 Welcome back. I'm Ernie Bauer again, the chair for Southeast Asian Studies here at CSIS. We have a terrific luncheon program for you. And the featured speaker, the keynote speaker of the program is a good friend and a man who has an incredible record as secretary of finance of the Philippines. In a lot of ways, Cesar Parísima, Cesar Parísima was born for this job. He was the leading auditor in the Philippines. So this is a man who knows where every penny in organizations that he runs are located. And that's a big job when you're running the Philippine government. I've known Cesar for probably three decades now. And I have the highest regard for him and his integrity. You heard earlier this morning about the results of leadership in the Philippines. And that leadership starts with President Aquino. But when it comes to the economic team, I think you've already met Secretary Domingo. But in terms of the finance portfolio, the buck stops with Cesar Parísima. And he's done a fantastic job. I'd like to ask you to join me in welcoming our keynote speaker who flew in in the middle of that big storm last night and was diverted to Norfolk and got into Washington, actually about two in the morning. So he's also a trooper. Please join me in welcoming Cesar Parísima. Good afternoon, everyone. My objective today is not to give you indigestion. So please continue with your lunch. I'm here to further share some of the developments in the country, in addition to what my colleagues said this morning. Secretary Domingo, I'm sure, spoke of the successes that the country has had the past five years. I'm sure Ambassador Quisha also said that. But before I give my own perspective on the developments, let me greet some of our friends who took time out to be with us today. Deputy Secretary Bruce Andrews of the Department of Commerce, thank you very much. As you know, the US is a strategic partner of the Philippines. We have collaboration across the spectrum, not just in the area of defense. In fact, we are the only country in Asia that is a member of the partnership for growth. And we are, of course, a beneficiary of the Millennium Challenge Corporation. We have one grant, and now we're working on a second courtesy of our good friend here, Mat Bon. I'd like to greet also a long, long time investor in the country, Mr. Greenberg. Thank you for your continuous support of the country, Ambassador Negroponte, another good friend of the Philippines, Ms. Carla Hill. And of course, her late husband has always been big supporters of the country. The new executive director representing the Philippines in the World Bank, Mr. Silvira from Brazil. As you know, the Philippines is in Southeast Asia. And yet in the World Bank, we are part of Latin America. Actually, it's really the proper location of the Philippines. If you can have a way to uproot us, then I think we're better off in Latin America. But that can't be, so we just do it in the World Bank. So we're represented by Brazil in the World Bank. And then, of course, my colleague in the cabinet, Secretary Singson. Friends, thank you for being here. The past five years for the Philippines has been one where we've shown what good governance can do to a country. For the longest time, the Philippines was looked at as a basket case amongst the tigers of Asia. And there was really no reason why the Philippines should underperform. We had talented people. We had natural resources. We had the right location. We spoke English. We were good friends with the largest countries in the world. We're next door neighbors to Japan. So again, no reason, except that we were not blessed with the right leadership, the right focus. And fortunately, in 2010, President Kekino, as I'm sure you've heard many times, was elected with a large mandate. And with the right agenda of bringing better governance to the country. And that just shows you that I think the past five years, that once you focus a country in the right direction, once you walk your talk, the market will give you the confidence. And when the market gave us confidence, it gave us more fiscal space, because my borrowing costs reduced. But more importantly, companies in the country now could borrow at lower cost, as well as the consumers. In fact, it's the latter two that has really been driving the economy after taking the lead and the signal from government. When you look at the growth statistics of the country, it's driven by consumption, as supported by a very favorable demography. And that consumption potential has always been there, except that things were not affordable. Interest rates were high. The terms were short. There was a lot of uncertainty. But once there was certainty, once interest rates were lower, things like condominiums and cars suddenly became affordable. And that's why Secretary Domingo was able to convince the president recently to even open up the car sector further. Because, as you know, our car sector is growing rapidly. It grew at 21% the first quarter of 2015. That puts more challenge for secretaries on to build more roads. But that's a good challenge. More cars, more roads, more economic development. But this story about the Philippines on where we are right now can only be truly appreciated if we look back at where we were 10 years ago, so in 2005. I was also a finance minister for a short time then. So I know the challenges at the time. Our debt to GDP at the time was about 68%. Now it's down to 45%. Our external debt to GDP was about 30%. Now it's down to 15%. It's half what it used to be. Our reserves now are over four times what it used to be then. Interest payments as a percentage of GDP is less than half now as opposed to what it was then. That means there's more fiscal space for our government to invest in infrastructure, invest in our people. When you look at the tax effort, we're now close to 14%. We were around 12%. Then total revenues over 15%. Again, when people tend to criticize us, they look at the fact that we're less than 16%, which is around the benchmark of what most countries with healthy fiscal positions have. But I tell them that we're pointed in the right direction. We've gone a long way. And therefore I'd like to look at the glass half full rather than half empty. And when you look at our deficit, our deficit last year was at 0.6% of GDP coming from 3.5% of GDP in 2010. So a lot of progress has been done just with a small change, confidence. Confidence is very important. And this is something that I think we in the Philippines should not lose sight of. That is the key currency that has allowed us to make this happen. Confidence from the market, confidence from the investors, and confidence from the consumers. And that's what President Aquino is trying to institutionalize as we speak. Now, all of this were done not just by giving the right speech and coming up with the right program. President Aquino has also pushed for certain key legislation that will make it easier to continue these reforms beyond this term. Among the key legislations during the term of President Aquino was the one that created the Governance Commission for government-owned and controlled corporations. For the longest time, 20, 30 years ago, this was a major source of leakage, major source of inefficiency and corruption. But with the GOCC law now, we are able now to put in the pillars for meritocracy in government-owned corporations. This will give us an opportunity to classify them in three buckets, which we're doing right now. Those that do government functions, we will absorb them back to national government. Those that do commercial functions, we will privatize them. And those that are in between, we will continue to nurture them so that they either go back to us or they become privatized down the road. In fact, I was just talking to IFC regarding the merger of the Land Bank of the Philippines and the Development Bank of the Philippines. There's no reason why we should have several banks. And as the interest rates go down, banking has to be a scale business. So they're advising us on how to go through this merger. The GOCC commission will allow us to properly manage over six trillion pesos of asset. That's one reform. The other is the syntax law. This law is not a new idea, except that many administrations before had not succeeded in passing it. It took over 16 years until President Aquino put in his political capital to push this. What does this bring to the table? One, I hope Philip Morris and the others are not here. It will discourage smoking. Ironically, the president is a smoker, but he sees what's good for the country and what's good for our people. So he pushed for this reform. But more importantly, the proceeds of this bill will go to universal healthcare. And universal healthcare is very important, especially in our fight to alleviate poverty. The ultimate objective of President Aquino is to have a more prosperous citizenry. But to do so, you not only need to give them opportunity to have skills through education and vocational skills, but you also have to make sure that they're protected from illness. Especially those that are near property, when they're hit with illness, they can easily slide back to poverty. And that's the challenge in this fight against poverty. So all the proceeds for the syntax law will now go to healthcare. In fact, as a result of that, the budget of the healthcare department since President Aquino came to office was increased three times. The budget of the conditional cash transfer program, this is a safety net, to encourage the poorest of the poor to keep their children in school and bring them to health centers has been increased over six times. The budget in infrastructure of Secretary Singson has almost doubled four times. And this is because of better governance. Our revenue did not go four times or six times. It almost doubled, but because we are able to approach it from a zero-base budgeting approach from a performance-based budgeting approach, we've been able to establish priorities, reduce inefficiencies, and improve our fight against corruption. So better revenue, better focus on expenditure, more confidence from our people. That's what has brought us to where we are. Now, a big question that's asked by many people is, what about after President Aquino? As you know, the Philippines presidency is only one term. This is a reaction to the Marcos years. What after his term, 2016? My answer to that is this, since 2010, people have started to feel, realize the importance of better governance in their own lives. They've seen that with better governance, they can actually have more chances in improving their lives. And now that they've aligned this, and now that they're able to get information as freely as anyone in the world with mobile telephony and access to internet, I really believe that now we not only have an engaged citizenry, but also an empowered citizenry. You should just look at the Facebook or social media. People are engaged on the smallest issue. And I think in the next elections, the youth will be a major factor. The second thing is the fact that President Aquino is committed to have a credible election. In fact, he appointed recently as chair, Harvard trained lawyer, Chairman Bautista, who is a political, who is considered very competent to lead the agency that will be in charge of that election. So that should help us attain a credible process, which I believe is very important. And third, I think it's less the personality, it's more the mandate that whoever wins, must have a mandate to be able to continue the reform. And as things are shaping up right now, I think we'll end up with a leader that people will