Duterte admin delivers on 1st ‘Sulong’ recommendations

CLARK FREEPORT—The Duterte administration has delivered on several key recommendations two years ago by the private sector to help the government supercharge the economy and fulfill its goal of inclusive growth, notably on improving the ease of doing business, implementing a national identification (ID) system and instituting tax reform, Finance Secretary Carlos Dominguez III said here Monday.

Dominguez said the government also responded to the call of the business sector to modernize the country’s infrastructure and logistics network with its ambitious “Build, Build, Build” program that is now powering the economy and providing a strong base for sustained high growth.

These recommendations, Dominguez recalled, were fleshed out by leaders of the business community during the first-ever “Sulong Pilipinas” consultative conference held on June 2016 in Davao City in the midst of preparations for the then-transition to the new presidency of Rodrigo Duterte.

Such consultations with the private sector were also held in 2017 in Manila and has been expanded this year to include regional forums across the country.

“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,” said Dominguez at the opening of the Sulong Pilipinas-Philippine Development Forum (PDF) here this morning.

Some 500 participants, including representatives from small and medium-scale enterprises (SMEs), have gathered at the Association of Southeast Asian Nations (ASEAN) Convention Center to take part in the event, which will now adopt a new town hall format in which delegates will be able to directly take part in shaping policies meant to benefit them and the rest of the stakeholders in the economy.

Dominguez said the government’s swift response to the business sector’s recommendation of improving connectivity and upgrading the logistics backbone has spurred growth, with the government spending P571 billion in the first nine months of 2018 alone on infrastructure, which is 7.2 percent above target and 46 percent higher than the amount spent in the same period last year.

“It 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…The old problem of absorptive capacity has been solved. The mantra of fast and sure is being observed,” Dominguez said.

He noted that in “the bad old days of underspending,” the government was faulted for moving too slowly in getting projects done. “Now that we are moving ahead of our spending schedule, we are being faulted for enlarging the budget deficit,” the Finance chief said.

Dominguez said infrastructure spending in the January-September period is also significantly higher by P225.5 billion or 65.3 percent more compared to the amount spent in 2015, which was the last full year of the Aquino administration. That year, infrastructure spending only reached P345.3 billion, which was 20 percent below target.

“Set against the infrastructure investments we are seeing now, the previous administration delivered an anemic performance,” Dominguez said.

The first package of the tax reform program—the Tax Reform for Acceleration and Inclusion (TRAIN) Law, helped fund “Build, Build, Build,” which has also been made possible through the generous financing support extended by Japan and China, Dominguez said.

Tapping funds from Japan and China, however, has led to uninformed claims about the country falling into a “debt trap,” which, Dominguez said, are unfounded because the loans from these countries were extended with the lowest interest rates and the lowest term arrangements possible.

He likewise stressed that it is the Philippine government, not China, that gets to dictate which projects should be implemented and presented for concessional financing. These projects also undergo a rigid selection process, with the government ensuring the lowest borrowing terms before implementing them with foreign funding support.

“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 (Asian Development Bank). Immediately, they dropped their costs. So we asked them to compete for the projects,” Dominguez said.

Dominguez said such stringent processes undertaken by the government as ordered by President Duterte are meant to protect the country and its people 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,” Dominguez added.

He assured the people that “there is no danger of us being drowned by Chinese debt.”

Dominguez noted for instance, that the estimated project debt to China, if project financing coming this year is included, will constitute only 0.65 percent of total debt, a slight rise from the current 0.11 percent.

The Philippines’ project debt to Japan, meanwhile, will increase from the current 3.17 percent to 8.90 percent of the total debt at the end of this year, Dominguez added.

Dominguez said that by the end of 2022, when most of the financing for the “Build, Build, Build “program will have been accessed, the country’s project debt to China would constitute around 4.5 percent of the total debt, while the project debt to Japan will be around twice as large or 9.5 percent of total 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,” Dominguez said. “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.”

Dominguez said that complemented by the Duterte administration’s other reform programs, “Build, Build, Build” will lay down the modern infrastructure that will enable our economy to “sustain its growth and liberate even more of our people from poverty in the medium term.”

For Central and Northern Luzon, among the “Build, Build, Build” projects currently underway are the 1) Chico River Pump Irrigation project, which will bring water to 8,700 hectares of farmland and benefit 4,350 farmers; 2) New Clark City that is envisioned to be a smart city hosting cutting-edge technology companies; and, 3) Clark International Airport New Terminal Building, which will increase this facility’s capacity to accommodate 8 million passengers per year.

“The synergy of these projects will help drive accelerated growth for this part the country,” Dominguez said.

He said increased investments in infrastructure are also matched by improved revenues, as shown by the total tax collections for the first 10 months of the year of the Bureau of Customs (BOC) and the Bureau of Internal Revenue (BIR), which amounted to P2.099 trillion. This amount is 16 percent higher than the tax collections in the same period last year and just slightly 3 percent short of target.

