New Year Report
of
His Excellency Fidel V. Ramos
President of the Philippines

[Held in Malacañang, Manila, January 4, 1995]

Sustaining our growth

AS WE BEGIN another year in our country, we stand on new ground of confidence in ourselves and hope about the future.

In these first few days of 1995, we can see what is within our capacity to attain—the achievement of even higher growth in the economy, the further empowerment of our people through jobs and livelihood, the spread of peace and prosperity throughout our land, and the vigorous growth of our commerce and rapport with the world.

Today, the Philippines is in better shape than before—economically, politically and socially—to achieve sustained growth and lasting progress. Now, more than ever, we can hold our head high as a nation holding its own in the most dynamic region of the world—the Asia-Pacific.

The biggest turnaround story of 1994

We are not alone in saying this. Foreign observers and institutions are saying the same. Asiaweek and the Far Eastern Economic Review, the two leading newsmagazines of the Asia-Pacific region, reported that 1994’s biggest turnaround story is—the Philippines.

Media leaders in other parts of the world have called attention to the unique quality of Philippine growth. Forbes Magazine of the United States has commented: “The economic reforms brought to much of Southeast Asia by authoritarian regimes have come to the Philippines via democracy.”

In assessing our future prospects, two prestigious international investment institutions have provided upbeat forecasts.

Salomon Brothers, in its final report for 1994, observed that in the Philippines “. . . political and economic factors are now united to produce sustainable growth in 1994 and onward.”

Merrill Lynch echoes the same assessment when it told its clients and affiliates: “It appears that the Philippine economy and its corporate sector are poised to continue their robust growth through 1995.”

These positive endorsements should not lull us into a sense of complacency or a foolish belief that, like Juan Tamad, we can now just wait for the fruit to fall into our mouths.

On the contrary, they should steel our resolve to work harder as a national team in order to win the future. Our achievements must inspire us to accomplish more—in 1995 and beyond.

Our reform programs

One word underlines every gain that we have made in the economy, in people empowerment and in national affairs in general, and that word is—reform. Reform undergirds the dynamism of our economy, our society and our Government today. Where we have faltered during the past year, it was in those areas where we failed to fully implement the needed reforms.

At the very start of my Presidency in June 1992, I said to one and all, “We must begin by telling ourselves the truth: Our nation is in trouble and there are no quick fixes for our basic ills. If we are to rise above our problems, we must make hard decisions and resort to swift and decisive reform.”

In this way, we made a commitment to put in place the reforms for national revival and sustainable growth. In those terms, we in the executive branch pledged to achieve our shared vision of “Philippines 2000″—to bring the country to the threshold of newly industrializing country status by 1998, and therefrom to leapfrog into the twenty-first century.

The details of our efforts at reform will not easily be forgotten, because they involved much sacrifice and fortitude. And we sailed against the authoritarian tide in Asia by striving to achieve development with democracy as our anchor and our guide.

Political stability we have forged by initiating an all-encompassing peace effort to conciliate with all disaffected groups and a nationwide drive to eliminate insurgency, to reduce crime and to keep the peace. Where factionalism and congressional-executive gridlock stymied progress in the past, we forged coalitions to enhance political cohesion. We brought communist, secessionist and military rebels to the negotiating table.

Dramatic changes

The economy we have opened up to competition to level the playing field of enterprise. We dismantled monopolies and cartels, starting with telecommunications.

In land, water and air transportation, we have put in place a comprehensive framework for liberalization. More than P5 billion in new investments has been made in shipping alone since we liberalized rates and routes. Dramatic changes should take place in Philippine skies beginning this year—as a result of our liberalization of both domestic and international civil aviation.

All these we have done within the limits of an outmoded public service law. Full deregulation will take place after Congress enacts a proposed Public Transport Services Act.

We removed restrictions on foreign-exchange transactions. We liberalized banking and our investment rules. We adopted a comprehensive build-operate-transfer plan, especially in the critical power sector. And last year, we adopted the flagship system to fast-track the implementation of strategic public investment projects within and between our growth centers nationwide.

In Government, we sought to make the bureaucracy the ally of development—and not its obstacle. And we asked politics to take a backseat to economic progress and social reform for a change.

All of these contributed to a record performance last year that presages our economic takeoff.

Economic gains

The estimated GNP growth of 5.5 percent in real terms surpassed our own target of 4.5 percent for 1994. For the first time in 20 years, the National Government achieved a budget surplus.

Inflation stood at single-digit level while our international reserves continued to build up.

In a paradoxical reversal, our problem this year with the exchange rate is not a declining peso, but an appreciating one. We have an oversupply of dollars because of expanded foreign investments, the attractiveness of Philippine blue-chip stocks, and increased remittances from our overseas workers.

