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Speech for the Induction of Officers

By Alice Cook,2014-06-17 05:59
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Speech for the Induction of Officers ...

    Speech for the Induction of Officers

    of the Economic Journalists Association of the Philippines

    by

    Socioeconomic Planning Secretary and NEDA Director General Ralph G. Recto

    16 February 2009 7:00pm

    Petron Cultural Hall, Sen. Gil Puyat Ave., Makati City

    A pleasant good evening to everyone. To the real head of the economic team,

    Governor Tetangco; Mr. Francisco of Meralco; to the better-looking Recto, my nephew, Eric

    Recto; Larry Tampingco of Napocor; Rolly Concepcion; to my uncle, Elpi CunaI saw him

    earlier, happy birthday too; and a happy valentines to all the ladies in the room.

    You know, I was also surprised coming here earlier. Coming out of this building was

    a representative of Shell. So I wonder if prices tomorrow will go up.

    Officers and members of the Economic Journalists Association of the Philippines,

    distinguished guests, good evening.

    Let me first thank you for inviting me as the guest of honor for your induction

    ceremony this year. Likewise, congratulations to EJAP’s new officers. Our economic

    journalists have been helpful through the years in popularizing accurate and timely business

    information to the public.

    Let me now segue to the most topic of interest, the global economic crisis and how

    the Philippines is coping with it. I will discuss measures that we have undertaken to protect

    the economy, in particular the Economic Resiliency Plan or ERP.

FALLOUT FROM THE GLOBAL STORM

    Japanese Prime Minister Taro Aso has said, ―The world economy is in a once-in-a-hundred years recession.‖ As put by Miguel Angel Fernandez Ordonez, the Governor of the

    Bank of Spain, ―The lack of confidence is totalconsumers are not consuming, businessmen are not taking on workers, investors are not investing, and the banks are not lending.‖ Last

    November in the United States, consumer confidence fell to a 28-year low, spiking

    unemployment to a 15-year high --- 3.6 million have lost their jobs and counting. One

    American economist has described the labor report as "almost indescribably terrible." China

    for its part has shed an estimated 20 million jobs already.

    A stagnant world economy has lowered foreign demand, hitting Philippine

    merchandise exports. In December, exports contracted by a startling 40 percent. As the

    current situation negatively affects consumer confidence, this weakens consumer demand,

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which was already dampened by rapid inflation and high oil prices last year. This translated

    to a slowdown in financial services, retail trading, transportation and communication. The

    dampening effect on investor confidence also delayed some expansion plans and postponed

    investment decisions. Capital flight is drying up funds available for investment. Our workers

    are vulnerable, particularly those in the exports sector, and overseas Filipinos in the US with

    temporary working visas.

STRONG FUNDAMENTALS

    Nevertheless, our fundamentals remain strong, and they help explain why the impact of the crisis on the Philippines has been softened.

    Let’s begin with the financial sector. The Asian Crisis of 1997 was a blessing of sorts,

    for it led to reforms that have made our financial system more resilient. The banking system

    has remained adequately capitalized: its capital adequacy ratio of 15 percent is well over the

    BSP’s minimum of 10 percent and the global standard of 8 percent.

    Our banks have not bitten into the temptation of fancy but shady instruments that were the rotten core of the Wall Street meltdown. For example, our banks’ exposure to

    Lehman Brothers was not even 1 percent of their total assets. Asset reforms have led to a

    continuing drop of the ratio of non-performing loans. The NPL ratio, once at 18 percent, is

    now down to less than 4 percent, or at pre-Asian crisis levels.

    Amid the global credit crunch, healthy lending continues, unlike in the most industrialized countries. Bank lending net of banks’ reverse repurchase (RRP) placements

    with the BSP, grew by 21.3 percent, and outstanding loans of commercial banks including

    RRPs, increased in November by 22.9 percent. Loans for production activities continued to

    rise by 18.4 percent. Lending to almost all sectors has increased.

    Remittances of overseas Filipinos coursed through banks reached a little less than US$17 billion in 2008. This is roughly 15 percent higher than the level recorded for the same

    period a year before. This is above the original 10 percent growth target. Note that Filipinos

    in the US hardly work in the hardest hit financial and construction sectors. They are often

    found in sectors that are least sensitive to recession. They work as teachers, caregivers, nurses,

    doctors, engineers professions that are last to be fired because of the shortages there. In the

    Middle East there is still a big demand for engineers, architects, interior designers, and

    construction workers because of the building boom. And there is new demand from emerging

    labor markets like South Australia, New Zealand, and Guam. Not to mention that not only

    are Filipinos productive, but they are very loyal workers as well.

