TRANSCRIPT: Finance Sec. Cesar V. Purisima in the Cebu Roadshow, August 2012
Purisima: It is my distinct honor and pleasure to represent the president of the Philippines in this forum. We are blessed with a president who truly cares; a president who truly wants to transform the country; a president who has the political capital to tackle the difficult challenges we face; and a president who doesnt shy away from these challenges.
Our topic for today is game changers for Philippine competitiveness. Before I share with you my thoughts on this, Id like to first situate the Philippines in the global context. After all, we are not an isolated island; we are part of a global economic community. And as we speak, globalization is increasing. Its important that were aware of whats happening. From where I sit, I believe we are in a period of transition. Transition of economic power and wealth from the West to the East. This is now new. In the 1800s, the East produced the bulk of the worlds GDP. The pendulum swinged back to the West and it peaked sometime in the 60s. Now, were in the process of it going back again to the East and fortunately for us, we are part of the East. But because of globalization, the challenges the West is facing is of interest to us.
A writer who analyzed global depression described the depression of the 1930s and summed it up like this: Great Britain couldnt and the US wouldnt. Fast forward now, with the same challenges thats facing the globe: the West couldnt. The big question is whether the East and the emerging markets will pick it up — because the gap between the two is an abyss that we do not want to be in.
This thought is very important as I started earlier because it will affect models development which is also changing positions. Asia and other emerging markets based on an export-led model mostly on the US. But again, with the problems that they are facing, we need to start adapting our models so that it is to the benefit of everyone.
The other transition thats going on is a generational transition. In the US, theres a transition from the baby boomers to generation XYZ.
Theres also transition in other countries. You have declining populations. For example, in Japan and other developed countries.
Theres also transition in leaderships. Last year, we saw the Arab Spring and that process is still continuing. As we speak, China is going through a once in a decade transition. The US just went through its last election. All of this will affect how we will be in the next few years especially since US President Obama now will have to deal with the fiscal cliff.
So, when we look at the world around us, it is actually a very challenging environment. From where I sit in the cabinet, I look for a more calmer and favourable environment. Unfortunately for us, its been set. But at the same time, as they say, with challenges there are opportunities. We can only hope for certain things that the global powers will do.
And of the few thing we are hoping for is we have a coordinated policy action among countries. What do I mean by this? Those that are a surplus – fiscal, current account, trade surplus “ must stimulate their economies. Those that have deficits must restructure their economies. As I said, we are now part of an increasingly global world and in this process, we cannot reverse.
The second thing I hope for is for Europe to be able to buy time for political consensus and to restructure its economy. How? First they have to make sovereign debt good because if they cant, the markets will panic. And they will not have time to gain political consensus and to restructure their economy. Secondly, I hope that the American leadership start wearing their global hat in dealing with their own issues because they are not an isolated country; they are actually a pillar of the global economy. After all, the US currency is the global reserve currency. And therefore, their actions should not be viewed within their narrow political interest but considering the broader global interest. Third, Im hoping that countries will continue to open up their markets rather than protect their markets. That was something done during the Great Depression and its something we do not want to do.
So, there are many things going on. Im just trying to give you a favour and showing you how we in this country are operating in. So, amidst this environment, how are we trying to navigate this? What are the opportunities for us as a country? First, Im an optimist and I really believe that the Philippines is a blessed country despite the many, many years of mismanagement of previous administrations, despite having a press that likes looking at the negative or the glass thats half-empty rather than half-full. Despite all of that, things are looking up for us.
Just consider this: the past two years, weve went against the trend. First, the global economy is on the down trend, having a difficult time; but we actually went the other way around. We actually grew much faster than our trend growth in the past 10 years, of 4.7%. First six months of the year, we are at 6.1%. So, in a difficult environment, we outperformed our performance during the good time. That just shows you that if we deal with the constraints to growth, the potential of this country is quite substantial.
Just the past two years also, weve been able to reserve the losses from our credit rating standpoint in the last ten years. Bringing back the country to a credit rating status of where it was in 2001. Hopefully, from here we can bring it back up further.
So, truly we are a blessed country. So, what are these things that are going well for us? First, the Filipinos, the true asset of this country. When you look at the fact that we are a current account surplus country, a structural surplus at that, its because of the remittances in the OFW industry. And, tourism. And I see continuing strength in that area.
