The Duterte administration pushed for the prompt passage of the Tax Reform for Acceleration and Inclusion (TRAIN) bill last year to raise more revenues to fund infrastructure and other vital programs.
But, according to Socioeconomic Planning Secretary Ernesto M. Pernia, the first package of the TRAIN law is expected to yield only around P90 billion in additional revenues during the first year of implementation, much lower than the P134 billion forecast in the original proposal. Economic managers have also lowered revenue targets in the medium term, or from 2018 to 2022.
Hence, the expected lower additional revenue generation from TRAIN will require a shift in the financing of infrastructure projects.
The National Economic and Development Authority had wanted to fund 78 percent of the P9.04-trillion budget for infrastructure until 2022 through annual appropriations, with the balance to be funded by a mixture of official developmend assistance (ODA) and foreign borrowings.
Apart from tax revenues, the government wants to tap ODA in the form of concessional loans from friendly governments, such as Japan and China, and from multinational financial institutions, such as the World Bank and the Asian Development Bank.
Early on, the Duterte administration said it was moving away from the previous reliance on public-private partnership (PPP) programs for infrastructure and other projects in favor of tax reform and ODA loans.
The government is considering additional borrowings as an option, but bigger participation by the private sector in the “Build, Build, Build” program appears to be on the horizon.
Recently, President Duterte tossed the idea of adopting the Swiss challenge system, where the private sector can submit unsolicited proposals to the government. With the Swiss challenge, third-party players can match or surpass the original proposal. The original proponent will also have the option to regain control of the project by surpassing third-party offers.
Does this indicate that the government is having second thoughts about the tax reform/ODA formula to finance infrastructure and other flagship projects? We’ll know
soon enough.
Beijing clarifies stand on loans to PHL
WE received an e-mail from the Chinese embassy on an issue concerning Philippines-China bilateral relations. Chinese Foreign Ministry spokesman Geng Shuang held a news conference on March 9, where he answered a question on an article from a Chinese newspaper, which cited a Chinese scholar’s view on China’s loans to the Philippines under its official development assistance program.
The question was: “Recently, the English version of the Global Times cited a Chinese scholar’s view that China is willing to provide assistance as the Philippine government proposed a large-scale investment plan to develop its economy. The loans provided by China are usually accompanied by repayment agreements, which will use certain natural resources as collateral. Could you confirm that? And the Philippine media said that China provides loans with terms that require the Philippines to compromise on the South China Sea issue. What’s your comment on this?
Here’s the spokesman’s answer in full:
“In principle, we do not make specific comments on the viewpoints of think thanks, media, experts or scholars.
“However, we have noted that the Philippine side has already made remarks on this, so I assume a response from our side is also due. I would like to say that the view of the relevant scholar only represents himself, not the official stance of the Chinese government.
“Since the turnaround of China-Philippines relations in 2016, China has been actively helping the Philippines develop its economy and improve people’s livelihood, and we have given our full support to President Rodrigo Duterte’s large-scale infrastructure program Build, Build, Build. The Chinese government and financial institutions have also provided financing support to the Philippines, including preferential buyer’s credits, and assisted the Philippines in issuing the panda bonds, which effectively ensured the implementation of relevant projects.
“By convention, parts of China’s concessional loans require the borrowers to use certain sovereign credit as collateral, which is an international practice. China has never asked and will never ask relevant countries to use natural resources as collateral in loan agreements. In this vein, our assistance and support to the Philippines are provided with no strings attached.
“To properly resolve the South China Sea issue is the basis and important guarantee for the sound and steady development of China-Philippines relations, but China will not link the South China Sea issue with bilateral economic and trade cooperation projects. China stands ready to work with the Philippines to follow through on the consensus between the two leaderships and stay committed to properly resolving differences through dialogue and consultation, ensuring the sound and steady development of bilateral relations and jointly upholding regional peace and stability.”
E-mail: ernhil@yahoo.com.