1. Dr. Roberto F. de Ocampo, OBE
Former Finance Secretary
Co-Vice Chairman, Makati Business Club
2nd Anniversary Forum of Arangkada Philippines: “Realize the Potential”
Rizal Ballroom, Makati Shangri-La Hotel
9:10-9:30 AM, February 26, 2013
Ladies and gentlemen,
Good morning.
How many of you remember the song “What a Difference a Day Makes”? It goes a little like this. . . .
“What a difference a day makes
Twenty-four little hours
Brought the sun and the flowers
Where there used to be rain. . .”
I’d rather refrain from singing the entire song as I do not want to risk breaking my contract with Universal/ Sony
Records. On the other hand considering what I said last year, many of you might think that I should shift from being an economic
commentator to a singer.
If I recall in connection with last year’s theme, “Moving Twice as Fast”, I said that the economy would not move
that fast. I said then that “if we take the lowest actual growth rate of 3.2 per cent of 2011 and multiply it by two, this would give
us a 6.4 per cent minimum growth rate for 2012 in order to reflect an economy that has moved twice as fast”.
Considering that the 2012 full year growth was 6.6 per cent over last year’s 3.9 per cent, should I eat crow or turn
singer instead? Or both? But I started with a song to highlight an important point which is: what a difference a year makes. If the
growth rate in many previous years were close to what it was last year, we may not be here asking ourselves how can the economy
grow twice as fast.
Fortunately, I don’t really have to eat crow since you will recall that I also said I would be happy to be proven wrong.
I’m sure I’m not the only one happy. How many of you are enjoying the benefits of that impressive growth performance in your
businesses and stock market transactions? I am sure many of you in this ballroom would raise your hands.
There is indeed much to be happy about. And I don’t need to dwell on them at length. They have been repeated
with glee in various publications both here and abroad. But let me tick off a few highlights.

2.  The 6.6per cent growth not only exceeded the Government’s target of 5-6 per cent, but was broad based. The Industry Sector grew
by 6.5 per cent which was more than twice its growth rate in 2011 at 2.3 per cent. The decline in Mining from 7.0 to negative 3.7 per
cent was more than compensated by Construction that zoomed from negative 7.3 to 14.4 per cent.
 Manufacturing likewise grew from 4.7 to 5.4 per cent and Utilities from 0.6 to 5.1 per cent. The Service Sector was also a major
driver growing at 7.4 from 5.1 per cent with contributions from Trade, Transport, Communications and Real Estate. Even the
Agricultural Sector performed relatively well at 2.7 per cent considering the several weather disturbances that hit many parts of the
country especially the rural areas.
 Government expenditure grew 11.8 per cent which was in fact the key element in the economy’s performance as it started from a
very low base of 1.0 per cent in 2011. On the demand side, government spending growth accelerated to 12.6 per cent.
 The Philippine Stock Market expanded 33 per cent last year as the composite index broke record highs 38 times. It is viewed as one
of the most dynamic stock exchanges in Asia. Last February 19, the main Philippine Stock Exchange Index (PSEi) broke the 6,600 level
for the first time, and some expect it to hit 7,000 this year.
 The country’s gross international reserves reached a historic level of US$84.2 billion, which can finance a full year’s worth of imports
of goods and payments of services and income.
 Registered portfolio investments inflows into the country last year reached US$18.5 billion, the highest in ten years.
 Overseas Filipino Workers’ (OFW) remittances also rose to a record level of US$21.4 Billion which is 27% GDP. This, in spite of
political unrest in the Middle East and economic downturn in Europe where a large number of OFWs are.
 The Philippines is now #1 in voice services and #2 in non-voice services within the BPO industry. Already employing some 700,000
Filipinos the BPO sector was expected to add 100,000 new jobs.
 After eight credit rating actions, the country is now poised to attain an investment grade credit standing from Fitch, Moody’s and
Standard and Poor’s this year from its rating of one notch below investment grade.
 Transparency International reported an improvement in the country’s anti-corruption drive as it improved its ranking on the list of
the most corrupt countries, ranking 105th out of 176 countries. Still low in ranking, but a significant improvement.

