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Ressa: It’s nice to be here a year later, and most of the panel members were here last year. So, Bobby de Ocampo last year said the focus should be infrastructure, infrastructure, infrastructure. What are the key accomplishment in the last year, and what do you want to see happen next? Why don’t we start with Ed.

Francisco: In terms of the key accomplishments, the coalition has done its job. The PPP Center is in place; resource building is in the works. As Secretary Jimenez and Bill Luz said, demand is easy now that it is getting the supply out. It’s getting the strategies in place. I think that is what I want to see.

In terms of accomplishments, I represent the private sector. The private sector has already funded the DepEd classrooms. We at BDO are willing to provide the 30 billion [peso] financing for the LRT. We are willing to provide the 12 billion [peso] financing for the NAIA expressway. We are willing to work with rest of the locals. I am glad to have read that the JBIC is willing to lend the 30 billion [pesos] for the LRT, which is the component the government needs. That in itself shows you that we are putting our money where our mouth is, because there is a component needed by the private sector for the sponsor, which we are willing to provide and the Japanese government is willing to provide. All the local banks are competing. We are willing to finance MRT-7, MRT-3, even the Cebu Mactan airport, we are very interested in that. We just need to see the numbers. With the National Orthopedic, we are looking at the numbers and willing to look at the financing of that. With the automated fare collection, there have been more than two dozen interested bidders. I was in the bid conference. That shows you how successful these programs are. There is more than enough equity interested. The government, together with SSS and GSIS, has already launched the PINAI fund, and they are willing to provide equity. The projects are there, and we want more projects. The private sector is ready. There is enough demand. I remember when the DOF and DPWH went on road shows with the PPP, a lot of foreign interest showed up. I was with them in Singapore and Geneva, and it was always packed. I think they went to Australia, but I was not with them, and there was also so much interest. We are in our sweet spot, and we just want to make sure we don’t drop the ball.

The last point I wanted to say is that the PPP is not all the infrastructure the government is doing. Our NEDA speaker can elaborate. There are so many investments being done by the government that is not being reported but is showing up as investments. Those are also critical, because those have a multiplier effect.

Ressa: Let’s go to transportation.

Carlos: We’d like to thank the government—the Congress, too—for answering the call of the private sector. Airlines were concerned about the Customs, Immigration, and Quarantine overtime. The government finally decided we will operate 24/7, and we will have the budget for that. The second issue that international airlines were concerned with was the abolition of Common Carriers and Philippine Gross Billings taxes, which were both approved by Congress. They removed Common Carriers Tax and made Gross Philippine Billings Tax conditional based on reciprocity. The other issue is the amendment of the BOT law, which I think will be put into effect pretty soon by NEDA, allowing joint ventures and other modifications. Finally, they encourage the transfer of the use of Subic and Batangas by reducing the wharfage fee by 50%.

On general issues, we would like to have NEDA upgrade the multi-transport policy issue that will look at all the basic transport sectors in the country and see how we can make them interconnected. One issue brought up by Secretary Jimenez is that a lot of people don’t have to fly to Manila; they can head to other airports, too. It might relieve congestion at the NAIA 3. These are issues that can be integrated in a national policy. That means we also need a wider open skies application. We also agree that we should get that 5% GDP in investment infrastructure. Otherwise, we really won’t move forward. I’m glad it’s there in their plans.

Although there is another issue that we would like to address to Congress, because we inherited a lot of flaws from the Marcos regime, which combined the regulatory and developmental functions in the line agencies of the government like PPA, CAAP, and so on. This confuses the issue because public interest is often sacrificed in such an arrangement. We would like to separate the regulatory from the developmental functions. In the meantime, it can be done by an Executive Order. Allow the user to participate in the regulatory function, so they can at least benefit from all this development.

Ressa: Let me give the other gentlemen a chance. Ray Cunningham, it’s nice to see you again.

Cunningham: Thank you very much. The foundation for power is the Electric Power Industry Reform Act of 2001. It’s now approaching its 13^th year. The most significant achievement out of our 21 recommendations was in December of 2012, the trial period of the open access and retail competition was announced. In June it will go forward on a restrictive basis, but on an actual basis it’s absolutely essential to achieve the intent and objectives of the Electric Power Industry Reform Act. In addition, there has been a significant improvement to the transmission system under the concessionaire National Grid Corporation of the Philippines. Beyond that, not so much on the 21 recommendations.

For water supply, we have nine recommendations. The good news is significant progress was made on all nine. There are several bills in Congress under consideration. Some deal with regulatory reform, while some deal with structural reform. Both are needed. We advocate approaching water on a river basin basis rather than political geographic boundaries. Water doesn’t care what municipality or province it’s in, and to focus on all the benefits of water—be it water supply, power, hydropower, irrigation, or flood control— is very important. We are hopeful that during 2013 some positive measures will come out of the Congress that can help structure this. Some of the bills though, I must caution, are extremely bureaucratic and are unlikely to succeed, but there are positive signs in some of those bills as well.

Ressa: Let’s wrap it up with accomplishments in telecommunications.

Felbaum: On the telco side, which is predominantly driven by the private sector, we have a lot of positive developments over the last few years. We have I think nearly 90 million subscribers coming in, so there is high penetration. We have excellent fibre optic networks throughout the country, and good resiliency for supporting the BPO sector. We have strong wireless broadband. Both major networks are now deploying LTE, which is the next generation or fourth generation in wireless technology.

One issue we need to address in 2013, under former President Ramos’ tenure in the 90s, we passed Republic Act 7925, Telecoms Policy Act, which basically provided the legal framework for deregulation. That law is over 15 years old. In the digital world, that’s a long time. We need to move toward convergence. There were some efforts made in the last administration to pass legislation on convergence, but we didn’t get the muscle to make it happen. Convergence has to happen in the near future to help us stay competitive with our ASEAN partners.

Other items I might note—we have no Philippine satellite today. In the ‘90s we had the Mabuhay satellite, and it was a great bird which provided connectivity for the 7000 islands we have. Today, we have to source from Malaysia, Hong Kong, and Thailand, so hopefully, that’s something we can move forward. A strong satellite will provide excellent educational services all over the country.

Finally, we tried very hard this last year to support the creation of the Department of ICT, which will have a lot of merits. The House and the Senate passed it and got to the bicam session, but it was frozen there. Unfortunately, we ran out of time and we’ll have to start again. Hopefully, we can make that happen in 2013.

Ressa: Undersecretary Tungpalan is also on the panel. Let me ask you to put this in context,  because if you look at the handbook that Arangkada has put together, we are not doing so well in ASEAN-6. In fact if you look at Policy, we rank fifth out of the six nations in capital outlays. For airports, we are at the bottom. For Seaports, also at the bottom. For Roads and Rails, we are fourth out of six. For Water, fifth out of six. Telecommunications is fifth out of 6. We actually moved back from from second from 2003. What do we need to do to compete more?

Cunningham: In Power, we need more foreign investment. Congress passed the Renewable Energy Act, but DOE imposed foreign ownership restrictions. Why? If you are trying to build a power plant such as my colleague Dan Chalmers, the co-chair of our Energy committee, why does a foreign contractor have to get 60% Filipino partner? The PCAB, the Philippine Contractor Accreditation Board, is in the way. We recommend doing everything we can to allow foreign investments and allow the benefits of major foreign expertise.

Ressa: Ito?

Carlos: Concerning the congestion at NAIA, we have the open skies. If we applied it, as Secretary Jimenez said, people will fly directly to the other airports. The other thing is we should light up the other provincial airports so they can operate at night. This is something we can do. Why don’t we apply existing policies?

Ressa: Ed, do you want to add?

Francisco: There’s this memo that the SEC, together with the Supreme Court, came out with on foreign ownership, and it looks like there is going to be—without preempting—at least, a new draft coming out. It’s not perfect, but it will address the issues most of the investors and sponsors have on doing business.

Ressa: On telcos, how could we have moved back?

Felbaum: I think one of the issues that Ray mentioned is that we are also handicapped by a 60-40 percent cap on foreign equity. That’s still a struggle. That takes changes in the constitution to administrative. That’s a tough one. On the other side, we talk more frequently about the creation of the Department of ICT. We are the only nation in ASEAN that doesn’t have a dedicated full-time cabinet secretary overseeing ICT. Although DOST is trying to cope with supporting BPO, the telecoms has moved to the back burner, and we are not getting the support.

Ressa: We are actually fourth out of six in terms of internet penetration.

Tungpalan: I just want to say that we have a very clear and feasbile Philippine Development Plan, and the roadmaps coming out will give very specific directions. I think the bonus is, we now have in the infrastructure committee a working mechanism that brings together the infrastructure agencies to do what, where, and when. That very mechanism can make a difference in infrastructure planning and development.

Ressa: Ito?

Carlos: We have Subic and Batangas seaports operating at 3% capacity. We’ve been pushing traffic in that direction. The big trouble is, the trucks are causing tremendous nightmare in Manila. What we need is the MMDA to compel those trucks to go to Batangas and Subic instead. Let’s tighten that window of operations for the trucks. That will ease the traffic for the Manila traffic system. The government has already helped in reducing the wharfage fee. What we need to do now is reduce the cargo handling fees for the sake of the shippers.

Ressa: Ray, you have always been outspoken. If you were to want one thing done this year, what do you want?

Cunningham: On the power side, we need open access and retail competition. We’d have to wait two years, because despite having satisfied the criteria a long time ago, the computer programs, the billing and settlement programs, and so forth were not ready. No one has taken any step. We desperately need that to go forward, because people are getting impatient to see the effects of the power reform.

Ressa: We still have one of the most expensive electricity costs. I know this has been a problem, and everybody has addressed it in different ways.

Cunningham: True. Power is expensive in the Philippines, but we do not subsidize our power. One reason why power is so cheap in some countries relative to the Philippines is because it’s being subsidized. This is counterproductive and many of these countries are getting out of that mode now. In addition, we must remember that the Philippines is a group of islands. In order to transmit power, we need submarine cables. Those are things that we can’t change so easily. Nonetheless, I believe EPIRA can deliver on its promise.

Ressa: Will there be power shortage in 2013? We’ve been seeing some of it in 2012. Has it been as bad as expected by Arangkada? Without what you are asking for, what do you say?

Cunningham: There is a chance that we can skate through until 2016. Right now the GNPower project is being commissioned. It should be ready by the beginning of the second quarter. That should help us greatly until, perhaps, 2015. At that point, whether the coal fire plants will carry us through until other cheaper plants are built, I’m not so sure.

Ressa: Thank you, our time is up, gentlemen.

Part 3: Big Winner Sectors (Infrastructure), Panel Discussion 2 Transcript by Arangkada Philippines

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Rimando: Good afternoon, everyone. This is the third panel. We’ll talk about business costs, education, the judiciary, and social services.

Let’s start with a question: What do you think have we accomplished in 2012 as far as your sectors are concerned? Let’s limit it to just three and then we move on from there. Let’s start with Mr. Yang.

Yang: To give you some perspective, I probably will represent the quick service industry or the informal eat-out industry. We are one of the biggest employers, so labor is one of our most important factors for success—the quality of labor. In the field of education, what’s most important to us is that the quality of education improves for our labor force. I think we are lucky that Filipinos have a natural sense of hospitality. In our business that’s critical, but the educational level needs to improve, so the K+12  program which the government has embarked on provide a longer term increase in the competitiveness of our pool of labor.

Rimando: What about in the health sector, Dr. Galvez-Tan?

Galvez-Tan: For me, the three biggest policy and program change that we truly welcome in health poverty and population are, number one, the passing of the Reproductive Health law. I think there has been no other substantial law that has been passed.

Second, the passing of the [new] sin tax law. Sin tax is very interesting. It’s the first ever earmark tax for health. For the first time in the history of the Philippines, we have tax earmarked for health, and this year we will start to benefit at least PhP30 billion for health.

Third, I’d like to see the program on public-private partnership in health. I’d like to congratulate the Department of Health for launching the public-private partnership in health last year, officially. They have a Center of Excellence now that is based in the National Kidney and Transplant Institute. I consider these the three most important policy and program changes that will guide the actions of government and private sector in the next three years. I am almost optimistic that we will get something concrete by the end of 2016 if not by the end of 2013.

Rimando: And Ms. Nuesa?

Nuesa: For the most important accomplishments for 2012, they are in your packet. But I would like to cite that the first is a coordinated approach toward reforms in the justice system—the DOJ as well as the Supreme Court both have their packages of judicial reform initiatives. The Department of Justice together with USAID have been spearheading the Philippine Development Forum with a focus on the rule of law. There is already what they call a Justice Sector Coordinating Council (JSCC), composed of the heads of the Department of Justice, the Chief Justice, as well as the Secretary of the Local Government.

Second would be the speedy resolution of cases, which is in [the Arangkada] report already. The case load per judge has declined—fifty percent increase in case resolution? That’s a lot. There had been a number of improvements that are moving towards speedier resolution of cases, including alternative dispute resolution (ADR) and the like.

The last is, at least, there was improvement in the consciousness of courts in deciding on economic issues, although that has also been cited as a major problem. I’ll get to that later.

Rimando: We will follow up on cases touching on economic issues. Mr. Forbes?

Forbes: Business cost is very important. If you can’t make a profit, you can’t run a business. If you can’t make a profit in the Philippines, you go to a country that is more competitive; the very point that Bill Luz was pointing out in his rules on having to move forward. We need a much more comprehensive study on what business costs we can reduce. In the last year, I would like to single out two areas where there was progress and one area where I think we fell backwards. For the airline industry, the fact that the government is now absorbing the cost for the CIQ is extremely important to the growth of tourism and having connectivity, because our actual inbound and outbound flights from abroad has not been growing, while in competing countries like [Indonesia], [Thailand], and Malaysia, and around the region, it’s been growing by low double-digit figures. That and the signing by the President of the [bill abolishing] CCT-GPBT—those are very important for growing torusim.

