President Benigno S. Aquino III was in the Solaire Hotel, Parañaque, upon the invitation of Steve Forbes, Forbes Media LLC Chairman and Editor in Chief of Forbes Magazine, to engage in a one-on-one dialogue as part of the Forbes Global CEO Conference [1].
Steve Forbes: Mr. President, thank you very much for coming to join us here today. We’ve had a great conference here in Manila. I think people who hadn’t been here for a while are very surprised at the dynamism of the economy and we’re discussing beforehand that when we get back, our party, to the United States, that some of us are going to try and get a constitutional amendment so that President Aquino, when he leaves office next year, can come to the US and give us the six percent growth rate. [Laughter] [Applause]
But, Mr. President, in recent years, there’s been a great breakthrough in growth rates in the Philippines that really hasn’t been seen in decades. And you’ve become a regional leader, a global leader–five to six percent growth rate, sometimes averaging seven percent. Can you describe what brought about this boom? What made it happen after years where you had subpar growth?
PRES. AQUINO: I think I have to start at the very beginning. When in 2010, elections were forthcoming, and we were surprised that, in the first and second quarter, there was already a resurgence in the economy. And a lot of our analysts were saying [that] with the exit of my predecessor, there was already renewed optimism. But having said that, [the] first mantra we had was “Good governance is good economics.” Bringing in, for instance, our Bureau of Internal Revenue—the tax collection agency—has been collecting more than double, without any new tax laws, from that which was previously gathered in the nine-and-a-half years of my predecessor. These in turn have enabled us to embark on very ambitious programs like, for instance, the growth and spending in infrastructure. We project it will about five percent of GDP by next year—it’s four percent currently. That has opened up so much of the countryside and delivered a lot of the various services to our people. Also, massive investments in the social services. Be it education, Be it health. Again, flowing from the idea of—we had this theme in the campaign: “Where there is no corruption, there will be no poor.”
And in essence, the people gave us a mandate. That mandate was used efficiently. We have shown them how government, [when] run properly, can really effect changes in their lives. And then this has enabled us to push reforms in previously sacrosanct sectors of our economy, for instance, in the banking sector, and another is the so-called cabotage, which has always been, in a sense, monopolistic and totally insular. We’ve opened this up recently with two new laws passed by Congress.
Also the Sin Tax is another major achievement which couldn’t have happened if the people were not solidly behind us in pushing for these changes. So, it becomes a virtuous cycle of us delivering on the promises, the expectations rising, and then the optimism generating a more positive activity within the economy both in terms of the growth of the middle class and also the confidence of those who have the economic clout to effect changes in our country.
Steve Forbes: You mentioned the banking sector, which had been closed. Now international investors can own 100%
PRES. AQUINO: Yes, Sir.
Steve Forbes: Are you going to have success in your remaining months with two sectors that seem to be very resistant–or they certainly are in my country–the lawyers? [Laughter]
PRES. AQUINO: Yes, that is a subject of discussion. I’m not fully competent to answer that question. It’s being studied; there are constitutional provisions that have to be looked into that limit certain areas of the professions to natural-born citizens. But, again, we’d like to think that we’re a progressive people where logic and rationality prevail. This will be assessed more especially by those that come after us. We have about 260 days remaining in office.
Steve Forbes: Some of the sources of this prosperity–one is Business Process Outsourcing. Over a million people now, but the growth is still growing.
PRES. AQUINO: Yes, Sir. We believe, [as] our Secretary of Trade and Industry has been quoted time and again, saying that it will be a 1.3 million industry, direct employees, with a factor of about two and a half to about three, for the indirect jobs that are created, will be worth about $25 billion by next year. It’s currently about a little over $19 billion now.
Steve Forbes: That’s more than the remittances overseas.
PRES. AQUINO: Currently, the remittances are still a little higher.
Steve Forbes: You’re going to overtake them now.
