Speech
of
His Excellency Fidel V. Ramos
President of the Philippines
At the Credit Lyonnais Securities (Asia) Investors’ Forum Asia ’97
[Delivered at the Grand Hyatt Hotel, Hong Kong, May 22, 1997]
Partners in
the Asia-Pacific
WE MEET at a historic juncture: close to the end of one phase of Hong Kong life—and the beginning of another. Over this past century colonial Hong Kong has been a trading and financial powerhouse of Southeast Asia, China and the countries that the Chinese call “Nanyang,” or the “Southern Ocean.” Its formal restoration to China— as a “special administrative region”—could not have taken place at a more fortuitous time—because the People’s Republic itself has entered the economic and political mainstream of the Asia-Pacific region. And so we can all reasonably assume that this new beginning will lead Hong Kong to even greater achievements for its dynamic, enterprising and adaptable people.
Let me begin by thanking Credit Lyonnais Securities for setting aside this “Philippines Day” at its 1997 Investor’ Forum—so that we could tell you how our country—long known as the “sick man of Asia”—has been transformed into what Newsweek magazine calls “Asia’s new tiger.”
Today we Filipinos have much to celebrate—in the economy and in national life as a whole. Our gross national product grew—from 5.0 percent in 1995—to 6.8 percent in 1996. Our target for this year is at least 7.0 percent and we should be hitting 8 percent next year. Industry led last year’s growth; it expanded by 6.3 percent, followed by services with 6.0 percent. Agriculture also grew by a respectable 3.1 percent—compared with less than 1 percent in 1994 and 1995.
What is most encouraging to us is the economy’s steady expansion from nearly zero growth when the Ramos Administration began in 1992. We have added—year after year—to national productivity. Now we are reaching the high levels of growth which most of our vigorous neighbors have known for over a decade—and where we in our turn will strive to stay.
Our competence in economic management
Sustaining growth is achievable—because Government has proved its competence in fiscal and monetary management, and because our private sector has matched this competence with enterprise and dynamism. The key indicators speak for themselves.
For instance, our inflation rate averaged 8.4 percent last year. But by the first quarter of this year, it has declined to 4.7 percent—down from 11.6 percent over the same period last year. And the reduced inflation is well within the target range for the whole year of 1997 of 6 percent to 7 percent set by Government.
Interest rates, as measured by 91-day Treasury bills, averaged 12.4 percent in 1996—still within the target of 12.5 percent set for that year. Since the first quarter of this year Treasury-bill yields have been on a downtrend—with the benchmark 91-day rate falling to a 14-month low of 9.5 percent.
The exchange rate has remained stable—with fluctuations in the peso-dollar rate hovering within a band of 13 centavos, or 0.5 percent—making it one of the steadiest in the world.
Exports and investments growing steadily
At a time exports were declining in other countries, our exports continue to grow—by 18 percent in 1996. According to a World Trade Organization survey, the Philippines posted the second-fastest annual average export growth rate between 1990 and 1996—exceeding by 10 percentage points the world average of 7 percent. Over January and February this year, our total exports grew by 16.2 percent to reach US$3.5 billion. Our exports to the United States grew even faster—by 26 percent—to reach US$1.2 billion.
For 1996, incoming investments recorded by our four official investment-promotion agencies—the Board of Investments, the Philippine Economic Zone Authority, the Clark Development Corporation and the Subic Bay Metropolitan Authority—reached P490 billion, increasing by 20.2 percent over the investments generated in 1995. Clark Development Corporation—which manages the former U.S. air base on Luzon Island—recorded the highest investment growth at 176 percent.
Over January and February this year, total investments approved by the Board of Investments reached P48.3 billion in project costs—an 85 percent increase over last year’s level. Investments recorded by the Economic Zone Authority over the first four months of 1997 already surpassed the investments that came in over the whole of last year—P72.4 billion as against the P65.3 billion level for 1996.
Government itself posting a budget surplus
The Government itself is doing well financially. It has posted a budget surplus for three consecutive years now. In 1996 the surplus in revenues over expenditures was P63 billion.
- Our gross international reserves hit a record US$12 billion as of end-1996.
- Our balance of payments had a US$4.1 billion surplus in 1996—a significant improvement over the US$645 million surplus in 1995.
- Unemployment in 1996 fell to 8.6 percent—the lowest since 1991.
And we continue to close our infrastructure gap.
The building of overhead capital is going on at a pace the country has not seen in two decades. Through a “flagship” system, we have speeded up critical public infrastructure and investments and focused strategic projects within and between designated growth centers throughout the archipelago.
In fact, our build-operate-transfer policy on infrastructure development has become a model for other developing countries with huge infrastructure requirements but limited resources.