In recognition of the country’s bright economic prospects, foreign investments have climbed up not only in volume but also in the variety of projects and destinations throughout the country.

Tourist arrivals in 1994 exceeded 1.5 million, representing a 20 percent growth.

Besides being the key force of economic expansion, the private sector generously supported our flagship projects. It provided 63 percent, or P139 billion, of their total cost of P220 billion.

We completed the construction of major road networks throughout the country, including the 100-kilometer General Santos-Glan, Sarangani highway; the Ilocos Norte-Cagayan highway from Laoag to Allacapan; the EDSA-Boni underpass; and usable portions of Circumferential Road 5. We reconstructed 24 major bridges, including those along the Philippine-Japan Friendship Highway.

Our regional growth centers are taking off, creating fresh opportunities for small and medium enterprises. In June 1992 these enterprises availed themselves of credit amounting to some P16 billion. By the end of 1994 small businesses accessed to more than P50 billion, or a 300 percent increase in the financing of entrepreneurs under our Magna Carta for small and medium enterprises.

The continued development of Subic and Clark alone into commercial, industrial, recreational and eco-tourism areas generated investments of P23.1 billion, providing employment to more than 50,000 of our countrymen.

Jobs and industrial peace

Improved economic performance and political stability impact on the whole society, by creating jobs, expanding livelihood and raising incomes.

Jobs are a major component of preserving social stability and distributing wealth. Both industry and services recovered so strongly in 1994 that, for the first time in many years, the economy generated more than 700,000 quality, productive full-time jobs in the formal sector.

The number of wage and salary workers alone grew by more than half a million in 1994. A survey of the top 400 manufacturers also shows the average worker compensation increased by 14.3 percent between October 1993 and October 1994. While the growth rate in farm work and agriculture-related jobs declined by 63 percent between 1993 and 1994, industrial jobs grew by 839 percent over the same period, which signals our advancing steps toward an industrializing economy.

The construction and housing sectors grew by 10 percent in 1994 and the expansion of infrastructure projects by both the public and private sectors in 1995 should generate many more new jobs—for both the skilled and the unskilled.

As a vital byproduct, we attained a record in “industrial peace” during 1994. For the first time since 1981, the number of strikes—93 in 1994—was below 100—and this is a record we achieved not under martial law, but as a functioning democracy.

Social reform: the center of our national agenda

Yet the benefits do not necessarily or immediately spread among our people in the same way. There are those in society who do not normally benefit from even a growing economy. To help the more vulnerable and disadvantaged among us, we have therefore placed social reform and democratization of wealth at the center of the national agenda.

On our social reform agenda, we will continue to provide a package of predictable, integrated and equitable reform measures to address basic inequities in our society. Our agenda intends to promote equity in terms of access to resources, just sharing of the benefits of growth, and effective people’s participation in decision-making.

To ensure the empowerment of ordinary Filipinos, we pursued our efforts to remove the root causes of dissidence and internal conflict by faithfully attending to the basic needs of our disadvantaged sectors.

These include increased access to quality education and technical training, the provision of decent and affordable housing, the promotion of employee and workers’ benefits, the pursuit of primary health and sanitation programs, and increased pensions for veterans and benefits for the elderly. The passage of the Shelter Financing Act provides additional funds to address our housing shortage more expeditiously.

Agrarian reform and productivity

To top all these, we have aggressively pursued agrarian reform. By the end of 1994, this Administration had distributed close to one million hectares of land to farmer-beneficiaries, which is already more than half the total distributed for the 20-year period from 1972 to 1992. Agricultural productivity increased from 3.5 percent in 1993 to 5.8 percent in 1994, with rice production growth at 29 percent in 1994, due mainly to our new key production area approach to agriculture and the improved productivity in 400 agrarian reform communities.

Overall, our policy is clear. In the economy, we strive for the greatest degree of enterprise and competition, so that the fittest will survive and prosper. In our society, however, it is the role of Government to look to the survival and care of the weakest.

To our poor, we have a social debt that is heavier than our external debt. This is a debt we cannot, and will not, default. But we can only pay it through the sustained growth of the economy.

Program of work for 1995

This is the central challenge of 1995—to prove that our performance in 1994 was not just plain luck, nor just the high point of a “boom-and-bust” cycle, nor just a case of a one-time “ningas cogon” result. This year we must prove that our gains are sustainable, that our policies are effective for the long term, and that the growth we achieve redounds to the welfare of all our people.

We began our recovery by reversing our inward-looking economy and turning it outward to the world in recognition of the implacable reality of global economic competition.

Globalism offers us vast opportunities for trade, investments, jobs and progress. Equally, it contains dangers for laggard economies.