In 2012, were going to hit our demographic sweet spot. That means the bulk of our people will be in working age and were going to be in this sweet spot in the next 15-20 years. And countries who have gone through this have seen an acceleration over their economic growth rates. Secondly, in 2015, were going to be a part of an integrated Asean with over 600 million people and a region that will have a GDP in excess of US$2.2 trillion. We will be the second largest population but more importantly, I think, we will be the most mobile of those population. And when you look at the composition of Asean, we have the opportunity to unleash the power of our human resources in accelerating the growth of the environment.
Then, we can talk about natural endowments, mineralization and natural beauty. We rank among the top. So again, were very blessed.
We speak English. Were the only Hispanic country in Asia. In todays global environment, the challenge really is opening up new markets. And the trade between Asia and Latin America is one of those that has a lot of upside. And the relationship of Asia to Latin America is so much stronger than the relationship of Latin America to Asia. We can become the natural gateway for Latin America. Remember our time before the Galleon Trade. I can go on and on, theres so many things going for us. What do we need to do to realize this opportunity?
First, I think we need to be believers. We have to believe in the future of the Philippines. We have to believe in ourselves that we can be better. We have to believe that we can have a government that can be honest. We have to accept the cards that have been drawn to us by the past. We just have to look forward and celebrate small wins so we generate more momentum and reach a tipping point. When we reach the tipping point then we can become believers. I think thats very important.
Theres a concept in raising children called the Pygmalion concept. When you keep telling a child that hes good, the child ultimately becomes good. When you keep telling a child hes bad, then the child tends to be bad. I think, the same goes with the national psyche. We have a psyche thats been burnt for many, many years of mismanagement and underperformance. Its time we pat our backs for small wins. Its time we celebrate small advances and look at the glass half-full rather than half-empty.
But amongst that, there are other things the president wants to do. Obviously, hes bringing better governance to our country. Its not going to be a one event. Its going to be a journey but we are making big strides in our fight to governance. From there, we just have to take our cue. Its not just a responsibility of government. Its a PPP. When you complain about corruption, its PPP. We need to work together to have better governance. We need to deal with constraints to grow.
The fiscal constraint is one that President Aquino ordered us immediately to address on day one of his administration. We charted a path to lowering the deficit to 2 percent GDP, the markets believe us, interest rates are so low, the confidence of the market is there. I believe the fiscal part if well on the way to being resolved. Weve been able to create fiscal space, tax efficiency has improved close to 2% of GDP, interest costs has gone down from 20% of our budget to 16.6% of our budget. Just because of this, weve been able to create P300 billion of fiscal space. What has President Aquino done with that money?
Hes basically walking his talk. Hes investing in our main asset: our people. In terms of social services, from the time we took over, weve increased it by close to P200 billion. In terms of health services, weve increased it to 868%. In terms of education, the largest item, weve increased it from P255 billion to almost P300 billion. In terms of CCT, weve increased it from P20 billion to P80 billion. Less corruption, better efficiency, creating space, creating opportunity to invest in our people. And thats the only way we can realize our demographic dividend that will come our way so we have to make sure that those in the bottom are going to be productive and healthy participants in the future.
The other challenge is infrastructure. NAIA was recently named the worst airport in Asia or the world. The point is: it takes 5-10 years to build an airport. Im not giving you excuses. But we have been able to increase infrastructure investment by over 40% since the president took over, reduce corruption and the efficiency of using the money dramatically also and we can give you examples of how that was done.
Weve also launched a very ambitious PPP project last year. Hopefully, we could launch ten but we only launched one. So, we ate our words. But were still proud with the fact that we launched one because thats the quickest ever for an administration to launch a PPP. In fact, in the next administration, PPPs will not take 16 months. On the next month, they can launch one because the object of President Aquino is to build trust and confidence in the process again so that the contracts that are bidded out will stand scrutiny. Thats why, we have to do our homework. Our preferences, of course, are solicited. But we are not saying never to unsolicited. So, to do a solicited project properly you need to do feasibility studies. It takes a while to do feasibility studies. When we took over, there were feasibility studies but we realized we needed to update them. We needed to update the market component and review the concept. Therefore, it took time. As we speak, we are bidding out several projects. This year, were hoping eight. But whats important is now we have a pipeline of over 20 projects. And next year, you will see the projects bidded out more regularly.
