Purisima drives down the road to reform

Anuj Gangahar
Published on:

The Philippines’ secretary of finance, Cesar Purisima, has a reputation for probity that has reached street level. And he is determined to rapidly advance economic growth through the encouragement of entrepreneurship, the development of capital markets and increased regional integration.

On learning that your correspondent’s wife is Irish, Raymond, a cab driver on a stormy night in Manila, bursts alarmingly into a lusty rendition of boy band Westlife’s 1999 hit "Flying Without Wings".

He proceeds to perform the entire song, even throwing in a few cheesy facial expressions and theatrical hand gestures to his increasingly uncomfortable back-seat audience of one. As he belts out the last line, and fearful that he is just getting warmed up, the subject changes abruptly to an upcoming interview with the Philippines’ secretary of finance. "Ahh- Purisima," he pants, still slightly out of breath from his warbling. "Purisima good. Clean. Good."

To this man on the street, the corruption that has long been damagingly associated with the politics of the Philippines is not something to worry about when dealing with Cesar Purisima, formerly the 37th and now the 39th secretary of finance of the Philippines.

Raymond’s quick character assessment, delivered while rashly overtaking the rushing Jeepneys and swerving rickshaws of downtown Manila, seems appropriate given the secretary’s recent background. Purisima returned to government under president Benigno 'Noynoy’ Aquino, having previously resigned from the same role in the last administration under president Gloria Macapagal-Arroyo. This followed the infamous Hello Garci election scandal of 2005, which centred on allegations of vote rigging during the presidential election.

In the campaign of 2009 and 2010, Aquino ran on a ticket preaching the benefits of good governance and a crackdown on corruption. This proved enough to lure Purisima back into the fray of public office and a second stint as secretary of finance as part of Aquino’s new administration, which took office in June 2010.

The Department of Finance is a slightly sinister-looking building that sits back from the eight lanes of traffic on Roxas Boulevard alongside street vendors, gossiping old ladies, tired or lazy workers and coconut trees on the shores of the Bay of Manila. The armed guard at the gate fails to ask for any identification but ushers Euromoney up to the sixth floor where a smiling Purisima enters an old-fashioned boardroom wearing a crisp white barong.

For Purisima, president Aquino’s central message made perfect sense when he decided to return to lead the department of finance and the message continues to resonate with him more than two years into the presidential term. "Good governance is good economics," he says. "There are clearly barriers; I think there are vested interests and there will be losers in any process of change. But if you are going to change for the better, you must have enough political capital to be able to see it through. Fortunately for us we have a president who has the largest mandate ever of a Philippines president and who campaigned on good governance and who is walking his talk."

The development of the capital markets will be central to the success of the Philippine economy and Purisima is keen to drive progress across the board [in order] to sustain higher levels of growth. "The capital market is at the centre of savings mobilization, allocation of resources and therefore the deeper it is, the more efficient it will become," he says. "The more transparent it is the more people will participate both from the Philippines and other countries."

Encouraging entrepreneurship in the Philippines is at the heart of Purisima’s strategy. He repeatedly mentions it, pointing out that the challenges for entrepreneurs centre on getting access to resources and using the capital markets to achieve their goals. "The banking system has basically been the main provider of credit in the country and what we would like to see is for the bond market to grow and increase in its contribution. If this is properly balanced, the downside in down markets won’t just be in the form of non-performing loans, but also in asset prices, which can be less destructive for the banking industry."

Efforts in the credit markets are already beginning to bear fruit. The Philippines was the fastest-growing corporate bond market among emerging east Asian economies in the second quarter of this year as companies sold fixed-income securities in greater numbers to meet their funding requirements. According to figures from the Asian Development Bank, outstanding peso-denominated corporate bonds amounted to a dollar equivalent of $12 billion in the second quarter, up more than a fifth on the same period in 2011.

The Philippines is also one of Asia’s more active sovereign borrowers in the international debt markets, with past bond offerings attracting investors across the world. Efforts to broaden the country’s investor base continue apace.

Purisima says he would also like to bolster the equity markets by increasing the number of listings and increasing participation, especially by small investors. To that end, the Philippines is making efforts to align its disclosure requirements, accounting standards and listing requirements with the rest of the Asean region. This is not an entirely selfless move. "The fact is that even if we have maximum penetration in the Philippines, we are still going to be a small market and I think it is important that we are able to create an Asean class of financial instruments and an Asean capital market. This will create depth so that the recycling of the region’s reserves can be done through the region’s own capital markets," he says.