January 30, 2012
The Manila Peninsula Hotel

To the new president and the board, congratulations. I’d like to recognize our friends, my predecessors from the Department of Finance – Secretary del Rosario, Secretary de Ocampo, to whom I look up for guidance, and other former cabinet members.

First, let me thank the MAP for their support for the ADB meeting. All donations from the private sector for the ADB meeting will be coursed through the MAP and they will also account for those donations so we’d like to thank you. We’d like to thank SM; they’re one of the Diamond Sponsors, committing P20 million for this very important undertaking.

We live in a very difficult time. Last year, not just the Philippines but the whole world faced a lot of black swans, events that were never expected: the events in Japan, the earthquake, as well as the nuclear problems affected global supply chains; the Arab Spring affected oil prices and stability of supply of a very key commodity; the problems in Europe also affected our exports. These are very tough times but if we as a country get our acts together then I think we face a lot of opportunities also because in the foreseeable future, the growth in the emerging markets is expected to be much faster than the developed world. And that means funds will continue to flow into countries such as the Philippines, ASEAN and the other emerging markets.

And we’re starting to see that now. Indonesia was just recently upgraded to investment grade and the Philippines issued a bond of $1.5 billion earlier this year with a coupon of 5% for 25 years. This is really unheard of. I think we, the business community and the government, must work together to make sure that we build the foundations so that the country can continue to take advantage of these opportunities.

We have the momentum. We have a president who was elected on a program of good governance, who has an unquestioned mandate and who wants to use it to really transform the country. This is a rare occasion for our country and I think we need to support President Aquino in his agenda of building better governance into the country.

Attaining high growth rates for a year can be done but the challenge for our country is attaining high growth rates and sustaining it over a period of time. The goal of any country is to improve its people’s lives; not to have good economic growth rates but to make sure these growth rates ultimately redound to the benefit of every Filipino. That is our challenge and to do so requires at least a decade of high growth rates. And if we do not transform the government by addressing the constraints to growth, then we would’ve cheated ourselves because this is a unique opportunity in the Philippines to really make sustainable change.

The term of the president is only six years. So what if we have 1 or 2 good years of growth? But if in the process we sacrifice the opportunity to transform government, transform how we think, transform how we do business, then I think we would have done our country more harm. The thesis of President Aquino is that “Good governance is good economics.” The first eighteen months of President Aquino, despite what the press has said, I think has been good. In fact, this has been confirmed by five positive rating actions by credit rating agencies. In fact, we’re borrowing at lower and lower costs, we’re getting deeper into the virtuous cycle where our interests expense as the percentage of our budget is getting smaller and smaller. And as a result, our debt as a percentage of our GDP will continue to go down. That way, over a period of time, we obtain fiscal sustainability, more space for infrastructure and social expenditure.

There are no shortcuts to this. We really have to build it block by block; we have to go step by step. In 2011, the increase of our revenues from 2010 was over 13%. This is the highest in at least over a decade without new taxes and without asset sales, purely from efficiency improvement – in an economy that didn’t go very fast, and that is why we continue to focus on this because we believe that it’s not only more fun in the Philippines. By focusing on this, we’ll have more funds in the Treasury.

I think that is crucial if we are to address the lack of infrastructure, if we are to address the increasing number of people at the very bottom, we cannot ignore them. We need to invest in them because it’s important that they become our partner in the growth of the country as we’re able to solve the constraints.

The president wants to make sure that when he turns over the country to the next president in 2016, we’ve changed the institutions, we’ve changed the mindsets of people, and we’ve changed the expectations of the population so that they will no longer tolerate administrations such as in the past.

I was listening to President Ed Francisco earlier talk about sacrificing growth for good governance. I don’t think we’re doing that lightly. We are really addressing serious issues because what we inherited are major problems, institutions that are really broken. First, we recognize the need for infrastructure. That is why we’ve allocated a major portion of the budget to infrastructure. We’ve also launched a very ambitious PPP program, sometimes referred to by critics as a powerpoint presentation. But those critics, I ask you, did you look at the facts? Have you looked at the phase of implementation of the previous administrations?

I’m not criticizing previous administrations but just for comparison, the Ramos administration was able to launch its first PPP, the Bauan project, in one year, but that was with emergency powers because we had brownouts there. The non-power PPP of the Ramos administration came in after two years. The same is true with the Arroyo administration. The first PPP project came in after two years and that is the computerization project, if I am not mistaken. Then, the Estrada administration did not have one because it was a short-lived administration.

