Now is the best time for investors to put their money in the Philippines, especially in Mindanao, as the country heads for a one-of-a-kind political and economic watershed under the Duterte presidency, Department of Finance (DOF) Secretary Carlos Dominguez III said here over the weekend.
Dominguez told top clients of the country’s No. 1 bank that while most countries across the globe plod through economic and political uncertainties, the Philippines has been moving onward in the opposite path of a growth streak expected to be sustained at 6.5% to 7.5% over the medium term.
Under this rosy scenario, the finance secretary said investors would do well to venture in Mindanao, which is poised to finally evolve from the perennial Land of Promise to the country’s new “economic promised land,’ not only because the new President hails from the South, but, more importantly, because it is an island that is teeming with natural resources plus human talent and has the “most headroom for growth” in our country.
“The world is wracked by so much uncertainty due to Brexit, recession in some of the oil exporting economies, continued weakness of the European Union due to high levels of indebtedness among some member economies, the massive refugee problem and escalating terrorism. In the face of all these, our economy stands as one of the rare safe havens for investments,” said Dominguez in his speech before some close to 500 business clients of the BDO Unibank at the SMX Convention Center here.
Dominguez said the Philippines would be able to sustain its strong economic fundamentals on the back of President Duterte’s 10-point socioeconomic agenda that aims not only to keep the country as one of Asia’s fastest growing economies, but also to guarantee that such sustained high growth would be inclusive enough to benefit all Filipinos.
“This is the best time to do business in our country. Interest rates are low. The growth trajectory is nearly certain. Government policies are most supportive. Investments in infra and property will create demand for jobs and, down the line, more robust consumer demand,” Dominguez said. “A golden age for entrepreneurs is in the offing.”
Dominguez, himself a true-blue Mindanaoan who hails from this city, told investors gathered at the SMX conference that Mindanao would be the biggest beneficiary of Duterte’s reform agenda, evolving from being a Land of Promise to an “economic Promised Land.”
“It is only an added factor that the President is from this island. The more important and substantial reason is that the island has the most headroom for growth,” Dominguez said.
The private sector in Mindanao, Dominguez noted, is already anticipating the “golden age” that the country would experience under the Duterte administration, with the Floirendo family now building a central business district in the Davao shoreline anchored on a modern container terminal.
San Miguel Corp., meanwhile, is investing in an industrial estate, virtually an entire city, also in Davao, he added.
Both these projects, he said, will draw in billions of pesos in investments and create tens of thousands of jobs, with thousands more of smaller support industries flourishing around them.
Dominguez said that tourism is expected to rise as a major revenue source,
“bringing with it higher demand for hotel rooms and restaurants, entertainment, laundry and local transport like bus and van rentals.”
“New schools from Luzon and abroad like Malayan Colleges will open, requiring teachers and residential facilities like dormitories and services like canteens,” he said. “Demand for uniforms and garments to clothe providers of these services will boom.”
The DOF secretary told his audience that new business process outsourcing companies will be put up along with more home-based outsourcing jobs as Internet speeds increase with the higher bandwidth brought about by new infrastructures of the telecommunications companies.
“Even the pasalubong industry will take off,” he said. “Cacao is emerging as a new source of products from tablea to nibs and other confections created by our numerous chefs and entrepreneurs. Lola Abon and her apo now make everything from durian, from candy, ice cream, and t-shirts.”
He said that “even the way we live is expected to change. People will start living in smaller spaces and vertical structures creating demand for new services like cleaning and maintenance. They will travel more often and partake of lifestyle choices, take up new sports and hobbies.”
Dominguez conceded that the “most glaring” handicap to Mindanao’s economic growth is its unreliable power supply, but added that the new government is addressing this problem very soon with the construction of several power generation plants, the upgrading of ports and airports and a plan to build a railway to link plantations and cities in the island.
“There will be no want of business opportunity, not only in the Davao region but all throughout the island. From being a net exporter of its population, Mindanao can look forward to inward migration, especially of young talent. The next generation will be suitably employed in high technology industries, BPOs (business processing outsourcing) and support businesses of every sort,” the finance chief said.
Dominguez, who had served at one time or another as agriculture and natural resources secretary, noted that President Duterte enjoys massive public support for his reform programs, including his anti-crime campaign, as shown by the latest Pulse Asia survey that polled the Chief Executive with an unprecedented 91% trust rating.
Investors have also responded positively to a Duterte presidency, with the Philippine Stock Exchange Index recovering above the 8,000 point level, while consumer confidence remains robust, he said.
Dominguez also pointed to the country’s low inflation rate and strong growth numbers, which indicate that “we will likely end the year as the fastest growing economy in this part of the world.”
In keeping with President Duterte’s electoral mandate, he said the new government will cash-in on this massive public support and stable economic fundamentals by way of aggressively implementing his 10-point socioeconomic agenda anchored on sustaining high growth, attacking poverty, dispersing wealth and keeping our homes and streets safe and free of illegal drugs.
Dominguez said Mr. Duterte’s economic program aims to effectively raise consumer demand by adjusting the tax rates to levels compatible with the rest of the region, which would, in turn, propel the domestic economy to a higher trajectory.
Another key factor of the Duterte economic formula, he said, is spreading investments to the countryside by raising spending on public infrastructure and human capital, pursuing the switch to the growth-friendly federal system of government and rapidly modernizing the agriculture sector.
“The shift to a federal system of government is seen as a lever to enhance this goal,” Dominguez said.
He said President Duterte has made increased infrastructure spending a major pillar of his economic program not only to energize the economy but also to ensure that growth is inclusive.
“This (higher infra spending) should immensely improve the logistics backbone of our economy. Gains in the efficiency of moving people and goods through the archipelago will bring down costs for consumers and enhance the productivity of our consumers,” Dominguez said.
“The dispersal of economic activity will be helped by improvements in our ports, airports, rails and roads,” he said. “There is a convergence, therefore, between the increased spending on infra and the pursuit of inclusive growth. The better our infra becomes, the more otherwise inaccessible areas can participate in the national economic mainstream.”
As the government cuts taxes, it will carry out a comprehensive tax program to make sure it could raise enough revenues that are expected to be lost from the tax cuts for individuals and businesses.
“The DOF leads in this effort. We are now in the process of crafting a tax reform package aimed at maintaining public revenues even as we bring down tax rates,” he said.
Dominguez said the DOF will do its best to “ensure fiscal stability and sufficient public revenues” while implementing the tax cuts, to guarantee that there would be enough funds for infrastructure spending as well as for the effective implementation of the rest of government’s 10-point socioeconomic agenda.
But the finance secretary stressed to the BDO clients that government policy constitutes only half of the equation in sustaining the economy’s high growth path, as the private sector would also have to do its share as the other half, by expanding businesses and setting up new enterprises.
“As business opportunities present themselves, it is for you the entrepreneurs to seize them. Otherwise the opportunities will simply pass and the huge investments preparing the ground for business will be lost,” he said.
Dominguez recalled how he, “as a much young entrepreneur,” set up a tissue culture facility to improve banana varieties in Mindanao, which later helped farm producers turn banana into a major agricultural export for the Philippines—agricultural enterprises involved in milling, storage, meat and poultry, vegetable and other food production to feed growing affluence.”
“I urge you to keep an eye out for possibilities to innovate and create new products,” he said. “The only way the country can compete in this new world is to constantly innovate. The expected inflow of investments it creates will alter the domestic market in remarkable ways.”