Mr. Pascual M. Garcia III
President, Chamber of Thrift Banks
President, PSBank

President Ferdie La Chica, Distinguished Officers and Members of the Bank Marketing Association of the Philippines, Amb. Yao, Miss Ressa, Friends from the Phil. Media, Guests, Ladies and Gentlemen, on behalf of the Officers and Members of the Chamber of Thrift Banks, I congratulate the Bank Marketing Association of the Philippines for holding a forum such as this.

This forum entitled “THE CRISIS IN PERSPECTIVE – IS THERE REALLY CAUSE FOR ALARM?” is timely and appropriate. For truly, the financial and economic crisis in the industrialized world is deepening. We see media and internet accounts of asset deflation, bank bailouts, business difficulties and job losses in major industrialized countries of the world. Consumer and Business confidence in the economic outlook has plunged to depths unseen in the post war era. Fear grips consumers. Even those unaffected directly have reduced their spending to save more.

For the Philippine analysts, who never saw this coming in the first place, have forecasted drastic negative effects given our large OFW complement. Who can forget, at the end of 2007, they forecast the Peso at a range of 36 to 39 for year-end 2008… This changed to 51 pesos by the 3rd quarter of the year after Lehman. Well, we all know how it ended.

The large remittances received from OFWs — some say it is the lifeblood of our economy, were similarly forecast to decline in the 4th quarter of 2008. Again, we all know what happened. Remittances held up and surprise surprise, our economy still grew by 4% in the 4th quarter.
It would seem that looking back over the last 6 months, the Philippines, contrary to the worst fears, has grown its economy and has held up well. So far, we avoided the ill effects of what is now being classified as the Great Recession. Many have heaved a sigh of relief. Some venture to say that we are blessed indeed! Ask the average person who does not listen or read the news. Those who confine themselves to the entertainment and sports section of the papers or just watch soap operas or shows such as The Buzz and Wowowee and they may respond to a question about the crisis with another question… “What Crisis?”

Yes, if you had not invested in foreign currency assets or the local equity market, the impact on you would be muted. Indeed, What Crisis? To the average Filipino, all he sees is he still has a job, inflation is coming down, gas for the car is cheaper, the malls are busy, Jollibee is selling more, and traffic is getting worse. And of course, he needs less for pamasahe. It’s strange but if we shut off media and the occasional anecdote of a relative or friend losing his job abroad, we probably would not even have to have a forum such as this today.

But yet again today’s world is globalized. We have 8 million Filipinos working abroad. We have some businesses that are export oriented. We have travel and entertainment businesses catering partly to foreign visitors and tourists. And yes, we depend on these sectors for precious foreign currency, for jobs and for remittances that fuel domestic consumption. A slowdown in these sectors is imminent or forthcoming. It is inevitable that that will happen if it isn’t happening already. The question in everyone’s mind therefore, is not whether these sectors and some others will be negatively affected but by how much. And will it drag the rest of the economy downward.

We all hear about anecdotes of friends or relatives losing their job in the US or other countries. We get concerned. We hear about semiconductor companies laying off workers, export furniture companies shuttering down. We get worried. We see other economies falling into a recession, financial systems being bailed out, exports plummeting, consumers saving more and spending less. We see a slight reduction in bank lending and weaker remittance growth in Dec…. And then we read foreign analysts forecasting a 20% decline in remittances and the peso at 53 by year-end. All of a sudden, hysteria is built up as if we will soon be in the eye of this latest economic storm. Strangely, it feels as if we are now in search for that data point, that job loss, that sales slow down to validate our developing fear that far worst is coming. We are slowly now letting fear take the better of us. We shun good news and focus on the negative. We are in danger of falling into the trap I call “Analysts Syndrome.” Yes, these same forecasters and analysts who never saw anything like this coming in the first place are falling all over themselves forecasting doom and gloom. Think about it. For remittances to decline by 20%, 3 conditions come to mind. 1st- 20% of OFWs should lose their jobs. 2nd_ none of those who lose jobs should be able to find a new one. 3rd- not a single additional or new deployment should happen. How realistic can these conditions be?

Should we really be alarmed?

Today’s forum gives us the opportunity to address these developing fears.

We all have heard the often repeated statement ‘When the United States sneezes, the Philippines catches a cold’.

Now that may have been true in the past but lets examine the present. The United States has officially been in recession since Dec 2007 or for a good 14 months. How is it that the Philippines still grew in 2008 by over 4%?

