Vol. XIX No. 5
What's Inside
4
6
9
10
11
14
15
Does foreign entry in the
domestic banking sector
promote efficiency?
Macroeconomic policy
plays a major role in
financial liberalization
PIDS Research: Looking
through old and new
policy frontiers
PIDS Board Member shares
some words of wisdom
PIDS at 24
Through the eyes of
aspiring photographers
PIDS employees unite
September - October 2001
ISSN 0115-9097
From the local banks'
perspective: Feeling
the liberalization effects*
Rene B. Hapitan**
P
romoting a competitive environment is a natural course of action to
take for the Philippine economy after two decades of economic
reforms.1 The competition process complements the reforms pre-
viously implemented and is expected to maximize consumer welfare and allow
the promotion of efficient market behavior.
Editor's Notes
This year, PIDS celebrated its 24th founding anniversay with its silver anniversary close
at hand. Its theme, "Strengthening the Infrastructure for Research and Networking" is a
continuation of last year's focus on providing
the necessary infrastructure for doing research,
an area where PIDS plays a leadership role.
The weeklong celebration was highlighted by a
seminar on the "Impacts, Risks and Opportunities of Financial Liberalization and Integration:
A Macro-Micro Analysis." The three research
papers presented during the seminar are the
main features in this issue of the Development
Research News. The papers looked
into the impacts of the financial +16
In the banking sector, competition was instituted in 1994 with the implementation of the Foreign Bank Liberalization Act (Republic Act No. 7721). It was
envisioned that the entry of foreign banks will create:
…a dynamic banking and financial system that will stimulate economic growth, attract foreign investments, provide a wider variety of financial services to Philippine enterprises,
households and individuals, strengthen linkages with global financial centers, enhance the
country’s competitiveness in the international markets and serve as a channel for the flow of
funds and investments into the economy to promote industrialization.2
With the liberalization of the Philippine banking and financial system, a more competitive environment is thus created and greater foreign
+2
* A condensed version of the author’s paper entitled “Reactions to the Entry of Foreign Banks in the Philippines:
A Critical Study of Selected Local Banks” with the Philippine APEC Study Center Network (PASCN).
** Assistant Professor, Financial Management Department, De La Salle University, Manila.
1
In terms of deregulation, privatization and the removal of unreasonable trade barriers (Rafaelita Aldaba.
2001. Competition policy: Why does it matter? Part II. Economic Issue of the Day, Volume II Number 2. Makati
City: PIDS.).
2
RA 7721, Section 1.
DEVELOPMENT RESEARCH NEWS
participation is encouraged. Consequently, increased ownership in domestic banks by foreign banks and the
entry of new foreign bank branches are
expected.
Under RA 7721, 10 foreign banks
were authorized by the Monetary Board
to operate in the Philippines through
any—but only one—of the following
modes of entry:
* By acquiring, purchasing or
owning up to 60 percent of the voting
stock of an existing bank;
* By investing up to 60 percent
of the voting stock of a new banking subsidiary incorporated under Philippine
laws; or
* By establishing branches with
full banking authority.
September - October 2001
2
the whole financial system, with the participation of new players, on society. In
terms of deposits, foreign banks have
grown three times in market share and
six times in absolute pesos, taking substantial market share from competing
local and government banks (Table 1).
In the same manner, in terms of loans,
foreign banks seem unaffected by the
currency crisis while lending activities
of local and government banks slowed
down after being hit by the financial crisis.
Fisher,3 in his study, noted, for instance, that taxpayers generally have to
bear the cost of the government’s strategy of shifting to a liberalized regime
and put forward this question: Is the Philippines starting on the wrong foot in terms of
financial liberalization through the entry of
foreign banks?
own 54 percent of the total assets, 65
percent of the total deposits and 62
percent of the total capital of the entire
Philippine banking industry as of December 2000.
The survey focused on these
banks’ reactions to the entry of their foreign counterparts. Interviews with these
banks’ personnel were likewise done to
validate the initial responses.
According to the survey results, local banks considered the environment
prior to the entry of foreign banks to be
very competitive and then reevaluated it
to be highly competitive with the entry of
the foreign banks.
There was more competition in
the wholesale banking operations compared to retail banking, development
banking and other areas of operations,
particularly since foreign banks initially
catered to the larger and higher margin accounts that comprised the wholesale banking.
Survey Says…
To understand what effects the
By July 1999 and during an interim bout with the East Asian financial entry of foreign banks had and how locrisis, nine of the 10
new foreign banks that
were granted licenses
continued to operate Table 1. Philippine Commercial Banking Industry Market Share Summary: Total Deposits
in the Philippines.
Year
Domestic Banks
Foreign Banks
Government Banks
One bank, the Development Bank of
million pesos % to total
million pesos % to total
million pesos
% to total
Singapore (DBS),
opted to acquire an established local bank
1995
575,094
69.3
43,311
5.2
211,688
25.5
(Bank of Southeast
1996
834,512
73.3
55,874
4.9
247,252
21.7
Asia) under existing
Philippine laws, thus
1997
1,073,395
72.7
110,379
7.5
292,551
19.8
making the DBS exist1998
1,141,577
72.0
149,611
9.4
293,175
18.6
ing outside of RA 7721.
1999
1,238,614
70.0
199,202
11.3
330,075
18.7
2000
1,124,529
66.8
260,796
The entry of
these banks, however,
are not without any ac- Source: Central Bank Factbook, various years
companying difficulty.
There remains a bigger question on the cal banks view such entry, a survey was
impact of the stability—or lack of it—of conducted among local banks in the
Philippines. The survey consisted of 10
local banks, broken down into six universal/commercial banks, two govern3
ment specialized banks and two savings/
Fisher, K.P. 1997. Financial Liberalization to bank
failure: Starting on the wrong foot.
thrift banks. All in all, the respondents
15.5
297,315
17.7
On the other hand, in terms of
specific products and/or services, foreign exchange transactions, lending/
loan services and investment banking
were affected on a highly significant
level. Moreover, deposits, money market placement, trust services and invest-
DEVELOPMENT RESEARCH NEWS
3
September - October 2001
factory in liberalizing the economy and
the banking sector. According to them,
it will be more desirable in the future if
there were more banks with more
branches, increase in the capitalization
requirements, and reciprocity arrangements with the foreign banks’ countries
of origin. However, there was a mixed
reaction as to whether the local banks
would favor a merger with a foreign
bank.
