 Well, welcome to the World Economic Forum, East Asia, I'm Martin, so we're here with a panel of experts today to talk about one simple but very big question, that is growth. How are we going to get more of it? Where's it going to come from and what can governments and also the private sector do to ensure that that happens? Let's get right down to it and start with the Philippine Finance Secretary Cesar Purissima and good to see you. Nice to see you. I think we were talking about just 24 hours ago, so we're spending a lot of time together. You know, you had a piece in the Asian Journal, just I think it was a day ago, where you said that, look, growth is fine, but more to the point, you need growth plus structural reforms equals sustainable and inclusive growth. This is what we really need. But you lamented the fact that in terms of reforms, structural reforms, you're sensing a bit of, I guess, slippage or stalling, and you said, look, that's a darn shame. Let me ask you, give me examples. How and where are you sensing stalling and slippage in terms of reforms? Well, before I give you examples, as you know, Martin, growth is not preordained. It is something we need to work on. The good thing about Asia is there's a lot of things going for us. Young demography, right location, right beside China, natural resources, some of the countries around us as natural resources. But we need to do many things to make sure that it becomes a reality. First, infrastructure. We need to make sure that we invest in infrastructure, because we need to be better connected with each other. ADB estimates we need about $8 trillion over the next 10 years. We have the money in the region. This is a capital surplus region, but we need to make our financial markets more efficient and more connected and seamless. Because if not, we have to keep sending our money outside the region. And then that's when it becomes an issue for us. Third, the region's institutions are not yet as mature as those of the comparable ones in the West. We need to continue to strengthen those institutions. One of the things we learned in the Asian crisis in the late 90s is that the central banks should be fully empowered, should be independent, and should be professional. And a lot of us learned that lesson, and we're now much better. A lot of us are much better for it. And I think we need to look at that. Now, examples of where we need the reforms. Let me take the case of our country. The Philippines was a laggard for a long time. In fact, the story of the last four years is a comeback story of the Philippines to one of the leaders in the region because of better governance. Governance is, I think, the most important ingredient. Because businesses want predictability, want an open economy, want to be able to reduce the risk so that they just focus on market risk. So in the case of the Philippines, corruption is a big challenge. Bureaucracy is a challenge. The President basically said that we will launch a war against this. And as we're speaking, we are in the midst of that war. We beat the cheap justice. We are imposing a new way of dealing with bureaucracy, basically an incentive-based system in the Bureau of Customs, where the second largest revenue-generating agency that we have. We put in a good team. We removed, basically, the top team. We're using information to drive performance. We're empowering them with technology. We're rationalizing the process. We're fast-tracking the national single window so that we can connect with the Asian single window. These are examples of reforms. Another one would be opening up markets. We cannot protect a few at the expense of many. In integration, in open markets, there will be losers. But the hope is that because of investments in natural strengths of countries, you will have winners also. So what countries need to do is not be afraid to do that, help those who are affected by helping them adjust workers' training and the others, and then continue to march towards more connectedness. Okay. Don't mean to be rude, but this sounds like your op-ed piece yesterday. But getting back to the original question, where do you sense there is stalling or slippage in terms of reforms? It doesn't have to be in the Philippines, but just generally in this part of the world. 20 years ago, we were challenging with fiscal issues. A major component of that problem was fuel subsidies. There are areas where we have subsidies as well. We must resist the populist tendencies to support certain sectors that can end up being a black hole, a financial black hole. Pensions is another. We have a positive demography right now, but that can come back to haunt us. We must deal with the problem early on, a rise in the case of the Philippines. We have quantitative restriction. We have a very high tariff. We need to open it up. Okay. Let's move along. I mean, talking about doing the right things for your economy, and with regards to subsidies as well, Indonesia, we all know, did something pretty tough. This is something that's politically very sensitive for your country. Fuel subsidies, you basically cut them. You hiked interest rates very aggressively, and now, lo and behold, you're no longer really one of the fragile five, are you? Yes. I think what we did last year was quite difficult for us. The first one, when we decided to choose stabilization over growth at the expense of the slowing down of our economy. We raised the interest rate by 175 basis point. We adjusted the fuel price by 44 percent, and we slowed down the growth. But I think this is good to provide a good ground for our macroeconomic stability. As you see now, the financial sector is much more stable. Our current account deficit is in the better shape. But I think, Martin, this is not enough. Because if we're talking about Indonesia in the medium term, we cannot continue only by focusing on the tightening cycle, the counter-cyclical or fiscal or the monetary. I think I agree with what Cesar said. In the medium term, we need to expand this country by supporting in the supply side. And if you're talking about supply side, the main critical issues for Indonesia, the first one is quite similar with Philippines, is infrastructure. It's really related to the issue of the land-curing, land-procuring, because we didn't have the eminent domain law before. This would be the big issue. Fortunately, by 2015, we will have this land bill. The second one is the quality of human resources. Because I don't