Ralf Rivas’ article says that Duterte’s economic team left out several issues during the pre-SONA 2018 forum. Indeed, many things were unsaid as the members of the economic team had to cut their individual presentations to fit the time available. For instance, the earlier compilation of Economic Development Cluster (EDC) achievements was 26 pages long, single-spaced, and had to be cut. That long list also left out the programs to be implemented during the next four years to strengthen some remaining weaknesses that hinder the economy from achieving its full growth potential.

Be that as it may, we need to answer some of the points expressed in that article.

First, on the growth rate. UP economist De Dios mentions why we did not include Nepal, Bangladesh, Laos and Cambodia in the list of fast growing countries to compare the Philippines’ growth performance. The only reason is that we do not wish to compare the Philippines with low-income economies undergoing easy expansion phase in their development. We are better off comparing our economic performance with the dynamic upper middle-income Asian economies with investment grade sovereign ratings, countries aiming to achieve “A” or higher credit ratings which we hope the economy could achieve in a few years’ time. Of course, fast-growing China and Vietnam are in the list which is why the country ranked third.

Second, the inflation rate. The economy is undergoing turbulent weather from the unprecedented rise in global petroleum prices due to geopolitics. Nobody should be blamed for it because nobody can stop the petroleum price rise and nobody was able to predict it. Even petroleum futures prices continue to set lower prices of US$55 per barrel over the medium-term. The best policy option is a quick price pass through to avoid subsidies that will eventually be borne by the future generations. On the “confused” monetary policy, perhaps, it is just economist De Dios who is confused since the reserve requirement cut was accompanied by the equivalent rise in the offer of BSP facilities to mop up excess liquidity. The objective of the reform is to unburden the financial system from frozen savings that push up interest rates for all borrowers.

Third, on the infrastructure push, economist De Dios says that “the government’s shift toward Official Development Assistance (ODAs) from Public-Private Partnerships (PPPs) was not as fast as expected in kicking off infrastructure projects.” He said the government’s 10-point agenda emphasized the “key role” of PPPs, yet the government is opting for ODAs.” This is a matter of perception. Many of the documents for ODA projects have been signed and design of projects is ongoing. A total of 78 major projects costing over P1 billion or more each, with aggregate project cost of P2.5 trillion are either under construction or under pre-construction. This is faster than any other administration achieved in the past. Contrary to criticisms, PPPs will be set up to operate and manage projects built using GAA and ODA funds.

Fourth, on foreign investments. The article says that the country dipped 9 notches in the IMD report. We are open to constructive criticism but the IMD study is perhaps the worst study ever made on competitiveness. It says that Philippine tourism and employment has declined when tourism numbers are rising to unprecedented levels and the unemployment rate dropped to its lowest levels since the country started compiling statistics. It also says that public finance is worsening when revenues are rising 19% from January to May 2018 with the revenue effort rising to 17% from 15.7% the year before and the deficit logging in at only 2.1% of GDP. In short, the IMD report is faulty.

The World Bank ease of doing business report is more credible in that while our EODB rating rose, the rank slipped as more countries were covered and other countries did better. To avoid further declines in ranking in the future, we have set up an EODB program that will push up the country’s rating to within the top 20% of countries surveyed in the medium-term. The program started on a strong note with the adoption of an EODB law, the national ID system law that will simplify the know-your-client (KYC) requirement for financial inclusion, a secured transaction law that will push up our rank in the “getting credit” indicator by 100 notches and amendments in the executive order on the national single window that will allow the country to interconnect 76 agencies so that import and export procedures will be cut to a minimum, among others. Also in the plan is the removal of FDI restrictions in the Constitution and various laws that stymied FDI inflows in 66 sectors—the most number of investment restrictions for a non-communist country. These were not discussed in the pre-SONA forum due to lack of time.

Indeed, we understand the impatience of some economists because many of these reforms should have been done ages ago. Adoption of reforms is not as easy as waving a magic wand, however. In a democratic setting, stakeholders must be given the chance to comment and debate. Although many things have been achieved, the list of reform measures to be implemented remains long and we cannot discuss all of them on this page or in a single event like the pre-SONA 2018 forum.

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