Upon closer look…
The survey results point to an increased state of competition in the banking industry particularly in the wholesale banking where foreign banks obtained a sizeable market share from domestic and government banks. Part of
the growth can be attributed to the increased activities of the established foreign banks such as Citibank, Hongkong
Deposits in local banks were significantly affected with the entry of foreign banks as a result of the competition. But local and Shanghai Banking Corporation
banks confronted the challenge by implementing a number of strategies, which include moving to other markets or market Ltd. (HSBC) and Standard Chartered
Bank although other foreign banks are
niches, reviewing their pricing, and reengineering all or some bank processes.
not far behind. In fact, new entrants such
as the ING Bank of Netherlands, Development Bank of Singapore (DBS), ANZ
ment in fixed assets were also signifi- in the wholesale side of banking activi- Banking Group Ltd. of Australia and the
cantly affected. Invetsment in fixed as- ties although local banks downplayed Deutsche Bank AG of Germany, posted
sets was on the low side because of the such losses and said that more competi- extremely large increases in total deposlimited number of branches that new tion was felt from competing local banks its. Over the last five years, foreign banks
exhibited faster growth in terms of total
foreign banks are allowed under RA than foreign banks.
loan portfolio and total deposits rela7721 while trust services were also exIn response to all these, local tive to the entire banking industry.
pected to be low because none of the
new foreign banks were granted licenses banks confronted the challenge of comLocal banks posted a loss of popeting with foreign banks by impleto undertake these operations.
tential
revenues as a result of the conmenting strategies. Almost all the recentration
of foreign banks on wholeOther qualitative factors that were spondent local banks resorted to investsale
banking.
An increase in the foreign
affected by the entry of foreign banks ing in new technology or jumped into
banks’
activity
on deposits and loans,
were the sourcing of funds, which in- the e-commerce bandwagon. Some immeanwhile,
had
a positive effect on
cludes deposits, hiring of employees mediate responses included moving to
these
foreign
banks’
return on equity .
and computerization/changes in infor- other markets or market niches, reviewCoupled
with
limited
capital infumation technology. Banks admitted that ing their pricing or interest rates, and
sions—since
they
are
excluded
from
there was difficulty in hiring and retain- reengineering all or some bank procapitalization
requirements—foreign
ing productive employees during the cesses. It is worth noting that local banks
first few months of the foreign banks’ implemented marketing strategies, lend- banks enjoy high rates of returns.
ing support to their almost unanimous
start of operations.
It is interesting to note that the
view that the entry of foreign banks pose
entry
of foreign banks neither encourOn top of this, local banks re- more of a marketing challenge.
aged
the
promotion of a variety of finanvealed an estimated potential revenue
On
the
whole,
local
banks
agreed
cial
services
and incremental inlosses of P500 million from the entry of
that
the
entry
of
foreign
banks
was
satistermediation
activities nor iniforeign banks as a result of competition
+8
DEVELOPMENT RESEARCH NEWS
4
September - October 2001
Does foreign entry in the domestic banking
sector promote efficiency?
F
oreign competition induces
domestic banks to be more efficient. It narrows interest rate
spreads and also lowers the operating
expenses of banks. Despite the decline
in interest rate spreads, bank profits are
not negatively affected because operating expenses decline resulting in domestic banks offering greater efficiency
and better service.
Dr. Angelo Unite, Senior Fellow
at the De La Salle University (DLSU)
Angelo King Institute for Economic and
Business Studies and DLSU Professor,
and Dr. Michael J. Sullivan, Visiting Fellow at the DLSU Angelo King Institute
for Economic and Business Studies and
Associate Professor at the University of
Nevada in Las Vegas, gave these conclusions in their paper entitled “The Impact of Liberalization of Foreign Bank
Entry in the Philippine Domestic Banking Market.” Unite presented their findings on 27 September 2001 at a research
seminar on financial liberalization
jointly organized by the Philippine
APEC Study Center Network (PASCN)
and the Philippine Institute for Development Studies (PIDS) in conjunction
with the 24th founding anniversary of
PIDS. Unite and Sullivan’s study is part
of the PASCN-funded research project
“Impacts, Risks and Opportunities of
Financial Liberalization and Integration: A Micro-Macro Analysis.”
Interest rate spreads
According to Unite and Sullivan,
foreign bank presence affects the operation of domestic banks by narrowing
down interest rate spreads. However,
they qualified that this narrowing is dependent on the level of group ownership of the domestic bank. Interest rate
spreads are found to decline with increases in foreign presence only when
group ownership is high. They interpreted this finding as evidence in favor
of the hypothesis that foreign competition reduces interest rate spreads as
both domestic and foreign banks vie for
the same business.
In addition, the authors noted that
“banks that are affiliated to family corporate groups are found to have greater
interest spreads, suggesting that affiliated banks are able to extract wealth from
group member firms.” “We also find that
relatively larger banks have lower
spreads. It could be that these larger
banks offer more favorable terms resulting in more business. Interestingly, we
also find that operating expenses are
inversely related to interest rate
spreads. Perhaps, better-managed banks
have relatively higher spreads and lower
expenses. Alternatively, banks that are
able to earn relatively higher interest
rate spreads are not inclined to pursue
non-interest income, and operating
expenses are lower for traditional income sources,” the authors added.
Profits
As opposed to the findings of
other authors, the study did not find any
evidence of a decline in profitability in
terms of accounting profits with the
entry of foreign banks. This implies that
the observed decline in interest rate
spreads does not diminish profitability.
The authors surmised that this could
be due to one of the following reasons:
(1) interest income and interest expense may make up only a small portion of total profits; (2) non-interest
sources of income may increase to offset any decline in interest income; and
(3) operating expense may decline to
offset any decline in profits from a narrowing of interest rate spreads.
As expected, group-affiliated
banks are found to be more profitable
as these family corporate groups include many of the largest and most profitable companies. This finding is consistent with the higher interest rate
spreads associated with group-affiliated
banks.
Non-interest income
In the study, Unite and Sullivan
also found that non-interest income of
domestic banks declines with foreign
bank penetration and increases with
bank asset concentration. That non-interest income of domestic banks decline with increased foreign presence
suggests that foreign banks take business away from domestic banks in nontraditional sources. However, the finding that increases in bank asset concentration raise non-interest income possibly indicates that the foreign banks compete in non-traditional areas such as investment banking, taking business away
from mid-size domestic banks but not
from the largest domestic banks.
Operating expenses
Consistent with findings of other
authors, the study found that operating
expenses decline with foreign bank
DEVELOPMENT RESEARCH NEWS
entry and penetration, suggesting that
foreign presence in the banking sector
results in greater efficiency. These
gains, however, are lower for banks that
have high levels of group-affiliate ownership.
“This may
suggest that groupaffiliated banks are
motivated by factors
other than efficiency and profits
or that to maintain
overall group profits, there must be
some sacrifice of
bank efficiency.
However, we find
that the greater efficiency induced by
an increased foreign presence is
somewhat diminished when levels of
insider ownership
are high. Operating expenses are
also found to be
greater with higher
bank asset concentration, suggesting
that large dominant
banks can easily
pass expenses to
their customers
than smaller banks can.”
September - October 2001
5
Moreover, because domestic
group-affiliated banks are better able to
cope with the competitive shock
brought about by foreign presence in
the domestic market as the study shows,
and greater reliance on market mechanism. Initially, screening of new foreign
banks should be made transparent and
based on objective criteria.