think the country like Indonesia can continue to rely on their natural resources or the cheap labor. So I think we need to move into this knowledge-based economy, good quality of human capital. Okay. I want to stop you here. I mean, it's all well and fine talking about these things that Indonesia has already done, and laudably so, and the things that are yet to come. But the reality is, in terms of continuity, really nobody knows. Isn't that true? Because come a month, what are we talking about? A month, a month and a half's time, there's going to be a new government. You may not be the finance minister anymore. There likely won't be. How confident are you that the things that you've done under the SBY administration, the reforms, will endure, can last, can continue? One thing that I learned on the decision-making process, usually when approaching the election, the politician always come up with this political gimmick in order to get a popular support. But let me perhaps talk with the number, Martin. Ever become the president in Indonesia in order to gain the political support, both candidates need to provide growth in order to create jobs to reduce poverty. And if you want to provide jobs, you need investment. In Indonesia now, 1% growth require about 5.3% investment over GDP. So if you want to grow by 7% in order to reduce poverty, you need investment probably around 38%. Unfortunately, our domestic savings now is only 32%. There is no way Indonesia could achieve 7% growth if it's not supported by the foreign capital. So my point is, whoever become a president, once they are in power later on, they will be constrained by the economic rationality to become the market-friendly. I want to get your comments on this very quickly. We managed to spend some time with one of Indonesia's top tycoons, whom I won't name, but I asked in point blank whether it's Jakobi Kala, that ticket, or anybody else. Indonesia's new president, the new administration, what is their number one priority, their top priority going to be? And bluntly, he told me, surviving two terms, getting re-elected for another term. Is it fair to say that it takes that long to get reforms through in Indonesia? Well, I think the first thing that we need to do is to ensure the political stability. I think the president, SBUI, had said the tone by having two terms and put the political stability, so allow us to do some reforms. I think for the next president, it's quite similar. The more focus is similar, quite similar with Philippines is on infrastructure. As I said to you then, you know, on the issue of the human capital. And need somehow, sort of like supported by good governance and also the strong government. That's interesting. Secretary, back to you just very quickly. You've got, I think, no noise administration, you're part of it obviously has, what is it, three years left, right? So you're halfway through a second term. A lot of people would look at that position and go, uh-oh, lame duck. How much more can you get done in terms of reforms in your remaining time? The good thing about President Aquino is extremely popular. So he has the political capital to make sure that in the last two years of his term, he's able to follow through on the reforms in the first four years. In fact, as we speak, we have several major legislation in Congress, new charter for the Banco Central, customs modernization law, rationalization of incentives on and so forth. So I think we will see this true. And as you know, I think what's happened the past four years, also in the Philippines. Is 64 going to change? I'm sorry? Is 64 going to change in your remaining three years? Well, there is a bill right now in Congress that will further open up the economy that will not require a constitutional change. So I think in a change process, you have steps. And we're still in the early part of the change agenda. There are things that we can still do without tampering with the Constitution. And I think our focus is to make sure that we use the political capital for the maximum immediate benefit. And as I was saying, President Aquino's main achievement, I think, is really in the empowerment of people to reverse appetite to one of ownership. And I think this is ultimately what's going to make sure that the changes he's done in the country will be continued beyond his term. We have an empowered citizenry who has access to information through mobile telephony and the Internet. We've seen changes in the world that we never thought we'd see in our lifetime. I mean, regimes that we thought will be there forever, but they're gone, mainly because people now are empowered. And I think the biggest gain in the Philippines the past four years is people know the impact of good governance on their own lives, that they actually have better potential. They have better chances of actualizing their dreams with good governance. And I think they're going to push for that. OK, you've made the point before that good governance is also good economics. Exactly, correct. OK, Mr. Chu, let me bring you in, or rather Victor, one of the things that this part of the world is worried about, economies in this part of the world and policymakers, of course, is what happens with the US. We've been through this whole taper tantrum, things of stabilized, but we are drawing closer to the fed getting out of the QE business and that first rate hike. In addition to that, there's also China slowing down. You're based in Hong Kong, of course, you've got a pretty good perspective on what's going on there. One school of thought says China's slowdown is good. It is making a choice between growth and stability. It is choosing stability because we do want China to be around in the next 30, 40, 50, 100 years, right? And more. The other school thinks, uh-oh, there's so much debt as well as hidden debt, this is a financial time bomb waiting to basically implode. Which is it? If I could say that I learned a friend from the Philippines. I think the formula with growth plus economic reform plus inclusive and sustainable growth, I think that's brilliant. I would add one more and we need reach no stability and peace. I think that's from an investor's point of view. I think that is number one. Whether, I mean, the tapering, the rising financing costs around the world, all these, we know about this. I mean, it's not going to come as a shock. It will have some impact to the emerging market. But long-term investors are completely