MAIN PAGE | EVENTS & PROGRAMS | 2002 | IGM | AVAILABLE SPEECHES | PRESIDENT ARROYO
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | EVENTS & PROGRAMS | 2002 | IGM | AVAILABLE SPEECHES | PRESIDENT ARROYO
Striving for Growth
in a Challenging Environment PBEC 35th International General Meeting
Kuala Lumpur, Malaysia May 3-7, 2002 Her Excellency Gloria Macapagal Arroyo Thank you very much, mr. Chairman. Minister Rafidah Aziz; Mr. Inaba, Chairman of PBEC; Mr. Oho; and Mr. Cho, Vice Chairman. And I would also like to greet all of the other participants both from the governments and from the business sector in this forum, this very important forum, ladies and gentlemen. I am very happy to be here once again in Malaysia. I was just here last year about August. It was my first state visit as president. I chose to make Malaysia the site of my first state visit because of the help that Prime Minister Mahathir and the government of Malaysia have been giving to the Philippines in its peace process in southern Philippines. And now, he invited me once again to keynote this affair. And though, I was here just a few months ago, after all the help that prime minister mahathir has done, has given so that we can have peace and development in southern Philippines it's very difficult to say no to him. So, here I am once again. It's a privilege of the president of the Philippines. I was here from my very first state visit anywhere last year in August because that was only a little over a year ago that I assume the presidency of the Philippines. I was resolved to turn my country around after a period of trip and neglect. When I became president, I declared that our challenge must be that within this decade we will win the fight against poverty. I also declared my intention to work hard so that we will tap into the opportunities of the world's new economy. Global interdependence has a seamless link to the battle to reduce poverty. And so, I will speak of fostering foreign direct investment in the Pacific basin. It is important to talk about this in terms of fighting poverty, in terms of fighting terrorism, in terms of promoting peace and order, in terms of fostering investment in that kind of environment. I was one of the first to call on the collective power of nations to strike at the root of the conditions that enable terrorism to spread its wings. And that is the despair of poverty, injustice and exclusion. And it is important that as we speak about fostering foreign direct investment in the Pacific basin, in this 21st century, in this setting of the battle against terrorism, it is important that we keep this in our minds. The idea of the interlink between the fight against poverty and the fight against terrorism, the idea of interdependence and the fight against poverty have taken root. For instance, the recent consensus at the U.N. financing for development conference in monterrey, mexico projected a deeper recognition that peace and development are mutually reinforcing. And that it is important to promote national and global economic systems that are based on the principles of justice, equity, democracy, participation, transparency, accountability and inclusion. The monterrey consensus also declares the international community support for an equitable trading system. It reaffirms the world's commitment to, and I qoute: ensuring that trade plays its full part in promoting economic growth, employment and development for all. Thus, it is fashionable in this age of fight against terrorism, in this age of linking the fight against terrorism with the fight against poverty, in this age of seeing the interdependent nature, the global nature of the fight against terrorism, it has become again politically correct to link foreign direct investment with the fight against terrorism and the fight against poverty. It has become politically correct to recognize that trade is not an end in itself but must be a means to social and human development. Properly employed trade policies enhance our access to a wider range of goods, services, technologies and knowledge. More trade stimulates entrepreneurship, creates jobs, attracts foreign direct investment around the Pacific basin, increases foreign earnings, and fosters vital learning processes. These are the tools for sustainable development and the alleviation of poverty. We must ensure that the global trading system can be equitable and genuinely contributory to development. On our part, the Philippines will maintain our openness to foreign direct investment and to foreign trade. We will maintain our economic ties with the rest of the world especially to the extent that it is consistent with our commitments and the welfare of our people. Thus, when we look at the world around us now. When we look at what is politically correct now to believe we'll find it tragic that developed countries still persist in maintaining protectionist barriers to trade. They persist in maintaining barriers to textiles and garments, barriers against agricultural and fisheries products, barriers even against steel products. The inability to reap benefits from trade on the part of the developing countries translates into a reduced capacity to sustain investments, to sustain imports of capital equipments and other inputs that are needed for development. And this in turn undermines our ability to mobilize support for trade policy reform. How can we reform our trade policies when our citizen see that the developed countries have not yet reformed their trade policies sufficiently to receive our goods more easily. All these erodes faith in the system and