HONG KONG-- With the Philippines free of its debt load and reaping investment-grade status, Finance Secretary Carlos Dominguez III has called on potential investors to help rewrite the Philippines' growth story by taking part in the country's nascent drive to finally close its infrastructure backlog that has for decades blunted its regional competitiveness as an investment hub.
Dominguez stressed at an investment forum here that apart from sustaining rapid growth, the Duterte administration aims to reshape the evolution of the Philippine economy into one that is investment-driven and more inclusive enough to open opportunities for all Filipinos.
He said that transforming the Philippine economy from being consumption-led to one driven by investments requires upgrading the country's infrastructure, realigning income tax rates to be competitive with the rest of the region and investing in training its youth to become a highly talented workforce.
Let me invite all of you to take a closer look at the rewriting of the Philippine growth story. It will be a heroic story of a people working their way out of poverty, of a government building a strong public order and a proud nation willing to be an engine of growth in a global economy that sometimes seems to be waning, said Dominguez at the 20th Credit Suisse Asian Investment Conference held here Monday.
More than just taking a closer look, Dominguez also invited participants at the forum in helping the Philippine economy draw in more investments, providing more meaningful jobs and enhancing wealth creation.
I assure you this will be an inspiring story for all the emerging economies, he said at the conference, which gathered some 3,000 corporate and financial leaders, prominent political figures, social thinkers and institutional and high-net worth investors from across the globe.
Over the past few years, we have worked down the debt and achieved investment-grade credit ratings. Our fiscal position is robust. We used the opportunity of low interest rates to replace expensive debt with cheaper bonds. Freed of the debt load, our economy is truly ready to run, Dominguez said.
The new administration is now ready to deal with our infra backlog head-on. In the past, our debt load prevented us from keeping pace with the investments in infra around the region. We are now beyond that and prepared to accept deficits of 3 percent of our GDP to rapidly improve facilities. We are looking at investing 5 percent of our GDP ininfrastructure, he added.
Dominguez said rewriting the Philippine growth story would mean discarding the weak government and deepening economic inequality of the past.
From here on, it will be about opening opportunities for all and a strong government presiding on behalf of the larger interest, he said.
Dominguez told the forum that the government is determined to implement a four-phase comprehensive tax reform program (CTRP) that will help ensure the financial sustainability of its aggressive spending program designed to reduce the poverty level to 14 percent and transform the Philippines into a high middle-income economy by the end of the Duterte presidency in 2022.
"The first package aims to lower personal income tax rates along with donor and estates taxes, while broadening the tax base by expanding the coverage of the VAT and adjusting the excise taxes on fuel and automobiles. The second package pairs the lowering of corporate income tax rates with the modernization of fiscal incentives; package three will tackle property taxes; and the fourth will simplify and harmonize tax rates for all assets to finally correct the bias of the current tax laws towards instruments that only the wealthy can access such as dollar-denominated accounts and time deposits, Dominguez said.
He said the first package alone is projected to generate an additional $3 billion for the Philippine economy in 2018, while packages 2 to 4 may yield $1 billion more by 2019.
If these packages still fall short of the country's revenue requirements, we are prepared with a series of other tax measures that include taxes on sugary beverages and an increase in motor vehicle user charges, Dominguez said.
In order to support this government's high growth yet inclusive economic strategy, we have proposed to the legislature a comprehensive tax reform package, he said. This is intended to make the tax system fairer, simpler and broader based. The tax reforms by themselves should enhance a more inclusive economic growth by helping lift some six million Filipinos out of poverty.
The more robust and reliable revenues generated by the reformed tax system should enable government to support economic investments over the long term, he added.
Economic development, as all of you know, is not a matter of fits and starts. It is achieved by constantly improving on the country's institutions and by making economic processes more efficient. This requires both far-sighted leadership and a willingness to do the hard work of economic governance, Dominguez said.
Several factors hindered our economic expansion in the past. Among them: a large debt overhang, excessive bureaucratic procedures, widespread corruption, a costly energy regime and a poor infrastructure backbone. The new government is addressing all these with decisiveness and an extreme sense of urgency, Dominguez noted.
He said now is the right time to move the Philippines to a higher growth plane and catch up with other dynamic economies in the region given the confluence of benefits it now enjoys, among these: a low interest rate regime, cheaper oil and a demographic sweet spot with millions of young Filipinos entering the labor force.
Under the Duterte administration, Dominguez said red tape has been drastically cut and bureaucratic efficiency will be improved further, alongside a government-wide crackdown on corruption.
Dominguez said robust public spending will also be the norm under the new government in order to boost growth and reverse the chronic underspending of the past that stemmed from a weak bureaucracy and lack of political will.
That suppressed rather than enhanced growth. Today, with more energetic economic management, we expect timely and adept public spending, he said.
Source: Philippines Information Agency