convinced on the long-term macro fundamentals here. But all the macro reform agenda that we talk about, we know about, we know it has to be done. It's going to be distracted if we don't have stability either in individual countries or regional peace. I think that's the number one, that's the number one thing. Chinese debt is right now is containable because we call, I mean, shadow banking is actually the wrong terminology. We're really talking about the secondary banking sector, the non-bank financial institution. The good thing is the Chinese government got to grips with it fairly early on. So as a percentage to the system is manageable. And also we can't assume every single debt from this secondary banking sector is bad. They're not. Only a fraction of it is bad and one has to deal with it. And that actually is a worldwide phenomenon. That's part of the legacy problem we inherit from the crisis. We have a massive stimulus. And of course, now we have to deal with the aftermath of that. And that's the same thing. The longer we have zero interest rate, the more painful it will be at the back end. But you can't really withdraw the low interest rate right now because the recovery in Japan, in America, in Europe is still quite fragile. Now, East Asia depends on three big blocks, China, Japan, and US. Japan, the first two arrows has been very successful. Japan is back. It's back on the radar screen. There's the dynamism, you know, activity, energy. Well, for how long is the question without that third arrow? Exactly. The third, fourth, and fifth will need help. And Japan also needs stability as well. Because if the regional conflicts are not resolved in a rational, sensible manner, it's going to be distracted in Japan's economic reform. Let me talk to you, Victor. I have two questions with regards to your first point. Regional stability and security. What really do you think, personally, and I have to make a distinction, you're basically in Hong Kong, right? What really are China's intentions in the South China Sea? No, no, there's no, it's not China's intention. I mean, these are very complicated issues when you're dealing with exclusive economic zones because they overlap. And then no perfect answer. It has to be something that one has to sit down and through a process sorted out for mutual interest in the long term. And now we have a window here because the way that economic impacts, there's a delay reaction. What happens today will manifest in six, nine, 12 months time. We have a window here that when the dust is settled, excitement is settled, people have to sit down and find a solution. I'm saying this as an investor in the region, right? Because otherwise, I would go for the safe havens in elsewhere. But I'm convinced on the macroeconomic dynamics here, long term, but the million dollar question is we have to see their efforts from all sides to come to census talk and be able to find something. With regards to the South China Sea. Yes, the difficulty is everybody is now looking at their domestic economics, the domestic politics at play that changes the government. And once all that is settled, people can sit down and talk. Okay, interesting. Now, Cesar, I want to bring you in on this because obviously, the film is as a word, taking the fight to the Chinese. You've taken your case to the Hague. I mean, that is a, to be blunt, it's a pretty ballsy thing to do. Well, we're not taking the fight. This is really a recognition of the fact that the relationship among countries of many dimensions. And territorial dimension cannot be the end all and be all of the relationship. In fact, it was the Chinese leader himself who said that the sum of our relationship must not just be about this issue. It must be the other dimensions as well. And I think that's what we've seen the past few years. Our trade relationships continue to grow. Our tourism continue to improve. Our people to people, cultural exchanges continue to grow. And I think that should be the focus. Even countries that are, you know, have a lot of trade, US and Canada, they have issues that where they've agreed to disagree and put it aside. Taiwan and China, they've had issues and yet trade and investment relationship is booming. So we cannot be distracted with one issue or disagreement on an issue. Trade business must go on. We'll go on. Yes, I think we have to have a holistic view of the situation. In today's interconnected world, we cannot, you know, just be fixated on one aspect because we are so interdependent of each other. The clothes we wear, the electronics we have, it's not made in one country. It's made in many countries. And therefore, we have to learn how to work with each other under international rules and that's why I think that's our safe artwork. Tony Fernandez, let me bring you in. What is your sense of things? We've talked about some of the risks of overhanging this part of the world. Rates in the US rising, maybe sooner or faster than expected. That's one risk. You've got the geopolitics, South China Seas, et cetera. You run a low-cost airline. You're doing extremely well. Does any of this matter to you? Yeah. Well, wars matter, by the way. But there's a very high-brown that side of the table, very complicated, very smart people. So make it simple for us. This is the full-service part of the airline industry. I'll give you the simple, low-cost answers. Number one, I think, as Victor said, we have a lot of people in this part of the world. The fundamentals are definitely going our way. The consumption is going to rise. Economy is going to grow. I think there's a wonderful opportunity, and if I can focus Southeast Asia for a little bit, in that in your topic of growth, there's an opportunity for the private industry, private sector, to really pump that up. And I think governments should allow businesses to grow and facilitate business as being involved too much in business. I think the potential of the ASEAN economic community is massive. You have a 6 to 700 million population there. And if you can dismantle some of the vested interests and put national interests ahead, the potential for ASEAN businesses to grow is enormous. If you can dismantle some of the barriers, make cost of business lower, the potential is huge. You take Air Asia, we started this airline 12 years ago with two planes, carried 200,000 passengers in the first year. We have now grown over the last 12 years to 160 planes and carry 50 million passengers. Most of that growth has come through ASEAN by connecting communities that weren't connected. 