And we’ve launched Daang Hari Tollway project in 18 months, less than our ambitious target but you know, the Aquino administration will continue to be ambitious because not being that, I think, will be cheating our population. We need to push ourselves. But we also need to work with each other.

A country has a psyche. Our national psyche is broken. Some of our people have lost hope. Some of our people are so negative. Some of us do not believe in government. But I think we need to take advantage of this opportunity by working together, by celebrating each victory and by looking at challenges as something that we can work on and we can solve together, not as a symbol of failure but as a challenge for us to work in partnership to make this a better country. After all, we cannot collect taxes without your support. We cannot generate economic activity without your confidence. We cannot create a vibrant economy without you putting in your money.

Since the Asian crisis, we’re one of the few countries that continued to grow but on the back of consumption powered by OFW remittances. We need to make your capital get to work. In the central bank, there’s close to two trillion of your money sitting there not doing the country any good. It’s time that you put your money where your mouth is and vote with confidence by investing and putting your money to more productive use.

President Aquino is committed to transforming government. You’re all management practitioners here. You’re all running organizations. The government is just like any organization. When President Aquino came to power, we had a procurement system that was so used to corruption, used to commissions. Would you put more money through that system of without first fixing it just for the sake of better figures? Obviously, you’re not going to trade hard-earned money for that.

Those of you who’ve had experience working with government know how complex it is to make things work in the government. I’m not making excuses but you change what, forty cabinet secretaries but the same million-plus people are there, the same culture is there, the same processes is there, the same COA rules is there, the same courts is there to block you every step of the way. It’s not easy but the important thing is the signal coming from the very top. There is no more FG, or family that takes so-called commissions from transactions. Yes, there’s still corruption, but I tell you, it’s much less and I think with your help it would even be much less.

And that is why President Aquino has taken on big challenges; he’s really putting at stake his mandate here. The judiciary, for example, is supposed to be the court of the last resort, the Supreme Court in particular. But if you look at their decisions, in some cases they’ve changed decisions five times; in other cases they’ve made their decisions even before even getting their files from the lower courts. Government itself is stuck in courts.

During the Ramos administration we privatized the Nonoc Mining asset for $260-plus million. The winner paid $1.2 million and has us stuck in court since then. In the meantime, they operate the mine and up to this date they owe us $300-plus million, stuck in the Makati court and the Surigao court. They have good lawyers, some of whom are whose firms are here, I have to be honest. This is a clear case and just one of the many examples why we’re stuck in court.

World Granary, the PhilExim guaranteed their debt, they did not even pay their guaranty fee and they defaulted and we’ve been paying their debt to their creditors. They have us stuck in the Quezon RTC for three years already and we cannot move. Our RATES cases, our RATS cases are stuck in court covering billions of resources.

That’s why President Aquino said, “If I’m not going to take on this branch of government and make sure we send a clear signal that it no longer is business as usual then my presidency will not accomplish what [I] was elected for – and that is to transform the country, not just to have faster growth rates, not just to make sure investments come in, but to create an environment where everyone will have an opportunity where you do not need contacts but where you can play on a level playing field that is transparent, where you can trust that the courts will make their decisions based on merit.

The Department of Budget is leading the way to make sure that hard-earned taxes that we collected and you paid from your hard effort will be used properly. And they want to make sure that process is transparent and ultimately, you can view that in the net – how we’re disbursing the money, who’s winning the contracts, how much the bids for those contracts. It’s important that we become partners. The DPWH, for example, have big contractors. They’re always winning the contracts. In the past, they were used to the chop-chop system where the regional directors chop the contracts so that it’s all within their authority. And they don’t care whether it’s part of a network; they just want to build the road wherever the congressman or local government officials want it.

That’s good numbers, good economic numbers but from benefit to the country in terms of an improved transportation network, there really is none. These are roads that are not connected to the network, these are the words that are one lane paved, the other not paved. Two kilometres paved, ten kilometres not paved. Go drive in some of the provincial roads, that’s what you’re going to see.

