Co-Organized by the Asia Society and American International Group (AIG)

A Peace with Freedom

Speech of His Excellency
President Joseph Ejercito Estrada
at the Asia Dinner

New York, 28 July 2000

I THANK the Asia Society, its Chairman, Mr. Hank Greenberg, and President, Ambassador Nick Platt for this great opportunity and honor to meet with you.
Heads of Asian States, including my own, have come to this city and met with the good members of the Asia Society to see if they might be able to catch the attention of the financial and cultural capital of the world. Even if only briefly, on behalf of their distant lands. As a Filipino, I could lay claim to an important edge over your other visitors: I represent a people whose association with you no other in the far east can easily match - a relationship that has spanned more than one hundred years and which has taken many forms.

No other country in the region has patterned so many of its democratic institutions - from its legal and political systems to its business and educational systems - so closely to yours. The Philippines has three million Filipinos living among you as fellow citizens and permanent residents. And no other ally in the region has stood by you through all the wars in the last six decades - from the Pacific war to the Korean war, from the Vietnam war to the Cold War.

But much has happened to the global community since our partnership underwent its last transition in the early 90's, when American military presence in my country ended. So, I make this visit - the first by a Philippine President in the new millennium - to enhance our century-old alliance and guide it to a new era of partnership. In this new world order, with interdependence and new security challenges intensifying. We anticipate the character of our alliance to make another transition.

As with any long-standing partnership, our alliance has seen both bad times and good. One difficult phase occurred within the first year of my watch, during the deliberations over the Visiting Forces Agreement or VFA. The VFA sought to allow US military forces to conduct joint military exercises and training with our forces in Philippine territory. It also provided the legal framework for the treatment of US personnel during the period of the exercises and training.

The debate was intense and the fight was no small political feat. Once the decision was made to pursuit it, however, my administration stood its ground and faced the opposition head on. The VFA was ratified and Philippine-American Defense Cooperation has been revitalized.

Political and economic challenges such as this have marked the first two years of my term as President, the financial and economic crisis that affected our region was triggered from beyond our borders and control. Yet had an inevitable impact on our economy, especially in the banking, industry and other sectors.

Other crises, such as what hit our Philippine Stock Exchange earlier this year, have had a more domestic character, surfacing from within our private and public institutions. These events cannot be excused nor brushed aside and they have served to pinpoint areas that required reform. Yet, even as they have served as a wake-up call, they also, ironically, have been the best demonstration of the basic soundness of our economic fundamentals and the resilience of our political system.

It is generally conceded that among the countries directly affected by the Asian crisis, the Philippines managed to pull itself through relatively unscathed.

In 1998, during the worst year of the crisis, the Philippines recorded a GDP contraction of only half a percent. That contraction could not even be primarily attributed to the original financial crisis but rather to the impact of adverse weather on our agriculture.

Last year, Philippine GDP grew by 3.2 percent. And for the first semester of this year, we anticipate a GDP increase of over 4 percent.

My assertions on the resilience of the Philippine economy are not mine alone. Allow me to quote from a recent IMF study on the Philippines, entitled Philippines: Toward sustainable and rapid growth. "On balance," it says, "the Philippine economy has been able to weather the regional crisis better than most of its neighbors, reflecting more favorable starting conditions as well as the pragmatic implementation of sound macroeconomic policies."

The report attributed the creditable performance of the Philippines during and in the aftermath of the crisis to "favorable starting conditions" and sound economic policies and management.

The first refers to the fact that, compared to our neighbors, the Philippines had less time to enjoy the Asian boom - and therefore less time to overload on cheap foreign credit and its other excesses - before the crisis struck. It is the second, however, the sound economic policies and management, which is the more interesting story but which, unfortunately, is often brushed aside.

The Philippines is one of the most open economies, a result of a series of market-oriented reforms to liberalize, deregulate and restructure the economy that our government started putting in place since 1986, and a legacy that my administration continued. These reforms and policies had the effect of making the economy more resilient to cope with the crisis when it came.