80% of our routes are new routes that were never done before in ASEAN. So let me ask you, with AEC, the ASEAN economic community, single common market, which is supposed to happen next year 2015, we're supposed to see exactly that, more interconnectedness, lower barriers, freer flow of goods, trade services, people, et cetera. Does that apply for aviation as well? I think we're moving in the right direction. I think open skies, there are a couple of countries that haven't ratified the open skies yet, but it's moving in the right direction. Certainly, from 12 years ago, connectivity has improved dramatically, but there's a lot still to be done, in my opinion, in terms of really opening up, because open skies is one thing, but there are many invisible barriers that still exist. You can have open skies, and then the airport says I've got no slots anymore. True, infrastructure, we'll get back to that again. But the national airline gets all the slots as well. So I think if we really, and there's a disconnect, I think, between what policymakers and what private industry think, and I think a big drive for policymakers is to engage the private industry more and see the reality. I think there's lots of conventions, lots of statements coming out from ASEAN, everyone feels good, a lot of bullish statements, but the reality is something different. And I think communication has to grow between the private sector and the government. All right, Cesar, and also Bacau, do you want to put both of you on the spot? With regards to the aviation, I know for a fact that neither the Philippines nor Indonesia have signed on to open skies yet, why? Well, first, I'd like to point out that the president made the skies outside Metro Manila, open sky. So that's what we call a pocket open sky. And the challenge really is congestion in Manila. So we need to fix first the infrastructure bottleneck in the aviation industry. We would like to have more connections, and we thank Tony for connecting cities in the Philippines now to the rest of the region. And we've seen the benefits. As the tourism secretary said, our tourism numbers have increased 60%. It's present at Aquino. Secondly, I think in all the Asian countries, you must realize that they operate in a political environment. And therefore, change must be done in a manner where you continue to bring the people with you. And there must be steps. Now, sometimes we're lucky we take big steps, but it's okay to take small steps so that you continue to move in the right direction and have the support of the government. This infrastructure has to catch up first before open skies, before you sign on to open skies. Yes, because if you just have congestion, then you'll have problems. What's the point? Exactly. Okay, Pakati. Well, we have a quite similar problem with Philippines, actually. Let me give an example about Sukarnoata Airport. The capacity is only about 25 million passengers. Now it's worked for about 59 million passengers. So I do understand that the demand is there, but need to be supported by the strong supply capacity. So talking about this infrastructure, I think this would be the first priority of the government before we can move into the next stage. Okay, interesting. And Mr. Lee, didn't mean to leave you up. Let's bring you on this as well. You're South Korea's G20 Sherpa, but you've also in a previous life, I guess, spent quite a lot of time at the fund, correct? When you've been listening into what these two gentlemen here, the policymakers have been talking about, what is your sense? Because what I see is what I worry about is, in the case of both the Philippines as well as Indonesia, is developing economies which maybe focus a little bit too much on the consumption or consumer end of development, not having fully developed the middle part, manufacturing, heavy industry, et cetera, or for that matter, maximized agriculture as well. Do you read it that way as well or not? Well, if you look at the development history in the last two decades, so what happened was there was a shift of manufacturing base from the advanced countries to the EM countries, particularly to Asia. What has happened is the product market, the purchasing power there, has lagged behind in terms of shifts to EM countries. During the years following the global financial crisis, because Asia's economy growth was faster than the advanced economy, there was indeed some acceleration of the shift of the purchasing power. For Asia to remain on a sustainable path and remain the engine of global growth, you need to have a system that allows the continuous growth of the middle income group. Because ultimately what drives an economic growth is on the demand side is the desire for improved living standard by the many. And for that you need to have a system that ensures, and for that you need to have a system that reduces income inequality, because income inequality essentially is an end product where for many reasons the wealth of the system ends up with the few, and thus the demand potential is reduced. But that's on the demand side. On the supply side you need of course a continuous innovation that, particularly the coming decade or two, you need an innovation system that allows less or more efficient use of energy resources because as more middle income groups come into the stream, natural resources are limited and thus you need a technology that will enable the natural resources to support the growing middle income group. So essentially two, one, a system that allows the growth of the middle income group in Asia through innovation that allows more efficient use of natural resources. Okay, all right. Hold that thought, Mr. Lee. We'll come back and talk more as when we come back. We're gonna take a quick break. When we continue, we'll talk about growth without leaving too many people behind after this. World Economic Forum East Asia, talking about growth, how are we gonna get more of it, where it's gonna come from and what governments and also the private sector can do to help. And we left off, Mr. Lee, we were talking about, I mean, what's important is that growth not leave too many people behind. Secretary Porisima, we mean to put you on the spot, but simply because the numbers are there, the turnaround in the Philippines is remarkable. You've called it basically the comeback kid or the comeback story of the last decade or so. Yet, your poverty levels are still alarmingly high. Unemployment is probably the highest in the region. It's not just absolute points, relatively as well, rich foregap, disparities have not improved. Why? Well, not exactly. The numbers have improved. There's been a 3% age point improvement that's almost 2.6 million people. Obviously, we need to continue and follow through. There are a need for sectoral interventions in particular in agriculture. 