PRES. AQUINO: The prediction is, the Secretary of Trade says, by next year but I think he will claim a Christmas gift by December and say [that] they have surpassed the targets that he promised. The beauty of it is, to a large degree, it is fueled by a very young and dynamic population. And the only requirement for the BPO industry, to a large degree, is availability of talent and that means, primarily, where there are schools, they tend to be able to grow their industries. Now, having said that, we have been very supportive, primarily because these jobs that are created are inducing a lot of development in the countryside at far greater rates than what was previously done by various other interventions.
So, it seems that the Philippines has identified a niche that we have the talent to be able to really populate and to really grow. So we are getting higher and higher up in the value chain, various other back-office functions are being transferred to us. We are getting, in turn, loaned [to] by other countries that did not see us on their maps so we think that this is an industry that has grown tremendously but still has so much potential especially for all the other outlying areas besides the current hotspots–Manila, Davao, a lot of the other urban areas.
Steve Forbes: Two areas where you seem to have what we call low-hanging fruit: one is tourism. Even if you’ve had growing tourism, the potential is enormous. If you could discuss that. And also manufacturing, particularly in electronics.
PRES. AQUINO: When we started out, agriculture, tourism, infrastructure were the low-lying fruits that were identified. Tourism in particular doesn’t need a lot of investment in terms of educating those who will participate in this particular industry. Again, the focus is how to provide maximum opportunities for our people at the quickest possible time. So towards this end, for instance, if I can cite, domestic tourism targets were 36 million annually. That was for 2016. But in 2011 or 2012, we actually surpassed that number already. The current target is 56 million tourist figures. In foreign tourist arrivals, we may be somewhat short of the original target but we were close to five million last year. We started out at about three million, three million tourist arrivals annually. We think at least six million by next year. The lifting of both the EU ban on our carriers and also the regaining of Category 1 Status with the FAA undoubtedly will help grow these numbers. There are, shall we say, new markets are coming in that previously did not also know us. Cruise ships are back in the country where previously we were not part of the cruise lines’ itinerary.
With regards to manufacturing, manufacturing was always a dream, but we recognized that our electricity rates are not very competitive. But even given this factor there has been a growth of about eight percent annually for the past three years or so. Not just new manufacturers, not just expansion of those that are already here, but what is really most exciting is there are two firms that I know of that want to set up research and development facilities within the country and they are both major concerns in their respective areas. I’m being signalled that I should not name the companies because they may have failed to reveal, or they have yet to reveal, to the NCC their plans. The bottom line is they seen in us the potential—again, back to our people—that they asked us: “Can you provide us both people with masteral or doctoral degrees in the engineering sciences, and they cited a particular number.” And our Department of Science and Technology guarantees that there are this number of Filipinos already available. But on top of that they are ready to sponsor scholarships for further development of the talent pool that they do need. But they do see it as available in the Philippines and ability to continue growing their industries. They see in the Philippines, and its people, a worthwhile partner.
Steve Forbes: You have a very large youthful population which is unusual in the world today. What reforms have you been taking to develop that potential, either in formal education or in what we call vocational education, which you mentioned, for example, scholarships from particular companies?
PRES. AQUINO: Let’s start with the formal sector. A case in point: There’s a professor in the Bicol State University that’s south of Metro Manila by the name of Dr. Arboleda. He developed genetic material coming from the coconut husk, which has replaced concrete in various applications and actually is being used worldwide. Now, the main thing that he contributed was that he asked: “Our university is situated in the region where the primary industry involves the coconut but all of our studies deal with rice and corn, which are irrelevant to the communities we serve.” One of the reforms that we have asked the state universities and colleges is to make yourself more relevant to your various communities.
