PHILIPPINE FOREIGN POLICY

AN INDEPENDENT AND PRINCIPLED PHILIPPINE FOREIGN POLICY FOR ECONOMIC GROWTH

Please allow me to begin by sharing with candor that, having come from the private sector, it can be
lonely in government as there are times you feel you are not accomplishing enough no matter how hard
you try. One real and consistent upside nonetheless is our admiration, respect and affection for our
President who has been a true source of inspiration through his style of leadership by example. And so it
is good to be with MAP today to visit home now and then and more satisfying, to be warmly welcomed.
I would like to humbly thank each and every one of you for your presence today. It means a lot to me.

For 60 years, MAP has consistently been at the forefront of promoting management excellence and
institutional integrity.

After having been a member of this premiere management organization for many years, I have
endeavored to bring the MAP culture with me in navigating the challenging and ever-changing world of
diplomacy first as Ambassador to the United States and now as Secretary of Foreign Affairs.

The last time I spoke in 2012 at a joint meeting of MAP and MBC, I touched upon the DFA
transformation that I felt was needed then, namely: (1) restoring morale by limiting the number of
political appointees; (2) upgrading economic diplomacy skills through a partnership with AIM; (3) placing
merit over seniority in the promotion process; (4) bringing our services closer to the people by moving
Regional Consular Offices to retail malls; (5) rationalizing our Foreign Service Posts resulting in a closure
of ten Foreign Service establishments; and (6) encouraging all my colleagues to reach beyond their
grasp.

We continue to do as much as possible in making the Department smarter, leaner and meaner.

Promoting Excellence in Philippine Management

Ladies and gentlemen,

MAP’s mandate of pursuing excellence is in consonance with President Benigno S. Aquino III’s good
governance agenda under his Social Contract with the Filipino People, which embraces the qualities of
integrity, humility and trustworthiness in public leadership.

MAP’s commitment to its mandate is evident in the letter it sent, together with 12 other leading
business organizations, to President Aquino last June. From promoting anti-trust and competition policy
and improving trade facilitation, to rationalizing fiscal incentives and pursuing judicial reforms, the
comprehensive “list of key issues and measures” hopes to achieve “our shared vision of inclusive growth
through job generation, poverty reduction, and global competitiveness.”

Today, l would like to share with you perspectives on our Philippine Foreign Policy – one that is
independent and principled, focused and forward-looking. In this context, I will also provide updates on
Philippines-US relations, Philippines-China relations, the West Philippine Sea and other developments in
our region, in particular, ASEAN and APEC.

Good Governance is Good Economics

Let me begin by recalling President Aquino’s concluding statement in his State of the Nation Address last
July when he proclaimed, loud and clear, “How wonderful it is to be a Filipino in these times!”

The Aquino Administration firmly maintains that “Good governance is good economics.” From day one,
President Aquino has worked to restore confidence in our country by making the difficult political
decisions necessary to root out corruption and institutionalize good governance at all levels and layers.

In addition to achieving a better than 7% growth for the last four quarters, the Philippines received
investment grade sovereign debt ratings from major credit rating agencies: Fitch, Standard & Poor’s,
Japan Credit Rating Agency, and just this month, from Moody’s.

Standard & Poor’s moreover labels the Philippines as Southeast Asia’s main economic engine, “fueled by
strong domestic demand to lead the rest of the region ahead of Asia in 2013.”

The Philippines is becoming even more globally competitive. In just the last three years, we have moved
up 26 places in the World Economic Forum (WEF) Global Competitiveness Report. In the ethics and
corruption category, the country has jumped from 135th in 2010 to 87th this year. Should we preserve
these gains, we can expect to move into the top third of the global rankings by 2016.

Recently, the Economic Freedom of the World 2013 Report issued by the Fraser Institute, Canada’s
leading think tank, recognized the Philippines as the second best performer in ASEAN, next to Singapore.

The Asian Business Cycle Report of the OECD Development Center also cited the Philippines as the only
emerging Asian nation with strong business cycle momentum highlighting its economic resilience.

Furthermore, the latest study conducted by KPMG International and Oxford Economics for the 2013
Change Readiness Index positioned the Philippines in 18th place in terms of the capability of the country
to deal with change.

