from transfer or death taxes of every character or          
description in respect of intangible personal property owned by citizens of the 
Philippines not residing in that foreign country.                               

UNITED STATES TAXATION                                                          

If you are a US holder of the global bonds and you receive additional 
amounts representing withholding or other taxes imposed by the Republic (see    
"Description of the Securities -- Description of Debt Securities -- Additional  
Amounts" in the accompanying prospectus), you will include such additional      
amounts in income as interest income at the same time and in the same manner as 
other interest payments (see "Taxation -- United States Tax                     
Considerations -- United States Holders -- Payments or Accruals of Interest" in 
the accompanying prospectus). Subject to certain limitations, the withholding or
other taxes imposed by the Republic should be allowed as a credit or deduction  
for US federal income tax purposes. The debt securities to be issued pursuant to
this offering should form part of a "qualified reopening" for US federal income 
tax purposes of the issue by the Republic on November 25, 2002 of 9.00% Global  
Bonds due 2013. Accordingly, the discussion under "Taxation -- United States Tax
Considerations -- United States Holders -- Original Issue Discount"             
notwithstanding, any discount on the debt securities to be issued pursuant to   
this offering that would otherwise be "original issue discount" should be       
treated as "market discount". For a description of certain "market discount" and
other United States tax aspects of the global bonds, see "Taxation -- United    
States Tax Considerations" in the accompanying prospectus.                      

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UNDERWRITING

     Subject to the terms and conditions contained in an underwriting agreement,
which consists of a terms agreement dated January 8, 2003 and the underwriting  
agreement standard terms filed as an exhibit to the registration statement, the 
Republic has agreed to sell to the underwriters named below, for whom Credit    
Suisse First Boston Corporation, J.P. Morgan Securities Inc. and Morgan Stanley 
& Co. Incorporated are acting as the representatives. In the underwriting       
agreement, the Republic has agreed to sell to the underwriters, and the         
underwriters have agreed to purchase from the Republic, global bonds in the     
principal amount of $500,000,000. Each of the underwriters, severally and not   
jointly, has agreed to purchase from the Republic, the principal amounts of the 
global bonds listed opposite its name below.                                    

                                                                [Download Table]

UNDERWRITERS                                                  PRINCIPAL AMOUNT
------------                                                  ----------------
                                                                              
Credit Suisse First Boston Corporation......................    $163,333,334  
  Eleven Madison Avenue                                                       
  New York, New York 10010                                                    
  United States of America                                                    
J.P. Morgan Securities Inc..................................    $163,333,333  
  270 Park Avenue                                                             
  New York, New York 10017                                                    
  United States of America                                                    
Morgan Stanley & Co. Incorporated...........................    $163,333,333  
  1585 Broadway                                                               
  New York, New York 10036                                                    
  United States of America                                                    
Deutsche Bank AG London.....................................    $  5,000,000  
  Winchester House                                                            
  1 Greater Winchester Street                                                 
  London EC2N 2DB                                                             
  England                                                                     
The Hongkong and Shanghai Banking Corporation Limited.......    $  5,000,000  
  Level 16, One Queen's Road, Central                                         
  Hong Kong                                                                   
                                                                ------------  
     Total..................................................    $500,000,000  
                                                                ============  

    The underwriting agreement provides that the underwriters are obligated to
purchase all of the global bonds if any are purchased. The underwriting         
agreement also provides that if an underwriter defaults, the purchase commitment
of the non-defaulting underwriters may be increased or the offering of the      
global bonds may be terminated.                                                 

   The Republic has agreed to indemnify the underwriters against liabilities
under the US Securities Act of 1933 or contribute to payments which the         
underwriters may be required to make in that respect.                           

The underwriters have agreed to reimburse the Republic for certain    
expenses.                                                                       

COMMISSIONS AND DISCOUNTS                                                       

   The underwriters have advised the Republic that they propose to offer the
global bonds to the public initially at the public offering price that appears  
on the cover page of this prospectus supplement. After the initial public       
offering, the underwriters may change the public offering price and any other   
selling terms.                                                                  

  The Republic estimates that its out-of-pocket expenses for this offering
will be approximately $50,000.                                                  

    In connection with this offering of the global bonds, the underwriters may
engage in overallotment, stabilizing transactions and syndicate covering        
transactions in accordance with Regulation M under the Securities Exchange Act  
of 1934. Overallotment involves sales in excess of the offering size, which     
create a short position for the underwriters. Stabilizing transactions involve  
bids to purchase the global bonds in the                                        

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open market for the purpose of pegging, fixing or maintaining the price of the  
global bonds. Syndicate covering transactions involve purchases of the global   
bonds in the open market after the distribution has been completed in order to  
cover short positions. Stabilizing transactions and syndicate covering          
transactions may cause the price of the global bonds to be higher than it would 
otherwise be in the absence of those transactions. If the underwriters engage in
stabilizing or syndicate covering transactions, they may discontinue them at any
time. The Republic has been advised by the representatives that they intend to  
make a market in the global bonds, but the representatives are not obligated to 
do so and may discontinue any market-making activities at any time without      
notice. No assurance can be given as to the liquidity of or the trading market  
for the global bonds.                                                           

UK SELLING RESTRICTIONS                                                         

    The underwriter represents and agrees that it has complied and will comply
with all applicable provisions of the FSMA with respect to anything done by it  
in relation to the global bonds in, from or otherwise involving the United      
Kingdom.                                                                        

FEDERAL REPUBLIC OF GERMANY SELLING RESTRICTIONS                                

   The underwriter represents and agrees that the global bonds have not been
and will not be offered, sold or publicly promoted or advertised in the Federal 
Republic of Germany other than in compliance with the German Securities Selling 
Prospectus Act (Wertpapierverkaufsprospektgesetz) of December 13, 1990, as      
amended, or any other laws applicable in the Federal Republic of Germany        
governing the issue, offering and sale of securities.                           

HONG KONG SELLING RESTRICTIONS                                                  

     No offer to sell the global bonds has been or will be made in Hong Kong, by
means of any document, other than to persons whose ordinary business it is to   
buy or sell shares or debentures, whether as principal or agent, or in          
circumstances which do not constitute an offer to the public within the meaning 
of the Companies Ordinance (Cap. 32) of Hong Kong, and unless permitted to do so
under the securities laws of Hong Kong, no person has issued or had in its      
possession for the purposes of issue, and will not issue or have in its         
possession for the purpose of issue, any advertisement, document or invitation  
relating to the global bonds other than with respect to the global bonds        
intended to be disposed of to persons outside Hong Kong or to be disposed of in 
Hong Kong only to persons whose business involves the acquisition, disposal or  
holding of securities, whether as principal or agent.                           

SINGAPORE SELLING RESTRICTIONS                                                  

    This prospectus supplement and the prospectus to which it relates have not
been registered as a prospectus with the Monetary Authority of Singapore (the   
"MAS") under the Securities and Futures Act 2001 (Act 42 of 2001) of Singapore  
(the "Securities and Futures Act"). Accordingly, the global bonds may not be    
offered or sold or made the subject of an invitation for subscription or        
purchase nor may this prospectus supplement and the prospectus to which it      
relates or any other document or material in connection with the offer or sale, 
or invitation for subscription or purchase of such global bonds be circulated or
distributed, whether directly or indirectly, to the public or any member of the 
public in Singapore other than (1) to an institutional investor or other person 
falling within Section 274 of the Securities and Futures Act, (2) to a          
sophisticated investor (as defined in Section 275 of the Securities and Futures 
Act) and in accordance with the conditions specified in Section 275 of the      
Securities and Futures Act or (3) otherwise than pursuant to, and in accordance 
with the conditions of, any other applicable provision of the Securities and    
Futures Act.                                                                    

JAPAN SELLING RESTRICTIONS                                                      

The global bonds have not been and will not be registered under the   
Securities and Exchange Law of Japan. The underwriter has represented and agreed
that it has not offered or sold, and it will not offer or sell, directly or     
indirectly, any global bonds in Japan or to, or for the account or benefit of,  
any resident of Japan or                                                        

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to, or for the account or benefit of, any resident for reoffering or resale,    
directly or indirectly, in Japan or to, or for the account or benefit of, any   
resident of Japan except (i) pursuant to an exemption from the registration     
requirements of, or otherwise in compliance with, the Securities and Exchange   
Law of Japan and (ii) in compliance with the other relevant laws and regulations
of Japan.                                                                       

REPUBLIC OF THE PHILIPPINES SELLING RESTRICTIONS                                

   The global bonds qualify as exempt securities under Section 9.1(a) of the
Philippine Securities Regulation Code, and the sale, offer for sale or          
distribution thereof in the Philippines is not subject to registration          
requirements with the Philippine Securities and Exchange Commission.            
Accordingly, each underwriter, on behalf of itself and each of its affiliates   
that participates in the offering of global bonds, represents and agrees that it
has not, and will not, sell or offer for sale or distribution any global bonds  
in the Philippines, except through registered salesmen or registered brokers or 
dealers in securities.                                                          

SETTLEMENT AND DELIVERY                                                         

     The Republic expects that delivery of the global bonds will be made against
payment therefor on or about the closing date specified on the cover page of    
this prospectus supplement, which will be the 3rd business day following the    
date of pricing of the global bonds.                                            

RELATIONSHIP OF UNDERWRITERS WITH THE REPUBLIC                                  

    The underwriters have in the past and may in the future provide investment
and commercial banking and other related services to the Republic in the        
ordinary course of business for which the underwriters and/or their respective  
affiliates have received or may receive customary fees and reimbursement of out 
of pocket expenses.                                                             

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LEGAL MATTERS 

The validity of the global bonds will be passed upon on behalf of the 
Republic as to Philippine law by the Secretary of the Department of Justice of  
the Republic, and as to US and New York State law by Allen & Overy. Certain     
matters will be passed upon for the underwriters by Cravath, Swaine & Moore,    
United States counsel for the underwriters, as to matters of US and New York    
State law, and by Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles,        
Philippine counsel for the underwriters, as to matters of Philippine law.       

GENERAL INFORMATION 

     1. The global bonds have been accepted for clearance through The Depository
Trust Corporation, Euroclear and Clearstream, Luxembourg. The Common Code number
is 015862807, the International Securities Identification Number is US718286AT41
and the CUSIP number is 718286AT4.                                              

     2. The issue and sale of the global bonds was authorized by the Full Powers
signed by the President of the Republic dated January 6, 2003.                  

   3. Except as disclosed in this prospectus supplement and the accompanying
prospectus, there has been no material adverse change in the fiscal condition or
affairs of the Republic which is material in the context of the issue of the    
global bonds since July 11, 2002.                                               

 4. Application has been made to list the global bonds on the Luxembourg
Stock Exchange. Copies of the following documents will, so long as any global   
bonds are listed on the Luxembourg Stock Exchange, be available for inspection  
during usual business hours at the specified office of Dexia Banque             
Internationale a Luxembourg societe anonyme in Luxembourg:                      

  - copies of the Registration Statement, which includes the fiscal agency
       agreement and the form of the underwriting agreement as exhibits thereto;
and                                                               

    - the Full Powers signed by the President of the Republic dated January 6,
     2003 and the resolution of the Monetary Board of Bangko Sentral adopted
     on January 3, 2003, authorizing the issue and sale of the global bonds.

   In addition, so long as the global bonds are outstanding or listed on the
Luxembourg Stock Exchange, copies of the Philippines' economic reports for each 
year in English (as and when available) will be available at the offices of the 
listing agent in Luxembourg during normal business hours on any weekday. The    
underwriting agreement, the fiscal agency agreement and the supplement to the   
fiscal agency agreement shall also be available free of charge at the office of 
the listing agent and any paying and transfer agent in Luxembourg.              

5. Dexia Banque Internationale a Luxembourg societe anonyme has been  
appointed as the Luxembourg paying agent. For so long as the global bonds are   
listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock   
Exchange so require, the Republic will maintain a paying agent in Luxembourg.   

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PROSPECTUS                                                                      

(REPUBLIC OF THE PHILIPPINES LOGO)

REPUBLIC OF THE PHILIPPINES 

1,200,000,000 
DEBT SECURITIES AND/OR
WARRANTS

     The Republic will provide specific terms of these securities in supplements
to this prospectus. You should read this prospectus and any supplement carefully
before you invest. This prospectus may not be used to offer or sell securities  
unless accompanied by a supplement.                                             

 NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A     
CRIMINAL OFFENSE.                                                               

This prospectus is dated July 11, 2002.                                         

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TABLE OF CONTENTS 

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
Certain Defined Terms and Conventions.......................     2
Forward Looking Statements..................................     2
Data Dissemination..........................................     3
Use of Proceeds.............................................     3
Republic of the Philippines.................................     4
  Recent Political Developments.............................     4
  Recent Economic Developments..............................     8
  Core Policies of the Arroyo Administration................    16
  History, Land and People..................................    23
  Government and Politics...................................    24
  Philippine Economy........................................    29
  GDP and Major Financial Indicators........................    31
  Principal Sectors of the Economy..........................    34
  Prices, Employment and Wages..............................    40
  Balance of Payments.......................................    44
  Monetary System...........................................    71
  The Philippine Financial System...........................    78
  The Philippine Securities Markets.........................    85
  Public Finance............................................    87
  The Government Budget.....................................    93
  Debt......................................................    94
Description of the Securities...............................   107
  Description of the Debt Securities........................   107
  Description of the Warrants...............................   116
  Limitations on Issuance of Bearer Debt Securities.........   116
Taxation....................................................   118
  Philippine Taxation.......................................   118
  United States Tax Considerations..........................   119
  Information Reporting and Backup Withholding..............   125
Plan of Distribution........................................   126
Validity of the Securities..................................   127
Authorized Representative in the United States..............   127
Experts; Official Statements and Documents..................   127
Further Information.........................................   127
Index to Tables.............................................   T-1

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CERTAIN DEFINED TERMS AND CONVENTIONS 

    Statistical information included in this prospectus is the latest official
data publicly available at the date of this prospectus. Financial data provided 
in this prospectus may be subsequently revised in accordance with the Republic's
ongoing maintenance of its economic data, and that revised data will not be     
distributed by the Republic to any holder of the Republic's securities.         

All references in this prospectus to (a) the "Republic" or the        
"Philippines" are to the Republic of the Philippines, (b) the "Government" are  
to the national government of the Philippines and (c) "Bangko Sentral" are to   
Bangko Sentral ng Pilipinas, the central bank of the Philippines.               

    Government owned corporations are corporations at least 51% of the capital
stock of which is owned by the Government directly or indirectly through its    
instrumentalities.                                                              

   The fiscal year of the Government commences on January 1 of each year and
ends on December 31 of such year.                                               

Unless otherwise indicated, all references in this prospectus to      
"Philippine Pesos", "Pesos" or "P" are to the lawful national currency of the   
Philippines, those to "dollars", "US dollars" or "$" are to the lawful currency 
of the United States of America and those to "Yen" or "JPY" are to the lawful   
currency of Japan.                                                              

   This prospectus contains conversions of some Peso amounts into US dollars
for the convenience of the reader. Unless otherwise specified, the conversions  
were made at the exchange rate as stated by the Bangko Sentral Reference        
Exchange Rate Bulletin published by the Treasury Department of Bangko Sentral on
the relevant date. No representation is made that the Peso amounts actually     
represent the US dollar amounts or could have been converted into US dollars at 
the rates indicated, at any particular rate, or at all.                         

    Any discrepancies in the tables included herein between the amounts listed
and the totals thereof are due to rounding.                                     

FORWARD LOOKING STATEMENTS

    Some of the statements contained in this prospectus under "Republic of the
Philippines" are forward-looking. They include statements concerning, among     
others,                                                                         

     - the Republic's economic, business and political conditions and prospects;

- the Republic's financial stability;                                 

- the depreciation of the Peso;                                       

- changes in interest rates;                                          

  - governmental, statutory, regulatory or administrative initiatives; and

- an adverse change in economic conditions in the Republic.           

Actual results may differ materially from those suggested by the      
forward-looking statements due to various factors. These factors include, but   
are not limited to:                                                             

   - Adverse external factors, such as high international interest rates and
recession or low growth in the Republic's trading partners. High  
international interest rates could increase the Republic's current
    account deficit and budgetary expenditures. Recession or low growth in
  the Republic's trading partners could lead to fewer exports from the
Republic and, indirectly, lower growth in the Republic.           

- Adverse domestic factors, such as a decline in foreign direct and   
  portfolio investment, increases in domestic inflation, high domestic
      interest rates and exchange rate volatility. Each of these factors could
lead to lower growth or lower international reserves.             

   - Other adverse factors, such as climatic or seismic events and political
uncertainty.                                                      

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DATA DISSEMINATION

   The Republic is a subscriber to the International Monetary Fund's Special
Data Dissemination Standard, which is designed to improve the timeliness and    
quality of information of subscribing member countries. The Special Data        
Dissemination Standard requires subscribing member countries to provide         
schedules indicating, in advance, the date on which data will be released or the
so-called "Advance Release Calendar". For the Philippines, precise dates or     
"no-later-than-dates" for the release of data under the SDDS are disseminated   
three months in advance through the Advance Release Calendar, which is published
on the Internet under the International Monetary Fund's Dissemination Standards 
Bulletin Board. Summary methodologies of all metadata to enhance transparency of
statistical compilation are also provided on the Internet under the             
Dissemination Standards Bulletin Board. The Internet website is located at      
"http://dsbb.imf.org/country/phlcats.htm".                                      

USE OF PROCEEDS 

     Unless otherwise specified in the applicable prospectus supplement, the net
proceeds from sales of securities will be used for the general purposes of the  
Republic, including for budget support and to repay a portion of the            
Government's domestic borrowings.                                               

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REPUBLIC OF THE PHILIPPINES 

RECENT POLITICAL DEVELOPMENTS                                                   

   POTENTIAL CHANGE IN THE SENATE LEADERSHIP.  On June 3, 2002, Senator John
Osmena, previously a member of the coalition supporting the administration of   
President Arroyo, announced that he was resigning from the coalition and joining
the opposition. As a result, both the opposition and the administration         
coalition currently have 12 senators in the 24-member Senate.                   

The Philippine Constitution provides that a majority vote of all the  
members of the Senate is needed to elect a Senate President. It is unclear,     
however, what number of Senators constitutes a quorum for purposes of conducting
legislative business and electing the other officers and chairs of the various  
committees of the Senate. Relying on a 1949 Supreme Court decision, the         
opposition senators argued that senators who are not physically present in the  
Philippines should not be counted for purposes of determining a quorum. These   
senators claimed that because 23 senators were in the Philippines on June 3,    
2002, 12 senators constituted a quorum. The 12 member opposition relied on this 
position in calling a session on June 3, 2002 to elect a new Senate President   
Pro Tempore and Majority Floor Leader as well as new committee chairs.          

 The incumbent Senate President, Senator Franklin Drilon, questioned the
legality of such session, reasoning that under the Senate rules only he, the    
Senate President Pro Tempore, the Majority Floor Leader, or his designated      
representative can call a session into order. The opposition argued that since  
the Senate President refused to open the session, they, as the new majority,    
could suspend the Senate rules and call a session under "exigent circumstances".
In response to the actions of the opposition senators, Senator Drilon decided to
adjourn the session on June 3, 2002, earlier than the scheduled adjournment date
of June 6. In a gesture of support for Drilon, the House of Representatives, led
by Speaker Jose De Venecia, also decided to adjourn its session. Sessions of    
both houses were scheduled to resume on July 22, 2002. However, the opposition  
in both houses protested the early adjournment and continued to hold sessions.  
In mid-June 2002 Senator Ramon Revilla, a member of the coalition supporting the
administration of the President and the Senator absent from the Philippines on  
June 3, 2002, returned to Manila. It is currently unclear what impact the return
of Senator Revilla will have on this dispute, as the opposition senators claim  
their actions taken on June 3, 2002 still stand.                                

    If the Senate is unable to resolve this dispute internally, the matter may
have to be referred to the Supreme Court for final adjudication. Unless and     
until it is resolved in favor of the administration, it is uncertain whether    
several important administration bills, including the Special Asset Vehicle     
(SPAV) bill, the granting of a franchise to the National Transmission           
Corporation ("Transco") and proposed amendments to the Electric Power Industry  
Reform Act, or any other legislation that does not have broad support, will be  
signed into law. If the opposition succeeds in taking control of the Senate     
leadership, it is uncertain whether the bills would be passed in their current  
form. Any significant delay in the passage of, or material revision to, the     
administration's proposed legislation could adversely affect the Government's   
economic program. It is impossible to predict at this time what effects, if any,
the dispute and its ultimate resolution will have on the Philippine economy, but
such effects could be material.                                                 

  CRIMINAL CHARGES AGAINST ESTRADA.  Criminal charges for perjury, illegal
use of an alias, and plunder have been filed against Mr. Estrada by the         
Ombudsman (the office mandated under the Constitution of the Republic to        
investigate and prosecute all complaints of corruption against public officials 
and government employees) with the Sandiganbayan, a special court with          
jurisdiction over criminal and civil cases involving graft and corruption.      

  Under Republic Act No. 7080, as amended by Republic Act No. 7659, or the
Plunder Law, a public officer commits the crime of plunder when he or she, alone
or by connivance with others, accumulates or acquires ill-gotten wealth, through
a combination or series of overt or criminal acts described in the Plunder Law, 
in an aggregate amount of at least P50 million. Plunder may be punished by      
reclusion perpetua (the equivalent of life imprisonment) or death. Mr. Estrada  
was charged with plunder arising from several acts, including the malversation  
of tax levy funds, the use of pension funds for private gain and the acceptance 
of kickbacks on illegal gambling.                                               
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   A special division was specially created by the Supreme Court to expedite
the hearing of these cases. On the first charge of perjury, relating to Mr.     
Estrada's 1999 statement of assets and liabilities, the Sandiganbayan has       
disallowed evidence regarding some of Mr. Estrada's alleged bank accounts and   
holdings in certain companies, ruling that such evidence was not included in the
information filed against Mr. Estrada and therefore was not admissible. The     
Ombudsman has appealed this evidentiary decision to the Supreme Court. A second 
charge of perjury, relating to Mr. Estrada's 1998 statement of assets and       
liabilities, is also currently pending before the Sandiganbayan. The first of   
four charges of plunder is being heard by the Sandiganbayan and refers to       
profits and commissions that Mr. Estrada is said to have derived from his       
alleged directives to the heads of the Social Security System and the Government
Service Insurance System to invest in certain companies listed on the Philippine
Stock Exchange. On February 27, 2002, Mr. Estrada refused to enter a plea on his
arraignment for the charge of illegal use of an alias and similarly, on April   
12, 2002 he refused to enter a plea on his arraignment for charges of perjury.  
This prompted the Sandiganbayan to enter a "not guilty" plea on his behalf on   
both occasions.                                                                 

Recently, Mr. Estrada publicly admitted that the money in certain bank
accounts identified as belonging to "Jose Velarde" actually belonged to him. He 
later retracted this statement claiming that he did not fully understand the    
question asked of him and that the money actually belonged to a close friend.   

Recently, Mr. Estrada has complained about the alleged bias of the    
Sandiganbayan against him. Claiming that he will not be treated fairly by the   
Philippine courts, he recently dismissed all of his lawyers. Since Mr. Estrada  
is not in a position to defend himself, the Sandiganbayan appointed several     
counsel de oficio for him. Hearings on the perjury charges are ongoing.         

    PEACE PROCESS.  Over the past three decades, groups of disaffected Muslims
have periodically fought with Government forces.                                

    Peace negotiations with the Moro Islamic Liberation Front (the "MILF") are
being revived, after they collapsed in the wake of the previous administration's
all-out war policy. Discussions between the Government and the MILF have        
resulted in the following agreements:                                           

   - Peace Agreement signed on June 22, 2001 in Tripoli, Libya, establishing
the agenda for the negotiations;                                  

   - Implementing Guidelines on the Security Aspect of the Tripoli Agreement
    of 2001 (otherwise known as the GRP-MILF Ceasefire Agreement of 2001);
and                                                               

 - Manual of Instructions for the Coordinating Committee on Cessation of
Hostilities and the Local Monitoring Teams.                       

The above agreements pertain to the security aspects of the peace     
negotiations and provide for the rules and regulations governing the cessation  
of hostilities between the two sides as well as the mechanisms to implement and 
monitor the observance of the ceasefire. One significant feature of these       
agreements is the establishment of local peace monitoring teams in 13 provinces 
covering 155 municipalities within the conflict-affected areas that empower the 
local leaders and civil society groups to participate actively in conflict      
prevention and resolution.                                                      

   A Joint Communique between the Republic and the MILF and the Implementing
Guidelines on the Humanitarian Rehabilitation and Development Aspects of the    
GRP-MILF Tripoli Agreement were signed in Malaysia on May 6, 2002. The two      
documents have helped to decrease hostilities between the two parties. The      
Republic and the MILF have agreed that: (i) the MILF will set up a body to      
implement Government-funded aid projects; (ii) the Republic will pay reparations
for destroyed or damaged property; and (iii) both sides must allow refugees to  
return to their homes. Some members of Congress have vowed to oppose the payment
of reparations to the MILF. Pursuant to the agreements, 145 ex-MILF rebels were 
promised amnesty and were given aid to help in the transition to civilian life. 

The Moro National Liberation Front (the "MNLF"), the largest of the   
ideologically-oriented armed groups, signed a peace agreement with the          
Government in September 1996. The peace agreement provided for an end to        
hostilities, the establishment of a development region in southern Mindanao and 
elections in 1999 to                                                            
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decide whether the residents of any of the provinces in the region would want to
join a Muslim autonomous region. This agreement was enacted by Congress as the  
Muslim Autonomy Act. On August 14, 2001, a plebiscite was held in the four      
province Autonomous Region in Muslim Mindanao on whether to expand the Muslim   
autonomous region and in 15 other provinces and 10 cities on whether to join the
Muslim autonomous region. However, only one city, Marawi, and one province,     
Basilan, voted to join the four other provinces that currently comprise the     
Autonomous Region in Muslim Mindanao, namely Lanao del Sur, Maguindanao, Sulu   
and Tawi Tawi. The first regular elections for the new autonomous region        
officials were held on November 26, 2001.                                       

In the days prior to the November 26, 2001 elections in the Autonomous
Region of Muslim Mindanao (the "ARMM"), Nur Misuari, then governor of the ARMM, 
and his supporters allegedly conducted a series of bombings and other acts of   
violence with the goal of postponing the elections. Despite Mr. Misuari's       
alleged actions, the first regular elections for the ARMM officials were held as
scheduled with no significant disruptions. On December 4, 2001, the Commission  
on Elections announced the results of the elections and the new leaders of the  
ARMM, many of whom were backed by the Arroyo Administration, including the new  
Regional Governor, Dr. Parouk Hussin and the new Regional Vice-Governor, Dr.    
Mahid Mutilan. The MNLF Interim Chairman Hatimil Hassan was elected as a member 
of the Regional Legislative Assembly of the ARMM. Meanwhile, Malaysian          
authorities arrested Mr. Misuari when he fled to Malaysia. On January 7, 2002,  
Malaysia deported Mr. Misuari to the Republic where he currently remains in     
custody. Mr. Misuari was charged with rebellion against the Republic.           

In accordance with Republic Act 9054, President Arroyo approved the   
establishment of the Regional Security Force (the "RSF"), which is responsible  
for peace-keeping in the ARMM. The RSF, composed of 1,423 former members of the 
MNLF, is under the effective control of the regional government. Meanwhile, a   
total of 1,744 MNLF forces who were not absorbed into the military and police   
were provided socio-economic assistance in the form of skills training,         
income-generating projects, resettlement housing, and study grants.             

    The Government conducted informal talks with the National Democratic Front
(the "NDF") in September 2001 to convey its serious concerns relating to the    
continuing acts of political assassination committed by the Communist Party of  
the Philippines and the New People's Army, both affiliates of the NDF, against  
non-combatants and civilians, particularly the assassination of Mayor Jose      
Libayao of Talaingod, Davao del Norte on September 5, 2001. The Government also 
informed the NDF that it was ready to resume formal talks if the NDF would make 
a public declaration renouncing acts of political assassination. In response,   
the NDF expressed its strong protest to what it deemed to be the Government's   
unilateral replacement of the formal talks with informal talks and rejected the 
Government's position. In December 2001, informal talks between the Government  
and the NDF resulted in a draft document of understanding, which provides, among
other things, that if talks are resumed, they should be completed within the    
next five to six months. Another round of informal talks was held in January    
2002, at which the Government presented a formula for a final peace agreement.  
The peace talks remain indefinitely suspended despite the Government's offer to 
continue informal negotiations. The NDF has rejected this offer and seeks to    
formalize talks with the Government.                                            

Military operations against the Abu Sayyaf have been conducted in the 
provinces of Basilan, Sulu, Tawi-Tawi and the Zamboanga peninsula since the     
abduction of guests and employees at a resort in the province of Palawan on May 
27, 2001. Between that date and December 31, 2001, a total of 108 recorded      
encounters have taken place between the Armed Forces of the Philippines (the    
"AFP") and Abu Sayyaf militants, 97 of which were initiated by the AFP.         
President Arroyo has now ordered the AFP to initiate an all-out offensive to    
eradicate the terrorist group.                                                  

  Through the recently heightened cooperation between the Republic and the
United States in the fight against terrorism, the US has sent military advisers 
to assist the AFP in eradicating the Abu Sayyaf. About 1,000 US Special Forces  
troops are participating in joint military exercises with the AFP. The US       
Special Forces have operated in the Zamboanga and Basilan provinces where the   
Abu Sayyaf operates. In accordance with a terms of reference entered into       
between the Republic and the US, the US Special Forces have observed and trained
the AFP on counter-terrorist strategy and techniques to improve the capability  
of AFP troops in                                                                

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combating terrorism. The Government has stated that the joint military exercises
are to train the AFP and US forces for their mutual benefit and are not a means 
for the US to intervene in operations against the Abu Sayyaf. Two Supreme Court 
cases brought against the Government requesting the termination of the joint    
military exercises were dismissed on April 11, 2002. On May 29, 2002, the U.S.  
Government offered a $5 million reward for the capture of Abu Sayyaf leaders.   
Additionally, on June 2, 2002, President Arroyo approved "a more active and     
realistic role" for American training exercises with AFP troops, which role     
specifically includes training the lowest ranking AFP troops and placing more US
troops closer to the combat zone and on June 28, 2002 the U.S. Government       
authorized a total of $10 million in equipment and other materials to be        
provided to the AFP. The United States and the Republic announced on July 2,    
2002 that they had entered into a sustained military cooperation agreement which
will replace the terms of reference set to expire on July 31, 2002. Vice        
President Teofisto Guingong resigned from his position of Secretary of Foreign  
Affairs, effective July 15, 2002 citing, among other things, differences of     
opinion with President Arroyo concerning the presence of US military troops in  
the Philippines.                                                                

  TERRORIST ATTACKS IN THE UNITED STATES AND RELATED EVENTS.  On September
11, 2001, several terrorist attacks occurred in the United States, which        
resulted in the destruction of the World Trade Center towers and several nearby 
buildings in New York City and part of the Pentagon in Washington D.C.          

 The terrorist attacks in the United States disrupted securities markets
worldwide, adversely affected economic conditions in the United States and      
elsewhere and have resulted in increased political and economic uncertainty     
worldwide. The evolving response of the United States and other nations has     
resulted in continuing political and economic uncertainty, and in increased     
volatility in the world's financial markets. It is unclear how the US economy,  
the international financial markets or the Philippine economy will be affected  
in the future.                                                                  

The response to these attacks has included the US-led military action 
against al Qaeda and the Taliban government in Afghanistan, which began in      
October 2001 and is ongoing. In response to the events of September 11, 2001,   
President Arroyo issued a 14-point program of action that emphasized the need   
for a regional consensus to effectively combat terrorism. In December 2001, in  
line with the Association of Southeast Asian Nations ("ASEAN") Declaration on   
Joint Action to Counter Terrorism adopted at the Seventh ASEAN Summit held in   
November 2001, the Republic hosted a trilateral meeting with Indonesia and      
Malaysia to complete a draft of the Agreement on Exchange of Information and    
Communication Procedures. In addition, the Republic continues to monitor actions
on the Asia-Pacific Economic Cooperation ("APEC") Statement on Counter Terrorism
issued in China in October 2001 and President Arroyo's proposals at the APEC    
Leaders' Meeting, which included the strict enforcement of anti-money laundering
laws to prevent the supply of funds to terrorists, increased security in all    
seaports and airports, combating cyber-crime and enhancing customs enforcement. 
In November 2001, the Republic became a signatory to the International          
Convention for the Suppression of the Financing for Terrorism. Bangko Sentral   
has circulated among banks the United Nations Security Resolutions and the      
terrorist lists supplied by the US government for their information, guidance   
and appropriate action. Within the range permitted by the Anti-Money Laundering 
Act, Republic authorities would have the ability to cooperate. On April 21,     
2002, President Arroyo offered a P5 million reward for information leading to   
the arrest of suspected terrorists. On May 6, 2002, the Philippines formally    
entered into a trilateral agreement with Malaysia and Indonesia aimed at        
facilitating mutual cooperation in combating cross-border terrorism and other   
transnational crimes.                                                           

 REVIEW OF FINANCIAL CONTINGENCY PLAN.  In light of the recent terrorist
attacks in the United States, on September 14, 2001, Standard & Poor's reviewed 
the financial contingency plans of policy makers in emerging market countries.  
In particular, Standard & Poor's reviewed plans of sovereign issuers, including 
the Republic, who may have large external funding gaps in relation to their     
foreign exchange reserves and may be vulnerable to a decline in foreign         
financing. On September 26, 2001, Standard & Poor's announced that it did not   
expect any substantial changes in the ratings of Asia-Pacific sovereign issuers 
as a direct result of the terrorist attacks, but that any future ratings actions
would only be considered where adverse policies are adopted by governments in   
response to the attacks.                                                        

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RECENT ECONOMIC DEVELOPMENTS                                                    

BACKGROUND.  Economic growth was sustained in 2000 and 2001, although 
growth momentum was weakened due to a string of adverse developments such as:   

     - a potential power shift in the Senate and the ongoing trial of the former
     president. See "-- Recent Political Developments -- Potential Change in
the Senate Leadership and -- Criminal Charges Against Estrada";   

  - the ongoing conflict in Mindanao and the US response to terrorism. See
 "-- Recent Political Developments -- Peace Process and -- Terrorist
Attacks in the United States and Related Events"; and             

    - a stock market scandal. See "-- Philippine Securities Markets -- History
and Development".                                                 

Despite these challenges and the generally weak global conditions, the
Philippine economy grew by 3.4% in 2001, surpassing the 3.3% target for the     
year. The average inflation of 6.1% was at the lower end of the 6.0-7.0% target 
range. The benign inflation environment allowed for cautious monetary easing,   
which supported the economy's growth objectives. On the external front, the     
current account, which measures the Republic's trade in goods and services and  
transfer payments, remained in surplus despite lower exports. The capital and   
financial account recorded a lower net outflow of $3.8 billion as compared to   
2000. The overall balance of payments deficit of $192.0 million was only 37.4%  
of the previous year's level. Reserves were maintained at comfortable levels in 
terms of import cover and as a ratio to short-term debt. See "-- Balance of     
Payments -- Balance of Payments Performance". Meanwhile, the Peso remained      
broadly stable even as it experienced depreciation pressures in 2001 due to     
domestic and external factors.                                                  

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   RECENT ECONOMIC INDICATORS.  The following table sets out the performance
of certain of the Republic's principal economic indicators for the periods      
indicated.                                                                      

                                                        [Enlarge/Download Table]

                                                             2000     2001      2002(1)   
                                                             ----     -----     -------   
                                                                                          
Real GDP growth (%).........................................  4.4       3.2        3.8(2) 
Real GNP growth (%).........................................  4.8       3.4        4.9(2) 
Inflation rate (%)..........................................  4.4(3)    6.1(3)     3.6(4) 
Unemployment rate (%)....................................... 11.2(5)   11.1(5)    12.1(4) 
91-day T-bill rate (%)...................................... 9.86(3)   9.86(3)    5.74(4) 
Fiscal position                                                                           
  Consolidated public sector fiscal position/GDP (%)........ (4.6)     (4.1)        --    
External position                                                                         
  Balance of payments ($ million)........................... (513)     (192)     2,157(2) 
  Trade(6)/GNP (%)..........................................  8.7       3.7        5.9(2) 
     Export growth (%)......................................  9.0     (16.2)       2.7(7) 
     Import growth (%)......................................  3.8      (6.2)      (3.0)(8)
  External debt ($ billion)................................. 52.1      52.4       53.4    
  International reserves                                                                  
     Gross ($ billion)...................................... 15.0      15.7       17.1(9) 
     Net ($ billion)........................................ 11.3      11.4       13.7(9) 
     Months of retained imports(10).........................  4.4       5.0        5.6(9) 
Domestic credit growth (%).................................. 8.55      1.05       2.94(2) 

---------------                                                                 

(1) Some 2002 data is preliminary.                                            

(2) First three months of 2002.                                               

(3) Full year average.                                                        

(4) Average of first six months of 2002.                                      

 (5) Average of the January, April, July and October applicable statistics based
on the January, April, July and October labor force surveys for the   
relevant year.                                                        

(6) Represents goods trade.                                                   

(7) First five months of 2002.                                                

(8) First four months of 2002.                                                

(9) As of May 31, 2002.                                                       

(10) Number of months of average imports of merchandise goods and payment of    
services and income that can be financed by gross reserves.           

  NATIONAL SOCIO-ECONOMIC SUMMIT OF 2001.  On December 10, 2001, President
Arroyo convened the National Socio-Economic Summit of 2001 in which over 1,000  
leaders of Government, business, labor organizations and civil society          
participated. President Arroyo called the summit in recognition that the        
September 11 terrorist attacks on the United States had given rise to new       
uncertainties and decreased the prospects of a global recovery initially        
anticipated by the Government to start in the latter part of 2001. The          
Government was concerned that these uncertainties, together with the delay in   
the recovery, could adversely affect the welfare of the Philippine people and   
the domestic economy, particularly export-oriented sectors, tourism-related     
industries and the financial markets. Towards this end, the Government          
recognized the need to take immediate steps to safeguard jobs and social        
services, enhance competitiveness and productivity of the economy and strengthen
investor confidence by improving peace and order and governance, and eliminate  
the structural and implementation bottlenecks in agriculture, industry and      
services.                                                                       

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The specific items agreed upon during the summit and which the various
Government agencies committed to implement in the first half of 2002 include:   

Peace, Order and Security.                                            

  - Accelerate the integration and coordination of intelligence activities
  and resources of law enforcement and security agencies; maximize all
     mechanisms to identify, locate and neutralize kidnap for ransom groups,
    drug syndicates, terrorists, smugglers, and coup plotters; and improve
the reward system for information on these groups; and            

- Mobilize the peace and order councils more actively and organize    
       self-defense units, which will be authorized to carry firearms and effect
     citizen's arrests pursuant to existing laws and under close supervision
   of the Department of Interior and Local Government and the Philippine
National Police.                                                  

Financial and Fiscal Reforms.                                         

 - Increase Bureau of Internal Revenue collection through administrative
    measures with a focus on industry benchmarking, review of big contract
    items in the budget with significant tax leakages, monitoring of local
government unit remittances, undertaking measures to improve the  
       collection of value-added tax and the 2% minimum corporate income tax and
the passage of legislation on the indexation of the excise tax;   

- Strictly implement seizure orders and stop issuances by Government  
       agencies of documents legitimizing smuggling and other measures to combat
smuggling;                                                        

- Pass legislation needed to facilitate the recovery of the financial 
     sector and enhance access to credit such as the Special Purpose Vehicle
     Act, the Securitization Act, new legislation removing documentary stamp
       taxes on secondary trading transactions, amendments to the Bangko Sentral
  and Philippine Deposit Insurance Corporation charters, the Corporate
Recovery Act and the Personal Equity Retirement Act; and          

- Enhance private sector access to official development assistance    
      including for Build-Operate-Transfer projects, railway and other private
sector-initiated infrastructure projects and private education    
institutions.                                                     

Agriculture.                                                                

 - Achieve food security and generate jobs by using hybrid and certified
    seeds in rice and corn production and facilitating marketing contracts
between agricultural producers and business corporations;         

- Enhance the effectiveness of the Government fund set up to increase 
  agricultural competitiveness and ensure that appropriate tariffs are
transferred to this fund;                                         

     - Reform lending procedures at the Land Bank of the Philippines to increase
the number of loans made for agricultural purposes; and           

- Maintain budgeted funding for programs on agriculture, fisheries,   
    indigenous peoples, agrarian reform, community based forest management
and watershed protection and management.                          

Trade and Industry.                                                         

- Pass amendments to existing legislation to rationalize the country's
    investment incentives scheme to match those of other Asian nations and
ensure that appropriate incentives will be granted to information 
technology services;                                              

- Support small and medium enterprises by streamlining business       
     documentation requirements, strengthening the guarantee fund system and
developing on-line credit application;                            

- Promote micro-finance banks in all provinces; and                   

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  - Modernize the cargo transport system by reviewing existing legislation
and passing new legislation on air cargo liberalization.          

Tourism-related Industries.                                                 

     - Amend existing legislation to allow for rechanneling of 40% of travel tax
collections to tourism-related projects and programs;             

- Improve access to tourist-generating markets by liberalizing visa   
requirements and fees for Chinese tourists;                       

- Institutionalize a mechanism to allow for an automatic increase in  
      frequency of flights once a carrier's current flights achieve a 70% load
factor; and                                                       

   - Aggressively promote programs geared towards domestic and international
tourism.                                                          

Telecommunications and Information Technology.                              

   - Facilitate granting of permits and licenses for increased deployment by
       private sector telecommunications service providers of broadband services
and other telecommunications facilities in key locations, such as 
industrial parks and regional centers, to develop and encourage   
e-commerce and e-business;                                        

   - Increase the demand for information technology services by accelerating
 the implementation of an e-development program for small, micro and
medium enterprises; and                                           

- Expand the implementing rules and regulations of the                
Build-Operate-Transfer Law to address specific requirements of    
information technology projects, consistent with the law.         

Labor and Employment.                                                       

- Address the needs of workers by providing assistance in terms of    
  employment facilitation services such as job matching and referrals,
  guidance counseling and livelihood and entrepreneurship development;

 - Implement a job corps program by January 2002 to promote, among other
things, entrepreneurship among workers and generate local jobs and
facilitate overseas employment; and                               

- Conduct skills training, retraining and upgrading to meet the       
requirements of fast changing technologies and equip workers with 
in-demand skills.                                                 

    On January 25, 2002, a memorandum of agreement was released implementing a
job corps program promoting volunteerism, civic consciousness among the         
country's youth, community development and employment projects.                 

Infrastructure.                                                             

- Unlock bottlenecks for the implementation of identified solid waste 
disposal projects in Metro Manila and other urban centers;        

- Reduce traffic congestion in Metro Manila and other urban centers by
       close coordination among the Metro Manila Development Authority and other
  implementing agencies, utilities, malls and private contractors; and

     - Utilize more labor-based construction methods, especially for small rural
infrastructure projects to generate employment.                   

Housing.                                                                    

    - Streamline housing permits and processes by prescribing time periods for
      the issuance of housing related permits and clearances and instituting a
mechanism to monitor compliance with the new processes;           

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- Promote rent-to-own and other similar schemes; and                  

- Pass legislation to index sin taxes and earmark P5 billion of the   
  Government's share of those taxes to subsidize a targeted socialized
housing program.                                                  

Health and Other Social Services.                                           

   - Expand coverage of services under the National Health Insurance Program
  and accelerate the rollout of areas for the indigent health program;

   - Reduce by one half the prices as of July 2002 of medicine commonly used
       by the poor by increasing the number and type of distribution points; and

- Pass legislation on domestic violence and anti-trafficking of women.

 A monitoring body composed of presidential advisers and assistants will
provide quarterly status reports on the above action items to the               
Legislative-Executive Development Advisory Council. The first review commenced  
in March 2002 and a status report is expected to be released at the end of July 
2002.                                                                           

PHILIPPINE STOCK EXCHANGE COMPOSITE INDEX.  In January 2002, due to   
increased investor participation, the Philippine Stock Exchange Composite Index 
finished the month at 1,361.94, or 16.6% higher than December 2001. In February 
2002, growing optimism for an economic recovery, the announcement of better-    
than-expected gross domestic product ("GDP") and gross national product ("GNP") 
growth for 2001 and the improvement of the US economy during the fourth quarter 
of 2001, resulted in the composite index finishing the month at 1,406.22, or    
3.2% higher than January 2002. However, an increase in inflation to 3.6%        
year-on-year in March from 3.5% in February, which ended seven consecutive      
months of decreasing inflation, and increasing world crude oil prices brought on
by rising tensions in the Middle East, contributed to a decline in the composite
index to 1,346.09 at the end of April 2002. Weaker than expected corporate      
earnings and continuing volatility of the Peso contributed to a further decline 
in the composite index in June 2002, which ended the month at 1,156.4.          

 GNP/GDP.  In the first quarter of 2002, real GDP grew at a rate of 3.8%
compared to a rate of 2.9% during the same period in 2001. Real GNP grew at a   
rate of 4.9% in the first quarter of 2002 compared to 3.4% in the first quarter 
of 2001. These growth rates reflect the current administration's macroeconomic  
strategy implemented last year which includes a budget deficit reduction        
program, as well as lower interest and inflation rates.                         

     INFLATION.  From 3.8% in January 2002, the year-on-year inflation slowed to
3.0% in June 2002. Inflation continues to be benign despite the recent          
adjustments in domestic oil prices, in part because the adjustments have not    
been passed on to transport charges. Food prices also remained soft given ample 
supply, and the nominal exchange rate remained broadly stable given improving   
inflows. Reductions in Bangko Sentral's policy interest rates and efforts to    
maintain fiscal discipline, which have led to lower market lending rates and    
lower cost of capital for businesses, also had a favorable impact on inflation. 
Equally important, demand-pull inflationary pressures continue to be subdued due
in part to current levels of unemployment and spare capacity as well as         
restrained, though improving, domestic demand.                                  

   On January 1, 2002, Bangko Sentral officially adopted inflation targeting
as the framework for monetary policy in the Republic, replacing the previous    
framework of monetary targeting. Under this new framework, Bangko Sentral will  
be committed to achieving the Government's average annual inflation targets of  
4.5% to 5.5% for 2002 and 2003.                                                 

   PRICES, EMPLOYMENT AND WAGES.  The consumer price index ("CPI") increased
by an average of 6.1% to 161.6 in 2001 from 152.3 in 2000. The CPI increased by 
1.2% to 166.3 in June 2002 from December 2001.                                  

 In April 2002, the unemployment rate rose to 13.9% compared to 13.3% in
April 2001. The total number of unemployed persons increased to 4.9 million in  
April 2002, from 4.5 million in April 2001. The average national unemployment   
rate for 2001 was 11.1% while the average unemployment rate for Metro Manila for
2001 was 17.2%.                                                                 

   Eleven of the Republic's administrative regions have adopted increases in
the minimum wage ranging from P3 to P20 per day. Metro Manila adopted an        
increase to the minimum wage in the amount of P30 per                           

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day. The P30 per day increase in the minimum wage for Metro Manila was in the   
form of an emergency cost of living allowance and was divided into two P15 per  
day increases that became effective in November 2001 and February 2002,         
respectively.                                                                   

  INTEREST RATES.  Currently, the overnight borrowing rate is 7.0% and the
overnight lending rate is 9.25%. These are the lowest interest rate levels in   
ten years and have been cumulatively lowered by 800 basis points since December 
2000. For 2001, the 91-day Treasury bill rate averaged 9.86%. As of the last    
auction held on June 10, 2002, the 91-day Treasury bill rate was 4.78%. The     
91-day Treasury bill rate averaged 5.89% for the first six months of 2002       
compared to 10.12% for the first six months of 2001. Bank lending rates averaged
10.58% for the first four months of 2002.                                       

   PESO/US$ EXCHANGE RATE.  Following the stabilization of market conditions
towards the end of 2001, the Peso strengthened against the US dollar during the 
first five months of 2002. In January 2002, the Peso averaged P51.410/US$1 and  
continued to appreciate to reach an average of P50.99/US$1 in April 2002. The   
local currency broke the P50.0/US$1 barrier on 7 May 2002, ending the day at    
P49.903/US$1, due mainly to sustained remittances by OFWs combined with stronger
regional currencies, particularly the Japanese yen and Thai baht. As of June 24,
2002, the exchange rate was P50.210/US$1.                                       

    BANKING SYSTEM NON-PERFORMING LOANS.  Non-performing loans as a percentage
of total loans of commercial banks was 18.8% in October 2001, 18.8% in November 
2001 and 17.4% in December 2001. The non-performing loan ratio increased to     
18.3% in January 2002, 18.4% in February 2002 and decreased to 18.0% in March   
2002.                                                                           

    As of December 19, 2001, Equitable PCI had fully repaid its P30 billion in
loans from Bangko Sentral. As of January 9, 2002, Philippine National Bank      
("PNB") had repaid P1.1 billion of its P25 billion in loans from Bangko Sentral.
On May 3, 2002, a Memorandum of Agreement was signed between the Lucio Tan      
group, PNB, the Philippine Deposit Insurance Corporation ("PDIC") and the       
Government on a program of reorganization and rehabilitation of PNB. Among      
others, the agreement includes the conversion of the Government's loans to PNB  
preferred shares which would increase the stake of the Government in PNB to     
44.98% and decrease the stake of the Lucio Tan Group to 44.98%.                 

    ELECTRIC POWER INDUSTRY REFORM ACT.  On February 18, 2002, the Joint Power
Commission, comprised of 14 members of Congress tasked to perform certain       
oversight functions in connection with the Electric Power Industry Reform Act   
(the "EPIRA"), approved the implementing rules and regulations for the EPIRA.   
Pursuant to Section 34 of the EPIRA, the Energy Regulatory Commission ("ERC")   
was given the task of calculating a "Universal Charge" to cover payment of      
stranded debts in excess of the amounts assumed by the Government under EPIRA as
well as other qualified stranded costs which include costs associated with IPP  
contracts. See "-- Issues Relating to the Purchased Power Adjustment Charge and 
the Universal Charge". The implementing rules and regulations, as formally      
signed on February 27, 2002, include:                                           

- an exemption from the Universal Charge for households, hospitals and
       other medical facilities that have their own power generating facilities;

   - an exemption from the Universal Charge for four years for industries or
firms with self-generating plants; and                            

- the elimination of value-added tax on the sale of electricity.      

In addition, the National Power Corporation's ("NPC") power supply contracts    
with the distribution utilities and electric cooperatives will be respected.    

On May 21, 2002, a bill was introduced in the Senate which would amend
various provisions of the EPIRA. This bill, if passed, would, among other       
things:                                                                         

 - Give the power of eminent domain to the buyer/concessionaire of NPC's
transmission business;                                            

 - Clarify that the Universal Charge would not be imposed on electricity
    output produced by a self-generation facility owned and operated by an
end-user solely for its own consumption;                          

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   - Exempt certain NPC customers from imposition of the purchase power cost
     adjustment charge and create a ceiling of 42 centavos per kilowatt hour
for the amount that may be approved as the amount of the Universal
Charge;                                                           

- Clarify that NPC, the Power Sector Assets and Liabilities Management
      Corporation ("PSALM"), Transco and any other entity created to privatize
   NPC's assets will not be subject to national taxes, charges, fees and
other assessments arising from the privatization of such assets;  

     - Extend the life of PSALM from twenty five years to thirty five years; and

- Clarify that the Republic may guarantee the payment of obligations  
assumed by PSALM from NPC and that such guarantees shall not count
      against the maximum amount which the Republic is authorized to guarantee
under existing laws.                                              

PRIVATIZATION OF THE NATIONAL POWER CORPORATION.  A plan for the      
privatization of NPC was prepared by PSALM and its advisers and was submitted to
the Joint Power Commission on December 21, 2001. The plan envisions the         
privatization of NPC in two stages as called for under the EPIRA. Initially, the
transmission business of NPC will be privatized by Transco, an entity           
established solely for this purpose, followed at a later stage by the           
privatization of NPC's power generation business by PSALM. Pursuant to Section 8
of the EPIRA, which provides for the transfer of all of NPC's transmission and  
subtransmission facilities and all other assets related to its transmission     
operations, including NPC's nationwide franchise for the operation of the       
transmission system and the grid to Transco, a deed providing for such transfer 
has been executed by NPC's President and the President of Transco. The effective
date of the transfer will be the date of fulfillment or waiver of all the       
conditions precedent contained in the deed of transfer. Pursuant to Section 49  
of the EPIRA which provides for the transfer of all of NPC's existing generation
assets, liabilities, independent power producer contracts, real estate and other
disposable assets to PSALM, a deed providing for such transfer was executed by  
NPC's President and the President of PSALM. The effective date of the transfer  
will be the date of fulfillment or waiver of all the conditions precedent       
contained in the deed of transfer.                                              

 Under the terms of the EPIRA, the Joint Power Commission is required to
approve the privatization plan. In April 2002, the Joint Power Commission       
endorsed the plan to privatize the transmission business, however the approval  
of the plan for the privatization of the generation business has not yet been   
granted. The target dates for finalizing the privatization are fourth quarter of
2002 and first quarter of 2003 for the transmission business and the generation 
business, respectively.                                                         

    ISSUES RELATING TO THE PURCHASED POWER ADJUSTMENT CHARGE AND THE UNIVERSAL
CHARGE.  In an attempt to recover costs incurred in connection with contracts   
that NPC signed beginning in the early 1990's with various independent power    
producers ("IPPs"), NPC imposed a purchased power adjustment ("PPA") charge on  
all of its customers that has increased the price of electricity. NPC's         
contracts with the IPPs contain various "take or pay" provisions that require   
NPC to pay for a contracted amount of electricity even if it does not take      
delivery of it. Because demand for electricity has not reached the levels       
expected when the contracts were signed, and because of the significant movement
in the US dollar - Peso exchange rate since that time, NPC has incurred         
significant losses relating to these IPP contracts. It is envisioned that the   
Universal Charge will replace the PPA charge.                                   

     Recently, the PPA and the proposed Universal Charge have come under intense
public and political scrutiny. This scrutiny led President Arroyo to reduce the 
current average P1.25 PPA/kWh charge to P0.40/kWh on May 8, 2002 until the      
passage of a law or ERC decision that will lower the average PPA charge. The    
reduction of the PPA is expected to cause NPC to suffer significant additional  
losses. While the Arroyo administration recently announced that as a matter of  
policy the Universal Charge would need to be implemented, there is still        
opposition from various members of the legislative branch and from the public as
to any imposition of a PPA or a Universal Charge. There has also been           
legislation introduced by the opposition in the Senate that seeks to reduce, and
in some instances remove, the Universal Charge. It is unclear whether any of the
currently proposed legislation will be passed. See "-- Recent Political         
Developments -- Potential Change in the Senate Leadership." If the PPA or       
Universal Charge is significantly lower than the expected P0.40/kWh or          
eliminated, NPC will need to rely on funding from other sources to continue     
operations.                                                                     

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Pursuant to the EPIRA, the Government is currently attempting to reduce the     
burden on NPC imposed by the unfavorable IPP contracts by renegotiating such    
contracts and the Arroyo administration has announced that certain IPP contracts
which the Government has determined to be flawed, may result in legal action    
against the relevant IPPs.                                                      

 ANTI-MONEY LAUNDERING ACT OF 2001.  On December 14, 2001, the Financial
Action Task Force (the "FATF") wrote to the Republic noting positively the      
efforts taken by the Republic to strengthen its anti-money laundering system. As
a result, the FATF decided not to impose additional counter measures on the     
Republic at that time. In the letter the FATF also noted certain areas for      
improvement, including a reduction in the P4 million threshold amount for       
covered transactions, the expansion of the list of predicate offenses and       
expansion of the instances for access to deposit accounts. During the FATF      
Asia-Pacific meeting held in January 2002, the Republic presented its position  
paper to the FATF addressing the FATF's concerns with the Anti-Money Laundering 
Act. The Republic plans to address the FATF's concerns through the Act's        
implementing rules and regulations. While the FATF has welcomed the continued   
progress made by the Republic to combat money laundering, the FATF has stated   
that the progress had not yet been enough to remove the Republic from the list  
of "non-cooperative countries and territories".                                 

    Further to its efforts to combat money laundering, Bangko Sentral issued a
circular in January 2002 endorsing a Model Anti-Money Laundering Manual for     
banks and other covered institutions. The Manual adopted guidelines to support  
governments, law enforcement agencies and international bodies, such as the     
FATF, in their efforts to combat money laundering. On March 13, 2002 the        
implementing rules and regulations (IRRs) of the Anti-Money Laundering Act of   
2001 were signed by the Congressional Oversight Committee and took effect on    
April 2, 2002. The IRRs address the four concerns raised by the FATF relating to
the efficacy of the Act. The Republic presented a progress report to the FATF in
June 2002 to demonstrate how the Act is being administered in the hope of being 
removed from the list of "non-cooperative countries and territories". Despite   
recognizing that the Republic has made progress in combating money-laundering,  
the FATF, in its report identifying non-cooperative territories dated June 21,  
2002, decided that the Republic should remain on the list for further           
monitoring.                                                                     

THE CONSOLIDATED FINANCIAL POSITION.  For the first quarter of 2002,  
preliminary figures indicate that the consolidated financial position (not      
including Bangko Sentral) recorded a deficit of P57.7 billion, or 6.0% of GDP at
current market prices. The Government accounted for P61.2 billion of the        
deficit.                                                                        

  GOVERNMENT REVENUES AND EXPENDITURES.  Government revenues for the first
quarter of 2002 were P125.1 billion, of which P108.6 billion were tax revenues  
and P16.5 billion were non-tax revenues. Revenue collections were P10.6 billion 
lower than the budgeted amount, primarily due to a P12.9 billion revenue        
shortfall at the Bureau of Internal Revenue which was partially offset by the   
Bureau of the Treasury which collected P3.4 billion more than was expected. The 
Bureau of Internal Revenue shortfall was caused primarily by the reduction in   
interest income caused by lower interest rates and lower corporate income tax   
collections resulting from the introduction of certain aspects of the           
Compensation Tax Reform Program. The Bureau of Customs had a P2.5 billion       
shortfall because of the decline in imports.                                    

    Government expenditures for the first quarter of 2002 were P186.3 billion,
P2.3 billion less than the budgeted amount. Savings to the Government resulting 
from lower interest rates partly offset increased accounts payable and capital  
expenditures. Non-interest expenditures were P7.5 billion higher than the       
budgeted amount. The deficit for the first quarter of 2002 was P61.2 billion    
compared to the budgeted deficit of P52.9 billion. The monthly deficit for April
2002 was P21.8 billion, which increased the cumulative deficit to P82.9 billion 
as of April 30, 2002, as a result of increased spending and lower tax           
collection.                                                                     

 In 2001, the Bureau of Internal Revenue implemented improvements to tax
administration including the use of audits and documentary stamp tax metering   
machines and a revised withholding tax system. For 2002 the Bureau of Internal  
Revenue is studying new measures for implementation including:                  

     - Improving the excise tax administration system by establishing electronic
links with the country's 20 largest excise taxpayers; and         

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 - Redefining "gross income" for the taxation of certain enterprises and
individuals to limit the scope of allowable deductions.           

  - Expanding the scope of audits to include firms whose performance falls
below established industry benchmarks.                            

In light of the larger than expected budget deficit, the Government has         
announced that it will consider expenditure reductions for 2002. A first        
semester performance review will be undertaken jointly by the Department of     
Budget and Management and the relevant agencies in July and August 2002, the    
results of which will be used to determine which programs, activities or        
projects will be discontinued or downscaled in the second half of 2002.         