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     An ace up our sleeves is the outsourcing industry, which is seen to post good growth

    this year. In a recession it makes sense for American and European firms to outsource their

    work to the Philippines, where labor costs are much, much cheaper. We can actually benefit

    from the crisis as well.

    Despite the global flight from emerging markets, we still have a balance of payments

    surplus, and if I’m not mistaken as of January of 2009 it was recorded to be about US$1.7

    billion.

    The country’s gross international reserves (GIR) is now almost US$40 billion or 4

    times the level we had during the Asian crisis.

    Inflation has been dropping. In 2008, it averaged 9.3 percent. The Bangko Sentral

    says their forecast for 2009 will be less than 4 percent.

    The National Government (NG) or NG deficit for January to November 2008 stood at

    PhP66.7 billion, still below the 2008 target of PhP75 billion. The primary balance in the first

    11 months of the year remained in surplus.

    Total external debt fell to US$53.5 billion as of September 2008, down by US$1.3

    billion from the end-June level. Likewise, the external debt to GDP ratio posted a significant

    drop from 41.2 percent in end-June 2008 to only 32 percent in end-October 2008. Just to

    give you an idea from where we came fromin 2004, debt-to-GDP ratio was a 120 percent.

    That’s now down to roughly 70 percent. External debt was 70 percent of GDP, and now

    down to below 32 percent.

    Just to give you a perspective on this as far as debt is concerned, the US total debt

    stock today is roughly US$11 trillion with the size of the economy roughly US$14 trillion.

    Their contingent liabilities is roughly US$6 trillion and growing as well.

    The Philippine economy remained robust as gross domestic product grew by 4.6

    percent in 2008, and gross national product even grew by 6.1 percent. In the fourth quarter

    last year, the time when the global economic crisis unfolded, we registered a 4.6 percent GDP

    growth, faster than the growth of our neighbors such as South Korea (-3.4%), Thailand (-

    3.5%), and Singapore (-3.7%).

    And as I mentioned earlier, the US has lost 3.6 million jobs, China lost around 20

    million jobs. Last year, the Philippines still created a net of 530,000 jobs.

    Standard and Poor’s has described the Philippines as an ―Island of Calm‖ because of

    these strengths and reforms. Others share that view:

    ―The Philippines is inherently strong, a potential beneficiary of these financial woes,‖

    said the Bank of New York Mellon’s chairman for Asia Pacific, Christopher Sturdy.

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    ―The Philippines is in a relatively strong position to weather the global downturn with

    the economy driven by private consumption and services, which are less vulnerable to

    external shocks,‖ said JP Morgan.

ECONOMIC RESILIENCY PLAN

    We are an island of calm not only because of our strong macroeconomic

    fundamentals. We are inherently strong as well because we have done our homework.

    We drew up the Philippine Economic Resiliency Plan which pursues the following

    objectives:

    1. To ensure sustainable growth and attain the higher end of the growth targets;

    2. To save and create as many jobs as possible;

    3. To protect the most vulnerable sectors: the poorest of the poor, returning OFWs,

    and workers in export industries;

    4. To ensure low and stable prices to support consumer spending; and

    5. To enhance competitiveness in preparation for the global economic rebound.

    Even before the Economic Resiliency Plan, our monetary authorities led by Gov.

    Tetangco, have worked to secure our financial institutions. As you all well know, globally

    there are only three types of responses to this global financial crisis. The first is monetary,

    the second is fiscal and the third is regulatory reform.

    The Bangko Sentral has embarked on monetary easing: lowering interest rates to spur

    investment and consumption. To ensure the proper functioning of the interbank market and to

    guard against credit tightness, the Monetary Board cut the regular reserve requirement on

    bank deposits by two percentage points effective November 14.

    The Monetary Board slashed BSP’s key policy interest rates to 5.0 percent for the

    overnight borrowing facility and 7.0 percent for the overnight lending facility on January 29.

    Bangko Sentral believes that with decelerating inflation, there is greater latitude to ease

    policy rates. And money supply is growing by roughly 15 percent, and that’s why we have many in the private sector today willing to come out with their bondsSan Miguel, probably

    the new owner of this building as well, will be issuing a PhP40 billion note or bond. Not to

    mention PLDT, Ayala, Globe, so on and so forth.

    On the fiscal front, we have postponed balancing the budget. The 2008 deadline was

    moved to 2011. That will give us greater freedom to pump-prime the economy.

    We accelerated the implementation of infrastructure projects in the latter half of 2008.

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    We granted additional tax exemptions under Republic Act 9504, exempting minimum

    wage earners from paying income tax and increasing personal exemptions for all employees,

    and this will help spur greater consumption.