30% of our people are in agriculture and yet it only produces 12% of our GDP. And here, infrastructure, again, plays a role. Drying facilities, storage facilities, irrigation. We need to invest in this area. We need to give them access to better technology, access to financing. We need to improve their productivity. If we succeed in doing that, we improve the overall competitiveness of the country because food cost becomes cheaper, push on wages becomes less. So agriculture is going to be an important area of intervention for the country. The other is manufacturing. Just like Mr. Lee mentioned, manufacturing in the Philippines is important because it is the one sector that will give the lesser skilled Filipinos high good quality jobs. The good news is that of late, light manufacturing has been doing well in the Philippines. We've seen an influx of particular Japanese light industry come to Manila. And I think what we need to do again to make sure that this is sustained and even grows faster is infrastructure. Power cost is high in the country because of legacy issues. We need to lower the power cost. We need to improve ports. We need to have better roads and mass transit. And the challenge, as I said, is infrastructure. How can you get done in the remaining three years? Well, I think what's important is we set the foundations so that it can be sustained. It will never be done in six years. Philippines was number two to Japan in the early 60s. It took us 40 years to get to the bottom. And I think it will take some time to get back up. But the important thing is we're pointed in the right direction and the opportunity is there. And it's coming at the right time. And that's why we're optimistic about the future of the country. We have the right leadership. We have the right demography. We're in the right location, the most dynamic economic region of the world. And I think it's coming at a time when there's an opportunity to leapfrog to the technology. Interesting. I want to go for a slight tangent here and get into the politics of both the Philippines and also, of course, Indonesia. No stranger to coups. I mean, look, they've happened before. Just days ago, in Thailand, the military took over. But no, it's not a coup. Does it really matter? Well, I think the political stability is important, Martin. But I think we also learn from the history. Once the market more mature, the business move into a certain direction, then there is a sort of separation between the political activities and then economic activities. But somehow, this need to be supported by the political stability as well. I don't want to give a comment about what's been happening in Thailand. But I think political stability, it's something necessary for profiting the good economic rules. Okay, let me ask you another question. We know as in the Philippines, infrastructure, build out and rule out is essential. One of the key reforms in Indonesia and the next government has to continue down the road on. Another reform that not a lot of people talk about these days, or I haven't heard that much talk about it, is what's going on with the military. We know there was legislation many years ago to get them out of business. Is the military in Indonesia right now out of business? Because I mean, the risks are, you compete for everything, including funding, if the military is in business. I will say that we are moving into the right direction because if you recall what happened to Indonesia during the Suharto era, we have this role of the strong, role of the military in business. But now with the improvement of the governance, et cetera, I think we put everything on the balance sheet now at the state budget. So I think on this particular issue, I think Indonesia is making a progress, a lot of progress compared to what we had 16 years ago. There are some involvement of the military in the business, but it's go through, it's like the business process. It's more on the transparent and on budget now. If you had to put a number on it, I mean, how much has the military retreated from business? Since the legislation. I will say that that is significant. It's more than 80%. Okay. It's quite significant. Okay, interesting. Cesar, does it matter to you when you saw the news, the headlines a few days ago? Military took over in Thailand, but no, they're not calling it a coup. Well, politics matters. But I think what we need to realize in this region is that we do have old societies here, but young countries. And that's part of the maturation process of democracies and countries that are adjusting to it. And I think the important point here is that it highlights the value of a more integrated ASEAN. Because companies actually want to manage risk. And therefore, in dealing with these challenges, I think companies now realize that if they're more diversified, then they're better able to deal with risk, whether due to political issues or climate change or other factors. And that is where the strength of a more integrated ASEAN. So in other words, what you're saying is basically more open, freer movement of goods, services, capital, people, et cetera, would allow economies as well as countries to literally, physically work around situations like, let's say, Thailand. Yeah, and our own experience, when we were hit with Taipoon Haiyan, the BPO companies in the Taipoon hit areas were able to move their processing in the areas not hit by Taipoon Haiyan. And I think that's how it should be. And I think the one good thing about the challenges that we face, the Philippines' face challenges in the 70s and 80s also did affect us. So the one thing good is that we're learning from this, that we need political stability to be able to attract businesses. Because businesses don't want additional risk. It's tough already to compete in the market. But they don't want further complication. And I think that's where all of us should focus on, make sure that we create a stable platform. Toby, obviously you do business in Thailand. When you heard the news, I'm not