Second, labor is a very big cost to companies. It’s the reason why half a million jobs in the garment industries have been lost here, and three million have been created in Bangladesh. The cost of holidays and leave days—34 leave days per year for the average male employee plus 21 holidays—you begin to wonder when people are going to get work done. They need to be rationalized. There are two steps forward in that in 2012: The first is an important Memo that was released by the Institute of Labor Studies at DOLE, which analayzed in five pages the number of paid non-working holidays in the Philippines compared to our regional competitors. That’s a policy that was circulated to our politicians in the House and the Senate who sometimes like to give away the expenses of businesses without properly considering or talking to the businesses. There were no new paid non-working holiday in the past year.

The other one is the two-tier wage system. The policy was announced two years ago in this administration. What it essentially does is it stops the constant escalation of the minimum wage. The minimum wage became equivalent to the average wage. When you do that, your other competitors in the region will eat your lunch because their minimum wage is much lower. We can keep the minimum wage above the poverty level, which is what the policy is, and then have a second tier for productivity. It’s important that we implement that over the next several years, because Malaysia introduced the minimum wage; Thailand has brought one up to the same as level the Philippines; in Jakarta the new mayor approved a 40% increase; and in China wages are going up. If we can maintain a level of control over this and reform the labor code, we will begin to move into a sweeter spot to attract some of the manufacturing and other investors that are moving around the region.

The negative I want to mention about last year was the cost of living increase in Manila. According to the Mercer study two years ago, we were less expensive than Hanoi and Ho Chi Minh. We are now more expensive. You would expect that because the Vietnamese Dong depreciated significantly, and the Philippine Peso appreciated significantly, so we have to watch that out. If we are not careful, we are going to be more expensive than Bangkok and Kuala Lumpur.

Rimando: Talking of business costs, we hear a lot from our economic managers that we have to be competitive as far as labor costs are concerned, especially with the growing costs in China. Has the government been listening to your recommendations? It’s always there, and you’ve always mentioned these issues to policymakers.

Forbes: You see companies closing. You find companies setting up in Jakarta and Vietnam. You have to find out why they’re doing so. It’s an important issue. When you have too high a cost of employment you can close down and go to another country, shed workforce, ask your workforce to work harder, or go underground. Peter Wallace wrote a column recently saying you ought to be able to dismiss an unproductive employee, because you don’t lose a job, you just hire a more productive employee. There is no net job loss. You just have greater efficiency and productivity.

Rimando: May we hear from you, too.

Mendoza: When we talk about the three reforms inside the government, let me start with the Commission on Audit, because this is where I came from.

First, we lifted pre-audit, because statistics have shown that when there was pre-audit, there was also so much corruption. This means it is not a perfect system that will prevent corruption. We lifted it because we believe such is the responsibility of management.

Second, we tried to strengthen integrity inside the Commission. We started filing administrative cases against our own people. We published several guidelines and policy issuances, the first of which is on the benefits or assistance that can be extended to our auditors who are resident of the agencies we are auditing, so the agency heads are aware that these are the only legitimate assistance that can be extended to them.

Third, we introduced the package audit, so there will be consistency in the opinions of the auditors in various agencies. Last December, we also introduced the citizen participatory audit. We are encouraging citizens to be active in terms of audit.

Recently, we have issued policy guidelines disalowing the use of public funds over tarpaulins, like “Happy Valentine’s Day” or “Happy Graduation” or “This project is in the name of so-and-so.” We do believe that certain information has to be relayed to the public, but only those information na talagang kailangan [which are truly necessary]. Sumabay ito dun sa “Anti-Epal” ng Comelec. [This coincided with the “Anti-Epal” initiative of Comelec.]

On the public financial management arena, we are working on the government integrated financial management system. Nandun yung [That includes] accounting, budget, and procurement. In addition to this, we are also looking into the electronic integrated risk-based audit system para yung mga auditors namin dun sa mga areas na malalayo [for our auditors based in far-flung areas] like the Autonomous Region for Muslim Mindanao ma-susupervise namin, makikita naming yung mga working papers nila [we can supervise them and check their working papers], so that we can be on top of what is happening, while the audit is happening, in a region that is very sensitive.

We also have some improvements in terms of our collaboration with the Office of the Ombudsman. We have the so-called joint investigation team between the Office of the Ombudsman and the Commission on Audit and we have prioritized cases that we will jointly look into. This is very important especially in terms of managing the gap between audit and prosecution. In our country, we do the audit, while the Office of the Ombudsman evaluates and files the case in the Sandiganbayan. Siyempre, [Certainly] while we are doing the audit, we have the mindset of an auditor. Only a few auditors will look into what are the legal implications of this and what are the elements of the crime, so we need to interact with the Office of the Ombudsman, so while the audit is being done, the legal requirements are already being looked upon. Collaboration with the Office of the Ombudsman also allows us to facilitate or shorten the duration between audit and case filing. For some complainants especially those going into our office, we immediately evaluate the case if it is “auditable” or something that is within our jurisdiction or can be immediately endorsed to the Office of the Ombudsman. At times, we immediately refer it to the appropriate office, and that office will immediately request for copies of the audit report to hasten the fact-finding and investigation at the Office of the Ombudsman. More or less, these are the areas I believe have been creating some traction in the field of prosecution aside from public financial management.

We are also looking into the development of the single treasury system, which will solve some of our excess liquidity, and also the unaccounted depository accounts which are excluded in the books. Our audit of various agencies have shown that there are several bank accounts in the name of government agencies but these are not included in the books, so they spend it like its their own private resources. We are trying to solve these weaknesses we have seen in our public financial management system.

COA, as a constitutional agency, exercises both accounting and audit functions–limited accounting though. That’s why we both have to be active in public financial management, as well as audit, and corruption prevention.

Rimando: Before we move onto the wish list you have for 2013, let me just follow up with Mr. Yang. You mentioned about K+12 a while ago. Can you give us more information on how the K+12 affect your business or your industry, at least?

Yang: I think what it really does is improve the quality of labor we have, and that’s looking forward. Today we are lucky in the sense that we do have bodies for labor. Metro Manila will meet the needs more in terms of quality, although our industry is growing not just in the National Capital Region, but all over the country. We actually have a bigger need in other parts of the country like Visayas or Mindanao, so I think by standardizing the curriculum and increasing that by two years, that really helps us in the future. It helps us reduce our training and development cost, which we spend a lot of money in today.

Rimando: This has something to do with your supply of qualified managers, I suppose?

Yang: Managers as well as restaurant staff.

I should take the opportunity to mention something about strengthening private and public partnership. That is something we would like to see more of. We’ve taken advantage of that with the Department of Labor which has this special program for the employment of students (SPS). What we have done is partner with government to provide employment for students who can’t afford to go to school. By tying together, we are able to provide jobs. This year, we hired 4,000 students through the program, just for our company. If you include the whole industry, that’s a lot. By doing that we are able to bridge the gap for those unprivileged students who are unable to finish school by providing employment. That’s another area that we should take advantage of.

Rimando: We are looking forward to that. Dr. Tan, your wish list for 2013. You’ve had a dramatic 2012.

Galvez Tan: My wish is that, one, the sin tax, reproductive health as well as the PPP will be integrated. By 2013 the implementation should help with the decrease in poverty. This can be done through a public-private partnership.

The biggest problem in health is equity. We do have tremendous health resources in the key cities of the Philippines, but nowhere can we see it in the rural areas. My proposal is for both public and private sectors to be involved in at least six regions of the poorest of the poor. These are the six regions with the highest maternal mortality, the highest infant and child mortality, and the highest malnutrition [rate], affecting our workforce. First, the Autonomous Region of Muslim Mindanao is my top priority; second, the Zamaboanga peninsula; third, MIMAROPA; fourth, Samar, Leyte; fifth, Bicol; and sixth, the Cordillera region. This is a total population of 20 million. We can improve equity using PPP, sin tax, and reproductive health frameworks in these areas.

There are areas of PPP where I’d like to involve all the chambers of commerce. First is pharmaceuticals. The number one problem in the Philippines is access to medicine, particularly, low-cost generic drug. Right now, we only have 18,000 pharmacies. We have a short fall of 24,000 pharmacies. That’s a lot of investment for PPP.

Second area is laboratory and diagnosis. We need to upgrade our services across the country. If we can focus on these six regions, universal health care can be demonstrated in 2013. This will lead to universal healthcare in the Ilocos region, Quezon province, and others. If we can show it in these six regions covering 20 million Filipinos then we can move onto the rest of the population.

Third area is birthing clinics. We have a shortfall of 4,000 birthing clinics. The private sector could help us build birthing clinics and even put human health resources in this. In 2013, we can, again, foruc on these six regions just to cut immediately the poverty level and improve access to universal healthcare.

Even in primary health care, we have a short fall of 24,000 clinics. We still have 24,000 villages that have no health infrastructure at all. They have schools, but nowhere a health center for these 24,000 villages.

Regarding health human resource, I would like to see the private sector participating in these large projects providing health services for these six regions. The government does not have enough nurses, midwives, and doctors in these areas. The sin tax, I hope, can help but I’d like to see private sector participation in this.

Finally, let us involve all the ICT companies in providing emergency healthcare and making use of mobile technology for diagnosis, treatment, and referral in, again, these six regions.

Rimando: Thank you. Let’s move onto Judiciary. You’ve touched about a strategic court for cases that involve economic issues. Can you tell us more about it and is it part of your 2013 wish list?

Nuesa: Yes. When it comes to my wish list, the first concerns economic and strategic issues affecting the business climate. Some of the rulings are deemed detrimental to the economic climate, although the Philippines is already moving very fast in certain areas. One thing I could recommend, to quote former Chief Justice Panganiban’s book With Due Respect, “when it comes to economic agenda, the judiciary should adopt a ‘no interference rule.’” What does that mean? Former CJ Panganiban has always espoused the theory that Filipinos have the right to prosperity under Articles 2 and 12 of the Constitution—the rights to prosperity and freedom from poverty. What is being asked of the courts is to consider the economic issues and the rights of the citizens to a better, prosperous life when they analyze cases that involve the economic agenda and the key strategic issues of the country. It is quite different from protecting the civil rights, where it is a strict interpretation, but when it comes to economic rights, it is what he calls a differential interpretation of the law. It is essentially respect for the independent powers of the three branches of government.

Of course, the clogged dockets are still very much a problem despite all of these efforts, although some gains have been made in the past. We should continue the system, the coordinated approach, the use of automation, decentralization, improvement of judges’ salaries–all these are related.

Aside from those two, we also have to do something about the use of sheriffs and courts. This is written in the report as tools of legal harassment. There are also questionable TROs.

Now, how do we handle those? In the business sector we have a performance system where we reward good performance. There is also an accountability system to penalize errant behaviour. We will be seeking those. We need a performance metrics system for the courts to identify the justices, judges, and prosecutors who are unable to resolve their cases within the required time and receiving a lot of complaints. On the accountability side, we are suggesting that there has to be an independent investigation, perhaps, a whistle blower policy even for the courts.

As a last statement, there is nothing like advocacy. There is nothing like the private sector also getting involved, making their voices heard, and for this very reason, we are having dialogues with the Department of Justice and the Supreme Court. There is hope, but we have a long way to go.

Rimando: We’d like to touch more on the Whistle Blower reform. Ms. Heidi, I think that’s right up your alley.

Mendoza: My wish list is very simple, and that is insulate the bureaucracy from politics. By doing so, those inside the bureaucracy will feel empowered to implement the laws, rules, and regulations. Let us not go far with so much modesty. I have been working hard, and I am trying my best to do the things I am supposed to do, but you see, I have so many opponents inside and outside the office. I cannot get confirmed until now. When we talk of political will, to be honest, I have not seen as much political will as right now especially at the top. But the problem is, kapag nag-iba nang leadership, nag-iba na ng mga heads of agencies,  pano natin i-eensure yung reforms na sinimulan [once the leadership has changed, once the heads of agencies have changed, how do we ensure that initiated reforms continue]? That can only take place if there is a bureaucracy that is insulated by politics, that people inside are so empowered that they have the will to implement the laws, rules, and regulations.

Sa totoo lang, [truthfully] we are talking of passing another anti-corruption law, eh ang dami na nating batas [but we already have many laws]. When I had the opportunity to be invited outside, pag tinitingnan ko yung law natin [if we look out our laws] when compared to others, halos parehas lang [they are almost similar]. Pero saan nagkukulang? Dun sa implementation. Hindi rin natin masasabi na lahat ng nasa loob ng gobyerno hindi marunong magpatupad ng batas. Marami nangangahas, maraming naglalakas loob, pero sila yung binabatikos. [But where do we fall short? In implementation. We are not saying that everyone in government doesn’t know how to implement laws. Many are aggressive and strong-willed, but they get sidelined.] Nagiging tuloy two-pronged yung fight [The fight becomes two-pronged]: the actual fight against corruption and the fight against perception.

So sakin napaka-simple [The solution, the way I see it, is very simple], insulate the bureaucracy from the politics and empower the people inside to implement the laws, rules, and regulations. You know, if we insulate the bureaucrats, kung iinsulate natin yung mga tao sa loob, na kaya nilang mag-implement ng laws, rules, and regulation, dadami ang marunong manindigan, dadami and magrunong tumayo. [If we could only insulate the people inside, if they can implement laws, rules, and regulations, more and more people will learn to have moral conviction and learn to stand up for what’s right.] The people inside—the bureaucrats—should find some kakampi [allies] from the citizens. Hindi yung pag ikaw yung gumagawa ng tama, ikaw yung makakasuhan [It shouldn’t be the case that people who do the right thing are sued in court], and then you feel so alone, and then you feel all the pressure. This is really nakakalungkot [disheartening]. Number one wish ko yan. [That’s my number one wish.] Let us insulate the bureaucracy and empower the people inside to be able to implement the laws, rules, and the regulations.

