INTRODUCTION Reforms to tackle poverty and corruption, boost business and attract investors
New leader brings new hope

Gloria Macapagal-Arroyo, who became president of the Philippines in January, has a tough job ahead to turn round her country’s fortunes. But she can take comfort from the fact that most observers have ruled out a slide into recession.
Indeed, the Philippines is one of the few economies in the region to post growth in the second quarter. Good agricultural output and a rise in telecommunications services pushed gross domestic product (GDP) to 2.25 per cent in the three months to the end of June.
Mrs Macapagal-Arroyo told business leaders in Manila: “I am pleased to report that the Philippine economy is in the recovery mode and we look forward to stronger growth in the coming months.”

The government is hopeful that the growth target of three to four per cent in agriculture, which accounts for a quarter of GDP, will be met by the end of the year. It wants to create one million jobs in the sector within the next
three years.
The president says the two other main areas of growth – ICT (information, communications and technology) and tourism – “will be the flagships of our national development in the new economy of the 21st century”.
Land reforms, the training of workers, the promotion of the service sector where well-paid jobs are plentiful, and education are high on the government’s agenda.
“Foreign investment is becoming robust again,” says Mrs Macapagal-Arroyo. “The Philippine peso has regained its strength relative to the US dollar. Our efforts to curb dollar speculation and dollar hoarding, a major cause of the foreign exchange deficit, are paying off.

“We will reform the capital market by ridding the securities regulation code of restrictive provisions preventing players in the capital market from increasing their participation. We are also confident of staying within the year-end deficit target ceiling, which we attribute to prudent expenditure and the outstanding performance of the Bureau of the Treasury.”
Following agreements between the government and secessionist groups, the troubled island of Mindanao can look forward to a brighter future. Mindanao is a major supplier of food, sending out 45 per cent of the national agricultural exports. It is looked upon as the nation’s food basket for the 21st century and will also be the hub of trade and commerce between the Philippines and Brunei, Indonesia and Malaysia, says the president.
A recently established national anti-crime commission will coordinate the government’s campaign against organised crime, graft and corruption.

“We must get rid of dishonest and incompetent officials. An ethical reform must inform the bureaucracy,” says Mrs Macapagal-Arroyo. She has also pledged a war on poverty.
The National Economic and Development Authority says economic growth may rise to three per cent, partly as a result of positive activity in the manufacturing sector, although the country’s electronics industry has been hit badly by the slump in global demand.
The Philippines remains an attractive country as an IT investment destination. Even the Japan External Trade Organisation (JETRO) is promoting the Philippines as a good place for IT investment.
Roman Baltazar, commercial counsellor at the Philippine embassy in Tokyo says: “JETRO is pushing for the Philippines as an investment destination for IT because they recognise our potential. They are aware of the skills that our human resources offer.

“So we will focus on IT and we will continue to send Japanese investment missions to the Philippines. We will also look at projects that will enable Japanese and Filipino businessmen to forge ties.”
Mr Baltazar, who is chairman of the executive board of the Asean-Japan Centre, cites Cebu, which is aiming to be the IT hub of the Philippines, as an “example of a good place to invest in”.
The country is attracting a growing number of US firms, lured by lower costs and the many skilled, English-speaking workers. America Online runs an email help centre there and software company Enterworks chose Manila last year to set up its $2 million Asian base for e-market services.

Guillermo LUZ, president of the Makati Business Club, says investors will see the Phillipines develop as an IT hub

Guillermo Luz, executive director of corporate think-tank and support group Makati Business Club, says that over the next few years investors will see how the Philippines develops as an IT hub for the region. “Some IT jobs in the UK are already being done here by Filipino companies,” he says. “Very large data processing and encoding jobs are being carried out here – they are being outsourced.”
Initial figures suggest the number of tourists has not fallen substantially this year, but the Philippines is still losing out to other southeast Asian destinations. It attracted only 1.8 million visitors last year, compared to Vietnam’s two million, Indonesia’s six million and Malaysia’s 12 million.
Secretary of tourism Richard Gordon is keen to stress the beauty of this nation of more than seven thousand islands, but he says more money needs to be spent on promotion. “Tourism doesn’t just happen because you have a beautiful country,” he adds. Development of new infrastructure in specific areas such as Mindanao will help encourage more visitors. In Boracay an underground pipeline has been completed to carry drinking water to the island.

In the energy sector, a long-awaited reform bill includes the privatisation of the National Power Corporation and the liberalisation of the electricity sub-sector. Oil giant Shell is on schedule to bring its offshore Malampaya gas field – the largest discovery in the country – on stream in October. The gas will be used to generate 2,700MW for Luzon
Alberto Romulo, executive secretary to the president, says: “We have to rebuild. We are trying to encourage foreign investors here and provide an environment in which they will be able to thrive.
“We have to build the infrastructure and remove a lot of bureaucratic red tape. One of
the first things we have to do is restore the confidence of the people in public officials. This is the reason why the president said we must lead by example.”