From the local banks' perspective · 2002. 1. 31. · reengineering all or some bank pro-cesses. It...

Vol. XIX No. 5 September - October 2001 ISSN 0115-9097

From the local banks'perspective: Feeling

the liberalization effects*

4 Does foreign entry in thedomestic banking sectorpromote efficiency?

6 Macroeconomic policyplays a major role infinancial liberalization

9 PIDS Research: Lookingthrough old and newpolicy frontiers

10 PIDS Board Member sharessome words of wisdom

11 PIDS at 2414 Through the eyes of

aspiring photographers15 PIDS employees unite

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This year, PIDS celebrated its 24th found-ing anniversay with its silver anniversary closeat hand. Its theme, "Strengthening the Infra-structure for Research and Networking" is acontinuation of last year's focus on providingthe necessary infrastructure for doing research,an area where PIDS plays a leadership role.The weeklong celebration was highlighted by aseminar on the "Impacts, Risks and Opportuni-ties of Financial Liberalization and Integration:A Macro-Micro Analysis." The three researchpapers presented during the seminar are themain features in this issue of the DevelopmentResearch News. The papers lookedinto the impacts of the financial

* 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. MakatiCity: PIDS.).2 RA 7721, Section 1.

Rene B. Hapitan**

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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.

In the banking sector, competition was instituted in 1994 with the imple-mentation of the Foreign Bank Liberalization Act (Republic Act No. 7721). It wasenvisioned that the entry of foreign banks will create:

…a dynamic banking and financial system that will stimulate economic growth, at-tract foreign investments, provide a wider variety of financial services to Philippine enterprises,households and individuals, strengthen linkages with global financial centers, enhance thecountry’s competitiveness in the international markets and serve as a channel for the flow offunds and investments into the economy to promote industrialization.2

With the liberalization of the Philippine banking and financial sys-tem, a more competitive environment is thus created and greater foreign

P

What's Inside

Editor's Notes

DEVELOPMENT RESEARCH NEWS September - October 20012

participation is encouraged. Conse-quently, increased ownership in do-mestic banks by foreign banks and theentry of new foreign bank branches areexpected.

Under RA 7721, 10 foreign bankswere authorized by the Monetary Boardto operate in the Philippines throughany—but only one—of the followingmodes of entry:

* By acquiring, purchasing orowning up to 60 percent of the votingstock of an existing bank;

* By investing up to 60 percentof the voting stock of a new banking sub-sidiary incorporated under Philippinelaws; or

* By establishing branches withfull banking authority.

By July 1999 and during an in-terim bout with the East Asian financialcrisis, nine of the 10new foreign banks thatwere granted licensescontinued to operatein the Philippines.One bank, the Devel-opment Bank ofSingapore (DBS),opted to acquire an es-tablished local bank(Bank of SoutheastAsia) under existingPhilippine laws, thusmaking the DBS exist-ing outside of RA 7721.

The entry ofthese banks, however,are not without any ac-companying difficulty.There remains a bigger question on theimpact of the stability—or lack of it—of

the whole financial system, with the par-ticipation of new players, on society. Interms of deposits, foreign banks havegrown three times in market share andsix times in absolute pesos, taking sub-stantial market share from competinglocal and government banks (Table 1).In the same manner, in terms of loans,foreign banks seem unaffected by thecurrency crisis while lending activitiesof local and government banks sloweddown after being hit by the financial cri-sis.

Fisher,3 in his study, noted, for in-stance, that taxpayers generally have tobear the cost of the government’s strat-egy of shifting to a liberalized regimeand put forward this question: Is the Phil-ippines starting on the wrong foot in terms offinancial liberalization through the entry offoreign banks?

Survey Says…To understand what effects the

entry of foreign banks had and how lo-

cal banks view such entry, a survey wasconducted among local banks in thePhilippines. The survey consisted of 10local banks, broken down into six uni-versal/commercial banks, two govern-ment specialized banks and two savings/thrift banks. All in all, the respondents

own 54 percent of the total assets, 65percent of the total deposits and 62percent of the total capital of the entirePhilippine banking industry as of De-cember 2000.

The survey focused on thesebanks’ reactions to the entry of their for-eign counterparts. Interviews with thesebanks’ personnel were likewise done tovalidate the initial responses.

According to the survey results, lo-cal banks considered the environmentprior to the entry of foreign banks to bevery competitive and then reevaluated itto be highly competitive with the entry ofthe foreign banks.

There was more competition inthe wholesale banking operations com-pared to retail banking, developmentbanking and other areas of operations,particularly since foreign banks initiallycatered to the larger and higher mar-gin accounts that comprised the whole-sale banking.

On the other hand, in terms ofspecific products and/or services, for-eign exchange transactions, lending/loan services and investment bankingwere affected on a highly significantlevel. Moreover, deposits, money mar-ket placement, trust services and invest-

3 Fisher, K.P. 1997. Financial Liberalization to bankfailure: Starting on the wrong foot.

Source: Central Bank Factbook, various years

Table 1. Philippine Commercial Banking Industry Market Share Summary: Total Deposits

Year Domestic Banks Foreign Banks Government Banks

million pesos % to total million pesos % to total million pesos % to total

1995 575,094 69.3 43,311 5.2 211,688 25.51996 834,512 73.3 55,874 4.9 247,252 21.71997 1,073,395 72.7 110,379 7.5 292,551 19.81998 1,141,577 72.0 149,611 9.4 293,175 18.61999 1,238,614 70.0 199,202 11.3 330,075 18.72000 1,124,529 66.8 260,796 15.5 297,315 17.7

DEVELOPMENT RESEARCH NEWS 3 September - October 2001

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ment in fixed assets were also signifi-cantly affected. Invetsment in fixed as-sets was on the low side because of thelimited number of branches that newforeign banks are allowed under RA7721 while trust services were also ex-pected to be low because none of thenew foreign banks were granted licensesto undertake these operations.

Other qualitative factors that wereaffected by the entry of foreign bankswere the sourcing of funds, which in-cludes deposits, hiring of employeesand computerization/changes in infor-mation technology. Banks admitted thatthere was difficulty in hiring and retain-ing productive employees during thefirst few months of the foreign banks’start of operations.

On top of this, local banks re-vealed an estimated potential revenuelosses of P500 million from the entry offoreign banks as a result of competition

in the wholesale side of banking activi-ties although local banks downplayedsuch losses and said that more competi-tion was felt from competing local banksthan foreign banks.