Specifically, barriers to investment were removed in key industries such as power, telecommunications, banking, insurance, domestic aviation, oil and mining, foreign exchange controls were lifted after 40 years of a regulated regime. The entry of foreign equity and investors was facilitated. Import restrictions were lifted and tariffs reduced.

Despite the many calls to resort to protectionist measures during the crisis, my administration continued to uphold these policy and structural reforms. The alternative would have seen a reversal of the gains from deregulation and liberalization.

Beyond those basic macro-economic reforms I have just mentioned are other areas that have received the priority attention of my administration.

I am happy to inform you that in recent months we had several home-runs with the Philippine Congress, and we anticipate more in the next few months.

Last March, I signed into law the new General Banking Act, which, among other things - enables the adoption of internationally accepted banking supervision and regulation standards. In the same month, we enacted the Retail Trade Law, which opened our retail trade to foreign companies after a century of protection.

Last June, about two weeks before the US Congress was able to do the same, our Congress passed a landmark E-Commerce Act. This Act provides the legal framework governing both commercial and non-commercial transactions through the Internet. It provides penalties for computer crimes.

Finally, just two weeks ago, I affixed my signature to a new Securities Act, which aligns the regulation of capital markets with international practices on full disclosure. The Act is a milestone in our efforts to reform and deepen Philippine Capital Markets.

Other important pieces of legislation I am pushing include the Omnibus Power Bill and Amendments to the Omnibus Investment Incentives Act. The Power Bill, which will further deregulate and privatize the power sector, is now in the Bicameral Conference Committee.

I am also pushing for the early enactment of an AntiRacketeering Law with anti-money laundering provisions, and a Bill that seeks to further strengthen the supervision capacity of the Central Bank. These are for instituting greater transparency, accountability and good governance in our public and corporate sectors.

Just as important, by taking more concerted efforts to pro-fit our education system and upgrade our communications infrastructure, my administration is equipping our most important resource - our people - for the global knowledge economy.

You may have heard that your country, the United States, recently garnered the top ranking in the global new E-Economy Index, which maps the "technological vitality" of the world's 47 leading economies. The Philippines did well, too, being ranked number 26 overall. Well ahead of most of our neighbors and Italy, Brazil, Mexico, China and Korea. We were adjudged the world's number 1 in the category of knowledge jobs. That put us ahead of Australia, the US, Canada and France, in terms of qualified engineers, availability of its skills, availability of Senior Management and higher education enrollment.

As Captains of Industry and pillars of American business, you will not have failed to notice that the reforms my administration is continuing and those that we have - begun all take the strategic view. They are not short-term, unsustainable palliatives. Not only are they intended to address weaknesses laid bare by the crisis; they are meant to further fortify Philippine Economic-Foundations, and brace the country for the challenges and opportunities of the new economy. We are building for the future now.

And this same orientation is what we have for the other aspects of our national life. Yes, we want long-term prosperity, so we yearn and now work hard for lasting peace.

You have heard, without a doubt, about the difficulties we have recently been facing in the southern part of the country.

For so long, the peace of the nation and the authority of the state have been threatened by elements seeking to dismember our land. Like all free nations that fought long and hard for their independence, we cannot allow this sorry situation to fester.

My government's first aim in Mindanao is to restore and maintain peace for without peace development will be a pipe dream. We know that poverty and the long government neglect that bred it are the roots of our present travails. But any government earnestly seeking to redress this wrong will fail if lawlessness runs rampant.

Accordingly, my government has been seeking to uphold its authority and solemn duty under the Constitution to preserve the integrity of our nation. We cannot allow lawless violence and barbaric terrorism to run our country down.

The reconstruction and socio-economic development efforts in Mindanao have begun. We will not stop until we uplift the lives of all Filipinos there. We will actively talk peace ad actually build it with everyone who sincerely seeks it.

When I sought and assumed the Philippine presidency two years ago, my overriding ambition was to give the best I can back to the nation that has been so good to me. That has not changed. It has only crystallized into the three-pronged goal I now wish to win for my country.

