Acknowledging that previous administrations had worked hard to establish solid macroeconomic fundamentals that led to robust growth in the past six years, President Duterte’s economic managers swiftly moved to ensure that good policies were kept while introducing new ones to address remaining socioeconomic problems such as the high rates of joblessness and poverty and the severe infrastructure lack.
Even before President Duterte assumed office on June 30, his economic team assembled businessmen and industry groups in Davao City for the consultative workshop dubbed “Sulong Pilipinas: Hakbang Tungo sa Kaunlaran.”
At the meeting, economic managers unveiled the administration’s 10-point socioeconomic agenda, aimed at slashing the poverty incidence from 26 percent at present to 17 percent when President Duterte steps down in 2022.
Socioeconomic Planning Secretary Ernesto M. Pernia says there’s a “zero” to the 10-point agenda—peace and order. For Pernia, who is also the director-general of planning agency National Economic and Development Authority (Neda), the war against illegal drugs being waged by the Duterte administration would bring about peace, low criminality and eventually entice more foreign investors to do business in the country.
While the new administration adjusts, the Cabinet-level, interagency Development Budget Coordination Committee cut the 2016 gross domestic product growth target to a 6-7 percent from the goal of 6.8-7.8 percent set by the Aquino ad ministration.
The new administration wanted to invest more in public infrastructure, which according to Budget Secretary Benjamin E. Diokno, had been “neglected” by the previous administration.
The budget deficit this year was programmed at 2.5 percent of GDP, wider than the previous program of 2 percent.
In the next five years, deficit spending will be raised to 3 percent of GDP to support higher infrastructure expenditures, according to the DBCC.
The government also raised its target infrastructure spending as a share of GDP to 7 percent by 2022.
Of the Duterte administration’s proposed P3.35-trillion budget for next year, the government plans to spend P860.7 billion on infrastructure.
“We proposed that P355.7 billion of the 2017 infrastructure budget be spent on fixing and building road networks, railways, seaports systems and airport systems,” Diokno said.
In line with this, Neda convened the Cabinet cluster of its Investment Coordination Committee twice to fast-track approval of vital infrastructure projects.
The Neda ICC CabCom endorses projects to the Neda Board chaired by the President.
In September, President Duterte approved the rollout of nine infrastructure projects worth more than P171 billion, namely the P74.6-billion Ninoy Aquino International Airport (Naia) public-private partnership (PPP) project; P37.8-billion Metro Manila Bus Rapid Transit (BRT) on Edsa; P23.5-billion first phase of the Metro Manila flood management project; P10.2-billion Inclusive Partnership for Agricultural Competitiveness project; P8-billion second phase of the Maritime Safety Capability Improvement project for the Philippine Coast Guard; P7.8-billion change in scope of the New Bohol Airport Construction and Sustainable Environment Protection project P4.8-billion increase in area of Bicol International Airport’s passenger terminal building in Albay; P2.4-billion modernization of Eastern Visayas Regional Medical Center in Leyte, and P2.2-billion modernization of the Gov. Celestino Gallares Memorial Hospital in Bohol.
Pernia said the government was working doubly hard to show results partly to counter the bad international press the President had been getting.
In late September, the Neda ICC CabCom approved another P52.2 billion in projects aimed at spreading development in rural areas. These included the P21-billion Philippine Rural Development Project expansion; P10.5-billion Plaridel Bypass Toll Road project; P9.2-billion New Cebu International Container Port project; P5.4-billion Malitubog-Maridagao Irrigation Project Stage 2; P2.8-billion improvement of General Luis Road; P2.7-billion Chico River Pump Irrigation project, and P601-million scaling-up of the Second Cordillera Highlands Agricultural Resources Management project.
To make project rollout faster, the Neda Board last month gave its go-ahead to new policies, including “the updating of the economic hurdle rate from 15 percent to 10 percent… (to) facilitate the economic justification for more projects (and therefore approval by government) that will help in spreading more public services to far-flung areas of the country, in support of reducing poverty, as committed by the President.”
Another economic thrust of the Duterte administration is tax reform. Finance Secretary Carlos G. Dominguez III submitted to both houses of Congress a bill containing the first package of its tax policy reform program.
The program, aimed at augmenting the P1 trillion in priority investments needed to sustain a 7-percent growth until 2040, comes in six packages.
The first of the six tax policy packages would adjust tax brackets to correct “income creeping”; reduce the maximum personal income tax rate to 25 percent, save for the “ultra rich” and shift to a modified gross system.
As lower personal income taxes would result in foregone revenue of P180.3 billion by 2019, the DOF plans to offset and gain P377.3 billion by expanding the VAT base by limiting exemptions.
The DOF is looking at targeted programs similar to the existing conditional cash transfer (CCT) to shield the poor and vulnerable from the effects of higher consumption taxes.
The second package would levy taxes indexed to inflation on sweetened drinks, as well as hike the excise tax on alcohol and tobacco. The “health tax” package would generate P120.4 billion in revenue for the government by 2019.
The four others are those on corporate income tax and incentives; property tax; capital income tax and other taxes, eyed for passage in the next two years.