In response to all these, localbanks confronted the challenge of com-peting with foreign banks by imple-menting strategies. Almost all the re-spondent local banks resorted to invest-ing in new technology or jumped intothe e-commerce bandwagon. Some im-mediate responses included moving toother markets or market niches, review-ing their pricing or interest rates, andreengineering all or some bank pro-cesses. It is worth noting that local banksimplemented marketing strategies, lend-ing support to their almost unanimousview that the entry of foreign banks posemore of a marketing challenge.

On the whole, local banks agreedthat the entry of foreign banks was satis-

factory in liberalizing the economy andthe banking sector. According to them,it will be more desirable in the future ifthere were more banks with morebranches, increase in the capitalizationrequirements, and reciprocity arrange-ments with the foreign banks’ countriesof origin. However, there was a mixedreaction as to whether the local bankswould favor a merger with a foreignbank.

Upon closer look…The survey results point to an in-

creased state of competition in the bank-ing industry particularly in the whole-sale banking where foreign banks ob-tained a sizeable market share from do-mestic and government banks. Part ofthe growth can be attributed to the in-creased activities of the established for-eign banks such as Citibank, Hongkongand Shanghai Banking CorporationLtd. (HSBC) and Standard CharteredBank although other foreign banks arenot far behind. In fact, new entrants suchas the ING Bank of Netherlands, Devel-opment Bank of Singapore (DBS), ANZBanking Group Ltd. of Australia and theDeutsche Bank AG of Germany, postedextremely large increases in total depos-its. Over the last five years, foreign banksexhibited faster growth in terms of totalloan portfolio and total deposits rela-tive to the entire banking industry.

Local banks posted a loss of po-tential revenues as a result of the con-centration of foreign banks on whole-sale banking. An increase in the foreignbanks’ activity on deposits and loans,meanwhile, had a positive effect onthese foreign banks’ return on equity .Coupled with limited capital infu-sions—since they are excluded fromcapitalization requirements—foreignbanks enjoy high rates of returns.

It is interesting to note that theentry of foreign banks neither encour-aged the promotion of a variety of finan-cial services and incremental in-termediation activities nor ini-

Deposits in local banks were significantly affected with the entry of foreign banks as a result of the competition. But localbanks confronted the challenge by implementing a number of strategies, which include moving to other markets or marketniches, reviewing their pricing, and reengineering all or some bank processes.


Does foreign entry in the domestic banking

sector promote efficiency?

F oreign competition inducesdomestic banks to be more effi-cient. It narrows interest rate

spreads and also lowers the operatingexpenses of banks. Despite the declinein interest rate spreads, bank profits arenot negatively affected because operat-ing expenses decline resulting in do-mestic banks offering greater efficiencyand better service.

Dr. Angelo Unite, Senior Fellowat the De La Salle University (DLSU)Angelo King Institute for Economic andBusiness Studies and DLSU Professor,and Dr. Michael J. Sullivan, Visiting Fel-low at the DLSU Angelo King Institutefor Economic and Business Studies andAssociate Professor at the University ofNevada in Las Vegas, gave these conclu-sions in their paper entitled “The Im-pact of Liberalization of Foreign BankEntry in the Philippine Domestic Bank-ing Market.” Unite presented their find-ings on 27 September 2001 at a researchseminar on financial liberalizationjointly organized by the PhilippineAPEC Study Center Network (PASCN)and the Philippine Institute for Devel-opment Studies (PIDS) in conjunctionwith the 24th founding anniversary ofPIDS. Unite and Sullivan’s study is partof the PASCN-funded research project“Impacts, Risks and Opportunities ofFinancial Liberalization and Integra-tion: A Micro-Macro Analysis.”

Interest rate spreadsAccording to Unite and Sullivan,

foreign bank presence affects the op-eration of domestic banks by narrowingdown interest rate spreads. However,

they qualified that this narrowing is de-pendent on the level of group owner-ship of the domestic bank. Interest ratespreads are found to decline with in-creases in foreign presence only whengroup ownership is high. They inter-preted this finding as evidence in favorof the hypothesis that foreign competi-tion reduces interest rate spreads asboth domestic and foreign banks vie forthe same business.

In addition, the authors noted that“banks that are affiliated to family cor-porate groups are found to have greaterinterest spreads, suggesting that affili-ated banks are able to extract wealth fromgroup member firms.” “We also find thatrelatively larger banks have lowerspreads. It could be that these largerbanks offer more favorable terms result-ing in more business. Interestingly, wealso find that operating expenses areinversely related to interest ratespreads. Perhaps, better-managed bankshave relatively higher spreads and lowerexpenses. Alternatively, banks that areable to earn relatively higher interestrate spreads are not inclined to pursuenon-interest income, and operatingexpenses are lower for traditional in-come sources,” the authors added.

ProfitsAs opposed to the findings of

other authors, the study did not find anyevidence of a decline in profitability interms of accounting profits with theentry of foreign banks. This implies thatthe observed decline in interest ratespreads does not diminish profitability.The authors surmised that this could

be due to one of the following reasons:(1) interest income and interest ex-pense may make up only a small por-tion of total profits; (2) non-interestsources of income may increase to off-set any decline in interest income; and(3) operating expense may decline tooffset any decline in profits from a nar-rowing of interest rate spreads.

As expected, group-affiliatedbanks are found to be more profitableas these family corporate groups in-clude many of the largest and most prof-itable companies. This finding is con-sistent with the higher interest ratespreads associated with group-affiliatedbanks.

Non-interest incomeIn the study, Unite and Sullivan

also found that non-interest income ofdomestic banks declines with foreignbank penetration and increases withbank asset concentration. That non-in-terest income of domestic banks de-cline with increased foreign presencesuggests that foreign banks take busi-ness away from domestic banks in non-traditional sources. However, the find-ing that increases in bank asset concen-tration raise non-interest income possi-bly indicates that the foreign banks com-pete in non-traditional areas such as in-vestment banking, taking business awayfrom mid-size domestic banks but notfrom the largest domestic banks.

Operating expensesConsistent with findings of other

authors, the study found that operatingexpenses decline with foreign bank


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entry and penetration, suggesting thatforeign presence in the banking sectorresults in greater efficiency. Thesegains, however, are lower for banks thathave high levels of group-affiliate own-ership.

“This maysuggest that group-affiliated banks aremotivated by factorsother than effi-ciency and profitsor that to maintainoverall group prof-its, there must besome sacrifice ofbank efficiency.However, we findthat the greater ef-ficiency induced byan increased for-eign presence issomewhat dimin-ished when levels ofinsider ownershipare high. Operat-ing expenses arealso found to begreater with higherbank asset concen-tration, suggestingthat large dominantbanks can easilypass expenses totheir customersthan smaller banks can.”

