Online Extra: Q&A with the Philippine Finance Minister
Philippine Secretary of Finance Alberto Romulo is a key Cabinet member in new President Gloria Macapagal Arroyo's government. Arroyo was swept into office on Jan. 20 on a pledge to clean up corruption and put the country's economy back on a solid footing. On Feb. 28, Romulo met with BusinessWeek Asia Correspondent Frederik Balfour in Manila to discuss the clean-up campaign and the steps the new administration is taking to woo foreign investors. Edited excerpts of their conversation follow:
Q: How does your Ministry plan to tackle the ballooning deficit?
A: It's a legacy we'd rather not have. The potential deficit is actually a big amount, at least 225 billion pesos [$4.8 billion], but we want to bring it down to tolerable levels, to about 4% of GDP. Obviously, we have to have an austerity budget, which means reducing our expenditures to a minimum and increasing our revenue generation and tax collection. In particular, we are working on increasing our revenue targets, therefore generation and collection.
Q: What about the serious problem of tax evasion. How can you convince taxpayers that their money will be put to proper use?
A: We have met with the business community, and they said they are willing to pay. But in return, they ask that there should be a level playing field -- no favorites. They say that this was the bane of the old administration. We are asking civil society to help check shenanigans in the government agencies, and we ask both the businessman and civil society to tell us which public officials are undermining the trust we are building.
Q: What kind of extrajudicial agencies or watchdogs is the government setting up?
A: In addition to the watchdogs or whistle blowers within government, we need the active help of civil society. We promised this to them when we were in the streets demonstrating -- that civil society would be part of the checks and balances.
Q: How much money to do you hope to raise with privatization programs?
A: The estimate or target is 15 billion to 20 billion pesos [$312 million to $416 million], but our list is not complete. We are looking for new projects.
Q: The Philippines relies on electronics for two-thirds of its exports. How can you grow if there is a global slowdown?
A: Exports are a cornerstone of our economy. That's why the President has appointed five special envoys who, together with ambassadors, are to drum up investment and export markets. We hope, together with trade or commercial attachés, to look for other niches.
Q: How do you plan to sell the Philippines to foreign investors?
A: We will take road shows so we can meet with investors all over the world and convey to them the message that there is a new government. That we want them to come back to our shores, that this time, there is a level playing field, and this time...we will have good government and all that that entails.
Q: What are the Philippines comparative advantages?
A: One thing we want to promote is the New Economy, the information/communication-technology sector. Also tourism. We have beautiful, historical, memorable places. The beaches can compete with the best in the world.
Q: What about the security problems here?
A: Principally, we want investors to come back. We have always said the government budget is a spark plug to the economy, and we need the private sector as the principal engine of growth -- and that includes our friends abroad. Peace and order is important. And they need to know there is a level playing field.
Q: What sort of incentives do you have in mind?
A: We are reviewing the whole fiscal program to see what works. We have to compare our tax structure and tariffs with other countries in the region. Also, we have to improve our infrastructure. We have a power bill pending in Congress, and that is a must because foreign investors need to be assured that there is power over the years.
Q: After floating a bond last year, are there any plans to tap international markets again?
A: We are still discussing this matter of the budget deficit. We feel that with the program, loans from various multilaterals, as well as domestic funds, we should be able to get by for the year. But this is not to say we are closing the door on anything because, as the bond market improves, we have certain indebtedness we want to improve, and we might need outside funding by 2002.
Q: What are your growth projections for this year?
A: The National Economic Development Agency has forecast between 4.2% and 4.5% growth in GNP, and a range of 3.9% to 4.1% for GDP.