With the P6.793-trillion 2026 national budget now signed and entering implementation — amid renewed calls for transparency and fiscal discipline — and with education and healthcare receiving some of the largest increases in public spending, an important question remains underexplored: how can policy mobilize private capital to support these priorities without weakening revenue integrity?

Budget debates often focus on where pesos are allocated. But spending alone cannot build innovative, adaptive institutions in healthcare and education. Tax policy also shapes whether private investors are willing to participate in long-gestation sectors where learning, experimentation, and early losses are unavoidable.

Learning-intensive sectors do not behave like ordinary businesses

Healthcare and education do not innovate the way consumer technology does. They evolve through institutions — clinics, hospitals, training centers, schools, diagnostics platforms — that improve gradually through practice.

Early losses in these ventures are not speculative excess. They reflect the cost of learning: training doctors, nurses, teachers, and administrators; developing curricula and clinical protocols; complying with regulation; and testing delivery models. These losses often precede any meaningful social or financial return.

Yet under current tax rules, investors absorb the full downside of this learning process. Losses are penalized, while upside remains uncertain and delayed. The rational response of capital is predictable: avoid early-stage healthcare and education altogether, demand immediate cash flow even where it undermines quality, or invest informally.

This is why so many clinics, training institutions, and education ventures in the Philippines are funded through small “chip-in” groups and personal networks. These arrangements may start projects, but they do not scale. They discourage institutional capital, limit governance, and keep innovation fragile.

Public spending cannot do this alone

The 2026 budget signals a strong commitment to human capital, with education and healthcare among the largest and fastest-growing allocations. But public spending alone cannot build adaptive, innovative institutions.

Government budgets are designed to fund services, not experimentation. They are poorly suited to absorb repeated failure in search of better models. Private capital is designed precisely for this role — provided the system does not punish it for trying.

International experience reinforces this point.

In the United States, investor willingness to fund healthcare, biotech, and education ventures is not driven by optimism alone. It is driven by a system that recognizes losses as part of portfolio-based investing. Because early failures are expected and tax-recognizable, investors think in portfolios rather than individual bets. Loss tolerance creates risk appetite.

Singapore, by contrast, illustrates the limits of a preservation-first system. Despite strong governance, efficient tax administration, and generous state co-investment, private capital remains cautious. Investor losses largely stay trapped at the entity level, and early innovation in healthcare and education depends heavily on government-linked capital. Private investors participate later, once risk has already been absorbed.

The lesson for the Philippines is not to copy either system wholesale. It is to recognize that without some form of disciplined downside sharing, private capital — no matter how well governed — will remain conservative.

Why full loss pass-through is not the answer

Some argue that investors should be allowed to fully deduct losses, similar to the US. While attractive in theory, this is not a realistic starting point in the Philippine context.

Full loss pass-through requires deep audit capacity, standardized fund structures, and credible enforcement against abuse. Without these, it risks incentivizing shell companies and paper losses rather than genuine institutions — a concern fiscal authorities are right to take seriously.

But rejecting full pass-through does not mean rejecting risk-sharing altogether. The real choice is not between reckless tax incentives and none at all. It is between disciplined risk-sharing and continued underinvestment.

A fiscally responsible middle ground

What could work is a partial, capped, and conditional investor loss framework, explicitly tied to healthcare and education.

The guiding principle is simple: incentivize structures, not labels.

Investor loss relief should apply only when capital is deployed through:

pre-accredited venture funds or angel syndicates,

licensed or registered investment vehicles,

single-purpose structures dedicated to healthcare or education.

Direct individual investments and personal holding companies should not qualify.

Eligible portfolio companies must be real operating institutions — clinics, training facilities, R&D platform for medical technology, especially for public health, and education platforms — with staff, facilities, and regulated activity. Shell entities, related-party vehicles, and non-operating companies created primarily for tax or ownership layering purposes must be explicitly excluded.

Relief itself should be:

capped annually,

usable only against capital gains, not ordinary income,

subject to minimum holding periods,

denied where capital is protected or guaranteed.

Crucially, approval must be pre-granted, time-bound, and revocable. No pre-accreditation, no loss relief. This shifts enforcement from chasing abuse after the fact to preventing it upfront — fully aligned with the fiscal discipline now demanded of the budget process.

Why healthcare and education are the right place to start

Healthcare and education are uniquely defensible entry points for such a framework.

Early losses in these sectors build human capital, institutional capability, and long-term productivity. They train professionals, improve systems, and raise service quality before profits appear. Allowing investors to share a portion of that downside is not a subsidy for failure; it is a co-investment in national capacity.

A narrowly designed framework would professionalize capital already being deployed informally, attract longer-term investors currently on the sidelines, and extend the impact of the national budget without expanding it.

The cost of doing nothing

The greatest fiscal risk is not modest, well-designed risk-sharing. It is stagnation.

When investors bear all the downside, capital retreats to safety. Clinics and schools stay small. Innovation becomes episodic. Founders underbuild or leave. The public sector absorbs pressure it cannot sustainably carry.

Budget debates rightly focus on where pesos are spent. They should also ask how policy shapes the behavior of private capital. If healthcare and education are truly national priorities, then tax policy must allow investors to participate in building them — carefully, selectively, and with discipline.

That is not a break from fiscal responsibility. It is an extension of it.

Dr. Jaemin Park is founder of Heal Venture Lab, a Singapore-based healthcare venture platform working with medical technology and health services companies across Asia and the US. He is an adjunct professor at the University of the Philippines College of Public Health.