Interview: Rodrigo Roa Duterte
To what extent has legislation been utilised over the course of 2020 to mitigate the economic and social impact of the Covid-19 pandemic?
RODRIGO ROA DUTERTE: The P165.5bn ($3.3bn) Bayanihan to Recover as One Act, or Bayanihan 2, was signed in September 2020 to fund the pandemic response and recovery. A significant portion of this package went to financing the Covid-19 Active Response and Expenditure Support programme, as well as lending initiatives for micro-, small and medium-sized enterprises (MSMEs); cooperatives; hospitals; tourism companies; and overseas Filipino workers affected by the pandemic. Meanwhile, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, now approved by both the House of Representatives and the Senate, is a priority. The legislation, which is part of wider fiscal reforms, was recalibrated to incorporate incentives for businesses to help them recover their losses, generate employment and contribute to the wider economic recovery.
How can the government better utilise technology and data-driven solutions to support the economic recovery without overburdening the health sector?
DUTERTE: The government has worked with research and academic institutions to monitor the spread of Covid-19. Through rigorous data collection and coordination with local government units, we continue to monitor cases so that we can ease restrictions and allow economic activities to resume in targeted areas.
We have developed an epidemiological modelling system that studies trends during the pandemic and guides government actions at the local and national levels. In order to ensure a coordinated response, we established a One Hospital Command Centre to guarantee that patients in Covid-19 referral facilities receive sufficient supplies and equipment.
Our testing capacity has improved significantly. Nevertheless, we are continuously working to further enhance the accuracy of our test kits. Moreover, the government is making use of digital platforms to distribute timely and science-based information to the public.
Which sectors of the economy do you expect to lead the rebound, and what role do you expect that foreign investment will play?
DUTERTE: The demand for products and services under the new normal will likely drive the economic rebound. This is particularly the case for those in segments such as health care, personal mobility and connectivity, and the digital economy. Furthermore, there will be heightened demand for insurance products, and manufacturing, iron and steel production, and agriculture are expected to play significant roles in the recovery.
The manufacturing industry already bounced back following the easing of stringent community quarantines in areas such as Bulacan, Cavite, Laguna and Rizal. The iron and steel industry also rebounded due to the resumption of construction activities and the continuing implementation of the Build, Build, Build programme. Agriculture, on the other hand, is expected to diversify away from being rice-centric due to our conversion of quantitative rice-import restrictions into tariffs. Services are also likely to contribute to the economic rebound due to the young, highly skilled and English-proficient labour force.
In the recovery phase both foreign and domestic investment will help the country acquire the technology and capabilities necessary to manufacture sophisticated products. As such, it was necessary that the CREATE bill was passed, as it provides for immediate tax relief to businesses, with a 5% reduction in the corporate income tax, which is set to boost competitiveness and attract further foreign investment.
Where do you see opportunities for new trade agreements to boost foreign investment inflows?
DUTERTE: Increased digitalisation will create new opportunities for the services sector. With more commercial transactions completed online, e-commerce, business process outsourcing and IT – as well as supporting industries such as energy, transportation and logistics – are expected to flourish.
As such, pursuing more free trade agreements (FTAs) that focus on services is important. We hope to incorporate this into our negotiations on several FTAs, such as the Regional Comprehensive Economic Partnership, the EU-Philippines FTA, and the joint economic cooperation dialogues with Chile and the UK. This also holds true with our FTAs with South Korea and India.
To attract more investors the government is pursuing reforms that will reduce restrictions on foreign investment, enhance market access and reduce the costs of doing business. These include the full implementation of the Ease of Doing Business Act, and amendments to the Public Service Act, the Retail Trade Liberalisation Act and the Foreign Investments Act.
What has been done to reduce financial inequality?
DUTERTE: Even before the pandemic, the administration laid out fiscal reforms aimed at reducing inequality through a more progressive taxation system that will ease the burden on the poor and the middle class. The Tax Reform for Acceleration and Inclusion (TRAIN) Act, which took effect on January 1, 2018, established a more simple, fair and efficient tax system that exempted individuals earning below P250,000 ($4970) a year from personal income tax.
It also lowered tax rates for higher-income earners, but not for the rich. TRAIN expanded value-added tax on petroleum, automobiles, sweetened beverages and tobacco. This increased revenue to fund poverty alleviation initiatives such as the Pantawid Pamilyang Pilipino Programme, the Unconditional Cash Transfer Programme, the Feeding Programme for Children, the Social Pension Programme and universal health care.
Because of these measures, the government had a buffer to respond to the needs of citizens during the onset of the pandemic. Immediately after the declaration of a state of emergency, we launched the Social Amelioration Programme – the largest social protection plan in the country’s history – to provide immediate relief to the most vulnerable families. We also assisted MSMEs by facilitating their access to credit, technology, markets and the value chain through the Small Business Wage Subsidy Programme, as well as provided cash grants for farmers and fishers.
Bayanihan 2 built upon these initiatives to expedite the delivery of social services to the poorest segments of the population. The package included P140bn ($2.8bn) for cash-for-work support, assisted affected sectors and provided capital to government financial institutions to support production.
The ongoing Build, Build, Build programme continues to create jobs, as well as opportunities for MSMEs at construction sites. Furthermore, we will ensure that individuals receive technology training and can access an affordable but stable internet connection to enable their participation in the digital economy.
In what ways can the government, academia and the private sector cooperate to improve research and development (R&D) practices?
DUTERTE: Collaboration between key stakeholders is imperative for the Philippines to achieve its development goals and empower citizens. It is crucial to engage all sectors, particularly academia, the private sector and the general public, in improving our R&D programmes.
We invested in physical and information infrastructure, as well as higher education, to create an environment conducive to R&D. Related reforms include the Philippine Innovation Act of 2019, which facilitated a whole-of-government coordination; the Innovative Start-up Act of 2019, which established incentives for start-ups and their ecosystem; and the Balik Scientist Programme, which encouraged expatriate scientists and other experts to return and share their expertise.
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