Carlos G. Dominguez
Secretary of Finance
His Excellency Jose Manuel Romualdez, Philippine Ambassador to the United States; Trade and Industry Secretary Ramon Lopez; Energy Secretary Alfonso Cusi; Ambassador Vinnai Thummalapally, Acting Director of the United States Trade and Development Agency; Ambassador Michael Michalak, Senior Vice President of the US-ASEAN Business Council; Ms. Karen Freeman, Acting Assistant Administrator for Asia of the United States Agency for International Development; Ms. Anna Shpitsberg, Deputy Assistant Secretary for Energy Transformation of the United States Department of State; Mr. Kyle Murphy, Senior Adviser to the CEO of the United States International Development Finance Corporation; my good buddy Alex Siegel, the shooting clay’s champ; distinguished guests from the private sector: Good morning and Good evening.
Thank you for making time for this briefing.
Now is the best time to do business in the Philippines.
Our economy is recovering rapidly. In the last quarter of 2021, our GDP grew by 7.7 percent, making the country’s expansion the highest in the ASEAN region and among our credit rating peers globally. This brought our 2021 full-year GDP growth to 5.6 percent, exceeding the government’s target. Our robust full-year performance is also among the best compared to our neighbors and our credit rating peers.
This year, we are well on our way to returning to normalcy with the Philippine economy expected to expand further between 7 and 9 percent.
The infections due to COVID have now receded. Cases are now subsiding rapidly due to the accelerated pace of our vaccination program, thanks also to the help of the United States. After two years, we are now fully reopening our borders to international travelers who have been vaccinated.
Last year, our tax collection was already 9 percent higher than in 2020, signaling a return to robust economic activity. Our merchandise trade volume is already above the pre-pandemic level. Our foreign direct investments in 2021 already surpassed the full-year level of 2020.
Remittance inflows from our overseas workers grew by 5 percent, fueling consumer demand. This already surpassed the pre-pandemic level. Consequently, our gross international reserves rose steadily to 109 billion US dollars while we continue to gain ground in reducing unemployment.
Clearly, these bullish signs of recovery are a product of our hard work and preparation before the pandemic hit us.
Over the last five and a half years, President Duterte signed into law and implemented game-changing reforms to boost the Philippines’ growth and competitiveness.
We are the only administration in history to pursue the most comprehensive tax reform program. To enhance tax administration, we embarked on a digitalization program and strengthened tax enforcement.
These allowed us to provide robust funding for our massive Build, Build, Build infrastructure program. Our infrastructure investments immensely improved the logistics backbone of our economy; created quality jobs for our people; and brought down the costs of doing business.
After decades in the legislative mill, we were able to enact the National ID System, the Ease of Doing Business Act, and the Rice Tariffication Act. We finally implemented the long-dormant Real Estate Investment Trust Act. This has become a powerful financial instrument for the property development sector, bringing the total market capitalization size of REITs in the country to 6 billion US dollars in just two years of implementation.
In addition, we improved peace and order as well as ensured good governance in the country. We invested heavily in our people–our greatest asset– through improved social services and free tertiary education in state universities and colleges.
All of these increased the Philippines’ competitiveness and provided us with the financial strength to weather the worst of the crisis.
Even as the world was battered by the pandemic, our continued commitment to reform strengthened our country’s ability to make a strong recovery. We enacted the CREATE Act or the Corporate Recovery and Tax Incentives for Enterprises. This brought down our country’s corporate income tax rate to align with the rest of the Southeast Asian region.
From a high corporate income tax rate of 30 percent, CREATE provided a hefty tax cut of 10 percentage points for small and medium enterprises and 5 percentage points for all other corporations. In addition, CREATE puts in place a flexible incentives system. We can choose the investors we want to bring in as the law allows us to tailor-fit incentives that are performance-based, time-bound, targeted, and transparent for prospective businesses.
The Amendments to the Retail Trade Liberalization Act are already part of our laws while the amendments to the Foreign Investments Act and the Public Service Act are expected to be signed by the President shortly.
The amendments to the Retail Trade Liberalization Act, in particular, lowered the minimum paid-up capital requirement for foreign corporations from 2.5 million US dollars to about 500,000 US dollars.
Foreign retailers that want to open more than one physical store must now invest a lower minimum investment of 200,000 US dollars per store, compared to the previous requirement of 830,000 US dollars per store.
The law likewise simplified the qualification requirements of foreign retailers by removing the required net worth, the number of retailing branches, and the retailing track record conditions.
Now that market entry barriers in the retail industry for foreign retailers have been eased, we urge you to establish and expand your retail trade operations in the Philippines.
The amendments to the Public Service Act provide a clearer definition of the terms public services and public utilities in the existing law. By doing so, it will open up public services to 100 percent foreign ownership, and retain public utilities as majority Filipino-owned, subject to the 60-40 ownership rule.
The list of public utilities will soon be limited to the distribution and transmission of electricity; water pipeline distribution system, wastewater, and sewerage pipeline systems; petroleum and petroleum products pipeline transmission systems; seaports; and public utility vehicles. All other industries previously subject to the restrictions on foreign ownership through this law will be opened up once the bill is enacted.
We, therefore, encourage experienced and strategic investors in the United States to bring their capital into our country, especially in the fields of telecommunications; media; and private transportation vehicles.
The amendments to the Foreign Investments Act, on the other hand, will improve the Philippines’ openness to foreign direct investments by mandating a review of the Foreign Investment Negative List every two years. This also liberalizes the practice of certain professions. This creates opportunities to attract foreign investors that would otherwise be unable to do business in the Philippines without foreign talent.
These three forward-looking measures widen the horizon for investments. They create numerous opportunities for synergy between local and international firms. There is now enough space for international firms to form joint ventures with Filipino companies, especially those at the cutting edge of information technologies. We likewise expect a sharp rise in green investments as the country pushes ahead with its goal of reducing greenhouse gas emissions by 75 percent in 2030.
With these reforms in place, we are confident of the near- and medium-term prospects of the Philippine economy. The election season will not be an issue. We have a long history of orderly and peaceful transfers of power. The next president will inherit many hard-won reforms that will boost our economic resurgence.
I invite you to look closely at the Philippine economy in the light of the pro-business policies instituted over the last five and a half years. The Philippines is a growth leader in the region and a reliable host for international partnerships.
Thank you.
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