Finance Secretary Carlos Dominguez III has underscored the need for businesses to adapt quickly to the rapid changes in the economy resulting from digital innovations to prepare them for a “new, better normal” that the government expects to commence at the onset of 2022.
Dominguez said the Duterte administration has been putting in place an array of measures to encourage innovation to flourish under this new economy and let the government take advantage of digital technology to improve its services.
These include implementing a liberal regulatory regime for financial technology (FinTech) enterprises, using digital innovations to improve the monitoring of the capital markets, and shifting government transactions, including tax payments, online to better serve the public, Dominguez said.
Dominguez said he is “very optimistic about the future” owing to the Duterte administration’s willingness to innovate and undertake the reforms necessary to rebuild a strong, inclusive, and sustainable economy that thrives in the 21st century.
With the arrival of an adequate supply of vaccines and an aggressive COVID-19 inoculation program starting in the third quarter that allowed people to return to work, businesses to continue operating and infections to drop significantly, Dominguez and his fellow economic managers expect the country to achieve Alert Level 1, by the “onset of the New Year.”
Under Alert Level I, all businesses are allowed to operate at full-site capacity, subject to minimum public health standards.
“We are all looking forward to the new and better normal. Our businesses should prepare to thrive under the terms of this new economy. They must adapt more quickly to the new market realities created by digital technology,” Dominguez said in a speech read for him by Finance Undersecretary Gil Beltran at the 47th Philippine Business Conference and Expo organized by the Philippine Chamber of Commerce and Industry (PCCI).
“This event happens at a more buoyant time. We contained the Delta variant and sustained our economic expansion even as stringent quarantines were in place for certain periods. Our strategy was correct. The results are clear,” Dominguez said.
The economic managers led by Dominguez recently said in a joint statement that the economy’s third-quarter growth of 7.1 percent year-on-year and year-to-date expansion of 4.9 percent means that it is “on track to reach the high-end of our 4 to 5 percent growth target for 2021.”
“As the main drivers of wealth and job creation in our economy, I trust our private enterprises are adjusting quickly enough to the rapid changes in our economy. We cannot be slow-footed in keeping up with the challenge,” Dominguez said.
Dominguez said the country should take full advantage of its demographic sweet spot, in which its workforce is made up mostly of young and talented people ready to swiftly adjust to the transformations taking place in the new economy.
The Corporate Recovery and Tax Incentives for Enterprises (CREATE) law will be a significant factor in helping businesses innovate, Dominguez said.
On top of reducing the corporate income tax (CIT) rate, Dominguez said CREATE grants a 100-percent additional deduction on research and development (R&D) expenses for enterprises to boost the creation of new knowledge and products under a performance-based, time-bound, targeted, and transparent fiscal incentives system
“This should foster a culture of research, development and innovation among Filipino enterprises. With CREATE, we will see more competitive Filipino companies in the coming period,” Dominguez said.
On the part of the government, Dominguez said among the technological innovations that have taken place are the electronic filing and payment of tax dues initiated by the Bureau of Internal Revenue (BIR), the ongoing modernization of the Bureau of Customs (BOC) and the operations of the Overseas Filipino Bank (OFBank) as the first official digital-only bank in the country.
“Even before the pandemic, I have long advocated digital transition both in the public and private sectors. Those agencies that were able to move ahead in this transition were able to deliver more effectively during the period of quarantines,” Dominguez said.
As a result, even when the pandemic struck, the BIR was able to continue collecting revenues, with nearly 90 percent of tax returns filed online this year; while the BOC was able to minimize its losses amid the general collapse in trade volumes because of its modernization initiatives.
Dominguez pointed out that the Small Business Wage Subsidy (SBWS) program—the country’s first-ever digital social amelioration initiative that was jointly implemented by the Department of Finance (DOF), the Social Security System (SSS) and BIR—has since become a role model for other agencies implementing similar subsidy programs, owing to its speed and efficiency in delivering financial aid to the targeted beneficiaries.
The Bureau of the Treasury (BTr), for its part, has increased the number of platforms for purchasing government securities, including Retail Dollar Bonds (RDBS), by using digital channels, which has led to these bond offerings being consistently oversubscribed.
“This enabled us to domestically source more than two-thirds of the government borrowing. This, in turn, allowed us to follow the path of prudence in our debt management strategy,” Dominguez said.
He said the Securities and Exchange Commission (SEC) has fully harnessed the powers of new digital technologies to improve its monitoring of the capital markets, build the trust of investors, protect the investing public, and support the reemergence of the domestic economy.
Dominguez said the SEC and BIR are also working together to ensure that FinTech companies in the country are properly regulated and taxed while encouraging their growth and continued innovation.
The Philippine Dealing and Exchange Corporation (PDEx), meanwhile, inaugurated last April its first-ever Electronics Securities Issue Portal (ESIP) that made possible online registration and processing of documents in the primary debt capital market—similar to the one introduced by the Philippine Stock Exchange (PSE) in June 2019 known as the PSE Electronic Allocation System.
“We have also put in place a liberal regulatory regime for FinTech enterprises to flourish. These enterprises have enabled payments to be made in real-time and revolutionized the interaction between sellers and buyers in our market. We will see the full implications of these changes over the coming period,” Dominguez said.
Dominguez said that to maximize the impact of these interventions being implemented by the government, he urged businesses to continue innovating sustainably.
“Shift to the circular economy. Use more renewables. Be green. Climate change will hit us harder than the pandemic did. We must prepare for the severe weather, droughts and all other damaging effects caused by global warming. Our businesses must learn to thrive in the face of these conditions,” Dominguez said.
Dominguez recalled that during the 26th United Nations (UN) Climate Change Conference of the Parties (COP26) last week, he emphasized the Philippines’ efforts in addressing the climate crisis through practical projects on the ground and demanded greater accountability from Western countries behind most greenhouse gas emissions believed responsible for global warming.
“We should become a role model for other countries by mainstreaming climate change adaptation and mitigation projects in our business processes. Our government banks stand ready to provide financing for green and environment-friendly projects,” said Dominguez, who headed the Philippine delegation in the just-concluded UN COP26 in Glasgow, Scotland.
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