sure we're taking over, but no, not a coup. What was your first reaction? Did you go, oh, no, not again? No, it was a great opportunity to let people see what tanks are on the streets. So we're promoting around ASEAN to say go to Thailand and see what a coup that's not a coup is like. So there's always an opportunity. But seriously, but seriously, now I mean, we've been through a lot over the last 12 years, a lot in Thailand as well. But I think there is a little bit of a, again, it's a slight disconnect. I think people are a little bit immune and business goes on. We haven't seen any slowdown in numbers at all. People are still flying to Thailand. It's a great place to go to. And with a sharp end, you'd see it first in our business. So I think there is a strong resilience. And I think that is very prevalent in Southeast Asia because we've been through a lot of crises. People are battle-hardened here and we're quite adept at dealing with situations for. So at this point, I mean, when there were lots of demonstrations and riots and then yes, it affected. Sure. But actually when there's a little bit of stability, I mean, right now there is a little bit with the army coming out. We actually see the numbers increasing, which is bizarre. Your numbers are increasing. In Thailand, yes. So it is a little bit of a dichotomy, but that's a fact. Bit of irony as well. Just like you just go back on equalization of people. I think two things governments have to look at as well is education and health. I think these are two things that no one talks about infrastructure, infrastructure, but these are my important parts of infrastructure, the human capital part of infrastructure. And I think education must be freely available and must be focused, skills driven, et cetera. And I think technology can play a big part in it because education infrastructure is expensive and trying to provide education and pay for it, et cetera. And I think technology and what you're seeing with Khan academies, et cetera, leads governments a tremendous opportunity to give access to its people, education and much lower costs, and then productivity increases as people are more educated. And I think health is also very important. There's a big gap between the state system and private health. And the state system will always be burdened because that's freer. So there must be opportunities for something in between, a low cost health system. What does that mean? Are you gonna charge you for oxygen when you come in or give you half a panadol? But I think innovation has, there's an opportunity to do that, but I think it's very important that governments see that part of this infrastructure development must include education and health. And healthcare. Okay, we're gonna take a quick break. We'll be right back here at the World Economic Forum East Asia. Welcome back and we're here at the World Economic Forum East Asia talking about growth and Tony Fernandez just a few seconds ago was telling us about how, when we talk about reforms and infrastructure, we also have to, we can't forget healthcare and also education. And Secretary, you had some thoughts on that. No, I fully agree with Tony. Education is a great equalizer. That's exactly what President Aquinas is doing. Since his term, we've almost doubled the education budget. We've more than doubled the healthcare budget. And more importantly, the conditional cash transfer program, the program that we have that gives stipends to the poorest of the poor to keep their children in school and bring them to health center. We've increased it sixfold. And then now we're working with the private sector. We're looking at the apprenticeship model of Germany to see how we can introduce that in the Philippines so that we have better match between the skills we produce and the skills that industry needs. So infrastructure, human infrastructure, I think we really need to invest in here because for example, in the case of the Philippines, if we are to realize the demographic dividend, we have to educate our people. Necessary as well as noble. Where's the money going to come from though? You've done fantastic work in terms of fiscal consolidation, but all these plans are going to require revenues and you do have a very narrow tax base. Well, since President Aquinas took office, we've increased the fiscal space, principally by reducing the cost of interest from the reducing debt to GDP that we have, but better utilization of our resources, less inefficiency, less corruption. And introduction of zero-based budgeting. Okay. So we've been able to get more out of limited resources. Okay, interesting. You know, we've been talking about healthcare slash welfare reform, infrastructure, and Secretary Burisma just referred to it, corruption or anti-corruption and reform of, I guess that also means in many cases, reform of the civil service, the public service as well. Three key reforms that any government, new government in Indonesia will also have to tackle. If it is, the Chukowi Kala ticket, how much movement are we gonna see on all three fronts? Well, before I answer your question, Martin, perhaps let me give some background behind it and later on I'm hoping you forget about your question to me about Chukowi Kala. First is, let me give the global context first. What will be the face of the global economy in the future? The first one is if you're looking the global situation with the US and the Europe having a deficit on the current account and the fiscal, I do believe that the rebalancing must take place because US one day they'll become an exporter. They become a savers rather than spenders. Then the question is what will be the locomotive of trade? Is no longer in the advanced country but will be in Asia. But unfortunately the problem in many Asian countries, we're still facing a problem about inequality, urbanization. So that is why those issue regarding this healthcare, education, access for education, infrastructure become very crucial. Because if Asia fail to address this issue, then we cannot rely on the advanced country because later on they will change their role as the locomotive of trade. It will shift to Asia but Asia is not ready yet. So this is the burden for every leaders in Asia. They must deliver this kind of reform. Then let me take your question about Djokovic. Thank you. I think the most important one, I'm not referring specifically to him but is looking at the approval rate is quite popular. One thing that it's