On January 1, 1995, we became a founding member of the World Trade Organization, which will oversee the new trade regime negotiated and approved by the Uruguay Round (UR) of the General Agreement on Tariffs and Trade (GATT).

Without doubt, UR-GATT is a boon to both developed and developing economies. But the countries that adjust the quickest and trade effectively will benefit the most.

Our 1995 agenda, therefore, must encompass all these needs for adjustment, maintenance and capacity-building in the world economy. Where policies have already been approved, we must move swiftly to carry them out.

As your Chief Executive, this is my commitment to our people.

Where policies still require legislative approval, we must move quickly to enact them into law during the current session of Congress. Where judicial statesmanship is needed, we must move toward what is best for the common good under our rule of law.

Areas of our increased efforts

We will focus our efforts on the following areas:

To build upon our comparative advantage, which is the quality and numbers of our labor force, we will pursue total human resources development, availing ourselves of policy reforms in basic and higher education, in vocational-technical dual-training systems, in improved teacher education, and in scholarships on science, technology and mathematics.

To sustain our growth, we will speed up efforts to promote further efficiency in our agriculture and industry, and in the marketplace; stress the judicious use of our natural resources; continue to open our economy to global competition; and rationalize, as well as make more progressive, our tax system.

This year, we will aim for a GNP of 6.5 percent, with exports growing between 17 and 25 percent, and investments at 10 to 12 percent growth. We will keep the cost of living and of doing business in the Philippines low—with an inflation target of 6.5 percent and interest rates of around 11 percent. We will work for a fiscal surplus of P15.5 billion and a balance-of-payments surplus of $1.2 billion.

All the right policies are in place

We will exploit our strategic, central location at the heart of Asia-Pacific by improving our services, particularly in banking and finance; in ports and airports operations; in cargo handling and distribution; in transport and telecommunications; and in our high-tech capabilities and knowledge as a literate, English-speaking nation.

We are confident that we can attain even higher growth rates because nearly all of the policy reforms are now in place. And it is a fact borne out by world experience in recent years that when all the right policies are in place, the resulting growth is exponentially greater.

To address the structural adjustments that we need as we shift to a freer and more competitive global trade under GATT, we have allocated P32 billion for GATT-related projects. We have also allocated substantial funds for programs that would enhance training and capability. We will strive to support all sectors that will be affected by the transition. But let us not look on such assistance as safety nets; rather, let us regard it as positive support to enable all industries, enterprises and sectors to become more productive and competitive.

We have a few years to adjust to the new trade regime, but the sooner we banish the words protection, monopolies, cartels and subsidies from our vocabulary, the faster will we reap the benefits from the new free-trade regime of the world.

As the World Trade Organization opens shop, it helps us that we are already actively engaged in the community of nations, through our recent initiatives in the Asia-Pacific Economic Cooperation (APEC) and other international forums. In 1996 the Philippines will host the APEC leaders’ summit and all other major conferences related thereto, where leaders of the Asia-Pacific region will again meet to discuss critical issues on economic, social and human development. Our friends and neighbors will have the opportunity to see the new Philippines for themselves, so we must prepare now for this grand undertaking.

By the time that event comes to pass, I am confident that the country shall not only be registering 7 percent growth or upward; we shall have put in place more modern infrastructures and facilities.

The flagship system for infrastructure

To provide adequate infrastructure support to our industrialization, we will enhance the development of our regional growth centers through the flagship system, and use our highly successful build-operate-transfer arrangements to tap greater private-sector support for infrastructure projects.

We have scheduled to start this year the following projects, among others: light rail transit (LRT) 3 along EDSA, Metropolitan Waterworks and Sewerage System water supply optimization for Metro Manila, Bataan petrochemical industry, Misamis Oriental integrated steel mill, Davao International Airport expansion, General Santos City fishing port, Batangas City port, Leyte-Cebu geothermal power interconnections, the Northwest Luzon growth quadrangle, the Zamboanga City development area, the Panay Regional Agroindustrial Center, the Alabang-Manila skyway and the EDSA-Pasay Road and the EDSA-Shaw interchanges. I need not mention in detail the expansion of the East ASEAN Growth Area.

As we promote the already existing regional growth areas, we will create new ones so that all the 15 regions of the country can simultaneously become centers of economic activity and growth.

This year we will redouble our commitment to improve the transport system throughout the country. By land, by sea and by air, we must begin the modernization of transport, because it is the wheel of our development.

In Metro Manila we will push the LRT system to cover a wider area. In Luzon we will begin to modernize our railway system through the build-operate-transfer scheme. Throughout the archipelago, we will spur the establishment of expanded and more efficient sea transport, and thereby reaffirm our maritime beginnings.