List of Foreign Bank Branches and Subsidiaries
(As of 31 December 2000)
Citibank, N. A.
Standard Chartered Bank
Hongkong and Shanghai Banking Corp.
Bank of America NT and SA
The Bank of Tokyo-Mitsubishi, Ltd.
Korea Exchange Bank
The Fuji Bank, Ltd.
The International Commercial Bank of China
ING Barings
Deutsche Bank AG
Bangkok Public Company, Ltd.
The Chase Manhattan Bank (formerly Chemical Bank)
Chinatrust (Phils.) Commercial Bank Corp.
ANZ Banking Group, Ltd.
Banco Santander Philippines, Inc.
Dao Heng Bak, Inc.
Maybank Philippines, Inc.
DBS Bank Philippines, Inc.
ABN-AMRO Savings Bank Corp.
United Overseas Bank Philippines
HSBC Savings Bank Phils., Inc.
Managing bank liberalization
While RA 7721 has liberalized foreign bank entry, foreign bank participation in the domestic banking market is
still limited. Under current laws, foreign
ownership of banks is generally limited
to 60 percent. With the results of the
study showing that foreign participation
is beneficial in terms of increased efficiency of domestic banks, the authors
noted that a policy of further opening
up the domestic commercial banking
market to foreign presence could be
worth pursuing.
an important issue to address, according to Unite and Sullivan, is how
nongroup-affiliated banks can develop
similar coping mechanisms. Thus, there
is a need to explore at the microeconomic level how exactly the group-affiliated banks cope with competitive
shocks and reap the net benefits of internal markets.
To mitigate the adjustment cost of
further liberalization of the banking sector, the authors recommended that foreign entry and participation should be
done in conjunction with built-in safeguards such as credible enforcement of
prudential regulations and supervision,
“Prudential regulations
and supervision
are essential
means of economic propriety
to temper the
negative aspects
of bank governance based on
affinity. Ownership of banks by
a dominant family group creates
conflict of interest,” the authors
said.
In addition to the mandate of the Central Bank to increase transparency and information disclosure, the authors
recommended
that ownership
information
must be detailed
enough for regulators to discern precisely who the owners of banks are. The
ownership data should include the
beneficial owner, relatives and associates. Moreover, both the ownership information and the borrower data should
be publicly disclosed for both private
and publicly traded corporations.
The authors also suggested that
the government should rely less on explicit and implicit guarantees via deposit insurance schemes to reduce
moral hazard problems associated with
group-affiliated banks and put pressure
on domestic banks to improve
+7
their productivity and service.
DEVELOPMENT RESEARCH NEWS
6
September - October 2001
Macroeconomic policy plays a major role
in financial liberalization
W
ith the entry of more foreign banks as a result of
RA 7721, a more competitive banking industry was envisioned for
the Philippines. In theory, allowing new
players to enter would deconcentrate
the banking sector and bank spreads
would consequently narrow.
However, a study by Dr. George N.
Manzano, APEC Study Center Director
of the University of Asia and the Pacific,
and Mr. Emilio S. Neri, Jr., Financial Analyst at Abacus Securities entitled "Foreign Bank Entry, Bank Spreads and the
Macroeconomic Policy Stance," funded
by the Philippine APEC Study Center
Network (PASCN) and presented during the 24th founding anniversary of
the Philippine Institute for Development Studies, revealed that relative bank
spreads did not narrow down shortly after the entry of foreign banks. Manzano
and Neri found in their study that the
structure of the banking industry, as
gleaned from the changes in concentration ratios in assets, loans and deposits, did not appear to be significantly altered by the entry of new foreign banks
in the subsequent years after liberalization. After RA 7721 took effect, 10 new
foreign banks entered the Philippines
in 1995 but their share accounted for
only less than 2 percent of the total banking assets. Although the share of the old
and new foreign banks reached a high
20 percent of the total banking assets in
1997, this declined to 16 percent in
2000. Such movements in the concentration ratios in assets of foreign banks
mirror the movements in the concentration ratios in loans and deposits. And
Dr. George N. Manzano and Dr. Angelo A. Unite
contrary to expectations that bank
spreads will decline, high bank spreads
persisted despite the entry of new players. Why is this so?
The missing piece of the
puzzle
While the persistence of high
bank spreads despite the entry of foreign banks can be partially explained
by the weak liberalization measures in
RA 7721 or the lags of the effects of competition, Manzano and Neri pointed to
macroeconomic policy as the important
missing piece of the puzzle. According
to them, the macroeconomic policy mix
that prevailed in 1993 until the Asian
financial crisis of 1997 prevented competitive forces of the bank liberalization
law of 1994 from taking full effect.
"In particular, the policy mix that
prevailed in 1993 to mid-1997 was generally of sterilized foreign exchange intervention to meet both the Central
Bank's tight monetary and foreign exchange targets. Maintenace of both an
International Monetary Fund (IMF)sponsored monetary aggregate targeting program and the consistent pegging
of the exchange rate led to a high interest rate. These combined policies of a
de facto nominal peg of the peso and
high domestic rates (which, by coinci-
DEVELOPMENT RESEARCH NEWS
dence, also had a big role in causing
the currency crisis) had a potent effect
on bank spreads," they explained.
September - October 2001
7
able funds than to compete for pesodenominated deposits of residents.
Effect on deposit rate
Pegging or fixing the level of exchange rate fuels expectations that exchange rate will remain stable in the
future and that funding of bank loans
through foreign currencies is less risky.
Since the interest rates on foreign debt
instruments, e.g., LIBOR*, were typically lower than the marginal cost of raising peso deposits, then it was cheaper
for banks, the authors said, to generate
foreign currency-denominated loan-
Banks therefore were encouraged
to fund a growing share of their assets
through foreign currency-denominated
liabilities. This incentive to engage in
more dollar intermediation tended to
put less pressure on banks to compete
for peso deposits and gave little motivation to bid up the peso deposit rates in
order to generate more deposits. Indirectly, the substitution of the peso with
the dollar as source of bank funds
tended to lower the cost of funds of local banks and led to wider bank spreads.
*LIBOR or London Inter Bank Offered Rate (LIBOR) is
the rate at which banks in London offer Eurodollars in
the placement market. Since different banks may be
offering Eurodollars at different rates, the LIBOR rate
used in pricing a loan is usually the average of the
11:00 A.M. offering rates of top three to five reference banks in the market. (Source: http://
www.bsp.gov.ph)
Effect on lending rate
The 91-day Treasury bill rate affects the lending rate behavior of banks
as it serves as a benchmark for bank
loans. The interest on the T-bill rate typically amounts to the opportunity cost of
bank lending to riskier private entities.
