President Gloria Macapagal Arroyo's Speech during the 10th Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) CEO Forum
Rizal Hall, Malacaņang, October 6, 2008
Thank you, Secretary Favila.
Chairman Arthur Young, President Ernie Santiago, all the members and officers of SEIPI, welcome once again to Malacanang!
Many of you may remember the last time we met as a group two years ago. But between then and now, I've met some of your principals at international fora and I get to see many of you individually during the many company events that have taken place in the industry. And I stay updated on your many successes as well as your concerns. For after all, you have made, as our two speakers have said, tremendous contributions to our economy. Thank you to the industry.
A special thanks to the 242 companies that form SEIPI, the moving spirit that has made your sector among the most united and organized of Philippine industries. I have heard about your GAINS program for global competitiveness, advocacy, information, networking and services, and that it is the most forward-looking industry strategy in the country. Congratulations to you!
We saw a part of your work in the two presentations today and for the ordinary Filipino, the Philippine economic landscape of the 21st century would be unrecognizable without your industries. You have every right to claim to be the "driver of the Philippine economy," as Ernie said in the beginning of his speech, you produce two-thirds of Philippine exports. Over a billion Philippine-made memory chips, power devices, disk drives, digital signal processors, magnetic heads and similar products are found in various electronic appliances all over the world coming from you. Because of you, our country has an 18-percent share of the global electronics market since 2006. I thank you also personally because during my presidency, you have earned 200 billion dollars for our country. Your exports have grown almost 50 percent -- from 22 billion dollars in 2001 to 31 billion dollars a year. And I was looking at the growth rate of the world and of Asia, your exports in the last seven years have grown faster than the rest of Asia.
Your industries have been major job creators. You give direct employment to almost half a million Filipinos. That is the same number as our Department of Education, which is our largest single government employer.
Your sector invested five billion dollars during my administration. And the peak, the rise in investments, was with Texas Instruments which, by itself, is pumping more than a billion dollars for a new operation in Clark, not to mention its new activities in Baguio. So, we thank Bing for bringing that investment over.
I've also had the fortune of presiding over the expansion of other companies like SunPower, large expansion. So, I'm very grateful for that.
In 2001, I was telling Ernie, that in 2001 you had a negative growth rate, didn't you? And Ernie remembers that 2001 had a minus-22 growth rate. It was a negative 22 percent. At that time, that was right after the 9/11, but even before 9/11, the global market was already slowing down. In 2001, the main market for Philippine-made electronics and semiconductor items was the United States. Then the U.S. market suffered a drop in sales. That's why your growth rate was minus 22 percent, though I might say that at that time, I remember how I said, "Naku! Kakaupo ko lang, magne-negative growth rate ang Pilipinas," because electronics is such a major part of our economy.
But we work to do other things to strengthen the domestic market, release all the arrears of IRA to the local governments, work on the housing industries, spend on agriculture, as a result of which the Philippine economy still had a positive growth rate even if the electronics industry had a negative growth rate. But in the meantime, just as we were working on how to make the Philippine economy remain with a positive growth rate, you were also working, you were looking for other markets. And indeed, you found other markets. So that when we met in 2006, China was already your main customer, taking in 26 percent of your exports. And today, with even more changes in the global economic arena, you have shifted your focus again.
This year 2008, 'cause most of your figures are 2007, Ernie confirmed to me that about 22 percent of your products go to Europe, 15 percent to Japan, 14 percent to the U.S., 13 percent to China, and the rest to other Asian countries.
But Arthur was telling me that there is a lot of potential, as you've shown us in the presentation, within our own region. And so, with such dynamism, your industry -- though it had a negative growth rate for the first six months of the year -- in June, it managed to grow 2.6 percent year-on-year, and maybe that means that the slump is over and you're beginning to go back to your upswing.
We have been working tirelessly as we did in 2001, and now even more to address challenges arising from the slowdown in the global economy which this time is combined with the spike in oil and food prices. We all know this is a global phenomenon. Your presentation shows how aware you are, and you need to be aware, because you're so integrated with the global economy of what's going on in the world.
The events in the U.S. and the slowdown in the global economy are causing real difficulties for countries around the world. But we are not insulated from them, but our economy is more resilient today than ever before. And I would say more resilient than some other countries in our region. In some other country, which is also an attractive area for your investments otherwise, the overheating is so much that the government has to cut down on infrastructure spending. We have not reached the stage of overheating and we are not cutting down. In fact, we are increasing infrastructure spending.
We're able to do this because of the economic and fiscal reforms that we have implemented in recent years through the cooperation of Congress. These have resulted in the strengthening of our macroeconomic fundamentals as well as our banking system. So our economy is strong enough to withstand the external financial turmoil.
We've been working hard on all fronts to manage inflationary pressures, to provide a safety net to those hit hardest by these global developments, and deliver the growth that will continue to generate jobs and tax revenues that we need to fuel our investments in our nation's future.
We've been working hard to make sure that food supplies remain stable and to put food on the table for every Filipino in order to avoid demands for a wage spiral and, therefore, keep you competitive. We were discussing what we know when Arthur was making his presentation about our... the cost being a small portion of the cost of goods sold compared to other places. So overall, there is still a good amount of competitiveness here and we contribute to that, among other things, by trying to keep the cost of food low or affordable so that there will be no demand for a wage spiral.
We've also been introducing measures to lift the burden of high fuel prices off our people. So that there will be no big transportation cost increase for the workers who go to work for the same reason to avoid demands for a wage spiral.