Second, I am expecting a lot from the private sector. Saludo po ako dun sa [I salute the] Integrity Pact but I am asking more than the private sector committing na hindi ka mag-offer ng bribe [not to offer bribe]. We need more commitment on providing the information and the necessary cooperation in terms of preventing corruption, and most especially, in prosecution. I’ll set a specific example. We’re building cases against ghost employees. Kasi everytime may eleksyon, may ghost employees. [Because every time there’s an election, there are ghost employees.] Dyan nila kinukuha yung pang kampanya nila e. [That’s where they get their campaign funds.] Alam niyo po, napakahirap, susulat kami sa [You know, it’s very difficult when we have to write to a] private company so-and-so. “May we ask for the details of employment of the following, because we found out these employees are working for this company?” We get replies like, “Sorry, we could not give the necessary information.” Papano natin sisisihin yung corruption sa gobyerno, kung yung private sector, kahit yung napaka simpleng bagay, yung pag provide lang ng information, hindi natin magawa. [So how do we pin the corruption on government when the private sector cannot provide information as simple as that?]

In most of our cases on overpricing, most of them are being dismissed for lack of evidence. Why a lack of evidence when you and I both know exactly the price of this item? The point is, the moment we try to ask that particular supplier, “Can we be given a copy of the receipt or invoice of this particular item?” No one will participate because they will raise the probability that the next time they will enter into bidding, they will get the punishment or the not-so good cooperation from the LGUs. Again, I will repeat, the Integrity Pact should not only include visions of non-payment of bribes, but also providing the necessary information, especially evidence for prosecution and the necessary assistance, lalo’t lalo na po kung actual prosecution na [especially when it’s time for the actual prosecution].

Yung government lawyers—alam yan ng DOJ— [The DOJ knows that if you are a government lawyer] you will be handling five to 10 cases. Ako po, government witness, ang naghahawak sakin isang prosecutor, ang hawak niyang kaso sampo. Ang kalaban namin number one na law firm, apat na abogado. [I am a government witness, and our lone presecutor is handling ten cases. Our rival is the number one law firm with four lawyers on the case.] It is so unfortunate that the ones who are corrupt are the ones who have the money to pay the highest paid lawyer. Ang sama sama ng loob ko, andito kami, nagdedefend ng kaso ng gobyerno, pero nakikipaglaban kami sa pinaka magagaling na abogado, [I feel so much anger and bitterness, because here we are, defending the case of the government, but we are up against the best lawyers in the country] and they are being paid out of the profit of corruption, and at times, they are schooled from the University of the Philippines. It hurts me a lot.  I hope the private sector would take it so seriously. You want to end corruption, help the prosecutors. Be vigilant in monitoring cases. In my office, I need six lawyers. Until now, iisang lawyer ang nakuha ko [I was only able to recruit one lawyer] who is about to resign. You know, we need to find the right incentive for those people who are doing good.

On the other hand, we have to make sure that doing those that are doing bad would necessarily and immediately be punished. So again I will repeat, I am expecting much from the private sector.

Next, I am also expecting vigilance on the part of the citizen. When we assumed office, there were so many complainants.  But if I take a serious look at the nature of the complaints, dalawang klase lang yan, isa natalo sa eleksyon kaya isinusumbong yung nakaupong mayor, o pangalawa, may utang na hindi nasisingil sa gobyerno kaya humihingi ng tulong. [There are only two types: one, a candidate is defeated in the election and reports the incumbent mayor, or two, there is an unsettled debt with the government, so he is asking for help.] Very small yung percentage ng complaint na nakikita kong pursigido, seryoso, nag-cocomplain para labanan yung corruption. [There is a very small percentage of complaints, which are pursued tenaciously and seriously, complaining to fight real corruption.]

You have recommended reforms on procurement. I will admit that we must also recognize that there are seeming tractions created in the reforms initiated outside the area of procurement. When we look at citizens monitoring procurement transactions, we are going back to the same problem. May mga LGUs nag-iinvite ng mga observers [There are LGUs that invite observers, but] no one comes. Private citizens will be asking, “Where do we charge our gasoline allowance”, “Where do we get our allowance while attending the bidding?” If we want to fight corruption, if we dream of good governance, we do not rely on government to do it alone. We, as citizens, as private sector, as people inside bureaucracy, should be able to contribute the best we can. After all, it is our money.

Rimando: I think what you just said are the wishes not only for COA but for a lot of the sectors represented here. Let’s wrap up with you, John, with business costs. It’s 2013; we just came from a year where we grew 6.6%. What are your wish list for 2013?

Forbes: First of all, I will repeat one that Ray Cunningham mentioned—open access. It was supposed to happen two years ago. In this very forum in January of last year, the President asked the Energy Secretary what the target was, and the answer was September. So now, that target is June. Let’s make it a hard and fast target. Let the infrastructure be in place and then let’s hope that it works. We don’t know for sure yet, but we’ve been trying for this reform for 15 years. The law was signed in 2010.

Second, we must work much harder on reducing red tape and that’s related to government regulation. The bureaucracy needs a mindset change to deregulate and regulate only as where and when necessary. We could consider experimenting with sunset provisions. Perhaps in the Congress, they can see if this works. We have some things that have been around 30, 40 years, and they shouldn’t be there anymore. There is no time to go back and figure out what should or shouldn’t be there; it’s a gargantuan task. So if we begin to do it for five to 10 years, and then it ends, you have to revalidate it. We’re always asking whether it continues to be necessary, and we see an example of that in the recent pronouncement of Secretary Purisima to look at the Foreign Investment Negative List, which contains 30- or 40-year old laws. I understand the Congress also is interested to see whether or not they continue to be in the national interest.

[Third] E-governance, we slipped on that. In 2003, we were third of six countries in ASEAN, and now we are fifth. I worry about that because e-governance goes hand in hand with the program of this administration to reduce corruption. Whether we do it with DICT, DOST, or DBM—there just has to be more emphasis on enabling citizens and smaller companies, not big businesses or companies, when they get their license, NBI clearance, or when they do this or that. There is great Internet penetration in the country. They may not be able to afford computers, but they can afford to go to an Internet café. Let’s bring the government to the Internet café rather than forcing the citizens to go stand in line and waste time.

Finally, transportation. We are facing gridlock in big cities like Manila and some of the smaller cities. There are solutions that are coming. The NLEX-SLEX connector for the extension of the skyway, LRT 1, and other rail systems, but they will take three or four years to build, and yet we are adding 150,000 cars. If we are like Indonesia, they added a million new cars last year. I don’t know if we will get that high, but in the interim, we should get solutions to the buses—whether to move them outside the city, whether radically, they should nationalize all the buses and privatize the result—something like what former President Ramos had where he had emergency powers for the power sector. Maybe some emergency powers for the transportation crisis. On the inter-island cost of transportation, clearly, the RORO system needs to be expanded.  When I was down in Davao at the PDF, I heard the people from Mindanao for the nth time, maybe for 20 or 30 years, that the cost of inter-island shipping is too high. I also heard Secretary Singson say it’s time we stop talking about it, because it’s time to implement it. That’s a good attitude for 2013. The Port of Manila also needs to be decongested. We heard that from Ito Carlos earlier. We’ve got the infrastructure in Batangas and Subic, but it’s underutilized. I’m told that 40% of the traffic in Manila is because of the trucks in Manila. Hopefully, our exports will go up through new manufacturing investments, but we’ll shift the point of the exports to Subic, Clark, and Batangas.

Rimando: All right. There is actually a suggestion to open up the floor to questions. Are there any burning questions that you would like to raise?

Q&A Participant: The question is [suggestions are] addressed to everybody but especially to the Auditor General. It appears that the underlying problem we have is the application or implementation of the justice system down to its lowest level. If private companies are hesitant to cooperate, its because they fear that they will be hit back and the legal system won’t be followed. My suggestion is this: To legislate an additional 1% tax levied on companies having net profit in excess of one billion (pesos) for the justice system. This fund cannot be touched. It will be in the line budget, but it cannot be touched even by the President to transfer to another budget line. The justice system can use the budget to train prosecutors properly down to its lowest level, and citizens will not have so much fear in cooperating in investigations. For the companies, in the long term, they’ll be in a better position to compete and plan the future, since they know that the justice system will give them the protection they need. The additional tax of 1% is really an investment for the future.

For my last suggestion: It appears that we have forgotten a basic need, and that is the NEDA Board should be divided into two. Half should be from the private sector, and the other half from the government. The President remains the chairman, and he will have to make the final decision on contentious matters. He cannot just push it aside and have someone else be blamed. We are complaining about the private sector having so much problem. Let’s be part of NEDA, and be part of the Board of NEDA, which is the overarching authority for the development of the country.

Nuesa: Going to the judicial fund, since that requires legislation and taxation, we can refer that back to an appropriate committee. Among the things that I have learned from our coordination with the Supreme Court is that they are getting less than 1% of the national budget. They have requested for greater independence from LGUs that give them extra allowances, and I think LGUs also provide for their Capex, meaning the whole of justice—the structure and the buildings—have to be constructed by the LGUs. Those are the things that have been raised, and maybe that’s one thing that we can address. Regarding the legislation the gentleman is proposing, that’s something that has to be discussed in another forum, but I guess that is duly noted by TAPP. On the NEDA side, I think that’s a totally separate matter. I don’t know if any of the gentlemen with me would like to mention that. I know there is a NEDA infrastructure committee. Regarding the involvement of the private sector, yes, that’s very much welcome.

Rimando:  [Question on TRO flashed on the screen: What are latest stopgap & damage-control measures against our Judiciary Department’s TRO system, the bane of foreign investors, over infrastructure development projects; a typical example of which is our experience & lessons learned from the costly litigations of the NAIA 3 Airport Terminal project?] This is regarding the TROs and it highlighted an infrastructure project that has been raised many times in this forum, the NAIA 3 airport terminal project.

Nuesa: Regarding TROs, there is a new Supreme Court memorandum issued in 2007 where unlike before, after a writ of preliminary injunction or TRO, it can be an indefinite or ongoing suspension. The courts now are required within six months to decide on the merits of the case so that it’s not a TRO forever.

Forbes: I don’t want to talk about the NAIA terminal project, because that could take the whole afternoon to do it justice. I can say that in a meeting last week with the new Secretary of Transportation, he assured us that the target for getting Terminal 1 open is before Christmas. They are about to enter a contract with a very respected Japanese construction firm Takenaka, which is the one that built the airport for PairCargo, and while that company is still owed $90 million by PairCargo from the project, they will fix the systems which have been neglected since 2005 and get it operational. I hope that target is a hard target.

Rimando: We hope so, too, because we’ve been hearing about NAIA 3 for ages since 2002.

Forbes: Terminal 1 is also being fixed up gradually as we all noticed when we go there.

Rimando: Any other question from the floor?

Q&A Participant 2:  Good afternoon. I am Jen Galvez from Vanguard News Network. My question is addressed to Ms. Heidi Mendoza. Since the time of your famous testimony of last year’s very high profile case, has there been significant increase in case filings in need of your office investigation? Second, what is the current ratio of cases filed and successfully dealt with under your watch?

Mendoza: Let me just qualify the question. From the time I assumed office, there were so many complaints. We cannot talk of cases filed, because it will take a number of months before you can develop a case, before you can file it, and before they can be resolved. I was an auditor of one specific agency, and I filed a case against the Governor. It took at least 14 years before the decision was affirmed by the Supreme Court. Forteen years. Hindi natin pwede bilangin sa dalawang tao ilang kaso yung na i-file. [We cannot count alone the number of cases filed.] Let me just talk about the number of complaints that the office is receiving from ordinary citizens. I think on the first day I got 4,000 emails. Most of these complaints are very simple in the sense that they are asking for copies of annual audit report. Some are asking for clarification in terms of COA policies. There are some real complaints which we are pursuing, but they are not yet in the stage where they have already been acted upon, elevated to the Sandigan, and decided at that level.

Rimando: Dr. Tan, you want to say something?

Galvez-Tan: I just want to make an announcement that for those in the private sector who want to do PPP projects in health, I have in my list 25 of the 81 governors of the Philippines who have committed themselves to help and are willing to spend money in health. Of the 25, 13 are in the six regions that I have talked about. I hope all the chambers here in Arangkada can support this to reach equity, ensuring that the poorest of the poor are enrolled in universal health care and insurance.

Rimando: Thank you, sir. There was a question flashed a while ago about the Maguindanao massacre, can we have it again. “How far are we in resolving the Maguindanao massacre case?”

Nuesa: I do not know exactly where it is at, but we are still far. One problem we did raise before is that there are [over] 200 people who have been sued in connection with the Maguindanao massacre. I think the lawyers will be in a better position to explain this , but as I understand it, since it is supposed to be a crime of conspiracy, they are supposed to be tried together. It has been proposed that there must be a system of isolating the masterminds from those who are co-accused. The number of accused alone has been hampering the movement of the case. There might be a solution already. We will ask where it is, but yes, it has been taking so long, unfortunately.

Part 4: General Business Environment, Panel Discussion 3 Transcript by Arangkada Philippines

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Alcuaz: We have about 30 minutes for this discussion and about 10 minutes for questions. If anyone has a question at any point , please stand up, wave your hand, and I will throw you into the discussion. Let me introduce members of the panel. Of course, you know the Secretary of Tourism Ramon Jimenez. Aileen Clemente, head of Rajah Tours, is from the Philippine Travel Agencies Association. Dr. Rolly Dy, representing agribusiness sector, is with the University of Asia and the Pacific. Bobby Batungbacal is with Dow Chemical and also with the Chemical Industries Association. He represents the manufacturing. John Ridsdel is with TVI, which operates a mine in Zamboanga del Norte.

