OBG talks to President Benigno Aquino III

Interview: President Benigno Aquino III

How can the Philippines translate the current economic momentum into inclusive growth?

PRESIDENT BENIGNO AQUINO: Inclusive growth and poverty alleviation can be achieved in two ways: increasing the opportunities available and maximising human capital capacity so that employees can take advantage of those opportunities and take hold of their own destinies. This is the idea behind our massive investments in social services. For example, our flagship conditional cash transfer programme now covers almost 4m households. As long as participating households send their children to school and ensure that pregnant women and children in the home get regular check-ups, they will receive a cash grant from the state. By 2014 we plan to include children up to 18 years of age. The idea is to create incentives for completing high school, as, according to the Philippine Institute for Development Studies, high school graduates earn 40% more than those who only have an elementary education. So, not only will this programme provide more resources for the less fortunate to spend on their daily needs, in the long term it will give us a healthier and more educated workforce.

Of course, this goes hand in hand with improving education and health services. I signed the Enhanced Basic Education Act in May 2013 to bring basic education up to par with international standards. Moreover, through the hard work of Education Secretary Armin Luistro, we have already eliminated the 2010 backlog of requests for textbooks and school desks and are set to address the 2010 backlog of classrooms by the end of 2013. We have also expanded the coverage and scope of the Philippine Health Insurance Corporation, our national health insurance programme. The medical conditions and procedures covered by its Z and Expanded Z benefit packages now include breast cancer, acute leukaemia, cervical cancer, coronary bypass surgery and corrective surgery for heart defects.

Expanding social services, however, is only part of the solution. We are also harnessing the potential of our expanded fiscal capacity and making certain that this is used to build strategic infrastructure, the benefits of which are spread across a multitude of sectors. This was all made possible by good governance. It has allowed us to invest in our people and equip them with the tools they need so they can truly assume authorship of the next chapters of their lives.

What reforms are needed to ensure an even playing field and to attract investment?

AQUINO: In the past few years, we have made significant progress battling the culture of corruption. Still, we realise our work is not done. Investors need to look at the Philippines and see a business environment where innovation and hard work pave the way for success for everyone, and not just for a few influential people in government. They should be able to come here expecting efficient processes and a fair chance.

One of the things we did to ensure competitiveness was establish the country’s first competition authority, the Department of Justice’s Office for Competition (DOJ-OFC), created through Executive Order No. 45 in June 2011. As a support for the DOJ-OFC, we established the Sector Regulators Council, which gathers different sector regulators into one body in order to focus and provide direction to regulation efforts.

To improve our competition policy, we are supporting the following legislative measures: (1) a competition bill which will define and prohibit anti-competitive agreements and mergers, and abuse of dominance; (2) amendments to the cabotage law which shall allow foreign ships to engage in coastal shipping in the country to lower the cost of transportation; and (3) revisiting the Republic Act No. 7042 to remove or lower investment restrictions and facilitate the entry of more foreign direct investment into the country.

How can the Philippines prepare for ASEAN economic integration in terms of connectivity?

AQUINO: The Philippines has always shown its full support for ASEAN economic integration. We have taken every opportunity to engage in open and respectful dialogue with other ASEAN member nations because we know that this will redound to the benefit of all. In fact, the Philippines organised an ASEAN Economic Community (AEC) conference held in November 2013 to bring together stakeholders from all sectors and raise awareness about the goals and visions of the AEC 2015.

The Philippines also fully supports ASEAN efforts to foster greater connectivity through initiatives like the Master Plan on ASEAN Connectivity and its key initiatives, such as the ASEAN Roll-On/Roll-Off (RORO) Shipping Network and ASEAN Single Aviation Market (ASAM). With regard to ASEAN RORO, the Japan International Cooperation Agency has chosen the Davao-General Santos-Bitung route for a pilot scheme. We are also liberalising our aviation industry, as envisioned under ASAM. In fact, we have instituted the Pocket-Open Skies Policy and enacted Republic Act No. 10378, which rationalises taxes paid by international carriers in the Philippines. These measures are expected to help make the Philippine aviation industry more competitive.

With regard to infrastructure development, we are working to construct three new airports and upgrade another 54 airports. Likewise, we are working on 18 ports to improve access for goods, services and people. We are also aiming to completely pave our national road network by 2016. All of these efforts will allow for stronger integration within the ASEAN economy, and will make the Philippines a more competitive player not only in the region, but also in the global market.

What type of investments and which sectors need to be prioritised for sustainable development?

AQUINO: Our administration has always been straightforward about its investment agenda: We want to attract investments that contribute to our goal of inclusive, broad-based growth. Our government has identified three priority sectors for investment that meet these criteria: agriculture, infrastructure and tourism. Tourism and agriculture are among our priorities because of their ability to spur development in rural areas and because they make the most of our natural resources.

Growing interest in the Philippines as a tourist destination can, in large part, be attributed to the Department of Tourism’s hard work, including the “It’s more fun in the Philippines” campaign. The number of both foreign and domestic travellers is further proof of this. In 2012 we surpassed 4m international tourist arrivals, and in 2011 we surpassed the 2016 target for domestic travellers (35.5m) by receiving 37.5m domestic travellers. There are ample opportunities for investment in tourism. For instance, despite new hotels and resorts in Metro Manila and key destinations like Cebu, Bohol and Boracay, we will need an additional 37,352 rooms in 2016. Foreign airlines may also find it favourable to set up or expand operations here because of our government’s recent initiatives in the aviation industry.

Employing almost one-third of the country’s labour force in April 2013, agriculture is also a priority. The agriculture sector grew by 1.4% in the first half of 2013, which is higher than 0.9% for the same period in 2012. We are developing agricultural infrastructure, ranging from farm-to-market roads and storage facilities to irrigation. Other possible areas of investment include the processing and export of agricultural products. For example, coconut products have posted astounding growth in the past few years, and what were once considered waste products are now being utilised, processed and exported to foreign markets.

Infrastructure is the third priority sector for investment. Improving the state of our national infrastructure, from roads and flood-control projects to airports and ports, will boost Philippine competitiveness as an investment destination and will facilitate the growth of other sectors. Our government has some public-private partnerships open to investors. Of course, this goes hand-in-hand with our own efforts to improve the state of infrastructure. Our Department of Public Works and Highways aims to pave all remaining unpaved sections of the national road network (7256 km) by 2016.