Customs reforms positive for PH

Improved collections and the reforms being introduced at the Bureau of Customs (BOC) augur well for the country’s credit ratings, even as the share of revenue collection as a whole in the economy remains lacking, a representative of Moody’s Investors Service said.

“I think (the BOC’s higher collections) is something that you really can’t ignore. That kind of performance over the past couple of months is credit positive in our point of view,” Christian de Guzman, vice president and senior analyst at Moody’s sovereign risk group, told reporters on the sidelines of the Financial Times-First Metro Philippines Investment Summit late Monday.

At end-April, Customs collections rose by over a fifth to P116.99 billion from P96.03 billion in the same period last year. The four-month haul, however, was still below the target of P130.57 billion for the period.

The BOC has also announced reforms to be implemented in the near-term, such as shifting into electronic transactions by next year, and conducting pre-shipment inspections particularly for cargo shipped in container vans.

“There has been a deterioration in customs revenue as a share of GDP [gross domestic product], but the way that [collections improved] the past four months with the new commissioner, certainly that is positive once again, not just for tax revenue but revenues as a whole,” he said.

De Guzman noted that higher collections would help provide more fiscal space for expenditures such as on infrastructure development. He said, however, that tax collection should still be improved.

“Tax revenue as a share of GDP in the Philippines is among the lowest among investment grade countries. So there is certainly room for improvement, but at the same time, I think you can also say that the government has not been spending beyond its means. So even though tax revenue as a share of GDP is low, expenditures as a share of GDP is also very low,” de Guzman pointed out.

Moody’s in October last year promoted the Philippines to investment grade. It has a “positive” outlook for the Philippines, implying a potential upgrade in the next 12 to 18 months.

Last May 8, Standard & Poor’s (S&P) upgraded to “BBB,” or two notches above junk, the country’s credit rating.

Fitch Ratings was the first to grant the Philippines investment grade status in March last year, but early this year kept the country at minimum investment grade.

But a renowned international economist cautioned the Philippines about being complacent after gaining investment grade, as external risks, such as the slowdown of China’s economy, may spill over to emerging markets.

“Do not let the credit upgrades go to your heads. Treat good shocks as temporary,” said Carmen Reinhart, professor of the international financial system at Harvard University’s John F. Kennedy School of Government.