The Manila police usually close their eyes to the brisk

business of prostitution, but lately the heat has been on them. Civic and church groups are agitating for a crusade against the city's brothels and night clubs, whose wide-open practices caused one Western porno magazine to label the Philippines the "Sodom of the Pacific." So the inevitable crackdown has been launched and news of the first arrest spread across front pages.

The man arrested is a Canadian, aged 70. He is a retired government employe, so low on funds that he could not post a 7,200 peso ($400) bail. He was held on three counts of inducing lascivious acts -- to wit, paying young girls small fees for allowing him to photograph them in erotic poses.

One could speculate endlessly on the reasons that brought an elderly retiree half way around the world to indulge his pathetic urges, but some explanations come easily to mind. First, sex is cheap here -- the man was paying 200 pesos (about $11) to each girl for an evening. Second, it's easy to arrange; a man of any age is offered his choice by energetic pimps on street corners and in cabs, hotels and bars. There's usually little official interference; the money is valued as foreign exchange by a nearly bankrupt government.

Cheap labor, eager entrepreneurs and little government regulation -- the classic reasons why foreigners come to the Third World -- explain why struggling Asian countries have become centers of an increasingly internationalized sex industry, sometimes organized by foreigners for foreign clientele. Mass-market sex, in fact, is as much a part of the development experience of Third World countries as sweatshops and overcrowded squatters camps.

In more affluent countries, of course, prostitution is also profitable. International call-girl rings operate in many cities. But in size and scope, they do not compare with the wholesale recruiting and peddling of girls that is common in such countries as Thailand and the Philippines.

Literally thousands of men emerge each year from 747s to haggle and buy. They come to the brothels, nightclubs and massage parlors of Thailand, the Philippines, Taiwan and South Korea, from Australia, Japan, Europe and the United States.

There is a pimp for every taste in Ermita, a seamy district in the center of Manila. These pimps are not simply amateurs hustling their sisters. They are organized to sell their prostitutes in assembly-line fashion. Yet Thai cabbies are still quick to unfold their samples -- slick, posed photographs enclosed in plastic in loose-leaf notebooks.

A French journalist once described a visit to Manila during which he was offered a certified young virgin who, he was promised, would be flown in specially for him from her home in the provinces.

Despite laws making prostitution illegal, government regulation is minimal. Poor nations are desperate for foreign exchange, no matter what the source. In one recent year, tourism was the Philippines' fourth-largest foreign-exchange earner. Research by feminist groups found that more than 80 percent of the tourists were men, few of whom came to see the museums.

As with other industries, the market is affected by currency-exchange rates, airline- travel costs and even the weather.

In its heyday a few years ago, the Japanese sex tour was the epitome of the trade. Jetliners packed with men took off daily from Osaka and Tokyo for countries to the south, flying on group fares often paid for by their companies as a reward for meeting assembly-line goals. An entire section of Japan's travel industry was organized around delivering Japanese to foreign countries where girls were conveniently lined up and numbered for easy selection in hotels devoted to the trade.

The sex-tour industry has tapered off under pressure from feminist groups protesting sexual imperialism and comparing the planeloads of pleasure-seekers to the Japanese armies of World War II.

Sister Myrna Tacardon of the Good Shepherd Convent in the Philippines' Quezon City often spends nights in the discos of Manila's Ermita and Mabini districts urging young prostitutes to quit. One recent crusade converted 75 young Filipinos from life in the dives.

Sister Myrna can introduce a 13-year-old fresh from the provinces who spends evenings with foreign men, or a 15-year-old who recruits her friends for a fixed fee. She tells of the three children, one a 10-year-old boy, who were kidnapped while playing jacks near their home in Samar and brought to the city to hustle. She describes how Filipino recruiters scour the poorer provinces for girls who are sold to the yakuza, Japanese gangsters.

