Doing the wrong things?
In my last piece, I noted dark clouds over the economy seen in worsening numbers on inflation, unemployment, and economic growth, among others. Some readers questioned my numbers, which are all official data published by the Philippine Statistics Authority and Bangko Sentral ng Pilipinas, and readily verifiable by anyone. Not surprisingly, I got my share of brickbats and foul language from online bashers with a misplaced notion that I was criticizing the incumbent President, whose fierce online defenders are quick to react to anything seen to be critical of their idol. Amusingly, bashers of the opposite persuasion have used similarly foul language in accusing me, over past columns, of currying favor with the same President. In this internet age, one can only take all these in stride.
Hopefully, the dark clouds I described are momentary and will blow away, and do not necessarily foretell a sustained downtrend of the kind we’ve seen before, following periods of boom. I ended that piece voicing concern that the economic momentum we’ve established and the resilience we exhibited amid past external shocks could be negated if we cause our own problems and insist on doing the wrong things to ourselves. I must explain what wrong things I was alluding to, and the right things we ought to be doing.
To his credit, President Duterte’s core economic team is worthy of our trust and confidence; they are seasoned technocrats and nonpoliticians for whom the common good defines sound policy. In particular, the secretaries of finance, socioeconomic planning, and budget and management lead departments traditionally described as “oversight agencies,” whose purview cuts across the various sectors of the Philippine economy and society. The Bangko Sentral governor completes this core team of top officials for whom all Filipinos comprise their constituency. Unlike them, other Cabinet secretaries have defined sectoral constituencies: workers, farmers, the socially disadvantaged, the energy sector, infrastructure, and so on. One can expect them to fight for their particular sector as if it were top priority in the overall scheme of things. But in a democratic society like ours, what must prevail at the end is the greatest good of the greatest number of Filipinos.
It is in this light that among the right things being pursued by the Duterte administration—or at least the core economic team thereof—is the comprehensive tax reform package proposed to our Congress by Finance Secretary Sonny Dominguez. It will correct a longstanding injustice to middle- and low-income taxpayers by reducing income tax rates to regional norms. It will do the same with income taxes on firms, making it more attractive to create even more jobs and further invigorate the domestic economy. It also proposes a well-studied way to recover revenues to be lost from such tax cuts, by updating excise taxes and narrowing value-added tax exemptions. Lawmakers support the income tax cuts, but not the revenue recovery measures they see as unpopular, even as finance officials have repeatedly demonstrated that the combination would yield a net win-win outcome. This Duterte tax reform package is critical to sustaining our economic momentum, but populist politicians threaten to do the wrong thing, and water it down as to render it counterproductive. The President can demonstrate strong leadership by supporting his core economic team and get his allies in Congress to do the right thing.
There are other right directions that Mr. Duterte’s core economic team has set, but resistance by certain officials or politicians unable or unwilling to see the broader perspective threaten to set us back on the wrong track. These include easing persisting foreign investment restrictions, adopting less restrictive farm trade in combination with proper support to raise farm productivity and competitiveness, a balanced approach to subcontracting, and others. I can only pray that the President upholds his signified intention to leave the hard economic decisions to his experts (and support them in Congress as needed), and not be swayed into impulsive or populist actions that could do the nation harm in the long run.