President Aquino said, “We will put a stop to this. You cannot change behaviour overnight. There’s a so called passive-aggression. They will say yes but they will not do anything. They will say yes but they will not do what you ask them to do until you convince them that really is the new way of doing things. We’re still fighting that type of culture. We need your help several ways. First, by paying your taxes. Secondly, those of you who want to help out, join government because we get a lot of criticism. The only way to help government is to be part of government. Third, by not cooperating with those in government who insist on operating on the same old basis.

I’m glad that a lot of you have signed the Integrity Pledge that was initiated by the Makati Business Club and I think the European Chamber of Commerce. I do hope that it’s not just a pledge in writing; it really is a pledge in action.

The next four and a half years of President Aquino, I hope to accelerate the disbursement of funds but by focusing on quality projects. This year, there are several projects already in the advanced stage of study and we hope to be able to bid out more than we bidded out last year, projects that will stand scrutiny. No NAIA3 was started way back in the Ramos administration that’s still stuck in court. We won finally in Singapore but they were able to successfully reopen the proceedings in Washington DC.

The Laguna Lake project, I heard President Francisco say, “There were a lot of good projects in the previous administration, but you know, there were some such as the Daang Hari that was already started and we did continue with it but the Laguna Lake, a dredging project for P18 billion and based on studies, what they will dredge will be back in three years because we have not addressed the source of the siltation, which is the deforestation of the Marikina river watershed and the human settlements are delayed. For the sake of accelerating expenditure, President Aquino could’ve signed that. But you would have wasted P18 billion of your money.

The Ports Project, the Ro-Ro project, again, several billion pesos. The ports were designed for European lakes and not for Philippines seas. They could not be properly implemented in the Philippines. Do you proceed with that? Or just say, No, we want this restructured because we want Philippine hard-earned taxes to be put to good use.”

The bridges projects, we talked to DPWH and the other local government units, we have bridges all over the Philippines that are rusting; these projects costing over P66 billion again in designed projects. You can go on and on. We don’t want that. We don’t want that to be the legacy of the Aquino administration and that’s why I want to more closely, with you, the premiere management association, tell us how you think we can accelerate things. Work with us, work with Congress if you think based on your analysis COA rules and the other rules in government are not right. Work with us so we can work with Congress to pass new bills. But we have to work within a system. I, for one, want to go back to the private sector without having to deal with lawsuits afterwards. That’s why we have to follow these rules whether we agree with it or not.

The MRT3 is another situation. It’s actually doing good but it could’ve been much better if it were properly bidded out, if it were not a sweetheart project. It’s a project that ended up costing us a lot of money, we still have to buy back the other 20% and you can go on and on.

I’m not giving excuses here. I’m just stating the facts. President Aquino is working his butt off. I’ve worked in another administration and I haven’t spent as much time working with a president on projects and issues. I’ve never seen a president so hands on in making sure that we change the way we do things.

I cannot announce it yet because I don’t think it’s been announced. But there was an agency that entered into a negotiated deal. He spoke to me and said, ‘This is not the way we do things.’ So I spoke to the agency head and I told him, Rescind this contract. Then before we know it, there were two other contracts. Last week, the president flew in, met with that person and fired the person, the person who supported him during the campaign. But President Aquino, whether you supported him in the campaign or not, he just wants to make sure that we change the way we do things in this country.

So, I don’t have a lot of time complaining here but I’d like to leave you with a request. Perfection is not possible in doing business in government; it’s easy to find something wrong. Columnists obviously get a lot of pressure to come up with an article so you can focus on what’s wrong. But we should know better than that because you are the opinion leaders of this country. You should know better than that because you run organizations. You should know better than that because you know how hard it is to transform a company, let alone a government. So, I would like to work with you so that we can continue to create successes and celebrate these so that we change the national psyche, so that people will start hoping and will start expecting more and will start demanding more; so that those who do not want to go by the new way of doing things will have a hard time doing it. And for things that do not work, let’s not put ourselves down. But let’s work together to deal with it.

I don’t have kids yet but those of you who have kids certainly know this. If you raise kids putting them down for every mistake they make, I bet you that kid will be a failure. There is such a thing as the Pygmalion concept. You reinforce what’s good, the more good things happen. I’m talking to you because you are the management gurus of this country, the premiere management association of the Philippines.

So, I’m looking forward to four and a half years of working with you so that we can transform the country, so we can all pass this on to the next administration in a much better shape than what we inherited. We are all stewards of this country. Thank you.

***