I will ask everyone one or two questions, and I will ask the same question to everyone. [First Question] Could you point out in your sector what’s been the biggest accomplishment or the biggest challenge in the last one or two years.

May we begin with the mining sector. John?

Ridsdel: The mining sector, is the one that, I think Secretary De Ocampo indicated last year had a growth rate of minus 7% and reflecting on John Forbes’ review of the Arangkada scorecard track record, mining is not advancing to the same degree. So as Roger Dimmell [Canadian Chamber of Commerce First Vice President] said, the challenge is, how do we make mining—I prefer to use the term mineral development—go forward.

I’d like to quote a recent speech by Finance Secretary Purisima. In a speech to kick off the country’s initiative to join the Extractive Industries Transparency Initiative, Secretary Purisima said and I quote, “If we are able to resolve the issues we are dealing with in mining, this industry can actually provide an extra gear or two to the Philippine economy.” In fact, said Secretary Purisima, “I believe mining can easily provide 1 or 2 percentage points growth of GDP if we are able to do it properly.” In short, mining can be a major contributor to the economy, social development, revenue, and recognizing the Philippines for investment grade. Looking back on 2012, I think industry would say that the number one accomplishment was that the Administration decided what the issues are. Secretary Purisima said we can resolve the issues. It took some time, but in fact, they have identified what those issues are. Executive Order 79 is a framework going forward to resolve the issues.

The Administration has, if you will pardon the expression, passed through the valley of doubt and emerged on the other side on the plateau of commitment. There are clearly a number of good elements in EO. The Executive Order recognizes existing contracts, it established a cabinet level committee moving forward, it commits to the Extractive Industry Transparency Initiative, it promises to do something about the scourge of illegal mining, and it asserts the primacy of national law over LGU ordinances.

The bad news is that it is taking a long time to get to this point. Meanwhile the moratorium on mining continues, and industry is on hold and even going backwards, minus 7% was the number Secretary De Ocampo had in his remarks. Except for companies with existing contracts which are recognized, the industry is staying away in droves. There are no new agreements, companies are not exploring, and we have to remember that in the extractive industries, it takes a long time to wind things back up. So while we decided what the main issues are to resolve, the problem is we actually didn’t resolve any of them.

The biggest issue to resolve, starting to look forward, is the fiscal regime or government share where government thinks it is not getting enough. And now because it is a financial issue, we have to wait until there is a new Congress, and so industry will be going backwards, and be in a moratorium even longer. For the record, the public sector share as we refer to it, not just the Finance Department’s tax receipts, but the public sector share is actually much bigger than what the government appears to think. That’s because not only does the industry pay excise tax and income tax which the Department of Finance sees, but it also pays something like 20 other taxes to various government department, agencies, and LGUs. And a 1-2% gross royalty to the indigenous people. And 1.5% of operating costs to social development and management plans for schools, hospitals, and sustainable development. And we have to build roads, bridges, and provide electricity and security for the surrounding regions so government does not have to. And even though mining is relatively a more capital-intensive than labor-intensive industry, we contribute a very significant multiplier for economic activity and employment both locally and nationally. Finally, industry is increasingly conscious of the importance of targeting long-term social and environmental sustainability.

Alcuaz: Let me ask Bobby who represents the manufacturing sector what he thinks is the biggest accomplishment or the biggest challenge facing the industry.

Batungbacal: Thank you. I’d like to mention [two]. First I think would be awareness. I think our awareness on the strategic importance of manufacturing has been pretty recent. If you think about when Arangakada was written in 2010, it was there, and it was recognized to be an important industry. But policy makers and the private sector didn’t have a high priority for it. We came from one end of the spectrum where people were asking “Meron pa bang manufacturing?” to the middle of the spectrum today were people are saying, “We didn’t realize that manufacturing was such a big part of the economy.” So I think this is a very important accomplishment this year because it raises the prioritization that both private and public sectors will put on this important sector. In the last 12 months, it became a very a hot and interesting topic. The Federation of Philippine Industries had their second manufacturing conference. Now, you have labor groups, investor groups, and everybody else coming up with their manufacturing forum with the intention of growing and reviving the manufacturing sector.

The second most important accomplishment this year was the creation of the roadmaps. Secretary Domingo and other speakers talked a lot about those. It’s important to point out that the creation of these roadmaps was quite inclusive. Before we would make roadmaps for the biggest groups like the SEIPIs and the BPAPs. It’s comprehensive now. You’ll even see roadmaps for laminated bamboo materials. It includes so many industry associations. BoI is working with PIDS on this one, and they are putting all of them together into a manufacturing roadmap for the Philippines. Having this unified roadmap enables the government to see this coordinating effort and enables industry associations to work with each other. That’s where you get synergy.

Alcuaz: Rolly Dy represents the agribusiness sector.

Dy: Many people do not realize that close to 40% of employment is the direct effect of agribusiness. If you add the multiplier effect, part of the output of agriculture is processed by manufacturing, and we buy from manufacturing. We are talking about easily 60% of the employment as affected by agriculture. The major long-term problems are low productivity, lack of diversification, and inefficient value chain. There are three important observations I have in 2012, which are very important for the future. It takes time to change policy in this country. You have the executive branch, and you have also the legislative branch.

First, there is now refocusing on food security from mere rice self-sufficiency to food staples sufficiency—white corn, cassava, coconut, and camote, which have large multipliers, and are more distributive, more inclusive, and less water-intensive. Water would be a crisis in the 21st century.

Second, there’s greater emphasis on other crops to address rural development. The major problem though is not only do we lack private investments, but there is surplus capacity in some sectors of the economy, such as coconut oil milling and rubber processing, because there is low raw material base due to lack of investments in the non-rice sector.

Third, there’s now better understanding on the part of government in convergence and value chain coordination—DA, DAR, DTI, DENR, etcetera. This is exemplified by more private sector participation, for example, in the rubber roadmap. UA&P did a benchmarking of the rubber industry and coffee industry in Southeast Asia.

Alcuaz: Aileen Clemente represents the tourism. You can either say what are the big issues right now, or better yet, you can ask Secretary Jimenez a question. I think we’d all prefer that. You ask him a question.

Clemente: I wouldn’t want to ask more questions to the Secretary because the Department of Tourism under his leadership has been very cooperative and usually in consultation with the private sector. The reason why tourism is ahead right now is because the private sector has worked to institutionalize development certain aspects of the industry to propel it to grow via the 2009 Tourism Act. The tourism industry is made up of mostly women—feisty women at that—so it has made it into law and part of that is the National Tourism Development Plan. That is moving us forward. In the Philippine Development Plan, there are five major guideposts. One is the rapid, inclusive, and sustained economic growth, and part of the Act is including other government agencies to be a part of the planning process. It’s institutionalizing the new mind set, which is present for tourism growth and the policies that are required for further growth. As the Secretary mentioned, we have an archipelagic landscape, and it is a must to push for our aviation to be treated as a conduit to trade and provide economies of scale. That is a big thing we need to do. It has passed through both the House and Senate and is meant to be signed into law. We hope that happens very soon.

Another is incentives. We are growing, but we need to grow faster, because the pipe can burst any time since the supply is not present. We need more investments at the onset.

The last is mind set, an active consciousness of what we need to have, and that there’s a trickle down on the high-level discussion so that there are no barriers to entry.

Alcuaz: I have a question to Secretary Jimenez. You are talking about how the target is 10 million arrivals by 2016. Last year we had 4 million, and you are saying it will be 5.5 this year. Our main airports were already at capacity last year. Where are you going to squeeze the 1.5 million additional arrivals this year in to those airports, since we don’t have any new airports yet?

Secretary Jimenez: This is precisely the paradigm shift taking place all over the system. Today, we throw around words like “convergence” as if we were doing it before. The fact of the matter is, we are only doing it in earnest now. When I talk about convergence with DPWH, we also have to talk about convergence between DOT and DOTC, or even entities like POEA. Let me give you an example. It is only in a convergence meeting that people realized that 95% of all OFW workers pass through Manila. That accounts for about 30% of traffic that goes through NAIAs 1, 2, and 3. Why? We process all our workers in Manila. Even if I am from Cebu, I cannot fly home directly to Cebu because my papers are processed in Manila. In the next two years, the convergence team will look at dispersing OFW arrivals throughout our airports. That’s where you are going to get some space, and this is just an example of the paradigm shifts that actually happened when people sat across a table and started comparing notes. It is a more transparent and insightful approach to our problems.

Alcuaz: You mentioned we are going to have 11 international airports by 2016. Is that 11 additional or we are going to have 11 in total?

Secretary Jimenez: Eleven airports capable of receiving international flights, yes. Very few people know that Iloilo’s runway will actually take an Airbus 330. It’s ready now, but we need the air agreements to bring them in. When you talk about releasing demand, you have to create the connectivity and agreements that will do that. We have more facilities than people think.

Alcuaz: Are there any questions from the audience? Do stand up, please. There’s a question here already. Mr. Ordoñez?

Ernie Ordoñez: Magandang umaga po sa inyong lahat. I am head of the Cement Manufacturers, which increased 17% at best in 15 years, but I’m also head of Alyansa Agrikultura, which lost jobs; 20% of our small holders lost their jobs. So, we see here growth but not inclusive growth. My question is this: Incidentally my most important job today is that I am recently appointed Chair of the Anti-smuggling Committee of the National Competitiveness Council concentrating on agriculture, but which will hit industry. My question, which deserves only a yes or a no with a small explanation, is addressed to both industry and agriculture, which are dying from smuggling. I have calculated smuggling every single year for the last 12 years and I found out that smuggling is worst now in the last two years, as compared to before, so on page 116 of Arangkada, you say it has started, but it is worst now. I think today will be a milestone. I have computed for every year that whenever Customs is left alone, smuggling skyrockets. When smuggling is looked upon—that is, BOC is looked upon with a committee or an inter-agency entity with some private sector—smuggling goes down. Question to Mr. Batungbacal for industry, and Mr. Rolly Dy for agriculture: Do you or do you not favor the resurrection of a committee that is proven to work, which will look at Customs activities, because right now, only Finance looks at it and they only hardly do so.Do you agree that we should have an oversight group spurred by Arangakda that will look at Customs in a systematic way and make recommendations.

Batungbacal: If you look at our assessment in Arangkada, smuggling is the only one where we did worse compared to all other metrics. I can’t agree more with Dr. Ordoñez. It needs coordinated effort beyond the DOF, and coordinated effort certainly includes private sector as well.

Dy: Data on the magnitude of smuggling is accessible to the public. We did research for 2011 and found that 500,000 tons of palm oil left Malaysia—this is Pemuli—but only 27,000 tons reached the Philippines for that classification. Three hundred fifty thousand (350,00) tons arrived in the Philippines in a different VAT-free classification. The same year, 84,000 tons of onions and garlic left China, but less than 25,000 tons arrived in the Philippines. You can see that as well for permit products. Definitely, I will agree with ka-Ernie here of Alyansa Agrikultura that there has to be some serious oversight on the informal trade of agricultural products.

Alcuaz: For a layman like myself, the reason why smuggling “works” is because their goods are cheaper than ours. They are cheaper to produce there than here. In 2016 we are supposed to have an ASEAN “free trade area” [sic], some people told me that the agriculture sector would not be able to compete with the goods that would be coming in with very low duties or no duties in 2016. Will the agriculture sector suffer a lot? How bad will it suffer in 2016? How prepared is it for the AEC?

Dy: It’s in 2015. As with any country, you cannot specialize in everything. We trade on the basis of competitive advantage. The benchmarking study of the sugar industry between Thailand and Philippines shows that we are down 35% in terms of cost competitiveness, 15% in terms of farm yield, and around 15% in terms of mill efficiency. But we cannot operate on the basis of those averages. The modern farmers in Negros and Bukidnon can survive this and be competitive. The main problem is good farmers cannot buy land or lease land to expand, unlike in Australia and New Zealand. That is difficult here. We have comparative advantage in tree crops, but we have not invested in tree crops, such as coconut oil, palm, coffee, cacao, etcetera. We import almost 80% of our coffee; we import 80% of our palm oil. There is a market out there hungry for more rubber or coconut, but we have not invested. This is something the private sector is looking at, to have a major thrust in developing tree crops in the country, as experienced in many Southeast Asian countries. The key here is looking at the value chain competitiveness of these products. This is not a walk in the park, because we have neglected this for a long time. The political sector talks about rice self-sufficiency, which is perhaps not an easy thing to do. They talk about exporting rice, which is going to mean big losses. I am happy that the [Agriculture] Secretary is talking about exporting fancy rice varieties where we are more competitive. There are opportunities for us to expand markets. If we address logistics, value chain, and R&D investment, we can compete like any other Southeast Asian country using modern science in addressing agricultural productivity.

Alcuaz: Let me ask John one more question before we go. How can the mining industry prosper in the next couple of years if the Congress doesn’t fix the taxes, which is the condition for new mining permits?

Ridsdel: Can it or how can it?

Alcuaz: Either way.

Ridsdel: It can’t. Everybody is very sympathetic with the government. Secretary Purisima said it is a finite resource. It is a depleting resource, and we need to be clear on what the costs and benefits are. The problem is we have frozen the industry while we are thinking about these imponderables. There’s a moratorium on new permits. All that’s happening in the industry is those companies with existing mines, projects, and exploration permits are working forward. Nobody else is. Government has been quite steadfast in saying that until we revise the fiscal terms, nobody will go forward. That is a policy decision they’ve made. Industry is working very hard to work with government. The International Monetary Fund has made an analysis and proposals. The moment Congress gets back after election to get the fiscal regime revised, the industry can start gearing up again.

