Ladies and Gentlemen:
Thank you for this opportunity to speak before you a day before a new administration takes over.
The past few days were exciting ones for the entire global business and financial community. A week ago, the United Kingdom decided to leave the European Union. This is a move without precedent — and certainly one that the markets only half-expected.
Nearly everyone expected a close contest in the British referendum, with a vote to remain in the European Community eventually winning in the end. This would have been like the Scottish referendum where, after months of heated debate, the status quo eventually triumphed.
Unfortunately, that was not what happened in the Brexit vote. Those demanding Britain exit the EU won by a slim margin. All hell broke lose. Markets fell across the board. The Pound Sterling fell sharply against the US dollar.
This vote is not unique. The global financial system is heir to unlikely turns and unseemly outcomes.
This is why those tasked with managing the finances of nations need to be constantly attuned to rising risks and the drift of public sentiment.
In our own case, the May 9 elections have been widely interpreted as a protest vote against a status quo that seems unresponsive to the plight of the poor. That unresponsiveness is due not only to the insensitivity and incompetence of the outgoing administration; it is also due to the more profound logic of the modern economy that tends to create fewer jobs and lower pay, creating social tensions and widespread disillusionment.
We are conscious both of the more immediate causes of the public’s disillusionment as well as its more structural bases.
The incoming Duterte administration seeks to address the short-term concerns while looking far ahead to build an economy that is fairer to our people. Both the short-term goals and the longer-term strategies must cohere and deliver palpable results. Otherwise, we could reap more profound disenchantment.
In the short term, there are a number of measures that may be undertaken to bring immediate relief to our people. We can reform the tax rates to spare our wage earners the harsh effects of over-taxation. We can increase public spending, particularly on infrastructure, taking advantage of its high multiplier effects, the creation of jobs and making business start-ups possible.
We are looking at dramatically increasing infrastructure investments to as much as 5% of our GDP so that public spending will have an immediate effect on the people’s economy. We intend to take the traffic crisis by the horns not only because of the grave economic costs of congestion but also because of its adverse effects on the health and quality of life of our labor force.
Over the medium- and long-term, our economy, improve the productivity of our agriculture and temper the population growth rate. The front-loading of our infra investments intends precisely to achieve the more strategic goals of dispersing economic opportunities, improving our nation’s logistical backbone and meeting the employment needs of our young population.
It is in the continuum of immediate policy responses and long-term strategic goals that the 10-pont socioeconomic agenda of the Duterte administration was conceived.
A number of policy issues require our urgent attention, mainly because this is what our people expect and these are the reasons they voted as they did last May. The urgent things include: immediately curbing criminality, especially relating to the epidemic of illegal drugs; cracking down on systemic corruption, especially in our revenue agencies; bringing down tax rates and eventually simplifying our tax system.
Eventually, we will have to address the need for constitutional renovation. This will help facilitate growth dispersal by empowering governments. It will alter the system of representation, enabling our marginalized sectors to more meaningfully participate in policy-making. It will clear all the obsolete economic orthodoxies enshrined in the existing charter.
Over the longer term, we should see programs that will revolutionize our agriculture. With severe limits on our arable land, we should strive for higher value creation in our farms. Otherwise, agriculture will remain the poverty trap it has been for decades.
In a more competitive world, our prosperity depends on massive public investments in our human resources. These investments will be directed not only towards improving our educational system but also for improving public access to health services. A malnourished population cannot be a competitive one.
In a consultation meeting held last week in Davao City with leaders of the business community, one concrete suggestion was to build a national ID system. This will go a long way towards properly targeting public services and subsidies. The conditional cash transfer program so lavishly funded by the outgoing administration has been basically blind because there is no means to specifically target the assistance.
Judging from the outcome of the Davao City consultation meeting, the business community seems to welcome initiatives towards improving capitalization of our agricultural sector, integrating farm systems in a novel way to produce higher value crops and make farming more economically rewarding. Modernizing our farm sector involves more than subsidizing seeds and fertilizer inputs to encourage inter-cropping. It requires mapping out our land-use policies so that both our housing and farming needs are met.
Our businessmen are urging the new government to dramatically improve the ease of doing business in the country. This includes not only deploying more information technology to serve clients better but also reducing the number of steps required to get things done. It will help if the telecommunications firms step up the quality of their service and bring down costs.
There was a clear call in the Davao forum for upholding policies governing responsible mining. We have the framework to do this. It is called the Mining Act of 1995 that was upheld by the Supreme Court after a decade of deliberation.
Our stakeholders expect the regional dispersal of industries to happen at a faster pace. To enable this, the labor force in the localities needs to be prepared along the modernization of our transport networks. I assure you that the dispersal of economic activity is high on the agenda of the incoming presidency. This is a mandate made emphatically by our voters in the last elections.
At the forum, business community sought a review of the CCT program. This should be more than a system for dispensing state patronage for partisan goals. It should be transformed into a program that improves skills and opens real employment opportunities for our poor.
The Public-Private Partnership program, likewise, requires drastic review, as sought by the businessmen during the Davao forum. As it stands, the PPP program seems to be understood principally as a means to raise short-term revenues for government rather than a powerful instrument for unleashing the power of private investments to prepare our economy for sustainable growth.
I assure you that both the concept and the execution of the PPP program will be dramatically reviewed. This should only secondarily be a tool for raising revenues. This is first and foremost an opportunity to bring private sector participation in nation-building. The PPP program will, in the new dispensation, no longer be merely a “Powerpoint presentation.”
Consistent with the new attitude towards genuine public-private partnership, we will welcome unsolicited proposals. Government does not have a monopoly over innovative ideas.
Last week, a public-private partnership for the Davao coastal area was inaugurated. In the same spirit, the new presidency will encourage local government units to initiate their own development partnerships. This will be consistent with the strategy of decentralization and dispersal that is central to the development vision of President Rodrigo Duterte.
There are ten thousand things to be done over the next few weeks.
The 10-point socioeconomic program unveiled by President Duterte will have to be fleshed out into clear policy dictates. The items that will require legislation, such as the tax reform program, will be submitted for congressional consideration. So, too, will policies such as the proposed “special powers” to deal with the traffic situation.
The task of the Finance Department is raising the financing a comprehensive economic reform program entails. This is, you can imagine, a gargantuan task.
Fortunately, we have much elbowroom today. The massive debt overhang that constrained our fiscal policies during the eighties and the nineties has been largely contained. The credit upgrades we saw the past few years can now be translated into something more meaningful for our people: cheaper money that government can use to frontload infra development and which entrepreneurs can use to build enterprises.
The incoming Budget Secretary promised the under-spending of the past few years will no longer happen. We expect aggressive public spending to meet our social goals.
In a reform program as comprehensive as we imagine it, there will be a lot of rethinking going on. The new administration has indicated openness to unsolicited ideas from the private sector. We will take every suggestion with great seriousness.
I foresee a government run on consultations driven by consensus. This is how modern government should be. It should not only be transparent in its procedures but also open in its attitude.
Let us keep our communication lines open as we all work to achieve the nation our people deserve.
Thank you and good day.