All of these developments represent a resounding affirmation of global and domestic confidence in the
Philippines.
There are, however, remaining challenges. And as we continue to tackle with resolve the remnants of
the culture of corruption and impunity, we seek at the same time to institutionalize and sustain the
reform agenda beyond the Aquino administration. It is our conviction that the Filipino people deserve
no less.

The Three Pillars of Philippine Foreign Policy

Our steadfast commitment towards a principled foreign policy serves as the bedrock of our foreign
relations.

Our foreign policy is not only about managing our relations with the global community. It is about
nurturing a safe and secure environment in accordance with the rule of law that is conducive to inclusive
growth in order to benefit our people. It is intended to harness the newfound business confidence and
renewed optimism on the Philippines to stimulate greater trade, investment and tourism. It is meant to
generate employment and reduce poverty in line with President Aquino’s goal to create more jobs at
home so that “working abroad will be a matter of choice rather than a need.”

With the President as its principal architect, Philippine Foreign Policy is anchored on three pillars: (1)
preservation and enhancement of national security; (2) protection of the rights and promotion of the
welfare of overseas Filipinos; and (3) promotion and attainment of economic security.

Let me quickly summarize these pillars just to place my remarks in context.

Under the pillar of promoting national security, our goal is to help create and sustain a strong and safe
regional neighborhood under the rule of law. On our own, and in concert with international partners, we
have pursued mutually beneficial security arrangements.

We designed defense and security relationships to manage new realities. In lieu of traditional ideas of
balance of power, we have emphasized engagement in new challenges, including transnational crime,
terrorism, and maritime security and cooperation, as well as, cooperation on humanitarian emergencies.

In addition to our treaty alliance with the United States, we expanded our defense and security
engagements with other countries such as South Korea, New Zealand, Italy, Spain and France. More
significantly, our Senate ratified a Status of Visiting Forces Agreement with Australia in June 2012.

The Philippines is also working with Japan in enhancing maritime security in the region. As one of two
Strategic Partners aside from the US, Japan has been supporting our Philippine Coast Guard in training
its personnel and upgrading its equipment.

From 2012 to July of this year, we successfully facilitated the conclusion of 40 agreements on political
and security matters.

Under the pillar of protecting Filipino nationals overseas, we continue to be guided by the President’s
call to be “even more responsive to the needs and welfare of our overseas Filipino workers.”
Since 2011, we have repatriated nearly 20,000 Filipinos in countries torn by civil strife and devastated by
natural and other disasters. We continue to repatriate our compatriots from Syria and Egypt, where
violence continues. Adhering to a policy that no one gets left behind, we have also had the good fortune
of not losing a single life that was within our control. We additionally are addressing the challenges of
Saudization and have so far repatriated a total of over 4,000 undocumented Filipinos and assisted
several thousand others in meeting regularization requirements.

From 2012 until the first semester of 2013, we extended assistance to more than 34,000 overseas
Filipinos and members of their families. Our Foreign Service personnel provide round-the-clock legal and
consular assistance, counseling, shelter, and labor mediation. They undertake jail visitations, administer
overseas absentee registration and voting, and help Filipinos organize themselves into communities.
They network with local organizations whose purposes are aligned with our policy objectives.

Taking care of our 10 million migrants in 174 countries over 40 time zones has earned us the reputation
as the Department that never sleeps.

Finally, let me discuss the economic security pillar in greater detail, as this is perhaps the pillar that
offers opportunities for closer collaboration between the DFA and MAP.

The Department has worked tirelessly to support the President’s twin goals of poverty alleviation and
job creation. As a result, we have made significant progress in economic cooperation with other
countries.

In 2012 alone, we were able to finalize 43 agreements involving economic cooperation in the areas of
investment, tourism, development assistance, education, and air services agreements. At the same time,
we assisted in developing more than 700 inbound and outbound trade and business missions.

With Europe, the 2012 Philippines-EU Partnership and Cooperation Agreement, which is in the process
of ratification, will allow both sides to address new challenges on issues such as customs and trade
facilitation, energy and migration. Indeed, European countries are now looking at the Philippines with
invigorated interest.

