Speech
of
His Excellency Fidel V. Ramos
President of the Philippines
At the Joint Foreign Chamber’s Luncheon Meeting for the “1995 European Business Week”

[Delivered at the Manila Peninsula Hotel, Makati, May 22, 1995]

Beneficial partners

I COMMEND the European Chamber of Commerce of the Philippines for organizing this European Business Week to highlight the growing beneficial partnership between Europe and the Philippines.

During my visits to Europe in September 1994 and March 1995, I sensed the growing interest and confidence of European businessmen in the Philippines. We together made a lot of progress during those visits in forging alliances with European business organizations. Building our partnership must continue.

Two salutary developments

European Business Week constitutes an important part of this process. I entertain hopes that two salutary developments will result from this program:

First, it will help speed up the process of building strategic alliances between European and Philippine companies.

And second, it will encourage European companies to develop production bases in the Philippines in order to better supply the rest of Asia.

During my two visits to Europe, we outlined and presented the business opportunities for European industry in our country. We signed a substantial number of contracts and memoranda of agreements between European and Philippine companies. These letters of intent, we trust, will soon be transformed into business.

We perfectly understand that investors weigh risks and rewards.

But European business must also understand that the Philippines offers business opportunities to Filipino and foreign businessmen in general. So investors from Europe should not take too long to decide; others may move faster.

I say to you—go! go! go! go for it!—the best is yet to come.

The European Union, with its 15 member states, 370 million citizens, and $5.8-trillion gross national product, is the largest single economic unit in the world. It is also the largest single importer in the world and is the Philippines’ second-largest export market.

Since the mid-1980s the Philippines has also benefited from a modest but consistent trade surplus with the European Union. While good progress in trade flows has been made with the Union in recent years, the level of Philippine trade flows with Europe is still well below that enjoyed by other countries in ASEAN.

Emerging market

I also recognize the efforts undertaken by the European Commission to develop the European Union strategy toward Asia, including the Philippines. This strategy will help persuade European companies to focus on Asia-Pacific.

I am glad to see the other foreign chambers, the American Chamber, the Australia-New Zealand Chamber, the Canadian Chamber and the Japanese Chamber participating in this event also.

When I last addressed the foreign chambers about a year ago, there was some concern about the Philippines as an emerging market. So I reminded you then that emerging markets are not all alike.

Look beyond your fears. The way your own companies performed last year and your plans for 1995 and beyond are themselves a barometer of an enhanced Philippine condition.

Not only has calm been restored, there has been a surge of positive news about the Philippines.

At the same time, we are coming out of our national and local by-elections, in which we have proven both the continued stability of our democracy and the support of the large majority of our people for the Ramos Administration.

This makes certain that we have the mandate to press on with our reform and development programs.

Infrastructure for development

The National Economic and Development Authority reported last week that we have met our growth targets during the first quarter of the year. We will ensure that we meet the growth targets for the rest of 1995.

Sustained growth, of course, will only be possible if we continue to invest in infrastructure. To meet this challenge, we are inviting the private sector—both local and foreign—to participate in infrastructure development. Our amended Build-Operate-Transfer Law is one of the most attractive laws of its kind in the world.

To complement the Philippine Infrastructure Privatization Program, the World Bank, the Development Bank of the Philippines and the Coordinating Council for the Philippine Assistance Program are working closely together to establish a Private Sector Infrastructure Development Fund.

The Fund is a lending program, led and managed by the private sector, that seeks to provide long-term, fixed-rate loans for viable private infrastructure projects on a competitive basis. It is, I am told, the first such facility in the world.

This development-oriented facility seeks to raise both foreign-and peso-denominated capital from domestic and offshore investors. Eligible borrowers are those proposing build-operate-transfer projects. This term financing facility will have the capacity to provide from US$500 million to US$1 billion in project financing.

