Executive Secretary Salvador Medialdea, DBM Secretary Benjamin Diokno, DOTr Secretary Arthur Tugade, PCOO Secretary Martin Andanar, BSP Deputy Governor Diwa Guinigundo, BCDA Chairperson Gregorio Garcia III, BCDA President Vince Dizon, Philippine Chamber of Commerce and Industry (PCCI) Chairman George Barcelon, PCCI Honorary Chairman Sergio Ortiz-Luis, PCCI President Ms. Alegria Limjoco, Mr. Dennis Uy, president of Phoenix Petroleum, Mr. Joey Leviste, chairman of OceanaGold Philippines, friends in the business community, development partners, our sponsors, fellow workers in government:
Thank you for joining us for this year’s Sulong Pilipinas. This event has become our yearly tradition to strengthen our partnership and listen to each other in a systematic and purposeful manner.
Sulong Pilipinas 2016, you will recall, happened in the midst of hectic preparations for the transition to a new presidency. But things could not be too busy to get in the way of consultations and consensus building to develop a progressive national economy that nurtures the people.
We responded to several key recommendations from the first Sulong meeting. We delivered on the Ease of Doing Business Act intending to streamline government frontline operations, making it easier to apply for and renew business permits and licenses. We have likewise delivered on the recommendation to establish a national ID system, which will allow us to more efficiently deliver social services to our citizens.
We responded to the call of the business sector to reform the tax system. Last year, Congress passed the first package of the comprehensive tax reform program.
Our legislators are currently working on the succeeding packages of this program, and we are hopeful they will consider the long-term benefits to the country of completing this reform at the soonest possible time.
When representatives from the business community asked for improvements in connectivity and the upgrade of our logistics backbone, we responded with an ambitious Build, Build, Build program. The 75 strategic projects included in this program will provide our nation a strong infrastructure base for sustained high growth.
In the first months of this year, infrastructure spending amounted to P571 billion. This is 7.2 percent above target. This demonstrates that the Department of Public Works and Highways and the Department of Transportation, the two lead agencies in the Build, Build, Build program are moving faster than expected. So let us give Art Tugade and DPWH Undersecretary Emil Sadain, who is representing Mark Villar, a big hand. The old problem of absorptive capacity has been solved. The mantra of fast and sure is being observed.
In the bad old days of underspending, critics faulted the government for moving too slowly in getting the projects done. Now that we are moving ahead of our spending schedule, we are being faulted for enlarging the budget deficit, which incidentally was our target, which incidentally was what the business community asked us.
Let me add that the P571 billion spent on infrastructure in the first nine months of this year is 46 percent higher than the same period last year. This is also significantly higher by P225.5 billion or 65.3 percent compared to the last full year of the Aquino administration in 2015.
In 2015, infrastructure spending amounted only to P345.3 billion—20 percent below their target. Set against the infrastructure investments we are seeing now, the previous administration delivered an anemic performance.
Among the strategic projects included in the Build, Build, Build program for Central and Northern Luzon which are currently under construction include: the Chico River Pump Irrigation project which will bring water to 8,700 hectares of farmland and benefit 4,350 farmers; the New Clark City that is envisioned to be a smart city hosting cutting-edge technology companies; and, the Clark International Airport New Terminal Building project that will increase this facility’s capacity to accommodate 8 million passengers a year. According to Vince (Dizon, the president and CEO of BCDA), they are already 30 percent complete and are ahead of schedule. The synergy of these projects will help drive accelerated growth for this part the country.
The increased investments in infrastructure are also matched by improved revenues. In the first ten months of this year, total tax collections of the Bureau of Customs and the Bureau of Internal Revenue amounted to P2.1 trillion, 16 percent higher than the same period last year. This is just slightly 3 percent short of target. Compare that with the full-year tax collection performance in 2015, our tax collection for the first ten months of the year is significantly higher by P298.66 billion or 16.58 percent. Tax collections of the main revenue-generating agencies for the last full year of the Aquino administration in 2015 amounted to P1.8 trillion—15 percent below their target.
Our economy responded well to the infrastructure program and the tax reform package that enables us to finance it. This program also benefitted from generous financing support extended by our two closest development partners in the region: Japan and China.
