Photo: Philippine Finance Sercretary Carlos Dominguez
Finance Secretary Carlos Dominguez III has said there is no turning back on the government's comprehensive reform agenda for rapid and inclusive growth as President Duterte's vision of providing a comfortable life for every Filipino is moored to the success of this economic strategy.
Dominguez said that for the Duterte administration, sustaining the country’s economic expansion is not just an option but a necessity to realize its ultimate target of significantly reducing poverty incidence from 27.6 percent in the first half of 2015 to just 14 percent by the time the President leaves office in 2022.
“We are confident that, over the next two years, we will continue strengthening the foundations of rapid and inclusive growth. If you look around you, with all the construction projects going on, you will see a new competitive economy being born,” Dominguez told his fellow Rotarians at the 2019 Rotary Institute held recently at the Marriot Hotel Manila in Pasay City.
He said the President's signature infrastructure modernization program “Build, Build, Build," which covers 100 strategic projects, will enable the country to close the infrastructure gap with its neighbors in the region “in the shortest possible time,” while creating jobs, opening numerous investment opportunities and pulling “our economy almost literally by our bootstraps” should global uncertainties turn for the worse.
With many of his fellow Rotary Club members being decision makers in their respective businesses, Dominguez appealed to them to help spread the word about the bright prospects facing the Philippine economy on the watch of President Duterte.
He pointed out that the Philippines, for instance, is expected to rise to the rank of upper middle-income country ahead of schedule by next year, which is testament to a strong and resilient domestic economy that grew by an average of 6.4 percent in the first 13 quarters of the Duterte presidency.
He also cited the vibrant participation of international and local companies in “Build, Build, Build" as indicative of the strong confidence and trust of the business community in the Duterte administration and in the transparent, fair and corruption-free bidding process that it has been implementing since the President assumed office in 2016.
“There is, therefore, no turning back from our 10-point socio-economic program that is designed to sustain our rapid and inclusive economic growth. The wellbeing of our people depends on the success of this strategy. There is no time to spare,” Dominguez said.
On top of “Build, Build, Build," a key plank of the Duterte administration’s 1o-point socioeconomic reform agenda is its comprehensive tax reform program (CTRP), which is responsible for the strong growth position of the economy and the steady revenue source for the government’s unmatched public investments in the future, Dominguez said.
He said the CTRP is the source of confidence in the government’s ability to bankroll its ambitious "Build, Build, Build" and realize its goal of accelerating poverty reduction.
The Tax Reform for Acceleration and Inclusion (TRAIN) Law, which is first package of the CTRP, has been delivering substantial tax savings equivalent to a month’s pay to 99 percent of individual taxpayers, which, in turn, has boosted their purchasing power and strengthened consumer demand.
This new law has also discouraged the consumption of products that are unhealthy such as sugar-sweetened beverages (SSBs) and tobacco, he said.
Dominguez said the remaining CTRP packages still need to be approved by the Congress and implemented by the Executive Department to encourage more investments and better tax compliance.
These are the CTRP packages on: reducing the corporate income tax (CIT) rate and rationalizing fiscal incentives to makes these performance-based, time-bound, specifically targeted and fully transparent; reforms in land valuation; reforms in the financial sector to help develop the capital markets; and a general tax amnesty contingent on the lifting of bank secrecy for tax fraud cases and the automatic exchange of information among regulatory agencies.
In his speech, Dominguez underscored before his fellow Rotarians these bright prospects and impressive developments in the economy on the Duterte watch:
· The Philippines’ sovereign risk rating has recently been upgraded to "BBB plus" by Standard and Poor’s. This is higher than the ratings of some Eurozone economies such as Italy and Portugal. Dominguez said this is a “recognition of the country’s efforts to maintain the highest standards of fiscal discipline;”
· Record-level international reserves of U$S85.7 billion by end-October, which is the equivalent of over seven months’ worth of imports and the major reason for the currency’s stability;
· Total revenue collections grew 42 percent for the first 10 months of 2019 compared to the same period in 2016. Revenues from the first package of the CTRP are up by 65 percent in the first half of this year;
· Remarkable improvements in tax administration as demonstrated by the cleanup of the cigarette business following the closure of an errant cigarette firm, which settled its tax liabilities by paying the government US$600 million, the highest ever collected from a single company in the country’s tax history. The government now collects US$50 milion more per month in cigarette excise taxes;
· Public spending on infrastructure rose to over 5 percent of GDP in 2018, the highest rate ever achieved and double the average ratio of infrastructure spending to GDP in over 50 years. The administration expects to bring this up higher to about 7 percent by the end of President Duterte’s term;
· Successful bond issuances in the Euro, Samurai and Panda markets with tight spreads as low as 32 basis points over benchmarks. The Philippines has tighter spreads relative to other observed countries such as Indonesia, Mexico and Colombia across currencies;
· The Philippines’ pole-vault by 29 places to Rank 95 in the World Bank’s latest Ease of Doing Business (EODB) report. Dominguez said the vigorous implementation of governance reforms that have cut red tape, brought down the volume of corruption and modernized bureaucratic procedures will continue;
· The passage of the Rice Tariffication Law (RTL), which has brought down the price of the country’s staple food for more than 100 million Filipinos, and slowed down the inflation rate, which, in turn, eased the pressure on businesses to raise wages. This law is designed to be a key driver in modernizing farm systems and bringing down rural poverty;
· Over the past two years, the Philippine economy has attracted foreign direct investments (FDIs) of US$20 billion. For two consecutive years, FDIs averaged US$10 billion a year, about double the inflows that the country received in 2015; and
· The Philippines’ demographic dividend in its young and well-educated workforce, which is in sharp contrast to the aging populations of other countries in the region.