TRANSCRIPT: Secretary Cesar V. Purisima, AL JAZEERA Interview, October 18, 2012
On Philippines being the brightest in Asia
Purisima: I think its a product of good governance; better governance than before. As a result, our economic growth rate has grown beyond our trend growth of 4.7% the past 10 years. For the first half of the year, our growth was 6.1% and this we did with a global economy thats not really doing well. Thats just shows you that with better governance, the Philippines can really achieve much more. Better governance has resulted in better revenues and better expenditures; as a result, our deficit is much lower and with better fiscal management, weve gotten more confidence from the financial markets allowing us to borrow in even lower costs, reducing interest in percentage of our budget. Again, creating more fiscal space for more productive expenditures. So what really hasnt happened in the Philippines is getting deeper into the virtuous cycle and our hope is that we can sustain this over a long period of time so we can really make a difference in peoples lives reduce poverty.
The other area were working on is infrastructure. As you know, infrastructure is crucial if youre going to be a part of a global supply chain; businesses are going to be competitive- thats why the President has made this a priority both as part of the budget and also as part of an ambitious private-public partnership program.
Third is aligning policies and making sure the country is open for business, open for tourism. For example, in his first year, the President opened up the skies outside Metro Manila because tourism is a key initiative of the President. Without access of airlines, tourists will have a difficult time coming in the country. He opened the skies, agreed to build more airports and modernize them because access is going to be very important.
Four, were working on making doing business in the Philippines much easier. Weve gone up 20 notches since the president took over in the World Economic Forum competitiveness rankings. Were only one of two countries that has done 10 notch jumps over the past two years.
On the countrys progress trickling down to the masses
Purisima: I think whats important is the rate of change and the direction of change- not the absolutes. Obviously, we have poverty and thats why were dealing with it in many ways. In terms of challenges for the country, were addressing it. On poverty, the President has more than tripled the Conditional Cash Transfer program, a stipend given to the poorest of the poor so they keep their children to school and bring them to health centers. This is important because were about to hit our demographic sweet spot, which means the bulk of our population within two years will be in working age. If we are to realize the demographic dividend, its important that we invest in our people in terms of educations and in terms of health care so that they live healthy and productive lives.
The other challenges, of course for the country, is making sure we continue to sustain investments in infrastructure. We are a large population; Manila is a big city. Were one of the largest metropolis in the world. We need to have more mass transits, more roads, better sewage systems, better power and water infrastructure. All of these are crucial for a modern economy. It offers a lot of opportunity for businesses especially in infrastructure.
I mentioned tourism earlier as a major opportunity. We are at the heart of the coral triangle which is probably the most beautiful area for diving. Around the world, we have about 60% of the worlds coral varieties. Our neighbouring countries are doing so well in tourism. In our case, weve lagged behind. But since the President took over, weve increased tourism arrivals by almost 50% and our target this year is to reach 4.6 million tourists and by 2016, 10 million tourists. I believe this will really make the Philippines a much stronger economy. Were very strong because of remittances from our OFWs, which amounted to over US$20 billion last year. Our BPO industry, were now second to India, in some cases in the call/voice area we are #1. Thats growing over 20% per year. Their target is to make it a US$25 billion industry by 2016 and employing over 1.3 million employees. Right now, its about a US$12 billion industry, with 700,000 people.
In addition to these three, there are other areas that offer potential in the country. We are the 5th most mineralized country in the world. In fact, for the first half of the year, we grew 6.1%, but mining actually went down. So, just imagine if were able to fix the regulatory environment in mining which were trying to do now. Mining can really be an extra give for the country.
The other extra give for the country and really has caused a lot of excitement is the Peace Framework Agreement with the MILF in the south of the Philippines. We believe that with peace, we will be able to unleash the true potential of Mindanao.
