Carlos G. Dominguez
Secretary of Finance
May 25, 2021
Mr. Ramon Monzon, President of the Philippine Stock Exchange; distinguished guests: Good afternoon.
The Philippine Stock Exchange is a vital institution. It allows our enterprises to raise capital through public offerings and efficiently allocate funding to businesses. Wider public access to investment opportunities and a broad-based financial system are key conditions for achieving financial inclusion among our people and realizing our goal of inclusive growth.
Throughout the Duterte administration’s term, the government pursued reforms aimed at deepening our financial system. Digitalization of transactions has been encouraged to achieve the least friction and the greatest efficiency.
Our comprehensive tax reform program ensured a reliable flow of revenues while enabling 99 percent of our workers to boost their disposable incomes with a lower individual tax rate. This allowed more people to save and invest in the market.
We successfully resolved the issues that prevented the previous administration from implementing the REIT or Real Estate Investment Trust Act of 2009. Two major real estate players have since entered the market. REIT is a powerful financial instrument to fund property development and drive the economy forward. REITs democratize wealth by opening access for thousands of small investors wanting to be shareholders in secure and profitable real estate projects.
The Duterte administration has been supporting our businesses by ensuring fiscal stability. This led to the highest sovereign credit rating the country ever achieved. In turn, this ensured lower interest rates and more accessible financing for our enterprises.
When the pandemic hit, the government exerted its best efforts to keep the capital markets open. Disclosure requirements and procedures were adjusted to ensure transparency in the market even as the health crisis limited physical transactions.
We found ourselves with a strong financial and banking system, ample foreign reserves, and enough fiscal stamina to support what could be a long health emergency.
Our strong fiscal position gave us breathing space during the pandemic. When we needed to borrow to support our budget in the midst of a public health crisis, we were able to do so expeditiously and on the best terms.
Our stable financial footing enabled the government to provide direct subsidies to our low-income families and fund fiscally responsible stimulus packages. Bayanihan 1 and 2 helped us rescue our most vulnerable enterprises, conserve jobs, and expand lending to businesses.
In particular, Bayanihan 2 repealed the tax on the sale, barter, or exchange of shares of stock listed and traded through the initial public offerings to encourage more companies to source funding through the stock exchange.
We believe that a strong private sector is the key to our recovery strategy. Along with the national vaccination program, we continue advancing the policy reforms required to ignite business activity and restore consumer confidence.
These key reforms will ensure a nimble bureaucracy able to support our businesses to recover from the pandemic. These will also increase the flow of investments that we need to fuel our long term growth.
The CREATE or Corporate Recovery and Tax Incentives for Enterprises law is our largest stimulus program ever for businesses. This significantly lowers the corporate income tax rates of our enterprises, bringing them close to the regional average.
CREATE provides tax savings for our enterprises to help them cope with the crisis and participate in the recovery of the whole economy. In addition, CREATE opens the way for us to rationalize our tax incentives system to ensure that fiscal and non-fiscal incentives are tightly targeted, performance-based, transparent, and time-bound. This would help ensure that the country would attract foreign capital and accelerate the recovery of pandemic-hit businesses.
The FIST or Financial Institutions Strategic Transfer law is an important step in protecting our banking system from the market pressures induced by the pandemic. FIST enables our banks to offload their non-performing assets and grow their loanable funds.
We also urge Congress to pass other pending measures that are immediately doable to attract more foreign direct investments and help ensure the long-term recovery of our economy. These are the amendments to the Foreign Investments Act, the Public Service Act, and the Retail Trade Liberalization Act.
We will continue to pursue more reforms that will build a truly broad-based and inclusive financial system fit for the 21st century.
We are supporting the Capital Market Development Act of 2021. This measure aims to further deepen the domestic capital markets by building a sustainable Corporate Pension System. This reform will help secure the future of Filipino workers and their families, while making available capital in the financial sector to further stimulate the economy’s growth.
We are also working with Congress in completing the final packages of our tax reform program. In particular, package 4 aims to simplify the taxation of passive income and financial services and transactions by reducing the number of combinations of tax bases and rates from 80 to about 40.
Package 4 aims to shift from the traditional bank-centric funding to capital market financing. It will help us provide long-term funding for our infrastructure program. With their high multiplier effect, infrastructure investments will be the cornerstone of our economic recovery.
As Chairman of the Capital Market Development Council, I commit to do my utmost for better investor protection, improved corporate governance, the centricity of shareholders, and broader investor participation.
I have challenged the Philippine Stock Exchange, the Philippine Dealing System, and the Philippine Dealing and Exchange Corporation to deepen our capital markets by making their systems more efficient and accessible to both issuers and retail investors. I also urged them to encourage more small companies to go public through a stepped-up marketing campaign.
I am glad that they have responded well to my challenge. Just this month, the Philippine Dealing System launched the electronic Securities Issue Portal. Ayala Land was the first to use the system through their corporate bond issuance. The Philippine Stock Exchange, for its part, has relaxed listing rules to encourage small enterprises to join the stock market.
It is very encouraging to know that retail investors have been very active in the stock market. Trading in the equities and fixed-income markets remained robust in the first quarter of 2021, with local retail investors accounting for 74 percent of stock market transactions from just 53 percent in 2015. This reflects the trust and confidence of the public in the regulatory bodies that are tasked to keep their capital and investment returns safe.
For the government securities market, we have always been keen on introducing reforms that would help diversify the investor base, tap the retail segment, and promote financial literacy and inclusion. The introduction of the Bonds dot PH and the Overseas Filipino bank mobile applications have allowed the Bureau of the Treasury to widen the reach to individual investors in the offering of government bonds.
All these efforts should open the door to a steady stream of new listings and new investment products.
We are very optimistic to bounce back from the COVID-19 crisis stronger and more resilient than ever. The capital markets, I believe, will lead us in this recovery.
Thank you.
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