Managing bank liberalizationWhile RA 7721 has liberalized for-

eign bank entry, foreign bank participa-tion in the domestic banking market isstill limited. Under current laws, foreignownership of banks is generally limitedto 60 percent. With the results of thestudy showing that foreign participationis beneficial in terms of increased effi-ciency of domestic banks, the authorsnoted that a policy of further openingup the domestic commercial bankingmarket to foreign presence could beworth pursuing.

Moreover, because domesticgroup-affiliated banks are better able tocope with the competitive shockbrought about by foreign presence inthe domestic market as the study shows,

an important issue to address, accord-ing to Unite and Sullivan, is hownongroup-affiliated banks can developsimilar coping mechanisms. Thus, thereis a need to explore at the microeco-nomic level how exactly the group-af-filiated banks cope with competitiveshocks and reap the net benefits of in-ternal markets.

To mitigate the adjustment cost offurther liberalization of the banking sec-tor, the authors recommended that for-eign entry and participation should bedone in conjunction with built-in safe-guards such as credible enforcement ofprudential regulations and supervision,

and greater reliance on market mecha-nism. Initially, screening of new foreignbanks should be made transparent andbased on objective criteria.

“Pruden-tial regulationsand supervisionare essentialmeans of eco-nomic proprietyto temper thenegative aspectsof bank gover-nance based onaffinity. Owner-ship of banks bya dominant fam-ily group createsconflict of inter-est,” the authorssaid.

In addi-tion to the man-date of the Cen-tral Bank to in-crease transpar-ency and infor-mation disclo-sure, the authorsrecommendedthat ownershipi n f o r m a t i o nmust be detailed

enough for regulators to discern pre-cisely who the owners of banks are. Theownership data should include thebeneficial owner, relatives and associ-ates. Moreover, both the ownership in-formation and the borrower data shouldbe publicly disclosed for both privateand publicly traded corporations.

The authors also suggested thatthe government should rely less on ex-plicit and implicit guarantees via de-posit insurance schemes to reducemoral hazard problems associated withgroup-affiliated banks and put pressureon domestic banks to improvetheir productivity and service.

Citibank, N. A.Standard Chartered BankHongkong and Shanghai Banking Corp.Bank of America NT and SAThe Bank of Tokyo-Mitsubishi, Ltd.Korea Exchange BankThe Fuji Bank, Ltd.The International Commercial Bank of ChinaING BaringsDeutsche Bank AGBangkok 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 PhilippinesHSBC Savings Bank Phils., Inc.

List of Foreign Bank Branches and Subsidiaries(As of 31 December 2000)


W ith the entry of more for-eign banks as a result ofRA 7721, a more competi-

tive banking industry was envisioned forthe Philippines. In theory, allowing newplayers to enter would deconcentratethe banking sector and bank spreadswould consequently narrow.

However, a study by Dr. George N.Manzano, APEC Study Center Directorof the University of Asia and the Pacific,and Mr. Emilio S. Neri, Jr., Financial Ana-lyst at Abacus Securities entitled "For-eign Bank Entry, Bank Spreads and theMacroeconomic Policy Stance," fundedby the Philippine APEC Study CenterNetwork (PASCN) and presented dur-ing the 24th founding anniversary ofthe Philippine Institute for Develop-ment Studies, revealed that relative bankspreads did not narrow down shortly af-ter the entry of foreign banks. Manzanoand Neri found in their study that thestructure of the banking industry, asgleaned from the changes in concen-tration ratios in assets, loans and depos-its, did not appear to be significantly al-tered by the entry of new foreign banksin the subsequent years after liberaliza-tion. After RA 7721 took effect, 10 newforeign banks entered the Philippinesin 1995 but their share accounted foronly less than 2 percent of the total bank-ing assets. Although the share of the oldand new foreign banks reached a high20 percent of the total banking assets in1997, this declined to 16 percent in2000. Such movements in the concen-tration ratios in assets of foreign banksmirror the movements in the concen-tration ratios in loans and deposits. And

contrary to expectations that bankspreads will decline, high bank spreadspersisted despite the entry of new play-ers. Why is this so?

The missing piece of thepuzzle

While the persistence of highbank spreads despite the entry of for-eign banks can be partially explainedby the weak liberalization measures inRA 7721 or the lags of the effects of com-petition, Manzano and Neri pointed tomacroeconomic policy as the importantmissing piece of the puzzle. Accordingto them, the macroeconomic policy mixthat prevailed in 1993 until the Asian

financial crisis of 1997 prevented com-petitive forces of the bank liberalizationlaw of 1994 from taking full effect.

"In particular, the policy mix thatprevailed in 1993 to mid-1997 was gen-erally of sterilized foreign exchange in-tervention to meet both the CentralBank's tight monetary and foreign ex-change targets. Maintenace of both anInternational Monetary Fund (IMF)-sponsored monetary aggregate target-ing program and the consistent peggingof the exchange rate led to a high inter-est rate. These combined policies of ade facto nominal peg of the peso andhigh domestic rates (which, by coinci-

Macroeconomic policy plays a major role

in financial liberalization

Dr. George N. Manzano and Dr. Angelo A. Unite


dence, also had a big role in causingthe currency crisis) had a potent effecton bank spreads," they explained.

Effect on deposit ratePegging or fixing the level of ex-

change rate fuels expectations that ex-change rate will remain stable in thefuture and that funding of bank loansthrough foreign currencies is less risky.Since the interest rates on foreign debtinstruments, e.g., LIBOR*, were typi-cally lower than the marginal cost of rais-ing peso deposits, then it was cheaperfor banks, the authors said, to generateforeign currency-denominated loan-

able funds than to compete for peso-denominated deposits of residents.

Banks therefore were encouragedto fund a growing share of their assetsthrough foreign currency-denominatedliabilities. This incentive to engage inmore dollar intermediation tended toput less pressure on banks to competefor peso deposits and gave little motiva-tion to bid up the peso deposit rates inorder to generate more deposits. Indi-rectly, the substitution of the peso withthe dollar as source of bank fundstended to lower the cost of funds of lo-cal banks and led to wider bank spreads.

Effect on lending rateThe 91-day Treasury bill rate af-

fects the lending rate behavior of banksas it serves as a benchmark for bankloans. The interest on the T-bill rate typi-cally amounts to the opportunity cost ofbank lending to riskier private entities.Manzano and Neri found in their studythat lending rates or the return on anypeso-denominated debt instrument

yielded very high returns during thepre-crisis liberalization period. To illus-trate, the returns on the 91-day T-bills,in dollar terms, consistently exceededthe returns on the LIBOR by as much as1,000 basis points.