    Under the EVAT law, crafted in 2004, realizing that it is those selling goods and

    services who liable to pay the VAT, and not necessarily the consumer, and it the one selling

    the good or service who is not a VAT-registered enterprisethere must be light at the end of

    the tunnel—and that’s why under that law, corporate income tax for 2009 will be deduced

    from 35 percent down to 30 percent. I suppose that is very timely as well.

    We are improving revenue collection through better tax administration, too.

     Now let us talk about the Economic Resiliency Plan or the ERP. I will discuss a few

    fiscal principles, the push for infrastructure, and protecting the vulnerable.

     I would call the ERP a responsible fiscal stimulus. Responsible because it realizes that

    the Philippines—we don’t have the same foot size like the US. They may afford to have a

    deficit of 8 or 10 percent of GDP, but not necessarily in the Philippine context, so one size

    does not fit all. In the case of the Philippines, a maximum of maybe 2 to 2.5 percent of GDP

    that’s it, will be more realistic. It is also fitting balance between expansionary public

    spending and tax cuts. We do not want the spending to swell our national debt or to worsen

    inflation or to crowd out private initiative. Hence, we seek to increase our national

    government deficit within prudent limits. The international benchmark for the deficit is

    roughly 2 percent of GDP.

    We are maximizing the Personal Services (PS) portion of the budget. Incidentally,

    the budget is PhP1.4 trillion for 2009. And just to give you a biblical perspective of that

    budget, if Jesus Christ was born until today, 2009 years times 365 is roughly 735,000 days to

    spend our budget of PhP1.4 trillion. That means you have to spend PhP2 million a day for

    2009 years. That’s how big the budget is also.

    As I mentioned, to maximize the PS portion of our budget, specifically to respond to

    the crisis, the lack of manpower and misallocation of personnel will be addressed. We are

    hiring more teachers, policemen, and soldiers. We are deploying doctors and nurses to

    underserved areas in the country.

    We are maximizing the Maintenance and Other Operating Expenses or MOOE

    Budget by stepping-up the repair and rehabilitation of government buildings. We are fast-

    tracking the purchase of supplies and equipment, like ambulances and patrol cars.

    In general we are now ensuring that agencies fully utilize their PS and MOOE budget

    allocations.

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    I have said before that our mantra, especially at NEDA during the crisis is ―Infra, Infra, Infra.‖ We are investing much in infrastructure to create and save jobs, to boost growth,

    and to upgrade our capital stock so the economy grows more efficient and at a faster rate in

    the future. Speed in hatching new jobs is critical. We are improving the absorptive capacity

    of government infrastructure agencies by ensuring that they hit the ground running in the first

    half of 2009. The program of works and procurement plans must be prepared under tight

    deadlines. Contracts will be awarded in the first half and first quarter of 2009. Sixty to 80

    percent of each agency’s budget must be awarded in the first half of 2009.

    Funds are being moved away from the slow-moving projects to the fast-moving ones. Projects with right-of-way problems will have to wait. We may also defer the implementation

    of new projects that do not have ICC and NEDA Board approval, or those that are difficult to

    implement immediately.

    We are stressing quick-disbursing high-impact infrastructure projects that are labor intensive and with great local value added. Examples of such rapid projects include the

    construction, repair, and rehabilitation of irrigation systems. During this critical time we will

    closely monitor project implementation.

    While upgrading infrastructure and creating jobs, we will also enhance social protection. We are intensifying our social protection services such as the Pantawid Pamilyang

    Pilipino Program (4Ps), which involves conditional cash transfers. Same too for the hunger

    mitigation programs.

    On the conditional cash transfers, we are pumping in another PhP5 billion so as to cover an additional 321,000 poor households, double the original 2009 target, giving them

    maximum cash grants of PhP9,000 per year. So that will also improve local consumption.

    We are adding a billion for PhilHealth to ensure full national government contributions to the National Health Insurance Program.

    We are increasing TESDA’s allocation to PhP 5.6 billion to cover around 566,000 additional beneficiaries, from the age brackets of 15 to 24 years old, which is the biggest

    segment of the unemployed population. In the first place, they should be in school, and not

    be looking for work. And this also helps us for the global rebound. It will be hard for them

    to look for new jobs this year anyway, so might as well put them back in school, and get them

    trained. Once the global rebound hits two years from now, then they’re in a better position to

    find jobs.

    As regards off-budget interventions, we will work so that our social security institutionsPhilHealth, GSIS and SSSwill provide additional benefits to their members.