The other aspect they are helping us address is that we have a web portal called Phil-JobNet. When we started out, it lists job opportunities, and it lists applicants for all of these vacancies. What was surprising, in one particular month, there were 200,000 openings for about 100,000 applicants. I asked why is this the case and primarily there was a skills mismatch between the job opportunity and the skills availability. So, again, the education sector has been tasked to—in connection with our Ministry for Labor, and the various other agencies under the economic cluster—to talk with [the] industry and map out, forecast, in a two-year span, in a four-year span, in a six-year span, what will be the jobs that will be available at that point in time.
The condition when we started out was so many Filipinos were entering college education hoping to join the hot industry at the time that they enrolled only to find that the hot industry was no longer hot by the time they graduated. A case in point would be nurses. So instead of being reactive, we wanted to be proactive. That was one aspect.
The other aspect in the vocational sector, we started out with a job placement of a 28 point something percent. It’s defined as finding a job within six months after graduation. Currently the average is about 71.09 percent job placement within a six-month period after graduation. We’ve graduated about eight million. We’ve had eight million course graduates in the five years that we have been in office and in certain industries where industry parted very well with us, took us up on the offer and cooperated very significantly. Placement rate is about 92 percent, currently and again, finding a job within six months.
Now, it has gotten to the point that when I talk to certain industries they ask me for availability of this particular group of talents and skills. If it’s a vocational job, I refer them to the agency called TESDA. At the start they could all give me every number that was asked of us. Lately, we’ve practically doubled if not tripled their support from the national budget. In spite of that, and having more graduates, time to time, they still are hard-pressed to meet the requirements for various sectors within the economy.
We want a holistic approach. The education sector has been improved. We now have a K-12 system where it was a ten-year basic education cycle before. And the dream is we’ve expanded the Conditional Cash Transfer Program to include those in the high school to keep the children in school. We graduated the first batch of those who were so assisted last year, about over 300,000 and amongst that group between thirteen to fourteen thousand were honor students who previously might not have been able to complete their education. So [they] are now going to be more productive members of the society because the skills that have been afforded to them by a country that is run better than what it was before.
Steve Forbes: So how would you sum up the attractions for foreign direct investments in the Philippines? What would you tell the executives here?
PRES. AQUINO: Well, we started at about a billion. It’s now about six billion the last time. We’re reckoning 600 percent growth. And I think I keep hearing comments from investors, especially foreign ones, who are saying: “We should have joined you when you started.” So it’s not too late. There are so many opportunities in this country. We have so many potentials that have yet to be tapped in so many different sectors. So in a sense, there will be less risk, optimism, hope, rather than more actual figures that will say that it is really more fun, not just to visit the Philippines but to do business in the Philippines.
Steve Forbes: Two areas that have been a bit of concern: one is corruption, and the other is security. On the corruption side, you made it a key part of your platform when you ran in 2010. Tell us the progress you’ve made including the Chief Justice of the Supreme Court.
PRES. AQUINO: Well, first up, in our system, we have an Ombudsman who is supposed to watch all members of government and anybody who participates in a government transaction. The first one that we inherited seemed to be sitting on all the important cases. This person actually underwent an impeachment process in our House of Representatives and resigned before trial commenced in the Senate. The Chief Justice of the Supreme Court violated the Constitution and by his own admission, admitted that he did not reveal all of his assets. And this was born out in the trial in the Senate, and he was impeached and removed from office. My predecessor in currently under hospital arrest, facing two charges: one on plunder, and one on electoral fraud. Several ranking senior politicians actually have also been arrested and detained. Only one of the three is out on a humanitarian consideration. The bottomline is, I think our people are convinced that previously there were people, or sectors, or groups beyond the pale of the law. Now, everyone is being made to account for their actions, or whether it was incorrect, or illegal, or unlawful. Now, that was considered not a possibility previously. So, we are very serious; we have installed a Supreme Court Chief Justice who will serve a total of about 18 years. We’ll have all the time to reform our judicial processes. We also have currently an Ombudsman, a former Associate Justice of the Supreme Court, who has actually gone after a lot more of those that were previously considered sacrosanct and invulnerable to being made to account to their actions. So I keep stressing to those agencies that are directly involved in ferreting out all these wrongdoings that the key to success is not filing cases, but actually, getting convictions. And I’m convinced that they are exerting everything that is in their power to make all of [those] who have done wrong by our people to be made to account for their actions.
