CLARK FREEPORT ZONE — Representatives of businesses in regions outside Metro Manila submitted their list of concerns for government action during the third leg here of the regional Sulong Pilipinas-Philippine Development Forum 2018.
About 500 participants, mostly representing small and medium enterprises (SMEs), attended the consultative workshop and submitted 10 policy concerns to ranking government representatives: improve access to education, particularly for the poor; agricultural modernization through financial and technological support; no palakasan (influence peddling) system to secure approval of business permits by state regulators; improve peace and order by making the policemen visible 24/7; more flood control and environmental projects; ensure equal punishment for the rich and the poor for criminal offenses; more funding for export support services; improve access to health facilities in rural areas through bigger fund allocation; address migration to Manila to decongest traffic; and hasten implementation of infrastructure projects.
“We’re trying to have more and more SMEs. This is a way to asking them on what they need and also reporting back on what they asked (the government) to do. I think it’s working quite well. This is what accountability means: that we report directly to small and medium enterprises and to the business community what we have achieved and also what we have not achieved,” Finance Secretary Carlos G. Dominguez III said in a news briefing at the sidelines of the forum.
Mr. Dominguez and other economic managers committed to pursue the Duterte administration’s socioeconomic agenda, with the Finance chief saying: “We have an economic program… we have not changed that, we are still pursuing it.”
“We have met with some success, we have met some delays, but we’re pushing ahead quite well,” he added.
In the forum, Mr. Dominguez enumerated the government’s action on businesses’ recommendations since the first Sulong event in 2016, including the first of up to five planned tax reform packages, Ease of Doing Business Act and the national identification system that were enacted in December 2017, May and August, respectively.
At the same time, he said that elevated inflation has been the focus of “the most severe criticism” that the government has received so far, caused largely by developments beyond government control like the spike in world oil prices and US monetary tightening that weakened the peso.
The government “moved very quickly”, Mr. Dominguez said, by raising benchmark interest rates by a total of 175 basis points so far since May and issued administrative orders to boost food supply by unclogging distribution bottlenecks.
And while Dubai crude prices — Asia’s benchmark — have lately been on the way down, Malacañang has so far stood by its decision to hold off implementation of the additional P2 per liter fuel excise tax that should kick in starting January 2019.
“There’s a relief because prices are down. We are currently again reviewing it. This is a totally unexpected development although it’s a pleasant development. We are currently reviewing the situation especially now that prices have gone down to $55 per barrel, or thereabouts. So that’s going to have a big effect on the reduction in inflation,” Mr. Dominguez said.
“The President has approved it (fuel excise tax hike suspension) already, but again we have to look at the facts on the ground. But most likely we will do it. It will depend on the prices: supposing it will go up to $90? Everything is possible because we cannot project. Less than 60 days ago, we’re talking that we thought prices will go at that level, but we have a pleasant surprise. Sometimes the market is wrong.”
Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo and Budget Secretary Benjamin E. Diokno meanwhile said that the economy is expected to continue growing at a robust pace as macroeconomic fundamentals remain intact.
The central bank official dismissed concerns the economy may already be overheating — as evidenced partly by inflation that has lately been breaching the official 2-4% full-year 2018 target range — noting that credit growth has been growing parallel with economic growth and that inflation has already peaked.
He also noted that the growing current account deficit has been fueled by “strong appetite for imports due to economic growth,” as shown in the surge in imports of capital goods, raw materials, and intermediate goods, which will be “exports in the future, eventually alleviating the current account deficit.”
“I think we can expect that the economy will continue to grow based on the target of the government between 7-8% in 2019 and 2020. Now will this amount result in overheating? We don’t think so because inflation is derived from supply sources; when you have overheating, inflation comes from the demand side. Second both our liquidity and domestic credit growth are consistent with the growing economy, you expect both the growth of domestic credit and monetary aggregates to continue growing because the economy is expanding. Overheating is not relevant or a problem in the Philippines at this point,” Mr. Guinigundo explained.
Mr. Diokno said in the same consultations that “government spending will continue to boost economic activity.”
“Our expansionary fiscal policy is prudent, sustainable and supportive of medium-term development objectives,” the Budget chief said, noting that government disbursements had exceeded targets in the first nine months of the year.
“This is clear proof that the ‘Build Build Build’ program is firing on all cylinders.”
Mr. Dominguez said that the state spending program has been “moving ahead of schedule,” and the “old problem of absorptive capacity has been solved.”
He also sought to allay nagging worries about a debt trap as the government taps China for development funds.
The government, the Finance chief said, availed of “soft loans at the lowest possible interest rates and the longest possible term arrangements,” estimating that China debt will account for just 0.65% of the overall debt burden this year and 4.5% in 2022, while the debt burden with Japan amounts to 8.90% this year and 9.5% in 2022.
“So there is no danger of us being drowned in Chinese debt. We borrow with great prudence, aware that it is the taxpayer who ultimately pays for the debt. In the past administration, there was a big scandal involving Chinese financing. And the reason for that, is that administration allowed the Chinese state-owned enterprises to dictate what projects are going to be done here. In our case, we have told the Chinese that it is only us who will determine what projects we will embark on without any interference from them,” said Mr. Dominguez.
“And in a recent case, there was one of the funding agencies that made an offer that we thought was too high, and we said we will not get it from them, we will get it from the ADB (Asian Development Bank). Immediately, they dropped their costs. So we ask them to compete for the projects.”
Mr. Diokno meanwhile remained confident that the government’s infrastructure program will remain intact despite risks of a reenacted budget for 2019.
“As far as the 75 major projects are concerned, I know that they will not be disrupted because we have multi-year obligational authority — that’s the nature of the big projects. But it’s the small projects that will suffer,” he said.
The House of Representatives approved the P3.757-trillion 2019 budget last week, but the Senate said that leaves it with little time to approve the same.
“A reenacted budget is only a fall-back position so that there will be no disruption in government. So at any time, we can have a new budget, it can be January or March or later. They (legislators) have until the end of the year. They can work holidays,” said Mr. Diokno. — Elijah Joseph C. Tubayan