Following is the transcript of CNBC’s interview with Credit Suisse’s Asia Pacific Vice Chairman, Lito Camacho at the Credit Suisse Asian Investment Conference in Hong Kong. The interview was broadcast on Squawk Box on 22 March 2018.
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Interviewed by CNBC’s Akiko Fujita.
Akiko Fujita (AF): Would love to get started with the headlines coming out of the Philippines or more on China yesterday, with the Chinese and the Philippines announcing potential for developments in the South China Sea which is disputed waters between these two countries. It seems like more of this pivot that we’ve seen from President Duterte, essentially aligning himself more closely with China to really see those economic benefits that could come in.
Lito Camacho: Well I think it’s a very pragmatic direction that the president has taken. Very very different from the previous, from his predecessor. I think the president sees great economic advantages with improving the relationship with China. And it’s beginning to show. Today, as we speak there are a lot of negotiations going on for major infrastructure projects that will be finance capitalized by Chinese organizations. You also see the influx of Chinese tourism now. I mean you see growing involvement of Chinese – Chinese tourism, Chinese infrastructure, Chinese investments in the Philippines.
AF: You talk about the infrastructure investments. Certainly when you think broadly in the Philippines, there’s been a huge boom, really, activity starting to pick up, how much more upside is there?
Lito Camacho: I think we’re just beginning to see the start of the boom, Akiko. When you think about it in the last year and a half since the new government, not many contracts have actually been signed. I think a lot of preparatory work has to be done and we’re now beginning to see it. I think I would expect the Chinese and the Japanese governments actively involved in supporting infrastructure in the Philippines, especially with the government taking on a more active role in the Build program that they have established. There’s probably going to be less participation from the private sector, unfortunately. But otherwise, I see major infrastructure beginning to be signed, contracted and start getting implemented in the Philippines. So I think for the next few years infrastructure will be a big contributor to the GDP growth in the country.
AF: When you look broadly at the economic growth in the Philippines, what do you see is the biggest risk right now that could really derail that growth story?
Lito Camacho: The biggest risk, I think, in the Philippines will always be implementation, execution. Good plans, a lot of capital, a lot of financing available, it’s getting the projects up and about and getting implemented. I think that’s one of the risks. The other risk, of course, are political events that might slow down, undermine, disrupt, distract attention of leaders away from business, economic matters and into politics. As you know there’s a lot of talk about a shift in the form of government, from its current form to federalism. I mean if that takes too much time of the Congress, takes too much time of the Senators, of the cabinet members and so on, it may take away very important attention that should be on the tax reform, on infrastructure, facilitating the implementation of projects and so on and so forth.
AF: Speaking of politics, a lot of eyes on Malaysia and the potential for an election by August. We had an analyst on yesterday talking about just the economic impact this could have, didn’t seem to really think that this would shake things up a whole lot. As you look at the political landscape over in Malaysia right now, where do you see things headed?
Lito Camacho: Well I think there’s the consensus would be that the prime minister and this government will be able to retain control of government. He has to call an election very soon. I think August is probably the deadline. People are expecting that it will probably come sooner, maybe sometime in May. I guess the opposition is not as organized as you otherwise could be. And the expectation is that the government will be able to take control.
Now having said that, I think for a couple of years now, it’s become business as usual again in Malaysia and investors, business people are continuing to make commitments, investment commitments and the like. I think the market has performed quite well. So generally speaking, I’m cautiously optimistic about the prospects of the Malaysian economy with or without the elections that’s coming.
AF: There’s a story coming out of Singapore this morning about a media blackout law – essentially blocking out any form of electronic post, if you will, in some of these areas that would, essentially be the scene of any kind of terrorist attack and you know what not. And I raise this issue because it does seem like what we’re talking about Singapore today, there is this increasing movement from governments to really try and control the narrative. You described it earlier as this strongman really taking flight, not just here in Southeast Asia or here in Asia but globally.
Lito Camacho: But I think it is a global phenomenon. I think we see a shift from a preference for Western style democracy, for western, you know, the old paradigm, the old conventions of free trade, globalization, to more strongman rule, firmer control of governments and you see that around the world from the U.S. to Russia to China to Southeast Asia. And I think the guard for media, control for media, has also been influenced by all the stuff about fake news and so on.
So media is kind of losing some credibility to the public and I think political leaders are taking advantage of that. And allowing them to take firmer actions to control media, whether it’s social media or you know mainstream media, so that they can control the narrative of what’s coming out in the public domain.
AF: And, I guess if you take that approach certainly hard to argue, with all the instability that’s coming from the West particularly the U.S. right now. You look at a place like China, where Xi Jinping is just, you know, the party has just voted to eliminate those term limits, consolidation of power seems to be working in China. And if you look at it from an economic standpoint.
Lito Camacho: Well I think it reinforces the view that perhaps Western style democracy has not worked as well as it could, in the past, for many economies and a different form of democracy – let’s call it Asian democracy – it seems to be working better in many many parts of the world. And you see from the results, you know, where the economies are going and what kind of government, what kind of leaders they have.
And certainly from my experience in government, when I was in the government, it is very frustrating when you’ve got, you know, the inability to be able to implement and push for reforms that you really want to do for the economy. And having that ability, and you see that now in the Philippines you know. If I may just go back to the Philippines. I think having a strong leader like President Duterte allows even these ministers, his finance secretary, Secretary Dominguez, the ability to push for radical reforms that in previous governments where it would have been inconceivable. The recent tax reforms that they’ve done and it’s only the first part of a four-part tax reform package I think is quite something, it’s very radical.