This is the famous speech by the late Lee Kuan Yew to the Philippine Business Conference on 18 November 1992, held at the Shangrila EDSA Ballroom, Mandaluyong City, Philippines. In this same speech, he uttered "I do not believe that democracy necessarily leads to development. I believe that what a country needs to develop is discipline more than democracy." More importantly, LKY also unequivocally mentioned that the Philippines must open up to foreign direct investors by removing restrictions so that these may more freely come in and create jobs for ordinary Filipinos. He also mentioned that the Philippines is unfortunately using a Presidential System with separation of powers which is among the most difficult to operate in the world, something that does not help with economic development. There were so many free tips and pointers given here, but sadly, after 30 years, the hurriedly-written and totally defective 1987 Constitution has not been modified or amended even one bit. To this day, the same errors and dysfunctions continue to be present.
Introducer: allow me to introduce the architect and driving force behind singapore's dramatic emergence a pillar of asean and a true friend of the philippines his excellency senior minister lee kuan yew
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Lee Kuan Yew: mr chairman jose pardo president of the philippines chamber of commerce and industry the honorable roberto r romulo secretary department of foreign affairs honorable ministers distinguished hosts your excellencies ladies and gentlemen when i received your invitation to speak i hesitated you must have known my attitudes from reports over the years i concluded that you have invited me because you wanted this conference of leading filipino businessmen and public figures to hear a contrary opinion a frank point of view i met secretary romulo about seven weeks ago when he came to singapore and we discussed this obligation of mine i asked him whether there were any taboo subjects and he encouraged me to speak my mind i use that as an alibi but i will speak my mind if somewhat carefully because you are my friends and i do not want to cause any offense even unintentionally the quotes that i have made are made not by singaporeans but by filipinos themselves and by independent observers and i use that as the basis for the conclusions which i would prefer you first contrary to what american political commentators say i do not believe that democracy necessarily leads to development i believe that what a country needs to develop is discipline more than democracy the exuberance that democracy leads to ends up in undisciplined and disorderly conditions which are inimical to development the ultimate test of a political system is whether it helps that society to establish conditions which improve the lives of the majority of his people plus enabling the maximum of personal freedoms compatible with the freedoms of others in the same society i knew of filipino politics in the marcus era as rambustious politicians reveled in democracy and its freedoms freedom of speech freedom of the press and freedom for those in office to wheel and to deal it was politics for his own sake election campaigns were colorful and entertaining candidates made elephant and stirring speeches but when it was over it was back to more wheeling and healing until the next elections the implementation of policies our promises did not match the presentation to bring myself up to date i asked for the latest press reports on the philippines not my embassy reports press reports on the philippines my remarks today are based on published reports the question i ask myself is can the next six years be better than the last six the london economist published july the 4th 92 1992 said this the challenge for president ramos is to find the economic growth that will confirm democracy's future that will confirm democracy's future in other words there's a question mark on democracy for the economist here the omens are less good and quoting the economies almost a quarter of the country's export earnings go to a service to service a foreign debt of 29 billion dollars over a tenth of his workforce is unemployed and inflation which averaged 19 last year is still running at an annual rate of nine percent if these figures are to change for the better the philippines has to abide by the strictures the strictures of the imf which means better tax collecting painful cuts in public spending and liberalizing trade to the detriment of some powerful vested interest one example of this vested interest that has to be tackled was reported in asia week 21st august 1992 and it refers to the philippines long-distance telephone company of mr antonio
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Lee Kuan Yew: i did not know he was going to be one of my powerful this evening but i do not flinch from quoting asia week because it's already on the record it says that it has a monopoly of 64 years and the quote is the joke in the philippines is that 89 of the population are waiting for a telephone and the other 2 for a dial
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Lee Kuan Yew: the nation the nation has only a little more than a million phones for 62 million people in 1973 the then president federer marcos using his martial law powers ordered all telephone subscribers to invest in preferred shares of pldt before they were issued a phone line when their combined invest with their combined investments and the value of preferred stock greater than the common stock subscribers in effect own about 92 of the company so everybody with a telephone line together the one million people owe 92 percent of the company and what do they get for that amongst the highest phone rates in asia only japan is more expensive and probably the worst service
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Lee Kuan Yew: in that same asia week magazine was another article entitled kidnappers in uniform question mark and the quote is police brigadier general raul imperial counts more than 50 kidnappings last year netting 7.6 million dollars u.s dollars in ransoms people are afraid to call the police because the officer may be the mastermind