Manzano and Neri found in their study
that lending rates or the return on any
peso-denominated debt instrument
Does foreign entry..from page 5
“Eventually, as a high level of transparency and disclosure becomes an integral part of domestic banking practices, the current banking corporate governance system will be transformed to
that with more formal controls. As a result of increased foreign competition,
the corporate governance structure of
domestic banks will evolve into one
where there is a high level of managerial professionalism, diverse ownership
structure that encourages improved underwriting criteria and sounder banking practices, and reduced relationship
style, making them more effective corporate monitors,” Unite and Sullivan
envision. DRN
yielded very high returns during the
pre-crisis liberalization period. To illustrate, the returns on the 91-day T-bills,
in dollar terms, consistently exceeded
the returns on the LIBOR by as much as
1,000 basis points.
The puzzle unmasked
Macroeconomic policy has masked
the competitive pressure that foreign
banks would otherwise have exerted on
the local banking system. The persistence of high relative spreads following
the entry of foreign banks did not mean
that RA 7721 did not "work." The Philippine experience showed that a policy
of tight monetary and foreign exchange
target from 1994 to 1998 maintained
wider bank spreads rather than narrowed the gap between lending and deposit
rates. Manzano and Neri said that this
experience highlights an important lesson: that in order to have a 'successful'
liberalization program, the necessary
condition of having the appropriate
macroeconomic environment should
be met. DRN
Terminology
Bank asset concentration – asset
concentration in the three largest
banks, measured as a percentage
of total assets of all commercial
banks
Foreign bank penetration – total of
all foreign bank assets as a
percentage of the total assets of all
commercial banks
Foreign entry – the number of
foreign banks as a percentage of
all commercial banks
Foreign ownership - the
percentage of foreign ownership
of the top 20 owners
Group affiliation – affiliation to
domestic family corporate group
Group ownership - the percentage
of group ownership of the top
twenty ownership
Interest rate spread – the difference
between the ratio of interest
income on loans to total loans and
the ratio of interest expense on
total deposits to total deposits
Operating expense – ratio of
overhead expense to total assets
Ownership concentration/insider
ownership – the percentage of
insider, group, and related party
ownership of the top 20 owners
DEVELOPMENT RESEARCH NEWS
From the local banks'..from page 3
tiated the adoption of new technologies
and processes. While the survey may
show that local banks recognized the
need to invest in new technologies, interviews show that there has been little
innovation in terms of developing new
‘foreign’ technologies and processes.
While foreign banks offer the “traditional” products and services, domestic
banks took the lead in e-commerce banking.
8
Policy Recommendations
Three policy implications are doable based on the analyses in the paper
to accelerate the liberalization process
of the Philippine banking industry.
These are:
1. Allowing the new foreign banks
to increase the number of branches
from the six branch-limit stipulated under RA 7721 will enable the new entrants to reach more consumers;
September - October 2001
2. Setting up proper incentives to
encourage reciprocity and complementary arrangements, whereby local banks
can be allowed entry in the country of
origin of the foreign banks, is considered by local banks as a positive step;
and
3. Increasing the capitalization requirements of foreign banks will encourage mergers that can further boost
the liberalization process. DRN
Development Research News
Vol. XIX No. 5
September - October 2001
ISSN 0115-9097
Since local banks prefer to view the
presence of foreign banks as a “marketing problem” rather than a banking
problem, the former implemented core
marketing strategies mostly directed at
their local counterparts.
Editorial Board: Dr. Mario B. Lamberte, President; Dr. Gilberto M. Llanto, Vice-President;
Mr. Mario C. Feranil, Director for Project Services and Development; Ms. Jennifer P.T. Liguton,
Director for Research Information; Ms. Andrea S. Agcaoili, Director for Operations and Finance;
Atty. Roque A. Sorioso, Legal Consultant.
Finally, local banks reengineered
their system as part of good business
strategy rather than as an approach to
competing with foreign banks.
Staff: Jennifer P.T. Liguton, Editor-in-Chief; Liza P. Sonico, Issue Editor; Sheila V. Siar,
Genna J. Estrabon, Jane C. Alcantara, Edwin S. Martin and Gizelle R. Gutierrez, Contributing
Editors; Valentina V. Tolentino and Rossana P. Cleofas, Exchange; Delia S. Romero,
Galicano A. Godes, Necita Z. Aquino and Federico D. Ulzame, Circulation and Subscription;
Liza P. Sonico, Layout and Design.
Concl usion
Hapitan explained that as competencies and economies of scale develop,
foreign banks will target more domestic clients that will create a “crowdingout” effect in the wholesale banking.
This could force the local banks to move
into the middle market and retail banking sector. While the local banks will
match the competition on the wholesale side, the foreign banks will “leapfrog” and move into the middle market
or retail banking. Examples are the case
of HSBC acquiring PCI Savings Bank
from Equitable-PCI last November 2000,
aggressive mall advertisements and appliance sales offered by credit card companies affiliated with local banks. Thus,
the interplay of strategies will result to a
more vibrant Philippine banking system
wherein more markets will be reached
by both local and foreign banks at a faster
rate.
DEVELOPMENT RESEARCH NEWS is a bimonthly publication of the PHILIPPINE
INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights the findings and
recommendations of PIDS research projects and important policy issues discussed
during PIDS seminars.
PIDS is a nonstock, nonprofit government research institution engaged in long-term,
policy-oriented research. This publication is part of the Institute's program to disseminate
information to promote the use of research findings.
The views and opinions expressed here are those of the authors and do not necessarily
reflect those of the Institute. Inquiries regarding any of the studies contained in this
publication, or any of the PIDS papers, as well as suggestions or comments are welcome.
Please address all correspondence and inquiries to:
Research Information Staff
Philippine Institute for Development Studies
Room 304, NEDA sa Makati Building,
106 Amorsolo Street, Legaspi Village, 1229 Makati City, Philippines
Telephone numbers 892-4059 and 893-5705
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DEVELOPMENT RESEARCH NEWS
9
September - October 2001
PIDS Research: Looking through old
and new policy frontiers*
T
hank you very
much for the PIDS
plaque.This would
certainly be one plaque that I
will be very happy to display.
First of all, I am happy to
see a lot of friends and former
colleagues present here tonight. I would like to thank
Dante (Canlas) and Mario
(Lamberte) for the kind words
they have said about me. I
would also like to thank the
members of the Board who really went out of their way to
make sure that the key decisions I made serve the institution (PIDS) well. In particular, Ledi (Cariño) and Emil
(Javier) made sure that the
Board remains a good Board. Dr. Felipe F. Medalla and Dr. Dante B. Canlas
That is why we really tried to
get Willy Padolina. This shows
how many people care that PIDS con- of my way to support PIDS. As I said,
tinues to be strong. I also wish to thank NEDA is the "department of everything."
