By Melissa Luz T. Lopez
Senior Reporter
THE PHILIPPINES needs to collect more taxes to address the “urgent task” of traffic congestion and efficient public transport, the Asian Development Bank (ADB) chief said as he threw support for upcoming revenue reform measures.
Investor optimism has significantly improved as far as the Philippine economy is concerned, although infrastructure gaps remain a major issue especially in urban areas amid robust domestic activity, ADB President Takehiko Nakao said.
“The perception of investors outside the Philippines as well as in the Philippines is now becoming better. I think this administration under President Duterte has been providing the impression that they will do something,” Mr. Nakao said in an April 11 interview with BusinessWorld.
“I think the Philippine economy is picking up and there’s some more expectations, and for ADB, it’s nice to see those developments in the Philippines. But of course for Manila transport and some rural poverty, there are many things to do.”
“Infrastructure transport in urban areas like Manila and Davao are urgent tasks,” Mr. Nakao said, as he acknowledged the Duterte government’s P8-trillion “Build, Build, Build,” program.
Central to realizing these ambitious infrastructure spending goals is tax reform, which will fund a huge chunk of big-ticket projects in the pipeline, the ADB president said.
The first tranche of the government’s comprehensive tax reform program has kicked in Jan. 1, from which the state intends to raise around P82.3 billion in additional revenues.
Together with up to four more tax packages expected to be passed into law, the share of revenues is expected to rise to 17.5% of gross domestic product by 2022, coming from a 16.3% share this year.
The Tax Reform for Acceleration and Inclusion (TRAIN) law reduced personal income tax rates for those earning P2 million annually. Revenue losses — pegged at roughly P10 billion a month — is expected to be offset by the removal of some value-added tax breaks; higher fuel, automobile, mineral and coal excise tax rates, as well as new levies on sugar-sweetened drinks and cosmetic surgery.
TRAIN has been pointed as the culprit for a surge in commodity prices in recent months. However, the reality is that the state needs to raise even more revenues for a deeper funding base, Mr. Nakao noted.
“People talk about the negative impact on economic activities and inflation by raising tax, but this country needs more tax revenues to do more things,” Mr. Nakao said. “To do more public service including the infrastructure investments, I think efforts to raise more revenues and those which rationalize the too-complicated [tax] system is important.”
“We are now starting to have a concrete plan of many things. Some of them have already been started building, but some of them we are still in designing stage like subways,” Mr. Nakao added, pointing out that “collective and decisive” actions from the central government are needed to ensure that plans go beyond the drawing board.
The ADB holds its 51st annual meeting from Thursday to Saturday as they engage government leaders and experts on discussions on embracing digitization and addressing infrastructure gaps to address pockets of poverty across Asia.
CIVIL SOCIETY organizations consulted by the Asian Development Bank (ADB) said their key proposals to mitigate climate change center on forest protection and curbing the use of coal in power plants.
The ADB’s Strategy 2030 sessions with these organizations hope to encourage innovative approaches to achieve a “prosperous, inclusive, resilient, and sustainable Asia and the Pacific.”
Devon Ronald Dublin, project coordinator of the Global Environment Facility-Satoyama Project for Conservation International, said reforestation efforts have great potential in addressing climate change.
“We came to the conclusion that 30% of necessary emission reductions can come from the protection and restoration of forests,” he said at the ADB session yesterday.
“If the ADB could integrate it in the strategy as a way to mitigate climate change, it would help,” he added.
Hemantha Withanage, executive director of the Centre for Environmental Justice, meanwhile urged the bank to pay more attention to reducing the share of power projects involving coal.
“If we are focusing on climate change, all countries need to bring down coal. The strategy should focus on climate change. Some 50% of investments should be carbon-neutral, not low-carbon,” he said.
In a statement, the Asian People’s Movement on Debt and Development added that the ADB’s commitment of $2 billion a year to clean energy projects is not enough because “it still supports coal-based power projects.”
“Fossil fuel — especially coal — has been recognized as a key driver of climate change,” it added.
In drafting its Strategy 2030, the ADB said that it will ensure that environmental considerations are “fully mainstreamed” and pledged to take a “comprehensive approach to build climate and disaster resilience.”
It added that about 75% of ADB’s funding commitments will be made “climate-relevant by 2030.”
Marlene Ramirez, Secretary General of the Asian Partnership for the Development of Human Resources in Rural Areas, said that aside from environmental issues, the bank should also support resiliency for agriculture outright in the face of climate change.
“It is commendable that the strategy covers climate change resilience, but what is missing is the strong link to proposed climate actions (in relation to) agriculture. We cannot underestimate the systematic risk posed by climate change on food security and livelihoods in the Asia and the Pacific region,” she said.
“Farmers’ organizations and cooperatives that thrive are active contributors to economic, social and political development. We believe that have key roles in job creation and reducing poverty. Majority of farmers need a lift not only in financing and capitalization but especially in the policy environment, as well as the legal basis to advance their work. They also need a range of capacity-building and technical advisory services,” Ms. Ramirez said.
Valerie Hill, Director of the ADB’s Strategy, Policy and Business Process Division, said that the bank aims to finalize the Strategy 2030 for board approval by the third quarter, in time for the work planning and budget cycle that starts in the same period.
“The current vision is to eliminate poverty in the region by 2020. What we want to do in the next in the Strategy 2030 is to expand that vision beyond poverty reduction,” Ms. Hill said. — Elijah Joseph C. Tubayan