And in the air, we will encourage and support the private sector to provide better and more efficient services within the country, and between our country and the world. For this purpose, I have, by executive order issued yesterday, promulgated a liberalized domestic and international civil aviation policy.

We will bring up our 19 poorest provinces to a more viable level of economic performance and social services delivery.

Dealing with the challenges of urbanization

To intensify social reform as our priority area of concern, we will step up the implementation of programs and projects for the delivery of basic services, widen the representation of basic sectors in various mechanisms of governance, and improve the provision of social services and utilities. We will directly address the challenges that come with rapid urbanization, such as better traffic management, improved sanitation and sewerage systems, and more rational urban planning. We are ready to show that we have the capacity to do all these with the forthcoming World Youth Day and the Pope’s visit this month.

For the mid-term, we have opened up a new growth area to relieve urbanization pressures within Metro Manila, which we call the MARILAQUE area (or Marikina-Rizal-Laguna-Quezon), the northern counterpart of the CALABARZON group of provinces.

To further push the bureaucracy to do more at less cost, we will pursue the further streamlining of Government operations and reduction of graft and corruption. We will follow up the early passage of the Metro Manila Development Authority bill, which I have already certified for immediate enactment by Congress. We will institutionalize the performance commitment system among Government workers to promote greater accountability and transparency.

Human resource development

We will continue our devolution program to further empower our Local Government units while demanding from them transparent and accurate accounting of the application of devolved internal revenue allotments, which now amount to 40 percent of National Government revenues. We will require the Government corporate sector to take a larger role in assuming the costs of development. To ensure the responsiveness of the bureaucracy, we will require, whenever necessary, round-the-clock operations for those Government agencies and their affiliates providing critical basic economic and social services.

In our catalogue of priorities for 1995, human resource development is second to none. Without doubt this constitutes our unique strategic advantage as a nation today—not just because we have the numbers, but especially because we have well-trained manpower and managerial talent.

But this advantage must be nurtured and further enhanced—by continually upgrading the skills of our workers. The new Technical Education and Skills Development Authority will organize our manpower development program to achieve this purpose. And we will continue to reform and upgrade our education system.

Knowledge today is a new factor in production, as important as labor, management and capital. While we should worry about the millions who enter our schools every year, we must ensure that we meet international requirements in both quality and responsiveness to the labor market.

In the development of our human resources, we should be thankful that we are blessed with a free and open society because it is in openness and freedom where knowledge thrives and expands. It is by exploration that people learn and widen their horizons. That is why the Filipino has counted always for a little more than his counterpart from other developing countries. With better training, education and enculturation, Filipinos will count for even more in years to come.

The role of our diplomacy

Let me say something about the role of our diplomacy in our successful economic performance this year. It is not by mere good fortune that foreign investors and foreign governments have moved to invest and establish strong economic ties with us. We went out and told them what we were doing—in countless forums, during courtesy calls of foreign dignitaries and trade missions at Malacañang and during my own official visits abroad. We have forged strong ties with old and new friends—especially the United States, our ASEAN neighbors, our European friends and our Asia-Pacific allies.

This year, diplomacy must once more play an important role. We must continue to open new doors, even as we take advantage of the fresh opportunities already opened. The growth of our exports—on which so much of our success depends—squarely rests as much on our ability to make friends as on our ability to produce.

In addition, several international meetings this year will enable us to project our national interests on regional and global concerns. These include the Copenhagen Summit on Social Development, the Beijing World Conference on Women, the fiftieth anniversary of the United Nations, and the APEC leaders’ meeting in Osaka, Japan.

The chance of a lifetime

By restoring purpose in Government, by working together and by striving for the welfare of our people first and foremost, we have made enough progress in two and a half years to wipe out our reputation as “the sick man of Asia.”

By applying ourselves now to the tasks of sustainable growth and modernization, we will not only remove that tag from everyone’s memory, but also install in its place the image of the Philippines as a young tiger or a young dragon— take your pick.

This is not rhetoric, but the consequence of our collective efforts and achievement.

Now, we have the chance of a lifetime to attain the progress that Rizal, Aguinaldo, Bonifacio and all other heroes envisioned a century ago for our people and our country.

Let us now seize this chance.

It will require a lot of hard work, harder than in 1994, of discipline, of commitment for all this to happen—but let us not be daunted. Let us sustain the thrust and momentum of national growth throughout the year.

In May we will hold local and national elections. Some say that these elections will be a referendum for the Ramos Administration. So be it! May the best candidates win.

Let our politicians and political parties contend for the favor of the national electorate. Let us, as political leaders, present our records before our people and ask them to render judgment. But once the elections are over and the verdict is known, let us regroup as one national team and one people—desiring and advancing the progress of our country and the well-being of every Filipino.