YOKOHAMA— With prospects for the Philippines’ higher growth “certain,” the main task of the Duterte administration is to ensure that the domestic economy becomes an inclusive one and is able to reduce the incidence of poverty as quickly as possible, Finance Secretary Carlos Dominguez III said here over the weekend.
Dominguez said that five years after the Philippines last hosted the Annual Meeting of the Asian Development Bank (ADB) in 2012, the country has progressed in reducing poverty incidence, improving fiscal stability and increasing its rate of growth, which enabled the new government of President Duterte to map out an ambitious economic plan that aims to transform the economy into a high middle-income one by 2022 and reduce poverty to 14 percent by that time.
“This is an opportune moment for the Philippines. Beneficial tailwinds and ample headroom will help us grow at a faster rate. Higher growth is certain. The task of leadership is to ensure this growth in inclusive and will result in poverty reduction as quickly as possible,” Dominguez said in his closing remarks at the 50th Annual Meeting of the Asian Development Bank (ADB) here.
Dominguez is the new chairperson of the ADB Board of Governors.
He said the Duterte administration will meet “head on” the challenge of reversing inequality among the country’s regions by investing heavily in boosting farm productivity and improving the country’s logistical backbone in order to facilitate trade across its islands.
He said this challenge falls squarely into the theme “Linking People and Economies for Inclusive Development” adopted for the 2018 ADB Annual Meeting that will be hosted by the Philippines next year.
To realize the 2018 theme’s goals, Dominguez called on the ADB to “begin a process of reinvention” so that its programs could be realigned to meet new global realities.
These new realities, he said, include the shifting of the balance of economic power to Asia, the rising economic nationalism and hostility to globalization in the US and Europe, and the emergence of new multilateral lending institutions such as the Asian Infrastructure Investment Bank (AIIB).
As for the Philippines, the key elements of its inclusive growth strategy are a “massive infrastructure program to bring us up to par with the region and a comprehensive tax reform package that will support robust economic investments in the country’s future,” Dominguez said.
“The first element is indispensable. For decades, the country lagged behind its neighbors in economic investments as we grappled with a debt overhang. We have to close the infra gap to achieve investment-led growth and evolve a truly inclusive economy,” Dominguez said.
He said the second element, which is the tax reform program, “is unavoidable.”
“To meet the challenge of a larger and younger labor force, we need to fund social spending in education and public health. We need to bring down our income tax rate close to the regional average to make our economy more attractive to investments,” he noted.
Dominguez said that as with other emerging archipelagic economies, the Philippines needs to address the “unevenness” in the economic development of its regions.
A case in point, he said, is that Metro Manila’s gross regional domestic production grew 12 times the rate of the country’s poorest region—the Autonomous Region in Muslim Mindanao.
Dominguez said the ADB will continue to play a key role in helping the Philippines correct such inequalities and in “building an economy that is much kinder to its people” as it thanked the Bank for the support that it has extended to our country over the years.
When the ADB holds its annual meeting in Manila next year, Dominguez said he expects it to help “rethink” Asia’s strategies for growth.
“The economic balance of power has shifted. Asia is now expected to lead global growth. We cannot be content to simply track the development experience of the West,” he said.
The member-economies of the ADB should also be prepared for the harm to be inflicted by emerging protectionist and anti-globalization policies in the US and Europe, Dominguez said.
For Dominguez, the ADB needs to “revisit the modalities of its intervention in order to remain relevant and effective,” as it works alongside new institutions like the AIIB.
“The development needs of our region are changing. The Bank must respond appropriately,” Dominguez said.