February 22, 2006
JS-4059

Statement by Under Secretary for International Affairs
Timothy D. Adams
Manila

First let me express my deepest condolences and sympathy for those who lost loved ones in the disaster in Leyte.  Our thoughts and prayers are with those families.

While here in Manila, I've met with President Arroyo, members of her economic team, senior members of Congress, and leaders of the Philippine and U.S. business communities.  I also met with Asian Development Bank President Kuroda and senior members of the ADB staff.

The message that I gave to all was this: The United States remains deeply engaged in East Asia.  Our relationship with this region is long and deep, and I want to ensure that it remains vibrant.   Our longest, and in many ways our strongest relationship in the region is with the Philippines, and I am pleased that this is the first country I visited on this trip. 

I congratulated President Arroyo and the congressmen I met on difficult but necessary measures they introduced in the last year to reduce the fiscal deficit and the cut losses in the power sector.   The importance of these decisions is clear in the strong and positive response of the financial markets. The resulting appreciation of the peso has lowered the cost of petroleum and other products for Philippine citizens and the reduction of interest spreads have lowered the cost of servicing Philippine debt. 

But all whom I met agreed that much work remains to be done - both in further reducing the deficit and in bringing about more rapid growth in incomes and employment in the Philippines.   Raising investment is key to boosting growth, and this requires greater confidence and willingness to invest in the Philippines by domestic residents, by foreign companies like those from the U.S., and by Filipinos living overseas.

There are many steps that need to be taken in order to raise investment.  The first is achieving macroeconomic stability, for which the fiscal and energy measures of the last year were critical.  A commercially run, vibrant, and privately-owned power sector, one that invests in the capacity required for Philippine growth is a second. 

A sound and efficient financial sector is also a requirement for robust growth.  This requires financial institutions that are adequately capitalized, have the skills to assess risk, and have supervisors who are able and willing to act at an early stage to force prompt corrective action before problems grow.   Participation by foreign firms can greatly contribute to the efficiency and health of financial markets.  It is important that the Philippines finally ratify the WTO financial services commitments that it made in 1997, as well as making, and ratifying, new commitments in the Doha Round. 

Finally, raising investment requires creating an environment in which the rules are clear and transparent, contracts are enforced, and intellectual property is protected.  The Philippines has taken important steps in the protection of intellectual property rights and we look forward to continued progress in this area.

By building on and extending the momentum created over the past year, the Arroyo Administration and Congress can continue to raise the level of Philippine economic performance.

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