support and will be inspired to continue to work with, especially in the area of better governance. President Aquino is going to be a young ex-president. He will be there. And just like his mother before him, who was a fiscalizer when it comes to democracy, President Aquino will continue to fiscalize in terms of economic empowerment. Because as he sees it, he's actually trying to complete what his parents started, which is people power. His mother started with the political pillar of people empowerment. But another important pillar is, of course, economic empowerment. And with political and economic, then you can really have true empowerment. And I think that's his mission in life. And that's why I'm confident that beyond 2016, the reform process will continue. It's like a genie that's out of the bottom. It's hard to push back because it came at the right time when people have been empowered. Finally, the Philippines has the right DNA. What is DNA? D for demography. The Philippines is the youngest country in Asia. We are also in a sweet spot where the bulk of our population are currently working age between 15 and 60. And that will remain so for the next 40 years. And when you look around in ASEAN in particular, a lot of the leading countries are practically full employment. They need people and we have people resources. And that's why the president is really emphasizing investment in people. And by 2030, it is estimated that two thirds of the world's middle class will be in Asia. So that's why it's important that we take advantage of this demographic dividend and natural resources. The Philippines has had 13 straight years of current account surplus. And that's the reason why our reserves have continued to go up. That's started before by the remittances. Now with BPO, expected to surpass remittances, we have two strong legs. And then we're working on a third leg, which is tourism. I think we've breached five million tourist arrivals. And within a year or two, we expect to breach 10 million. And if we do hit 10 million, tourism can easily become as much as the BPO industry in terms of remittances. So we have a third strong leg. But more importantly on the fourth leg, which is natural endowment. Philippines is the fifth most endowed country in terms of mineralization in the world. So far, we haven't really taken advantage of that from a current account standpoint. That can become a fourth strong leg. So we're confident that we will have the resources to continue to fund the growth of the country, both investment as well as consumption. Then finally, A, A is Asia, ASEAN. Many writers have talked about the fact that the 21st century is going to be the Asian century. Obviously that's not preordained. But when you look at sheer numbers of a population, where over half of the world's population will be there, sheer size of the GNP Asia definitely has the potential to really be the driver for growth of the world in this century. The Philippines is well positioned in this context because one, it's going to be part of a more integrated ASEAN. And in a more integrated ASEAN, Philippines can position itself as a gateway to ASEAN for North Asia, we being the closest southern neighbor of Japan. We can also be the gateway to ASEAN and Asia for Latin America or even across the Pacific. And that is why investments in connectivity in terms of infrastructure, entering into agreements such as Secretary Domingo is doing right now to really support connectivity not just from an infrastructure standpoint, but also from a policy standpoint is going to be crucial. Very few of us know that Asia up to the 1850s was the world's largest economy from one BC to 1850. Asia was bigger than the rest of Europe and the Western world. But it lasted the past 200 years. It can get it back and assuming it does, then Philippines can play a big role. And that's why I hope that the Philippines and the US given our long, special historical relationship can work closely together so that we can both benefit from this coming Asian century. After all, the US, although it is in North America, is in the Pacific and it is the world's superpower. And I do hope that with your investment, with your support, with your encouragement, we will be able to realize the potential of our partnership and the potential of the Philippines. Thank you. Thank you. Thank you very much. Eric Lechica from the US, Filipinas for Good Governance. Yes, the President Aquino, I think when he was in Japan was interviewed and he said that he decided not to pursue the membership of the Philippines in the Asian Infrastructure Investment Bank. What are your thoughts on that decision? The President didn't say that. In fact, we have also not committed yet. But we are part of the process. The commitment phase I think will start by the end of the month and all the way to December. There are over 57 countries and all Asian countries that are part of the process. Obviously, we are looking at this issue not purely from, not just from an economic standpoint but from a holistic standpoint. We do have concerns regarding governance and we're watching carefully what are the governance mechanisms that they're putting in place, what will be the basis for granting of loans and whether this will become more of a political rather than a financial arm. So the decision has not been made but we are part of the process. We do hope that this will turn out to be real financial institution operated from a purely financial and need standpoint not from a political standpoint because the demand for infrastructure in the region is quite substantial. The ADB estimates that over the next 10 years we will need over $8 trillion in the region. In ASEAN alone about $1.2 trillion in the Philippines over $100 billion. Asian Development Bank with its increased capitalization, Japan with its new focus on infrastructure, Prime Minister came out with his four pillars of infrastructure including $110 billion that will be offered as additional support for its partners. I think it's not enough. Now in fact, private sector will have to step in and that is why as an aside, I forgot to mention our APEC initiative which is the SIBU Action Plan. One of the pillars is PPP initiative but what we want to create is an APEC standard for PPP. APEC standard in terms of definition of terms, APEC standard in terms of covenants and an APEC passport for companies that are involved in PPP. So that a company that's involved in one country for PPP doesn't have to requalify in another country because the need is so great it cannot just be from public and multilateral funding. Mr. Secretary, you talked about the likelihood that good governance would last beyond the next presidential transition and you talked about social media as helping out in this. Can you tell us something about the role of the legislature in making policy in the Philippines and what its role in good governance might or might not be? Well, there are three branches in the Philippine government just like the U.S. The ones that are most susceptible to immediate impact by the people are those that are subject to re-election and that's the executive branch with the president having to be elected as well as the legislature. In fact, the legislature have to refresh their mandate at the lower house every three years and the Senate half of them every three years will also have to get a new mandate and when you look at people's involvement now, at least when I look at the social media, they are now more engaged unlike towards the end of the Arroyo administration, they were more apathetic. There was this hopeless last, but I think now they realize that better govern Philippines is a possibility within their lifetime and that realization I think is driving them to make sure that this becomes a reality rather than just a dream. We cannot underestimate or overestimate the impact of social media. Go around the world, the changes that are happening or the movements that are going on. In Hong Kong, for example, country that's quite small but controlled, people demanding that they have more say in the choices of their leaders. So in a way, we're blessed that this change that President Kino is doing is happening at the right time when people have access to information. Hi, thanks Mr. Secretary. Two quick questions. So first of all, you mentioned just to follow up on the AIB question, you've mentioned a number of times now the concerns that you have regarding governance standards as well as China potentially using it as a political rather than a financial tool. I'm wondering what kind of clarifications from China would assuage your worries or concerns regarding these two things. And then secondly, with respect to the very interesting initiative you talked about that's I guess in the SIBU Action Plan about the infrastructure and PPPs, which is also in the SIBU Action Plan. I'm wondering if you could tell us a little bit more about that and what might be some of the difficulties or challenges getting this through because it's obviously a, it's a very interesting initiative but I think there may be some minor disagreements by some countries about that initiative. Thanks. Well, first on the AIIB, obviously we have to look at the documents. So for example, we're looking at the composition of the board, they will have a board of governors. So all member countries will have one member but the working board would really be the board of directors. And we're looking at that, the composition. Right now, based on what we've seen, there are positive signals. For example, there are 12 members and there's a provision there that says that only one nationality per member, for each nationality should only have one member. So even though China may have about 30%, they cannot have three representatives there. Then they broke up that board into 75, 25, nine and three, nine for the regional members and three for the non-regional members. And then there are other provisions but obviously we're looking at the fine print to make sure that not only is it put in writing, that it will also be done in actuality. So those are some of the things that we're looking at. Now, the SIBU Action Plan, we've had meeting in Bagak recently in near Bataan. And we're close to finalization of an action plan with four pillars. First is promote the financial markets integration. The second is to advance fiscal transparency and policy reform. Third is enhance financial resiliency. And fourth is to accelerate infra-development and financing. What I mentioned earlier was part of the fourth pillar. Now, there are some countries in the APEC region that do not want to put as many specifics yet. But for us, this is a good start because unlike the trade group, finance has really been on an ad hoc basis in APEC. The host basically sets an agenda and then that's what you discuss. And then the next host tries to pick it up from what the previous host took up. So that's why during the retreat in Beijing or the financial ministers, we agree that we'll try to come up with a roadmap that will then support the trade agenda because the trade goals have been there for the longest time. And I think if this is ultimately adopted, this will be a breakthrough and then this can become the roadmap for hopefully a faster integration of the region in terms of the financial markets. After all, trade doesn't occur in a vacuum. It occurs in the financial markets. Now, you need money, you need credit, letters of credit, you need to go through banks. And the more integrated the markets are, the banks are, the standards are, the credit bureaus are, the better it would be. And I think the faster we can accomplish the