I want my people to enjoy peace, but only with freedom, I want my people to savor prosperity, but only with fairness, and I want my people to experience stability, but only with openness.

Our road to lasting peace, sustained prosperity and social stability may be long and arduous. But one thing is certain, our journey is now underway, and it will be much more difficult if we are so foolhardy as to try to do it all alone.

As my predecessors in office had done in the past, we actively seek the support and cooperation of friendly countries and partners.

In this global village, a nation's life and fate are inextricably linked with those of others. This is as true to us - in East Asia as it is in Europe and to yourselves in the Americas. For interdependence, integration and cooperation are the guideposts of today and tomorrow.

East Asian integration is on the march. In the economy sphere, ours is already one of the most integrated developing regions in the world. Our production networks are so closely interlinked. Intra-Regional Trade and Tourism are rising fast, even the gyrations of our currency and equity markets are highly correlated.

Consider for instance China, a country which for so long was a world unto itself. Before its opening to the world in the late '70s, China's economic ties with its neighbors were small or negligible. The trade volume between China and Japan was only a little over one billion US dollars in 1972; by 1999, it was more than 66 billion US dollars.

Last year, China's two-way trade with South Korea was 25 billion US dollars, and with the major economies of Southeast Asia. Nearly 27 billion US dollars, indeed, China's trade with its east Asian neighbors now exceeds that between China and America or between China and Europe.

Of course, the clearest proof yet of how closely linked east Asian economies are with one another was our common experience of three yearsd bad. Bad because the fundamentals of individual economies were summarily disregarded. And good because east Asians came to realize that they must count on each other's understanding and support.

Thus, the Asians contributions to the financial packages for South Korea, Thailand and Indonesia. Thus, China's restraint from devaluing the Yuan. Thus, the new Miyazawa initiative and the Obuchi plan. And last, the ASEAN economic and financial surveillance process.

And the spirit lives on. At the summit of ASEAN leaders with the leaders of China, Japan and Korea, which I chaired in Manila last year, we issued our firstever resolve to collaborate more closely towards regional stability, peace and prosperity.

Since that trailblazing document, economic ministers from the thirteen east Asian countries have identified nine areas for enhanced cooperation, such as information technology and Ecommerce.

Our finance ministers have launched the Chiang Mai initiative , a regional network of currency swap arrangements, as an initial step to prevent recurrence of the 1997-98 financial turmoil.

At the pace east Asia is now moving, an Asian monetary fund may be just around the corner.

I believe very strongly that east Asia is taking the right path. Greater economic integration does not only provide avenues for advancing shared growth and prosperity, it also improves the likelihood of lasting peace.

Of course, one will always remind us that Germany and Britain were each other's largest trading partner in the early years of the last century, but that did not stop them from waging world war I on opposite sides.

There indeed are no guarantees, but if the French and Germans could put aside centuries of war and deep antagonism, if a European union can grow from the seeds of a steel, and coal community, I see no compelling reason why, say, ASEAN plus three cannot flower into an agent of global peace and stability.

An Asian scholar recently observed that the Asian crisis has served as the most important defining event of regional security since the end of the cold war. It "revealed not only the vulnerabilities of the region of External pressures. But also the inherent weaknesses in the internal foundations of regional security."

Indeed, terrorism, transnational crime and other scourges add new fuel to the old hurts left over from colonial past, and as we in the Philippines are so keenly aware, religious extremism - not only in my country, but in many areas of the region - is again rearing its ugly head.

If allowed to deteriorate, by indifference of meager action, the small fires that have now begun burning may engulf us all and it will be small solace to America that our region lies on the opposite side of the globe.

For our vision of one east Asia is not of a monolith pitted against others. The world is too small for that.

We know and are truly thankful that the road to Asian recovery passed through Washington and New York. Without America's locomotive, the Asian train would still be stuck in the station. Without America's commitment to fairness and openness, the Asian crisis could have been a global catastrophe.

And we know, too, that for us to have peace in Asia we need America, not so much because America alone has the might, but because America is peerless in championing the ideals of the peace we want - a peace with freedom.

Thank you.