DAVAO CITY—Infrastructure spending of over a half-trillion pesos in the first nine months of 2018 demonstrates the “fast and sure” mantra in the implementation of projects and shows the vastly improved absorptive capacity of government agencies on the Duterte watch, Finance Secretary Carlos Dominguez III said here Wednesday (Nov. 28).
These increased infrastructure investments of P571 billion over the January-September 2018 period are matched by improved revenue collections, with the total take of the Bureaus of Customs (BOC) and of Internal Revenue (BIR) in the first 10 months of the year amounting to P2.099 trillion, up 16 percent from collections in the same period last year, Dominguez said.
He said the P571 billion in infrastructure spending is 7.2 percent above target and 46 percent more than the amount spent in the same period last year.
“This demonstrates that the Department of Public Works and Highways (DPWH) and the Department of Transportation (DOTr), the two lead agencies in the ‘Build, Build, Build’ program are moving faster than expected. The old problem of absorptive capacity has been solved. The mantra of fast and sure is being observed,” said Dominguez at the opening of the Sulong Pilipinas-Philippine Development Forum at the SMX Convention Center in the Lanang district here.
Dominguez said he was “very happy to note that the Congress is going to call a hearing on what is perceived as underspending because we would like to inform the Congress and the public that “the bad old days of underspending, which critics faulted the government for moving too slowly in getting the projects done, is now over.”
“Now that we are moving ahead of our spending schedule, we are now being faulted for enlarging the budget deficit, when in fact, we said that our budget deficit is going to be 3 percent of GDP. And we have hit it on target this year, the first time ever in recent history,” the Finance chief said.
He said the P571 billion for infrastructure in the first nine months is significantly higher by P225.5 billion or 65.3 percent compared to the amount spent in 2015, which was the last full year of the Aquino administration.
The sum of P345.3 billion spent by the Aquino government in 2015 is even 20 percent below target, said Dominguez, who likewise noted that “set against the infrastructure investments we are seeing now, the previous administration delivered an anemic performance.”
On revenue performance, Dominguez said the tax collections in the first 10 months of 2018, which is just slightly 3 percent short of target, was significantly better by P298.66 billion or 16.58 percent compared to the P1.8 trillion collected during the last full year of the Aquino administration in 2015, which was even 15 percent below target.
Dominguez said that Mindanao is at the front and center of “Build, Build, Build,” made possible by the improved revenue collections as a result of the implementation of the first package of the comprehensive tax reform program (CTRP).
“The package of infrastructure projects in this area includes irrigation systems, extensive road networks, construction and rehabilitation of key regional airports, long-span bridges and the Mindanao Railway project that will help dramatically enhance regional connectivity, reduce the cost of moving goods and people across long distances and spur economic activity for this part of the country,” Dominguez said.
Aside from tax reform, the infrastructure program is also benefitting from the generous funding support from Japan and China, two of the Philippines’ closest development partners in the region, he said.
Dominguez, however, noted that some uninformed critics have made unfounded claims about the country falling into a debt trap as a result of the financing extended by China and Japan even though the government had secured these at the lowest interest rates and longest term arrangements possible.
“Let me reiterate, in the face of uninformed criticism, this administration is not about to allow the country to be drowned in debts to China. In all the financing agreements, we have made sure that the country got the best deals possible and that the cardinal tenets of fiscal discipline are carefully observed,” Dominguez said.
He said that if project financing coming this year is included, the estimated project debt to China will constitute only 0.65 percent of the country’s total debt from the current 0.11 percent. Meanwhile, the project debt to Japan will increase from the current 3.17 percent to 8.90 percent of the total debt at the end of this year.
By 2022, when most of the financing for ‘Build, Build, Build’ should have been accessed, the Philippines’ project debt to China will constitute around 4.5 percent of the total debt, while the project debt to Japan will be around twice as large or 9.5 percent of total debt, Dominguez said.
Dominguez said the Duterte administration has learned much from the past, blemished by the “scandalous mismanagement of Chinese financing” owing to the fact that “the previous leadership allowed Chinese state-owned enterprises to dictate what projects will be undertaken here.”
“In our own dealings, we have made it very clear to the Chinese side that the Duterte administration will protect the country from unnecessary projects driven by agencies outside the Philippines,” Dominguez said. “This does not please some people who intend to profit from wasteful projects that they are pushing.”
“These are now the same people who are attacking the prudent decisions of this government,” he added.
Dominguez ticked off the safeguards that the government has put in place to ensure that only projects that need to be urgently implemented are proposed for concessional financing: 1) a feasibility is conducted on the project to determine its viability, sustainability and best means of financing; 2) approval by the Investment Coordination Committee (ICC) and the NEDA Board; 3) internal vetting of Chinese contractors that would be recommended to implement the project, in order to ensure that each project would be a successful one.
“In each case of projects using Chinese financing … they have to name the bidders from which we will make the final choice. If the bidder does not deliver, the Chinese government will certainly lose face,” Dominguez said.
He likewise stressed that “in conformity with the Constitution and laws of the Philippines, none in any of the pipeline projects allow for the appropriation or takeover of domestic assets in the event of failure to pay which will hollow out our sovereignty.”
As a whole, Dominguez said that “Build, Build, Build” will lay down the modern infrastructure that will enable the Philippine economy “to sustain its growth momentum and liberate even more of our people from poverty in the medium term.”
He noted that with the Philippines remaining as one of the fastest-growing economies in the region, its foreign direct investments (FDIs) rose by 31 percent in the first eight months of the year, contrary to claims by the Philippine Economic Zone Authority (PEZA) that investments are down.
“That is only true for PEZA projects where the investors are asking for what I consider unreasonable incentive packages from our government. The more meaningful investments are being made by competitive companies that do not ask for tax holidays and other incentives. These competitive investments are rising sharply, underscoring the investments are not prerequisites for getting the best projects,” Dominguez said.
He assured the forum participants, including representatives from small and medium enterprises (SMEs), that the country’s economic fundamentals remain strong, and reinforced by the element of decisiveness of the present administration.
“Sulong Pilipinas,” the annual consultative forum held by the Duterte administration with the private sector, returned to its roots in Davao on Wednesday to tackle the two key recommendations of the business community that have so far been delivered by the government–tax reform and infrastructure modernization.
The first Sulong forum was held in Davao City in June 2016. The next ‘Sulong’ forum in 2017 was held in Manila.
This year, the forum has evolved into a series of regional workshops, with ‘Sulong’ forums earlier held this month in Cebu City, San Fernando City in La Union and the Clark Freeport in Pampanga.
The 2018 series of ‘Sulong’ regional workshops are jointly organized by the DOF and the Presidential Communications Operations Office (PCOO), along with the Departments of Public Works and Highways (DPWH), of Trade and Industry (DTI), of Transportation (DOTr), and of Budget and Management (DBM); National Economic and Development Authority (NEDA); Bangko Sentral ng Pilipinas (BSP); Bases Conversion and Development Authority (BCDA); and the Philippine Chamber of Commerce and Industry (PCCI).