 RELATIONSHIP WITH THE IMF.  The IMF maintains a close dialogue with the
Government, within the framework of a post-program monitoring arrangement       
("PPM"). The PPM involves program assessments which are based on a regular      
review of economic developments and policies rather than the attainment of      
specific quantitative targets. This arrangement does not involve a financing    
component. On March 6, 2002, the Executive Board of the IMF concluded a PPM     
discussion on the Republic and issued a Public Information Notice detailing its 
findings on April 9, 2002. The IMF stated its support for the Government's      
adherence to its fiscal deficit targets, its monetary policy, its power industry
deregulation program and its proposed legislation relating to the banking       
industry, such as the Corporate Recovery Act and amendments to the New Central  
Bank Act. In a review of the Government's fiscal policy, the IMF stated that a  
rebuilding of Government revenues will be required to restore fiscal balance    
while maintaining adequate outlays for the Government's socio-economic reform   
program. The IMF supported a program of strengthened tax administration, but    
also suggested selective tax increases to aid in the rebuilding of Government   
revenues. Other routes suggested by the IMF to increase fiscal health included  
an increase in the value-added tax rate, a reworking of the bureaucracy, reforms
in procurement practices and addressing existing imbalances in pension funds run
by the Government. The IMF's latest PPM review is ongoing.                      

  DEBT.  The Republic borrowed a total of P150.7 billion during the period
from January to May 2002, up 73.9% from the same period last year. The increase 
was due primarily to the frontloading of external commercial borrowings by the  
Government to take advantage of the favorable external market conditions, which 
significantly reduced spreads on the Republic's sovereign bonds. On the domestic
front, the Government issued predominantly longer-term commercial paper. Its    
issuance of Treasury Bonds for the first five months of the year grew by 15.3%  
on a year-on-year basis to P89 billion, as compared with the 68.4% decline in   
the issuance of Treasury Bills to P6.6 billion during the same period. The      
policy to increase external funding brought the borrowing mix for the five-month
period to a ratio of 59.4% in favor of external borrowings, compared to 100%    
domestic borrowings during the same period in 2001. In June 2002, the Republic  
received the proceeds of the $300 million 8.375% global bonds due 2009.         

    CREDIT RATINGS.  On April 4, 2002 Standard & Poor's revised its outlook on
the Republic's long term foreign currency rating to stable from negative,       
crediting the Government's improved economic management under the Arroyo        
administration and the Republic's adequate external liquidity. This follows the 
upgrade by Moody's on February 4, 2002 when Moody's upgraded its outlook on the 
Republic's long term foreign currency rating to stable from negative, crediting 
the Republic's success in meeting its fiscal targets and a stronger economic    
outlook. Fitch Ratings affirmed its foreign and local currency ratings for the  
Republic in June 2002.                                                          

CORE POLICIES OF THE ARROYO ADMINISTRATION.                                     

    In addition to the items agreed upon in the National Socio-Economic Summit
of 2001, the Arroyo Administration has set out several other broad policy       
objectives which are discussed below.                                           

 MEDIUM-TERM PHILIPPINE DEVELOPMENT PLAN.  In its Medium-Term Philippine
Development Plan for 2001-2004, the Government has stated that its primary      
policy objectives are:                                                          

- Comprehensive human development and protecting the vulnerable;      

- Good governance and rule of law;                                    
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- Agricultural and fisheries modernization with sound equity; and     

  - Macroeconomic stability and equitable growth based on free enterprise.

     COMPREHENSIVE HUMAN DEVELOPMENT AND PROTECTING THE VULNERABLE.  The goal of
the Arroyo administration is to eradicate poverty by the end of the decade. The 
Arroyo administration's five core strategies to fight poverty are:              

- Asset reform programs or the redistribution of physical and resource
assets, particularly land and credit.                             

- Human development services, particularly basic education, health,   
shelter, water and electricity.                                   

- Social protection of the poorest and most vulnerable sectors and    
   communities through social welfare and assistance, local safety nets,
social security and insurance.                                    

- Participation of the poor in governance.                            

- Security and protection against violence, including in the home.    

The plan calls for expanding the access of low-income groups to health
care, education, vocational and technical training, housing and shelter         
programs, and population management and reproductive health initiatives. The    
plan also calls for an alleviation of regional disparities by directing more    
resources to poorer parts of the country. Special attention will be given to    
Mindanao to promote peace and economic development in the region.               

    GOOD GOVERNANCE AND RULE OF LAW.  To ensure good and effective governance,
the Government plans institutional reforms to heighten accountability, decrease 
graft and corruption in procurement, guarantee political stability through the  
electoral and judicial process, and promote peace and order through a           
modernization of the national police and armed forces. The plan also reaffirms  
the Government's intention to abide by international commitments, including     
those under the ASEAN Free Trade Area-Comprehensive Effective Preferential      
Tariff, the World Trade Organization, and the Asia-Pacific Economic Cooperation 
forum.                                                                          

These international commitments include:                              

- removing quantitative restrictions (import quotas or prohibition on 
    imports) and conversion of these restrictions into equivalent tariffs;

- maintaining current regulations on market access with respect to the
financial sector, telecommunications, transport and tourism;      

  - strengthening financial market supervision through training of banking
supervisors and securities regulators;                            

- assessing the banking supervisory regimes;                          

- reforming the pension systems;                                      

    - improving credit rating agencies' ability to channel timely and accurate
   information to capital markets and strengthening financial disclosure
standards;                                                        

- developing domestic bond markets;                                   

- strengthening corporate governance;                                 

     - designing a voluntary action plan for supporting freer and stable capital
flows; and                                                        

    - supporting privatization efforts through institutional strengthening and
investment programs.                                              

The Republic's compliance with its international commitments helps to 
strengthen the country's economic performance and support the economies of other
Asian nations. For instance, in 1996, the Republic enacted Republic Act 8178    
which authorized the replacement of all quantitative restrictions on            
agricultural                                                                    

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imports (except rice) with tariffs. To promote more trade between the           
Philippines and other Asian countries, the tariffs will be reduced by 24% over a
period of 10 years.                                                             

AGRICULTURAL AND FISHERIES MODERNIZATION WITH SOUND EQUITY.  To raise 
agricultural productivity and rural household incomes, the plan calls for the   
full implementation of the Agriculture and Fisheries Modernization Act of 1997  
before the end of this decade. This Act includes increased research and         
development in the agriculture and fishing industries, rural industrialization, 
and the accelerated development of infrastructure facilities like irrigation and
farm-to-market roads. As agriculture is modernized, safeguards will be put in   
place to ensure that intensified production activities do not undermine the     
integrity of the environment.                                                   

     MACROECONOMIC STABILITY AND EQUITABLE GROWTH BASED ON FREE ENTERPRISE.  The
plan calls for macroeconomic stability and sustained growth of income and       
employment across sectors and socio-economic groups. The plan aims to avoid     
unexpected surges in unemployment and declines in income through fiscal,        
monetary, financial, and exchange rate policies coordinated to achieve a low    
inflation rate and a sound balance of payments position. The plan includes an   
expansion of microfinance and small-to-medium enterprise credit, acceleration of
improvement in information and communications technology, development of tourism
infrastructure, and outreach and social safety net programs. The plan also aims 
to remove barriers to private investments, including power costs, through the   
recently enacted Electric Power Industry Reform Act, which became effective on  
June 26, 2001. See "-- Recent Economic Developments -- Electric Power Industry  
Reform Act".                                                                    

The following is a description of the principal elements of the plan  
relating to macroeconomic stability.                                            

   Fiscal Policy: Sustainability and Discipline.  The Government's immediate
objective is to reduce its budget deficit. The Government believes that reducing
the deficit will reduce interest rates, free resources for private sector       
investment and reduce the risk of insolvency and illiquidity. To support the    
Government's development objective, the Government's fiscal deficit reduction   
program will focus primarily on revenue generating measures, while maintaining  
prudent public spending. The deficit reduction program will be comprehensive and
extend also to Government corporations and local government units. The          
components of the fiscal deficit reduction program are:                         

- increasing revenue collection efficiency to finance the Government's
      development projects, especially those intended to benefit the poor; and

- reducing Government expenditures without sacrificing anti-poverty   
       programs and vital social services such as education and training, health
care and agricultural modernization.                              

  Revenue generating measures will include improved tax administration and
privatization of Government assets, including:                                  

   - Restructuring the road users' tax, redefining automobile categories and
increasing automobile fees and charges;                           

     - Installing electronic metering machines to collect the proper documentary
stamp taxes;                                                      

     - Establishing large taxpayer's offices, initially in three major cities in
the country;                                                      

    - Accelerating efforts to pursue settlements of Bureau of Internal Revenue
  receivables and conducting intensive audits of various taxpayers and
industries; and                                                   

- Disposing government assets, including shares in National Power     
Corporation, Philippine National Oil Company -- Energy Development
Corporation and Philippines National Construction Corporation.    

Cost-cutting measures include:                                        

- Re-imposing a 25% mandatory reserve on all government agencies;     

- Re-enactment of the 2000 budget for calendar year 2001;             

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- Austerity measures such as staff reduction through attrition and    
    postponing construction of new buildings and the purchase of furniture
and motor vehicles; and                                           

- Deferment of low priority projects and the scaling down of special  
purpose funds.                                                    

  These measures combined with expected increases in tax and privatization
revenues beginning in 2001, are expected to offset any decline in Government    
revenues which may result from declines in the Republic's economic performance. 
Even as Government spending is reduced, poverty alleviation programs and other  
core programs will be protected. Increasingly, a larger proportion of the budget
and more discretionary expenditures will be channeled to social services.       

To further its fiscal policy, the Arroyo administration will propose  
legislation which will:                                                         

  - Restructure the excise tax system on motor vehicles to remove the bias
       based on engine displacement of all types of vehicles, and modify the tax
      system to include new automotive technologies, such as electric cars and
cars propelled by other types of fuel;                            

- Rationalize grants of fiscal incentives;                            

- Index excise tax rates to inflation;                                

- Include reforms for effective governance, including the             
institutionalization of a professional and dynamic bureaucracy;   

 - Grant the President authority to reorganize the executive branch; and

     - Rationalize the pay structure between the public and private sectors with
mitigation measures to enable the smooth implementation of the    
reengineering of the organizations in such sectors.               

   Monetary Policy: Price Stability.  Monetary policy is geared to achieving
price stability, which is expected to result in a low and stable inflation rate 
over the medium term and is expected to lead to a reduction in lending rates,   
which will encourage firms to invest and thus generate jobs. Low interest rates 
also benefit farmers and small enterprises that borrow to meet their working    
capital requirements. The Government's fiscal deficit reduction program is      
intended to ensure that the efforts of the monetary authorities to lower        
inflation and lending rates are not negated by a persistent budget deficit. The 
Government will seek to achieve greater coordination between its fiscal and     
monetary policies.                                                              

     On January 1, 2002, Bangko Sentral formally shifted from monetary targeting
to inflation targeting as the framework for monetary policy. The policy shift is
expected to strengthen Bangko Sentral's commitment to achieve its primary       
mandate of price stability and enhance the level of transparency and credibility
in the conduct of monetary policy.                                              

    As a strategy for conducting monetary policy, Bangko Sentral believes that
inflation targeting offers the following advantages:                            

- provides a clearer definition of the objective of monetary policy;  

- enhances transparency in the conduct of monetary policy;            

- provides simplicity and, therefore, is easier for the public to     
understand;                                                       

- guides or anchors inflationary expectations;                        

  - improves the accountability and credibility of monetary authorities to
the inflation objective; and                                      

- leads to greater probability of success in achieving the inflation  
objective.                                                        

  External Policy: Stable Foreign Exchange Rate.  The Government's foreign
exchange rate policy is to maintain a comfortable level of reserves, keep the   
capital markets open and maintain a market-determined exchange rate. These      
policies are intended to increase the economy's resilience against volatile     
capital flows and facilitate the Government's realization of its macroeconomic  
targets.                                                                        

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Financial Sector Policy: Banking and Corporate Governance Reforms and 
Capital Market Development. The Government intends to pursue policies that      
strengthen the regulatory framework and minimize systemic risks. Because a sound
banking system cannot exist when the corporate sector is weak, policies that    
will enhance corporate governance are needed to complement banking sector       
reforms.                                                                        

    To prepare the financial system for the challenges posed by globalization,
Bangko Sentral implemented major reforms in financial regulation and legislation
geared toward improving the legislative and regulatory framework, using a       
risk-based approach to banking supervision and encouraging mergers and          
consolidations.                                                                 

Bangko Sentral has identified several areas in its regulatory and     
supervisory framework that need to be strengthened further to ensure the banking
system's ability to absorb shocks. Aside from the ongoing efforts to amend the  
New Central Bank Act, as described below, Bangko Sentral proposes implementing  
the newly formulated rules and regulations of the General Banking Law. In the   
area of banking supervision, Bangko Sentral continues its effort to shift to    
consolidated bank supervision and risk-based examinations.                      

Bangko Sentral has recognized the need to upgrade the banking system's
settlements and payments system into real-time gross settlements. The envisaged 
system would cover equities, fixed income, money and foreign exchange markets,  
and effect final settlement on a real-time basis.                               

The Asian financial crisis has also shown the importance of developing
primary and secondary capital markets that can provide financial instruments    
other than bank credit to the corporate sector. The development of the capital  
markets is also necessary to raise domestic savings, especially long-term       
savings, to finance domestic investments. The poverty reduction agenda requires 
supporting the development of microfinance and agriculture related credit       
institutions that are in the best position to provide credit to small and       
agricultural enterprises.                                                       

  The Government is pursuing the enactment of the following legislation to
further its policies, strengthen financial and corporate governance and develop 
the capital markets:                                                            

AMENDMENTS TO THE NEW CENTRAL BANK ACT                                

    The key changes being sought in the New Central Bank Act of 1993 are aimed
at three main objectives:                                                       

- Promoting greater stability of the banking system:                  

     - Grants Bangko Sentral authority to provide loans in situations that, in
     the judgement of the Monetary Board, could lead to illiquidity of the
banking system;                                                 

- Treats an overdraft as an emergency loan;                         

- Removes the five-day overdraft privilege granted to banks; and    

- Allows the placement of banks into receivership and liquidation:  

     - Upon submission of a report by Bangko Sentral to the Monetary Board
          that the capital to risk asset ratio falls below 2% for 90 consecutive
days; or                                                    

      - Upon a public announcement by banks of a bank holiday and suspension
 of payments of its deposit liabilities for more than 30 days.

- Strengthening supervisory capability of Bangko Sentral:             

- Authorizes the Monetary Board to allow Bangko Sentral to conduct  
    examinations or inquiries into all deposit accounts of more than P50
   million or its foreign currency equivalent, if there are reasonable
   grounds to believe that there is irregular activity in the account;

    - Allows Bangko Sentral to conduct examinations of the books of banks at
least once every calendar year and permits the governor or the  
supervisory department head or his deputy to authorize these    
examinations;                                                   

- Imposes stiffer penalties for violations of banking laws;         

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   - Imposes stiffer sanctions on banks and expands the sanctions to their
subsidiaries and affiliates;                                    

- Extends the requirements of a balanced currency position to banks'
subsidiaries and affiliates; and                                

- Authorizes Bangko Sentral to impose service fees on financial     
institutions.                                                   

- Enhancing Bangko Sentral's effectiveness:                           

   - Removes the five-year time limit on Bangko Sentral's tax exemption as
provided in Sections 125 and 126 of R.A. No. 7653;              

- Grants the Monetary Board the authority to provide a compensation 
structure based on job evaluation and wage surveys; and         

     - Allows banks to engage in financial derivatives subject to regulations,
     as may be issued by the Monetary Board, to restrain banks from taking
    speculative positions with respect to future fluctuations in foreign
exchange rates.                                                 

The bill proposing the amendments to the New Central Bank Act is pending in     
Congress.                                                                       

AMENDMENTS TO THE PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT        

     - Strengthens the supervisory authority of the Philippine Deposit Insurance
     Corporation over insolvent banks, provides assistance to facilitate the
      sale of assets and assumption of liabilities of banks under receivership
and increases the amount of the permanent insurance fund.         

The Philippine Deposit Insurance Corporation is consulting with Bangko Sentral  
on the specific terms of the proposed amendments.                               

CORPORATE RECOVERY ACT                                                

     - Seeks a pre-negotiated, fast-tracked, and court-supervised rehabilitation
  plan and provides a procedure for the dissolution and liquidation of
companies;                                                        

- Repeals certain sections of the old insolvency law that pertain to  
      corporate bankruptcies while retaining individual bankruptcy procedures;
and                                                               

 - Includes some specific measures such as allowing either a debtor or a
creditor to initiate formal insolvency proceedings.               

Two competing bills relating to the Corporate Recovery Act are being considered 
by Congress. One bill is being discussed in the House and the other bill is     
being discussed in the Senate.                                                  

RATIONALIZATION OF TAXATION ON THE FINANCIAL SECTOR                   

     - Restructures gross receipts and documentary stamp taxes to minimize their
 cascading effect, particularly on frequently traded instruments and
assets;                                                           

- Eliminates distortions arising from the non-uniform tax treatment of
financial institutions and assets; and                            

  - Rationalizes tax treatment of pension funds, insurance and investments
houses to assist in the development of the capital market.        

The Department of Finance has drafted a proposed bill and is preparing to submit
it to Congress.                                                                 

REVISED INVESTMENT COMPANY ACT                                        

- Establishes a comprehensive regulation scheme to permit investment  
    companies to serve their role in the capital formation process, and at
      the same time to prevent abuses and protect investors in such companies;
and                                                               

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    - Provides a favorable framework where investment companies can operate to
    facilitate the flow of investments from sources within the country and
abroad, and to broaden securities ownership by Filipinos.         

Four competing bills relating to the Investment Company Act have been submitted 
to Congress.                                                                    

PRE-NEED PLAN CODE                                                    

 - Provides the regulatory framework for the efficient regulation of the
      pre-need industry (investing today for things like education costs which
   will be needed in the future) including the method of determining and
computing reserves and the annual valuation of pre-need products. 

Five competing bills relating to the Pre-need Plan Code have been submitted to  
Congress. Two bills are being considered in the House and three bills are being 
considered by the Senate.                                                       

SECURITIZATION ACT                                                    

    - Offers investment participation in asset-backed securities products to a
wider range of investors; and                                     

 - Creates special purpose vehicles as the transferees of assets and the
       issuer of securities, removes gross receipts and documentary stamp taxes,
    creates a regulatory system, and removes the one-year right to redeem,
although foreclosure will be considered a final settlement of an  
obligation.                                                       

A draft bill relating to the Securitization Act is being reviewed by the        
Department of Finance and the SEC.                                              

ASSET MANAGEMENT COMPANY                                              

- Authorizes the creation of special purpose asset vehicles to acquire
   non-performing loans, real estate and other assets for the benefit of
financial institutions.                                           

A bill relating to asset management companies has been approved by the Senate.  

SECURITIES REGULATION CODE                                            

- Amends the mandatory tender provision from 15% to 35%;              

  - Amends the broker-director prohibition by allowing the broker-dealers'
self-regulatory organization to issue rules;                      

    - Transfers the authority to impose net capital and other capital adequacy
ratios on broker/dealers from the SEC to the self-regulatory      
organization;                                                     

- Repeals the broker-dealer segregation; and                          

    - Repeals the rule which allows the automatic listing of securities in all
exchanges.                                                        

Three bills relating to the Securities Regulation Code have been submitted to   
Congress. Two bills are being considered by the Senate and one bill is being    
considered by the House.                                                        

PERSONAL EQUITY AND RETIREMENT ACCOUNT BILLS                          

     - Provides for the taxability or non-taxability of an individual's personal
equity and retirement account; and                                

   - Provides rules relating to contributions, earnings from investments and
distribution of benefits upon retirement.                         

Eight bills relating to personal equity and retirement accounts have been       
submitted to Congress. Four bills are being considered by the House and four    
bills are being considered by the Senate.                                       

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INCOME TAX SYSTEM REFORM                                              

- Proposes uniform taxation on income of corporations, self-employed  
     individuals and professionals by changing the tax base and lowering the
income tax rate; and                                              

     - Amends the tax on salaried individuals by increasing the amount of exempt
income, lowering the marginal income tax rate and simplifying tax 
compliance and administration rules.                              

Three bills relating to income tax reform have been submitted to Congress. Two  
bills are being considered by the House and one bill is being considered by the 
Senate.                                                                         

EXCISE TAX INDEXATION AND RECLASSIFICATION                            

   - Proposes to adjust the excise tax on cigarettes and alcohol products to
more accurately reflect prevailing market values; and             

    - Proposes to reclassify the excise tax based on net retail price and on a
three-year interval.                                              

The Department of Finance has prepared a draft bill relating to excise tax      
indexation and reclassification, which is currently being reviewed.             

FISCAL INCENTIVE SYSTEM REFORM                                        

    - Rationalizes fiscal incentives granted under all existing laws including
those incentives granted under laws creating economic zones; and  

- Provides for an indicative tax expenditure budget.                  

Five bills relating to fiscal incentive system reform have been submitted to    
Congress. Two bills are being considered by the House and three bills are being 
considered by the Senate.                                                       

CUSTOMS MODERNIZATION BILL                                            

- Amends certain sections of the Tariff and Customs Code to enable the
Bureau of Customs to accept documents and electronically transmit 
acknowledgement receipts, approvals and responses.                

A draft bill relating to customs modernization has been submitted to Congress.  

HISTORY, LAND AND PEOPLE                                                        

    HISTORY.  Spain governed the Philippines as a colony from 1521 until 1898.
On June 12, 1898, during the Spanish-American War, the Filipinos declared their 
independence. The United States claimed sovereignty over the Philippines under  
the 1898 Treaty of Paris, which ended the Spanish-American War, and governed the
Philippines as a colony until 1935 when the Philippines became a self-governing 
commonwealth. On July 4, 1946, the Philippines became an independent republic.  

    GEOGRAPHY AND GENERAL INFORMATION.  The Philippine archipelago, located in
Southeast Asia, comprises over 7,000 islands and a total land area of           
approximately 300,000 square kilometers. The Republic groups the islands into   
three geographic regions: Luzon in the north, covering an area of 141,395 square
kilometers, Visayas in the center, covering an area of 55,606 square kilometers,
and Mindanao in the south, covering an area of 101,999 square kilometers. The   
Republic is also divided into 15 administrative regions.                        

   Forests cover approximately 50% of the Philippines and 47% of the country
is under agricultural cultivation. In 2000, agriculture, forestry and fishery   
employed 37.1% of the labor force and provided 4.4% of the Republic's export    
earnings (including exports of agriculture-based products). The Republic is     
generally self-sufficient in staple cereals and is a major exporter of certain  
agricultural products. Manufactured goods comprise the most important category  
of the Republic's exports, accounting for 89.2% of the Republic's exports in    
2000. Electronics, machinery and transport equipment and garments have          
historically been the Republic's leading manufactured exports.                  

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As of May 1, 2000, the Republic's population was approximately 76.5   
million. The Republic's population grew at an average annual rate of 2.4% from  
1996 to 2000. The Republic's capital, Manila, located in Luzon, has an estimated
population of approximately 1.7 million. The cities of Manila, Pasay, Kalookan, 
Quezon City, Mandaluyong, Las Pinas, Muntinlupa, Marikina, Pasig and Makati,    
together with seven surrounding municipalities, make up the National Capital    
Region or Metro Manila. Metro Manila, the most populous of the administrative   
regions, has an estimated population of approximately 9.9 million people.       

    The majority of Filipinos have Malay ethnic origins. Filipino culture also
includes strong Spanish, Chinese and American influences. Filipino is the       
national language, but English is the primary language used in business,        
government and education. The population speaks over 80 other dialects and      
languages, including Chinese and Spanish. Based on a 1999 survey, the Republic's
literacy rate is 95.1%, ranking among the highest in Asia.                      

   Christianity, primarily Roman Catholicism, is the predominant religion in
the Philippines. A significant Muslim minority lives in Mindanao.               

GOVERNMENT AND POLITICS                                                         

GOVERNMENTAL STRUCTURE.  Since 1935, the Republic has had three       
Constitutions. The country adopted the current Constitution by plebiscite in    
February 1987 after the ousting a year earlier of Ferdinand E. Marcos, who had  
ruled for 20 years, in favor of Corazon C. Aquino after a people's uprising. The
new Constitution restored a presidential form of government comprised of three  
branches: executive, legislative and judicial.                                  

The principal features of each branch are as follows:                 

   - Executive -- A President, directly elected for a single, six-year term,
   exercises executive power. If the President dies, becomes permanently
       disabled or is removed from office or resigns, the Vice President acts as
   President for the remainder of the term. If the Vice President cannot
       serve, the President of the Senate or, if he cannot serve, the Speaker of
    the House of Representatives, acts as President until the election and
      qualification of a new President or Vice President. The person acting as
     President for any remaining term may, if elected, serve a six-year term
as President.                                                     

   In May 1998, the country elected Joseph Estrada as President and Gloria
 Macapagal-Arroyo as Vice President. In January 2001, after a people's
uprising, there was a transition of power to President Arroyo. See  
"-- Recent Political Developments".                                 

 - Legislative -- The Congress, comprised of the Senate and the House of
 Representatives, exercises the country's legislative authority. The
Constitution mandates a Senate of 24 members and a House of       
  Representatives of not more than 250 members, all elected by popular
      vote. Senators serve for a term of six years and members of the House of
       Representatives for a term of three years. The country held elections for
      13 Senators and all members of the House of Representatives in May 2001.
The other 11 Senators were elected in May 1998.                   

 - Judicial -- The Supreme Court and any lower courts established by law
      exercise the country's judicial authority. The country's court system is
       a multi-tiered system of courts of general jurisdiction that includes the
     Supreme Court and the Court of Appeals. Below these, the Regional Trial
   Courts, Metropolitan Trial Courts, the Municipal Trial Courts and the
Municipal Circuit Trial Courts constitute courts of original      
jurisdiction.                                                     

Special or administrative tribunals and quasi-courts also exercise  
judicial functions. Included in this category are constitutional    
commissions, the Sandiganbayan, which handles Government graft and  
  corruption cases, the Court of Tax Appeals, the Shari'ah courts, which
    handle matters governed by Islamic law, and administrative agencies that
handle specialized areas such as labor relations and securities     
regulation.                                                         

   A Chief Justice and 14 Associate Justices constitute the Supreme Court,
      which supervises all lower courts and related personnel. The Supreme Court
and the Court of Appeals may review decisions and                   
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rulings of lower courts and quasi-judicial tribunals. The President 
   appoints each Supreme Court or Court of Appeals justice and lower court
  judge from at least three candidates nominated by the Judicial and Bar
Council.                                                            

     POLITICAL PARTIES.  The Republic's multi-party system currently has several
registered political parties. For the May 2001 elections, President Arroyo was  
supported by the People Power Coalition which was comprised of the              
Lakas-NUCD-UMDP, the Liberal Party, Reporma, Promdi, Aksyon Demokratiko and     
other pro-Arroyo administration parties. In turn, parties identified with former
President Estrada formed the Puwersa ng Masa ("Force of the Masses") coalition  
which was comprised of the Nationalist People's Coalition, the Laban ng         
Demokratikong Pilipino, Partido ng Masang Pilipino, the People's Reform Party   
and the Kilusang Bagong Lipunan (the party organized by the late President      
Ferdinard Marcos and his political allies).                                     

    ADMINISTRATIVE ORGANIZATION.  As of April 30, 2001, there were 1,626 local
Government units, 16 regions, 79 provinces, 114 cities, 1,496 municipalities    
(subdivisions of provinces) and 41,943 barangays (villages, which are the basic 
units of the political system) -- comprising the country's basic political and  
administrative structures. Highly urbanized cities function independently of any
province, while other cities are subject to the administrative supervision of   
their home provinces.                                                           

The Government is mainly organized around the 20 departments and      
department-equivalent agencies of the executive branch, which implement the     
various programs and projects of the Government. The departments and            
department-equivalent agencies are in turn organized into sectors.              

                                                        [Enlarge/Download Table]

SECTOR                                                  MAJOR DEPARTMENTS                      
------                             ------------------------------------------------------------
                                                                                               
Social services................... Health; Education, Culture and Sports; Labor and Employment;
                                   Social Welfare and Development                              
Economic services................. Agriculture; Agrarian Reform; Energy; Environment and       
                                   Natural Resources; Tourism, Trade and Industry; Public Works
                                   and Highways; Transportation and Communications; Science and
                                   Technology                                                  
Defense........................... National Defense                                            
General public services........... Foreign Affairs; Finance; Budget and Management; Interior   
                                   and Local Government; Justice; National Economic and        
                                   Development Authority; Office of the Press Secretary        
Constitutional offices............ Elections; Audit; Civil Service; Office of the Ombudsman;   
                                   Human Rights                                                
Autonomous Region of                                                                           
  Muslim Mindanao................. Not applicable                                              
Cordillera Administrative                                                                      
  Region.......................... Not applicable                                              

 Agencies attached to the various departments perform regulatory, policy
formulation and coordination functions.                                         

   The projects and programs in the Autonomous Region of Muslim Mindanao and
Cordillera Administrative Region are implemented by various departments from    
different sectors. The total budget allocated for projects in the Autonomous    
Region of Muslim Mindanao is P5.4 billion for 2002. For 2002, P50.0 million or  
0.9% of the budget is allocated to infrastructure projects, with locally-funded 
road and flood control projects implemented by the Department of Public Works   
and Highways. The remainder of the budget is allocated for governance and       
institutions development projects. The total budget allocated for projects in   
the Cordillera Administrative Region is P4.0 billion for 2002. For 2002, P517.7 
million or 12.9% of the budget is allocated to infrastructure projects, with    
locally-funded road and flood control projects implemented by the Department of 
Public Works and Highways. Approximately 20% of the budget is allocated for     
agriculture, natural resources and agrarian reform projects. The remainder of   
the budget will pay for social reform and development projects.                 

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    The Government also owns or controls a number of corporations that provide
essential goods and services and work with the private sector to encourage      
economic growth and development. Traditionally restricted to basic public       
services and national monopolies, the number of Government corporations grew    
from 13 in the 1930s to 301 by 1984. In 1988, the Government launched a reform  
program to reduce the number of Government corporations, establishing the legal 
and policy framework for the country's privatization program. See "-- Government
and Politics -- Privatization".                                                 

   Currently, there are approximately 100 Government corporations, including
subsidiaries. Each of these corporations is attached to a department for policy 
and program coordination.                                                       

The Government closely monitors 14 major non-financial Government     
corporations engaged in various major business activities by recording their    
individual contribution to the public sector deficit or surplus position and    
other financial indicators. These 14 corporations and their areas of activity   
are as follows.                                                                 

                                                                [Download Table]

GOVERNMENT CORPORATION                                         BUSINESS ACTIVITY   
----------------------                                       ----------------------
                                                                                   
National Power Corporation.................................. power                 
Philippine National Oil Company............................. holding company, power
National Electrification Administration..................... electric utilities    
Metropolitan Waterworks and Sewerage System................. water utilities       
Local Water Utilities Administration........................ water utilities       
Philippine Export Zone Authority............................ area development      
National Food Authority..................................... agriculture           
National Irrigation Administration.......................... agriculture           
Philippine National Railways................................ transportation        
Light Rail Transit Authority................................ transportation        
Philippine Ports Authority.................................. transportation        
National Development Company................................ holding company       
National Housing Authority.................................. housing               
Home Insurance Guaranty Corporation......................... housing insurance     

As of March 30, 2001, these 14 corporations had aggregate domestic and external 
debt of approximately P1,097 billion, which comprised virtually all the debt    
incurred by Government corporations.                                            

To facilitate the implementation of better business practices, the    
Government intends to expand its monitoring of Government corporations,         
including to the National Home Financing Corporation, which provides mortgage   
financing for low-income housing.                                               

The Government currently records the contribution to the public sector
deficit or surplus, and other financial indicators, of three Governmental       
financial institutions that provide credit to enterprises in support of public  
policies including two specialized Government banks -- the Development Bank of  
the Philippines and the Land Bank of the Philippines. For a description of the  
Development Bank and the Land Bank, see "-- The Philippine Financial            
System -- Structure of the Financial System". The third institution, the Trade  
and Investment Development Corporation of the Philippines (formerly Philippine  
Export and Foreign Loan Guarantee Corporation), guarantees foreign currency     
loans to exporters and contractors. As of March 30, 2001, the monitored         
Governmental financial institutions had aggregate domestic and external debt of 
approximately P353.4 billion.                                                   

PRIVATIZATION.  The Government has privatized a number of Government  
corporations. The country's privatization program has broadened the ownership   
base of Government assets and developed the domestic capital markets.           

  Prior to 2001, the Committee on Privatization, an executive office under
the office of the President chaired by the Secretary of Finance, oversaw the    
Government's privatization program. The Committee was responsible for           
formulating privatization policies and guidelines, identifying disposable       
assets, monitoring progress and approving the price for and the buyers of the   
assets. The marketing of assets was handled by                                  

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disposition entities, including the Asset Privatization Trust, the Presidential 
Commission on Good Government and the National Development Company. The division
of responsibilities between the Committee on Privatization and the disposition  
entities served as a check and balance mechanism and enhanced transparency.     

 The terms of the Committee on Privatization and the Asset Privatization
Trust expired on December 31, 2000. Since January 1, 2001, the Privatization    
Council has been responsible for the privatization of the remaining Government  
corporations scheduled to be privatized. The Privatization Council, a           
policy-making body, is chaired by the Secretary of Finance and includes         
representatives from the Department of Tourism, The Department of Trade and     
Industry, the Department of Budget and Management, the Department of Justice,   
the National Economic and Development Authority, the National Treasury and the  
Presidential Commission on Good Government. Along with the Privatization        
Council, there are two new disposition entities, the Land Bank of the           
Philippines, which is responsible for the disposition of the financial assets   
previously held by the Asset Privatization Trust, and the Privatization and     
Management Office, which is responsible for the disposition of physical assets. 
To maintain a check and balance system, all disposition entities must submit    
their privatization plans to the Privatization Council for its review and       
approval and file a report containing the results of each privatization         
transaction.                                                                    

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The following table summarizes certain information regarding the      
Government's principal privatizations to date.                                  

                                                        [Enlarge/Download Table]

                                                                          GOVERNMENT                        
                                                                        OWNERSHIP AFTER  GROSS PRIVATIZATION
                                               YEAR OF SALE                  SALE            PROCEEDS(1)    
                                    ----------------------------------  ---------------  -------------------
                                                                                            (IN BILLIONS)   
                                                                                                            
International Corporate Bank......  1987; 1993                                 0.0%             P 2.2       
Union Bank of the Philippines.....  1988; 1991; 1992                          13.0                1.3       
Philippine National Bank..........  1989; 1992; 1995; 1996; 2000              16.0(2)             6.5       
Philippine Plaza Holdings.........  1991                                       0.0                1.5       
Manila Electric Company...........  1991; 1994; 1997                          30.0(3)            16.3       
Philippine Airlines...............  1992                                      0.97(2)            10.7       
Petron Corporation................  1993; 1994                                40.0               25.0       
National Steel Corporation........  1994; 1997                                12.5               17.1       
Paper Industries Corporation of                                                                             
  the Philippines.................  1994                                       8.0                2.4       
Philippine Shipyard and                                                                                     
  Engineering                                                                                               
  Corporation.....................  1994                                       9.0                2.1       
Fort Bonifacio Development                                                                                  
  Corporation.....................  1995                                      45.0               39.2       
Metropolitan Waterworks and                                                                                 
  Sewerage System.................  1997                                        --(4)              --(4)    
Philippine Associated Smelting and                                                                          
  Refining Corp. .................  1999                                      4.26                3.3       
Philippine Phosphate Fertilizer                                                                             
  Corporation.....................  2000                                       0.0                3.1       

---------------                                                                 

Source: Privatization Council.                                                  

(1) Net remittances to the Government upon the privatization of its assets are, 
    in certain circumstances, less than the gross proceeds from the sale of such
assets, based on agreements between the Government and the privatized   
entities.                                                               

(2) Government ownership was diluted in 2001 by a pre-emptive rights offering.  

(3) Government ownership includes ownership by agencies and Government financial
institutions.                                                           

(4) The privatization of Metropolitan Waterworks and Sewerage System involved   
awarding two 25-year concessions to rehabilitate, expand and operate the
system. Over the term of the concessions, the concessionaires obligated 
   themselves to make improvements by, among other things, providing for water
services, sewerage services, and interconnection facilities between     
themselves and paying concession fees to the Metropolitan Waterworks and
  Sewerage System. The estimated cost of these improvements is $7.0 billion,
which is expected to be incurred over the 25-year concession period.    

   As of May 31, 2002, 26 Government corporations, 144 assets handled by the
Privatization and Management Office and certain personal property assets held by
the Presidential Commission on Good Government were scheduled for privatization.
With the initial privatization phase approximately 80% complete, during the     
remainder of 2002 the Government plans to focus on selling its remaining shares 
in Manila Electric Company, privatizing the Philippine National Construction    
Corporation, disposing of certain assets held by the Presidential Commission on 
Good Government and selling the International School of Manila property. The    
current economic slowdown, however, may, in the near term, affect investors'    
propensity to invest, or the prices that they are willing to pay for the        
Government's assets, which would thereby reduce the proceeds received from any  
privatized assets. In the medium term, the Government plans to privatize the    
National Power Corporation, PNOC Energy Development Corporation, the            
International Broadcasting Corporation, Food Terminal Inc. and the Philippine   
Postal Corp. In the long term, the Government intends to concentrate on         
establishing public-private partnerships to provide social services, especially 
in the health, education and pension sectors and also on privatizing the        
operations and management functions of selected Government corporations. The    
Government has also encouraged "build-operate-transfer" arrangements and other  
initiatives to enable the private sector to meet more of the country's          
infrastructure needs, especially in the power, water, transportation and        
telecommunications sectors. By pursuing its privatization goals, the Government 
hopes the private sector will provide for infrastructure and social needs,      
simultaneously stimulating the economy and relaxing the demand on public        
resources.                                                                      
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  From January through May 2002, remittances to the National Treasury from
privatizations amounted to P140 million, increasing total remittances to        
approximately P128 billion as of May 31, 2002. The Government's privatization   
proceeds target for 2002 is P5 billion.                                         

INTERNATIONAL RELATIONS.  The Philippines places a high priority on   
expanding global trade through a multilateral framework of principles and rules 
that respect national policy objectives and the level of economic development of
individual countries. The country's participation in various international      
organizations, like the World Trade Organization of the United Nations, the IMF,
the International Bank for Reconstruction and Development, also known as the    
World Bank and the Asian Development Bank, allows it to encourage liberalized   
global trade and investment and to discuss financial and development issues that
will affect the Republic's economic development.                                

The following table shows the Republic's capital participation in, and
loans obtained from, major international financial organizations.               

MEMBERSHIP IN INTERNATIONAL FINANCIAL ORGANIZATIONS 

                                                        [Enlarge/Download Table]

                                                                 AS OF DECEMBER 31, 2001             
                                                    -------------------------------------------------
                                        DATE OF                  CAPITAL   CAPITAL PAID      LOANS   
NAME OF ORGANIZATION                   ADMISSION    SUBSCRIBED    SHARE         IN        OUTSTANDING
--------------------                 -------------  ----------   -------   ------------   -----------
                                                          (IN MILLIONS, EXCEPT FOR PERCENTAGES)      
                                                                                                     
International Monetary Fund(1)...... November 1945  SDR 879.9       --       SDR 879.9    SDR 1,559.2
International Bank for                                                                               
  Reconstruction and                                                                                 
  Development(2).................... December 1945   $6,844.0     0.4%           $48.9       $3,802.1
Asian Development Bank(3)........... December 1966   $1,091.9     2.4%           $78.0       $7,994.3

---------------                                                                 

(1) Source: IMF.                                                                

(2) Source: World Bank Annual Report.                                           

(3) Source: Asian Development Bank Annual Report.                               

 The Philippines also promotes its economic interests through close ties
with neighboring countries and membership in the following regional             
organizations:                                                                  

- the Association of Southeast Asian Nations ("ASEAN");               

- South East Asia, New Zealand and Australia Central Banks;           

- South East Asian Central Banks;                                     

- ASEAN Free Trade Area;                                              

- Asia-Pacific Economic Cooperation; and                              

- Executives Meeting of East Asia and Pacific Central Banks.          

The Philippines seeks advances in bilateral relations and peaceful    
solutions to regional issues through frequent consultations, visits and         
cooperative activities. For example, in 1995, the country adopted a series of   
bilateral codes of conduct regarding the Spratly Islands, an archipelago in the 
South China Sea claimed by several Asian countries, to reduce the chances of    
accidental conflict and is working toward the adoption of a regional code of    
conduct with ASEAN and China. Nevertheless, several incidents related to the    
disputed islands have occurred since 1995.                                      

PHILIPPINE ECONOMY                                                              

Overview                                                                    

Like many developing countries after World War II, the Philippines    
protected local industry from foreign competition through measures such as      
import tariffs and quotas, hoping to replace imported finished goods with       
domestically produced goods over time. Successive Governments also intervened in
the country's economic affairs by imposing quantitative trade barriers, price   
controls and subsidies. Initially, the economy grew rapidly, with real GNP      
growing at an average rate of 5.8% per annum from 1970 to 1980 largely due to   
increased exports and Government investments. Infrastructure spending increased,
and state ownership of                                                          
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commercial enterprises became prevalent. By the early 1980s, however, the       
country faced ballooning budget deficits, growing levels of foreign and domestic
borrowing, rising inflation, climbing interest rates, a depreciating Peso,      
declining investment capital, and slowing economic growth or, at times, a       
contraction in GDP. The country's unstable political situation during that      
period, highlighted by the assassination of opposition leader Benigno Aquino in 
1983, exacerbated its economic problems.                                        

     The general optimism brought about by the peaceful removal of the unpopular
Marcos administration in 1986 helped economic recovery. Real GNP grew by 3.6% in
1986, increasing to 7.2% in 1988 before decelerating to 0.5% in 1991. The       
deceleration was caused principally by underlying macroeconomic imbalances,     
compounded by supply bottlenecks, natural disasters, political instability, the 
global recession and the Persian Gulf crisis.                                   

The Government of President Corazon Aquino, who came to power in 1986,
embarked on a stabilization program aimed at preventing an upsurge in inflation,
controlling the fiscal deficit and improving the external current account       
position. The economy responded favorably to these measures, posting increases  
in real GNP, investments, private consumption and imports in 1992. The Aquino   
administration also recognized that the country's economic difficulties in large
part resulted from its protectionist policies. The Aquino administration,       
therefore, initiated reforms to open the economy to market forces and reduce the
size and role of the Government in the Philippine economy. The Government of    
President Fidel Ramos, who assumed office in 1992, accelerated the reform       
efforts initiated by the Aquino administration.                                 

Despite undertaking a review of a number of the policies and programs 
initiated by previous administrations, the Estrada administration continued many
of the financial policies and market-oriented reforms of the Aquino and Ramos   
administrations.                                                                

    Prior to the onset of the Asian economic crisis in mid-1997, real GDP grew
at an average annual rate of 5.0% from 1994 to 1996 while real GNP grew at an   
average annual rate of 5.8% during the same period. The exchange rate between   
the Peso and the US dollar was stable, ranging from P24 to P27 per US dollar    
from 1994 to 1996. The consolidated public sector financial position swung from 
a deficit of P8.4 billion in 1994 to a surplus of P7.3 billion in 1996. Total   
net foreign investments increased from $1.6 billion to $3.5 billion during the  
same period and the unemployment rate declined from 9.5% in 1994 to 8.6% in     
1996.                                                                           

   After the onset of the Asian economic crisis in mid-1997, the Philippines
experienced economic turmoil characterized by currency depreciation, a decline  
in the performance of the banking sector, interest rate volatility, a           
significant decline in share prices on the local stock market and a reduction of
foreign currency reserves. These factors led to a slowdown in the Philippine    
economy in 1997 and 1998 with real GDP contracting by 0.6% in 1998. The         
Philippines' economic performance in 1998 was also adversely affected by the    
decline in agricultural production caused mainly by the effects of the drought  
related to the El Nino phenomenon and later the typhoons related to the La Nina 
phenomenon. In response, the Government adopted a number of policies to address 
the effects of the Asian economic crisis by strengthening the country's economic
fundamentals. In 1999 and 2000, a number of the Philippines' economic indicators
showed more favorable results. In 1999, real GNP growth improved to 3.7% while  
real GDP expanded by 3.4%. The trend continued in 2000 with real GNP growing by 
4.8% and GDP growing by 4.4%. In 2001, the real GNP grew by 3.4% and the real   
GDP grew by 3.2%. The GNP and GDP growth for 2001 remained strong, although     
growing at a slower pace than 2000, primarily due to strong agricultural output,
a strong services sector and rapid growth in the telecommunications industry,   
which was able to offset a manufacturing sector suffering from weak global      
demand.                                                                         

   The Arroyo administration has prepared a medium-term development plan for
2001 to 2004 to fight poverty and unemployment. Major features of the           
medium-term development plan are devoted to ensure good and effective governance
and improve public finances to reduce the number of poor families and reduce    
unemployment. See "Core Policies of the Arroyo Administration."                 

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Relationship with the International Monetary Fund                           

    Multilateral organizations have generally supported the structural reforms
undertaken by the Philippines. In February 1998, an IMF review mission cited the
strong performance of the Philippine economy and the implementation of key      
structural reforms as evidence of the country's commitment to sustaining        
economic growth. Consequently, on March 28, 1998 the IMF allowed the Philippines
to draw down the final $331 million available under the Philippines' last       
extended fund facility. The drawdown marked the end of more than three decades  
of conditional lending by the IMF to the Republic. All borrowings from the IMF  
have been carried out in the name of Bangko Sentral and all repayments under the
facility with the IMF are made by Bangko Sentral.                               

 The Republic and the IMF entered into a two-year precautionary stand-by
facility in March 1998 that made available $1.4 billion to support the country's
economic program for 1998-1999. Because of the regional economic slowdown, in   
September 1998 the Government activated the stand-by facility. To draw funds,   
the Republic had to satisfy certain quantitative performance criteria with      
respect to base money, public sector borrowing, net international reserves,     
approvals of medium- and long-term external borrowings and short-term public    
sector debt. The criteria were based on assumptions regarding macroeconomic     
growth, inflation and the current account.                                      

   As of December 31, 2000, a total of $1.1 billion had been disbursed under
the stand-by facility. The stand-by facility expired in December 2000. The      
Philippines is currently engaged in a post-program monitoring arrangement with  
the IMF. See "Recent Economic Developments -- Relationship with the IMF".       

GDP AND MAJOR FINANCIAL INDICATORS                                              

Gross Domestic Product                                                      

Gross domestic product, or GDP, measures the market value of all final
goods and services produced within a country during a given period and is       
indicative of whether the country's productive output rises or falls over time. 
By comparison, gross national product, or GNP, measures the market value of all 
final goods and services produced by a country's citizens during a given period,
whether or not the production occurred within the country.                      

Economists show GDP in both current and constant market prices. GDP at
current market prices values a country's output using the actual prices of each 
year, whereas GDP at constant market prices values output using the prices from 
a base year, thereby eliminating the distorting effects of inflation.           

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    The following tables present the GDP of the Philippines by major sector at
both current and constant market prices.                                        

GROSS DOMESTIC PRODUCT BY MAJOR SECTORS 
(AT CURRENT MARKET PRICES)

                                                        [Enlarge/Download Table]

                                                                                                PERCENTAGE OF 
                                                                                        FIRST        GDP      
                                                                                       QUARTER  ------------- 
                                    1997      1998      1999       2000       2001      2002    1997    2001  
                                  --------  --------  --------   --------   --------   -------  -----   ----- 
                                                      (IN BILLIONS, EXCEPT AS INDICATED)                      
                                                                                                              
Agriculture, fishery and                                                                                      
  forestry......................  P  458.0  P  451.6  P  510.5   P  525.9   P  549.4   P134.8    18.8%   15.1%
                                  --------  --------  --------   --------   --------   ------   -----   ----- 
Industry sector                                                                                               
  Mining and quarrying..........      17.3      20.1      18.0       21.2       21.2      6.6     0.7     0.6 
  Manufacturing.................     540.3     582.9     644.0      745.9      831.6    199.1    22.3    22.8 
  Construction..................     156.1     157.4     162.9      174.4      182.4     46.6     6.4     5.0 
  Electricity, gas and water....      66.1      78.0      86.1       97.5      116.3     28.4     2.7     3.2 
                                  --------  --------  --------   --------   --------   ------   -----   ----- 
          Total.................     779.8     838.4     911.1    1,039.0    1,151.5    280.7    32.1    31.6 
Service sector                                                                                                
  Transportation, communications                                                                              
     and storage................     118.9     139.7     159.3      199.0      247.6     63.4     4.9     6.8 
  Trade.........................     317.2     361.2     419.3      473.0      517.5    118.5    13.1    14.2 
  Finance.......................     114.5     130.3     141.6      149.1      160.1     40.6     4.7     4.4 
  Ownership of dwellings and                                                                                  
     real estate................     168.0     189.3     208.9      221.9      236.7     62.7     6.9     6.5 
  Private services..............     233.7     280.6     335.4      381.6      433.7    112.6     9.6    11.9 
  Government services...........     236.7     274.1     290.8      319.8      343.6     85.3     9.7     9.4 
                                  --------  --------  --------   --------   --------   ------   -----   ----- 
          Total.................   1,189.0   1,375.0   1,555.3    1,743.4    1,939.1    483.2    49.0    53.3 
                                  --------  --------  --------   --------   --------   ------   -----   ----- 
Total GDP.......................  P2,426.7  P2,665.1  P2,976.9   P3,308.3   P3,640.0   P898.8   100.0%  100.0%
                                  ========  ========  ========   ========   ========   ======   =====   ===== 
Total GNP.......................  P2,528.3  P2,802.1  P3,136.2   P3,496.9   P3,853.3   P966.1                 
Total GDP (in billions of US                                                                                  
  dollars)(1)...................  $   82.3  $   65.2  $   76.2   $   74.9   $   71.4   $ 17.5                 
GDP per capita (in US                                                                                         
  dollars)(1)...................  $1,116.3  $  864.5  $  988.8   $  951.7   $  888.7   $215.5                 

---------------                                                                 

Source: National Statistical Coordination Board.                                

(1) Calculated using the average exchange rate for the period indicated. See    
"-- Monetary System -- Foreign Exchange System".                        

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GROSS DOMESTIC PRODUCT BY MAJOR SECTORS 
(AT CONSTANT MARKET PRICES(1))

                                                        [Enlarge/Download Table]

                                                                                       PERCENTAGE OF 
                                                                             FIRST          GDP      
                                                                            QUARTER    ------------- 
                            1997     1998     1999      2000       2001      2002      1997    2001  
                           ------   ------   ------   --------   --------   -------    -----   ----- 
                                               (IN BILLIONS, EXCEPT PERCENTAGES)                     
                                                                                                     
Agriculture, fishery and                                                                             
  forestry................ P 185.0  P 173.2  P184.5     P190.7     P197.7   P 51.4      20.7%   20.0%
                           ------   ------   ------   --------   --------   ------     -----   ----- 
Industry sector                                                                                      
  Mining and quarrying....   10.3     10.6      9.7       10.7       10.0      3.4       1.2     1.0 
  Manufacturing...........  223.7    221.2    224.7      237.3      244.1     56.9      25.0    24.7 
  Construction............   57.3     51.8     51.0       51.7       49.8     12.1       6.4     5.0 
  Electricity, gas and                                                                               
     water................   29.4     30.3     31.3       32.6       32.8      7.1       3.3     3.3 
                           ------   ------   ------   --------   --------   ------     -----   ----- 
     Total................  320.7    313.9    316.7      329.0      336.7     79.5      35.9    34.0 
Service sector                                                                                       
  Transportation,                                                                                    
     communications and                                                                              
     storage..............   55.1     58.6     61.7       68.2       74.2     18.6       6.2     7.5 
  Trade...................  135.3    138.6    145.4      152.9      161.5     37.0      15.0    16.3 
  Finance.................   43.5     45.4     46.3       46.7       47.3     11.8       4.9     4.8 
  Ownership of dwellings                                                                             
     and real estate......   47.3     48.1     48.4       48.3       48.1     12.3       5.3     4.9 
  Private services........   61.0     63.9     67.6       70.9       74.0     18.6       6.8     7.5 
  Government services.....   45.2     46.2     47.7       48.5       49.8     12.8       5.1     5.0 
                           ------   ------   ------   --------   --------   ------     -----   ----- 
     Total................  387.5    400.9    417.0      435.5      454.8    111.1      43.4    46.0 
                           ------   ------   ------   --------   --------   ------     -----   ----- 
Total GDP................. P 893.2  P 888.0  P918.2     P958.4     P989.3   P241.9     100.0%  100.0%
                           ======   ======   ======   ========   ========   ======     =====   ===== 
Total GNP................. P 930.7  P934.5   P969.3   P1,012.6   P1,051.1   P261.1                   
Percentage change in                                                                                 
  GDP.....................    5.2%    (0.6)%    3.4%       4.0%       3.2%    3.8%(2)                
Percentage change in                                                                                 
  GNP.....................    5.3%     0.4%     3.7%       4.5%       3.4%    4.9%(2)                

---------------                                                                 

Source: Economic and Social Statistics Office; National Statistical Coordination
Board.                                                          

(1) Based on constant 1985 prices.                                              

(2) Changes as compared to the first quarter of 2001.                           

    The following table shows the percentage distribution of the country's GDP
at constant 1985 prices.                                                        

DISTRIBUTION OF GROSS DOMESTIC PRODUCT BY EXPENDITURE 
(AT CONSTANT MARKET PRICES(1))

                                                        [Enlarge/Download Table]

                                                                                              FIRST 
                                                                                             QUARTER
                                                     1997    1998    1999    2000    2001     2002  
                                                     -----   -----   -----   -----   -----   -------
                                                                                                    
Personal consumption................................  76.6%   79.7%   79.1%   78.8%   78.6%    79.6%
Government consumption..............................   8.0     7.9     8.2     7.8     7.5      8.1 
Capital formation                                                                                   
  Fixed capital.....................................  25.8    23.1    21.8    21.0    20.4     23.8 
  Changes in stocks.................................   0.5    (0.9)   (0.8)   (0.3)    0.5      0.5 
                                                     -----   -----   -----   -----   -----    ----- 
     Total capital formation........................  26.3    22.2    21.0    20.7    20.9     24.3 
Exports of goods and services.......................  52.1    41.4    41.5    46.9    43.0     44.1 
Imports of goods and services....................... (63.6)  (54.5)  (51.3)  (51.3)  (49.1)   (47.0)
Statistical discrepancy.............................   0.6     3.4     1.5    (2.8)   (1.3)    (5.3)
                                                     -----   -----   -----   -----   -----    ----- 
Total............................................... 100.0%  100.0%  100.0%  100.0%  100.0%   100.0%
                                                     =====   =====   =====   =====   =====    ===== 

---------------                                                                 

Source: Economic and Social Statistics Office; National Statistical Coordination
Board.                                                          

(1) Based on constant 1985 prices.                                              

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PRINCIPAL SECTORS OF THE ECONOMY                                                

Agriculture, Fishery and Forestry                                           

AGRICULTURE.  The country's principal agricultural products include   
cereals, such as palay (rice) and corn, cultivated primarily for domestic use,  
and crops, such as coconuts, sugar cane and bananas, produced for both the      
domestic market and export. The Philippines' diverse agricultural system        
contains many coconut plantations farmed by agricultural tenants and workers,   
sugar haciendas farmed either under labor administration or by tenants, and     
large "agro-business" plantations devoted mainly to non-traditional export crops
such as bananas and pineapples. Rice, corn and coconuts each account for        
approximately one-quarter of the country's cultivated area. The country         
occasionally needs to import rice and corn.                                     

Through its economic stimulus activities, the Government has begun to 
implement a number of programs to boost agricultural output. The principal      
programs are as follows:                                                        

 - The Agriculture and Fisheries Modernization Act of 1997, which is the
 Government's blueprint for the modernization of the agriculture and
fisheries sectors. The Act provides for, among other things, the  
establishment of development zones for production, processing and 
      marketing agencies responsible for the enforcement of quality standards,
the simplification of access to credit, and the grant of tariff   
exemptions on the importation of certain equipment.               

- A national productivity program designed to increase the yield and  
   competitiveness of the five major agriculture subsectors: rice, corn,
high value crops, livestock and fisheries.                        

- Improvement of support services to farmers, particularly irrigation,
roads, post-harvest facilities, training, credit and marketing    
assistance.                                                       

- Stabilization of prices and supply of agricultural commodities.     

  FISHERY.  The Philippines' fishing industry contributes significantly to
the country's foreign exchange earnings. Pollution of coastal waters as a result
of population growth, mining activities and wasteful fishing methods have       
damaged the marine and inland resources in some areas in recent years, leading  
to decreases in production.                                                     

FORESTRY.  The country's forests, one of the Philippines' main natural
resources, contain a large quantity of hardwood trees. Over the years population
growth, shifting cultivation, illegal logging and inadequate reforestation      
depleted the forests, leading to a Government-imposed total ban on logging      
activity and the subsequent continuing decline of the forestry subsector.       

    RECENT RESULTS.  The agriculture, fishery and forestry sector grew by 3.7%
in 2001 compared to growth of 3.4% in 2000 at constant market prices, due to the
positive performance of the agriculture and fishery subsectors, offsetting the  
decrease in the forestry subsector. The agriculture industry subsector grew by  
4.0% in 2001 compared to growth of 3.6% in 2000. In addition to favorable       
weather conditions, the Government's revitalized support for agriculture through
various means including the distribution of certified seeds, rehabilitation of  
irrigation facilities and the use of modern equipment, especially in the fishery
subsector, contributed to the growth in the agriculture and fishery subsectors. 
The forestry subsector contracted by 33.5% in 2001 compared to a 19.5%          
contraction in 2000. For 2001, the agriculture, fishery and forestry sector     
contributed 0.7% to the total GDP growth rate of 3.2%.                          

    In the first quarter of 2002, the agriculture, fishery and forestry sector
grew by 4.4% compared to 3.0% in the first quarter of 2001 at constant market   
prices. The increase was attributable primarily to the favorable weather        
experienced during the period, the Government's efforts to improve productivity 
(particularly for palay and corn) and the elimination of tariffs on fertilizer. 

Industry Sector                                                             

    The sector comprises, in order of importance, manufacturing, construction,
electricity, gas and water and mining and quarrying. The sector contributed     
approximately 35.9% of GDP in 1997 and 34.0% in 2001, at constant market prices.
The sector grew by 1.3% in 2001, compared to growth of 4.9% in 2000. This lower 

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growth was mainly due to the global economic slowdown. In the first quarter of  
2002, the industry sector grew by 1.9% compared to 0.6% in the first quarter of 
2001.                                                                           

 MINING AND QUARRYING.  The mining and quarrying subsector contracted by
6.6% in 2001, compared to growth of 10.0% during 2000. This considerable decline
was caused primarily by the decline in growth of gold production and contraction
in the production of stone quarrying, clay and sandpits and other non-metallic  
mining. Increases in the growth of chromium and other metallic mining did not   
have a significant impact on the growth of the subsector as a whole.            

     MANUFACTURING.  The country's manufacturing subsector comprises three major
industry groups:                                                                

- consumer goods, including the food, footwear and garment industries;

- intermediate goods, including the petroleum, chemical and chemical  
product industries; and                                           

- capital goods, including the electrical machinery and electronics   
industries.                                                       

  The following table presents, at constant market prices, the gross value
added, which equals the value of sales minus the cost of raw material and       
service inputs, for the manufacturing sector by industry or industry group.     

