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Thriving In An Era Of Uncertainty

Office of the Vice President
9 October 2017
Message at the Makati Business Club Luncheon

Mr. Ed Chua, Chairman of the Makati Business Club (MBC); Ms. Marife Zamora, President of the Management Association of the Philippines (MAP); Mr. George Barcelon, President of the Philippine Chamber of Commerce and Industry (PCCI); Mr. Dan Lachica, President of the Semiconductor and Electronics Industries of the Philippines Foundation, Inc. (SEIPI); Mr. Sergio Ortiz-Luis Jr., President of the Philippine Exporters Confederation, Inc. (PHILEXPORT); members of the business community; ladies and gentlemen: Magandang hapon po sa inyong lahat.

Yesterday, we woke up to the sad news of the passing of Washington SyCip, a friend and colleague to many of us here. He was a national treasure—I am sure you would agree—who perfectly combined business excellence and social responsibility, with the legacy he has left in SGV and his philantrophy. He once said that our objective must be to reduce poverty, because if a nation is poor, democracy doesn’t work. We will miss his wisdom as we face today’s challenges. But he will always be a big inspiration to all of us.

There is no question about the fact that the difficulties faced by businesses around the world today, are massively different from the challenges of 10, 20 years ago. We live in a world of uncertainties. Things are rapidly changing even as we speak—in ways that are both good and bad.

Almost on a daily basis, we can see how the nature of leadership now, is vastly different in many countries around the world—and this is shaping diplomatic interactions, aid, and global trade. Financial crises are longer and more frequent, and they don’t just affect Wall Street—you can see their impact on every street. Terrorism and random killings end peoples’ lives brutally and casually. Political and economic institutions are under attack, and people are confused and scared. Very, very scared.

On the other hand, technological innovations and world-changing disruptions are enhancing the way we live, interact, and see our future. Driverless cars may soon allow the ordinary man to stop worrying about parking, tiny robots may soon inspect and fix jet engines from the inside, video games are helping people with disabilities cope, and mobile phone networks are becoming clever ways of detecting and forecasting rain.

Although we might be tempted to see only darkness in this era of uncertainty, there are many things that can provide hope. For example, women in Saudi Arabia are now allowed to drive, China’s new wave of entrepreneurs are turning to original ideas and their fintech solutions are for the poor and marginalized. Closer to home, people are finally getting angry about fake news.

I am pleased to see that within this environment, among the leaders of the business community especially the people in this room, there is no talk of giving up despite difficulties. Instead, there is always talk of how to thrive—and even grow—in this era of uncertainty.

We believe that the government’s 10-point agenda for economic growth will help businesses thrive. It is a sound strategy for sustaining our gains and strengthening economic growth. But although we already have a great vision, the question is how to line up the nuts and bolts so that we do it the right way. We all know Filipinos are great at creating visions; clearing the trail to get there is another matter.

At the moment, the consensus is that we can continue to expect economic growth in the next few years, so long as the tax reform package is enacted, the infrastructure program delivers cost-effective projects, and investments continue to come in. We support all of these reforms, and hope that they will be felt down at the bottom, where higher income and more jobs can benefit the people most.

We realize, however, that it will be best if the tax reform package does not just focus on the revenue side. We must not lose sight of the importance of equity and fairness on the structural side to make sure it support inclusivity. Lack of infrastructure has long been identified as a huge weakness in our economy. Any effort to build roads, bridges, airports, and ports that our growing population needs will benefit our country. But we must build smarter—not just more. We will waste much of our people’s resources if we use plans that are fragmented and build expensive projects that we do not need. The master plan must use disaster-resilient technologies, and be devoid of politics, corruption, and silo-thinking.

The biggest fly in the ointment is foreign direct investment. In the first six months of 2017, FDI net inflows fell 14% from the same period a year before, to $3.6 billion from $4.1 billion. This is a raindrop, compared to Vietnam’s $21.9 billion in the first seven months of 2017—a growth of 52% from last year’s level.  But aside from that, we have to deal with something else. During the same period from January to July 2017, net equity other than reinvestment of earnings plunged 90.3% to $141 million from $1.45 billion—meaning no new FDIs are coming in. We all know that investors are looking for stability, predictability in politics, ease of doing business with the national government and the local governments, to support economic growth.

Confidence in the economy is everything. As the country’s premiere business community, you know more than I do about the business sector’s mood meter. But in my mind, even as the economy might go through more uncertainty before things get brighter, there are things that we can already do today.

The first and most important agenda is inclusive growth.  We fondly call this “laylayanomics” at the Office of the Vice President. We need to let the majority of our people who remain poor and marginalized feel the benefits of progress sooner rather than later. Their anger and discontent are causing societal shifts that further harm our already very polarized country.

The Family Income and Expenditure Survey by the PSA shows that the income gap between the rich and the poor hardly changed since 2006—from 30% to 29% in 2015. The current administration aims to reduce the poverty rate to 14% and boost our economic growth to 8% by 2022—all laudable goals. But to get there, we need to work together now more than ever. And we need to act fast.

To this end, and through the help of the Makati Business Club, we conducted a series of consultations with various sectors on ways to bridge the gaps on livelihood and employment—two areas that we feel will help address the problem of inclusivity faster.

There were many things that we discovered from those conversations. First, we learned that there is a big disconnect between industry requirements and available training programs.

