WASHINGTON DC—The “vibrant participation” of both international and Philippine companies in President Duterte’s signature “Build, Build, Build” infrastructure program is solid proof of the trust that the government has earned from the global community as a result of its transparent and corruption-free governance, Finance Secretary Carlos Dominguez III has said here.
Dominguez cited as an example the auction for the contracts covering the fourth and fifth packages of the segment of the North-South Commuter Railway (NSCR) running from Malolos in Bulacan to Clark in Pampanga, which has attracted five foreign firms and one Philippine company.
The bids for the contract packages were submitted by the interested parties last Oct. 14.
These firms are EEI Corp., one of the Philippines’ leading construction firms; the Spanish conglomerate group Acciona S.A.; South Korea’s leading infrastructure companies GS Engineering and Construction and Posco Engineering and Construction; PT Waskita Karya (Persero) Tbk of Indonesia; and PT Wijaya Karya Tbk, the largest construction company in Indonesia.
“The vibrant participation from international and local companies in our ‘Build, Build, Build’ program is proof that they trust the Duterte administration and in the transparent, fair and corruption-free bidding process implemented by the government,” said Dominguez during last week’s roundtable lunch meeting here with representatives from the United States (US) government, various industries and sectors, economic think-tanks, and the private sector.
This lunch meeting, which was held at the official residence of Philippine Ambassador to the US Jose Manuel Romualdez, served as a Philippine Economic Briefing (PEB) to share with American government executives and business leaders the country’s growth narrative and exchange views on how to further strengthen economic ties between the Philippines and US.
The 53-kilometer (km) Malolos-Clark railway, also known as the Philippine National Railways (PNR) Phase 2, forms part of the 148-km NSCR project. The other segments are the 56-km Calamba-Tutuban railway and the 38-km Tutuban-Malolos line.
According to the Department of Transportation (DOTr), the P32.7-billion project for Package 4 of the Malolos-Clark railway spans 8 km and includes the Clark International Airport Station, while the P18.1-billion project for Package 5 consists of the NSCR’s Clark Depot.
The Malolos-Clark rail line, which the DOTr expects to be partly operational in 2022, will reduce travel time between Clark airport and the Makati Central Business District (BD) to just 55 minutes from the current three hours.
The DOTr aims to award the contract for Packages 4 and 5 within the first quarter of 2020.
In the first three packages of the Malolos-Clark railway segment, nine international firms and two Philippine companies vied for the contracts. The DOTr is targeting to award the contracts for Packages 1 to 3 in December this year.
With improved public revenues as a result of tax reform and strong support from the Philippines’ development partners such as Japan, China and South Korea, Dominguez expressed confidence that the Duterte administration’s ambitious infrastructure modernization program will help the economy weather the headwinds induced by the global economic slowdown.
Dominguez said “Build, Build, Build” has “become a showcase for coordinated international cooperation,” with both China and Japan having committed USD 9 billion each in official development assistance (ODA) and Korea pledging an additional USD 1 billion to help implement the program’s big-ticket infrastructure projects.
While several international companies want to take part in the “Build, Build, Build” program, Dominguez observed that no serious offer has been received by the Philippines from US companies.
Dominguez said he has so far only heard expressions of interest in the “Build, Build, Build” program from the American business community.
One area that could be of particular interest to American investors is New Clark City (NCC) in Central Luzon, which has attracted new industries and promises to be a center of modern enterprise in the region, Dominguez said.
“I believe FedEx has just signed a contract to locate in Clark. The rapid transformation of the growth corridor between Subic Bay and Clark should be of particular interest to US businesses. This growth corridor is anchored on what used to be American bases,” he said.
After raising the Philippines’ infrastructure budget for the first time ever to over 5 percent of gross domestic product (GDP) last year, Dominguez said the government will further ramp up spending on this sector to 7 percent of GDP by the time President Duterte leaves office in 2022.
He said improved revenues as a result of the implementation of the first package of the Duterte administration’s comprehensive tax reform program (CTRP)—the Tax Reform for Acceleration and Inclusion (TRAIN) Law—are helping the government fund its ambitious infrastructure modernization and human capital development programs.
TRAIN also reduced personal income tax (PIT) rates for 99 percent of Filipino taxpayers, which, in turn, has boosted consumer demand while discouraging the consumption of unhealthy products such as sugar-sweetened beverages (SSBs), alcohol and tobacco.
Tax administration has also vastly improved, Dominguez said, as proven by the government’s feat of cleaning up the cigarette business one year after President Duterte took office. He cited the closure of a tax-dodging cigarette firm and the collection of the highest amount of tax settlement from this erring company totaling USD 600 million.
“The improved revenues are helping the government fund our ambitious infrastructure modernization and human capital development programs in a very conservative way. We figure we raised about 20 percent of our infrastructure program and we will borrow the rest,” Dominguez said.
The rest of the CTRP packages are the Corporate Income Tax and Incentives Reform Act (CITIRA) bill, which covers the gradual reduction of the corporate income tax (CIT) rate from 30 percent to 20 percent and the modernization of the incentives system to make them performance-based, time-bound, targeted, and transparent; increase of excise taxes on alcohol products as well as heated tobacco and nicotine vapor products; reforms in real property valuation; simplification of the tax system on passive income, financial services, and transactions (PIFITA); adjustments to the Motor Vehicle User Charge (MVUC); and a general amnesty that should incorporate the lifting of bank secrecy laws plus the automatic exchange of information.
“The succeeding packages in our CTRP are in the legislative pipeline. We expect most of them to become law later this year or early next year,” he said.
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