By Charmaine A. Tadalan, July 22 2019; Business World
Image Credit to Business World
PRESIDENT Rodrigo R. Duterte had done relatively well in the first half of his term in pushing fiscal and other economic reforms as well as in stepping up infrastructure spending, but much still needs to be done in liberalizing the economy and overhauling an outdated tax structure, industry groups said in separate interviews last week.
As Mr. Duterte enters the second half of his term with his fourth State of the Nation Address (SONA) today, the Malacañan Palace sought to assure that the remaining three years would be better for business. “The business environment will be very good for investors because there’s no corruption, the ease of doing business is okay…” Presidential Spokesperson Salvador S. Panelo said in a July 15 interview in Malacañang.
Key measures enacted in the first half of Mr. Duterte’s term include Republic Act No. 10963 that reduced personal income tax rates and increased or added levies on several goods and services; RA 11203 that replaced quantitative restrictions on rice with tariffs in order to bring down retail prices, and RA 11032, or the “Ease of Doing Business and Efficient Government Service Delivery Act of 2018”, that is designed to make it easier to do business in the country.
A continuing reform thrust, despite political noise, convinced S&P Global Ratings to lift the Philippines’ debt score to “BBB+” — a historic high for the country — with a “stable” outlook from “BBB” previously, two notches above minimum investment grade and a step away from “A” rating.
With this backdrop, local and foreign business groups cited the need to persevere with reforms well into the next administration.
“We expect to listen to the President set direction in terms of major economic and social reforms for the remainder of his term,” Rakesh Daryanani, president of the Federation of Indian Chambers of Commerce (Philippines), Inc., said in an e-mail when asked on his group’s expectations today.
“We hope that the blueprints for these reforms will be crafted in such a way that these will be sustainable even into the term of his successor,” he added, citing a reduced crime rate and corruption as well as increased infrastructure build as achievements so far.
At the same time, Mr. Daryanani cited the need for the Duterte administration to “take a hard look” at the bill now just awaiting his signature that will further restrict labor contracting, saying this practice “is not the problem” but rather “ending a contract to escape payment of benefits.”
For European Chamber of Commerce of the Philippines (ECCP) President Nabil Francis, “The government’s priority to improve the country’s state of infrastructure through its flagship ‘Build, Build, Build’ (BBB) program is… noteworthy.”
“Nonetheless, we look forward to the government continuing to prioritize economic reforms as part of its socioeconomic agenda to spur growth and development, generate employment, and improve the country’s competitiveness,” Mr. Francis said in a said in a July 16 e-mail, citing the need to further ease restrictions to foreign ownership and participation in utilities and retail trade, as well as for more locally funded public works.
Desired measures include the proposed amendment of RA 7042, or the Foreign Investments Act of 1991, that will remove restrictions on foreigners from practicing their profession in the Philippines; of the 82-year-old Commonwealth Act No. 146, or the Public Service Act, that will lift foreign ownership caps in utilities; and of RA 8762, or the Retail Trade Liberalization Act, that will reduce the required minimum paid-up capital for foreign entrants to the country’s retail sector.
The said measures were also among the proposals of the Philippine Chamber of Commerce and Industry (PCCI); Management Association of the Philippines (MAP); British Chamber of Commerce Philippines (BCCP); Japanese Chamber of Commerce and Industry of the Philippines, Inc. (JCCIPI), and the Korean Chamber of Commerce Philippines.
The MAP, ECCP, BCCP and JCCIPI also pushed for remaining tax reforms, starting with the proposed gradual cut in corporate income tax rate to 20% by 2029 from 30% currently, the highest in Southeast Asia.
BCCP Chairman Chris Nelson said in a July 17 e-mail that Mr. Duterte will have to talk more about “tax reform update to address the uncertainty among businessmen and investors in the country and economic zones” especially amid government moves to overhaul fiscal incentives to make them performance-based and time-bound.
For PCCI President Ma. Alegria S. Limjoco, “a big question now is in proceeding with BBB” and “what are the alternatives” should tax reforms again “have difficulty passing Congress.”
Samahang Industriya ng Agrikultura Chairman Rosendo O. So said in a July 16 mobile phone message that his group would want to hear steps “to lower cost of production… [and an] agriculture product plan for the next three years.” — with K. T. Mina, V. M. P. Galang, G. M. Cortezand D. A. Valdez