goal of truly having an integrated market that will resolve to more inclusive growth. Ladies and gentlemen, please join me in thanking Secretary Kim. I'd now like to call on our partners in this endeavor, the US Philippine Society and the person of Ambassador John Negroponte to make a special presentation. John. Thank you. Good afternoon, everybody. Thank you, Ernie Bauer for CSIS, giving us the hospitality of hosting this conference. And of course, we in the US Philippine Society and the Embassy of the Philippines have been pleased to support this endeavor. And it fits right in with the purposes of the US Philippine Society, which is to elevate the profile of the Philippines, not only in the capital of our country, but throughout the United States. And I think the kind of mission that we're receiving today, led by three such able cabinet ministers, I think contributes enormously to that. I wanna be remembered as the person who gave the briefest speech here today so that we can both get back on our schedule and so that I can make another speaking commitment that I have in about 30 minutes time. And I think most of what I would have said in my prepared remarks has been said in one way or another today, but suffice it to mention just a couple of key points. First, the pivot so-called, I don't really agree with that term because we've been in the Pacific for a long, long time, starting in the 19th century. And certainly our relationship with the Philippines is a testament to that, which goes back to the end of the 19th century. And of course it is a very storied and deep relationship indeed. But in any case, whatever you think of the term, I think it's important, and I think we all agree that the Asian region is becoming the demographic and the economic sort of center, epicenter of the global economy. And so we need to be thinking about the implications of that fact. And as has been mentioned by several, clearly the Philippines is very well situated to take advantage of these developments. And I think if they play their cards right, and that's of course what we've been hearing about today about the question of good governance and the highly skilled and able and capable Filipino people, the country should be able to continue to make the kinds of impressive progress that it has made in the last several years. And believe me, as somebody who was ambassador to the Philippines back from 1993 to 1996, which was also a good period for the Philippines, but I think there's been significant progress since that time, and particularly since the beginning of President Aquino's administration. So I think we all are hopeful for the future of the Philippines. We know there's always these political question marks and we're gonna have to see what happens in a couple of years' time when the country again comes under a new administration. One takeaway from this meeting that I have and I heard Mr. Secretary Greg Domingo say it here was that the Philippines wants to join the TPP. If I had to write a headline from this meeting and I'd been an AP correspondent, that's when I would have left the room to go file my report. Now you can do it with a tweet or whatever from wherever it is you're sitting. But that's important. I think, and I don't know what the Senate has done today or whether it's voted yet, but we're gonna soon have trade promotion authority which is gonna pave the way for this TPP, this Trans-Pacific Partnership. And it's probably gonna be the most strategic thing that this administration has done in its eight years in office if it gets it done. And if it's fortunate enough to also get the European one done, wow, that's really gonna be a big deal. These two huge sort of continental wide trading arrangements. So I for one am all for that just like I was for the NAFTA when I served as our ambassador to Mexico. And I think that we could be living in really in trade and economic terms in some very momentous times. Indeed, I hope we get the TPP and I hope that we can then eventually pave the way for membership by countries such as the Philippines who wish to join. And I hope whatever is necessary to be done to get that done will be done. Now, ladies and gentlemen, I have the distinct honor to take this opportunity and it is a special occasion for us to recognize Mr. Hank Greenberg, the honorary chair of the US Philippine Society. He's also a trustee of the CSIS. This is a two-fer, Hank. You've got two birds with one stone. And member of the Sumitro Chair for Southeast Asia Studies Advisory Board. So I was wondering if I could trouble Mr. Greenberg and Ambassador Quecia to come up to the stage for just one moment while I make this presentation to Mr. Greenberg. Maybe if you all could come up here. Either way, I guess. Oh, there's no stairs there. You better come over here. Hank, the stairs are over here. We don't want to make you high jump. Well, you probably can do it. So this conference on the theme of promoting business ties between our countries is the ideal venue to recognize a man who has done so much to create opportunities in that area over many years. So Hank, in recognition of your indispensable support for the US Philippine Society and for exceptional service in strengthening ties between America and the Philippines, our Board of Directors has chosen to name you as a recipient of the Society's 2015 Carlos P. Romulo Award. On behalf of my co-chair, Manny Pangilinan, I am honored to present you with this award along with our best wishes for continued success. I'll be very brief. Thank you very much for that award. I've had a long relationship with the Philippines and my predecessor, the founder of our company, really started it all. And I'm always pleased to go back there. I'll be there actually in maybe two weeks. Joey Cuesha and I were working in the same company. He ran our business in the Philippines, did a great job as he's doing a great job as ambassador. Thank you very much. That was a special one. I gotta say, from the minute I started working on Southeast Asia, I think Hank Greenberg was in one way or another my boss. I think he still is. So Hank, congratulations. Thank you. Our next speaker is the guy who puts everything together. He's the man who in the Philippine cabinet links the private sector and the public sector. He is in charge of building infrastructure in this country or helping to enable the building of infrastructure in his country. And he's a very good choice to do so. As you've heard earlier, he has a tremendous program underway. He knows what he's talking about too. He was recruited for this job by President Aquino from a position where he was running one of the most successful privatized companies in the Philippines, Monilad Water Services. He was president and chief executive of that company for four years before he was elevated to the cabinet. I'd like to ask you to join me in welcoming Ruggilio Singsong, the secretary of the Public Works and Highways for the Republic of the Philippines, Mr. Secretary. Thank you very much, Ernie. And good afternoon. I know it's a difficult time for you. I think it's also difficult time for me because it's about two o'clock in the morning in Manila time. Anyway, I'd like to just greet Deputy Secretary Bruce Andrews, Ambassador, my good friend Ambassador Negroponte and Ambassador Hubbard, Ambassador Carla Hill, the World Bank Executive Director, Mr. Silveria. I did mention that DPWH is one of the biggest users of, I mean, World Bank loans in the Philippines. Of course, Ambassador Joey Quechia, who comes from the same school as I come from, not from the other school, my colleagues in the cabinet, the business delegates from Manila, colleagues, friends, ladies and gentlemen, good afternoon. I'll go straight to the point. Why am I here? What I am going to propose is, we kept mentioning the presence, would you like to increase the presence of the U.S. construction companies in the Philippines? But let me show you the big picture. The big picture for the U.S. companies is really ASEAN. The ASEAN integration has a total, has become the sixth largest economy with 625 million population. All of the 10 member countries, maybe except for Singapore, all of them will need infrastructure investment these coming years. So look at it at the big picture. Don't confine yourself to the Philippines. But however, how do you become competitive in the ASEAN market? My answer is simple. The business model we are proposing is locate in the Philippines, register as a company in the Philippines, and avail of the millions of engineers, construction workers all over the Middle East, who will just love to work just around the Philippines in the ASEAN market. So that's my direct business proposition. Now, the only missing link in the past was that for you to locate in the Philippines as a construction company, you had to register every time you want to get a project in the Philippines. So what we've done and the President has approved this and signed a proclamation that now allows foreign contractors to be registered as a new category, what we call quadruple A, quadruple A construction permit. You now are given a regular contractors permit so that you don't have to work for every single construction permit every time you work. So the President signed this and this is the model that foreign companies are doing in Singapore. They've allowed foreign contractors 100%. However, why register in Singapore? Where will you get your engineers? Where will you get your construction workers, your equipment operators? You still have to go to the Philippines or some other ASEAN countries. So we opened up this quadruple A precisely for foreign contractors to be competitive in the ASEAN market. Now, having said that, as you have seen, the Philippines itself offers a lot of construction opportunities. In terms of our growth in 2011, the total investment in infrastructure was only at four billion. I'm just talking about investment in infrastructure. In 2016, this will go up to almost 18 billion. So from four billion to 18 billion. And where will this investment go? This will go into road construction, the water sector, rail, airports. The other, I'm excluding here the PPP because the PPP is private sector. I'm just talking here of public sector investments. Now, in terms of the department itself, TPWH, when we started, we had about less than 80% of our road network, what we call national roads, as being paved. By 2016, our national primary and secondary roads will all be paved by then. So I think if you have visited the Philippines recently, other than maybe Metro Manila, because it really affects traffic congestion, we have to schedule it properly. But if you go outside Metro Manila, you will see the development of our road networks tremendously different from five, six years ago. For example, we had our Independence Day celebration in Iloilo. In Iloilo, I was talking earlier to someone from Iloilo, we have 10-lane boulevards in Iloilo now with bike lanes. So it's not a typical two-lane, we have 10 lanes with a bike lane provided for. Now, and this is happening all over the Philippines. Now, aside from roads and bridges that we're mandated to do, we have our convergence program with other agencies. First is tourism convergence program. With the Department of Tourism, they continue to promote tourism. However, in the past, roads leading to tourist destinations were local barangay roads. So they are not paved, the local communities do not have the funds. So from 2011, we've invested over 50 billion to support tourism destinations. The master plan of the Department of Tourism has been identified in what they call the tourism master plan and all