In grants and loans, we have helped secure over three billion dollars from Japan in official development
assistance for, among others, infrastructure projects, disaster risk reduction and peace and
development for Mindanao. In addition to a five-year grant amounting to 434 million dollars from the
Millennium Challenge Corporation for poverty reduction and infrastructure projects, the US, in the past
year, has provided over 400 million dollars in aid. We have also secured approval in the last twelve
months of nearly half a billion dollars from the Republic of Korea in loans and grants and close to 141
million dollars in grants from Australia in 2013.

Meanwhile, the Philippine hosting of the 23rd World Economic Forum on East Asia in 2014 and the Asia-
Pacific Economic Cooperation in 2015 provides invaluable opportunities for the Philippines to promote
itself as a business and investment destination.
Developments in APEC and ASEAN

The Philippines looks forward indeed to chairing APEC in 2015, the second since 1996. Our leadership in
APEC can be an excellent platform to perpetuate the domestic reform agenda of the President, based on
the principles of sound economic governance, regulatory reform, and inclusive economic integration,
towards a post-2015 development agenda for the Philippines.

Three weeks ago, in Bali, the assembled APEC Economic Leaders renewed their commitment towards
achieving a Free Trade Area of the Asia-Pacific (FTAAP), and to continue supporting the multilateral
trading system consistent with the WTO framework including the Doha Development Agenda.

To encourage more efficient flow of goods, services, capital, and people throughout the Asia-Pacific
region, the Leaders adopted the APEC Framework on Connectivity. This plan involves the elimination of
trade barriers; the strengthening of regional transportation networks; the implementation of good
regulatory practices; the enhancement of people-to-people connectivity through greater cross-border
education and service flows; and the implementation of a multi-year plan on infrastructure
development and investment.

Among these, infrastructure development has been given special priority, and as such, Leaders have
committed to take several steps, such as fostering a business-friendly environment for infrastructure
investment and development.

Further to this, the Leaders stated that they would continue to implement the APEC Investment
Facilitation Action Plan, to encourage government officials to work with the private sector in enhancing
Corporate Social Responsibility practices and sustainable investment.

Facilitating trade and investment within APEC economies will be easier through increased mobility of
business people across borders. This was the reason for the creation of the APEC Business Travel Card
(ABTC), which facilitates the travel of business persons by, among other benefits, granting them three-
year, multiple-entry privileges to participating APEC economies.

It is in this regard that the DFA continues to strengthen its relationship with Certifying Business
Organizations or CBOs.[1] CBOs are expected to pre-screen applicants to ensure that they are bona fide
business persons with a legitimate need to travel within APEC economies. CBOs also help raise
awareness about the opportunities in APEC and encourage SMEs to expand their presence outside of
their traditional markets.
I am pleased to note the interest of the MAP in becoming a CBO. Talks are ongoing with the APEC
Business Advisory Council to establish clear guidelines for recognizing CBOs. The Advisory Council has
given its comments on the latest draft of the proposed Memorandum of Agreement which will, among
others, detail the responsibilities of the CBOs and simplify the application process. These responsibilities
include verifying and endorsing applications, regularly reporting to the DFA, and coordinating with
cardholders regarding policy or procedural updates.

The DFA and the Advisory Council will meet next month to further refine the draft Memorandum of
Agreement. Rest assured that I have tasked key officials of the DFA to keep you informed of
developments in this regard.

The success of each of these APEC initiatives – connectivity, infrastructure development, and more –
depends not merely on the government, but also on our close cooperation with the private sector. We
look forward to working with you in promoting the economic development of the Philippines and the
Asia-Pacific region as a whole.

It should be pointed out that 2015 is an important year for the Philippines and for the region. This year
marks the deadline for many international commitments, such as the Millennium Development Goals
and the realization of the ASEAN Community based on the Political-Security, Economic and Socio-
Cultural pillars.

In particular, the ASEAN Economic Community envisions a competitive region with a single market and
production base

Based on the scorecard, ASEAN is viewed to be on track to realize the ASEAN Economic Community
(AEC). The notable developments in the AEC pillar show that the implementation rate of the measures in
the AEC Blueprint has increased from 74.5% in December 2012 to 79.7% as of September 2013.[2]

Based on DTI’s July 2013 data, the Philippines has achieved a national implementation rate of 85.54%
this year, accomplishing 182 items out of 213 total AEC measures. For the 2008 to 2013 period, the
Philippines scored 87.2%, accomplishing 392 of 439 measures. This accomplishment lays the foundation
for achieving the ASEAN vision of a fully functioning and integrated economic community.

