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17/04/2019: PHILIPPINE ECONOMIC, INFRASTRUCTURE REFORMS HIGHLIGHTED AT SIDELINES OF IMF-WB MEETINGS IN WASHINGTON DC

WASHINGTON DC, 11 April 2019 — Top government economic officials led by Finance Secretary Carlos Dominguez III and Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, promoted the Philippines’ profile before a high-level audience at the “Philippine Day Forum,” held at the sidelines of the IMF-World Bank meetings.

Around 150 key executives from top US banking, investment, and financial companies were present at the event themed, “Powering Progress through Transformative Reforms.”

“Today, the Philippines is one of the fastest growing economies in the world. Reaching this milestone ... is attributable to many years of hard work — especially in building a strong fiscal position and a bureaucracy honed to the task of catalyzing growth,” Secretary Dominguez said.

He added, “While we rank as among the best performing economies in this dynamic part of the world, growth is not the final goal of all our efforts. We seek a more dynamic and competitive economy to bring down poverty rates and create more opportunities for our people. The economic team stands by its goal of bringing down poverty incidence from 21.6 percent in 2015 to just 14 percent by the end of President Duterte’s term.”

At the event, the Philippine economy’s resilience to external headwinds and capacity to sustain robust economic growth were also underscored.

“We are prepared to face the three great challenges  — growth divergence, policy fragmentation, and technological disruption. For the Central Bank, it is a matter of careful commitment and timely action. The economy itself is fundamentally solid. Overall macro-economic conditions provide sound basis for cautious optimism,” BSP Governor Diokno emphasized.

Dr. Victoria Kwakwa, World Bank’s Vice President for East Asia and Pacific, echoed the same message on the country’s resilience in her opening remarks: “The Philippines has the potential to become the next East Asian success story,” and that its vision to “become a prosperous, resilient, middle-class society free of poverty by 2040,” is “an achievable goal – but one that will require continued reform and investment to open the economy, overcome infrastructure backlog, invest in human capital, and build the resilience of the nation, especially as the threat of climate change increases.”

At the Forum, Assistant Secretary Tony Lambino also showcased the government’s comprehensive tax reform program, stating it, “is the first time that we are doing tax reform on our own terms – to reduce poverty and inequality, and not for deficit or debt reduction.”

In January 2018, the first package of the Comprehensive Tax Reform Program of the administration of President Rodrigo Duterte (Republic Act. No. 10963) took effect, addressing the long-standing need to update the outdated personal income tax system, among others.

On one hand, the law slashed personal income tax rates to make these competitive with regional peers. On the other, it raised excise taxes on fuel and automobile, and imposed excise tax on sugary drinks, thereby raising additional revenues for the government on a net basis, among other provisions.

The additional revenues help ensure that the government’s “Build, Build, Build” program, the country’s most ambitious infrastructure development agenda to date, is fiscally sustainable.

“These [infrastructure development] accomplishments are the clearest and most tangible proof that the will and determination of the President and this team knows no bounds. We are determined to deliver what we say, and to deliver them on time and on budget. All of these infrastructure projects have made the Philippines one of the most attractive destinations of the world,” said Bases Conversion and Development Authorty President & CEO Vivencio Dizon.

The Duterte administration expects more game-changing tax reforms to be implemented, with proposed bills on other packages already in Congress for deliberation. Among these is a bill seeking to slash the corporate income tax rate to boost the country’s competitiveness in attracting foreign direct investments, while rationalizing fiscal incentives to ensure that tax perks are properly targeted, performance-based, time-bound, and transparent.

In addition, there are also bills seeking to fix the real property tax system and to put in place a more equitable system of taxing financial instruments.

Another landmark legislation featured during the Forum was the Rice Tariffication law (RA No. 11203). The law abolished the quantitative restriction on rice imports in favor of tariffs helping improve the supply of rice by stabilizing its prices.

BSP Monetary Board Member Bruce Tolentino stressed that there is need, “to focus on ensuring that the law is implemented well and that there is no pushback that leads to withdrawal of the advances that have now been achieved under the law.”

The Philippine government is also taking purposeful steps towards financial digitalization and financial inclusion. The BSP seeks to make financial products and services more accessible through an enabling and conducive regulatory environment that allows technical innovation to flourish tempered by proper safeguards against risks.

The economic reforms were favored by international observers.

“Of course, tax reform is not the objective in itself. It is a tool to have a good and healthy budget. If we have a good and healthy budget, that means we are not only collecting money but also spending money in a wise way. So… the connection between tax and social spending [in the Philippines], I think, that is very well recognized,” remarked Mr. Suahasil Nazara, Chairman of the Fiscal Policy Agency of Indonesia’s Ministry of Finance.

Ms. Lalita Moorty, World Bank Director of the East Asia and the Pacific Macroeconomic, Trade and Investment GP, observed, “This reform effort in the Philippines is done in a very proactive, forward-looking manner.”

The Philippines is among the fastest growing economies in the region and the world, registering above 6-percent gross domestic product (GDP) growth over the past 15 consecutive quarters.

The Philippines is expected to reach upper middle income status this year, ahead of the supposed 2022 target.

The reforms are expected to ensure that the Philippines’ favorable performance is sustained over the long haul and help the economy hit high-income status by 2040, as stated in the government’s long-term vision.

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