On the same token, our Economic team, of which Peter is a member, in coordination with the Bangko Sentral, of which Peter is our government representative to the Monetary Board, our Economic team is closely monitoring developments in the global financial markets. We're working hard to further strengthen the domestic economy by accelerated spending for infrastructure. As I have said, whereas other countries around us may be pressured to reduce infrastructure spending, we're accelerating infrastructure and agriculture, fast-tracking financial reforms to further strengthen the banking system, improve our fiscal health by better tax collection and also by legislative measures, and encouraging investment by such measures as reducing regulatory bottlenecks for strategic industries like the semiconductor and electronics industry.
Texas Instruments, Bing was telling us, came to the Philippines and it was not easy for us to make sure that they come to the Philippines. There were other very attractive or prospective hosts, and we are all vying and the key was the red tape. And we won over our other rival possible destinations and Texas Instruments decided to do their new plant here. The same thing with some other multi-hundred million-dollar investments coming up soon. Peter, who is chairman of our Anti-Red Tape Task Force, is working hard to make sure that old bottlenecks are removed and I hope we will be seeing this new investment soon.
We are addressing most of the concerns you presented in 2001, aside from the concerns that are presented by individual prospective investors. And I remember infrastructure was one of your biggest concerns. And your companies were among the ones we thought of when we pushed for big infrastructure projects across the nation. The SLEX, the Alabang Viaduct, is now 83-percent complete -- should be finished soon. But even now, with one lane already completed, it has eased the flow of traffic from CALABARZON towards NAIA. The Batangas Port, which was completed last year, last December, services some of your companies. The SCTEX has been completed also for the convenience of the factories located in the northern part of the Luzon Urban Beltway.
Now, I remember the last time we had a meeting, you saw all the infrastructure coming up. So you were confident about that, so you said the infrastructure we must work on now must be the power sector. And on power costs, PEZA now offers reduced rates for its locators. And hopefully, we will have the implementation of open access which would hopefully bring power cost down some more and, probably, the milestone for that will be the consummation of the Calaca investment in the power sector, perhaps by November.
Earlier than that, we began the 'time of use method' of computing power rates along with the WESM, then MERALCO's Customer Choice program and High Load Factor Discount for customers consuming at least 5 MW, and that's certainly you. Other provisions of the EPIRA, particularly the condonation of the loans of electric cooperatives, have been implemented. And let me point out that there are areas around the country where the host municipalities and barangays give discounts or subsidized the electric bills of their customers. So I would reiterate my invitation that when you do your expansions, you think of locating in these areas where the local government has the royalties from the power sources that are in their areas and they used these royalties to subsidize electric bills.
One example would be Palinpinon in the town of, is it Dauin or Zamboanguito? Ah, no, in Valencia in Negros Oriental, and that's the reason why we're making the airport better so that your airports... so that your whole logistics will be acceptable to you. Another example would be the geothermal areas in Leyte in Tongonan, in Ormoc and the neighboring town of Kananga, I believe, because they also have a lot of royalties. Some barangay residents don't even pay any electric bill at all. And we have an airport in Ormoc or even in Tacloban that can be suited to your requirements, as Texas Instruments has seen, we are doing with La Union Airport for their Baguio operation. So these are things that will help you to reduce your power costs. And we will spend in the infrastructure that you need for your transport competitiveness.
And most recently, an ERC ruling lowered to eight percent the recoverable systems loss of distribution utilities.
But together, let us look for more ways to reduce power costs, especially for small and medium companies outside of PEZAs, some of whom are your own suppliers and subcontractors.
On manpower, Ernie Santiago said I should announce to you, because not all of you know, that we are promoting Engineering R&D activities in the country at a significant scale. Three billion pesos is our budget for that in order to modernize every aspect of the economic underpinnings of the Philippines, including semiconductors and electronics, to propel economic growth. Because we know that modernization needs a critical mass of R&D-capable manpower that will further attract technology-based investments like semiconductorsand especially electronics. This three billion pesos that I'm talking about started last year. It's an investment in Engineering Research and Development Technology. As a part of this, as a big part of this since last school year, seven universities led by the U.P. College of Engineering have been offering scholarships for masters and doctoral degree programs in all fields of Engineering, including what specialized field you might want for your own industry.
But I must congratulate SEIPI because they're already a part of this program spearheading linkages with U.P. and other reputable academic institutions for specialized masteral and doctoral training for your industry.
Government consults SEIPI on the steps that can strengthen your industries, expand your markets, and increase your convincing power in bringing in more investors to your sector. Ernie last appeared before a Cabinet meeting only last month, so he can attest to how frequently we consult SEIPI when we need to do our industrial planning.
A continuation of these efforts will help us weather the global storm and make sure that we are able to achieve the economic rebound that we are projecting for next year.
As I said, if you think of the fact that we will have flat growth this year, remember you were minus-22 percent in 2001 and how you recovered, and you will recover even more now because we can see the investments that are under gestation. Texas Instruments will formally open in January and with their market of three billion dollars a year, we can expect that by yearend, we will have a very big increase in the electronics exports not to mention those new industries that Peter is nursing, or those new factories that Peter is nursing for them to locate here in the Philippines.
So, against the gale force winds of the global economy, we remain bullish on our country and your industry. We are optimistic about our future, your future, and we're deeply committed to being a force for the good of your industry which is good for our people. The semiconductor and electronics industries and the government have a strong synergy. You are an invaluable partner in Philippine growth.
So, from a grateful nation, Mabuhay at maraming salamat sa inyo!
Thank you. (PIA-MMIO) [top]