Gerry (Sicat) for readily accepting the Its constituency is the entire country
job of finding a new PIDS President at and anybody who has a little knowledge
the time when Pons (Intal) left the in economics knows that the larger the
presidency. It must really mean some- constituency is, the greater the free
thing when you look at the people who riding becomes. In that sense, NEDA
do volunteer work for PIDS like Ben needs all the help it can get. The major
(Diokno) who has supported PIDS a lot. disadvantage of NEDA is that it has to
It was never really hard for me to go out see the entire society from everybody’s
point of view. Thus, there is a risk that it
will not have enough lobbying power behind it to win the policy debates. That
* Response Speech delivered during the author's Testimonial Dinner on September 21, 2001.
was why it was extremely important for
** Outgoing Chairman of the PIDS Board of Trustees
me that PIDS does a good job. And if it
and former Secretary of Socio-Economic Planning and
does a good job, then NEDA can use its
Director-General of the National Economic and Develresearch results to win its (NEDA) arguopment Authority (NEDA).
ments. Likewise, it is important
that PIDS should do extension
work especially when it comes to
the legislative body.
To a great extent,
brainpower and ideas could be
as powerful as a strong lobby.
They are helpful in establishing
a policy force.
Now, how does one become
a policy force?
First, I think the most important thing is that the knowledge generation is done properly. Second, that the knowledge
generation is done in great volume so that whatever issue comes
up, you are ready. Third, that the
knowledge is communicated
properly. However, communication may create its own risks. If
you communicate too well and some
powerful people do not like what you
are communicating, then you may end
up having some very powerful people
trying to reduce your budget and making you less effective. That is why the
long run view is to make PIDS more financially independent. Of course, until now, it remains hard to figure out how
we can make PIDS private and financially independent and yet public at the
same time.
Fourth and finally, you must have
a strong set of core people. While it is
true that a strong research organization must be willing to +16
DEVELOPMENT RESEARCH NEWS
September - October 2001
10
PIDS Board Member
shares some words of wisdom
I
n today’s highly competitive
world, the image of a sucessful professional is a soughtafter goal for many. The proliferation
and high marketability of self-help
books that tackle the topic of success is
indicative of man’s continuing thirst for
information on how—and yearning—
to succeed. But who is really a successful professional in this day and age?
What qualities does he possess?
country’s decisionmakers come up with
more effective programs and policies.”
Speaking before the PIDS staff
during the recent 24th Anniversary Loyalty Awards Ceremony, Dr. William G.
Padolina, Deputy Director for Partnerships at the International Rice Research Institute, and a member of the
PIDS Board of Trustees, expressed his
gratitude for the invitation to be the
guest speaker and shared his inspirational message on the topic.
“A successful professional possesses three attributes: he is talented;
he is adaptive; and he is ingenious,”
Padolina said.
Dr. William G. Padolina
Padolina explained further:
“Your talent is useless if you could not
adapt, as you could never be productive in a particular environment. And
you are not going to be productive either even if you are talented and adaptive when you do not want to exercise
your imagination and be ingenious and
imaginative in your approach to solving
problems or analyzing situations.”
of service to the Institute (see related
article on pages 11 to 13). Padolina
congratulated the loyalty awardees for
their long years of service and for becoming a progressively adjusted type of
individuals. He added that he can sense
the very strong degree of kinship and
human relationship within the Institute
judging from their very jovial speeches
and the blissful atmosphere during the
event.
His choice of topic was most relevant for the ceremony held to honor
six PIDS staff for their 15 and 20 years
“I hope that as you look forward to
more years at PIDS, you will continue to
share your talents in helping the
A high-performance workplace, composed of talented,
adaptive and ingenious individuals, is
how he described
PIDS. He commended
the Institute for its valuable contributions in
the area of policy research especially in
guiding various development efforts in the
government. He also
mentioned that the
celebration is a good
time to recognize past
achievements as well as
a good time to look
ahead.
In his parting words, he advised
the staff to be always open to new ideas
and take up opportunities for
nonlateral and creative thinking. Being
open to learning is what helps a person
develop the attribute of agility or the
ability to adjust to new situations and
environment. "Do not stop taking advantage of opportunities to train, to learn
new things or take up new challenges.
Learning should not stop after you earn
a college degree...Do do not expect
learning to take place only in the classroom. It must come from your own initiative because opportunities come in
many forms.” SVS DRN
DEVELOPMENT RESEARCH NEWS
11
The Corporate
September - October 2001
NEWS
The Corporate News section includes brief accounts of inhouse PIDS activities, staff training and workshop results. It is intended to inform both the readers and
PIDS staff members of the various activities participated in by the latter. There are stories that document the staff's effort to improve their knowledge and skills through
trainings. Other stories highlight the personal interaction among the staff in the process of carrying out their individual tasks. Most of the time, the stories focus on serious
matter while on certain occasions, they simply talk about the PIDS staff having fun.
Whatever the topic is about, the objective is to show that each activity is meant to help the staff become better persons and performers in their respective fields
so that they can contribute more to the attainment of the Institute's overall mandate.
PIDS at 24
by
Barbara G. Gualvez*
P
IDS celebrated its week-long 24th
founding anniversary on September 2428, 2001 with the theme "Strengthening the Infrastructure for Research and Networking." This year's celebration was purposely
subdued in preparation for the silver anniversary next year but the occasion was no less
significant and the festivities no less jovial.
The opening of the PIDS Photo Contest—a first in PIDS—on September 25 signaled
the start of the three-day celebration. A total of
26 entries were submitted by six PIDS employees who participated in the contest. All the photos depicted the various socioeconomic policy
issues of PIDS research studies and were originally taken by the employees themselves. Seven
winning photos were selected for the 2002 PIDS
Calendar to be given as corporate gift to PIDS'
friends and patrons.
The thanksgiving ceremony was held on
September 26 with a mass offering celebrated
by Fr. Alton Fernandez of the Salesian Order of
Don Bosco. The PIDS Choir 2001, formed
months in advance to select and rehearse the
hymns for the mass, led in the singing. A short
*
Information Officer, Philippine APEC Study Center
Network (PASCN) Secretariat.
programme followed with the choir leading in
the singing of the opening song I Offer My Life
followed by the ecumenical thanksgiving prayers
by Ms. Jessaine C. Sugui, Jenny D. Balboa,
Genna E. Manaog and Merle G. Galvan. All the
staff joined in the closing song Magpasalamat
Kayo sa Panginoon.
The annual Loyalty Awards ceremony,
the highlight of the anniversary celebration, followed. PIDS President Dr. Mario B. Lamberte,
in his opening remarks, expressed hope that
the PIDS will continue to fulfill its role as an organization that manufactures a lot of keys—keys
that could unlock many doors to more opportunities for development. The Institute, through
policy research, has been contributing in the
production and enhancement of skills for the
past 24 years, and in view of this, he hopes that
PIDS will be as productive as ever in unlocking
many more doors for national development in
the succeeding years.
There are five loyalty awardees for 15
years in service and one for 20 years for this
year. The 15-year awardees are Ms. Emma P.
Cinco, Mr. Manuel C. Mores, Ms. Susan I.