The puzzle unmaskedMacroeconomic policy has masked

the competitive pressure that foreignbanks would otherwise have exerted onthe local banking system. The persis-tence of high relative spreads followingthe entry of foreign banks did not meanthat RA 7721 did not "work." The Phil-ippine experience showed that a policyof tight monetary and foreign exchangetarget from 1994 to 1998 maintainedwider bank spreads rather than narrow-ed the gap between lending and depositrates. Manzano and Neri said that thisexperience highlights an important les-son: that in order to have a 'successful'liberalization program, the necessarycondition of having the appropriatemacroeconomic environment shouldbe met.

Bank asset concentration – assetconcentration in the three largestbanks, measured as a percentageof total assets of all commercialbanks

Foreign bank penetration – total ofall foreign bank assets as apercentage of the total assets of allcommercial banks

Foreign entry – the number offoreign banks as a percentage ofall commercial banks

Foreign ownership - thepercentage of foreign ownershipof the top 20 owners

Terminology

Group affiliation – affiliation todomestic family corporate group

Group ownership - the percentageof group ownership of the toptwenty ownership

Interest rate spread – the differencebetween the ratio of interestincome on loans to total loans andthe ratio of interest expense ontotal deposits to total deposits

Operating expense – ratio ofoverhead expense to total assets

Ownership concentration/insiderownership – the percentage ofinsider, group, and related partyownership of the top 20 owners

DRN

DRN

“Eventually, as a high level of trans-parency and disclosure becomes an in-tegral part of domestic banking prac-tices, the current banking corporate gov-ernance system will be transformed tothat with more formal controls. As a re-sult of increased foreign competition,the corporate governance structure ofdomestic banks will evolve into onewhere there is a high level of manage-rial professionalism, diverse ownershipstructure that encourages improved un-derwriting criteria and sounder bank-ing practices, and reduced relationshipstyle, making them more effective cor-porate monitors,” Unite and Sullivanenvision.

*LIBOR or London Inter Bank Offered Rate (LIBOR) isthe rate at which banks in London offer Eurodollars inthe placement market. Since different banks may beoffering Eurodollars at different rates, the LIBOR rateused in pricing a loan is usually the average of the11:00 A.M. offering rates of top three to five refer-ence banks in the market. (Source: http://www.bsp.gov.ph)

Does foreign entry..from page 5


DEVELOPMENT RESEARCH NEWS is a bimonthly publication of the PHILIPPINEINSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights the findings andrecommendations of PIDS research projects and important policy issues discussedduring 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 disseminateinformation to promote the use of research findings.

The views and opinions expressed here are those of the authors and do not necessarilyreflect those of the Institute. Inquiries regarding any of the studies contained in thispublication, or any of the PIDS papers, as well as suggestions or comments are welcome.Please address all correspondence and inquiries to:

Research Information StaffPhilippine Institute for Development Studies

Room 304, NEDA sa Makati Building,106 Amorsolo Street, Legaspi Village, 1229 Makati City, Philippines

Telephone numbers 892-4059 and 893-5705Telefax numbers (632) 893-9589 and 816-1091E-mail address: [email protected]

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 foreignsubscribers. All rates are inclusive of mailing and handling costs. Prices may changewithout prior notice.

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.

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, ContributingEditors; 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.

Development Research NewsVol. XIX No. 5

September - October 2001ISSN 0115-9097

tiated the adoption of new technologiesand processes. While the survey mayshow that local banks recognized theneed to invest in new technologies, in-terviews show that there has been littleinnovation in terms of developing new‘foreign’ technologies and processes.While foreign banks offer the “tradi-tional” products and services, domesticbanks took the lead in e-commerce bank-ing.

Since local banks prefer to view thepresence of foreign banks as a “market-ing problem” rather than a bankingproblem, the former implemented coremarketing strategies mostly directed attheir local counterparts.

Finally, local banks reengineeredtheir system as part of good businessstrategy rather than as an approach tocompeting with foreign banks.

ConclusionHapitan explained that as compe-

tencies and economies of scale develop,foreign banks will target more domes-tic clients that will create a “crowding-out” effect in the wholesale banking.This could force the local banks to moveinto the middle market and retail bank-ing sector. While the local banks willmatch the competition on the whole-sale side, the foreign banks will “leap-frog” and move into the middle marketor retail banking. Examples are the caseof HSBC acquiring PCI Savings Bankfrom Equitable-PCI last November 2000,aggressive mall advertisements and ap-pliance sales offered by credit card com-panies affiliated with local banks. Thus,the interplay of strategies will result to amore vibrant Philippine banking systemwherein more markets will be reachedby both local and foreign banks at a fasterrate.

Policy RecommendationsThree policy implications are do-

able based on the analyses in the paperto accelerate the liberalization processof the Philippine banking industry.These are:

1. Allowing the new foreign banksto increase the number of branchesfrom the six branch-limit stipulated un-der RA 7721 will enable the new en-trants to reach more consumers;

2. Setting up proper incentives toencourage reciprocity and complemen-tary arrangements, whereby local bankscan be allowed entry in the country oforigin of the foreign banks, is consid-ered by local banks as a positive step;and

3. Increasing the capitalization re-quirements of foreign banks will en-courage mergers that can further boostthe liberalization process. DRN

From the local banks'..from page 3


T hank you verymuch for the PIDSplaque.This would

certainly be one plaque that Iwill be very happy to display.

First of all, I am happy tosee a lot of friends and formercolleagues present here to-night. I would like to thankDante (Canlas) and Mario(Lamberte) for the kind wordsthey have said about me. Iwould also like to thank themembers of the Board who re-ally went out of their way tomake sure that the key deci-sions I made serve the institu-tion (PIDS) well. In particu-lar, Ledi (Cariño) and Emil(Javier) made sure that theBoard remains a good Board.That is why we really tried toget Willy Padolina. This showshow many people care that PIDS con-tinues to be strong. I also wish to thankGerry (Sicat) for readily accepting thejob of finding a new PIDS President atthe time when Pons (Intal) left thepresidency. It must really mean some-thing when you look at the people whodo volunteer work for PIDS like Ben(Diokno) who has supported PIDS a lot.It was never really hard for me to go out

PIDS Research: Looking through old

and new policy frontiers*

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PIDS Research: Looking through old

and new policy frontiers*

ments. Likewise, it is importantthat PIDS should do extensionwork especially when it comes tothe legislative body.

To a great extent,brainpower and ideas could beas powerful as a strong lobby.They are helpful in establishinga policy force.

Now, how does one becomea policy force?

