TOKYO--Finance Secretary Carlos Dominguez III, along with the other economic managers and key members of the "Build, Build, Build" team, held the Philippine Economic Briefing (PEB) at the Imperial Hotel here on Tuesday, June 19, 2018 to showcase the vibrant economic prospects in the Philippines amid the Duterte administration's goal of spurring infrastructure development to achieve inclusive growth. The PEB, the second to be held in this Japanese capital since last year, also featured updates on the Philippines’ macroeconomic performance, fiscal and monetary policies and infrastructure developments from Socioecomic Planning Secretary Ernesto Pernia, Budget Secretary Benjamin Diokno, Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr., Transportation Secretary Arthur Tugade, Public Works Secretary Mark Villar, and Vivencio Dizon, the president of the Bases Conversion and Development Authority.
TOKYO—Finance Secretary Carlos Dominguez III confirmed here Tuesday that the Philippines is planning to issue about $1 billion-worth of “Samurai” bonds this year following its two successful floats of dollar- and renminbi-denominated securities in the offshore markets in the first quarter of 2018.
Buoyed by the tight spreads of the Philippines’ earlier bond issuances this year, Dominguez said such developments “indicate confidence in the fiscal and debt management of the Duterte administration.”
In showcasing the Philippines’ vibrant economic prospects, Dominguez recalled that when the government issued $2 billion-worth of 10-year dollar denominated bonds in January, its spread was 37.8 basis points (bps) over the US Treasuries, while its maiden “Panda” bond float of 1.46 billion renminbi in March had an even tighter spread of only 35 bps over the benchmark.
“This year, we are also planning to issue around one billion US dollars worth of ‘Samurai’ bonds,” Dominguez told Japanese businessmen during his opening remarks at the Philippine Economic Briefing (PEB) held at the Imperial Hotel here.
The finance chief gave no other details of the planned yen-denominated bond float in his speech, but he has said earlier that the government will proceed with it by September or October of 2018.
National Treasurer Rosalia de Leon also quoted the same amount of “about $1 billion” in an earlier interview with reporters.
This year’s PEB, which showcases the Philippines’ economic resilience amid its goal of spurring infrastructure development to achieve inclusive growth, is the second held in this Japanese capital since last year.
In his remarks, Dominguez said bilateral relations between the Philippines and Japan have emerged “closer and stronger” these past few years as the former rises to join the elite group of Asia’s tiger economies, fueled by its long-term goal to achieve zero poverty rates about two decades from now.
To date, Japan has been the Philippines’ major source of official development assistance (ODA) a reliable ally in terms of infrastructure support from the period of reconstruction, one of its top trading partners, and its fourth largest source of foreign tourists, Dominguez said.
He thanked Japan and its people for their continuing support to the Philippines’ economic emergence as well as its support for the reconstruction and rehabilitation of the devastated city of Marawi in Mindanao.
As the Philippines continues to institute reforms both in the economic and peace and order fronts to sustain its growth momentum, Dominguez assured the Japanese business community that the government on the watch of President Duterte will continue to further open the economy to investors and “improve the ease of doing business, respect the sanctity of contracts, and promote a more conducive climate for investments.”
Joining Dominguez at the briefing were Socioeconomic Planning Secretary Ernesto Pernia, who gave an overview of the latest Philippine economic performance and the government’s socioeconomic priorities; Budget Secretary Benjamin Diokno, who discussed the country’s fiscal strategy and budget reforms; and Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr., who provided an update on the monetary, external and financial sectors.
Transportation Secretary Arthur Tugade and Public Works Secretary Mark Villar presented the latest developments in the infrastructure and transport sectors, while Vivencio Dizon, the president of the Bases Conversion and Development Authority, talked about the developments in the envisioned New Clark City at the former US military base in Pampanga.
“As we modernize our infrastructure and accelerate our growth, we look forward to increased investment flows from Japanese companies,” Dominguez told Japanese businessmen gathered at the event. “We are impressed with the commitment to excellence that imbues your corporate culture. We hope to benefit from the transfers of technology that invariably tracks investment flows.”
In his speech, Dominguez cited Japan’s support for at least three flagship infrastructure projects under the Duterte administration’s “Build Build Build” program, namely, the 1) Cavite Industrial Area Flood Risk Management Project, 2) the Arterial Road Bypass Project Phase III; and 3) the first phase of the Metro Manila Subway Project, which is the Philippines’ first-ever underground rail system.
These projects are among the fruits of the regular discussions held between the two countries through the Philippines-Japan Joint Committee on Infrastructure Development and Economic Cooperation, which was convened just in March last year, Dominguez said.
To date, Japan has already formalized loans and grants totaling about $1.25 billion to the Philippines.
On top of providing ODA financing for these projects, Japan is also the Philippines’ second major trading partner, with total bilateral trade between the two countries amounting to $20.8 billion in 2017.
Japan is also the fourth largest source of tourists for the past three years. In 2017 alone, some 584,000 Japanese visited the Philippines, an increase of 9 percent over the previous year.
Through the Japan International Cooperation Agency (JICA), Dominguez noted that Japan has also responded immediately to the Philippines’ appeal for assistance in rebuilding the devastated city of Marawi.
Japan has so far provided an estimated $36 million in assistance for Marawi’s relief and rehabilitation operations.
Dominguez painted a general picture of the Philippines’ economic emergence by underscoring the economy’s sustained rapid expansion of 6.5 percent or better for the last 10 quarters; the significant growth of the manufacturing, industry and construction sectors; the government’s plan to increase infrastructure investments from 6.3 percent of the gross domestic product (GDP) in 2018 to 7.3 percent by 2022 through its 75 high-impact and big-ticket projects.
He said the first package of the comprehensive tax reform program—the Tax Reform for Acceleration and Inclusion (TRAIN) Law—has contributed to strengthening the Filipinos’ purchasing power as well as immensely improving the country’s tax effort to 14.3 percent of GDP in the first quarter.
From January to May this year, national government revenues rose by 20 percent year-on-year, while tax revenues grew by 19 percent. Collections of the Bureau of Internal Revenue improved by 16 percent and Bureau of Customs’ collections grew by 31 percent over the same period last year.
Dominguez said the government expects to “consolidate this positive trend” with a second tax reform package on reducing the corporate income tax while modernizing investment incentives.
Alongside these positive developments, however, is an elevated inflation rate, which is typical of a high-growth economy like the Philippines, but was aggravated by the sharp rise in global oil prices and the adjustments in the peso-dollar exchange rate, Dominguez said.
He said inflation “should begin deescalating towards the second half of this year” and that economic managers “do not expect the elevated inflation rate to become permanent.”
Further underlining the strong investor confidence in the Philippine economy was the impressive net inflow of $2.2 billion in foreign direct investments (FDIs) in the first quarter of 2018, which surpassed the figure recorded for the same period last year by 43.5 percent.
According to Dominguez, the government is revisiting its Foreign Investments Negative List (FINL) to open more areas for joint ventures and direct investments, reviewing its procedures to reduce red tape and shorten approval time for business start-ups, and exploring possibilities for expanded e-governance using digital technologies.
President Duterte recently signed the Ease of Doing Business Law, which creates a unified business application form and a central business portal to make it easier for investors to open or renew businesses, and mandates a zero-contact policy to reduce official corruption.
Dominguez said the President has also made the country a safer place for investors, with his campaign against corruption and criminality leading to a decrease in crime volume by 21.86 percent since the start of his administration.