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Lee Kuan Yew: said representative hernando perez one daily recently suggested that relatives of kidnapped victims ask police how much the ransom is rigo beto tigliao in the far eastern economic review of the 3rd of september 1992 wrote there were two waves of japanese capital investment both driven by the yen's strengthening in 1985 and in 1987. the first period was when the violent overthrow of the marcos dictatorship seemed to be imminent discouraging investors in the second period the kidnapping of a japanese executive in the philippines which took six months to settle was enough to abort most japanese investment plans mr tiglia went on the country lost nearly a decade of growth and as a result faces so many problems that some people even some filipinos have started to believe that there is a deep-seated self-destructive combination of political and cultural factors cursing the country allah this is me even nature has been unkind in 1990 the philippines was struck by a powerful earthquake in 1991 mount and at least one typhoon struck each year let's look at the future whatever the misfortunes of the past a fresh start has to be made and the future can be better if i were a filipino to cheer myself i would count my blessings and start in a positive frame of mind the philippines is immensely better off and afghanistan all lebanon or sri lanka all these three have been torn apart by strife and war and the contending factions are still killing each other and inflicting more damage on their countries than anybody else instead of repairing the harm already done now unlike these countries the philippines can pull itself together and get on with the job and it has a good chance of success because it is part of a region which is set for high growth what is needed is confidence the confidence of investors both filipinos and foreigners that the government and the people are determined to get themselves out of the hole they are in the first task is to restore order law and order but order first there must be a cleanup of racketeers in the police whether for kidnappings or other crimes
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Lee Kuan Yew: kidnappings of local chinese have increased three victims two university students and one businessman have been killed unless these kidnappings stop most investors and especially ethnic chinese taiwanese and hong kongers and singaporeans will stay away president ramos has started to clean up the police and the military he has sacked some senior police officers and removed others to less sensitive positions he has asked congress to reintroduce the death penalty for kidnapping rape and murder the legislature and the executive must show the world that they are determined to reimpose discipline and control over the police and the military and the key bodies in charge of law and order and stability other crimes especially corruption must be suppressed and punished it can never be eliminated not even in singapore it is good i hear that there will be a bill in the house to increase the salaries of government workers by some 500 to 1250 pesos a month from the first of january 1993. this can be a start of what should be part of a wider strategy to cut down corruption if government workers are adequately paid they deserve to be punished with severe penalties when they take bribes it is possible to weed out corruption provided top political leaders set the examples and the peace an efficient and a strong anti-corruption unit under the president with powers to investigate any person however higher and to carry it to a successful prosecution will work wonders the laws against corruption should be tightened to shift the owners of proof on to the person who possesses more assets than his income can justify that's the law we have in singapore
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Lee Kuan Yew: two or three big fish brought to justice successfully will have a salutary effect on everyone this has been the singapore experience where the prime minister is in charge of the corrupt practices investigation bureau the second task is to free the economy from controls and monopolies i quote rigobettoglia again in the review it has become obvious to economists says he now that the nationalist industrialization rhetoric has benefited only a group of inefficient oligarchs including some heading some heading us own firms from beer brewing to soap manufacturing to appliance assembly while the aquino administration has backed down under pressure from lobby groups and revised its original and more drastic executive order 413 the new tariff liberalization program will bring down the average effective protection rate for philippines industry from 25 to 20 to 21 over a four-year period ending july 1995 one percent a year battalion barriers had been a major element of an intricate web of regulations that have shackled the philippines shackled his entrepreneurs and only nurtured the favored fuel cartels and monopolies from banking to telecommunications to shipping people who have thrived through their privileged access to licenses franchises and concessional loans mr thierglia was hopeful he said however the economic performance of the philippines asian neighbors which had sought foreign investments has gradually in the sea change in national attitudes i'm trying to confirm that there has been a sea change he said there was an easy passage of the foreign investment act of 1991 which basically lifted all restrictions except those that are in the constitution on foreign investments by the experience of malaysia thailand and indonesia is especially relevant from the 1950s to the 1970s their policies were like those of the philippines they protected their markets to establish import substituting industries their products were poor and growth was slow because these were monopolies with no competition but by the early 1980s just about 10 years ago first thailand and next malaysia changed policies they learned from the policies of the nies they watched singapore hong kong taiwan south korea where foreign investments and export-oriented growth made for booming growth thailand and malaysia started to deregulate and to liberalize they allowed 100 direct foreign investments they cut down protection and opened up their industries and services to competition through the infusion of technology and high quality management from successful countries like japan the niece america and europe their goods and services became internationally competitive that's why the thai foreign minister proposed the asean free trade area in january this year in singapore and he was strongly supported by the malaysian prime minister whose country had that same experience singapore took a back seat because we did not want it said that we were pushing it for our interest these two countries had their economic growth bouncing up from three to four percent a year to eight to ten percent per