Speech
of
His Excellency Fidel V. Ramos
President of the Philippines
At the Joint General Membership Luncheon of the Foreign Chambers of Commerce
[Released on February 24, 1994]
Our common stake
in development
AS INVESTORS and managers in this country, you hardly need to be told that the Philippines—having weathered a year of difficulty in 1993—is now facing its best prospects for growth in a decade. The way your own companies did last year, and your plans for this year and beyond, are your best barometer of the national condition.
But the point needs repeating—because if you were to judge from the headlines or from what some of our politicians are saying, you’d think this country is once again in crisis.
Talking up a crisis
Fortunately, a crisis—like its antithesis, stability—cannot be produced by talk alone. Politicians may talk all they want; but they cannot talk up a crisis—if the country is stable and sound. Similarly, we can insist all we like that the Philippines has become a magnet for investors. But if the facts are otherwise, then all our dramatics would count for nothing. Businessmen invest not in pie in the sky but in fundamentals.
Perhaps we Filipinos differ so much in assessing where we are today because most of us have our noses too close to the landscape. We can’t see the larger picture.
Certainly that’s what happened in the oil-price controversy. The issue has unhinged our public life—people have been seized by anxiety and panic while demagogues and agitators have had a field day. Lost in the frenzy was the basic case Government laid before the nation: the need to shore up public revenues to fund our development programs and to narrow the fiscal deficit. Government must either increase revenues or decrease its development spending. There is no middle way.
We all need to recognize that, with the progress we have made, we must now dare to do more. Otherwise we could find ourselves back where we started 20 months ago.
A country much changed
From your own vantage point, you yourselves can see how much this country has changed, say, over the last five years.
In 1989 you could only own 60 percent of business. Today you can own all of it, except for a few exceptions—and most of those we will soon be removing too.
Five years ago you couldn’t import machine tools, rolling mills, gear-cutting machines, cylinder liners, concrete mixers and pavers, casting machines and equipment, weaving and knitting machines and so on. Today you can import all of these machineries freely.
Today you can lease land for 75 years and take out insurance against political risk.
Up until 1989 there was a pervasive fear of coups—a fear that proved to be only too real in December of that year. At The Economist Second Round Table Conference, the session on security elicited very few questions. Security is not an issue anymore.
We can claim—believably—that our stabilization and restructuring programs have created the foundations of macro-economic stability. Investment houses like Salomon Brothers have said as much: The conditions for achieving sustainable growth in this country are now firmly in place.
I need not recite here the well-known economic indicators that show an economy poised for takeoff. It suffices for me to say here that:
- Inflation is down, while investments are up;
- Interest rates have sunk to their lowest in years, while the equity market rose to historic highs in 1993;
- Our debt ratio has declined, while export receipts have moved up;
- And the GNP grew by 2.5 percent in 1993, and should achieve 4.5 percent to 5 percent growth this year.
For your community, these numbers mean increased opportunities for doing business in this country. We already have some of the most liberal laws on foreign investment in Southeast Asia—and we have more to come.
Investment opportunities
My trips to the United States and to various Asian capitals last year were meant to acquaint our friends abroad with the business opportunities we now offer. My meetings with businessmen were invariably fruitful. But the message that the Philippines is back in business hasn’t been spread widely enough—particularly to Europe, Australia and New Zealand.
Trade Secretary Rizalino Navarro assures me this is all going to change. He says your chambers will help us in our “mini-ambassador” program to promote investor interest in the Philippines. For this gesture, I thank you. I cannot say often enough that foreign investments are votes of confidence in our future.
We know only too well that confidence-building is not just salesmanship. It’s a matter of credibility—that we really mean business when we speak of reform; that we’re prepared to do all thaf s necessary to return our country to the way of growth.
Our political twists and turns since 1986—punctuated as they were by calamities both natural and man-made—had generated skepticism even among our foreign friends. But I think we have now succeeded in addressing your concerns.
Let me review some of these concerns.
First, power. I came to office with a crisis on my hands, a crisis that required emergency measures and enormous resources. We launched not just a stop-gap solution but a comprehensive power development program. At the height of the power crisis, I promised an end to brownouts by December.
We delivered on that promise.
Even so, we’re not yet out of the woods. Reserve power is still precariously low. We still need large, baseload plants to provide reliable and low-cost power.
These plants are under way. By the middle of 1995 we will have more than enough power to serve fully the needs of our growing economy.
Second, traffic. As power was a year ago, so traffic is today a major concern of your community—and of everyone living in Metro Manila. It seems odd that I should be devoting time here to this issue. But we have a serious problem here, and every problem is a litmus test for Government.
The first thing we’re going to do is train traffic policemen in how to control traffic and maximize traffic flow.