***

Part 3: Big Winner Sectors, Panel Discussion 1 Transcript

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Forum Program Reference

Rimando: Good afternoon, everyone. This is the third panel. We’ll talk about business costs, education, the judiciary, and social services.

Let’s start with a question: What do you think have we accomplished in 2012 as far as your sectors are concerned? Let’s limit it to just three and then we move on from there. Let’s start with Mr. Yang.

Yang: To give you some perspective, I probably will represent the quick service industry or the informal eat-out industry. We are one of the biggest employers, so labor is one of our most important factors for success—the quality of labor. In the field of education, what’s most important to us is that the quality of education improves for our labor force. I think we are lucky that Filipinos have a natural sense of hospitality. In our business that’s critical, but the educational level needs to improve, so the K+12  program which the government has embarked on provide a longer term increase in the competitiveness of our pool of labor.

Rimando: What about in the health sector, Dr. Galvez-Tan?

Galvez-Tan: For me, the three biggest policy and program change that we truly welcome in health poverty and population are, number one, the passing of the Reproductive Health law. I think there has been no other substantial law that has been passed.

Second, the passing of the [new] sin tax law. Sin tax is very interesting. It’s the first ever earmark tax for health. For the first time in the history of the Philippines, we have tax earmarked for health, and this year we will start to benefit at least PhP30 billion for health.

Third, I’d like to see the program on public-private partnership in health. I’d like to congratulate the Department of Health for launching the public-private partnership in health last year, officially. They have a Center of Excellence now that is based in the National Kidney and Transplant Institute. I consider these the three most important policy and program changes that will guide the actions of government and private sector in the next three years. I am almost optimistic that we will get something concrete by the end of 2016 if not by the end of 2013.

Rimando: And Ms. Nuesa?

Nuesa: For the most important accomplishments for 2012, they are in your packet. But I would like to cite that the first is a coordinated approach toward reforms in the justice system—the DOJ as well as the Supreme Court both have their packages of judicial reform initiatives. The Department of Justice together with USAID have been spearheading the Philippine Development Forum with a focus on the rule of law. There is already what they call a Justice Sector Coordinating Council (JSCC), composed of the heads of the Department of Justice, the Chief Justice, as well as the Secretary of the Local Government.

Second would be the speedy resolution of cases, which is in [the Arangkada] report already. The case load per judge has declined—fifty percent increase in case resolution? That’s a lot. There had been a number of improvements that are moving towards speedier resolution of cases, including alternative dispute resolution (ADR) and the like.

The last is, at least, there was improvement in the consciousness of courts in deciding on economic issues, although that has also been cited as a major problem. I’ll get to that later.

Rimando: We will follow up on cases touching on economic issues. Mr. Forbes?

Forbes: Business cost is very important. If you can’t make a profit, you can’t run a business. If you can’t make a profit in the Philippines, you go to a country that is more competitive; the very point that Bill Luz was pointing out in his rules on having to move forward. We need a much more comprehensive study on what business costs we can reduce. In the last year, I would like to single out two areas where there was progress and one area where I think we fell backwards. For the airline industry, the fact that the government is now absorbing the cost for the CIQ is extremely important to the growth of tourism and having connectivity, because our actual inbound and outbound flights from abroad has not been growing, while in competing countries like [Indonesia], [Thailand], and Malaysia, and around the region, it’s been growing by low double-digit figures. That and the signing by the President of the [bill abolishing] CCT-GPBT—those are very important for growing torusim.

Second, labor is a very big cost to companies. It’s the reason why half a million jobs in the garment industries have been lost here, and three million have been created in Bangladesh. The cost of holidays and leave days—34 leave days per year for the average male employee plus 21 holidays—you begin to wonder when people are going to get work done. They need to be rationalized. There are two steps forward in that in 2012: The first is an important Memo that was released by the Institute of Labor Studies at DOLE, which analayzed in five pages the number of paid non-working holidays in the Philippines compared to our regional competitors. That’s a policy that was circulated to our politicians in the House and the Senate who sometimes like to give away the expenses of businesses without properly considering or talking to the businesses. There were no new paid non-working holiday in the past year.

The other one is the two-tier wage system. The policy was announced two years ago in this administration. What it essentially does is it stops the constant escalation of the minimum wage. The minimum wage became equivalent to the average wage. When you do that, your other competitors in the region will eat your lunch because their minimum wage is much lower. We can keep the minimum wage above the poverty level, which is what the policy is, and then have a second tier for productivity. It’s important that we implement that over the next several years, because Malaysia introduced the minimum wage; Thailand has brought one up to the same as level the Philippines; in Jakarta the new mayor approved a 40% increase; and in China wages are going up. If we can maintain a level of control over this and reform the labor code, we will begin to move into a sweeter spot to attract some of the manufacturing and other investors that are moving around the region.

The negative I want to mention about last year was the cost of living increase in Manila. According to the Mercer study two years ago, we were less expensive than Hanoi and Ho Chi Minh. We are now more expensive. You would expect that because the Vietnamese Dong depreciated significantly, and the Philippine Peso appreciated significantly, so we have to watch that out. If we are not careful, we are going to be more expensive than Bangkok and Kuala Lumpur.

Rimando: Talking of business costs, we hear a lot from our economic managers that we have to be competitive as far as labor costs are concerned, especially with the growing costs in China. Has the government been listening to your recommendations? It’s always there, and you’ve always mentioned these issues to policymakers.

Forbes: You see companies closing. You find companies setting up in Jakarta and Vietnam. You have to find out why they’re doing so. It’s an important issue. When you have too high a cost of employment you can close down and go to another country, shed workforce, ask your workforce to work harder, or go underground. Peter Wallace wrote a column recently saying you ought to be able to dismiss an unproductive employee, because you don’t lose a job, you just hire a more productive employee. There is no net job loss. You just have greater efficiency and productivity.

Rimando: May we hear from you, too.

Mendoza: When we talk about the three reforms inside the government, let me start with the Commission on Audit, because this is where I came from.

First, we lifted pre-audit, because statistics have shown that when there was pre-audit, there was also so much corruption. This means it is not a perfect system that will prevent corruption. We lifted it because we believe such is the responsibility of management.

Second, we tried to strengthen integrity inside the Commission. We started filing administrative cases against our own people. We published several guidelines and policy issuances, the first of which is on the benefits or assistance that can be extended to our auditors who are resident of the agencies we are auditing, so the agency heads are aware that these are the only legitimate assistance that can be extended to them.

Third, we introduced the package audit, so there will be consistency in the opinions of the auditors in various agencies. Last December, we also introduced the citizen participatory audit. We are encouraging citizens to be active in terms of audit.

Recently, we have issued policy guidelines disalowing the use of public funds over tarpaulins, like “Happy Valentine’s Day” or “Happy Graduation” or “This project is in the name of so-and-so.” We do believe that certain information has to be relayed to the public, but only those information na talagang kailangan [which are truly necessary]. Sumabay ito dun sa “Anti-Epal” ng Comelec. [This coincided with the “Anti-Epal” initiative of Comelec.]

On the public financial management arena, we are working on the government integrated financial management system. Nandun yung [That includes] accounting, budget, and procurement. In addition to this, we are also looking into the electronic integrated risk-based audit system para yung mga auditors namin dun sa mga areas na malalayo [for our auditors based in far-flung areas] like the Autonomous Region for Muslim Mindanao ma-susupervise namin, makikita naming yung mga working papers nila [we can supervise them and check their working papers], so that we can be on top of what is happening, while the audit is happening, in a region that is very sensitive.

We also have some improvements in terms of our collaboration with the Office of the Ombudsman. We have the so-called joint investigation team between the Office of the Ombudsman and the Commission on Audit and we have prioritized cases that we will jointly look into. This is very important especially in terms of managing the gap between audit and prosecution. In our country, we do the audit, while the Office of the Ombudsman evaluates and files the case in the Sandiganbayan. Siyempre, [Certainly] while we are doing the audit, we have the mindset of an auditor. Only a few auditors will look into what are the legal implications of this and what are the elements of the crime, so we need to interact with the Office of the Ombudsman, so while the audit is being done, the legal requirements are already being looked upon. Collaboration with the Office of the Ombudsman also allows us to facilitate or shorten the duration between audit and case filing. For some complainants especially those going into our office, we immediately evaluate the case if it is “auditable” or something that is within our jurisdiction or can be immediately endorsed to the Office of the Ombudsman. At times, we immediately refer it to the appropriate office, and that office will immediately request for copies of the audit report to hasten the fact-finding and investigation at the Office of the Ombudsman. More or less, these are the areas I believe have been creating some traction in the field of prosecution aside from public financial management.

We are also looking into the development of the single treasury system, which will solve some of our excess liquidity, and also the unaccounted depository accounts which are excluded in the books. Our audit of various agencies have shown that there are several bank accounts in the name of government agencies but these are not included in the books, so they spend it like its their own private resources. We are trying to solve these weaknesses we have seen in our public financial management system.

COA, as a constitutional agency, exercises both accounting and audit functions–limited accounting though. That’s why we both have to be active in public financial management, as well as audit, and corruption prevention.

Rimando: Before we move onto the wish list you have for 2013, let me just follow up with Mr. Yang. You mentioned about K+12 a while ago. Can you give us more information on how the K+12 affect your business or your industry, at least?

Yang: I think what it really does is improve the quality of labor we have, and that’s looking forward. Today we are lucky in the sense that we do have bodies for labor. Metro Manila will meet the needs more in terms of quality, although our industry is growing not just in the National Capital Region, but all over the country. We actually have a bigger need in other parts of the country like Visayas or Mindanao, so I think by standardizing the curriculum and increasing that by two years, that really helps us in the future. It helps us reduce our training and development cost, which we spend a lot of money in today.

Rimando: This has something to do with your supply of qualified managers, I suppose?

Yang: Managers as well as restaurant staff.

I should take the opportunity to mention something about strengthening private and public partnership. That is something we would like to see more of. We’ve taken advantage of that with the Department of Labor which has this special program for the employment of students (SPS). What we have done is partner with government to provide employment for students who can’t afford to go to school. By tying together, we are able to provide jobs. This year, we hired 4,000 students through the program, just for our company. If you include the whole industry, that’s a lot. By doing that we are able to bridge the gap for those unprivileged students who are unable to finish school by providing employment. That’s another area that we should take advantage of.

Rimando: We are looking forward to that. Dr. Tan, your wish list for 2013. You’ve had a dramatic 2012.

Galvez Tan: My wish is that, one, the sin tax, reproductive health as well as the PPP will be integrated. By 2013 the implementation should help with the decrease in poverty. This can be done through a public-private partnership.

The biggest problem in health is equity. We do have tremendous health resources in the key cities of the Philippines, but nowhere can we see it in the rural areas. My proposal is for both public and private sectors to be involved in at least six regions of the poorest of the poor. These are the six regions with the highest maternal mortality, the highest infant and child mortality, and the highest malnutrition [rate], affecting our workforce. First, the Autonomous Region of Muslim Mindanao is my top priority; second, the Zamaboanga peninsula; third, MIMAROPA; fourth, Samar, Leyte; fifth, Bicol; and sixth, the Cordillera region. This is a total population of 20 million. We can improve equity using PPP, sin tax, and reproductive health frameworks in these areas.

There are areas of PPP where I’d like to involve all the chambers of commerce. First is pharmaceuticals. The number one problem in the Philippines is access to medicine, particularly, low-cost generic drug. Right now, we only have 18,000 pharmacies. We have a short fall of 24,000 pharmacies. That’s a lot of investment for PPP.

Second area is laboratory and diagnosis. We need to upgrade our services across the country. If we can focus on these six regions, universal health care can be demonstrated in 2013. This will lead to universal healthcare in the Ilocos region, Quezon province, and others. If we can show it in these six regions covering 20 million Filipinos then we can move onto the rest of the population.

Third area is birthing clinics. We have a shortfall of 4,000 birthing clinics. The private sector could help us build birthing clinics and even put human health resources in this. In 2013, we can, again, foruc on these six regions just to cut immediately the poverty level and improve access to universal healthcare.

Even in primary health care, we have a short fall of 24,000 clinics. We still have 24,000 villages that have no health infrastructure at all. They have schools, but nowhere a health center for these 24,000 villages.

Regarding health human resource, I would like to see the private sector participating in these large projects providing health services for these six regions. The government does not have enough nurses, midwives, and doctors in these areas. The sin tax, I hope, can help but I’d like to see private sector participation in this.

Finally, let us involve all the ICT companies in providing emergency healthcare and making use of mobile technology for diagnosis, treatment, and referral in, again, these six regions.

Rimando: Thank you. Let’s move onto Judiciary. You’ve touched about a strategic court for cases that involve economic issues. Can you tell us more about it and is it part of your 2013 wish list?

Nuesa: Yes. When it comes to my wish list, the first concerns economic and strategic issues affecting the business climate. Some of the rulings are deemed detrimental to the economic climate, although the Philippines is already moving very fast in certain areas. One thing I could recommend, to quote former Chief Justice Panganiban’s book With Due Respect, “when it comes to economic agenda, the judiciary should adopt a ‘no interference rule.’” What does that mean? Former CJ Panganiban has always espoused the theory that Filipinos have the right to prosperity under Articles 2 and 12 of the Constitution—the rights to prosperity and freedom from poverty. What is being asked of the courts is to consider the economic issues and the rights of the citizens to a better, prosperous life when they analyze cases that involve the economic agenda and the key strategic issues of the country. It is quite different from protecting the civil rights, where it is a strict interpretation, but when it comes to economic rights, it is what he calls a differential interpretation of the law. It is essentially respect for the independent powers of the three branches of government.

Of course, the clogged dockets are still very much a problem despite all of these efforts, although some gains have been made in the past. We should continue the system, the coordinated approach, the use of automation, decentralization, improvement of judges’ salaries–all these are related.