First, I think the most im-portant thing is that the knowl-edge generation is done prop-erly. Second, that the knowledgegeneration is done in great vol-ume so that whatever issue comesup, you are ready. Third, that theknowledge is communicatedproperly. However, communica-tion may create its own risks. If

you communicate too well and somepowerful people do not like what youare communicating, then you may endup having some very powerful peopletrying to reduce your budget and mak-ing you less effective. That is why thelong run view is to make PIDS more fi-nancially independent. Of course, un-til now, it remains hard to figure out howwe can make PIDS private and finan-cially independent and yet public at thesame time.

Fourth and finally, you must havea strong set of core people. While it istrue that a strong research or-ganization must be willing to

of my way to support PIDS. As I said,NEDA is the "department of everything."Its constituency is the entire countryand anybody who has a little knowledgein economics knows that the larger theconstituency is, the greater the freeriding becomes. In that sense, NEDAneeds all the help it can get. The majordisadvantage of NEDA is that it has tosee the entire society from everybody’spoint of view. Thus, there is a risk that itwill not have enough lobbying power be-hind it to win the policy debates. Thatwas why it was extremely important forme that PIDS does a good job. And if itdoes a good job, then NEDA can use itsresearch results to win its (NEDA) argu-

Dr. Felipe F. Medalla and Dr. Dante B. Canlas

* Response Speech delivered during the author's Tes-timonial Dinner on September 21, 2001.** Outgoing Chairman of the PIDS Board of Trusteesand former Secretary of Socio-Economic Planning andDirector-General of the National Economic and Devel-opment Authority (NEDA).

DEVELOPMENT RESEARCH NEWS September - October 20011 0

I n today’s highly competitiveworld, the image of a sucess-ful professional is a sought-

after goal for many. The proliferationand high marketability of self-helpbooks that tackle the topic of success isindicative of man’s continuing thirst forinformation on how—and yearning—to succeed. But who is really a success-ful professional in this day and age?What qualities does he possess?

Speaking before the PIDS staffduring the recent 24th Anniversary Loy-alty Awards Ceremony, Dr. William G.Padolina, Deputy Director for Partner-ships at the International Rice Re-search Institute, and a member of thePIDS Board of Trustees, expressed hisgratitude for the invitation to be theguest speaker and shared his inspira-tional message on the topic.

“A successful professional pos-sesses three attributes: he is talented;he is adaptive; and he is ingenious,”Padolina said.

Padolina explained further:“Your talent is useless if you could notadapt, as you could never be produc-tive in a particular environment. Andyou are not going to be productive ei-ther even if you are talented and adap-tive when you do not want to exerciseyour imagination and be ingenious andimaginative in your approach to solvingproblems or analyzing situations.”

His choice of topic was most rel-evant for the ceremony held to honorsix PIDS staff for their 15 and 20 years

of service to the Institute (see relatedarticle on pages 11 to 13). Padolinacongratulated the loyalty awardees fortheir long years of service and for be-coming a progressively adjusted type ofindividuals. He added that he can sensethe very strong degree of kinship andhuman relationship within the Institutejudging from their very jovial speechesand the blissful atmosphere during theevent.

“I hope that as you look forward tomore years at PIDS, you will continue toshare your talents in helping the

PIDS Board Member

shares some words of wisdom

country’s decision-makers come up withmore effective pro-grams and policies.”

A high-perfor-mance workplace, com-posed of talented,adaptive and inge-nious individuals, ishow he describedPIDS. He commendedthe Institute for its valu-able contributions inthe area of policy re-search especially inguiding various devel-opment efforts in thegovernment. He alsomentioned that thecelebration is a goodtime to recognize pastachievements as well asa good time to lookahead.

In his parting words, he advisedthe staff to be always open to new ideasand take up opportunities fornonlateral and creative thinking. Beingopen to learning is what helps a persondevelop the attribute of agility or theability to adjust to new situations andenvironment. "Do not stop taking ad-vantage of opportunities to train, to learnnew things or take up new challenges.Learning should not stop after you earna college degree...Do do not expectlearning to take place only in the class-room. It must come from your own ini-tiative because opportunities come inmany forms.” SVS DRN

Dr. William G. Padolina

DEVELOPMENT RESEARCH NEWS 1 1 September - October 2001

P IDS celebrated its week-long 24thfounding anniversary on September 24-28, 2001 with the theme "Strengthen-

ing the Infrastructure for Research and Net-working." This year's celebration was purposelysubdued in preparation for the silver anniver-sary next year but the occasion was no lesssignificant and the festivities no less jovial.

The opening of the PIDS Photo Con-test—a first in PIDS—on September 25 signaledthe start of the three-day celebration. A total of26 entries were submitted by six PIDS employ-ees who participated in the contest. All the pho-tos depicted the various socioeconomic policyissues of PIDS research studies and were origi-nally taken by the employees themselves. Sevenwinning photos were selected for the 2002 PIDSCalendar to be given as corporate gift to PIDS'friends and patrons.

The thanksgiving ceremony was held onSeptember 26 with a mass offering celebratedby Fr. Alton Fernandez of the Salesian Order ofDon Bosco. The PIDS Choir 2001, formedmonths in advance to select and rehearse thehymns for the mass, led in the singing. A short

programme followed with the choir leading inthe singing of the opening song I Offer My Lifefollowed by the ecumenical thanksgiving prayersby Ms. Jessaine C. Sugui, Jenny D. Balboa,Genna E. Manaog and Merle G. Galvan. All thestaff joined in the closing song MagpasalamatKayo sa Panginoon.

The annual Loyalty Awards ceremony,the highlight of the anniversary celebration, fol-lowed. PIDS President Dr. Mario B. Lamberte,in his opening remarks, expressed hope thatthe PIDS will continue to fulfill its role as an or-ganization that manufactures a lot of keys—keysthat could unlock many doors to more opportu-nities for development. The Institute, throughpolicy research, has been contributing in theproduction and enhancement of skills for thepast 24 years, and in view of this, he hopes thatPIDS will be as productive as ever in unlockingmany more doors for national development inthe succeeding years.

There are five loyalty awardees for 15years in service and one for 20 years for thisyear. 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 thePublications and Circulation Division, one of the +12

byBarbara G. Gualvez*

PIDS at 24

The Corporate News section includes brief accounts of inhouse PIDS activities, staff training and workshop results. It is intended to inform both the readers andPIDS 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 throughtrainings. 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 seriousmatter 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 fieldsso that they can contribute more to the attainment of the Institute's overall mandate.

event's masters of ceremonies (the other one isHRD Officer Edmund K. Labuguen), stressedthat the award for loyalty does not only reflectlength of service but more importantly, depend-ability, reliability and devotion to the organiza-tion that one is serving. Thus, the award forloyalty takes on a more profound meaning andgreater value for the awardees and the Insti-tute.

