August 11, 2011
Good morning, everyone. Governor Tetangco, friends, ladies and gentlemen. Thank you for inviting me to be here.
Governor Tetangco is a national treasure. He has handled monetary system, the macroeconomic environment with solid hands in the past seven years. I think we should give him a round of applause.
After praising him, Iâ€™d like to say I do not agree with 3 points the previous three speakers said.
First, Mr. Montinola said itâ€™s a potentially volatile environment. I believe it is a volatile environment. Secondly, Governor Tetangco said it is exciting times. I believe it is an exciting time. And third, he said, this is a timely conference. I believe it is the wrong time.
Because it is a volatile market, the market is open, I do not know what you are doing here. Who is in your office? If I were your CEO, Iâ€™d be worried. Itâ€™s too late to study. The war is out there and you should be there monitoring the market every second.
After telling you it is an ill timed conference, let me welcome you to this conference and tell you that the topics actually are quite interesting. Unless the fundamental issues are dealt with, I think weâ€™re going to face volatility for the year term. And these fundamental issues are the deficit issue, the political debate and direction of the US. The second, the debt issue in Europe. Third is really the policy imbalances as well as the currency imbalances, particularly China that I think should be addressed.
There was a politician that ran many years back, I couldnâ€™t recall who he was. But I remember he said the economy is stupid. Iâ€™d like to say if the fundamental is stupid, you reverse it; itâ€™s the stupid fundamentals weâ€™re facing right now. But I think thatâ€™s what we have to really keep in mind as corporate treasurers and traders: that the numbers must reflect reality. The real economy, in effect, is actually what matters. All these numbers we must go down and really see what really is the underlying fundamental.
In fact, since SGV is the co-host of this conference, I think itâ€™s high time that we revisit the accounting model. I believe that the information weâ€™re getting is as important to our decision making as any other thing that we use to make judgment. And if that model can no longer cope up with the realities of todayâ€™s market, then thee decisions based on that model***. Therefore I think itâ€™s time to revisit the model.
The other thing we need to revisit in light of these challenges is the global regulatory environment, After the war, they had the Bretton Woodâ€™s agreement. As a result of the Bretton Woodâ€™s agreement, they created the institutions meant to create global financial stability. But since that agreement, many things, many instruments and developments. The markets are open, the globe is more flat.
I believe that these institutions and their powers can be put to good use in particular, the IMF since I see Dennis Botman here. I believe we need to review what the IMFs mandate is and empower it so it can have teeth in addressing the challenges it faces across the global financial market. We need to make sure that they will have the power to be able to regulate amongst countries.
In fact, weâ€™re seeing it right now in Europe itself where they have a monetary union and yet they donâ€™t have fiscal unity. Therefore, this imbalance is creating the problem that theyâ€™re facing right now.
The other is, of course, the review on what the role of the US currency should be. It is our global reserve currency right now. But clearly, if they donâ€™t deal with their fundamental issues and realize that their political squabbles have global implications, then we may want to really look at alternative global reserve currencies.
So I think the situation right now, yes itâ€™s volatile. But I think we should reflect as to what really should be done so we could avoid the pitfalls that has resulted to the situation right now. All these topics are very relevant. Ultimately, I think we should not lose sight of the fundamentals.
In the Philippines, when President Aquino took over, he immediately focused on the fundamentals. First, fiscal sustainability. We believe we need to achieve fiscal sustainability within the medium term, at the same time create fiscal space so we can continue to invest in infrastructure and social services. I think in the past 12 months weâ€™ve gone a long way. In fact, the credit rating agencies have recognized that effort. We will continue to focus on the fundamentals, continue to focus in making sure we are fiscally responsible in navigating the country through this difficult situation. Macroeconomic stability is in very good hands with Governor Tetangco.
The other areas are also as crucial. Making the Philippines easier to do business in especially for foreign capital. We need foreign capital to invest in our infrastructure and other key services. We also need to make sure that we create a predictable regulatory environment thatâ€™s aligned to our markets thatâ€™s open, that will not give undue advantage or disadvantage to foreign or local players.
The Aquino administration is focused on the fundamentals. Weâ€™re basically bi-standard in this situation because weâ€™re a small country so the best thing that we can do is focus on the fundamentals, In 1998, the Philippines has gone through the global financial crisis and Iâ€™d like to say that we are even in a stronger position now. So I think we just need to focus on the things that Â we need to do and that is improve competitiveness, continue to invest in our people so they become productive and not lose sight of the fundamentals.
On that note, Iâ€™d like to thank the organizers for inviting me in this conference and I wish you to have an interesting afternoon ahead in the conference. Thank you.