Aside from those two, we also have to do something about the use of sheriffs and courts. This is written in the report as tools of legal harassment. There are also questionable TROs.

Now, how do we handle those? In the business sector we have a performance system where we reward good performance. There is also an accountability system to penalize errant behaviour. We will be seeking those. We need a performance metrics system for the courts to identify the justices, judges, and prosecutors who are unable to resolve their cases within the required time and receiving a lot of complaints. On the accountability side, we are suggesting that there has to be an independent investigation, perhaps, a whistle blower policy even for the courts.

As a last statement, there is nothing like advocacy. There is nothing like the private sector also getting involved, making their voices heard, and for this very reason, we are having dialogues with the Department of Justice and the Supreme Court. There is hope, but we have a long way to go.

Rimando: We’d like to touch more on the Whistle Blower reform. Ms. Heidi, I think that’s right up your alley.

Mendoza: My wish list is very simple, and that is insulate the bureaucracy from politics. By doing so, those inside the bureaucracy will feel empowered to implement the laws, rules, and regulations. Let us not go far with so much modesty. I have been working hard, and I am trying my best to do the things I am supposed to do, but you see, I have so many opponents inside and outside the office. I cannot get confirmed until now. When we talk of political will, to be honest, I have not seen as much political will as right now especially at the top. But the problem is, kapag nag-iba nang leadership, nag-iba na ng mga heads of agencies,  pano natin i-eensure yung reforms na sinimulan [once the leadership has changed, once the heads of agencies have changed, how do we ensure that initiated reforms continue]? That can only take place if there is a bureaucracy that is insulated by politics, that people inside are so empowered that they have the will to implement the laws, rules, and regulations.

Sa totoo lang, [truthfully] we are talking of passing another anti-corruption law, eh ang dami na nating batas [but we already have many laws]. When I had the opportunity to be invited outside, pag tinitingnan ko yung law natin [if we look out our laws] when compared to others, halos parehas lang [they are almost similar]. Pero saan nagkukulang? Dun sa implementation. Hindi rin natin masasabi na lahat ng nasa loob ng gobyerno hindi marunong magpatupad ng batas. Marami nangangahas, maraming naglalakas loob, pero sila yung binabatikos. [But where do we fall short? In implementation. We are not saying that everyone in government doesn’t know how to implement laws. Many are aggressive and strong-willed, but they get sidelined.] Nagiging tuloy two-pronged yung fight [The fight becomes two-pronged]: the actual fight against corruption and the fight against perception.

So sakin napaka-simple [The solution, the way I see it, is very simple], insulate the bureaucracy from the politics and empower the people inside to implement the laws, rules, and regulations. You know, if we insulate the bureaucrats, kung iinsulate natin yung mga tao sa loob, na kaya nilang mag-implement ng laws, rules, and regulation, dadami ang marunong manindigan, dadami and magrunong tumayo. [If we could only insulate the people inside, if they can implement laws, rules, and regulations, more and more people will learn to have moral conviction and learn to stand up for what’s right.] The people inside—the bureaucrats—should find some kakampi [allies] from the citizens. Hindi yung pag ikaw yung gumagawa ng tama, ikaw yung makakasuhan [It shouldn’t be the case that people who do the right thing are sued in court], and then you feel so alone, and then you feel all the pressure. This is really nakakalungkot [disheartening]. Number one wish ko yan. [That’s my number one wish.] Let us insulate the bureaucracy and empower the people inside to be able to implement the laws, rules, and the regulations.

Second, I am expecting a lot from the private sector. Saludo po ako dun sa [I salute the] Integrity Pact but I am asking more than the private sector committing na hindi ka mag-offer ng bribe [not to offer bribe]. We need more commitment on providing the information and the necessary cooperation in terms of preventing corruption, and most especially, in prosecution. I’ll set a specific example. We’re building cases against ghost employees. Kasi everytime may eleksyon, may ghost employees. [Because every time there’s an election, there are ghost employees.] Dyan nila kinukuha yung pang kampanya nila e. [That’s where they get their campaign funds.] Alam niyo po, napakahirap, susulat kami sa [You know, it’s very difficult when we have to write to a] private company so-and-so. “May we ask for the details of employment of the following, because we found out these employees are working for this company?” We get replies like, “Sorry, we could not give the necessary information.” Papano natin sisisihin yung corruption sa gobyerno, kung yung private sector, kahit yung napaka simpleng bagay, yung pag provide lang ng information, hindi natin magawa. [So how do we pin the corruption on government when the private sector cannot provide information as simple as that?]

In most of our cases on overpricing, most of them are being dismissed for lack of evidence. Why a lack of evidence when you and I both know exactly the price of this item? The point is, the moment we try to ask that particular supplier, “Can we be given a copy of the receipt or invoice of this particular item?” No one will participate because they will raise the probability that the next time they will enter into bidding, they will get the punishment or the not-so good cooperation from the LGUs. Again, I will repeat, the Integrity Pact should not only include visions of non-payment of bribes, but also providing the necessary information, especially evidence for prosecution and the necessary assistance, lalo’t lalo na po kung actual prosecution na [especially when it’s time for the actual prosecution].

Yung government lawyers—alam yan ng DOJ— [The DOJ knows that if you are a government lawyer] you will be handling five to 10 cases. Ako po, government witness, ang naghahawak sakin isang prosecutor, ang hawak niyang kaso sampo. Ang kalaban namin number one na law firm, apat na abogado. [I am a government witness, and our lone presecutor is handling ten cases. Our rival is the number one law firm with four lawyers on the case.] It is so unfortunate that the ones who are corrupt are the ones who have the money to pay the highest paid lawyer. Ang sama sama ng loob ko, andito kami, nagdedefend ng kaso ng gobyerno, pero nakikipaglaban kami sa pinaka magagaling na abogado, [I feel so much anger and bitterness, because here we are, defending the case of the government, but we are up against the best lawyers in the country] and they are being paid out of the profit of corruption, and at times, they are schooled from the University of the Philippines. It hurts me a lot.  I hope the private sector would take it so seriously. You want to end corruption, help the prosecutors. Be vigilant in monitoring cases. In my office, I need six lawyers. Until now, iisang lawyer ang nakuha ko [I was only able to recruit one lawyer] who is about to resign. You know, we need to find the right incentive for those people who are doing good.

On the other hand, we have to make sure that doing those that are doing bad would necessarily and immediately be punished. So again I will repeat, I am expecting much from the private sector.

Next, I am also expecting vigilance on the part of the citizen. When we assumed office, there were so many complainants.  But if I take a serious look at the nature of the complaints, dalawang klase lang yan, isa natalo sa eleksyon kaya isinusumbong yung nakaupong mayor, o pangalawa, may utang na hindi nasisingil sa gobyerno kaya humihingi ng tulong. [There are only two types: one, a candidate is defeated in the election and reports the incumbent mayor, or two, there is an unsettled debt with the government, so he is asking for help.] Very small yung percentage ng complaint na nakikita kong pursigido, seryoso, nag-cocomplain para labanan yung corruption. [There is a very small percentage of complaints, which are pursued tenaciously and seriously, complaining to fight real corruption.]

You have recommended reforms on procurement. I will admit that we must also recognize that there are seeming tractions created in the reforms initiated outside the area of procurement. When we look at citizens monitoring procurement transactions, we are going back to the same problem. May mga LGUs nag-iinvite ng mga observers [There are LGUs that invite observers, but] no one comes. Private citizens will be asking, “Where do we charge our gasoline allowance”, “Where do we get our allowance while attending the bidding?” If we want to fight corruption, if we dream of good governance, we do not rely on government to do it alone. We, as citizens, as private sector, as people inside bureaucracy, should be able to contribute the best we can. After all, it is our money.

Rimando: I think what you just said are the wishes not only for COA but for a lot of the sectors represented here. Let’s wrap up with you, John, with business costs. It’s 2013; we just came from a year where we grew 6.6%. What are your wish list for 2013?

Forbes: First of all, I will repeat one that Ray Cunningham mentioned—open access. It was supposed to happen two years ago. In this very forum in January of last year, the President asked the Energy Secretary what the target was, and the answer was September. So now, that target is June. Let’s make it a hard and fast target. Let the infrastructure be in place and then let’s hope that it works. We don’t know for sure yet, but we’ve been trying for this reform for 15 years. The law was signed in 2010.

Second, we must work much harder on reducing red tape and that’s related to government regulation. The bureaucracy needs a mindset change to deregulate and regulate only as where and when necessary. We could consider experimenting with sunset provisions. Perhaps in the Congress, they can see if this works. We have some things that have been around 30, 40 years, and they shouldn’t be there anymore. There is no time to go back and figure out what should or shouldn’t be there; it’s a gargantuan task. So if we begin to do it for five to 10 years, and then it ends, you have to revalidate it. We’re always asking whether it continues to be necessary, and we see an example of that in the recent pronouncement of Secretary Purisima to look at the Foreign Investment Negative List, which contains 30- or 40-year old laws. I understand the Congress also is interested to see whether or not they continue to be in the national interest.

[Third] E-governance, we slipped on that. In 2003, we were third of six countries in ASEAN, and now we are fifth. I worry about that because e-governance goes hand in hand with the program of this administration to reduce corruption. Whether we do it with DICT, DOST, or DBM—there just has to be more emphasis on enabling citizens and smaller companies, not big businesses or companies, when they get their license, NBI clearance, or when they do this or that. There is great Internet penetration in the country. They may not be able to afford computers, but they can afford to go to an Internet café. Let’s bring the government to the Internet café rather than forcing the citizens to go stand in line and waste time.

Finally, transportation. We are facing gridlock in big cities like Manila and some of the smaller cities. There are solutions that are coming. The NLEX-SLEX connector for the extension of the skyway, LRT 1, and other rail systems, but they will take three or four years to build, and yet we are adding 150,000 cars. If we are like Indonesia, they added a million new cars last year. I don’t know if we will get that high, but in the interim, we should get solutions to the buses—whether to move them outside the city, whether radically, they should nationalize all the buses and privatize the result—something like what former President Ramos had where he had emergency powers for the power sector. Maybe some emergency powers for the transportation crisis. On the inter-island cost of transportation, clearly, the RORO system needs to be expanded.  When I was down in Davao at the PDF, I heard the people from Mindanao for the nth time, maybe for 20 or 30 years, that the cost of inter-island shipping is too high. I also heard Secretary Singson say it’s time we stop talking about it, because it’s time to implement it. That’s a good attitude for 2013. The Port of Manila also needs to be decongested. We heard that from Ito Carlos earlier. We’ve got the infrastructure in Batangas and Subic, but it’s underutilized. I’m told that 40% of the traffic in Manila is because of the trucks in Manila. Hopefully, our exports will go up through new manufacturing investments, but we’ll shift the point of the exports to Subic, Clark, and Batangas.

Rimando: All right. There is actually a suggestion to open up the floor to questions. Are there any burning questions that you would like to raise?

Q&A Participant: The question is [suggestions are] addressed to everybody but especially to the Auditor General. It appears that the underlying problem we have is the application or implementation of the justice system down to its lowest level. If private companies are hesitant to cooperate, its because they fear that they will be hit back and the legal system won’t be followed. My suggestion is this: To legislate an additional 1% tax levied on companies having net profit in excess of one billion (pesos) for the justice system. This fund cannot be touched. It will be in the line budget, but it cannot be touched even by the President to transfer to another budget line. The justice system can use the budget to train prosecutors properly down to its lowest level, and citizens will not have so much fear in cooperating in investigations. For the companies, in the long term, they’ll be in a better position to compete and plan the future, since they know that the justice system will give them the protection they need. The additional tax of 1% is really an investment for the future.

For my last suggestion: It appears that we have forgotten a basic need, and that is the NEDA Board should be divided into two. Half should be from the private sector, and the other half from the government. The President remains the chairman, and he will have to make the final decision on contentious matters. He cannot just push it aside and have someone else be blamed. We are complaining about the private sector having so much problem. Let’s be part of NEDA, and be part of the Board of NEDA, which is the overarching authority for the development of the country.

Nuesa: Going to the judicial fund, since that requires legislation and taxation, we can refer that back to an appropriate committee. Among the things that I have learned from our coordination with the Supreme Court is that they are getting less than 1% of the national budget. They have requested for greater independence from LGUs that give them extra allowances, and I think LGUs also provide for their Capex, meaning the whole of justice—the structure and the buildings—have to be constructed by the LGUs. Those are the things that have been raised, and maybe that’s one thing that we can address. Regarding the legislation the gentleman is proposing, that’s something that has to be discussed in another forum, but I guess that is duly noted by TAPP. On the NEDA side, I think that’s a totally separate matter. I don’t know if any of the gentlemen with me would like to mention that. I know there is a NEDA infrastructure committee. Regarding the involvement of the private sector, yes, that’s very much welcome.

Rimando:  [Question on TRO flashed on the screen: What are latest stopgap & damage-control measures against our Judiciary Department’s TRO system, the bane of foreign investors, over infrastructure development projects; a typical example of which is our experience & lessons learned from the costly litigations of the NAIA 3 Airport Terminal project?] This is regarding the TROs and it highlighted an infrastructure project that has been raised many times in this forum, the NAIA 3 airport terminal project.

Nuesa: Regarding TROs, there is a new Supreme Court memorandum issued in 2007 where unlike before, after a writ of preliminary injunction or TRO, it can be an indefinite or ongoing suspension. The courts now are required within six months to decide on the merits of the case so that it’s not a TRO forever.

Forbes: I don’t want to talk about the NAIA terminal project, because that could take the whole afternoon to do it justice. I can say that in a meeting last week with the new Secretary of Transportation, he assured us that the target for getting Terminal 1 open is before Christmas. They are about to enter a contract with a very respected Japanese construction firm Takenaka, which is the one that built the airport for PairCargo, and while that company is still owed $90 million by PairCargo from the project, they will fix the systems which have been neglected since 2005 and get it operational. I hope that target is a hard target.