very important is if you deliver your policy, you get a political support. If you get a political support it must be easier because if I recall what happened with the IMF in Indonesia back in 1998, the program itself was pretty good. But since they didn't get the political support, people do not have the ownership of the program. But if you have a leader with get a political support and I think it's much easier for you to deliver all this issue about healthcare, about access for education, we'll see whether Djokovic will win the election or not. His approval rate showing that he's quite popular. But I think whoever is winning the election, I think it's very important to get this political support. Not a fair question. A lot of people make much of his local and provincial experience but really wonder whether that can translate on a national stage. Whether someone who was the governor, now was the governor of Jakarta and then before that solo. Whether he can govern an entire country, do you share those concerns? I think the best answer to this is we need to wait. But this is my experience in doing the reform, Martin. Sometimes people are tempted to do to the uphill battle. But I think the best way to do reform is just to provide a success story. When you provide a success story, you gain the political credibility. Once you gain the political credibility, you get a political support and much easier to go to another reform. In the case of Djokovic, he has been quite successful in the case of solo. So he provided a success story. I think that's the reason why people sort of like giving support to him. So we don't need to talk about the radical reform in the national level. As long as you can provide the success story, that could be a sort of like, you know, a start to move into another reform. What do we fair say that he's actually introduced during his provincial regional time, healthcare or insurance cards, I remember that. Also, he cleaned up or streamlined government processes. Isn't that a pretty decent sort of precedent to bring with you into office? Well, on the healthcare issue, I think we need to look at this issue carefully. Because if you're talking about welfare system, it's not always easy. Yeah, Indonesia now is experimenting also with the social security welfare system. And I think we need to look at more carefully. But, and you mentioned about this, you know, sort of like streamlining the regulation, simplifying the process. I think he made a case for the case in solo. Okay, and you talked about your social security system. I know this legislation is pending. It should go through sometime this year, correct? And for folks that are not into this, it's been described by some people as what's going to be the healthcare part of it. The largest single payer program in the world, 250 million people, and it's gonna require a lot of revenue. As a minister of finance, I would say that we have to move step by step. Because one of my concern is, if you learn from the welfare system, all over the world, the problem is unfunded. The other one is, we need to look at the composition of the demography as well. Once the country moves into the situation in which that's with the aging populations, it's become a burden. So what I can say about this, I think we need to look at this issue carefully, move step by step, and ensure this is physically funded. Interesting, Victor, you've been silent for quite a while. Come on on this, weigh in on this. Well, I think in China too, I think similar issues apply. I think it's anti-corruption, healthcare, clean air, safety of food, livelihood issue, major investment quality infrastructure. So I think the, I mean, regionally, the agenda are very similar, interestingly. The agenda is very similar to how the execute is very different though. In China's case, we have a still central command control economy and the communist party. Does that make it easier or harder? Sometimes it's easier, sometimes it's harder. I think one of the interesting stories now we are seeing is, why are we seeing major anti-corruption campaign? It's really, there's a lot of blockages imposed by vested interests, right? And that makes execution inefficient to put it in a very elegant way. And also you see these special zones coming up in Shanghai and later on in Tianjin, Beijing. Again, it's going to cut red tape so that certain areas in China can benchmark to international standards. And then you have the recent city, the whole group is being transferred to Hong Kong to be subjected to Hong Kong and therefore international investors scrutiny subject to international listing rules and roof of law. So I think that's very bold as macro reform and I hope we'll continue. We need to take a quick break but lots more to talk about as we continue here at the World Economic Forum East Asia. Welcome back. You're still with us here at the World Economic Forum East Asia. We're talking about growth and the way forward in a growth challenged world. Mr. Lee, let me bring you in on this. What I basically want to talk to you about is from your experience in the past at the fund and looking at the sort of way the trade is developing out in this part of the world. You've got two competing models or models that are trying to compete against each other. TPP are set, right? Multilateral system is pretty much broken down. Both of these gentlemen here represent countries, Mr. Burisma, Kutib, which have not been very keen to sign on to the TPP. China happens to be Indonesia's number one training partner right now. So it seems as though both economies are very much already in the RCEP or China camp. Is that necessarily a good thing? Well, you know, TPP and RCEP are both mega FTAs but they aim for different things. TPP essentially is aiming not only for free trade in terms of merchandise trade exchange but also to establish common standards and regulations governing procurement issues and so on. So it's more focused on advanced economies as well as EM economies to facilitate not only exchange of merchandise trade but the whole capital flows, labor flows and exchange of ideas. So it's probably a higher standard than what we are trying to aim for in the RCEP because in Asia it's a very diverse group of countries, different stages of economic growth. So what we need to achieve within Asia is initially a closer economic integration, acknowledging the different stages of economic development and achieve. And that's I think what RCEP is