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January 7, 2014

[ASEAN Dialogues] Former Philippines Premier Virata Looks Back on Decades of Working with Japan
He hopes Japanese technology can help boost agriculture and alleviate poverty

photoTakahiro Sasaki, left, interviews Cesar Virata.

Japan and the Philippines share a long-standing friendship and cooperation since the 1970s. Through the years, Japan’s official development assistance (ODA) in the Philippines has evolved from addressing basic human needs, building socio-economic infrastructure, increased collaboration and assistance, to addressing many emerging issues, namely peace and development, disaster risk reduction, poverty alleviation, industry development and human resource capacity building, among other.

Japan’s assistance in the Philippines began with the establishment of OTCA (*1) in 1962 and World War II reparations. In 1966, Japan dispatched its first Japan Overseas Cooperation Volunteers in the Philippines. This was followed by the founding of the Philippine Japan Fellows Association in 1967, and the creation of the OTCA Office in Manila in 1968. In 1974, the Japan International Cooperation Agency (JICA) was established and Japan opened the JICA Philippines Office.

Since then, JICA has invigorated its assistance in the Philippines toward inclusive, dynamic development that is mutually beneficial to both Japan and the Philippines.

As the 60th anniversary of Japan’s ODA approaches, Takahiro Sasaki, chief representative of JICA Philippines Office, recently interviewed Cesar Virata, former Philippines prime minister, on Japanese assistance to the Philippines and on how JICA can contribute to ASEAN in the era of the ASEAN Economic Community, which starts in 2015. The interview is excerpted below.

Yen Loans

photoCesar Virata, former Philippines prime minister

<Sasaki>: On the Philippines economic development story and Japan’s development assistance, having witnessed the first ODA loan of Japan in the Philippines, what were your observations on the changes in direction or transformations in Philippine-Japan cooperation through the years?

--JICA’s Cooperation with the Philippine-Japan Friendship Highway--

<Virata>: When I was still Dean of the College of Business Administration, University of the Philippines, I was called by the Department of Foreign Affairs about the Philippine-Japan Friendship Highway project, from north to south, as a means of integrating the three regions and for national unity. That is how I came to know the initial loan was only $US25 million in the beginning. This was from Japan Export-Import Bank, at that time, meant to buy equipment for road development.

During that time, there were already reparations going on as assistance on a post-war basis for the restoration for [destruction] during the war. Some of these were for the industries, like pulp and paper, chemical industry, ships from Japan for inter-island shipping, and also some for the energy requirements. That was my first experience with Japanese assistance.

Later on, when I entered the government as the Deputy Director General of Presidential Economic Staff (PES) for Investments, the Philippine –Japan trade opened up and additional loans [were made] for the Philippine-Japan Friendship Highway bridge between Leyte and Samar.
And also [the loans were used for the sea traffic such as] the Ro-Ro (*2) or ferry, between Sorsogon and Samar, and for Leyte and Surigao for the connection to Mindanao.

--Flood control--

The government had a major plan to avoid severe flooding in Manila, and that was one of the major projects presented to Japan, the flood control in Manila such as construction of a channel — the Manggahan channel — to divert the Marikina river into Laguna De Bay.

--Geothermal plant--

And then, we had the geothermal development to reduce dependence on imported oil; Japan was able to supply us with equipment for geothermal energy development.

--On Japan’s commodity loan to the Philippines--

The Philippines had a balance of payments problems, so we wanted policy loans to augment it. We had drawn from IMF [International Monetary Fund] facilities and also from the World Bank. Japan was enjoying a lot of trade surplus with us, and that is why we applied for a commodity loan. I was the minister of Finance at that time and we had tough negotiations with our counterparts.

Technical Cooperation

photoTakahiro Sasaki, chief representative of the JICA Philippines Office

--Building institutional capacity--

<Virata>: Japan started improving our institutions. That is one thing different in your program, the development of various institutions within the departments — Department of Agriculture, Department of Labor and Department of Health.

