For both beginning and veteran investors and entrepreneurs, a common question raised nowadays, especially in conferences and seminars, is “Is this the right time to do business?” especially with the ebb and flow of investments and the questionable stability of the national currency.
It won’t be a surprise if many a businessman have second thoughts, but if you ask Secretary Benjamin Diokno of the Department of Budget and Management, his answer would be a resounding “yes.” According to the secretary, the Duterte administration’s fiscal and economic policies are set to improve the business climate so as to attract more investors.
Fresh from a hearing of the Commission on Appointments (CA), the secretary of the Department of Budget and Management delivered his speech entitled “New Budget Dynamics Under the Duterte Administration” before local and foreign business leaders, financial analysts, economists and prospective investors at the recently concluded Philippines Investment Conference 2016 in New World Hotel, Makati. With the theme “Sustaining Development in a World of Policy Divergence,” the conference is an initiative of the CFA Society Philippines together with the CFA Institute, and had as its speakers noted financial experts, business magnates and policy makers from the government sector.
Secretary Diokno began his presentation by exposing a need for “a just and disciplined fiscal policy,” which includes raising the deficit from the two percent set by the Aquino administration. “The deficit will expand to three percent of GDP over the medium term to support expenditure priorities,” he continued. Asked on how the new target was finalized, Diokno revealed that the three percent deficit to GDP ratio is a European Union entry standard implemented by European countries in relation to their credit ratings.
Small deficit is no big deal
Having an audience of economists and financial leaders before him, the secretary downgraded concerns on the fiscal and economic impacts of the new budget deficit target. “This may appear scary for some investors but I can assure you that it is manageable, appropriate and sustainable,” said Diokno. He added that debt to GDP is expected to decline to 35 percent by the end of the Duterte administration, as opposed to the 45 percent listed in 2015.
With the Duterte administration having surpassed its first 100 days, and the President himself garnering an “excellent” trust rating of +76, the various agencies of government strive to reach their respective targets despite the effects brought by on-going questions about a solid foreign policy. The Department of Trade and Industry under Secretary Ramon Lopez, for example, has handed its report detailing the agency’s efforts in MSME development, consumer welfare and the end of ‘endo.’ To facilitate this, according to the DBM secretary, government spending must be intensified, and must focus on specific programs and reinforced projects.
“For a country like us, which has the worst public infrastructure in this part of the world, we need to make up for that by spending on infrastructure,” began Diokno. According to the secretary, the need to address infrastructure problems stems from the need to move people faster, as solving current traffic congestion problems will earn for the country an additional Php 2.4 billion daily from business and tourism spendings. To do this, the government is set to continue facilitating public-private partnership projects, with 1.4 trillion worth of projects currently in the pipeline. This, says the secretary, will usher in “the golden age of infrastructure in this country.”
Secretary Diokno also unveiled the administration’s efforts to streamline various processes in agencies that serve people directly. This will involve steps in simplifying the IRR of the Government Procurement Reform Law, the revitalization of the PPP program with the help of the 2017 borrowing program of 80-20 in favor of domestic fund sources, and reforms in the tax system to make business “equitable, efficient and profitable.”
Reforming the tax system, according to the secretary, will be made up of four major components, and will involve various sectors of society, from the minimum wage-earner to the importers and executives: (1) income tax reform, (2) expansion of VAT base, (3) indexation of oil excise tax, and (4) rationalization of fiscal incentives. This pronouncement comes after IMF country representative Shanaka Jayanath Peiris reveals the IMF’s support for the Department of Finance’s new and “well-structured” tax reform program.
Before businessmen that could bring in a multitude of capital for the country’s use, Secretary Diokno further announced upcoming governance and budget reforms with the Budget Reform Bill and the Right-Sizing Bill, while urging the investment community to engage in the competitive world of the Philippine business climate. He stressed the need for continued infrastructure development, people empowerment, and support for the administration’s fiscal and social goals.
Jerricho Reynaldo is an editor, writer, and creative and social media consultant. He has written for various local and international publications that include North Bound Magazine, asianTraveler Magazine and Planet Philippines. His writings and editorial work cover a wide range of topics, from food and travel, to business-lifestyle and entertainment. Read more of his works at Brewing Echo.