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June 5, 2003

Her Excellency Gloria Macapagal Arroyo
President, Republic of the Philippines

Thank you very much. Mr. Sugita president and CEO of Nikkei; Prime Minister Mahatir; Prime Minister Shinawatra; Former Prime Minister Hashimoto; distinguished participants to Nikkei's 9th international conference; honored guests; ladies and gentlemen.

I would like to thank the Nikkei for inviting me once again to the prestigious Future of Asia conference.

I have always known it, but now I must perform the formidable task of having to speak next to my esteemed senior colleague Prime Minister Mahatir and just before my dynamic peer Prime Minister Shinawatra. Prime Minister Mahatir's insights are always profound, but on the topic we are now grappling with, his views have set a defining tone, not just today, not only in the present conference, but many, many years ago, when EAEG or EAEC were disjoint letters in search of a meaning and vision. He provided the meaning; he pursued the vision. He transformed ASEAN plus three from a mere intriguing idea and inaugurated it in kuala lumpur as the most viable working process for pan-East Asian cooperation that it is today.

As for Prime Minister Shinawatra, I would like to say that the model I follow in my economic policy is his domestic consumption - based "managed asset reflation" that helped accelerate Thailand's growth. I call it thaksinomics.

The conference this year is especially meaningful, not only because of the company of my distinguished fellow heads of government, but also because it is the opportunity to address the profound reality that the world changed on March 20 when the U.S.-led coalition took action against Iraq. The September 11 tragedy was historic, but Iraq affected the global order in a more fundamental manner.

Like all citizens of the world, we have come to see since 9/11 that no place is safe from terrorism, from Washington and New York, to Bali and Riyadh we have also come to see that we cannot be deterred by terrorists, wherever they strike. This means that we cannot retreat from the world but rather we must engage it.

In the new geopolitical environment post-Iraq war, there is a realignment of relations in asia marked by several trends including greater national self-reliance and national sovereignty bolstered by strengthened regional cooperation and more strategic global engagement. From our relations with China, with the United States and North Korea to regional issues like SARS. We are coming of age and dealing more transparently and pragmatically with one another. We must also impart a new asian perspective that demonstrates to the world that we are full and equal partners in global affairs, consistent with our mutual self-interest.

March 20 signified a major blow to the power of the United Nations. Critics have long described the current set-up of the U.N. security council as patently undemocratic, grossly outmoded or mostly impotent. That unless its security mandate is updated, the United Nations will continue to limp forward, tasked to do much tedious. Peacekeeping but too feeble or hand-tied to be effective at peace maklng.

It was for this reason that during the cold war states resorted to regional and bilateral arrangements, such as NATO, the Warsaw Pact, and networks of security alliances.

Nonetheless, the United Nations and the multilateralism that it represents will never become irrelevant countries by sheer might win a war, but it will take a concert of countries to win the peace. This was the case in Kosovo, in which the U.S. intervened as the leader of a coalition of the willing, but post-conflict reconstruction was implemented under U.N. auspices. In 1999, the security council was skipped because the U.S. knew that Russia would veto any resolution authorizing the use of force in Kosovo. However, negotiations with Russia produced an agreement that made the U.N. the immediate source of humanitarian aid and civil authority after the war.

Moreover, even if the U.N. did not exist, the world would have to invent an international body just like it. For many developing countries, the United Nations is a supremely vital forum in addressing global economic, social, and cultural concerns. After all, many transnational threats to our societies, such as global warming, the spread of new diseases, and drug and arms trafficking, are global in scope and cannot be managed individually, or even regionally.

Perhaps the greatest collateral benefit of the Iraq war that should not be squandered is the opportunity to reform the United Nations and make it a more effective development agent and peacemaker.

Security, like our economic endeavors, is increasingly becoming regionalized. The contributions of each country in East Asia, whether large or small, are vital to regional peace. Being ready to respond nationally to security threats is to us a prerequisite for the ability to contribute positively to the maintenance of regional security. It is under that light that we are looking at the new emergency legislation being considered in the Japanese Diet.

As you may know, we have pockets of terrorism in the southern Philippines that we are wiping out, and it is in our international interest to welcome assistance the supporters of this terrorism are not confined within our borders. Because of this, we must work with our friends from the region and around the world to achieve lasting peace. We continue to rely on Malaysia's willing support to our peace process in the southern Philippines, we thank Thailand for helping us build up our air battle capacity and as for the United States.

The Philippines and the U.S. have a mutual defense treaty which governs our military cooperation; it has been in effect for 50 year and guides our mutual involvement. We have had regular and joint military exercises throughout that relationship and continue to do so. But it is also important to understand that the Philippine constitution forbids foreign troops - U.S. or otherwise - from engaging in combat in the Philippines. There will be no U.S. combat activity in the Philippines; only training and security assistance.

The majority of the people of the Philippines support U.S. troops in the Philippines as long as they are under our command, as long as they comply with our constitution, and their efforts help us wipe out terrorism. We need to protect the Philippine people from wanton terrorists and I welcome international assistance to root out terrorists and bring renewed economic prosperity to our most impoverished areas. Substantial progress has been made in eliminating Al Qaeda networks. However, in Asia, in the world, we must continue to be alert.

The war on terrorism has many battlefronts and it is in everyone's interests to support efforts to win this war wherever and whenever these battles break out. Terrorism has many faces, but we should recognize its one result: a step backwards from humanity and progress to fear we owe it to ourselves to move forward together to eradicate terrorism and rebuild those regions of the world affected by terrorism on a foundation of peace, goodwill and prosperity.