trying to do. TPP on the other hand is sort of a further deepening that includes the whole regulatory environment. So I think they're not competing. They should go in tandem and as countries get ready they can join one and alter the other. You know, Secretary, we've talked about this before when I spent time with you a couple of days ago and we were talking about the maybe not seed change but it's been a bit of a 180 has it not for the Akina administration in terms of your interest in TPP. Now you're pretty keen on being the second wave, right? Yeah. No, in fact the president express his interest from day one. But as you know, they're just going to the first 12 countries. And we don't really know how high the standard will be until they have an agreement with the first 12 countries. But we did express our intention to be part of the second batch of countries. South Korea also has been knocking on the first batch of countries. ASEAN is engaged with RCEP. I think for countries like the Philippines it's important that we be part of these two large free trade agreements. TPP covers over half of the world's GDP. RCEP is also huge. So we cannot have a competitive disadvantage vis-a-vis our neighboring countries. Kati, you're on board. Indonesia is on board with RCEP by virtue of the fact that you're part of ASEAN as well. What about TPP? I think Indonesia is watching this TPP process very closely. But I think there are two reasons that we need to look at carefully. The first one is if you want to join on the trade agreement it is important to ensure that you could reap the benefit of this trade agreement. It is true while joining this trade agreement like TPP you get a market access. But the first question is whether in the supply side you could reap the benefit, as a colleague from Korea mentioned about this very high standard. So it's not easy for some countries they need to increase their capacity first. The second issue I don't think that we can exclude China because China has become a very important trading partners in Asia. Most of the Southeast Asian countries they trade with China. It is your biggest trading partner, right? So that is why this is also a very important consideration. Because I think if you're talking about the trade agreement in the region, if China is not there I don't think that it's not easy to sort of like because we exclude really a big country of it. Interesting. But Victor, I mean the fact of the matter is the reality is even before RCEP, with the exception of let's say the Philippines, China is already pretty much the number one trading partner for all of Southeast Asia. I mean, even if we go down to Australia and also New Zealand. Absolutely. I think as a multilateralist, I would prefer that we stick to the multilateral system. Because it's not working. Any regional bloc. It's almost dead. Well, having said that, I mean, you agree that the WTO is the fairest and the least discriminatory regime that we have, right? I think unfortunately in the practicalities of the world, we do have to have major groupings as a kind of balance. And hopefully we can benchmark ourselves towards eventually the reform of a better WTO or multilateral system to have the fairest for everybody as a whole. I think that's my first point. The second point is I think we'll be very unfortunate. The TPP initially was being seen as a counterbalance towards the rise of China. I think that would, it would be very unfortunate if it proceeded that way. As a true trade and giving higher benchmarks to trade, I think that's good. And I think there's now some talk in Washington that maybe they will invite China to be observer, to get China more engaged. Maybe China cannot join from day one, but eventually, when the time is right, China may become part of it. And as my friend said, that will be a welcome way for everybody. Do you really think that could happen? My third point, if I may, it just finishes. I think TPP is still a question mark. The reason is the president does not have fast track, and our trading partners here would not be able to compromise if they're not sure that the president can deliver. I mean, that's the major problem we have right now. And it's unlikely to happen in the near future. I mean, in the practical politics, realities. So I think that's the real point. And therefore, we may have to look at some other arrangements to proceed further. OK. Very quickly, we're running out of time here. I want to start with Victor and go right down the line. In 30 seconds or less, your growth wish list. And number one, I think we need peace and stability so that all of us can proceed with macroeconomic reform, inclusive reform, sustainable reform for the benefit of everybody in East Asia. OK. There's got to be security. Pak Hatim. I think the main challenge in the future is not only the sustainable of growth, but also the share of growth. Because the rising inequality it appears in many Asian countries. So that is why the role of the government in intervention on education, infrastructure, health is very important to ensure about the inclusive growth. Inclusiveness and narrowing the rich poor gap. Secretary? Well, we need to continue structural reforms. We need to continue to deepen the regional financial markets. We need to increase intra-Asia trade, especially in final goods, so that we're less dependent on China, Japan, and outside the region. And finally, we need to invest in infrastructure to assure our connectivity within each other and with the rest of the world. Mr. Lee? Income inequality has been getting worse for the last 30 years across the globe. It was associated also with declining wage share. Though we need a system re-overhaul or review of the regulatory environment to see why the wage share is declining to address the fundamental question of inequality rather than just window address through transfer payments and so on. Wow. OK, Tony. More liberalization, opening up markets, less government to facilitate business, as opposed to being involved in business. I think ASEAN and Asia has tremendous opportunities because of the huge population. It is long-term the place to be in, allow businesses to grow by facilitating them and providing the right infrastructure. OK, excellent. Tony, thank you, Mr. Lee. Thank you, Cesar. Thank you, Bakantip. Also, Victor, thank you. And thank you, folks, for watching. That's it from us here at the World Economic Forum East Asia. I'm Martin Sung. Thanks for watching.