The president of the Philippines and his entire economic team courted foreign investors yesterday at the start of a two-day conference organised by FinanceAsia and aimed at attracting foreign investment through public-private partnerships.
“Welcome to the daylight summit,” said President Benigno Aquino, as he addressed delegates in a ballroom at the Manila Marriott hotel, “where things are not done in the dark.” Aquino and his economic team were clearly keen to push home a message of change that sought to distance this administration from the problems of the past.
“It is not business as usual in the Republic of the Philippines,” said Florencio Abad, budget and management secretary, who announced a commitment to halve the fiscal deficit by 2016. That will give the government room to increase spending on much-needed infrastructure, he said, but also to carry out the president’s social contract with the people who elected him.
Aquino certainly seemed comfortable rubbing shoulders with international capital, but he would dispute the charges made by protestors outside the venue that he is putting the Philippines up for sale. His campaign slogan translates as “good governance to lift the people from poverty”, and he started his welcome address by re-affirming the government’s commitment to social welfare, with promises of the biggest budget increase in a decade for education and a coordinated effort to reduce poverty.
“We’re putting money where our mouth is,” he said. “The government does not have the resources of a developed country and it’s therefore important that our funds are prioritised.”
That means using private money as much as possible, but in a way that ensures everyone gets a “square deal”, said Aquino.
Where the protestors are wrong is in assuming that there is a queue of foreign capital waiting to pour into the Philippines. Over the years, investors have progressively lost confidence in the government’s ability to stick to its word – or even to its contracts. “I can very well imagine your apprehension,” Aquino assured the assembled investors. “You cannot deal with a government who offers a handshake with its right hand, while the left hand is picking your pocket.”
The conference site could hardly have been more appropriate to strike this point home. Just across the road is the airport’s not-so-new international terminal, which has become a symbol of the Philippines’ failure to pull off big infrastructure projects. Eight years after its completion, only one airline flies internationally from terminal three, thanks to endless disputes that left the whole building sitting idle for six years.
“Why should I believe that I can confidently invest in the Philippines for the next 20 or 25 years, and that my investment will be protected, successful and rewarding?” asked Pascal Leccia, a project finance specialist from Deutsche Bank, at the start of a panel session with the economic team.
For all its fine talk, the government does not yet have a good answer to that question. Cesar Purisima, the finance secretary, said that by focusing only on solicited projects he hopes to reduce opportunities for corruption, and reminded the audience that the Philippines has never defaulted on its international obligations. Even so, 25 years is a long time.
But the road to rehabilitation must start somewhere. Most delegates seemed to appreciate that the government is willing to have a discussion about how to achieve its goals and many left the venue at the end of the day more confident than they arrived.
Perhaps the best advice came from a panel of project finance specialists, who worried that the government’s list of potential PPP projects was too long and too ambitious: “It’s important to focus on financially viable projects so that you can get some early wins,” recommended Conor McCoole, from Standard Chartered. The Philippines’ history with power projects and toll roads made those natural sectors to focus on, he said, instead of the railways and airports that make up so much of the list.
“It’s a case of less PowerPoint and more power generation,” he joked.
The new cabinet has put on a good show so far, but the jury is still out on whether it can actually deliver the infrastructure its people need. Bankers such as McCoole might argue they need electricity and decent roads, whereas the economic team seems to be trying to give them Chinese tourists. In time, they could of course have both; it is simply a question of which ought logically to come first.
