In a recent meeting with World Bank official Otaviano Canuto, Dominguez said that on top of enlisting the World Bank’s support behind the “Build, Build, Build” program, the Philippine government would also want to tap this multilateral institution’s assistance in getting Marawi City back on its feet and in strengthening the infrastructure in the country’s east coast.
“We should rebuild these areas (in Marawi City). People will go back and live there, so the infrastructure should be good and sound. That’s certainly an area where we will need assistance. We welcome your expertise,”
-Secretary Dominguez, to Executive Director Otaviano Canuto.
Canuto, who is currently the executive director of the Executive Board of the World Bank Group and Its Affiliates, said the Bank can help in Mindanao, where its experience and expertise “is unmatched,” particularly in the area of education.
Closing the Infrastructure Gap
Dominguez informed Canuto that the Duterte administration is “determined to close the Philippines’ infrastructure gap,” which will require funding of around $170 billion over the next five years.
“We are coming from a long period when we under-invested in infrastructure as compared to our neighbors…We have announced our major program is to reduce poverty and (one of) the tools to be used is building a lot of infrastructure. There’s a wide open field for your engagement on those areas.”
-Secretary Dominguez, on the goals for the “Build, Build, Build” Program
Canuto said the World Bank can provide assistance in tapping the necessary skills and expertise to help the Philippines improve the design and implementation of its infrastructure program.
In the meeting, Canuto also commended the Philippine government for spearheading a tax reform program, which, he said “is a template for a lot of countries.”
“It’s very good to highlight what the Philippines is doing in the area of tax reform. We will use what has happened here as an (example) for other countries,”
At a recent business forum at the Hotel Conrad in Pasay City, Dominguez said that to begin rebuilding the Philippines’ competitiveness, the government must start by filling the infrastructure backlog and realigning the country’s income tax rates.
He noted that the Philippines lost out on competitiveness “in the decades when we neglected our infra while our neighbors rapidly built up theirs. For an archipelagic country, poor infrastructure is debilitating. It raises the costs of transporting goods between islands.”
“That is the reason our food price regime is high. Our congested roads and ports discouraged investors who need to operate on just-on-time deliveries. Our high power costs and unstable supply discouraged investments in manufacturing,”
Paying for Progress
Dominguez said, however, that Malacanang’s plan to accelerate spending on infrastructure and on human capital by upgrading the country’s educational and health care systems, along with its goal to lower income tax rates to sharpen the Philippines’ global competitiveness, would require additional revenue measures that could only be generated via the Comprehensive Tax Reform Program (CTRP).
“The CTRP is an indispensable component of the Duterte administration’s economic strategy. It is an audacious strategy that seeks to lift our country to upper middle-income status by 2022 and high-income status by 2040,”
Dominguez said at the same forum that now is the time to move decisively in carrying out this “grand effort,” given the convergence of positive factors that are conducive to high and inclusive growth, such as the economy’s low-interest rate regime, excess liquidity, benign oil prices, investment-grade credit rating, a young, vigorous work force and the strong support of countries like Japan and China.
A Leader of Much Audacity
“We do not intend to fail in meeting the challenges of this time, fortunately, we have a leader capable of much audacity. We have a leader of vision and intense love of country. All the favorable factors are present. It is time now for a breakout.”
He said the Duterte administration’s 10-point socioeconomic reform agenda takes into account these positive factors, but the economic opportunities arising from them will bear real fruit “only if they are undertaken by audacious policymaking.”
According to Secretary Dominguez, realigning income tax rates will bring down revenues even as tax administration is improved and the tax base is broadened. We will have to introduce new revenue measures that will not only compensate for lower tax rates but also fund the massive infrastructure program that commences now.
The CTRP is the key link in the effort to break out of the cycle of low growth, and to build a dynamic and inclusive economy for the Filipino people. Dominguez said. “It is a pro-active and pro-poor measure that supports the expansionary fiscal posture of the present administration.
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