Finance Secretary Carlos Dominguez III has called on lawmakers to act swiftly on doable priority measures to help jumpstart the country’s recovery from the global economic slump brought by the coronavirus disease (COVID-19) pandemic.
Dominguez added that among the government’s legislative agenda are the long-due reforms in the corporate income tax (CIT). fiscal incentives system and easing the “inordinate” restrictions on foreign ownership in certain sectors of the economy.
These priority measures include the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) and amendments to 84-year old Public Service Act, the Retail Trade Liberalization Act and the Foreign Investments law, Dominguez said at Tuesday’s hearing by the House committee on constitutional amendments on the latest initiative on Charter change (Cha-Cha).
With only 17 months left before President Duterte ends his term of office, Dominguez asked members of the Congress “to act on something that is doable.”
“What is most important is to undertake what is immediately achievable,” Dominguez during the hearing of the House committee chaired by AKO-BICOL partylist Rep. Alfredo Garbin Jr.
“It is preferable, of course, to achieve the liberalization reforms in one blow. But if there are things that we can do to open up the economy through administrative measures, we must implement them. If there are areas that we can liberalize by amending our existing laws, then let’s do that,” Dominguez, who heads Duterte’s economic team.
Dominguez declined to provide any advice to members of the committee on the means to amend the restrictive economic portions of the Constitution, and only said that such provisions “would be a significant factor in revving up the Philippine economy and sustaining its recovery.”
“The means for amending the Constitution, however, is a political question. And I would not dare advise our legislators on the matter,” Dominguez said.
Dominguez added his proposed investment liberalization strategies that involve the immediate congressional passage of CREATE and the relaxation of the restrictions on foreign ownership, except land, “should accomplish enough to enable our rapid economic recovery.”
Although the restrictive economic conditions of the Constitution explain why the Philippines, over the past decades, received vastly less foreign direct investments (FDIs) than its fellow Association of Southeast Asian Nations (ASEAN) economies, Dominguez said that starting the process towards a more liberalized investment climate through the passage of these economic priority bills of President Duterte “will be a strong signal to the international investment community that the Philippines is open for business.”
“Immediately, the Congress can help in restarting our economy by acting on our pending priority economic bills. We call on our legislators to swiftly ratify the CREATE bill. As I have mentioned earlier, we want to push for the passage on the amendments to the Foreign Investment Act and the Public Service Act. We also need to modify the Retail Trade Liberalization Act,” he said.
These measures will complement the reforms that the government is now implementing, such as the Build, Build, Build infrastructure modernization program and the Ease of Doing Business law, Dominguez said.
“With Indonesia poised to cut red tape and dramatically overhaul its investment policies to make them more open to foreign capital, the Philippines will be left as the only ASEAN country still maintaining inordinate restrictions on foreign investment participation in economic growth,” he noted.
“This does not bode well for our competitiveness in the coming years,” Dominguez added.
According to Dominguez, a draft presidential decree being prepared by the Indonesian government will cut the list of industries where foreign investment participation is limited from more than 300 to only 48. These include the removal of restrictions for sectors, such as communications, information and technology, energy and tourism.
Indonesia also plans to introduce a fiscal incentives regime similar to what the CREATE bill aims to accomplish, Dominguez said, describing the corporate reform measure as “immediately doable” and an “opportunity to jumpstart our economic recovery.”
He thanked the House of Representatives for passing the long-overdue reforms outlined in the CREATE bill that aims to “modernize the Philippines’ tax incentives system, so that we are better able to attract more strategic and high-value investments.”
Dominguez said the economy should not be tied down to a fixed set of policies but should have “an adaptable economic regime” to effectively compete in “a world that is constantly innovating.”
“A very good analogy to explain this is by using the concept of anchors and sails. We must adhere to our anchor, which is our core set of principles. This will keep us grounded. But we should also be flexible enough to adjust our sails when the winds change direction,” he said.
“The Philippines should have the flexibility to be able to adjust and maximize economic opportunities as, and whenever, necessary. State policies that should be in the Constitution should be limited to fundamental policies universally accepted and unalterable in character,” according to Dominguez.