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I had a thoroughly enjoyable moment with President
Arroyo on Feb. 14, Valentine’s Day. I had a 30-minute exclusive
interview at 11 a.m. at the Quezon Room of the Palace, followed by
listening to Claire de la Fuente belting out Carpenters favorites
with the piano accompaniment of Richard Carpenter.
Excerpts from our
conversation:
Economic situation
Of course, you are much better at
analyzing the economy than I am. The economy has reached a level of
maturity and stability with some of the strongest macro economic
fundamentals in three decades. Moody’s upgraded our credit rating
to positive, and for a very good reason. Our 7.3 percent growth is
the highest in 31 years. Our peso is the highest (against the
dollar) in many years. Our stock market is one of the best
performing in Asia. Investments are pouring in. We created seven
million jobs in seven years.
The rate of poverty is down, both
the objective measure and the self-rated poverty (to 46 percent from
66 percent in July 2001). Of course, we are conscious about the
global economic situation. And because the more interconnected we
become, the more we have to manage the ups and downs of other
nations’ bubbles, and the volatility in the US economy. The good
news about the Philippines is that because of macro economic
fundamentals, we have reached a level of maturity and
diversification to make us resilient to the external shocks.
For instance, we have developed
our markets. Trade with China is $31 billion, growing by leaps and
bounds and the balance of trade is in our favor. The US is now 18
percent of our markets vs. 28 percent several years ago. We have
diversified our economy and our markets very much. For instance, in
Dubai almost all the bananas come from the Philippines.
Income inequality
Like all nations, whether rich or
poor, we still have the challenge to close the gap in income
inequality. But only a strong economy can do that. To that extent,
we have turned the economy around. If you want to reduce income
inequality, the most important thing to do is create jobs and by
increasing our expenditures in social services in quantities we
haven’t done in many, many years.
On possible downside
On the economy front, we do have
to be alert about the global economic situation. As regards the US,
recession is a very technical term. It’s two quarters of negative
economic growth which has not happened. We believe that any US
recession will be short and sharp. We believe, as far as the
Philippines is concerned, it will be manageable because of our
diversification, our maturity, our capability to frontload our
spending and have a construction surge to pump-prime the economy
during this short and sharp period. This refers to infra, especially
on roads and school buildings.
We are spending hundreds of
millions on infra. I don’t think we ever had an education budget
of P160 billion plus and an infrastructure budget of P200 billion,
including that of government corporations and local governments. The
infra with the biggest multiplier is housing. We are doing
farm-to-market roads and irrigation because the multiplier effect is
greater in the rural areas. For irrigation, we are spending P500
million a month or P6 billion a year. It’s P200 million a month
for North Luzon, P200 million a month for Mindanao and P100 a month
for other regions which are less agricultural. The biggest
irrigation item is the downstream irrigation of the San Roque Dam
which was mainly a flood control project.
Agriculture has been doing quite
well. We have been spending at least P20 billion a year on
agriculture, which is also an unprecedented amount.
The remaining years
Make the reforms permanent. We
have achieved all of these things. The pain of raising taxes must
now be followed by the gain of investing in human and physical
infrastructure. That’s the way to make the gains permanent. We are
spending on infrastructure to have a good business environment to
create jobs. We are spending on social services, health and
antihunger programs, education, cutting down on red tape and
corruption, peace in Mindanao, and fighting terrorism.
Chacha and Mindanao
That’s one of the reasons. In
fact, it is an imperative. Many of the wishes of the MILF (Moro
Islamic Liberation Front) will have to do with constitutional
change.
On federalism
It is still hard at this point to
define what it will be. I think it is better for us to wait for the
final peace agreement and let the MILF have what will be the
specifics. Ancestral domain is where we are now. I believe that we
are overcoming the final difficulties on ancestral domain. Any
negotiation has its difficulties. I am optimistic we can overcome
the difficulties.
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