of the designated primary or primary tourist destinations we have paved. Unfortunately, when the local governments learned about this program, all of a sudden I realized that the Philippines has many waterfalls. They're now all of a sudden sprouting all over the country. Everybody wants the local waterfalls to be paved. So we're seeking to our tourism infrastructure plan. The second area is in developing infrastructure for agricultural development. So we're now doing an honest to goodness farm to market routes, not dictated by political parties, but where are these food production areas that we can connect to the market? So there's an ongoing program at the rate of about 2,000 to 3,000 kilometers of farm to market routes. We hope to be able to do as much as 5,000 this year and next year. The third major convergence program is in the water sector. So if you're in the water sector, whether you're building dams, you're in the sanitation, you're in the water distribution, you're in flood management, we are investing heavily to making sure that we are able to utilize water resources efficiently. So we're looking at, we've identified our 19 major rivers. So we are adopting integrated water resources management principles from upstream to downstream so that we're able to optimize our water resources. And this includes the use for domestic use, hydropower, flood management, as well as irrigation. The third, the fourth area of convergence is in the transport system. We're now connecting all major airports, seaports, rural ports to our national road network. A major component that was mentioned earlier about Mindanao. We've started developing the Mindanao integrated logistics network. Since we started, we've been budgeting 30% of DPWH to Mindanao. So islands that used to be isolated like Tawitawi, Basilan, Sulu, there now we're completing the circumferential roads in this island provinces. So 30% is going to go to Mindanao and we will continue to complete the Mindanao logistics network, connecting food production areas, tourism destinations to major airports, seaports and rural ports. So in terms of DPWH again, we've had very successful implementation of what we refer to as the high standard highway around Metro Manila and 200 kilometers around Metro Manila. So we've had 152 kilometers of ongoing tall roads. We're implementing 188 kilometers more and we will be beating out an additional of 72 kilometers. So these roads are either going to be tall roads or they will be financed by government but operated by the private sector for the operations and maintenance. So this goes all the way to Cabanatuan north of Metro Manila, all the way to the south in Batangas area so that we're able to, the whole objective of the high standard highway is to decongest Metro Manila and make Metro Manila a little bit more livable. Together with the road network would be the rail system that my colleague and their secretary Limcauco will be discussing with you a bit later. Let me just mention one major project that we are launching and this bidding will happen sometime November. This is the Laguna Lake Expressway Dyke project. This is our biggest PPP so far. It has several components. It's a road dyke Expressway at the same time flood control and at the same time land reclamation. Whoever's going to win this bid will be given the right to reclaim some 700 hectares of prime property because then they will be able to really develop a 700 lakeside prime property. I was directly involved in the Fort Bonifacio development so we know exactly what the market can absorb and of course the 700 hectares is three times the size of Fort Bonifacio but we strongly feel that having this development in the lakeside will give the developer an opportunity upscale land development. So we have continued to also go into new areas as far as road is concerned. We just continue to bid out what we refer to as long term road maintenance. If possible we don't even want DPWH to do these roads. If the private sector can do it we'll just pay them on a regular basis. So far we've bid it out five and for your information four of them were won by Chinese contractors so there's no problem as far as accepting Chinese contractors in the construction market and won by Korean. No US company has participated unfortunately and that's why we're saying you should look at the business model so that you're more competitive not only in the Philippines but in the ASEAN where all of these 10 member countries except maybe for Singapore they will need all of the infrastructure that we're getting into in their own countries. Let me end by saying that we will continue to focus to make sure that the gains in the department will be institutionalized. So our role has been simple. We took over the department one of the always top three noted most notorious most corrupt agency. We had a simple program. Good governance and anti-corruption was the main program. However it couldn't be just hype we also had to deliver safer and better quality road network. So when we say good governance we had to look at the total system making sure that we fund the right projects. We had to make sure that we look at the right costs in terms of the bidding that it is competitive and full accountability and transparency. We had to make sure at the quality. So slowly we upgraded the quality of our registered contractors. We recently got DPWH itself ISO certified for quality management system one of only three national agencies who has ISO certified. Right people as well as right implementation. It used to be that we had almost 20,000 plantilla people in the department. We were able to reduce we were able to remove 4,500. We brought it down to a little over 15,000 in spite of our budget increasing four fold. So we're saying we're a lot more efficient this time. We've gotten rid of people we have to get rid of through early retirement, separation, filing cases against them. Just to make sure that the department no longer is going to be in the top three notorious departments. So we've gotten headway there. It's not the perfect system. We're saying it took several generations for the department to be where it was. So I hope five years, six years is not too long to make the changes but we're confident that we've institutionalized the reforms in the department. The other thing is we've hired we run a cadet engineering program where we hire the best and the brightest registered civil engineers nationwide. We get them through a management training program so that we are assured that we have the next generation running the department. After all, what we have been doing is really for the future generations. So these are the programs that to me would like to live in the department as our legacy. Get the young people who are highly qualified, idealistic, run the department. So we're now, for example, when we started the average age was close to, they say 57 was the average age. Now we're down to 43 years old. And the new hires that we are getting has to be no older than 30 years. So just to make sure that we have the young cadet engineers running the department after 2016. So ladies and gentlemen, as I said, my business proposition, U.S. companies have to look at the ASEAN market. And how do you do that? We've created the avenue by opening a quadruple A registration for foreign contractors. So with that, just again, invite construction companies and engineering related companies to come to the Philippines and compete in the ASEAN market. Good afternoon and thank you very much. Thank you again. Nelson Garcia, Washington in a governmental professional group. Mr. Secretary, the issue of the airports in Manila, the, there was talk initially about expanding the airport at Naia by creating a new runway and possibly obviously the need to modernize the three terminals that are still basically getting old. But there was also talk about incorporating Clark as a replacement for Naia. Can you please talk a little bit about what the long-term plans are for those two airports? And secondly, are we looking at the potential of additional gateways from the Philippines beyond Manila and Cebu to the outside world? I'd like to keep, get Under Secretary Limcaugo answer you because the airports and seaports are really under the Department of Transport and Communication, but I know there are plans and they're now just finalizing how we will develop the second gateway in Metro Manila. So if you don't mind Under Secretary Limcaugo can give you an answer when his turn comes into this afternoon. Well, again, when I took over Manila, we were, you, I hate to say this, but most of the government employees ended up with Manila. So my first objective, unfortunately, I had to do it Christmas time. I was distributing pink slips. So we had to get rid of at least 30%. To my mind, to create an impact, you have to replace at least 30% of an organization to really turn it around. Replacing 10% doesn't create that much impact. So to me, 30% had to go. So, of course, you had employees union, but I said, I'll have to explain to them that this is the way to go moving forward. Otherwise, remember when we took over Manila, this was the secondary privatization. It was not successful in the first 10 years. For some other reasons, other than personnel. So to me, 30%. And that's what I did in DPWH as well. I had to clean up up to 30%. We are now going to welcome the next panel, which will dig deeply into the investment opportunities in the infrastructure and private public partnerships in the Philippines. And that will be moderated by my colleague, Dr. Scott Kennedy, who's the direct deputy director of the Freeman chair in China studies and has studied this area extensively and our panel. So if I could just call up the panel, please. They'll be right with you. Just introduce them. Yeah. Okay, there we go. All right. So, good afternoon, I'm Scott Kennedy. I'm with the Freeman chair in China studies here at CSIS. I do research and write about China's economy, both domestic and international. In my former life as a professor at Indiana University, I spent a lot of time thinking about the politics of development across the region from Sapporo to Singapore. And I'm delighted to have the chance to moderate this panel on public-private partnerships in the Philippines. We have a very distinguished group of experts here this afternoon. You have their full bios in the materials that you have. So there's no need for me to spend a lot of time going over that. I'll just say by way of introduction, before we get turned to each of them, that in my experience and the experience of just observing countries, there's no one model of economic development of how countries raise their standards of living and become prosperous countries. There's just many different flavors of development and the role of the state changes over time. And at different stages of development, the state plays a different role. But one of the things that we're gonna highlight in this panel is the role of the private sector changes across countries and changes over time. And the idea that the private-public partnerships can are very important for infrastructure and providing public goods is something we're going to explore, both the history, experience, and the possibilities. So to bring that explanation forward to share with you, we have four excellent panelists. Gazette Canilao, who's the Executive Director of Public Private Partnership Center in the Philippines. Guillermo Luchango is the Chief Executive Officer and Chairman of the Investment and Capital Corporation of the Philippines. Robert Prieto, who's the Senior Vice President for Infrastructure at Floor