Ambassador Harry K. Thomas, Jr. Remarks for Philippine Business for Social Progress (PSBP) 1/24/2012
Thank you for the opportunity to address this distinguished group of business leaders, international donor partners, and representatives from the NGO community. I am pleased to join you in celebrating the 41st birthday of your organization. You have played an important role in helping the Philippines address poverty and social development issues over the last four decades, and many people are leading better lives due to your efforts. I hope you have many more birthdays to celebrate.
I would like to talk with you about some of the programs the United States Government has underway here in the Philippines. Our engagement with your government is strong and getting stronger, and the initiatives that I’ll describe reflect our dedication to a vibrant and mature partnership with the Philippines.
Your theme of “Harnessing Business Solutions against Poverty” is timely and appropriate. Clearly both our governments see that the capabilities of the business sector are an important part of the battle against poverty. Businessmen and women are skilled at creative problem-solving, using capital effectively, and developing ever-efficient ways to produce goods and services. These abilities are necessary to stay ahead of the competition in a globalized economy. These “business solutions” help unleash potential - the potential inherent in a land with rich soil, beautiful beaches, abundant minerals in the ground, and most importantly, the potential inherent in every human being. And once that potential is unleashed, I believe we’re well on our way to eliminating poverty.
One U.S. government program that has a business-like approach is the Millennium Challenge Corporation, or MCC. MCC is providing $434 million dollars of grant assistance, called a Compact, through 2016 and the program is already beginning to show results on the ground. We are providing those funds towards one simple goal – reducing poverty in the Philippines through economic growth. MCC’s philosophy is that aid is most effective when it reinforces sound political, economic, and social policies, and ultimately increases income of the poor. MCC only signs compacts with countries that have made a commitment to combat corruption, strengthen health and education, and promote economic freedom. Here in the Philippines, MCC worked with Filipinos in the government, academia, NGOs and the private sector to understand the constraints that inhibit investment and perpetuate poverty. They were rigorous in their analysis, and demanding of their staff and of the Philippine government. This business-like approach also included a focus on social impact and how activities would help poor Filipinos participate in the economy. Finally, the program is managed by a Philippine entity, called MCA-Philippines, with the assistance of private sector contractors. MCC officials here and in Washington provide strict oversight. This is what we call aid with accountability.
MCC’s compact includes three key investments: The first is already working to rehabilitate 220 kilometers of road in Samar, which will allow people to get their products to market more easily, and improve access to social services such as education and health care. The road is designed and will be built to strict environmental and engineering standards. The procurement and contracting processes are closely managed and audited to ensure transparency and prevent fraud and corruption. We even have auditors who watch over the auditors, and you know what, I’m keeping an eye on all of them. This road will be built right and will transform peoples’ lives.
The second investment builds on an existing project known as Kalahi CIDSS. Here, ordinary citizens at the barangay level, who would not normally be involved in community decision-making, identify local development needs, and work as a team to design and implement the projects themselves. The estimated 3,000 plus projects in 160 municipalities will include small roads and bridges, water and sanitation, schools, and health facilities. However, the actual projects are really icing on the cake—what this project leaves behind are stronger communities that know how to lift themselves out of poverty. The third MCC investment supports reforms in the Bureau of Internal Revenue. Without revenue collection, the government cannot invest in infrastructure and social services. The objective of this project is to ensure that there is a better engineered and more transparent tax system that reduces opportunities for corruption. I know the subject of collecting taxes is not always popular with the business community. But this project should level the playing field between the honest tax-paying companies and those that do not pay their fair share. If your competitor can no longer dodge the tax man, your companies will benefit, and impoverished Filipinos will too.