A secretary to Dr. Aniceto C. Orbeta, Jr.and Dr. Celia M. Reyes, both PIDS senior re-search fellows, Ms. Cinco started as a typist/stenographer in 1978 and worked for variousresearch fellows during the course of her ser-vice to PIDS. She was one of three PIDS em-ployees who were given the fossil-engravedPIDS Pioneer Award in 1998 as one of thefounding staff of the Institute during its forma-tive years. Mr. Mores has been the driver of Dr.Lamberte for many years. He started drivingprivate vehicles, then worked in a trucking com-pany and as a personal driver to the Mayor ofMati, Davao Oriental before coming to work forPIDS. Mang Maning (as he is fondly called) wasstraightforward in accepting his plaque and sim-ply declared his gratitude to the Almighty andthe PIDS for the opportunity to work for theInstitute. Meanwhile, Ms. Pizarro, the long-timesecretary and research assistant of Dr.Medalla, thanked the PIDS manage-

The Corporate NEWS

* Information Officer, Philippine APEC Study CenterNetwork (PASCN) Secretariat.


ment and especially her boss who has supportedher all this time and whose nurturing outlookmade it possible for their professional relation-ship as well as personal friendship to endurethroughout the years. Mr. Arthur Salazar, or sim-ply Budi, also thanked the Lord, his boss Ms.Andrea S. Agcaoili (Operations and Finance Ser-vices [OFS] Director) and other OFS person-nel. On behalf of PIDS Senior Research FellowDr. Yap who is on leave, Merle Galvan, his sec-retary, accepted the award. Jokingly, she saidthat the reason why Dr. Yap has been with PIDSfor so long is because of his very patient secre-tary (herself!). But she took it back quickly andsaid that it was Dr. Yap who has been a kind,jolly and very patient boss and not the other wayaround.

Dr. Medalla is a senior research fellow atPIDS. She earned her Ph.D. in Economics atthe UP School of Economics in 1979. In hershort but heartwarming speech, she expressedbeing overwhelmed by the thought that she isreceiving an award for 20 years of service. She

thanked Ms. Pizarro, whom she described asher "secretary, assistant and friend whose quietsupport has been very soothing and really help-ful." She also cited Ms. Rafaelita M. Aldaba, herlong-time research associate, with whom shegave credit for having helped her produced someof her better works. She also thanked Ms.Melalyn D. Cruzado, her research assistant whohas been with her for many years and her col-leagues at PIDS whom she considers more asfriends. Certainly, the fact that all of Dr. Medalla'sstaff have been with her for so long says a lotabout her as a supervisor and co-worker.

The ceremony perked up with an inter-mission number from Ms. Nilda A. Lagapa (HRDDivision Chief), Mr. Labuguen, Mr. Ariel G.Cambri (of OFS) and Ms. Delia S. Romero (ofthe Research Information Staff) whose mas-tery of the cha-cha impressed everyone. Mean-while, Mr. Gonzalo B. Gorospe (Mang Zaldy forshort) rendered a surprise number with the songHabang may Buhay with Mr. Mike H. Diza (ofthe PASCN) as guitarist.

This year's guest of honor at the LoyaltyAwards was none other than Dr. William G.Padolina, Deputy Director for Partnerships ofthe International Rice Research Institute (IRRI)and PIDS Board of Trustees member. He con-gratulated PIDS for reaching 24 years of ser-vice to the country and was most impressed bythe camaraderie manifested by the staff (seepage 10 for his speech).

Awards and gifts were then given to themembers of the PIDS women's and men's bas-ketball and volleyball teams which won first placein the women's basketball, second place in thewomen's volleyball and third place in the men'svolleyball games, respectively, during the NEDACentral Office Sportsfest 2001 held last August.

The much-awaited winners of the PIDSPhoto Contest were awarded their cash pricesof P2,000 per winning entry and a certificate ofrecognition. Seven photos from among 26 en-trees were chosen by the Federation of Philip-pine Photographers, Inc. headed by Dr. AmadoA. Castro who spoke about the criteria they usedand also shared some tips on how to take goodphotos. The winners were Ms. Eden Villanueva,Ms. Janet Cuenca and Dr. Myrna Austria (seerelated article on page 14).

The event also featured the oath-takingof the PIDS Employees Association (PIDSEA)officers headed by Ms. Marie C. Esquivel asChairperson and Ms. Josefina Vinluan as Vice-Chairperson. Ms. Esquivel thanked the PIDSmanagement for supporting the association andenjoined the members to constantly support theactivities of the PIDSEA in order to sustain itsoperations (see page 16 for related article).

In his closing remarks, Dr. Gilberto M.Llanto, Vice President of PIDS on leave andconcurrently Deputy Director-General of theNEDA, said that his work schedule is always fullthree weeks in advance because of many com-peting demands. In fact, he said that there is anongoing review meeting in the same buildingwhich he is supposed to attend—but he pre-ferred the PIDS Anniversary and Loyalty AwardsCeremony instead. Greeting the awardees, Dr.Llanto articulated the Institute's intention to offi-cially honor and express its gratitude to the loy-alty awardees for their invaluable contribution

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


and long years of service to the Institute. Healso acknowledged the contribution of the re-search fellows who have pioneered many policystudies at PIDS. He also recognized the role ofthe middle-level managers and emphatically therank-and-file employees, without whose ser-vices, PIDS would not have reached its leader-ship status in the field of policy research.

Dr. Llanto summed it up best when hesaid that like the awardees, he has been withPIDS for a long time and is looking forward tothe loyalty awards ceremony next year when hewill 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 hefound the continuing opportunity to discover him-self and actualize his possibilities. He ended hisclosing remarks with the congratulations andthanks on behalf of NEDA Director-General andPIDS Board of Trustees Chairman, Dr. DanteB. Canlas.

Finally, on September 27, a workshop on"Impacts, Risks and Opportunities of FinancialLiberalization and Integration: A Macro-MicroAnalysis" was held in cooperation with the Phil-

ippine APEC Study Center Network (PASCN)at the Carlos P. Romulo Hall.

The seminar presented three relatedpapers—"Reactions to the Entry of ForeignBanks in the Philippines: A Critical Case Studyof Selected Banks" by Dr. Rene B. Hapitan ofDe La Salle University (see cover story), "For-eign Bank Entry, Bank Spreads and the Macro-economic Policy Stance" by Dr. George N.Manzano of the University of Asia and the Pa-cific and Mr. Emilio S. Neri, Jr. of Abacus Secu-rities (see page 6), and "The Impact of the Lib-eralization of Foreign Bank Entry on the Philip-pine Domestic Banking Market" by Dr. AngeloA. Unite and Dr. Michael J. Sullivan (see page4) of the Angelo King Institute for Economicsand Business Studies, De La Salle UniversityManila.