For our friends not very familiar with the Philippines, Mindanao is the southernmost island in the Philippines. Its the part of the Philippines that is seldom hit by typhoon, thats very fertile and very rich in mineral resource. More importantly, its very close to the rest of Asean. We hope that with peace, we can fast track infrastructure developments so we can accelerate agricultural investment, accelerate tourism, development of its mineral resources and connect Mindanao to the rest of Asean, as well as to the rest of the Middle East. As you know, the bulk of our Islamic population is in this island. We can see Mindanao to become part of the Halal food chain, for example. That is a very large potential market.
Obviously, the Philippines, outside of the benefits Ive mentioned earlier, is lucky to be right in the center of the most dynamic economic region in the world in the next 30-50 years which is in Asia. So were really excited about the future of the Philippines.
On dependence of PH to overseas remittances
Purisima: Its really not unstable. Weve proven that its very resilient even during the global economic crisis, it continues to grow. Last year, we grew over 7%. This year its programmed to grow 5%. Its already over 10% of our GDP. Outside of remittances, weve been able to develop other very strong sectors: BPO, tourism, were #4 in the world in terms of shipbuilding. Our electronics industry is quite vibrant. We are also very strong in some agricultural sub-sectors. The key is to really invest in the country so we can really encourage more investments in manufacturing and other areas of opportunities so in the future, going abroad wont be a necessity but a choice. Thats the dream of President Aquino.
On an expanding young population opting to stay in PH than going overseas
Purisima: Definitely. Our average age is 22- were the youngest population in Asia. In 2015, were going to be part of an integrated Asean so that would be a region with over two trillion in GDP over 600 million people. Were going to be one economic community. Moving to Asean wont be considered as moving abroad because that will become part of our backyard. Weve seen the benefits of integration. Our electronics industry over 20 years ago was seen in decline because the cluster wasnt complete. Its 1 of 11 industries that weve already integrated ahead of 2015 and as a result, its become not a Philippine electronics industry but an Asean electronics industry connected to Singapore, Penang and the rest of the electronics industry in the region. So moving products from Manila to Penang or Singapore or Bangkok is as easy as moving one product from one US state to another US state – and thats because of Super Green Lanes, harmonized forms, same standards. And I think that will happen to other industries as well as we integrate as part of Asean.
In an integrated Asean, well be the second largest in population behind Indonesia, but well probably be the most mobile because we speak better English and as proven by our OFWs, they integrate easily with other cultures outside our country. I think with the opportunities, our strengthened population will become an asset and will open up lots of opportunities for our people. But more importantly, with the integration if Asean, the Philippines can position itself as the northern gateway to Asean. It can even be the Pacific gateway to Asean and thats why we need to make sure we continue to invest in infrastructure so that the Philippines can be connected seamlessly with Asean through ports and airports; through telecommunications and making sure that our standards are harmonized so that moving products from one country to another would be as easy as it is in the US.
On passage of AMLA
Purisima: Weve passed two of the three bills that I think will deal with that. Were working with the senate right now to pass the last bill that will allow us to address these concerns. Making sure that we pass this is very important. As you know, remittances is an important component of our economy and if were blacklisted, it will become more expensive for our people to remit their money and it will take more people and more time.
On CCT and other programs that aim poverty alleviation
Purisima: The heart of the Presidents program is the Daang Matuwid program, which is really the straight path. In the economic team, good governance is the basis for good economics. Weve done it over the past two years. Weve reaped dividends from it in terms of lower borrowing costs, higher collections, better expenditures, more fiscal space that allows us to continue investing in our people. For example in education expenditure which is the biggest component of our budget, since President Aquino took over, weve increased it to 30%. In health care, weve increased it 50% over the past two years. In terms of infrastructure, we increased it substantially, as well. The CCT alone has been more than tripled covering 3 million families now, or close to 4.6 million families. As we speak, weve proposed to Congress the Sin Tax law that increases taxes on cigarettes and liquor so we can use that to fund the Universal Health Care program to make sure the bottom quintile of the country gets access to health care and were able to upgrade our hospitals as well.
