Does Foreign Entry in the Domestic Banking Sector Promote Efficiency by Ronald Yacat

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**

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

* 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.

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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

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

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Does foreign entry in the domestic banking sector promote efficiency?

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.”

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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

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Macroeconomic policy plays a major role in financial liberalization

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.

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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.

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;

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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 Telefax numbers (632) 893-9589 and 816-1091 E-mail address: publications@pidsnet.pids.gov.ph Reentered as second class mail at the Makati Central Post Office on April 27, 1987. Annual subscription rates are: P200.00 for local subscribers; and US$20.00 for foreign subscribers. All rates are inclusive of mailing and handling costs. Prices may change without prior notice.

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September - October 2001

PIDS Research: Looking through old and new policy frontiers*

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 (CariĂąo) 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 everybodyâ&#x20AC;&#x2122;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

PIDS Board Member shares some words of wisdom

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

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*

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

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 attendâ&#x20AC;&#x201D;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

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 papersâ&#x20AC;&#x201D;"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. ValdepeĂąas 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

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

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

PIDS employees unite

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

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