I totally agree with PhilSTAR columnist and former NEDA chief Gerry Sicat that “the next president will inherit excellent significant economic reforms” started by President Duterte. The next occupant of Malacañang should “understand the good fortune” that these reforms bring in and should “not negate the intent of the reforms by contrary actions.”
One must admit that the economic managers of the Duterte administration have done a good job in pushing for the much-needed reforms and legislation that would provide a more business-friendly environment in the country. For instance, Republic Act 11032 or the Ease of Doing Business Act of 2018 that simplified business transactions, effectively amending RA 9485 or the Anti-Red Tape Act of 2007.
Even before the onset of the pandemic, bureaucratic red tape has been such a bane to businessmen, both foreign and local, who have been complaining about the tedious and slow process of securing permits and other requirements even at the LGU level. The creation of the Anti-Red Tape Authority or ARTA (under Section 17 of RA 11032) and its use of technology is also a welcome initiative, as its launch of a digital platform known as the Central Business Portal early last year not only streamlines processes, it also allows people to file complaints about inefficiencies or violations of the law.
One landmark reform is the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law that lowered the rate of corporate income tax from 30 percent to 25, to be reduced annually until the 20 percent rate is reached by 2027 and onwards. Prior to CREATE, the Philippines has one of the highest – if not the highest – corporate income tax rate among ASEAN member-nations, and the lowering of the CIT will certainly make the Philippines more attractive to investors.
According to the OECD (Organization for Economic Cooperation and Development)’s Restrictiveness Index 2020, the Philippines is the most restrictive in the ASEAN region and the third most restrictive out of 84 countries when it comes to foreign investments.
As correctly pointed out by Socioeconomic Planning Secretary Karl Chua, we need a strong competition policy if we are to achieve upper-middle income country status. Which is why aside from CREATE – which has been described as “game-changing” – several key other reforms are being pursued to foster a more business-friendly environment, improve our global competitiveness ranking and create more jobs to speed up our economic rebound and accelerate growth.
Just the other day, the Bangko Sentral ng Pilipinas disclosed that foreign direct investments (FDIs) went up to $1.09 billion in November 2021 compared to the same month in 2020 that recorded $599 million. According to BSP governor Ben Diokno, FDIs reached $9.24 billion from January to November last year, or $3.18 billion more than the $6.06 billion recorded for the same period in 2020.
The passage into law last December of RA 11595 or the Amendments to the Retail Trade Liberalization Act, which brings down the minimum capital for foreign retailers to P25 million from P125 million, will be attractive to international brands who may want to operate in the country. The uniform capitalization requirement also simplifies processes and reduces regulatory uncertainty. In addition, the amendments encourage the inflow of new technology and innovations, and gives consumers a wider array of choices at lower prices.
One anticipated piece of legislation is the Public Service Act (PSA) that aims to liberalize key sectors such as telecommunications and transportation while protecting the nation’s interest through safeguard provisions, which is a much better alternative to blanket restrictions that place a 40 percent cap on foreign ownership. Once enacted into law, this bill that will allow 100 percent foreign ownership in certain sectors is expected to result in a surge in foreign capital inflows because of new investment opportunities that will be opened up. We all know that such restrictive economic provisions have dampened the enthusiasm of interested foreign investors from coming in.
Several friends from the European business community told me that they see double-digit growth in FDIs with the passage of these key economic reform bills that include amendments to the Foreign Investments Act (which was ratified by Congress last December). Plus, we have a rich pool of young, educated, highly skilled and cost-efficient workforce, which gives us the edge over other nations.
I strongly believe that while we have a good relationship with major allies like the United States, it’s equally possible for us to have excellent economic relations with our neighbors in Asia, most especially China. The world has changed dramatically over the past decades, and being in a global economic village, we cannot put our eggs in just “one basket,” so to speak. At the end of the day, economic security is what is important for a country like ours.
As stated by the Duterte economic team led by Finance Secretary Sonny Dominguez, they have “put in place several game-changing reforms throughout the Duterte administration” and have assured that they will not slow down in the final months to make the country more resilient against future crises and solidify our growth prospects.
This message has resonated well with majority of Filipinos, which is probably one of the reasons why the President continues to enjoy high approval ratings as seen in the latest SWS survey result of a “very good” +60 net approval rating.
If the next occupant of Malacañang enjoys an overwhelming mandate like President Duterte, he can certainly use that political capital to build on the honest-to-goodness economic reforms that have been accomplished by this administration.
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