In the manufacturing sector, for instance, industry growth has not resulted to higher employment. The potential of the senior high school program, with appropriate investments and support, can be unlocked to expand employment. Roughly 40% of senior high school students in the public sector are involved in technical skills, so we must make sure that they are ready to work. The BPO sector has already taken the initiative of actively working with the academe to improve their curricula, so that graduates are better prepared to join the industry.

Second, while the National Competitiveness Council has made gains in streamlining the bureaucracy and reducing red tape, businesses continue to be overly burdened by the complexity of processes like registration and securing permits to operate, especially at the local level. Government, both at the national and local level, must balance its role of regulator and provider of an enabling environment. If the focus remains primarily as regulator, we will never attract the needed investment to provide enough employment for our growing population.

Third, as we now operate in a world where local businesses can no longer be protected by tariff barriers, businesses need scale so they can compete internationally. But structural issues like land ownership in agriculture are creating difficult barriers. Some businesses have responded by going straight to local communities and building inclusive business models that create shared value between companies and farmers.

Inclusive business models are great platforms in ensuring that there is sustainable livelihood in areas where they are needed most. For example, Jollibee Foundation has partnered with the farmers of San Jose in Nueva Ecija. They provided financial and technical assistance for growing onions. And when they showed results, they sourced all their onions from the farmers rather than import them from other countries, like they usually did. They are now in 11 communities in seven provinces, helping 12 farmer groups. Since they started in 2009, these groups have delivered four million kilos of vegetables to Jollibee worth more than P160 million in sales. The Office of the Vice President aims to replicate these inclusive business models for farmers from Alabat, Quezon who produce coco sugar; the coffee and cocoa farmers in Tampacan, South Cotobato; the Calamansi farmers in Cabanatuan; and the vegetable growers in Doña Remedios Trinidad in Bulacan.

Partnerships like these are not just good for farmers; they are also good for company bottomlines. They solve big business’ supply chain problems. Kenemer Foods teaches small farmers how to have their cocoa harvest universally certified, which leads to a rise in farmers’ income by up to 15%, as well as a steady source of raw materials. The same goes with Unilever: The next time you eat sinigang, our “pambansang sabaw,” you know that Unilever sourced the tamarind from our small, poor farmers.

These ideas, the urgency, and the partners who bring in the money—they are all a result of our constant visits to poor municipalities, and our consultations with our partner-companies, and farmer beneficiaries.

During my inaugural speech, I promised to visit as many far-flung communities as I can—and this is exactly what we have done. My staff and I have gone to places like Siayan in Zamboanga del Norte, once the poorest municipality in the country and now a crowd-favorite when it comes to happy, turnaround stories. We have been to Barangay Diit in Agutaya, Northern Palawan, which can only be reached after a 10-hour boat ride from Coron. We have been to communities at the top of mountains, in flatlands of ricefields, coastal towns battered by storms, and of course, the deepest parts of Metro Manila’s urban jungles.

We chose these difficult roads because at the Office of the Vice President, we believe that the best solutions to development should come from our very people who experience the problems. We also believe that the best thing that the government can do for the poor and marginalized is to create a good business environment, so that entrepreneurs and business mavens like you can ethically build your companies with the least restraint, and ensure that there is enough growth to go around for everyone. And the best way for government to do that is by getting out of business’ way.

Having said that, government still has important roles. It has to make sure that the following conditions are present: transparent and accountable governments, a bureaucracy that listens to its people and the business community, progressive taxation, level playing fields, open markets, responsive local government units, inclusive political and economic institutions, and a strong leadership capable of making the bureaucracy work.

Convergence is of course implied in the functions of government. After having been entrusted by the people, the least that we can do is for branches of government to talk to each other. But the business sector of all groups know the reality most intimately, that the solutions that are needed for businesses to thrive are simple, but they do not happen because government agencies are not very good at collaborating well. When these solutions do work, we admire those who exhibit the strong and committed leadership that allow for effective convergence to happen.

Over the past year that we have worked on Angat Buhay, our 12-month-old flagship program against poverty, we have come across significant lessons on convergence that worked for all—the poor and marginalized, the local government units, our partner corporations, and the government bureaucracy. In terms of pesos and cents, our programs may be considered small compared to your foundations’, but to us, they show how we can move forward to scale up impact towards our shared dream of inclusivity.

Under Angat Buhay, we have targeted six areas of intervention: universal health care, food security and nutrition, rural development, education, women empowerment, and housing. We are now in 153 communities, serving over 83,000 families, and have mobilized around P145-million worth of projects in the past year. We have also helped in disaster relief and rehabilitation, built a network of schools to inspire the youth to take part in nation building, promoted local government leadership skills through our Bridging Leadership program with Seaoil Foundation, and through our latest project Metro Laylayan, we help poor urban poor families in Metro Manila to get jobs and start businesses.

This October, as we celebrate the first anniversary of Angat Buhay, we are also launching Angat Kabuhayan, our jobs and livelihood push. There are opportunities all around us right now to create new jobs. One less employed Filipino means food for the table and a better future for the poor. We are targeting to create jobs in key sectors that help push for inclusivity, namely: agribusiness, construction, IT-BPO, manufacturing, services and tourism.

All these cannot be done if we are unable to collaborate and work together. Sustainable growth happens only when there is a strong convergence between the private and the government sector. In this light, let us build these models of convergence that could serve as valuable evidence that can shape the more enabling laws and policies in the future. Let us listen to each other and learn from each other.

But more importantly let us listen to our people. Let our shared motivation be centered on how we can truly include the millions of our countrymen who have long been left behind.

Thank you very much for this opportunity to speak before you today. Maraming salamat po, at magandang hapon muli.