These facts and figures do not merely represent incremental changes. In an important way they show-perhaps for the very first time—that the Philippines is no longer trapped hopelessly in a cycle of boom and bust: the growth of its economy can be sustained.
The newest ‘tiger’ economy in East Asia
As a result of our continuing economic progress and social reforms, the latest world competitiveness report has moved the Philippines into the 31st overall position—up from number 35 last year. At this point, we are already ahead of Indonesia, and well within reach of Thailand, which is number 30. Malaysia is still ahead-but we are getting there.
Our successful hosting of the Fourth APEC Leaders’ Meeting in November 1996 has shown the world that, indeed, the Philippines is not only a profitable destination for investments—that issue has already been settled—but a competitive partner of the “tiger” economies in the world’s fastest-growing region.
In describing this region’s tremendous growth, people often speak of the “East Asian miracle.” But there has been neither mystery nor miracle in the Philippine economic performance.
Our achievements over these past five years are rooted in policies of pragmatism—which reversed the protectionist and inward-looking policies that had hobbled the economy; dismantled the monopolies and cartels that have stifled competition; and, by so doing, released the creativity and entrepreneurial energies of our business people.
The Ramos Administration has consistently focused the Philippine state on providing the policy framework within which private enterprise can flourish. That policy framework includes political stability and civil order, the rule of law, which assures fair competition and the security of business contracts, a sound macroeconomic policy that, among other things, guarantees a sound currency and stable prices; and public investment in both physical infrastructure and human capital which private industry cannot provide for itself.
Building a credible and capable state
As part of this effort, we have overcome and made honorable peace with rebels, insurgents and separatists. And we have come some distance in streamlining the administrative bureaucracy—in reforming the justice system—generally, in building a credible and capable state that can guarantee the integrity of Philippine democracy and its free-market system.
In May next year, we shall be holding our second presidential election under the 1987 Constitution which calls for a nationwide democratic and peaceful process. Thus I see 1997 and the balance of my term as an opportunity—and a challenge—to consolidate for the long term our policy environment and uplift the Philippines to a place of respect and competitiveness in the international community.
It is in this context—of a Hong Kong that should remain a world financial and trade hub—of a People’s Republic of China that adheres to market socialism while preserving its political system—and of a Philippines that has consolidated its political stability and economic gains that I propose an economic partnership that will expand the scope and scale of development and benefit all our peoples.
We are seeing in our time an epochal shift in international relations brought about by the end of the Cold War. This tidal change, which promises to set the pattern of global relationships for the foreseeable future results from the globalization of production and breakthroughs in science and technology particularly in information, communication and transportation.
The result is greater interdependence and expanded economic, political and cultural linkages among nations. The promise is that the security and stability nations once sought through arms buildup and military alliances we can now obtain through economic cooperation and interdependence that produces mutual benefit.
Vehicles for peace and stability
The Philippines actively promotes regional political associations, economic groupings and trading arrangements as vehicles for greater peace, stability, economic prosperity and deeper social and cultural understanding.
Thus, our country is a charter member of the Association of Southeast Asian Nations (ASEAN) and its Free-Trade Area (AFTA), as well as of the larger Asia-Pacific Economic Cooperation (APEC) grouping. On a smaller scale, we promoted the East ASEAN Growth Area, which incorporates the Southern Philippine island of Mindanao with Brunei and the adjacent territories of Indonesia and Malaysia—a virtually untapped market of 40 million people.
A unified investment area by 2010
Southeast Asia’s unification under ASEAN is now only a matter of time. And its dramatic growth should continue for decades more. The U.S. Department of Commerce, for instance, estimates that, by 2010, Southeast Asia will have a population of 686 million and a GDP of $1.1 trillion (almost two and a half times its GDP of 1995). At that point, U.S. exports to ASEAN will equal—or exceed—its exports to China or Japan.
ASEAN also seeks progressively to facilitate the flow of investments in both the manufacturing and nonmanufacturing sectors of its member-countries. AFTA’s common effective preferential tariff serves as the springboard for the new ASEAN industrial cooperation scheme to promote joint manufacturing ventures among ASEAN-based companies. Hong Kong-based enterprises are welcome partners in this scheme, since the minimum ASEAN national equity requirement is pegged at only 30 percent.
In investment, ASEAN is working toward a unified investment area by the year 2010—by which time a unified Southeast Asia would offer tremendous market opportunities and economies of scale for Hong Kong investors.
The international acceptance of ASEAN has been outstanding. For instance, its regional forum for political and security problems has attracted 14 outside powers. And APEC has adopted ASEAN’s negotiating methods of consultation and consensus.