GROSS VALUE ADDED IN MANUFACTURING BY INDUSTRY GROUP
(AT CONSTANT MARKET PRICES(1))

                                                        [Enlarge/Download Table]

                                                                                         FIRST  
                                                                                        QUARTER 
INDUSTRY/INDUSTRY GROUP              1997      1998      1999       2000       2001      2002   
-----------------------            --------  --------  --------   --------   --------   ------- 
                                                         (IN MILLIONS)                          
                                                                                                
Food manufactures................. P 76,318  P 78,744  P 83,049   P 84,590   P 88,227   P 23,363
Beverage industries...............    8,961     9,003     8,896      9,175      8,820     1,367 
Tobacco manufactures..............    5,779     5,538     5,681      5,886      6,133     1,220 
Textile manufactures..............    5,320     5,085     4,660      4,128      3,778       832 
Footwear/wearing apparel..........   12,356    12,699    10,801     12,327     12,801     1,863 
Wood and cork products............    2,969     2,769     2,451      2,220      2,060       403 
Furniture and fixtures............    2,822     2,881     2,852      3,172      3,232       676 
Paper and paper products..........    2,038     2,132     2,033      2,627      2,258       491 
Publishing and printing...........    3,233     3,093     3,055      2,964      2,967     1,060 
Leather and leather products......      215       224       222        229        254        61 
Rubber products...................    2,088     1,849     2,065      2,115      1,743       484 
Chemical and chemical products....   14,276    14,169    13,868     13,523     14,648     3,099 
Petroleum and coal products.......   39,753    37,472    37,137     39,896     38,929     7,268 
Non-metallic mineral products.....    7,925     6,614     5,834      5,625      5,215     1,236 
Basic metal industries............    5,223     4,745     4,206      3,600      3,851       795 
Metal industries..................    4,841     4,231     4,272      4,645      5,257       961 
Machinery (except electrical).....    3,756     3,540     3,555      4,219      5,326     1,133 
Electrical machinery..............   18,179    19,284    22,277     27,678     29,009     8,281 
Transport equipment...............    2,744     1,810     1,984      2,125      2,325       454 
Miscellaneous manufactures........    4,876     5,269     5,769      6,527      7,249     1,819 
                                   --------  --------  --------   --------   --------   ------- 
  Gross value added in                                                                          
     manufacturing................ P223,672  P221,151  P 224,667  P 237,271  P 244,082  P 56,866
                                   ========  ========  ========   ========   ========   ======= 

---------------                                                                 

Source: Economic and Social Statistics Office; National Statistical Coordination
Board.                                                          

(1) Based on constant 1985 prices.                                              

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Higher interest rates in the wake of the currency crisis led to a 1.1%
decline in the manufacturing subsector in 1998, compared to 4.2% growth in 1997.

     From 1998 through the first quarter of 1999, weak demand and high operating
costs forced a number of businesses to close or cut back operations.            
Import-dependent industries, including transport equipment and rubber, chemical,
petroleum and coal products, experienced declining output. Export-related       
industries, however, including furniture and fixtures, electrical machinery and 
leather products, grew, as did food manufactures.                               

    In 1999, the manufacturing subsector reversed its 1.1% contraction in 1998
to record a growth of 1.6%. The sector recorded positive growth for the last    
three quarters of 1999. The major gainers for the sector included electrical    
machinery, which registered a growth of 15.5% and transport equipment, which    
registered a growth of 9.6%. The decliners in the subsector were led by         
footwear/wearing apparel, which recorded a 14.9% contraction.                   

Manufacturing accounted for, on average, approximately 24.8% of GDP at
constant market prices from 1997 to 2001. The subsector grew by only 2.9% in    
2001, compared to 5.6% growth in 2000. This reduction was caused primarily by   
lower growth in the manufacture of apparel, furniture and electrical machinery  
and by contraction in the manufacture of beverages, paper products, rubber      
products, petroleum and coal products, and non-metallic mineral products. Gains 
in growth in the manufacture of food, tobacco, leather products, non-electrical 
machinery, chemical products and basic metal products contributed positively to 
the manufacturing subsector, although they were unable to fully offset the      
declines in the subsector as a whole.                                           

In the first quarter of 2002, the growth rate in the manufacturing    
subsector decreased to 2.0%, compared to 3.4% in the first quarter of 2001, due 
to a slowdown in exports. Food processing, textiles, footwear and apparel,      
non-metallic mineral products and electrical machinery showed improved results  
while wood and cork products, beverages, paper and paper products, rubber       
products, leather products, petroleum and coal products and non-electrical      
machinery products were all negatively affected by the slowdown in exports.     

CONSTRUCTION.  The construction subsector's contribution to GDP, at   
constant market prices, declined from 6.4% in 1997 to 5.0% in 2001. The         
construction subsector declined by 3.6% in 2001 compared to an increase of 1.4% 
in 2000. This reduction was primarily because public construction recorded a    
6.1% decrease reversing a 6.6% increase in 2000. For 2001, the industry sector  
contributed 0.6% to the total GDP growth rate of 3.4%. Growth in the            
construction subsector increased to 1.5% in the first quarter of 2002 compared  
to a contraction of 9.7% in the first quarter of 2001.                          

    ELECTRICITY, GAS AND WATER.  Electricity, gas and water accounted for 3.4%
of GDP at constant market prices, on average, from 1997 to 2001. The subsector  
grew by 0.7% in 2001, compared to 4.2% in 2000. The slower growth was           
attributable primarily to reduced electricity demand and decreased water sales  
resulting from the rehabilitation of water mains and pipes. The electricity, gas
and water subsector contracted by 8.8% in the first quarter of 2002 compared to 
growth of 4.0% in the first quarter of 2001.                                    

With limited natural resources available for energy development, the  
Philippines satisfies most of its energy needs with imports of coal and oil,    
which it then converts into electric power. In August 1996, the Government      
deregulated oil prices by introducing an automatic mechanism that adjusted      
petroleum product prices monthly in accordance with Singapore posted prices. In 
February 1997, the Downstream Oil Industry Deregulation Act of 1996 superseded  
the automatic-pricing mechanism and allowed domestic oil prices to fluctuate    
freely based on market conditions. On November 5, 1997, however, the Philippine 
Supreme Court declared the act unconstitutional on the basis that it inhibited  
fair competition, encouraged monopolies, interfered with free market forces and 
nullified the principle of deregulation. On February 10, 1998, the Government   
enacted a new oil industry deregulation act, which allowed oil prices to        
fluctuate and eased the entry of new players into the industry.                 

  The 1998 oil industry deregulation act has increased investment activity
and attracted new players into the downstream oil industry, with approximately  
P4 billion of new investments in LPG refilling, bulk storage and retail outlets 
since deregulation of the industry. Prices of petroleum products have fluctuated
in response to market prices and competition has increased. Retail petrol prices
declined by a total of 50-65 centavos per                                       
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litre between October 1998 and January 1999 in response to increased            
competition, however prices have since increased due to the increase in world   
crude oil prices. Increases in world crude oil prices led the country to        
increase coal imports and decrease oil imports.                                 

  The following table sets out the country's energy consumption by source.

ENERGY CONSUMPTION BY SOURCE

                                                        [Enlarge/Download Table]

ENERGY SOURCE                                          1997    1998    1999    2000    2001  
-------------                                          -----   -----   -----   -----   ----- 
                                                             (% OF TOTAL CONSUMPTION)        
                                                                                             
Domestic sources                                                                             
  Oil.................................................   0.0%    0.1%    0.1%    0.0%    0.1%
  Coal................................................   1.7     2.0     1.6     1.6     1.9 
  Hydro...............................................   4.5     3.6     5.5     5.0     5.1 
  Geothermal..........................................   5.5     6.4     7.5     7.8     7.2 
  Other(1)............................................  30.3    28.6    28.8    27.8    30.7 
                                                       -----   -----   -----   -----   ----- 
          Total domestic sources......................  42.0    40.7    43.5    42.2    45.0 
                                                       -----   -----   -----   -----   ----- 
Imported sources                                                                             
  Oil.................................................  52.9    53.7    50.2    45.5    46.0 
  Coal................................................   5.1     5.5     6.3    12.3    10.1 
                                                       -----   -----   -----   -----   ----- 
          Total imported sources......................  58.0    59.2    56.5    57.8    56.1 
                                                       -----   -----   -----   -----   ----- 
            Total..................................... 100.0%  100.0%  100.0%  100.0%  100.0%
                                                       =====   =====   =====   =====   ===== 

---------------                                                                 

Source:Department of Energy.                                                    

(1) Other includes gas, fuelwood and biomass fuel.                              

National Power Corporation is the principal entity engaged in the     
development, generation and transmission of electric power on a nationwide      
basis. It establishes and maintains transmission line grids, generating         
facilities and inter-island connections throughout the Republic.                

   In August 1998, the Department of Energy proposed a number of measures to
restructure the Republic's electric power industry, including:                  

- eliminating subsidies for less populated service areas, which are   
       currently generated by requiring all service areas to pay the same prices
for electricity;                                                  

- restructuring and privatizing the National Power Corporation;       

- creating competition in power generation; and                       

- providing free access to the transmission and distribution system.  

 The reforms, especially the restructuring and privatization of National
Power Corporation, would allow distributors and large customers to choose their 
electricity supplier. Commercial, regulatory and tariff reforms will be put in  
place in response to the additional burdens on the regulatory agency, the       
distribution sector and the other industry players resulting from increased     
competition in the industry. The Electric Power Industry Reform Act, which      
provides a legal framework for the restructuring of the electric power industry 
and the privatization of the assets and liabilities of the National Power       
Corporation, was enacted on June 8, 2001. See "-- Recent Economic               
Developments -- Electric Power Industry Reform Act and -- Privatization of the  
National Power Corporation".                                                    

Service Sector                                                              

   The sector comprises, in order of importance, trade, finance and housing,
private services, transportation, communications and storage and Government     
services. The service sector remains the largest contributor to                 

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GDP, having contributed approximately 45.1% of GDP at constant market prices    
from 1997 to 2001. In the first quarter of 2002, the services sector grew by    
4.8%, compared to growth of 4.6% in the first quarter of 2001.                  

TRADE.  The trade subsector, which consists of wholesale and retail   
activities, accounted for an average of 15.8% of GDP at constant market prices  
from 1997 to 2001. The trade subsector grew by 5.6% in 2001 at constant market  
prices, compared to 5.2% growth in 2000. This increase was caused by a notable  
growth in wholesale trade, which accounts for one-fourth of trade output. The   
trade subsector grew by 5.3% in the first quarter of 2002 compared to growth of 
5.6% in the first quarter of 2001 at constant market prices.                    

FINANCE AND HOUSING.  The finance subsector's contribution to GDP at  
constant market prices decreased slightly from 4.9% in 1997 to 4.8% in 2001. The
housing subsector's contribution to GDP at constant market prices, decreased    
from 5.3% in 1997 to 4.9% in 2001.                                              

     The finance subsector grew by 1.2% in 2001, compared to a growth of 0.9% in
2000. The bank subsector grew by 0.8% in 2001 as it slightly recovered from its 
0.4% contraction in 2000. For a discussion of the country's financial system,   
see "-- The Philippine Financial System". Insurance, the only subsector which   
had positive gains in each quarter of 2000, grew by 4.4% in 2000. With sustained
positive gains from the second to the fourth quarter of 2000, non-banking       
activities were able to withstand the turbulence in financial services as that  
subsector posted growth of 3.1% in 2000 against 2.4% in 1999. The positive      
development in the non-banking activities resulted from the expansion in        
financing activities and the increasing use of credit cards. The finance        
subsector contracted by 0.7% in the first quarter of 2002 compared to growth of 
3.3% in the first quarter of 2001, at constant market prices.                   

   The housing subsector contracted by 0.5% in 2001, compared to zero growth
in 2000, at constant market prices. This was primarily caused by the 10.0%      
contraction of the real estate market, which was partially offset by the 2.0%   
growth in the ownership of dwellings. The ownership of dwellings and real estate
subsector grew by 3.0% in the first quarter of 2002 at constant market prices   
compared to a contraction of 2.7% during the same period of last year.          

 PRIVATE SERVICES.  The private services subsector includes educational,
medical and health, recreational and hotel and restaurant services. The         
subsector contributed an average of approximately 7.3% to GDP at constant market
prices each year from 1997 to 2001. Except for business services and personal   
services, which experienced higher rates of growth, all private services        
experienced lower, although positive, growth. The private services subsector    
grew by 5.0% in the first quarter of 2002 compared to growth of 4.8% in the     
first quarter of 2001.                                                          

 TRANSPORTATION, COMMUNICATIONS AND STORAGE.  The geographically diverse
nature of the Philippines makes it important to have well developed road, air   
and sea transportation systems. The Government has encouraged, "build, operate  
and transfer", projects and other private sector initiatives to provide basic   
transportation services and strengthen inter-regional and urban links to ensure 
safe and efficient movement of people and goods. Important ongoing "build,      
operate and transfer" projects (or variants of such projects) and joint venture 
projects include the Metro Rail Transit Project, Metro Manila Skyway Project,   
the Manila-Cavite Expressway Project and the South Luzon Expressway Extension.  

The country's road network is the most important transportation system
carrying about 65% of freight and 90% of passenger traffic. The road network    
covers more than 200,000 kilometers. About 1.8 million vehicles use the road    
network, including 236,000 vehicles for public use, principally in Metro Manila.
Traffic remains congested in the capital region, despite traffic management and 
various engineering measures. The Government has built and continues to         
emphasize alternative road networks and mass rapid urban transit rail facilities
to ease the problem.                                                            

  In 2000, approximately 1,194 miles of national roads were constructed or
rehabilitated while 7,100 lineal meters of bridges along national roads were    
converted to permanent structures. This improved the percentage of paved        
national arterial roads to 77% and that of national secondary roads to 52% at   
the end of 2000.                                                                

    Usage of the country's rail facilities has declined largely because of the
outdated facilities of the Philippine National Railways. The Government has     
constructed a two-line light-rail transit system in Metro                       

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Manila, financed by a build, lease and transfer arrangement, and has started    
work on a third line of the light-rail transit system, which is expected to be  
operational by year 2004 and will provide additional maximum capacity of 500,000
passengers per day for the Metro Manila commuters.                              

In addition to a more conducive environment for private sector        
participation brought about by the amendment of the Build-Operate-Transfer Law, 
the light-rail transit system Line 1 South Extension Project is expected to be  
undertaken under a joint venture agreement. The 27-kilometer extension line will
expand the existing light-rail system Line 1 service southward to the cities of 
Paranaque and Las Pinas and the adjoining municipality of Bacoor. The project   
will connect the north and south ends of the existing railway system.           

     Four international airports, in Manila, Cebu, Clark and Subic, and 83 other
facilities throughout the country help meet the country's air transport needs.  
The Government plans to upgrade several major airports to international         
standards and generally to modernize air navigation and communications          
operations in the country. The new Manila International Airport terminal's      
project will commence by the end of this year. The Government has formulated a  
plan for the transition from land-based to satellite-based technology in civil  
aviation. It approved the implementation of the new communications, navigation  
surveillance and air traffic management systems project, which will implement   
satellite-based technology designed to control and manage the air traffic within
the respective flight information region. Once financing is obtained and        
implementation is completed, the system will increase air travel safety, shorten
flight duration for air passengers and improve aircraft operating efficiency due
to more flexible flight paths and increased airspace capacity.                  

Philippine Airlines, Inc., the primary national air carrier, several  
smaller domestic airlines and airlines from various countries provide air       
service to, from and within the country. Philippine Airlines retains a leading  
position in domestic routes, but since the beginning of 1998, Philippine        
Airlines has had increasing financial difficulties and labor problems. After    
suspending operations in September 1998, Philippine Airlines resumed service in 
October 1998 after management and the unions agreed to, among other things, a   
10-year suspension of the collective bargaining agreement, a grant of 20% of the
airline's equity to its employees and a guarantee of no salary reductions. On   
December 7, 1998, the airline submitted a rehabilitation plan to the Philippine 
Securities and Exchange Commission which included proposals for debt            
restructuring and forgiveness, capital injection, fleet reduction, manpower     
adjustments and a spin-off of non-core businesses. In May 1999, the airline     
submitted a restated rehabilitation plan which was approved by the Philippine   
SEC. Certain creditors of the airline have objected to the rehabilitation plan  
and its approval by the Philippine SEC. In June 1999, Lucio Tan, a shareholder  
of the airline, provided $200 million of equity capital to Philippine Airlines  
and became its Chief Executive Officer.                                         

   The airline's finances, however, began to improve in its fiscal year 1999
(ending on March 31, 2000). After registering six consecutive years of losses,  
Philippine Airlines reported a net profit of P45.8 million in fiscal year 1999. 
In the fiscal year 2000 (ending on March 31, 2001), the airline realized an 815%
rise in profits, registering a net profit of P419 million.                      

   The country's geography also requires an effective water transport system
to ferry cargo and passengers among islands. Currently, the water transport     
system handles about 40% of total freight traffic and 10% of total passenger    
traffic in the Philippines. The regulatory policy during the past decade has    
been to open the industry to competition, ensuring lower cargo passage rates and
improving the quality of service. The Government plans to construct or improve  
96 national ports, approximately 300 municipal, feeder and fishing ports and    
river landings and special handling facilities for grains and bulk cargo in     
other selected ports.                                                           

     Faced with historical shortages of telephone lines and long waits for basic
telephone service, especially outside Metro Manila, the Government opened the   
telecommunications industry in 1993 to intensify competition and to increase    
substantially the number of telephone lines and interconnections. The Government
has continued to implement programs designed to provide telephone lines,        
exchanges and transmission facilities to underserved regions of the country. As 
of December 31, 2001, a cumulative total of more than 6.9 million lines have    
been installed, which translates to a telephone density of 9.0 main telephone   
lines per 100 inhabitants.                                                      

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    The country has 11 international long distance providers and five cellular
mobile telephone operators, as well as a number of competitors in the local     
telephone market. The privately-owned Philippine Long Distance Telephone Company
("PLDT") continues to exert strong influence over the telecommunications market 
through its ownership and operation of the public switch telecommunications     
network, to which other companies are interconnected. On November 24, 1998,     
First Pacific Limited ("First Pacific") announced the acquisition of 17.2% of   
PLDT's issued common shares and an effective 27.4% voting interest. As the phone
company's principal shareholder, First Pacific assumed management control. The  
acquisition was completed in the first half of 1999. First Pacific recently     
announced the signing of a memorandum of agreement with the group of companies  
controlled by industrialist John Gokongwei to create a joint venture entity that
will own all of First Pacific's assets in the Philippines including the         
controlling interest in PLDT. The joint venture will be owned 66 2/3% by the    
Gokongwei group and 33 1/3% by First Pacific.                                   

For the year ended December 31, 2001, PLDT's revenues increased 17% to
P73.6 billion, although the company reported a net loss due to increased selling
and promotional expenses, as well as subsidiary losses. The company's revenues  
rose again in the first quarter of 2002 to P19.1 billion, representing an       
increase of 5.8% from revenues of P18.0 billion in the first quarter of 2000.   

    The transport, communications and storage subsector's contribution to GDP,
at constant market prices, grew from 6.2% in 1997 to 7.5% in 2001. The subsector
grew by 8.8% in 2001, compared to growth of 10.4% in 2000. This reduced growth  
was caused primarily by decreases in the growth rate of most facets of          
transportation and storage, most notably a contraction in water transport and a 
significant decrease in growth of air transport. Growth in communications       
partially offset the slowdowns in transportation and storage, although the      
growth rate in communications has declined on a quarterly basis since the first 
three months of 2001. In the first quarter of 2002, the subsector grew by 9.7%, 
compared to 10.3% in the first quarter of 2001.                                 

  Similarly, the combined transport and storage services subsector grew at
2.5% in the first quarter of 2002 due to increased volume of goods moved and    
passengers carried, compared to the 1.7% growth during the same period in 2001. 
Storage and services incidental to transport posted a 2.5% gain during the      
period. Air transport decreased to 5.4% in the first quarter of 2002, from the  
14.9% growth registered in the first quarter of 2001.                           

 GOVERNMENT SERVICES.  Government services was one of the three services
subsectors that experienced increased growth in 2001 compared to 2000,          
increasing from 1.7% to 2.7%. This resulted from the hiring of additional       
teachers as well as additional compensation for teachers for their              
election-related duties. The Government services subsector grew by 3.4% in the  
first quarter of 2002 compared to growth of 3.3% in the first quarter of 2001.  

PRICES, EMPLOYMENT AND WAGES                                                    

Inflation                                                                   

  The Philippines reports inflation as the annual percentage change in the
consumer price index, which measures the average price of a standard "basket" of
goods and services used by a typical consumer. In June 1998, the Government     
began employing a 1994-based CPI basket of goods and services, which since 1999 
has been the sole official measurement. For Metro Manila, the 1994 CPI basket   
consists of 705 commodities. In addition, the 1994 CPI basket for areas outside 
Metro Manila focuses on provinces or cities.                                    

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The following table sets out the principal components of the 1994 CPI 
basket.                                                                         

PRINCIPAL COMPONENTS OF 1994 CPI BASKET 

                                                                [Download Table]

CATEGORY                                                      BASKET
--------                                                      ------
                                                                    
Food items (including beverages and tobacco)................   55.1%
  Rice......................................................   11.8 
Non-food items..............................................   44.9 
  Housing and repairs.......................................   14.7 
  Services..................................................   12.3 
  Fuel, light and water.....................................    5.7 
  Clothing..................................................    3.7 
  Miscellaneous.............................................    8.5 

     The following table sets out the consumer price index and the manufacturing
sector's equivalent, the producer price index, as well as the annual percentage 
changes in each index based on the 1994 CPI basket.                             

CHANGES IN CONSUMER AND PRODUCER PRICE INDEX

                                                        [Enlarge/Download Table]

                                                1997    1998    1999    2000    2001    2002      
                                                -----   -----   -----   -----   -----   -----     
                                                                                                  
Consumer Price Index........................... 124.7   136.8   145.9   152.3   161.6   165.4(1)  
Increase over Previous Year....................   5.9%    9.7%    6.7%    4.4%    6.1%    3.5%(2) 
Producer Price Index for Manufacturing(3)...... 118.7   117.6   125.8   141.5   165.6   160.1(4)  
Increase/(Decrease) over Previous Year(3)......   3.5%   (0.9)%   7.0%   12.5%   17.0%   (2.0)%(5)

---------------                                                                 

Source: National Statistics Office.                                             

(1) Preliminary. January through June 2002.                                     

(2) Represents the average year on year increase for the six months ended June  
30, 2002.                                                               

(3) Measured by the 1994 PPI benchmark except for 1997, which was measured by   
the 1992 PPI benchmark.                                                 

(4) January through March 2002.                                                 

(5) Represents the average year-on-year increase for the three months ended     
March 31, 2002.                                                         

Inflation in 1998 increased because of Peso depreciation and lower    
agricultural output caused principally by the drought related to the El Nino    
phenomenon and a number of typhoons related to the La Nina phenomenon. The 1998 
inflation rate was 9.7%. The Producer Price Index increased by 7.0% in 1999 from
1998. In December 1999, the monthly inflation rate was 4.3%, down from a high   
for the year of 11.5% in January 1999. The decline was due primarily to a sharp 
fall and subsequent stability in food prices resulting from strong performance  
in the agriculture sector leading to increased food supply, which partially     
offset the effects of increases in world crude oil prices.                      

     The easing of inflationary pressures in the second half of 1999 extended up
to the second quarter of 2000. Inflation remained in single digits at 4.4% for  
2000 compared with the 6.7% recorded in 1999. Moderate inflation was achieved   
notwithstanding an increase in economic activity, inflationary pressures arising
from wage adjustments and increases in oil prices and transport fares. Inflation
was kept low in 2001, at an average of 6.1%, which was below the Government's   
target of 6.7%. Favorable food and oil prices, stable exchange rates and        
moderate growth in demand all contributed to low inflation.                     

Implementation of Bangko Sentral's inflation targeting framework for  
monetary policy formally began in January 2002. Among the changes in the        
institutional setting of monetary policy was the creation of the Bangko Sentral 
Advisory Committee, which is scheduled to meet regularly every four weeks to    
deliberate, discuss and make recommendations to the Monetary Board on the       
appropriate stance of monetary policy. The Committee may also meet between the  
regular meetings when necessary. Decisions of the Monetary Board are determined 
by a majority vote of its members. However, there is no attribution of votes to 
individual                                                                      

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members in order to emphasize consensus and the collegial process in            
decision-making. Chaired by the Governor, with the Deputy Governors for banking 
services and supervision, and the heads of the Research and Treasury Departments
as members, the Advisory Committee held its first regular monthly meeting on    
January 15, 2002.                                                               

Employment and Wages                                                        

  The following table presents selected employment information for various
sectors of the economy.                                                         

SELECTED EMPLOYMENT INFORMATION(1)

                                                        [Enlarge/Download Table]

                                                                                    FIRST QUARTER
                                        1997     1998    1999(2)  2000(2)  2001(2)     2002(2)   
                                       ------   ------   -------  -------  -------  -------------
                                                                                                 
Labor force (in thousands)............ 30,355   31,056   30,759   30,911   32,808      34,075    
Unemployment rate.....................    8.7%    10.1%     9.8%    11.2%    11.1%       12.1%   

Employment share by sector:                                                                      
Agriculture, fishery and forestry.....   40.8%    39.2%    40.1%    37.1%    37.2%       36.8%   
Industry sector                                                                                  
  Mining and quarrying................    0.5      0.4      0.4      0.4      0.4         0.4    
  Manufacturing.......................    9.9      9.7      9.5     10.0     10.0         9.6    
  Construction........................    5.9      5.8      5.4      5.4      5.4         5.3    
  Electricity, gas and water..........    0.5      0.5      0.5      0.4      0.4         0.4    
                                       ------   ------   ------   ------   ------      ------    
          Total industry sector.......   16.7%    16.4%    15.8%    16.2%    16.2%       15.7%   
Service sector                                                                                   
  Transportation, communication and                                                              
     storage..........................    6.3      6.6      6.7      7.2      7.3         7.1    
  Trade...............................   14.9     15.4     15.5     16.3     18.0        18.8    
  Finance and housing.................    2.5      2.4      2.5      2.6      2.8         2.8    
  Services............................   18.7     19.9     19.5     20.5     18.6        18.7    
                                       ------   ------   ------   ------   ------      ------    
          Total services sector.......   42.5%    44.4%    44.2%    46.7%    46.6%       47.5%   
                                       ------   ------   ------   ------   ------      ------    
               Total employed.........  100.0%   100.0%   100.0%   100.0%   100.0%      100.0%   
                                       ======   ======   ======   ======   ======      ======    

---------------                                                                 

Source: Bureau of Labor and Employment Statistics -- Current Labor Statistics;  
National Statistics Office -- Labor Force Survey.               

(1) Figures are the average of the applicable statistic for each quarter in the 
relevant period.                                                        

(2) Figures generated using 1995 census-based population projections.           

    In 2001, the Filipino labor force totalled 32.8 million people. A total of
866,590 Filipino workers were deployed overseas during 2001, an increase of     
approximately 3.0% from 2000. The Filipino labor force is relatively young. They
are employed primarily in service industries, such as nursing and education, and
in manufacturing export industries, such as electronics and garments.           

 Regional tripartite bodies consisting of representatives of Government,
businesses and workers establish minimum wage requirements, which vary based on 
region and industry. Under the law, minimum wage requirements may only be       
increased once in any twelve month period. The minimum wages for workers in     
Metro Manila and the surrounding areas are the highest in the country. Across   
the regions, daily minimum wages range from a low of P114.0 to a high of P280.0.

    The economic difficulties that began in the second half of 1997, including
the slower growth of the country's industrial production, drove the average     
unemployment rate to 8.7% in 1997 and 10.1% in 1998, before improving to 9.8% in
1999. The unemployment rate increased to 11.2% in 2000 amidst uncertainties over
the allegations of corruption surrounding former President Estrada and fears of 
subsequent economic slowdown. In Metro Manila, where 13.8% of the country's     
labor force is located, unemployment ranged from 13.8% to 16.3% from 1997 to    
1999 and from 16.4% to 18.4% in 2000. In response to the economic slowdown in   

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2001, employers and workers agreed to the Social Accord for Industrial Harmony  
and Stability under which they confirmed the commitment to refrain from layoffs,
closures, work stoppages or slowdowns except as a last resort.                  

Labor and employment conditions improved in 2001 as the economy grew  
stronger than expected during the year. The substantially reduced number of     
strikes, increased rates of deployment of workers overseas and improved         
legislated wage indicators reflect broadly improved labor, employment and wage  
conditions during the year.                                                     

  The number of employed persons increased by 6.2% to 29.2 million in 2001
from 27.5 million in 2000, due largely to the strong performance of the services
sector, particularly in the wholesale and retail trade sub-sector, as well as   
the agriculture, fishery and forestry sector. The employment rate, however,     
improved slightly by only 0.1% to 88.9% from 88.8% in 2000 as the 6.2% growth in
the number of employed persons was accompanied by a 6.1% increase in the labor  
force.                                                                          

   Meanwhile, the number of unemployed persons increased by 9.1% in 2002, to
4.9 million. The largest number of unemployed persons was located in Metro      
Manila which posted double-digit rates of unemployment.                         

Social Security System and Government Service Insurance System              

The Philippines does not pay any unemployment compensation or make any
general welfare payments other than through the Social Security System and the  
Government Service Insurance System. The Social Security System provides private
sector employees, including self-employed persons and their families, with      
protection against disability, sickness, old age and death. Monthly             
contributions by covered employees and their employers, and investment income of
the Social Security System fund the system. The Social Security System invests  
its funds in Government securities and in local equity securities.              

The Government Service Insurance System administers social security   
benefits for Government employees, including retirement benefits, life          
insurance, medical care and sickness and disability benefits. The system also   
administers the self-insurance program for Government properties, such as       
buildings and equipment. The Government Service Insurance System also oversees  
loan programs, including housing loans for Government employees. Monthly        
contributions by covered employees and their employers fund the system.         
Government agencies must include in their annual appropriations the amounts     
needed to cover their share of the contributions and any additional premium     
required based on the hazardous nature of the work. The Government Service      
Insurance System invests its funds in a manner similar to the Social Security   
System.                                                                         

Savings                                                                     

 The following table sets out the ratio of gross national savings, total
investment and the savings-investment gap as a percentage of GDP.               

                                                        [Enlarge/Download Table]

                                                            1997   1998   1999   2000  2001
                                                            ----   ----   ----   ----  ----
                                                                    (IN PERCENTAGES)       
                                                                                           
Gross national savings..................................... 19.5   22.7   28.8   29.2  23.7
Gross investments.......................................... 24.8   20.3   18.8   17.8  17.4
Savings-investment gap..................................... (5.3)   2.4   10.0   11.3   6.3

---------------                                                                 

Source: National Economic and Development Authority.                            

    Government steps to stimulate the savings rate in the Philippines include:

  - launching a nationwide savings consciousness campaign to inform savers
about different types of financial assets;                        

    - shifting by the Philippine Stock Exchange from merit-based regulation to
self-regulation;                                                  

- tightening disclosure and insider trading rules;                    

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- removing double taxation of mutual funds;                           

- allowing increased foreign equity participation in investment and   
financing companies;                                              

- rationalizing financial taxes (e.g., gross receipts tax, documentary
stamp tax, initial public offerings tax);                         

    - broadening of the scope and coverage of small denominated Treasury-bills
which were offered beginning in November 1998;                    

     - establishing a Small and Medium Enterprises Board at the Philippine Stock
Exchange; and                                                     

- lengthening of the yield curve of government securities.            

BALANCE OF PAYMENTS                                                             

Balance of Payments Performance                                             

  Balance of payments figures measure the relative flow of goods, services
and capital into and out of the country as represented in the current account   
and the capital and financial accounts. The current account tracks a country's  
trade in goods, services, income and current transfer transactions. The capital 
and financial account includes the capital account, which covers all            
transactions involving capital transfers and acquisition or disposition of      
non-produced, non-financial assets, and the financial account, which covers all 
transactions associated with changes of ownership in the foreign financial      
assets and liabilities of an economy. A balance of payments surplus indicates a 
net inflow of foreign currencies, thereby increasing demand for and             
strengthening the local currency. A balance of payments deficit indicates a net 
outflow of foreign currencies, thereby decreasing demand for and weakening the  
local currency.                                                                 

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     The following table presents basic balance of payments information for 1996
through 1998 prior to the Bangko Sentral adopting the revised framework for     
compiling and reporting balance of payment information.                         

BALANCE OF PAYMENTS(1)

                                                        [Enlarge/Download Table]

                                                               1996         1997         1998      
                                                             --------     --------     --------    
                                                                       (IN MILLIONS)               
                                                                                                   
Current account:                                                                                   
  Goods trade                                                                                      
    Exports................................................. $ 20,543     $ 25,228     $ 29,496    
    Imports.................................................  (31,885)(2)  (36,355)(2)  (29,524)(2)
  Services trade                                                                                   
    Receipts................................................   19,006       22,835       13,917    
    Payments................................................  (12,206)     (17,139)     (12,778)   
  Transfers                                                                                        
    Inflow..................................................    1,185        1,670          758    
    Outflow.................................................     (596)        (590)        (323)   
                                                             --------     --------     --------    
      Total current account (deficit)....................... $ (3,953)    $ (4,351)    $  1,546    
Capital and financial account:                                                                     
    Medium and long-term loans                                                                     
      Availment............................................. $  6,540     $  7,724     $  6,025    
      Repayment.............................................   (3,699)      (2,900)      (3,285)   
    Trading of bonds in the secondary market                                                       
      Resale of bonds.......................................    4,148        3,072        3,307    
      Purchase of bonds.....................................   (4,185)      (3,748)      (4,390)   
    Investments, net(3)                                                                            
      Non-resident investments in the Philippines...........    3,621          843        2,016    
      Resident investments abroad...........................     (104)         (81)        (344)   
    Change in the net foreign assets of commercial banks....    4,214        1,188       (4,347)   
    Short-term capital, net.................................      540          495       (1,205)   
                                                             --------     --------     --------    
Net capital and financial account........................... $ 11,075     $  6,593     $    187    
Monetization of gold(4).....................................      198          105          118    
Revaluation adjustments(5)..................................     (203)        (465)         (22)   
Net unclassified items......................................   (3,010)      (5,245)        (470)   
                                                             --------     --------     --------    
Overall balance of payments position........................ $  4,107     $ (3,363)    $  1,359    
                                                             ========     ========     ========    

---------------                                                                 

Source:Bangko Sentral.                                                          

(1) As described below, the framework for compiling and reporting the balance of
   payments has been revised based on the new concept under the IMF Balance of
Payment Manual, 5th Edition.                                            

(2) National Statistics Office data was adjusted to exclude the value of        
aircraft amounting to $542 million in 1996, $45 million in 1997 and $136
   million in 1998 procured under operating lease arrangements, and to include
 an additional $466 million worth of aircraft imported under capital lease
arrangements in 1997.                                                   

(3) Revised to reflect proper classification of balance of trade related        
transactions from non-resident to resident transactions.                

(4) Represents gold purchased by Bangko Sentral from domestic gold producers    
that becomes part of its official reserves, and profits from the sale of
gold by Bangko Sentral.                                                 

(5) Represents changes in valuation of monetary assets and liabilities as a     
   result of changes in the exchange rate of the US dollar against the Special
 Drawing Rights and other foreign currencies that form part of the reserve
assets and monetary liabilities of Bangko Sentral, as well as discounts 
accruing to Bangko Sentral in connection with debt-to-equity conversion 
programs and other debt reduction schemes.                              

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New Framework                                                               

   Beginning in January 2000, Bangko Sentral adopted a new framework for the
balance of payments compilation and reporting based on the fifth edition of the 
Balance of Payments Manual, or BPM5, of the International Monetary Fund.        

  The following table presents a comparative summary of major revisions in
the format of balance of payments reports.                                      

COMPARATIVE SUMMARY OF MAJOR REVISIONS IN THE BALANCE OF PAYMENTS REPORT FORMAT 

                                                        [Enlarge/Download Table]

BOP CATEGORIES                         OLD FORMAT                                NEW FORMAT               
--------------         ------------------------------------------  ---------------------------------------
                                                                                                          
Current Account        Consists of:                                Consists of:                           
                       - Goods                                     - Goods                                
                       - Services                                  - Services                             
                       - Transfers                                 - Income                               
                                                                   - Current transfers                    

Goods                  Includes data on all goods leaving the      Excludes shipments of goods that do not
                       country and entering any of the seaports    involve a change in ownership          
                       and airports of entry in the Philippines                                           
                       that are properly cleared through the                                              
                       Bureau of Customs                                                                  

Services               Includes both factor services (services of  Includes only non-factor services;     
                       labor and capital) and non-factor services  factor services are lodged separately  
                       (transport services, travel, and other      under "Income Account"                 
                       services not reported separately)                                                  

Income                 Included in the "Services Account"          Includes income for factor services    

Transfers              Includes both current and capital           Includes only current transfers.       
                       transfers                                   Capital transfers are lodged under the 
                                                                   "Capital Account", a sub-account under 
                                                                   the Capital and Financial Account      

Capital and Financial  Consists of:                                Consists of:                           
  Account              - Medium- and long-term loans                 Capital Account which includes:      
                       - Trading of bonds in the secondary market  - Capital transfers                    
                       - Investments                               - Acquisition or disposition of non-   
                       - Change in commercial banks' net foreign     produced non-financial assets (e.g.  
                         assets                                      goodwill, patent, copyrights)        
                       - Short-term capital                          Financial Account which is composed  
                                                                     of:                                  
                                                                   - Direct Investments                   
                                                                   - Portfolio Investments                
                                                                   - Other Investments                    

Medium- and Long-Term  Consists of:                                Consists of:                           
  Loans                - Non-bank loans including inter-company    - Non-bank loans, excluding inter-     
                         loans                                       company loans, are categorized as    
                       - Bonds issued and redeemed by the            Other Investments.                   
                         original issuer                           - Inter-company loans are treated as   
                                                                     Direct Investments                   
                                                                   - Bonds are classified under Portfolio 
                                                                     Investments                          

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                                                        [Enlarge/Download Table]

BOP CATEGORIES                           OLD FORMAT                                NEW FORMAT               
--------------           ------------------------------------------  ---------------------------------------
                                                                                                            
Trading of Bonds in the  Refers to the purchase and sale abroad of   Classified as Portfolio Investments    
  Secondary Market       resident-issued bonds in the secondary      (together with bonds treated as medium-
                         market by residents (other than the         and long-term loans under the old      
                         original issuer) from non-residents         framework)                             

Investments              Includes:                                   Includes:                              
                         - Direct Investments which covers:          - Direct investments which cover:      
                          - Investments in equities                   - Investment in equities              
                                                                      - Reinvested earnings                 
                         - Portfolio Investments                      - Inter-company loans                 
                          For non-residents, covers investments in:                                         
                          - Equities of resident firms acquired      - Portfolio Investments                
                         through the stock exchange                   For Non-Residents, covers investments 
                           - Resident debt securities issued in the      in:                                
                         local market                                 - Equities of resident firms acquired 
                           For residents, covers investments in:        through the stock exchange          
                           - Equities listed in foreign stock          - Debt securities (bills and bonds)  
                         exchanges                                       issued by both the public and      
                                                                         private sectors, banks and         
                                                                         non-banks, in the local market and 
                                                                         abroad. These include bonds which  
                                                                         were treated as medium-and         
                                                                         long-term loans under the old      
                                                                         framework                          
                                                                       For Residents, covers investments in:
                                                                     - Equities listed in foreign stock     
                                                                       exchanges                            
                                                                       - Foreign debt securities of bank and
                                                                         non-banks                          

Change in Commercial     Change in net foreign asset position of     Distributed among direct, portfolio and
  Banks Net Foreign      commercial banks                            other investments accounts             
  Assets                                                                                                    

Short-Term Capital       Consists of non-bank short-term loans and   Included in other investments          
                         net trade credits                                                                  

Other Investments                                                    Includes:                              
                                                                     - Net trade credits                    
                                                                     - Loans of banks and non-banks         
                                                                     - Currencies and deposits of resident  
                                                                       banks abroad, and currencies and     
                                                                       deposits non-residents with resident 
                                                                       banks (net change)                   
                                                                     - Other assets and liabilities of banks
                                                                       (net change)                         

Others                   Includes:                                   No longer part of the computation of   
                         - Monetization of gold                      the balance of payments                
                         - Revaluation adjustments                                                          

Net Unclassified Items   Includes:                                   Includes:                              
                         - Errors and omissions                      - Errors and omissions                 
                         - Floats                                    - Floats                               

Overall BOP              Computed as the sum of the Current Account  Computed as the sum of the Current     
                         and Capital and Financial Account plus      Account and Capital and Financial      
                         Others and Net Unclassified Items           Account plus Net Unclassified Items    

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    The following table sets out the consolidated financial position on a cash
basis for the Republic for the periods indicated.                               

BALANCE OF PAYMENTS(1)

                                                        [Enlarge/Download Table]

                                                       YEARS ENDED 31 DECEMBER       FIRST  
                                                    -----------------------------   QUARTER 
                                                     1999       2000       2001       2002  
                                                    -------    -------    -------   --------
                                                                  (IN MILLIONS)             
                                                                                            
CURRENT ACCOUNT:................................... $ 7,363    $ 8,459    $ 4,603   $ 2,323 
                                                    -------    -------    -------   ------- 
Goods and services:................................   2,247      4,805        809       889 
  Exports..........................................  39,014     41,267     34,391     8,681 
  Imports..........................................  36,767     36,461     33,852     7,792 
  Goods............................................   4,959      6,918      2,763     1,113 
     Credit: Exports(2)............................  34,211     37,295     31,243     7,902 
     Debit: Imports(2).............................  29,252     30,377     28,480     6,789 
  Services.........................................  (2,712)    (2,112)    (1,954)     (224)
     Credit: Exports...............................   4,803      3,972      3,148       779 
     Debit: Imports................................   7,515      6,084      5,102     1,003 
Income:............................................   4,604      3,216      3,350     1,331 
  Credit: Receipts.................................   8,082      7,804      7,446     2,200 
  Debit: Disbursements.............................   3,478      4,588      4,096       869 
Current transfers:.................................     512        437        444       103 
  Credit: Receipts.................................     607        552        515       140 
  Debit: Disbursements.............................      95        115         71        37 
CAPITAL AND FINANCIAL ACCOUNT:.....................  (1,803)    (6,469)    (3,839)      538 
Capital account:...................................      (8)        38        (12)       (4)
  Credit: Receipts.................................      44         74         12         0 
  Debit: Disbursements.............................      52         36         24         4 
Financial account:.................................  (1,795)    (6,507)    (3,827)      542 
  Direct investment................................     608      1,348      1,953     1,224 
     Debit: Assets, residents' investments                                                  
       abroad......................................     (30)      (107)      (161)       13 
     Credit: Liabilities, non-residents'                                                    
       investments in the Philippines..............     578      1,241      1,792     1,237 
  Portfolio Investment:............................   6,064       (113)     1,399     1,511 
     Debit: Assets, residents' investments                                                  
       abroad......................................     586        806       (234)      271 
     Credit: Liabilities, non-residents'                                                    
       investments in the Philippines..............   6,650        693      1,165     1,782 
  Other Investment:................................  (8,467)    (7,742)    (7,179)   (2,374)
     Debit.........................................  18,647     15,311     13,893     3,579 
     Credit........................................  10,180      7,569      6,714     1,205 
NET UNCLASSIFIED ITEMS:............................  (1,974)    (2,503)      (956)     (363)
                                                    -------    -------    -------   ------- 
OVERALL BOP POSITION:(3)........................... $ 3,586    $  (513)   $  (192)  $ 2,157 
                                                    =======    =======    =======   ======= 

---------------                                                                 

Source: Bangko Sentral.                                                         

(1) Beginning January 2000, the Republic adopted the fifth edition of the       
  International Monetary Fund's Balance of Payments Manual ("BPM5"). For the
  purpose of assessing comparative performance, the 1999 balance of payments
was reconstructed to conform with the conceptual coverage of the BPM5.  

(2) Data on exports and imports from the National Statistics Office were        
adjusted to exclude temporary exports and imports and returned goods.   

(3) The overall BOP position results from the change in net international       
reserves that is purely due to transactions excluding the effects of    
revaluation of reserve assets and selected reserve liabilities, gold    
monetization and Special Drawing Rights allocation.                     

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In 1997, the balance of payments registered an overall deficit of $3.4
billion. The current account deficit grew by 10.1% to $4.4 billion because of a 
fall in net receipts from services due to increased travel expenses for         
Filipinos and increased interest expenses. The capital and financial account    
also suffered in 1997, registering a surplus of only $6.6 billion after an $11.1
billion surplus in 1996. Lower net receipts of foreign investments and higher   
foreign exchange liability payments in the second half of 1997, both in response
to the regional economic crisis, contributed to the lower net inflow to the     
capital and financial account.                                                  

In 1998, the balance of payments registered an overall surplus of $1.4
billion, compared to a $3.4 billion deficit in 1997. The current account yielded
a surplus of $1.5 billion compared to a deficit of $4.4 billion in 1997         
primarily because of an increase in merchandise exports and a reduction of      
imports that led to a 99.7% improvement in the goods trade balance. The capital 
and financial account fell 97.2% from $6.6 billion in 1997 to $187 million in   
1998, due mainly to a significant decline in net medium and long-term loans and 
a negative change in the net foreign asset position of commercial banks arising 
largely from the reduction in commercial banks' foreign liabilities. Net        
unclassified items fell to $470 million in 1998 versus $5.2 billion in 1997, due
to more effective monitoring by the authorities, further contributing to the    
improved balance of payments position.                                          

  In 1999, under the BPM5 framework, the balance of payments registered an
overall surplus of $3.6 billion. This resulted from a surplus of $7.4 billion in
the current account due to an improvement in the goods trade balance and net    
inflows from the income account. The capital and financial account recorded a   
deficit of $1.8 billion in 1999, although there were sustained inflows of direct
investment and portfolio investment by nonresidents.                            

    In 2000, under the BPM5 framework, the balance of payments position showed
a deficit of $513 million following the weaker capital and financial account    
even as the current account continued to perform favorably. The current account 
posted a surplus of $8.5 billion for 2000, or 14.9% higher than the level       
registered in 1999. The trade-in-goods surplus was driven by the robust growth  
of export earnings. The net outflow in the capital and financial account        
totalled $6.5 billion following the weakening in the financial account. Inflows 
of both direct and portfolio investments offset some of the outflows in the     
other investments account. However, portfolio investments were down considerably
in 2000 to a net outflow of $113 million from a net inflow of $6.1 billion in   
1999 due to fewer issuances of public debt. Overall, the underperformance in the
capital and financial account in 2000 compared to 1999 resulted mainly from weak
portfolio investments by non-residents, purchases by residents of foreign       
currency-denominated Philippine debt papers, lower medium- and long-term loan   
availments, and higher residents' short-term trade receivables.                 

   The overall balance of payments showed a deficit of $192 million in 2001,
compared to a deficit of $513 million in 2000. This positive development was    
caused by lower net outflows of $3.8 billion in the capital and financial       
account in 2001, as compared to $6.5 billion in 2000, which overshadowed a      
substantial decline in the current account surplus of $4.6 billion in 2001, as  
compared to $8.5 billion in 2000. The current account surplus declined due      
mainly to lower receipts from trade-in-goods even as the services trade account 
yielded lower net outflows and as the surplus in the income account rose        
slightly. Exports of goods contracted by 16.2% and inflows in the services trade
account decreased by 20.7% due to lower travel receipts arising from perceived  
security concerns and the travel scare that followed the terrorist attacks in   
the United States. Imports of goods declined by 6.2%, and outflows in the       
services trade account declined by 16.1% due mainly to lower payments for       
freight (following the decline in merchandise imports). Foreign direct          
investments posted a sustained net inflow of $2.0 billion, compared to a $1.3   
billion net inflow in 2000. From a net outflow of $113 million in 2000,         
portfolio investments increased, posting a net inflow of $1.4 billion in 2001.  

    The Republic's balance of payments for the first quarter of 2002 yielded a
surplus of $2.2 billion. This was a reversal of the $512 million deficit        
recorded for the first quarter of 2001, which resulted due to turnaround in the 
capital and financial account from a net outflow to a net inflow and the        
substantial increase in the current account surplus.                            

     The current account surplus of $2.3 billion for the first three months 2002
resulted from higher net inflows in the income and goods accounts which more    
than offset the deficit in the services account. The net inflow in the income   
account of $1.3 billion during the period was nearly twice the amount of net    
inflow during                                                                   
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the same period in 2001, while the trade-in-goods account continued to be in    
surplus at $1.1 billion. Together with the reduced net outflow in the services  
account, these developments caused the current account surplus to increase by   
38.7% from the level realized in the same period in 2001.                       

  With the adoption of the BPM5 framework, the change in net international
reserves is not exactly equal to the balance of payments position. Under the new
format, the balance of payments position results from the change in net         
international reserves that is due solely to economic transactions, excluding   
the effects of revaluation of reserve assets and reserve-related liabilities,   
gold monetization and Special Drawing Rights allocation.                        

Current Account                                                             

Goods Trade                                                           

     Trading in goods significantly affects the Philippine economy. From 1997 to
2001, exports accounted for an average of approximately 41.4% of the country's  
GNP and imports accounted for an average of approximately 40.5% of GNP. The     
country's trade strategy emphasizes export promotion. The rapid expansion of    
export-oriented, labor-intensive manufacturing operations, such as electronics  
and textiles, drove total exports to $32.1 billion in 2001 and produced an      
average annual export growth rate of 16.8% from 1997 to 2001.                   

A significant proportion of exports, estimated at 40% to 50% in 2000, 
depends on imported raw materials or other inputs, rendering the country's      
exports vulnerable to any import decline resulting from a Peso depreciation. The
Government aims to reduce the importance of imports for producing the country's 
exports by implementing a number of different policies, including infrastructure
development and tariff reform.                                                  

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EXPORTS.  The following table sets out the country's exports by major 
commodity group.                                                                

MERCHANDISE EXPORTS BY SECTOR 

                                                        [Enlarge/Download Table]

                                                                                                 PERCENTAGE OF 
                                                                                                 TOTAL EXPORTS 
                                                                                  FIRST QUARTER  ------------- 
                                    1997     1998      1999      2000     2001        2002       1997    2001  
                                   -------  -------   -------   -------  -------  -------------  -----   ----- 
                                                   (IN MILLIONS)                                               
                                                                                                               
Manufactures                                                                                                   
  Electronics and electrical                                                                                   
    equipment/parts and                                                                                        
    telecommunications...........  $13,028  $17,137   $21,166   $22,179  $16,699     $4,323       51.6%   52.0%
  Garments.......................    2,349    2,356     2,267     2,563    2,403        483        9.3     7.5 
  Textile yarns/fabrics..........      299      242       219       249      226         56        1.2     0.7 
  Footwear.......................      194      147        86        76       73         11        0.8     0.2 
  Travel goods and handbags......      174      183       154       177      174         20        0.7     0.5 
  Wood manufactures..............      134      118       129       212      119         22        0.5     0.4 
  Furniture & fixtures...........      322      323       354       381      298         71        1.3     0.9 
  Chemicals......................      383      340       294       328      318         85        1.5     1.0 
  Non-metallic mineral                                                                                         
    manufactures.................      105      106       111       133      123         28        0.4     0.4 
  Machinery and transport                                                                                      
    equipment....................    2,685    3,316     4,950     5,909    6,136      1,654       10.6    19.1 
  Processed food and beverages...      346      306       256       267      337         79        1.4     1.0 
  Iron and steel.................       46       28        18        25       14          2        0.2     0.1 
  Baby carriages, toys, games and                                                                              
    sporting goods...............      203      169       158       165      145         26        0.8     0.5 
  Basketwork, wickerwork and                                                                                   
    other articles of plaiting                                                                                 
    materials....................       93       85        85        95       83         22        0.4     0.3 
  Miscellaneous manufactured                                                                                   
    articles, not elsewhere                                                                                    
    specified....................      209      202       212       229      220         50        0.8     0.7 
  Others.........................      892      785       850       997      974        239        3.5     3.0 
                                   -------  -------   -------   -------  -------     ------      -----   ----- 
    Total manufactures...........   21,462   25,843    31,309    33,985   28,342      7,171       85.1    88.2 
Agro-based products                                                                                            
  Coconut products...............      835      831       466       577      532        103        3.3     1.7 
  Sugar and sugar products.......       99      100        71        57       32         30        0.4     0.1 
  Fruits and vegetables..........      458      446       455       528      552        127        1.8     1.7 
  Others.........................      508      466       476       486      427         94        2.0     1.3 
                                   -------  -------   -------   -------  -------     ------      -----   ----- 
      Total agro-based                                                                                         
         products................    1,900    1,843     1,468     1,648    1,543        354        7.5     4.8 
Mineral products.................      762      592       646       650      537        115        3.0     1.7 
Petroleum products...............      258      129       216       436      242         64        1.0     0.8 
Forest products..................       45       24        20        44       23          4        0.2     0.1 
Others...........................      801    1,065     1,379     1,315    1,464        400        3.2     4.5 
                                   -------  -------   -------   -------  -------     ------      -----   ----- 
      Total......................  $25,228  $29,496   $35,038   $38,078  $32,150     $8,108      100.0%  100.0%
                                   =======  =======   =======   =======  =======     ======      =====   ===== 

---------------                                                                 
Source: National Statistics Office.                                             

 Exports of manufactured goods grew at an average rate of 18.9% per year
from 1997 to 2000. However in 2001 a decline of 16.6% was recorded. As a        
percentage of total exports, manufactured goods increased from 85.1% in 1997 to 
89.4% in 1999 before declining slightly to 89.3% in 2000 and declining further  
to 88.2% in 2001. Exports of electronics, electrical equipment and parts, and   
telecommunications equipment grew as a proportion of total exports at an average
rate of 56.1% from 1997 to 2001, reflecting increasing global demand for        
electronics products. During the same period, exports of garments as a          
proportion of total exports decreased from 9.3% in 1997 to 7.5% in 2001 because 
of increased international competition and a general decline in world-wide      
demand. Exports of agro-based products, including coconut products, sugar       
products, fruits and vegetables also declined considerably as a proportion of   
total exports from 7.5% in 1997 to 4.4% in 2000, and increased slightly to 4.8% 
in 2001. On the other hand, increased production helped exports of machinery and
transport equipment grow at an average annual rate of 30.7% from 1997 to 2000,  
but slowed to                                                                   

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3.8% in 2001. As a percentage of total exports machinery and transport grew from
10.6% in 1997 to 19.1% in 2001.                                                 

In 1997, total exports reached $25.2 billion, growing 22.8% from 1996.
Growth in exports of electronics, which constituted more than 50% of the total  
exports of goods, spurred the increased export activity in 1997. Exports        
increased despite a decline in shipments of garments, shrimp and prawns and     
copper. The rise in exports of light industry products in 1997 indicated the    
success of Government efforts to diversify the country's exports.               

  In 1998, total exports increased by 16.9% to $29.5 billion compared with
1997, less than the 24.6% increase in 1997 over 1996. The start-up of a number  
of new semiconductor and microprocessor factories boosted exports of            
semiconductors, the top export earner. The depreciation of the Peso helped      
exports and offset the adverse effects of the Asian financial crisis on a number
of the Republic's trading partners.                                             

     In 1999, total exports grew by 18.8% to $35.0 billion, an increase of 18.8%
over 1998. Electronics, machinery and transport equipment and garments were the 
leading export earners. Higher shipments of mineral products, fruits and        
vegetables and furniture and fixtures also contributed to the expansion of      
exports in 1999.                                                                

     In 2000, exports totalled $38.1 billion and accounted for 43.9% of the GNP.
Merchandise exports in 2000 grew by 8.7%. Among the merchandise exports,        
electronics maintained its position as the top earner and continued growing, but
at a decelerated rate of 4.8% in 2000 compared to 23.5% in 1999. Garments, the  
third top earner, had a 13.1% increase in 2000 after a 3.9% contraction in 1999.
Machinery and transport, the second top earner in 2000, experienced decelerated 
growth, from 49.3% in 1999 to only 19.8% in 2000. Merchandise exports during    
2000 amounted to $38 billion translating to an 8.7% growth, a deceleration from 
the 18.8% growth registered in 1999.                                            

    In 2001, exports declined by 15.6% to $32.1 billion. The decline reflected
the slump in demand by the country's leading trading partners, namely the US and
Japan, as well as the downtrend in demand in the information technology sector. 
Exports of semiconductor components experienced declines in both volume and     
price. All major commodity groups posted declines except fruits and vegetables, 
which registered a 4.7% modest growth. Electronics, machinery and transport     
equipment and garments remained the top three export commodities.               

     Exports for the first quarter of 2002 declined to $7.9 billion, or by 5.3%,
as compared to the same period in 2001, largely due to decreased shipments of   
manufactured goods, particularly electronics and garments. On the other hand,   
exports of machinery and transport equipment, processed food and beverages and  
sugar products increased relative to the same period in 2001. The year-on-year  
rate of contraction of exports has slowed considerably from the double-digit    
declines in 2001 to less than 1% in March 2002, mainly due to the marked        
deceleration in the rate of decline of electronics exports, the monthly         
year-on-year contraction for which was only 3.9% in March 2002 from a high of   
almost 39% in May 2001. The continued expansion in exports of machinery and     
transport also contributed to the relatively improved export performance. The   
leading export commodities during the first quarter of 2002 continued to be     
electronics, machinery and transport equipment and garments.                    

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 The following table sets out the destinations of the country's exports.

EXPORTS BY DESTINATION

                                                        [Enlarge/Download Table]

                                                                        PERCENTAGE OF                
                                                                        TOTAL EXPORTS                
                                                                        -------------   FIRST QUARTER
                         1997     1998      1999       2000     2001    1997    2001        2002     
                        -------  -------   -------   --------  -------  -----   -----   -------------
                                        (IN MILLIONS)                                                
                                                                                                     
United States.......... $ 8,815  $10,098   $10,446   $ 11,381  $ 8,979   34.9%   27.9%     $2,002    
Japan..................   4,192    4,232     4,660      5,606    5,054   16.6    15.7       1,259    
ASEAN countries(1).....   3,335    3,723     4,916      5,894    4,915   13.2    15.3       1,228    
United Kingdom.........   1,086    1,757     1,766      1,506      997    4.3     3.1         243    
Hong Kong SAR..........   1,171    1,326     1,947      1,907    1,580    4.7     4.9         468    
The Netherlands........   1,663    2,319     2,865      2,982    2,976    6.6     9.3         710    
Germany................   1,060    1,035     1,229      1,329    1,323    4.2     4.1         294    
Taiwan.................   1,169    1,757     2,993      2,845    2,127    4.6     6.6         616    
South Korea............     474      509     1,032      1,173    1,044    1.9     3.2         349    
People's Republic of                                                                                 
  China(2).............     244      344       575        663      793    1.0     2.5         269    
Others.................   2,018    2,396     2,609      2,792    2,362    8.0     7.4         670    
                        -------  -------   -------   --------  -------  -----   -----      ------    
          Total........ $25,228  $29,496   $35,038   $ 38,078  $32,150  100.0%  100.0%     $8,108    
                        =======  =======   =======   ========  =======  =====   =====      ======    

---------------                                                                 

Source: Foreign Trade Statistics, National Statistics Office.                   

(1) Includes only Brunei, Indonesia, Malaysia, Singapore and Thailand.          

