Good evening ladies and gentlemen.

I would like to thank AIG and Citigroup for this opportunity to share with you the sense of optimism and determination that the Philippines has for its future. It is a future intricately linked with that of the world and particularly the United States.

It is also a future that is based on solid performance and a willingness to take tough measures. I will also discuss our performance and touch upon our programs and measures for growth.

In July, we acted to save the live of a Filipino, for every Filipino life is important.
In saving Angelo dela Cruz, two realities were tested: the reality of our close relations with the United States and the reality and need to protect our overseas Filipinos.

The clash was momentary, and rather than prove any weakness in our relationship, this episode demonstrated the strength and resilience of these ties.
As friends, we voiced our dissent in words and in ways that could place no doubt as to our respective resolves on this particular issue.  But as friends, we did not allow this difference to define our relationship.

RP-US Relations: Common Interests, Shared Values

Our relationship is defined by the common interests that bind us: to protect ourselves and help preserve the peace and security of our region, we are strategic and treaty partners; to realize our development objectives, our economies are deeply engaged; to bring our nations closer are over 2 million Filipinos in the United States and more than a hundred thousand Americans in the Philippines.

Our shared values help define our close relations: democracy and the rule of law, tolerance and plurality, market economy and the war against terror.

The bonds of friendship between the Philippines and the United States are enduring and beyond temporary setback.  Those bonds have been forged in the battlefields of freedom, in the foxholes of Bataan and Corregidor, in the hills of Korea and the fields of Vietnam, by brave and courageous soldiers who fought and died together for their beliefs and ideals.

We will be jointly commemorating a powerful symbol of the sacrifices that forged our relations: the 60th anniversary of the Leyte Landing and other events to observe the end of the war in the Philippines. Our defense and security cooperation is anchored on several agreements, foremost of which is our Mutual Defense Treaty. Over the years we have engaged in joint training against conventional threats.  Recently, this area of cooperation received an added dimension.   Today training and assistance is also conducted to best prepare us in the fight against terror as well as against counter-narcotics trafficking, transnational organized crime and money laundering.

Our economic relations also reflect robust exchanges and lasting opportunities. The US is our biggest trade partner (19.82%, 2003) and the top destination of our exports (19.91%, 2003). It is also the top investor in our country (US$3.4B, 2003). In the area of development assistance, the $4 billion dollars that the USAID has so far brought to the Philippines remains unmatched.  These relations run deep and are an important part of the political and economic future of my country.

Basis for Optimism

And to take a peek at the basis for our optimism for our future, allow me now to provide you an update of the recent trends in the Philippine economy.  I am glad to say that our economy sustained its upward momentum, growing by 6.35% in the first half of 2004, the highest first-half growth we’ve seen in 16 years.  Our exports grew 13% compared with just 5.7% growth in imports.

Investments have recovered and, in fact, grew the fastest in the first half of 2002, to 9.4%. The services sector continued to be the growth leader but industry is catching up.
Monetary Policy and Management

Monetary policy remains supportive of price stability and domestic economic activity. Interest rate differentials remain at comfortable levels.

Given the unexpected surge in international crude oil prices, managing inflation will be a challenge. However, the national government will keep its inflation target of 4% to 5% given that the inflation pressure from the demand side is still low. Meanwhile, amid recent weakness, the Peso’s volatility remains highly manageable.

Our balance-of-payment position in the first half of 2004 went to a surplus of US$68 million from a deficit of US$609 million a year ago, as the balance of payments found good support from stronger exports growth and the steady flow of OFW remittances.  The level of inflows of OFW remittances particularly from the Americas and Europe, the prime markets for well-compensated workers, were sustained. I should note that there was a very strong pick up after elections with July remittances increasing by 14.5%, lifting the first seven months’ growth to positive territory. Promoting the welfare and safety of overseas Filipinos is an important pillar of our foreign policy, and it’s not just because of the foreign currency that they send home.

Portfolio investments are also getting a lift from improved equity investor confidence and strong corporate earnings pushing the Phisix up 20.5% from December last year. This makes the Philippine stock market the best performing market in Asia to date this year.  More encouraging however is the trend in leading Foreign Direct Investment indicators: first-half investments approved by our Board of Investments and the Philippine Export Zone Authority were up 493% and are seen to strengthen further with the expected investments in energy-related projects late this year.  As for our gross international reserves, these remain at a comfortable level of US$16.0 billion as of end-August 2004.

Managing External debt and Finance

Meanwhile, our external debt policy stays focused on debt sustainability and is guided by the following points:

· No bunching of maturities
· Medium- to long-term debt maturities are well spread out over an average of 17 years
· Short-term debt accounts for only 13.2% of total external debt

The Philippine Government continues to enjoy wide access to local and foreign financial markets. Dire forecasts that we are going the way of some countries that fell into crisis because they no longer had this access are certainly a bit misplaced.  For 2005, our programmed expenditures of P943 billion shows a modest growth of 7.9%.  The revenue projection of P758.5 billion or 14.8% of GDP is conservative and based only on existing tax measures and on the impact of ongoing administrative measures. A supplemental budget will be provided in the event that new tax measures are passed by Congress.

Reform Agenda

With the President’s 10-point growth agenda giving us content and direction, we will be implementing these reform packages:
 

1. Job Creation and Economic Growth
2. Energy Independence and Savings
3. Anti-Corruption and Good Governance
4. Social Justice and Basic Needs
5. Education Improvement and Youth Opportunity

We will also address historical and structural flaws in our economy that had been ignored largely because of the difficult measures they require from everyone back home.  We will propose legislative measures that can generate P80 billion in additional revenues and continue implementing administrative measures that can both enhance revenues and generate P20 billion in savings.  We have adopted and will adopt administrative measures to generate revenue.  Increasing infrastructure investment, and improving our investment climate are also keys to our growth strategy. The Philippine Government is committed to the growth and progress of our nation.   The hopes and dreams of our people for a better future will be realized.

Thank you.