For the second year running,FinanceAsia has ranked the finance ministers of the Asia-Pacific region’s 12 largest economies.
We've been releasing the results day by day, from lowest to best. For the results so far, click here. For last year's results, click here.
FinanceAsia considers several factors when thinking about how to compare the performance of these men over the past 12 months. The role’s responsibilities and powers vary between countries but each minister contributes to fiscal policy and the budget, accesses capital markets, regulates financial institutions, and drives reform. Investor perceptions are one way to view how good a job they are doing, particularly when times are tough.
But the hardest criterion is independence. Most finance ministers serve at the pleasure of their prime ministers, presidents, or military dictators. Their ability to get things done requires political deftness, mastery of policy, sway over the bureaucracy, and the will to fight for the public interest.
Today, we name the minister who impressed most over the course of 2015.
Ranked No1: Cesar Purisima, the Philippines
Top of the class once again is Cesar Purisima of the Philippines, our finance minister of the year for the second and, probably, last time given that his term expires this spring.
Purisima deserves his gong, having improved the country’s finances and avoided missteps that could have undermined the remarkable growth story in the Philippines.
“My proudest achievement was changing the Philippines from being viewed as the sick man of Asia,” Purisima told FinanceAsia. “It would have been beyond belief to imagine just a decade ago that we would become a comfortably investment grade credit.
The Philippines has been one of the few bright spots in Southeast Asia. The IMF expects the economy to grow by 6.2% in 2016, a very respectable figure for what looks set to be a relatively weak year for Asia.
With a five-year average growth rate hitting the highest in 40 years, it seems the country, once dubbed “the sick man of Asia”, has learned its lesson to become one of the most resilient of Asian economies.
The country has fared relatively well in part because of its service industry focus, strong domestic consumption, government spending (which rose 19% year-on-year in the third quarter of 2015, according to HSBC), and the steady flow of remittances from its diaspora of overseas workers.
Cesar Purisima and the department of finance also deserve plaudits for their sound economic management. Purisima has been the architect of the government’s reputation for fiscal discipline, professionalism, and a desire to combat corruption.
Years of careful economic management have meant the central government’s debt was only 45% of GDP in 2015, the lowest in 30 years. A carefully managed reduction in foreign borrowing means that non-peso denominated debt should drop from 31.6% of public debt last year to 30.4% this year. Plus, most of the government’s external debt repayments are spread out over a long time frame.
Purisima admits his biggest regret was not conducting comprehensive tax reform. “We introduced the Sin Tax in 2012, and I should have pushed forward with comprehensive tax reform then,” he told FinanceAsia. “I thought the president wouldn’t consider it. However, I didn’t know him as well then as I do now, and I think he would have been open to the idea.”
The law imposed higher taxes on tobacco and alcohol, overcoming a strong industry opposition that kept prices in the Philippines among the cheapest in the world. The additional revenues went towards universal health care for Filipinos.
Yet even despite this, Purisima has overseen a marked improvement in tax revenues. The Bureau for Internal Revenue’s collection has risen from 12.1% of GDP in 2010 to 13.7% between January and November 2015. The country has used this largesse to invest heavily, increasing social services fivefold over five years and hitting its goal of spending 5% of GDP on infrastructure.
These positive indicators led NICE Investors Service to upgrade the country’s credit rating by a notch from the minimum investment grade of BBB- to BBB. The Philippines has had 24 such upgrades from rating agencies since 2010 - making it the most upgraded sovereign in the last five years.
The change in attitude towards the country has been marked.
“In 2005, during my first brief time as finance minister [under the presidency of Gloria Macapagal Arroyo], we attended an Asean forum event in New York,” Purisima recounted after collecting his award at FinanceAsia's annual Achievement Awards dinner in Hong Kong. “Each country had a room to meet investors, and it was embarrassing because nobody came to our room. In fact two other countries, Thailand and Vietnam I think, came in to ask if they could borrow our chairs.”
It’s fair to say this would not be the case today.
The pace of approved public-private partnerships continues to frustrate, with the award of just 12 contracts since the launch of the programme in 2012. Analysts believe the government could, if anything, expand its budget deficit of 2% of GDP to spend more on needed-infrastructure.
However, the biggest immediate concern for onlookers is the fact that President Benigno Aquino’s six-year term ends this year, so the country will soon get a new president and financial team.
However, Purisima can leave with his head held high, having burnished the country’s reputation for solid financial management.
