Other legislative imperatives
The two other concerns the think tank raised relates to the Bangsamoro basic law (BBL) and General Appropriations Act (GAA).
The BBL, which the Global Source tagged as a medium-term game changer on security and economic grounds, should be passed into law by end-2014 so that there would be enough time to address “expected challenges so that elections in the new autonomous region can be held within this administration’s term.”
“It is also essential that the approved legislation is seen as preserving the terms that the Executive agreed with the Moro Islamic Liberation Front [MILF], which were the product of a long struggle and negotiation for peace. The short-term goal is to allow the current, more pragmatic MILF leadership to secure early wins and broaden support for the peace agreement in order to fend off the younger fundamentalist faction demanding greater autonomy,” it added.
Last, Global Source hopes that the government’s budget for 2015 will be passed on time, before the year ends.
The proposed budget amounts to P2.6 trillion, a 15-percent increase over this year’s total appropriations. It is based on assumptions of 7-percent to 8-percent gross domestic produc growth and another 80-basis-point increase in the tax and revenue efforts to 15.5 percent and 16.5 percent, respectively, yielding a deficit of equivalent to 2 percent of GDP, or about the same as this year’s target.
“Budget officials have been stressing the importance of on-time passage of the GAA to enable front-loading of priority expenditures, particularly infrastructure that should be completed before the start of the rainy season midyear.
“Whether or not the government can, in fact, spend as planned to meet its growth and inclusivity targets is still a question mark as [August] statistics show still-anemic spending performance. On the other hand, we think there will be greater urgency for the administration to ramp up spending next year to secure political support for its candidates in the 2016 elections, especially for the presidency,” it said.
For 2015, the Aquino administration intends to ramp up infrastructure spending to 4 percent of GDP, from 3.5 percent this year and 2.5 percent last year, and continue to raise allocations for education, health and the Conditional-Cash Transper Program.
Global Source said aside from these three legislative imperatives, there are proposed economic reform measures that have been in the legislative mill for years requiring immediate action.
These include a competition law for fair-trade practices, amendments to the built-operate-transfer law to support the government’s Public-Private Partnership Program, a bill clarifying the fiscal regime for the mining sector and in preparation for the Asean Economic Community, liberalization of more areas for foreign investment, including a one-liner, “unless provided by law” amendment to free up economic restrictions in the Constitution.
“The key piece, insofar as the short-term macro outlook is concerned, is the harmonization of fiscal incentives embedded in some 186 laws. Estimates put the cost of these incentives at 1 percent to 2 percent of GDP. Unfortunately, we expect that even if Congress approved this measure, it would likely be in diluted form.
In fact going into an election season, we expect to see more revenue-eroding proposals from Congress, with several bills lowering income taxes already under deliberation. Nonetheless, designed to win votes, we do not expect these to appreciably dent public finances.”