Governance is the tie-breaker

President Marcos signed the P6.793-trillion 2026 national budget on Jan. 5, signaling strong intent by vetoing P92.5 billion in unprogrammed appropriations. It was a decisive move to protect our fiscal trajectory and restore market discipline. However, capital markets act much like banks evaluating borrowers: they do not judge intent based on a single transaction. They judge consistency.

Institutional investors are now watching what comes next. Scrutiny is fixed on the remaining P150.9 billion in unprogrammed funds — specifically, whether its utilization will strictly adhere to the release conditions and transparency commitments laid out by the government. They want to know if technocratic efficiency can survive the weight of recurring political noise.

Six months into the unresolved flood control controversy, governance scandals continue to drag sentiment. While our investment-grade ratings remain intact, anchored by a commendable fiscal consolidation plan, both the World Bank and S&P Global Ratings have cited corruption concerns in trimming growth forecasts. Even as manufacturing purchasing managers’ index edged up to 50.2, Bangko Sentral ng Pilipinas data show foreign direct investment net inflows dropped 25.8% year on year to $320 million, dragged by lower debt flows.

These macroeconomic pressures are not unique to the Philippines. Elevated global interest rates, ongoing trade tensions, and regional supply chain shifts have also made capital more expensive and selective across emerging markets. We must also acknowledge the structural realities: Vietnam and Indonesia often beat us on “hard costs” like subsidized electricity and logistics.

But this structural disadvantage is exactly why governance is nonnegotiable.

The government’s recent pivot to shift its primary metric from investment pledges to actual “realization” is the correct strategic move. The private sector has long clamored for shovels in the ground rather than signatures on a press release. Likewise, operationalizing “green lanes” for strategic investments is a vital counter-move to our high operating costs. If we cannot be the cheapest place to do business, we must be the fastest.

Yet a green lane fails if it leads to a toll gate of corruption. Speed cannot bypass integrity. If an investor chooses Vietnam for cheap power, they might choose the Philippines for transparency, but only if we offer it. When fundamentals are tight, governance becomes the tie-breaker.

So what must happen?

The vetoed P92.5 billion, welcomed by FINEX and other business groups, must not stand alone. The remaining P150.9 billion must be guarded by strict adherence to clear and legal release “triggers,” independent validation before disbursement, and full public reporting. However, safeguards on paper are insufficient. To bridge the trust gap, we urge the adoption of a Unified Transparency Dashboard covering the entire P6.793-trillion budget, granting the public and markets real-time, granular data access from the National Treasury down to the last mile of implementation. Crucially, this standard of integrity must extend to the “Anti-Epal” provision under Section 19 of the 2026 General Appropriations Act, which must move from intention to strict enforcement to ensure public funds are never again treated as campaign war chests.

A CALL FOR SUSTAINED PARTNERSHIP
In response, the business sector must remain the vigilant partner it has always been. We are not passive observers or mere political watchdogs; we are active technical evaluators. This commitment underpins the FINEX thrust for 2026: to catalyze confidence by leading with capital, integrity, and innovation.

We stand ready to deepen our collaboration with government, multilaterals, and industries to advance fiscal prudence, institutional credibility, and a modern capital market. Specifically, we continue to support the operationalization of the shift from pledges to “realization.” We can provide data on the specific regulatory bottlenecks, ranging from local government unit permits to national requirements, that continue to stall capital flows. Beyond regulatory feedback, we are prepared to work in collaboration to identify and champion targeted investments that need prioritization, spanning education, healthcare, infrastructure, food security, climate resilience, and technology in underserved areas. Simultaneously, we strongly advocate for a broad initiative to reduce frictional costs in our capital markets. Just as importantly, we support the aggressive digitalization of the Bureau of Customs and Bureau of Internal Revenue to solve corruption as an efficiency problem. Furthermore, as the CREATE MORE Act is implemented, we must advocate for clear, unchangeable rules on incentives to end “interpretation risk.”

In all these areas, the private sector offers its expertise to benchmark performance, ensuring that policy intent translates into credible execution.

THE LONG GAME
The 2026 budget execution will be watched closely: by investors, capital markets, and business leaders deciding where to place their next ASEAN investment. The veto was the first move. What matters now is the disciplined, unglamorous work of credibility-building.

Capital flows favor three conditions: efficient allocation, transparent execution, and credible oversight. Every peso transparently accounted for sends a message: this government is serious, capable, and stable.

In markets, credibility is the only currency that compounds. Let’s ensure we are investing it wisely.

The views expressed herein are the author’s own and do not necessarily reflect the official policy or position of FINEX.

Carlo Enrico B. Lazatin is the 2026 president of the Financial Executives Institute of the Philippines (FINEX) and the Philippine Finance Association (PFA). He is the president and CEO of DES Financing Corp. He advocates for fiscal transparency and closer collaboration between policymakers and capital markets to strengthen the Philippines’ investment climate.