We are also attacking poverty through a new effort called the Partnership for Growth, or PFG. PFG’s objective is really the same as MCC’s – to accelerate and sustain broad-based economic growth. The PFG agreement was signed in November by Hillary Clinton and Albert del Rosario here in Manila. Only four countries worldwide are included in this initiative. The Philippines by far has the largest population of these four, and it is the only one in Asia. PFG is a White House-led program that coordinates the efforts of many U.S. government agencies, starting with USAID and MCC. It includes agencies as different as the Department of Justice and the U.S. Treasury. Like MCC, it also focuses on removing constraints that inhibit economic growth. The key is improving the coordination of our two governments’ resources to accomplish this. With growth comes jobs, and a person with a steady job has a stake in the economy, a stake in a stable society, and a stake in an honest government that offers services such as health care and education to their families.
PFG, similar to MCC, came about through a demanding process of consultation with Philippine partners, and it also insists on accountability and results. The focus is on real partnership, meaning that goals and projects are agreed upon by both sides. Our two teams drew up a Joint Country Action Plan, which seeks to establish a transparent and consistent legal and regulatory framework for businesses and entrepreneurs. Another goal is to create a more open and competitive business environment with lower barriers to entry. PFG will also direct funds to strengthen the rule of law by supporting a more efficient court system. And finally, it will direct efforts towards improved oversight of government revenue collection and spending.
Already, as a result of PFG, the U.S. Treasury has committed to helping the Department of Budget and Management set up a nationwide system to organize and oversee government payrolls, which is certainly a good business practice. Another PFG project will direct technical assistance to help prepare the Philippines for any future request for full membership in the Trans-Pacific Partnership free trade agreement. PFG is still in its early stages, but there will be many more successes to speak of in the upcoming years.
I cannot leave here tonight without mentioning the one thing that undermines all of our good efforts to improve peoples’ lives – the plague of corruption. We all know corruption is far too prevalent, and reinforces the inequality and misery that, unfortunately, is so visible throughout the country. I agree with President Aquino’s statement “Kung walang corrupt, walang mahirap.” The Aquino Administration has made a good start in rolling back corrupt practices that result in poor services, inferior infrastructure, and reduced economic growth. I am confident the Philippines can improve its reputation, it can improve its ranking in the various indexes of corruption, and it can improve its chances of attracting job-creating investment. But it needs to follow through on corruption cases in a timely manner so that guilty parties make restitution and serve time in jail, and innocent parties have their names cleared.
To close I’d like to touch on one other initiative your government is using to improve people’s lives – that of Public-Private Partnerships, or PPPs. These joint ventures between governments and private entities harness the strengths of the private sector to create value for the society as well as profits for the businesses involved. The Philippines already has several highly-regarded PPPs, ranging from cell phone banking to the water concessions in Manila. USAID supported initiatives in privatization and mobile banking that helped pave the way for these successful projects. We all know that the government’s current PPP infrastructure initiative has taken some time to gain traction. It is not a bad thing to be careful in your due diligence when planning large projects, but I’m glad to see that the first one – the road project south of Manila - has been bid out and a winner selected. We believe that Public Private Partnerships can be helpful in harnessing businesses skills and private capital to improve the Philippines’ infrastructure. Better roads and better water systems mean better lives for everybody, from the fellow stuck in traffic on EDSA to rural folks lugging water to their houses from a distant well. We hope to see many more infrastructure projects open to bid this year, and I hope many U.S. companies will participate – perhaps partnered with some of you – in these projects.
In many ways, I believe the philosophy behind our development efforts in the Philippines is similar to the approach used by the Philippine Business for Social Progress. I know you were founded back in 1970 by 50 companies that united their individual efforts to improve society in order to get better, more focused results. Your Small and Medium Enterprise Credit Program, your Business Advisory Program and your Sustainable Livelihood Program are all directed towards unleashing potential by promoting economic growth. You have a tradition of discipline in planning, and I’m told you are rigorous in overseeing and monitoring projects. These sound business practices have made your efforts effective, and set you apart from an ordinary foundation or charity. It has also made you a good partner with USAID over the years.
I’d like to reiterate my thanks for the opportunity to speak with you today. And now, I’m available for comments and questions.