(2) Excludes Hong Kong SAR.                                                     

     The United States, Japan and ASEAN countries are currently the Philippines'
largest export markets. In 2001, the United States accounted for 27.9% and the  
ASEAN countries accounted for 15.3% of total exports. Japan, historically the   
second largest market for Philippines exports, accounted for 15.7% of total     
exports in 2001.                                                                

     The United States absorbed, on average, 32.2% of total exports from 1997 to
2000 and 27.9% in 2001. Japan accounted for, on average, 14.9% of Philippine    
exports from 1997 to 2001. Recognizing the danger of over-reliance on so few    
export markets, the country has attempted to increase its exports to other      
countries, particularly ASEAN countries. The Republic is a party to the ASEAN   
Free Trade Agreement that provides for the implementation of the common         
effective preferential tariff that will reduce tariffs among ASEAN nations by   
2008 to between 0% and 5% for all manufactured goods and non-sensitive          
agricultural and processed agricultural products. Additional activities to      
support the free trade area include plans for intra-regional investments,       
industrial linkages and banking and financial integration.                      

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IMPORTS.  The following table sets out the country's imports by major 
commodity group.                                                                

IMPORTS BY COMMODITY GROUP

                                                        [Enlarge/Download Table]

                                                                                              PERCENTAGE OF  
                                                                                              TOTAL IMPORTS  
                                                                               FIRST QUARTER  -------------- 
                              1997       1998       1999      2000     2001        2002       1997     2001  
                             -------    -------    -------   -------  -------  -------------  -----    ----- 
                                               (IN MILLIONS)                                                 
                                                                                                             
Raw materials and                                                                                            
  intermediate goods                                                                                         
Unprocessed raw                                                                                              
  materials(1).............. $ 1,645    $ 1,168    $ 1,518   $ 1,337  $ 1,368     $  335        4.5%     4.6%
Semi-processed raw                                                                                           
  materials(2)..............  12,989     10,416     11,083    10,724   10,068      2,507       35.7     34.1 
                             -------    -------    -------   -------  -------     ------      -----    ----- 
  Total raw materials and                                                                                    
    intermediate goods...... $14,634    $11,584     12,601    12,061   11,436      2,842       40.2     38.7 
Capital goods...............  14,369     12,051     11,827    12,162   11,463      2,857       39.5     38.8 
Consumer goods                                                                                               
  Durable...................   1,516        901      1,093     1,070      947        207        4.2      3.2 
  Non-durable...............   1,575      1,722      1,549     1,452    1,536        325        4.3      5.2 
                             -------    -------    -------   -------  -------     ------      -----    ----- 
    Total consumer goods.... $ 3,091    $ 2,623      2,642     2,523    2,483        532        8.5      8.4 
Mineral fuels and                                                                                            
  lubricants................   3,074      2,020      2,433     3,877    3,373        619        8.5     11.4 
Others......................   1,187      1,246      1,239       765      796        234        3.3      2.7 
                             -------    -------    -------   -------  -------     ------      -----    ----- 
  Total..................... $36,355(3) $29,524(4) $30,742   $31,388  $29,551     $7,084      100.0%   100.0%
                             =======    =======    =======   =======  =======     ======      =====    ===== 

---------------                                                                 

Source: National Statistics Office.                                             

(1) Includes wheat, corn, unmilled cereals excluding rice and corn, inedible    
crude materials and unmanufactured tobacco.                             

(2) Includes chemicals and chemical compounds, manufactured goods that are not  
  capital or consumer goods, materials for the manufacture of electrical and
electronic equipment and parts and embroideries.                        

(3) Excludes the value of aircraft amounting to $45 million procured under      
    operating lease arrangements and includes the value of aircraft amounting to
$466 million procured under capital lease arrangements.                 

(4) Excludes the value of aircraft amounting to $136 million procured under     
operating lease arrangements.                                           

  Imports declined by 18.8% from 1997 to 1998 before increasing by 4.1% in
1999 and 2.0% in 2000. In 2001, imports declined by 5.8%, reflecting weak       
domestic demand. Raw materials and intermediate goods needed to manufacture     
electrical and electronic equipment and parts accounted for, on average,        
approximately 39.5% of total imports from 1997 to 2001. Imports of mineral fuels
and lubricants, which accounted for 8.5% of total imports in 1997, constituted  
11.4% of imports in 2001.                                                       

     In 1997, imports grew to $36.4 billion spurred on by the continued strength
of the Philippine economy. Imports of capital goods, particularly               
telecommunications equipment and electrical machinery, aircraft, office and     
electric data machines, as well as raw materials and intermediate goods,        
supported investment growth in the economy.                                     

In 1998, weakening demand because of the economic slowdown and the    
depreciation of the Peso forced imports down 18.8% to $29.5 billion, compared   
with $36.4 billion for 1997. Lower imports of machinery transport equipment,    
partly due to Philippine Airlines' financial difficulties and temporary closure,
fertilizers and artificial resins led the decline. A number of exporters        
decreased their imports and elected instead to draw down their inventories to   
alleviate the impact of the weak Peso, also hurting overall imports.            

  In 1999, imports totalled $30.7 billion. This represented an increase of
4.1% from imports for 1998. The increase was due mainly to an increase in       
imports of electronics and components, minerals, fuel and lubricants. Imports in
December 1999 increased by 28.7% compared to December 1998, the highest monthly 
growth in imports in three and a half years.                                    

In 2000, imports increased by 2.1% to $31.4 billion compared to a 4.1%
increase in 1999. The growth was due to higher imports of capital goods which   
rose by 2.8%, as well as the increase in imports of mineral fuel                

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and lubricants which grew by 59.3% following the hike in the average price of   
petroleum crude to $27.89 per barrel, compared to $16.31 per barrel in 1999.    

In 2001, imports fell by 5.9% to $28.5 billion, a reversal of the 3.8%
increase registered in 2000. This decline resulted primarily from the reduction 
in imports of raw materials and intermediate goods and capital goods used for   
exports and domestic production as well as the reduced appetite for foreign-made
goods as a result of the weak Peso. Except for the months of April to June,     
imports were down, with November posting the largest year-on-year contraction at
23.6%. However, the decline in imports appeared to be bottoming out as December 
imports fell by only 4.2%. All major commodity groups except for special        
transactions posted downtrends, with imports of mineral fuels and lubricants    
registering the highest drop at 13.0%.                                          

 Imports continued to show signs of recovery during the first quarter of
2002, expanding by 10% in March, after exhibiting consecutive declines since    
July 2001. This tempered the first quarter import contraction to 2.6%. Total    
imports amounted to $7.1 billion during the first quarter of 2002. Increases in 
imports were noted in capital goods and raw materials and intermediate goods,   
particularly materials and accessories for the manufacture of electrical        
equipment.                                                                      

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 The following table sets out the sources of the Philippines' imports by
country.                                                                        

IMPORTS BY SOURCE 

                                                        [Enlarge/Download Table]

                                                                                                PERCENTAGE OF 
                                                                                                    TOTAL     
                                                                                                   IMPORTS    
                                                                                 FIRST QUARTER  ------------- 
                                  1997(1)  1998(1)    1999      2000     2001        2002       1997    2001  
                                  -------  -------   -------   -------  -------  -------------  -----   ----- 
                                                  (IN MILLIONS)                                               
                                                                                                              
Japan............................ $ 7,414  $ 6,029   $ 6,138   $ 6,027  $ 6,098     $1,462       20.4%   20.6%
United States....................   7,154    6,562     6,365     5,323    4,991      1,441       19.7    16.9 
ASEAN countries(2)...............   4,605    4,050     4,242     4,746    4,658      1,117       12.7    14.8 
Hong Kong SAR....................   1,549    1,300     1,225     1,217    1,259        326        4.3     4.3 
Saudi Arabia.....................   1,058      606       810     1,048      887        102        2.9     3.0 
Taiwan...........................   1,808    1,415     1,614     1,948    1,607        345        5.0     5.4 
South Korea......................   2,182    2,190     2,721     2,350    1,950        597        6.0     6.6 
Australia........................     955      683       747       816      645        118        2.6     2.2 
Germany..........................   1,180      812       800       734      734        156        3.2     2.5 
People's Republic of China(3)....     872    1,198     1,039       768      953        233        2.4     3.2 
Others...........................   7,578    4,679     5,025     6,411    5,769      1,187       20.8    20.5 
                                  -------  -------   -------   -------  -------     ------      -----   ----- 
  Total.......................... $36,355  $29,524   $30,724   $31,388  $29,551     $7,084      100.0%  100.0%
                                  =======  =======   =======   =======  =======     ======      =====   ===== 

---------------                                                                 

Source: Foreign Trade Statistics, National Statistics Office.                   

(1) Foreign trade statistics were adjusted to exclude aircraft procured under   
  operational lease arrangements to conform with the new balance of payments
framework.                                                              

(2) Includes only Brunei, Indonesia, Malaysia, Singapore and Thailand.          

(3) Excludes Hong Kong SAR.                                                     

   From 1997 to 2001, an average of 39.4% of the country's imports came from
Japan (20.1%) and the United States (19.3%). In 2001, Japan accounted for 20.6% 
and the United States 16.9% of total imports. The Philippines increased its     
imports from the ASEAN countries from 12.7% of total imports in 1997 to 14.8% in
2001. The country also imported from South Korea, Taiwan, Hong Kong and Saudi   
Arabia. For the first two months of 2002, imports from Japan decreased by 0.9%  
to 17.7% compared to the first two months of 2001, while those from the United  
States increased by 2.4% to 20.6% of total imports. The Republic's imports from 
the ASEAN countries increased at 16% from 14.4% of the same period last year    
while those from other countries remained relatively unchanged.                 

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The following table sets out the country's services trade by sector   
compiled in accordance with the BPM5 framework for the periods indicated.       

SERVICES TRADE

                                                        [Enlarge/Download Table]

                                                                                     FIRST QUARTER
                                                        1999      2000      2001         2002     
                                                       -------   -------   -------   -------------
                                                                      (IN MILLIONS)               
                                                                                                  
Total services trade.................................. $(2,712)  $(2,112)  $(1,939)     $ (224)   
  Exports.............................................   4,803     3,972     3,151         779    
  Imports.............................................   7,515     6,084     5,090       1,003    
Transportation........................................  (1,369)   (1,785)   (1,666)       (291)   
  Exports.............................................     575       891       659         161    
  Imports.............................................   1,944     2,676     2,325         452    
  of which: Passenger.................................    (117)      (73)     (236)        (57)   
     Exports..........................................      15       243        99          19    
     Imports..........................................     132       316       335          76    
  of which: Freight...................................  (1,167)   (1,638)   (1,361)       (214)   
     Exports..........................................     428       481       380         120    
     Imports..........................................   1,595     2,119     1,741         334    
  of which: Other.....................................     (85)      (74)      (69)        (20)   
     Exports..........................................     132       167       180          22    
     Imports..........................................     217       241       249          42    
Travel................................................   1,246     1,129       499         257    
  Exports.............................................   2,554     2,134     1,723         479    
  Imports.............................................   1,308     1,005     1,224         222    
Communication services................................    (307)      (79)      115          27    
  Exports.............................................     424       182       330          54    
  Imports.............................................     731       261       215          27    
Construction services.................................    (108)      (27)     (234)        (69)   
  Exports.............................................      58        97        64           5    
  Imports.............................................     166       124       298          74    
Insurance services....................................     (30)      (90)      (68)        (55)   
  Exports.............................................      51        66        48           6    
  Imports.............................................      81       156       116          61    
Financial services....................................    (250)     (389)      (41)         (6)   
  Exports.............................................      67        80        34           8    
  Imports.............................................     317       469        75          14    
Computer and information services.....................     (38)      (18)      (61)        (11)   
  Exports.............................................      57        76        22           4    
  Imports.............................................      95        94        83          15    
Royalties and license fees............................    (104)     (190)     (157)        (39)   
  Exports.............................................       6         7         1           0    
  Imports.............................................     110       197       158          39    
Other business services...............................  (1,672)     (595)     (318)        (40)   
  Exports.............................................     929       359       219          54    
  Imports.............................................   2,601       954       537          94    
  Merchanting and other trade-related services........    (230)     (200)       16          10    
     Exports..........................................     186        59        24          11    
     Imports..........................................     416       259         8           1    

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                                                        [Enlarge/Download Table]

                                                                                     FIRST QUARTER
                                                        1999      2000      2001         2002     
                                                       -------   -------   -------   -------------
                                                                      (IN MILLIONS)               
                                                                                                  
  Operational leasing services........................     (47)      (58)      (61)         (7)   
     Exports..........................................      15        23        10           0    
     Imports..........................................      62        81        71           7    
  Misc. business, professional and technical                                                      
     services.........................................  (1,395)     (337)     (123)        (43)   
     Exports..........................................     728       277       185          43    
     Imports..........................................   2,123       614       458          86    
Personal, cultural and recreational services..........     (81)      (87)      (42)         (3)   
  Exports.............................................      58        43        15           1    
  Imports.............................................     139       130        57           4    
  Audio-visual and related services...................      (3)       (9)      (10)         (3)   
     Exports..........................................      14        15         6           1    
     Imports..........................................      17        24        16           4    
  Other personal, cultural and recreational                                                       
     services.........................................     (78)      (78)      (32)          0    
     Exports..........................................      44        28         9           0    
     Imports..........................................     122       106        41           0    
Government services, n.i.e. ..........................       1        19        34           6    
  Exports.............................................      24        37        36           7    
  Imports.............................................      23        18         2           1    

---------------                                                                 

Source: Bangko Sentral.                                                         

   In 1997, receipts from the services trade totalled $22.8 billion, growing
from 13.5% of GNP in 1993 to 26.6%. Increasing receipts from overseas Filipino  
workers and Peso conversions of foreign currency deposits contributed to the    
growth in the service receipts. Payments for services grew from approximately   
9.0% of GNP in 1993 to 20% in 1997, when payments totalled $17.1 billion.       
Greater trade and travel-related outflows spurred the increase in service       
payments. Freight and merchandise insurance payments and investment expenses    
also increased significantly.                                                   

 In 1998, service receipts declined by 39.1% from their 1997 levels, and
service payments fell 25.4% compared with the 1997 levels, principally as a     
result of the regional economic decline. Total services receipts declined in    
1998 principally because of declining receipts from Peso conversion of foreign  
currency deposits and lower investment income during the year. Services payments
also declined because of the significant decline in other services disbursements
reported by commercial banks.                                                   

In 1999, under the BPM5 framework, the services account recorded a net
outflow of $2.7 billion following higher service payments. Net outflows were    
noted in transportation, communication, construction, insurance, financial,     
computer and information, royalties and license fees, and other personal,       
cultural and recreational services with the exception of travel services which  
recorded a net inflow of $1.2 billion.                                          

  For 2000, the services account, under the BPM5 framework, recorded a net
outflow of $2.11 billion, 22.0% lower than the net outflow of $2.7 billion in   
1999. This development was due to lower net outflows in communication,          
construction, miscellaneous business, professional and technical services,      
computer and information and other trade-related services.                      

 For 2001, under the BPM5 framework, the services trade account posted a
deficit of $1.94 billion, 8% lower than the $2.11 billion deficit recorded last 
year. This year's deficit was brought about by decreased inflows from passenger 
and travel services. However, the reduction in the deficit from last year was   
due mainly to the lower net outflows in freight following the decline in good   
imports, royalties and fees, financial services and other business services. The
reversal in communication services account to a net inflow from a net outflow   
also contributed to the narrower deficit.                                       

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     During the first quarter of 2002, the services trade account under the BPM5
framework posted a deficit of $224 million, comparing favorably with the $494   
million deficit recorded in the same period in 2001. The 54.7% reduction of the 
deficit was brought about largely by lower net outflows for transportation      
services and the higher net inflow from travel. The lower net outflow for       
transportation services was a result of the reduced payment for freight         
following the contraction in merchandise imports. However, the net inflow from  
travel services accelerated by 26.0% to $257 million from the previous year's   
period due to a higher rate of decline in travel payments relative to that of   
travel receipts.                                                                

   The following table sets out the Republic's income compiled in accordance
with the BPM5 framework for the periods indicated. Prior to the adoption of the 
BPM5 framework, income was included in services trade. Entries with "zero"      
balances indicate either that there are no relevant transactions during the     
period or that the Republic has not yet begun to track and record the relevant  
entry.                                                                          

INCOME

                                                        [Enlarge/Download Table]

                                                                                   FIRST QUARTER
                                                      1999      2000      2001         2002     
                                                     -------   -------   -------   -------------
                                                                    (IN MILLIONS)               
                                                                                                
Total income........................................ $ 4,604   $ 3,216   $ 3,350     $   1,331  
  Receipts..........................................   8,082     7,804     7,446         2,200  
  Disbursements.....................................   3,478     4,588     4,096           869  
Compensation of employees, incl. border, seasonal                                               
  and other workers.................................   6,794     6,050     6,325         1,964  
  Receipts..........................................   6,794     6,050     6,325         1,964  
  Disbursements.....................................       0         0         0             0  
Investment income...................................  (2,190)   (2,834)   (2,975)         (633) 
  Receipts..........................................   1,288     1,754     1,121           236  
  Disbursements.....................................   3,478     4,588     4,096           869  
  Direct investment income..........................    (772)     (802)   (1,150)         (183) 
     Receipts.......................................      63       163        10            11  
     Disbursements..................................     835       965     1,160           194  
     Income on equity...............................    (718)     (819)   (1,143)         (182) 
       Receipts.....................................      35        57        10            11  
       Disbursements................................     753       876     1,153           193  
       Dividends and distributed branch profits.....    (184)     (240)     (654)          (62) 
          Receipts..................................      35        57        10            11  
          Disbursements.............................     219       297       664            73  
       Reinvested earnings and undistributed branch                                             
          profits...................................    (534)     (579)     (489)         (120) 
          Receipts..................................       0         0         0             0  
          Disbursements.............................     534       579       489           120  
     Income on debt (interest)......................     (54)       17        (7)           (1) 
       Receipts.....................................      28       106         0             0  
       Disbursements................................      82        89         7             1  
  Portfolio investment income.......................    (607)     (445)     (545)          (72) 
     Receipts.......................................     451       645       634           165  
     Disbursements..................................   1,058     1,090     1,179           237  
     Income on equity (dividends)...................     (22)       (8)      (23)           (2) 
       Receipts.....................................      16         8         6             0  
       Disbursements................................      38        16        29             2  

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                                                        [Enlarge/Download Table]

                                                                              FIRST QUARTER
                                                 1999      2000      2001         2002     
                                                -------   -------   -------   -------------
                                                               (IN MILLIONS)               
                                                                                           
  Monetary authorities.........................       0         0         0             0  
     Receipts..................................       0         0         0             0  
     Disbursements.............................       0         0         0             0  
  General government...........................       0         0         0             0  
     Receipts..................................       0         0         0             0  
     Disbursements.............................       0         0         0             0  
  Banks........................................       0         0         0             0  
     Receipts..................................       0         0         0             0  
     Disbursements.............................       0         0         0             0  
  Other sectors................................     (22)       (8)      (23)           (2) 
     Receipts..................................      16         8         6             0  
     Disbursements.............................      38        16        29             2  
Income on debt (interest)......................    (585)     (437)     (522)          (70) 
  Receipts.....................................     435       637       628           165  
  Disbursements................................   1,020     1,074     1,150           235  
  Bonds and notes..............................    (525)     (429)     (554)          (76) 
     Receipts..................................     430       621       584           159  
     Disbursements.............................     955     1,050     1,138           235  
     Monetary authorities......................     180       305       303          (110) 
       Receipts................................     266       443       417           123  
       Disbursements...........................      86       138       114            13  
     General government........................    (501)     (469)     (516)         (127) 
       Receipts................................       0         0       126            26  
       Disbursements...........................     501       469       642           153  
     Banks.....................................      35         0         0             0  
       Receipts................................      35         0         0             0  
       Disbursements...........................       0         0         0             0  
     Other sectors.............................    (239)     (265)     (341)          (59) 
       Receipts................................     129       178        41            10  
       Disbursements...........................     368       443       382            69  
  Money market instruments.....................     (60)       (8)       32             6  
     Receipts..................................       5        16        44             6  
     Disbursements.............................      65        24        12             0  
     Monetary authorities......................      (6)       (5)        0             0  
       Receipts................................       0         0         0             0  
       Disbursements...........................       6         5         0             0  
     General government........................       0         0         0             0  
       Receipts................................       0         0         0             0  
       Disbursements...........................       0         0         0             0  
     Banks.....................................       0         0         0             0  
       Receipts................................       0         0         0             0  
       Disbursements...........................       0         0         0             0  
     Other sectors.............................     (54)       (3)       32             6  
       Receipts................................       5        16        44             6  
       Disbursements...........................      59        19        12             0  

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                                                        [Enlarge/Download Table]

                                                                            FIRST QUARTER
                                               1999      2000      2001         2002     
                                              -------   -------   -------   -------------
                                                             (IN MILLIONS)               
                                                                                         
Other investment income......................    (811)   (1,587)   (1,280)         (378) 
   Receipts..................................     774       946       477            60  
   Disbursements.............................   1,585     2,533     1,757           438  
   Monetary authorities......................     135       184       (91)           40  
     Receipts................................     313       472       232            34  
     Disbursements...........................     178       288       323            74  
   General government........................    (795)   (1,462)     (659)         (208) 
     Receipts................................       0         0         0             0  
     Disbursements...........................     795     1,462       659           208  
   Banks.....................................     187       161      (102)          (38) 
     Receipts................................     382       397       206            25  
     Disbursements...........................     195       236       308            63  
   Other sectors.............................    (338)     (470)     (428)          (92) 
     Receipts................................      79        77        39             1  
     Disbursements...........................     417       547       467            93  

    The income account posted a surplus of $3.2 billion in 2000, down by 30.2%
from $4.6 billion in 1999. Negating the impact of increasing interest payments  
were income from investments abroad and continuing inflows of remittances from  
overseas Filipino workers.                                                      

In 2001, the income account continued to be in surplus totaling $3,350
million, which was 4.2% higher than the 2001 surplus of $3,216 million. This    
increase was due mainly to the increase in remittances from overseas Filipino   
workers ("OFW"). The 4.5% increase in OFW remittances was attributed mainly to  
the expanded coverage of the OFW monitoring system, which, now includes foreign 
exchange corporations and thrift banks. The net outflow in the investment income
account rose by 5.0% to $2,975 million as falling global interest rates had a   
greater impact on investment income (particularly interest income on placements 
in portfolio and other investments) than on interest repayments. Disbursements  
mainly consisted of divided repatriation and interest payments on loans.        

   During the first quarter of 2002, the income account yielded a surplus of
$1.3 billion, 91.2% higher than the surplus of $696 million during the same     
period in 2001. The increase was due to higher remittances from OFWs of $2.0    
billion from $1.4 billion in the same period or an annual increase of 38.0%.    
Remittances from OFWs comprised about 89% of gross income receipts. The bulk of 
OFW remittances came from the U.S., Saudi Arabia, Japan, Hong Kong and          
Singapore. The Government expects that OFW remittances will continue to be a    
major source of foreign exchange as it continues to promote Filipino skills in  
new markets as well as in other professional fields.                            

Capital and Financial Account                                               

Foreign Investments                                                   

The Philippines monitors investment flows into and out of the country,
keeping track of direct and portfolio investments by non-residents in the       
Philippines and by Filipino residents abroad. Direct investments are the        
category of international investment in which a resident entity in one economy  
obtains a lasting interest in an enterprise resident in another economy. A      
direct investment is established when a resident in one economy owns 10% or more
of the ordinary shares or voting power of an incorporated enterprise or the     
equivalent of an unincorporated enterprise in another economy. Portfolio        
investments include investments in equity and debt securities, that is, bonds,  
notes and money market instruments, and financial derivatives. The essential    
characteristic of instruments classified as portfolio investments is that they  
are traded or tradable.                                                         

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   The following table sets out the foreign investment flows into and out of
the Philippines by type for the periods indicated. Entries with "zero" balances 
indicate either that there are no relevant transactions during the period or    
that the Republic has not yet begun to track and record the relevant entry.     

FOREIGN INVESTMENTS 

                                                        [Enlarge/Download Table]

                                          1996      1997      1998       1999      2000      2001   
                                         -------   -------   -------   --------   -------   ------- 
                                                               (IN MILLIONS)                        
                                                                                                    
Non-resident investments in the                                                                     
  Philippines                                                                                       
  Direct investments                                                                                
     Placements                                                                                     
       New foreign investments in the                                                               
          Philippines................... $ 1,074   $ 1,073   $ 1,631   $  1,241   $ 1,207   $   697 
       Reinvested earnings..............      44        56        85        534       579       488 
       Technical fees and others                                                                    
          converted to equity...........       0         0         0         26         2         0 
       Bond conversions.................     277       114        36          0         0         0 
       Imports converted into                                                                       
          investments...................       0         6         0          0         0         0 
       Others...........................     125         0         0          0         0         0 
     Withdrawals(1).....................       0         0         0       (122)     (185)      (69)
                                         -------   -------   -------   --------   -------   ------- 
  Total direct investments..............   1,520     1,249     1,752      1,679     1,603     1,116 
                                         =======   =======   =======   ========   =======   ======= 
  Portfolio investments                                                                             
     Placements.........................   6,687     6,947     4,297     15,490     3,704     1,486 
     Withdrawals........................  (4,586)   (7,353)   (4,033)   (14,080)    3,887     1,103 
                                         -------   -------   -------   --------   -------   ------- 
  Total portfolio investments...........   2,101      (406)      264      1,410      (183)      383 
                                         =======   =======   =======   ========   =======   ======= 
  Total non-resident investments in the                                                             
     Philippines(2).....................   3,621       843     2,016      3,089     1,420     1,499 
                                         =======   =======   =======   ========   =======   ======= 
Less Resident Investments Abroad                                                                    
  Direct investments                                                                                
     Placements                                                                                     
     Residents' investments abroad......     182       136       160         63        46        33 
     Withdrawals........................       0         0         0       (108)     (141)     (195)
                                         -------   -------   -------   --------   -------   ------- 
  Total direct investments..............     182       136       160        (45)      (95)     (162)
                                         =======   =======   =======   ========   =======   ======= 
  Portfolio investments                                                                             
     Placements.........................     119       184       184        788     1,866     4,080 
     Withdrawals........................    (197)     (239)        0       (300)   (1,417)   (4,022)
                                         -------   -------   -------   --------   -------   ------- 
  Total portfolio investments...........     (78)      (55)      184        488       449        58 
                                         =======   =======   =======   ========   =======   ======= 
  Other investments(3)..................      --        --        --      1,317       177       589 
                                         =======   =======   =======   ========   =======   ======= 
Total resident investments abroad.......     104        81       344      1,760       531       485 
                                         =======   =======   =======   ========   =======   ======= 
Total foreign investments, net.......... $ 3,517   $   762   $ 1,672   $  1,329   $   889   $   771 
                                         =======   =======   =======   ========   =======   ======= 

---------------                                                                 

Source: Bangko Sentral.                                                         

(1) Non-resident withdrawals of direct investments include capital recovery     
under the build-operate-transfer scheme.                                

(2) Excludes net flows arising from the trading of Philippine debt papers in the
secondary market abroad.                                                

(3) Includes residents' deposits in banks abroad. For the 1996 to 1998 period,  
other investments were not separately tracked.                          

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  After the implementation of the BPM5 framework, the Financial Account is
now divided into three categories: direct investments, portfolio investments and
other investments. The following table sets out the Republic's direct           
investments compiled in accordance with the BPM5 framework for the periods      
indicated. Entries with "zero" balances indicate either that there are no       
relevant transactions during the period or that the Republic has not yet begun  
to track and record the relevant entry.                                         

DIRECT INVESTMENTS

                                                        [Enlarge/Download Table]

                                                                                      FIRST QUARTER
                                                          1999      2000      2001        2002     
                                                         -------   -------   ------   -------------
                                                                       (IN MILLIONS)               
                                                                                                   
Total direct investments................................ $   608   $ 1,348   $1,953    $    1,224  
                                                         =======   =======   ======    ==========  
Assets: Residents' investments abroad...................     (30)     (107)    (161)           13  
  Equity capital........................................     (45)      (95)    (162)           12  
     Claims on affiliated enterprises...................     (45)      (95)    (162)           12  
       Placements.......................................      63        46       33            12  
       Withdrawals......................................     108       141      195             0  
     Liabilities to affiliated enterprises..............       0         0        0             0  
  Reinvested earnings...................................       0         0        0             0  
  Other capital.........................................      15       (12)       1             1  
Liabilities: Non-residents' investments in the                                                     
  Philippines...........................................     578     1,241    1,792         1,237  
  Equity capital........................................   1,145     1,024      628           662  
     Liabilities to direct investors....................   1,145     1,024      628           662  
       Placements.......................................   1,267     1,209      697           666  
       Withdrawals......................................     122       185       69             4  
  Reinvested earnings...................................     534       579      488           120  
  Other capital.........................................  (1,101)     (362)     676           455  
     Claims on direct investors.........................       0         0        0             0  
     Liabilities to direct investors....................  (1,101)     (362)     676           455  

---------------                                                                 

Source: Bangko Sentral.                                                         

(1) Preliminary.                                                                

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    The following table sets out the Republic's portfolio investments compiled
in accordance with the BPM5 framework for the periods indicated. Entries with   
"zero" balances indicate either that there are no relevant transactions during  
the period or that the Republic has not yet begun to track and record the       
relevant entry.                                                                 

PORTFOLIO INVESTMENTS 

                                                        [Enlarge/Download Table]

                                                                                     FIRST QUARTER
                                                          1999     2000      2001        2002     
                                                         -------  -------   ------   -------------
                                                                      (IN MILLIONS)               
                                                                                                  
Total portfolio investments............................. $ 6,064  $  (113)  $1,399     $   1,511  
                                                         =======  =======   ======     =========  
Assets: Residents' investments abroad...................     586      806     (234)          271  
  Equity securities.....................................      55       42        4             0  
     Placements.........................................      75      219        4             0  
     Withdrawals........................................      20      177        0             0  
  Debt securities.......................................     531      764     (238)          271  
     Banks..............................................      98      357     (292)          270  
     Other sectors......................................     433      407       54             1  
       Placements.......................................     713    1,647    4,076           505  
       Withdrawals......................................     280    1,240    4,022           504  
  Money-market instruments..............................       0        0        0             0  
  Financial derivatives.................................       0        0        0             0  
Liabilities: Non-residents' investments in the                                                    
  Philippines...........................................   6,650      693    1,165         1,782  
  Equity securities.....................................   1,410     (183)     383           122  
     Placements.........................................  15,490    3,704    1,486           396  
     Withdrawals........................................  14,080    3,887    1,103           274  
  Debt securities.......................................   5,240      876      782         1,660  
     Monetary authorities...............................   1,158       88      (47)          227  
     General Government.................................   2,912    2,223      944         1,675  
     Banks..............................................       0        0        0             0  
     Other sectors......................................   1,170   (1,435)    (115)         (242) 
  Money-market instruments..............................       0        0        0             0  
  Financial derivatives.................................       0        0        0             0  

---------------                                                                 

Source: Bangko Sentral.                                                         

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  The following table sets out the country's other investments compiled in
accordance with the BPM5 framework for the periods indicated. Entries with      
"zero" balances indicate either that there are no relevant transactions during  
the period or that the Republic has not yet begun to track and record the       
relevant entry.                                                                 

OTHER INVESTMENTS 

                                                        [Enlarge/Download Table]

                                                                                          FIRST  
                                                                                         QUARTER 
                                                            1999      2000      2001      2002   
                                                           -------   -------   -------   ------- 
                                                                       (IN MILLIONS)             
                                                                                                 
Total other investments................................... $(8,467)  $(7,742)  $(7,179)  $(2,374)
                                                           =======   =======   =======   ======= 
Assets: Residents' investments abroad.....................  18,647    15,311    13,893     3,579 
  Trade credits(1)........................................  16,381    17,401    13,770     3,185 
  Loans(2)................................................     262    (1,309)      830      (297)
  Currency and deposits...................................   2,278      (757)     (508)      841 
     Banks................................................     961      (934)   (1,097)      530 
     Other sectors........................................   1,317       177       589       311 
  Other assets(3).........................................    (274)      (24)     (199)     (150)
Liabilities: Non-residents' investments in the                                                   
  Philippines.............................................  10,180     7,569     6,714     1,205 
  Trade credits(1)........................................   9,958     7,157     7,499     1,325 
  Loans...................................................     575       354      (225)      102 
     Monetary authorities.................................       0        51       171        (2)
       Drawings(4)........................................       0       105       177         0 
       Repayments(4)......................................       0        54         6         2 
     General Government...................................     340      (125)      (78)        6 
       Drawings(4)........................................   1,465       933       826       243 
       Repayments(4)......................................   1,125     1,058       904       237 
     Banks(6).............................................     626      (250)     (647)      143 
     Other sectors........................................    (391)      678       329       (45)
       Long-term..........................................    (494)      952       686      (119)
          Drawings........................................   2,610     2,428     2,848       311 
          Repayments......................................   3,104     1,476     2,162       430 
       Short-term.........................................     103      (274)     (357)       74 
  Currency and deposits(6)................................    (466)     (120)     (340)     (195)
  Other Liabilities(7)....................................     113       178      (220)      (27)

---------------                                                                 

Source: Bangko Sentral.                                                         

(1) All trade credits are short-term credits in non-governmental sectors.       

(2) All loans are short-term bank loans.                                        

(3) All other assets are short-term bank assets.                                

(4) Long-term loans.                                                            

(5) Short-term loans.                                                           

(6) All bank currency and deposits.                                             

(7) All short-term bank liabilities.                                            

   Domestic macroeconomic policies and structural reforms have significantly
affected the flow of foreign investment into the Philippines. The Foreign       
Investment Act of 1991, as amended, introduced a more favorable investment      
environment to the Philippines. The act permits foreigners to own 100% of       
Philippine enterprises, except in certain specified areas included in a         
"negative list" with respect to which the                                       

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Constitution or applicable statute limits foreign ownership, generally to a     
maximum of 40% of the enterprise's equity capital. The Constitution also        
prohibits foreign ownership in certain sectors, such as the media.              

 From 1994 to 1996, improvements in macroeconomic conditions resulted in
growth in production, declining inflation rates, lower interest rates, a stable 
exchange rate and an improved external payments position, including a rising    
level of international reserves, all of which encouraged foreign investment. In 
1996, the country's net foreign investment surplus grew 118.6% to $3.5 billion  
as residents' investments abroad declined 92.2% to $104 million and             
non-residents' investments in the country rose 23%. New foreign investments in  
the country fell 17.4% to $1.1 billion.                                         

     In January 1997, Bangko Sentral attempted to enhance the investment climate
by lifting the limits on domestic borrowing by foreign firms. Beginning in      
mid-1997, however, due to the regional economic crisis, production dropped,     
interest rates climbed, the Peso depreciated, the balance of payments position  
deteriorated and international reserves fell, leading to a flight of capital    
from the country. In 1997, the country's net foreign investment surplus fell    
78.3% to $762 million. Non-residents investments in the Philippines dropped     
76.7% as portfolio investment withdrawals climbed 60.3%, creating a portfolio   
investments deficit of $406 million. Total resident investments abroad fell     
22.1% from 1996. New foreign investments in the Philippines remained virtually  
unchanged from 1996.                                                            

 In 1998, net investment inflows increased significantly to $1.7 billion
compared with $762 million recorded in 1997. New foreign direct investments in  
the Philippines grew 52% to $1.6 billion, compared with $1.1 billion in 1997.   

In 1999, net investment inflows declined by 20.5% to $1,329 million   
compared to 1998. New foreign direct investments declined by 23.9% to $1.2      
billion, compared with $1.6 billion for 1998. In 1999, under the BPM5 framework,
a net outflow of $1.8 billion was registered in the capital and financial       
account due to the net outflow of $9.5 billion in the other investment accounts.
The continued inflows of direct and portfolio investments, on the other hand,   
cushioned the impact of these outflows.                                         

    In 2000, under the BPM5 framework the net outflow in the financial account
reached $6.5 billion, an increase of 262.5% from the net outflow of $1.8 billion
recorded in 1999. However, sustained net inflows of both direct and portfolio   
investments mitigated the contraction in the financial account. This developed  
due to the net outflows posted in the portfolio and other investment accounts.  

    In 2001, the financial account registered a net outflow of $3.8 billion, a
41.2% decline from the net outflow of $6.5 million recorded in 2000. The direct 
investment account posted a sustained net inflow while the portfolio investment 
account gained strength as it made a dramatic turnaround to a net inflow of $1.4
billion in 2001. Meanwhile, the cumulative net outflow in the other investment  
account of $7.2 billion was lower by 7.3% than last year's level of $7.7        
billion.                                                                        

     For the first quarter of 2002, the financial account posted a net inflow of
$361 million, a reversal of the net outflow of $1.7 billion for the same period 
in 2001. This occurred because of higher net portfolio and direct investment    
inflows, which more than offset the increase in the net outflow of other        
investments. Total direct investments for the period from January-March 2002    
more than doubled to $1.2 billion compared to $608 million for the same period  
in 2001. The significant expansion in direct investments was traced to non-     
residents' investments in equity capital which rose by almost seven times to    
$662 million in the first three months of 2002. The bulk of this equity         
investment was represented by a $557 million investment in a local brewery      
company by a Japanese firm, with the remainder directed at other manufacturing  
companies, financial institutions, and services industries. Higher intercompany 
loans extended by parent companies to their local subsidiaries, which rose by   
15.8% to $455 million, also contributed to the favorable performance of the     
direct investment account during the quarter. Meanwhile, portfolio investment   
recorded a net inflow of $1.5 billion compared to a net outflow of $554 million 
during the same period in 2001. This positive development resulted because of a 
$2.0 billion increase in non-residents' investments in foreign-denominated debt 
securities, particularly Government-issued bonds. Similarly, non-residents'     
investments in equity securities rose by 22% to $122 million from the level     
posted last year, reflecting increased confidence in the local equities market. 
On the other hand, the net outflow in the other investments account increased by
37.5% to                                                                        

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$2.4 billion from $1.7 billion in the same period in 2001 due to higher net     
deposits abroad of resident banks to cover their clients' import payments and to
diversify their portfolios. Payments arising from maturing non-residents'       
placements to local banks also contributed to the net outflow in the other      
investments account.                                                            

     Over the past few years, the Government has undertaken a number of programs
to encourage capital investment, including introducing build, operate and       
transfer programs, reforming the legal regimes governing foreign investment and 
the foreign exchange payment system and restructuring the tariff regime. In     
August 1995, the Government implemented a schedule of tariff reductions to      
correct distortions caused by past policies. Rates will be reduced to 3% for raw
materials and to 10% for finished goods by 2003 and tariffs will be further     
adjusted to a range from 0% to 5% by 2004. The Philippines also lifted          
quantitative restrictions on all regulated agricultural products, except rice,  
and replaced them with tariffs permitted under the Uruguay Round agreements. In 
early 1996, the authorities further reduced import costs by changing the system 
of import duty valuation from "home consumption value" to actual transaction    
value. The Philippines is also a member of the ASEAN Free Trade Area, which     
provides for the gradual reduction to 5% or less or elimination of tariffs in   
2003 on the trade of goods among ASEAN countries pursuant to a Common Effective 
Preferential Tariff scheme. Currently, the Philippines restricts imports of     
certain products only for reasons of health, security, safety and environmental 
protection.                                                                     

    The Republic's Board of Investments coordinates with national agencies and
local Governments on investment policies and procedures and establishes and     
administers annual investment priority plans to promote certain sectors of the  
economy by providing special investment incentives to specific industries. The  
Government's 2001 Investments Priorities Plan is working to promote the         
following areas:                                                                

- poverty alleviation and eradication for all filipinos;              

- a business and policy environment to promote economic health; and   

     - a business community that is prepared to compete in the global e-commerce
business community.                                               

   Businesses that promote the Republic's investment priorities are eligible
for a package of incentives which can last for up to 10 years, including:       

- income tax holidays;                                                

- exemption from wharfage fees;                                       

- unlimited use of consigned equipment;                               

- additional tax deductions for labor expenses; and                   

- fewer restrictions on the employment of foreign nationals.          

The Government grants additional incentives to industries located in            
less-developed areas or administered by the Philippine Export Zone Authority and
the Subic and Clark special economic zones.                                     

 In March 2000, the Retail Trade Liberalization Act was enacted. The law
aims to promote efficiency and competition among domestic industries and foreign
competitors which will result in better service and lower prices for the        
consumers. Prior to its enactment, only citizens of the Philippines and         
corporations wholly-owned by Filipino citizens could engage in the retail       
business in the Philippines. Under the law, a foreigner is allowed to own 100%  
of a retail business in the Philippines provided it makes an investment of at   
least $7.5 million in the Philippines. If a foreigner makes an investment of    
between $2.5 million to $7.5 million, the foreigner is allowed to own up to 60% 
of the retail business in the Philippines for the first two years.              

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The following table sets out foreign investment in the Philippines    
registered with Bangko Sentral by sector.                                       

FOREIGN EQUITY INVESTMENTS REGISTERED 
WITH BANGKO SENTRAL BY SECTOR 

                                                        [Enlarge/Download Table]

                                                                                          JAN-MAR
                                             1997     1998     1999       2000     2001    2002  
                                           --------  ------  --------   --------  ------  -------
                                                               (IN MILLIONS)                     
                                                                                                 
Banks and other financial institutions.... $  226.4  $193.1  $  258.3   $  483.9  $476.4  $ 44.4 
Manufacturing.............................    172.2   245.5   1,049.1      171.7   262.9    58.7 
Mining....................................      2.8   161.2      27.3      239.5    66.2       0 
Commerce and real estate..................     78.0   161.9     166.3       62.3    23.2     0.2 
Services..................................     33.3    12.1      16.7        5.2     8.4    17.9 
Public utilities..........................    297.8    67.9     552.5      423.5    20.6    59.1 
Others(1).................................    242.9    43.0      36.5       12.2     0.2       0 
                                           --------  ------  --------   --------  ------  ------ 
Total investments......................... $1,053.4  $884.7  $2,106.7   $1,398.2  $857.8  $180.3 
                                           ========  ======  ========   ========  ======  ====== 

---------------                                                                 

Source: International Operations Department, Bangko Sentral.                    

(1) Includes construction and agriculture, fishery and forestry.                

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International Reserves                                                      

 The following table sets out the gross international reserves of Bangko
Sentral, compiled in a manner consistent with the revised balance of payments   
framework and the treatment of IMF accounts in the monetary survey published in 
the IMF's International Financial Statistics.                                   

GROSS INTERNATIONAL RESERVES OF BANGKO SENTRAL

                                                        [Enlarge/Download Table]

                                                          AS OF DECEMBER 31,                  AS OF  
                                            ----------------------------------------------   MAY 31, 
                                             1997     1998     1999(4)   2000(5)    2001      2002   
                                            ------   -------   -------   -------   -------   ------- 
                                                  (IN MILLIONS, EXCEPT MONTHS AND PERCENTAGES)       
                                                                                                     
Gold(1).................................... $1,472   $ 1,569   $ 1,782   $ 1,973   $ 2,216   $ 2,644 
SDRs.......................................     31         1        19         2        14         3 
Foreign Investments(2).....................  6,968     8,738    12,881    12,371    12,786    13,858 
Foreign Exchange...........................    179       376       222       565       533       472 
Reserve Position in the IMF(3).............    118       122       120       113       109       112 
                                            ------   -------   -------   -------   -------   ------- 
Total...................................... $8,768   $10,806   $15,024   $15,024   $15,658   $17,089 
                                            ======   =======   =======   =======   =======   ======= 
Total as number of months of imports of                                                              
  goods and services.......................    2.0       3.1       4.4       4.4       5.0       5.6 
As a % of short-term debt                                                                            
  Original maturity........................  103.9%    150.4%    261.5%    252.6%    258.9%    324.0%
  Residual maturity........................   77.8%     98.2%    168.4%    141.8%    130.7%    149.7%

---------------                                                                 

Notes:                                                                          

(1) Of these amounts 82.3% in 1997, 75.3% in 1998, and 83.3% in 1999 served as  
    collateral for gold-backed loans. Under the new accounting system adopted in
   2000, 82.6% of the amount as of December 31, 2000, 85.7% as of December 31,
2001, and 65.9% as of May 31, 2002 served as collateral for gold-backed 
loans and gold swap arrangements.                                       

(2) Consists of time deposits, investments in securities issued or guaranteed by
government or supranational organizations and repurchase agreements.    

(3) The reserve position in the IMF is an off-balance sheet item and is recorded
by Bangko Sentral's Treasury Department as a contingent asset with a    
matching contingent liability.                                          

(4) Represents official figures from Bangko Sentral's Treasury Department under 
  the old system where monetary gold under the swap arrangement was not part
of gross international reserves.                                        

(5) Beginning January 2000, a new system was adopted revising the treatment of  
monetary gold under the swap arrangement, including it as part of gross 
  international reserves. To allow comparability with 2000 data, the revised
    treatment of monetary gold under the swap arrangement would have resulted in
an upward adjustment of the gross international reserves level as of    
December 31, 1999 to $15,107 million.                                   

  The gross international reserves controlled by Bangko Sentral constitute
substantially all of the Philippines' official international reserves.          

By the end of March 1997, gross international reserves rose to        
approximately $12 billion. After the onset of the Asian economic currency       
crisis, however, gross international reserves declined to $8.8 billion as of    
December 31, 1997, primarily because of $2.8 billion of net foreign exchange    
sales by Bangko Sentral in 1997. In addition, in 1997 the Government spent $1.9 
billion and Bangko Sentral spent $555 million on debt service payments. These   
expenditures effectively consumed $500 million from Bangko Sentral's June 1997  
bond flotation, $700 million and $331 million from two drawings under the       
Republic's extended fund facility with the IMF and $324 million borrowed in     
parallel loan financing from the Export-Import Bank of Japan.                   

     In 1998, the Government took a number of steps to boost reserves, including
obtaining a $610 million one-year loan from a syndicate of mainly domestic banks
in September 1998 and drawing upon the $1.4 billion stand-by facility provided  
by the IMF. The IMF disbursed $278 million under the stand-by facility in       
November 1998 and $133 million in December 1998.                                

  In 1998, the reserve level was also increased by $500 million of foreign
currency deposits with Bangko Sentral from foreign banks, $492 million in net   
proceeds from the Republic's global bond offering in                            

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April 1998, a $750 million club loan from a consortium of foreign banks, $210   
million in net foreign exchange purchases by Bangko Sentral and increased       
investment inflows resulting from improvements in the currency markets. Foreign 
exchange outlays of $1.9 billion by the Government and $532 million by Bangko   
Sentral were used to service maturing foreign obligations, however, reduced     
reserve levels.                                                                 

In 1999, gross international reserves increased significantly to reach
$15.0 billion as of the end of 1999, equivalent to 4.4 months of imports of     
goods and payment of services and income. The increase in reserve level was due 
to higher public sector borrowing, renewed private capital flows and stronger   
external trade performance. Among other reasons, the reserve level was increased
by the Republic's $1.2 billion global bond offerings in January and February    
1999, E350 million eurobond offering in March 1999, $292 million global bond    
offering in October 1999 and $400 million re-opening of its 2019 bonds in       
December 1999. Further, the IMF disbursed $130 million under the stand-by       
facility in March 1999 and $214 million in July 1999. In June 1999, the Republic
refinanced the $610 million syndicated loan facility it obtained in 1998 with   
three-year fixed and floating rate notes and, in December 1999, the Republic    
completed a $260 million eurobond offering to partially refinance the $610      
million one-year loan.                                                          

In January 2000, Bangko Sentral revised its method of accounting for  
international reserves at the recommendation of the IMF. Under the previous     
accounting system, a gold swap transaction was treated as a sale of gold which  
reduced the amount of gold holdings. Under the revised system, a gold swap      
transaction is treated as a loan transaction collateralized by gold that remains
a part of the international reserves. In addition, under the revised system, the
accrued interest payable on Bangko Sentral's short-term liabilities is netted   
out of gross international reserves when calculating net international reserves,
reducing the level of net international reserves.                               

As of December 31, 2000, gross international reserves stood at $15.0  
billion, equivalent to 4.4 months of imports of goods and payment of services   
and income. Major sources of foreign exchange inflows in 2000 were the          
Republic's $1.6 billion Yankee bond offering in March, a $500 million Bangko    
Sentral syndicated loan in April, Y35 billion Samurai bond offering and $400    
million syndicated loan in October, $200 million private placement of           
Yen-denominated eurobonds in November and $200 million private placement of     
eurobonds in December. These inflows were partially offset by a decline in      
portfolio investments by non-residents from their 1999 levels. As of December   
31, 2000, net international reserves totalled $11.3 billion, compared to $11.8  
billion as of December 31, 1999 (after adjustment for the BPM5 framework).      

     As of December 31, 2001, gross international reserves rose to $15.7 billion
compared to $15.0 billion as of December 31, 2000. The increase in gross        
international reserves during the year 2001 was attributed mainly to foreign    
exchange inflows arising from various foreign loans and bond flotations. The    
various loans and bond flotations include, among others, the Republic's $199    
million Floating Rate Notes due 2004; the Republic's $100 million Facility Loan 
Agreement; the Republic's $220 million Cross Currency Swap; the Republic's $119 
million Treasury Bills to pre-fund the Government's 2002 requirements; the Asian
Development Bank ("ADB") Non-Bank Financial Program Loan of $75 million; the ADB
Power Sector Loan of $100 million; the Republic's $444 million Fixed Rate Bonds 
due 2006; the Republic's Shibosai $365 million Fixed Rate Guaranteed Bonds due  
2011; Bangko Sentral's $740 million 3-year Term Loan Facility; Bangko Sentral's 
$200 million Floating Rate Notes due 2003; Bangko Sentral's $550 million 9%     
Notes due 2005 and Bangko Sentral's $700 million loan from other foreign        
financial institutions. The impact of these inflows was partly mitigated by the 
servicing of foreign exchange requirements of the Government and Bangko Sentral.
Net international reserves totaled $11.4 billion as of December 31, 2001.       

Bangko Sentral's gross international reserves, including the reserve  
position in the IMF, rose to $17.1 billion as of May 31, 2002 from $15.7 billion
as of December 31, 2001. The rise in reserves in May 2002 was due mainly to the 
deposit by the Republic of the proceeds from Global Bonds issued in January and 
March 2002 totaling $1.73 billion, a loan drawdown from the Japan Bank for      
International Cooperation Co-Financing Power Sector Reform Loan of $100 million 
in January, as well as Bangko Sentral's reopening of four-year fixed rate notes 
totaling $250 million in January. The increase in reserves was partly offset,   
however, by the servicing of foreign exchange requirements of the Republic and  
Bangko Sentral. The gross reserves were equivalent to 5.6 months of imports of  
goods and payments of services and income, 1.5 times the amount                 

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of short-term external obligations of the Republic based on residual maturity   
and 3.2 times the amount of short-term external debt of the Republic based on   
original maturity.                                                              

Bangko Sentral occasionally enters into options with respect to gold, 
foreign exchange and foreign securities for purposes of managing yield or market
risk. It also enters into financial swap contracts to optimize yield on its gold
reserves.                                                                       

MONETARY SYSTEM                                                                 

Monetary Policy                                                             

    In 1993, the Government established Bangko Sentral, the Republic's central
bank, pursuant to the New Central Bank Act. Bangko Sentral replaced the old     
Central Bank of the Philippines, which had incurred substantial deficits in     
connection with:                                                                

     - quasi-fiscal activities, including entering into foreign exchange forward
      cover contracts and swaps with certain banks and Government corporations
     and assuming the foreign exchange liabilities of certain Government and
     private corporations during the Philippines' foreign exchange crisis in
the early 1980s;                                                  

- development banking and financing; and                              

     - open market operations financed by the issuance of domestic securities at
high interest rates.                                              

Bangko Sentral functions as an independent central monetary authority 
responsible for policies in the areas of money, banking and credit as authorized
under Section 3 of Republic Act No. 7653, otherwise known as the New Central    
Bank Act. As such, it does not engage in the quasi-fiscal activities that caused
the old Central Bank to fail. The New Central Bank Act also prohibits Bangko    
Sentral from engaging in development banking or financing. Additionally, Bangko 
Sentral does not engage in any commercial banking activities.                   

     Bangko Sentral's primary objective is to maintain price stability conducive
to a balanced and sustainable growth of the economy, as well as to promote and  
maintain monetary stability and the convertibility of the Peso. To achieve the  
price stability objective, Bangko Sentral undertakes monetary management mainly 
through adjustments to policy rates and the conduct of open market operations,  
including the purchase and sale of Government securities, rediscounting         
transactions and adjustments in reserve requirements.                           

Bangko Sentral's functions include:                                   

- conducting monetary policy;                                         

- issuing the national currency;                                      

- managing foreign currency reserves;                                 

   - acting as depository for the Government, its political subdivisions and
instrumentalities and for Government owned corporations; and      

- supervising and regulating banks and quasi-banks in the Philippines.

 The Government owns all of the capital stock of Bangko Sentral. A seven
member Monetary Board, comprised of Bangko Sentral's Governor, a member of the  
Cabinet designated by the President and five full-time private sector           
representatives, governs Bangko Sentral. The President appoints each of the     
seven Monetary Board members to six-year terms except the Cabinet               
representative.                                                                 

   Philippine law requires Bangko Sentral to maintain a net positive foreign
asset position. As of June 2001, Bangko Sentral had total assets of P1.13       
trillion, of which net international reserves accounted for P756.5 billion      
($14.4 billion). Bangko Sentral's remaining assets consist mainly of foreign    
exchange receivables, loans and advances and Government securities, and its     
liabilities consist mainly of deposits of financial institutions and, the       
Government and Government-owned corporations and foreign liabilities in the form
of loans and bonds payable.                                                     

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Money Supply                                                                

The following tables presents certain information regarding the       
Philippines' money supply:                                                      

MONEY SUPPLY

                                                        [Enlarge/Download Table]

                                                             AS OF DECEMBER 31                       AS OF     
                                           -----------------------------------------------------   APRIL 30,   
                                             1997       1998       1999       2000        2001      2002(1)    
                                           --------   --------   --------   --------    --------   ---------   
                                                         (IN BILLIONS, EXCEPT FOR PERCENTAGES)                 
                                                                                                               
M1(2)                                                                                                          
Currency in circulation................... P  143.6   P  146.1   P  218.5   P  192.3    P  194.7   P  176.2    
Current account deposits..................    114.7      135.4      175.6      194.7       193.3      227.4    
                                           --------   --------   --------   --------    --------   --------    
Total.....................................    258.3      281.5      394.1      387.0       388.1      403.6    
  % increase..............................     16.4%       9.0%        40%      (1.8%)       0.3%       3.7%(5)
M2(3)..................................... P1,053.9   P1,138.4   P1,357.9   P1,423.2    P1,521.1   P1,564.9    
  % increase..............................     20.5%       8.0%      19.3%       4.8%        6.9%       6.7%(5)
M3(4)..................................... P1,066.0   P1,144.6   P1,365.1   P1,427.0    P1,525.0   P1,563.2    
  % increase..............................     20.9%       7.4%      19.3%       4.6%        6.8%       6.6%(5)

---------------                                                                 

Source: Bangko Sentral, Department of Economic Research.                        

(1) Preliminary.                                                                

(2) Consists of currency in circulation and demand deposits.                    

(3) Consists of M1, savings deposits and time deposits.                         

(4) Consists of M2 and deposit substitutes.                                     

(5) Percentage growth over April 2001 level.                                    

  The following table presents information regarding domestic interest and
deposit rates.                                                                  

DOMESTIC INTEREST AND DEPOSIT RATES 

                                                        [Enlarge/Download Table]

                                                             1997    1998    1999    2000    2001    2002    
                                                             -----   -----   -----   -----   -----   -----   
                                                             (WEIGHTED AVERAGES IN PERCENTAGES PER PERIOD)   
                                                                                                             
91-day Treasury bill rates.................................. 13.1%   15.3%   10.2%    9.9%    9.9%    5.7%(3)
90-day Manila Reference rate(1)............................. 11.1    13.8    10.1     8.8    10.1     8.9(4) 
Bank average lending rates(2)............................... 16.2    18.4    11.8    10.9    12.4    10.6(5) 

---------------                                                                 

Source: Bangko Sentral, Department of Economic Research.                        

(1) Based on promissory notes and time deposit transactions of sample commercial
banks.                                                                  

(2) Starting January 2002, monthly rates reflect the annual percentage          
equivalent of all commercial banks' actual monthly interest income on   
Peso-denominated loans to the total outstanding levels of their         
Peso-denominated demand/time loans, bills discounted, mortgage contract 
receivables and restructured loans.                                     

(3) January to June 2002.                                                       

(4) January to May 2002.                                                        

(5) January to April 2002.                                                      

  The Asian economic crisis complicated Bangko Sentral's task of balancing
the need for readily available credit against the fear of rising inflation. To  
control the inflationary effect of the Peso's depreciation, Bangko Sentral      
initially reduced the supply of Pesos by raising interest rates and reserve     
requirements. Bangko Sentral raised its overnight borrowing rate to 32% in July 
1997 from 15% at the end of June 1997 and its overnight lending rate to 34% in  
July 1997 from 17% at the end of June 1997. On August 20, 1997, Bangko Sentral  
temporarily suspended its overnight lending facility. Bangko Sentral also       
increased liquidity reserve requirements on Peso deposit liabilities from 2% in 
July 1997 to 8% in August 1997 in addition to the bank's 13% statutory reserve  
requirement. In November 1997, as signs of improvement appeared, Bangko Sentral 
lowered liquidity reserve requirements to 4% of Peso deposit liabilities.       

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  Bangko Sentral and the Bankers' Association of the Philippines also took
measures to encourage reductions in bank lending rates to avoid potential       
corporate bankruptcies. Bangko Sentral approved certain liquidity easing        
measures in January 1998, including the opening of a 30-day lending window, the 
opening of a swap window for banks without Government securities holdings and   
the purchase of Government securities at market prices. In April 1999, Bangko   
Sentral decreased the liquidity reserve requirement from 5% to 4% and lowered   
the statutory reserve requirement from 13% to 10% on March 1998. These measures 
were intended to lower bank intermediation costs and thereby reduce the banks'  
domestic lending rates. Bangko Sentral further reduced the statutory reserve    
requirement to 9% in July 1999 to help reduce the cost of money and increase    
funds available for lending. At the same time, Bangko Sentral maintained        
liquidity by raising the proportion of reserves which earns interest to 40% from
25%. In July 2001, Bangko Sentral raised banks' liquidity reserve requirement   
from 7.0% to 9.0%. The statutory reserve requirement remained unchanged at 9.0%.
Bangko Sentral also reduced, from $10,000 to $5,000, the amount of US currency  
an individual could buy over-the-counter from banks without documentation. The  
measures were intended to siphon excess liquidity in the economy that could lead
to higher inflation or be used to speculate on the Peso. On August 10, 2001,    
Bangko Sentral raised required liquidity reserves by another 2% points to 11%.  

As the inflation rate eased from 11.5% in January 1999 to 6.7% for the
full-year 1999, Bangko Sentral implemented 21 rate cuts in its overnight        
borrowing rate (for a cumulative reduction of 462.5 basis points) and 20 rate   
cuts in its overnight lending rate (for a cumulative reduction of 377.5 basis   
points).                                                                        

The inflation rate in 2000 averaged 4.4%, which is well below the 6.7%
recorded in 1999. Emerging inflationary pressures and volatility in the foreign 
exchange market due to narrowing interest rate differentials prompted monetary  
tightening actions in 2000. In May 2000, Bangko Sentral increased its overnight 
borrowing and lending rates by a total of 125 basis points to 10.0% and 12.3%,  
respectively. Policy rates were raised in September 2000 by 100 basis points and
by an additional 400 basis points in October 2000 to address the upside risks of
inflation due to the sharp depreciation of the Peso and the narrowing interest  
rate differential. The October 2000 rate increase was accompanied by a          
4-percentage point increase in banks' liquidity reserve requirements intended to
siphon off excess liquidity, which was feeding speculative activity in the      
foreign exchange market. As a result of these tightening moves, the average     
91-day Treasury bill rate rose from 8.9% in January to 15.8% in November.       

