Carlos G. Dominguez
Secretary of Finance
September 8, 2o20
Ambassador Benedicto Yujuico, President of the Philippine Chamber of Commerce and Industry; Ms. Maria Alegria Limjoco, Chairperson of the PCCI; Mr. George Barcelon, President Emeritus of the PCCI; Ms. Delia Jimenez, Area Vice President of the PCCI for Metro Manila; business community of Metro Manila; distinguished guests; ladies and gentlemen: Good afternoon.
Thank you for this opportunity to speak with you today.
I congratulate the Philippine Chamber of Commerce and Industry for successfully organizing the 28th Metro Manila Business Conference and the Sulong Pilipinas workshop despite challenging circumstances.
In this moment when the nation is challenged by a pandemic and the economy has been set back by our efforts to fight it, it is always good to touch base with the business community. There is much to learn from those who have skin in the game.
While our medical workers braved the frontlines to save lives and treat the infected, you—our entrepreneurs—have been fighting in the trenches to save jobs and bring our economy to the track of high growth. The country is grateful for your efforts.
Since the launch in 2016, Sulong has played a crucial role in bringing our key stakeholders together in collaborative and participatory workshops in support of game-changing reforms.
The TRAIN Law or Tax Reform for Acceleration and Inclusion; the amnesties on the estate taxes and delinquencies; the increases in sin taxes to fund the Universal Health Care program were passed with the support and contributions of PCCI chapters nationwide.
Your continued support for Sulong Pilipinas has also led to the enactment of several of this administration’s other far-reaching reforms, such as the National ID System, the Ease of Doing Business, the Build, Build, Build program, and the program to do fuel marking.
These initiatives have strengthened our fiscal and economic positions. We are better prepared now than at any point in recent history for black swan events, such as the COVID-19 pandemic that has put lives and livelihoods at serious risk.
These reforms helped us bring down our debt-to-GDP ratio to a historic low of 39.6 percent in 2019 and improve our revenue stream to 16.1 percent of GDP last year—the highest in more than two decades. They have allowed us to build up our gross international reserves to an unprecedented 98.6 billion US dollars in July of this year and achieve for us our highest-ever credit ratings. They have helped us rapidly bring down our poverty rate to 16.7 percent last year, compared with 23.5 percent when the President took over in 2016.
When the pandemic struck, we were able to quickly access emergency loans, first from our international development partners and secondly at the commercial markets at very low rates and spreads, as well as longer repayment periods.
Our strong fiscal position has given us sufficient means to fight the battle and ramp up public spending to beef up our health system and to provide relief to individuals and sectors hardest hit by the pandemic.
The Duterte administration has been focused not just on saving lives from COVID-19, but also saving lives from other factors, such as hunger and other diseases. While we continue to fight COVID-19, we have to rebuild our economy.
We are doing our utmost to prevent the need for further lockdowns and keep the virus at bay so our people can start to move around more freely and more confidently as long as we all comply with the required health behaviors.
The lockdown the government imposed in the beginning was necessary to save lives and protect our communities. It enabled us to strengthen our prevention, testing, and isolation, as well as treatment capacities. The decisive move helped us to avert an estimated 1.3 to 3.5 million infections, according to university researchers.
Further lockdowns, however, will be even more painful for the economy. Metro Manila is one of the hardest hit areas in the pandemic in terms of health and livelihoods. NEDA estimates that for every one month of lockdown of Metro Manila and adjacent areas, we lose around 1.5 trillion pesos worth of sales as only around 32 percent of the economy is effectively open. Unemployment and reduced incomes due to lockdowns have public health consequences, too.
Rebuilding the economy is a condition for ensuring public health. We cannot fight a pandemic with a weak economy; nor can we restore economic vigor without solving the public health crisis. The health of our people and the strength of our economy are mutually reinforcing.
The progress we have seen in our labor market after the slight easing of mobility restrictions is very encouraging. As we gradually reopened our economy, our unemployment rate in July of this year significantly dropped to 10 percent from a high of 17.7 percent in April, when strict lockdowns were still in place.
The continuous slower contraction in manufacturing production also signals rising economic activities. For instance, the value of production index for the month of July showed a slower annual decline of 14.8 percent from a high of 41.2 percent in April. The volume of production index likewise shrank at a slower rate by 11.9 percent compared to a high of 38.8 percent in April.
There are also significant improvements in the tax collections of our main revenue-generating agencies. Both the Bureau of Customs and the Bureau of Internal Revenue registered hefty tax collections in August and exceeded their targets for the month by 33 percent and 46 percent, respectively. These are strong indicators that the economy is starting to recover.
Improvements in our employment numbers and other economic indicators will depend on how we will continue to ease mobility restrictions by opening up additional modes of public transportation that are safe and adhere strictly to health standards. People cannot go back to work if they do not have public access to transportation.
