ASIAN AFFAIRS INTERVIEW WITH JOSE T. PARDO

Trade and Industry Secretary

THE ECONOMIC CONUNDRUM

Serge Berthier.- A year ago, you were working in the private sector, a successful businessman, and one of the economic advisors to President Fidel Ramos. In his own words, his administration was gunning to industrialize the nation by the year 2000. Less than a year later, you are part of the new administration of President Estrada, gunning to develop the agricultural sector, and to let the uncompetitive industries drop dead. Is that consistent?

Jose Pardo.- Indeed I was somewhat associated with the Ramos administration and held a different position in the private sector (1). I accepted the challenge to join full time an administration because I saw in President Estrada a passionate advocate of a cross-section of the poor’s interests which, because of my NGOs’ work, I identify with. Admittedly, before taking office in July 1998, I tried to do an assessment of our economic situation and had to do some rhetorical thinking about what we wanted to achieve.

S.B.- To alleviate poverty has been a perennial strategy of each and every administration since the 1950s. During the seventies, the rice production which is the country's basic food staple of the poor, was successfully doubled. The then policies of the Marcos government was enthusiastically backed by the international communities, yet it was a failure. Could it be different this time, and why?

J.P.- There is a difference this time. President Estrada and I would like it to happen.

S.B.- Isn't it a bit far-fetched to say that previous administrations did not have the same will?

J.P.- They took the problem differently. Historically, the marginalized poor, because that is what we are talking about, have not been the subject of development. They were rather considered by every one, including the academics and the international experts, to be the beneficiaries of a trickle down effect. The idea has been therefore to broaden the pie and let it spread, thinking it will be enough. And the marginalized poor have never been getting more than what was trickling down to them. Many attempts by the government to bring prosperity, to bring affluence, to create pockets of economic activities in the countryside encountered problems for one reason or another. Today, the challenge is that we are looking at it the other way. The development should start with them (2).

S.B.- The marginalized poor, that is about one-third of the population, live in the countryside. How do you intend to develop economic activities in the country side?

J.P.- It is a challenge given our limited resources. We cannot do it everywhere but we have given priority to 110 areas. We have 56 areas open to economic activities and 54 more coming in the pipeline.

S.B.- Those areas are in the countryside where you currently have only landless farmers. Why is the Trade and Industry Secretary dealing with what is going on in rural areas which are mostly agricultural zones?

J.P.- The areas are in the rural part of the Philippines, but they are economic zones where we are trying to develop processing activities. That is why they are under my wing.

S.B.- To create special economic zones is not a particularly new concept. Under Ramos, they were called "growth centers" and the government boasted that they had established 62 export processing zones (EPZ). Some were a success but did not make much difference at the social level. What is different this time that makes you feel they will make a difference with past policies?

J.P.- I agree that it is not totally a new concept. But in the past, we were putting it up near urban centers. Now, we push the new ones into the remote agricultural area.

S.B.- But what sort of competence can you expect to develop in rural economic zones that will engineer a sustainable economic development in the hinterland?

J.P.- Mostly what we need are agricultural processing centers. Post-harvest facilities are lacking throughout the country. But once processing competence has been developed, the centers with such a know-how will attract industries. That is how we see it. A processing centre can process not only agro-products, but food, and sooner or later garments or electronics.

S.B.- Such economic zones have to be at some stage self-sustainable. What will be their market once the government investments have subsided?

J.P.- Being associated with entrepreneurs all my business life, I have always looked at the market before going into productions. Our scheme, that we planned with the President, is a very structured market-driven initiative.

S.B.- Yet, I fail to see what makes it very different from the 67 export zones (EZ) that the Ramos administration developed and which did not, for some of them, achieve their objectives?