annum few years after that indonesia watching what has happened in thailand and malaysia also changed course they are now pressing ahead with deregulation and liberalization to open up the economy and make their products internationally competitive our foreign investors would not have gone into thailand malaysia or indonesia if they had not got their macro economic policies right these countries cut their budget deficits which brought inflation under control with inflation under control confidence was restored in their currencies malaysia and indonesia have reduced their budget deficits to 2 of their gnp or less since 1987 five years ago they cut it down to a third of the previous deficit levels of 6 to 7 today thailand has is running budget surpluses and the thai bar is up suggest the philippines must press forward with fiscal reforms which president aquino began in 1991 under imf conditionality big trouble is that taxes especially income taxes are not collected therefore investors fear that the government cannot control future budget deficits and therefore cannot control inflation and furthermore if there are not enough taxes it will not be able to put in place the necessary infrastructure to make the investments productive next filipino savings must and can be raised indonesia with a lower per capita income level than the philippines had a national savings rate of 33 in the last five years the philippines had only 17 double that of the philippines with a lower per capita income indonesia therefore achieved a much higher investment rate of 36 percent last five years the philippines has only 17 double that of the philippines with a lower per capita income indonesia therefore achieved a much higher investment rate of 36 compared to the philippines 20 if you want to know the difference between the bounce of the indonesian economy and the filipino economy you look at these figures the ramos administration has started deregulation and liberalization but these initial moves must be followed up it has to be systematic with a publicly announced timetable during which the protective barriers enjoyed by industrial and service sectors will be dismantled and foreign competitors allowed in if you do that you will find that filipinos can perform as well as singaporeans or thais or malaysians or indonesians if you stick to your old policies because vested interests are too strong too powerful to overturn then filipinos were further and further behind our asean neighbors if the ramos administration can make ordinary filipinos understand that politics is not simply elections with singing and fiestas and giveaways but that it is about their lives their jobs their wages their homes schools for their children hospitals then the situation can change dramatically when the ordinary filipino understands that his country's stagnation and his joblessness is because of vested interest corrupt politics and general disorder and lack of confidence of filipinos with money and foreigners who would otherwise have invested i think they will agitate in support of those who want to establish law and order and discipline cut high tariffs cut quarters to licensing and other restrictive monopolistic practices in order to get the investments which will give them the jobs they will then put pressure on congress to clean up their ass to demolish barriers which are depriving filipinos of the progress enjoyed by their neighbors even china and vietnam are now offering very liberal more liberal incentives with full foreign ownership than the philippines communist countries the philippines has a lively and an ambitious press and tv i think they should undertake this vital job of educating the filipino voter of the link between political policies macroeconomic reforms low inflation confidence law and order with his brother and if they take that as their national duty it can be done
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Lee Kuan Yew: one problem which you have is that the philippines has an american-style constitution one of the most difficult to operate in the world there is a complete separation of powers between executive legislature and judiciary the americans wrote this constitution in 1787 in philadelphia and they ratified it in 1789 more than 200 years ago they wanted a weak executive president having suffered at the hands of king george iii of england they wanted the opposite of a strong monarch but you are a developing country and developing countries faced with disorder and underdevelopment needs strong honest executive governments a u.s style constitution for the philippines failed long before marcos declared martial law it was readapted in its pristine form in 1987 by president aquino the system worked in america because of a super abundance of resources and riches in a vast underpopulated continent i do not believe that korea taiwan hong kong or singapore could have succeeded as they have done if you had to work under such a constitution where political gridlock on every major issue is the way of god and you will notice that since the vietnam war and the great society for some 28 years now the united states system has not functioned well in the united states i move on to the brighter side of the philippines picture nomura research institute in its asia and pacific economic outcome third quarter 1992 reports on the philippines on page 28. that's an important publication because you have a reputation to defend this is huge losses suffered by industrial and commercial establishments due to the electricity shortages and scheduled power blackouts averaging seven hours a day could not have come at a more inopportune time for the country with foreign investors closely monitoring the country for a stable political transition the infrastructure problem is publicity it can ill afford i understand that brownouts have got worse and that mccarthy is back to five to six hours a day of brownouts and the center for research and communications predicts that in the dry summer months ground up could last as long as eight hours a day in metro manila and luzon they estimate industries could lose 20 billion pesos during this three-month period at the center for research and communication this problem must be put right urgently there is already legislation to allow for bot build operate transfer other schemes like boo build operate own operator bops build open profit sharing can also work so that infrastructure projects especially roads telecommunications and industrial estates can be done quickly when public funds are such short supply in the 1950s economic development in