Corporation. And Bernie Sheehan, who's the Director of Infrastructure and Natural Resources at the IFC. So each of our speakers will make introductory remarks of about five to seven minutes and then we'll turn it over to you all for a vigorous conversation. So let's first turn things over to Gazette. Good afternoon, everyone. The Philippines has always recognized the crucial role of the private sector in the development of our infrastructure. As a matter of fact, the passage of the Build, Operate Transfer Law in 1990 institutionalized the role of the private sector in infrastructure development. This was later amended to include that traditional and social infrastructure projects for the agriculture, health, and education sector. Under President Aquino's term, he further bolstered the role of the public-private partnerships in addressing infrastructure gaps in our country. He reorganized the Build, Operate Transfer Center into Public Private Partnership Center through Executive Order 8. The PPP Center, the Philippines is the sole body task to facilitate and coordinate the country's PPP program. Part of its mandate, aside from providing technical advisory in the project development and management of the implementing agency's PPP projects, is also to manage a revolving fund called the Project Development and Monitoring Facility. This fund is utilized for the conduct of pre-investment activities and bid management of PPP projects. This fund is allowed implementing agencies to hire renowned transaction advisors to ensure that we put together bankable and viable PPP projects. Since 2010, we have already awarded 10 PPP contracts with an estimated project of about 4.2 billion U.S. dollars. We are currently procuring or bidding out 12 PPP projects worth about 7.7 billion. And of these 12 PPP projects, eight come from the Department of Transportation and Communication, and one from the DPWH, which Secretary Sincso mentioned earlier as our biggest PPP project that's for the Laguna Lakeshore Development Projects. We also have a social infrastructure project in the 12 that we are currently bidding out, and that's the regional prison facilities and two water projects. On top of that, we have three projects that have already been approved by the National Economic Development Authority Board, chaired by the President. And these three projects, we are looking at rolling out in the next two months. And one of these is again, the very ambitious 709 kilometers rail project under the Department of Transportation and Communication. The, these three projects, estimated project cost is around 4.2 billion U.S. dollars. We are also trying to secure approval for six more projects which we intend to launch and award before the President steps down. And these six projects, project cost is around 4.6 billion U.S. dollars. So we have worked so hard, the Philippine government has worked really hard in ensuring, in creating an enabling environment for PPPs and that ensures transparency and level playing field, not only for local investors, but for foreign investors as well. And we continue to do so. We continue to face challenges, but we also continue to address these challenges to partnerships with multilateral agencies, with World Bank, IFC, ADB, JICA, and other partners that help us promote best practices in doing PPPs. That's it for me, Scott. Thank you very much. That's a very terrific summary. I think I counted somewhere about 41 or so projects either that you've already started or that are in the works. So it's quite a lot. And it adds up to not a small amount of funding overall. I'll turn things over now to Guillermo. Good afternoon, everybody. I'd like to draw a little more focus on the manufacturing sector for those of you who represent manufacturing companies because we covered a lot of ground this morning, but a lot of it was either financial institution type or government administration type. And I think that the story on the manufacturing front really deserves a lot of attention. One example for that, if I may, just related to you, I was with the President Aquino's state visit to Japan just about a month ago. And what really amazed the Philippine delegation was that, whereas in the past, we would have to be begging them to come to the Philippines or explaining why they should be in the Philippines during that visit to Japan, it was the Japanese who were telling us why they were coming to the Philippines. We didn't have to convince them they were already, it was almost as if the nation had, on its own, decided they had to be in the Philippines. And in truth, in the industrial estates in the Philippines today, the biggest nationality pouring into the Philippines now are the Japanese. And in a sense, we would certainly like to see that kind of an attitude take hold in the United States as well, because after all, we have had a much longer history of cooperation and support between the Americans and the Filipinos, and as you know, Americans are always welcome in the Philippines. So what is the reason that Japan has had this major turnaround and why I think you should also consider it? Well, the obvious things have been mentioned. We really are in a sweet spot in terms of our population because the median age is 23, and I think the statistic is that 75% of the people are 40 and under. So I think it was Secretary Domingo who mentioned that we'll be in this sweet spot from maybe 40 years to come. So that is one attractive factor about the Philippines. And then as you know, we've always been known to have very productive labor and English speaking. You don't have to translate your manuals into some other language. Your people can address the workers directly and be understood without the need for translation. And of course, the comparatively lower cost of manpower in the Philippines that we have to offer and the fact that we still have a lot of available manpower. The Director General of PESA likes to say in the Philippines you don't even have to put an add out. In the papers when you open your factory you just put a sign outside on the gate of the factory and people will be lining up to apply. So that having been said, I think what has added to that recently which has improved the attraction of the Philippines is the fact that the President has had this drive against corruption which really shows up in his sincerity of not being corrupt. I think that's a very important factor because a lot of people get bothered by it. And now that we have convinced the foreign nations that we have a government that intends to root out corruption, now they're really starting to pour in. And don't be confused if sometimes you come to the Philippines and you see that the newspapers are talking about corruption cases, et cetera. The simple reason for that is in order to root it out you have to take action against corruption. So you'll see these things coming out. But the important thing is that there is from the top there is this drive to root it out. So I think that's another important factor that should be considered. And I think this is one of the reasons, for instance, that the Japanese are now coming into the Philippines in such strong numbers. My group runs industrial estates and we have really seen that the majority of the nationalities coming in to the factories nowadays are Japanese at the moment. And we hope the Americans will counterbalance that with their own manufacturing facilities. And the thing about the Philippines also, it's part of the ASEAN region and it's been referred to that this economic integration program for ASEAN is coming into place and definitely this enables you to have a base in ASEAN which is going to be friendly to your industries. So for those reasons, I think it's a good time to come into the Philippines. And it's also from the standpoint of the expatriates you have to send into the Philippines to live, it's always been an attractive place for your people to live in when they put up their businesses there. And with the government now exerting all effort to streamline and become more efficient, I think that you will find that it's a lot different now and it's easier to do business than it was before. And one last thing I'd like to say is there was a question brought up here and we've come across this question many times before, what happens in 2016 when we have an election and we have a new president. And I just wanna say that maybe the Filipinos themselves have to look into the issue of who they want to govern the Philippines. But one thing that I can say is normally the foreign manufacturing companies or foreign companies in general are not very affected by who's the president because we're not talking with any of the candidates that have any chance of winning, we're not talking about a radical change in government, where we don't intend to go back into a dictatorship or a radically left-leaning government. That's not on the cards, no. And one thing that I can say to, two things I can say to substantiate that and then I'll shut up. The first one is that if you look at the Filipino business plan today, all the big leading Filipino business interests, they are all pouring money into the Philippines. The PPP program, for instance, many of the winners have been Filipino consortiums, although they may tie up with the foreign technical groups, but they're putting their money into the Philippines. So if the Filipinos are pouring their money into the Philippines instead of taking it out of the Philippines, they obviously believe in the future of the country. And the second thing I want to say is that one of our former trade and industry secretaries, a guy by the name of Johnny Santos, before he became Secretary of Trade and Industry was president of Nestle in the Philippines. And he produced the chart in which he showed the net income growth of Nestle in the Philippines over the last, I think, 50 years. And the chart showed a constant upward movement. And then he would plot against that, this is the Marcos era, this was Ramos era, but the chart still kept going that way. And I can actually reproduce that for anybody who is interested. So that's all I had to say. So we'll turn things now next to Robert. Okay, so I'm gonna talk about half a dozen challenges, the biggest challenges that PPPs face. I'm gonna do it from two perspectives. First, Flour is both a developer and builder of PPPs in North American and Europe. And then second, the Philippines is an attractive and important place for us as a company. We've been in Manila since 1987, opened a second office in Cebu in 2011. We have a fab yard joint venture in the country. And all together employ 2,800 Filipino engineers and other skilled individuals, half of them are engineers. The average age of our offices there is 33. So it's a young staff that is very important to us as a company. And it's also our most innovative office in our company. And I think that says a lot about the culture and not just the individuals that make it up. So let me talk about a half a dozen challenges and kind of try to give you a perspective on how I see them either being addressed or where there's opportunity yet in the Philippines. So the number one challenge PPPs face is political will. Now we've seen this development strengthened over the last several years in the Philippines, the PPP Center and its continued improvements now under PIZZET is a clear demonstration of this will. And that's something that we find very, very attractive. That's actually a sign of maturity in the PPP market from our perspective. Second challenge is good regulation and legislation. This is an area of continued work and this is true almost universally