March 26, 2021
First of all, I thank Ambassador Yap for putting together this conference. This forward-looking event signals that the Philippines is back in business despite the pandemic.
The Philippines and Singapore are parties to the same economic fate. The ASEAN Free Trade Area brought our economies closer together through harmonization of policies and joint ventures. Our economies rely on a common recovery from the challenges of the past year.
The pandemic hit our countries severely. Restrictions on movement punished our tourism industry particularly hard. Community quarantines took a toll on our once vibrant services and retail sector.
Early on, the Philippines took a clear public health position. Nothing could be more important than protecting our people’s health and saving lives.
We quickly took stock of the unprecedented situation and responded with everything we had. Fortunately, the worst did not happen. Our public health system did not collapse.
We were able to leverage our strengths in the comprehensive battle that needed to be waged. Our financial readiness gave us the confidence to do what was necessary to save our people and keep the economy afloat.
Before COVID-19 struck, the Philippines had built a strong financial position. Our credit ratings broke all records. We had amassed unprecedented volumes of international reserves.
We had passed a series of tax reform laws that reduced the personal income tax rates for 99 percent of our taxpayers and introduced sin tax measures. These reforms guaranteed healthy revenue flows to sustainably fund our massive infrastructure modernization, Universal Health Care program, and other priority projects.
We had also improved our tax administration by introducing a nationwide fuel marking program. We implemented various information and communications technology projects to make tax compliance more convenient and accessible for all our taxpayers.
President Duterte’s policy of fiscal prudence and his push for tax reforms enabled us to boost our revenue collections to unprecedented levels. We also reduced our debt load to a historic low. It is through these game-changing reforms that we faced the pandemic with strength on the fiscal front.
We were able to rapidly deliver emergency cash grants to low-income families and wage subsidies to workers in small businesses. We quickly extended various forms of assistance to save small enterprises, especially in the service and retail sectors.
We expanded medical resources to fight COVID-19 and ensured the safety of our frontline health workers. We purchased test kits, protective equipment, and vaccines.
Our economic stimulus measures were among the largest this country has had. However, we took into account what we can spend quickly and effectively.
Meanwhile, both the Department of Finance and the Bangko Sentral ng Pilipinas were in sync in ensuring that fiscal and monetary actions were undertaken to keep the economy afloat and support recovery initiatives.
From a fiscal point of view, the health crisis and the economic contraction it precipitated posed a most difficult challenge. The crisis meant additional unplanned spending. The economic downturn meant a reduction in revenue flows to the government. Despite all these, we did not abandon the judicious fiscal management set by President Duterte when he assumed office.
Our strong financial position allowed us to afford a responsible level of deficit spending to cover our COVID-19 response. We bridged the budget gap with additional borrowings. We prioritized domestic financing followed by official development assistance and then the international capital markets.
Although we undertook emergency borrowing to support our budget deficit, our debt load remained within a sustainable threshold.
Our sustained effort at fiscal consolidation was recognized through a series of credit rating affirmations amid the wave of negative rating outlooks and downgrades worldwide.
Through the darkest times of the pandemic last year, we were never under the illusion that this challenge would be short. We were prepared to fight a long battle, exercising prudence over the use of our fiscal resources. The worst we could have done was to run out of water before the fire was out.
We could, for instance, be administering vaccines for years until the virus is extinct. This is precisely the reason why we are committed to maintain fiscal prudence even as we try to stimulate the economy.
Despite lingering problems with fully suppressing infections, the mood is now more hopeful. The Philippine economy continues to demonstrate strength and resilience in adverse conditions.
The economic downturn we experienced last year was entirely due to the public health emergency rather than to any serious weakness in our economic fundamentals.
This year, we are more ready to face the worst episodes of this pandemic. Medical science knows more about the virus. We are now more prepared to handle the surge in infections because of our improved health system and experienced healthcare workers. Public health protocols have been carefully studied. We are now rolling out our national vaccination program, which has inspired market optimism.
On the financing side, we are optimistic that we can easily fulfill our funding requirement for this year on the back of our healthy domestic liquidity situation. We also have available policy tools to sustain a low-interest rate environment.
We continue to have good access to official development assistance and external commercial loans as our credit ratings remain better than our peers.
Meanwhile, our record-high international reserves and strong Philippine peso will strengthen our ability to import the goods that we need to support our economic recovery.
On the revenue side, we expect to achieve our adjusted collection target for 2021 and beyond as the full digitalization of our revenue agencies is well underway. This is expected to dramatically improve our agencies’ organizational capacity and collection efficiency.
We also have ongoing efforts to accelerate the roll out of the national ID system, electronic invoicing, and the digitalization of the government’s frontline services.
