OBG talks to President Benigno Aquino III

Interview: President Benigno Aquino III

How is your administration addressing the culture of graft and corruption that many say has characterised the Philippines for years?

BENIGNO AQUINO III: The culture of graft and corruption, especially in government, has persisted for so many years because it has been tolerated. Thus, the first step is to show that it will no longer be allowed. The graft cases we have filed against former government officials have been both symbolic and substantive. Making it clear that corrupt officials can and will be punished is one way of changing the culture. Our new budgeting process, which has eliminated many of the discretionary areas where graft can be committed, has also been effective, though it is not something that gets a lot of headlines.

A new culture will not spring up overnight, however. People need to see that our efforts are serious and sustained, and this is something that we will make sure of for the rest of our term in office.

In what ways can the Philippines balance fiscal responsibility with economic growth?

AQUINO: During our first year and a half in office we were busy eliminating waste and corruption by changing the way the government spends its money. An often cited example of previous waste is the way regional directors in the Department of Public Works and Highways used to request a lump sum to build bridges without any evaluation as to whether the bridges were necessary or appropriately priced. Now these evaluations are mandatory. Before projects are approved and funded, a detailed design and a list of itemised costs or estimates must be prepared and evaluated to ensure public funds go to the right projects at the right cost.

Philippine bureaucracy has had to get used to the new processes. Because of the adaptation period, we spent less than we could have during the first half of 2011. This was a necessary sacrifice to get the proper procedures established. As of the fourth quarter of 2011, the systems were in place and spending has been accelerated and will be sustained for the coming years.

How should the Philippines address past issues while looking towards future development?

AQUINO: There are certain issues from the past that, if unresolved, will prevent us from really moving forward in a sustained and substantial way. As I mentioned earlier, instances of corruption during previous administrations must be prosecuted to demonstrate that those who engage in such crimes will be penalised.

Additionally, I’ve always maintained that a sense of justice – of actions receiving the consequences they deserve – brings about a sense of predictability and stability, which then results in economic benefits, investor confidence and livelihood opportunities.

The growth the economy experienced over the last decade did little to reduce the gap between rich and poor. This is an important issue because if we can increase incomes for the poor, there will be a stronger basis for equitable and inclusive economic growth.

What role will education play in future economic development and the empowerment of citizens?

AQUINO: Education is the great equaliser. We have been taking steps to address the gradual deterioration of education quality over the last several decades, focusing first on primary provision. We believe that students with a good primary education are better able to absorb the knowledge they will receive at the secondary and tertiary levels, and this will ultimately lead to more marketable skills and better employment.

For these purposes I signed into law the Kindergarten Act, which formalises preschool as part of basic education, particularly within public schools. The Department of Education, the Council on Higher Education and the Technical Education and Skills Development Authority (TESDA) are likewise working closely on the development of high school curriculum, particularly in the areas of technical and vocational education and training or mid-level skills development.

We have also been promoting skills relevant to the growth sectors in higher education. The TESDA, for example, has a programme to help young people acquire the skills they need to work in the knowledge process outsourcing industry. We provided an additional P1.1bn ($24.97m) to the TESDA for skills training for workers in five priority sectors, namely: information and communications technology/BPO, electronics/semi-conductors, infrastructure, tourism and agribusiness.

Our higher education reform agenda is also focused on developing the country’s competitive edge through a systematic build-up of high-level professionals in the science and technology fields. This will be done through investments in the capacity of select institutions, which will then produce talented employees in strategic areas such as science, technology, agriculture and fisheries.

How can the Philippines work to attract additional international investments to the country?

AQUINO: Our macroeconomic fundamentals are strong, and confidence in the economy is increasing because of our initiatives to fight corruption and improve governance. We shall continue these reforms to promote the rule of law, transparency and accountability.

In infrastructure projects we have been following the law and clarifying the processes by which projects are undertaken, thereby demonstrating a predictability with regard to how we bid out projects. We have recently bid out the first public-private partnership project, the Daang-Hari road, which was won by a local private company. This demonstrates the many opportunities that are available and should inspire confidence in those thinking to invest in the Philippines.

The “wait and see” attitude is ending and we are confident that in 2012, based on our achievements to date, companies will come in. There is a great demand in this country for investments in agriculture, tourism, business process outsourcing (BPO) and infrastructure. Opportunities exist, people just need to be secure in the knowledge that the processes by which they will undertake these investments are legal, proper and fair. This has been the case over the last year and a half.

How can increased regional and international collaboration benefit the Philippines economically?

AQUINO: In ASEAN, we are committed to eliminating tariffs on almost all merchandise trade by 2015. We are also part of APEC, which has as one of its core missions the further integration and expansion of trade and investment among member economies on a volunteer basis. The Philippines is involved in these regional groupings because we believe that our participation will foster greater economic growth. Furthermore, certain mechanisms, such as the ASEAN+3 and the East Asia Forum, offer the Philippines some benefit in terms of facilitating greater international cooperation and the resolution of trade issues.

Our participation in international economic integration endeavours is already delivering results. Our free trade agreements (FTAs) are perhaps the most concrete examples of how these collaboration efforts generate strong dividends for business. Japan, an FTA partner, became our biggest export destination in 2010. Even while we were negotiating the ASEAN-China FTA, our trade with China reversed from chronic deficits of $400m-600m in the late 1990s to tremendous growth and a surplus that peaked at some $1.5bn in 2007.

While the Korea’s investment in shipbuilding largely took advantage of the Subic Bay Free Port, the ASEAN-Korea FTA also provided strong encouragement and helped us become the fourth-largest shipbuilding country in the world. Meanwhile, Korea gained access to an all-weather deep-water port and an excellent workforce composed of Filipino executives, managers, and skilled and unskilled workers. In turn, we developed our shipbuilding industry and were given an opportunity to service international markets. All of these things will benefit on our inter-island shipping industry.

Out of what was once the ASEAN Free Trade Area we are working to build the ASEAN Economic Community. In the early 1990s ASEAN used to account for only 10% of Philippine trade, but since the middle 1990s it has increased its share, occasionally up to as much as 20%.