Pizarro, Mr. Jesus Arthur O. Salazar and Dr.
Josef T. Yap. The lone 20-year awardee is Dr.
Erlinda M. Medalla. Ms. Sheila V. Siar of the
Publications and Circulation Division, one of the
event's masters of ceremonies (the other one is
HRD Officer Edmund K. Labuguen), stressed
that the award for loyalty does not only reflect
length of service but more importantly, dependability, reliability and devotion to the organization that one is serving. Thus, the award for
loyalty takes on a more profound meaning and
greater value for the awardees and the Institute.
A secretary to Dr. Aniceto C. Orbeta, Jr.
and Dr. Celia M. Reyes, both PIDS senior research fellows, Ms. Cinco started as a typist/
stenographer in 1978 and worked for various
research fellows during the course of her service to PIDS. She was one of three PIDS employees who were given the fossil-engraved
PIDS Pioneer Award in 1998 as one of the
founding staff of the Institute during its formative years. Mr. Mores has been the driver of Dr.
Lamberte for many years. He started driving
private vehicles, then worked in a trucking company and as a personal driver to the Mayor of
Mati, Davao Oriental before coming to work for
PIDS. Mang Maning (as he is fondly called) was
straightforward in accepting his plaque and simply declared his gratitude to the Almighty and
the PIDS for the opportunity to work for the
Institute. Meanwhile, Ms. Pizarro, the long-time
secretary and research assistant of Dr.
Medalla, thanked the PIDS manage- +12
DEVELOPMENT RESEARCH NEWS
12
September - October 2001
This year's guest of honor at the Loyalty
Awards was none other than Dr. William G.
Padolina, Deputy Director for Partnerships of
the International Rice Research Institute (IRRI)
and PIDS Board of Trustees member. He congratulated PIDS for reaching 24 years of service to the country and was most impressed by
the camaraderie manifested by the staff (see
page 10 for his speech).
Awards and gifts were then given to the
members of the PIDS women's and men's basketball and volleyball teams which won first place
in the women's basketball, second place in the
women's volleyball and third place in the men's
volleyball games, respectively, during the NEDA
Central Office Sportsfest 2001 held last August.
PIDS loyalty awardees. Top (l-r): Dr. Erlinda M. Medalla,
Dr. Josef T. Yap; Middle (l-r) Mr. Jesus Arthur O. Salazar,
Ms. Emma P. Cinco, Mr. Manuel C. Mores; Bottom: Ms.
Susan I. Pizarro
ment and especially her boss who has supported
her all this time and whose nurturing outlook
made it possible for their professional relationship as well as personal friendship to endure
throughout the years. Mr. Arthur Salazar, or simply Budi, also thanked the Lord, his boss Ms.
Andrea S. Agcaoili (Operations and Finance Services [OFS] Director) and other OFS personnel. On behalf of PIDS Senior Research Fellow
Dr. Yap who is on leave, Merle Galvan, his secretary, accepted the award. Jokingly, she said
that the reason why Dr. Yap has been with PIDS
for so long is because of his very patient secretary (herself!). But she took it back quickly and
said that it was Dr. Yap who has been a kind,
jolly and very patient boss and not the other way
around.
Dr. Medalla is a senior research fellow at
PIDS. She earned her Ph.D. in Economics at
the UP School of Economics in 1979. In her
short but heartwarming speech, she expressed
being overwhelmed by the thought that she is
receiving an award for 20 years of service. She
thanked Ms. Pizarro, whom she described as
her "secretary, assistant and friend whose quiet
support has been very soothing and really helpful." She also cited Ms. Rafaelita M. Aldaba, her
long-time research associate, with whom she
gave credit for having helped her produced some
of her better works. She also thanked Ms.
Melalyn D. Cruzado, her research assistant who
has been with her for many years and her colleagues at PIDS whom she considers more as
friends. Certainly, the fact that all of Dr. Medalla's
staff have been with her for so long says a lot
about her as a supervisor and co-worker.
The ceremony perked up with an intermission number from Ms. Nilda A. Lagapa (HRD
Division Chief), Mr. Labuguen, Mr. Ariel G.
Cambri (of OFS) and Ms. Delia S. Romero (of
the Research Information Staff) whose mastery of the cha-cha impressed everyone. Meanwhile, Mr. Gonzalo B. Gorospe (Mang Zaldy for
short) rendered a surprise number with the song
Habang may Buhay with Mr. Mike H. Diza (of
the PASCN) as guitarist.
The much-awaited winners of the PIDS
Photo Contest were awarded their cash prices
of P2,000 per winning entry and a certificate of
recognition. Seven photos from among 26 entrees were chosen by the Federation of Philippine Photographers, Inc. headed by Dr. Amado
A. Castro who spoke about the criteria they used
and also shared some tips on how to take good
photos. The winners were Ms. Eden Villanueva,
Ms. Janet Cuenca and Dr. Myrna Austria (see
related article on page 14).
The event also featured the oath-taking
of the PIDS Employees Association (PIDSEA)
officers headed by Ms. Marie C. Esquivel as
Chairperson and Ms. Josefina Vinluan as ViceChairperson. Ms. Esquivel thanked the PIDS
management for supporting the association and
enjoined the members to constantly support the
activities of the PIDSEA in order to sustain its
operations (see page 16 for related article).
In his closing remarks, Dr. Gilberto M.
Llanto, Vice President of PIDS on leave and
concurrently Deputy Director-General of the
NEDA, said that his work schedule is always full
three weeks in advance because of many competing demands. In fact, he said that there is an
ongoing review meeting in the same building
which he is supposed to attend—but he preferred the PIDS Anniversary and Loyalty Awards
Ceremony instead. Greeting the awardees, Dr.
Llanto articulated the Institute's intention to officially honor and express its gratitude to the loyalty awardees for their invaluable contribution
DEVELOPMENT RESEARCH NEWS
13
September - October 2001
PIDS staff show their dancing prowess during the Loyalty Awards Ceremony to much delight of the audience. From left to right: Ms. Delia S. Romero and Edmund Labuguen, Ms. Nilda
A. Lagapa and Mr. Ariel G. Cambri
and long years of service to the Institute. He
also acknowledged the contribution of the research fellows who have pioneered many policy
studies at PIDS. He also recognized the role of
the middle-level managers and emphatically the
rank-and-file employees, without whose services, PIDS would not have reached its leadership status in the field of policy research.
Dr. Llanto summed it up best when he
said that like the awardees, he has been with
PIDS for a long time and is looking forward to
the loyalty awards ceremony next year when he
will receive his award for 10 years of service.
Like this year's awardees of 20 and 15 years,
Dr. Llanto surmised that it is at PIDS where he
found the continuing opportunity to discover himself and actualize his possibilities. He ended his
closing remarks with the congratulations and
thanks on behalf of NEDA Director-General and
PIDS Board of Trustees Chairman, Dr. Dante
B. Canlas.
Finally, on September 27, a workshop on
"Impacts, Risks and Opportunities of Financial
Liberalization and Integration: A Macro-Micro
Analysis" was held in cooperation with the Phil-
ippine APEC Study Center Network (PASCN)
at the Carlos P. Romulo Hall.