“Compare that with the full year tax collection performance in 2015, our tax collection for the first 10 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,” Dominguez noted.

After delivering TRAIN, Dominguez said the administration is hopeful that the Congress will consider the long-term benefits of completing the comprehensive tax reform program (CTRP) and pass the remaining packages at the soonest possible time, including the second package on corporate income tax (CIT) reform.

“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,” Dominguez said.

Regional ‘Sulong’ forums were earlier conducted in Cebu City last Nov. 9 and in San Fernando City in La Union on Nov. 14. The last leg will be in Davao City this Wednesday (Nov. 28).

This year’s ‘Sulong’ regional workshops are jointly organized by the DOF and the Presidential Communications Operations Office (PCOO), along with the Departments of Public Works and Highways (DPWH), of Trade and Industry (DTI), of Transportation (DOTr), and of Budget and Management (DBM); National Economic and Development Authority (NEDA); Bangko Sentral ng Pilipinas (BSP); Bases Conversion and Development Authority (BCDA); and the Philippine Chamber of Commerce and Industry (PCCI).


Last leg of ‘Sulong’ 2018 SME workshops

to be held in Clark, Davao

‘Sulong Pilipinas,’ the annual consultative forum held by the Duterte administration with the private sector, will focus on tax reform and the ‘Build, Build, Build’ infrastructure program this year, with the last two legs to be held at the Clark Freeport Zone in Pampanga and in Davao City on Nov. 26 and 28, respectively.

The previous ‘Sulong’ forums were held once each year since 2016 to gather the inputs and recommendations of the business sector on how the government could further improve the country’s investment climate and fulfill President Duterte’s agenda of high–and inclusive–growth.

Several recommendations from participants of the previous Sulong forums have since been delivered by the government. These include the “Build, Build, Build” program, National ID System, Ease of Doing Business (EODB) Law, and the first package of the Comprehensive Tax Reform Program (CTRP)—the Tax Reform for Acceleration and Inclusion Act or TRAIN—that lowered personal income taxes for 99 percent of taxpayers.

This year, the forum has evolved into a series of regional workshops, with ‘Sulong’ events earlier held this month in Cebu City and San Fernando City, La Union.

Now dubbed the Sulong Pilipinas 2018–Philippine Development Forum (PDF), the events in Clark and Davao will also adopt a new town hall format, in which delegates, mostly representing small and medium-scale business enterprises (SMEs), will be able to directly take part in shaping policies meant to benefit them and the rest of the domestic economy.

“The events provide an opportunity for the economic team to highlight the socio-economic accomplishments of the current administration as well as the government’s monetary and external sector performance,” said Finance Assistant Secretary Antonio Joselito Lambino II, who has been involved in this forum since it was first convened in June 2016 in Davao City.

“‘Sulong’ will also be an opportunity for the government to dialogue with the business community and other stakeholders to discuss reforms such as Package 2 of the CTRP, EODB Law, and the implementation of major infrastructure projects under the ‘Build, Build, Build’ program,” added Lambino, who is also the spokesperson of the Department of Finance (DOF).

Package 2 of the CTRP covers the proposed reductions in the corporate income tax (CIT) and the modernization of the country’s outdated and convoluted fiscal incentives system, while the EODB Law (Republic Act 11032) aims to mandate government agencies to cut red tape by simplifying requirements and streamlining procedures for businesses.

Lambino said around 1,500 delegates, mostly from SMEs, are expected to attend this year’s series of ‘Sulong’ regional workshops.

This year’s ‘Sulong’ regional workshops are jointly organized by the DOF and the Presidential Communications Operations Office (PCOO), along with the Departments of Public Works and Highways (DPWH), of Trade and Industry (DTI), of Transportation (DOTr), and of Budget and Management (DBM); National Economic and Development Authority (NEDA); Bangko Sentral ng Pilipinas (BSP); Bases Conversion and Development Authority (BCDA); and the Philippine Chamber of Commerce and Industry (PCCI).

The ‘Sulong’ workshop at the Clark Freeport Zone, which the Duterte administration aims to transform into the country’s first green and smart metropolis, will be held at the ASEAN Convention Center.

The Davao City event will be at the SMX Convention Center in Lanang district, where the first Sulong Pilipinas conference was held in 2016.


Visayas and Luzon SMEs back lower

corporate income tax, EODB reforms

Small and medium enterprises (SMEs) from Visayas and Luzon have rallied behind the Duterte Administration’s proposed reforms in corporate taxation, which, they said, would enable them to expand their businesses, raise their employees’ salaries and hire more workers.

Edward Du and Alexander Ang, regional governors of the Philippine Chamber of Commerce and Industry (PCCI) for Regions VII and I, respectively, said the savings from lowering the corporate income tax (CIT)–as proposed under the second package of the Duterte Administration’s comprehensive tax reform program (CTRP)—would allow businesses, especially SMEs, to not only hire more workers but to even increase wages.

