Statement by Mr. Dante B. Canlas,
Secretary of the National Economic and Development Authority of the Philippines,
at the WSSD Side Event "Global Transmission of "East Asian Development Approach""
(September 1, 2002, at Japan Pavilion)

One of the important developments of the last half of the 20th century was the emergence of Japan as a modem industrial economy. Japan's industrialization was followed a few decades later by the rise of the four newly industrializing economies (NIEs), namely, Hong Kong, Singapore, South Korea and, Taiwan.

These East Asian economies, which are all exporters of manufactured goods on a global scale, have since become models of successful industrialization, particularly, to the developing countries in Southeast Asia. Shaking off an inward-oriented industrialization strategy, the ASEAN countries are now integrated, in varying degrees, with the rest of the world through trade in commodities, securities, and national currencies.

The factors that contributed to the rise of the East Asian economies are many and varied, given the diversity of their social, political and economic backgrounds. Some common features, however, can be discerned.

The political stability is worth mentioning. Such stability was accompanied by credible legal, judicial, and administrative procedures that provided a predictable and stable environment for private business decisions.

They put in place consistent fiscal, monetary, and exchange-rate policies that brought price stability and low interest rates. In addition, there was the high savings rate of the people that allowed any budget deficit to be financed smoothly. The export-led strategy, meanwhile, resulted in healthy balance of payments and large foreign exchange reserves. As a result of sound and coordinated policies for short-term stability and long-term industrial restructuring, full employment was reached, real per capita income rose, and absolute poverty disappeared.

In time, as a consequence of rising real wages, the East Asian economies moved on to higher levels of comparative advantage, transferring the labor-intensive stages of manufactured exports to the developing countries, now emerging markets, in Southeast Asia. The full flowering of international subcontracting and global division of labor, facilitated by the liberalization of trade and investment, helped Southeast Asian countries begin their transformation into industrializing economies.

One other important means by which Japan assisted the rise of the East Asian NIEs and the emerging markets in Southeast Asia has been through foreign aid or official development assistance (ODA). This took the form largely of soft loans to major social overhead capital and grants for technical assistance.

The ODA loans have allowed Southeast Asia to build needed physical infrastructure facilities like roads, ports, and airports. ODA corrected the limitations posed by the absence of long-term credit supportive of major capital projects with long gestation periods. Grants and technical cooperation, at the same time, helped in the establishment of social infrastructure, such as, school buildings and hospitals, and in raising capacity to undertake public investment projects. Moreover, by coming up with even softer loans for environmental projects, Japan's ODA is contributing to the attainment of sustainable development objectives.

In this regard, the Philippines is benefiting greatly from Japan's ODA; today, Japan accounts for about 60 percent of total Philippine ODA loans. In bilateral discussions between the two governments, great efforts go into achieving a large area of convergence between the ODA policies of Japan and the development priorities of the Philippines as spelled out in the latter's medium-term development plan. Economic infrastructure, sustainable agricultural modernization, human resource development, poverty alleviation and removal of regional social and economic disparities constitute the major areas of cooperation in Japan's assistance package to the Philippines.

In 1997, many of the East and Southeast Asian economies were set back by the region-wide collapse of their national currencies. Recessions intervened in 1998. Fortuitously, the recessions were of short durations. In 1999, recovery began. The affected economies, in adjusting, started a policy reform process based mainly on raising the efficiency levels of their banks and capital markets in general. Swap arrangements were forged among central banks to ward off speculative currency attacks.

Japanese ODA played an important role in the recovery from the 1997 financial crisis through its Special Yen Credit Package. This has now been replaced by a new fund facility called Special Terms for Economic Partnership or STEP.

At the recently held meeting on "Initiatives for East Asian Development" or IDEA hosted by the Japanese government, ministers and senior officials from 10 ASEAN countries, Japan, Korea, and China agreed to accelerate the integration of their economies by forging new partnerships that respond to the new realities in the region. Essentially, the envisioned partnerships contained in the ministerial statement are based on what Prime Minister Koizumi described as "Act together, advance together." One element is anchored on South-South cooperation. In support of the agreement, Japan pledged continuing ODA support for the development thrusts of the participating countries in spite of the fiscal consolidation currently being undertaken by the Japanese government.

The envisioned integration of East and Southeast Asia, however, goes beyond ODA. It is still based mainly on strengthened private sector relations. Trade and investment facilitation continues, while capacity building from technical cooperation seeks to enable the developing country members participate meaningfully in the enhanced trade and investment relations.

In the overall, this new partnership envisioned by IDEA reaffirms the continuing relevance of the East Asian growth model, but infused with the flexibility and dynamism needed to respond to the new and emerging international economic and political environment.

In view of this flexibility and dynamism, I am sure there are many lessons and approaches from the East Asian growth experience that can usefully be applied to helping Africa realize its development objectives.

Thank you very much.