It is said that the average US recession lasts 17 months with the longest taking 21 months or so. Well, it’s been 14 months already so going by this average, it should take anywhere from 3 to 7 months more. That is if history holds up.

When prices go down, you often hear the dictum ‘what goes up, must come down’
Given that asset, commodity and equity prices have plunged so quickly and massively, isn’t it time for us to assume a new saying – ‘What goes down should hit bottom and then come up again!’
Yes, this asset deflation should come to pass specially with governments worldwide assuming bigger roles in the economy - stepping in thru massive spending. Some would argue spending beyond their future means.

We welcome this. Let them spend so much and create demand and jobs. Our OFWs will benefit, they will be there to earn their way back to normalization. And then remittances will grow once again. And we will all be happy.

Likewise, we see and hear about massive bailouts of banks. The US government alone has injected funding into 419 banks as of last count. It now owns 36% of one of its largest banks and will probably end up with ownership stakes of other US banks as well. Other countries have similarly seen the need to bail out, shore up or guaranty obligations of their banks to the depositors and investors.
What about us here in our home? It’s been 6 months since the Lehman crisis. Our deposit insurance is still at 250K and both houses of the Legislature are putting the final touches on an increase to 500K. While we welcome this increase, it’s beginning to seem as if we didn’t need it at all. No bank, save for 16 rural banks associated with the Legacy group, has closed up. No depositor panic — bless our depositors for remaining calm and confident in us. No government guarantees. No need for government bail outs. Why so? Because the Philippine Banking System is strong, liquid and well capitalized. To be sure, the BSP has been responsive, reducing policy rates and reserve requirements and providing liquidity and rediscounting windows to banks. We at the Chamber of Thrift Banks welcome and applaud the BSP for the timely and effective interventions that have improved our liquidity and funding costs & have allowed us to continue to lend. The Thrift Banks will respond to these policy actions by ensuring the continued flow of credit to the sectors we serve.

The closure of 16 Rural Banks, while exposing the entire rural banking industry to stress, has not resulted in any contagion to the rest of the close to 700 other rural banks. Phil Banks ended 2008 on a positive note. While bank profitability was lower on average than in 2007, it still held up well. Furthermore, many institutions, given our experience in the last Asian crisis when loan defaults rose, took measures to prepare for this thru improved provisioning levels.

I share with you the confidence of Philippine bankers as we face up to the challenges from the Global crisis. We are well managed and have more than adequate capital and liquidity. And we are strong. We are ready to face up to the challenges brought upon us by the rest of the world.

Consider that while corporations worldwide have experienced a credit crunch, experiencing difficulty in accessing bank credit, the reverse is true in the Philippines. Over the last 3 months, many Philippine corporations such as Smart, MERALCO, Globe, Ayala Land, PLDT among others have raised around 30 or more billion from Philippine Banks, insurance companies and Pension Funds. Once again, Philippine Banks responded with credit facilities at a time of crisis, at the time of their need. And, we will continue to do so for corporations, MSMEs and consumers we serve.

All these and many more give us comfort that we are not in the eye of the storm.

For the first time in my memory, we are staring at a crisis not of our own making. In the past, we always seem to have caused or participated in crisis-creation. Well, we did not start this, cause it or even participate in it. We didn’t create bubbles, we ensured our banks took manageable risks and were well capitalized, we did not build an over dependence on exports to fuel our economic growth.
Our economy was growing, yes. But it was still taxiing down the runway setting the stage for takeoff. Then this storm happens. So back we go to the tarmac, to feel the winds and rain, but still grounded on good foundations. Ready to take off once this storm passes. And it will eventually pass.

But does this mean that we should remain indifferent to the dark clouds in the horizon? Should we just sit back and do nothing?

Is there clear and present danger to this environment of normality and calm?

I submit that even as we recognize that our economy and banking system are holding up well, we should learn from the mistakes of other nations. What started as a bursting of the real estate bubble in the US and a few other countries has morphed into a financial crisis that has spawned an economic crisis of major proportions. The downward spiral continues from last year. No one saw this coming. Now everyone has his own version of where it is going. One major lesson that many countries have recognized and realized is that this crisis has broadened and deepened to levels seemingly out of control because of confidence or the lack of it. This crisis, for all its twists and turns, while financial and economic in its roots… has been exacerbated by a decline in Consumer confidence. Yes, it may be appropriate to re-label this crisis as a Crisis of Confidence. The decline of confidence of consumers and businessmen has caused destruction of demand of unimaginable proportions.