No one really knows how long this public health crisis will persist. The best scenario for the widespread availability of a safe and effective vaccine is next year. Even then, we are not sure how quickly this will contain infections.
The public health effort will be a marathon. There is no magic wand to wave away the virus. We must be prepared for a long battle.
Because of these considerations, it is important that we exercise fiscal prudence to ensure that we do not run short of resources in this long game.
What we are facing is a test of fiscal stamina. How a country’s economy performs during COVID-19 and how quickly it can bounce back once the crisis is over will depend on its economic resilience. This is why we have been consistent with our approach: we will do what is necessary, but we will not be wasteful.
We are grateful that Congress recently passed a fiscally responsible Bayanihan 2 that we can implement within our means.
Bayanihan 2 provides funds to hire thousands of contact tracers and various forms of support for our medical workers. We will purchase safe and effective vaccines when they become available. But ahead of that and even beyond that, we will continue to intensify our public health response.
Continuous improvements in our health systems are crucial to building the confidence of our people and our businesses to operate in the new economy.
The government continues to wage a war on COVID-19 on all fronts, even as signs of recovery are emerging. The Duterte administration will continue to work with Congress on our economic priority bills. These measures will make more support available for businesses, workers, and families and will come on line as soon as Congress is able to pass them.
We are pushing for the swift passage of the CREATE bill or the Corporate Recovery and Tax Incentives for Enterprises Act. This will provide an outright 5 percentage point reduction in the corporate income tax rate, from 30 to 25 percent, as soon as it is made effective. This will help businesses continue operations and retain jobs.
CREATE will enhance the flexibility of our incentives system so that we can aggressively go after the investments that will greatly benefit the Filipino people.
The availability of financing for businesses and the continued strength of our banks will also be critical in our economic recovery.
We are seeking Congressional approval for banks to dispose of non-performing loans and assets through asset management companies. FIST, or Financial Institutions’ Strategic Transfer Act proposes improved versions of the special purpose vehicles created in the early 2000s in response to the Asian Financial Crisis. The bill will enable banks to offload souring loans and assets, clean up their balance sheets, and extend more credit to more sectors in need.
We also support the GUIDE Bill or the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery. This will enable government banks to form a special holding company that will infuse equity, with strict conditions, into strategically important companies facing insolvency.
We seek to provide greater support to the agriculture sector by giving the banking system the ability to support the whole value chain of agri-enterprises through amendments tothe Agri-Agra law.
The timely passage of the 2021 national budget is crucial to our economic recovery. This will provide us with the tools necessary to rebuild the economy and decisively defeat COVID-19.
We will also continue to push for the passage of the remaining tax reform packages that will allow a simpler, fairer and more efficient tax system while providing additional revenue streams for the government.
Our strategy for recovery rests on sustaining the Build, Build, Build program. Investing in sound infrastructure has the largest effect on the economy. Its multiplier effects create jobs, fire up consumption, and spur productive activity.
Metro Manila stands to benefit from major infrastructure projects in the Build, Build, Build program. For too long, the capital has suffered from one of the worst traffic conditions in the world, affecting the daily lives of commuters and the cost of doing business. The government’s massive infrastructure spending in Metro Manila will relieve these pain points, while generating employment and business opportunities across sectors as well as fostering inter-regional connectivity.
Our country’s most ambitious single infrastructure project is the 36-kilometer Metro Manila Subway. The mobilization work for the project started last year. It is set to commence partial operations by 2022, while the entire rail line will be fully operational by 2025. Once completed, travel time from Quezon City to NAIA International Airport will be reduced from 1 hour and 10 minutes to just 36 minutes.
The Metro Manila Skyway Stage 3 is now 83 percent complete and is expected to open by December this year. The elevated expressway is set to decongest EDSA and other major roads in Metro Manila. This will reduce travel time from Buendia in Makati to NLEX in Balintawak, Quezon City from 2 hours to only 20 minutes.
The Bonifacio Global City to Ortigas Center Road Link Project connects Makati to Pasig. Now 80 percent complete, it will reduce the travel time between BGC and the Ortigas Central Business District to 12 minutes from the current 1 hour. This is targeted to open in the first quarter of next year.
Phase 1 of the Southeast Metro Manila Expressway C-6 will make traveling from Bicutan in Taguig to Batasan in Quezon City much easier, reducing the time on the road from 1 hour and 50 minutes to just 26 minutes. The entire toll road is slated for completion in 2022.
These are just some examples of the long list of big-ticket infrastructure projects in the National Capital Region.
We know that beyond infrastructure, there are mounting socioeconomic concerns that require targeted, viable, and relevant solutions. I look forward to the outcome of your discussions and the insightful recommendations this meeting will produce. Your suggestions will certainly be the building blocks of our sustained recovery.
I am optimistic that by putting our minds together, we can find the best path to come out of this crisis stronger and more resilient than ever.
Thank you.
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