Good governance encourages inclusive growth

President Benigno Aquino III

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Weeding out corruption allows for a more fertile economic landscape: one that not only brings investors in, but also allows the real work of governance to impact the greatest number of our people

In 2009, as my countrymen began calling on me to seek the presidency, I found myself facing a dilemma. On one hand, I knew the problems of the nation were very grave indeed; on the other hand, I knew that I could not turn my back on the chance to do my part to solve all these problems.

I answered the clamor of my people. We rolled up our sleeves to start work and clean house, thinking that I had a reasonable grasp of the problems I had inherited. But none of us could have imagined how deeply eroded the foundations of government had become, in the nine and a half years of my predecessor’s administration.

Rice, imported at inflated cost by the government, was rotting away in rented warehouses. Stewards of government-owned and controlled corporations advanced their interest at the expense of the people. Bidding for public works had been orchestrated to favor certain contractors, again, at the expense of the people. Endemic corruption had sapped the system of its vitality; public funds ceased to be used for the public good, and found themselves in private hands, whom we are now holding accountable.

The message, for 9 and a half years, was: nice guys finish last. To finish first, you had to lack conscience, exhibit a certain degree of shamelessness, and be an expert at giving handshakes with one hand, while picking pockets with the other.

The playing field was skewed towards those who had connections or those who could afford to bribe their way into contracts or permits. Politics permeated everything, even poverty-alleviation programs: slots on the conditional cash transfer program were handed out in exchange for votes.

Is it any wonder that domestic investments had plunged, and foreign investors were reluctant to come in? With too few jobs being generated, our people were trapped in a downward spiral: no education, no work, no chance to improve their lot in life.

It would not be far from the truth to say that, during the early days of our administration, we all eagerly looked forward to weekends, for a short respite from the shock of discovering the extent of the problems that were bequeathed to us.

But we refused to compound the apathy of the past with defeatism in the present. Our blueprint was clear: to encourage investment and jumpstart the economy; and for the benefits of growth to be all-inclusive. We wanted to generate jobs; we wanted to ensure our people were healthy enough and had enough skills to fill all of these jobs.

We wanted long-term solutions, that would not leave any of our people behind. And, first and foremost, we wanted a system that our people could buy into: A system where everyone willingly fell in line, because no one—no matter how rich or well-connected they might be—was allowed to cut in  front of the line.

We went about our work. One of our first moves was to institutionalize a zero-based budget approach, where expenditures are rationalized and are not mindlessly carried over to the next year, regardless of whether they worked or not.

We went after tax evaders aggressively, and we still do. With the help of our allies in Congress, we passed a law that put standards of governance in place so that government- owned and controlled Corporations became more efficient and rational. And we showed our resolve that no public official, regardless of his or her position, will be beyond the reach of justice and accountability.

All of these efforts have allowed us to reclaim our national honor; they have boosted confidence in the country, restored our citizenry’s morale, and are reaping dividends on the economic front.

Positive rating

Investors and Filipinos alike see what is happening: Here is a country determined turn the corner by instituting genuine, wide-ranging, meaningful reform, and acting on its belief that good governance is the bedrock of equitable progress.

We have had 6 positive rating actions from the credit-ratings agencies since we took over government a little less than two years ago–a stark contrast to the single upgrade and six downgrades in the nine years of the previous administration. We have experienced all-time highs in our stock market, in fact, 27 times in our 22 months in office.

Two years ago, who would have thought that our peso-denominated bonds would have a demand, let alone be over-subscribed? Who would have thought that onerous incentives would not have to be offered to make proponents actively compete for our infrastructure projects? Who would have thought that, at this point, we would be less than a year away from being a net exporter of rice, obviously, weather permitting?

As can be seen from our experience, weeding out corruption allows for a more fertile economic landscape: one that not only brings investors in, but also allows the real work of governance to impact the greatest number of our people.

Enforcing strict adherence to public bidding rules have allowed our Department of Public Works and Highways to save 6.14 billion pesos from our 2011 budget; now that the leaks have been plugged, we can go about our business knowing that our taxpayers’ hard-earned money indeed goes to projects that will benefit them.

As of April 15 of this year, the DPWH has bidded out 92% of the 2,139 projects for the year; of these, 95 percent have actually been given notices to proceed. In fact, 403 have already been completed, with the rest either ongoing or about to begin construction.