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The intervention will be time-bound12, 18 or 24 monthsaimed at increasing purchasing

    power. The resources can be taken from the difference between the contributions, claims and

    benefits, would entail roughly about PhP25 to PhP30 billion for the Social Security

    Institutions (SSIs). You may probably notice or read in the papers as well that PhilHealth is

    already ready to give out PhP7 billion additional benefits to members of PhilHealth

    I am sure you’re aware of the PhP100 billion fund with the private sector to lower

    borrowing and financing costs for CAPEX spending and redirect these resources to important

    infrastructure projects. We are tapping the resources of other Government Financial

    Institutions (GFIs) for infrastructure projects.

    The government has formulated programs to assist OFWs and vulnerable domestic workers. The DOLE and OWWA will establish a stand-by fund for displaced seafarers and

    land-based OFWs. A program is being carried out to help expatriate workers who might

    return home from host countries now buffeted by the crisis. This program is being made

    available as well to workers being laid off in export-oriented industries.

    The DOLE is the lead in carrying out the government’s program for the returning expatriates and the retrenched export workers. The first component of this program is an

    Expatriate and Export Workers’ Livelihood Support Fund in the amount of PhP1 billion

    financed by OWWA for the OFWs and supported by government lending institutions such as

    the Development Bank of the Philippines, the Land Bank and the SB Corporation. Displaced

    workers can access the fund to help capitalize start up businesses or finance further studies

    and training.

    The Department of Labor is also engaging its tripartite partners business and the

    workers to implement coping mechanisms, like shortened work shifts and work week; maximized vacation leaves; and adopted rotating forced leaves, among others.

    We are also implementing training programs, training interventions specifically targeted for workers displaced as a result of the global financial crisis at the community level.

    The TESDA will do this starting in CALABARZON, then Subic, Clark and Mactan.

    Government and industries will share information on industry employment, the number of companies affected, the number of workers displaced and other relevant

    information.

    We are creating a multitude of ―green collar jobs.‖ People will be hired for reforestation, for the regeneration of mangrove areas, for the coastal clean-up by Baywatch

    groups, for jatropha cultivation, for replanting coconut farms, for retrofitting tricycles with

    LPG, for installing solar-powered street lights.

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    Also, some 6,000 short-term jobs have been opened up in the government’s PhP650-

    million poverty mapping project which the DSWD will undertake once the 2009 budget takes

    effect in about six weeks, just in time when school is out. This project will be a major

    component of the government’s Youth Employment in Summer or YES program.

    Likewise, we are launching NARS or Nurses Assigned in Rural Areas. They will be deployed to initiate primary health services, to inform communities about sanitation practices,

    to immunize children and mothers. They shall also serve as roving nurses for rural schools.

    How much will this cost? If the nurses are paid an allowance of PhP8,000 a month, and you

    have two 6-month tours of duty, and there are five nurses deployed for each of the 1,000

    poorest municipalities, that will cost less than half a billion pesos.

    This is a long list of running projects, and it will keep getting longer as we get other minds into the loop.

    And finally, let us take this opportunity to improve our regulatory environment. You are aware of the problems hounding the pre-need industry and the Securities and Exchange

    Commission. Much needs to be done, and this includes sharpening the teeth of Bangko

    Sentral, and fixing the MWSS, the Toll Regulatory Board, and the Energy Regulatory

    Commission.

    Yes, the Philippines is feeling the impact of the global crisis. But our economy is tough, and this has been acknowledged by many rating agencies. The economy will be even

    more resilient as pesos are poured into kilometers of concrete.

Experiences with Economic Reporters

    On a more personal note, I would like to specially mention the NEDA beat reporters who welcome me very warmly when we have informal chats on the economy at the NEDA

    press office ? Cai, Benjie, Ann, Mitch, Ron, Iris, Cheryl, Darwin, Cel, Albert and Jake.

    Please give them a round of applause.

    These people are some of the most hardworking reporters I have ever met. Some of them make ambush interviews with me early morning in the elevator. All of them pressure

    me for statements so they could file stories and meet their deadlines. Nonetheless, they are

    able to write fairly, objectively and accurately. I know a couple of them have won awards in

    economic journalism. But I believe all of them deserve to be recognized as well.

    All of you are our ―buddies‖ in spurring economic development. Through the stories that you write, we are able to communicate our efforts to the public. More importantly,

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through your stories, we are able to get feedback from them ? positive or negative ? which

    prompts us to work harder and more effectively.

    Certainly, economic journalism is a special craft. Many ordinary people do not

    understand the ins and outs of the economy. But they should, as they are also involved with

    businesses or workers and as consumers or taxpayers. And you are doing a good job of

    making these ordinary people understand these things better. That is what makes your role as

    members of EJAP significant in our quest to keep people informed of the socioeconomic

    conditions of the country.

    Given this, let me again congratulate EJAP and its new officers. May you continue to

    be the government’s partner in responsibly communicating socioeconomic information to the

    Filipino people.

    Thank you very much. A pleasant good evening to all of you.

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