aggravates poverty. We should, therefore, put an end to tariff escalation and tariff peaks for the products of developing countries. Corollary efforts should be made to lessen the burden some requirements for developing countries to meet the stringent standards in developed country markets. Compliance in many cases has proven to be onerous and expensive. Let me give an example. While we have made many inroads now in getting our mangoes and bananas approved for entry in many developed countries. In some countries, they still have to undergo exhaustive data collection and certification requirements, and these requirements last for years. So, sad to say, while everybody is looking at reducing tariff barriers, sanitary requirements and technical standards seem to be now the weapon of choice of protectionists. There needs to be greater liberalization in these non-tariff barriers especially sanitary and partly sanitary standards. There should also be greater liberalization of the temporary entry of service providers in the general agreement on trade and services because here there is a large potential, commercially meaningful area for developing countries. And here, there is great support for liberalization especially in the i.c.t. sector. Also, if we want to foster an environment for a good investment climate, anti-dumping actions need to be lessened by raising the requirements for the initiation of such actions. Because when a developing country has to protect itself of anti-dumping charges, the actions are resource-intensive and they weigh down on small business in developing countries. We must also make special and differential treatment that famous snd in the wto. We must make it truly operational by providing more resources for capacity-building to enhance competitiveness and by further differentiation among developing countries. Right now, there are only two categories among developing countries -- you have the least developed and you have the developing. But among the developing countries, there are wide variations in circumstances. For example, there is a very big difference between a south korea and an indonesia. And therefore, special and differential treatment must also be applied through these variations within one of the two classifications of developing countries. Speaking of indonesia, speaking of Malaysia, the Philippines has faith in the viability of the asean free trade area. This makes asean a great place for foreign direct investments. Because we cannot generate foreign direct investments in adquate magnitudes unless we become a part of a larger integrated regional market. This is the only way we can compete, our markets and investments, with the giants elsewhere in the world. In 1992, the member-countries of asean launch the common effective preferential tariff for the asean free trade area. Under this scheme, the members of asean bound themselves into a schedule of tariff-cutting until their tariffs of intra-asean trade were no more than 5 percent. This year the afta process quietly reached a significant milestone. Relatively quietly because so many other headlines were competing for it all over the world. But it is no less of a great momentous event when the first signatories to the afta agreement -- meaning brunei, indonesia, Malaysia and the Philippines, singapore and thailand -- achieved tariff levels of zero to 5 percent on almost all goods traded among them. And this is something that those who consider investing in the Pacific basin especially in this part of the world should remember. And even as we have achieved this asean is resolve to go beyond tariff-cutting. We are working on the elimination of non-tariff barriers. We are harmonizing our product standards. We are developing mutual recognition arrangements. We are negotiating the liberalization of trade in financial services, telecommunications, construction, transport and tourism. We are binding the region by expanding our transportation and energy networks. We are easing the flow of goods, people and power. We are drafting an agreement to make it easier for tourists to come to asean and to travel within asean. All these integration of asean makes asean truly the investment area for this 21st century. But, we are not only talking about asean, we're looking beyond our immediate neighborhood to extend regional integration to our major trading partners -- the so-called asean + 3 -- of China, japan and south korea. In fact, to complement this regional effort, there is great activity among the individual asean members in examining the feasibility of entering into bilateral trading arrangements initially with japan. As for China, its entry into the wto will greatly enhance its already strong impact on the world economies. The nations of asean must all embark on a process of collective reflection on how to sustain the competitiveness of their exports and capitalize on the opportunities presented by a more open China. Chinaõ's entry into the wto is considered by everyone as both a threat and an opportunity. As a threat, it's quite obvious, China is a very attractive place for the foreign direct investment going to the Pacific basin, but the opportunities are also important because by entering wto China becomes a more open market. The chinese people who are in the hinterlands become more prosperous, and if you have 400 million newly-enriched chinese wanting to travel around the world, that is a great market for tourist investments in asean, which is a neighbor of China. And besides, there are fruits, tropical fruits-producing asean that are not produced in China but are greatly