J.P.- Leadership comes in many stages. We have, and it is providential, a President who is an action-driven man while President Ramos came with his gifts for policy making. He was methodical, he had a vision and a development strategy. However some initiatives, while useful in their time, are now counterproductive. For example, our land-reform program was politically popular (3). Yet it has not been productive in the sense that we dismembered the sector and by doing so we created non-economy of scale at the time of the global market. So in a sense we have weakened our agriculture rather then strengthen it. Our bid to become a food-basket of Asia has badly failed. We cannot even guarantee our own food-security.

S.B.- One of the leading economists of the country, Bernado Villegas, described the industrial sector of the Philippines as a 'white elephant" (4). Now you are telling me that the land reform was also a "white elephant". Can it be reversed?

J.P.- We now have on board a horseman who can move things faster, somebody who is action-driven.

S.B.- Move things faster maybe but how? After all the land reform has been going on ever since the presidency of Macapagal and is still going on, and as you say, with negative effects rather than positive ones. Can the President fast-track it one way or another?

J.P.- It boils down to one question. Do we invest presidential goodwill to land reform? My answer is: this is a contentious subject, difficult and politically unpopular, not worth investing the president goodwill…

S.B. - That may explain why no one was really doing anything substantial about it for so many years, but you say that President Estrada will make a difference. How can it be done without touching it?

J.P.- Reforming can be done two ways: you take the problem and address it head on or you do a flanking attack. I am more pragmatic than my predecessors. They were mostly professional civil servants, I am from the private sector and I want results, therefore if necessary I go for a flanking attack. You have to have a lateral thinking. So, we'll do a flanking attack. What are we trying to achieve? An increase in agricultural productivity which seems precluded by our own land reform. But what land do we need? We still have 5 million hectares of public land which are available and not farmed. Why should we go first into the quagmire of private land reform? That is how the idea of the Emergency Recovery for Agricultural Product (ERAP) plan came about.

S.B.- Governments are highly inefficient when it comes to farming…

J.P.- We know. The government is not going to farm anything. We will tie up with the private sector which is short of land. We have set up a National Development Company (NDC) (5) and we will be launching a bond issue, the so-called ERAP bonds, to finance it. NDC will be the corporate arm of the government for the development. NDC will invest in large scale plantations

S.B.- Using public land as its assets I presume…

J.P.- Correct, converting the land into an asset. Then NDC will deal with the corporate sector and the shareholding arrangement will have to be made on a fair evaluation basis. But in any case, NDC will remain a minority shareholder and the private sector will manage, not the government.

S.B.- Are you not afraid that most of the land will not bring any return for a long time, because they lack the proper infrastructure, such as water irrigation and so on and so forth, and therefore they will not attract the private investors who might see the deal as a losing proposition?

J.P.- The government will have to do its share of investment. We did not do it in the past, that is why we did not succeed. We will incubate these enterprises to become intrinsically viable. That is why this time our plan to develop the countryside has a twofold approach. On the one hand, you have the economic zones which will bring the lacking support services needed, and on the other hand, you will have the large scale plantation scheme. The combination will create collateral businesses, the home-base businesses that will create employment, a demand for housing, as a revenue stream flowing within the rural areas.

S.B.- The scheme you are putting in place is not really new but in the past, large agribusiness conglomerates have avoided the Philippines and have concentrated their effort elsewhere. Do you think that this time you have a chance to bring in substantial foreign investments in the agricultural sector, specially with the competition of Thailand or Malaysia, or even Indonesia?

J.P.- I am confident. Nestlé, for example, wants to go into coffee plantation in our country. However the company did not dare making the investment in the past, because of our land-reform program and the law and order situation. Now I am telling Nestlé that I can supply both to them. We are now trying to accumulate the land that they want. So I expect them to come and invest. It is not the only company waiting for us to make some land available. We have already signed an agreement of this kind with First Pacific for a 1000 hectares rice plantation and the final approval is now with the President (6). Dole Company is also willing to go from pineapples to rice. The private sector is aware of our food security concern and our self-sufficiency targets. And as we say, where there is a need, private sector generally fills it. During my entrepreneurs's day, it was my motto. As a government member, it is still the same. When I am finding a need, I try to fill it. I know a company that has two sugar-mills that were a losing proposition from day one because the land reform did not provide the expected result. The mills cannot get the raw material at a competitive price since the productivity is low. The mills are therefore uncompetitive. The owner now feels that there is a possibility of turning the things around because, with large sugar plantation, productivity will increase and enhances the likelihood that the mills will provide sugar at world price level, which today, is just an impossibility.