On CCT as a dole-out
Purisima: I think its an investment for the future of the Philippines. Even if there are job opportunities, if our people are not healthy, if they do not have the right skills then it will be hard for them to participate in our economy. Thats why it has to be an intervention that is multi-pronged; an intervention in terms of investment to people, in terms of infrastructure, in terms of doing making business in the country easier, in terms of making the economic environment stable and the macroeconomic situation stable. So, this is a holistic approach of the President under an over-arching umbrella of good governance.
On Peace dividends
Purisima: Very big. Mindanao is the second largest contiguous land mass in the Philippines. The Cotabato plains alone can probably provide for all the rice that the Philippines will need provided we have the right investments in irrigation and other facilities. Its very fertile. It produces a lot of pineapples, bananas, livestock, etc. With peace, we can open up new areas for agriculture and development. It has the potential to become a major tourist destination. It has the potential for mineral resource development. It can be a logistics area also, being connected with the rest of the region. We can now actually, probably give EAGA a chance to become a reality, which is a road area involving north Indonesia, north Malaysia, Brunei, and southern Philippines. They make sense because theyre very close to each other. Doing business across borders will make that a reality. Its these borders which will be the thread that will put Asean together.
I think things that matter will take a little longer but its important that we do it properly, we work on the fundamentals so we make sure we execute properly so it is lasting. I think that given its a hard-won peace, we have to work hard to make sure it works. Thats why in January of next year we will have a Philippine Development Forum in Davao. We will invite all our development partners, multilateral organizations, bilateral partners and friends to join us in talking about how we can jumpstart development in Mindanao; how we can put together a peace dividend package; how we can start new businesses and new industries in Mindanao quickly so the former rebels will realize that they can be productive; they dont have to be soldiers to make a living but to become workers. And weve proven that.
In Datu Paglas*, which is part of ARMM. The former mayor there was quite a visionary. He decided to enter pineapple business and had a joint venture to supply pineapple to Middle East. With the job opportunities in his town, the former rebels who lived there decided to be farm workers. His town became a very peaceful area. If we are able to replicate that with the rest of Mindanao, then we can go a long way. We want to make sure that this peace is sustainable; this peace will help people in the future in improving their lives and realizing their dreams.
When you look at the various measures of progress in the Philippines, its in the ARMM region where we have the lowest performance, highest mortality rates, highest drug trades. Clearly, we need to make sure that we invest not only in the economic infrastructure but also in the social infrastructure so we can prove to everyone that peace is better than war.
On the South China Sea
Purisima: The South China Sea borders many of our neighbours in the region. It is also going to be at the center of economic growth. As Ive mentioned, in the next 30-50 years, it will be a major channel from navigation. It is important that the South China Sea is really Asean prosperity, and not a sea of conflict. As countries begin to realize that the relationship are multi-dimensional that they have trade, investment, people to people, security, cultural and other types of relationships- it is important that they realize that the sum of those relationships are more often than not, more than the sum of their differences. So if you have differences in one area and if you agree to disagree but work together to resolve it to make sure it doesnt affect the whole relationship, then you continue to move forward. In our case, exports to China continue to be strong. Tourist arrivals, although we were hoping could be much more, is still at levels last year. Were still working to make sure that these numbers can grow.
On effects of conflict with China and possible shared exploration with China in the SCS
Purisima: Well, we grew 6% first half of 2012. If there was ever an effect, it would be higher growth. 6.1% is not a bad rate. But again, with continued flattening of the world, trade is going to be an important component for everyone and we hope that our relationships in the region will be peaceful and one that is guided by cooperation and respect. In terms of resources, there are various international rules governing the law of the sea and I think so long as we respect the international laws and its in accordance with our Constitution then we can continue to exploit whatever wealth is in the Philippines or in the seas near the Philippines.
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