Rimando: We hope so, too, because we’ve been hearing about NAIA 3 for ages since 2002.

Forbes: Terminal 1 is also being fixed up gradually as we all noticed when we go there.

Rimando: Any other question from the floor?

Q&A Participant 2:  Good afternoon. I am Jen Galvez from Vanguard News Network. My question is addressed to Ms. Heidi Mendoza. Since the time of your famous testimony of last year’s very high profile case, has there been significant increase in case filings in need of your office investigation? Second, what is the current ratio of cases filed and successfully dealt with under your watch?

Mendoza: Let me just qualify the question. From the time I assumed office, there were so many complaints. We cannot talk of cases filed, because it will take a number of months before you can develop a case, before you can file it, and before they can be resolved. I was an auditor of one specific agency, and I filed a case against the Governor. It took at least 14 years before the decision was affirmed by the Supreme Court. Forteen years. Hindi natin pwede bilangin sa dalawang tao ilang kaso yung na i-file. [We cannot count alone the number of cases filed.] Let me just talk about the number of complaints that the office is receiving from ordinary citizens. I think on the first day I got 4,000 emails. Most of these complaints are very simple in the sense that they are asking for copies of annual audit report. Some are asking for clarification in terms of COA policies. There are some real complaints which we are pursuing, but they are not yet in the stage where they have already been acted upon, elevated to the Sandigan, and decided at that level.

Rimando: Dr. Tan, you want to say something?

Galvez-Tan: I just want to make an announcement that for those in the private sector who want to do PPP projects in health, I have in my list 25 of the 81 governors of the Philippines who have committed themselves to help and are willing to spend money in health. Of the 25, 13 are in the six regions that I have talked about. I hope all the chambers here in Arangkada can support this to reach equity, ensuring that the poorest of the poor are enrolled in universal health care and insurance.

Rimando: Thank you, sir. There was a question flashed a while ago about the Maguindanao massacre, can we have it again. “How far are we in resolving the Maguindanao massacre case?”

Nuesa: I do not know exactly where it is at, but we are still far. One problem we did raise before is that there are [over] 200 people who have been sued in connection with the Maguindanao massacre. I think the lawyers will be in a better position to explain this , but as I understand it, since it is supposed to be a crime of conspiracy, they are supposed to be tried together. It has been proposed that there must be a system of isolating the masterminds from those who are co-accused. The number of accused alone has been hampering the movement of the case. There might be a solution already. We will ask where it is, but yes, it has been taking so long, unfortunately.

Part 4: General Business Environment, Panel Discussion 3 Transcript by Arangkada Philippines

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Ressa: It’s nice to be here a year later, and most of the panel members were here last year. So, Bobby de Ocampo last year said the focus should be infrastructure, infrastructure, infrastructure. What are the key accomplishment in the last year, and what do you want to see happen next? Why don’t we start with Ed.

Francisco: In terms of the key accomplishments, the coalition has done its job. The PPP Center is in place; resource building is in the works. As Secretary Jimenez and Bill Luz said, demand is easy now that it is getting the supply out. It’s getting the strategies in place. I think that is what I want to see.

In terms of accomplishments, I represent the private sector. The private sector has already funded the DepEd classrooms. We at BDO are willing to provide the 30 billion [peso] financing for the LRT. We are willing to provide the 12 billion [peso] financing for the NAIA expressway. We are willing to work with rest of the locals. I am glad to have read that the JBIC is willing to lend the 30 billion [pesos] for the LRT, which is the component the government needs. That in itself shows you that we are putting our money where our mouth is, because there is a component needed by the private sector for the sponsor, which we are willing to provide and the Japanese government is willing to provide. All the local banks are competing. We are willing to finance MRT-7, MRT-3, even the Cebu Mactan airport, we are very interested in that. We just need to see the numbers. With the National Orthopedic, we are looking at the numbers and willing to look at the financing of that. With the automated fare collection, there have been more than two dozen interested bidders. I was in the bid conference. That shows you how successful these programs are. There is more than enough equity interested. The government, together with SSS and GSIS, has already launched the PINAI fund, and they are willing to provide equity. The projects are there, and we want more projects. The private sector is ready. There is enough demand. I remember when the DOF and DPWH went on road shows with the PPP, a lot of foreign interest showed up. I was with them in Singapore and Geneva, and it was always packed. I think they went to Australia, but I was not with them, and there was also so much interest. We are in our sweet spot, and we just want to make sure we don’t drop the ball.

The last point I wanted to say is that the PPP is not all the infrastructure the government is doing. Our NEDA speaker can elaborate. There are so many investments being done by the government that is not being reported but is showing up as investments. Those are also critical, because those have a multiplier effect.

Ressa: Let’s go to transportation.

Carlos: We’d like to thank the government—the Congress, too—for answering the call of the private sector. Airlines were concerned about the Customs, Immigration, and Quarantine overtime. The government finally decided we will operate 24/7, and we will have the budget for that. The second issue that international airlines were concerned with was the abolition of Common Carriers and Philippine Gross Billings taxes, which were both approved by Congress. They removed Common Carriers Tax and made Gross Philippine Billings Tax conditional based on reciprocity. The other issue is the amendment of the BOT law, which I think will be put into effect pretty soon by NEDA, allowing joint ventures and other modifications. Finally, they encourage the transfer of the use of Subic and Batangas by reducing the wharfage fee by 50%.

On general issues, we would like to have NEDA upgrade the multi-transport policy issue that will look at all the basic transport sectors in the country and see how we can make them interconnected. One issue brought up by Secretary Jimenez is that a lot of people don’t have to fly to Manila; they can head to other airports, too. It might relieve congestion at the NAIA 3. These are issues that can be integrated in a national policy. That means we also need a wider open skies application. We also agree that we should get that 5% GDP in investment infrastructure. Otherwise, we really won’t move forward. I’m glad it’s there in their plans.

Although there is another issue that we would like to address to Congress, because we inherited a lot of flaws from the Marcos regime, which combined the regulatory and developmental functions in the line agencies of the government like PPA, CAAP, and so on. This confuses the issue because public interest is often sacrificed in such an arrangement. We would like to separate the regulatory from the developmental functions. In the meantime, it can be done by an Executive Order. Allow the user to participate in the regulatory function, so they can at least benefit from all this development.

Ressa: Let me give the other gentlemen a chance. Ray Cunningham, it’s nice to see you again.

Cunningham: Thank you very much. The foundation for power is the Electric Power Industry Reform Act of 2001. It’s now approaching its 13^th year. The most significant achievement out of our 21 recommendations was in December of 2012, the trial period of the open access and retail competition was announced. In June it will go forward on a restrictive basis, but on an actual basis it’s absolutely essential to achieve the intent and objectives of the Electric Power Industry Reform Act. In addition, there has been a significant improvement to the transmission system under the concessionaire National Grid Corporation of the Philippines. Beyond that, not so much on the 21 recommendations.

For water supply, we have nine recommendations. The good news is significant progress was made on all nine. There are several bills in Congress under consideration. Some deal with regulatory reform, while some deal with structural reform. Both are needed. We advocate approaching water on a river basin basis rather than political geographic boundaries. Water doesn’t care what municipality or province it’s in, and to focus on all the benefits of water—be it water supply, power, hydropower, irrigation, or flood control— is very important. We are hopeful that during 2013 some positive measures will come out of the Congress that can help structure this. Some of the bills though, I must caution, are extremely bureaucratic and are unlikely to succeed, but there are positive signs in some of those bills as well.

Ressa: Let’s wrap it up with accomplishments in telecommunications.

Felbaum: On the telco side, which is predominantly driven by the private sector, we have a lot of positive developments over the last few years. We have I think nearly 90 million subscribers coming in, so there is high penetration. We have excellent fibre optic networks throughout the country, and good resiliency for supporting the BPO sector. We have strong wireless broadband. Both major networks are now deploying LTE, which is the next generation or fourth generation in wireless technology.

One issue we need to address in 2013, under former President Ramos’ tenure in the 90s, we passed Republic Act 7925, Telecoms Policy Act, which basically provided the legal framework for deregulation. That law is over 15 years old. In the digital world, that’s a long time. We need to move toward convergence. There were some efforts made in the last administration to pass legislation on convergence, but we didn’t get the muscle to make it happen. Convergence has to happen in the near future to help us stay competitive with our ASEAN partners.

Other items I might note—we have no Philippine satellite today. In the ‘90s we had the Mabuhay satellite, and it was a great bird which provided connectivity for the 7000 islands we have. Today, we have to source from Malaysia, Hong Kong, and Thailand, so hopefully, that’s something we can move forward. A strong satellite will provide excellent educational services all over the country.

Finally, we tried very hard this last year to support the creation of the Department of ICT, which will have a lot of merits. The House and the Senate passed it and got to the bicam session, but it was frozen there. Unfortunately, we ran out of time and we’ll have to start again. Hopefully, we can make that happen in 2013.

Ressa: Undersecretary Tungpalan is also on the panel. Let me ask you to put this in context,  because if you look at the handbook that Arangkada has put together, we are not doing so well in ASEAN-6. In fact if you look at Policy, we rank fifth out of the six nations in capital outlays. For airports, we are at the bottom. For Seaports, also at the bottom. For Roads and Rails, we are fourth out of six. For Water, fifth out of six. Telecommunications is fifth out of 6. We actually moved back from from second from 2003. What do we need to do to compete more?

Cunningham: In Power, we need more foreign investment. Congress passed the Renewable Energy Act, but DOE imposed foreign ownership restrictions. Why? If you are trying to build a power plant such as my colleague Dan Chalmers, the co-chair of our Energy committee, why does a foreign contractor have to get 60% Filipino partner? The PCAB, the Philippine Contractor Accreditation Board, is in the way. We recommend doing everything we can to allow foreign investments and allow the benefits of major foreign expertise.

Ressa: Ito?

Carlos: Concerning the congestion at NAIA, we have the open skies. If we applied it, as Secretary Jimenez said, people will fly directly to the other airports. The other thing is we should light up the other provincial airports so they can operate at night. This is something we can do. Why don’t we apply existing policies?

Ressa: Ed, do you want to add?

Francisco: There’s this memo that the SEC, together with the Supreme Court, came out with on foreign ownership, and it looks like there is going to be—without preempting—at least, a new draft coming out. It’s not perfect, but it will address the issues most of the investors and sponsors have on doing business.

Ressa: On telcos, how could we have moved back?

Felbaum: I think one of the issues that Ray mentioned is that we are also handicapped by a 60-40 percent cap on foreign equity. That’s still a struggle. That takes changes in the constitution to administrative. That’s a tough one. On the other side, we talk more frequently about the creation of the Department of ICT. We are the only nation in ASEAN that doesn’t have a dedicated full-time cabinet secretary overseeing ICT. Although DOST is trying to cope with supporting BPO, the telecoms has moved to the back burner, and we are not getting the support.

Ressa: We are actually fourth out of six in terms of internet penetration.

Tungpalan: I just want to say that we have a very clear and feasbile Philippine Development Plan, and the roadmaps coming out will give very specific directions. I think the bonus is, we now have in the infrastructure committee a working mechanism that brings together the infrastructure agencies to do what, where, and when. That very mechanism can make a difference in infrastructure planning and development.

Ressa: Ito?

Carlos: We have Subic and Batangas seaports operating at 3% capacity. We’ve been pushing traffic in that direction. The big trouble is, the trucks are causing tremendous nightmare in Manila. What we need is the MMDA to compel those trucks to go to Batangas and Subic instead. Let’s tighten that window of operations for the trucks. That will ease the traffic for the Manila traffic system. The government has already helped in reducing the wharfage fee. What we need to do now is reduce the cargo handling fees for the sake of the shippers.

Ressa: Ray, you have always been outspoken. If you were to want one thing done this year, what do you want?

Cunningham: On the power side, we need open access and retail competition. We’d have to wait two years, because despite having satisfied the criteria a long time ago, the computer programs, the billing and settlement programs, and so forth were not ready. No one has taken any step. We desperately need that to go forward, because people are getting impatient to see the effects of the power reform.

Ressa: We still have one of the most expensive electricity costs. I know this has been a problem, and everybody has addressed it in different ways.

Cunningham: True. Power is expensive in the Philippines, but we do not subsidize our power. One reason why power is so cheap in some countries relative to the Philippines is because it’s being subsidized. This is counterproductive and many of these countries are getting out of that mode now. In addition, we must remember that the Philippines is a group of islands. In order to transmit power, we need submarine cables. Those are things that we can’t change so easily. Nonetheless, I believe EPIRA can deliver on its promise.

Ressa: Will there be power shortage in 2013? We’ve been seeing some of it in 2012. Has it been as bad as expected by Arangkada? Without what you are asking for, what do you say?

Cunningham: There is a chance that we can skate through until 2016. Right now the GNPower project is being commissioned. It should be ready by the beginning of the second quarter. That should help us greatly until, perhaps, 2015. At that point, whether the coal fire plants will carry us through until other cheaper plants are built, I’m not so sure.

Ressa: Thank you, our time is up, gentlemen.

Part 3: Big Winner Sectors (Infrastructure), Panel Discussion 2 Transcript by Arangkada Philippines

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Alcuaz: We have about 30 minutes for this discussion and about 10 minutes for questions. If anyone has a question at any point , please stand up, wave your hand, and I will throw you into the discussion. Let me introduce members of the panel. Of course, you know the Secretary of Tourism Ramon Jimenez. Aileen Clemente, head of Rajah Tours, is from the Philippine Travel Agencies Association. Dr. Rolly Dy, representing agribusiness sector, is with the University of Asia and the Pacific. Bobby Batungbacal is with Dow Chemical and also with the Chemical Industries Association. He represents the manufacturing. John Ridsdel is with TVI, which operates a mine in Zamboanga del Norte.

