39th Philippine Business Conference Sustaining Economic Development Through Good Governance His Excellency Jejomar C.

Binay Vice President, Republic of the Philippines Pleasantries/ Acknowledgements, a very meaningful and productive morning to all of you. It is my honor and privilege to be with all of you on the first day of your yearly Philippine Business Conference. I have been requested by no less than your Chairman, Mr. Edgardo Lacson, to talk about Economic Resiliency Through Good Governance. With advance apologies however to my good friend who is a staunch advocate of economic prosperity and a firm believer of the potential of the Philippines as an economic power as shown by not one, not two, not three but at least eight companies that he manages (I wonder if you still sleep, Ed) I may have to deviate a little from the title he had suggested that I cover. Rather than call my speech Economic Resilience Through Good Governance I would instead discuss with you Sustaining Economic Development Through Good Governance. As a fundamental concept, resilience means the ability to recover from a catastrophic failure. The economic experts describe it as the ability of an economy to recover from the effects of adverse shocks to which it may be inherently exposed. My dear friends in the business sector, the Philippines is no longer in resiliency mode. I will explain. On January 15, 2009, the National Economic Development Authority or NEDA prepared an Economic Resiliency Plan or ERP which is specifically designed to put in place measures to stimulate the economy amidst the impact of global economic downturn of 2008. Back then, ERP prescribed 9 areas where government must focus on namely; better revenue collections, cash liquidity, low interest credit, effective spending, stable growth, saving and creating jobs, assistance to the most vulnerable sectors, low and stable prices, and improved competitiveness in preparation for the global economic rebound. As we all know however prior to the Aquino administration one may have as many good plans as you can craft but the same will not yield positive results particularly when government has credibility and governance issues. I am not going to talk to you about the pitfalls and faults of the previous government. At this point, we are beyond that. We will let the wheels of justice take their due course and determine culpability as the law will rightfully and fairly direct. Instead, I am here before you today to share with you one major message: the Philippines is no longer an economic laggard the Philippines is no longer the sick man of Asia. With this administration having been three years in office, the Philippines is now poised to take off with a solitary weapon - your Philippine government has used: Good Governance.

Buoyed by election spending and the results thereof, the 2nd and 3rd quarters of 2010 showed drastic improvement in the gross domestic product or GDP of the Philippines, as measured by the National Statistical Coordination Board. As President Aquino however took over and directed all of us to revisit previous government undertakings and proceed with plans under a whole of government approach for results, a mechanism that highlights shared responsibilities and collaborative practices among the countrys various sectors, a temporary slight dip occurred in the GDP in 2011. After resolving many of these issues and taking stock of the specific goals needed to be completed with Good Governance as the guiding principle, this administration has poured in all government resources to carry out the 2011-2016 Philippine Development Plan. Thus, since the 1st quarter of 2012, we have witnessed continuing yearly high GDP growth and sustained strong economic fundamentals. With help from the business sector, the fruits of your governments labor have earned for the Philippines three successive credit upgrades from various international credit rating agencies. Who would have thought that we would see the day when the Philippines would overtake the rest of Asia even China for one quarter at least in economic growth? While we bask in the glory of our gains, we cannot let down our guards and rest on our laurels with this temporary success. This thought becomes even more imperative what with the recent 16-day U.S. government shutdown and a close brush with a debt default by the worlds economic superpower. Had that impasse remain unresolved, it would have, among others, affected dollar remittances from our overseas Filipino workers and reduced volume of trade thus obliterating the substantive gains we have had for the past three years in the economic front. With this in mind, allow me to expound on what I believe is a shared vision and a common expectation for the Philippines as a country at par with the best in the world. I am sure we all want a vibrant economy, a solid and stable social order, equitable wealth distribution, where all citizens are deeply proud of their leaders and institutions, and a governance structure that is transparent and fully accountable. The Philippine Development Plan for 2011-2016 has identified and laid the groundwork for eventually achieving this vision. Specifically, the plan presents the governments official guide in its policies and development programs for the medium term. This plan outlines five major guideposts: (1) Anti-Corruption; (2) Poverty Reduction and Empowerment of the Poor and Vulnerable; (3) Rapid, Inclusive and Sustained Economic Growth; (4) Just and Lasting Peace and the Rule of Law; and (5) Integrity of the Environment and Climate Change Mitigation and Adaptation. Let me start with Anti-Corruption. We have seen multitude of efforts from your government to weed out the scalawags in all kinds of public service, whether in the executive, legislative or judiciary. There is a Maam Janet, there is also an Arlene. I wonder what name will come out next. Regardless of their nicknames, photos or the terms of endearment, whether maam or amiga, that one describes any of them, we as a Filipino nation should be constantly vigilant against any attempts to tarnish the hard work that our men and women both in the public and private sector all so work hard for: a nation that will prosper without any political partisanship and will