Just to give you an idea what is corruption’s cost to us: Some countries will talk about leakages, but in some instances, the allegation is that all that was spent actually evaporated. A hundred percent was utilized not for the project or program that was supposed to be implemented, but wound up in the pockets of the people who actually have control over these.
Steve Forbes: On the security side, the headlines don’t seem to reflect the reality.
PRES. AQUINO: Our media, like any other body, any country’s media would want to have something that is sensational. We admit, we have problems, but I don’t think our problems are disproportionate to any other countries of our size and our particular status. Most of the kidnappings happen in the southern part of the Philippines where we are in the process of trying to forge a peace agreement with the major cessationist group.
It has already reached a stage that there is a law that will implement all of the agreements which is pending before our legislature. Hopefully, it gets to be passed soon so that they can demonstrate the different of governance that can be wrought by a difference of system that they want to implement there. The previous one was so subject to abuse by a person who, once assumes power, thinks of himself as the supreme warlord in the area.
That is one aspect of it, handling the political side. The other aspect is we are in the process of modernizing both our armed forces and our police. And getting them the equipment, the training, and the necessary personnel to effect the security considerations for this country. Again, it would be wrong to say that there is no crime in the Philippines but I think our crime situation is being addressed. There has been quite a substantial reduction of what they call “index crimes,” but we’re not stopping our efforts to make us as crime-free as possible. We do have the same threats as anybody else: Drug cartels trying to penetrate our country, either to sell it to us or start shipment points. The new white collar crimes of identity theft, is also a work-in-progress in terms of addressing [the issue], and so on and so forth.
Steve Forbes: You mentioned earlier about the things you’re trying to do on infrastructure which is a huge challenge for future growth. Can you go over with us? You have a program of Public-Private Partnerships that had a little hiccup this year but you seem to think those hiccups have been dealt with and that real resources, not just from the public sector but also from outside capital, is going to move ahead. And if you could just touch on some of the things your doing: you have a major railroad project, airport expansion, and highways.
PRES. AQUINO: Again, let me just try to sum up all of the thoughts that I have to deal with. We wanted to come up with a PPP program that was very transparent. There was stability, there was liability, there was confidence building that was put into it. It took us a while to get it off the launching pad to ensure that it met all of the criteria. Now, as a result, we have actually awarded ten. There is another one pending and then there are about 39 or so that are in various stages of complying with all of the procedures and all of the due diligence studies and all of the feasibility studies. Now, contrast that to about six total solicited projects by three of my predecessors. There was a point in time, to get people interested in PPP projects the government had to come up with very onerous deals for our countrymen. Too much burden is on them. We’d like to say that under our watch, we have been getting so many premiums because there really is so much interest in the PPP projects that we have been launching.
Major highway Cavite-Laguna Expressway would be one of them. And the airports, the major one in the central part of the Philippines called the Cebu Mactan International Airport was awarded last year. There is an upgrade for eight airports that will serve as key regional areas for various parts of the country. We are an archipelago. We really need the air transportation for communication, not just for the regular conduct of business but also for disaster-risk reduction amongst other things.
The major one, as you’ve mentioned, is a railway that eventually will link the northernmost tip of Luzon to the southernmost portion of Luzon. The ones on the drawing board right now will be the first province north of Metro Manila eventually up to the southern tip of Luzon, the distance of about 200 miles. But eventually, the dream is also to link up with the north which is a 600-kilometer distance. Another one that we have just launched is called the Clark Green City, which is a planned metropolis in the former American airforce base in the Central part of Luzon. The first portion of getting the schools and other institutions in place are, I think, already [in] process.
