By LEE CHIPONGIAN
Images by ALI VICOY
The day after Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno was appointed as the next BSP chief to the surprise of everybody, he faced the media still wearing his budget secretary hat (he was to take his oath of office later that day) and he didn’t mince his words.
Diokno addressed the Rodrigo Duterte-sized elephant in the room—that the BSP will remain an independent government financial institution, he’s nobody’s minion, not a political appointee, and as a matter of fact he’s very much qualified for the job, backed by his Ph.D. in Economics (Syracuse University in New York), two Master’s Degree (University of the Philippines), and one Master of Arts (Johns Hopkins University in Baltimore, Maryland).
He’ll have to temper his frank and point-blank ways when addressing the public from now on, that he will have to be more circumspect and guarded as the highest ranking central bank official. It’s traditional, he said.
Three months later an unusual BSP governor is emerging. He’s testing the conventional ways of a central monetary authority and is purposely pro-growth with unconventional pro-poor agenda that he thinks is what BSP policies should be more of. One thing that hasn’t changed—he still didn’t mince his words.
The buck stops here
The governor of the BSP is a unique government post because he has no boss, says Diokno. President Duterte cannot tell him what to do since he’s no longer a cabinet member.
“I’m not answerable to him (Duterte). But I have a Monetary Board,” he says. The Monetary Board is composed of three economists (including Diokno), two former bank presidents, a former central bank legal counsel, and a cabinet member. With Diokno as chairman, they decide whether or not to raise or lower interest rates and what to do with other monetary policy tools to help manage inflation.
The ordinary Filipino only needs to know that the BSP’s main mandates are ensuring price stability (which means keeping inflation low and stable), financial stability (regulating banks), and an efficient payments system. All these things, when done right and successfully, will lead to a sustainable, inclusive, and strong economic growth.
Diokno, a university professor by heart, has put it simply like this: Be decisive, forward-looking, and communicate your intentions as soon as possible. That’s how Diokno wants his watch as BSP governor to start and to end. His term finishes in 2023. Don’t keep the banks guessing, he adds, and don’t even let the market’s proclivity to risky and speculative endeavors take root. “Action agad” or to take action swiftly is what he wants his trademark to be. “Ayaw ko ng matagal,” he says in Filipino. “I don’t like to things to take too long.”
Diokno refuses to be vague and he’s adverse to what’s done before of a reticent Monetary Board until an actual decision is made on which direction the BSP will take interest rates, the exchange rate, and the general business of central banking. He has repeatedly assured the market that Monetary Board actions will be timely and data-dependent such as freeing funds for more bank lending to encourage further growth.
Diokno says his work now is easier compared to when he was budget secretary. “Dito mas relax ako (I’m more relaxed), I’ve more time to read,” he said. “I watch TV. I love sports, NBA, women’s volleyball (the UP team), UAAP…Kasi dati-rati, pressured ka, you spend a lot of your time in meetings, you talk to senators, congressmen, governors, barangay captains. Now, I have more time to read (because) my staff are very professional.”
In another universe, Diokno says he could have been a lawyer, but he did want to follow in the footsteps of his father who was a lawyer.
“I studied public administration, then I joined the senate, before (the 1972) Martial Law,” he said. He had three choices at the time: Teach in UP, work for a government agency (Board of Investments), or remain in the senate. “Kung hindi siguro nag Martial Law, baka pulitiko ako. Nasa senado na ako eh. Buti na lang (If Martial Law didn’t happen, I would have been a politician because I was already in the senate),” says Diokno.
‘Every year we have a steady supply of (US) dollars. We have lots of bullets. Every year, we have about $30 billion from the OFWs (overseas Filipino workers), and we have $30 billion from the BPOs (business process outsourcing). Tourism is picking up and we have FDI (foreign direct investments), which is very sound. In the last two years, it’s reached $10 billion…and I think it’s going to increase. There’s lots of interest in the Philippines right now.’
During the Martial Law years, Diokno was in the US for his Ph.D., he was sent there by UP as a lecturer-scholar. He would then come back seven years later, and he resumed his UP teaching job for another 40 years.