At the most recent ASEAN Summit held in Brunei Darussalam last October 9, the President firmly laid
down our advocacies for an ASEAN Community in 2015 and beyond. He stressed that economic gains
are underpinned by a stable and predictable political environment that is founded on the rule of law.
The blessings of a society characterized by peace and harmony necessarily predict an economic milieu
that promotes even stronger and more inclusive growth.

To this end, the President highlighted our focus on micro, small, and medium enterprises or
MSMEs, which are the backbone of our growing economy. The dynamism of our SME sector pertinent to
the establishment of the ASEAN Economic Community serves as our impetus to support the ASEAN-wide
Self-Certification Scheme, paving the way for their greater participation in regional and global trade.

The President also announced the Philippine Tariff Finder mechanism, an online facility that
allows users to quickly search Philippine tariff rates on specific products and also access the eight
existing Philippine tariff schedules such as the Most Favored Nation, ASEAN-Australia New Zealand FTA,
ASEAN-China FTA, ASEAN-India FTA, ASEAN-Japan Comprehensive Economic Partnership Agreement,
ASEAN-Korea FTA, the ASEAN Trade in Goods Agreement, and the Philippines-Japan Economic
Partnership Agreement. This, by the way, is proudly, for us, the first of its kind in ASEAN.

Building on the commitments on the past ASEAN Summits to realize an ASEAN Community that
is people-centered and socially responsible, the President, along with the nine other ASEAN Leaders,
adopted the ASEAN Declaration on Strengthening Social Protection. He emphasized that a strong
economy is founded on an empowered citizenry and that the government has focused on improving
education, healthcare, and social welfare programs.

We also spoke of the principle of ASEAN centrality and our strong belief that we must continue
to deepen our engagements with our external partners through ASEAN-led mechanisms such as the
ASEAN Regional Forum, the ASEAN Defense Ministers Meeting Plus, and the East Asia Summit.

`The President, likewise, mentioned the need to enhance mutual cooperation through the
Regional Comprehensive Economic Partnership or the RCEP, which aims to achieve a regional free trade
area that builds upon the existing free trade areas of the region. These avenues promote greater
cooperation in terms of human rights protection, maritime security, and people-to-people connectivity,
among many others.

The government can work with the business sector and other stakeholders to realize the ASEAN
Economic Community (AEC). Opportunities for the business sector include wider markets for exports;
better supply chain linkages; and enhanced partnerships and joint ventures.

I commend the MAP leadership for successfully introducing the AEC Exchange this year, an innovative
platform to bring business leaders together to discuss the challenges of economic integration.

MAP also recommended that the Philippine Government design a ‘nation-branding’ strategy or
roadmap, maximizing the country’s “unique combination of strengths” vis-a-vis ASEAN integration. I
believe this is an excellent idea worth exploring with other stakeholders.

Safeguarding our Sovereignty and National Patrimony

Ladies and gentlemen,

During the Official Working Visit of President Aquino to the US last year, our leaders ushered in
a new era of strategic partnership, with the US Government reaffirming support for Philippine efforts to
build the country’s minimum credible defense posture. This broadening and deepening of the
Philippines-US relations is being positively viewed in the context of the US rebalance toward Asia.

Last month, we began discussions on institutionalizing increased rotational presence (IRP) through a
framework agreement premised on mutuality of benefits and in full accord with the Philippine
Constitution.

Increased Rotational Presence is the policy which increases the presence of U.S. forces in Philippine
territory. It is meant to support the development of minimum credible defense posture of the
Philippines through capability building and combined activities and high impact-high value joint
exercises focusing on maritime domain awareness, maritime security, humanitarian assistance and
disaster response.

Thus far, we have completed four negotiating rounds with several remaining issues still to be agreed
upon.

The US rebalance to Asia is not only limited to defense and security cooperation but also encompasses
economic arrangements and greater people-to-people exchanges.