 The temporary tightening measures helped keep inflationary pressures in
check, restored general stability in the foreign exchange market and provided   
room for the gradual easing of the monetary policy stance. In December 2000,    
Bangko Sentral began the process of restoring policy rates to pre-crisis levels 
by reducing the overnight rates by a cumulative 150 basis points. This induced a
gradual downtrend in interest rates, with the 91-day Treasury bill rate falling 
to 13.6% in December.                                                           

In early 2001, Bangko Sentral successively reduced interest rates to  
encourage economic activity. From January to May 2001, sustained monetary easing
reduced Bangko Sentral policy rates by a total of 450 basis points to 9.0% and  
11.25% for the overnight borrowing rates and lending rates, respectively. These 
rates remained unchanged from May 18 to October 4, 2001. Subsequently, relative 
stability in the financial markets and the containment of inflation allowed     
Bangko Sentral to further ease monetary policy. Moreover, the worldwide         
reduction in interest rates by many central banks, following significant        
monetary policy easing by the US Federal Reserve, made possible a comfortable   
interest rate differential and mitigated the risk of abrupt shifts in short-term
investment funds toward foreign-currency denominated assets. Thus, Bangko       
Sentral's policy rates were reduced successively in the fourth quarter of 2001, 
resulting in a cumulative reduction of 575 basis points from December 2000. At  
the end of December 2001, the overnight borrowing rates and lending rates stood 
at 7.75% and 10.0%, respectively. The reduction in policy rates in December was 
accompanied by a two percentage point reduction in banks' liquidity reserve     
requirements intended to encourage a further downtrend in market interest rates.

The tiering system on banks' overnight placements with Bangko Sentral 
(initially adopted in June 2000) was temporarily removed on August 3, 2001 to   
help ease pressure on the Peso. In November 2001, the tiering scheme was        
subsequently restored to induce banks to lend their funds to the various        
productive sectors of the economy. In December 2001, a change in the structure  
of the tiering scheme of Bangko Sentral's overnight                             

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rates window was effected as follows: 7.75% for placements of up to P5 billion, 
5.75% for the next P5 billion, and 3.75% for placements in excess of P10        
billion.                                                                        

  During the first three months of 2002, Bangko Sentral eased policy rates
three times for a cumulative reduction of 75 basis points to reach 7.0% and     
9.25% for the overnight borrowing and lending rates, respectively. These are the
lowest levels in Bangko Sentral's policy rates in 10 years. The rate reductions 
were accompanied by corresponding changes in the structure of the tiering scheme
for interest rates on banks' overnight placements with Bangko Sentral. As of    
March 15, 2002, the rates under the tiering structure for banks' placements in  
the overnight rates placements with Bangko Sentral were as follows: 7.0% for    
placements of up to P5 billion, 4.0% for the next P5 billion, and 1.0% for      
placements in excess of P10 billion. The tiering scheme was also modified to    
cover placements in special deposit accounts ("SDAs") and was required to be    
applied on a consolidated basis. These changes were aimed at inducing banks to  
channel the additional liquidity into lending for productive activities. Bangko 
Sentral also reduced the liquidity reserve requirement on deposits by two       
percentage points to 7.0% effective January 18, 2002, a move which restored the 
liquidity reserves to their pre-July 2001 level.                                

   The benchmark 91-day Treasury bill rate declined from an average of 12.2%
in January 2001 to 9.9% in December 2001. Bank lending rates have also begun to 
ease, from a range of 17.1%-19.0% in January 2001 to a range of 14.2%-12.7% in  
December 2001 and further to 7.9%-9.6% in June 2002.                            

Foreign Exchange System                                                     

   The Republic maintains a floating exchange rate system under which market
forces determine the exchange rate for the Philippine Peso. Bangko Sentral may, 
however, intervene in the market to maintain orderly market conditions and limit
sharp fluctuations in the exchange rate.                                        

     The following table sets out exchange rate information between the Peso and
the US dollar.                                                                  

EXCHANGE RATES OF PESO PER US DOLLAR

                                                        [Enlarge/Download Table]

YEAR                                                      PERIOD END  PERIOD AVERAGE(1)
----                                                      ----------  -----------------
                                                                                       
1997.....................................................   39.975         29.471      
1998.....................................................   39.059         40.893      
1999.....................................................   40.313         39.089      
2000.....................................................   49.998         44.194      
2001.....................................................   51.789         50.993      
2002(2)..................................................   50.418         50.832      

---------------                                                                 

Source: Reference Exchange Rate Bulletin, Treasury Department, Bangko Sentral.  

(1) The average of the monthly average exchange rates for each month of the     
applicable period.                                                      

(2) First six months of 2002.                                                   

In 1993, the Government significantly reformed the Republic's foreign 
exchange payment system by, among other things:                                 

- eliminating the requirement to surrender export proceeds;           

- removing restrictions on current account transactions;              

    - easing access to foreign currency loans for exporters and producers; and

   - relaxing the regulations governing investments outside the Philippines.

Foreign exchange may be freely sold and purchased outside the banking 
system and deposited in foreign currency accounts. Both residents and           
non-residents may maintain foreign currency deposit accounts with authorized    
banks in the Philippines, and residents may maintain deposits abroad without    
restriction.                                                                    

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Payments related to foreign loans registered with Bangko Sentral and  
foreign investments approved by or registered with Bangko Sentral may be        
serviced with foreign exchange purchased from authorized agent banks. Bangko    
Sentral must approve and register all outgoing investments by residents         
exceeding $6 million per investor per year if the funds will be sourced from the
banking system. For a discussion of Bangko Sentral's loan approval regime, see  
"-- The Philippine Financial System -- Foreign Currency Loans".                 

While the Government imposes no currency requirements for outgoing    
payments, all exchange proceeds from exports, services and investments must be  
obtained in any of 22 prescribed currencies. Authorized agent banks may convert 
the acceptable currencies to Pesos.                                             

  Bangko Sentral maintains an Exporters' Dollar Facility to facilitate the
conversion of export proceeds in US dollars into Pesos. In 1999, Bangko Sentral 
expanded the facility to include a Japanese yen rediscounting facility and      
renamed it the Exporters' Dollar and Yen Rediscount Facility.                   

   Individual or corporate non-residents may open Peso bank accounts without
Bangko Sentral's approval. The export or electronic transfer out of the         
Philippines of Peso amounts exceeding P10,000 requires prior authorization from 
Bangko Sentral.                                                                 

The value of the Peso relative to the US dollar and other foreign     
currencies declined substantially in 1997 and early 1998. Bangko Sentral        
initially responded to the Peso depreciation in July 1997 by increasing its     
sales of US dollars and raising interest rates. In 1997, total net sales of US  
dollars by Bangko Sentral amounted to over $2.6 billion, including $2.1 billion 
in June and July 1997. Despite Bangko Sentral's intervention, sales of Pesos    
proved stronger than expected and as a result, Bangko Sentral allowed the Peso  
to float on July 11, 1997. The value of the Peso then declined over time,       
reaching a low of P45.42 per US dollar on January 8, 1998. As the Government    
implemented various monetary, foreign exchange and fiscal policies to curb      
speculation and restore confidence in the economy, the Peso began to strengthen.
On December 31, 1998, Bangko Sentral's reference exchange rate was P39.06 per US
dollar and on December 31, 1999, the exchange rate was P40.31 per US dollar.    

For the first four months of 2000, the Peso-dollar rate was relatively
stable, averaging P40.78 per US dollar. However, the exchange rate began to     
exhibit volatility starting in mid-May and exceeded P45.00 per US dollar on July
27, 2000. It exceeded P50.00 per US dollar on October 27, 2000, and reached a   
record average low of P51.68 per US dollar in November 2000. The Peso recovered 
briefly in November, bringing the rate up to P49.39 per US dollar on November   
29, 2000. This trend, however, was not sustained as the Peso depreciated to an  
average of P49.99 per US dollar by the end of 2000.                             

    The weakness of the Peso in 2000 may be attributed to a number of factors,
including the rise in US interest rates, which reduced the interest rate        
differential between domestic and international interest rates, concerns over   
the rising fiscal deficit, and some domestic, non-economic factors, which       
included the tension in Mindanao, some issues pertaining to public governance,  
and the ensuing political uncertainties surrounding the impeachment trial of    
former President Estrada.                                                       

The Peso depreciated further in 2001. From P49.998/US$1 at end-2000,  
transitory shocks caused the Peso to reach a low of P55.013/US$1 on January 19, 
2001. The Peso strengthened thereafter and was relatively stable for most of    
February and March. From early April, however, the Peso traded in the           
P50-P51/US$1 range. The pressure on the Peso again intensified starting late    
June until the first week of August but the Peso subsequently appreciated to an 
average of P51.250/US$1 in September, from an average of P53.224/US$1 in July.  
The Peso weakened again starting the second week of October before appreciating 
towards the latter part of December as market conditions stabilized. Overall,   
during 2001 the Peso depreciated by 13.8% compared to the average peso-dollar   
exchange rate for 2000.                                                         

The fluctuations in the peso-dollar rate during 2001 were caused by a 
confluence of domestic and external factors. In early January, the political    
crisis involving the impeachment proceedings of the former President negatively 
affected the Peso. However, the speedy and peaceful resolution of the political 
crisis enabled the Peso to recover and gain some stability beginning in the     
third week of January. Starting April until the first week of August, the Peso, 
along with other regional currencies, was again weakened against the dollar due 
primarily to bearish market sentiment brought about by concerns over the        
economic slowdown in the US and                                                 
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in Japan. The weakness of the Peso was also attributed to: (1) the continued    
tension resulting from the Abu Sayyaf hostage crisis and the spate of           
kidnappings in Metro Manila; (2) the downgrading of growth projections by the   
government due to the contraction in exports and the slowdown in industrial     
output; (3) worries over the budget deficit; (4) rising corporate dollar demand 
for mid-year import requirements and dividend repatriation; and (5) renewed     
weakening of investor sentiment on emerging market currencies due to the debt   
crisis in Argentina. Heightened uncertainty after the 11 September terrorist    
attacks in the United States was mainly behind the depreciation pressure on the 
Peso in the last quarter of the year.                                           

STABILIZATION OF THE PESO.  Since it allowed the Peso to move within a
wider range on July 11, 1997, Bangko Sentral has intervened minimally in the    
foreign exchange market. It has, however, adopted certain measures related to   
foreign exchange trading including:                                             

- requiring prior approval of Bangko Sentral to sell non-deliverable  
   forward contracts to non-residents to decrease the demand for foreign
     currency (Bangko Sentral believes that speculators used non-deliverable
forward contracts to increase artificially the demand for foreign 
currency);                                                        

     - reducing banks' permitted long or overbought foreign exchange position to
     the lower of $10 million or 5% of unimpaired capital, to limit a bank's
ability to speculate in foreign exchange;                         

  - lifting temporarily, subject to periodic review by Bangko Sentral, the
 20% limit on banks' short or oversold foreign exchange position, to
increase the foreign exchange available in the market;            

  - limiting the types of forward contracts that can be used as deductions
when valuing a bank's overbought foreign exchange position;       

     - requiring banks to consolidate their foreign exchange accounts with those
of their subsidiaries when calculating net open foreign exchange  
 positions so that a bank cannot circumvent the rules by engaging in
foreign exchange transactions through a subsidiary or affiliate;  

 - decreasing the maximum amount of foreign exchange that banks can sell
     over-the-counter on an undocumented basis to $5,000 from $100,000, thus
moderating demand for foreign exchange;                           

- prohibiting banks from extending Peso loans to non-residents to curb
       undue speculation in the foreign exchange market and to further reinforce
    the regulation that Peso deposits should be funded from inward foreign
exchange remittance;                                              

 - requiring banks with foreign exchange corporations to submit a report
containing details of foreign exchange purchases and sales;       

 - issuing rules and regulations to combat money laundering. See "-- The
Philippine Financial System -- Structure of the Financial System".

    In addition, in December 1997, Bangko Sentral introduced the currency risk
protection program, which is a hedging facility provided by Bangko Sentral      
through commercial banks under which, on the maturity of a forward contract, the
difference between the contract rate and the market rate is settled and paid in 
Pesos. The program allows eligible borrowers with unhedged foreign exchange     
liabilities to borrow from the program to hedge their unmatured liabilities with
reference to foreign currency deposit units of banks. This reduces their foreign
exchange exposure and generally reduces demand for foreign currency in the spot 
market. In early 1998, as a part of the program, Bangko Sentral expanded oil    
companies' access to commercial bank funds by permitting them to borrow foreign 
currencies, in addition to obtaining loans and advances, to pay for their non-  
crude and non-refined imports and to meet their short-term working capital      
requirements.                                                                   

     In January 2000, Bangko Sentral imposed a 90-day minimum holding period for
foreign investments placed in Peso time deposits with Philippine banks to       
tighten its monitoring of the foreign exchange market and discourage the inflow 
of short-term speculative funds. The holding period applies only to Peso time   
deposits and not to other investments such as equities, government securities or
commercial paper. Peso time deposits that are terminated within the 90-day      
period will not be converted by Philippine banks to foreign currency, but may be
transferred to other Peso-denominated investments.                              

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    In June 2000, Bangko Sentral began to require banks and their subsidiaries
with foreign exchange operations to submit detailed reports of foreign exchange 
purchases and sales transactions involving more than $250,000 with the objective
of closely monitoring and supervising the foreign exchange operations of those  
banks and subsidiaries.                                                         

In October 2000, Bangko Sentral introduced guidelines on the foreign  
exchange trading activities for foreign exchange corporations or corporations   
that are subsidiaries or affiliates of banks, quasi-banks or non-bank           
intermediaries. Under the guidelines, foreign exchange corporations must require
a written, notarized application and supporting documentation for sales of      
foreign exchange in excess of $10,000 to Philippine residents for trade and     
non-trade purposes. Additionally, foreign exchange corporations are required to 
confirm that the $10,000 limit is not breached by splitting the foreign exchange
purchases into smaller amounts to make it appear that the purchase does not     
violate the prescribed limit. Bangko Sentral also increased the minimum paid-in 
capital for foreign exchange corporations to P50 million. In October 2000,      
Bangko Sentral also expressly prohibited banks from engaging in engineered swap 
transactions because Bangko Sentral believes these transactions contributed to  
the volatility of the Peso-US dollar exchange rate during 2000.                 

In 2001 and 2002, Bangko Sentral implemented the following measures to
address dollar speculation and exchange rate volatility:                        

- in July 2001, expanded the eligibility rules of the currency risk   
       protection program, a hedging facility established in 1997, to include US
dollar trust receipts; net importers; registered foreign currency-
    denominated bonds and foreign currency deposit loans with the original
maturities longer than one year and up to five years; and trade   
   transactions of clients other than oil companies. The coverage of the
     currency risk protection program was further expanded in September 2001
      to include Bangko Sentral-registered short-term trade-related borrowings
  of oil companies from offshore banking units and offshore banks. The
      measures are expected to further relieve the pressure on the spot market
       created by investors who seek to front-load their future foreign currency
requirements and by borrowers who seek to cover unmatured foreign 
currency obligations;                                             

 - reduced the ceiling on undocumented over-the-counter sales of foreign
  exchange to $5,000 to prevent abuse through the splitting of foreign
exchange sales;                                                   

     - kept policy rates unchanged since May 18, 2001 to preserve an appropriate
 interest rate differential to encourage investors to maintain their
Peso-denominated assets, while concurrently addressing the risk of
       inflation arising from the pass-through effects of the Peso depreciation.
      Bangko Sentral's overnight borrowing and lending rates were subsequently
     reduced after the third quarter of 2001 to their current levels of 7.0%
and 9.25%, respectively;                                          

    - increased the monetary penalty and introduced non-monetary sanctions for
those violating foreign exchange rules and regulations; and       

  - required effective from January 1, 2002, any person who brings into or
 out of the Philippines foreign currency in excess of $10,000 or its
     equivalent to declare the same in writing and to furnish information on
the source and purpose of the transport of such currency.         

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THE PHILIPPINE FINANCIAL SYSTEM                                                 

Composition                                                                 

   The following table sets out the total assets of the Philippine financial
system by category of financial institution.                                    

TOTAL ASSETS OF THE FINANCIAL SYSTEM(1) 

                                                        [Enlarge/Download Table]

                                                       AS OF DECEMBER 31,                     AS OF    
                                      ----------------------------------------------------  MARCH 31,  
                                        1997       1998       1999       2000     2001(2)     2002     
                                      --------   --------   --------   --------   --------  ---------  
                                                               (IN BILLIONS)                           
                                                                                                       
Banks                                                                                                  
  Commercial banks................... P2,513.0   P2,512.2   P2,722.3   P3,013.6   P3,070.5  P3,108.3   
  Thrift banks.......................    208.4      216.4      223.5      245.8      259.0     256.9(2)
  Rural banks........................     57.6       60.0       61.9       67.4       73.8      73.8(3)
                                      --------   --------   --------   --------   --------  --------   
    Total banks......................  2,779.0    2,788.6    3,007.7    3,326.8    3,403.3   3,439.0   
                                      ========   ========   ========   ========   ========  ========   
  Non-bank financial institutions....    610.3      656.2      733.6      773.8      691.3     690.5   
                                      --------   --------   --------   --------   --------  --------   
    Total assets..................... P3,389.3   P3,444.8   P3,741.3   P4,100.6   P4,094.6  P4,129.5   
                                      ========   ========   ========   ========   ========  ========   

---------------                                                                 

Source: Bangko Sentral.                                                         

(1) Excludes assets of Bangko Sentral.                                          

(2) As of February 28, 2002.                                                    

(3) As of December 31, 2001.                                                    

  The Philippine financial system consists of banks and non-bank financial
institutions. Banks include all financial institutions that lend funds obtained 
from the public primarily through the receipt of deposits. Non-banks include    
financial institutions other than banks which lend, invest or place funds, or at
which evidences of indebtedness or equity are deposited with or acquired by     
them, either for their own account or for the account of others. Non-bank       
financial institutions may have quasi-banking functions. Quasi-banking functions
include borrowing money to relend or purchase receivables and other obligations 
by issuing, endorsing or accepting debt or other instruments or by entering into
repurchase agreements with 20 or more lenders at any one time.                  

 The Supervision and Examination Sector of Bangko Sentral supervises all
banks and non-banks with quasi-banking functions, including their subsidiaries  
and affiliates engaged in related activities, with Bangko Sentral's Monetary    
Board having ultimate supervisory authority.                                    

Structure of the Financial System                                           

  The Philippine financial system is comprised of commercial banks, thrift
banks, rural banks, specialized Government banks and non-bank financial         
institutions. Each type of bank participates in distinct business activities and
geographic markets.                                                             

Commercial banks perform the following activities:                              

- accept drafts;                                                      

     - issue letters of credit, discount and negotiate promissory notes, drafts,
bills of exchange and other evidences of indebtedness;            

- receive deposits;                                                   

- buy and sell foreign exchange and gold and silver bullion; and      

- lend money on a secured or unsecured basis.                         

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Expanded commercial banks, otherwise known as universal banks, in addition to   
regular commercial banking activities may also engage in investment banking     
activities, invest in non-bank businesses and own allied financial undertakings 
other than commercial banks. As of March 31, 2002, the country had 44 commercial
banks, with 4,282 branch offices. Of such commercial banks, 41 were privately   
owned, including 13 foreign-controlled banks and six subsidiaries of foreign    
banks.                                                                          

The following table sets out the outstanding loans of commercial banks
classified by sector.                                                           

COMMERCIAL BANKS' OUTSTANDING LOANS BY SECTOR 

                                                        [Enlarge/Download Table]

                                                      AS OF DECEMBER 31,                                                      
                       ---------------------------------------------------------------------------------    AS OF APRIL 30,   
                              1998                 1999                 2000                 2001               2002(1)       
                       ------------------   ------------------   ------------------   ------------------   ------------------ 
                                                         (IN MILLIONS, EXCEPT PERCENTAGES)                                    
                                                                                                                              
Agriculture, fishery                                                                                                          
  and forestry........ P   62,930     4.7%  P   58,859     4.3%  P   62,101     4.3%  P   56,823     4.1%  P   48,962     3.5%
Mining and                                                                                                                    
  quarrying...........     20,048     1.5       16,466     1.2       21,166     1.5       19,890     1.4       16,114     1.1 
Manufacturing.........    357,455    26.5      382,267    28.2      404,224    27.8      372,906    26.7      372,261    26.3 
Electricity, gas and                                                                                                          
  water...............     47,284     3.5       53,274     3.9       75,398     5.2       70,359     5.0       68,524     4.8 
Construction..........     54,972     4.1       53,384     4.0       46,949     3.2       42,151     3.0       42,278     3.0 
Wholesale and                                                                                                                 
  retail..............    210,191    15.6      203,177    15.0      201,233    13.9      210,306    15.0      194,765    13.7 
Transportation,                                                                                                               
  storage and                                                                                                                 
  communication.......     98,636     7.3       91,024     6.7       99,653     6.9       83,068     5.9       81,110     5.7 
Financial                                                                                                                     
  institutions, real                                                                                                          
  estate and business                                                                                                         
  services............    347,339    25.7      342,673    25.3      386,797    26.6      359,199    25.7      409,004    28.8 
Community, social and                                                                                                         
  personal services...    149,336    11.1      153,104    11.3      153,983    10.6      184,534    13.2      185,008    13.1 
                       ----------   -----   ----------   -----   ----------   -----   ----------   -----   ----------   ----- 
    Total............. P1,348,191   100.0%  P1,354,228   100.0%  P1,451,504   100.0%  P1,399,236   100.0%  P1,418,026   100.0%
                       ==========   =====   ==========   =====   ==========   =====   ==========   =====   ==========   ===== 

---------------                                                                 

Source: Bangko Sentral.                                                         

(1) Preliminary.                                                                

Thrift banks invest their capital and the savings of depositors in:   

- financings for homebuilding and home development;                   

- marketable debt securities;                                         

- commercial paper and accounts receivable, drafts, bills of exchange,
acceptances or notes arising out of commercial transactions; or   

  - short-term working capital and medium and long-term loans to small and
       medium-sized businesses and individuals engaged in agriculture, services,
      industry, housing and other financial and allied services in its market.

   As of March 31, 2002, the country had 100 thrift banks, with 1,242 branch
offices.                                                                        

  Rural banks extend credit in the rural areas on reasonable terms to meet
the normal credit needs of farmers, fishermen, cooperatives and merchants and in
general, the people in the rural communities. As of March 31, 2002, the country 
had 782 rural banks, with 1,137 branch offices.                                 

The specialized Government banks are the Development Bank of the      
Philippines, the Land Bank of the Philippines and the Al-Amanah Islamic         
Investment Bank of the Philippines. The Development Bank generally provides     
banking services to meet the medium and long-term needs of small and            
medium-sized agricultural and industrial enterprises, particularly in rural     
areas. The Land Bank primarily provides financial support for agriculture and   
all phases of the Republic's agrarian reform program. In addition to their      
special                                                                         

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functions, the Development Bank and the Land Bank may operate as universal      
banks. The Al-Amanah Islamic Investment Bank promotes and accelerates the       
socio-economic development of the Autonomous Region of Muslim Mindanao by       
offering banking, financing and investment services based on Islamic banking    
principles and rulings.                                                         

Non-bank financial institutions are primarily long-term financing     
institutions that engage in productive ventures and, to a minor extent,         
facilitate short-term placements in other financial institutions. As of December
31, 2001, Bangko Sentral regulated or supervised 36 investment houses, 48       
finance companies, 26 security dealers/brokers, 5,018 pawnshops, 11 investment  
companies, nine lending investors, 86 non-stock savings and loan associations,  
four venture capital corporations, six mutual building and loan associations,   
four Government non-bank financial institutions and seven credit companies.     

Over the past several years, the Government has reformed the financial
sector to eliminate controls, enhance competition and promote stronger and more 
efficient financial institutions. The reforms include:                          

- unifying and gradually reducing reserve requirements to reduce      
intermediation costs of banks and improve their efficiency;       

- using the extension of credit by Bangko Sentral to banks against    
       promissory notes and other collateral or rediscounting as a mechanism for
liquidity control rather than pure credit allocation;             

   - broadening securities dealing in Philippine Treasury bills to allow the
market to determine interest rates;                               

    - prescribing more stringent standards for the establishment of new banks;

- easing the entry and operation of foreign banks to attract foreign  
investments, promote competition and reduce intermediation costs; 

  - simplifying the entry rules for rural banks to improve competition and
promote efficiency; and                                           

 - increasing minimum capital requirements to promote stronger financial
institutions.                                                     

   The minimum bank capitalization requirements as of December 2000 is P4.95
billion for universal banks, P2.4 billion for commercial banks and P325 million 
for thrift banks based in Metro Manila.                                         

  The economic downturn affected banks in the Philippines primarily in two
ways. First, due to the economic troubles, bank deposits increased only         
minimally which in turn limited the ability of banks to extend new loans.       
Aggregate assets of the banking system increased by 21.8% from year-end 1997 to 
February, 2002. Second, the depreciation of the Peso, declining equity prices   
and higher domestic interest rates weakened the quality of the assets of        
Philippine banks. This caused a number of relatively small financial            
institutions to fail and created concerns about the stability of the Philippine 
financial system.                                                               

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     The following table provides information regarding non-performing loans for
the banking system for the periods indicated.                                   

TOTAL LOANS (GROSS) AND NON-PERFORMING LOANS BY TYPE OF COMMERCIAL BANKS        

                                                        [Enlarge/Download Table]

                                                   AS OF DECEMBER 31,                      AS OF  
                                  ----------------------------------------------------   APRIL 30,
                                    1997       1998       1999       2000       2001       2002   
                                  --------   --------   --------   --------   --------   ---------
                                                  (IN BILLIONS EXCEPT PERCENTAGES)                
                                                                                                  
Expanded commercial banks(1)                                                                      
  Total loans.................... P1,112.0   P1,080.1   P1,086.1   P1,025.0   P  992.2   P  988.6 
  Total non-performing loans.....     46.6      112.4      141.6      172.4      192.6      211.3 
  Ratio of non-performing loans                                                                   
     to total loans..............      4.2%      10.4%      13.0%      16.8%      19.4%      21.4%
Non-expanded commercial banks(2)                                                                  
  Total loans....................    137.6      120.8      139.7      184.3      182.7      190.0 
  Total non-performing loans.....      9.8       16.5       23.0       32.4       41.7       40.7 
  Ratio of non-performing loans                                                                   
     to total loans..............      7.2%      13.6%      16.4%      17.6%      22.8%      21.4%
Government banks(3)                                                                               
  Total loans....................    166.4      185.9      201.0      222.4      200.3      206.9 
  Total non-performing loans.....     10.2       18.8       25.4       33.5       35.7       38.6 
  Ratio of non-performing loans                                                                   
     to total loans..............      6.1%      10.1%      12.6%      15.1%      17.8%      18.7%
Foreign banks(4)                                                                                  
  Total loans....................    157.1      155.7      156.2      196.5      249.9      267.0 
  Total non-performing loans.....      6.9       12.2        5.4        7.5       11.9       10.7 
  Ratio of non-performing loans                                                                   
     to total loans..............      4.4%       7.9%       3.5%       3.8%       4.8%       4.0%
Total loans...................... P1,573.1   P1,542.5   P1,582.9   P1,628.2   P1,625.1   P1,652.6 
Total non-performing loans.......     73.6      160.0      195.4      245.8      281.9      301.3 
Ratio of non-performing loans to                                                                  
  total                                                                                           
  loans..........................      4.7%      10.4%      12.3%      15.1%      17.4%      18.2%

---------------                                                                 

Source: Bangko Sentral, Department of Economic Research/Supervisory Reports and 
Studies Office.                                                                 

(1) Includes ING Bank (foreign bank) and excludes Land Bank of the Philippines  
  and Development Bank of the Philippines. Starting May 2001, three expanded
commercial banks (Standard Chartered Bank, HSBC and ING Bank) were      
reclassified as foreign banks.                                          

(2) Excludes Orient Bank.                                                       

(3) Consists of Land Bank, Development Bank and Al-Amanah Islamic Bank.         

(4) Consists of 13 foreign banks, excludes three foreign banks' subsidiaries.   

The commercial banking system's NPLs, as a percentage of total loans  
climbed from 4.7% in 1997 to 17.4% in 2001. In 1998, Bangko Sentral shortened   
the period after which overdue loans must be classified as NPLs from six months 
to three months. High interest rates and the depreciation in the Peso have      
contributed to the increase in NPLs. Bangko Sentral's policy to address the     
increase in NPLs has been to lower domestic interest rates, promote corporate   
restructuring and encourage the swift disposal of real and other properties     
owned or acquired through private-sector led initiatives. These actions enable  
banks to concentrate on new loans and focus on areas within their core          
competence.                                                                     

  The rise in NPLs weighed down on the asset quality of banks in 2001. The
commercial banking system's NPLs as a percent of total loans rose from 15.1% in 
December 2000 to 17.4% in December 2001. This weakening resulted from the       
depreciation of the Peso, which contributed to a rise in loan defaults, and the 
slowdown in business activity that saw a drop in credit demand.                 

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In late 2000 and early 2001, Bangko Sentral extended P30 billion in   
emergency loans to Equitable PCI and P25 billion in emergency loans to          
Philippine National Bank ("PNB") to help the banks alleviate short-term         
liquidity problems attributed to heavy withdrawals during the Estrada           
impeachment trial.                                                              

   The average capital adequacy ratio of the banking system based on the old
concept was 16.6% as of February 28, 2002, above the statutory floor of 10%.    

After the onset of the Asian economic crisis, Bangko Sentral adopted a
number of measures to protect the financial position and soundness of the       
country's banks, including measures relating to:                                

- Limits on a bank's transactional capacity by:                       

       - reducing the maximum loan value for real estate loans from 70% to 60%
of the appraised value of the real estate collateral;       

        - limiting bank's real estate loans to no more than 20% of a bank's loan
    portfolio, subject to certain exceptions that could increase the
percentage to 30% overall;                                  

   - requiring that 30% of the 100% cover of a bank's foreign currency
         deposit units' foreign exchange liabilities be kept in liquid assets;
and                                                         

    - requiring banks to mark-to-market their trading portfolios in line
         with existing market conditions at the execution of every transaction
at the end of each month.                                   

- Measures relating to delinquent and restructured loans:             

 - in cases of loans payable in monthly or quarterly installments,
        reducing the number of missed monthly payments from six to three and
          quarterly payments from two to one before a loan must be classified as
    non-performing. To align domestic regulations with international
         standards, in May 1999 Bangko Sentral extended the date to classify a
          loan as non-performing for loans payable on a lump sum basis and loans
       payable in quarterly, semi-annual or annual installments to 30 days
after their past-due date;                                  

   - revising the treatment of restructured loans to provide that they
       should be treated as performing loans or interest income related to
    them should accrue if they are current and fully secured by real
       estate with loan value up to 60% of the appraised value of the real
          estate security plus ensured improvements. In May 1999, Bangko Sentral
       further tightened regulations regarding the appraisal of collateral
 for restructured loans and stipulated additional criteria for
reclassifying restructured loans as performing;             

     - mandating general loan loss provisions over and above the provision
       for probable losses linked to individually identified bad accounts.
        Incremental loans granted over and above the loan portfolio level of
          banks, net of allowable exclusions, as of March 31, 1999 are no longer
          subject to the provisioning requirements requiring banks to reserve an
  amount equal to 2% of their gross loan portfolio (less certain
    accounts) as an allowance for probable losses. In December 2001,
      Bangko Sentral lowered the provisioning ratio from 2% to 1% of the
latest outstanding balance of unclassified loans other than 
      restructured loans (less loans which are considered non-risk under
         existing laws and regulations) to increase new lending, and imposed a
      5% reserve on the outstanding balance of unclassified restructured
       loans (less the outstanding balance of restructured loans which are
          considered non-risk under existing regulations), to reflect the higher
       risks attached to such loans even if they are presently performing.
         These adjustments were implemented to reduce disincentives to lending
 activities of banks with otherwise sound loan portfolios; and

   - tightening provisioning requirements to include new categories of
    loans especially mentioned, regardless of whether such loans are
         secured by collateral (loan loss provisions of 5% of outstanding loan
   amount), and secured loans classified as substandard (loan loss
    provisions of 25% of outstanding loan amount). Guidelines on the
         allowance required on loan accounts classified as substandard-secured
were subsequently issued.                                   
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- Measures relating to capitalization:                                

      - increasing minimum capital requirements for universal banks to P4.95
         billion by December 31, 2000 and for commercial banks to P2.4 billion
by December 31, 2000;                                       

       - implementing additional penalties for a bank's failure to comply with
minimum capital requirements; and                           

      - categorizing banks by the degree of undercapitalization and adopting
prompt corrective measures as appropriate.                  

- Measures relating to disclosure and management:                     

     - improving bank disclosures regarding interest rates, non-performing
        loans, classified loans, loan loss reserves, allowances for probable
losses and loss provisions;                                 

    - improving bank management by outlining and expanding the duties of
boards of directors;                                        

     - requiring banks to appoint compliance officers to ensure the bank's
compliance with banking rules and regulations; and          

   - requiring external auditors to provide more information to Bangko
Sentral.                                                    

- Measures relating to regulatory control and bankruptcy:             

- shifting the regulatory approach to a risk-based approach of  
      examination and consolidated supervision as opposed to one focused
      exclusively on transaction testing and verifying the existence and
value of assets;                                            

        - issuing stricter guidelines to establish and operate new banks so that
 new banks will have suitable stockholders, adequate financial
         strength, an appropriate legal structure in line with its operational
      structure and appropriate management with sufficient expertise and
         integrity to operate the bank in a sound and prudent manner. In 1999,
Bangko Sentral put in place an indefinite moratorium on the 
        establishment of new banks with certain exceptions such as new banks
    resulting from mergers and consolidations. In March 2001, Bangko
      Sentral issued implementing guidelines to enforce section 8 of the
General Banking Law of 2000. These guidelines provided for a
     moratorium on the establishment of commercial banks, with certain
          exceptions such as new banks arising from the acquisition by a foreign
       bank of 100% of the voting stock of an existing domestic commercial
bank; and                                                   

        - adopting strategies for restructuring a failed bank before closing it,
         including rehabilitating the troubled bank, buying-in another bank or
   financial institution or merging the troubled bank with another
financial institution.                                      

Bangko Sentral worked to amend the banking laws to:                   

   - allow Bangko Sentral to adopt internationally accepted risk-based
capital requirements,                                       

     - define unsound banking practices and increase the frequency of bank
examinations,                                               

 - impose sanctions on banks and related persons for violations of
banking regulations,                                        

       - issue regulations requiring banks and affiliates to maintain balanced
positions in their foreign currency transactions, and       

- grant loans to banks for liquidity purposes.                  

   To stimulate economic recovery and encourage greater bank lending, Bangko
Sentral relaxed the general loan loss provisioning requirement in April 1999 so 
that banks would not have to make general loan loss provisions for loans granted
after March 31, 1999 (the general loan loss provision prior to March 31, 1999   
was 1.5% of the total amount of outstanding loan). The requirements for specific
loan loss provisions still apply.                                               

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  The General Banking Law of 2000, signed in May 2000, amended the General
Banking Act and enhanced Bangko Sentral's supervisory powers, tightened         
prudential norms and liberalized foreign ownership of banks. Bangko Sentral now 
has the power to conduct more in-depth examinations of banks and undertake more 
effective prompt corrective action. The General Banking Law, however, repealed  
the Philippine Deposit Insurance Corporation's independent right to conduct     
on-site supervision and require information from banks. Since August 2000,      
Bangko Sentral has been issuing the implementing guidelines for the General     
Banking Law. The General Banking Law reforms introduced include:                

- a strong legal basis for consolidated supervision;                  

- formal adoption of Basel risk-based capital requirements effective  
beginning July 1, 2001;                                           

- fit-and-proper criteria for directors and officers;                 

- stronger safeguards against connected lending and more comprehensive
coverage of single borrower's limit;                              

    - inclusion of the declaration of a bank holiday as a ground for placing a
bank under receivership;                                          

    - the legal basis for formulating standards determining unsafe and unsound
bank practices;                                                   

- ownership ceilings by foreign and domestic banks;                   

- increases in monetary penalties; and                                

- improved transparency and disclosure standards.                     

As part of the global fight against money laundering, since July 2000,
Bangko Sentral has required banks to report on unusually large transactions and 
all unusual patterns of transactions which have no apparent or visible lawful   
purpose. On July 26, 2001, Bangko Sentral also reduced the ceiling on           
undocumented over-the-counter sales of foreign exchange from $10,000 to $5,000. 
Additionally, Bangko Sentral has issued a number of administrative measures that
bring the country's regulatory regime relating to money laundering closer to    
international standards. See "Recent Economic Developments -- Anti-Money        
Laundering Act of 2001". These measures include:                                

  - requiring banks and non-bank financial institutions to take reasonable
     measures to establish and record the true identity of their clients and
to update their records at least every other year;                

 - requiring banks and non-bank financial intermediaries to submit their
respective plans of action to comply with the above requirements; 

  - requiring banks to take necessary measures to establish and record the
  true identity of their clients in cases of numbered foreign currency
accounts authorized under existing law;                           

- precluding banks from issuing cashier's, manager's checks, certified
       checks or other instruments payable, to cash, bearer or numbered accounts
in amounts exceeding $10,000;                                     

- requiring banks with foreign exchange subsidiaries or affiliates to 
   report, on a daily basis, the counterparties and other details of all
    foreign exchange sales and purchases. For transactions of $250,000 and
      above, banks are required to specify the identities and addresses of the
parties as well as the purpose of the transaction;                

    - instructing foreign exchange corporations, for sales of foreign exchange
     exceeding $5,000 or more to residents for trade and non-trade purposes,
      to require foreign exchange purchasers to submit a notarized application
and supporting documents; and                                     

     - requiring any person to declare in writing the amount, source and purpose
 of the transfer of foreign currency into and out of the country for
amounts equivalent to or exceeding $10,000.                       

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Foreign Currency Loans                                                      

  Bangko Sentral imposes a combination of prior approval, registration and
reporting requirements on all non-Peso denominated loans. The regime is as      
follows:                                                                        

                                                        [Enlarge/Download Table]

                TYPE OF LOAN                              REGULATORY REQUIREMENT            
---------------------------------------------  ---------------------------------------------
                                                                                            
Private sector loans:                          Prior approval, subsequent registration and  
- guaranteed by a public sector entity or a    reporting requirements.                      
  local                                                                                     
 commercial bank;                                                                           
- granted by foreign currency deposit units                                                 
  that are specifically or directly funded                                                  
  from, or collateralized by, offshore loans                                                
  or deposits;                                                                              
- obtained by banks and financial                                                           
  institutions with a term exceeding one year                                               
  which will be relent to public and private                                                
  enterprises; or                                                                           
- serviced using foreign exchange purchased                                                 
  from the banking system, unless                                                           
  specifically exempted from the approval                                                   
  requirement.                                                                              
Private sector loans which are specifically    Subsequent registration and reporting        
  exempted and which will be serviced with     requirements.                                
  foreign exchange purchased in the                                                         
  banking system.                                                                           
All private sector loans to be serviced with   Reporting requirements.                      
  foreign exchange not purchased from the                                                   
  banking system.                                                                           
Public sector offshore loans except:           Prior approval and reporting requirements.   
- short-term foreign currency deposit loans                                                 
  for trade financing; and                                                                  
- short-term interbank borrowings.                                                          

THE PHILIPPINE SECURITIES MARKETS                                               

History and Development                                                     

  The securities industry in the Philippines began with the opening of the
Manila Stock Exchange in 1927. In 1936, the Government established the          
Securities and Exchange Commission (the "SEC") to oversee the industry and      
protect investors. Subsequently, the Makati Stock Exchange opened in 1963 and   
merged with the Manila Stock Exchange to form the Philippine Stock Exchange in  
1994. Until economic and political difficulties in the 1970s caused its decline,
the Philippine securities market was the most active in Asia. Since 1992, the   
Government has attempted to improve the capital market, attract more companies  
to list on the Philippine Stock Exchange and allow more investors to participate
in the market by emphasizing market deregulation and self-regulation.           

 On December 6, 1996, the SEC granted the Philippine Central Depository,
Inc. a temporary operating license. The central depository, a private           
institution, implemented a book-entry system to simplify the mechanism for      
issuing and transferring securities. By December 1997, the central depository   
had enrolled all active listed issues in the book entry system.                 

On June 29, 1998, the SEC granted the Philippine Stock Exchange       
self-regulatory organization status, empowering it to supervise and discipline  
its members, including by examining a member's books of account and conducting  
audits.                                                                         

 To broaden the range of securities eligible for listing, the Philippine
Stock Exchange established a board for small-and medium-sized enterprises with  
an authorized capital of P20 million to P99.9 million of which at               

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least 85% must be subscribed and fully paid. The Philippine Stock Exchange      
intends to eventually list debt securities and equity derivatives as well.      

   On July 19, 2000, the Securities Act of 1999 was signed into law. The new
Act:                                                                            

    - shifts the focus of securities regulation from a merit-based system to a
disclosure-based system;                                            

- strengthens the anti-fraud provisions of the securities laws;       

- utilizes self-regulatory organizations to enforce greater investor  
protection;                                                         

     - updates the regulations governing the securities industry consistent with
international practices; and                                        

  - strengthens the rule-making and corporate reorganization powers of the
SEC.                                                                

 As of June 10, 2002, the Philippine Stock Exchange had 151 local and 33
foreign members and 236 listed companies.                                       

Share prices of companies listed on the Philippine Stock Exchange fell
significantly in 1997. The falling stock market and resultant heavy selling of  
Philippine equity securities by foreign investors hurt the value of the Peso and
the foreign currency positions of financial institutions in the Philippines. The
Philippine Stock Exchange Composite Index declined by 45.8% in Peso terms from  
3,447.6 on February 3, 1997 to 1,869.2 on December 29, 1997. The Philippine     
Stock Exchange Composite Index was quite volatile and continued to fall during  
most of 1998, reaching an historic low of 1,082.2 on September 11, 1998.        

   The stock market rebounded in late 1999, as the Philippine Stock Exchange
Composite Index reached 2,143.0 at the end of December 1999, a 8.9% increase    
from its level at the end of December 1998. The recovery, however, was          
short-lived as the Philippine Stock Exchange Composite Index contracted for     
three consecutive quarters in 2000, declining 31.1% for the first nine months   
due to political turmoil, weakening economic fundamentals and a stock market    
manipulation scandal involving BW Resources Corporation ("BW"), a publicly      
traded company, and Mr. Dante Tan, its largest shareholder. During 1999, Mr.    
Tan, in his own name, under alias names and through associates, bought and sold 
large quantities of BW shares in an attempt to control the price of the shares. 
Mr. Tan was charged with, among other things, price manipulation and insider    
trading. Mr. Tan's case is currently pending with the Department of Justice. The
stock market's overall capitalization grew 33% in 2000. As of December 31, 2000,
overall capitalization was approximately P2.5 trillion, compared to P1.9        
trillion as of December 31, 1999 and P1.4 trillion as of December 31, 1998. As a
percentage of GNP, market capitalization declined from 86.4% in 1999 to 77.6% by
the end of 2000. The Philippine Stock Exchange Composite Index closed at 1,494.5
on December 31, 2000.                                                           

    On June 20, 2001, the Philippine Stock Exchange announced that the SEC had
approved its proposal for its demutualization, or conversion from a mutual or   
membership organization into a publicly-held stock corporation. Under the       
demutualization, the Exchange created a new corporation which assumed           
approximately 80% of the Exchange's total assets. Exchange member broker-dealers
surrendered membership rights to the Exchange and, in return, received shares of
the new corporation, shares of the Exchange and trading rights. On July 20,     
2001, the Philippine Stock Exchange approved the plan to demutualize the stock  
exchange. On August 8, 2001, the Philippine Stock Exchange completed its        
conversion to a stock corporation that is publicly held. As its first           
shareholders, each of the 184 member-brokers subscribed and fully paid for      
50,000 shares. The second part of the demutualization which is the public       
offering and listing of its shares on the Exchange is still under planning.     

   The Philippine Stock Exchange Composite Index reached 1,168.08 at the end
of December 2001, a 21.8% decrease from its level at the end of December 2000.  
At the end of September 2001, the composite index closed the month at 1,126.63, 
a decrease of 21.5% from end of September 2000. In October 2001, amid the onset 
of the US-led attacks against the Taliban government in Afghanistan, fears and  
uncertainties about the prospects of the global economy due to the subsequent   
threat of war and recession and apprehensions over the Philippine economic and  
political environment, the composite index continued its decline, finishing the 
month at 993.35, or 11.8% lower than September 2001. In November 2001, the      
composite index rose to finish the month at 1,128.47, or 13.6% higher than the  
prior month, due to the release of better-than-expected domestic economic data, 
a lower budget deficit for October 2001 than was targeted and favorable news on 
the                                                                             

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US-led attacks against the Taliban in Afghanistan. In December 2001, the        
composite index increased to 1,168.08 at month-end, or 3.5% higher than at the  
end of November 2001.                                                           

Government Securities Market                                                

    The Government securities market is dominated by short-term Treasury bills
with maturities not exceeding one year. Responding to investor preferences and  
to create a yield curve for long-term domestic securities, the Government issued
securities with longer maturities, including five-year fixed rate treasury bonds
in June 1995 and seven and ten-year fixed rate treasury bonds in 1996. The      
restructuring of the Republic's domestic debt in favor of longer-term securities
kept the issuance of Treasury bills of P17.9 billion below budget in 1996, while
the issuance of fixed rate Treasury bonds exceeded expectations by P13.5        
billion. In 1997, the Government sold, for the first time, 20-year Treasury     
bonds in the amount of P2 billion. The Government's outstanding direct domestic 
debt totalled P1,247.7 billion as of December 31, 2001, an increase of 46.6%    
from P850.9 billion as of December 31, 1998.                                    

In June 1999, the Government issued P11.6 billion small-denominated   
Treasury bonds. These bonds, which have a maturity of five years and are        
available in blocks of as low as P5,000, are aimed at Philippine retail         
investors. The bonds are intended to reduce the Government's dependence on      
weekly auctions and to provide the Government with another source of long-term  
funding. The Government intends to continue to issue small-denominated Treasury 
bonds and expects the program to reduce demand for short-term funding and       
contribute to reduced pressure on interest rates.                               

    The Government has taken steps to further the development of the secondary
market in Treasury securities, including establishing of the Registry of        
Scripless Securities which computerizes the sales and purchases of Treasury     
securities in the secondary market.                                             

International Bond Market                                                   

     In February 1997, Bangko Sentral approved guidelines governing the issuance
of Peso-denominated instruments in the international capital markets. Bangko    
Sentral will require the receipt of foreign currency by the Philippines and its 
exchange into Pesos in the local banking system.                                

PUBLIC FINANCE                                                                  

The Consolidated Financial Position                                         

The consolidated public sector financial position measures the overall
financial standing of the Republic's public sector. It is comprised of the      
public sector borrowing requirement and the aggregate deficit or surplus of the 
Social Security System and the Government Service Insurance System, Bangko      
Sentral, the Government financial institutions and the local Government units.  
The public sector borrowing requirement reflects the aggregate deficit or       
surplus of the Government, the Central Bank-Board of Liquidator's accounts, the 
Oil Price Stabilization Fund and the 14 monitored Government owned corporations.

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    The following table sets out the consolidated financial position on a cash
basis for the periods indicated.                                                

CONSOLIDATED PUBLIC SECTOR FINANCIAL POSITION OF THE REPUBLIC 

                                                        [Enlarge/Download Table]

                                                        1997     1998      1999      2000     2001(1)  
                                                       ------   -------   -------   -------   -------  
                                                             (IN BILLIONS, EXCEPT PERCENTAGES)         
                                                                                                       
Public sector borrowing requirement:                                                                   
  National Government................................. P  1.6   P (50.0)  P(111.7)  P(134.2)  P(147.0) 
  Central Bank-Board of Liquidation...................  (25.7)    (26.4)    (20.5)    (19.2)    (23.5) 
  Oil Price Stabilization Fund(2).....................   (0.8)      0.7       1.9       0.1       0.0  
  Monitored Government owned corporations.............  (17.2)    (38.0)     (4.6)    (19.2)    (20.9) 
  Government transfers to Government owned                                                             
    corporations......................................    2.5       0.9       3.0       4.2       4.4  
  Other adjustments...................................    0.0       1.5      (6.1)     (6.6)      0.0  
                                                       ------   -------   -------   -------   -------  
    Total public sector borrowing requirement......... P(39.5)  P(111.3)  P(138.0)  P(174.8)  P(187.0) 
                                                       ======   =======   =======   =======   =======  
As a percentage of GNP................................   (1.6)%    (4.0)%    (4.4)%    (5.0)%    (5.1)%
Other public sector:                                                                                   
  Social Security System and Government Service                                                        
    Insurance System.................................. P  3.9   P  17.8   P  36.4   P  15.5   P  15.6  
  Bangko Sentral(3)...................................    2.2       3.2      (4.0)      0.2      15.0  
  Government financial institutions...................    4.4       5.4       3.3       2.8       4.8  
  Local Government units..............................    4.0       2.0       3.2       3.8       4.2  
  Timing adjustment of interest payments to Bangko                                                     
    Sentral...........................................    2.3      (0.3)     (2.3)      0.5      (0.2) 
  Other adjustments...................................    0.0       0.0       0.8       0.1       0.1  
                                                       ------   -------   -------   -------   -------  
      Total other public sector.......................   16.6      28.1      37.5      22.9      39.4  
                                                       ------   -------   -------   -------   -------  
      Consolidated public sector financial position... P(22.9)  P (83.2)  P(100.5)  P(151.9)  P(147.6) 
                                                       ======   =======   =======   =======   =======  
As a percentage of GNP................................   (1.0)%    (3.0)%    (3.2)%    (4.3)%    (4.1)%

---------------                                                                 

Source: Fiscal Policy and Planning Office, Department of Finance.               

(1) Preliminary.                                                                

(2) The Oil Price Stabilization Fund was created by the Government to stabilize 
the domestic price of oil products. Prior to deregulation in 1997, if   
  exchange rates and international crude oil prices exceeded certain levels,
   oil companies received money from the fund, but if exchange rates and crude
  oil prices fell below those levels, oil companies contributed to the fund.
The fund was technically abolished with the full deregulation of the oil
industry in February 1998. The Government will settle claims against the
fund, amounting to P2.6 billion in 1997, by granting the claimants tax  
credits over a 15-month period.                                         

(3) Amounts are net of interest rebates, dividends and other amounts remitted to
the Government and the Central Bank-Board of Liquidation.               

  In 1997, the consolidated financial position recorded a deficit of P22.9
billion, or 1.0% of GNP at current prices. The significantly higher deficit     
resulted from increased interest rates and, accordingly, interest costs, coupled
with lower than projected GNP, which resulted in lower revenues in 1997. In     
addition, costs relating to the restructuring of the old Central Bank of the    
Philippines contributed P25.7 billion to the deficit.                           

   For 1998, the consolidated financial position recorded a deficit of P83.2
billion, or 3.0% of GNP at current prices, because of increased public sector   
borrowing requirement to finance higher deficits incurred by the Government and 
the Government owned corporations. Costs relating to the restructuring of the   
old Central Bank contributed P26.4 billion to the deficit.                      

    For 1999, the consolidated financial position recorded a deficit of P100.5
billion, or 3.2% of GNP at current market prices, compared to a deficit of P83.2
billion in 1998. The Government's position was P15.2 billion off its target of  
P85.3 billion for the year. The Government accounted for P111.7 billion of the  
total deficit for the period, in line with its objective of stimulating the     
economy. Restructuring costs for the old Central Bank also contributed P20.5    
billion to the total public sector borrowing requirement.                       

    Led by the Government deficit, the consolidated financial position deficit
increased to P151.9 billion in 2000 or 4.3% of GNP at current market prices,    
compared with the previous year's deficit of P100.5 billion. The consolidated   
public sector deficit was largely due to a public sector borrowing requirement  
of P174.8 billion,                                                              
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which included P19.2 billion for costs relating to the restructuring of the old 
Central Bank and the P19.2 billion deficit of the 14 monitored non-financial    
Government corporations. The Government owned corporations' budget gap          
deteriorated from the single-digit deficit posted in 1999 as both current and   
capital expenditures increased. The greatest contributors to the deficit were   
the Philippine National Oil Company, the National Power Corporation, the Light  
Rail Transit Authority, the National Development Corporation and the National   
Food Authority.                                                                 

     The other public sector entities had a combined surplus of P22.9 billion in
2000, largely due to the substantial surpluses of the local government units and
the social security institutions such as the Government Services and Insurance  
System and Social Security System.                                              

    For 2001, the consolidated financial position recorded a deficit of P147.6
billion or 4.1% of GDP at current market prices. The Government accounted for   
P147.0 billion of the deficit, the Central Bank restructuring accounted for     
P23.5 billion and the monitored Government-owned corporations accounted for     
P21.7 billion. The other public sector entities had a combined surplus of P39.4 
billion during 2001, of which P15.5 billion was attributable to the social      
security institutions.                                                          

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Government Revenues and Expenditures                                        

   The following table sets out Government revenues and expenditures for the
periods indicated.                                                              

GOVERNMENT REVENUES AND EXPENDITURES

                                                        [Enlarge/Download Table]

                                                             ACTUAL                                   BUDGET         
                                    ---------------------------------------------------------   -------------------  
                                                                                      JAN-MAY                        
                                     1997     1998     1999      2000     2001(1)      2002     2001(2)      2002    
                                    ------   ------   -------   -------   -------     -------   -------     -------  
                                                (IN BILLIONS, EXCEPT PERCENTAGES)                                    
                                                                                                                     
REVENUES                                                                                                             
Tax revenues                                                                                                         
  Bureau of Internal Revenue....... P314.7   P337.2   P 341.3   P 360.8   P 388.7     P160.0    P 388.1     P447.6   
  Bureau of Customs................   94.8     76.0      86.5      95.0      96.2       36.8      105.1      115.1   
  Others(3)........................    2.7      3.4       3.8       4.2       4.9        2.3        5.7        8.6   
                                    ------   ------   -------   -------   -------     -------   -------     ------   
    Total tax revenues.............  412.2    416.6     431.7     460.0     489.8      199.1      498.9      571.3   
      As a percentage of GNP.......   16.1%    14.9%     13.9%     13.2%     12.8%       N/A       13.0%      13.7%  
Non-tax revenues                                                                                                     
  Bureau of the Treasury                                                                                             
    income(4)...................... P 35.4   P 22.5   P  26.3   P  30.8   P  46.4     P 12.7    P  24.9     P 22.2   
  Fees and other charges(5)........   13.2     21.0      16.0      17.9      24.3       11.9       23.2       25.6   
  Privatizations(6)................    9.4      1.7       4.2       4.6       1.2        0.1       10.0        5.0   
  Comprehensive Agrarian Reform                                                                                      
    Program (land acquisition and                                                                                    
    credit)........................    0.0      0.0       0.1       0.0       0.0         --        0.0        0.0   
  Foreign grants...................    1.7      0.4       0.3       1.4       2.0        0.1        1.2        0.3   
                                    ------   ------   -------   -------   -------     -------   -------     ------   
    Total non-tax revenues.........   59.7     45.6      46.8      54.7      73.9       24.8       59.3       53.0   
                                    ------   ------   -------   -------   -------     -------   -------     ------   
      Total revenues...............  471.8    462.5     478.5     514.8     563.7      223.9      558.2      624.3   
                                    ------   ------   -------   -------   -------     -------   -------     ------   
        As a percentage of GNP.....   18.4%    16.6%     15.2%     14.7%     14.7%       N/A       14.5%      15.0%  
EXPENDITURES                                                                                                         
  Personnel services............... P150.4   P198.5   P 202.7   P 225.2   P 195.3        N/A        N/A(7)  P251.3   
  Maintenance and operating                                                                                          
    expense........................  108.1     64.4      70.8      79.8     150.8        N/A        N/A(7)    80.8   
  Other current operating                                                                                            
    expense........................    6.1      0.2       5.5       3.6         0        N/A        N/A(7)     N/A(7)
  Interest payments                                                                                                  
    Foreign........................   19.6     26.3      31.3      47.3      62.2       24.9       63.2       64.0   
    Domestic.......................   58.4     73.5      75.0      93.6     112.6       47.4      116.2      140.3   
                                    ------   ------   -------   -------   -------     -------   -------     ------   
      Total interest payments......   78.0     99.8     106.3     140.9     174.8       72.3      179.4      204.3   
  Subsidies to Government                                                                                            
    corporation....................    5.9      4.7       6.8       6.7       9.4        N/A        N/A(7)     5.0   
  Allotment to local government                                                                                      
    units..........................   71.0     72.0      78.7     100.0     118.2        N/A        N/A(7)   103.9   
  Transfers to the Oil Price                                                                                         
    Stabilization Fund.............    0.0      0.0       0.7       0.0       0.0        N/A        N/A(7)    28.6   
  Comprehensive Agrarian Reform                                                                                      
    Program (land acquisition and                                                                                    
    credit)........................    0.0      0.5       0.0       2.3       0.0        N/A        N/A(7)     5.6   
  Infrastructure and other capital                                                                                   
    outlays........................   47.9     71.3     115.7      87.2      57.9        N/A      101.0       67.8   
  Equity and net lending...........    3.0      1.1       3.2       3.2       4.4        N/A        N/A(7)     7.1   
                                    ------   ------   -------   -------   -------     -------   -------     ------   
    Total expenditures.............  470.3    512.5     590.4     649.0     710.8      331.3      703.2      754.3   
                                    ------   ------   -------   -------   -------     -------   -------     ------   
      As a percentage of GNP.......   18.6%    18.4%     18.8%     18.5%     18.6%       N/A       18.3%      18.0%  
Surplus/(Deficit).................. P  1.6   P(50.0)  P(111.7)  P(134.2)  P(147.0)    P(107.5)  P(145.0)    (130.0)  
                                    ======   ======   =======   =======   =======     =======   =======     ======   
FINANCING                                                                                                            
  Domestic financing............... P  5.3   P 37.6   P  28.9   P  55.5   P 124.1     P 18.4    P 118.7     P 79.0   
    Net domestic borrowings........  (20.3)    76.5      98.8     119.5     152.3       61.6      165.2       63.3   
    Non-budgetary accounts.........   (7.0)   (56.0)     32.6     (57.6)    (50.4)     (15.2)     (24.3)      15.1   
  Use of cash balances.............   32.6     17.1      37.4      (6.5)     22.2        (28)      22.2              
  Foreign financing................   (6.8)    12.3      82.8      78.8      22.9       89.1       26.3         .7   
                                    ------   ------   -------   -------   -------     -------   -------     ------   
      Total financing.............. P (1.6)  P 50.0   P 111.7   P 134.2   P 147.0     P107.5    P 145.0     P130.0   
                                    ======   ======   =======   =======   =======     =======   =======     ======   

---------------                                                                 

Source: Department of Finance; Department of Budget and Management.             
(1) Preliminary.                                                                
(2) Revised as of July 17, 2001.                                                
(3) Represents tax revenues of the Department of Environment and Natural        
    Resources, Bureau of Immigration and Deportation, Land Transportation Office
and other Government entities.                                          
(4) Represents interest on deposits, interest on advances to Government owned   
corporations, interest on securities, dividends from Government owned   
corporations, earnings received from the Philippine Amusement and Gaming
Corporation, earnings and terminal fees received from Ninoy Aquino      
International Airport, guarantee fees and others.                       
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(5) Represents receipts from the Land Transportation Office, Department of      
Foreign Affairs and other Government agencies.                          
(6) Represents remittances to the National Government from the sale of interests
in Government owned corporations, Government financial institutions and 
other Government-owned assets and from the sale of assets by the        
Presidential Commission on Good Government and the Asset Privatization  
Trust.                                                                  
(7) N/A means "not available".                                                  

Revenues                                                                    

 SOURCES.  The Government derives its revenues from both tax and non-tax
sources. The main sources of revenue include income tax, value added tax and    
customs duties. The main sources of non-tax revenue consist of interest on      
deposits, amounts earned from Government owned corporations and privatization   
receipts.                                                                       

     In 1995 the Ramos Government submitted the Comprehensive Tax Reform Package
for Congressional action. The objective of the proposal was to establish a      
simple, broad-based and efficient tax system, with minimal scope for discretion 
on the part of Government officials, that would provide a self-sustaining       
revenue base that would keep pace with the budgetary needs of a growing economy.
The comprehensive tax reform package was enacted in 1997 and provides a         
three-tiered excise tax on cigarettes and converts beer taxation from ad valorem
to specific excise taxes. The comprehensive tax reform package also restructured
and simplified the tax rates for business and professional income, reduced the  
corporate income tax rate, and reformed certain elements of tax administration. 

