Thank you Mr. Vergara. One of the important things that happened when President Aquino took office was, he was able to attract very good Filipinos to join the government and Mr. Vergara is one of them. He was an asset manager based in Hong Kong and had to give up a high paying job to help manage the government pension plan over the past 5 years.

Ms. Ana Sharp, thank you for inviting me in this conference.

Mr. Yasushi Akahoshi, President of JETRO; a big supporter of the Philippines.

Mr. Ryozo Himino.

Mr. Rintaro Tamaki. When I first took office, Mr. Tamaki was the Vice Minister of Finance.

I accepted to be here this morning for several reasons. One, Japan is very important to the Philippines. It is our only bilateral free-trade partner. It is one of two strategic partners of the Philippines, together with United States. It is our closest neighbor to the north, and it is a country where we have a lot of complementarities from demography, technology, natural resources, and I think Japan and the Philippines can work well together. I think we’ll end up with two very, much stronger countries.

The second reason I accepted the opportunity to speak here is the fact that infrastructure is very important to the long term sustainability of economic success of the Philippines, ASEAN and the whole of Asia Pacific. In the case of the Philippines, as mentioned by Mr. Vergara, the past 5 years from a growth standpoint has been quite good. It’s also been quite good in terms of how much resources we’ve put into infrastructure. We’ve increased it from 2% of GDP to now 5% of GDP. But when you go visit the Philippines, you will see that there is still a lot of need for infrastructure investment. Infrastructure is crucial for connecting a country to global supply chains, the tourist markets. But in the case of the Philippines, just like Japan, infrastructure is crucial for internal connectivity because we are an archipelago, just like Japan. Not only are we an archipelago, we are vulnerable to the effects of climate change and therefore, just like Japan, we need to continue to build better infrastructure that not only connects but also is able to protect us from the challenges of nature.

The third reason why I accepted this opportunity is the fact that to build infrastructure, you need to be able to recycle capital. In Asia, it’s estimated by the Asian Development Bank that over the next 8 to 10 years, we’ll need close to $8 trillion in infrastructure investment. In ASEAN alone, it will be over $2 trillion. And in the case of the Philippines, it’s $115 billion. These are large sums of money and the ability to recycle the savings pool around the region to support infrastructure is going to be crucial.
And that is why I am thankful to Mr. Vergara of the Government Service Insurance System because in partnership with Macquarie and several other partners, they put up the first Philippine focused infrastructure fund. The PINAI fund. I’m sure he will be talking more about the success so far of that fund but that just shows you that there are other ways other than the banking system to fund infrastructure.

The key to the success of the Philippines the past 5 years is really in unlocking the opportunities offered to us by the financial market by creating an environment of confidence. As a result of the good governance agenda of President Aquino, the financial markets has learned to take a second look at the country. The potential has always been there. There was a time when we were all much younger, when the Philippines was next to Japan only in terms of economic development in Asia. This was in the sixties. In fact in 1965, the total exports of the Philippines was more than that of Taiwan and Korea combined. But obviously, because of misadventures in terms of governance, we lost our way. Fortunately in 2010, President Aquino brought back that governance and it just showed that good governance is good economics. During the past 5 years, not only have we been able to start growing the country, but growing it at a much higher rate of over 6% which was pointed out earlier as the highest we’ve had in 40 years. We’ve also been able to shift the image from that of a sick man of Asia to one of the brighter spots in Asia. In fact, during that period, we were the most upgraded sovereign in the whole world upgraded with positive credit rating actions over 24 times, bringing us a notch higher than investment grade ratings.

This confidence has allowed us to get into a virtuous cycle where we were able to increase our fiscal space through our own ways. First, the confidence that you’ve given to the country has allowed us to borrow at lower rates. In fact, just the other day we did a liability management exercise that allowed us to borrow the lowest we’ve ever done – 3.7% for a 25 year downward denominated paper and we’ve also been able to extend our gratuities smoother than the maturities of the Philippine papers. This has reduced interest as a portion of our budget but at the same time, our people are more supportive of government and therefore our revenues have also improved. And then the push for better governance has cut corruption. And that has allowed us to measure (I mentioned earlier the increase in infrastructure investment), the investment in our people. Double the healthcare budget, triple the healthcare budget rate, increased by seven times the support we give to the poorest of the poor. And this is crucial if we want to realize the demographic dividend. The Philippines as you know, unlike our friends from Japan, is the youngest country in Asia with an average median age of 23.

The other thing that’s important is our corporates now borrow at a lower rate and therefore has become more optimistic in terms of future plans and increased in investments. And then of course our people now have access to cheaper funding and more confident of their own futures, therefore has allowed them to become more aggressive in buying things such as cars and condominiums. In fact, last year, we sold – for the first time in history, over 300,000 new vehicles making the Philippines one of the fastest growing car markets in the region. Our market sales grew over 20% for the third straight year.