And then for industry, the shoe manufacturing. Japan helped improve the manufacture of shoes in Marikina, because we were using wooden lasts. When it is the rainy season, they expand, but when it is the dry season, they shrink a little, so there was no standard size, and the Japanese consultant said we have to replace the lasts with plastic ones.

In PAGASA [the Philippine Atmospheric, Geophysical and Astronomical Services Administration], Japan had provided us with more equipment and radar systems. Japan has very good weather and typhoon tracking.

Philippines-Japan relations promotion

<Sasaki>: So did you facilitate any promotion between Japan and the Philippines when you were the prime minister?

<Virata>: Well, it was done largely by our Ministry of Trade, because we joined the GATT (General Agreement on Trade and Tariffs) Tokyo round in 1974, and it lasted up to 1978. We also developed the copper industry smelter in Leyte to save on shipping costs, because we were exporting a lot of copper concentrates to Japan.

<Sasaki>: So maybe in addition to the promotion of trade, JICA also accelerated infrastructure development.

<Virata>: In the case of Asian Development Bank (ADB), I requested then as minister of Finance to concentrate on the development of Mindanao. ADB then was a very new institution, and I thought it would be a lot easier for them to get started by focusing on one place in the Philippines. So we told ADB about its financing construction of the road to connect it from the southern portion (of the Philippine-Japan Friendship Highway) to Cotabato City (from east to west) and also from Surigao to Iligan. And more energy projects such as hydroelectric and transmission lines from Iligan to Cotabato, as well as port development. These projects were promoted in order to connect with what have been provided by Japanese loans and assistance.

And then the Japanese and USAID [United States Agency for International Development] started the rural roads program to connect to the main highways that were developed and also farm to market roads.

Donor comparison

<Sasaki>: On JICA’s development assistance in the Philippines, what do you think are the advantages and unique characteristics of Japanese assistance compared with other donors? You know, USAID, ADB…

<Virata>: JICA has a very broad coverage.

For example, AusAID [the Australian Agency for International Development] has concentrated more on education and budgetary methods. In the case of USAID, they have a government tax system. They also helped set up cooperatives, although there have been some challenges to overcome.

<Sasaki>: Can you say that the Japanese approach, the demand basis, the request basis, provides more solutions?

<Virata>: Well I think to a certain extent, yes. The Japanese are more attuned to the Asian situation.

ASEAN integration

<Sasaki>: So lastly, on JICA and ASEAN integration, as ASEAN prepares for economic integration, what do you think will be the role of JICA in promoting inclusive growth in the region and in enhancing connectivity in ASEAN regions?

<Virata>: In the case of the Philippines, inclusiveness means that the government and private sector must cooperate to invest in agriculture because of high poverty in the rural areas. I think we should process more of our fruits and vegetables, and set up industries to process rubber, so we can employ more people in the rural areas. I have seen Japanese-designed equipment being used in Cebu in the processing of fruits. With the support from Japanese technology for processing and packaging, we can export products to different areas around the world.

--People-to-people exchange--

<Virata>: People-to-people exchange can be on a reciprocal basis. During the ASEAN meetings in Japan or the Philippine-Japan Economic Cooperation meeting, we proposed whether we could have caregivers or nurses admitted to Japan. We knew that the requirements were quite strict in knowledge of the Japanese language because they must be good to relate with people and doctors.

We knew that we had to study in order to qualify. That is why we set up a language school here; for those who would like to study in Japan for different levels of training and education.

With the U,K., their subsidiary companies (in the Philippines) bring some Filipino executives to their headquarters, and vice versa. Usually, they send relatively mature people so they are limited to one three-year assignment. We said that to promote good relations, they should be assigned abroad while young so they have a way of coming back.

<Sasaki>: In relation to that, your young population is a great advantage. So clearly, this time, new future JICA cooperation in the Philippines could be strengthening the new relationship between Japan and the Philippines, and sharing common complementary advantages.