    The Government expanded the coverage of the value-added tax system in 1996
and 1997 to include Government contracts and suppliers, telecommunication       
services, road freight and other transportation, real property, restaurants and 
caterers, hotels and motels, and broadcasting. The new regime raised P6.7       
billion out of total value-added tax revenues of P40.9 billion in 1996, P6.4    
billion out of total value-added tax revenues of P47.3 billion in 1997 and P0.2 
billion out of total value-added tax revenues of P47.5 billion in 1998. Total   
value-added tax revenues amounted to P55.2 billion for 1999 and P55.3 billion   
for 2000.                                                                       

The tax effort in 2001 will be increased through policies designed to 
result in the collection of additional tax revenues and non-tax revenues such as
fees and charges. Increased tax revenue is expected to come from a program of   
intensified collection through enforcement of tax laws, improvement of corporate
governance and plugging of leakages in the tax system. The Bureau of Internal   
Revenue is currently implementing tax administration improvements which include 
the following:                                                                  

- resolution of delinquent accounts or disputed assessments which are 
    either being litigated in the courts or being challenged by taxpayers;

- use of electronic documentary stamp metering machines to accurately 
assess and monitor documentary stamp taxes;                       

   - broadening the tax base to increase the number of registered taxpayers;

   - issuance of revenue regulations regarding automobiles which are subject
to excise tax; and                                                

    - implementing a ceiling on deductible representation expenses as mandated
by the Tax Code of 1997.                                          

Moreover, the Department of Finance is in the process of identifying  
measures to address the areas in which tax collection is deficient in an effort 
to increase revenues in 2001. Likewise, necessary controls need to be instituted
to ensure the correct declaration of revenues and deductions, and controls need 
to be established on the claims of input taxes.                                 

    RESULTS.  In 1997, Government revenues rose to P471.8 billion, an increase
of 15% from 1996, due to higher tax revenues resulting from excise tax reforms, 
computerization of the tax authorities' offices and an increased number of tax  
audits, tied in part to the Government's Tax Reform Package. Non-tax revenue    
also rose as privatization receipts and dividends and other receipts from       
Government owned corporations climbed. These increases more than offset the loss
of revenues from the tariff reductions that took effect in 1997. Nevertheless,  
revenues came in below projections because of lower than expected GNP growth. In
1997, the Government recorded a surplus of P1.6 billion.                        

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In 1998, Government revenues decreased to P462.5 billion compared with
P471.8 billion for 1997 due, in part, to the general contraction of the economy 
and lower imports. Revenues collected by the Bureau of Internal Revenue         
increased to P337.2 billion from P314.7 billion, but were P17.9 billion short of
target estimates. Revenues from customs duties fell to P76 billion from P94.8   
billion, just below the target for the year.                                    

  In 1999, Government revenues amounted to P478.5 billion, a 3.5% increase
compared with 1998. The 1999 figure was, however, P12.2 billion less than the   
revised target. Non-tax revenues reflected a P5.6 billion dividend payment from 
Bangko Sentral and P3.3 billion in proceeds from the sale of Philippine         
Associated Smelting and Refining Corp. Revenues collected by the Bureau of      
Internal Revenue were P12.2 billion less than the revised target. The shortfall 
was primarily attributable to the slow recovery of the industry sector. Revenues
collected by the Bureau of Customs were P2.9 billion more than the revised      
target.                                                                         

  In 2000, Government revenues amounted to P514.8 billion, a 7.6% increase
over 1999 revenues. The 2000 amount was P47.6 billion short of the April 2000   
IMF revenue target. Revenues collected by the Bureau of Internal Revenue        
increased to P360.8 billion but were P37.0 billion short of target estimates.   
The shortfall was attributable primarily to lower Bureau of Internal Revenue    
collections of items such as documentary stamp tax and capital gains tax. The   
slowdown in the financial and real estate sectors also adversely affected       
collections in 2000. Bureau of Customs revenue increased to P95.0 billion, P3.1 
billion more than targeted. Intensified customs collection and anti-smuggling   
operations accounted for the Bureau of Custom's overperformance. Even with the  
marked slowdown in its collections from 1999 levels, the Bureau of the Treasury 
continued to surpass its target. The Treasury collected P30.8 billion in non-tax
revenue from dividends on its shares of stocks and income from investments.     
Privatization efforts generated only P4.6 billion in remittances, compared to a 
target of P22.9 billion, as unfavorable market prices prevented the government  
from disposing of its assets. Privatization remittances consisted of proceeds   
from the sale of the Philippine National Bank, Philippine Phosphate Fertilizer  
Corporation, and a package of International Broadcasting Corporation's radio    
stations.                                                                       

   Government revenues for 2001 were P563.7 billion, of which P489.8 billion
were tax revenues and P73.9 billion were non-tax revenues. Revenue collections  
for 2001 were P5.5 billion higher than the budgeted amount of P558.2 billion and
9.5% higher than revenue collections for 2000. The increase was mainly          
attributable to the Bureau of the Treasury which collected P21.5 billion more   
than its target of P24.9 billion, offsetting a P8.9 billion shortfall from the  
targeted amount of cash collections by the Bureau of Customs. The Bureau of     
Internal Revenue surpassed its target by P621 million for the period, collecting
P388.7 billion. Privatization revenues for 2001 were P1.2 billion, compared to  
the budgeted amount of P10 billion, as unfavorable market conditions prevented  
the disposition of Government assets targeted for privatization. Government     
expenditures for 2001 were P710.8 billion, P7.5 billion more than the budgeted  
amount of P703.2 billion and 9.5% higher than expenditures for 2000. The actual 
Government deficit for 2001 was P147.0 billion compared to the budgeted deficit 
of P145.0 billion.                                                              

Expenditures                                                                

     Expenditures for 1997 amounted to P470.3 billion, an increase of 16.4% from
1996. Personnel expenses accounted for the largest increase, an increase of     
27.6%, due to the implementation of the last phase of the Salary Standardization
Law, which reduced the gap between public- and private-sector salaries. Capital 
outlays also climbed because of irrigation projects constructed to offset the   
effects of the El Nino phenomenon on agricultural production levels. Allotments 
to local Government, especially for infrastructure projects, rose significantly.
Interest expenses also rose as a result of the depreciation in the value of the 
Peso due to the regional economic turmoil.                                      

     Expenditures in 1998 increased to P512.5 billion compared to P470.3 billion
in 1997. These expenditures compared together with revenues of P462.5 billion   
resulted in a deficit of P50.0 billion in the Government's fiscal position for  
1998, compared to a fiscal surplus of P1.6 billion in 1997.                     

     Expenditures in 1999 increased to P590.2 billion compared to P512.5 billion
in 1998. The total expenditures were P14.1 billion more than the revised target.
The increase in expenditures in 1999 was due in large part to economic stimulus 
efforts by the Government and in part to the repayment of certain accounts      
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payable that were outstanding from previous Government administrations. Revenues
of P478.5 billion resulted in an overall deficit of P111.7 billion in 1999.     

     Expenditures in 2000 increased to P649.0 billion compared to P590.2 billion
in 1999. The total expenditures were P19.5 billion more than the Government's   
target. The increase in expenditures was due primarily to higher interest       
payments which increased by P16 billion as a result of high interest rates for  
Treasury bills and fixed rate Treasury bonds. Other contributing factors        
included the depreciation of the Peso, compared to the US dollar, an increase in
LIBOR and the unprogrammed interest payment for the Metro Rail Transit          
obligation. Revenues of P514.8 resulted in an actual Government deficit of      
P134.2 in 2000.                                                                 

THE GOVERNMENT BUDGET                                                           

The Budget Process                                                          

  The Administrative Code of 1987 requires the Government to formulate and
implement a national budget. Various planning and fiscal agencies coordinate to 
determine expected revenue, expenditure and debt based on growth, employment and
inflation targets. The budget also reflects national objectives regarding       
domestic and foreign debt, domestic credit and balance of payments.             

    The President submits the budget to Congress within 30 days of the opening
of each regular session of Congress, which occurs on the fourth Monday of each  
July. The House of Representatives reviews the budget and transforms it into a  
general appropriations bill. The Senate then reviews the budget. A conference   
committee composed of members of both houses of Congress then formulates a      
common version of the bill. Once both houses approve the budget, the bill goes  
to the President for signing as a general appropriations act.                   

Government Budget for 2002                                                  

On August 8, 2001, the Arroyo administration submitted to Congress its
proposed 2002 budget. The 2002 budget is seeking an 11.6% increase in general   
appropriations to P780.8 billion from P699.9 billion in 2001. The proposed 2002 
budget contemplates revenue collections of P624.3 billion and expenditures of   
P754.3 billion, resulting in a P130 billion deficit. The 2002 budget proposal is
based on assumptions of real GDP growth of 4.0% to 4.8%, no export growth,      
inflation of 5% to 6% and interest rates for 91-day Treasury bills between 10%  
and 11%. The Republic expects to fund 52% of the 2002 budget deficit with       
foreign sourced financing and 48% with domestic sourced financing, compared to  
18.1% and 81.9%, respectively, in 2000. The Government plans to increase the    
proportion of its foreign borrowings in 2002 because of its desire not to reduce
the amount of funds available for borrowers in the domestic market.             

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DEBT                                                                            

External Debt                                                               

    The following table sets out the total outstanding Bangko Sentral-approved
and registered external debt.                                                   

BANGKO SENTRAL APPROVED EXTERNAL DEBT 

                                                        [Enlarge/Download Table]

                                                        AS OF DECEMBER 31                    AS OF  
                                         -----------------------------------------------   MARCH 31,
                                          1997      1998      1999      2000      2001       2002   
                                         -------   -------   -------   -------   -------   ---------
                                                      (IN MILLIONS, EXCEPT PERCENTAGES)             
                                                                                                    
By Maturity:                                                                                        
  Short-term(1)......................... $ 8,439   $ 7,185   $ 5,745   $ 5,948   $ 6,049    $ 5,565 
  Medium and long-term..................  36,994    40,632    46,465    46,112    46,306     47,874 
                                         -------   -------   -------   -------   -------    ------- 
     Total.............................. $45,433   $47,817   $52,210   $52,060   $52,355    $53,439 
                                         =======   =======   =======   =======   =======    ======= 
By Debtor:(2)                                                                                       
  Bangko Sentral........................ $ 2,499   $ 3,437   $ 3,005   $ 2,914   $11,537    $11,089 
  Public sector(3)......................  24,459    26,873    31,795    31,498    25,149     26,707 
  Private sector........................  18,475    17,507    17,410    17,648    15,669     15,644 
                                         -------   -------   -------   -------   -------    ------- 
     Total.............................. $45,433   $47,817   $52,210   $52,060   $52,355    $53,439 
                                         =======   =======   =======   =======   =======    ======= 
By Creditor Type:                                                                                   
  Multilateral.......................... $ 8,638   $10,058   $10,245   $ 9,665   $ 9,553    $ 8,884 
  Bilateral.............................  13,307    14,926    16,429    15,336    14,531     14,767 
  Banks and financial institutions......  10,176     9,672    10,340    11,176    12,003     12,172 
  Bondholders/noteholders...............  10,633    11,209    12,951    13,447    13,678     15,061 
  Others................................   2,679     1,952     2,245     2,436     2,590      2,555 
                                         -------   -------   -------   -------   -------    ------- 
     Total.............................. $45,433   $47,817   $52,210   $52,060   $52,355    $53,439 
                                         =======   =======   =======   =======   =======    ======= 
Ratios:                                                                                             
  Debt service burden to exports of                                                                 
     goods and services(4)..............    11.6%     11.7%     14.2%     12.3%     15.7%      15.4%
  Debt service burden to GNP............     6.5%      7.4%      8.4%      7.7%      8.7%       8.9%
  Foreign exchange liabilities to GNP...    53.0%     69.8%     65.1%     65.9%     70.1%      70.0%

---------------                                                                 

Source: Bangko Sentral.                                                         

(1) Debt with original maturity of one year or less.                            

(2) Classification by debtor is based on the primary obligor under the relevant 
loan or rescheduling documentation.                                     

(3) Includes public sector debt whether or not guaranteed by the Government.    

(4) This ratio is based on the debt service burden for the relevant period      
    relative to the total exports of goods and receipts from services and income
during such period based on the BPM5 framework.                         

The Republic's external debt amounted to $53.4 billion as of March 31,
2002, a 2.1% increase over the $52.4 billion recorded as of December 31, 2001.  
The increase in debt was due primarily to net loan availments, upward           
adjustments to reflect audited results and late reporting of transactions       
occurring in prior periods.                                                     

    During the first quarter of 2002, new loans and bond issuances were higher
than repayments made, contributing $1.1 billion to the increase in the debt     
stock. In January 2002, the Republic received the proceeds of the $750 million  
9.375% global bonds due 2017, and in March 2002 the Republic received the       
proceeds of the $1 billion 8.375% global bonds due 2009. The Republic intends to
on-lend an aggregate of a maximum of $750 million of the proceeds of these two  
offerings to NPC. In addition, Bangko Sentral received the proceeds of the $250 
million Fixed Rate Notes due 2005, the Land Bank of the Philippines received $96
million in proceeds (net of funds provided by resident Foreign Currency Deposit 
Units) of a $100 million syndicated bank loan and the Development Bank of the   
Philippines received proceeds from a $94 million partial                        

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drawdown from its Y32.5 billion ($250 million) 10-year Information Technology   
and Industry Support Loan from the Japan Bank for International Cooperation.    
These borrowings were primarily used to finance projects involving power and    
energy development, communication, transportation and other infrastructure      
projects as well as to provide budgetary support.                               

Upward adjustments amounting to $234 million were also made to reflect
audited results and late reporting of transactions from prior periods. These    
upward adjustments in the debt stock were more than offset by foreign exchange  
revaluation gains, resulting in a $175 million reduction of total debt. Almost  
three-fourths of the revaluation gains resulted from the weakening of the       
Japanese yen against the US dollar during the first quarter of 2002. Liabilities
of commercial banks also decreased the total debt by $103 million. In addition, 
the increase in residents' holdings of foreign currency-denominated Philippine  
debt that was originally issued offshore led to a further increase of the debt  
stock by $5 million.                                                            

   Medium- and long-term liabilities, 84.3% of which have a maturity of more
than five years, totaled $47.9 billion and accounted for 89.6% of total external
debt as of March 31, 2002, slightly higher than the 88.4% share of total        
external debt in the previous quarter. Public sector medium- and long-term debt 
had a longer average maturity of 18.6 years as compared to the average maturity 
of 10.3 years for similar private sector debt.                                  

    Fifty-four percent of medium- and long-term debt carried fixed rates while
45% had variable rates. The remaining 3% were non-interest bearing. The average 
cost of fixed rate credits was about 6.2%. For liabilities with floating        
interest rates, the average margin over base rate was 1.6%. The average interest
rates for short-term debt decreased from 2.7% as of December 31, 2001 to 2.4% as
of March 31, 2002, following the decline in global interest rates.              

As of March 31, 2002, more than half (58.5%) of the country's external
obligations were denominated in US dollars while 23.9% were in Japanese yen.    
Multi-currency loans from the World Bank and the Asian Development Bank         
comprised 8.7% of total liabilities.                                            

 Based on preliminary estimates, the ratio of debt service to exports of
goods and receipts from services and income declined to 15.4% in the first      
quarter of 2002, compared to 16.3% in the fourth quarter of 2001 and 15.8% in   
the first quarter of 2001. The quarter-on-quarter improvement in the ratio was  
the combined result of lower principal and interest payments as well as higher  
receipts from exports of goods during the first quarter of 2002. Similarly, the 
year-on-year decline in the ratio was due largely to reduced interest payments  
in the first quarter of the year in view of the continued decline in global     
interest rates.                                                                 

The public sector remained the biggest borrower, accounting for $26.7 
billion of foreign financing as of March 31, 2002, compared to $25.1 billion as 
of December 31, 2001. The increase was due primarily to net loan availments by  
the Government and adjustments made on prior periods' transactions. Meanwhile,  
private sector debt remained unchanged at 15.6 billion. Some private companies  
have taken steps to manage the effects of the currency depreciation on their    
ability to repay their external debt. These steps include netting foreign       
currency obligations and entering into forward contracts to hedge their currency
risks. Certain companies also benefit from natural hedges intrinsic to their    
businesses. These companies either generate foreign exchange revenues or are    
allowed by law to pass on to clients the impact of exchange rate adjustments.   
Bangko Sentral also introduced the currency risk protection facility, or the    
non-deliverable forward facility, to allow eligible borrowers to limit their    
foreign exchange risk on unhedged outstanding foreign exchange obligations to   
foreign currency deposit units of banks.                                        

     The Government has obtained funds under the so-called "Miyazawa initiative"
to help finance projects contemplated by the country's spending program. The    
Miyazawa initiative was launched by the Japanese government in October 1998 with
an assistance package totalling the equivalent of $30 billion. The package      
consists of support measures to assist five Asian countries, including the      
Philippines, overcome their economic difficulties. Under the Miyazawa           
initiative, the Government requested co-financing from Japan of approximately   
$900 million of program loans from the Asian Development Bank and the World     
Bank, $300 million each for the banking sector reform program with the World    
Bank, the power sector restructuring program with the Asian Development Bank and
the Metro Manila air quality enhancement program with the Asian                 
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Development Bank. As of the end of March 2002, the Government had received total
disbursements of $800 million for these three programs from the Asian           
Development Bank, the World Bank and the Japan Bank for International           
Cooperation. The World Bank disbursed $100 million for a banking sector reform  
program loan while the Asian Development Bank disbursed $100 million under an   
air quality improvement program loan and $200 million under the power sector    
program loans. The Japan Bank for International Cooperation disbursed $200      
million as co-financing to each of the foregoing Asian development Bank program 
loans and $100 million as co-financing for the banking sector reform program    
loan. While the Government remains committed to the policies of the banking     
sector reform program, in early 2001 the Government canceled the balance of the 
Japan Bank for International Cooperation parallel financing of the banking      
sector reform program loan following the cancellation by the World Bank of its  
participation. Thus, a total of $400 million in loan program financing for      
banking sector reform was cancelled by the Government by June 2001.             

    The Government is also negotiating with the World Bank for a loan of up to
$365 million to finance various development projects, including public finance  
restructuring, investments in water supply, environment, public services and    
judicial reforms, for the fiscal year 2002. This amount exceeds the             
approximately $200 million that the World Bank allotted to lend the Government  
for 2001. In September 2001, the Government commenced discussions with the World
Bank for a $200 million loan program to finance reforms in the country's        
expenditure management and revenue enhancement systems and possibly co-financing
an additional $200 million loan program.                                        

For its 2002 budgetary requirements, the Government plans to raise    
approximately $1.5 billion from commercial sources and about $1.2 billion from  
official development assistance sources. As of June 2002, the Government had    
raised a total of approximately $1.7 billion from commercial sources for its    
2002 budgetary requirements. These include the JPY 50 Billion Shibosai Bonds    
issued in December 2001, the $500 million 9.375% Global Bonds issued on January 
18, 2002, the $500 million 8.375% Global Bonds issued on March 12, 2002 and the 
$300 million 8.375% Global Bonds issued on June 14, 2002. The Government intends
to on-lend a total of $750 million to the National Power Corporation from the   
remaining proceeds of the January 18, 2002 and March 12, 2002 bond issuances.   

The Government is also seeking financing under the Special Yen Loan   
Package, or "Obuchi Fund", which is a $5 billion loan facility offered to all   
countries and concentrating primarily on project type activities. Under this    
program, since January 2002, the Government has secured financing for ten       
projects in the amount of approximately $1.2 billion.                           

     The Government hopes to finance the restructuring of small and medium-sized
enterprises with a portion of the $10 billion expected to be available under the
Asian Growth and Recovery Initiative. The United States, Japan, the Asian       
Development Bank and the World Bank established the Asian Growth and Recovery   
Initiative in 1998 to accelerate the pace of bank and corporate restructuring,  
increase trade finance, mobilize new private sector capital financing by        
multilateral agencies and enhance technical assistance to corporations          
undergoing restructuring.                                                       

   With the passage of the Electric Power Industry Sector Reform Act on June
8, 2001, certain multilateral agencies are expected to release up to $950       
million in loans for additional infrastructure projects and government budgetary
needs.                                                                          

New ODA-assisted projects in the agricultural-industrial area include 
Credit Lines for Small and Medium Enterprises, Grains Sector Development Program
and the Pasig River Environmental Management and Rehabilitation. The social     
development area received 9% ($117.3 million) of the total commitments. Other   
ODA-assisted projects in the social development area include the Technical      
Education and Skills Development Project and the Expansion of the Contraceptive 
Social Marketing Project.                                                       

Credit Ratings                                                              

    Standard and Poor's has assigned the Republic a long-term foreign currency
rating of BB+, a short-term foreign currency rating of B, a long-term local     
currency rating of BBB+ and a short-term local currency rating                  

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of A2, with a stable outlook on the Republic's long-term foreign currency       
rating. On February 2, 2002, Moody's confirmed the Republic's long-term foreign 
currency rating of Ba1 and upgraded its outlook on the Republic's long term     
foreign currency rating to stable from negative. See "Recent Economic           
Developments -- Review of Financial Contingency Plan".                          

The following table sets out the changes in credit ratings or rating  
outlooks for the Republic from February 1998 to the date of this Prospectus.    

                                                        [Enlarge/Download Table]

                                                                             CREDIT RATING OR RATING 
DATE                         RATING AGENCY              INSTRUMENT                   OUTLOOK         
----                     ----------------------  -------------------------  -------------------------
                                                                                                     
February 23, 1998....... Standard & Poor's       Republic's long-term       Lowered to BBB+ Rating   
                                                 local currency rating      outlook changed to       
                                                                            "negative" from          
                                                                            "stable"(1)              
                                                 Republic's short-term      Lowered to A2(1)         
                                                 local currency rating                               
                                                 Bangko Sentral's           Lowered to BBB+          
                                                 long-term local currency                            
                                                 rating                                              
                                                 Bangko Sentral's           Lowered to A2            
                                                 short-term local currency                           
                                                 rating                                              
April 7, 1998........... Moody's                 Republic's bonds and       Lowered to Ba1/NP(2)     
                                                 notes                      Rating outlook changed to
                                                                            "cloudy"(2) from "stable"
January 6, 1999......... Standard & Poor's       Republic's long-term       Rating outlook changed to
                                                 foreign currency rating    stable from negative(3)  
March 30, 2000(4)....... Moody's                 Republic's bonds and       Rating outlook changed to
                                                 notes                      "stable" from            
                                                                            "cloudy"(2)(4)           
October 19, 2000........ Standard & Poor's       Republic's long-term       Rating outlook changed   
                                                 local and foreign          from "stable" to         
                                                 currency rating            "negative"(5)            
October 27, 2000........ Moody's                 Republic's bonds and       Raised to Ba1 Rating     
                                                 notes                      outlook changed to       
                                                                            "negative" from          
                                                                            "stable"(6)              
March 15, 2001.......... Fitch-IBCA              Long-term local currency   Rating outlook changed to
                                                 obligations                "stable" from            
                                                                            "positive"(7)            
May 3, 2001............. Moody's                 Republic's bonds and       Affirmed Ba1 Rating      
                                                 notes                      outlook remains          
                                                                            "negative"(8)            
June 19, 2001........... Standard & Poor's       Republic's long-term       Affirmed BB+             
                                                 foreign currency rating    Rating outlook remains   
                                                                            "negative"(9)            
                                                 Republic's short-term      Affirmed B               
                                                 foreign currency rating                             
                                                 Republic's long-term       Affirmed BBB+            
                                                 local currency rating      Rating outlook remains   
                                                                            "negative"(9)            
                                                 Republic's short-term      Affirmed A-2             
                                                 local currency rating                               
July 30, 2001........... Fitch-IBCA              Republic's foreign         Affirmed BB+             
                                                 currency rating                                     
                                                 Republic's local currency  Affirmed BBB-            
                                                 rating                                              

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                                                        [Enlarge/Download Table]

                                                                             CREDIT RATING OR RATING 
DATE                         RATING AGENCY              INSTRUMENT                   OUTLOOK         
----                     ----------------------  -------------------------  -------------------------
                                                                                                     
February 4, 2002........ Moody's                 Republic's long-term       Upgraded outlook from    
                                                 foreign currency rating    "negative" to            
                                                                            "positive"(10)           
April 4, 2002........... Standard & Poor's       Republic's long-term       Upgraded outlook from    
                                                 foreign currency rating    "negative" to            
                                                                            "positive"(11)           
June 27, 2002........... Fitch-IBCA              Republic's long-term       Affirmed BB+(12)         
                                                 foreign currency rating                             

---------------                                                                 

 (1) Standard & Poor's noted the deterioration in the bank asset quality and the
   expected 1998 budget deficit, as well as the depreciation of the Peso and
the risk of increased spending around the time of the presidential    
elections in May 1998. Also, on February 23, 1998, Standard & Poor's  
   affirmed the country's long-term and short-term foreign currency ratings.

(2) NP (Moody's): Not prime. Cloudy: With speculative elements/uncertainty of 
position.                                                             

(3) Standard & Poor's noted the diminished likelihood of a deterioration in   
     external liquidity and financial flexibility and the improved prospects for
policy continuity from the Ramos administration to the Estrada        
administration.                                                       

(4) Moody's noted that the changes in the Philippines' credit rating in 2000  
   reflected changes in the domestic climate and continued momentum from the
previous government's success in reform.                              

(5) Standard & Poor's noted the political uncertainty relating to former      
 President Joseph Estrada's alleged corrupt practices, the rising budget
  deficit and growing concerns about the Government's ability to undertake
 effective economic management during a period of political uncertainty.

(6) Moody's noted that unfolding political developments associated with       
then-president Estrada could impair policy-making and hamper the      
Government's ability to defend its external payments position.        

(7) Fitch-IBCA noted the continuing deterioration of public finances and its  
impact on public indebtedness.                                        

(8) Moody's noted that the negative outlook reflected the challenges from     
     structural economic and political problems in the country, deterioration in
 the budget and in the external conditions particular to the country and
increases in Government debt.                                         

 (9) Standard & Poor's noted that the negative outlook on the Republic reflected
    its high Government debt, rising fiscal inflexibility, narrow tax base and
weak banking sector.                                                  

(10) Moody's noted that the upgrade reflected the Republic's success in meeting 
its fiscal targets and a stronger economic outlook.                   

(11) Standard & Poor's noted that the upgrade reflected the Government's        
improved economic management under the Arroyo administration and the  
Republic's adequate external liquidity.                               

(12) Fitch-IBCA noted that the change in the Republic's political leadership has
 restored investor and business confidence and curbed capital flight but
stated concern over the country's fiscal situation.                   

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Public Sector Debt                                                          

     The following table describes the country's outstanding public sector debt.

OUTSTANDING PUBLIC SECTOR DEBT(1) 

                                                        [Enlarge/Download Table]

                                                                   AS OF DECEMBER 31,             
                                                        ----------------------------------------- 
                                                          1997       1998       1999     2000(2)  
                                                        --------   --------   --------   -------- 
                                                            (IN BILLIONS, EXCEPT PERCENTAGES)     
                                                                                                  
Government(3)                                                                                     
  Domestic............................................. P  749.7   P  850.9   P  986.7   P1,058.6 
  External.............................................    602.1      570.2    1,155.5    1,310.1 
                                                        --------   --------   --------   -------- 
     Total.............................................  1,351.8    1,421.1    2,142.2    2,368.7 
Monitored GOCCs(4)                                                                                
  Domestic.............................................    203.6      143.5      644.8      578.9 
  External.............................................    198.6      548.0      286.1      365.6 
                                                        --------   --------   --------   -------- 
     Total.............................................    402.4      691.5      930.9      944.5 
CB-BOL(5)                                                                                         
  Domestic.............................................     51.4        0.0        0.0        0.0 
  External.............................................     60.6      102.2       74.9       75.3 
                                                        --------   --------   --------   -------- 
     Total.............................................    112.0      102.2       74.9       75.3 
Bangko Sentral(5)                                                                                 
  Domestic.............................................    199.5      197.3      193.5      278.7 
  External.............................................    139.0      190.3      299.3      345.1 
                                                        --------   --------   --------   -------- 
     Total.............................................    338.6      387.6      492.8      623.8 
GFIs(4)                                                                                           
  Domestic.............................................     58.0      204.5      379.9      280.3 
  External.............................................     52.0       68.9       95.3       67.4 
                                                        --------   --------   --------   -------- 
     Total.............................................    110.0      273.4      475.2      347.8 
Less loans on-lent or guaranteed by the Government                                                
  Domestic.............................................      7.6        8.7        8.3       12.3 
  External.............................................    265.8      370.6      441.4      487.4 
                                                        --------   --------   --------   -------- 
     Total.............................................    273.4      379.3      449.7      499.6 
Total public sector(6)                                                                            
  Domestic.............................................  1,262.3    1,396.2    2,196.6    2,184.2 
  External.............................................  1,052.3    1,479.6    1,469.7    1,676.1 
                                                        --------   --------   --------   -------- 
     Total............................................. P2,314.6   P2,875.8   P3,666.3   P3,860.4 
                                                        ========   ========   ========   ======== 
As a percentage of GNP (at current prices)                                                        
Public sector debt(6)..................................     91.7%     102.9%     116.9%     110.6%
  Public sector domestic debt(6).......................     48.9%      50.0%      70.0%      62.6%
  Public sector external debt(6).......................     30.7%      53.0%      46.9%      48.0%
  National Government debt(3)..........................     42.0%      37.3%      54.0%      53.5%
  National Government domestic debt(3).................     29.2%      30.5%      31.5%      30.3%
  National Government external debt(3).................     23.5%      20.4%      36.8%      37.5%

---------------                                                                 

Source: Fiscal Policy and Planning Office, Department of Finance.               

(1) Amounts in original currencies were converted to Pesos using the applicable 
Bangko Sentral reference exchange rates at the end of each period.      

(2) Preliminary.                                                                

(3) Includes debt that is on-lent to Government owned corporations and other    
   public sector entities and debt that has been assumed by the Government and
contingent liabilities.                                                 

(4) Includes net lending from the Government, and borrowings on-lent or         
guaranteed by the Government.                                           

(5) Liabilities, including deposits, less currency issue and inter-government   
accounts.                                                               

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(6) Includes the Government, the monitored Government owned corporations, the   
Central Bank -- Board of Liquidation, Bangko Sentral and Government     
 financial institutions. Does not include other public sector debt that is
not guaranteed by the Government.                                       

The outstanding public sector debt, comprised of the debt of the      
Government, the monitored Government corporations, the Central Bank-Board of    
Liquidation, Bangko Sentral and the Government financial institutions amounted  
to P3,860.4 billion as of June 30, 2000 and P2,854.1 billion as of June 30,     
1999. As of June 30, 2000, the Government incurred P2,368 billion, or 61.4% of  
outstanding public sector debt. Public sector debt as a proportion of GNP       
decreased from 116.9% as of December 31, 1999 to 110.6% as of June 30, 2000.    

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Government Debt                                                             

    The following table summarizes the outstanding direct debt of the Republic
as of the dates indicated.                                                      

SUMMARY OF OUTSTANDING DIRECT DEBT OF THE REPUBLIC(1)(2)

                                                        [Enlarge/Download Table]

                                                         AS OF DECEMBER 31,                          
                                  ----------------------------------------------------------------   
                                    1997       1998       1999       2000             2001           
                                  --------   --------   --------   --------   --------------------   
                                                           (IN MILLIONS)                             
                                                                                                     
Funded debt(3)                                                                                       
  Domestic....................... P357,446   P408,809   P513,667   P600,925   P822,269     $15,966   
  External....................... $ 15,034   $ 16,525   $ 19,800   $ 21,992   $ 22,082     $22,082(5)
Floating debt(4)                                                                                     
  Domestic....................... P392,162   P442,121   P464,737   P467,275   P425,414     $ 8,260   
                                                                                           -------   
     Total debt..................                                                          $46,309   
                                                                                           =======   

---------------                                                                 

Source: Bureau of the Treasury, Department of Finance.                          

(1) Includes Government debt that is on-lent to Government owned corporations   
    and other public sector entities. Excludes debt guaranteed by the Government
    and debt originally guaranteed by other public sector entities for which the
    guarantee has been assumed by the Government. The table reflects debt of the
Government only and does not include any other public sector debt.      

(2) Amounts in original currencies were converted to US dollars or Pesos, as    
 applicable, using Bangko Sentral's reference exchange rates at the end of
each period.                                                            

(3) Debt with original maturities of one year or longer.                        

(4) Debt with original maturities of less than one year.                        

(5) The Government has incurred an aggregate of $1.3 billion of external debt   
since December 31, 2001.                                                

Domestic Debt of the Republic                                               

    The following table summarizes the outstanding direct domestic debt of the
Republic as of the dates indicated.                                             

SUMMARY OF OUTSTANDING DIRECT DOMESTIC DEBT OF THE REPUBLIC(1)(2) 

                                                        [Enlarge/Download Table]

                                                       AS OF DECEMBER 31,                         
                              --------------------------------------------------------------------
                                1997       1998       1999        2000               2001         
                              --------   --------   --------   ----------   ----------------------
                                                         (IN MILLIONS)                            
                                                                                                  
Loans                                                                                             
  Direct..................... P 14,980   P 38,789   P 39,743   P   15,541   P   15,317     $   297
  Assumed....................   29,520     24,355     20,369       19,117       13,858         269
                              --------   --------   --------   ----------   ----------     -------
     Total loans.............   44,500     63,144     60,112       34,658       29,175         567
Securities                                                                                        
  Treasury bills.............  392,162    442,121    464,737      467,275      425,414       8,260
  Treasury notes/bonds.......  312,946    345,665    453,555      566,267      793,094      15,400
                              --------   --------   --------   ----------   ----------     -------
     Total securities........  705,108    787,786    918,292    1,033,542    1,218,508      23,660
                              --------   --------   --------   ----------   ----------     -------
     Total debt.............. P749,608   P850,930   P978,404   P1,068,200   P1,247,683     $24,227
                              ========   ========   ========   ==========   ==========     =======

---------------                                                                 

Source: Bureau of the Treasury, Department of Finance.                          

(1) Includes Government debt that is on-lent to Government owned corporations   
    and other public sector entities. Excludes debt guaranteed by the Government
    and debt originally guaranteed by other public sector entities for which the
    guarantee has been assumed by the Government. The table reflects debt of the
Government only, and does not include any other public sector debt.     

(2) Amounts in original currencies were converted to US dollars or Pesos, as    
 applicable, using Bangko Sentral's reference exchange rates at the end of
each period.                                                            

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The following table sets forth the direct domestic debt service       
requirements of the Republic for the years indicated.                           

DIRECT DOMESTIC DEBT SERVICE REQUIREMENT OF THE REPUBLIC(1) 

                                                        [Enlarge/Download Table]

YEAR                                     PRINCIPAL REPAYMENTS  INTEREST PAYMENTS   TOTAL    TOTAL(2)
----                                     --------------------  -----------------  --------  --------
                                                                (IN MILLIONS)                       
                                                                                                    
1997....................................       P 17,865            P 58,350       P 76,215   $1,907 
1998....................................         28,761              73,525        102,286    2,619 
1999....................................         61,552              74,980        136,532    3,392 
2000....................................         45,429              93,575        139,004    2,783 
2001....................................         54,039             112,592        166,631    3,236 
2002(3).................................         72,697             136,935        209,632    4,071 
2003(3).................................         86,204             151,825        238,029    4,622 
2004(3).................................         99,002             164,952        263,954    5,125 
2005(3).................................        105,719             174,051        279,770    5,432 
2006(3).................................        110,316             179,658        289,974    5,631 

---------------                                                                 

Source: Bureau of the Treasury, Department of Finance.                          

(1) Excludes debt service in respect of Government debt that is on-lent to      
    Government owned corporations and other public sector entities guaranteed by
the Government and debt originally guaranteed by other public sector    
entities for which the guarantee has been assumed by the Government. The
  table reflects debt of the Government only, and does not include any other
public sector debt.                                                     

(2) Amounts in Pesos were converted to US dollars using the applicable Bangko   
    Sentral reference exchange rates at the end of each period. For 2002 through
2006, amounts in Pesos were converted to US dollars using the applicable
Bangko Sentral reference exchange rates as of December 29, 2001.        

(3) Projected, based on debt outstanding as of December 31, 2001.               

The Government's outstanding direct domestic debt increased 16.8% to  
P1,247.7 billion as of December 31, 2001, from P1,068.2 billion as of December  
31, 2000.                                                                       

External Debt of the Republic                                               

    The following table summarizes the outstanding external direct debt of the
Republic as of the dates indicated.                                             

SUMMARY OF OUTSTANDING DIRECT EXTERNAL DEBT OF THE REPUBLIC(1)(2) 

                                                        [Enlarge/Download Table]

                                                                AS OF DECEMBER 31,                  
                                                  -----------------------------------------------   
                                                   1997      1998      1999      2000      2001     
                                                  -------   -------   -------   -------   -------   
                                                                   (IN MILLIONS)                    
                                                                                                    
Loans                                                                                               
  Multilateral................................... $ 4,546   $ 4,665   $ 4,468   $ 4,388   $ 4,323   
  Bilateral......................................   7,082     7,944     9,055     8,193     7,236   
  Commercial.....................................     180       208       256       651       841   
                                                  -------   -------   -------   -------   -------   
     Total loans.................................  11,808    12,817    13,779    13,232    12,400   
Securities                                                                                          
  Eurobonds......................................      --        --       352       514       915   
  Brady Bonds....................................   2,229     2,173     1,482     1,385     1,287   
  Yen Bonds......................................     307       345       391       655       949   
  Notes..........................................      --        --        --       810     1,010   
  Global Bonds...................................     690     1,190     3,796     5,396     5,396   
                                                  -------   -------   -------   -------   -------   
  T-Bills........................................      --        --        --        --       125   
     Total securities............................   3,226     3,708     6,021     8,760     9,682   
                                                  -------   -------   -------   -------   -------   
       Total..................................... $15,034   $16,525   $19,800   $21,992   $22,082(3)
                                                  =======   =======   =======   =======   =======   

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---------------                                                                 

Source:Bureau of the Treasury, Department of Finance.                           

(1) Includes Government debt that is on-lent to Government owned corporations   
    and other public sector entities. Excludes debt guaranteed by the Government
    and debt originally guaranteed by other public sector entities for which the
    guarantee has been assumed by the Government. The table reflects debt of the
Government only, and does not include any other public sector debt.     

(2) Amounts in original currencies were converted to US dollars using the       
applicable Bangko Sentral reference exchange rates at the end of each   
period.                                                                 

(3) Additional external debt of $1.3 billion has been incurred since December   
31, 2001.                                                               

Outstanding direct external debt increased 0.4% to $22.1 billion as of
December 31, 2001, from $22.0 billion as of December 31, 2000. The Government   
borrowed to finance power and energy development projects, financial and        
economic reforms and manufacturing, transportation and communication and other  
infrastructure undertakings. The currency depreciation during 1997 significantly
increased the amount of external debt in Peso terms. As of December 31, 2001,   
the Government owed 32.8% of outstanding direct external debt to bilateral      
creditors, mainly the United States and Japan, 47.6% to banks and other         
commercial creditors and 19.6% to multilateral creditors.                       

     In June 2001, the Government issued $200 million of floating rate notes. In
July 2001, the Government borrowed $100 million under a loan facility.          

   The following table sets forth, by designated currency and the equivalent
amount in US dollars, the outstanding direct external debt of the Republic as of
December 31, 2001.                                                              

SUMMARY OF OUTSTANDING DIRECT EXTERNAL
DEBT BY THE REPUBLIC BY CURRENCY(1) 
(AS OF DECEMBER 31, 2001) 

                                                        [Enlarge/Download Table]

                                                        AMOUNT IN       EQUIVALENT AMOUNT            
                                                    ORIGINAL CURRENCY   IN US DOLLARS(2)   % OF TOTAL
                                                    -----------------   -----------------  ----------
                                                                (IN MILLIONS)                        
                                                                                                     
US Dollar..........................................       12,710             $12,710          57.56% 
Japanese Yen.......................................      974,263               7,400          33.51  
Special Drawing Rights.............................          697                 874           3.96  
European Currency Unit.............................          866                 765           3.46  
French Franc.......................................          908                 122           0.55  
Deutsche Mark......................................          130                  59           0.27  
Austrian Schilling.................................        1,115                  72           0.32  
Pound Sterling.....................................           15                  21           0.10  
Belgian Franc......................................          776                  17           0.08  
Swiss Franc........................................           28                  17           0.08  
Danish Kroner......................................           70                   8           0.04  
Kuwait Dinar.......................................            2                   7           0.03  
Italian Lire.......................................        9,686                   4           0.02  
Korean Won.........................................        4,359                   3           0.01  
Canadian Dollar....................................            2                   1           0.01  
Sweden Kroner......................................           14                   1           0.01  
                                                                             -------         ------  
  Total............................................                          $22,082(3)      100.00% 
                                                                             =======         ======  

---------------                                                                 

Source: Bureau of the Treasury, Department of Finance.                          

(1) Includes Government debt that is on-lent to Government owned corporations   
    and other public sector entities. Excludes debt guaranteed by the Government
    and debt originally guaranteed by other public sector entities for which the
    guarantee has been assumed by the Government. The table reflects debt of the
Government only, and does not include any other public sector debt.     

(2) Amounts in original currencies were converted to US dollars using the       
   applicable Bangko Sentral reference exchange rates as of December 28, 2001.

(3) Additional external debt of $1.3 billion has been incurred since December   
31, 2001.                                                               

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The following table sets forth the direct external debt service       
requirements of the Republic for the years indicated.                           

DIRECT EXTERNAL DEBT SERVICE REQUIREMENTS OF THE REPUBLIC(1)(2) 

                                                        [Enlarge/Download Table]

                                                             PRINCIPAL    INTEREST        
YEAR                                                         REPAYMENTS   PAYMENTS  TOTAL 
----                                                         ----------   --------  ------
                                                                     (IN MILLIONS)        
                                                                                          
1997........................................................   $  741      $  458   $1,199
1998........................................................      907         584    1,491
1999........................................................      933         776    1,711
2000........................................................      831         947    1,778
2001........................................................      887       1,209    2,095
2002(3).....................................................    1,805       1,229    3,034
2003(3).....................................................    1,551       1,402    2,954
2004(3).....................................................    1,482       1,452    2,934
2005(3).....................................................    2,021       1,439    3,459
2006(3).....................................................    1,526       1,436    2,962

---------------                                                                 

Source: Bureau of the Treasury, Department of Finance.                          

(1) Excludes debt service in respect of Government debt that is on-lent to      
    Government owned corporations and other public sector entities or guaranteed
by the Government, other than debt originally guaranteed by other public
   sector entities for which the guarantee has been assumed by the Government.
The table reflects debt of the Government only, and does not include any
other public sector debt.                                               

(2) For 1997 through 2001, amounts in original currencies were converted to US  
dollars using the applicable Bangko Sentral reference exchange rates    
prevailing on the date of payment. For 2002 through 2006, amounts in    
    original currencies were converted to US dollars using the applicable Bangko
Sentral reference exchange rates as of December 28, 2001.               

(3) Projected, based on debt outstanding as of December 31, 2001.               

Government Guaranteed Debt                                                  

 The following table sets forth all Republic guarantees of indebtedness,
including guarantees assumed by the Government, as of the dates indicated.      

SUMMARY OF OUTSTANDING GUARANTEES OF THE REPUBLIC(1)(2) 

                                                        [Enlarge/Download Table]

                                                               AS OF DECEMBER 31,                  
                                              -----------------------------------------------------
                                               1997     1998     1999     2000           2001      
                                              ------   ------   ------   -------   ----------------
                                                                  (IN MILLIONS)                    
                                                                                                   
Domestic..................................... P7,645   P8,677   P8,320   P12,451   P23,167   $  450
External..................................... $6,649   $7,568   $8,908   $ 9,402   $ 9,177   $9,177
                                              ------   ------   ------   -------   -------   ------
  Total                                                                                      $9,627
                                                                                             ======

---------------                                                                 

Source: Bureau of the Treasury, Department of Finance.                          

(1) Includes debt originally guaranteed by the Government and debt guaranteed by
    other public sector entities for which the guarantee has been assumed by the
Government.                                                             

(2) Amounts in original currencies were converted to US dollars or Pesos, as    
 applicable, using Bangko Sentral's reference exchange rates at the end of
each period.                                                            

Payment History of Foreign Debt                                             

    In early 1985 and in 1987, the Government rescheduled principal maturities
of most medium- and long-term liabilities owed to commercial bank creditors     
falling due between October 1983 and December 1992. The Philippines normalized  
its relationship with foreign bank creditors in 1992 after issuing Brady Bonds  
in exchange for its commercial bank debt.                                       

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The Philippines rescheduled portions of its obligations to official   
creditors, such as foreign Governments and their export credit agencies, five   
times between 1984 and 1994 as follows.                                         

                                                        [Enlarge/Download Table]

DATE OF RESCHEDULING                                          NEW MATURITY (FROM DATE OF              
AGREEMENT                                 AMOUNT RESCHEDULED   RESCHEDULING AGREEMENT)    GRACE PERIOD
--------------------                      ------------------  --------------------------  ------------
                                                                                                      
December 1984............................    $896 million               10 years              5 years 
January 1987.............................     $1.1 billion              10 years            5.5 years 
May 1989.................................     $1.8 billion             8.5 years              5 years 
June 1991................................     $1.5 billion           15-20 years            6.5 years 
July 1994*...............................    $498 million            15-20 years           8-10 years 

---------------                                                                 

* Not implemented. See discussion in following paragraph.                       

  In December 1994, the Government decided not to avail itself of the July
1994 rescheduling agreement to accelerate the country's graduation from         
rescheduling country status. As of June 30, 1999, the Republic's rescheduled    
obligations with its bilateral creditors amounted to $2.2 billion, with Japan at
$1.2 billion and the United States at $506 million having the largest exposures.

In addition to debt restructuring, the Republic has engaged in debt   
buyback, debt-to-equity, debt-for-debt, debt-for-nature and other debt reduction
arrangements to reduce its debt by at least $6 billion. The Republic intends to 
maintain various efforts to manage its debt portfolio to improve yield and      
maturity profiles. The Republic may utilize proceeds from debt issues for the   
purpose of repurchasing outstanding debt through a variety of methods, including
public auctions and repurchases of debt securities in the open markets.         

   While there have been a number of reschedulings of the Republic's debt to
its bilateral creditors in the past few years, the Republic has not defaulted   
on, and has not attempted to restructure, the payment of principal or interest  
on any of its external securities in the last 20 years.                         

     BRADY BONDS.  In 1992, the Philippines issued approximately $3.3 billion of
Brady Bonds, maturing between 2007 and 2018, in exchange for commercial bank    
debt, and secured, as to repayment of principal at stated maturity, $1.9 billion
of the bonds with zero-coupon bonds purchased by the Republic in the open       
market. As of year-end 1997, cash and short-term investment grade securities    
deposited with the Federal Reserve Bank of New York, as collateral agent,       
secured the payment of approximately 12 to 14 months of interest on $1.6 billion
of the Brady Bonds.                                                             

In October 1996, the Government exchanged $6.5 million of Series A    
Principal Collateralized Interest Reduction Bonds due 2018 and approximately    
$628 million of Series B Principal Collateralized Interest Reduction Bonds due  
2017 for $551 million of its $690 million 8.75% Bonds due 2016. After the       
exchange, approximately $2.3 billion of the Brady Bonds remained outstanding.   
The exchange generated significant savings in debt service and the release of   
the US Treasury securities held as collateral and established a liquid and      
long-term sovereign benchmark extending the maturity of the Philippine debt     
profile. The exchange resulted in the redemption, at a discount, of             
approximately $635 million of Brady Bonds. In addition, the Brady Bond exchange 
freed more than $124 million in cash from the collateral released in the        
retirement of the Brady Bonds.                                                  

     In October 1999, the Government exchanged approximately $401 million of its
Principal Collateralized Interest Reduction Bonds, $165 million of its Interest 
Reduction Bonds and $54 million of its Floating Rate Debt Conversion Bonds for  
approximately $544 million of 9.50% Global Bonds due 2024. After the exchange,  
approximately $1.5 billion of the Brady Bonds remained outstanding. Similar to  
the October 1996 exchange, this exchange generated significant savings in debt  
service and the release of the US Treasury securities held as collateral and    
established a sovereign benchmark extending the maturity of the Philippine debt 
profile. The exchange freed approximately $149 million in cash from the         
collateral released in the retirement of the Brady Bonds.                       

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The following table sets out the foreign currency bonds issued by the 
Republic.                                                                       

FOREIGN BONDS ISSUED BY THE REPUBLIC

                                                        [Enlarge/Download Table]

                                                                                  OUTSTANDING BALANCE
                                                            OUTSTANDING BALANCE   AS OF DECEMBER 31, 
                                                             AS OF ISSUE DATE            2001        
                                                            -------------------   -------------------
                                                                          (IN MILLIONS)              
                                                                                                     
Brady Bonds(1)                                                                                       
  Interest Reduction Bonds.................................       $   757               $  296       
  Principal Collateralized Interest Reduction Bonds........         1,894                  583       
  Debt Conversion Bonds....................................           697                  408       
                                                                  -------               ------       
     Total.................................................       $ 3,348               $1,287       
Japanese Yen Bonds(2)                                                                                
  Fifth Series.............................................       $    76               $   76       
  Sixth Series.............................................           228                  228       
  Seventh Series...........................................           266                  266       
                                                                  -------               ------       
Shibosai Series A..........................................           380                  380       
                                                                  -------               ------       
     Total.................................................       $   950               $  950       
Notes......................................................         1,010                1,010       
Global bonds...............................................         5,396                5,396       
Eurobonds(2)...............................................           915                  915       
T-Bills....................................................           125                  125       
                                                                  -------               ------       
     Total foreign bonds...................................       $11,743               $9,682(3)    
                                                                  =======               ======       

---------------                                                                 

Source: Bureau of the Treasury, Department of Finance.                          

(1) The difference between the amount of the Brady Bonds originally issued and  
    the amount currently outstanding represents repurchases of such Bonds by the
 Republic in the secondary market (or their acquisition in connection with
debt for equity and similar transactions), the 1996 and 1999 Brady Bond 
    exchanges, the cancellation of such acquired Bonds and principal repayments.

(2) Yen and Euro denominated bonds were converted to US dollars using Bangko    
Sentral's reference exchange rate as of December 28, 2001.              

(3) Additional external debt of $1.3 billion has been incurred since December   
31, 2001.                                                               

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DESCRIPTION OF THE SECURITIES 

DESCRIPTION OF THE DEBT SECURITIES                                              

 The Philippines may issue debt securities in separate series at various
times. The description below summarizes the material provisions of the debt     
securities that are common to all series and the Fiscal Agency Agreement. Each  
series of the debt securities will be issued pursuant to a fiscal agency        
agreement (each, as applicable to a series of debt securities, the "Fiscal      
Agency Agreement"). Since it is only a summary, the description may not contain 
all of the information that is important to you as a potential investor in the  
debt securities. Therefore, the Philippines urges you to read the form of the   
Fiscal Agency Agreement and the form of global bond before deciding whether to  
invest in the debt securities. The Philippines has filed a copy of these        
documents with the Securities and Exchange Commission as exhibits to the        
registration statement of which this prospectus is a part. You should refer to  
such exhibits for more complete information.                                    

  The financial terms and other specific terms of your debt securities are
described in the prospectus supplement relating to your debt securities. The    
description in the prospectus supplement will supplement this description or, to
the extent inconsistent with this description, replace it.                      

     You can find the definitions of certain capitalized terms in the subsection
titled "Glossary of Certain Defined Terms" located at the end of this section.  

General Terms of the Bonds                                                  

     The prospectus supplement that relates to your debt securities will specify
the following terms:                                                            

- The aggregate principal amount and the designation;                 

  - The currency or currencies or composite currencies of denomination and
payment;                                                          

- Any limitation on principal amount and authorized denominations;    

 - The percentage of their principal amount at which the debt securities
will be issued;                                                   

- The maturity date or dates;                                         

- The interest rate or rates, if any, for the debt securities and, if 
variable, the method by which the interest rate or rates will be  
calculated;                                                       

- Whether any amount payable in respect of the debt securities will be
      determined based on an index or formula, and how any such amount will be
determined;                                                       

- The dates from which interest, if any, will accrue for payment of   
interest and the record dates for any such interest payments;     

- Where and how the Philippines will pay principal and interest;      

 - Whether and in what circumstances the debt securities may be redeemed
before maturity;                                                  

- Any sinking fund or similar provision;                              

   - Whether any part or all of the debt securities will be in the form of a
 global security and the circumstances in which a global security is
exchangeable for certificated securities;                         

  - If issued in certificated form, whether the debt securities will be in
    bearer form with interest coupons, if any, or in registered form without
   interest coupons, or both forms, and any restrictions on exchanges from
one form to the other; and                                          

     If the Philippines issues debt securities at an original issue discount, in
bearer form or payable in a currency other than the US dollar, the prospectus   
supplement relating to the debt securities will also describe applicable US     
federal income tax and other considerations additional to the disclosure in this
prospectus.                                                                     

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Payments of Principal, Premium and Interest                                 

    On every payment date specified in the relevant prospectus supplement, the
Philippines will pay the principal, premium and/or interest due on that date to 
the registered holder of the relevant debt security at the close of business on 
the related record date. The record date will be specified in the applicable    
prospectus supplement. The Philippines will make all payments at the place and  
in the currency set out in the prospectus supplement. Unless otherwise specified
in the relevant prospectus supplement or the debt securities, the Philippines   
will make payments in US dollars at the New York office of the fiscal agent or, 
outside the United States, at the office of any paying agent. Unless otherwise  
specified in the applicable prospectus supplement, the Philippines will pay     
interest by check, payable to the registered holder.                            

    If the relevant debt security has joint holders, the check will be payable
to all of them or to the person designated by the joint holders at least three  
business days before payment. The Philippines will mail the check to the address
of the registered holder in the bond register and, in the case of joint holders,
to the address of the joint holder named first in the bond register.            

    The Philippines will make any payment on debt securities in bearer form at
the designated offices or agencies of the fiscal agent, or any other paying     
agent, outside of the United States. At the option of the holder of debt        
securities, the Philippines will pay by check or by transfer to an account      
maintained by the payee with a bank located outside of the United States. The   
Philippines will not make payments on bearer securities at the corporate trust  
office of the fiscal agent in the United States or at any other paying agency in
the United States. In addition, the Philippines will not make any payment by    
mail to an address in the United States or by transfer to an account with a bank
in the United States, Nevertheless, the Philippines will make payments on a     
bearer security denominated and payable in US dollars at an office or agency in 
the United States if:                                                           

    - payment outside the United States is illegal or effectively precluded by
exchange controls or other similar restrictions; and              

   - the payment is then permitted under United States law, without material
adverse consequences to the Philippines.                          

If the Philippines issues bearer securities, it will designate the offices of at
least one paying agent outside the United States as the location for payment.   

Repayment of Funds; Prescription                                            

    If no one claims money paid by the Philippines to the fiscal agent for the
payment of principal or interest for two years after the payment was due and    
payable, the fiscal agent or paying agent will repay the money to the           
Philippines. After such repayment, the fiscal agent or paying agent will not be 
liable with respect to the amounts so repaid. However, the Philippines'         
obligations to pay the principal of, and interest on, the debt securities as    
they become due will not be affected by such repayment.                         

    You will not be permitted to submit a claim to the Philippines for payment
of principal or interest on any series of debt securities unless made within ten
years, in the case of principal, and five years, in the case of interest, from  
the date on which payment was due.                                              

Global Securities                                                           

The prospectus supplement relating to a series of debt securities will
indicate whether any of that series of debt securities will be represented by a 
global security. The prospectus supplement will also describe any unique        
specific terms of the depositary arrangement with respect to that series. Unless
otherwise specified in the prospectus supplement, the Philippines anticipates   
that the following provisions will apply to depositary arrangements.            

   REGISTERED OWNERSHIP OF THE GLOBAL SECURITY.  The global security will be
registered in the name of a depositary identified in the prospectus supplement, 
or its nominee, and will be deposited with the depositary, its nominee or a     
custodian. The depositary, or its nominee, will therefore be considered the sole
owner or                                                                        

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holder of debt securities represented by the global security for all purposes   
under the Fiscal Agency Agreement. Except as specified below or in the          
applicable prospectus supplement, beneficial owners:                            

  - will not be entitled to have any of the debt securities represented by
the global security registered in their names;                    

   - will not receive physical delivery of any debt securities in definitive
form;                                                             

- will not be considered the owners or holders of the debt securities;

 - must rely on the procedures of the depositary and, if applicable, any
    participants (institutions that have accounts with the depositary or a
   nominee of the depositary, such as securities brokers and dealers) to
exercise any rights of a holder of the debt securities; and       

  - will receive payments of principal and interest from the depositary or
its participants rather than directly from the Philippines.       

 The Philippines understands that, under existing industry practice, the
depositary and participants will allow beneficial owners to take all actions    
required of, and exercise all rights granted to, the registered holders of the  
debt securities.                                                                

The Philippines will issue certificated securities and register debt  
securities in the name of a person other than the depositary or its nominee only
if:                                                                             

    - the depositary for a series of debt securities is unwilling or unable to
       continue as depositary or ceases to be a clearing agency registered under
      the Securities Exchange Act of 1934 and the Philippines does not appoint
a successor depositary within 90 days;                            

    - the Philippines determines, in its sole discretion, not to have a series
of debt securities represented by a global security; or           

- a default occurs that entitles the holders of the debt securities to
accelerate the maturity date and such default has not been cured. 

In these circumstances, an owner of a beneficial interest in a global 
security will be entitled to registration of a principal amount of debt         
securities equal to its beneficial interest in its name and to physical delivery
of the debt securities in definitive form. Definitive debt securities in bearer 
form will not be issued in respect of a global security in registered form.     

BENEFICIAL INTERESTS IN AND PAYMENTS ON A GLOBAL SECURITY.  Only      
participants, and persons that may hold beneficial interests through            
participants, can own a beneficial interest in the global security. The         
depositary keeps records of the ownership and transfer of beneficial interests  
in the global security by its participants. In turn, participants keep records  
of the ownership and transfer of beneficial interests in the global security by 
other persons (such as their customers). No other records of the ownership and  
transfer of beneficial interests in the global security will be kept.           