I will ask everyone one or two questions, and I will ask the same question to everyone. [First Question] Could you point out in your sector what’s been the biggest accomplishment or the biggest challenge in the last one or two years.

May we begin with the mining sector. John?

Ridsdel: The mining sector, is the one that, I think Secretary De Ocampo indicated last year had a growth rate of minus 7% and reflecting on John Forbes’ review of the Arangkada scorecard track record, mining is not advancing to the same degree. So as Roger Dimmell [Canadian Chamber of Commerce First Vice President] said, the challenge is, how do we make mining—I prefer to use the term mineral development—go forward.

I’d like to quote a recent speech by Finance Secretary Purisima. In a speech to kick off the country’s initiative to join the Extractive Industries Transparency Initiative, Secretary Purisima said and I quote, “If we are able to resolve the issues we are dealing with in mining, this industry can actually provide an extra gear or two to the Philippine economy.” In fact, said Secretary Purisima, “I believe mining can easily provide 1 or 2 percentage points growth of GDP if we are able to do it properly.” In short, mining can be a major contributor to the economy, social development, revenue, and recognizing the Philippines for investment grade. Looking back on 2012, I think industry would say that the number one accomplishment was that the Administration decided what the issues are. Secretary Purisima said we can resolve the issues. It took some time, but in fact, they have identified what those issues are. Executive Order 79 is a framework going forward to resolve the issues.

The Administration has, if you will pardon the expression, passed through the valley of doubt and emerged on the other side on the plateau of commitment. There are clearly a number of good elements in EO. The Executive Order recognizes existing contracts, it established a cabinet level committee moving forward, it commits to the Extractive Industry Transparency Initiative, it promises to do something about the scourge of illegal mining, and it asserts the primacy of national law over LGU ordinances.

The bad news is that it is taking a long time to get to this point. Meanwhile the moratorium on mining continues, and industry is on hold and even going backwards, minus 7% was the number Secretary De Ocampo had in his remarks. Except for companies with existing contracts which are recognized, the industry is staying away in droves. There are no new agreements, companies are not exploring, and we have to remember that in the extractive industries, it takes a long time to wind things back up. So while we decided what the main issues are to resolve, the problem is we actually didn’t resolve any of them.

The biggest issue to resolve, starting to look forward, is the fiscal regime or government share where government thinks it is not getting enough. And now because it is a financial issue, we have to wait until there is a new Congress, and so industry will be going backwards, and be in a moratorium even longer. For the record, the public sector share as we refer to it, not just the Finance Department’s tax receipts, but the public sector share is actually much bigger than what the government appears to think. That’s because not only does the industry pay excise tax and income tax which the Department of Finance sees, but it also pays something like 20 other taxes to various government department, agencies, and LGUs. And a 1-2% gross royalty to the indigenous people. And 1.5% of operating costs to social development and management plans for schools, hospitals, and sustainable development. And we have to build roads, bridges, and provide electricity and security for the surrounding regions so government does not have to. And even though mining is relatively a more capital-intensive than labor-intensive industry, we contribute a very significant multiplier for economic activity and employment both locally and nationally. Finally, industry is increasingly conscious of the importance of targeting long-term social and environmental sustainability.

Alcuaz: Let me ask Bobby who represents the manufacturing sector what he thinks is the biggest accomplishment or the biggest challenge facing the industry.

Batungbacal: Thank you. I’d like to mention [two]. First I think would be awareness. I think our awareness on the strategic importance of manufacturing has been pretty recent. If you think about when Arangakada was written in 2010, it was there, and it was recognized to be an important industry. But policy makers and the private sector didn’t have a high priority for it. We came from one end of the spectrum where people were asking “Meron pa bang manufacturing?” to the middle of the spectrum today were people are saying, “We didn’t realize that manufacturing was such a big part of the economy.” So I think this is a very important accomplishment this year because it raises the prioritization that both private and public sectors will put on this important sector. In the last 12 months, it became a very a hot and interesting topic. The Federation of Philippine Industries had their second manufacturing conference. Now, you have labor groups, investor groups, and everybody else coming up with their manufacturing forum with the intention of growing and reviving the manufacturing sector.

The second most important accomplishment this year was the creation of the roadmaps. Secretary Domingo and other speakers talked a lot about those. It’s important to point out that the creation of these roadmaps was quite inclusive. Before we would make roadmaps for the biggest groups like the SEIPIs and the BPAPs. It’s comprehensive now. You’ll even see roadmaps for laminated bamboo materials. It includes so many industry associations. BoI is working with PIDS on this one, and they are putting all of them together into a manufacturing roadmap for the Philippines. Having this unified roadmap enables the government to see this coordinating effort and enables industry associations to work with each other. That’s where you get synergy.

Alcuaz: Rolly Dy represents the agribusiness sector.

Dy: Many people do not realize that close to 40% of employment is the direct effect of agribusiness. If you add the multiplier effect, part of the output of agriculture is processed by manufacturing, and we buy from manufacturing. We are talking about easily 60% of the employment as affected by agriculture. The major long-term problems are low productivity, lack of diversification, and inefficient value chain. There are three important observations I have in 2012, which are very important for the future. It takes time to change policy in this country. You have the executive branch, and you have also the legislative branch.

First, there is now refocusing on food security from mere rice self-sufficiency to food staples sufficiency—white corn, cassava, coconut, and camote, which have large multipliers, and are more distributive, more inclusive, and less water-intensive. Water would be a crisis in the 21st century.

Second, there’s greater emphasis on other crops to address rural development. The major problem though is not only do we lack private investments, but there is surplus capacity in some sectors of the economy, such as coconut oil milling and rubber processing, because there is low raw material base due to lack of investments in the non-rice sector.

Third, there’s now better understanding on the part of government in convergence and value chain coordination—DA, DAR, DTI, DENR, etcetera. This is exemplified by more private sector participation, for example, in the rubber roadmap. UA&P did a benchmarking of the rubber industry and coffee industry in Southeast Asia.

Alcuaz: Aileen Clemente represents the tourism. You can either say what are the big issues right now, or better yet, you can ask Secretary Jimenez a question. I think we’d all prefer that. You ask him a question.

Clemente: I wouldn’t want to ask more questions to the Secretary because the Department of Tourism under his leadership has been very cooperative and usually in consultation with the private sector. The reason why tourism is ahead right now is because the private sector has worked to institutionalize development certain aspects of the industry to propel it to grow via the 2009 Tourism Act. The tourism industry is made up of mostly women—feisty women at that—so it has made it into law and part of that is the National Tourism Development Plan. That is moving us forward. In the Philippine Development Plan, there are five major guideposts. One is the rapid, inclusive, and sustained economic growth, and part of the Act is including other government agencies to be a part of the planning process. It’s institutionalizing the new mind set, which is present for tourism growth and the policies that are required for further growth. As the Secretary mentioned, we have an archipelagic landscape, and it is a must to push for our aviation to be treated as a conduit to trade and provide economies of scale. That is a big thing we need to do. It has passed through both the House and Senate and is meant to be signed into law. We hope that happens very soon.

Another is incentives. We are growing, but we need to grow faster, because the pipe can burst any time since the supply is not present. We need more investments at the onset.

The last is mind set, an active consciousness of what we need to have, and that there’s a trickle down on the high-level discussion so that there are no barriers to entry.

Alcuaz: I have a question to Secretary Jimenez. You are talking about how the target is 10 million arrivals by 2016. Last year we had 4 million, and you are saying it will be 5.5 this year. Our main airports were already at capacity last year. Where are you going to squeeze the 1.5 million additional arrivals this year in to those airports, since we don’t have any new airports yet?

Secretary Jimenez: This is precisely the paradigm shift taking place all over the system. Today, we throw around words like “convergence” as if we were doing it before. The fact of the matter is, we are only doing it in earnest now. When I talk about convergence with DPWH, we also have to talk about convergence between DOT and DOTC, or even entities like POEA. Let me give you an example. It is only in a convergence meeting that people realized that 95% of all OFW workers pass through Manila. That accounts for about 30% of traffic that goes through NAIAs 1, 2, and 3. Why? We process all our workers in Manila. Even if I am from Cebu, I cannot fly home directly to Cebu because my papers are processed in Manila. In the next two years, the convergence team will look at dispersing OFW arrivals throughout our airports. That’s where you are going to get some space, and this is just an example of the paradigm shifts that actually happened when people sat across a table and started comparing notes. It is a more transparent and insightful approach to our problems.

Alcuaz: You mentioned we are going to have 11 international airports by 2016. Is that 11 additional or we are going to have 11 in total?

Secretary Jimenez: Eleven airports capable of receiving international flights, yes. Very few people know that Iloilo’s runway will actually take an Airbus 330. It’s ready now, but we need the air agreements to bring them in. When you talk about releasing demand, you have to create the connectivity and agreements that will do that. We have more facilities than people think.

Alcuaz: Are there any questions from the audience? Do stand up, please. There’s a question here already. Mr. Ordoñez?

Ernie Ordoñez: Magandang umaga po sa inyong lahat. I am head of the Cement Manufacturers, which increased 17% at best in 15 years, but I’m also head of Alyansa Agrikultura, which lost jobs; 20% of our small holders lost their jobs. So, we see here growth but not inclusive growth. My question is this: Incidentally my most important job today is that I am recently appointed Chair of the Anti-smuggling Committee of the National Competitiveness Council concentrating on agriculture, but which will hit industry. My question, which deserves only a yes or a no with a small explanation, is addressed to both industry and agriculture, which are dying from smuggling. I have calculated smuggling every single year for the last 12 years and I found out that smuggling is worst now in the last two years, as compared to before, so on page 116 of Arangkada, you say it has started, but it is worst now. I think today will be a milestone. I have computed for every year that whenever Customs is left alone, smuggling skyrockets. When smuggling is looked upon—that is, BOC is looked upon with a committee or an inter-agency entity with some private sector—smuggling goes down. Question to Mr. Batungbacal for industry, and Mr. Rolly Dy for agriculture: Do you or do you not favor the resurrection of a committee that is proven to work, which will look at Customs activities, because right now, only Finance looks at it and they only hardly do so.Do you agree that we should have an oversight group spurred by Arangakda that will look at Customs in a systematic way and make recommendations.

Batungbacal: If you look at our assessment in Arangkada, smuggling is the only one where we did worse compared to all other metrics. I can’t agree more with Dr. Ordoñez. It needs coordinated effort beyond the DOF, and coordinated effort certainly includes private sector as well.

Dy: Data on the magnitude of smuggling is accessible to the public. We did research for 2011 and found that 500,000 tons of palm oil left Malaysia—this is Pemuli—but only 27,000 tons reached the Philippines for that classification. Three hundred fifty thousand (350,00) tons arrived in the Philippines in a different VAT-free classification. The same year, 84,000 tons of onions and garlic left China, but less than 25,000 tons arrived in the Philippines. You can see that as well for permit products. Definitely, I will agree with ka-Ernie here of Alyansa Agrikultura that there has to be some serious oversight on the informal trade of agricultural products.

Alcuaz: For a layman like myself, the reason why smuggling “works” is because their goods are cheaper than ours. They are cheaper to produce there than here. In 2016 we are supposed to have an ASEAN “free trade area” [sic], some people told me that the agriculture sector would not be able to compete with the goods that would be coming in with very low duties or no duties in 2016. Will the agriculture sector suffer a lot? How bad will it suffer in 2016? How prepared is it for the AEC?

Dy: It’s in 2015. As with any country, you cannot specialize in everything. We trade on the basis of competitive advantage. The benchmarking study of the sugar industry between Thailand and Philippines shows that we are down 35% in terms of cost competitiveness, 15% in terms of farm yield, and around 15% in terms of mill efficiency. But we cannot operate on the basis of those averages. The modern farmers in Negros and Bukidnon can survive this and be competitive. The main problem is good farmers cannot buy land or lease land to expand, unlike in Australia and New Zealand. That is difficult here. We have comparative advantage in tree crops, but we have not invested in tree crops, such as coconut oil, palm, coffee, cacao, etcetera. We import almost 80% of our coffee; we import 80% of our palm oil. There is a market out there hungry for more rubber or coconut, but we have not invested. This is something the private sector is looking at, to have a major thrust in developing tree crops in the country, as experienced in many Southeast Asian countries. The key here is looking at the value chain competitiveness of these products. This is not a walk in the park, because we have neglected this for a long time. The political sector talks about rice self-sufficiency, which is perhaps not an easy thing to do. They talk about exporting rice, which is going to mean big losses. I am happy that the [Agriculture] Secretary is talking about exporting fancy rice varieties where we are more competitive. There are opportunities for us to expand markets. If we address logistics, value chain, and R&D investment, we can compete like any other Southeast Asian country using modern science in addressing agricultural productivity.

Alcuaz: Let me ask John one more question before we go. How can the mining industry prosper in the next couple of years if the Congress doesn’t fix the taxes, which is the condition for new mining permits?

Ridsdel: Can it or how can it?

Alcuaz: Either way.

Ridsdel: It can’t. Everybody is very sympathetic with the government. Secretary Purisima said it is a finite resource. It is a depleting resource, and we need to be clear on what the costs and benefits are. The problem is we have frozen the industry while we are thinking about these imponderables. There’s a moratorium on new permits. All that’s happening in the industry is those companies with existing mines, projects, and exploration permits are working forward. Nobody else is. Government has been quite steadfast in saying that until we revise the fiscal terms, nobody will go forward. That is a policy decision they’ve made. Industry is working very hard to work with government. The International Monetary Fund has made an analysis and proposals. The moment Congress gets back after election to get the fiscal regime revised, the industry can start gearing up again.

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Part 3: Big Winner Sectors, Panel Discussion 1 Transcript

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