3.  The Global Competitiveness Report of the World Economic Forum ranked the Philippines 65th among 144 countries in its 2012 survey, a
significant jump from 75th last year.
Clearly, the favourable perception in both the domestic and international arenas towards the administration’s anti-
corruption campaign has had its effect. However, even the Government realistically admits that much more has to be done. It would be
important for the Arangkada Forum to maintain a posture of positive criticism rather than joining in an unquestioning chorus of praises
that have the pitfall of being self-congratulatory. After all, true friends should not be shy about telling the truth particularly if it may be
helpful towards the realization of a common cause.
In this light, the question I wish to address is precisely whether we can rest on the laurels of recent successes or look upon
these successes as a platform for the vital reforms still needed to realize the country’s potential as the theme of this forum indicates. Not a
few have voiced the opinion that the recent successes are mainly reflective of the financial economy, and not as much of the real economy.
How many of you in this room are market vendors or tricycle drivers? I’m sure there would not be that many if any at all.
When I earlier asked how many of you were happy, most of you were. Of course, that may not be the same response in different economic
strata, largely unrepresented here, who may not even know what the stock market is but try to make ends meet to be able to buy and sell
at the wet market and survive day to day.
Perhaps to put some perspective, let me mention the major concerns.
 While the country posted the highest growth rate of 6.6 per cent in Southeast Asia last year, we also account for
the highest unemployment rate in the region at 7.20 per cent. That is not counting underemployment in both the
urban and rural areas of the country. This raises the question of how inclusive is our growth. Poverty reduction has
not kept up with the GDP growth rate as it did not result in any increase in mass employment.
 We continue to lag behind our neighbours in Foreign Direct Investments. We registered a growth rate of 10.6 per
cent in FDIs which is a far third behind Thailand and Cambodia at 62.1 and 165.7 per cent, respectively. And while
Malaysia, Indonesia and Singapore registered negative growth rates, the Philippines with its positive growth rate is
just at par with Cambodia in absolute amount of FDIs at US$ 900 Million. The updated statistics for the period
January to November 2012 shows that Foreign Direct Investment in the Philippines reached $1.2 Billion. I believe this
is the first time we breach the $1 billion level. But $1B is nothing to breast beat about compared to say Indonesia’s
$18B.
 While government infrastructure spending surged last year, the overall state of Philippine infrastructure still lags
far behind neighboring countries whose citizens used to come to the Philippines to learn from us.

4. Even some of the elements of success have their downside. For instance, the stock market boom may also be an
indicator of hot money growing at such a rate that may make it too hot to handle. Not only has its benefit not reached much of the real
economy but it is always prudent to remember the adage that a bubble is not seen as a bubble until it bursts.
What reforms are needed? The most important of the reforms should be those that would target the three most
important priorities to enable sustainable and inclusive growth to take place namely, job creation, job creation, and job creation. The
financial economy by itself despite the stellar performance of the stock market and the prospect of an investment grade credit rating
cannot pull that off. The Arangkada Philippines has been at the forefront of advocating such specific reforms in vital sectors of the
economy.
Let us revisit some of the key Arankada ones:
1. Agriculture – The key to improving this sector remains our ability to transform it towards higher productivity and a more
agro-industry based configuration. That will not happen unless we revisit our land Reform paradigm that focuses on
ownership much more than productivity to the point of near romanticizing of subsistence farming and placing much of the
blame and burden on credit policies. The present Land Reform Act expires in 2014. Perhaps inputs towards generating
important amendments to it should begin to be gathered rather than just allow the present law to lapse or just
automatically be extended another 5 years.
2. Infrastructure – The government’s, particularly the DPWH’s, great leap forward in spending here last year accounted for a
large part of the impressive growth rate but that level of spending, by nature, cannot be expected to double year by year. At
the same time, infrastructure relating to other than roads has not experienced the same boost. There is some concern, for
instance, that the Energy Sector needs closer watching and a more energetic push particularly in Mindanao. Clearly, we
continue to wait with baited breath for a more vigorous implementation of the PPP.
3. Manufacturing – We should all be delighted to learn of the marked increase particularly in Japanese and Korean investments
in this sector but the relatively low FDI translates into relatively low new manufacturing plant. And we continue to suffer
from a poor rating as among the countries most difficult to do business in (with the outstanding exception of PEZA). More
than most other sectors, Manufacturing, is a generator of jobs. Bureaucratic processing, a skewed labor policy, including a
so-called profit sharing bill being presently deliberated in Congress, and poor level of infrastructure still hinder our ability to
be a preferred investment destination in this sector.
4. Mining – I should not belabour the point here since the issues are familiar to you but efforts by government to bring a
workable compromise between environmental protection and reaping the economic benefits of mining may need further
tweaking. Among others, the present moratorium on new mining activity and the blurred division of jurisdiction and
responsibility between national and local governments still leaves many prospective investors confused, to say the least.