punish the guilty as may be proven with due process of the law. I have been in numerous legal battles as a litigator during my heyday as a lawyer. We are all witnesses to how corruption in the judicial system creates disincentive to business. As Vice President, I also face an uphill climb against privately-funded influences as I strive hard to pursue cases against those who have committed sins against the general public. It does not help of course that administrative cases against those in the judiciary remain unresolved despite numerous complaints. If we are indeed serious in our commitment to the people, Good Governance requires that we should not let up in our drive against corruption in the public sector.

Lets now proceed to Poverty Reduction. Two critical elements appear to lurk in our midst: (1) the existence of endemic poverty in our country that affects 28% of the population, or roughly 26 million Filipinos (within the ASEAN, the Philippines has the highest poverty incidence), and (2) despite our impressive economic growth over the past several quarters, levels of unemployment at 7.3% and chronic underemployment at 19% remain high, particularly when compared to other emerging economies in the region. These only point to the unacceptable reality that the fruits of our economic development have not benefitted many of our countrymen. This only means we still have much to do. As your government continues to ponder on propping up the economy for more investments, your Filipino leaders must always consider the welfare of our poor people. We cannot be simply ecstatic about our continuing credit upgrades without thinking about whether Amer in Lanao del Sur Abdel in Maguindanao or Mang Jose in the mountains of Apayao or Aling Nene in the alleys of Eastern Samar are able to bring food on their table for their families. These are 5 of the poorest provinces in the Philippines that cry for governments attention. Taking to heart the needs of our poorest kababayans or countrymen is part of Good Governance. The Philippine economy cannot be strong if its, roots, the greater mass of the Filipino people, are weak. Ensuring resiliency of our economy means ensuring the resiliency of our people. It means consciously empowering our people with the means to access and enjoy the benefits of our economic expansion. Here are a few thoughts. The statistics clearly show that big part of the unemployment and underemployment problem is the mismatch between the competencies business requires from its workforce and the competencies being learned by our kids in school. The Kto12 reform will bridge the mismatch in the long term. But there are opportunities for shorter term, high impact creative initiatives. Academe-business partnership is a greenfield area. The Philippine Business for Education or PBED has brokered a pact, between business and academe, following the German Dual technology model, to open up 100,000 paid apprenticeship positions for out of school high-school age youth. Business has to aggressively work with the education sector to craft a human resource development plan for the country that is aligned with the growth strategies of Philippine business. How about Rapid and Inclusive Economic Growth: the 3rd major guidepost? This is probably where you, my dear businessmen, aside from our individual countrymen, are more concerned about.

I have surveyed various industries and I have determined that many of you are not competitive enough. Compared to our Asian neighbors, our rank, albeit improving, in the Global Competitiveness Index leaves much to be desired. In a highly interconnected world, a dynamic business environment, and very discerning and demanding customers, we need to double time in the competitiveness arena or we will continue to be left behind. To address this, we need to focus on: (1) productivity, innovation and efficiency; (2) energy independence and security; and (3) infrastructure. Increased productivity, innovation and efficiency are paramount to making Philippine industries competitive. Improving the business environment in the country means promoting a consistent, predictable, and responsive policy environment and reducing the cost of doing business by, among others, streamlining bureaucratic procedures and lowering the cost of power which is already one of the highest in the region, or in the planet as proclaimed by your PCCI Energy Committee Chair. I also believe there are several drivers that would support our focus on economic growth, given their propensity for job creation, higher incomes, and more value added through their strong forward and backward linkages to other sectors of the economy like agriculture and services. I also refer to revitalizing our manufacturing and mining sub-sectors. On the latter, the Philippines is one of the most mineralized countries in the world and given the value of metals in the world, this sector can boost our level of economic development several notches higher, so long as we put in place proper environmental safeguards, and ensure that working conditions meet decent work international guidelines and activities in the Investment Priorities Plan (IPP) for 2012 and beyond. In other words, mining can be accepted provided that there is responsibility accountability and sustainability. With many experiences from the outside world, the Philippines certainly can learn from the best mining practices that creates a balance in economic development through harnessing natural resources and protecting the environment.