around the world. But it is being worked and I think that's important. For example, ownership of construction companies has been a challenge with the requirement either to be 60% local or to have a special license. But the very recent quadruple that the minister made reference to license is promising. But for us, it'll really hinge on the final rules and regulations that surround that. So we're very excited about the possibility and we'll be clearly watching the details because the details of what either will make it workable or not workable for us. Third is efficient processes. And what that means is timely with reasonable cost and free of corruption. I think one of the most noteworthy things I wanna offer is that in this infrastructure space globally and particularly in the Philippines, you can now say the word corruption in public and it's well received. And I think this is very important. So the awards to date from our perspective have been a little slow. They've taken a little longer than we would like to see. But what we think is the PPP Center really offers hope that the projects will advance up that learning curve. And we recognize that they're in a learning curve. They have the institutional framework to learn from that learning curve. And so we're optimistic about the direction. We'll obviously look to see continued improvement. Risk allocation remains a key area for improvement though. For example, the allocation right away risks is something that troubles us when we know others in the marketplace. These are risks that the private sector is really not in the best position to take on and manage. Terms and conditions need to continue to evolve to attract more bidders and avoid single bidder situations. Delays and moving projects into the procurement process and efficiently through the process have significant implications for bidders. And this is even made even worse if projects are actually canceled. So the PPP Center during this initial period, one of the recommendations I would offer is that they may wanna consider bid stipends in these early days as the market grows comfortable with the process. These are things that you can fade out as you build up a pipeline of projects and experience in the business. And then transparency and a continued focus on combat and corruption remain important. I think they will for some time to come. I don't think this is just the Philippines issue. Fourth challenge is the need for a prioritized pipeline of projects. And this is something that we're very pleased with the strengthening that we're seeing in the pipeline development in the Philippines. These projects, and I think again, I think there's good focus on this, need to not only improve economic efficiency and quality of life, but for the Philippines in particular, we're also national resilience. And I think a number of the projects now are starting to bring this in as a consideration. The work today is promising, but confidence in the timing of procurements and awards must continue to improve. It's that uncertainty, which is gonna be a drag on a number of bidders, and quite frankly, also on the quality of the bids, the willingness to make investments. There's a broad recognition that PPP projects need to compete globally. So for us putting a team into the Philippines to develop a P3 project means we're trading off opportunities in North America, Latin America, Africa, Europe, because we see this as a better opportunity. And I think this is an important recognition that's required that when you move into the P3 space, you're competing globally for the resources to develop the projects and the money to fund those projects. Fifth is really the financing frameworks and Bernie may pick up on this more. Need to have both capacity and capability that this pipeline that's now developing requires. This means that access to local finance is gonna be constrained as project size grows and institutions like IFC, ADB, AIIB, and others are gonna become increasingly important. But that means not just the money has to be there, it means that the regulations, legislation, project constructs, and the financial industry itself have to be open to this access to international financing. So that's gonna include harmonization and standardization with ASEAN plus three, with ADB, others. And for example, that standardization is gonna be important around the areas of debt disclosures and reporting. The SABU action plan that was referenced earlier by the minister is a very, very positive sign and really hope that that moves forward in the APEC meetings later this year. And then as funding becomes non-local, political and regulatory risk faced by debt must be addressed. Now likely this will be through further refinement of international arbitration mechanisms that for the Philippines already exists with Singapore and Hong Kong being potential in destinations. I think also the P3 Center might want to look at not just government subsidy as a way to make projects go, but also some sub-debt features such as the TIFIA feature here in the U.S. I think it may give you more leverage and obviously give the government more of an ongoing role in the success of these projects. And sixth, the final challenge, I think, is really there needs to develop, and this is often the last of the things to develop in a P3 market, a clear understanding of how government's role changes in the execution process of PPP. So this is always a challenge with bureaucracies and it's not unique to the Philippines. PPP projects must become performance-based versus having overly prescriptive specifications. This will allow the innovation potential that we see already in the Philippines to really find a way into solving the infrastructure challenge in the Philippines. Terrific, thank you very much for very good remarks to show how the process has evolved and how you can take advantage of it and also the things that this is part of a learning curve that is moving in the right direction. For the broadest perspective, we're now gonna turn to Bernie Sheehan from the IFC. Look forward to your remarks. Great, thanks a lot, Scott. Let me start with picking up one of the comments that Guillermo made, like you said, it's a good time to come into the Philippines and invest. And I think there are a number of positives about the situation that are worth starting with in any discussion on this. And I think we can take off a number of the ones that have already been raised here in terms of the significant improvements on the macroeconomic governance side that we have seen over the last several years. We look at generally in the investment, investment press worldwide, the Philippines has become one of the destinations most often talked about in a positive standpoint because of these reforms, because of the perceptions of progress on the anti-corruption drive, because of some inherent features as have already been mentioned with the productivity of labor force, languages, very high domestic savings. So all these things are good. Secondly, I think that the focus that the current administration has been putting for the last few years on infrastructure as a key bottleneck clearly makes sense in the situation that the Philippines finds itself in. Having reaped a number of the benefits from the macroeconomic reform process to date, I think the Philippines is looking going forward at the same kind of dilemma that a lot of the other reforming emerging markets have faced over the last few years, which is the risk of declining productivity in spite of further reforms. So without significant improvements on the infrastructure side, the likelihood that the macroeconomic reforms continue to translate into economic growth starts becoming much more complicated. So here, there's also good news in terms of where the Philippines has been. Aside from its current focus, the Philippines has at many stages been one of the early leaders amongst emerging markets in terms of particularly engaging the private sector and private capital into infrastructure. The Philippines were one of the first to move on IPPs back a couple of decades ago and similarly have been the source of innovation in a number of sectors, including the water sector. I think as we see from the PPP Center, and it's great to have a cosette here on the panel as well, illustrates that there's a lot of planning capacity, including at the detailed project level in the Philippines, which is needed to bring pipeline of projects forward, particularly in the transport side. And for IFC, IFC, the Philippines has been a very good destination for us in terms of investment. It has historically been one of our larger destinations for infrastructure investment globally, backed up until a few months ago. Our infrastructure portfolio in the Philippines was twice the size of our infrastructure portfolio in China. So it has been a place where we have been able to put a lot of capital. Our returns on that capital have been very good over time, accompanying the various reforms, going back to the early BOTs, the privatization phase, even some of the off-grid power that the government has gone into. So with all that said, there's still very significant challenges, I think, for the government to reach the objectives that it has. And I think here we observe that the infrastructure plans that the government has are still significantly outrunning the quality of the infrastructure on the ground. So the plan to get to infrastructure investment on the level of 5% plus of GDP, as has been put forward by President Aquino, makes sense. But infrastructure investment levels are still just reaching about 3% of GDP, which still puts the Philippines in the lower portion in terms of infrastructure investment as a percentage of GDP of many of the emerging markets. And frankly, I think, as you see in Manila and you see in other parts of the country, even for all the capacity and the positive history that the Philippines has around infrastructure and introducing the private sector into infrastructure, the quality of some of the infrastructure remains, frankly, terrible. And I think that's an observation that is clear to everyone. So the trouble as now the Philippines is trying to get to a different level in terms of investment, particularly investment of private capital into infrastructure to deal with this and it's got the right objectives and it's got the right targets and it has a lot of capacity in terms of moving forward. The problem is a little bit what Bob mentioned a few minutes ago, which is the Philippines in trying to do so is competing globally with probably every large emerging market around the world, which is similarly trying to deal with declining productivity, trying to focus on infrastructure and infrastructure improvements as a way to get to improving productivity and restoring stronger economic growth. And every one, all of these emerging markets are trying to do things at least on the scale of what the Philippines are trying to do, if not more. So if you go to Mexico, you go to Brazil, you go to Indonesia, you go to Egypt, you go to India, you go to a number of smaller markets, you go to Bangladesh, you go to Ethiopia, you go to Kenya, you go to Ghana. Every single one of these countries that I've just mentioned has the intention to create more, for example, power generation capacity in the next five years than exists in the entire country to date. So every major emerging market today has extremely ambitious plans on what they want to do in infrastructure and every single of those markets intends to get there by significantly scaling up private capital flowing into infrastructure. So there's a big issue