A BSP that’s closer to the people
Diokno says there’s a need for the BSP to “go beyond convention and embark on goals outside the ambit of traditional monetary policy” when fostering inclusive growth. Right now, the BSP is pursuing financial education and consumer protection to maximize the impact of BSP’s policies to all Filipinos.
“There’s a misconception that BSP is ‘up there’ but when you’re in BSP, you’re really serving the people and the main goal (for the BSP) is price stability,” says Diokno. Inflation hits consumers the worst because they have a fixed income, he explains. Businessmen will cope with higher prices by passing the costs to their customers.
Diokno says as governor, he will naturally go for what will be good for the majority, not just for the banks or investors. In other words, a BSP that’s more into economic utilitarianism. “It’s about what’s best for the majority, always. I’m not here to work for the banks—we’re the regulators of the banks.”
He relates his straightforward ways, his decision to preannounce BSP policies, as part of bringing the BSP closer to ordinary Filipinos. “You have to be transparent. The old practice, the old norm, is you have to be deliberately vague,” he explains. Ultimately, this is bad for the market, the banks, and depositors because it leads to risk-taking behavior.”
Diokno’s BSP and the next four years
Diokno has served three Philippine presidents, so far, all as official of the Department of Budget and Management (DBM)—two times as DBM secretary under the Duterte and Joseph Estrada administration, and as its undersecretary during the revolutionary government of President Cory Aquino.
He never thought he would shift from budget chief to central bank chief as he is now, but he’s appreciative of the timing.
“You can say that I came in at the right time. Parang sinadya (like it was meant to be),” muses Diokno.
He knows it will be challenging work with the amended BSP Charter just signed in February. “In the next few years, a key direction that we will take is the implementation of recently enacted laws that support the implementation of our mandate (mainly price stability).”
Republic Act No. 11211, which amends the BSP Charter (The New Central Bank Act), will make the BSP more independent and powerful. It will further reform the BSP to align its operations with global best practices, enhance its corporate viability, and strengthen its capacity for crafting policies, according to Diokno. A key provision is the increase in the BSP’s capitalization from P50 billion to P200 billion.
Diokno says they also have to implement Republic Act No. 11127 or the National Payment Systems Act, which will bring a more efficient, secure, and reliable payment system, and Republic Act No. 11256 or the “Gold Law,” which is an important law because it will expand the country’s financial crisis buffer or its US dollar stock.
Diokno says the Duterte administration is “lucky” in that the former Mayor of Davao inherited a government that has a lower debt-to-GDP ratio.
“Each President of the Philippines (he’s served) is different. They work under different environments. Noon si Cory (President Corazon Aquino), talagang we were heavily indebted, we wouldn’t be able to do this thing now, like the ‘Build Build Build,’ kasi walang gusto magpautang sa atin (nobody would lend us money). One half of our budget was just paying for our debts. Interest rates were so high at the time,” said Diokno. “Kay Erap (Estrada) naman, we were just coming out of the Asian financial crisis.”
Gov. Ben’s ‘money advise’
As head of an autonomous government agency handling $85 billion—at least—of the country’s foreign assets and foreign exchange, Diokno or Gov. Ben to the press, has a practical way of looking at money.
“Money is (just a) medium of exchange (but our money) has to have integrity, that the people can trust that the peso (or the 1-Piso) has value,” says Diokno. And as long as key prices are tamed, the local currency will be strong, he adds.
While Diokno says he’s the “least person to advise” ordinary folks about money, he says it’s always safe to say to take care of your money and put it in a bank. “I’m a pro-manager of my own money,” he said. “It’s not about the amount of money you earn, but it’s the amount of money you save that matters.”
Since he is the BSP governor, he says that they “just have to make sure the banking system is stable and compliant with our rules and regulations (so that banks) are operated soundly.” He adds that the BSP issues regulations “so banks observe prudent lending standards to help ensure that they are able to collect the funds that they lend to businesses and individuals.”