S.B.- The land reform program was originally a way to give land to landless peasants so that they can farm. Today, the large plantation scheme may give jobs to unemployed rural manpower, but what will happen to the small farmers unable to compete with the economy of scale that a large plantation with substantial government investment will induce?

J.P.- I told the President to follow two tracks, on the one hand, the public land scheme and on the other the agrarian reform land scheme. The agrarian reform which is a different department can deal with the reform land. They do as they think fit, but I am going full steam ahead with the other track. I am getting land and putting viable business concerns in rural areas. There is no alternative. And to the farmers, without altering the law, I am telling them that if they want to do it their way they can. However we are giving them one more option that will bring economy of scale and a chance to improve productivity and therefore incomes, which is to form cooperatives and go for corporate farming which is the future.

S.B.- How does it work?

J.P.- We are telling them that they will become shareholders of the agro-concern and they will work in a better environment. The first step is for the farmers to set up cooperatives and combined their land, then to convert it into shares into the agribusiness concern. There are also other alternatives.

SB.- If they don't follow your advice and do not want to become employees of multinational agribusiness concerns?

J.P.- It is their democratic choice.

S.B.- Governments don't work as fast as private companies for all sorts of reasons, and the Philippines bureaucracy is notorious for being slow and imperious to change…

J.P.- I agree. To be able to do what we want to do we need the government to be quick and responding. We are here facing the perennial problem that democracy brings: it is inefficient, very difficult to operate and overmanned. That has been subject to many debates. Many attempts to change the model of governance have been made in the past, none proved to be better and so, we have to rely on democracy as a strength rather than as a weakness. Therefore do we reform and invest presidential goodwill in tackling an everlasting problem? We decided not to…

S.B.- And go for a flanking attack, as you said earlier?

J.P.- Yes. Instead of putting a losing proposition, what have we done? Put in place a mechanism created by our President that will streamline the government machinery and make it respond faster. So the President put together what he calls his "economic SWAT team", ready, alert around the clock to respond to economic symptoms, in the same manner as he established a law and order SWAT team, a police SWAT team when he was in charge of that problem. It worked. You can ask businessmen now. Law and order have been problems during the past administration but have been decisively addressed in the urban area by the President Estrada, a law and order expert. So, he is dealing with the economy the same way, with a team that we formally call the "economic mobilisation group" which I co-chair with the Executive Secretary to oversee the effort with all the other ministries involved in the economy.

S.B.- What does it achieve in practice?

J.P.- I take an example. Before it was a tedious process for the businessmen to get a visa, the bureaucracy was slow, now we have in this building -(the Board of Investment building), a visa office so businessmen can get a visa without delay. Registration of companies was another complicated process, we now have a quick response team. For large investors, we try to develop the account executive concept. We will assign someone that will fast-track all the paperwork required by the administrative maze.

S.B.- In short, you are suggesting that there are ways to bypass the bureaucracy when needed. But isn't it a way to admit that the bureaucracy does not work to the extent that the government is trying to avoid dealing with it, which is a damning statement for a government?