Back to driving school
Second, we will require all drivers—especially jeepney and bus drivers—to go through driving school, where they should learn not only how to drive and obey the rules of the road, but to do it courteously.
I read how some students obtained a license for a blind man—that clearly is part of the problem. We’ll accredit driving schools which must adhere to a curriculum we shall prescribe.
Transportation Secretary Jesus Garcia is working out the details of this program. It should ease the situation while we undertake to modernize our arterial road networks. Public Works Secretary Gregorio Vigilar has an ambitious plan. It includes for Metro Manila four of our “flagship” projects:
1. The North and South Expressway skyways;
2. The C-5 Circumferential Road;
3. The Metro Manila-Clark-Subic expressway; and
4. The Marikina-Infanta Corridor.
Within the year we will open the first portion of C-5.
Third, the method of valuing imports. I am aware of your concern about the Home Consumption Value method of valuing imports. I will make no unrealistic promises—but we too are anxious to dismantle the HCV.
But, as you’ve seen vividly, we also have a revenue problem. This compels us to adopt a gradualist approach to the HCV issue. We shall shift initially from HCV to the Export Value method, before fully adopting the Brussels Definition of Value.
Reforming the bureaucracy
A familiar lament of your community is that our bureaucracy takes forever; but I think we’ve moved some way.
Duty drawbacks and tax credits—something you’ve complained to me about—can now be obtained in 60 days.
Investment promotional units have been established in 17 Government agencies to ensure new investments get priority.
The SEC has instituted an “express lane” where standard incorporation papers are processed in 24 hours.
The Bureau of Patents, Trademarks and Technology Transfer has liberalized the requirements for the transfer of foreign technology to the Philippines; automatic approval of up to 85 percent of royalty payments is now in place.
The Bureau of Customs has removed the 10-percent physical examination of imports. The Bureau of Immigration is simplifying visa requirements and procedures.
By next month, I believe, you should be able to import capital equipment for a nominal three-percent duty.
And, of course, the One-Stop Action Center in the Board of Investments now enables investors to get all investment information and documentation in one physical location.
We have also begun upgrading the International Airport as well as the domestic terminal, to remove the hassle and discomfort they cause our visitors.
Beyond these piecemeal reforms, we’re self-consciously working to rethink and to redesign the role Government has traditionally played in the economy and in public life.
Our agenda calls on Government to let markets work where they can, and to step in where they cannot.
We know the costs of excessive intervention—corruption and a timorous private sector. But we also know the perils of weak government—an oligarchic order that works against the public interest.
It is important for Government to get out of business— privatizing as speedily as possible the public enterprises that grew during the dictatorship. But we must take care to establish effective government, which alone can give shape to the development effort and ensure a level playing field.
The surest path to growth
In the experience of successfully industrializing nations, this combination—of a strong orientation toward the market and a more focused and efficient public sector role—is the surest path to faster growth in productivity, rising incomes and sustained economic development.
This year will be important in enhancing Government’s role in development and in further liberalizing the economy.
I have asked Congress for authority to reorganize the entire executive branch. Meanwhile, I have ordered all agencies to submit plans to streamline their organizations.
I have also asked Congress to further liberalize the economy and enable foreign investors to undertake more activities.
The areas we are looking at include the following:
First, liberalization of the entry of foreign banks. This has become a contentious issue, but I’m convinced our lawmakers will consider the benefits to our country and our people ahead of parochial and vested interests.
Second, passage of the proposed Mining Code, Geothermal Development Act, and Oil and Gas Development Bill.
In the same spirit we need the bill allowing multilateral financial institutions to buy Filipino shares in joint ventures— provided they later divest.
Third, passage of the Horizontal Condominium Law.
Fourth, review of the Foreign Investments Act to open the retail trade to non-nationals—but only at the larger levels. We will continue to protect our sari-sari stores (although I doubt any of you will be interested in investing at that level).
Fifth, an antitrust law; stronger antidumping regulations, and putting more teeth into the protection of intellectual property.
Sixth and last: my new Finance Secretary is drafting an Administration bill to restructure—massively—the tax system to make it more equitable, to expand its base and to emphasize direct taxes.
Some of these measures will no doubt move faster than others through the legislative mill. This is in the nature of the democratic process, which we ought not to exchange so readily for the sake of a little more speed in lawmaking.
Fostering our faith
To return to the point with which I began: we have built in this country an economic environment conducive to the energetic participation of foreign investors. And we continue to improve both the business climate and the capacity of Government to aid the process of development.
In closing, let me salute your business chambers and everyone of you. You have helped these past so many years to spread hope and a better life among us, by creating jobs and by fostering our faith in the development of this country.
I pray that in this crucial time when our economy is finally poised for takeoff, you will not only continue to do business with us but also grant us the benefit of your counsel and your good wishes.