Prominent personalities in various fields at-tended the workshop, namely, Dr. Victor B.Valdepeñas of Union Bank of the Philippines; Dr.Johnny Noe E. Ravalo of the Bankers Associationof the Philippines; Mr. Francisco Dakila of BSP;Dr. Ponciano S. Intal, Jr. of the Angelo King Insti-tute for Economics Business Studies; PIDS

founder Dr. Gerardo P. Sicat; Dr. Alex C. Escuchaof China Bank; Atty. Gloria G. Funtalan of SillimanUniversity; Ms. Patricia N. Jacinto of the Develop-ment Bank of the Philippines; Ms. Aileen H.Bugarin of the Department of Foreign Affairs; Mr.Eufrocinio M. Bernabe, Jr. of the Department ofFinance; Ms. Emy C. Centeno of the PhilippineNational Bank; Mr. Anastacio C. A. Dungao, Jr. ofCitystate Savings Bank; and Mr. R. Asaka of Ja-pan Bank for International Cooperation, amongothers.

Servicethroughpolicy

research

DRN

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. NildaA. Lagapa and Mr. Ariel G. Cambri


H ow do you take a photo of poverty? Orpicture the lack of effective housingprograms for the poor? Or illustrate

the low quality of education?

An article may lay down the necessaryinformation and tickle the senses of its readerbut only photographs have the exceptional qual-ity to capture a thousand emotions and conveya thousand words. Indeed, there is delight intaking photographs that capture the world asone sees it. But there is much pleasure to lookat the photographs of others and see the worldthrough their eyes.1

Engaging the staffPhotographs are often used to spice up

PIDS print materials and presentations and makethe author’s work more captivating to its read-ers.

Thus, the Publications Unit of the Re-search Information Staff (RIS) recommendedto Management to encourage the other em-ployees to take photos of issues being addressedby PIDS research studies by holding the first-ever PIDS photo contest. Dubbed as the 2002PIDS Calendar Photo Contest, the competitionwas aimed at collecting picturesque photos thatshow the theme or the substance of the pastand present PIDS studies. As the name sug-gests, the chosen photos will be featured in theInstitute’s 2002 calendar—one of PIDS’ specialoutputs for its forthcoming 25th founding anni-versary in September 2002. All PIDS staff—whether contractual, temporary or permanentand with the exception of the RIS which coordi-nated the contest—were invited to participate.

As a rule, the photos should be able todepict the subject of a completed, ongoing orpipeline PIDS project or study, or the socioeco-nomic problem tackled in that study. For a morepositive perspective, the photos could also showthe opposite or the desired scenario that saidproject or study hopes to achieve in the longterm.

By 31 August 2001, the organizers re-ceived a total of 26 photo entries. The entries

focused on a number of socioeconomic issuessuch as housing programs, poverty, urbaniza-tion, infrastructure, competition policies, fish-ery and environment.

The professionals as judgesThe board of judges had the unenvi-

able task of making sure that only the bestphotos are included in the 2002 PIDS Calen-dar. The board of judges was headed by Dr.Amado C. Castro (a former professor in eco-nomic history at the University of the Philip-pines, a professional photographer and thefinance chairperson of the Federation of Phil-ippine Photographers Foundation, Inc. orFPPFI) and included three top photographersfrom FPPFI—Mr. Vic Sison, Mr. Lito Beltranand Mr. Ed Yap—as well as PIDS PresidentDr. Mario Lamberte.

Judging of the pho-tos were based on the fol-lowing criteria:

* Relevance to thePIDS project or study – thechoice of subject and its rel-evance to the PIDS project/study selected by the par-ticipant;

* Composition – thearrangement of the ele-ments of the photo and ap-plication of design principlessuch as balance/symmetry,rule of thirds, and framing,among others;

* Title and explana-tion of work – the clarity andpotency of the title and ex-planation;

* Technical – thephoto's color balance, clar-ity, exposure; and

* Uniqueness and creativity – the abilityof the participant to show familiar subjects photo-graphed in new ways.

The winnersTwo participants—Ms. Eden C. Villanueva

and Ms. Janet S. Cuenca from the ResearchDepartment—each got three winning entries. Outof six entries, three of Ms. Villanueva’s photos onsustainable environment, urbanization and qualityeducation got the nod of the judges. Similarly,three out of Ms. Cuenca’s photos on housing,poverty and infrastructure were approved for in-clusion in the calendar. The seventh winning photo,which was also recommended by the judges tobe the calendar’s cover photo, was the sole entryof PIDS Research Fellow Dr. Myrna S. Austria.Her photo of a sunset in Dumaguete City fo-cused on environmental management. GJE

Through the eyes

of aspiring photographers

Ms. Eden C. Villanueva and Ms. Janet S. Cuenca

DRN

1Based on Charlotte K. Lowrie’s Reflections onPhotography (2001). (http://wordsandphotos.org)


PIDS employees unite

I ndividual members of an organizationbond together for a common objective.This commonality is what drives them to

willingly pursue the achievement of their com-mon vision and goal. And it is in their unity andnumber that their strength lies in order to sur-vive. Such organizations include trade unions,labor unions, associations and public sectorunions, among others.

Public sector unionism is still young in thePhilippines. The rights of government employ-ees to self-organization and collective negotia-tions have been recognized and protected un-der the 1987 Constitution. Furthermore, Ex-ecutive Order No. 180 provides the guidelineson these constitutional rights and grants gov-ernment employees representation in labormanagement committees, work councils andother forms of workers' participation schemes.The Civil Service Commission, as the primeadvocate of public employee empowerment,assists both the management and the publicunion in establishing a working environment thatwill promote harmonious relation, enhance em-ployees' welfare and productivity, and contrib-ute to the attainment of a responsible publicservice.

A number of workers from national gov-ernment agencies, local government units(LGUs), state colleges and universities (SCUs),and government-owned-and-controlled corpo-rations (GOCCs) have already taken advantageof this opportunity and privilege. Inspired by thegrowing number of employees associations inthe public sector and realizing the importance ofcollective action to advance employees’ welfare,the Philippine Institute for Development Studies(PIDS) recently formed its own employees as-sociation—the PIDSEA or PIDS Employees As-sociation.

BeginningsThe creation of an employees associa-

tion was a result of a meeting between the PIDSManagement Committee (ManCom) and a

number of concerned employees on June 19,2001 wherein the latter raised some questionson the reclassification of some staff.

One of the issues raised to the ManComwas the employees’ desire to set up an associa-tion and field a representative to the ManCommeetings. PIDS President Mario B. Lambertewelcomed the idea and encouraged the staff toform such an association. More than two weeksafter, on July 9, the Management invited CivilService Director Luisa Agamata to orient theemployees on public sector unionism.