Steve Forbes: In developing infrastructures critical for tourism and for getting Foreign Direct Investment, particularly in the area of manufacturing, in terms of making it easier to do business, what have you been doing to make it easier to start a legal business? Once upon a time, there were banks that you had 34 different processes. What are you doing to streamline that?
PRES. AQUINO: One of the things I remembered is what used to take several days, if not weeks, and in certain cases months, have now been reduced to about a 30-minute process by combining various offices into a one-stop shop. Places that you have to get approvals, signatories to sign on one thing, has been reduced to just one area because they’ve managed to combine all their databases. We are very responsive to the various complaints by the various chambers of commerce as to how to expedite the whole process. We have finished other items that were a major hindrance. For instance, the cadastral survey will be finished this year, This was something that was started in the 1900s, before 1910, probably 1905. And for whatever reason, [it] has never been completed. But we understand that what was left to us was the most difficult [to] finish; and digitizing the whole process so that there’s sanctity for all of the land titles that are in segregation is another thing that has already been done.
I keep telling the Cabinet when we started, when we asked for investors to come in, let us endeavor to change the mindset that we are doing them a favor by registering them in the country. Let us make them feel that they are partners that we are actively soliciting to help us grow this economy and get us all the opportunities for our people in the here and the now.
Steve Forbes: One of the areas in terms of economic performance that standout is that in the time of currency turbulence, the peso has come down a little bit against the dollar but not very, very impressive strength compared to neighbors such as Indonesia, Malaysia, and others. What are you doing to keep that kind of currency stability which is very good for investors to know that they are not gonna have a wild inflation?
PRES. AQUINO: I guess part of it is all of us have learned the lesson from 1997 and 2007. But more importantly, I think we have a very good economic cluster that so far has given me all the right predictions. Let us try to insulate ourselves from those that promote these vagaries and turbulence.
For instance, we are not a resource dependent economy to the same degree that some of our neighbors are in, wherein your growth is so much dependent on the growth of the final consuming entity. Even as we recognize the contributions of our overseas foreign workers, the mantra that I’ve been telling them is: Can we depend on this as a continuing resource for our economy, when they will be subject to the growth or the stalling of the economies of the host countries. So there has been that conscious effort to insulate ourselves to a large degree from things that are beyond our control and extremely difficult to predict.
We have concentrated on growing our middle class and giving all of the opportunities to our people, that we can find and maximize, to afford them and provide them this.
I think we are very prudent in terms also of borrowing. In the era of a very liquid situation, we did not pounce on borrowing [from] everybody who was in a capacity to lend [to] us. But each borrowing really have to have a significant output. We have this investment, or we are gonna take this particular cause, what is the output that will generate to the common good? And if that cannot be demonstrated then we will not undertake this particular load. I guess I am very conservative in terms of handling the people’s funds.
Steve Forbes: And that’s why we need you in Washington. [Laughter] The amazing thing is by the way the debt of the Philippines, of the Filipino government, as a proportion of GDP has come down quite dramatically in recent years.
PRES. AQUINO: It’s a virtuous cycle. Spend on that which really redounds to the common good produces the expected common good, increases the revenue that government can take, diminishes the need to borrow, to balance the budget.
Steve Forbes: What do you see happening now with the Philippines and the trans-pacific partnership negotiations which was recently completed. Your country has exhibited an interest in becoming a part of that. How do you see that moving forward?
PRES. AQUINO: We really want to participate in it. We were not the first group that was invited [to] it. We have been invited, in a sense, afterwards. But for instance, America continues to be one of our biggest trading partners. Number three currently in terms of trade. The bottom line is: We are used to dealing with you. The rules seem to be very clear. Everybody would want to have an increase in their potential market. So why not deal where there is stability in the relationship, where, again, you can expect the assumptions are valid, rather than going somewhere where the gains are potentially very large but at the same time the risks are undetermined, or unknowable. So joining PPP does make very good sense to us, especially because of those already in it who we find ourselves in very close alliances [in] so many different fronts. Japan comes to mind. Vietnam comes to mind. And other countries.