J.P.- I am a pragmatist. Mind you, the bypass does not happen unless the main arteries, given time-bounding - before we did not have time-bounding limits - now we have fixed time-bounds, have failed to deliver all approval. Rather than create a bypass, we induce it through intervention that will allow for it to happen. To look at our administrative bottleneck, every week I conduct a meeting of thirteen heads of business and academics to see what are the problems. We intervene only if a clog has happened and there is a need to create a new passage to move things. We can credit the President for his ability to want to respond to the reality. The problem of most policy-makers is that they cannot identify with the problem. And what does it tell you that President Estrada got five Academy awards in his acting career? He has discipline, good memory and the ability to identify with a given situation. That is maybe what makes the difference. Our government empathizes, this is how we operate and function. We can identify with the surroundings and take different roles when needed

S.B.- Sometimes, the result is not what you expect. There has been lately a lot of controversy when President Estrada signed an Executive Order regarding the creation of a board monitoring the importation of petrochemical products in the country which was seen as an attempt at going back on the deregulation of the downstream oil industry which was approved by the Congress in 1996 (7).

J.P.- The Administrative Order 58 has been misunderstood. I was out of the country when President Estrada signed the first version, and there were mistakes. Since then the President reverted and supported my original view that we have to put that "Competitiveness Board" to move things faster. To be able to find out how we can make that industry competitive.

S.B.- Your position has been attacked by the Federation of Industries of the Philippines (8).

J.P.- In fact, the argument is not with me, it is between two of our leading businessmen, Mr. Gokongwei, who is in petrochemical and textiles, and the President of the Federation, Mr. Garcia, who is also head of a petrochemical concern. Mr. Gokongwei supports my efforts, but both argue now about a policy position where Mr Garcia has recommended the creation of a super-economic body, with me as economic czar to monitor the economy.

S.B.- What the public knows is that they wanted protection that runs contrary to the rules of the WTO and somehow through an oversight it became the subject of an administrative order that was signed by the President.

J.P.- As I said, I was out of the country but somehow my name was used. It is public that I came with the revised Administrative Order and that the President found it excellent since our aim is to improve competitiveness. And now Mr. Conception is suggesting we should extend such aboard to other sectors. We have agreed to do it for sugar for there is a problem (9) and we will do it in other industrial sectors. The competitiveness boards will have members from both the private sector, and the government side.

S.B.- If you had to list the main challenges you are facing, besides an oversized bureaucracy, what would they be?

J.P.- We have a problem with the cost of power. It is one of the highest in the world. A government is always overdoing things. In the past President Ramos had no option but to deal with power shortage. Our BOT program was, maybe, not, the best rational structure but the situation called for a quick decision. It has engineered today an overcapacity production. The government is paying for it (10). Now we can complain, power cost is high. But we have one of the best labor of the region especially at supervisory levels. And if we have been able to increase our exports despite the crisis it is because we are competitive in spite of it. There is a bill in Congress to rationalize and privatize Napocor which distributes power and pay for it. It has been tried before but was not successful. If a president can do it, it is President Estrada.

S.B.- What are the sticking points of the legislation?

J.P.- Political will has to be put in place to put order and allow the private sector to rationalize not only generation but distribution. But not all are equal and currently some get paid for keeping their power generation plants idle.

S.B.- What other major concerns do you have?

J.P.- Our infrastructures are weak and few, that is why our commodities are not competitive. Corn prices, sugar prices are too expensive. Our fishing industry is not competitive. Then on the basis of the given, what can be competitive? We are on the earthquake belt. It is not comfortable but we have one of the best iron ore and copper grades available and other products. The question is how can extraction be efficient, given the constraints, the NGOs and so on and so forth? We have laws that make mining difficult (11). This is a challenge. I want to get the mines into the private sector. The elite business leaders are looking at that. I am quite happy to see that we have become a major exporter of electronic components, but also worried to see such a dependence. We need to broaden our export base. It is very clear that some sort of intervention is needed to reduce our overdependence on such trade. We cannot expect a 35% growth rate every year, even if today rather than to go in Indonesia, Malaysia, or China, Silicon Valley chooses to come here and propel us as an emerging centre of electronic goods.

S.B.- And in spite of very strong unionism in the labor force as we have witnessed with the Philippines Airlines strike which has crippled not only the airline but the economy?

