Agenda & Issues

General Economic Framework and Philosophy
of the Estrada Administration
By Dr. Felipe M. Medalla
Secretary of Socio Economic Planning
National Economic and Development Authority

Excerpts from: What To Expect From an Erap Presidency
(National Economic and Development Authority briefing held 11 July 1998 at
Manila Galleria Suites, Pasig City. Delivered by Assistant Director-General Ofelia Templo
in behalf of Director-General Felipe Medalla)

The most important goal of the Estrada administration's economic program is sustained, broad-based, and non-inflationary economic growth which reduces absolute poverty through efficient, honest and fair taxation, judicious use of public funds, and the generation of sufficient job and livelihood opportunities. In short, the basic objective is sustained and equitable economic growth or "kaunlaran para sa lahat."

To achieve growth with equity, the Estrada administration will:

1. Establish clear, simple, transparent, consistent and uniformly-applied set of rules which govern the private sector and its interaction with government.

2. Maintain a clear delineation of private sector and public sector roles or functions, with the private sector performing the business and entrepreneurial functions and the public sector playing a supportive but vital role. The business of business is business; and the business of government is to provide efficiently and effectively the climate and the services that are needed, so that business can become more productive and competitive, and capable of creating wealth and employment opportunities for everyone who wants to work. (And we know that our countrymen want to work. Millions of them take great risks by going abroad to find gainful employment). The most important role of government is the provision of essential public goods and services such as the maintenance of peace and order, the protection of the environment, and the provision of infrastructure and basic education and health services.

3. Promote a competitive environment for Filipino firms both at home and in relation to the rest of the world. Firms and businesses will survive and grow because they are efficient and competitive, and not because they are protected from foreign competition or are the favorites of some government officials. (We must learn from past experience, however, that an important key to maintaining our global competitiveness is the avoidance of excessive and unsustainable foreign borrowing that result in an artificially strong peso which inevitable collapses as soon as foreign funds are no longer easily available.)

4. Adopt policies and implement a public investment plan that will engender a strong rural-based middle class. This class will not only supply food and raw materials to other sectors of our economy. It will purchase services and manufactured goods in towns and cities all over the country, thereby contributing to the decongestion of Metro-Manila and the progress of urban middle class households in regions other than the national capital region.

5. Maintain a sound and stable macroeconomic environment. Policies designed to accelerate growth and reduce poverty will fail of the macroeconomy is unstable and unpredictable. In turn, prudent fiscal and monetary management, a sound and stable financial and banking sector, and adequate foreign exchange reserves are necessry conditions for macroeconomic stability. The Estrada administration will adopt trade, commercial, monetary and fiscal policies which will bring the rate of inflation from the current level of nearly 10 percent to 5 per cent or less and eventually reduce interest rates to levels that are consistent with the goal of rapid economic and employment growth.

However, even if our economy surmounts the regional financial and economic crisis more quickly than expected and our economy takes off during the next 12 to 24 months, it will take a long time before most of our poor countrymen will feel directly the benefits of a vibrant economy. For instance, according to some studies, there would still be around 27 million people below the poverty line in the year 2000 even if our GNP grows at an average annual rate of 6 per cent during the next three or four years (a very high growth scenario, given the severity of the regional financial crisis).

Measures must therefore be taken (restructure the budget, improve delivery of rural credit and basic services, rationalize and improve the targeting of government subsidies, etc.) to alleviate and reduce overly directly. The Estrada administration will forcefully carry out its responsibility to protect, uplift and empower the poor. This must be done, not just because improving equity sustains economic growth and stability, but because promoting equity and reducing the incidence of poverty are themselves the primary ethical basis of the modern nation state.

The Estrada administration is of course fully aware that myopic and ineffective anti-poverty programs that waste resources and imperil fiscal balance are themselves anti-poor in the long run. But there are ways of improving significantly the welfare of the poor that are consistent with fiscal discipline. Any such plan will of course give the highest priority to extending assistance to the poorest of the poor (e.g. expand and strengthen the comprehensive and integrated delivery of social services to the poorest barangays), place a strong emphasis on people's empowerment and the development of self-reliant communities, and involve the private sector and civil society in the design, delivery and monitoring of anti-poverty programs.

In summary, the Estrada administration will be unbending in its commitment to the free market but its dedication to the poor and the weak is unwavering. The Estrada administration also believes that it is possible to design an economic program that is both market-friendly and pro-poor. However, given the time constraints, we cannot discuss in detail the concrete policies that will help achieve these objectives (e.g. on trade liberalization, privatization, deregulation, agricultural modernization, banking and financial sector reforms, infrastructure program and tax and public expenditure reforms, specific programs to help the poor, etc.)

The underlying requirement or starting point for all of the above is of course a program that will enable our economy to navigate its way through the regional financial crisis. Such a navigation plan must at the very least directly solve the financial and economic problems that have been triggered or exposed by the crisis and take advantage of opportunities that may be uniquely accessible to the Philippines, by virtue of the fact that our neighbors have been devastated by the crisis.

With your help, our country will enjoy economic growth with equity or "kaunlaran para sa lahat." Needless to say, we also hope that this is just one of the many times that we will meet to find creative solutions to our nation's problems.

Thank you very much and good morning.