for the Philippines of how does it achieve both getting this pipeline of more projects out and capturing the investment and the financing that is needed to turn that into a reality. And as we look at that, I think I would suggest three areas that in particular are areas that make sense to think about. One is the kind of work that is already ongoing and which Kazat alluded to in detail, which is progress on the specifics of individual transactions, of individual opportunities to bring transactions to market. I think here the Philippines is, in our mind, clearly in the upper echelon of capacity amongst emerging markets in trying to do that, particularly on the transport side. I would mention in passing that IFC has an advisory practice in terms of helping governments structure PPPs, structure private infrastructure, bring it to market. And our single largest program of investment anywhere in the world in transport is in the Philippines. So I think that's an area which needs a lot of work in the Philippines as in every country and will continue to need work, but where the Philippines is going in the right direction. The second big challenge I think was alluded to in some detail by Bob a couple of minutes ago, which is the issue of process efficiency. So the Philippines is not lacking in planning capacity, is not lacking in knowing what it wants to do, is not even lacking I think in the decision making of going forward, but the processes are still extremely slow and compared to emerging markets peers as opposed to the planning capacity which is in the upper part of the spectrum of quality, the process efficiency is more towards the lower end. And then finally there's a broader issue which I think as we look across emerging markets and we see reforms taking place in a number of those countries that is worth putting on the table which is the broader, the more macro approach to the system. And I noted one of the comments that Bob made about floor across the emerging markets and their experience in the Philippines and Bob mentioned that Manila is the most innovative office for floor worldwide. Now one of the problems is that quality of innovation which is definitely there also applies to regulation. The Philippines has some of the most innovative regulatory barriers that you are going to find anywhere in the world. And this can be good at a micro level in terms of dealing with very specific problems that these regulations are trying to address. But when you add all of that innovation together, it becomes quite challenging in terms of its overall effects. A couple of examples here to close off on this. One of the things, and I'll go to the area of renewable energy. One of the things that we have observed over the last 12 to 18 months is a number of these emerging markets that are trying to reform and trying to capture private capital have specifically in the area of renewable energy made dramatic improvements in terms of the structure of procurement. We look at the auction programs for renewable energy. Specifically, we look at those programs that have been rolled out in Brazil, that have rolled out in South Africa, that have rolled out in India, and more recently in Jordan and the United Emirates. What we see is that countries have figured out an aggregate approach to how they want to procure, really reinvented from scratch, quite different than the procurement programs that they had before, and have succeeded at getting significantly larger levels of private capital than they had anticipated, and building up their generation capacity in renewables significantly faster than they had anticipated, at significantly lower costs than they had anticipated. Now, that's really the trifecta that you would want in a procurement program for infrastructure. And in each of those cases, the governments basically started from scratch and said, okay, how are we gonna get to the finish line that we want? And all of those have succeeded in doing so. By contrast, if we look at the procurement of renewable energy in the Philippines today, and this is an area where IFC will, in the next few weeks, announced a major investment of about $230 million in the sector, so we're quite positive about it and bullish about it, we notice that some of the regulations that apply here that are very specific to the Philippines in terms of foreign ownership, in terms of the complexity of tariff guarantees that are offered in this sector, are very significant impediments and are very different to what the Philippines competitors are doing in terms of attracting the amount of capital in. A second example that I'll give and I'll close off is Mexico, another country, not dissimilar in terms of size of the economy, not dissimilar in terms of the scope of the ambitions on infrastructure. And if we look at the scale and the depth of the changes in procurement and the changes in regulation that Mexico is undergoing in order to capture the investment that it wants in energy in particular, it's significantly deeper than what we've seen to date in the Philippines reform program. So I think this is the situation, I think as we see it is, a lot of tremendous positives for the Philippines today, very much on the right track, very much on the right target, tremendous capacity, but some important things to think about in terms of achieving the ambitious objectives that it has here. Thank you very much. I arrive at this point of the conversation being optimistic and seeing the glasses half full and more water flowing into the glass. And it seems as if the Philippine economy is developing quickly, it seems potentially quite sustainable compared to previous eras where you had a lot of volatility in growth. And if you look at reform measures in other countries around the region or more broadly where there's being more progress in the Philippines compared to elsewhere, if you look at the challenges Abe is facing in Japan, other ASEAN countries, even the challenges China is facing with a very strong hand by Xi Jinping, it seems like the Philippines has a very good story to tell. At the same time, it seems to me that although there's a lot of competition for projects, there's also a lot of available capital and capacity and knowledge to feed into all of these so that it doesn't have to be that the Philippines has to necessarily compete with others for this capital because the demand is there and the institutional changes and everything are in the process of being made. I thought I'd use my prerogative as chair just to ask two questions of the panel, one a micro question and then one a macro question. I guess the first, the micro would be maybe because that and others feel free to chime in in terms of if you could just maybe talk about some of the specific cases of the recent public private partnerships that your center has helped organize an example of how things have changed from the past and the learning curve that you're on and how that is perceived by others in terms of specific examples. And then I'll hold off and wait for the second question. Yes, thank you Scott. Well, since started in 2010, one of the innovative ways by which we could accelerate the pipeline development was the creation of the project development and monitoring facility. Using ADB guidelines, we were able to procure transaction advisors and consultants for the implementing agencies in a much shorter period of time. And that we are also thinking of expanding it to include providing of consultancy services to the implementing agencies to assist them during the early phase of execution. Like for example, an independent consultant or engineer during the construction period. Again, that's one bottleneck that we've identified and we are working on expanding the PDMF services to also address that. Another, Bob talked about I think process improvements which I think failed to articulate earlier on. But in terms of project planning or project development, we've created a separate process for evaluation as well as approval for PPP project and that was only put in place last year. And when we did that, there was really a jump in the number of PPP projects that were approved by the government. And that's one of the, again, the innovations that we came up with. The government of the Philippines through the PPP Governing Board and the PPP Center also issued several policy guidelines for the implementing agencies, the pipeline development to assist them in the priority station selection of their projects. Viability gap funding which Bob alluded to in terms of government providing subsidy to certain PPP projects. We also came up with the PPP best practices and one of which is the free interaction with the private sector during the bidding process. And that's that one we've institutionalized and it's been accepted by the various implementing agencies most especially by the two infra agencies, the TPW, H&D, OTC. Now, that's quite a mind ship because as even though we've had the build operate transfer law since 1990s, most agencies are used to using the traditional procurement which forbids interaction with the private sector. And in some cases, there's a no contact rule which is totally opposite of what we're trying to do in the PVPs before we bid out our projects. We want interaction with the market feedback and feedback from the investors, the lenders so that when we go out and ask for bid submissions, then we'd have a more successful rate than doing so. And that's what we've also included in our PPP best practices. So I guess Scott. That helps, that helps a lot. Yeah, let me just offer a couple of comments. First I want to get maybe back to the premise of the question that it appears there shouldn't be any constraint. I don't think the constraint is money. I don't even think necessarily the constraint is good projects but everything is relative in life. And the choke point in the P3 processor, just quite frankly, the sheer number of deal teams that are out there to put these projects together, the cost that those deal teams will occur through the bidding process and the amount of time that you're tying up those deal teams because of extended procurements. So streamline procurements with a lot of the key issues and you're already addressing some of this with the discussions during the procurement process. This is huge, but anything that shortens those time frames and takes out some of the risk associated with the bidding process itself is going to result in you being much more competitive globally. Bernie talked about a number of the macro factors in the industry and the positive nature of those macro factors. And I would just kind of reinforce the good macro has to be complemented by good micro. And the good micro here is really about process efficiency. And it's not something I can point to as a fact, but just kind of gut reaction is I think there's about twice as many hoops, regulations, approvals, whatever you want to call it, for a comparable size transaction in the Philippines versus let's call it your competitor set. And that I think is an area for a good scope. And then maybe just one last comment. And I think, again, Bernie made the point on the quality of the infrastructure, it's not just the number of miles, it's the quality of those miles. And this is where I think you have an opportunity to not only improve quality, but to accelerate the bidding process. And that's by moving much more to performance-based specifications, performance-based procurements because now you can hold the bidders feet to the fire and the quality of that infrastructure, the performance of that infrastructure over an extended period of time. It makes your bid process