Integration with Asian economies propels investment-led growth

Finance Secretary Carlos Dominguez III said the Duterte administration’s move towards greater integration with other Asian economies would lead to substantial investment inflows this year, as well as rapid tourism growth and robust exports that would benefit not only big businesses but micro and small enterprises as well. (Photo: KING RODRIGUEZ/ Presidential Photo)

MANILA—Finance Secretary Carlos Dominguez III said the Duterte administration’s move towards greater integration with other Asian economies would lead to substantial investment inflows this year, as well as rapid tourism growth and robust exports that would benefit not only big businesses but micro and small enterprises as well.

Some PHP326 billion worth of projects that have begun construction or will be built starting this year are among the investments that Dominguez said would lead to a “blossoming of opportunities for Filipino businessmen.”

As the country shifts its source of growth from consumption to investments, Dominguez also said one key factor that needs to be addressed is improving the country’s low savings rate, as he pointed out that 86 percent of Filipinos today remain “unbanked.”

“To be an investments-led economy, we need to improve our savings rate. The key to this is the deepening of the country’s capital markets and the broadening of access to the formal business sector,” said Dominguez in his remarks at the general membership meeting of the Philippine Chamber of Commerce and Industry (PCCI) at the Makati Diamond Residences in Makati City.

The finance chief said businesses should expect themselves to be busy starting this year, as the Duterte administration rolls out its big-ticket infrastructure projects, which would, in turn, stimulate the economy, create jobs and generate more financing opportunities for the country’s banking and insurance sectors.

“It is not only the large businesses that will benefit from the multifold opportunities that will open up in the near future. Our closer relationship with China, Japan, South Korea and the ASEAN (Association of Southeast Asian Nations) will translate into rapid tourism growth and bountiful export markets. This will mean stronger demand for processed food, in-person service enterprises, household items and consumer electronics,” Dominguez said.

He said “the stronger linkages we now forge with our development partners and regional neighbors will provide new drivers for the growth of our domestic economy.”

Among the large-scale infrastructure projects that would commence starting this year are the Clark-Subic Rail, Tutuban-Clark Rail, and the 581-km South Line of the North-South Railway Project connecting Tutuban, Calamba, Batangas and Bicol, Dominguez said.

He said construction has already begun on the Panguil Bay Bridge in Mindanao, while groundbreaking rites are set this year for the Clark International Airport, the Metro Manila Bus Rapid Transit System, and three bridges across Pasig River, two of which will be built through Chinese grants.

The government, according to Dominguez, is “also closely working with our Chinese partners” to finally start the construction in 2017 of the Kaliwa Dam, which will help ensure a stable water supply to Metro Manila, and the Chico River Pump Irrigation project in the Cordillera region.

According to Dominguez, these projects alone are worth a combined total of PHP326 billion.

“The administration envisions one trillion pesos a year in infrastructure investments. This alone should help sustain our growth momentum,” Dominguez said.

Beyond 2017, the Duterte administration will start the construction of long-span bridges between Bicol and Samar, and between Leyte and Surigao that will finally make land travel between Luzon, Visayas and Mindanao possible, Dominguez said.

Regional airports will also be rehabilitated or new ones built, to ease travel across the country’s three island groups, while in Mindanao, a 2,000-kilometer railway that will connect its key cities and boost the economies of the country’s poor regions is also in the pipeline, he said.

“I am well aware that the congestion at the ports imposed heavy costs on our manufacturers, especially those whose competitiveness depends on just-in-time deliveries of both raw materials and finished products. The congestion is both an infrastructure and administrative problem. As we upgrade our port infrastructure, we should also remove unnecessary procedural hindrances to the flow of goods,” Dominguez said at the PCCI forum.

While the government plans to invest more outside Mega Manila, Dominguez said it will also address the congestion in the country’s premier urban hub through projects such as the Mega Manila Subway, almost a dozen more bridges across Pasig River, and the development of Clark Green City “to attract businesses and people out of the Mega Manila area.”

“When I said we will start these projects, we do not mean just bidding out projects, signing contracts, or attending opening ceremonies. In this Administration, ‘start’ means groundbreaking and actual construction. We will no longer tolerate the wishy-washy promises that implementing agencies have been accustomed to making in the past,” Dominguez said.

“You can count on this administration to be aggressive in building these infrastructure,” he added.

Besides focusing on infrastructure, Dominguez said the Duterte administration is also committed to address other factors that have made the Philippine economy unattractive to investments, such as its high energy costs, restrictive economic policies, corruption and uncertainty over contracts.

“In a word, increasing investments in our economy requires an all-rounded strategy. It requires both adept and far-sighted governance as well as a dynamic private sector that is always ready to seize opportunities offered by the market,” Dominguez said.

He added: “The key to this strategy is to bring up the quality of our infrastructure backbone to match those of our neighbors. We need to invest in training our labor force and in strengthening our human capital. In the comprehensive tax reform package we submitted to Congress, we are seeking to align our income tax rates with those prevailing in the region. Exceedingly high tax rates are a disincentive to investments.”

In overhauling the tax system, Dominguez said administrative reforms are already being undertaken by the Bureaus of Internal Revenue (BIR) and of Customs (BOC), which have led to marked improvements in their respective revenue collections.

Moreover, the joint operations of the BIR under the leadership of Commissioner Caesar Dulay and the BOC under Commissioner Nicanor Faeldon against manufacturers of illegally stamped cigarettes was the kind of teamwork he expects from the government’s revenue collection agencies in running after tax evaders.

Along with these improvements in tax administration, the first package of the Duterte administration’s comprehensive tax reform package (CTRP), which has already been approved in principle by the ways and means committee of the House of Representatives, would make revenue collections “truly robust” and “help government pursue its program of building a truly inclusive economy.”

“In pushing the reforms further, we will be in constant consultation with business groups such as the PCCI. We are building a new attitude among our personnel, one that treats every taxpayer, every importer and exporter as a valued client. We have benefitted immensely from your inputs and will continue to benefit as we go along,” Dominguez said.