 All payments on a global security will be made to the depositary or its
nominee. When the depositary receives payment of principal or interest on the   
global security, the Philippines expects the depositary to credit its           
participants' accounts with amounts that correspond to their respective         
beneficial interests in the global security. The Philippines also expects that, 
after the participants' accounts are credited, the participants will credit the 
accounts of the owners of beneficial interests in the global security with      
amounts that correspond to the owners' respective beneficial interests in the   
global security.                                                                

The depositary and its participants establish policies and procedures 
governing payments, transfers, exchanges and other important matters that affect
owners of beneficial interests in a global security. The depositary and its     
participants may change these policies and procedures from time to time. The    
Philippines has no responsibility or liability for the records of ownership of  
beneficial interests in the global security, or for payments made or not made to
owners of such beneficial interests. The Philippines also has no responsibility 
or liability for any aspect of the relationship between the depositary and its  
participants or for any aspect of the relationship between participants and     
owners of beneficial interests in the global security.                          
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   BEARER SECURITIES.  The Philippines may issue debt securities of a series
in the form of one or more bearer global debt securities deposited with a common
depositary for the Euroclear System and Clearstream Banking, societe anonyme, or
with a nominee identified in the applicable Prospectus Supplement. The specific 
terms and procedures, including the specific terms of the depositary            
arrangement, with respect to any portion of a series of debt securities to be   
represented by a bearer global security will be described in the applicable     
Prospectus Supplement.                                                          

Additional Amounts                                                          

The Philippines will make all payments on the debt securities without 
withholding or deducting any present or future taxes imposed by the Philippines 
or any of its political subdivisions, unless required by law. If Philippine law 
requires the Philippines to deduct or withhold taxes, it will pay the holders of
the debt securities such additional amounts as are necessary to ensure that they
receive the same amount as they would have received without such withholding or 
deduction.                                                                      

     The Philippines will not pay, however, any additional amounts if the holder
of the debt securities is liable for Philippine tax because:                    

     - the holder of the debt securities is connected with the Philippines other
     than by merely owning the debt security or receiving income or payments
on the bond; or                                                   

  - the holder of the debt securities failed to comply with any reasonable
     certification, identification or other reporting requirement concerning
  the holder's nationality, residence, identity or connection with the
 Philippines, if compliance with such requirement is required by any
     statute or regulation of the Philippines as a precondition to exemption
from withholding or deduction of taxes; or                        

     - the holder of the debt securities failed to present its debt security for
       payment within 30 days of when the payment is due or when the Philippines
  makes available to the holder of the debt securities or the relevant
     fiscal or paying agent a payment of principal or interest, whichever is
     later. Nevertheless, the Philippines will pay additional amounts to the
extent the holder would have been entitled to such amounts had it 
   presented its debt security for payment on the last day of the 30 day
period.                                                           

Status of Bonds                                                             

While outstanding, the debt securities will:                          

- constitute direct, unconditional and unsecured obligations of the   
Philippines;                                                      

  - rank at least equally in right of payment with all of the Philippines'
 other unsecured and unsubordinated External Indebtedness, except as
described below; and                                              

  - continue to be backed by the full faith and credit of the Philippines.

  Under Philippine law, unsecured debt (including guarantees of debt) of a
borrower in insolvency or liquidation that is documented by a public instrument,
as provided in Article 2244(14) of the Civil Code of the Philippines, ranks     
ahead of unsecured debt that is not so documented. Debt is treated as documented
by a public instrument if it is acknowledged before a notary or any person      
authorized to administer oaths in the Philippines. The Government maintains that
debt of the Philippines is not subject to the preferences granted under Article 
2244(14) or cannot be documented by a public instrument without acknowledgment  
of the Philippines as debtor. The Philippine courts have never addressed this   
matter, however, and it is uncertain whether a document evidencing the          
Philippines' Peso or non-Peso denominated debt (including External              
Indebtedness), notarized without the Philippines' participation, would be       
considered documented by a public instrument. If such debt were considered      
documented by a public instrument, it would rank ahead of the debt securities if
the Philippines could not meet its debt obligations.                            

     The Philippines has represented that it has not prepared, executed or filed
any public instrument, as provided in Article 2244(14) of the Civil Code of the 
Philippines, relating to any External Indebtedness. It also has not consented or
assisted in the preparation or filing of any such public instrument. The        
Philippines                                                                     

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also agreed that it will not create any preference or priority in respect of any
External Public Indebtedness pursuant to Article 2244(14) of the Civil Code of  
the Philippines unless its grants equal and ratable preference or priority to   
amounts payable under the debt securities.                                      

Negative Pledge Covenant                                                    

    If any debt securities are outstanding, the Philippines will not create or
permit any Liens on its assets or revenues as security for any of its External  
Public Indebtedness, unless the Lien also secures the Philippines' obligations  
under the debt securities. In addition, the Philippines will not create any     
preference or priority for any of its External Public Indebtedness pursuant to  
Article 2244(14) of the Civil Code of the Philippines, or any successor law,    
unless it grants equal and ratable preference or priority to amounts due under  
the debt securities.                                                            

The Philippines may create or permit a Lien:                          

- on any property or asset (or any interest in such property or asset)
       incurred when the property or asset was purchased, improved, constructed,
     developed or redeveloped to secure payment of the cost of the activity;

- securing Refinanced External Public Indebtedness;                   

- arising out of the extension, renewal or replacement of any External
       Public Indebtedness that is permitted to be subject to a lien pursuant to
       either of the previous two bullet points, as long as the principal amount
of the External Public Indebtedness so secured is not increased;  

     - arising in the ordinary course of banking transactions to secure External
Public Indebtedness with a maturity not exceeding one year;       

- existing on any property or asset at the time it was purchased, or  
    arising after the acquisition under a contract entered into before and
       not in contemplation of the acquisition, and any extension and renewal of
      that Lien which is limited to the original property or asset and secures
any extension or renewal of the original secured financing;       

- that:                                                               

(A) arises pursuant to any legal process in connection with court   
proceedings so long as the enforcement of the lien is stayed and the
Philippines is contesting the claims secured in good faith; or      

(B) secures the reimbursement obligation under any surety given in  
connection with the release of any lien referred to in (A) above;   

if it is released or discharged within one year of imposition; or   

   - arising by operation of law, provided that any such Lien is not created
       or permitted to be created by the Philippines for the purpose of securing
any External Public Indebtedness                                  

     The international reserves of Bangko Sentral represent substantially all of
the official gross international reserves of the Philippines. Because Bangko    
Sentral is an independent entity, the Philippines and Bangko Sentral believe    
that the debt securities' negative pledge covenant does not apply to Bangko     
Sentral's international reserves. Bangko Sentral could therefore incur External 
Indebtedness secured by international reserves without securing amounts payable 
under the debt securities.                                                      

Events of Default                                                           

   Each of the following constitutes an event of default with respect to any
series of debt securities:                                                      

          1. NON-PAYMENT:  the Philippines does not pay principal or interest on
    any debt securities of such series when due and such failure continues for
30 days;                                                              

        2. BREACH OF OTHER OBLIGATIONS:  the Philippines fails to observe or
   perform any of the covenants in the series of debt securities (other than
non-payment) for 60 days after written notice of the default is       
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delivered by any holder of debt securities to the Philippines at the  
corporate trust office of the fiscal agent in New York City;          

3. CROSS DEFAULT AND CROSS ACCELERATION:                    

  (a) the Philippines fails to make a payment of principal, premium,
     prepayment charge or interest when due on any External Public
     Indebtedness with a principal amount equal to or greater than
            $25,000,000 or its equivalent, and this failure continues beyond the
applicable grace period; or                             

      (b) any External Public Indebtedness of the Philippines or the central
       monetary authority in principal amount equal to or greater than
       $25,000,000 is accelerated, other than by optional or mandatory
prepayment or redemption;                               

    For purposes of this event of default, the US dollar equivalent for non-US
dollar debt will be computed using the middle spot rate for the relevant        
currency against the US dollar as quoted by The Chase Manhattan Bank on the date
of determination.                                                               

        4. MORATORIUM:  the Philippines declares a general moratorium on the
   payment of its or the central monetary authority's External Indebtedness;

5. VALIDITY:                                                

      (a) the Philippines, or any governmental body with the legal power and
           authority to declare such series of debt securities and the related
        Fiscal Agency Agreement invalid or unenforceable, challenges the
        validity of such series of debt securities or the related Fiscal
Agency Agreement;                                       

      (b) the Philippines denies any of its obligations under such series of
  debt securities or the related Fiscal Agency Agreement; or

 (c) any legislative executive, or constitutional measure or final
          judicial decision renders any material provision of such series of
         debt securities or the related Fiscal Agency Agreement invalid or
  unenforceable or prevents or delays the performance of the
            Philippines' obligations under such series of debt securities or the
related Fiscal Agency Agreement;                        

6. FAILURE OF AUTHORIZATIONS:  any legislative, executive or
   constitutional authorization necessary for the Philippines to perform its
 material obligations under the series of debt securities or the related
Fiscal Agency Agreement ceases to be in full force and effect or is   
modified in a manner materially prejudicial to the holders of the debt
securities;                                                           

  7. CONTROL OF ASSETS:  The Philippines or the central monetary
     authority does not at all times exercise full control over the Philippines'
International Monetary Assets; or                                     

        8. IMF MEMBERSHIP:  The Philippines ceases to be a member of the IMF
or losses its eligibility to use the general resources of the IMF.    

    The events described in paragraphs 2, 4, 5 and 6 will be events of default
only if they materially prejudice the interests of holders of the debt          
securities.                                                                     

    If any of the above events of default occurs and is continuing, holders of
the debt securities representing at least 25% in principal amount of the debt   
securities of that series then outstanding may declare all of the debt          
securities of the series to be due and payable immediately by written notice to 
the Philippines and the fiscal agent. In the case of an event of default        
described in paragraphs 1 or 4 above, any holder of the debt securities may     
declare the principal amount of debt securities that it holds to be immediately 
due and payable by written notice to the Philippines and the fiscal agent.      

Investors should note that:                                           

     - despite the procedure described above, no debt securities may be declared
    due and payable if the Philippines cures the applicable event of default
before it receives the written notice from the holder of the debt   
securities;                                                         

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- the Philippines is not required to provide periodic evidence of the 
absence of defaults; and                                            

  - the Fiscal Agency Agreement does not require the Philippines to notify
     holders of the debt securities of an event of default or grant any holder
of the debt securities a right to examine the bond register.        

Modifications and Amendments; Bondholders' Meetings                         

     Each holder of a series of debt securities must consent to any amendment or
modification of the terms of that series of debt securities or the Fiscal Agency
Agreement that would:                                                           

     - change the stated maturity of the principal of the debt securities or any
installment of interest;                                            

- reduce the principal amount of such series of debt securities or the
  portion of the principal amount payable upon acceleration of such debt
securities;                                                         

- change the debt securities' interest rate;                          

- change the currency of payment of principal or interest;            

 - change the obligation of the Philippines to pay additional amounts on
account of withholding taxes or deductions; or                      

- reduce the percentage of the outstanding principal amount needed to 
    modify or amend the related Fiscal Agency Agreement or the terms of such
series of debt securities.                                          

   With respect to other types of amendment or modification, the Philippines
may, with the consent of the holders of at least a majority in principal amount 
of the debt securities of a series that are outstanding, modify and amend that  
series of debt securities or, to the extent the modification or amendment       
affects that series of debt securities, the Fiscal Agency Agreement.            

   The Philippines may at any time call a meeting of the holders of a series
of debt securities to seek the holders' approval of the modification, or        
amendment, or obtain a waiver, of any provision of that series of debt          
securities. The meeting will be held at the time and place in the Borough of    
Manhattan in New York City as determined by the Philippines. The notice calling 
the meeting must be given at least 30 days and not more than 60 days prior to   
the meeting.                                                                    

  While an event of default with respect to a series of debt securities is
continuing, holders of at least 10% of the aggregate principal amount of that   
series of debt securities may compel the fiscal agent to call a meeting of all  
holders of debt securities of that series.                                      

 The Persons entitled to vote a majority in principal amount of the debt
securities of the series that are outstanding at the time will constitute a     
quorum at a meeting of the holders of the debt securities. To vote at a meeting,
a person must either hold outstanding debt securities of the relevant series or 
be duly appointed as a proxy for a holder of the debt securities. The fiscal    
agent will make all rules governing the conduct of any meeting.                 

     The Fiscal Agency Agreement and a series of debt securities may be modified
or amended, without the consent of the holders of the debt securities, to:      

- add covenants of the Philippines that benefit holders of the debt   
securities;                                                         

- surrender any right or power given to the Philippines;              

- secure the debt securities;                                         

  - cure any ambiguity or correct or supplement any defective provision in
      the Fiscal Agency Agreement or the debt securities, without materially and
    adversely affecting the interests of the holders of the debt securities.

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Replacement of Debt Securities                                              

   If a debt security becomes mutilated, defaced, destroyed, lost or stolen,
the Philippines may issue, and the fiscal agent will authenticate and deliver, a
substitute debt security. The Philippines and the fiscal agent will require     
proof of any claim that a debt security was destroyed, lost or stolen.          

The applicant for a substitute debt security must indemnify the       
Philippines, the fiscal agent and any other agent for any losses they may suffer
relating to the debt security that was destroyed, lost or stolen. The applicant 
will be required to pay all expenses and reasonable charges associated with the 
replacement of the mutilated, defaced, destroyed, lost or stolen debt security. 

Fiscal Agent                                                                

  The Philippines will appoint a fiscal agent or agents in connection each
series of the debt securities whose duties would be governed by the related     
Fiscal Agency Agreement. Different fiscal agents may be appointed for different 
series of debt securities. The Philippines may maintain bank accounts and a     
banking relationship with each fiscal agent. Each fiscal agent is the agent of  
the Philippines and does not act as a trustee for the holders of the debt       
securities.                                                                     

Notices                                                                     

  All notices will be mailed to the registered holders of a series of debt
securities. If a depositary is the registered holder of global securities, each 
beneficial holder must rely on the procedures of the depositary and its         
participants to receive notices, subject to any statutory or regulatory         
requirements.                                                                   

If the Philippines lists a series of debt securities on the Luxembourg
Stock Exchange, and the rules of that exchange so require, all notices to       
holders of that series of debt securities will be published in a daily newspaper
of general circulation in Luxembourg. The Philippines expects that the          
Luxemburger Wort will be the newspaper. If notice cannot be published in an     
appropriate newspaper, notice will be considered validly given if made pursuant 
to the rules of the Luxembourg Stock Exchange.                                  

Governing Law                                                               

     The Fiscal Agency Agreement and the debt securities will be governed by the
laws of the State of New York without regard to any principles of New York law  
requiring the application of the laws of another jurisdiction. Nevertheless, all
matters governing the authorization, execution and delivery of the debt         
securities and the Fiscal Agency Agreement by the Philippines will be governed  
by the laws of the Philippines.                                                 

Further Issues of Debt Securities                                           

The Philippines may, without the consent of the holders of the debt   
securities, create and issue additional debt securities with the same terms and 
conditions as any series of bonds (or that are the same in all respects except  
for the amount of the first interest payment and for the interest paid on the   
series of debt securities prior to the issuance of the additional debt          
securities). The Philippines may consolidate such additional debt securities    
with the outstanding debt securities to form a single series. Any further Debt  
Securities forming a single series with the outstanding Debt Securities of any  
series constituted by a Fiscal Agency Agreement shall be constituted by an      
agreement supplemental to such relevant Fiscal Agency Agreement.                

Jurisdiction and Enforceability                                             

The Philippines is a foreign sovereign government and your ability to 
collect on judgments of US courts against the Philippines may be limited.       

    The Philippines will irrevocably appoint the Philippine Counsel General in
New York, New York as its authorized agent to receive service of process in any 
suit based on any series of debt securities which any holder of the debt        
securities may bring in any state or federal court in New York City. The        
Philippines submits to the jurisdiction of any state or federal court in New    
York City or any competent court in the Philippines in                          

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such action. The Philippines waives, to the extent permitted by law, any        
objection to proceedings in such courts. The Philippines also waives irrevocably
any immunity from jurisdiction to which it might otherwise be entitled in any   
suit based on any series of debt securities.                                    

     Because of its waiver of immunity, the Philippines would be subject to suit
in competent courts in the Philippines. Judgments against the Philippines in    
state or federal court in New York City would be recognized and enforced by the 
courts of the Philippines in any enforcement action without re-examining the    
issues if:                                                                      

- such judgment were not obtained by collusion or fraud;              

     - the foreign court rendering such judgment had jurisdiction over the case;

   - the Philippines had proper notice of the proceedings before the foreign
court; and                                                          

- such judgment were not based upon a clear mistake of law or fact.   

     Notwithstanding any of the above, the Philippine Counsel General is not the
agent for receipt of service for suits under the US federal or state securities 
laws, and the Philippines' waiver of immunity does not extend to those actions. 
In addition, the Philippines does not waive immunity relating to its:           

- properties and assets used by a diplomatic or consular mission;     

- properties and assets under the control of its military authority or
defense agency; and                                                 

- properties and assets located in the Philippines and dedicated to a 
public or governmental use.                                         

If you bring a suit against the Philippines under federal or state    
securities laws, unless the Philippines waives immunity, you would be able to   
obtain a United States judgment against the Philippines only if a court         
determined that the Philippines is not entitled to sovereign immunity under the 
United States Foreign Sovereign Immunities Act. Even if you obtained a United   
States judgment in any such suit, you may not be able to enforce the judgment in
the Philippines. Moreover, you may not be able to enforce a judgment obtained   
under the Foreign Sovereign Immunities Act against the Philippines' property    
located in the United States except under the limited circumstances specified in
the act.                                                                        

Glossary of Certain Defined Terms                                           

Certain definitions used in the Fiscal Agency Agreement are set forth 
below. For a full explanation of all of these terms or any capitalized terms    
used in this section you should refer to the Fiscal Agency Agreement.           

  "External Indebtedness" means Indebtedness denominated or payable by its
terms, or at the option of the holder, in a currency or currencies other than   
that of the Philippines.                                                        

    "External Public Indebtedness" means any External Indebtedness in the form
of bonds, debentures, notes or other similar instruments or other securities    
which is, or is eligible to be, quoted, listed or ordinarily purchased and sold 
on any stock exchange, automated trading system or over-the-counter or other    
securities market.                                                              

   "Indebtedness" means any indebtedness for money borrowed or any guarantee
of indebtedness for money borrowed.                                             

  "International Monetary Assets" means all (i) gold, (ii) Special Drawing
Rights, (iii) Reserve Positions in the Fund and (iv) Foreign Exchange.          

 "Lien" means any mortgage, deed of trust, charge, pledge, lien or other
encumbrance or preferential arrangement which has the practical effect of       
constituting a security interest.                                               

     "Refinanced External Public Indebtedness" means the US$130,760,000 Series A
Interest Reduction Bonds due 2007 issued by the Republic on December 1, 1992,   
the US$626,616,000 Series B Interest Reduction Bonds due 2008 issued by the     
Republic on December 1, 1992, the US$153,490,000 Series A Principal             
Collateralized Interest Reduction Bonds due 2018 issued by the Republic on      
December 1, 1992 and                                                            

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the US$1,740,600,000 Series B Collateralized Interest Reduction Bonds due 2017  
issued by the Republic on December 1, 1992.                                     

"Special Drawing Rights," "Reserve Positions in the Fund" and "Foreign
Exchange", have, as to the type of assets included, the meanings given to them  
in the IMF's publication entitled "International Financial Statistics" or any   
other meaning formally adopted by the IMF from time to time.                    

DESCRIPTION OF THE WARRANTS                                                     

     The description below summarizes some of the provisions of warrants for the
purchase of bonds that the Republic may issue from time to time and of the      
Warrant Agreement. Copies of the forms of warrants and the Warrant Agreement are
or will be filed as exhibits to the registration statement of which this        
prospectus is a part. Since it is only a summary, the description may not       
contain all of the information that is important to you as a potential investor 
in the warrants.                                                                

  The description of the warrants that will be contained in the prospectus
supplement will supplement this description and, to the extent inconsistent with
this description, replace it.                                                   

General Terms of the Warrants                                               

Each series of warrants will be issued under a warrant agreement to be
entered into between the Republic and a bank or trust company, as warrant agent.
The prospectus supplement relating to the series of warrants will set forth:    

- The terms of the bonds purchasable upon exercise of the warrants, as
  described above under "Description of the Debt Securities -- General
Terms of the Bonds";                                              

  - The principal amount of bonds purchasable upon exercise of one warrant
and the exercise price;                                           

- The procedures and conditions for the exercise of the warrants;     

     - The dates on which the right to exercise the warrants begins and expires;

    - Whether and under what conditions the warrants and any bonds issued with
the warrants will be separately transferable;                     

   - Whether the warrants will be issued in certificated or global form and,
  if in global form, information with respect to applicable depositary
arrangements;                                                     

  - If issued in certificated form, whether the warrants will be issued in
       registered or bearer form, whether they will be exchangeable between such
     forms, and, if issued in registered form, where they may be transferred
and registered; and                                               

- Other specific provisions.                                          

     The warrants will be subject to the provisions set forth under "Description
of the Securities -- Description of the Debt Securities," "-- Governing Law" and
"-- Jurisdiction and Enforceability".                                           

LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES                               

Bearer securities will not be offered, sold or delivered in the United
States or its possessions or to a United States person, except in certain       
circumstances permitted by United States tax regulations. Bearer securities will
initially be represented by temporary global securities (without interest       
coupons) deposited with a common depositary in London for the Euroclear System  
and Cedel for credit to designated accounts. Unless otherwise indicated in the  
applicable Prospectus Supplement:                                               

     - each temporary global security will be exchangeable for definitive bearer
      securities on or after the date that is 40 days after issuance only upon
       receipt of certification of non-United States beneficial ownership of the
     temporary global security as provided in United States tax regulations,
provided that                                                     

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      no bearer security will be mailed or otherwise delivered to any location
in the United States in connection with the exchange; and         

   - any interest payable on any portion of a temporary global security with
     respect to any interest payment date occurring prior to the issuance of
definitive bearer securities will be paid only upon receipt of    
      certification of non-United States beneficial ownership of the temporary
global security as provided in United States tax regulations.     

 Bearer securities (other than temporary global debt securities) and any
related coupons will bear the following legend: "Any United States person who   
holds this obligation will be subject to limitations under the United States    
federal income tax laws, including the limitations provided in Sections 165(j)  
and 1287(a) of the Internal Revenue Code." The sections referred to in the      
legend provide that, with certain exceptions, a United States person who holds a
bearer security, or coupon will not be allowed to deduct any loss realized on   
the disposition of the bearer security, and any gain (which might otherwise be  
characterized as capital gain) recognized on the disposition will be treated as 
ordinary income.                                                                

For purposes of this section, "United States person" means:           

- a citizen or resident of the United States;                         

 - a corporation, partnership or other entity created or organized in or
       under the laws of the United States or any political subdivision thereof;

    - an estate the income of which is subject to United States federal income
taxation regardless of its source; or                             

    - a trust if a United States court is able to exercise primary supervision
   over the trust's administration and one or more United States persons
     have the authority to control all of the trust's substantial decisions.

For purposes of this section, "United States" means United States of  
America (including the States and the District of Columbia), its territories,   
its possessions and other areas subject to its jurisdiction.                    

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TAXATION

The following discussion summarizes certain US federal income and     
Philippine tax considerations that may be relevant to you if you invest in debt 
securities. This summary is based on laws, regulations, rulings and decisions   
now in effect, all of which may change. Any change could apply retroactively and
could affect the continued validity of this summary.                            

  This summary does not describe all of the tax considerations that may be
relevant to you or your situation, particularly if you are subject to special   
tax rules. You should consult your tax advisor about the tax consequences of    
holding debt securities, including the relevance to your particular situation of
the considerations discussed below, as well as of state, local or other tax     
laws.                                                                           

PHILIPPINE TAXATION                                                             

    The following is a summary of certain Philippine tax consequences that may
be relevant to non-Philippine holders of the global bonds in connection with the
holding and disposition of the global bonds. The Republic uses the term         
"non-Philippine holders" to refer to (i) non-residents of the Philippines who   
are neither citizens of the Philippines nor are engaged in trade or business    
within the Philippines or (ii) non-Philippine corporations not engaged in trade 
or business in the Philippines.                                                 

 This summary is based on Philippine laws, rules, and regulations now in
effect, all of which are subject to change. It is not intended to constitute a  
complete analysis of the tax consequences under Philippine law of the receipt,  
ownership, or disposition of the global bonds, in each case by non-Philippine   
holders, nor to describe any of the tax consequences that may be applicable to  
residents of the Republic.                                                      

   Effect of Holding Global Bonds.  Payments by the Republic of principal of
and interest on the global bonds to a non-Philippine holder will not subject    
such non-Philippine holder to taxation in the Philippines by reason solely of   
the holding of the global bonds or the receipt of principal or interest in      
respect thereof.                                                                

     Taxation of Interest on the Global Bonds.  When the Republic makes payments
of principal and interest to you on the global bonds, no amount will be withheld
from such payments for, or on account of, any taxes of any kind imposed, levied,
withheld or assessed by the Philippines or any political subdivision or taxing  
authority thereof or therein.                                                   

     Taxation of Capital Gains.  Non-Philippine holders of the global bonds will
not be subject to Philippine income or withholding tax in connection with the   
sale, exchange, or retirement of a global bond if such sale, exchange or        
retirement is made outside the Philippines or an exemption is available under an
applicable tax treaty in force between the Philippines and the country of       
domicile of the non-Philippine holder.                                          

Documentary Stamp Taxes.  No documentary stamp tax is imposed upon the
transfer of the global bonds. A documentary stamp tax is payable upon the       
issuance of the global bonds and will be for the account of the Republic.       

Estate and Donor's Taxes.  The transfer of a global bond by way of    
succession upon the death of a non-Philippine holder will be subject to         
Philippine estate tax at progressive rates ranging from 5% to 20% if the value  
of the net estate of properties located in the Philippines is over P200,000.    

  The transfer of a global bond by gift to an individual who is related to
the non-resident holder will generally be subject to a Philippine donor's tax at
progressive rates ranging from 2% to 15% if the value of the net gifts of       
properties located in the Philippines exceed P100,000 during the relevant       
calendar year. Gifts to unrelated donees are generally subject to tax at a flat 
rate of 30%. An unrelated donee is a person who is not a (i) brother, sister    
(whether by whole or half blood), spouse, ancestor, or lineal descendant or (ii)
relative by consanguinity in the collateral line within the fourth degree of    
relationship.                                                                   

  The foregoing apply even if the holder is a nonresident holder. However,
the Republic will not collect estate and donor's taxes on the transfer of the   
global bonds by gift or succession if the deceased at the time of death, or the 
donor at the time of donation, was a citizen and resident of a foreign country  
that provides certain reciprocal rights to citizens of the Philippines (a       
"Reciprocating Jurisdiction"). For these purposes, a                            

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Reciprocating Jurisdiction is a foreign country which at the time of death or   
donation (i) did not impose a transfer tax of any character in respect of       
intangible personal property of citizens of the Philippines not residing in that
foreign country or (ii) allowed a similar exemption from transfer or death taxes
of every character or description in respect of intangible personal property    
owned by citizens of the Philippines not residing in that foreign country.      

UNITED STATES TAX CONSIDERATIONS                                                

The following discussion summarizes certain US federal income tax     
considerations that may be relevant to you if you invest in debt securities.    
This summary is based on the Internal Revenue Code of 1986, as amended (the     
"Code"), applicable income tax regulations ("Treasury regulations"), published  
rulings, administrative pronouncements, and court decisions in effect on the    
date of this prospectus, all of which are subject to change, possibly with      
retroactive effect. Any such change could affect the tax consequences described 
below. This summary deals only with US holders that hold debt securities as     
capital assets. It does not address considerations that may be relevant to you  
if you are an investor that is subject to special tax rules, such as a bank,    
thrift, real estate investment trust, regulated investment company, insurance   
company, dealer in securities or currencies, trader in securities or commodities
that elects mark to market treatment, a person that will hold debt securities as
a hedge against currency risk or as a position in a "straddle" or conversion    
transaction, tax exempt organization or a person whose "functional currency" is 
not the US dollar.                                                              

  You will be a US holder if you are (i) an individual who is a citizen or
resident of the United States, (ii) a corporation or other entity treated as a  
corporation for US federal income tax purposes created or organized in or under 
the laws of the United States or any state thereof (including the District of   
Columbia), (iii) an estate the income of which is subject to US federal income  
taxation regardless of its source or (iv) a trust if a court within the United  
States is able to execute primary supervision over its administration and one or
more US persons have authority to control the substantial decisions of such     
trust. If you are a partner in a partnership that holds debt securities, the tax
consequences of an investment in debt securities will generally depend on the   
status of the partners and the activities of the partnership. If you are not a  
US holder, consult the discussions below under the captions "Non-US Holders" and
"Information Reporting and Backup Withholding".                                 

You should consult your own tax advisor concerning the particular US  
federal income tax consequences to you of ownership and disposition of debt     
securities, as well as the consequences to you arising under the laws of any    
other taxing jurisdiction.                                                      

United States Holders                                                       

PAYMENTS OR ACCRUALS OF INTEREST                                      

     Payments or accruals of "qualified stated interest" (as defined below) on a
debt security will be taxable to you as ordinary interest income at the time    
that you receive or accrue such amounts (in accordance with your regular method 
of tax accounting). If you use the cash method of tax accounting and you receive
payments of interest pursuant to the terms of a debt security in a currency     
other than US dollars (a "foreign currency"), the amount of interest income you 
will realize will be the US dollar value of the foreign currency payment based  
on the exchange rate in effect on the date you receive the payment regardless of
whether you convert the payment into US dollars. If you are an accrual basis US 
holder, the amount of interest income you will realize will be based on the     
average exchange rate in effect during the interest accrual period (or with     
respect to an interest accrual period that spans two taxable years, at the      
average exchange rate for the partial period within the taxable year).          
Alternatively, as an accrual basis US holder you may elect to translate all     
interest income on foreign currency denominated debt securities at the spot rate
of exchange on the last day of the accrual period (or the last day of the       
taxable year, in the case of an accrual period that spans more than one taxable 
year) or on the date that you receive the interest payment if that date is      
within five business days of the end of the accrual period. If you make this    
election you must apply it consistently to all debt instruments from year to    
year and you cannot change the election without the consent of the Internal     
Revenue Service. If you use the accrual method of accounting for tax purposes   
you will recognize foreign currency gain or loss on the receipt of              

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a foreign currency interest payment if the exchange rate in effect on the date  
the payment is received differs from the rate applicable to a previous accrual  
of that interest income. This foreign currency gain or loss will be treated as  
ordinary income or loss, but generally will not be treated as an adjustment to  
interest income received on the debt security.                                  

Payments of interest on the debt securities will be treated as foreign
source income for US federal income tax purposes. For US foreign tax credit     
limitation purposes, interest on the debt securities will generally constitute  
"passive income", or in the case of certain US holders, "financial services     
income".                                                                        

THE PURCHASE, SALE AND RETIREMENT OF DEBT SECURITIES                  

    Initially, your tax basis in a debt security generally will equal the cost
of the debt security to you. Your basis will increase by any amounts that you   
are required to include in income under the rules governing original issue      
discount and market discount, and will decrease by the amount of any amortized  
premium and any payments other than qualified stated interest made on the debt  
security. The rules for determining these amounts are discussed below. If you   
purchase a debt security that is denominated in a foreign currency, the cost to 
you (and therefore generally your initial tax basis) will be the US dollar value
of the foreign currency purchase price on the date of purchase calculated at (i)
the exchange rate in effect on that date or (ii) if the foreign currency debt   
security is traded on an established securities market and you are a cash basis 
taxpayer, or if you are an accrual basis taxpayer that makes a special election,
the spot rate of exchange on the settlement date of your purchase. The amount of
any subsequent adjustments to your tax basis in a debt security in respect of   
foreign currency denominated original issue discount, market discount and       
premium will be determined in the manner described below. If you convert US     
dollars into a foreign currency and then immediately use that foreign currency  
to purchase a debt security, you generally will not have any taxable gain or    
loss as a result of the conversion or purchase.                                 

When you sell or exchange a debt security, or if a debt security is   
retired, you generally will recognize gain or loss equal to the difference      
between the amount you realize on the transaction (less any accrued but unpaid  
interest not previously included in income, which will be subject to tax in the 
manner described above under "Payments or Accruals of Interest") and your tax   
basis in the debt security. If you sell or exchange a debt security for a       
foreign currency, or receive foreign currency on the retirement of a debt       
security, the amount you will realize for US tax purposes generally will be the 
US dollar value of the foreign currency that you receive calculated at (i) the  
exchange rate in effect on the date the foreign currency debt security is       
disposed of or retired or (ii) if you dispose of a foreign currency debt        
security that is traded on an established securities market and you are a cash  
basis US holder, or if you are an accrual basis holder that makes a special     
election, the spot rate of exchange on the settlement date of the sale, exchange
or retirement.                                                                  

    The special election available to you if you are an accrual basis taxpayer
in respect of the purchase and sale of foreign currency debt securities traded  
on an established securities market, which is discussed in the two preceding    
paragraphs, must be applied consistently to all debt instruments from year to   
year and cannot be changed without the consent of the Internal Revenue Service. 

Except as discussed below with respect to market discount and foreign 
currency gain or loss, the gain or loss that you recognize on the sale, exchange
or retirement of a debt security generally will be long-term capital gain or    
loss if you have held the debt security for more than one year. The Code        
provides preferential treatment under certain circumstances for net long-term   
capital gains recognized by individual non-corporate investors. Net long-term   
capital gain recognized by an individual US holder generally will be subject to 
a maximum tax rate of 20%. A further reduced tax rate may apply to any such     
capital gain if you have held the debt security for more than five years.       
Capital gain or loss, if any, recognized by a US holder generally will be       
treated as US source income or loss for US foreign tax credit purposes. The     
ability of US holders to offset capital losses against income is limited.       

 Despite the foregoing, the gain or loss that you recognize on the sale,
exchange or retirement of a foreign currency debt security generally will be    
treated as ordinary income or loss to the extent that the gain or loss is       
attributable to changes in exchange rates during the period in which you held   
the debt security. This foreign                                                 

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currency gain or loss will not be treated as an adjustment to interest income   
that you receive on the debt security.                                          

ORIGINAL ISSUE DISCOUNT                                               

If the Republic issues debt securities at a discount from their stated
redemption price at maturity, and the discount is equal to or more than the     
product of one-fourth of one percent (0.25%) of the stated redemption price at  
maturity of the debt securities multiplied by the number of full years to their 
maturity, the debt securities will be "OID debt securities". The difference     
between the issue price and the stated redemption price at maturity of the debt 
securities will be the "original issue discount" or "OID". The "issue price" of 
the debt securities will be the first price at which a substantial amount of the
debt securities are sold to the public (i.e. excluding sales of debt securities 
to underwriters, placement agents, wholesalers, or similar persons). The "stated
redemption price at maturity" will include all payments under the debt          
securities other than payments of qualified stated interest. The term "qualified
stated interest" generally means stated interest that is unconditionally payable
in cash or property (other than debt instruments issued by the Republic) at     
least annually during the entire term of a debt security at a single fixed      
interest rate or, subject to certain conditions, based on one or more interest  
indices.                                                                        

   If you invest in OID debt securities you generally will be subject to the
special tax accounting rules for OID obligations provided by the Code and       
certain Treasury regulations. You should be aware that, as described in greater 
detail below, if you invest in an OID debt security you generally will be       
required to include OID in ordinary gross income for US federal income tax      
purposes as it accrues, although you may not yet have received the cash         
attributable to that income.                                                    

In general, and regardless of whether you use the cash or the accrual 
method of tax accounting, if you are the holder of an OID debt security with a  
maturity greater than one year, you will be required to include in ordinary     
gross income the sum of the "daily portions" of OID on that debt security for   
all days during the taxable year that you own the debt security. The daily      
portions of OID on an OID debt security are determined by allocating to each day
in any accrual period a ratable portion of the OID allocable to that period.    
Accrual periods may be any length and may vary in length over the term of an OID
debt security, so long as no accrual period is longer than one year and each    
scheduled payment of principal or interest occurs on the first or last day of an
accrual period. If you are the initial holder of the debt security, the amount  
of OID on an OID debt security allocable to each accrual period is determined   
by:                                                                             

        (i) multiplying the "adjusted issue price" (as defined below) of the
 debt security at the beginning of the accrual period by a fraction, the
     numerator of which is the annual yield to maturity of the debt security and
  the denominator of which is the number of accrual periods in a year; and

       (ii) subtracting from that product the amount (if any) of qualified
stated interest payments allocable to that accrual period.            

    An OID debt security that is a floating rate debt security will be subject
to special rules. Generally, if a floating rate debt security qualifies as a    
"variable rate debt instrument" (as defined in applicable Treasury regulations) 
then (i) all stated interest with respect to such floating rate debt security   
will be qualified stated interest and hence included in a US holder's income in 
accordance with such US holder's normal method of accounting for US federal     
income tax purposes, and (ii) the amount of OID, if any, will be determined     
under the general OID rules (as described above) by assuming that the variable  
rate is a fixed rate equal, in general, to the value, as of the issue date, of  
the floating rate.                                                              

  If a floating rate debt security does not qualify as "variable rate debt
instruments", such floating rate debt security will be classified as contingent 
payment debt instruments and will be subject to special rules for calculating   
the accrual of stated interest and original issue document.                     

    Any special considerations with respect to the tax consequences of holding
a floating rate debt security will be provided in the applicable prospectus     
supplement.                                                                     

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    The "adjusted issue price" of an OID debt security at the beginning of any
accrual period will generally be the sum of its issue price (including any      
accrued interest) and the amount of OID previously includable in the gross      
income of the holder, reduced by the amount of all payments other than any      
qualified stated interest payments on the debt security in all prior accrual    
periods. All payments on an OID debt security, other than qualified stated      
interest, generally will be viewed first as payments of previously accrued OID  
(to the extent of the previously accrued discount), with payments considered    
made from the earliest accrual periods first, and then as a payment of          
principal. The "annual yield to maturity" of a debt security is the discount    
rate (appropriately adjusted to reflect the length of accrual periods) that     
causes the present value on the issue date of all payments on the debt security 
to equal the issue price. As a result of this "constant yield" method of        
including OID income, you will generally be required to include in your gross   
income increasingly greater amounts of OID over the life of OID debt security.  

  You generally may make an irrevocable election to include in income your
entire return on a debt security (i.e., the excess of all remaining payments to 
be received on the debt security, including payments of qualified stated        
interest, over the amount you paid for the debt security) under the constant    
yield method described above. For debt securities purchased at a premium or     
bearing market discount in your hands, if you make this election you will also  
be deemed to have made the election (discussed below under the caption "Premium 
and Market Discount") to amortize premium or to accrue market discount in income
currently on a constant yield basis.                                            

  In the case of an OID debt security that is also a foreign currency debt
security, you should determine the US dollar amount includible as OID for each  
accrual period by (i) calculating the amount of OID allocable to each accrual   
period in the foreign currency using the constant yield method, and (ii)        
translating the foreign currency amount so determined at the average exchange   
rate in effect during that accrual period (or, with respect to an interest      
accrual period that spans two taxable years, at the average exchange rate for   
the partial period within the taxable year). Alternatively, you may translate   
the foreign currency amount so determined at the spot rate of exchange on the   
last day of the accrual period (or the last day of the taxable year, for an     
accrual period that spans two taxable years) or at the spot rate of exchange on 
the date of receipt, if that date is within five business days of the last day  
of the accrual period, provided that you have made the election described under 
the caption "Payment or Accruals of Interest" above. Because exchange rates may 
fluctuate, if you are the holder of an OID debt security that is also a foreign 
currency debt security you may recognize a different amount of OID income in    
each accrual period than would be the case if you were the holder of an         
otherwise similar OID debt security denominated in US dollars. Upon the receipt 
of an amount attributable to OID (whether in connection with a payment of an    
amount that is not qualified stated interest or the sale or retirement of the   
OID debt security), you will recognize ordinary income or loss measured by the  
difference between the amount received, translated into US dollars at the       
exchange rate in effect on the date of receipt or on the date of disposition of 
the OID debt security, as the case may be, and the amount accrued, using the    
exchange rate applicable to such previous accrual.                              

   If you purchase an OID debt security outside of the initial offering at a
cost less than its "remaining redemption amount", or if you purchase an OID debt
security in the initial offering at a price other than the debt security's issue
price, you will also generally be required to include in gross income the daily 
portions of OID, calculated as described above. However, if you acquire an OID  
debt security at a price (i) less than or equal to the remaining redemption     
amount but (ii) greater than its adjusted issue price, you will be entitled to  
reduce your periodic inclusions to reflect the premium paid over the adjusted   
issue price. (As discussed under "Premium and Market Discount" below, if you    
purchase an OID debt security at a price greater than its remaining redemption  
amount, the OID rules described in this section will not apply.) The "remaining 
redemption amount" for an OID debt security is the total of all future payments 
to be made on the debt security other than qualified stated interest.           

Certain of the OID debt securities may be redeemed prior to maturity, 
either at the option of the Republic or at the option of the holder, or may have
special repayment or interest rate reset features as indicated in the pricing   
supplement. OID debt securities containing these features may be subject to     
rules that differ from the general rules discussed above. If you purchase OID   
debt securities with these features, you                                        

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should carefully examine the pricing supplement and consult your tax advisor    
about their treatment since the tax consequences of OID will depend, in part, on
the particular terms and features of the debt securities.                       

     OID accrued with respect to an OID debt security will be treated as foreign
source income for US US federal income tax purposes. For US foreign tax credit  
purposes, OID accrued with respect to an OID debt security will generally       
constitute "passive income", or in the case of certain US holders, "financial   
services income".                                                               

SHORT-TERM DEBT SECURITIES                                            

   Special rules may apply to a debt security with a maturity of one year or
less ("short-term debt securities"). If you are an accrual basis holder, you    
will be required to accrue OID on the short-term debt security on either a      
straight line basis or, at the election of the holder, under a constant yield   
method (based on daily compounding). No interest payments on a short-term debt  
security will be qualified stated interest. Consequently, such interest payments
are included in the short-term debt security's stated redemption price at       
maturity. Since the amount of OID is calculated in the same manner as described 
above under "Original Issue Discount," such interest payments may give rise to  
OID (or acquisition discount, as defined below) even if the short-term debt     
securities are not actually issued at a discount. If you are a cash basis holder
and do not elect to include OID in income as it accrues, you will not be        
required to include OID in income until you actually receive payments on the    
debt security. However, you will be required to treat any gain upon the sale,   
exchange or retirement of the debt security as ordinary income to the extent of 
the accrued OID on the debt security that you have not yet taken into income at 
the time of the sale. Also, if you borrow money (or do not repay outstanding    
debt) to acquire or hold the debt security, you may not be allowed to deduct    
interest on the borrowing that corresponds to accrued OID on the debt security  
until you include the OID in your income.                                       

    Alternatively, regardless of whether you are a cash basis or accrual basis
holder, you can elect to accrue any "acquisition discount" with respect to the  
short-term debt security on a current basis. Acquisition discount is the excess 
of the stated redemption price at maturity of the debt security over the        
purchase price. Acquisition discount will be treated as accruing rateably or, at
the election of the holder, under a constant yield method (based on daily       
compounding). If you elect to accrue acquisition discount, the OID rules will   
not apply. US holders should consult their own tax advisors as to the           
application of these rules.                                                     

As described above, certain of the debt securities may be subject to  
special redemption features. These features may affect the determination of     
whether a debt security has a maturity of one year or less and thus is a        
short-term debt security. If you purchase a short-term debt security, you should
carefully examine the pricing supplement and consult your tax advisor about     
these features.                                                                 

PREMIUM AND MARKET DISCOUNT                                           

    If you purchase a debt security at a cost greater than the debt security's
remaining redemption amount, you will be considered to have purchased the debt  
security at a premium, and you may elect to amortize the premium as an offset to
interest income, using a constant yield method, over the remaining term of the  
debt security. If you make this election, it generally will apply to all debt   
instruments that you hold at the time of the election, as well as any debt      
instruments that you subsequently acquire. In addition, you may not revoke the  
election without the consent of the Internal Revenue Service. If you elect to   
amortize the premium you will be required to reduce your tax basis in the debt  
security by the amount of the premium amortized during your holding period. In  
the case of premium on a foreign currency debt security, you should calculate   
the amortization of the premium in the foreign currency. Amortization deductions
attributable to a period reduce interest payments in respect of that period, and
therefore are translated into US dollars at the rate that you use for those     
interest payments. Exchange gain or loss will be realized with respect to       
amortized premium on a foreign currency debt security based on the difference   
between the exchange rate computed on the date or dates the premium is amortized
against interest payments on the debt security and the exchange rate on the date
when the holder acquired the debt security. For a US holder that does not elect 
to amortize premium, the amount of premium will be included in your tax basis   
when the debt security matures or is disposed of.                               

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Therefore, if you do not elect to amortize premium and you hold the debt        
security to maturity, you generally will be required to treat the premium as    
capital loss when the debt security matures.                                    

    A debt security, other than a short-term debt security, will be treated as
purchased at a market discount (a "market discount debt security") if the debt  
security's stated redemption price at maturity or, in the case of OID debt      
security, the debt security's "revised issue price", exceeds the amount for     
which the US Holder purchased the debt security by at least one-fourth of one   
per cent (0.25%) of such debt security's stated redemption price at maturity or 
revised issue price, respectively, multiplied by the number of complete years to
the debt security's maturity. If such excess is not sufficient to cause the debt
security to be a market discount debt security, then such excess constitutes "de
minimis market discount" and such debt security is not subject to the rules     
discussed in the following paragraphs. For these purposes, the "revised issue   
price" of a debt security generally equals its issue price, increased by the    
amount of any OID that has accrued on the debt security.                        

 Any gain recognized on the maturity or disposition of a market discount
debt security will be treated as ordinary income to the extent that such gain   
does not exceed the accrued market discount on such debt security.              
Alternatively, a US holder of a market discount debt security may elect to      
include market discount in income currently over the life of the debt security. 
Such an election shall apply to all debt instruments with market discount       
acquired by the electing US holder on or after the first day of the first       
taxable year to which the election applies. This election may not be revoked    
without the consent of the Internal Revenue Service.                            

Market discount on a market discount debt security will accrue on a   
straight line basis unless the US holder elects to accrue such market discount  
on a constant yield method. Such an election shall apply only to the debt       
security with respect to which it is made and may not be revoked. A US holder of
a market discount debt security that does not elect to include market discount  
in income currently generally will be required to defer deductions for interest 
on borrowings allocable to such debt security in an amount not exceeding the    
accrued market discount on such debt security until the maturity or disposition 
of such debt security. Any accrued market discount on a foreign currency debt   
security that is currently includable in income will generally be translated    
into US dollars at the average rate for the accrual periods (or portion thereof 
within the holder's taxable year).                                              

WARRANTS                                                              

    A description of the tax consequences of an investment in warrants will be
provided in the applicable prospectus supplement.                               

    INDEXED DEBT SECURITIES AND OTHER DEBT SECURITIES PROVIDING FOR CONTINGENT
PAYMENT                                                                         

     Special rules govern the tax treatment of debt obligations that provide for
contingent payments ("contingent debt obligations"). These rules generally      
require accrual of interest income on a constant yield basis in respect of      
contingent debt obligations at a yield determined at the time of issuance of the
obligation, and may require adjustments to these accruals when any contingent   
payments are made. In addition, special rules may apply to floating rate debt   
securities if the interest payable on the debt securities is based on more than 
one interest index. We will provide a detailed description of the tax           
considerations relevant to US holders of any debt securities that are subject to
the special rules discussed in this paragraph in the relevant prospectus        
supplement.                                                                     

Non-US Holders                                                              

     The following summary applies to you if you are not a US holder, as defined
above.                                                                          

  Subject to the discussion below under the caption "Information Reporting
and Backup Withholding", the interest income and gains that you derive in       
respect of the debt securities generally will be exempt from US federal income  
taxes, including US withholding tax on payments of interest (including OID)     
unless such income is effectively connected with the conduct of a trade or      
business in the United States.                                                  

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If you are not a US holder, subject to the discussion below under the 
caption "Information Reporting and Backup Withholding", any gain you realize on 
a sale or exchange of debt securities generally will be exempt from US federal  
income tax, including US withholding tax, unless:                               

- your gain is effectively connected with your conduct of a trade or  
business in the United States; or                                 

     - you are an individual holder and are present in the United States for 183
       days or more in the taxable year of the sale, and either (i) your gain is
 attributable to an office or other fixed place of business that you
     maintain in the United States or (ii) you have a tax home in the United
States.                                                           

    A debt security held by an individual holder who at the time of death is a
non-resident alien will not be subject to US federal estate tax. However, this  
rule only applies if, at the death of the individual, payments on the global    
bonds were not effectively connected with the conduct of a trade or business in 
the United States.                                                              

Information Reporting and Backup Withholding                                

In general, information reporting requirements may apply to certain   
payments made within the United States of interest on a debt security, including
payments made by the US office of a paying agent, broker or other intermediary, 
and to proceeds of a sale, exchange, or retirement of debt security effected at 
the US office of a US or foreign broker. A "backup withholding" tax at a maximum
rate of 30% may apply to such payments or proceeds if the beneficial owner fails
to provide a correct taxpayer identification number or to otherwise comply with 
the applicable backup withholding rules. Certain persons (including, among      
others, corporations) and non-US holders which provide an appropriate           
certification or otherwise qualify for exemption are not subject to the backup  
withholding and information reporting requirements.                             

     The proceeds of the sale, exchange, retirement or other disposition of debt
securities effected through a foreign office of a broker that is a US controlled
person will be subject to information reporting, but are not generally subject  
to backup withholding. A "US controlled person" is (i) a United States person,  
(ii) a controlled foreign corporation for United States federal income tax      
purposes, (iii) a foreign person for which 50% or more of its gross income from 
all sources, over as specified three year period, is effectively connected with 
a United States trade or business or (iv) a foreign partnership that, at any    
time in its taxable year, is 50% or more (by income or capital interest) owned  
by a United States person or is engaged in the conduct of a United States trade 
or business.                                                                    

     Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment made to a US holder generally may be    
claimed as a credit against such holder's US federal income tax liability       
provided the appropriate information is furnished to the United States Internal 
Revenue Service.                                                                

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PLAN OF DISTRIBUTION

     The Republic may sell the debt securities or warrants in any of three ways:

- through underwriters or dealers;                                    

- directly to one or more purchasers; or                              

- through agents.                                                     

The prospectus supplement relating to a particular series of debt     
securities or warrants will set out:                                            

- the names of any underwriters or agents;                            

- the purchase price of the securities;                               

- the proceeds to the Republic from the sale;                         

- any underwriting discounts and other compensation;                  

- the initial public offering price;                                  

   - any discounts or concessions allowed, reallowed or paid to dealers; and

- any securities exchanges on which the securities will be listed.    

Any underwriter involved in the sale of securities will acquire the   
securities for its own account. The underwriters may resell the securities from 
time to time in one or more transactions, including negotiated transactions, at 
a fixed public offering price or at varying prices to be determined at the time 
of sale. The securities may be offered to the public either by underwriting     
syndicates represented by managing underwriters or by underwriters without a    
syndicate. Unless the prospectus supplement states otherwise, the underwriters  
will benefit from certain conditions that must be satisfied before they are     
obligated to purchase such securities and they will be obligated to purchase all
of the securities if any are purchased. The underwriters may change any initial 
public offering price and any discounts or concessions allowed or reallowed or  
paid to dealers.                                                                

If the Republic sells debt securities or warrants through agents, the 
prospectus supplement will identify the agent and indicate any commissions      
payable by the Republic. Unless the prospectus supplement states otherwise, all 
agents will act on a best efforts basis.                                        

The Republic may authorize agents, underwriters or dealers to solicit 
offers by certain specified entities to purchase the securities from the        
Republic at the public offering price set forth in a prospectus supplement      
pursuant to delayed delivery contracts. The prospectus supplement will set out  
the conditions of the delayed delivery contracts and the commission receivable  
by the agents, underwriters or dealers for soliciting the contracts.            

The Republic may offer securities as full, partial or alternative     
consideration for the purchase of other securities of the Republic, either in   
connection with a publicly announced tender, exchange or other offer for such   
securities or in privately negotiated transactions. The offer may be in addition
to or in lieu of sales of securities directly or through underwriters or agents.

    Agents and underwriters may be entitled to indemnification by the Republic
against certain liabilities, including liabilities under the United States      
Securities Act of 1933, or to contribution from the Republic with respect to    
certain payments which the agents or underwriters may be required to make.      
Agents and underwriters may be customers of, engage in transactions with, or    
perform services (including commercial and investment banking services) for, the
Republic in the ordinary course of business.                                    

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    Unless otherwise specified in the applicable prospectus supplement, if the
Republic offers and sells securities outside the United States, each underwriter
or dealer will acknowledge that:                                                

     - the securities offered have not been and will not be registered under the
US Securities Act of 1933; and                                    

 - may not be offered or sold in the United States except pursuant to an
  exemption from, or in a transaction not subject to, the registration
requirements of the US Securities Act of 1933. Each participating 
   underwriter or dealer will agree that it has not offered or sold, and
  will not offer or sell, any debt securities constituting part of its
  allotment in the United States except in accordance with Rule 903 of
 Regulation S under the US Securities Act of 1933. Accordingly, each
      underwriter or dealer will agree that neither the underwriter nor dealer
   nor its affiliates nor any persons acting on its or their behalf have
    engaged or will engage in any directed selling efforts with respect to
the securities.                                                   

      VALIDITY OF THE SECURITIES

    The Secretary of the Department of Justice of the Republic will provide an
opinion on behalf of the Republic as to the validity of the securities under    
Philippine law. Allen & Overy, United States counsel for the Republic, will     
provide an opinion on behalf of the Republic as to the validity of the          
securities under US and New York State law. US and Philippine counsel named in  
the applicable prospectus supplement will provide an opinion as to certain legal
matters on behalf of the underwriters named in the applicable prospectus        
supplement.                                                                     

AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

The authorized agent of the Republic in the United States is Hon.     
Linglingay Lacanlale, Consul General, the Philippine Consulate General, 556     
Fifth Avenue, New York, New York 10036-5095.                                    

EXPERTS; OFFICIAL STATEMENTS AND DOCUMENTS

   Hon. Jose Isidro N. Camacho, in his official capacity as Secretary of the
Department of Finance of the Republic, reviewed the information set forth in the
prospectus relating to the Republic, which information is included in the       
prospectus on his authority.                                                    

FURTHER INFORMATION 

    The Republic filed a registration statement with respect to the securities
with the Securities and Exchange Commission under the US Securities Act of 1933,
as amended, and its related rules and regulations. You can find additional      
information concerning the Republic and the securities in the registration      
statement and any pre- or post-effective amendment, including its various       
exhibits, which may be inspected at the public reference facilities maintained  
by the Commission at Room 1024, 450 Fifth Street N.W., Washington, D.C. 20549.  

