TRANSCRIPT: Malacanang Press Briefing, ADB Launch, March 1, 2012

Sec. Ricky Carandang: Good afternoon. The Philippines is proud to be hosting the 45th Annual Meeting of the Board of Governors of the Asian Development Bank. ADB President Haruhiko Kuroda has just come from a meeting with President Benigno Aquino and he joins us here to take some questions and to make a statement. Then, we will be hearing a statement from Finance Secretary Cesar Purisima. Before that, let me just introduce our panel here. Mr. Washington Sycip, known to all of you in the business industry, Finance Sec. Cesar Purisima, ADB President Haruhiko Kuroda and Management Association of the Philippines president Mr. Ed Francisco. Secretary Purisima?

Sec. Cesar Purisima: Good afternoon, everyone. The Philippines takes pride in hosting the 45th Annual Meeting of the ADB. We expect over 4,000 delegates to come to the Philippines and attend the conference and the other events related to the ADB meeting. The theme of the meeting is Inclusive Growth Through Better Governance and Partnerships. This is really in alignment with the program of President Aquino which is to bring better governance to the Philippines. And the theory that good governance is good economics. The Philippines is very fortunate to have the private sector partners including the MAP led by its president Ed Francisco and of course, the dean of Philippine business, Mr. Washington Sycip who will be helping the organizing committee composed of myself, Sec. Mon Jimenez and Gov. Tetangco of the central bank with the hosting responsibilities for hosting of the delegates.

Its been over 10 years since we last hosted the annual meeting and we take pride in being selected for this special year, the 45th anniversary of the ADB. We hope to show all the delegates that its more fun to have an ADB meeting in the Philippines. Thank you.

Carandang: Thank you Sec. Purisima. President Kuroda, you have some remarks?

ADB Pres. Haruhiko Kuroda: Thank you very much for joining us. Im honored to join Secretary Purisima in welcoming you to this press conference. As he said, the Asian Development Bank will hold its 45th annual meeting here in Manila at the PICC. This morning, I had the opportunity to tour the venue and Im very pleased with the progress so far for the preparation for the meeting. Since the ADB is based in the Philippines, it is an occasion we very much look forward to. We expect this years gathering to attract more than 4,000 participants with a sizeable number of delegates from the private sector, the non-government organizations and multilateral partners, as well as our member countries. Up to 40 finance ministers may attend the annual meeting, as well as a number of central bank governors from their region. I am pleased with the significant support given by the government of the Philippines. The Philippines is of course a founding member of the ADB. Over the years, our execution and thousands of ADB staff have built strong and enduring ** in the Philippines. We very much appreciate the efforts the country has made to provide us with a welcoming and hospitable environment in which we could carry out our mission and shared vision of poverty reduction.

We also appreciate the opportunity to support the Philippines ongoing efforts to improve the lives of its people. ADBs country-partners strategy for the Philippines is fully-aligned with the Government Development Plan for 2011-2016. Further, many large challenges facing the country, we also believe that with sound policies and firm resolve, the government is charting a course towards creating open economic opportunities for more and more Filipinos.

In this respect, I wish to commend the government for its focus for its governance reforms. This include reforms covering key aspects in public policy that will build an important foundation for social and economic progress. Good governance is essential for ensuring sustained inclusive growth and creating an environment for a competitive private sector. The mutual commitment of the government and ADB to good governance is reflected in the theme of this years annual meeting, that is “Inclusive Growth Through Better Governance and Partnerships.”

Several of its seminars and knowledge-sharing events are dedicated to discussing this issue. Over all, I expect the meeting will generate considerable discussion about the state of the global economy and Asias growth. I would like to highlight one important event that will take place and that is a governance seminar focusing on the critical issue of how Asia can respond to the global economic crisis.

In closing, I think we can look forward to a very fruitful annual meeting and look forward to seeing all of you there. Thank you.

Carandang: Thank you, Mr. Kuroda. Mr. Sycip, would you like to say a few words?

Washington Sycip: Ive known the ADB from the first day when it started operations, when Mr. Watanabe was president and the main problem they had was how to get telephones. *** So many years have passed and you see the progress of the country so Im happy to be of assistance to the social activities of the directors that will be coming here.

Carandang: Ed, is there anything youd like to say?

Ed Francisco: I guess on behalf of MAP, we represent the private sector. This is an example really of the presidents PPP. Its public-private partnership in action so even here in making sure we do a good job and make sure our guests are welcome then everybody leaves feeling they had fun in the Philippines and thats what were here for.

Carandang: If we can direct our questions first to Mr. Kuroda.

Q: Do you think Asia is nearing the end of its easing cycle and what risks to growth are you seeing this year?