J.P. - Labour! So many administrations have looked at it. When I was Chairman of the Chamber of Commerce, I have debated endlessly with the government about our labour laws and our lack of flexibility. I have told the President what I think of it. What we need is job creation, not job security because it does not create anything in the long term. And the problem is to give a job to as many people as possible. And nobody wanted to touch Pandora’s box. Not anymore. President Estrada signed an Administrative Order creating a commission to open Pandora’s box, that is to update the labour code and reform it. The immediate result was that the leftists picketed my office. I asked them: “Why me, I am not even a member of the commission?”. Then, I explained to them that we were after the same things, we all want to create more jobs, we do not want more jobless people. The commission is now working under the chairmanship of the executive secretary to whom I recommended to take five businessmen and five employees’ representatives on board on top of the Labour secretary. The Trade and Industry Department is not part of it.

S.B.- President Estrada has been signing many Administrative Orders which are in effect, decrees that bypassed the Senate and the House. He has also set up a number of committees which are looking at legislation, which to me, look like a duplication of the many committees you have in the Congress. What exactly is the Congress doing?

J.P.- The Senate and House are the sole authorities to amend laws. Our purview is just to originate and prepare documents that will say: can this be done through an Administrative Order? Yes or no? If no, we go to Congress because we are a democracy.

S.B.- It looks like there are many yes and as few as possible no. Is it what you called earlier your lateral thinking?

J.P.- It is pragmatism.

S.B.- What does that mean?

J.P.- Democracy Philippines style is free, willing, inherited over the years from America. And there is no substitute for it, but it means you can’t, with it, improve the economic wellbeing of the marginalized poor as fast since they are mostly left out of the political debate. America had its own experiments at its own pace. Unfortunately it began preaching democracy here faster than our level of development allowed it. It is a point I discussed with the American ambassador a while ago. I told him that his country brought here a kind of unionism and a strong independent judiciary (12) that intervene constantly in economic affairs, and I pointed out that it is not even the case in his country. But he rightly emphasized that it was not so much the institution that is at fault but the way we used it. "If you overdo it, it is not America’s fault and as a matter of fact, we do not have unionism as developed as you have here" he said. But it is also a fact that they have supported countless NGOs, and countless numbers of safety nets that create today more handicaps. Nevertheless, we are proud to have democracy and the rule of law. Admittedly, sometimes it is difficult to move things fast, the price of many voices, having different branches of government that have separation of power, an independent central bank and a strong civil society that can be vocal.

S.B.- Is ASEAN very much at the centre of the future of the Philippines?

J.P.- Very much. In the next few years, our economy will evolve from a 73 million people market economy to a 500 million market economy. It is a tremendous challenge and it opens tremendous opportunities. I am currently chairman for one year of the ASEAN economic minister meeting and I have been asked to put the paper about the ASEAN transnational corporation, the mergers and the strategic alliances of ASEAN companies. The purpose is to try to stimulate investments in ASEAN. We have already signed in Manila last year an ASEAN Investment Agreement (AIA) that will give nationality status to investors. As we, ASEAN countries, know we need capital investment from outside ASEAN, we took the bold measure in ASEAN to give ASEAN status to non-ASEAN for two years from January 1, this year to 31st December 2000 in selected manufacturing and manufacturing related services. We are seeing now again a flow of investment in this part of the world as foreign companies are taking advantage of the opportunities we offer (13).

S.B.- It also means for ASEAN companies that are not yet ready for such competition that, as you have said once, they will drop dead. But can companies drop dead without an heavy social price?

J.P.- I have raised capital, I have lost money and make money, and I must admit I made more money than I lost. I have been involved in nearly every sector of the economy, I am not saying I am the best or even good at managing them day to day, but I have an inside knowledge of those sectors, their strengths and their weaknesses. I put people together that were better than me. Don’t misunderstand me. I have no illusions about my limitations. I have more limitations than I have strengths, but what I am saying is that you should not invest in sunset industries.

