September 22, 2022
My fellow Cabinet Secretaries; Philippine BSP Governor Felipe Medalla; our panelists from the private sector, Mr. Jaime Augusto Zobel de Ayala and Mr. Sabin Aboitiz; our partner banks, namely, Bank of America Securities, Goldman Sachs, HSBC, SMBC Nikko, Standard Chartered Bank, and UBS; ladies and gentlemen: good morning.
(Disclaimer flashed on screen)
The United States has played a special role in the economic history of the Philippines.
In the last six years, the US has been the Philippines’ third largest trading partner and fourth top source of foreign direct investments in the country.
The US is also the Philippines’ biggest source of overseas Filipino remittances. With over 4 million Filipinos living and working in the US, their contributions to the economies of both our countries cannot be understated.
Our strong economic relationship has endured the test of time and has even deepened through the years.
Now, as we pursue the economic transformation of the Philippines in the next six years, the Marcos administration is determined to explore new frontiers with investors from the US and the rest of the world.
This is why we believe that this is the best time to do business in the Philippines.
The future of the Philippine economy is bright.
In the second quarter of this year, the economy grew by 7.4 percent. This brought our average growth for the first half of the year to 7.8 percent.
The expansion in the second quarter of the year was broad-based, driven by positive growths in all three major sectors – agriculture, industry, and services.
Investors have continued to put their confidence in the Philippines’ long-term economic prospects. In 2022, we achieved record-high foreign direct investment inflows amounting to 12.4 billion US dollars.
And for the first half of this year, FDI inflows reached 4.6 billion US dollars, higher by 3.1 percent compared to the same period last year.
The Philippines’ growth outlook is supported by the full reopening of the economy and the enactment of key structural reforms.
But while our economic prospects are looking up, the Philippines remains vigilant to respond to ongoing risks posed by current global upheavals.
High world prices of oil and other key food commodities have continued to push inflation upward globally. The effects of the pandemic on other parts of the economy linger, while the global political economy remains unpredictable.
In order to address these challenges and steer the economy back to its high-growth path, the Marcos administration has laid out a comprehensive 8-point socioeconomic agenda.
This Agenda will guide our pursuit of a faster, greener, and more inclusive growth that will benefit all Filipinos.
In the near-term, the immediate priority is to tackle the urgent concerns confronting the Filipino people, namely, price stability and the lingering economic scars from the pandemic.
Over the medium term, the plan will focus on creating more jobs, quality jobs, and green jobs.
Our strongest asset is our people; we have a large pool of young, highly-skilled, and tech-savvy workers ready to compete with the global workforce.
We will capacitate them through higher investments in human capital development, digitalization, and infrastructure.
Overall, the 8-point socioeconomic agenda aims to dramatically cut poverty incidence to 9 percent by 2028 and attain upper middle-income country status by 2024.
Fiscal discipline is critical to the attainment of these lofty goals. To achieve this, we will implement the country’s first-ever Medium-Term Fiscal Framework.
The Framework serves as our blueprint to reduce the fiscal deficit, promote fiscal sustainability, and enable robust economic growth.
It charts out a clear path to maintaining our fiscal health while remaining supportive of strong economic growth.
We have secured the full support of both houses of Congress for the Medium-Term Fiscal Framework. This will ensure the alignment of the government’s legislative agenda with our macroeconomic targets for 2022 to 2028.
The Framework proposes measures that will promote efficient tax administration through digitalization, help our tax system catch up with the digital economy, and promote environmental sustainability to address the impact of climate change.
We are also committed to pursuing the remaining tax reform packages of the previous administration.
And this includes the Real Property Valuation and Assessment Reform Bill. This aims to improve the quality of real property valuation by making frequent revisions, making it transparent, reliable, and attuned to market developments.
The other package is the Passive Income and Financial Intermediaries Taxation Bill. This bill seeks to boost capital market development by simplifying and rationalizing the tax regime for passive income, financial services, and financial transactions.
Our tax system must also evolve in pace with the digital economy. We will pursue tax fairness by imposing value-added tax on digital goods and services to level the playing field between traditional and digital businesses.
On the sustainability front, we will pursue the imposition of an excise tax on single-use plastics.
We are also proposing to rationalize the Mining Fiscal Regime to achieve simplification, fair share, and good governance in the mining industry, which is one of our key investment priorities. This reform will enhance the predictability of mining policy and ensure the equitable share of government in the use of natural resources.
The measure also institutionalizes existing transparency and accountability mechanisms in the extractive industries to promote good governance.
Overall, the Medium-Term Fiscal Framework aims to promote sustainable long-term growth and sound fiscal management.
We target to bring down our debt-to-GDP ratio to less than 60 percent by 2025 and further down to 51 percent by the end of President Marcos’ term. We also aim to cut the deficit-to-GDP ratio to 3.0 percent by 2028.
Our increased fiscal space will allow us to maintain high investments in infrastructure, which is equivalent to 5 to 6 percent of our gross domestic product.
We will intensify investments in digital infrastructure to enable our industries to evolve in pace with the Fourth Industrial Revolution.
Our renewed commitment to public-private partnerships and the newly-enacted economic liberalization laws will support our lofty infrastructure plan.
The participation of the private sector will be critical in our economic resurgence.
We have set in place structural reforms to establish a business-friendly environment for both domestic and foreign investors, and we anticipate significant benefits from the implementation of these structural reforms.
The Corporate Recovery and Tax Incentives for Enterprises Act or CREATE, as mentioned by the President, has changed the corporate tax regime and the structure of our tax incentives.
The CREATE law has cut our corporate income tax rate by 10 percentage points for domestic micro, small, and medium enterprises and 5 percentage points for all other corporations, which include foreign enterprises.
CREATE also rationalized the country’s fiscal incentives system to make it performance-based, targeted, time-bound, and transparent. It offers a superior menu of incentives for businesses and activities that are aligned with the Philippines’ strategic priorities.
The Fiscal Incentives Review Board serves as the primary gatekeeper of fiscal incentives. Investors can now rely on the Fiscal Incentives Review Board for a fair, objective, and evidence-based assessment of their projects as they apply for fiscal incentives in the Philippines.
Meanwhile, our economic liberalization measures swing the doors open for international firms to invest in previously protected sectors – I call this a 90-year project – and you can now form joint ventures with Filipinos or even own 100 percent enterprises in advanced technologies, in particular, this will benefit from these new laws.
The amendments to the Retail Trade Liberalization Act has simplified the requirements for foreign retailers.
Additionally, it lowered the minimum paid-up capital from 2.5 million US dollars to half a million US dollars.
Meanwhile, the amendments to the Foreign Investments Act provides flexibility and transparency in the review of Foreign Investment Negative List.
The law also liberalizes the practice of professions, making it easier for foreign investors that require foreign talent to do business in the Philippines.
Lastly, we have amended our almost century-old Public Service Act. This opened up public services to 100 percent foreign ownership while retaining the public utilities as majority Filipino-owned.
Foreign investors are now welcome to bring their capital into the country, especially in the fields of telecommunications, airports, toll roads, and shipping.
In closing, allow me to express the Marcos administration’s eagerness to work with you in advancing the Philippine economy to greater heights.
With capable leaders at the forefront of a robust economic plan, we are fully confident that the Philippines is primed for a bright economic future.
Thank you.
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