Moreover, we have maintained our Build, Build, Build program that we expect to be the cornerstone of our recovery. The quick resumption of the infrastructure program will help drive up economic and business activities over the next few months.
We are confident that the strong economic stimulus provided by our infrastructure program will keep creating new jobs and opening new investment opportunities. Private sector participation not only in our country’s Build, Build, Build program, but also in investments that would open up as a result of this infrastructure modernization which should be highly considered by our Singaporean investors.
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.
Both houses of Congress have ratified the CREATE bill or the Corporate Recovery and Tax Incentives for Enterprises, which is our biggest stimulus program ever for businesses.
Soon, enterprises doing business in the Philippines can avail of lower corporate income taxes and other benefits to aid in their recovery or plan for their expansion.
With CREATE, we are leaving money in the private sector’s hands to revitalize their businesses. We trust that enterprises will re-invest their tax savings from CREATE back into the economy to spur domestic activity and create more jobs for our people.
In addition, this measure proposes more flexibility in granting fiscal and non-fiscal incentives. This will create an enhanced incentives package that is performance-based, time-bound, targeted, and transparent just like Singapore’s.
Through CREATE, we see an opportunity to deepen our trade and investment partnership with Singapore by incentivizing industries with higher value-added activities.
In addition, the President just signed into law the FIST Act or the Financial Institutions Strategic Transfer. FIST allows banks to efficiently offload their bad loans and non-performing assets. It will assist the banking system in performing its crucial role of efficiently mobilizing savings and investments by extending more loans to enterprises in need of assistance.
FIST is an improved version of the SPV or the Special Purpose Vehicles law of 2002. The big difference is that FIST was enacted within the first year of the pandemic, making it an effective measure in ensuring the stability of our financial system. This is in contrast to the SPV, which was signed into law five years after the Asian financial crisis struck in 1997.
We are also pushing for the passage of a bill that will help us save strategically important companies by aiding them to address their solvency issues.
A crisis is both a threat and an opportunity. The pandemic seriously threatened our people’s health and our economy’s vigor. We have gone through a difficult test. From here, we are focused on the opportunities in the horizon.
We look forward to working with Congress in completing the final packages of our tax reform program. While the remaining bills are broadly revenue neutral, they will help us expand the capital market and make the real property sector more efficient.
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.
Conditions for partnerships and joint ventures with Singaporean investors will rapidly improve with the passage of these measures. These would open up the economy and allow foreigners like you to invest in industries that are otherwise reserved only for Filipino citizens, such as public utilities, educational institutions, mass media, and advertising.
We will not recover alone. The best way forward for the region is to resume integration and cooperation in earnest. We are each other’s best allies in recovery. We create products for each other’s consumers. A surge in demand later this year should translate into an expansion of our manufacturing activities and more robust investment flows.
As we transition to a digital economy, the Philippines and Singapore should explore opportunities for collaboration in developing technological innovations.
Singapore has positioned itself as a center of innovation, research and development. It has a strong cadre of experts in digital technology. It has been successful in creating a conducive environment to attract international start-ups to its shores.
The Philippines, on the other hand, has a highly talented, tech-savvy, and young workforce that can provide intellectual capital to Singapore. This is an opportunity for Singapore to create an ecosystem for its leading startups to establish their presence in our country. Singapore could also be instrumental in helping our own startup companies to flourish.
As we all prepare to reemerge on the brighter end of the tunnel, the Philippines looks forward to more comprehensive dialogues with our partners in the ASEAN. A more dynamic regional partnership will enhance our recovery efforts.
Even with the ongoing pandemic, the Philippines acknowledges the urgency of putting forward stronger climate adaptation and mitigation measures. Our country is an archipelago located along the Pacific Ring of Fire. We have to cope with the constant risk of volcanic eruptions, earthquakes, and floods.
To jumpstart our fight against climate change, the Philippine government will push for the passage of a bill that would ban single-use plastics. The Philippines is ranked as the world’s third-biggest plastics polluter of the oceans. The move to curb single-use plastics will not only be a crucial component to effective solid waste management and climate change action, but it will also encourage all Filipinos to do their part to help save the world’s environment on a daily basis.
Rest assured, the Duterte administration will work hard and will not waste any minute of the remaining months of its term to undertake the reforms necessary in rebuilding a strong and inclusive economy that thrives in the 21st century. We are doing our utmost to provide a sustainable, greener, and healthier future for the Filipino people.
I urge the Singaporean business community to take a much closer look at the investment opportunities in the Philippines.
I hope that our strong fundamentals, fiscal stamina, pro-business environment, and effective governance will continue to make us a promising investment destination for Singaporean investors.
Thank you.
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