5. 5. Tourism – I applaud the gains made by the Department of Tourism that has resulted in an increase of tourists by a million since
the start of the administration from 3.5 million in 2010 to 4.3 in 2012. But this pales in comparison with the 25 million tourists
in Malaysia and the 7 million in Vietnam. I am confident that more can have more fun in the Philippines but DOT can’t do it
alone. Again, infrastructure looms as the bottleneck.
I am encouraged that we at least seem to have a government that listens. I’m realistic enough, having been in the Cabinet
myself, to realize that it cannot do all things all at once without rushing into too many false starts and too little real accomplishment.
May I suggest therefore focus on the following priorities.
1. NAIA. This is a no brainer. With the DOT’s tourism program doing well, the sad state of NAIA continues to be a major
drag. Clearly, the present single runway international airport is primitive compared to almost any other international
airport in ASEAN. Clark is the obvious choice. Yet, we are spending funds to have consultants to tell us what we had
ourselves already studied and concluded as early as 1996 – that a two airport set-up (similar to that in Washington DC)
with Clark as the International gateway and NAIA for domestic flights), would be best.
2. PPP. I said last year that the continuing central problems are infrastructure, infrastructure and infrastructure. They still
are. The PPP as the government’s flagship program in this regard, has actually begun to move but ever so slowly as some
projects have been awarded and started. But a short, few kilometer road like Daang Hari and a school building program
do not a vigorous PPP program make. We should be heartened by recent announcements from NEDA of many more
approvals for PPP projects for this year. But again, bear in mind that approval is not the same as implementation and
there is, by its very nature, a minimum 2-year gestation period between breaking ground on a significant PPP project
and its actual commissioning.
3. Smuggling. The value of smuggled petroleum, fertilizers, rice and other commodities is estimated at almost US$ 20
Billion annually. This cuts deep into the government’s import duties, and puts local industries and manufacturing at a big
disadvantage, if not totally driving them out of business. This is the big hole in the drive for a better fiscal situation. BIR
can’t go it alone inspite of its dedicated tax collection mindset.
4. Competition Policy. It is not enough to say that our system is a democracy when much of its social and business
structure still reflects oligarchy. The essence of a truly democratic, free-enterprise system is competition. I understand
that the government is presently crafting a competition policy and there is, coming through Congress, a so-called Anti-
Trust bill. We should do what we can to not only keep watch on these developments but bring our inputs to bear to help
ensure that these twin efforts are effectively synchronized and that the laudable objectives of increasing competition,
diminishing oligarchy, and widening opportunity in a truly free-enterprise economy are realized.

6. 5. Finally, and for a more serious consideration, amendments to the constitution to encourage foreign investment. I understand
there is some reluctance on the part of the Executive. The questions in our minds though are: if not now, when? Isn’t this the
best time to make the move with a President in office who is trusted not to make constitutional change an avenue for extending
his term? Reluctance in the context of conservatism may be understandable but we are lagging behind, and a leapfrog, a bold
move, may be the order of the day.
There is one part of the President’s inaugural address that I remember – that he would want to introduce change that could
not be easily reversed even after his administration. I, like many of you here, would hope that he does not run out of time to do that.
But bear in mind that one half of this year is likely distracted by politics and 2016, when the President’s term ends, lasts only
half of that year, and most of that will be devoted to Presidential election politics. That leaves about two full years to go for this
administration to institutionalize the needed reforms.
Institutionalizing reforms is not the responsibility of the government alone. We need to do our part. This year, the most
important aspect of our responsibility lies with the forthcoming elections. Many have observed that this is the most confusing elections
with respect to political alignments – as well as the most dynastic elections we’ve had. It may be too late to change the political
configurations as we know them today but it is still our vote and all the processes involved in helping ensure its protection that needs
to be brought to bear by us. We can resign ourselves to an attitude that the system is too impaired to be changed or we can join those
in various NGO’s or media establishments, or expand our network of internet interaction to help towards as honest an election as
possible and eventually, true electoral reform.
Finally, the world will not be standing still while we race to improve our lot. We need to be alert to global game changers
that could negatively or positively affect our economy. On the potential negative side, the possibility of currency wars looms, an
offshoot of which may be the strengthening of the peso to a point disadvantageous to our present two pillars of the economy-
remittances and the BPO industry. So far, the BSP has managed the situation well and can still count on a few more monetary tools at
its disposal. But fiscal policy is the complimentary side of this exercise. I am glad to learn that the government is shifting its proportion
of borrowing more towards local sourcing, but I believe more of this may have to be done. Also, while I support the dedication to tax
collection compliance I would caution that this should be balanced by a strategy of growing the tax base as well and not focusing on
squeezing more juice from the existing one.
On the positive side, 2015 will be the year of moving to deepened ASEAN economic cooperation. This could prove beneficial
to us in many ways. But we have to put on our thinking caps now and identify our position in this new environment rather than be
caught flatfooted when its reality is already upon us.
I am told by Feung Shui experts that the year of the snake can slither hither and thither and may bring treacherous pitfalls.
But bear in mind that the snake is also the symbol of the medical profession and the right economic medicine in the right doses could
give us a halfway mark in this administration that could produce a winning margin for better long term economic prospects.
Thank you.