For instance, under the Partnership for Growth (PFG), the Philippines was selected as one of the
4 pilot countries and the only country in Asia, in recognition of our track record in partnering with the US
government and our potential for continued economic growth. In this program, the US Government has
committed an estimated $170 million to pursue three (3) key areas of policy engagement: (i) improving
the regulatory environment; (ii) strengthening the rule of law and anti-corruption measures; and (iii)
improving fiscal space. The Philippine Government is being assisted, moreover, by 17 different US
agencies to achieve the objectives of the program.

Ladies and gentlemen,

There has been no forum where I was not expected to discuss the West Philippine Sea issue. The
core issue here is China’s claim of indisputable sovereignty over nearly all of the South China Sea under
its nine dash line position. It is a claim that is expansive, excessive and in gross violation of international
law, specifically UNCLOS. China’s continuous overwhelming naval and maritime presence in the area is
also contributing to the raising of regional tensions.
 We have undertaken many efforts to peacefully engage China and settle these disputes.
However, all of these were unsuccessful. The Philippines has exhausted all reasonable political and
diplomatic avenues for a peaceful negotiated settlement of its maritime dispute with China. Our last
resort is to utilize the legal track towards the resolution of these disputes.\

From the Philippine perspective, the rules-based approach contains two elements: the first is
the third-party arbitration towards resolution of maritime disputes, in accordance with the universally
recognized principles of international law, specifically UNCLOS; and the second is the expeditious
conclusion of a Code of Conduct (COC) on the South China Sea between ASEAN and China towards the
management of tensions. Those initiatives are anchored on international law.

The Philippines initiated arbitral proceedings in January this year. Upon invitation, China refused
to participate. We see arbitration as an open, friendly, and durable solution to the dispute. We believe it
benefits everyone. For China, arbitration will define and clarify its maritime entitlements. For the
Philippines, arbitration will clarify what is ours, specifically our fishing rights, rights to resources and
rights to enforce laws within our Exclusive Economic Zone. For the rest of the international community,
the clarification of maritime entitlements will assure peace, security, stability and freedom of navigation
in the South China Sea.

On the status of the arbitration, the Arbitral Tribunal has adopted the rules of procedure and
decided that the Permanent Court of Arbitration in The Hague shall act as the Registry in the
proceedings. Again, China refused to participate in the proceedings. Nonetheless, the decision of the
Arbitral Tribunal will be legally binding on all parties and will not be appealable. The Philippines will
submit its Memorial by 30 March 2014.

The Philippines fully supports ASEAN’s efforts to work towards the early conclusion of a
substantive and legally binding COC to promote the peaceful management of tensions in the South
China Sea. The Philippines is encouraged by the results of recent meetings between officials of ASEAN
and China where both sides agreed to begin discussions on the workplan for the COC.

Despite the challenges we face in protecting what is ours, the Philippines endeavors to maintain
a constructive relationship with China, one that is mutually beneficial. We maintain that our dispute in
the West Philippine Sea is not the sum total of our relations.

The President is firm in his conviction to uphold his agreement with Chinese President Hu Jintao
in 2011 not to let the maritime dispute affect the broader picture of friendship and cooperation
between the two countries.

We acknowledge China’s role in world affairs and support its peaceful rise. To be truly viewed as
a positive force, China must manifest its adherence to and respect for the rule of law.
Clarion Call for the MAP

Ladies and gentlemen,

The MAP has a significant role to play in all of these challenging developments.

As an organization that exerts a strong influence on the Philippine business environment, the MAP is in a
strategic position to support national development efforts.

May I, therefore, enjoin the MAP to fully support our independent and principled Foreign Policy in
advancing our advocacies in all three pillars.

May I also enjoin the MAP to continue fully supporting the President’s Daang Matuwid. With you as
partners, the Government will be further energized to work towards inclusive growth, combating
corruption, promoting transparency and accountability, improving global competitiveness, achieving just
and lasting peace, and upholding the rule of law.

May I , moreover, enjoin each and every one of you to continue speaking well of what is happening in
the Philippines and to speak more often and more loudly of our very bright future.

The global spotlight is on us. Let us make the most of this important juncture in our history.

Thank you and Mabuhay!