The game plan is now to try to stimulate strategic alliances when you deal with a larger market of 500 million people. Those alliances might give you the economy of scale needed to be competitive but if you can’t achieve that, there are no long term options. Your business will effectively drop dead. You cannot stay in sunset industries, you just have to move to new industries that have a future. It could be mining or tuna or large scale rice productions or corn or potatoes or whatever. There are many options open to the entrepreneurs. They should not dig their heels into sunset industries and expect the government to assist them.

S.B.- Can we say that the multinational companies that have recently pulled out of the Philippines did so because they had invested in sunset-industries?

J.P.- Philipps pulled out of the light-bulbs industry. It meant the loss of 340 jobs in the Philippines. Philipps is expanding in electronics where it will employ 4000 people. Some sectors contract, other expand. Greatness can never be achieved by never falling down but by learning to rise every time you fall. And we have to admit that yesterday is history, tomorrow a mystery, today a gift.

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Notes:

1.- Jose T. Pardo is the owner of 7-Eleven (Philippines) and Wendy (Philippines), that are Philippine Area Licensee of the American companies.

2.- See on the subject "The Political Economy of growth and impoverishment in the Marcos Era" by James K. Boyce (Ateneo de Manila University Press) and the interview with Bernardo Villegas in this issue. In the past, the Philippine development strategy did not challenge the country's inegalitarian economic and political order. On the contrary, that order provided the fulcrum for their pursuit of development "from above".

3.- Until the twentieth century, land rights in the Philippines were generally unrecorded. Neither landlord nor tenant depended on a piece of paper backed by a formal legal apparatus to define and enforce their respective claims to the land. Their positions instead rested on precedent and power. The Spanish government introduced formal land titles in Central Luzon in the late nineteenth century, initiating a shift in the political basis of property rights from local society to the state. The land owning elite used the opportunity of registering their land to claim extensive areas occupied by small holder neighbors. Illiterate and ignorant of the processes of the law, the peasants were helpless to protect themselves. Land grabbing continued under the US colonial rule. In 1913, the new colonial government launched a cadastral survey, officially registering land ownership rights but not tenancy rights. The intervention of the state inflated the power of the landlords, reducing the need for a loyal following. Many landlords, then, entrenched in their rights, moved to Manila, leaving the supervision of their properties to overseers.

In response to their deteriorating economic positions, tenants and landless peasants, joined together at times to challenge the landlords' power. The most famous movement arose in Central Luzon in the 1930s and gave birth to the Hukbalahap (People's anti-Japanese army) After the war, the United States made the choice to support the elite despite the fact that many of its members had collaborated with the Japanese. The government responded to the Huk challenge with the stick of military repression and the carrot of agrarian reform. But as President Magsaysay's Defense Secretary, Jose Crisol, said: "the agrarian reform was a psych war aimed at the soft core of the Huk movement."

Ever since, there has been an Agrarian Reform program, and it was enshrined in the 1987 Constitution. It is indeed a "white elephant".

4.- See interview with Bernardo Villegas on the website.

5.- Jose T. Pardo is the chairman of the public company.

6.- See interview with First Pacific Executive Chairman, Manuel Pangilinan in this issue who says that it is only at the drawing board stage, and nothing yet is really decided.

7.- Administrative Order (AO) 58 issued March 4, 1999, created a multi-sectoral force (called Petrochemical and Plastics Mobilization Task Force) that effectively put a blanket against the flood of cheap imports directly competing with locally produced petrochemical and plastic products. The PPMTF was headed by petrochemical industry leaders who were to have the power to "regulate the importation of petrochemical and plastics products" and direct the Bureau of Customs to "withhold the release of any shipment". The contents of the order were said to be in violation of the Philippines commitment to the World Trade Organization (WTO) for market liberalization.

The changes in (AO) 58a reconstituted the task force into a "Petrochemical Industry Competitiveness Board" headed by Jose T. Pardo. The new order also expanded the composition of the board.