The seminar presented three related
papers—"Reactions to the Entry of Foreign
Banks in the Philippines: A Critical Case Study
of Selected Banks" by Dr. Rene B. Hapitan of
De La Salle University (see cover story), "Foreign Bank Entry, Bank Spreads and the Macroeconomic Policy Stance" by Dr. George N.
Manzano of the University of Asia and the Pacific and Mr. Emilio S. Neri, Jr. of Abacus Securities (see page 6), and "The Impact of the Liberalization of Foreign Bank Entry on the Philippine Domestic Banking Market" by Dr. Angelo
A. Unite and Dr. Michael J. Sullivan (see page
4) of the Angelo King Institute for Economics
and Business Studies, De La Salle University
Manila.
Prominent personalities in various fields attended the workshop, namely, Dr. Victor B.
Valdepeñas of Union Bank of the Philippines; Dr.
Johnny Noe E. Ravalo of the Bankers Association
of the Philippines; Mr. Francisco Dakila of BSP;
Dr. Ponciano S. Intal, Jr. of the Angelo King Institute for Economics Business Studies; PIDS
founder Dr. Gerardo P. Sicat; Dr. Alex C. Escucha
of China Bank; Atty. Gloria G. Funtalan of Silliman
University; Ms. Patricia N. Jacinto of the Development Bank of the Philippines; Ms. Aileen H.
Bugarin of the Department of Foreign Affairs; Mr.
Eufrocinio M. Bernabe, Jr. of the Department of
Finance; Ms. Emy C. Centeno of the Philippine
National Bank; Mr. Anastacio C. A. Dungao, Jr. of
Citystate Savings Bank; and Mr. R. Asaka of Japan Bank for International Cooperation, among
others. DRN
Service
through
policy
research
DEVELOPMENT RESEARCH NEWS
H
ow do you take a photo of poverty? Or
picture the lack of effective housing
programs for the poor? Or illustrate
the low quality of education?
An article may lay down the necessary
information and tickle the senses of its reader
but only photographs have the exceptional quality to capture a thousand emotions and convey
a thousand words. Indeed, there is delight in
taking photographs that capture the world as
one sees it. But there is much pleasure to look
at the photographs of others and see the world
through their eyes.1
14
Through the eyes
of aspiring photographers
Engaging the staff
Photographs are often used to spice up
PIDS print materials and presentations and make
the author’s work more captivating to its readers.
Thus, the Publications Unit of the Research Information Staff (RIS) recommended
to Management to encourage the other employees to take photos of issues being addressed
by PIDS research studies by holding the firstever PIDS photo contest. Dubbed as the 2002
PIDS Calendar Photo Contest, the competition
was aimed at collecting picturesque photos that
show the theme or the substance of the past
and present PIDS studies. As the name suggests, the chosen photos will be featured in the
Institute’s 2002 calendar—one of PIDS’ special
outputs for its forthcoming 25th founding anniversary in September 2002. All PIDS staff—
whether contractual, temporary or permanent
and with the exception of the RIS which coordinated the contest—were invited to participate.
As a rule, the photos should be able to
depict the subject of a completed, ongoing or
pipeline PIDS project or study, or the socioeconomic problem tackled in that study. For a more
positive perspective, the photos could also show
the opposite or the desired scenario that said
project or study hopes to achieve in the long
term.
By 31 August 2001, the organizers received a total of 26 photo entries. The entries
1
Based on Charlotte K. Lowrie’s Reflections on
Photography (2001). (http://wordsandphotos.org)
September - October 2001
Ms. Eden C. Villanueva and Ms. Janet S. Cuenca
focused on a number of socioeconomic issues
such as housing programs, poverty, urbanization, infrastructure, competition policies, fishery and environment.
The professionals as judges
The board of judges had the unenviable task of making sure that only the best
photos are included in the 2002 PIDS Calendar. The board of judges was headed by Dr.
Amado C. Castro (a former professor in economic history at the University of the Philippines, a professional photographer and the
finance chairperson of the Federation of Philippine Photographers Foundation, Inc. or
FPPFI) and included three top photographers
from FPPFI—Mr. Vic Sison, Mr. Lito Beltran
and Mr. Ed Yap—as well as PIDS President
Dr. Mario Lamberte.
Judging of the photos were based on the following criteria:
* Relevance to the
PIDS project or study – the
choice of subject and its relevance to the PIDS project/
study selected by the participant;
* Composition – the
arrangement of the elements of the photo and application of design principles
such as balance/symmetry,
rule of thirds, and framing,
among others;
* Title and explanation of work – the clarity and
potency of the title and explanation;
* Technical – the
photo's color balance, clarity, exposure; and
* Uniqueness and creativity – the ability
of the participant to show familiar subjects photographed in new ways.
The winners
Two participants—Ms. Eden C. Villanueva
and Ms. Janet S. Cuenca from the Research
Department—each got three winning entries. Out
of six entries, three of Ms. Villanueva’s photos on
sustainable environment, urbanization and quality
education got the nod of the judges. Similarly,
three out of Ms. Cuenca’s photos on housing,
poverty and infrastructure were approved for inclusion in the calendar. The seventh winning photo,
which was also recommended by the judges to
be the calendar’s cover photo, was the sole entry
of PIDS Research Fellow Dr. Myrna S. Austria.
Her photo of a sunset in Dumaguete City focused on environmental management. GJE DRN
DEVELOPMENT RESEARCH NEWS
September - October 2001
15
PIDS employees unite
I
ndividual members of an organization
bond together for a common objective.
This commonality is what drives them to
willingly pursue the achievement of their common vision and goal. And it is in their unity and
number that their strength lies in order to survive. Such organizations include trade unions,
labor unions, associations and public sector
unions, among others.
Public sector unionism is still young in the
Philippines. The rights of government employees to self-organization and collective negotiations have been recognized and protected under the 1987 Constitution. Furthermore, Executive Order No. 180 provides the guidelines
on these constitutional rights and grants government employees representation in labor
management committees, work councils and
other forms of workers' participation schemes.
The Civil Service Commission, as the prime
advocate of public employee empowerment,
assists both the management and the public
union in establishing a working environment that
will promote harmonious relation, enhance employees' welfare and productivity, and contribute to the attainment of a responsible public
service.
A number of workers from national government agencies, local government units
(LGUs), state colleges and universities (SCUs),
and government-owned-and-controlled corporations (GOCCs) have already taken advantage
of this opportunity and privilege. Inspired by the
growing number of employees associations in
the public sector and realizing the importance of
collective action to advance employees’ welfare,
the Philippine Institute for Development Studies
(PIDS) recently formed its own employees association—the PIDSEA or PIDS Employees Association.