easier. It also reduces, it won't eliminate, for the various agencies to want to go in and influence the design in the P3 process. They have to move into motive accepting the design as meeting the performance spec. I think it's a huge opportunity for you. All right, let me ask a macro question. You know, if you travel around the United States and you drive on the roads of our nation's capital or elsewhere, you won't get the immediate sense that we have wonderful infrastructure, right? But I travel to China a lot and I just drove down some wonderful highways. I went on a high-speed train, wonderful subway, you know, China seems to be infrastructure central. In addition, China just led the creation of the Asian Infrastructure Investment Bank, which has now 57 members. So I was wondering if you could talk about the relative interest in attracting infrastructure investment from China. I know AIB is not supposed to be a Chinese representative. It's supposed to be an international multilateral development bank. But that opportunity, relative to the opportunity that American companies and others have in these opportunities in the Philippines. I think in many emerging markets, China is the single largest non-domestic source of capital for infrastructure. The scope of Chinese investment in infrastructure has been huge. Significantly larger than, say, the World Bank Group or multilateral institutions put together if you add it up. I think the issue has been, or the issue going forward for governments looking to capture Chinese capital is a lot around what model does that capital flow into. And just for the purposes of simplification, we can call it two different models. One being, again, to stereotype the China Inc. model. And the second, again, for the purpose of stereotyping international best practice model. I think we can probably observe that the significant majority of infrastructure investment, cross-border infrastructure investment by China has historically been in the first of those models. Typically characterized by things like government to government sourcing, by non-competitive procurement and use of Chinese ownership, construction, Chinese labor and Chinese capital put together. With then standards that are applicable to that just to the Chinese groups. I think we can also, however, observe that in recent years there's starting to be more investment, cross-border investment falling from China in a different type of model. So we see whether it be Chinese SOEs bidding for procurement opportunities that are in projects that are owned and operated by non-Chinese partners. We have started to see more recently Chinese capital beginning to flow in an entirely untied way. The ISC, for example, has had for about 18 months a $3 billion line of credit from the State Agency for Foreign Exchange in China, which has no ties to any Chinese partners in the projects which receive that financing and where the decision making on that investment is entirely delegated to the IFC. So I think we see the AIIB, for example, as being something which, given the decisions that have been made on the shareholding, likely to line up more in that second camp. So I think we would think that both types of channels are likely to continue, but for a host government, whether it be the Philippines or another merging market, the question is really what, which of these two channels do I want to engage with? Turn things open, turn things over to the floor. And right here, yes. We have a microphone that's coming your way. There you go. Sorry, thank you. The question probably should be more or less addressed to the gentleman from IFC. As you know, the World Bank Group is well respected around the world, probably more especially in developing countries. You had mentioned about the accompaniment of advisory capacity in your lending program to the Philippines. I presume that includes technical assistance and I presume it includes monitoring of your loan investments to the Philippines. Could you let us know what is the best success story you have on the Philippine program? How much have you lent the Philippines and what is the outstanding balance? Thank you for the question. As I mentioned in my remarks, Philippines has actually been one of the largest partners for us on the infrastructure side over time, both in terms of investment and advisory. In investment actually, the Philippines, relative to other countries, had one of the highest ratios for us of infrastructure investments as a portion of our overall investment activity and for many years infrastructure was over half of the total investments we were making in the Philippines, as opposed to on a global basis for IFC, that being about 20 or 25%. On the advisory side, we have had an extensive engagement on infrastructure and that is what I'm referring to here is transaction advisory, where we work with the PPP Center or other counterparts to help the government on the detailed planning and detail bringing to market of individual opportunities, generally in the form of a international public tender. Within that space, the two largest areas of activity for us have been on the transport side and currently that is by far and away, I think where our support is concentrated, including working probably the project we worked the longest on, I would say would be the LRT line one, yeah, that I remember working on maybe 12 years ago and that came to market I think about a year ago. So it was quite a long process but we're very pleased that that got through and then the second area was advising on off-grid electrification or small grid electrification in the Philippines. So those two activities I should specify are quite separate within the IFC on the one side, it's advisory to governments handled by one team and then the investments are handled by a totally separate group and the quality and the impact of the investments is monitored from the investment side. With things that are actually very few instances, if any that I can think of where IFC has then subsequently invested in transactions that were prepared by our advisory side which underlies that historically, capital has not been a big constraint for infrastructure in the Philippines. That may change as the country tries to scale up its private infrastructure program but historically the transactions that we have helped the government bring forward have found other sources of finance than IFC. Right here. I'm Larry Nicks from CSIS. In the past, one of the major corruption issues in the Philippines has focused on the customs bureau in the Philippines. A couple of past presidents I know have targeted the customs bureau in previous anti-corruption campaigns with apparent minimal success. I know that the US Chamber of Commerce has addressed this issue a number of times in its recommendations to the Philippine government. So in the context of whether the Philippines can attract American construction companies to come into the Philippines, my first part of my question is for American construction companies operating in the Philippines today in terms of importing materials and equipment, which I'm sure they have to do, how extensive do they have to deal with the Philippines customs bureau? And secondly, is a continued problem with the customs bureau a continued disincentive for American construction firms in terms of the attractiveness of the Philippines and also does the progress that many of you have cited today on the corruption issue in the Philippines include progress in reforming the customs bureau, which you could use in advertising and trying to attract American construction companies and just a footnote that this customs problem is not unique to the Philippines. I know in Indonesia, for example, has gone through with this, but it has been, I know, a big problem. And I think in terms of the subject of what you all have been talking about today, it may be a particular problem. Like customs bureau. Thank you. I should have been asked when Secretary Porosima was here, but I'll take a crack at it. Well, and definitely the reforms in the bureau of customs very much part of the good news that we are offering to the world. But we are also, the government is also concerned of the fact that there's a lot of things that need to be done at the bureau of customs, but the reforms continue and they've instituted several mechanisms which to simplify processes and make it easier for importers to deal with the bureau of customs. But that's the extent that I could say about that matter though. Maybe Bob could be able to answer the other part of the question. Yeah, let me just offer it this way. First of all, the construction, if you will, that we're doing today in the Philippines would be in our fab yard and that's a jointly owned fab yard. But I guess really just two comments. One, I've not heard this being an issue for us in terms of either the import of equipment or the ultimate export of fabricated modules. Second, I have to tell you the one thing that the US government has done for American business over the years that is hugely powerful is the Foreign Corrupt Practices Act. I think the world has figured out that it's not even worth the time to ask anymore. So I'd like to personally thank Congress and whatever administration signed that into law. And then last, maybe a comment more specifically on infrastructure, almost, or I'll say differently, with limited exceptions of very specialized pieces of equipment control systems or something like that, a lot of the basic materials of construction are gonna be sourced locally. Labor's gonna be sourced locally. So infrastructure maybe is contrasted with a different manufacturing process. I think it's gonna have less challenges, not that there'll be zero, but less challenges than maybe some of what was experienced before. But like I said, this has not risen to the level of somebody saying we're not getting done what we need to get done there because of issues over at the customs bureau. Because of time, I think we have time for just one more question here before we wrap things up. Yes, ma'am. Thank you so very much. Yes, considering the potential and progress that this panel has made quite very effectively in portraying the Philippines as making a headway towards membership in that Trans-Pacific Partnership or TPP program, which I understand would cover something like about 40% global trade all together at the present time that there are 12 members and if the Philippines will be probably the 13th member. Bottom line is that would any in the panel or all of you or some of you could sort of speculate seriously as to what would be the timeframe in the Philippines so far, so far as number of years that the Philippines would succeed in becoming a member of TPP? Thank you. Yeah. I wish any of us knew when the first round of the negotiations will conclude the news from Congress on TPA seems relatively positive but it'll, and hopefully we've got a calendar that will have those negotiations conclude wrap up this year and put it and have it ratified and entered. That's potentially an optimistic assessment. I think then there's a whole lot of variables in terms of what happens for the second round as several have noted, there are a variety of elections that are coming up in the United States, the Philippines and elsewhere that are gonna affect Asia Pacific relations and the chances for where TPP goes forward. I'm generally an optimist and as I'm a glass half full with water pouring into the glass on the Philippines I'm even more so on TPP and I also think it's incredibly important as well for the region and elsewhere. It's been a terrific discussion. Everyone please.