The third constraint to growth is policies. We need to align our policies; we need to open up our markets. Opening the skies outside Metro Manila was a big task because many administrations before us have tried but failed. As we speak, were in the midst of a sin tax fight against vested interest and there are many other fights. The president impeached the Chief Justice of the Supreme Court to send a very clear signal that corruption will not be tolerated even in the independent branch of the judiciary. These are very difficult challenge but the president has not hesitated to use his political capital to deal with this challenges.
We need to make doing business in the country much easier. Even us, were frustrated because government to government.
In fact, Lee Kwan Yew said, when we were complaining to him four years ago when we met with him, he said, If you think your government is not doing well and is corrupt, the only way to change it is join it. So, for those of you who complain a lot, join government. Help us because we really need good people with good experience, good background and good skills to make this an even better government. And those of you who have made your money already, go join the government. I think in the front row, there are several who are very capable and financially able to join the government.
So, we need to do this and Bill Luz has been working really hard as a member of the National Competitiveness Council. Mr. President Joseph mentioned that we climbed down two notches although we really are stationary because there are two new names in the list but thats not an excuse so, thats not the place we want to be. In the World Economic Forum, were up ten notches for two consecutive years but still were at #65. But the thing is, we shouldnt hang ourselves simply because weve just jumped 20 notches the past two years, or weve been stationary. I think, we should tap ourselves n the back and say, Youve done well, but you need to do better. We have more challenges to tackle and thats the way we need to look at this.
Tourism in Cebu is easily going to be one of our big anchors in tourism. We need to fix that airport. I think there is a plan already to bid out that program. We need to fix the bus transit system that was mentioned earlier and was presented to ICC, except that we wanted to make sure the concept is the correct concept because they proposed a bus transit system with non-exclusive lanes to the buses. You know, we drivers when were behind the wheel, we suddenly behave differently. Cars and other vehicles will go into that lane and as you know, once there is a blockage just like when there is on a part of a person, the system can have a heart attack. Thats why we told the DOTC just a few days ago that, Why dont you revisit that concept because if it costs more money to make it exclusive, then so be it so we attain the objective of easing movement of people from one end of Cebu to the other end of Cebu.
The other thing we questioned was, there are four operators of buses. Again, from a logical standpoint: you have four operators, four mechanics, four inventory of spare parts “ of everything. So, is that the best way to do it? We asked them to revisit that. So, for those of you in a hurry, there are these details that need to be dealt with. Just like when you have your own projects “ when youre building your own house, sometimes you think it would look nice and after when you look at it, its not nice. You want it torn down and done in another way. But the important point is we are marching forward as a country.
The peace process cannot be underestimated. This again just shows you what kind of president we have. In August of last year, he went to Tokyo. In an unprecedented step, he said, I would like to meet with the leader of the MILF, and said, Look, if youre serious to about peace, you will strike a deal in the first half of my term because in the first half of my term, I can deliver what I promise. And true enough, they signed a Framework Agreement. Mindanao is something that will bring our growth to the next level. Its the second largest contiguous piece of land in a country thats very rich. Minerals are very fertile. Its seldom hit by typhoons. Its very close to the rest of Asean. Its right in the middle of the coral triangle. Imagine what it can do to our agriculture, to our tourism, to our mining and the rest of the other industries. That can easily add to 1-2 percent additional growth per year of the economy. In fact, when we grew 6.1% in the first half of the year, mining went down 10%. So, if were able to do mining properly, mining can be the 5th of 6th gear of this economy. I believe weve been able to increase the trend growth of our country from 4-5% to 5-6%, but where we want to go is 7-8%. What will bring us to 7-8% is Mindanao, tourism, agriculture, mining and really spurring consumption and production.
Exports is good but export markets are tough. Were drowning in dollars. We have so much dollars right now. In fact, the central bank has been telling us to borrow locally so thats what were doing right now. We have the dollars, we have the domestic liquidity, we have the low interest rate, we have the better government, were investing in the country, we have the people, we have the natural resources and were right in the middle of the economic region in the world. And were dealing with our challenges, were not shying away from it.
So, what are we sad about? We should be excited about the future. We should wake up and thank the Lord, Im glad Im Filipino at this time because this is our time and it will be only our time if all of us work together to make it our time.â€
Thank you and have a good day.