350 business executives, diplomats, politicians, govt officials attend Times’ forum as Duterte receives ‘Man of the Year’ 2016 award
REDUCE poverty and improve public services, fight graft and corruption and create jobs, pour more investments into infrastructure and continue to rebalance foreign policy.
These are what business and economic experts have advised the Philippine government to work on and pursue in the coming year, in order to sustain GDP growth and enhance global competitiveness. And while they agree that the drug menace has brought immense economic losses to the country, corruption has likewise done so and will continue to deprive government of a significant amount of revenues if it won’t exercise a strong political will to deal with it.
It isn’t about the country found wanting of anti-corruption laws because it has such regulations in place; it is, rather, that these laws are not implemented the way they should be, according to Corazon Guidote, SVP for Investor and Corporate Communications Relations at SM Investments Corp. And so she is having a wait-and-see attitude whether the administration of President Rodrigo Duterte is bent on fighting corruption. “Let’s see if this administration has the political will to do it,” she says Friday in her presentation at The Manila Times’ The 5th Business Forum, held at the Marco Polo Hotel, in Davao City.
Guidote was one of the five guest speakers at the Feb. 10 forum, dubbed “The Philippine Economic Outlook for 2017: Peace Toward Sustainable Prosperity,” where Duterte gave the keynote speech after receiving his award as The Manila Times “Man of the Year” 2016.
“I’d made it a matter of personal and official policy not to accept awards all these years,” the President says in his remarks at the forum—where he again pushes for the reinstatement of the death penalty because of an increase the number of in heinous crimes—attended by more than 350 business executives, diplomats, politicians, and public officials. “But now, maybe because it’s high time, at least before I go beyond, I should have one award.”
Describing him as “a man of integrity and conviction,” the Times Chairman Emeritus Dante Ang says: “Love him, hate him, he will do what he thinks is right and good for the Filipinos. His methods could be brutal at times, but make no mistake about it—he has ‘pusong mammon,’ a soft heart for the oppressed and the marginalized.” Ang continues: “He genuinely cares for the Filipino people and would offer his life in the service of the nation. Our ‘Man of the Year’ is a true nationalist.”
As such there is a need to fast-track the various reforms and programs that the current administration has been pushing for since Duterte took office. If it were just up to Chinese Ambassador to Manila Zhao Jianhua, Duterte would now have emergency powers in his hands, so that major infrastructure projects to be funded by China would be completed during the President’s term. In his remarks during the forum, Zhao says China is “afraid of taking up projects” that would outlast Duterte’s term. “We must hurry,” he says.
While he admits to having socialist leanings, Duterte, who had been Davao City’s mayor for 23 years before becoming President, says he has never been a communist. “And so when Davao was seriously affected with, drugs and crime … my warning … was like this: “Go out of my city, do not do drugs, do not rape people, do not kidnap people because I will kill you.”
The economic cost of illegal-drug use amounts to P87.8 billion per annum, involving about 3.7 million addicts nationwide, Guidote says, citing various studies done from 2010 to 2014; when coupled with economic losses emanating from corruption, the amount balloons to P422 billion, which is equivalent to 1.5 to 2.5 percent of GDP or 17 percent of the national budget. “Illegal drug usage affects personal consumption while the cost of rehabilitation affects fiscal budget,” she says, adding that “social cost creates dysfunctional families and compromises the health and future of the victims.”
Citing the “Philippine Public Transparency Reporting Project,” Guidote talks of “missed opportunities” from a yearly corruption losses of P250 billion, an amount that could have been used to provide an annual Medicare for more than 210 million indigent families, or to purchase 12,500 fire trucks or 400,000 nonpolluting electronic jeepneys. She says corruption involves malversation of public funds, tax evasion, bribery, smuggling, and abuse of authority and power.
Duterte says he had knowledge about a serious disorder in the Philippine society, owing to illegal drugs, even before he became President. “But it was not until I had the full access to information and intelligence input that I realized the drug problem had already engulfed my country,” he reveals. “I realized that five years ago before this election, we were already in narco politics because 40 percent of all the barangay captains of the entire … Philippines were into drugs.”
The President’s recent announcement to extend his administration’s war on illegal drugs until his term ends by 2022 from the previous deadline of six months, followed by another six-month extension, from when he took office is expected by many to solve a lot of ills in society, especially heinous crimes. Throw in the various other reforms and programs being spearheaded by the respective departments of the ruling administration, and you have many citizens, supporters and political observers and analysts saying Duterte’s is an ideal government for the Philippines.
