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Funding economic growth

by Atty. Ignacio R. Bunye

Of his many personal traits, President Rody Duterte’s candor easily stands out. He admits to lack of knowledge of economics.

“I don’t even understand those graphs,” he once told a gathering of fellow Bedans.

That said, he professes to rely heavily on the advice of his trusted economic advisers to help him move the country forward.

Easily among his top four are Finance Carlos Dominguez III , Budget Secretary Ben Diokno, Economic Planning Secretary Ernie Pernia, and Transportation Secretary Art Tugade.

Although legally independent of the Executive, the BSP Governor would be the 5th man in the team.

Here is wishing that President Rody makes a wise choice on or before July 2, when the 2nd non-extendible term of BSP Governor Amando M. Tetangco expires.

Finance Secretary Dominguez, Duterte’s economic captain ball, rightfully gives credit to the Arroyo and Aquino administrations for leaving behind a healthy economy. But more still needs to be done.

Growth must be inclusive, Dominguez said. As we grow, we should be able to lift millions out of poverty.

Dominguez explains that one of the strategic objectives of the Duterte administration is to reduce the nation’s poverty rate from the current 26 % to just 17% or a reduction of the poor by 1.5% per year for the next 6 years.

Difficult yes, but eminently achievable.

Echoing the “7×7 formula” of former Neda Chief Romy Neri, Dominguez stated:

“There is only one benchmark we need to consistently attain year after year: this is to keep growth at 7% for the next generation.”

But this growth must be inclusive, Dominguez states, “with the goal of enhancing access to opportunity, reducing disparities among the regions and preparing the young for meaningful economic roles through superior but accessible educational systems.”

One of the linchpins of the growth strategy is massive infrastructure spending. The strategy was rolled out in detail during the recent Dutertenomics fora, which Dominguez himself helped organize.

Massive infra spending “should immmensely improve the logistics backbone of our economy as well as create jobs in the area that are less progressive. Gains in the efficiency of moving people and goods through the archipelago will bring down costs for consumers and enhance the productivity of farmers, as well as manufacturing.”

“The dispersal of our economic activity will be helped by improvements in our ports, airports, rail and road.

“There is increased convergence, therefore, between the increased spending on infra and the pursuit of inclusive growth.

“The better our infra becomes, the more otherwise inaccessible areas can participate in the national economic mainstream.”

And how does the Duterte government intend to fund all these projects?

  1. By continuing to tap the private sector in big-ticket projects. The big guns, like Ayala and SMIC, immediately pledged to continue to do their share of the heavy lifting.
  2. By borrowing locally. This could be sourced from massive OFW funds remitted annually.
  3. By improving tax collection efficiency through the approval and implementation of the proposed tax reform package.

Of the last, Dominguez acknowledges raising taxes is never popular. Thus, Dominguez proposes to ease the pain by seeking to lower personal and corporate income taxes.

But of course, each item that will result in revenue loss will have to be coupled with a proposal that will result in revenue gain.

Here’s hoping that Congress expeditiously passes the proposed tax reform package.

(to be continued next week)

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