the philippines was better than that in korea comparable to that in taiwan and was at the lower end of the same bracket as japan i asked for a check of the figures in the 1950s today japan's per capita is 27 000 taiwan's is 8 000 korea 6 500 the philippines is 724 about 50 percent of filipinos less than subsistence wage every filipino knows that all the other asean countries have overtaken or are about to overtake the philippines if the next six years are wasted the philippines were lagged behind even vietnam and filipinos cannot blame others for it the american forces have left so because there will be no foreign military presence to conscribe of the filipino nation the aquino president's presidency achieved the restoration of democratic constitution ramos presidency will have to prove that this democratic constitution can be made to work in the philippine context and that development is achievable many checks and balances have been written into the constitution to guard against the abuse of power that happened with marcos but they should not lead to a paralysis of government at the end of the day after discussion and debate the legislature must allow the executive to take the hard decisions and people must be prepared to work to make these hard decisions stick then the world will quickly change his view of the prospects for the philippines if political leaders in the administration in congress go back to politics as usual more time will be lost you know the london economist said democracy's future is waiting to be confirmed there is absolutely no assurance that the american-style constitution will produce wealth for the philippines as it has for america filipinos have no wealthy empty continents to make them rich they have a densely populated archipelago with little oil gas or other valuable natural resources however filipinos are a people not without talent and energy nomura asia focus the same nominal research institute i quoted just now in august 92 sported a 1991 general survey of japanese companies listing the major advantage in the philippines as high-grade low-cost labor force high-grade low-cost labor force a very powerful factor for economic growth provided the framework is there for the capital the technology the management to set it off in singapore there are over 500 filipinos professionals engineers accountants architects managers more than those from all other asean countries except malaysia which is our nearest neighbor they hold their jobs on their merits the philippines has six post graduate schools for mbas and your prestigious asian institute of management there are more mbas in the philippines than in any other asean country both filipino and american trees filipinos are fluent in english and english use is widespread these are all factors that aid development since the sweating in the president marcos there has been some positive signs for the future in august he announced the complete liberalization of foreign exchange regulations and ended 40 years of foreign exchange control this has generated a sense of optimism over economic recovery banking activities have increased and the stock market is upbeat if the president carries through his liberalizing trade and investment regulations he will generate new momentum in economic activities in the nature of all economic recoveries there cannot be instant dramatic reversal you must expect domestic vested interest to exploit the political system to the maximum to slow down economic liberalization but if people generally understand that economic globalization means jobs to them wages that will go up and there will be counter pressures on congressmen cabinet ministers and officials to get on with it filipinos should not tolerate a slower pace of liberalization and what the asean partners have achieved especially thailand and malaysia and now indonesia the president in his state of donation address has declared that he would pump prime the economy that his priorities are the construction of infrastructure communications and transportation water supply power generation in trade and foreign investment sees for more aggressive liberalization policies you would like to abolish all remaining quantitative restrictions on trade to encourage foreign investment he will liberalize nationality requirements in the omnibus investment code to make it possible for foreign investors to own their plant sites because i understand it was written into your constitution in 1987. the president will have to show political skill and courage to cut away through the conflicting interests of western monopolies and the rest of the people of the philippines i think his duty first and foremost is to the people of the philippines
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Lee Kuan Yew: to recap first restore law and order make manila safe from organized kidnapping and major crimes remove these stories from the headlines no advertisement in however prestigious a magazine can counter the disadvertisement of another kidnapping headline second concentrate on economics not politics
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Lee Kuan Yew: or more accurately stop the politicking
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Lee Kuan Yew: lift restrictions on trade and investment dismantle the web of measures which keep out foreign companies and make philippine companies compete to survive not thrive at the expense of the ordinary filipino third build up
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Lee Kuan Yew: third build up your infrastructure like power stations roads communications either in partnership with or completely through the private sector if you don't have the funds
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Lee Kuan Yew: in conclusion i hope i have provoked you
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Lee Kuan Yew: businessmen the government the establishment the press and tv of the philippines provoked you into setting your priorities for getting your act together so that you can achieve your potential if you maximize the next six years of the ramos administration by freeing your economy attracting and getting the investments and making them profitable and if you work hard at creating conditions that make them increasingly profitable then you will get yourselves back into the mainstream of growth and development and be in the same league as thailand malaysia indonesia the oecd countries the oecd calls them now the new dynamic economies of asia you can be should be one of them thank you
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