This is the 37th Philippine Business Conference and Expo under the auspices of the chamber.  This means that you have been meeting with some regularity to assess the prospects of business year after year.  But this cannot be just like any of your regular business conferences in the past.

            These are most interesting times. We are experiencing the after-effects of a global economic tsunami which has swept across the Atlantic and sunk not just business and financial institutions but entire national economies.

            The end is not yet in sight. Trillions of dollars have already been spent to bail out firms that are too big to be allowed to fail, but there seems to be no sign the crisis will be ending soon.

            In New York, in October 2008, the president of the United Nations general assembly constituted a commission of 18 financial experts headed by the Nobel Prize laureate Joseph E. Stiglitz to conduct an independent study on the crisis and what should be done.

            In France, President Nicolas Sarkozy likewise formed his own commission of 22 experts to measure economic and social progress, also headed by Stiglitz and Amartya Sen, another Nobel Prize laureate in economics.

            Both commissions have completed their work and have published their respective reports.  The first Stiglitz (U.N.) report recommends reforming the international money and financial systems in the wake of the global crisis, while the other (France) report finds the GDP inadequate as a measure of economic performance and social progress, and proposes something else.

            I would encourage our friends in the Chamber, in the Cabinet, Congress, the academe and media to pay special attention to these reports.

            We need to know the whole truth about the causes and ramifications of this crisis, and what the major trans-Atlantic actors are doing, and what price they are prepared to pay, to get out of it.

            Although its immediate impact on our economy may be ascertainable, we need to determine what we stand to gain or lose from their proposed solutions to the problem.

            For just as we stand to absorb a big part of the effects, we could also end up bearing an undue share of the cost of the proposed remedies.

            These are not merely imagined fears.  In the face of crisis, the first rule is self-preservation---survival of the fittest.  To fast track their own recovery, the developed countries could adopt all sorts of beggar-thy-neighbor policies, protectionist measures directed against the developing countries.

            For example, they could devalue their currency to favor their exports and depress the value of ours, or impose quotas, tariffs and other measures in restraint on trade. They could reduce the outward flow of investments and borrowing to the developing countries, even at inflated risk premiums. At the same time, they could accelerate the repatriation of capital from the developing countries.

            I am not suggesting all these will happen.  But they could. We need to be extra alert not only in protecting, but above all in advancing our own interests.  Nobody else will do it for us.

            We need to make sure we get compensated for any distortion that may result from the bailouts, guarantees, and expansionary fiscal policies of the major economies, which could only widen the inequalities created by what the Stiglitz report calls “the long-standing asymmetries in the functioning of the global financial markets.”

            Hand in hand, we must now see to it the partnership between government, the private sector and civil society is genuine, and that our political, economic and social system really works.  We need to define this partnership by our common understanding of what is needed to make things work, even before we embark upon a specific PPP project.

            Around the world today, the dominant forecast is that China will continue its two-digit growth for next so many years.  The Goldmann Sachs Forecast suggest that by the middle of this century the world’s leading economies will be China, India, United States and Japan---in that order.

            If we are to grow our economy anywhere near China’s  rate,  and be able to ride on the crest of the shift of  power from the Atlantic to the Pacific, we should now develop a clear vision of what we want to achieve,  and the will and the skills needed to achieve it.  We should be able to compete in what Michael Spence, the Nobel Prize winning economist, calls a “multi-speed world.”

            We should be able to meet the highest standards of producing whatever we decide to produce, of engaging in business, and governance. But above all, we should learn to innovate.  For innovation alone can make you produce more---or more valuable---output, with the same inputs of capital, labor, raw materials, and energy, says Spence.

            Normally, productivity rises because of an increase in capital or in market incentives. But you don’t have to do any of this, if you innovate. Spence defines innovation as the new knowledge that is applied to add value by creating new products and new production techniques, or by lowering costs. It could take us to the 21st century and offer us our rightful place.

            Our political leaders, entrepreneurs and professionals, no less than our scientists, artists and intellectuals, should be at the forefront of an earnest effort to create among our people a unified awareness of our past trials as a nation and where we are going.

            This we must do. For we can only connect the dots by looking back, says Steve Jobs, and we can only prevail against the enmities of this world by looking at the stars, says Cyrano De Bergerac.

            Now Spence says the future belongs to us if we innovate.  I ask the Chamber to seize this message.

            That said, this business conference should now set in motion the process of looking at greater depth certain pressing issues that have emerged during the crisis.  There are some big questions that must be answered.

