The next three years should hopefully see the President giving the finance secretary more political support to enact the tax reform packages. The President often refers to TRAIN as Sonny Dominguez’s reform packages.
Philstar.com/Erwin Cagadas
The next three years
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - May 15, 2019 - 12:00am

The mid-term election results appear to be what many of us feared. The country can do a lot better than re-elect characters tainted with plunder and/or have done nothing in previous terms.

Google Analytics may have noticed a significant surge from the Philippines in its search engine on “How to Migrate”. But the election results should make us more active in the public arena to make sure what happens next isn’t a disaster many of us fear.

The first three years of Duterte passed by quickly. Those were pretty contentious years.

Challenges from an external environment also undergoing drastic changes have affected how we frame our geopolitical and economic strategies.

The economic and political rivalry of China and the US will certainly affect our country. The Duterte administration has chosen to side with China even as the Filipino people still overwhelmingly trusts the US more.

In fact, this national distrust of China almost became a lethal issue in the mid-term election if only the opposition knew how to frame it. The Duterte administration sensed the problem early and they tempered their usual expression of love for China.

Will it be back to a China lovefest after the election?

The big item on the China checklist is the exploitation of what is believed to be significant natural gas deposits in the West Philippine Sea. Will President Duterte dare enter into a joint exploration agreement with China?  

On the economic front, expect the Duterte economic team to continue delivering for so long as Finance Secretary Sonny Dominguez is leading it. Getting an “A” credit rating is well within the realm of possibilities.

But the tougher challenge for the finance secretary is producing all the money needed to carry out the populist policies of his boss. For instance, there are so many freebies to fund and there will be many more in the works.

Over the last three years, Duterte and Congress gave out such things as free college tuition, free farm irrigation, salary increases for soldiers and police officers and free Wifi. Increasing the salaries and benefits of teachers are next, and also for most government employees.

Let’s not forget the cost of Universal Health Care and the Conditional Cash Transfer.

There is also the cost of a bigger bureaucracy with the creation of new departments and agencies. A bigger budget is needed for more members of Congress with the dismemberment of Palawan into three provinces and creation of new districts.

Government debt, now on record high of P7.5 trillion, can only increase.

Hopefully, the Duterte administration also conducts a serious effort to close down units that are no longer useful. Top of mind is the need to abolish the Philippine National Oil Co. and the National Transmission Corp. Both are vestiges of the old energy bureaucracy that the new energy environment no longer requires.

The next three years should hopefully see the President giving the finance secretary more political support to enact the tax reform packages. The President often refers to TRAIN as Sonny Dominguez’s reform packages.

As it turns out, revenue collections from TRAIN last year hit P68.4 billion, breaching the P63.3 billion target. That happened even as fixed income earners got to keep more of their salaries.

Personal income tax was lowered for those in the tax brackets that need the added spending money most. That’s P111 billion in additional take home pay to boost our consumer- led economy.

During his last three years, Duterte needs to give his finance people political cover. Indeed, TRAIN 2, now known as TRABAHO, is still pending in Congress. This bill will not necessarily scare investors away.

Lower corporate income taxes in TRABAHO, even as setting a time limit for incentives given to investors, should make us more regionally competitive. The bill may be tweaked to treat more favorably investors in footloose businesses like BPOs that create a lot of jobs. 

But finance people don’t know how to explain well. That’s why TRAIN 1 was blamed for soaring inflation rate because of the new taxes imposed on gasoline. The real culprit was (and still is) an agricultural sector that barely moved, thus creating high food prices.

The President took too long to understand and support the economic managers on the Rice Tariffication Law. It could have helped ease the food inflation problem early on.

The President must now give the agriculture sector more attention He needs a point person who knows what to do in place of his apparently clueless, but publicity savvy political ally running it now.

The agri sector is a drag to the economy. We are unable to lift our farmers out of poverty. Food producers suffer low income and food consumers suffer high food prices. Business as usual is too dangerous to contemplate.

Mr. Duterte must ramp up his Build Build Build program to meet lofty ambitions. With the rainy season upon us, they have practically lost this year for an infra drive. But next year, must be a no nonsense and no excuses year for Duterte’s Cabinet members entrusted with implementing Build Build Build.

The President should convince his economic managers to go PPP so he can leave a legacy in infrastructure. Let San Miguel build the airport. Let the private consortium rehabilitate and run NAIA.

Then there are dark clouds in the OFW sector as countries like Saudi Arabia embark on a program to replace foreign workers with their own nationals. The third phase in the “Saudization” policy of the Saudi government has gone into effect early last month.

New hires for the Kingdom could drop by as much as 100,000 OFWs working in 41 categories.

What must the administration do to create enough jobs for returning OFWs and for those aspiring to work abroad, but can no longer do so?

The fun and games are over. There is so much work to be done. Hopefully the President gets more hands-on than he had been the first three years.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco

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