And again, these developments also point to the necessity of increasing investments in infrastructure. You land in Manila and when you go through the roads, there’s a very clear need of implementing the dream plan that JICA has developed for us which is really aimed at the congestive Metro Manila and at increasing the use of miles transit aimed at opening new metropolitan hubs across the country.

But all of this will require financing. That is why maintaining the fiscal health of the country over the next many years is crucial. We need to get deeper into the investment grade. A status to make sure that the cost of funding becomes lower and lower not just for government but all sectors of the Philippine economy.

We’ve been blessed by the Central Bank that has done a wonderful job also, making our banking sector well managed, attaining price stability. Our inflation is well within our policy goals of between 2-4%. Our external sector has never been stronger – we’ve had 13 straight years of current account surplus. Growth as I’ve mentioned has been strong. We’ve had 68 straight quarters of growth since the end of the Asian crisis.

Therefore, the ability to develop the capital markets in the Philippines, as well as in ASEAN and the region is going to be crucial if we want to recycle Philippine funds within the Philippines or ASEAN funds within ASEAN or Asia funds within Asia. As it is now, a lot of our funds go to the bank – to the money centers in the West. And then we depend upon their young asset allocator to determine if we deserve our money back.

There was a mention earlier of the pool of savings that we have in Japan. If you look at China, they have close to 20 trillion of savings. If you look at ASEAN, we have also a huge pool of savings. The ability to recycle that is very crucial. That’s why within ASEAN, we’ve been working closely at developing the ASEAN bond market to integrate our equity markets to harmonize our standards and rules so we can create an ASEAN class of securities that again should help all of us.

On the infrastructure side, the ASEAN countries have put up the ASEAN Infrastructure Fund together with the support of the Asian Development Bank. It’s still quite small at $400-something million but I think this is a good first step to create a vehicle that will ultimately help the central banks of the region recycle its reserves towards infrastructure by creating a vehicle that qualifies as an investing for the central banks of the region.

The other thing we’re developing in the country is the insurance sector. The insurance sector was a bit underdeveloped in terms of penetration in the Philippines. In fact, the resources of the insurance sector just reached a trillion Pesos for the first time during the Aquino administration. It’s about 1/8th the size of the banking sector. But it’s growing rapidly about 30% per year.

It is the insurance sector money that ultimately, I think, matches very well with infrastructure projects because of the length of the funding infrastructure requires as well as the length of the money that the infrastructure sector has.

So the discussions today are very important. That’s why I eagerly accepted Ana’s offer and I do hope that in your discussions, you will keep in mind the opportunities that we have in the Philippines, especially from our friends from Japan.

I mentioned earlier that the demographic complementarity between the Philippines and Japan. The Philippines is also compatible from a geographic standpoint being – again, you’re the closest north to us, obviously we’re the closest south to Japan. So we can be your Mexico. Hopefully we won’t have a Trump that will create a sea border between us but NAFTA actually allowed Mexico to develop economically faster.

For example, in the automotive industry, they started with the maquiladora industry and now they produce most of the vehicles in that region. In fact, that sector is the backdoor to the US market and with JAEPA and JPEPA , our economic free-trade agreement, I hope that we can really tap it to take advantage of our geographic compatibility.

The other important thing is even though commodity is in a down cycle right now, we know that commodities are finite and that it will go back up. We’ve seen so many of those down cycles in the past but it is followed by an up cycle. The Philippines is one of the most mineralized countries in the world and therefore it offers opportunities for Japan. In fact, together with Indonesia, we account for the top of the world’s resources of nickel and chromite, and other minerals.

And then starting this year, we’re part of a more integrated ASEAN. Again, you should look at the Philippines as a potential gateway of Japan to ASEAN, being the northernmost part of ASEAN closest to Japan. But more importantly, if you look at ASEAN, although they’re 700 million – population of ASEAN, the more developed parts of ASEAN – Thailand, Malaysia, and Singapore, are at full employment, and Vietnam also has actually quite high employment. But when you look at opportunities for extra human resources, the Philippines together with Indonesia is the one that offers opportunities.

So I hope that in your discussions this morning, we can talk about how your industry can parlay some of your resources to infrastructure investments in ASEAN and in the whole of the region and how we can work together to make that a reality.

Again, Ana, thank you for hosting this conference. I like conferences like this where it’s not big in terms of people but it’s very big in terms of resources. Therefore you get quality audience with high potential, therefore I’d be glad to engage with you in discussion.

Thank you and good morning.