Kuroda: We at ADB are optimistic about the short economic outlook of emerging economies in Asia. Although there could be some slowdown compared with 2010 and 2011. But still, we expect very robust growth in Asia, particularly emerging and developing Asia. Average growth rate could be around 7 percent or 7 percent plus. Still quite high, respectable rate for an economic growth. We are optimistic but we are at the same time cautiously optimistic. One of the downside risks is European financial crisis which might worsen or which might be rather prolonged. Then, emerging Asia or developing Asia might be affected more seriously. Another potential downside risk is high oil prices or rising oil prices. At this moment, despite some slowdown of the global economy particularly in Europe, oil prices stay at relatively high levels and if oil prices go up sharply deflecting some geopolitical events then Asia could be seriously affected. Otherwise, we are still optimistic about short economic outlook of Asia. In the long run, also Asia could continue its economic growth. Of course, in the very long run, growth run could inevitably decelerate but in the next couple of decades, Asia will be able to maintain relatively high growths.

Q: Your outlook specifically on the Philippines?

Kuroda: Last year, the Philippines suffered from significant slowdown of exports. As you know, Philippines major export item is electronic goods. The earthquake in Japan, the flood in Thailand- both of them disrupted Southeast Asian supply chain of electronics goods and machineries. That affected the Philippine economy through slowing down of exports. Also, the European situation deteriorated and that affected the Filipino export directly and indirectly. Last year, the Philippines economy grew slightly less than 4%. But this year, we expect around 5% growth in the Philippines and in medium to long-run, the Philippine economy can grow 6-7 percent.

Q: What do you think will be the drivers for that growth?

Kuroda: I think the Filipino economy in some sense is quite a balanced economy. Exports are important but the Philippine economy is not excessively dependent to exports particularly to US and Europe. Then it has very strong services sector, not just outsourcing sector but also financial sector, so on and so forth, including real estate sector. Then, Philippines has annually slightly more than 10% GDP equivalent to remittances which continue to increase in a very robust way. We expect the economy will continue to grow not just depending on one item but on multiple items- exports, consumption, investments, so on and so forth. That would probably continue. In order to accelerate economic growth, the Philippines must have more and better infrastructure and of course, better governance. ADB is cooperating with the government of the Philippines to improve governance and to improve infrastructure because infrastructure is the basis of sustained economic growth and transport, energy, water, telecommunications – there are many sectors. The Philippines must have better and more infrastructure to accelerate poverty reduction in the coming years.

Q: On rising oil prices affecting global economy

Kuroda: I think the last peak of oil prices was at 2008. Up until summer of 2008, oil prices were quite high, close to US$150 per barrel. But then, there was the Lehman shock, that derailed the global economic growth and with what they called the Great Recession dampened oil prices and oil prices fell quite sharply. Then after the global economy started to recover in 2010, then 2011 oil prices started to recover and now its very high. The impact of higher oil prices is a bit complicated because even in Asia there are some net oil exporters like Brunei Darussalam, Vietnam, many central Asian republics. Many companies will benefit from high oil prices. Even in Indonesia which is not net oil exporter anymore but substantial exporter of crude oil may also benefit somewhat. On the other hand, bigger economies including Japan, Korean, China, India- they are huge oil importers. They would suffer significantly if oil prices go up sharply. To what extent no one knows at this moment. But the impact will be quite serious. When it comes to intra-regional trade, even some oil net exporters may suffer indirectly through the slowdown of major economies in Asia, not only in Asia but in the world. So the impact will vary from one country to another. But on the whole, since Asia is a large net oil importer, Asian economies would be negatively affected by higher oil prices.

Carandang: No more questions? Thank you very much Mr. Kuroda for taking your time to join us. He has to leave a little early. I think S/CVP may want to answer the question about the impact of political developments in the economy.

Purisima: I believe the impeachment process is one of the best evidence that democracy in the Philippines works, the institutions that were put in place by the Constitution are working as planned and I think this should be looked at as strength for the Philippines. At the same time, this should be looked at as an affirmation of the determination of President Aquino to really have better governance in the Philippines no matter how difficult the challenge is. Whatever the results, I believe this has sent a positive signal that you have good governance and institutions in the country thats working.

Carandang: Let me just add that if youre wondering if investors are concerned about whats happening. The stock market this morning passed 5,000. It closed this morning at 4978, if Im not mistaken the 17th record high since President Aquino took office. If you look at ROPs, theyre trading at lower yields than Spanish bonds, sometimes theyre trading at even lower yields than Italian bonds. So if you look at the way how investors are reacting to Philippine securities, I dont think anybodys worried at all. In fact, the proper term is optimism.