Beginnings
The creation of an employees association was a result of a meeting between the PIDS
Management Committee (ManCom) and a
number of concerned employees on June 19,
2001 wherein the latter raised some questions
on the reclassification of some staff.
One of the issues raised to the ManCom
was the employees’ desire to set up an association and field a representative to the ManCom
meetings. PIDS President Mario B. Lamberte
welcomed the idea and encouraged the staff to
form such an association. More than two weeks
after, on July 9, the Management invited Civil
Service Director Luisa Agamata to orient the
employees on public sector unionism.
The founding members and officers
The first major activity that the employees carried out was to elect willing volunteers
who shall compose the PIDSEA Executive Committee (ExeCom). The ExeCom had the difficult
task of reviewing the proposed constitution and
by-laws. After several marathon discussions, the
constitution and by-laws were subsequently ratified by 62 founding members out of the 91 total
employees of PIDS on July 17, 2001.
Elected to head the association on its
maiden year was Ms. Marissa C. Esquivel,
Project Development Officer from the Project
and Services Department, as chairperson. Assisting her would be Ms. Josefina D. Vinluan,
secretary of the PIDS Board of Trustees, as
vice-chairperson. Genna E. Manaog was
elected secretary, Necita Z. Aquino as assistant secretary, Eden C. Villanueva as treasurer,
Liza P. Sonico as assistant treasurer, Victoria
D. Perinion as auditor, Ma. Teresa D. Caparas
and Edwin S. Martin as public relations officers
and Janet S. Cuenca as sergeant-at-arms. In
addition to the principal positions, four committees were created to ensure coordination and
efficiency in the transaction of matters related
to the association. These were the Committees on Organizing and Membership headed
by Melalyn S. Cruzado, Grievance and Welfare headed by Sheila V. Siar, Financial Management with Laila Leah C. Garcia as committee chairperson, and Labor Education and Re-
search with Sheila S. Buenafe as committee
chairperson.
PIDSEA: The employees’ voice
The PIDSEA officers were formally inducted into office during the Thanksgiving and
Loyalty Awards Ceremonies on September 26,
2001 in celebration of the Institute’s 24th Founding Anniversary. Dr. Lamberte led the induction
of the 14 officers. In her speech, Ms. Esquivel
expressed the PIDSEA’s gratitude to the Management, especially Dr. Lamberte who showed
support to the association even before it was
formally organized. Moreover, she encouraged
all the officers and members to support the
association’s forthcoming activities.
PIDSEA represents the employees’ desire to have a unified voice to speak on their
behalf and a legal entity that shall protect their
rights and welfare. Much effort was exerted to
establish the association and under Ms.
Esquivel’s leadership, the PIDSEA hopes to work
for its members in close coordination and cooperation with PIDS management. GJE DRN
AVAILABLE ONLINE !!!
The full texts of recent Development Research News (DRN)
issues and other PIDS publications (Discussion Paper Series,
Policy Notes and Economic
Issue of the Day) may be
accessed at:
http://www.pids.
gov.ph/publications/
index.html
DEVELOPMENT RESEARCH NEWS
PIDS Research...from page 9
16
the field of public spending to make it
more effective especially now that revenue from tariff has fallen.
contract research out, one should know
what to contract out. But to begin with,
how do you know what to contract out?
This is essentially the problem with
knowledge. You have to know what
policymakers want to know. In that
sense, it requires a general idea of what
the overall knowledge base is and what
the upcoming policy debates will be. In
many cases, you do what you can do well
but to a great extent, what you can do
depends on your resource constraints.
So the important question becomes
where PIDS must remain strong and
where it should get stronger in the future.
I think what we should look forward to is that some of the wars that we
used to fight will finally be over and
therefore we have new areas to explore.
Hopefully, the wars that Gerry started
fighting do not have to be fought anymore. Hopefully, for instance, by 2004
or 2005, we are a low-tariff, zero-trade
barrier country. After more than 20
years, hopefully, we will essentially have
as close to free trade as possible. Getting the “price right” is only half of the
battle, though, and getting government
to do what has to be done like good regulation, provision of good supply of public goods and others, is actually the
harder part of the reform process.
Some old wars will never die. I
think that has to do with public finance—both the tax collection and the
way money is spent. My favorite example
is always “How in heaven’s name did we
get 120 state universities when many
studies said that 45 is too many?" In other
words, there is still a lot of work to do in
Another important battle that is actually a very old one is that on population. When Gerry and I met by accident
at the NEDA Regional Office in Cagayan
de Oro, we had a good opportunity to
discuss a number of things. One of the
accounts Gerry shared was how much
support he got from the late President
Editor's Notes
...From page 1
liberalization in the Philippine banking industry.
What happened after Republic Act 7721 was
passed in 1994 and where do we go afterwards?
Liberalization is a step toward globalization
of world economies. The September 11 US terrorists' attack shows how fragile the global community is when tragedy strikes especially when a
big economy like the US falls as a victim. Thus,
it is an imperative for policymakers to make sure
that sound fundamentals and proper safeguards
are put in place like in the financial industry to
minimize, if not to prevent, the ill effects of crises.
Another highlight of the PIDS anniversary
is the Loyalty Awards Ceremony preceded by the
Thanksgiving Ceremony where the PIDS staff
join together to pray and feast as one big family.
This year's occasion was graced by the presence
of Dr. William G. Padolina, Deputy Director for
Partnerships at the International Rice Research
Institute and member of the PIDS Board of Trustees. He shared an inspiring message on how to
September - October 2001
Marcos on family planning. Perhaps
PIDS may not have to go in this area
because POPCOM is already there but
this is a very important area. I hope the
fact that this is an old battle does not
mean that it is unwinnable. It is a good
thing that at a number of ex-NEDA Directors-General, including the current
one, are present here tonight and share
my belief on this.
As you can see, I enjoyed my two
and a half years' stay in NEDA and the
time I spent at PIDS. I think the reason
for this is that I knew I was working with
professionals who have, more or less, the
same world view that I have and that despite all the resource constraints, we are
all waging for key reforms. In other
words, we knew that reforms are difficult and slow in coming but we cherish
every little reform that we create although deep inside, we also knew that
the nation needed a lot more. I am, however, sure that the people who are on
top now will do a better job than we have.
Finally, I cannot express my gratitude enough to the NEDA family and
in particular, the PIDS family. DRN
become a successful professional in this day
and age. The anniversary article narrates the
low-profile but merry celebration, starting with
the photo contest for the 2002 PIDS calendar
and the induction ceremony of the newly-organized PIDS employees association, a public sector union.
Last but not the least, we included the response speech of our beloved outgoing Chairman of the PIDS Board of Trustess and former
Director-General of NEDA, Dr. Felipe M.
Medalla, in this issue. Dr. Medalla recalled the
challenging times of his stay with the NEDA and
shared his thoughts on the new policy research
frontiers of PIDS. DRN