I now go to the second focus of rapid and inclusive economic growth. I am a bit concerned about the recent pronouncements by our energy planners about the prospects of limited supply of electricity in 2015. If this is not addressed properly like a firm commitment to implement many laws such as the Electric Power Industry Reform Act of 2001 and the Renewable Energy Act of 2008 all the gains we have achieved will be erased by another era that we once called the dark ages. What use is there for us to attract all of you to expand your businesses when you have no power to utilize? Apart from power, we need to prioritize and put in place our infrastructure facilities, and form an integrated and multi-modal national transport and logistics system that connects underserved but productive areas and communities to markets and social services. Part of infrastructure development is the growth of the housing sector in the medium term. It is important that government should give primacy over the housing problem as housing is not simply a matter of building concrete structures or infrastructure, but

is intrinsically a social and human problem that relates to the empowerment of local communities. Towards this goal, the Bahay Bonds 2, the first ever retail housing asset-backed securities in the Philippine market, has been officially listed in the Philippine Dealing and Exchange Corporation (PDex). This has marked the entry of a new class of asset in the capital market in the Philippines. The bonds are designed to be safe, high yielding, and affordable savings instruments. Another development that will provide growth in the housing sector in the years to come is the expected passage of a bill for the creation of the Department of Housing and Urban Development (DHUD). The proposed department will closely work with environmental planners, builders, and community beneficiaries to ensure a holistic strategy in addressing access to and affordability of housing to those with less. Corollary to the issue of power is the 4th guidepost: Environment and Climate Change Mitigation. I have heard many debates about renewable energy versus the conventional fuels or the clean and green versus coal and black. I have always believed that we need to develop all our energy resources and not just focus on one. However, inasmuch as the Philippines is vulnerable to storms, earthquakes and other natural disasters, I cannot help but adhere to the principle that clean and green energy must be considered primus inter pares: the first among equals. In so stating, I am also conscious that as we advance developing all energy resources, your government must be conscious about the issue of cost to the general public. There is a right balance to both. Mitigation measures against disasters must also be made central in the development program in order to ensure ecological integrity from the effects of climate change. All these also form part of Good Governance. I will no longer discuss Just and Lasting Peace as I believe your government is doing its best to attain it. We should however keep an open mind about resolving all these disputes because as one good friend told me, nobody has a monopoly of ideas. An ear close to the people on the ground is also part of Good Governance. It is not my intention in the short period allotted to me today to discuss exhaustively all the relevant and critical areas and strategies to sustain economic development, but the above, to mention a few, outlines in brief, areas of immediate importance. Let me stress, however, that while job creation remains a key consideration for inclusive growth, we should not be content with just the quantity of jobs but likewise with the quality of employment that will give rise to opportunities for upward mobility between economic classes. Our success in government can only be made possible by working closely with all stakeholders most especially the private sector. The positive results of Good Governance have already been proven and we will stay on this path. We in public office need your unending support as we continue to create an environment where all are given equal opportunities to grow and prosper from their own initiative. Given the many challenges we face on many fronts, I would like to encourage all of you to remain steadfast in working with us and engage your government in timely cooperation through the many projects that we have in the pipeline. After all, government cannot do without business and neither can business do without government. My own outlook on our respective roles in making economic growth happen is this:

In a centrally planned economy, it is government that performs the tasks of the captain as well as the navigator. It does not work that way in a market economy, such as ours. In the Philippines, I believe government works best as captain and crew, and business works best as navigator. Government sets the course, and business charts it. Government steers, and business reads the waters for reefs to avoid and squalls to ride out. Let government focus on governance and business focus on business. As we appeal to you to work with us however, we in government must veer away from any knee-jerk reaction, avoid any ad hoc type of leadership and live up to the true principle of Good Governance. We must govern efficiently and competently. After all, this is what we are expected to do. Thank you very much and a good day to all of you.