Good job (despite rantings, distractions)
BIZLINKS - Rey Gamboa (The Philippine Star) - July 4, 2019 - 12:00am

There’s still so much more work that needs to be done at the halfway mark of the current administration’s six-year life, but there can’t be too many complaints on how the first three years progressed, specifically on the economic front.

The Build Build Build program, being the administration’s flagship initiative, has finally taken wings, albeit a little too timid. The first two years saw the President’s economic team scrambling to find the ideal funding for 75 big-ticket infrastructure projects.

Official development assistance from other countries most often provide for very low interest rates with payment schedules, preceded by a reasonable moratorium and then spread over decades – but they require lengthy preparatory discussions from commitment stage to actual funding release.

Still, diligence had paid off, and 46 – or over half of the 75 flagship projects valued at P1.56 trillion – are already in the implementation stage. Of the rest, 24 are under development, while five are up for review. Half of the 75 projects are expected to be completed within Duterte’s term.

More importantly, the spending splurge has brought the country’s infrastructure spending ratio to gross domestic product (GDP) to an acceptable level that would be able to sustain and even improve future economic growth.

According to the Department of Finance, this ratio is now at 5.5 percent, double the average of 2.8 percent during the last 50 years. The objective is to raise this ratio to seven percent in the coming years to support the goal of a seven percent economic growth.

Improved revenue stream

A big reason for the government’s ability to propel the BBB program to its current momentum is the creation of an improved revenue stream arising from the passage of several new tax measures in the last three years to support counterpart funding required in starting flagship infrastructure projects.

The Tax Reform for Acceleration and Inclusion (TRAIN) Law, being the first package of the government’s push to introduce structural reforms in the existing taxation system, has opened a new, rich source of funds for the national coffers.

Not only has TRAIN generated the needed funds for BBB, it has also allowed government to pass new measures to finance social amelioration initiatives, the biggest of which would be the Universal Health Care Act that was passed during the last Congress.

The TRAIN Law, as well as additional tax collections from its amendments in the closing hours of the  17th Congress, should allow for generous funding towards the provision of basic health care for the poor.

Other notable social measures directed at inclusive growth are the Free Higher Education Act mandating state colleges and universities to waive tuition fees, and the institutionalization of the Pantawid Pamilyang Pilipino Program (4Ps) or conditional cash transfer scheme.

Fiscal discipline

Of course, the new tax measures – and many more that are in the pipeline for discussion by lawmakers – has bloated the national budget to levels that were unimagined in previous administrations. This is not altogether a bad thing, but overdoing it may.

As Finance Secretary Carlos Dominguez III had noted, lawmakers trying to pass over a hundred bills that required state resources was financially unsustainable, which simply prompted the President to veto them for “going beyond the limits of fiscal discipline.”

Dominguez adds that passing 147 bills in the 17th Congress alone would have meant an additional spending of close to P1 trillion by government. This would have driven the Treasury to bankruptcy in no time.

Among the bills that should be discouraged, according to Dominguez, are those that propose to create new special economic zones where businesses that are set up enjoy multiple tax benefits that represent lost revenues for the government.

The pressure for the economic team is not just ensuring that the right programs get underway, but that there will be funds to sustain future growth. More than ever, funding considerations should rule deliberations of new laws.

This is why the much-delayed studies on the remaining parts of the Comprehensive Tax Reform Program should be given priority by the 18th Congress, not just towards identifying new revenue sources, but more importantly to plug leakages from unnecessary tax perks.

Making things happen

On the legislative level, the Duterte administration took immense pride in the number of economic laws passed during the last three years. After the TRAIN Law in 2017, the President signed the Ease of Doing Business Act (EDBA) and the Rice Trade Liberalization Act in 2018, and the New Central Bank Act and the Revised Corporate Code this year.

How well crafted these new laws are will be tested in the coming years. Specifically, the EDBA and rice tariffication measure should be supported by solid work by the executive, with emphasis on having a leadership that can make things happen.

Still pending, and should be given a firmer push by both the executive and legislative branches, are the amendments to the Public Services Act and the Foreign Investments Act (FIA), two pieces of legislation earmarked to improve the country’s competitiveness.

The work of governance seems to be unending, with countless demands to improve the country for its 104 million inhabitants and future generations.

We had in 2016 a new regime that was led by an unorthodox leadership, one that apparently put emphasis on cleansing the streets of drugs and crime. If there is one area that is less recognized, it is the fact that he had put together an empowered economic team that could deliver – and more importantly, one he respected and rarely meddles with.

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