Like the fear on which it feeds, terrorism can be contagious and it will not be contained unless we agree on a comprehensive approach for defeating it in asia. The early implementation of the road map to peace in the Middle East would help improve the situation. And by deepening our inter- dependence in asia by facilitating all kinds of interaction, and by raising the costs of conflict, regional economic integration can help us preserve the peace in East Asia, just as it has done in the case of Europe.

I am an advocate for broad-based economic engagement with the world, for the Philippines as well as our neighbors. I believe more trade makes for less conflict and more interdependence as long as the trade expansion genuinely lifts all partners equally. But as developed and developing countries alike know to be true, the benefits of globalization are not all apparent, and they are not all positive.

This poses a problem in a democracy like the Philippines. As the Philippines comes down on the side of trade, we understand that at the same time, we must manage the transition well with our poor in order to gain their political support for additional political and economic reforms down the road short-term necessities can then be offset in the longer term by a strong Philippine economy able to dismantle its non-competitive sectors and fully join a fair global trading system.

Japan, China and ASEAN form an economic sphere to rival Europe and North America. It is the dawn of a new age in Asia as Japan, China and ASEAN nations come together seeking greater economic cooperation and integration. The Philippines welcomes this development, particularly as we have seen our exports to our regional neighbors growing by leaps and bounds. We are brimming with confidence at the role we can play to assert the economic might of the region.

But we will only be planting aspirations for economic integration and security cooperation on barren soil if we do not also collectively cooperate on human security, on basic human needs like shelter, food, education and employment, or on sustainable development.

In this regard, we commend Japan's active role in the reconstruction of countries that have experienced conflict, such as Afghanistan, East Timor, and Sri Lanka, and regions such as the Philippines' southernmost island of Mindanao and the Indonesian province of Aceh.

In many ways, we are still recovering from the effects of the ASEAN financial crisis. It is crucial, therefore, for the Japanese economy to recover its dynamism, and to act as an engine of global growth.

The challenges that we face necessitate greater interaction and cooperation among the countries of East Asia. Some of these challenges are completely new, such as the SARS epidemic, which in a very short period has become a really serious scourge to asian economies, not so much the sickness itself but the fear it engendered.

But, as the 1997 Asian crisis made us realize, when we face a challenge together, we can overcome it. At that time, Thailand and Indonesia were financially assisted by Japan and China, while Korea received assistance from Japan. In the current SARS crisis, the first donors have once again been Japan and China.

In 1997, the ASEAN plus three process was born, almost to the day the financial storm began wreaking havoc in the region. That was a most fortuitous conjunction, indeed, as the first achievement of this process was as quick as "quick response" must be the network of currency swap arrangements established in Chiang Mai set the stage for pan-East Asian financial cooperation. The spirit of Chiang Mai should live on; a common East Asian currency should be an active goal of our region.

East Asian economic integration is not good only for East Asians. In this global village, growth and development are like waves that can animate all shores. For the global race against poverty, marginalization and under- development is not fought nor won by competing teams. It is rather like a relay where every economy is free to join the sole team pitted against the sole opponent, the clock and in this relay, the more sprinters there are in the team, the greater is the prize to be shared by everyone.

For achieving development, non-participation or isolation is a losing option. For achieving peace and security, isolation is another name for failure.

Thus the Korean peninsula has traditionally been a source of uncertainty in East Asia. The isolationist North Korea fired No Dong and Taepo Dong missiles in Japan's direction last 1993 and 1998, respectively. After launching a rocket over Japan in 1998, North Korea promised a year later that it would suspend missile tests after Washington agreed to ease trade sanctions.

Unfortunately, last January North Korea announced that it was unilaterally pulling out of the nuclear non- proliferation treaty, the cornerstone of global efforts to stop the spread of nuclear weapons. North Korea subsequently expelled iaea inspectors and resumed operations at the nuclear facilities of Yongbyon, which may be linked to nuclear weapons development.

The world is united in trying to bring North Korea to a disarmament position. Aside from its destabilizing effects, an arms race is wasteful of resources, especially at a time when East Asia should prioritize its capacity for sustained economic growth in the region.

Politically, the Philippines represents the closest ASEAN border to Korea and Japan and remains deeply concerned about peace on the peninsula, particularly a nuclear-free peninsula that is my position and I believe that it can be resolved peacefully, but it will require regional as well as international cooperation.

The current Korean crisis is both a challenge and a great opportunity for multilateral diplomacy. I fervently hope that the nuclear genie can be contained, as has been done in Ukraine and belarus, which were persuaded to give up their nuclear weapons programs. We hope that Japan, south Korea the U.S., China, Russia, and the European union will be able to convince North Korea to do the same and to dismantle its weapons of mass destruction. We therefore welcome the talks among North Korea, the United States and China. These talks, while still in the initial stages, are beginning to heal the strains in the relationship between the U.S. and Korea, has strengthened the alliance between Japan and the U.S. They have also allowed China to be a major construction player in the region's security. China's efforts at the start of the trilateral meeting were truly commendable, and we hope that it will continue to play an important role, commensurate to its growing economic importance, in resolving security and political issues in East Asia.

Given the largely undefined security relations among China, Japan and the U.S., Their interaction will result in a decentralized and multipolar regional order. The ASEAN regional forum or arf is now the necessary linchpin for security and political dialogue in the region, because the major individual country players still have to resolve important differences among themselves. Progress in the arf may not be as fast as some quarters may want it. But with the consent of its members, arf can evolve from mainly a confidence - building body into an institution that can handle conflict resolution.

Full engagement by all stakeholders is the foundation of the new asian order. We should work together to seize the moment, define the opportunity, and move forward as modern nations finding common ground with our global neighbors while fighting for our own national interests. Thank you.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.