IF there is one saving grace of the present administration, I think that even the fiercest of the President’s critics will grudgingly admit that it’s the economic performance that will define the Duterte legacy. It’s not the much vaunted drug war, which has spawned too much violence and extrajudicial killings nor the government’s costly and yet anemic response to the pandemic, which has buried us in debt.
Yes, to borrow former President Bill Clinton’s election campaign slogan to unseat President George H. W. Bush from power, “it’s the economy stupid!” It’s a phrase coined by Clinton’s political strategist, James Carville, in 1992 to highlight the economic recession gripping the US that election year. If the economy was the curse of Bush that led to his political downfall, it’s the bright spot of the Duterte regime. And much of the credit goes to Duterte’s economic A-team led by Finance Secretary Carlos G. Dominguez III with the able support mainly of former Budget Secretary and now BSP Governor Benjamin Diokno, Neda Secretary Karl Chua, DTI Secretary Ramon Lopez and the heads of other allied departments and agencies.
The overall economic structure of any country is shaped by the supply of money, the tax system and the level of government expenditures. When the government controls the amount of money in circulation to raise or lower the interest rates, it engages in monetary policy. When the government changes the levels of taxation and government expenditures, we call the combined action as fiscal policy.
Our economic team is the architect of our monetary and fiscal policies. They can shake and shape the country’s economy with their pronouncements and policies. Both monetary and fiscal policies can be used to expand or contract the economy.
For instance, lowering taxes gives workers more spending money, which they can use to purchase more goods and services. This eventually results in having more people employed in consumer industries and attracts capitalists to invest in more plants and factories. More government spending as in financing the “Build, Build, Build” infrastructure program creates work in both the public and private sectors. It provides construction jobs to private contractors who end up investing in machineries and plants. When the interest rates are lowered, more people can afford to borrow money to purchase homes and cars. It stimulates the housing and motor vehicle sectors, which again produces employment and investments. It encourages more businesses to open since the cost of borrowing has gone down. Dominguez, who has been in private business and on top of his game for decades, has a deep grasp of the ramifications of both the monetary and fiscal policies as instruments for economic growth, and the results of his solid work with the support of the bright and the brightest staff he could muster—like Diokno and Chua—have saved the Philippines from economic disaster amidst the health crisis.
On April 5, 2022, he led his economic team in presenting an economic briefing at the PICC, which was attended by leaders in the government and business sectors. In a well-received paper fully supported by data entitled: “The Ship of State Has Been Masterfully Steered,” Dominguez listed the major achievements of the current administration in expanding our economy. At the outset, he emphasized that “many reform measures that languished for decades on the shelves of Congress were finally enacted into law.” Among others, he cited RA 11032, or The Ease of Doing Business and Efficient Government Service Delivery Act of 2018, which promotes efficient and enhanced delivery of government services. It aims to prevent graft and corruption and reduce red tape. The government also enacted the Philippine Identification System Act (RA 11055), which provides the basis for the government’s issuance of the national ID to its citizens. This will help us achieve e-governance and greater financial inclusion among our people. He claims, and the facts bear him out, that “the Duterte administration decisively passed and implemented the most comprehensive tax reform program ever in this country.”
The Tax Reform for Acceleration and Inclusion Act reduced the personal tax burden for most taxpayers. In effect, the TRAIN has given out a 14th-month benefit to our wage earners. It also imposes excise taxes on sweetened beverages where the government coffers are enriched by almost P104 million a day. The TRAIN, together with the other tax packages under the tax reform program of the government, has raised a little over half a trillion pesos in additional revenues during the first four years of its implementation. Our economic managers pursued and implemented the Real Estate Investment Trust Act (REIT), which had been lying dormant for several years.
Now, just barely two years since it was launched, the REIT proved to be a powerful financial instrument that has enlivened the property sector and encouraged the small investors to participate in the market. RA 11203, otherwise known as the “Rice Tariffication Law” was approved in 2019.
This law opened up the rice market and lowered the price of the commodity. Since the law was implemented, the government has earned a total of P46.6 billion in rice import tariffs. This amount directly benefits our rice farmers who get credit access, high-quality seeds, fertilizers, education and training and farm mechanization assistance. This does away with the annual P11 billion annual tax subsidies given by the government to the National Food Authority. Under the present administration, the government has collected an average of P68.7 billion annually from the various GOCCs, which is more than twice the average annual collection of the previous government. Overall, our tax collection efficiency has improved to 16.1 percent of GDP in 2019 from 15.1 percent in 2015, our highest achievement in over two decades. Our robust revenue growth has enabled us to sustain the funding of our ambitious “Build, Build, Build Program,” which will be an enduring legacy of the Duterte administration. Our infrastructure spending of over 5% of our GDP has more than doubled the expenditures incurred by the last four administrations. One project worth mentioning is the construction of the Metro Manila Subway Project.
This flagship project will be a dream-come-true, which we shall experience in our lifetime. This is being made possible through a concessionary loan granted by Japan which, together with many other wealthy nations, has kept its faith and trust in the Philippines as a worthy borrower.
Ever modest about his work and achievement, Secretary Dominguez placed it on record and stressed in his speech that “the success of the tax reform measures cannot be attributed exclusively to the current efforts. This is the logical continuation of the decades of reforms arduously passed by the previous administrations.” It’s wonderful how much you can accomplish if you give due credit to others. Secretary Dominguez has declined awards and recognitions that highly credible award-giving institutions around the world have proposed to him.
He is strict and demanding. He does not suffer fools gladly, and unforgiving in dealing with incompetent subordinates. Presiding over our economy during a period of turbulence—the pandemic years—we are fortunate that our economy did not suffer a meltdown. And we are more than fortunate that we have an economic manager at the command room that fully understands our financial system and knows exactly which lever to push or pull. The Duterte presidency will be over in 85 days but the Filipinos, to borrow the opening lines of his economic briefing, will look back at this time as the moment when the country made the turn towards more inclusive growth and prosperity.