The leaders’ summit last November adopted the Manila Action Plan for APEC (MAPA ’96) containing; concrete and practical pledges by the members to establish free and open trade in the Asia-Pacific—by 2010 for the developed APEC economies and 2020 for the developing countries.
Forming natural economic territories
While it is these large regional formations like ASEAN and APEC (and their counterparts in other continents) that have attracted attention, smaller groupings have also been forming-which are binding together our post-Cold War world.
In East Asia, over recent years, we have seen the increasing cohesion—across political borders—of natural economic territories. The American scholar Robert Scalapino—who first gave a name to this phenomenon-describes these natural economic territories—”NETs”—as having no permanent size; they expand or contract in reaction to opportunity and circumstance.
One good example is the Brunei, Indonesia, Malaysia, Philippines-East ASEAN Growth Area—BIMP-EAGA for short—which connects Brunei and major components of Malaysia and Indonesia with the Southern Philippines. This grouping—conceived and first promoted by the Ramos Administration in 1992—restores to life a natural trading zone that centered on the maritime power of the sultanate of Sulu in the 17th and 18th centuries.
The coastal provinces of Southeast China—Fujian and Guangdong—plus Hong Kong and Taiwan—make up a much greater natural economic territory. This “Southeast China/Greater China natural economic territory,” has been the main energy source for East Asia’s and Southeast Asia’s tremendous growth these past 20 years or so.
Indeed, it has become the model for other NETs such as the Johore-Singapore-Batam Island and the Mekong River Delta in Southeast Asia; the NETs clustered around Shanghai and Dalian in Northeast China; and the emerging Tumen River Delta NET on the border shared by China, Russia and North Korea.
The Philippines intends to involve itself increasingly in some of these NETs: and, clearly, this will mean our greater economic interaction with China, even as Hong Kong is restored to China. We are optimistic about Hong Kong’s economic future—and that of China as a whole.
We believe China will maintain its open, export-oriented policies—which have already done so much to lift up the life of the Chinese people. We support unequivocally China’s admission to the World Trade Organization—because we believe doing so will strengthen immensely the open and rules-based trading system and benefit all of the Asia-Pacific region.
Economic growth depends on regional stability
In our view, economic prospects in East and Southeast Asia have never been more promising. To be sure, there are problem areas—where autarkic policies still prevail or where political security remains fragile. What is important is that virtually every state in the region—irrespective of its political system—is striving toward development that rests on greater openness, liberalization and regional cooperation. In this drive for development lies East Asia’s promise in the 21st century now dawning upon us.
If we are to realize this promise of the future however, we must have civil order at home and stability in our region. And, in my view, this means among other things) keeping down the excesses of militant nationalism and radical communalism. Fortunately, we have seen improvements in the political security of many East Asian nations in recent years. It is also of great benefit that the old ideological barriers have come down to a great degree.
Resolving state disputes through dialogue
There remain complex issues involving sovereignties and boundaries. It is our position that these issues must be settled peacefully. In the case of competing claims to islets and reefs in the South China Sea, the 1992 Manila Declaration of ASEAN and the code of conduct agreed on among the claimants provide the framework for their peaceful resolution.
While we should acknowledge that numerous challenges lie ahead, I believe Asia-Pacific’s prospects to be more promising than ever before.
Recall the situation at the end of World War II, then the Asian peoples—many of them just emerging from colonialism—were virtual strangers to one another, despite their ties of blood, culture and trade. Poverty warlordism, ignorance and ill-health were widespread—breeding violence and political instability. The major states, moreover, were at loggerheads—divided by an ideological chasm.
Today we live in an entirely different and more congenial environment. As I have noted, the economic prospects for the overwhelming majority of East Asian and Southeast Asian countries are good, to be sure. National economic policies must be kept flexible—so that they can easily adapt to change as the situation warrants.
Meanwhile, the risks of a major war are at their lowest level. The powers, nevertheless, must deal with complex domestic problems on the one hand, and rising economic interdependence on the other—which make a resort to force more and more costly.
A sustainable quality of life
We have the institutions and mechanisms, in increasing measure, to deal with state disputes through dialogue. We also possess a growing body of treaties, covenants and agreements that set out the rules by which we all can live harmoniously.
The nation-state will remain the political organization for rule-making and rule-dispensing. But it is gradually accepting rules that govern interstate relations—at both the regional and global levels. In sum, we are extending the rule of law across borders and territories for the benefit of humankind.
Thus, we can bequeath to those who follow us a quality of life that is more enduring and sustainable. We have the opportunity to take part in the excitement of scientific and technological discovery—of learning more about other peoples on this earth we occupy and also about the planets around us.