--Investment promotion--

<Sasaki>: What do you think is the role of ODA in enhancing business relationships?

<Virata>: We badly need infrastructure design and development. Secondly, you know our internal regulations. When investments are located in PEZA (the Philippine Economic Zone Authority), there is no problem. But when it is outside PEZA, we have various problems.

So many investments in the ASEAN region are from Japan. So our role in the ASEAN integration sometimes is so dependent on Japanese investments. For example, in the automotive industries, Japan had developed an area in Thailand and also in Indonesia, but not for the Philippines because of a lack of open land.

We now have program loans to improve the investment climate. For example, we have hired a Japanese person from a trading company in the Japan Export-Import Bank who was subsequently assigned to the Japan Board of Investments desk to help out new Japanese investors.

ASEAN integration is partly a balancing act for an investor. The pattern of investment decided by Japanese investments produce a pattern of trade among ASEAN.

--Challenges of the Philippines for ASEAN integration--

<Sasaki>: So the final question, how do you think ASEAN and Japan could work together to overcome challenges affecting developing countries in ASEAN?

<Virata>: Well, so many of the solutions are our own responsibility. How to improve our economic and social development, and income. We have to strengthen education and health facilities and services. We have to be able to use technological developments in these fields. We have to improve our power plants to reduce the cost of electricity.

<Sasaki>:My observation — I also used to work in other ASEAN countries like Vietnam — is that they are poor, but not like the big gap in the Philippines, since they are starting to develop. In your country there are many educated people. They belong to good families, enjoy a high level of life like the middle class, but at some certain level, some people are left behind. Now the Philippines is in the economic sweet spot, but for the future ASEAN integration, the gap between the middle-class and those left behind should be minimized. How do we narrow the gap?

<Virata>: Basically education and training are important, and how we can keep people healthy.

The [Catholic] Church has also a great influence in the Philippines. Our fertility rate is quite high for poorer people, and they get poorer because they have so many children. This is unlike before [when] people wanted many children because they help on farms. But now, the Philippines is more crowded and many of the young ones don’t want to work on the farm.

<Sasaki>: So maybe in the process of ASEAN integration, you also need to look for job opportunities.

<Virata>: Well, for those who are educated, many go abroad. But we have to continue educating and training. Those workers who go abroad send back their earnings to their families for the education of their children, and you can see the improvement in their housing and in startups of small business.

*1: Overseas Technical Cooperation Agency. It was later reorganized and became Japan International Cooperation Agency in 1974.
*2: roll on/ roll off ship, designed to carry wheeled cargo.



Profiles

<Cesar Virata, Former Philippines Prime Minister>
Cesar Virata was the fourth Philippine prime minister (1981-1986) under the National Assembly of former President Ferdinand Marcos. Concurrently, he also served as the Finance Minister from 1970 to 1986. He headed the National Economic and Development Authority , the country's highest economic planning body, while serving as prime minister. He holds double Bachelor of Science in Mechanical Engineering and Business Administration from the University of the Philippines and an M.B.A. from the University of Pennsylvania. He also served as Governor for the Philippines to World Bank and Asian Development Bank. Currently, he is the chairman and president of C. Virata and Associates Incorporated Management Consultants.

<Takahiro Sasaki, Chief Representative at Japan International Cooperation Agency Philippines Office>
Takahiro Sasaki started working for JICA in the Agriculture, Forestry and Fisheries Department in 1984 after graduating from Tokyo University of Agriculture and Technology with a bachelor's degree in Agriculture and Technology. Sasaki also worked in ASEAN member countries Vietnam and Myanmar, where he served as Second Secretary of the Embassy of Japan in Vietnam and Chief Representative of the JICA Myanmar Office. Currently, he is the Chief Representative of JICA Philippines Office, a position in which he has served since October 2011.

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