The next 3 years: ‘The best is yet to come’
What seemed inconceivable for some skeptics in seeing how President Duterte’s drug war could translate to economic prosperity is now coming into fruition.
Last month, international credit rating agency Standard & Poor’s Global upgraded the country’s credit rating to “BBB+” with a stable outlook – making the Philippines just a notch shy of the coveted “A-” rating.
According to the latest research conducted by the Switzerland-based business school International Institute for Management Development (IMD), the Philippines’ competitiveness moved up to 46th from 50th last year owing to its impressive economic performance and higher labor force. In determining the rankings, the IMD looked into economic performance, infrastructure development, government efficiency and business efficiency, and evaluated “the extent to which a country fosters an environment where enterprises can achieve sustainable growth, generate jobs and ultimately, increase welfare for its citizens.”
Two weeks ago, the Asian Development Bank also approved financing of up to $2.75 billion for the 53.1-kilometer Malolos-Clark Railway (MCR) project connecting Malolos in Bulacan to the Clark economic zone and the Clark International Airport in Central Luzon. This is ADB’s single biggest infrastructure project financing ever, underscoring the international financial institution’s strong partnership with the country.
The MCR project – which is part of the big-ticket North-South Commuter Railway stretching 163 kilometers from New Clark City in Tarlac to Calamba in Laguna province – will cut travel time from Metro Manila to Clark Airport in under one hour compared to the twoto three-hour travel time by car or bus. Expected to be partially operational from 2022, it can serve up to 342,000 passengers daily traveling from Manila to Clark, which will ease the chronic congestion in Metro Manila, thereby reducing air pollution and improving productivity.
No doubt the reduced cost of transportation and logistics will go a long way in spurring economic growth in Central Luzon, with the real estate industry expected to receive a major boost as the value of real estate in outlying areas is expected to increase. Tourist arrivals are also expected to spike up even more, with Central Luzon registering a record 4.1 million visitors in 2018.
In fact, the government has embarked on an ambitious program to expand the country’s railway infrastructure from the current 77 kilometers that are operational to 1,900 kilometers by 2022. “If we are to grow as a nation, we have to improve our railway system,” Transportation Secretary Art Tugade correctly remarked.
To this end, the government is also set to establish the Philippine Railway Institute to complement the massive expansion program. The DOTr is also partnering with several universities in Metro Manila – namely the Technological Institute of the Philippines, University of Santo Tomas, National University, Mapua University and Polytechnic University of the Philippines – to include Railway Engineering as an elective subject for students taking up various engineering disciplines.
This is in anticipation of the future need for trained and skilled railway professionals who will handle the operation and maintenance of railways and other transport infrastructure projects in 2022 and beyond. History has shown that efficient railroad systems have driven the growth and progress of countries. In the US for example, the passage of the Pacific Railway Act in 1862 paved the way for the construction of transcontinental railroads that enabled the faster movement of goods and people, improved connectivity between cities, and opened up economic opportunities in areas covered by these railroads.
For those who still doubt President Duterte’s sincerity in “doing good,” let the economic benefits they will enjoy from what he has done speak for itself. The result of the recent midterm elections is an affirmation of the people’s continued trust in the president – whose satisfaction rating reached record-high levels at 81 percent according to the latest SWS survey – and their belief that he has in mind the welfare of all Filipinos whether rich or poor.
With majority of the incoming 18th Congress allied to the administration, priority legislation to achieve the president’s 10-point socioeconomic agenda which includes the reduction of poverty to 14 percent by 2022 and promote inclusive growth have high hopes of being passed. International observers have noted the critical economic reforms introduced by the government, among them the Tax Reform for Acceleration and Inclusion (TRAIN) law that has lowered personal income tax rates while widening the tax base, thereby increasing government revenue that redound to the benefit of the poor through social services and funding for education, among many others.
Our friend Finance Secretary Sonny Dominguez is optimistic the incoming 18th Congress will pass the second tax reform package known as the TRABAHO (Tax Reform for Attracting Better and High-Quality Opportunities) bill that will lower corporate income tax (CIT) from 30 percent – the highest in Southeast Asia – to as low as 20 percent and make the CIT closer with the average in the region. The TRABAHO bill also aims to realign tax incentives to benefit micro, small and medium enterprises and in turn generate more jobs. In short, the bill wants to level the playing field and remove “preferential treatment” for companies that have been enjoying tax perks over the others for so long.
While many big-ticket infrastructure projects will not be finished by the end of President Duterte’s term, there is no question that when these projects are completed – everybody will be happy.
This coming first week of July, the Economic team led by Finance Secretary Sonny Dominguez will present the total Philippine economic picture. I share Sonny’s optimism that “the best is yet to come.” I am sure everybody will feel the same.