Speech
of
His Excellency Fidel V. Ramos
President of the Philippines
At the fifteenth annual general meeting of the Asian-Pacific Bankers’ Club

[Delivered at Shangri-La Hotel, Makati, January 26, 1995]

A shared vision of
Asian development

I AM DELIGHTED to welcome you all to Manila.

Business opportunities are rising in the Philippines, as they are rising in many countries of the Asia-Pacific. We are proud to say we have put our economy back on track—with not a little help from friends like you.

The structural reforms we have made are paying off—entrepreneurs are responding very well to the new opportunities these reforms are opening up. And we in Government are determined to sustain the momentum of change and growth.

Liberalization and deregulation

Of interest to this forum are liberalization and deregulation policies we have carried out in several key areas.

We have liberalized and deregulated the foreign-exchange market, alongside our new foreign investment law.

We have dismantled the monopolies and cartels that had curtailed the efficiency and productivity of our industry.

We have begun opening up our economy to the new world trading order.

And we are set to implement the recent liberalization of banking—which allows the entry of 10 foreign banks for the first time in 46 years.

The restoration of purpose in Government and of consensus in national society have brought the Philippines to the attention of global investors. Our capital market has benefited from their increasing trust and confidence. In 1993 Philippine portfolios returned 152 percent on investment—the third-highest return in developing-country markets. Because of the corporate strength of companies listed in our equities market, we are confident our market will match the growth of the larger markets in the Asia-Pacific. Our optimism is based on both our efforts to sustain what we have gained and the globalization—and free flow—of capital.

Globalization is the call of the times

Globalization carries both opportunities and challenges for developing countries—particularly for us in this region, which is the fastest-growing in the world. That we must seize the opportunities opening up is plain. Much too long have we Filipinos remained spectators at the Asia-Pacific’s banquet of growth and development.

But, just as important, we recognize the need to make adjustments in financial policy—to soften the sometimes disorienting impact that the free flow of capital has on still-vulnerable economies like ours.

For instance, the surge of foreign portfolio and direct investments into this country has appreciated the peso. In these last few months, the peso’s appreciation has begun to hurt Philippine exporters. Since the export sector must be our primary growth sector—if our open economy is to survive international competition—we should cushion it as far as we can from the shocks arising from currency fluctuations.

The answer to problems like this is not to retreat from globalization—but to adjust to it. And this is what we are doing in this country.

Let me assure you—here and now—that our policy agenda is firm. The Philippines is open for business—and we will do business not only here at home: we will also venture out to compete internationally.

In cooperation with our neighbors and partners in ASEAN, we are looking initially beyond our traditional markets and identifying areas where our collective efforts can enhance our mutual benefit.

Regional initiatives

We believe regional cooperation can lead to expanded markets, greater trade, more efficient production and competitive pricing of products and services. Several joint ventures between Filipino and ASEAN entrepreneurs in various sectors have been agreed on; others are on the drawing board.

The most significant of these joint ventures are in the strategic areas of banking and finance, property development, tourism, infrastructure development, exports production and telecommunications.

The Common Effective Preferential Tariff program which the ASEAN states have agreed on will lead to an ASEAN Free-Trade Area (AFTA) early in the new century. Tariffs on most manufactured and processed agricultural goods in the ASEAN region will be reduced either to zero or to 5 percent by the time AFTA is fully implemented in 2003.

This ASEAN Free-Trade Area will mean a market of about 330 million and diversified sources of price-competitive raw materials. We may also expect by then the greater mobility of skilled and managerial workers among the ASEAN countries—as a result of compensation differentials and shifts in demand for specific skills and work experiences.

A perceptible expansion of vision

On a larger scale, the new World Trade Organization will be creating the same kind of market access. Beginning this year, its 102 member-states have a maximum of ten years within which to lower their tariff structures to levels agreed on during the Uruguay Round of negotiations.

In short, I see a perceptible expansion of vision by statesmen and entrepreneurs in much of today’s world—a raising of sights from the national level to the regional and the global. I see rising a shared vision of growth and development—bringing developed and developing countries together—North and South, East and West—to the same banquet table.

Liberalizing our economy

We in the Philippines are determined to sit at that table. And we will do all that is necessary to take part in these new global arrangements—and maximize the opportunities opening up for our economy.

Thus you may expect the further opening of our Philippine economy to global competition.

I must say we have received an enthusiastic response to our financial reforms. Governor Gabriel C. Singson of our Central Bank has received applications to open here from among the world’s biggest banks.

Right now, we have 33 commercial banks in the country—four of which are foreign.

Among the Filipino banks, the Philippine National Bank is still 57 percent Government-owned. I mention this not only to note that your club president, Arsenio Bartolome, is also president of the PNB, but to underscore our resolve to continue its privatization. I would be happy to see PNB become a private bank soonest.

Privatization has been an effective vehicle of our efforts at deregulation. Last year, in our biggest privatization issue, we sold one billion shares of Petron—our biggest oil company. The initial public offering fetched Government P10.4 billion—and spread ownership of this country’s largest oil refining and distribution company among 459,000 small investors.

Through deregulation, liberalization and privatization, we are laying the foundations of a more productive, more efficient and more equitable economy. But we are not about to sit back and congratulate ourselves on what we have merely begun. We must keep up the vigor of change, ensure our economy remains on track, and move it toward self-sustaining growth.

We have paid too much for the gains we have made, for us to fall into the trap in which Mexico, for one, has fallen. We will pursue growth with aggressive prudence—strengthening those sectors of the economy that are vulnerable to shocks arising from abrupt changes in capital flows through the world economy.

International confidence

There is an aspect of the Mexican crisis I must remark on—and this is that it seems driven not merely by the erosion of international confidence but by sheer investor panic. Between the acknowledged shortcomings of Mexican managers and the response of international portfolio investors, there is a clear disproportion. And there is an even greater disproportion in the way the crisis is extending to developing economies that do not even remotely resemble Mexican conditions.

What the Mexican crisis implies for economies like ours is that the foreign investments genuinely good for us are those that stay with us over the long term—not those revolving-door investments in easy profits. We need investors who would be partners with us—investors who share our vision of the future and who are willing to grow with us.

As Adam Smith said long ago, investment is the activity that makes our societies productive. By investment are factories built—multiplying by factors of tens, hundreds and thousands the material goods that human minds and hands can fashion in an hour of work.

And it is bankers like you who have the commanding view of this saving-and-investment process that creates wealth for people to enjoy. Give us, then, your wholeheartiest support in this time of opportunity for the developing countries of Asia. Share our vision. Join our team. Grow with us.