The founding members and officersThe first major activity that the employ-

ees carried out was to elect willing volunteerswho shall compose the PIDSEA Executive Com-mittee (ExeCom). The ExeCom had the difficulttask of reviewing the proposed constitution andby-laws. After several marathon discussions, theconstitution and by-laws were subsequently rati-fied by 62 founding members out of the 91 totalemployees of PIDS on July 17, 2001.

Elected to head the association on itsmaiden year was Ms. Marissa C. Esquivel,Project Development Officer from the Projectand Services Department, as chairperson. As-sisting her would be Ms. Josefina D. Vinluan,secretary of the PIDS Board of Trustees, asvice-chairperson. Genna E. Manaog waselected secretary, Necita Z. Aquino as assis-tant secretary, Eden C. Villanueva as treasurer,Liza P. Sonico as assistant treasurer, VictoriaD. Perinion as auditor, Ma. Teresa D. Caparasand Edwin S. Martin as public relations officersand Janet S. Cuenca as sergeant-at-arms. Inaddition to the principal positions, four commit-tees were created to ensure coordination andefficiency in the transaction of matters relatedto the association. These were the Commit-tees on Organizing and Membership headedby Melalyn S. Cruzado, Grievance and Wel-fare headed by Sheila V. Siar, Financial Man-agement with Laila Leah C. Garcia as commit-tee chairperson, and Labor Education and Re-

search with Sheila S. Buenafe as committeechairperson.

PIDSEA: The employees’ voiceThe PIDSEA officers were formally in-

ducted into office during the Thanksgiving andLoyalty Awards Ceremonies on September 26,2001 in celebration of the Institute’s 24th Found-ing Anniversary. Dr. Lamberte led the inductionof the 14 officers. In her speech, Ms. Esquivelexpressed the PIDSEA’s gratitude to the Man-agement, especially Dr. Lamberte who showedsupport to the association even before it wasformally organized. Moreover, she encouragedall the officers and members to support theassociation’s forthcoming activities.

PIDSEA represents the employees’ de-sire to have a unified voice to speak on theirbehalf and a legal entity that shall protect theirrights and welfare. Much effort was exerted toestablish the association and under Ms.Esquivel’s leadership, the PIDSEA hopes to workfor its members in close coordination and coop-eration with PIDS management. GJE

AVAILABLE ONLINE !!!AVAILABLE ONLINE !!!

The full texts of recent Develop-

ment Research News (DRN)

issues and other PIDS publica-

tions (Discussion Paper Series,

Policy Notes and Economic

Issue of the Day) may be

accessed at:

http://www.pids.http://www.pids.gov.ph/publications/gov.ph/publications/

index.htmlindex.html

DRN


contract research out, one should knowwhat to contract out. But to begin with,how do you know what to contract out?This is essentially the problem withknowledge. You have to know whatpolicymakers want to know. In thatsense, it requires a general idea of whatthe overall knowledge base is and whatthe upcoming policy debates will be. Inmany cases, you do what you can do wellbut to a great extent, what you can dodepends on your resource constraints.So the important question becomeswhere PIDS must remain strong andwhere it should get stronger in the fu-ture.

Some old wars will never die. Ithink that has to do with public fi-nance—both the tax collection and theway money is spent. My favorite exampleis always “How in heaven’s name did weget 120 state universities when manystudies said that 45 is too many?" In otherwords, there is still a lot of work to do in

the field of public spending to make itmore effective especially now that rev-enue from tariff has fallen.

I think what we should look for-ward to is that some of the wars that weused to fight will finally be over andtherefore we have new areas to explore.Hopefully, the wars that Gerry startedfighting do not have to be fought any-more. Hopefully, for instance, by 2004or 2005, we are a low-tariff, zero-tradebarrier country. After more than 20years, hopefully, we will essentially haveas close to free trade as possible. Get-ting the “price right” is only half of thebattle, though, and getting governmentto do what has to be done like good regu-lation, provision of good supply of pub-lic goods and others, is actually theharder part of the reform process.

Another important battle that is ac-tually a very old one is that on popula-tion. When Gerry and I met by accidentat the NEDA Regional Office in Cagayande Oro, we had a good opportunity todiscuss a number of things. One of theaccounts Gerry shared was how muchsupport he got from the late President

...From page 1

liberalization in the Philippine banking industry.What happened after Republic Act 7721 waspassed in 1994 and where do we go afterwards?

Liberalization is a step toward globalizationof world economies. The September 11 US ter-rorists' attack shows how fragile the global com-munity 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 surethat sound fundamentals and proper safeguardsare put in place like in the financial industry tominimize, if not to prevent, the ill effects of cri-ses.

Another highlight of the PIDS anniversaryis the Loyalty Awards Ceremony preceded by theThanksgiving Ceremony where the PIDS staffjoin together to pray and feast as one big family.This year's occasion was graced by the presenceof Dr. William G. Padolina, Deputy Director forPartnerships at the International Rice ResearchInstitute and member of the PIDS Board of Trust-ees. He shared an inspiring message on how to

become a successful professional in this dayand age. The anniversary article narrates thelow-profile but merry celebration, starting withthe photo contest for the 2002 PIDS calendarand the induction ceremony of the newly-orga-nized PIDS employees association, a public sec-tor union.

Last but not the least, we included the re-sponse speech of our beloved outgoing Chair-man of the PIDS Board of Trustess and formerDirector-General of NEDA, Dr. Felipe M.Medalla, in this issue. Dr. Medalla recalled thechallenging times of his stay with the NEDA andshared his thoughts on the new policy researchfrontiers of PIDS.

Marcos on family planning. PerhapsPIDS may not have to go in this areabecause POPCOM is already there butthis is a very important area. I hope thefact that this is an old battle does notmean that it is unwinnable. It is a goodthing that at a number of ex-NEDA Di-rectors-General, including the currentone, are present here tonight and sharemy belief on this.

As you can see, I enjoyed my twoand a half years' stay in NEDA and thetime I spent at PIDS. I think the reasonfor this is that I knew I was working withprofessionals who have, more or less, thesame world view that I have and that de-spite all the resource constraints, we areall waging for key reforms. In otherwords, we knew that reforms are diffi-cult and slow in coming but we cherishevery little reform that we create al-though deep inside, we also knew thatthe nation needed a lot more. I am, how-ever, sure that the people who are ontop now will do a better job than we have.

Finally, I cannot express my grati-tude enough to the NEDA family andin particular, the PIDS family.

Editor's Notes

DRN

DRN

PIDS Research...from page 9

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