Another example: Now that the targeting system for our social welfare programs has been insulated from political considerations, we are confident that the more than three million households in our conditional cash transfer program are actually the neediest families, and not merely the best-connected; now we know that we are actually sponsoring 5.2 million of our poorest families through our Philhealth program–our national health insurance program.

We have been blessed with an abundance of resources and with a strategic location as a gateway between Asia and the Pacific. But our greatest resource has always been our people who have constantly shined given the right environment.

In any industry, in almost any corner of the Earth, you will see a Filipino working hard and earning praises from his or her employers. Our people have always been our greatest competitive advantage, and our efforts are focused on investing in them.

We are making sure that opportunity, wealth, and power are distributed equitably among our citizenry. This is the key to ensuring that growth is sustained: equal opportunity breeds social and political stability, which acts as a safeguard against disruptions on the road to progress.

We have seen, in recent years, how the opposite is a real danger that governments must address; we have seen formerly stable economies rocked by unrest because a small elite reaped the benefits of growth, while the rest of the population was left with little means to pay their mortgages or finance their children’s educations. For growth to be meaningful, it has to be inclusive.

3 key sectors

It is with this principle in mind that we have allocated unprecedented sums to alleviate extreme poverty, and are concentrating on providing more opportunities for employment.

We have identified three sectors that will have the most impact on inclusive growth: Agriculture has experienced a 51.3% increase in its budget this year, for example. We are also going all-out in our “It’s more fun in the Philippines” tourism campaign, along with a more liberalized air policy to increase access to the country’s secondary gateways.

And, aside from the aforementioned strides in infrastructure development, we are also set to roll out ten Public-Private Partnership projects this year, which will include schools and extensions to our train systems.

Good governance does encourage inclusive growth; being steadfast in our principles, leading by example, and sending a clear signal that corruption will not be tolerated gives us a certain measure of confidence that the 568.6 billion pesos we allocated to social services, which is about 31 percent of our entire budget, will go where it’s supposed to.

Transparency, accountability, and prudent spending also create fiscal space for social and infrastructure investments. This discipline has allowed us to channel resources to investments in our people. The budget we inherited in 2010 allocated, for example, 175 billion pesos to basic education. It now has a budget of 238.8 billion peso–a 36.5 percent jump after two consecutive years of budget increases. Our budget for health also increased by 48.5% over two years, up to 43.5 billion pesos from 29.3 billion in 2010.

The government’s conditional cash transfer program experienced an almost fourfold increase over the past two years, from ten billion pesos in 2010, catering to about 800,000 families, to 39.4 billion pesos this year for over three million families. All of these we were able to do without raising taxes.

These are amounts that have been generously augmented by those who share our vision of an equitably progressive Philippines.

The Asian Development Bank’s Official Development Assistance (ODA) assistance to the Philippines amounts to US$761.97-M. These include $643.85-M to projects concerning social protection and support; agrarian reform; rural infrastructure enhancement; credit for better health care; and irrigation in the Southern Philippines. You have helped out in our Public-Private Partnership Program, in our efforts to reform the justice system; and our energy-efficient electric tricycle project. We are getting to where we want to be faster because of your assistance. This meeting of your board of governors, in fact, reaffirms the newfound confidence that the international community has exhibited towards our nation.

For this, you have the gratitude of our people, and a commitment from my administration. Gone are the days when the funds you funnel to our country will end up like water leaking through a broken pail. You will continue to see results; you will continue to see a Philippines that is finally living up to its potential.

We are prepared to follow through on our commitments, and you are by all means welcome to see if we’re living up to our word.

Change has set in the Philippines, and we are open for business. It began with a people granting us the trust and opportunity to re-establish a government that truly puts them front and center.

It continues with a people empowered and finally aware of their vast potential; a people buying into a system where actions have consequences, and hard work reaps its rewards; a people willing to cast aside the negativity, eager to harness optimism into more opportunities.

It can only end with a people reaping the benefits of a system where growth is both inclusive and sustained, where progress is felt by all, and where every citizen lives the life of dignity that he truly deserves.

Again, on behalf of our people, we welcome all of you. We thank you, and may you have a very good day.

(President Aquino delivered this speech during the Asian Development Bank 45th Annual Meeting of the Board of Governors at the Philippine International Convention Center, Pasay City, on Friday, May 4.)

 

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