Increasingly, however, Sister Myrna finds herself thinking not of the sinfulness of it all but of the economics. "This terrible depression," she says, when asked why the young girls keep joining the trade. "And, of course, the typhoons." When fierce typhoons swept through the central Philippine islands of Cebu, Bohol, Negros and Samar last November, thousands of farmers were ruined and it became necessary for each family to send a wage-earner to the big city. A daughter was often the most marketable.

Recruiters offer parents 200-400 pesos ($11 to $22) per child and promise to place them in respectable factory jobs in Manila. Many end up in the bars of Ermita and Mabini.

From the accounts of Sister Myrna and others who have investigated the sex business in Asia's Third World, the economics of prostitution become apparent. Thai girls in Bangkok's discos and massage parlors support whole families in the countryside. The imminent collapse of the Philippines' sugar industry will provide more rural girls for the Manila prostitution market. Wages are relatively attractive. Girls can make 500-1,000 pesos ($27-55) a night, compared with about 400 pesos ($22) a month as domestic servants.

The inexhaustible supply feeds an insatiable, though fluctuating, demand. There are fewer American servicemen now to enrich the sex markets of Bangkok, Olongapo at Subic Bay Naval Base in the Phillipines, and Peitou in Taiwan. But West Europeans, especially Germans, and Australians have picked up some of the slack in Bangkok and Manila.

The strong dollar and yen, and successive devaluations of the Philippine peso mandated by the International Monetary Fund, have made Manila especially attractive as a sex haven.

The entrepreneurial spirit among the experienced middlemen, who keep most of the profits, is strong.

A high proportion of the bars and discos providing prostitutes here are foreign- owned, although nominally established through Filipino dummy corporations. One church survey of 52 bars, discos and saunas found 92 per cent of them owned by foreigners, mostly Australians, Europeans and Japanese. Sister Myrna estimates that only two per cent of the sex dens are really owned by natives. Some, she said, even ban Filipino clients because they allegedly would lower the tone.

But patrons need not travel to the Philippines to indulge themselves. Thai and Philippine "entertainers" are increasingly in demand in Japanese cities and even rural areas. The yakuza, or gangsters, who are allied with Phillipine bugaws, or recruiters, are to control the trade in prostitutes. Girls are promised legitimate jobs as singers and dancers; once illegally in Japan they are forced into prostitution. A few get work permits as entertainers but many simply remain there on expired tourist visas until caught by police. A church-sponsored survey recently put the number at 30,000, although hundreds are deported by immigration officials every year.

But profitable trade has a way of flowing around such artificial barriers. Church and feminist groups contend that while Manila may be off the sex-tour list, Japanese entrepeneurs have opened up less conspicuous prostitution haunts in the central islands of Cebu and Bohol. Kisaeng parties (food, booze and sex) for foreigners in Seoul are on the decline, they report, but the new resorts on South Korea's remote Cheju Island are attracting many Japanese customers.

The Asian experience, however, does seem to suggest that internationalization of the sex industry has some natural limits. There are always, as John Kenneth Galbraith once wrote, "countervailing forces" in a free economy. Prostitution tends to decline as poor countries get richer, for the purest of economic reasons -- wages go up and prices get too expensive, reducing volume and also profits. In newly industrialized countries such as South Korea and Taiwan, which are becoming more prosperous, the sex trade is falling off. Given a choice, it seems, young women prefer to make computer chips or become housewives, thus raising the costs of prostitution.

But for countries on the lower rungs there is no such law of diminishing returns and their sex industries will continue to thrive. A Filipino newspaper columnist, surveying his country's economic debacle, admonished his compatriots in acid tones recently to face reality and continue serving the foreigner what he wants because his money is so deperately needed.

The sugar plantations are collapsing, causing the loss of 170,000 more Filipino jobs, and copra is not the great cash crop of yesteryear. Exports of copper concentrates and lumber declined radically last year. In bad times like these, morality and human dignity have to take a back seat to harsh economic realities.