The Department of Finance (DOF) and other line departments in lieu of line agencies are fleshing out President Duterte’s “marching orders” in his first State-of-the-Nation Address (SONA) on two areas—tax reform and a massive infrastructure buildup — meant for the new government to disperse incomes, attack generational poverty and reverse the public discontent that had propelled him to the presidency.

Finance Secretary Carlos Dominguez III said today that reducing poverty incidence by nine percentage points to 17 percent from the current 26 percent is the ultimate goal that the Duterte administration hopes to accomplish by the time it reaches its last 100 days in office.

“Instead of imagining what can be done in the first 100 days of the Duterte administration, it might be more fruitful to imagine what the last 100 days ending in June 30, 2022 will look like,” Dominguez said in his speech at the FT-First Metro Philippines Investment Summit held at the Fairmont Hotel in Makati City this afternoon.

He said President Duterte’s marching orders to the DOF are “not easy orders” to accomplish, particularly when it comes to reforming the tax system to make it fairer for the middle class and bringing corporate tax rates to competitive levels.

“Tax reform is easy to imagine but it is the toughest to execute,” Dominguez noted.

Dominguez said the Duterte presidency would have to shed the obsolete or distorted policies of the previous administration that have made most Filipinos feel that they were left behind by Government in its quest for high growth.This is to accomplish its mission of attacking poverty and achieving inclusive growth.

He said the Duterte administration would reverse the underspending of the past by launching “hundreds of infrastructure projects over the next few years” under a “reimagined” Public-Partnership Program (PPP) whose primary goal is to first bring its benefits to consumers rather than to the government.

“PPPs are ideal for large projects of long-term duration,” Dominguez said. “That makes it possible to take advantage of the strengths of partnership with private corporations. Small, short-term projects often turn out to be more expensive for government eventually because of related costs such as the hiring of consultants and multiple Cabinet-level approvals.”

The finance secretary noted that the previous administration’s failed PPPs led to the public absorbing the costs of unbuilt infrastructure as can be seen from the country’s congested roads and airports, poorly maintained ports and high transport costs.

Said Dominguez: “There has to be a better way of doing this. I am asking my staff to look into more innovative ways of doing this, bearing in mind that infra are also public goods and not just commodities that enable government to earn. It is always tempting for government to think about its bottom line and forget about the public needs.”

On tax reform, Dominguez said the DOF would focus on growing the middle class and energizing businesses by lowering personal and corporate income taxes.

To offset the projected drop in revenues as a result of lower income tax rates, Dominguez said the government would broaden the tax base, reform the collections systems of, and eliminate graft and corruption in, revenue-generating agencies, particularly the Bureaus of Internal Revenue (BIR) and of Customs (BOC).

“I am sure there is a way to keep the budget balanced while growing the middle class,” he said.

In the BIR, Dominguez said measures would be implemented to plug loopholes and make revenue collections more efficient in its Large Taxpayers Unit, which is in charge of collecting taxes from the country’s biggest industries.

“If this unit can collect more efficiently, it should be possible to raise enough revenues at least to compensate for the lower tax rates,” Dominguez said.

In the BOC, Dominguez said the government would have to upgrade the agency’s capabilities to fight smuggling, which—according to World Bank estimates—denies the government billions of dollars in potential revenues.

He noted that while the past administration succeeded in getting the country out of the boom-and-bust rut and in sustaining quarter-on-quarter growth, it had unfortunately hesitated to spend what it had borrowed, which resulted in “chronic underspending and a severe shortfall in infrastructure.”

“When our voters cast their votes last May, they delivered a strong message,” he said. “We can no longer do business as usual. We have to start innovating, not just the technological foundations of our society, but its ethical premises as well.”

Dominguez said he is confident that the new administration “will get to some approximation” of its vision to significantly bring down poverty by 2022 through “massive investments in infra, education and public health.”

He said, “It will have been boosted by gains in honest government and a perceptible decline in corruption. It will be consolidated by proper dispersal of economic activity and improvements in our logistics system.”

Dominguez said he imagines a Philippines, by the approach of Duterte’s last 100 days in office, leading the region in sustainable growth.

“That growth will happen in a climate of peace and order,” he said. “It will happen in the context of superior business confidence in our institutions of governance, a high degree of transparency and a committed bureaucracy.”

Dominguez said that, “Lastly, this will be a country equipped with the civic virtues necessary for all civilizations to thrive. Public discipline will be unlike anything we have seen before. Respect for the environment will be paramount. The nation’s resources will be there for everybody to share, as long as the needs of the future are not compromised.”

He noted that even with the tools of modern finance, countries have failed to match the successes of their economies with the ability to make growth inclusive.

Modern finance, along with the instruments of digital technologies, has made it easier to profit from an idea, which is why the global economy has produced “billionaires like rabbits” over the last 20 years, Dominguez said.

“The power of modern finance, however, is not matched by an ability to be inclusive. Poverty rates rise at a faster rate than wealth is created,” the finance chief said. “Communities that could not cope are obliterated. Nation-states are shredded as in Syria or defended as in Britain.”

This confusion has led to a clash of concepts, with modernity pitted against ancient wisdom, Dominguez said. “Orthodoxy is challenged; novelty is not always welcome,” he added.

He said the same is true in the Philippines, where the previous administration had stuck to outdated policies and focused on curing the problem of a boom-and-bust economy yet failed in pulling down poverty and unemployment rates.

“The economic growth and its parallel poverty rate are obviously unsustainable. We have to start rethinking things. We have to put equal importance on community as much as growth, on repairing the social fabric as much as restoring order,” Dominguez said.