Our immediate objective in infrastructure development is to provide the following:

1. Adequate water supply for household and industrial uses.

2. Power supply in line with growing requirements, to include natural gas as feedstock.

3. Smoother traffic flow. The situation in Metro Manila will definitely improve after the opening of the phase 2 of Circumferential Road 5, which will be completed within 12 months; the completion of the light rail transit systems, to include LRT 2, 3, 4 and 5; the construction of the rail and highway link between Manila and Batangas City, which is being developed as an international seaport.

4. Alternative investment sites beyond Subic, Cebu, Clark and CALABARZON, over which there has been established a Philippine Economic Zone Authority.

5. Improved roads, ports and airports.

6. Adequate telecommunications facilities.

Investor concerns

The response of the private sector—Filipino and foreign—has been very encouraging. Foreign businessmen appear to be eager to invest long-term funds in infrastructure development; this indeed is a strong vote of confidence in the future of the Philippines.

This show of confidence does not make us complacent in responding to your concerns. To the contrary, it impels us to act faster.

We are concerned about the substantial trade deficit. In the past we had been able to finance the deficit through inflows from our overseas contract workers, and from investments (portfolio and direct investments). While these remain substantial, it is crucial that by making use of the Philippines as a production center, the big domestic market-oriented companies develop a greater volume of exports for our world market.

There are still many countries with which the Philippines has a large trade deficit. Let us put our talents together to reduce these trade imbalances for the benefit of the Philippines and its trading partners.

Another area of concern is tax reform. A high-level inter-agency group, led by the Department of Finance, submitted in August 1994 to the leaders of the House and the Senate a proposed tax reform package for the consideration of Congress.

There will be a continuing dialogue among us to enable Congress, the Presidency and the private sector to put the best possible solutions in place, to include the problem of home consumption value. The shift from the home consumption value to the Brussels definition of value as an interm measure—and to the GATT valuation code or transaction value—is high on our agenda.

Other economic bills that we expect to be discussed (and passed) during the final session of the Ninth Congress are the bill further amending the Foreign Investment Act of 1991 and the bill allowing the horizontal application of the Condominium Law in industrial estates.

Further improvements in the new Antidumping Law and the protection of intellectual property rights are being considered.

The next three years

On July 1 this year, I shall be entering the second half of my Presidency. Let me give you an idea of what you can expect in the next three years.

With the expected support of both houses of Congress, I am convinced that a number of reforms which were kept on hold will now have a much better chance to succeed.

We will finish the flagship infrastructure projects and we will lay the groundwork for other infrastructure requirements that will allow the Philippine economy to grow much faster in the years to come.

We will continue with our policy of monetary stability on the basis of free-market forces.

We will pursue the deregulation of industries. The oil industry is part of this endeavor; the deregulation of the banking industry is well under way.

We have deregulated the telecommunication and transport industries. We are now studying the deregulation of the retail industry and are addressing the problem of the duty-free shops.

We will also address the labor issues—industrial peace, human resource development and protection, and cost-competitiveness.

In the next three years, a top objective is to achieve high employment. Accordingly, I have ordered a comprehensive employment strategy to be formulated, which will be discussed in our next Cabinet meeting. It goes without saying that foreign investments will form a crucial part of this strategy.

Stability, continuity and predictability

If there is one condition to describe what you can expect from the Philippines in the next three years, that condition is stability, continuity and predictability. And we shall pursue our social reform agenda, a large part of which is already in place.

We will provide predictable monetary and fiscal policies—on inflation, interest rates, exchange rates, responsible debt management and tax reform.

Success will not depend on us alone. We also need people and organizations like you to tell our story to the world—and bring more investors and buyers to our country.

We want to develop relations with Europe similar to the ties we have within the Asia-Pacific Economic Cooperation. I have manifested total support for an Asia-Europe summit planned for early 1996, where European and Asian heads of state and government will be able to define the ways to achieve closer economic cooperation between Asia and Europe on the basis of mutual benefit and sovereign partnership.

That should raise Philippine-European relations to a much higher level. I say to you—stay with us—the best is yet to come!