Steady as she goes

It was a little more than three years ago, on July 7, 2005, to be exact, when 10 key officials of the Arroyo administration held a press conference at the Hyatt Hotel in Manila to publicly resign their positions and to demand the resignation of President Arroyo. Luckily for the President, that stunt by the so-called Hyatt 10 did little to change her political fortunes.

Indirectly, the same event appears to have unwittingly ushered in a short era of economic prosperity—although all economic gains in the last three years or so now appear to be at risk due to factors mostly external in nature: surging world oil prices, the world food-distribution crisis and the subprime crisis in the United States and its ensuing economic slowdown, among others.

It could very well be the result purely of luck—being at the right place at the right time—but to a certain extent, the economic gains in the last three years would not have been possible had the government not been steady on the fiscal front. And while prudent spending by the state appears to be somewhat less certain nowadays, one can only hope that fiscal managers will keep the faith, be steady and keep fiscal management on track to ensure long-term economic growth.

In a recent presentation to the Committee on Oversight of the House of Representatives, the Department of Finance (DOF) made the following commitments to Congress for the next three years: improve the tax effort to 14.6 percent in 2008, and to about 14.9 percent of gross domestic product (GDP) by 2010; sustain the consolidated public sector (CPS) surplus; and to cut the national government debt to lower than 50 percent of GDP by end-2010.

Not necessarily impossible, really, judging from the government track record of fiscal management from July 2005 to July 2008. The fiscal deficit, for instance, fell from P146.5 billion in 2005 to just P64.8 billion in 2006, and to just P12.4 billion in 2007. And for January-May 2008, it’s at P18.8 billion—still way below the P46.1 billion that was programmed. Over the same period, it has likewise dropped to just 0.6 percent of GDP from 2.7 percent. In 2005-2007 the tax effort, or the ratio of tax collection to GDP, climbed to 10.7 percent from 10 percent, indicating an overall improvement in tax collection. Customs collection, meanwhile, rose to 3.1 percent from 2.8 percent.

And thanks to revenues from the sale of government assets, the CPS deficit of P106 billion in 2005 was turned into a surplus of P36.4 billion as of end-2007. And this has helped the government keep its debt from further ballooning. In the medium term, the DOF targets to achieve a higher tax effort and generate more nontax revenues, including from privatization, to provide necessary resources to meet social- and infrastructure-spending targets.

But to achieve its medium- and long-term targets, fiscal managers obviously need the help of Congress on the following initiatives: rationalization of fiscal incentives or tax perks given to businesses and investors; improve fiscal responsibility; restructure the excise tax on sin products such as cigarettes and alcohol; modernize the Customs bureau and its procedures; and to indirectly improve revenue collection, exempt the tax and customs bureaus from the salary standardization law.

With the assistance of Congress and the Palace and their clear support for continuity in fiscal-management policies in the last three years, the government has a more-than-even chance of surviving its present fiscal predicament. Given their track record since July 2005, present economic and fiscal managers appear qualified and competent to see the economy through rough times in the next two-and-a-half years—despite criticisms to date regarding their supposed mishandling of the rice and oil emergencies.

Without doubt, more needs to be done. Present government programs and initiatives are far from perfect, and fiscal and economic managers need all the help they can get. But instead of criticism, line people should be given advice and support by all sectors. Cut the politics. Only through persistence and unwavering determination to put up a united front can success be achieved. Deliberate, reach a consensus, plan and execute. Be steady, for people’s sake.

Comments to matort@yahoo.com

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Sway: Steady as she goes

It was a little more than three years ago, on July 7, 2005, to be exact, when 10 key officials of the Arroyo administration held a press conference at the Hyatt Hotel in Manila to publicly resign their positions and to demand the resignation of President Arroyo. Luckily for the President, that stunt by the so-called Hyatt 10 did little to change her political fortunes.

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