            The first of these has to do with the way we look at the market. Given the fact that the failure of regulators to regulate the runaway financial derivatives was the main reason for the meltdown, we need to revisit the old dogma that unfettered markets are self-correcting and efficient.  They are simply not.

            Can the old mantra about privatization, deregulation and liberalization still be defended?

Should our old reliance on the market’s invisible hand be superseded now by the visible hand of the state?

            Or is the answer a mix, where the state’s visible hand guides the market?

            This seems to describe China’s style, Singapore’s too, and it certainly has worked.  Does Philippine big business think we should adopt it, too?

            In the celebrated Reith Lecture Series on BBC three years ago, the distinguished Harvard Professor Michael Sandel said the market triumphalism that most characterized the US and British economies during the Reagan and Thatcher years and the Clinton and Blair years has now given way to a new market skepticism where almost everybody agrees that we need not only to improve regulation but above all to rethink the role of markets in achieving the public good.

            This goes far beyond the scheme envisioned in the public private partnership (PPP).  In the PPP, the state allows the private sector to undertake government projects.  In the proposed readjusted relationship between the market and the state, nothing the private sector does which affects the public should be completely free from state oversight.

            This should make it easier for government to identify the major industries and projects that should form the core of its development, and for the private sector to focus its investments in those core industries and projects.  The country would now be walking on its two legs.

            Perhaps we could begin to enforce our building code, traffic rules and shipping laws better. Perhaps we could begin replanning our cities, towns and countryside, instead of leaving everything to the real estate industry and private developers, which has been the case for years.

            As  Housing and Urban Development Coordinating Council (HUDCC) chair, charged with the duty of providing 3.6 million homes for our people in the next ten years, and of introducing proper zoning and land use throughout the country, I have to point out that the inexplicable absence of a National Land Use and Zoning Law, and a strategic urban development plan for Metro Manila and other highly urbanized cities has stunted our country’s modernization  and pushed us behind nearly all our Asian neighbors by years and years.

            If we are going to join the competition of the 21st century, that drift must be arrested,   and ultimately reversed.

            We cannot regain our people’s pride and self-confidence unless we first get rid of the squalor around them and rebuild their physical environment.

            Squalor is not the only problem.  Large tracts of government-owned land are being converted for commercial and residential purposes in areas where we should more wisely be developing parks and other facilities to enable adjoining communities to live their “public life.”

            The result is an overconcentration of high-density high-rise buildings, with no adequate provisions for water, clean air, sewerage, green or open space, or road space for the cars of all the car owners residing in the high-rise buildings.

            The final introduction of zoning and proper land use is one project I would encourage the Chamber to support. They could enter into a strong partnership with local government.

            Development-oriented LGUs are looking for partners for their most important projects.  And many of them have no problems with financing.  If they are able to collect their uncollected internal revenue allotments by next year, they stand to gain a total of P500 billion, according to one estimate coming from Congress.  I am sure they would want to invest in their own development.  This is where they could use reputable partners.

            These are not the only possibilities open for partnership.  I would surmise that if the national government could be persuaded to utilize its large gross international reserves of $75 billion for its development projects, the PPP could open up in various areas, giving a big boost to business activity nationwide.

            This could also shift the source of public borrowing from foreign financial institutions to the central bank, which could save the government from the rise and fall of the U.S. dollar.

            I will now conclude before I begin to tax your patience.  I will do so by going back to where I started, and recapitulating the points I have made.

            We live in interesting times, as the Chinese wise men like to put it.  Everything we have learned about running a business and turning a profit has been put to the test by the crisis.

            Yet businessmen must continue to run their businesses. They must continue to compete, and they must continue to turn a profit.

            How can they do this?

            I believe we must first reform the business environment.  Make it friendly to business---embarrassingly friendly, if you like. Once and for all, we must eradicate government red tape as we must eradicate corruption.

            This has been said so many times before by so many administrations in various ways.  But let this be the last time any administration will ever have to say it. After this, red tape should be gone.

            And let us finally reduce the cost of doing business.  The matter of bringing down energy, transport and related costs, and of providing better infrastructure may need a timeline, but no businessman should need to know anybody in high office to be able to land a contract on its merit or go into business that provides genuine service and make money in it.

            Businessmen must not be made to speculate whether or not a rule or policy that is in effect today would still be the same tomorrow. Transparency, consistency, predictability, longevity---these must govern all such rules and policies.

            Government must ensure a level playing field for all players, but businessmen must win the competition by innovation, entrepreneurial skill and fair play.  And the whole country, not just big business, must win.

            Thank you and good morning.