consumed by the chinese people. A framework for all of these may well be offered by the China-asean free trade agreement proposed by China. The Philippines on its part is fashioning a domestic environment to attract investments, facilitate trade, create an enlarge markets and generate economic activity. We set down a concrete national reform program founded on four main pillars: First, a competitive economy capable of building wealth for our people in a more interactive global setting; Second, a caring society where wealth is interlinked with social equity; Third, a robust agricultural sector matching the global benchmark of efficiency; And, fourth, modern institutions of public and private governance based of globally accepted standards of accountability and transparency and the effective enforcement of laws. I speak about competitiveness as our number one policy for fighting poverty. To enhance our competitiveness as an investment destination, we have addressed several factors crucial to the cost of production and doing business in the country. We are putting in place policies to develop our capital markets such as securitization and the operation of asset management companies, the new area for investment in post-asian crisis asean. To reduce the cost of power, transportation and communications, we are working with the private sector via our build-operate-and-transfer law. Thereõs room for investments in mass transport, in transmission and many other areas of infrastructure. We are also increasing productivity by strengthening labor management relations and eliminating corruption and red tape as well as expanding training programs to prepare our workforce for the demands of the new global economy. Mass housing, land distribution and human development services are essential to winning the battle against poverty. We have enacted -- or are in the process of enacting laws -- to meet these objectives. And in all these cases, whether infrastructure or social services, opportunities abound for the intrepid investor who wants to make a profit while helping us achieve our social dividends. And it is important that peace and order be secured -- we realize this. It is important so that we can devote our resources to productive undertakings. We are addressing law and order through a holistic approach consisting of political, economic and security components. As for the security component, I have launched an anti-crime program which includes among other things the allocation of more resources to the police forces. The close integration and coordination of intelligence activities and the raising of bounties for criminals. To help us in our fight against terrorism, the U.S. is providing assistance in the training of our forces and the sharing of intelligence and in the supply of some hardware. We have been rebuilding our national edifice as you can see stone by stone. And after more than a year, our efforts are starting to pay-off. Growth is respectable. In the sea of negative growth rates, last year, we grew at 3.7 percent gnp. Inflation is low -- the lowest in maybe 15 years. Unemployment has been reduced. We give jobs to 1.5 million people, in addition to the original ones with jobs this past year. The peso is stable. Yesterday, the peso reached the 50 pesos to the dollar mark. The dollar is now -- as of yesterday -- 49.78 pesos. I thank you for your applause, and I would like to add that usually, especially during the asian crisis, especially last year when we had the world slowdown and the 9-11, and economies are all seeking to stabilize their economies, well, the classical dilemma between interest rates and exchange rates crop up again as they always do when an economy is seeking to stabilize itself. Sometimes you have to make a choice. If you want to reduce interest rates you must be willing to let your exchange rate go. If you want to stabilize your exchange rate, you must do it by a draconian method of raising interest rates. But in the Philippines, we have stabilized our exchange rate and we have reduced our interest rates. And that is the best evidence of sound macro-economic fundamentals. How did we achieve this? Among other things, we put our fiscal house in order. And as a result of putting our fiscal house in order, our credit ratings are now improving. Nexi, JBIC, the World Bank, the IMF, the ADB, J.P. Morgan, Goldman Sachs, Fitch, Moody's, and Standard and Poor have all endorsed our economic fundamentals. And from the negative credit rating that I inherited last year, in less than a year -- because I became president January 20 and the last of these ratings came in middle of January -- we have moved from negative to stable in all these credit ratings. And all of these is being reflected in the market as the spreads that we have in the international capital market are growing narrower and narrower by the day. Last January, Bloomberg said that the Philippines has the most... It has the best performing stockmarket in the world -- the first time the Philippines got that accolade. Now, I am hearing that the Philippines is the best performing issue in the international bond market. And I thank you, the investors for that. And if our record can be used as a benchmark for the future, I am confident that we can build on the momentum we have established. I ask you, therefore, the leaders of the Pacific basin to join me in delivering on the promise of a new Philippines. I ask you to help bring my country to the threshold of the new economy in terms of human progress, in terms of human dignity. Thank you. |
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