8.- Jose T. Pardo mentions Mr. Gokongwei but it is in fact another industrialist, Raul T. Concepcion who is Chairman of the Federation of Philippine Industries (FPI). Its president is Antonio Garcia.

Raul T. Concepcion, on his own initiative, bought a full page in several Manila newspapers to explain how to make the Philippines globally competitive. He suggested a crisis task force, with a lifespan of six months, to once and for all determine which industries can be globally competitive, given the 0 to 5% tariff rates in less than three years. But he also suggested that industries that have invested substantially to meet the criteria of being a World Class, ISO-Certfied, Cost-Competitive Plant, must be exempted from the accelerated tariff reduction, in other words, proposing to keep the existing tariff in place.

In another page, Raul T. Concepcion, writing on behalf of the FPI, stated that the proposal to create an Economic Superbody was a concept paper submitted by FPI President Antonio Garcia, which had yet to be approved by the Board of Trustees of the Federation.

John Gokongwei is very much in the mind of Jose T. Pardo because the industrialist owned a brand-new US$300 million petrochemical complex producing polyethylene and polypropylene, used to make plastic kitchenware and other molded products. Gokongwei had counted on underpricing imported petrochemicals because of the average tariff of 30% on these products. But the duty was trimmed to 15% and will be down to 0% in 2003. Gokongwei had also invested in a cement plant (Apo Cement) on the same assumption. The plant was completed in 1998. In January 1999, he sold it to Cemex of Mexico.

9.- It is an understatement. The government has decided to import 500,000 metric tons (MT), to prevent a third-quarter crisis. It is a good example of how badly managed was the agricultural sector and its lack of competitiveness. The Philippines have the right climate, the right land and the manpower to be a major exporter of sugar. Yet, for 1999, the local sugar industry is expected to produce 1.5 million MT while domestic consumption is projected at two million MT. Local producers are worried that the imports will cause local prices to plunge. World market prices of the commodity have fallen to a range of six to seven cents per pound, local prices stand at 21 cents per pound. The government has decided against imposing a levy on the imported raw sugar as a way of protecting the local industry. It has decided instead to impose a conversion fee that will be passed on to the consumers.

10.- National Power Corp (Napocor) distributes power which is supplied by a mix of private operators, the largest being Meralco (Manila Electric Co) controlled by the Lopez family supplying 75% of Luzon's power. On April 22, 1999, President Estrada announced a 55-centavo power rate reduction for distressed industries nationwide starting on May 1. The cut down was made possible by Napocor's approval of a 45 centavo per kw/hour decrease and an additional 10-centavo cut offered by Meralco. It represents a cut of about 25% of the price which stands at P1.79/kWh in Luzon, P1.97/kWh in Visayas and P1.32kWh in Mindanao.

While the government saying officially that it won't absorb the "stranded" costs of Napocor, which is more than US$5 billion in debt and required to buy power that nobody uses or even produces, President Estrada is directing the company to take up new loans from the Miyazawa Fund to offset the deficit.

11.- The Constitution currently limits to 40% any foreign participation in the exploitation of natural resources.

12.- It is the Taft Commission, set up on March 16,1900 by American President McKinley, that established between September 1900 and August 1920, a code of law and a judicial system.

13.- In December 1998, the ASEAN leaders relaxed the nationality requirements for investors to qualify as ASEAN nationals under the AICO (ASEAN Industrial Cooperation) program. Foreign companies established in an ASEAN country between January 1999 and December 2000 will be considered eligible for AICO status - meaning it can export its products to members of the grouping at preferential tariff rates. The old rules required that ownership must involve at least two companies from two member countries. In the two years the relaxation is in force, non-ASEAN AICO participants will also enjoy duty-free imports of capital goods and income tax exemptions. Toyota, Honda, Mirsubishi, Nissan and Isuzu have already applied for AICO certification

Published in Spring 1999

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