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INDEX TO TABLES 

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
Guaranteed External Debts of the Republic of the                  
  Philippines...............................................   T-2
External Debt of the Republic of the Philippines............   T-9
Domestic Government Securities..............................  T-20
Government Guaranteed Corporate Bonds.......................  T-31
Domestic Debt of the Republic (Other Than Securities).......  T-32
Guaranteed Domestic Debt of the Republic (Other Than              
  Securities)...............................................  T-34

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GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES
AS OF DECEMBER 31, 2001 
(IN MILLIONS) 

                                                        [Enlarge/Download Table]


                                                                                      INTEREST RATE/                        
                                                                                         SPREAD/                            
                                                                                      SERVICE CHARGE      YEAR      YEAR OF 
CURRENCY                                          INTEREST RATE BASIS                  (PER ANNUM)     CONTRACTED   MATURITY
--------                                          -------------------                 --------------   ----------   --------
                                                                                                                            
GRAND TOTAL                                                                                                                 

I. NATIONAL GOVERNMENT DIRECT GUARANTEE ON GOCC LOANS                                                                       
     A.   LOANS                                                                                                             
          CANADIAN DOLLARS         Fixed Rate                                             9.2000%         1991        2003  
          SWISS FRANCS                                                                                                      
                                   Fixed Rate                                             8.8750%         1992        2004  
                                   Swiss Export Base Rate                                 1.3750%         1993        2004  
                                   Swiss Export Base Rate                                 1.3750%         1993        2004  
          DEUTSCHE MARKS                                                                                                    
                                   Fixed Rate                                             7.0000%         1995        2035  
                                   Fixed Rate                                             2.0000%         1990        2020  
                                   Fixed Rate                                             2.0000%         1988        2018  
                                   Fixed Rate                                             9.0000%         1992        2032  
                                   Fixed Rate                                             9.0000%         1993        2033  
                                   Fixed Rate                                             9.0000%         1993        2023  
                                   Fixed Rate                                             2.0000%         1981        2016  
                                   Fixed Rate                                             2.0000%         1981        2011  
                                   Fixed Rate                                             7.5000%         1995        2035  
                                   Fixed Rate                                             2.0000%         1981        2011  
                                   Fixed Rate                                             2.0000%         1979        2009  
                                   Fixed Rate                                             2.0000%         1979        2015  
                                   Fixed Rate                                             7.5000%         1995        2035  
                                   Fixed Rate                                             2.0000%         1979        2009  
                                   Fixed Rate                                             9.0000%         1993        2033  
                                   Fixed Rate                                             6.5000%         1996        2008  
                                   Fixed Rate                                             9.0000%         1995        2036  
                                   Fixed Rate                                             6.5000%         1996        2036  
                                   German Capital Market Rate                             0.0000%         1991        2031  
                                   German Capital Market Rate                             0.0000%         1992        2005  
                                   German Capital Market Rate                             0.0000%         1993        2005  
                                   German Capital Market Rate                             0.0000%         1993        2005  
                                   LIBOR-6 Mos. Deposit                                   1.0000%         1992        2004  
                                   LIBOR-6 Mos. Deposit                                   0.0000%         1994        2004  
          EURO                     Interest Free                                          0.0000%         2000        2013  
          SPANISH PESETAS                                                                                                   
                                   Fixed Rate                                             2.5000%         1993        2013  
                                   Organization for Economic Cooperation Development      0.0000%         1993        2004  
                                   Rate                                                                                     
          FRENCH FRANCS                                                                                                     
                                   Fixed Rate                                             6.8500%         1994        2006  
                                   Fixed Rate                                             6.8500%         1994        2002  
                                   Fixed Rate                                             3.0000%         1990        2021  
                                   Fixed Rate                                             3.0000%         1990        2021  
                                   Fixed Rate                                             8.3000%         1991        2002  
                                   Fixed Rate                                             3.5000%         1979        2005  
                                   Fixed Rate                                             8.3000%         1990        2002  
                                   Fixed Rate                                             3.0000%         1990        2021  
                                   Fixed Rate                                             3.1000%         1994        2014  
                                   Fixed Rate                                             8.3000%         1990        2002  
                                   Fixed Rate                                             3.3000%         1994        2014  
                                   Fixed Rate                                             3.0000%         1990        2021  
                                   Fixed Rate                                             2.5000%         1991        2022  
                                   Fixed Rate                                             3.1000%         1994        2014  
                                   Fixed Rate                                             3.0000%         1990        2022  
                                   Fixed Rate                                             8.3000%         1990        2001  
                                   Fixed Rate                                             8.1000%         1994        2005  
                                   Fixed Rate                                             3.0000%         1988        2021  
                                   Fixed Rate                                             3.0000%         1990        2021  
                                   Fixed Rate                                             8.3000%         1990        2002  
                                   Fixed Rate                                             8.3000%         1990        2001  
                                   Fixed Rate                                             3.0000%         1990        2021  


                                                                                           ORIGINAL AMOUNT                  
                                                                                              CONTRACTED                    
                                                                                      --------------------------            
                                                                                      (IN ORIGINAL     (IN US               
CURRENCY                                          INTEREST RATE BASIS                  CURRENCY)     DOLLARS)(2)            
--------                                          -------------------                 ------------   -----------            
                                                                                                                            
GRAND TOTAL                                                                                           15,088.04             
                                                                                                      ---------             
I. NATIONAL GOVERNMENT DIRECT GUARANTEE ON GOCC LOANS                                                 14,695.99             
                                                                                                      ---------             
     A.   LOANS                                                                                       12,875.86             
                                                                                                      ---------             
          CANADIAN DOLLARS         Fixed Rate                                               23.54         14.74             
                                                                                       ----------     ---------             
          SWISS FRANCS                                                                      81.46         48.52             
                                                                                       ----------     ---------             
                                   Fixed Rate                                               34.31         20.44             
                                   Swiss Export Base Rate                                    6.50          3.87             
                                   Swiss Export Base Rate                                   40.65         24.21             
          DEUTSCHE MARKS                                                                   850.93        384.22             
                                                                                       ----------     ---------             
                                   Fixed Rate                                               30.70         13.86             
                                   Fixed Rate                                              150.00         67.73             
                                   Fixed Rate                                               46.00         20.77             
                                   Fixed Rate                                               60.00         27.09             
                                   Fixed Rate                                               60.00         27.09             
                                   Fixed Rate                                               30.40         13.73             
                                   Fixed Rate                                               15.50          7.00             
                                   Fixed Rate                                                0.60          0.27             
                                   Fixed Rate                                               14.75          6.66             
                                   Fixed Rate                                                4.70          2.12             
                                   Fixed Rate                                                7.00          3.16             
                                   Fixed Rate                                               35.80         16.16             
                                   Fixed Rate                                               50.10         22.62             
                                   Fixed Rate                                                2.80          1.26             
                                   Fixed Rate                                              145.00         65.47             
                                   Fixed Rate                                               15.00          6.77             
                                   Fixed Rate                                               12.80          5.78             
                                   Fixed Rate                                                9.30          4.20             
                                   German Capital Market Rate                               17.25          7.79             
                                   German Capital Market Rate                               26.00         11.74             
                                   German Capital Market Rate                               39.60         17.88             
                                   German Capital Market Rate                               15.00          6.77             
                                   LIBOR-6 Mos. Deposit                                     18.70          8.44             
                                   LIBOR-6 Mos. Deposit                                     43.93         19.84             
          EURO                     Interest Free                                             7.81          6.90             
                                                                                       ----------     ---------             
          SPANISH PESETAS                                                                1,262.24          6.70             
                                                                                       ----------     ---------             
                                   Fixed Rate                                              631.12          3.35             
                                   Organization for Economic Cooperation Development       631.12          3.35             
                                   Rate                                                                                     
          FRENCH FRANCS                                                                    554.46         74.64             
                                                                                       ----------     ---------             
                                   Fixed Rate                                                9.42          1.27             
                                   Fixed Rate                                               54.75          7.37             
                                   Fixed Rate                                                4.86          0.65             
                                   Fixed Rate                                                0.38          0.05             
                                   Fixed Rate                                                4.78          0.64             
                                   Fixed Rate                                               80.00         10.77             
                                   Fixed Rate                                                0.29          0.04             
                                   Fixed Rate                                                1.68          0.23             
                                   Fixed Rate                                               10.09          1.36             
                                   Fixed Rate                                                0.47          0.06             
                                   Fixed Rate                                                4.94          0.67             
                                   Fixed Rate                                                1.45          0.20             
                                   Fixed Rate                                                6.44          0.87             
                                   Fixed Rate                                                9.90          1.33             
                                   Fixed Rate                                                0.76          0.10             
                                   Fixed Rate                                                1.97          0.27             
                                   Fixed Rate                                                1.69          0.23             
                                   Fixed Rate                                               45.88          6.18             
                                   Fixed Rate                                                6.26          0.84             
                                   Fixed Rate                                                0.53          0.07             
                                   Fixed Rate                                                1.57          0.21             
                                   Fixed Rate                                                1.41          0.19             


                                                                                            OUTSTANDING BALANCE             
                                                                                          AS OF DECEMBER 31, 2001           
                                                                                      --------------------------------      
                                                                                         (IN ORIGINAL        (IN US         
CURRENCY                                          INTEREST RATE BASIS                     CURRENCY)        DOLLARS)(2)      
--------                                          -------------------                 ------------------   -----------      
                                                                                                                            
GRAND TOTAL                                                                                                  9,176.89       
                                                                                                            ---------       
I. NATIONAL GOVERNMENT DIRECT GUARANTEE ON GOCC LOANS                                                        8,856.17       
                                                                                                            ---------       
     A.   LOANS                                                                                              6,594.49       
                                                                                                            ---------       
          CANADIAN DOLLARS         Fixed Rate                                                   3.53             2.21       
                                                                                          ----------        ---------       
          SWISS FRANCS                                                                         27.20            16.20       
                                                                                          ----------        ---------       
                                   Fixed Rate                                                   8.58             5.11       
                                   Swiss Export Base Rate                                       2.18             1.30       
                                   Swiss Export Base Rate                                      16.44             9.79       
          DEUTSCHE MARKS                                                                      427.74           193.13       
                                                                                          ----------        ---------       
                                   Fixed Rate                                                  29.48            13.31       
                                   Fixed Rate                                                  28.19            12.73       
                                   Fixed Rate                                                  37.95            17.14       
                                   Fixed Rate                                                  72.80            32.87       
                                   Fixed Rate                                                  59.95            27.07       
                                   Fixed Rate                                                  30.40            13.73       
                                   Fixed Rate                                                   7.35             3.32       
                                   Fixed Rate                                                   0.30             0.14       
                                   Fixed Rate                                                  14.75             6.66       
                                   Fixed Rate                                                   2.33             1.05       
                                   Fixed Rate                                                   2.63             1.19       
                                   Fixed Rate                                                  17.64             7.97       
                                   Fixed Rate                                                  44.70            20.18       
                                   Fixed Rate                                                   1.05             0.47       
                                   Fixed Rate                                                   9.20             4.15       
                                   Fixed Rate                                                   0.00             0.00       
                                   Fixed Rate                                                   6.86             3.10       
                                   Fixed Rate                                                   6.76             3.05       
                                   German Capital Market Rate                                   2.70             1.22       
                                   German Capital Market Rate                                   7.01             3.16       
                                   German Capital Market Rate                                  20.32             9.18       
                                   German Capital Market Rate                                   9.71             4.38       
                                   LIBOR-6 Mos. Deposit                                         4.68             2.11       
                                   LIBOR-6 Mos. Deposit                                        10.98             4.96       
          EURO                     Interest Free                                                3.06             2.70       
                                                                                          ----------        ---------       
          SPANISH PESETAS                                                                     772.75             4.10       
                                                                                          ----------        ---------       
                                   Fixed Rate                                                 549.63             2.92       
                                   Organization for Economic Cooperation Development          223.12             1.18       
                                   Rate                                                                                     
          FRENCH FRANCS                                                                       344.20            46.34       
                                                                                          ----------        ---------       
                                   Fixed Rate                                                   5.58             0.75       
                                   Fixed Rate                                                   0.40             0.05       
                                   Fixed Rate                                                   4.86             0.65       
                                   Fixed Rate                                                   0.38             0.05       
                                   Fixed Rate                                                   0.24             0.03       
                                   Fixed Rate                                                  13.99             1.88       
                                   Fixed Rate                                                   0.03             0.00       
                                   Fixed Rate                                                   1.68             0.23       
                                   Fixed Rate                                                   9.86             1.33       
                                   Fixed Rate                                                   0.05             0.01       
                                   Fixed Rate                                                   4.76             0.64       
                                   Fixed Rate                                                   1.41             0.19       
                                   Fixed Rate                                                   6.44             0.87       
                                   Fixed Rate                                                   9.67             1.30       
                                   Fixed Rate                                                   0.76             0.10       
                                   Fixed Rate                                                   0.00             0.00       
                                   Fixed Rate                                                   0.59             0.08       
                                   Fixed Rate                                                  40.15             5.40       
                                   Fixed Rate                                                   6.11             0.82       
                                   Fixed Rate                                                   0.05             0.01       
                                   Fixed Rate                                                   0.00             0.00       
                                   Fixed Rate                                                   1.34             0.18       

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GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED) 
(IN MILLIONS) 

                                                        [Enlarge/Download Table]


                                                            INTEREST RATE/                        
                                                               SPREAD/                            
                                                            SERVICE CHARGE      YEAR      YEAR OF 
CURRENCY                               INTEREST RATE BASIS   (PER ANNUM)     CONTRACTED   MATURITY
--------                               -------------------  --------------   ----------   --------
                                                                                                  
                           Fixed Rate                           8.3000%         1990        2001  
                           Fixed Rate                           3.0000%         1990        2021  
                           Fixed Rate                           8.3000%         1990        2001  
                           Fixed Rate                           5.4500%         1990        2016  
                           Fixed Rate                           2.5000%         1991        2022  
                           Fixed Rate                           3.0000%         1990        2022  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           3.0000%         1990        2022  
                           Fixed Rate                           3.0000%         1990        2021  
                           Fixed Rate                           3.0000%         1990        2022  
                           Fixed Rate                           3.0000%         1990        2022  
                           Fixed Rate                           3.0000%         1988        2021  
                           Fixed Rate                           8.1000%         1994        2006  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           3.1000%         1994        2014  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           6.8700%         1996        2017  
                           Fixed Rate                           1.5000%         1996        2022  
                           Fixed Rate                           1.5000%         1996        2002  
                           Fixed Rate                           1.5000%         1996        2002  
                           Fixed Rate                           1.5000%         1996        2002  
                           Fixed Rate                           1.5000%         1996        2002  
                           Fixed Rate                           5.4500%         1991        2018  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           8.3000%         1991        2002  
                           Fixed Rate                           3.3000%         1994        2014  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           3.0000%         1990        2022  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           3.0000%         1990        2022  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           8.3000%         1990        2002  
          KOREAN WON                                                                              
                           Fixed Rate                           3.5000%         1995        2015  
                           Fixed Rate                           3.5000%         1995        2015  
          POUNDS STERLING                                                                         
                           Fixed Rate                           8.3000%         1990        2002  
                           Fixed Rate                           5.9500%         1995        2007  
          JAPANESE YEN                                                                            
                           Fixed Rate                           6.5000%         1991        2002  
                           Fixed Rate                           2.5000%         1992        2022  
                           Fixed Rate                           6.5000%         1991        2003  
                           Fixed Rate                           3.0000%         1994        2024  
                           Fixed Rate                           2.5000%         1989        2006  
                           Fixed Rate                           6.5000%         1991        1999  
                           Fixed Rate                           2.5000%         1991        2021  
                           Fixed Rate                           6.0000%         1992        2004  
                           Fixed Rate                           2.7000%         1988        2002  
                           Fixed Rate                           6.5000%         1991        2011  
                           Fixed Rate                           3.0000%         1994        2024  
                           Fixed Rate                           5.5000%         1992        2010  
                           Fixed Rate                           4.7000%         1993        2009  
                           Fixed Rate                           2.5000%         1991        2007  
                           Fixed Rate                           2.0000%         1992        2006  
                           Fixed Rate                           2.5000%         1989        2002  
                           Fixed Rate                           5.8000%         1992        2004  
                           Fixed Rate                           7.5000%         1992        2003  
                           Fixed Rate                           2.5000%         1995        2025  
                           Fixed Rate                           2.1000%         1995        2025  
                           Fixed Rate                           2.5000%         1995        2025  
                           Fixed Rate                           2.1000%         1995        2025  
                           Fixed Rate                           2.7000%         1995        2025  
                           Fixed Rate                           2.3000%         1995        2025  
                           Fixed Rate                           2.7000%         1995        2025  


                                                                 ORIGINAL AMOUNT                  
                                                                    CONTRACTED                    
                                                            --------------------------            
                                                            (IN ORIGINAL     (IN US               
CURRENCY                               INTEREST RATE BASIS   CURRENCY)     DOLLARS)(2)            
--------                               -------------------  ------------   -----------            
                                                                                                  
                           Fixed Rate                              1.68          0.23             
                           Fixed Rate                              1.69          0.23             
                           Fixed Rate                              0.13          0.02             
                           Fixed Rate                            120.00         16.16             
                           Fixed Rate                              8.06          1.09             
                           Fixed Rate                              1.22          0.16             
                           Fixed Rate                              0.29          0.04             
                           Fixed Rate                              6.12          0.82             
                           Fixed Rate                              4.73          0.64             
                           Fixed Rate                              0.36          0.05             
                           Fixed Rate                              2.25          0.30             
                           Fixed Rate                              4.12          0.55             
                           Fixed Rate                              5.00          0.67             
                           Fixed Rate                              0.44          0.06             
                           Fixed Rate                             42.62          5.74             
                           Fixed Rate                              0.22          0.03             
                           Fixed Rate                             24.65          3.32             
                           Fixed Rate                              8.42          1.13             
                           Fixed Rate                              4.46          0.60             
                           Fixed Rate                              7.49          1.01             
                           Fixed Rate                             10.46          1.41             
                           Fixed Rate                              0.45          0.06             
                           Fixed Rate                             30.00          4.04             
                           Fixed Rate                              0.22          0.03             
                           Fixed Rate                              6.83          0.92             
                           Fixed Rate                              1.14          0.15             
                           Fixed Rate                              0.57          0.08             
                           Fixed Rate                              0.48          0.07             
                           Fixed Rate                              0.47          0.06             
                           Fixed Rate                              3.50          0.47             
                           Fixed Rate                              4.79          0.64             
                           Fixed Rate                              0.70          0.09             
                           Fixed Rate                              0.29          0.04             
                           Fixed Rate                              0.69          0.09             
                           Fixed Rate                              0.38          0.05             
          KOREAN WON                                           8,249.00          6.25             
                                                             ----------     ---------             
                           Fixed Rate                          8,249.00          6.25             
                           Fixed Rate                          8,645.00          6.55             
          POUNDS STERLING                                         20.77         30.18             
                                                             ----------     ---------             
                           Fixed Rate                             13.03         18.94             
                           Fixed Rate                              7.74         11.25             
          JAPANESE YEN                                       728,681.73      5,534.34             
                                                             ----------     ---------             
                           Fixed Rate                          2,250.58         17.09             
                           Fixed Rate                          6,686.00         50.78             
                           Fixed Rate                         13,214.97        100.37             
                           Fixed Rate                         15,000.00        113.93             
                           Fixed Rate                          5,003.68         38.00             
                           Fixed Rate                          2,201.88         16.72             
                           Fixed Rate                         30,084.00        228.49             
                           Fixed Rate                         27,073.09        205.62             
                           Fixed Rate                          1,936.96         14.71             
                           Fixed Rate                         12,215.94         92.78             
                           Fixed Rate                         22,500.00        170.89             
                           Fixed Rate                         20,550.00        156.08             
                           Fixed Rate                         17,812.50        135.29             
                           Fixed Rate                          6,705.49         50.93             
                           Fixed Rate                            891.52          6.77             
                           Fixed Rate                            987.56          7.50             
                           Fixed Rate                         27,885.85        211.79             
                           Fixed Rate                         18,820.15        142.94             
                           Fixed Rate                          5,283.00         40.12             
                           Fixed Rate                            848.00          6.44             
                           Fixed Rate                          1,104.00          8.38             
                           Fixed Rate                            248.00          1.88             
                           Fixed Rate                         11,394.00         86.54             
                           Fixed Rate                            921.00          6.99             
                           Fixed Rate                          2,224.00         16.89             


                                                                  OUTSTANDING BALANCE             
                                                                AS OF DECEMBER 31, 2001           
                                                            --------------------------------      
                                                               (IN ORIGINAL        (IN US         
CURRENCY                               INTEREST RATE BASIS      CURRENCY)        DOLLARS)(2)      
--------                               -------------------  ------------------   -----------      
                                                                                                  
                           Fixed Rate                                 0.00             0.00       
                           Fixed Rate                                 1.61             0.22       
                           Fixed Rate                                 0.00             0.00       
                           Fixed Rate                                90.00            12.12       
                           Fixed Rate                                 8.06             1.09       
                           Fixed Rate                                 1.22             0.16       
                           Fixed Rate                                 0.03             0.00       
                           Fixed Rate                                 6.12             0.82       
                           Fixed Rate                                 4.38             0.59       
                           Fixed Rate                                 0.36             0.05       
                           Fixed Rate                                 2.13             0.29       
                           Fixed Rate                                 3.81             0.51       
                           Fixed Rate                                 2.23             0.30       
                           Fixed Rate                                 0.04             0.01       
                           Fixed Rate                                36.68             4.94       
                           Fixed Rate                                 0.02             0.00       
                           Fixed Rate                                16.02             2.16       
                           Fixed Rate                                 8.42             1.13       
                           Fixed Rate                                 4.46             0.60       
                           Fixed Rate                                 7.49             1.01       
                           Fixed Rate                                10.46             1.41       
                           Fixed Rate                                 2.99             0.40       
                           Fixed Rate                                25.65             3.45       
                           Fixed Rate                                 0.02             0.00       
                           Fixed Rate                                 0.34             0.05       
                           Fixed Rate                                 1.06             0.14       
                           Fixed Rate                                 0.06             0.01       
                           Fixed Rate                                 0.47             0.06       
                           Fixed Rate                                 0.05             0.01       
                           Fixed Rate                                 0.35             0.05       
                           Fixed Rate                                 0.48             0.06       
                           Fixed Rate                                 0.70             0.09       
                           Fixed Rate                                 0.03             0.00       
                           Fixed Rate                                 0.07             0.01       
                           Fixed Rate                                 0.04             0.01       
          KOREAN WON                                              7,655.98             5.80       
                                                                ----------        ---------       
                           Fixed Rate                             7,655.98             5.80       
                           Fixed Rate                                 7.85             0.01       
          POUNDS STERLING                                             4.94             7.18       
                                                                ----------        ---------       
                           Fixed Rate                                 0.30             0.43       
                           Fixed Rate                                 4.64             6.75       
          JAPANESE YEN                                          394,526.36         2,996.43       
                                                                ----------        ---------       
                           Fixed Rate                               225.06             1.71       
                           Fixed Rate                             6,686.00            50.78       
                           Fixed Rate                             2,640.80            20.06       
                           Fixed Rate                            12,699.81            96.46       
                           Fixed Rate                             4,943.68            37.55       
                           Fixed Rate                                 0.00             0.00       
                           Fixed Rate                            28,616.48           217.34       
                           Fixed Rate                                 0.00             0.00       
                           Fixed Rate                             1,936.95            14.71       
                           Fixed Rate                             7,985.70            60.65       
                           Fixed Rate                            22,500.00           170.89       
                           Fixed Rate                             4,586.55            34.83       
                           Fixed Rate                             7,325.25            55.64       
                           Fixed Rate                                 0.00             0.00       
                           Fixed Rate                                 0.00             0.00       
                           Fixed Rate                                 0.00             0.00       
                           Fixed Rate                             7,154.39            54.34       
                           Fixed Rate                                 0.00             0.00       
                           Fixed Rate                               172.17             1.31       
                           Fixed Rate                               359.86             2.73       
                           Fixed Rate                               836.48             6.35       
                           Fixed Rate                               285.79             2.17       
                           Fixed Rate                             9,624.38            73.10       
                           Fixed Rate                             1,048.22             7.96       
                           Fixed Rate                             1,366.30            10.38       

 T-3

424B4
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GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED) 
(IN MILLIONS) 

                                                        [Enlarge/Download Table]


                                                               INTEREST RATE/                        
                                                                  SPREAD/                            
                                                               SERVICE CHARGE      YEAR      YEAR OF 
CURRENCY                                  INTEREST RATE BASIS   (PER ANNUM)     CONTRACTED   MATURITY
--------                                  -------------------  --------------   ----------   --------
                                                                                                     
                           Fixed Rate                              2.7000%         1996        2026  
                           Fixed Rate                              2.3000%         1996        2026  
                           Fixed Rate                              2.7000%         1996        2026  
                           Fixed Rate                              2.3000%         1996        2026  
                           Fixed Rate                              2.5000%         1996        2026  
                           Fixed Rate                              2.1000%         1996        2026  
                           Fixed Rate                              2.3000%         1997        2027  
                           Fixed Rate                              2.7000%         1997        2027  
                           Fixed Rate                              2.3000%         1997        2027  
                           Fixed Rate                              2.7000%         1997        2027  
                           Fixed Rate                              2.3000%         1997        2027  
                           Fixed Rate                              2.7000%         1997        2027  
                           Fixed Rate                              2.3000%         1997        2027  
                           Fixed Rate                              2.5000%         1997        2027  
                           Fixed Rate                              2.1000%         1997        2027  
                           Fixed Rate                              2.5000%         1997        2027  
                           Fixed Rate                              2.1000%         1997        2027  
                           Fixed Rate                              2.5000%         1997        2027  
                           Fixed Rate                              2.1000%         1997        2027  
                           Fixed Rate                              2.2000%         1998        2028  
                           Fixed Rate                              0.7500%         1998        2038  
                           Fixed Rate                              2.2000%         1998        2028  
                           Fixed Rate                              0.7500%         1998        2038  
                           Fixed Rate                              2.2000%         1998        2028  
                           Fixed Rate                              1.7000%         1998        2028  
                           Fixed Rate                              0.7500%         1998        2038  
                           Fixed Rate                              2.2000%         1999        2028  
                           Fixed Rate                              1.7000%         1999        2028  
                           Fixed Rate                              2.2000%         1999        2040  
                           Fixed Rate                              0.9500%         2001        2041  
                           Fixed Rate                              0.7500%         2001        2041  
                           Japan Long Term Prime                   1.2500%         1994        2003  
                           Japan Long Term Prime                   1.2500%         1994        2003  
                           Japan Long Term Prime Lending Rate      1.2500%         1994        2005  
                           Japan Long Term Prime Lending Rate      0.0000%         1994        2014  
                           Japan Long Term Prime Lending Rate      1.2500%         1994        2005  
                           Japan Long Term Prime Lending Rate      0.0000%         1992        2014  
                           Japan Long Term Prime Lending Rate      0.0000%         1992        2015  
                           Japan Long Term Prime Lending Rate      0.0000%         1999        2019  
                           Japan Long Term Prime Lending Rate      0.0000%         2000        2007  
                           Japan Long Term Prime Lending Rate     -0.2000%         1999        2014  
                           Japan Swap Rate                         1.6000%         1999        2009  
                           LIBOR 6 Mos. Deposit                    1.6000%         1999        2009  
                           LIBOR 6 Mos. Deposit                    0.0000%         1999        2003  
                           LIBOR 6 Mos. Deposit                    0.0000%         1999        2004  
                           ADB Floating Rate                       0.5000%         1996        2016  
                           LIBOR Base Rate                         0.5000%         1996        2016  
                           US LIBOR                                0.0000%         2001        2020  
          SPECIAL DRAWING                                                                            
          RIGHTS                                                                                     
                           Interest Free                           0.7500%         1992        2032  
                           LIBOR 6 Mos. Deposit                    0.8000%         1995        2034  
                           LIBOR 6 Mos. Deposit                    0.8000%         1995        2014  
          UNITED STATES                                                                              
          DOLLARS                                                                                    
                           ADB Floating Rate                       0.0000%         1993        2018  
                           ADB Floating Rate                       0.0000%         1989        2004  
                           ADB Floating Rate                       0.0000%         1991        2009  
                           ADB Floating Rate                       0.0000%         1992        2007  
                           ADB Floating Rate                       0.0000%         1989        2012  
                           ADB Floating Rate                       0.0000%         1988        2012  
                           ADB Floating Rate                       0.0000%         1991        2006  
                           ADB Floating Rate                       0.0000%         1986        2006  
                           ADB Floating Rate                       0.0000%         1995        2020  
                           ADB Floating Rate                       0.0000%         1993        2012  
                           ADB Floating Rate                       0.0000%         1991        2015  
                           ADB Floating Rate                       0.0000%         1988        2008  
                           ADB Floating Rate                       0.0000%         1989        2009  
                           ADB Floating Rate                       0.0000%         1995        2019  


                                                                    ORIGINAL AMOUNT                  
                                                                       CONTRACTED                    
                                                               --------------------------            
                                                               (IN ORIGINAL     (IN US               
CURRENCY                                  INTEREST RATE BASIS   CURRENCY)     DOLLARS)(2)            
--------                                  -------------------  ------------   -----------            
                                                                                                     
                           Fixed Rate                            22,837.00        173.45             
                           Fixed Rate                             1,875.00         14.24             
                           Fixed Rate                            10,184.00         77.35             
                           Fixed Rate                               310.00          2.35             
                           Fixed Rate                             5,000.00         37.98             
                           Fixed Rate                               158.00          1.20             
                           Fixed Rate                             8,760.00         66.53             
                           Fixed Rate                            14,011.00        106.41             
                           Fixed Rate                               449.00          3.41             
                           Fixed Rate                             7,747.00         58.84             
                           Fixed Rate                               339.00          2.57             
                           Fixed Rate                            14,638.00        111.18             
                           Fixed Rate                               334.00          2.54             
                           Fixed Rate                             5,903.00         44.83             
                           Fixed Rate                             1,325.00         10.06             
                           Fixed Rate                               386.00          2.93             
                           Fixed Rate                               648.00          4.92             
                           Fixed Rate                             1,927.00         14.64             
                           Fixed Rate                               819.00          6.22             
                           Fixed Rate                            13,788.00        104.72             
                           Fixed Rate                               767.00          5.83             
                           Fixed Rate                            19,532.00        148.35             
                           Fixed Rate                               458.00          3.48             
                           Fixed Rate                             3,064.00         23.27             
                           Fixed Rate                             2,193.00         16.66             
                           Fixed Rate                               815.00          6.19             
                           Fixed Rate                             3,064.00         23.27             
                           Fixed Rate                             2,193.00         16.66             
                           Fixed Rate                            16,450.00        124.94             
                           Fixed Rate                            39,455.00        299.66             
                           Fixed Rate                             2,476.00         18.81             
                           Japan Long Term Prime                 26,840.00        203.85             
                           Japan Long Term Prime                 31,500.00        239.24             
                           Japan Long Term Prime Lending Rate     2,163.65         16.43             
                           Japan Long Term Prime Lending Rate    12,400.00         94.18             
                           Japan Long Term Prime Lending Rate       297.84          2.26             
                           Japan Long Term Prime Lending Rate     6,100.00         46.33             
                           Japan Long Term Prime Lending Rate    18,600.00        141.27             
                           Japan Long Term Prime Lending Rate    60,000.00        455.70             
                           Japan Long Term Prime Lending Rate     5,370.68         40.79             
                           Japan Long Term Prime Lending Rate    26,000.00        197.47             
                           Japan Swap Rate                       20,800.00        157.98             
                           LIBOR 6 Mos. Deposit                  27,200.00        206.58             
                           LIBOR 6 Mos. Deposit                   8,469.00         64.32             
                           LIBOR 6 Mos. Deposit                  13,537.00        102.81             
                           ADB Floating Rate                      2,166.00         16.45             
                           LIBOR Base Rate                        9,090.39         69.04             
                           US LIBOR                               2,400.00         18.23             
          SPECIAL DRAWING                                                                            
          RIGHTS                                                     13.50         16.94             
                                                                ----------     ---------             
                           Interest Free                              3.00          3.76             
                           LIBOR 6 Mos. Deposit                       3.50          4.39             
                           LIBOR 6 Mos. Deposit                       7.00          8.78             
          UNITED STATES                                                                              
          DOLLARS                                                 6,534.34      6,734.34             
                                                                ----------     ---------             
                           ADB Floating Rate                         43.20         43.20             
                           ADB Floating Rate                        130.00        130.00             
                           ADB Floating Rate                         25.00         25.00             
                           ADB Floating Rate                          2.60          2.60             
                           ADB Floating Rate                         26.40         26.40             
                           ADB Floating Rate                         43.50         43.50             
                           ADB Floating Rate                        100.00        100.00             
                           ADB Floating Rate                         92.00         92.00             
                           ADB Floating Rate                         92.00         92.00             
                           ADB Floating Rate                        138.00        138.00             
                           ADB Floating Rate                        200.00        200.00             
                           ADB Floating Rate                        120.00        120.00             
                           ADB Floating Rate                        160.00        160.00             
                           ADB Floating Rate                        244.00        244.00             


                                                                     OUTSTANDING BALANCE             
                                                                   AS OF DECEMBER 31, 2001           
                                                               --------------------------------      
                                                                  (IN ORIGINAL        (IN US         
CURRENCY                                  INTEREST RATE BASIS      CURRENCY)        DOLLARS)(2)      
--------                                  -------------------  ------------------   -----------      
                                                                                                     
                           Fixed Rate                                8,092.68            61.46       
                           Fixed Rate                                3,257.67            24.74       
                           Fixed Rate                                9,458.12            71.83       
                           Fixed Rate                                  219.34             1.67       
                           Fixed Rate                                4,652.67            35.34       
                           Fixed Rate                                  157.99             1.20       
                           Fixed Rate                                  502.89             3.82       
                           Fixed Rate                                  411.92             3.13       
                           Fixed Rate                                   15.76             0.12       
                           Fixed Rate                                5,479.35            41.62       
                           Fixed Rate                                  282.30             2.14       
                           Fixed Rate                                5,379.17            40.85       
                           Fixed Rate                                  206.08             1.57       
                           Fixed Rate                                    0.00             0.00       
                           Fixed Rate                                  760.27             5.77       
                           Fixed Rate                                  248.88             1.89       
                           Fixed Rate                                  434.86             3.30       
                           Fixed Rate                                    0.00             0.00       
                           Fixed Rate                                  143.51             1.09       
                           Fixed Rate                                  310.92             2.36       
                           Fixed Rate                                  136.51             1.04       
                           Fixed Rate                                2,648.90            20.12       
                           Fixed Rate                                  248.32             1.89       
                           Fixed Rate                                  298.70             2.27       
                           Fixed Rate                                  227.53             1.73       
                           Fixed Rate                                  134.72             1.02       
                           Fixed Rate                               10,158.42            77.15       
                           Fixed Rate                                1,638.70            12.45       
                           Fixed Rate                                  303.40             2.30       
                           Fixed Rate                                    0.00             0.00       
                           Fixed Rate                                    0.00             0.00       
                           Japan Long Term Prime                    16,622.68           126.25       
                           Japan Long Term Prime                    28,909.69           219.57       
                           Japan Long Term Prime Lending Rate          713.71             5.42       
                           Japan Long Term Prime Lending Rate        5,147.26            39.09       
                           Japan Long Term Prime Lending Rate           89.35             0.68       
                           Japan Long Term Prime Lending Rate        4,771.15            36.24       
                           Japan Long Term Prime Lending Rate       14,136.44           107.37       
                           Japan Long Term Prime Lending Rate       60,000.00           455.70       
                           Japan Long Term Prime Lending Rate        4,603.44            34.96       
                           Japan Long Term Prime Lending Rate       19,050.50           144.69       
                           Japan Swap Rate                          20,800.00           157.98       
                           LIBOR 6 Mos. Deposit                     27,200.00           206.58       
                           LIBOR 6 Mos. Deposit                      4,234.53            32.16       
                           LIBOR 6 Mos. Deposit                      7,520.30            57.12       
                           ADB Floating Rate                           143.48             1.09       
                           LIBOR Base Rate                           1,380.39            10.48       
                           US LIBOR                                  2,400.00            18.23       
          SPECIAL DRAWING                                                                            
          RIGHTS                                                        11.86            14.87       
                                                                   ----------        ---------       
                           Interest Free                                 2.35             2.95       
                           LIBOR 6 Mos. Deposit                          3.48             4.36       
                           LIBOR 6 Mos. Deposit                          6.03             7.56       
          UNITED STATES                                                                              
          DOLLARS                                                    3,305.28         3,305.28       
                                                                   ----------        ---------       
                           ADB Floating Rate                            19.17            19.17       
                           ADB Floating Rate                            88.69            88.69       
                           ADB Floating Rate                            11.50            11.50       
                           ADB Floating Rate                             1.10             1.10       
                           ADB Floating Rate                            20.25            20.25       
                           ADB Floating Rate                            33.03            33.03       
                           ADB Floating Rate                            18.69            18.69       
                           ADB Floating Rate                            44.95            44.95       
                           ADB Floating Rate                            72.60            72.60       
                           ADB Floating Rate                           103.67           103.67       
                           ADB Floating Rate                           170.65           170.65       
                           ADB Floating Rate                            68.41            68.41       
                           ADB Floating Rate                           109.52           109.52       
                           ADB Floating Rate                           155.24           155.24       

 T-4

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GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED) 
(IN MILLIONS) 

                                                                [Download Table]


                                              INTEREST RATE/                        
                                                 SPREAD/                            
                                              SERVICE CHARGE      YEAR      YEAR OF 
CURRENCY                 INTEREST RATE BASIS   (PER ANNUM)     CONTRACTED   MATURITY
--------                 -------------------  --------------   ----------   --------
                                                                                    
          ADB Floating Rate                       0.0000%         1992        2012  
          ADB Floating Rate                       0.0000%         1992        2016  
          ADB Floating Rate                       0.0000%         1993        2013  
          ADB Floating Rate                       0.0000%         1998        2021  
          ADB Floating Rate                       0.0000%         1996        2011  
          ADB Floating Rate                       0.0000%         1998        2017  
          ADB Floating Rate                       0.0000%         1998        2013  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                             10.5000%         1984        1999  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              3.0000%         1995        2006  
          Fixed Rate                              8.1000%         1980        2005  
          Fixed Rate                              7.6000%         1979        2004  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              7.7000%         1978        2003  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              8.9000%         1977        2002  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              2.0000%         1993        2013  
          Fixed Rate                              3.5750%         1995        2012  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              8.3000%         1989        2003  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                             10.1000%         1981        2006  
          Fixed Rate                             11.6000%         1982        2002  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                             11.6000%         1982        2006  
          Fixed Rate                              8.3000%         1977        2003  
          Fixed Rate                              9.6000%         1981        2001  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                             11.0000%         1983        2002  
          Fixed Rate                             10.2500%         1984        2004  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              3.0000%         1995        2006  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.2500%         1993        2025  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                             10.5000%         1984        2007  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              9.0000%         1980        2001  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              1.5000%         1990        2010  
          Fixed Rate                              6.6000%         1995        2008  
          Fixed Rate                              7.6500%         1996        2009  
          Fixed Rate                              3.0000%         1994        2007  
          Fixed Rate                              4.0000%         1995        2018  
          Fixed Rate                              6.5000%         1997        2010  
          IBRD Cost of Qualified Borrowings       0.5000%         1989        2009  
          IBRD Cost of Qualified Borrowings       0.5000%         1994        2014  
          IBRD Cost of Qualified Borrowings       0.5000%         1982        2002  
          IBRD Cost of Qualified Borrowings       0.5000%         1993        2012  
          IBRD Cost of Qualified Borrowings       0.5000%         1994        2014  
          IBRD Cost of Qualified Borrowings       0.5000%         1993        2013  
          IBRD Cost of Qualified Borrowings       0.5000%         1989        2009  
          IBRD Cost of Qualified Borrowings       0.5000%         1994        2014  
          IBRD Cost of Qualified Borrowings       0.5000%         1994        2014  


                                                   ORIGINAL AMOUNT                  
                                                      CONTRACTED                    
                                              --------------------------            
                                              (IN ORIGINAL     (IN US               
CURRENCY                 INTEREST RATE BASIS   CURRENCY)     DOLLARS)(2)            
--------                 -------------------  ------------   -----------            
                                                                                    
          ADB Floating Rate                         75.00         75.00             
          ADB Floating Rate                         31.40         31.40             
          ADB Floating Rate                        164.00        164.00             
          ADB Floating Rate                         50.00         50.00             
          ADB Floating Rate                          5.35          5.35             
          ADB Floating Rate                         20.22         20.22             
          ADB Floating Rate                        300.00        300.00             
          Fixed Rate                                 0.17          0.17             
          Fixed Rate                                 0.03          0.03             
          Fixed Rate                                39.30         39.30             
          Fixed Rate                                 0.08          0.08             
          Fixed Rate                                 0.05          0.05             
          Fixed Rate                                 0.50          0.50             
          Fixed Rate                                42.80         42.80             
          Fixed Rate                                60.70         60.70             
          Fixed Rate                                 0.41          0.41             
          Fixed Rate                                49.00         49.00             
          Fixed Rate                                 0.04          0.04             
          Fixed Rate                                52.00         52.00             
          Fixed Rate                                15.67         15.67             
          Fixed Rate                                 9.34          9.34             
          Fixed Rate                                11.56         11.56             
          Fixed Rate                                 0.09          0.09             
          Fixed Rate                                19.30         19.30             
          Fixed Rate                                37.90         37.90             
          Fixed Rate                                 0.03          0.03             
          Fixed Rate                                 2.24          2.24             
          Fixed Rate                                 0.10          0.10             
          Fixed Rate                                 0.20          0.20             
          Fixed Rate                                 3.38          3.38             
          Fixed Rate                                 0.17          0.17             
          Fixed Rate                                87.50         87.50             
          Fixed Rate                                24.00         24.00             
          Fixed Rate                                11.21         11.21             
          Fixed Rate                                17.00         17.00             
          Fixed Rate                                29.00         29.00             
          Fixed Rate                               150.00        150.00             
          Fixed Rate                                 0.15          0.15             
          Fixed Rate                                32.75         32.75             
          Fixed Rate                                33.00         33.00             
          Fixed Rate                                 0.04          0.04             
          Fixed Rate                                 9.50          9.50             
          Fixed Rate                                 0.18          0.18             
          Fixed Rate                                 0.91          0.91             
          Fixed Rate                                 0.12          0.12             
          Fixed Rate                                 0.63          0.63             
          Fixed Rate                                24.50         24.50             
          Fixed Rate                                 0.51          0.51             
          Fixed Rate                                43.80         43.80             
          Fixed Rate                                 0.99          0.99             
          Fixed Rate                                 0.38          0.38             
          Fixed Rate                                60.50         60.50             
          Fixed Rate                                 4.99          4.99             
          Fixed Rate                                 0.23          0.23             
          Fixed Rate                                 1.35          1.35             
          Fixed Rate                                11.70         11.70             
          Fixed Rate                                25.00         25.00             
          Fixed Rate                                25.00         25.00             
          Fixed Rate                                 5.00          5.00             
          Fixed Rate                                15.00         15.00             
          Fixed Rate                                11.10         11.10             
          IBRD Cost of Qualified Borrowings         65.50         65.50             
          IBRD Cost of Qualified Borrowings        113.00        113.00             
          IBRD Cost of Qualified Borrowings         36.00         36.00             
          IBRD Cost of Qualified Borrowings        134.00        134.00             
          IBRD Cost of Qualified Borrowings        114.00        114.00             
          IBRD Cost of Qualified Borrowings        110.00        110.00             
          IBRD Cost of Qualified Borrowings         65.00         65.00             
          IBRD Cost of Qualified Borrowings        127.35        127.35             
          IBRD Cost of Qualified Borrowings         19.65         19.65             


                                                    OUTSTANDING BALANCE             
                                                  AS OF DECEMBER 31, 2001           
                                              --------------------------------      
                                                 (IN ORIGINAL        (IN US         
CURRENCY                 INTEREST RATE BASIS      CURRENCY)        DOLLARS)(2)      
--------                 -------------------  ------------------   -----------      
                                                                                    
          ADB Floating Rate                            64.22            64.22       
          ADB Floating Rate                             8.04             8.04       
          ADB Floating Rate                           101.32           101.32       
          ADB Floating Rate                             4.48             4.48       
          ADB Floating Rate                             4.39             4.39       
          ADB Floating Rate                             9.32             9.32       
          ADB Floating Rate                             1.01             1.01       
          Fixed Rate                                    0.15             0.15       
          Fixed Rate                                    0.03             0.03       
          Fixed Rate                                   14.08            14.08       
          Fixed Rate                                    0.07             0.07       
          Fixed Rate                                    0.04             0.04       
          Fixed Rate                                    0.37             0.37       
          Fixed Rate                                    8.49             8.49       
          Fixed Rate                                   14.06            14.06       
          Fixed Rate                                    0.37             0.37       
          Fixed Rate                                    8.50             8.50       
          Fixed Rate                                    0.04             0.04       
          Fixed Rate                                    2.69             2.69       
          Fixed Rate                                   14.10            14.10       
          Fixed Rate                                    8.40             8.40       
          Fixed Rate                                   10.40            10.40       
          Fixed Rate                                    0.08             0.08       
          Fixed Rate                                   19.30            19.30       
          Fixed Rate                                   37.90            37.90       
          Fixed Rate                                    0.02             0.02       
          Fixed Rate                                    0.45             0.45       
          Fixed Rate                                    0.09             0.09       
          Fixed Rate                                    0.18             0.18       
          Fixed Rate                                    3.04             3.04       
          Fixed Rate                                    0.15             0.15       
          Fixed Rate                                   23.17            23.17       
          Fixed Rate                                    0.00             0.00       
          Fixed Rate                                   10.09            10.09       
          Fixed Rate                                    0.00             0.00       
          Fixed Rate                                    2.13             2.13       
          Fixed Rate                                    0.00             0.00       
          Fixed Rate                                    0.14             0.14       
          Fixed Rate                                    1.03             1.03       
          Fixed Rate                                    7.74             7.74       
          Fixed Rate                                    0.04             0.04       
          Fixed Rate                                    3.75             3.75       
          Fixed Rate                                    0.16             0.16       
          Fixed Rate                                    0.82             0.82       
          Fixed Rate                                    0.11             0.11       
          Fixed Rate                                    0.57             0.57       
          Fixed Rate                                   24.50            24.50       
          Fixed Rate                                    0.46             0.46       
          Fixed Rate                                    5.23             5.23       
          Fixed Rate                                    0.89             0.89       
          Fixed Rate                                    0.34             0.34       
          Fixed Rate                                    0.00             0.00       
          Fixed Rate                                    4.49             4.49       
          Fixed Rate                                    0.21             0.21       
          Fixed Rate                                    1.00             1.00       
          Fixed Rate                                   10.53            10.53       
          Fixed Rate                                    0.72             0.72       
          Fixed Rate                                    1.88             1.88       
          Fixed Rate                                    0.64             0.64       
          Fixed Rate                                   14.37            14.37       
          Fixed Rate                                    3.50             3.50       
          IBRD Cost of Qualified Borrowings            39.57            39.57       
          IBRD Cost of Qualified Borrowings            88.89            88.89       
          IBRD Cost of Qualified Borrowings             0.55             0.55       
          IBRD Cost of Qualified Borrowings            30.78            30.78       
          IBRD Cost of Qualified Borrowings            49.18            49.18       
          IBRD Cost of Qualified Borrowings            44.28            44.28       
          IBRD Cost of Qualified Borrowings            43.53            43.53       
          IBRD Cost of Qualified Borrowings           113.89           113.89       
          IBRD Cost of Qualified Borrowings            11.20            11.20       

 T-5

424B4
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GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED) 
(IN MILLIONS) 

                                                        [Enlarge/Download Table]


                                                                             INTEREST RATE/                        
                                                                                SPREAD/                            
                                                                             SERVICE CHARGE      YEAR      YEAR OF 
CURRENCY                                          INTEREST RATE BASIS         (PER ANNUM)     CONTRACTED   MATURITY
--------                                          -------------------        --------------   ----------   --------
                                                                                                                   
                                   IBRD Cost of Qualified Borrowings             0.5000%         1995        2002  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1994        2013  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1991        2011  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1994        2014  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1995        2011  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1992        2012  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1988        2008  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1988        2008  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1991        2011  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1990        2010  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1990        2010  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1985        2005  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1991        2011  
                                   IBRD Cost of Qualified Borrowings             0.5000%         1989        2009  
                                   Interest Free                                 0.0000%         2000        2013  
                                   LIBOR 6 Mos. Deposits                         0.6250%         1992        2003  
                                   LIBOR 6 Mos. Deposits                         0.6250%         1992        2003  
                                   LIBOR 6 Mos. Deposits                         0.6250%         1991        2003  
                                   LIBOR 6 Mos. Deposits                         0.6250%         1992        2003  
                                   LIBOR 6 Mos. Deposits                         0.6250%         1992        2003  
                                   LIBOR 6 Mos. Deposit                          0.0000%         1992        2004  
                                   LIBOR 6 Mos. Deposit                          0.0000%         1992        2004  
                                   LIBOR 6 Mos. Deposit                          0.0000%         1992        2004  
                                   LIBOR Base Rate                               0.5000%         1996        2016  
                                   LIBOR Base Rate                               0.5000%         1996        2016  
                                   LIBOR Base Rate                               0.5000%         1996        2016  
                                   LIBOR Base Rate                               0.5000%         1995        2015  
                                   US Concessionary Interest Relending Rate      0.0000%         1993        2004  
                                   LIBOR Base Rate                               0.5000%         1996        2017  
                                   LIBOR Base Rate                               0.5000%         1997        2017  
                                   LIBOR Base Rate                               0.5000%         1998        2018  
                                   LIBOR Base Rate                               0.5000%         1998        2019  
                                   LIBOR Base Rate                               0.5000%         1998        2019  
                                   LIBOR 6 Mos. Deposit                          0.0000%         1998        2014  
                                   LIBOR 6 Mos. Deposit                          0.0000%         1997        2008  
                                   LIBOR 6 Mos. Deposit                          0.0000%         1998        2014  
                                   LIBOR 6 Mos. Deposit                          0.0000%         1998        2008  
                                   US Floating Rate                              0.9000%         1999        2014  
                                   US Floating Rate                              0.3000%         2000        2003  
     B.   BONDS                                                                                                    
          UNITED STATES                                                                                            
          DOLLARS                                                                                                  
                                   Fixed Rate                                    9.0000%         1995        2002  
                                   Fixed Rate                                    9.7500%         1994        2009  
                                   Fixed Rate                                    7.8750%         1996        2006  
                                   Fixed Rate                                    8.4000%         1996        2016  
                                   Fixed Rate                                    9.6250%         1998        2028  
                                   Fixed Rate                                    9.8750%         2000        2010  
          JAPANESE YEN                                                                                             
                                   Fixed Rate                                    4.6500%         1995        2015  
                                   Fixed Rate                                    3.1500%         1997        2003  
                                   Fixed Rate                                    2.3500%         2000        2010  
          EURO                                                                                                     
                                   Fixed Rate                                    9.5750%         2001        2006  
II.  GFI GUARANTEE ASSUMED BY NATIONAL GOVERNMENT                                                                  
          BELGIAN FRANCS                                                                                           
                                   BIBOR 6 Mos.                                  0.6000%         1992        2007  
                                   BIBOR 6 Mos.                                  0.6000%         1992        2007  
                                   BIBOR 6 Mos.                                  0.6000%         1992        2007  
          CANADIAN DOLLARS                                                       0.0000%         1986        Upon  
                                   Interest Free                                                           Demand  
          DEUTSCHE MARKS                                                                                           
                                   DM LIBOR                                      0.8125%         1986        2003  


                                                                                  ORIGINAL AMOUNT                  
                                                                                     CONTRACTED                    
                                                                             --------------------------            
                                                                             (IN ORIGINAL     (IN US               
CURRENCY                                          INTEREST RATE BASIS         CURRENCY)     DOLLARS)(2)            
--------                                          -------------------        ------------   -----------            
                                                                                                                   
                                   IBRD Cost of Qualified Borrowings               50.00         50.00             
                                   IBRD Cost of Qualified Borrowings               64.00         64.00             
                                   IBRD Cost of Qualified Borrowings              175.00        175.00             
                                   IBRD Cost of Qualified Borrowings               40.00         40.00             
                                   IBRD Cost of Qualified Borrowings               50.00         50.00             
                                   IBRD Cost of Qualified Borrowings               91.30         91.30             
                                   IBRD Cost of Qualified Borrowings               41.00         41.00             
                                   IBRD Cost of Qualified Borrowings               59.00         59.00             
                                   IBRD Cost of Qualified Borrowings              150.00        150.00             
                                   IBRD Cost of Qualified Borrowings              150.00        150.00             
                                   IBRD Cost of Qualified Borrowings              200.00        200.00             
                                   IBRD Cost of Qualified Borrowings              100.00        100.00             
                                   IBRD Cost of Qualified Borrowings               15.00         15.00             
                                   IBRD Cost of Qualified Borrowings               40.00         40.00             
                                   Interest Free                                    7.50          7.50             
                                   LIBOR 6 Mos. Deposits                           19.52         19.52             
                                   LIBOR 6 Mos. Deposits                            4.87          4.87             
                                   LIBOR 6 Mos. Deposits                           19.52         19.52             
                                   LIBOR 6 Mos. Deposits                            6.21          6.21             
                                   LIBOR 6 Mos. Deposits                            4.52          4.52             
                                   LIBOR 6 Mos. Deposit                            25.50         25.50             
                                   LIBOR 6 Mos. Deposit                            17.44         17.44             
                                   LIBOR 6 Mos. Deposit                            18.77         18.77             
                                   LIBOR Base Rate                                100.00        100.00             
                                   LIBOR Base Rate                                 57.00         57.00             
                                   LIBOR Base Rate                                150.00        150.00             
                                   LIBOR Base Rate                                 50.00         50.00             
                                   US Concessionary Interest Relending Rate         2.13          2.13             
                                   LIBOR Base Rate                                 60.00         60.00             
                                   LIBOR Base Rate                                 54.50         54.50             
                                   LIBOR Base Rate                                150.00        150.00             
                                   LIBOR Base Rate                                150.00        150.00             
                                   LIBOR Base Rate                                 23.30         23.30             
                                   LIBOR 6 Mos. Deposit                           160.00        160.00             
                                   LIBOR 6 Mos. Deposit                            25.00         25.00             
                                   LIBOR 6 Mos. Deposit                           160.00        160.00             
                                   LIBOR 6 Mos. Deposit                            25.00         25.00             
                                   US Floating Rate                               200.00        200.00             
                                   US Floating Rate                               200.00        200.00             
     B.   BONDS                                                                               1,820.13             
                                                                                             ---------             
          UNITED STATES                                                                                            
          DOLLARS                                                               1,410.00      1,410.00             
                                                                              ----------     ---------             
                                   Fixed Rate                                     150.00        150.00             
                                   Fixed Rate                                     100.00        100.00             
                                   Fixed Rate                                     200.00        200.00             
                                   Fixed Rate                                     160.00        160.00             
                                   Fixed Rate                                     300.00        300.00             
                                   Fixed Rate                                     500.00        500.00             
          JAPANESE YEN                                                         54,000.00        410.13             
                                                                              ----------     ---------             
                                   Fixed Rate                                  12,000.00         91.14             
                                   Fixed Rate                                  20,000.00        151.90             
                                   Fixed Rate                                  22,000.00        167.09             
          EURO                                                                    500.00        441.55             
                                                                              ----------     ---------             
                                   Fixed Rate                                     500.00        441.55             
II.  GFI GUARANTEE ASSUMED BY NATIONAL GOVERNMENT                                               392.05             
                                                                                             ---------             
          BELGIAN FRANCS                                                        1,005.34         22.01             
                                                                              ----------     ---------             
                                   BIBOR 6 Mos.                                   158.97          3.48             
                                   BIBOR 6 Mos.                                   722.14         15.81             
                                   BIBOR 6 Mos.                                   124.23          2.72             
          CANADIAN DOLLARS                                                          0.27          0.17             
                                                                              ----------     ---------             
                                   Interest Free                                                                   
          DEUTSCHE MARKS                                                            3.84          1.73             
                                                                              ----------     ---------             
                                   DM LIBOR                                         0.33          0.15             


                                                                                   OUTSTANDING BALANCE             
                                                                                 AS OF DECEMBER 31, 2001           
                                                                             --------------------------------      
                                                                                (IN ORIGINAL        (IN US         
CURRENCY                                          INTEREST RATE BASIS            CURRENCY)        DOLLARS)(2)      
--------                                          -------------------        ------------------   -----------      
                                                                                                                   
                                   IBRD Cost of Qualified Borrowings                  48.05            48.05       
                                   IBRD Cost of Qualified Borrowings                  46.51            46.51       
                                   IBRD Cost of Qualified Borrowings                 132.24           132.24       
                                   IBRD Cost of Qualified Borrowings                  34.73            34.73       
                                   IBRD Cost of Qualified Borrowings                  45.15            45.15       
                                   IBRD Cost of Qualified Borrowings                  44.15            44.15       
                                   IBRD Cost of Qualified Borrowings                  24.85            24.85       
                                   IBRD Cost of Qualified Borrowings                  31.35            31.35       
                                   IBRD Cost of Qualified Borrowings                 117.37           117.37       
                                   IBRD Cost of Qualified Borrowings                  97.31            97.31       
                                   IBRD Cost of Qualified Borrowings                 139.91           139.91       
                                   IBRD Cost of Qualified Borrowings                  26.63            26.63       
                                   IBRD Cost of Qualified Borrowings                   1.13             1.13       
                                   IBRD Cost of Qualified Borrowings                  25.07            25.07       
                                   Interest Free                                       2.74             2.74       
                                   LIBOR 6 Mos. Deposits                               3.90             3.90       
                                   LIBOR 6 Mos. Deposits                               0.65             0.65       
                                   LIBOR 6 Mos. Deposits                               2.93             2.93       
                                   LIBOR 6 Mos. Deposits                               1.24             1.24       
                                   LIBOR 6 Mos. Deposits                               0.70             0.70       
                                   LIBOR 6 Mos. Deposit                                7.65             7.65       
                                   LIBOR 6 Mos. Deposit                                4.11             4.11       
                                   LIBOR 6 Mos. Deposit                                4.14             4.14       
                                   LIBOR Base Rate                                    33.24            33.24       
                                   LIBOR Base Rate                                     5.56             5.56       
                                   LIBOR Base Rate                                    84.07            84.07       
                                   LIBOR Base Rate                                    43.37            43.37       
                                   US Concessionary Interest Relending Rate            0.04             0.04       
                                   LIBOR Base Rate                                    13.31            13.31       
                                   LIBOR Base Rate                                     3.18             3.18       
                                   LIBOR Base Rate                                    38.52            38.52       
                                   LIBOR Base Rate                                     0.00             0.00       
                                   LIBOR Base Rate                                     5.03             5.03       
                                   LIBOR 6 Mos. Deposit                               66.56            66.56       
                                   LIBOR 6 Mos. Deposit                                0.00             0.00       
                                   LIBOR 6 Mos. Deposit                                0.00             0.00       
                                   LIBOR 6 Mos. Deposit                               21.25            21.25       
                                   US Floating Rate                                  180.00           180.00       
                                   US Floating Rate                                  175.00           175.00       
     B.   BONDS                                                                                     2,261.68       
                                                                                                   ---------       
          UNITED STATES                                                                                            
          DOLLARS                                                                  1,410.00         1,410.00       
                                                                                 ----------        ---------       
                                   Fixed Rate                                        150.00           150.00       
                                   Fixed Rate                                        100.00           100.00       
                                   Fixed Rate                                        200.00           200.00       
                                   Fixed Rate                                        160.00           160.00       
                                   Fixed Rate                                        300.00           300.00       
                                   Fixed Rate                                        500.00           500.00       
          JAPANESE YEN                                                            54,000.00           410.13       
                                                                                 ----------        ---------       
                                   Fixed Rate                                     12,000.00            91.14       
                                   Fixed Rate                                     20,000.00           151.90       
                                   Fixed Rate                                     22,000.00           167.09       
          EURO                                                                       500.00           441.55       
                                                                                 ----------        ---------       
                                   Fixed Rate                                        500.00           441.55       
II.  GFI GUARANTEE ASSUMED BY NATIONAL GOVERNMENT                                                     320.72       
                                                                                                   ---------       
          BELGIAN FRANCS                                                             789.91            17.29       
                                                                                 ----------        ---------       
                                   BIBOR 6 Mos.                                      124.90             2.73       
                                   BIBOR 6 Mos.                                      567.40            12.42       
                                   BIBOR 6 Mos.                                       97.61             2.14       
          CANADIAN DOLLARS                                                             0.27             0.17       
                                                                                 ----------        ---------       
                                   Interest Free                                                                   
          DEUTSCHE MARKS                                                               2.43             1.10       
                                                                                 ----------        ---------       
                                   DM LIBOR                                            0.07             0.03       

 T-6

424B4
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GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED) 
(IN MILLIONS) 

                                                        [Enlarge/Download Table]


                                                               INTEREST RATE/                        
                                                                  SPREAD/                            
                                                               SERVICE CHARGE      YEAR      YEAR OF 
CURRENCY                                  INTEREST RATE BASIS   (PER ANNUM)     CONTRACTED   MATURITY
--------                                  -------------------  --------------   ----------   --------
                                                                                                     
                           DM LIBOR                                0.8125%         1986        2003  
                           DM LIBOR                                0.8125%         1986        2003  
                           Fixed Rate                              8.6000%         1992        2007  
          SPANISH PESETAS                                                                            
                           Fixed Rate                             11.0000%         1991        2007  
          FRENCH FRANCS                                                                              
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Taux Du Marche Obligataire              0.4000%         1991        2007  
                           Taux Du Marche Obligataire              0.4000%         1991        2007  
                           Taux Du Marche Obligataire              0.4000%         1989        2007  
                           Taux Du Marche Obligataire              0.4000%         1989        2007  
          POUNDS STERLING                                                                            
                                                                   0.0000%         1986        Upon  
                                                                                              Demand 
                           GBP LIBOR                               0.5000%         1991        2007  
          JAPANESE YEN                                                                               
                           Long Term Prime Rate                    0.1000%         1992        2007  
                           Long Term Prime Rate                    0.1000%         1992        2007  
                           Long Term Prime Rate                    0.1000%         1992        2007  
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Long Term Prime Rate                    0.1000%         1992        2007  
                           Long Term Prime Rate                    0.1000%         1992        2007  
                           Long Term Prime Rate                    0.1000%         1992        2007  
                           Long Term Prime Rate                    0.1000%         1992        2007  
                           Long Term Prime Rate                    0.1000%         1992        2007  
                           Long Term Prime Rate                    0.1000%         1992        2007  
                           Long Term Prime Rate                    0.1000%         1992        2000  
          SAUDI RIAL                                                                                 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
          UNITED STATES                                                                              
          DOLLARS                                                                                    
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1986        Upon  
                                                                                              Demand 
                           Interest Free                           0.0000%         1988        Upon  
                                                                                              Demand 
                           Fixed Rate                              3.4750%         1992        2007  
                           Fixed Rate                              3.4750%         1992        2007  
                           Fixed Rate                              3.4750%         1992        2007  
                           LIBOR 6 Mos.                            0.8125%         1986        2003  
                           LIBOR 6 Mos.                            0.8125%         1986        2003  
                           LIBOR 6 Mos.                            0.8125%         1991        2007  


                                                                    ORIGINAL AMOUNT                  
                                                                       CONTRACTED                    
                                                               --------------------------            
                                                               (IN ORIGINAL     (IN US               
CURRENCY                                  INTEREST RATE BASIS   CURRENCY)     DOLLARS)(2)            
--------                                  -------------------  ------------   -----------            
                                                                                                     
                           DM LIBOR                                   0.33          0.15             
                           DM LIBOR                                   0.33          0.15             
                           Fixed Rate                                 2.84          1.28             
          SPANISH PESETAS