The Philippines will be the world’s fastest-growing economy in Asia
The Philippine Star
December 12, 2016
Despite uncertainties in Europe, North America and other parts of the world, I believe the coming New Year, 2017, is going to be a milestone in the history of Philippine economic growth, if the grand plans and bold promises of the Duterte administration will really be implemented decisively.
Businesspeople should get ready to invest more in the Philippines. We should all fasten our seatbelts, roll up our sleeves and get ready to hustle our way up with the whole economy, regardless of the loud and often distracting, headline-making noises by our perennially bickering politicians.
‘Fortune’ magazine: ‘It’s the Philippines’ year’
In its Dec. 1 issue, the American edition of Fortune magazine reported, “It’s the Philippines’ Year.” According to the article, “President Rodrigo Duterte’s penchant for vigilantism and anti-Americanism is worrying. But (the)… economy is hitting its stride. Economists expect Philippine GDP to grow 6.2 percent next year. One clue to a looming boom: An analysis by IBM Watson of some 700,000 global news sources found a high concentration of mentions of infrastructure investment linked to the country.”
New airport, P8.2 to P9 trillion for new infrastructure
Budget Secretary Dr. Benjamin Diokno announced at a recent Pandesal Forum in Kamuning Bakery Café, Quezon City: “We are reforming and opening up the Philippine economy. Local and foreign investors are welcome to be part of the fastest-growing economy of the Philippines in the fastest-growing region in the world, which is Asia. We are undertaking massive new infrastructure projects to modernize the economy.”
Secretary Diokno predicted a new “golden age of infrastructures” for the Philippines under the Duterte administration in the coming six years, with a projected record-high budget of P8.2 trillion to P9 trillion. Among his other announcements were:
- The Philippine government can register 8 percent annual economic growth by year 2022.
- NEDA has already approved 18 public infrastructure projects.
- The Duterte administration plans to build a new 600-kilometer train system from Tutuban in downtown Manila through Albay to Sorsogon province in the Bicol region, with estimated construction costs of US$250 million to $300 million to be completed in four to five years.
- Infrastructure construction projects will be undertaken by the Duterte administration 24/7. Duterte described it as “non-stop and full-speed.”
- The infrastructure budget for 2017 will be P861 billion.
Duterte has already convened nine Cabinet meetings in less than five months, usually lasting from 2 p.m. to 9 p.m. in order to fast-track socio-economic development projects and reforms.
Dr. Diokno said that infrastructure projects will help solve Metro Manila’s chronic traffic problem, which is costing the Philippine economy P2.4 billion in productivity losses daily. He added: “I think this will get worse until they get better, due to the coming construction activities and infrastructure projects.”
The Duterte administration is planning to reduce the personal income tax rate from 32 percent to 25 percent, and to increase the number of people who will enjoy tax exemptions. Diokno said, “President Duterte is the first president of the country to submit a tax reform policy within only a few months in office.”
Diokno said that the ideal ratio of infrastructure budget to a country’s gross domestic product (GDP) is 5 percent, but, from EDSA 1986 to now, the Philippines has averaged “not over 3.5” percent in the past 30 years. Diokno said, “Under the Aquino administration of the past six years, the infrastructure budget averaged only 2.7 percent to 2.9 percent of GDP. Under the Duterte administration, the target is 7 percent to 8 percent, and that’s the conservative target only. The cost of borrowing money in the world now is so low that government should increase infrastructure developments and socio-economic services. National economic growth that is not inclusive or not felt by ordinary citizens should change and this Duterte administration wants high economic growth to improve the lives of the people.”
The creation of a new government center is possible, perhaps in Clark. During President Joseph Estrada’s short-lived term, there was a plan to create a new government center in Quezon City, where TriNoma mall is now located, and this was already planned by architect Jun Palafox, but the Estrada government fell. Another possible option is the Veterans Memorial Medical Center, which has 50 hectares of government land.
Diokno said President Duterte is expected to decide on what to do with our existing congested international airport: either go for Clark, or San Miguel Corporation’s proposal of a new airport in Bulacan or SM Group’s proposal in Sangley Point, Cavite.
Secretary Diokno said, “The Duterte administration will continue the Private Public Partnership (PPP) but with a twist: there will be reforms such as the government entertaining unsolicited bids and others.”
The Duterte administration aims to create at least one million new jobs a year.
The current administration also aims to reduce poverty by 1.25 percent to 1.5 percent of GDP every year.
AIIB loans to boost infrastructure & new jobs
Skeptics have asked me, how can the Duterte government finance all these ambitious new infrastructure plans, plus his pro-poor socio-economic programs if they are going to push bold tax reforms to lower personal income and business tax rates?
Possibly because of an influx of foreign investors from China, Japan, South Korea, ASEAN and other places, due to the Philippines’ new pragmatic independent foreign policy of winning more friends and having no enemies. Thanks to the initiative of Senator Loren Legarda, who on Dec. 5 had 20 senators ratify the Philippines’ becoming one of the founding members of the China-led Asian Infrastructure Investment Bank (AIIB).
The China-led AIIB is like the Japan-led Asian Development Bank (ADB) and US-led World Bank; thus, the Philippines can now benefit from all the world economic powers due to our independent foreign policy guided by our national interests.
Legarda explained our AIIB membership benefits:
It’s an additional source of financing to implement better and resilient infrastructure and to support rural and value chain development to increase agricultural and rural enterprise productivity and the rural tourism of the country.
It will also accelerate the Philippines’ annual infrastructure spending to account for 5 percent of GDP, or even higher.
It will improve competitiveness through better infrastructure facilities that will attract investments into the country.
It will increase opportunities for Filipino contractors and professionals to work on infrastructure projects here and abroad, including China’s huge transcontinental Belt and Road Initiative.
It will provide more employment opportunities for Filipino workers due to heightened infrastructure spending.
It will reduce trade costs of about 15.6 percent of trade value and real income gain of about US$220 billion.
AIIB can provide an annual financing window to the Philippines of about US$200 million to $500 million.
Last but not least, Department of Trade and Industry Undersecretary for consumer protection Atty. Teodoro “Ted” Pascua said at a recent Pandesal Forum that, in the first quarter of 2017, the Duterte administration will make P1 billion available for lending to micro-entrepreneurs. He said the goal of this fund is to ease the pressure of high-interest “5-6” lenders on the country’s smallest traders. Pascua said this micro-lending fund might grow to P6 billion by 2018.
Let us all work hard, be resourceful, dream, save, invest more and help make 2017 a prosperous new year for the Philippines and Asia!□