Finance Secretary Carlos Dominguez 3rd praises Duterte for having rebalanced the country’s foreign policy when he concluded a P1-trillion trade agreements with China and Japan, saying that, coupled with his upcoming visit to Russia—which would also open new markets—could “offset whatever possible protectionist policies” that might come from the US. “The only uncertainty on the horizon is the final direction the Trump administration will take the US economy in,” he adds, explaining that protectionist policies would dampen trade and might be bad for the business-process outsourcing sector, which is now the second-highest dollar-earner for the Philippines. He says the populist parties in Europe, especially in countries set to hold elections this year, would also benefit immensely from the rise in protectionism.
And while the US economy is being watched by the global CEOs to guide their decisions on how to further grow their businesses, the Southeast Asian nations are seen to benefit the most from fresh investments to be made by CEOs within the APEC or Asia-Pacific Economic Cooperation. Global investments from APEC CEOs are still rising, more than 50 percent of which are brought into the 21 APEC economies, says Alex Cabrera, chairman and senior partner of PwC Philippines, a provider of tax, assurance, and advisory services.
Since the CEOs are holding off because of less confidence, Cabrera says the Philippines must have a healthy economic environment if it wants to attract investments from regional and international companies. “We need to make financing accessible to small enterprises,” he stresses in a presentation titled “PwC APEC CEO Survey and Conversations: Fast-Growth … Slow-Growth World,” and realize massive spending on infrastructure as promised. He also cites the need to focus on the further development of the agricultural sector as well as the importance of leveraging social enterprises, improving the investment framework, and opening up the economy through liberalization.
The other important points Cabrera mentions in growing the economy further are transparency in public policies and aboveboard dealings with all government agencies, as well as the building of a better Visayas and Mindanao. Not to be left behind is the need to leverage technology and teach applied sciences in schools.
In his forum presentation titled “No Taxes, No Infra,” Dominguez says he is confident that more private-sector investments will come in, owing to “adept monetary policies” that have kept “inflation rate benign.” He also cites a number of “institutional and economic reforms” that the present government is pushing for in order to achieve a “truly inclusive” economic progress. “To achieve that goal, our growth must be investment-led instead of consumption-led,” he says. He expresses confidence that the Philippines will hit its target of a 7-percent GDP growth—having missed it last year by just a shade—with increased investment flows and massive spending in infrastructure.
No wonder the Duterte administration is pushing through with its 10-point economic agenda, so that the country could close the “infrastructure gap” with its neighbors, which have over the past 20 years invested 5 percent of their GDP in roads, bridges, airports, ports and other infrastructure as compared to the Philippine infra investment of only 2.5 percent. “Our backward infrastructure backbone constrains economic inclusion,” Dominguez says. “Areas in our economy, especially isolated islands and parts of large islands that did not have sufficient power supply, were kept out of the mainstream of modernization. We cannot have a truly inclusive growth pattern until we are able to close the infrastructure gap.”
He emphasizes, however, that to have an investment-led growth through massive infrastructure upgrade would require ample government revenues. And so there is a need to further improve tax administration and raise the needed capital.
If only government could create more jobs for the Filipinos, more than 10 million of whom are working overseas, this could help a lot in tax collection. According to Guidote, around 2.5 million of OFWs or overseas Filipino workers pay a total of $1.1 billion in taxes to their host economies—which contributes to the narrowing of fiscal revenues in their home country. Besides the lack of fiscal stimulation, Guidote cites also noninclusive growth and economic leakages as the other factors that hinder further GDP growth.
Richard Bolt, country director for the Philippines at the Manila-based Asian Development Bank, says the Duterte administration is on the right track in pursuing further growth through its economic agenda, despite some challenges. “We are happy with … how it is progressing,” he says in a presentation titled “Philippine Economic Update: Prospects and Development Challenges.” He expects a sustained economic growth on strong investments from both public and private sectors, as well as increased domestic consumption.
Besides tax reforms, infrastructure building, and rural development, the Duterte administration’s 10-point socioeconomic agenda includes continuous macroeconomic policies, ease of doing business, land administration, human capital development, social protection program, reproductive health and science, technology and arts.