Du and Ang, representing the business community from Central Visayas and Luzon, submitted the sector’s recommendations on how the government could further strengthen investor confidence in the economy, during recent regional Sulong Pilipinas consultative workshops in Cebu City and San Fernando, La Union.

They said the SME community is also backing reforms to further improve the ease of doing business (EODB), especially the zero-contact policy provided under the EODB law, which “will create the most significant positive impact.”

“With regard to the TRABAHO bill (Tax Reform for Attracting Better and High-Quality Opportunities), we support the lowering of corporate income taxes. Savings from lower corporate income taxes will allow us to hire more workers, increase wages and expand our businesses,” Du said.

The Sulong Pilipinas workshop, held annually and organized by an inter-agency and multisectoral committee convened by the Department of Finance (DOF), aims to gather the inputs and recommendations of the business sector on how the government could further improve the investment climate and fulfill its goal of high and inclusive growth.

The workshop has evolved this year into a series of forums held in each of the country’s major regions. A Sulong forum was held last Nov. 9 in Cebu City and Nov. 14 in San Fernando, La Union, while two others are scheduled soon in Davao City and the Clark Freeport in Pampanga.

During the Sulong-Cebu forum, Du cited as the Central Visayas business sector’s top recommendation “the need to increase agricultural output through better access and improved public investment in new farm technology.”

Among the inputs from the business sector cited by Du were for the Department of Agriculture and the Bureau of Fisheries and Aquatic Resources to ramp up their research and development efforts, as well as for the government to “prioritize transforming the agriculture sector into a net exporter of high-valued crops.”

Du also cited, as the business sector’s recommendation, the “improvement of farmer’s income through support services and assistance.” These include financial assistance, subsidies and credit facilities for farmers, mechanisms for farmer participation in policy-making, farmer training and techniques, improved access to cheap farming inputs and irrigation systems, and more post-harvest facilities and marketing venues.

In the Sulong-La Union forum, the top ten recommendations also included suggestions for agriculture. Ang stated, as Luzon business sector’s recommendation, “[for the government to] improve the efficiency of the local farming industry by investing in education and new technology.”

Other recommendations from Sulong Cebu include the need to implement efficient mass transport systems to ease traffic congestion; simplify loan requirements and offer low interest rates, especially for SMEs; speed up processing by the Food and Drug Administration of licenses and certificates of product registration; allow the filing and paying of taxes by SMEs online; and streamline government processes and reduce red tape.

In Sulong-La Union, the business sector also cited the need to build seaports, airports, and mass transit systems to improve access and mobility; provide more funding for health care; and ensure that infrastructure projects comply to existing standards.

Some 90,000 active SMEs and more than a hundred thousand micro enterprises that pay the current regular CIT rate of 30 percent, which is the highest in the region, stand to benefit from Package 2 of the CTRP.

Besides proposing to lower the CIT rate to make it at par with the regional average, the DOF is also pushing the congressional approval of CTRP Package 2 to rationalize incentives for businesses, because under the now-convoluted system, a select group of mostly big firms enjoy tax breaks plus other perks that let them pay discounted rates of between 6 and 13 percent, while the rest pay the regular rate of 30 percent.

These favored firms–many of them on the elite list of Top 1,000 Corporations–that enjoy tax holidays and other incentives are registered with any of the country’s 14 investment promotion agencies (IPAs). Most other countries only have one or two IPAs under their respective finance ministries governing tax incentives.

The government has incurred P344 billion in foregone revenues in 2015 because of the tax perks given to favored firms on the strength of 136 laws.

The House of Representatives has approved its version of Package 2, dubbed the TRABAHO bill last September. The Senate is still discussing in its ways and means committee its version filed by Senate President Vicente Sotto III and called the Corporate Income Tax and Incentives Reform Act.

Finance Secretary Carlos Dominguez III has said the new “targeted, time-bound, performance-based and transparent” set of incentives under Package 2 will include perks such as more tax deductions for firms hiring more workers, and longer tax holidays for those that would set up shop in areas outside Metro Manila, especially in post-conflict and post-calamity areas.

Moreover, Package 2 will allow additional tax deductions in incremental spending on labor, research and development (R&D), reinvestment in manufacturing, and domestic input expense, among other factors.

This year’s series of ‘Sulong’ regional workshops are jointly organized by the DOF and the Presidential Communications Operations Office (PCOO), along with the Departments of Public Works and Highways (DPWH), Trade and Industry (DTI), Transportation (DOTr), Budget and Management (DBM); the National Economic and Development Authority (NEDA); Bangko Sentral ng Pilipinas (BSP); Bases Conversion and Development Authority (BCDA); and Philippine Chamber of Commerce and Industry (PCCI).