Press Release
January 21, 2009

Villar seeks new economic model for RP

Nacionalista Party President Senator Manny Villar has called for the formulation of a new economic model to ensure the country's growth amid the worsening global crisis.

In a speech before the Foreign Correspondents Association of the Philippines (FOCAP) on Monday, Villar said the economic models used by western governments and international organizations proved to be ineffective in preventing the housing credit problem in the United States from developing into a global crisis.

"The global financial crisis has crunched, or destroyed some conventional economic thinking, particularly the Washington consensus. When we finally get out of this crisis we will find that things will never be the same again," said the senator, who is also one of the country's most successful businessmen.

"First, we have been led to believe that big is good, so we encourage consolidations, mergers, combinations, like in the banking system," he said. "However, the collapse or near-collapse of the world's biggest banks - UBS, Citigroup, Bank of America and, of course, Lehman -- has shattered this once-held gospel truth. Big is not necessarily good because being too big also means being unwieldy."

Villar also cited the concept that the less government interference in business, the better. "In reality, we know now that the damage wrought on the global economy would have been far greater if governments did not intervene," he noted.

"Now, governments all over the world are heavily interfering in private institutions," Villar said. "Europe is already implementing de facto nationalization to protect the huge amounts of taxpayer money being injected in troubled companies. It is also happening in the U.S., although the word nationalize is not commonly used."

He said that whereas before the trend was for governments to stay away from business, the reverse is happening now. Governments in major economies like the U.S. and Europe are taking ownership control of banks and other companies in exchange for their bailouts.

"What is happening now in the world economy is giving rise to the need for a new economic model," Villar said. "The Philippines must closely monitor the changes in the world economy so that we do not fall into the trap of just copying models that are not suited to us."

"One thing is very clear to us now: it is very dangerous to adopt all-encompassing principles because some principles that are good for some countries may not be good for the others," he added.

Fortunately, for the Philippines, it has been freed from IMF interference since the country prepaid its remaining $220 million obligation to the Fund.

Villar also noted that the country has a large pool of economists, both in the government and in the private sector, which can be tapped to formulate an economic model suited to the Philippines.

The former Senate president said "we have to think on our own and come out with an economic model that is suited to the Philippines. It is no longer automatic that what is good for others is good for us. We have the intellectual capacity to decide on the model that we should follow and not depend on other countries."

During his speech, Villar expressed confidence that the Philippines would stay on the growth track amid the global crisis, because of the continuing flow of remittances from overseas Filipino workers, which fuel domestic consumption and boost the tourism and real estate industries.

The decline in oil and commodity prices, he said, has pushed down inflation, allowing the Bangko Sentral to ease interest rates and spur economic activities.

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