Duterte to make P-Noy’s PDP really inclusive

by BusinessMirror | June 3, 2016

Incoming Economic Planning Secretary Ernesto M. Pernia said the Duterte administration may only tweak the existing Philippine Development Plan (PDP) according to its priorities, instead of crafting one from scratch.

“There is already a medium-term development plan. I’m not going to junk that. I’m just going to fine-tune that according to our vision,” Pernia told the BusinessMirror.

The economic and social priority of the Duterte administration, Pernia said, is addressing inequality. He said the poor, not only the rich, should benefit from the country’s economic gains.

The uneven distribution of wealth, Pernia said, is the reason the Philippines continues to struggle from high poverty rates.

The average full-year poverty incidence in 2012 was at 25.2 percent. Succeeding first-semester poverty figures were also not that encouraging.

The Philippine Statistics Authority (PSA) said that poverty incidence among Filipinos in the first semester of 2015 was estimated at 26.3 percent, lower than the poverty incidence among Filipinos of 27.9 percent in the first semester of 2012.

Uneven wealth distribution

“In the past, what has been happening is, the distribution is going more to the rich, mas malaki ang nakukuha nila kaysa mga mahihirap [they benefit from growth more than the poor]. Kaya walang improvement in poverty [this is why there is no improvement in poverty],” Pernia said.

Apart from better wealth distribution, the Duterte administration will also focus on implementing an effective population policy.

Pernia, who was the lead author of the University of the Philippines School of Economics position paper supporting the reproductive health law in 2008, said this will help the poor limit the number of children they have.

He said the poor are often burdened with more children than they can afford because they have no access to effective family-planning services.

With more children, poor households often scrimp of financing the education and health of their children just to make ends meet. This prevents children from poor households to move out of poverty in the future.

“The poor wants to limit the number of children. They’re having more than they can afford and, yet, they have not been able to do that because they haven’t had ready access to effective family-planning services. So I think to attack the poverty problem, we have to work on the economic side, as well as the population side,” Pernia said.

12% growth goal

Pernia said these will be the priorities alongside efforts to catch up to the Philippines’s Asean neighbors in terms of economic growth.

In a television interview, Pernia said that, to catch up, the Philippines needs to grow 12 percent annually.

This will enable the country to raise its per-capita income to around $7,000, the level of income in many Asean countries, from the current $3,500.

However, this is highly unattainable in the next six years. What would be more prudent is to focus on the existing problem of inequality that will give a major boost to attaining higher economic growth.

“Given our growth deficit na naiwanan na talaga tayo ng mga neighbors natin sa Asean, to be able to catch up with them, we probably need to double our GNI [gross national income] per capita from $3,500  to $7,000 and to do that, over the next  six years, we would need about 12-percent growth rate to double,” Pernia said.

“Of course, that is not attainable, it is not likely to be achieved, highly unlikely. I think what we should be more concerned about is the distribution of economic growth,” he added.

In a recent statement, the National Economic and Development Authority (Neda) said the consultations for the Philippine Development Plan (PDP) 2017 to 2022 will start in August 2016.

The Neda Sustainable Development Goals (SDGs) and the data obtained from the AmBisyon Natin 2040 will be part of the crafting of the country’s next medium-term socioeconomic blueprint.

The SDGs, or Agenda 2030, is a set of 17 global goals and 230 indicators. The global goals were adopted by countries, like the Philippines, in September 2015.

The AmBisyon Natin 2040 is the long-term visioning project of Neda. It articulated the long-term aspirations of Filipinos, and will serve to frame future development plans.

Looser fiscal policy

The incoming administration of Philippine President-elect Rodrigo R. Duterte signaled its willingness for looser fiscal policy and higher borrowing, as it seeks to ramp up spending on infrastructure and cut taxes.

Benjamin E. Diokno, who will be Duterte’s budget secretary when the new government takes office on June 30, said a fiscal shortfall of 3 percent of GDP is a “comfortable deficit target.” That would be the highest since 2010 and a departure from the more conservative approach adopted by President Aquino, which resulted in the nation’s first investment-grade credit ratings.

Duterte, a firebrand mayor who won support with promises to fight crime and fix transport bottlenecks, has pledged to reform the country’s tax regime. The new government plans to cut personal and corporate taxes within six months of taking office and borrow more, Diokno said.

“I don’t mind borrowing now, because it’s quite cheap,” he said. “Rates now are a lot lower than before.” He questioned why the nation wasn’t borrowing more, adding that “we need to fund and invest in infrastructure and social capital.”

Investor support

Investors may support a widening in the deficit target because the government plans to use the additional fiscal space to improve public infrastructure, Diokno, 68, said. He is currently a professor at the University of the Philippines’s School of Economics and was also budget chief under President Joseph Estrada.

“Investors would be willing to look past any potential increase in the deficit depending on the details of the fiscal policy,” said Michael Wan, an economist at Credit Suisse Group AG in Singapore. “A broad overhaul of the tax structure could put more money in the hands of consumers, while more spending on infrastructure, education and health would boost the Philippines’s growth potential.”

The new government’s immediate priorities include building infrastructure faster, solving Manila’s traffic woes and investing in agriculture, Pernia said in an interview with ABS-CBN News Channel on Thursday.

Aquino’s administration had cut the budget deficit to 0.9 percent of GDP in 2015, from 3.5 percent in 2010. A key concern for Fitch Ratings is the nature of the planned higher spending, as a wider budget deficit would be a shift from trends seen in the past few years.

“We would be waiting to see more details regarding this planned higher deficit,” Sagarika Chandra, Fitch sovereign ratings associate director in Hong Kong, said in an e-mailed reply to questions. “Also, it remains to be seen whether the targeted level of spending would be achieved. In the past, government spending
has typically been below what has been budgeted.”

Outgoing Finance Minister Cesar V. Purisima said on May 20 he will submit tax-reform recommendations to the new administration, including a proposal to lower personal and corporate income taxes to 25 percent. The company rate is currently 30 percent, while personal rates are as high as 32 percent, according to the International Monetary Fund.

(Cai Ordinario, Bloomberg News)

Source: www.businessmirror.com.ph