More laws to pass
The 16th Congress came up with key economic reforms that promise to fundamentally change our economy. Foremost among them is the Philippine Competition Act (Republic Act No. 10667), a law that took nearly three decades to finally enact, long needed to curb anticompetitive conduct and level the playing field in the economy. Other major economic laws are the Amendments to Foreign Banks Liberalization (RA 10641), the Go Negosyo Act (RA 10644), and the Customs Modernization and Tariff Act that awaits the President’s signature.
Meanwhile, the economy’s growth performance has somewhat tapered after peaking at 7.3 percent in 2010 and 2013. We boosted our annual export earnings from an annual average of $37 billion in the past decade to more than $62 billion in 2014. Even so, we actually fell even farther behind our closest neighbors, with the gap now actually much wider (our neighbors’ export earnings range from Vietnam’s $150 billion to Singapore’s $410 billion). We multiplied our net annual foreign direct investment (FDI) inflows six times from an average of only $1 billion in the past decade to over $6 billion, but this still pales in comparison to what Vietnam, Malaysia, Indonesia, Thailand and Singapore have been getting, which range from $8.9 to $67.4 billion. And while there are signs that the growth is finally trickling down to the lower segments of our society, we need much broader participation to get us out of our traditionally narrow, hollow and shallow economic growth, and spread the benefits of growth more widely.
Clearly, so much still needs to be done even with recent improvements. For the next Congress, I’d put the following high on its to-do list: Pass the proposed Freedom of Information (FOI) Act, ease remaining foreign investment restrictions, delimit the definition of public utilities, pursue fundamental tax reform, improve and strengthen governance of transport and provision of infrastructure, and pursue regulatory reform to further reduce red tape, among others. Let me briefly go into each one in turn.
The FOI Act was a firm commitment made by the President at the outset of his administration. But somewhere along the way, and to the disappointment of many, it ceased being a priority. Ironically, the administration has been preaching “daang matuwid,” and transparency in government should be the bedrock of this. It was in fact high expectations on more honest governance that spurred the investment and growth surge we have seen since 2010. That such growth has tapered lately suggests that this confidence may be flagging, and could use reinvigoration that the passage of the FOI bill would help achieve.
With our FDI inflows still falling behind in Asean even as we multiplied it six times over the past six years, I’m convinced that our outdated constitutional restrictions on foreign investment in public utilities, mass media, advertising and education need to go. Doing so will not only boost job creation. It will also arrest the growing concentration of economic power in a few dominant Filipino business interests, which, apart from controlling the bulk of production, now control the bulk of our public facilities as well.
Short of amending the Constitution, there’s a way we can move faster in allowing foreign investment in vital public infrastructure via public-private partnership schemes. All it needs is a long-needed revision of our antiquated and unduly encompassing definition of public utilities, still governed by the Public Service Act of 1936, and a limitation of the definition to the bare essentials. For example, ice plants, transport terminals, shipyards, marine repair yards, and freight services should no longer be in that list.
It’s now well known that our income taxes on corporations and individuals are much higher than in our neighbors, further turning away job-creating investments. Redefinition of our individual income tax brackets is long overdue, as the top rate of 32 percent now applies even to middle-income families. Meanwhile, excessive bank secrecy hampers tax evasion investigations, impairing our revenue authorities’ ability to hike tax collection performance. Congress needs to pursue fundamental, out-of-the box tax reforms that address the above, and achieve significantly hiked revenue collections even with lower rates of taxation.
Transport has become a severe constraint to sustaining the growth momentum. Here, we need to delimit the power of local governments over national roads passing through their jurisdictions, to prevent myriad rules (e.g., truck bans) and charges/fees that make land transport of goods costly. We need to amend the charter of the Metropolitan Manila Development Authority to unify and strengthen accountability for traffic management. Revisions on the charters of the Philippine National Railways and the Light Rail Transit Authority are in order, to recapitalize and repurpose these agencies to meet new demands, as we recognize the need to provide far greater rail transport facilities for our people. And we need to separate the conflicting regulatory and operational functions of the Civil Aeronautics Authority of the Philippines and the Philippine Ports Authority, via amendments to their respective charters, as well.
Finally, the preponderance of stifling rules and regulations that unnecessarily raise business costs must be addressed via legislation to mandate deliberate regulatory repeal, the way Australia, Canada and the United Kingdom have done. This would spur much more job creation, especially in smaller enterprises.
Truly, the legislative agenda of the next Congress will be a rich and challenging one.
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