This is the major risk we face in the Philippines today. While we have much to be thankful for, we face the danger represented by declining confidence. Our consumers and businesses are inundated by a barrage of negative news and information. The many analysts, who were terribly wrong and didn’t see this coming, have started a chorus of providing their own versions of ‘the worsening crisis to come’. We see images in CNN, Bloomberg and CNBC and hear doom and gloom scenarios forthcoming. Ultimately we worry. Then we get alarmed.

We should not allow this to happen! If our economy has been holding up well, in part, it is because Filipinos remain confident in themselves, our banking system and our institutions such as the BSP and PDIC. So we are not holding back. We continue to spend and consume — unlike consumers in other parts of the world.

Forums such as this are timely and appropriate. It provides the public with an opportunity to hear another perspective.

We say to everyone — stay calm! Lets not panic! Sure some sectors in our economy will experience negative effects of the Global recession. IT is inevitable. But then again, it will not be as significant as that which other countries are experiencing. And while jobs will be lost, other jobs will be created. Just yesterday, it was reported that 1,000 nurses and caregivers will be deployed in Japan. And our needs, for products and services will continue and will be served by businesses. So net net, we will hold up well and better than others. We know how it is to be in a crisis. We have had so many. We got so used to being in one. We have faced up to worst.

Let us preserve and protect our Confidence in ourselves, our institutions and our future. In any challenge we face as a nation, we have always been able to rely on ourselves as in the past. We remain confident that we can rely on ourselves once again.

We call on the Philippine Media to continue exercising a sense of balance in their reporting of events. If we have held up well, part of that has been because our local media, by and large, and bless them for doing so, have consciously refrained from unduly alarming our people. While job losses are reported, as it is their role to inform, we note that other stories of growth/ job gains have now seen print. As an example, media quickly reported that 4000 Filipinos lost their jobs in Taiwan about 2 months ago. Recently, they reported that 4000 new deployments to the same country were made. We ask them to guard against the attempts by some quarters to discredit the very institutions and their leaders we should remain confident in the Bangko Sentral and the PDIC. An erosion of confidence in these institutions will cause a crisis of confidence in the Philippine Banking System. We are all witness to what has happened in the US and other countries. It was catastrophic. Let us not allow this to happen here.

Our domestic industries need to be protected. This is best ensured by protecting domestic demand. While that demand is still holding up, it will not remain if consumer confidence weakens. For so long as we Filipinos remain confident in ourselves, in our ability to withstand the ill effects of this crisis then, we will continue to spend normally. But if fear overcomes us, if confidence in ourselves and in the future dissipates, we will follow the path that other consumers and businesses have taken in the US and many other countries. Those who can afford to buy and who are not affected directly will stop or reduce consumption. And then the downward spiral will commence. Slower sales, lower economic activity reduced profitability, even business losses. Then jobs will be shed. And the cycle goes on.
Finally, even as we maintain our confidence, we need to grow domestic demand so businesses can survive, preserve and create jobs. How do we ensure this? By consciously buying Filipino. Let us all make an effort to prioritize purchasing goods and services produced, manufactured or assembled here.
Why should we continue to buy apples, oranges and grapes and feed farmers in other countries? Will it hurt us to buy mangoes, bananas, pineapples and other locally produced fruits instead? It won’t. And yet we will provide income to our farmers in the provinces who will in turn consume local goods.
We seem to be increasing our appetite for wine. Would it hurt us to ask for a local beer instead?
When we reach for that grocery item, shouldn’t we prioritize our own? That dalandan soda, that Jack & Jill or Oishi local snack food. The soap or canned items manufactured in the Philippines.
The appliances that are manufactured here, the cars that are assembled here. They too, as so many other Philippine-made products, deserve our support. They deserve priority in our purchasing decisions.

If we plan to take a vacation or travel, should we not visit local vacation spots instead of going abroad? We will keep our hotels occupied and help maintain the jobs of those who are engaged in the tourism related industries.

Think about it. If we band together. If we all act this way, how much more demand for local products will be created? How much foreign currency saved? More importantly, how many jobs saved and created? How much more taxes paid? How many businesses will survive and prosper?
The path to manage and mitigate the risks of this global recession is clear. It is in our hands. It is our choice.

Remain confident. Buy Filipino.

If we make this effort, if we respond to this need and make this choice, I am confident that a year from now, the Bank Marketing Association will hold its next forum which will be entitled…The Philippine Perspective… Crisis? What Crisis?

Thank you and good day!