inance Secretary Carlos Dominguez III said Thursday the Philippines is committed to continue striking a “delicate balance” between providing substantial support to the economy and keeping its policy of long-term debt sustainability in its fight to defeat, and recover from, the prolonged COVID-19 pandemic.
Speaking before senior executives of American and Philippine companies, Dominguez said the country’s solid financial footing over the past year despite the economic shock from the pandemic confirmed the correctness of the game-changing economic and fiscal reforms that President Duterte has put in place since he assumed office in 2016.
These reforms reinforced the Philippines’ overall macroeconomic stability and allowed the government to respond decisively to the global health crisis, Dominguez said.
“In this battle against COVID-19, we are committed to continue striking a delicate balance between providing substantial support to the economy and maintaining our policy of long-term debt sustainability,” Dominguez said during the virtual forum.
With the rapid and adequate deployment of COVID-19 vaccines critical to the recovery of the global economy from the pandemic, Dominguez called for the just and equitable distribution of vaccine supplies for all countries.
“The Philippines strongly supports the statement of Mr. David Malpass, former US Under Secretary of the Treasury for International Affairs and now the World Bank President, who underscored the importance of releasing COVID-19 vaccines from countries with excess supplies as soon as possible,” Dominguez said during the virtual forum.
According to the World Health Organization (WHO), as of April 9, more than 700 million vaccine doses have been administered globally, but over 87 percent have gone to high-income or upper middle-income countries, while low-income countries have received just 0.2 percent of the supply.
Dominguez told the participants at the forum that the government will continue to push and implement more reforms to restore the economy’s vigor, armed with the Duterte administration’s ample political will and capital that it is committed to use judiciously until the end of the President’s term.
“Even with the unprecedented crisis, the Duterte administration will continue to work hard until the last minute of its term to undertake the reforms we had set out to do in our zero-to-ten-point socioeconomic agenda,” Dominguez said during the virtual briefing on the Philippine economy for American and Filipino business leaders.
“We will make sure that these measures will be irreversible and will form the foundation of an inclusive, sustainable and investment-driven economy for the Filipino people,” Dominguez added.
The event, which was held via Zoom with the theme “Philippines-United States (PHL-US) at 75: Strengthening Ties through Sustainable Recovery,” was organized by Philippine Ambassador to the US Jose Manuel Romualdez in Washington DC.
Also present at the event were Energy Secretary Alfonso Cusi; John Law, Chargé d’ Affaires of the US Embassy in the Philippines; David Marchick, Chief Operating Officer of the US International Development Finance Corporation; Gloria Steele, Acting Administrator of the US Agency for International Development (USAID); Enoh Ebong, Acting Director of the US Trade and Development Agency; and Alexander Feldman, President and CEO of the US-ASEAN Business Council.
Dominguez said that despite the challenges of the pandemic, the government was able to allow “a temporary but controlled expansion” of the Philippines’ deficit-to-GDP (gross domestic product) ratio to 7.6 percent last year, keep a fiscally viable debt-to-GDP ratio of 54.5 percent, and sustain its accelerated spending on the “Build, Build, Build’ infrastructure program, which is expected to increase to more than 5 percent of the country’s GDP until the end of President Duterte’s term.
The Duterte administration was also able to stick to its socioeconomic reform agenda despite the ongoing pandemic, as shown by the recent enactment of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which makes its comprehensive tax reform program (CTRP) nearly complete, Dominguez noted.
“Through CREATE, we see an opportunity to deepen our trade and investment partnership with the United States by incentivizing industries with higher value-added activities,” Dominguez said.
CREATE lowers the Philippines’ corporate income tax (CIT) rate from 30 percent to 20 percent for micro, small and medium enterprises (MSMEs) and to 25 percent for all other firms, while providing an improved incentives package that is performance-based, time-bound, targeted and transparent.
“I would like to emphasize that the President did not just sign CREATE into law but he vetoed 9 items to ensure that it would serve its purpose as a tax relief measure and as an effective instrument in modernizing our fiscal incentives system. At this late stage, we have again demonstrated the administration’s commitment to make tax reform a real game-changer,” Dominguez said.
On possible concerns over the Philippines’ COVID-19 cases, Dominguez said that while the recent spike of infections in the country might appear accelerated, these are nowhere the levels experienced by other countries, which have far higher death rates of 150 per one hundred thousand of their populations. The Philippines’ COVID-19 fatality rate is roughly 14 people per hundred thousand of its population.
“Despite supply challenges, we are fully rolling out our vaccination program. Our target is to inoculate at least 70 million Filipinos or 100 percent of our adult population within the year. We have arranged for the delivery of more than 140 million doses of COVID-19 vaccines this year. About 15 percent will be delivered in the first half of this year and 85 percent in the second half,” Dominguez said.
Dominguez said majority of the financing needed for the country’s vaccination program was sourced through loans from the World Bank (WB), Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB) to assure the public that: “First, that the vaccines we are buying are internationally accepted, and have passed the stringent criteria for safety and effectiveness. Second, that the vaccine procurement is totally transparent.”
“I would also like to point out that the trilateral cooperation among the three multilateral banks in support of the Philippines’ vaccination program is a first in the ASEAN (Association of Southeast Asian Nations) region,” Dominguez said.
He said that to fully liberalize the Philippine economy, the Duterte administration will continue to push for the amendments to the Foreign Investments Act (FIA), Public Service Act (PSA) and Retail Trade Liberalization Act (RTLA), which were all certified by the President as urgent.
“The move will help speed up the approval of these measures within the President’s term,” Dominguez said of the proposed amendments, which President Duterte certified this week as priority bills for congressional approval.
He said the government will also sustain the ongoing digital reforms in its principal revenue agencies to ensure that they match the efficiencies of the best comparable institutions worldwide.
“In our digitalization efforts, we give primacy to our close collaboration with the private sector,” Dominguez said.
The government will invest heavily in training its highly talented, tech-savvy and young workforce to be more competitive in the global economy, he said.
Dominguez said the Duterte administration is looking forward to the congressional passage of the remaining components of the CTRP.
These are Package 3, which will make the property valuation system at par with international standards; and Package 4, which aims to simplify the taxation of passive income and financial services and transactions by reducing the number of combinations of tax bases and rates from 80 to about 40.
Dominguez assured investors that the Duterte administration is strongly committed to hitting the targets set by the Paris Agreement on climate change action, as demonstrated by his strong advocacy of a bill banning single-use plastics, to make sure that every Filipino will do his or her part on a daily basis to help save the world’s environment.
“We also want to pursue investments in green technologies and clean energy. I am sure that there are many areas where we can cooperate on these initiatives,” said Dominguez, who is concurrent chairman of the Climate Change Commission (CCC).
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