Some uninformed critics claim that we are falling into a “debt trap” by tapping Chinese and Japanese financing for our strategic infrastructure projects. This is totally unfounded. The financing we availed of are soft loans at the lowest possible interest rates and the longest possible term arrangements. If we include project financing coming this year, our estimated project debt to China will only constitute 0.65 percent of our total debt from the current 0.11 percent. Our 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 the Build, Build, Build program should have been accessed, our 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 at 9.5 percent of total debt. So there is no danger of us being drowned by Chinese debt.
We borrow with great prudence, aware that it is the taxpayer who ultimately pays for the debt. We always keep in mind that the money we borrow come from the taxes dutifully paid by the people of the countries that have continued to generously support us. Thus, we take care that the funds we borrow are wisely used and will produce sufficient economic benefits to make the debt service easier down the road.
Let me just add something else. In the past administration, there was a big scandal involving Chinese financing. And the reason for that, is that administration allowed the Chinese state-owned enterprises to dictate what projects are going to be done here. In our case, we have told the Chinese that it is only us who will determine what projects we will embark on without any interference from them. So all the projects that we have decided to get on are all generated locally and go through the approvals that are required by law, which is essentially the NEDA Board approval. When these projects are approved, we then go to the funding agencies and say, okay, which ones do you want to fund? And then they make an offer.
And in a recent case, there was one of the funding agencies that made an offer that we thought was too high, and we said we will not get it from them, we will get it from the ADB. Immediately, they dropped their costs. So we ask them to compete for the projects.
And what happens particularly in the Chinese projects, once they have agreed to fund the project, we ask them to submit three names as bidders for their project. So the Chinese government is involved in the choice of the bidders. So if the bidders don’t perform, the Chinese government is on the hook here.
So this is the way this administration, as ordered by President Duterte, is protecting the Philippines from projects that are unnecessary and are driven by agencies outside of the Philippines.
Incidentally, this system is not popular with certain people who try to influence our government to do this project or that project. So please expect attacks on us because they are not making illicit money.
Taken as a whole, the Build, Build, Build program will lay down the modern infrastructure that will enable our economy to sustain its growth and liberateeven more of our people from poverty in the medium term.
Despite the elevated inflation rates we experienced in the first three quarters of this year, the Philippines remains one of the fastest growing economies in the world’s fastest-growing region. The government has responded decisively to the challenge posed by the elevated inflation rates. We expect inflation to taper off in the closing months of this year.
We intend to sustain this growth momentum. In the first eight months of the year, we saw a 31 percent rise in foreign direct investments. Now, you will read in the papers that places like PEZA are complaining that their investment commitments are down. That may be true. But in fact, the investments are actually up. Now, the ones in PEZA are down because those are the investments that ask for subsidies. Investments from foreign companies that do not ask for subsidies are actually up by 31 percent. Improved international investor confidence in our economic outlook is indicated by the tighter spreads on the bonds we have floated in the global market.
Our fundamentals also remain strong. The present administration has added to those fundamentals the element of decisiveness. We intend to move quickly but surely in pushing forward with the economic programs we committed to complete by the end of this administration.
I want to thank also here our national treasurer (Lea de Leon) and Deputy Governor Diwa Guinigundo because in all our negotiations for bonds, they are the main negotiators, and they have done an extremely good job. So please give them a hand. Unfortunately, Lea is not here. I’m sure she’s negotiating for lower interest rates elsewhere.
We certainly look forward to the discussions today. I am confident they will be as informative as the ones we have had every year in the past two years. This year, we have organized regional forums to better reach out to all stakeholders. The business community from Visayas and Northern Luzon have already submitted the sector’s recommendations on how the government could further strengthen investor confidence in the economy.
We wish our small and medium enterprises here would look more closely at the elements of the second package of the tax reform now being considered by our legislators. The reduction in corporate income taxes will bring much relief to our small enterprises. We look at this reduction principally as a means for spurring business activity and creating more employment opportunities.
I wish you a productive meeting and anticipate the inputs you will have to the refinement of our growth plan.
Thank you and good day.
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