Steve Forbes: In terms of US-Filipino relationship, how would you describe it on the economic side and then on the strategic side?
PRES. AQUINO: On the economic side, some of the figures shown to me for instance is: of the roughly about 5 million tourists, over 600—close to 700 thousand came from America. Number one. Number two, again, third in terms of being the largest trade partner. Probably fourth, consistently in terms of overseas development assistance.
In the strategic side, again, we only have two strategic partnerships currently. One is with America, and the other is with Japan. And amongst the grounding of this is shared values, shared principles, shared outlooks. And I think there is again a lot of commonality between how the American people and I think the Filipino people would want to deal with each other and govern themselves. So having a close relationship that has been born out of countless decades of being there for each other, I think is a very valuable asset for both countries that can be further strengthened to meet the common goals.
Steve Forbes: Well perhaps when we get a new president that relationship can be strengthened even more. I can say that, you can’t [Laughter] How would you describe then the Philippines’s geo-strategic role within the region? How do you see that in the years ahead?
PRES. AQUINO: When you look at the map, we’re roughly about four hours away from every country that we—with just the exception of probably one country—everybody else is four hours away from us. We’re close enough to be relevant. And I guess there’s a little buffer also that there is no automatic infection if there’s issues with—if we were a country that had a land border with somebody else. There is no automatic transmittal of their problem to us.
Now, having said that, again, we think we are in a very good position to afford our partners, especially the economic field, that access, for instance, to the ASEAN community, and be in a situation that has, again, predictability, stability, and very good prospects, especially peopled with very young demographic that is increasingly getting more and more skills upgrade, and educational opportunities afforded to them. And so you have a better and better labor force situated in a country that is in a sense in the central hub of so many different trading partners.
Steve Forbes: You have mentioned 260 days left in office.
PRES. AQUINO: 259 and a half. [Laughter] But of course nobody’s counting.
Steve Forbes: He’s not counting. But you’ve been in office over five years, how would you describe your achievements? Looking back, what makes you most proud of?
PRES. AQUINO: One of the people who, and the group he was representing when they were—I had no plans to run in 2009, when they were asking me. And I knew to a degree the enormity of the problems that I would confront. They were saying [to] stop the hemorrhaging would be enough. And I think we’ve gone beyond stopping the hemorrhaging to actually getting our people really inspired. Whereas our primary ambition before we started in office was how to get out of the Philippines. Now we have a reduction in our overseas foreign workers. And the numbers are debated, but there seems to be a sizable proportion that have gone back to the country and found meaningful employment. So I guess, if there’s one central achievement—the people who brought us into this office gave us the opportunity—then the renewed outlook and optimism is I think the single biggest achievement that we have—”We” meaning the government and the people we have managed to elicit in the five years plus that we have been in office. Now with that new attitude, from “nothing was possible” to “everything seems to be possible,” seems to be a common thought amongst our countrymen. Even those who are outside the country exhibit, shall we say, renewed pride.
So with that concept, again, I would like to say, when we started out, we can now start dreaming again. Now I think that has translated that dreams are more and more becoming realities as the days go by. So we think what we have achieved currently is just a stepping stone towards what can be achieved by the next achievement because they will be starting at a better situation than what we had when we started.
Steve Forbes: Well, believing in the future, that’s something the rest of the world needs, which is why we hope after you leave office you will come to the US and give us some of that belief in the future. Mr. President, thank you very much.
PRES. AQUINO: Thank you, thank you so much.
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[1] The conference is an annual global business event organized by Forbes Magazine. It gathers business magnates, entrepreneurs, CEOs, and thought leaders. For its 15th year, the conference will be held in the Philippines for the first time, focusing on visionary leadership, specifically, how companies can best conceive and articulate a winning vision to drive their businesses forward.
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