President Duterte’s last SONA

The last State of the Nation Address (SONA) of President Duterte was delivered in his usual style: homespun, serious, and at times humorous, self-deprecating, but full of sound and fury mixed with frustration when dealing with incompetence and corruption in government.

Reading from a prepared text, he freely interrupted his narrative with occasional ad libs. The text was long and with the added asides, it came out to be a two hours and 45 minutes speech.

Substance over style. Thus, the SONA was delivered in rambling style, although it covers most of the things that a governing president would normally want to cover.

My concern is mainly to highlight the economic and social issues of the SONA. I omit many topics, except those with a strong bearing on economic outcomes.

SONA topics are contributed by different departments and agencies of government fighting for space in getting mentioned. Because of this, they often fail to meet the theme of cohesive story since they may not be naturally connected. Add to this the rambling nature of delivery and we get a disjointed presentation.

This particular SONA, being the last in his six-year-presidency, covers almost a retrospective of achievements and the main problems he faced and leaves behind.

In contrast, the first SONA, delivered two months after taking office in 2016 was, one of analyzing the problems to be faced and the promise of effort to correct them.

Taking this perspective in mind, the final SONA provides a report of the achievements and unsolved problems as the nation moves on to the next set of leaders.

In essence, we ask, did the presidency contribute to the success of nation-building?

The economy during the Duterte years. The key phrase in the SONA that refers to the economy is the following: “Our economy, with investor confidence, was poised to leapfrog into the company of the world’s fastest-growing economies until the COVID-19 pandemic stole everything.”

This sentence has two important parts: first, the accomplishments before the pandemic hit in 2020; and second, how those achievements will impact on the future of the country – on the nation’s economic recovery.

The pre-pandemic economy. The first part of this story is essentially a strong economic performance by the Duterte government.

When he assumed the presidency, he inherited an economy from former president Benigno Aquino III that was already performing well. In fact, economic recovery began to consolidate and continue unimpeded after the experience of economic and political instability of previous decades.

But Mr. Duterte deserved credit in continuing the reform process. Economic reform is never on autopilot. Almost always in a democracy, any reform effort invites resistance and encounters delays. When the leadership shows resolve and determination, the reforms succeed in getting adopted, thereby initiating the needed changes.

Major tax reforms took place in successive steps.

The first of these reforms was accomplished by the second year of the administration. This achieved a realignment of personal income taxes with sales taxation that resulted in the improvement of tax collections.

A later fiscal reform program dealt with corporate taxation and the revision of the investment incentives regime. This set of economic reforms has taken more time to guide through legislation, but it ultimately realigns the country’s corporate taxes and the country’s investment incentives on a more competitive basis with its ASEAN neighbors.

The objective to attract more foreign direct investments requires more reform. However, the Senate still has to approve three major bills that are needed to open more areas for foreign investments.

In addition to fiscal reforms, changes in trade and development policies helped to stabilize domestic food prices. Foremost among these was the decision to reform the rice import monopoly of the government’s food agency by replacing the import of rice with a tariff. Though this change in policy was resisted by the domestic rice agricultural sector, government support of domestic rice growing continues. The new rice trading regime has made a major impact in making the price of the staple much more stable, hence relieving pressures on wage demands of workers in the urban sectors.

On the fiscal expenditure side, there has been a major expansion of government spending. Some of these expenditures account for a change in the overall allocation of commitments to public infrastructure spending. There have also been a major rise in social sector spending, many of which are essential toward maintaining a sound program of development.

Faster decisions on infrastructure construction in the country is a major feature of the Duterte government. In contrast with the slow pace of actions, especially in contrast with the Ninoy Aquino presidency, new major projects enlivened economic activity in public investments.

Much of the new investments have been financed from domestic savings, as well as through access to development assistance from major multiliateral institutions and from bilateral partners, principally from Japan and from China.

More efforts along PPP (public-private partnerships) framework could further enlarge the portfolio of investment projects, but these, incidentally, have not reached the implementation and construction stage.

The pipeline of projects still needs to improve however. Practically, there is continuing need to build a strong domestic capacity to enlarge the amount of feasibility studies for identified public investments and to get the private sector to help implement them.

Nevertheless there have been major improvements in the number and scale of public infrastructure projects, which has been identified as a major deficiency of the Philippine development efforts.

The SONA, therefore, cites as examples the following infrastructure road construction projects on the way to realization: the North Luzon Expressway Harbor Link, the NLEX-SLEX Connector, the Cavite-Laguna Expressway, the Metro Manila Skyway Stage 3, the R-1 Bridge Project, the Tarlac-Pangasinan-La Union Expressway Project, and the Subic Freeport Expressway Project, to name a few.

Further, the infrastructure projects include railway, transport, ports, airport, and energy generation projects.

To be continued: Social spending; implications on economic recovery.

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