Title: Economic Policy Imperatives
1Economic Policy Imperatives
W01/3868
2I want to create an economic opportunity at home
and abroad. I dont want just one or the other I
want both. But it can only be done with energy
and with a common purpose to do that which still
lies within our power. Put our economic house
back in working order before it finds itself
beyond hope of repair and doomed to share the
fate of failed nations
PGMA, SONA
3ECONOMIC POLICY IMPERATIVES
- SUSTAINING MACROECONOMIC STABILITY
- RESTRUCTURING AND REFORMING THE POWER SECTOR
- RESTRUCTURING AND REFORMING THE FINANCIAL SECTOR
- INCREASING INVESTMENTS, EXPORTS AND EMPLOYMENT
4- SUSTAINING MACROECONOMIC STABILITY
5THE ECONOMY TODAY
- GDP real growth in 2003 was 4.7 and 6.4 Q1 in
2004 - National savings to GDP rate was 20.6 in 2003
and 23.4 in Q1 2004 - Investment to GDP rate was 16.6 in 2003 and
20.5 in Q1 2004 - Exports grew by 4.4 in 2003 and 10 in Q1 2004
against import growth of 10.2 in 2003 and 4.9
in Q1 2004
6THE ECONOMY TODAY
- Inflation was 3.1 in 2003 and 4.1 first
semester 2004 - Unemployment rate was 11.4 in 2003 and 11 in
Q1 of 2004
7THE ECONOMY TODAY
- NG deficit to GDP was 4.7 in 2003 and expected
to be contained at Php 197.8 billion or 4.2 of
GDP by end of 2004 - CPSD was 5.6 of GDP in 2003 and expected to rise
to 6.7 of GDP by end of 2004 - NG debt was 74.4 of GDP in 2003 and Public
Sector Debt reached 135.6 of GDP in 2003
8REAL GDP GROWTH, 2003 SELECT ASIAN COUNTRIES
Country REAL GDP GROWTH
Philippines 4.7
China 9.1
S. Korea 3.1
Singapore 1.1
Malaysia 5.2
Thailand 6.7
Indonesia 4.1
Vietnam 7.1
Source ADB
9INVESTMENTS TO GDP RATIO, 2002 Select Asian
Countries
Source SPEI, Bangko Sentral ng Pilipinas
10INFLATION RATES,2003SELECT ASIAN COUNTRIES
Indonesia
China
Korea
Philippines
Thailand
Malaysia
Singapore
Source SPEI, Bangko Sentral ng Pilipinas
11UNEMPLOYMENT RATE,2003 SELECT ASIAN COUNTRIES
China
Korea
Singapore
Thailand
Malaysia
Philippines
Source SPEI, Bangko Sentral ng Pilipinas
12NG DEFICIT TO GDP RATIO, SELECT ASIAN COUNTRIES,
2003
Country NG Deficit/GDP Ratio
Philippines -4.6
China -2.3
South Korea -1.7
Singapore 6.4
Malaysia -5.3
Thailand 0.6
Indonesia -2.1
Vietnam -4.8
Source ADB
13NG REVENUE TO GDP RATIO, SELECT ASIAN COUNTRIES,
2003
Country Revenue/GDP Ratio
Philippines 14.1
China 18.8
South Korea 20.9
Singapore 20.6
Malaysia 22.7
Thailand 16.6
Indonesia 19.1
Vietnam 22.7
Source ADB
14TAX EFFORT, 2002 Select Asian Countries
Source SPEI, Bangko Sentral ng Pilipinas
15NG EXPENDITURES TO GDP RATIO, 2002, SELECT ASIAN
COUNTRIES
Country Expenditure/GDP Ratio
Philippines 19.5
China 21.5
South Korea 22.8
Singapore 17.5
Malaysia 28.7
Thailand 18.2
Indonesia 19.4
Vietnam 20.8
Source ADB
16CAPITAL EXPENDITURES TO TOTAL GOVT EXPENDITURES,
2002 Select Asian Countries
Source SPEI, Bangko Sentral ng Pilipinas
17NG DEFICIT TO GDPRATIOS, PHILIPPINES
Source DOF
18REVENUES TO GDP VS. TAX EFFORT, PHILIPPINES (IN
PER CENT)
Source DOF
19NG EXPENDITURE TO GDP, PHILIPPINES
Source DOF
20NATIONAL GOVERNMENT EXPENDITURE PROFILE 1997 vs.
2003
Source DOF
21POLICY OBJECTIVES
- NG Fiscal Consolidation in six years
- Reduce CPSD to GDP to 3 in six years
- Reduce Public Sector Debt to GDP to 90 in six
years
22ACTION PLAN
- Proposed Legislative Measures
- Introduce new tax policy measures
- Gross income tax system for corporation and self
employed - Indexation of the excise tax on sin products
- Increase excise tax on petroleum products
- Rationalize fiscal incentives
23ACTION PLAN
- General Tax Amnesty with Submission of SAL
- Lateral Attrition System
- Franchise Tax on Telecommunications to replace
VAT - Two-Step Increase in the VAT rate
24ACTION PLAN
- Push for the enactment of the Fiscal
Responsibility Bill, i.e. no new expenditure
without new revenue measure - Push for the enactment of an Omnibus
Re-engineering Law - Rationalize existing pension/retirement schemes
of all uniformed personnel and veterans - Remove automatic guarantee provisions in certain
GOCCs
25ACTION PLAN
- Administrative Measures
- Upward adjustment of fees and charges
- Improve enforcement mechanisms of revenue
generating agencies to increase collection
efficiency - Issue an EO to jumpstart reorganization process
in the national government agencies and GOCCs
26ACTION PLAN
- Issue an EO on integrated control and supervision
of GOCCs - Fully implement the devolution of LGU Code
- Increase social safety net programs within the
budget - Rationalize GOCCs with negative retained earnings
and limit NG exposure
27ACTION PLAN
- Implement a debt reduction plan
- Bond exchange to lengthen debt maturity
- Make more use of ODAs than commercial borrowings
- Limit guarantees to GOCCs
28RESTRUCTURING AND REFORMING THE FINANCIAL SECTOR
29THE FINANCIAL SECTOR TODAY
- The financial system remains an important
intermediation channel. But unless critical
reforms are undertaken to improve its efficiency
and competitiveness, investment would continue to
be weak.
30THE FINANCIAL SECTOR TODAY
- Inadequate legal and regulatory framework for
bank and non-bank supervision - High level of NPLs
- Poor corporate governance and lack of market
discipline
31THE FINANCIAL SECTOR TODAY
- Main pension providers, SSS and GSIS, are in poor
financial health resulting in growing funding
gaps and deficits and declining surpluses which
may translate to NG bailout - Underdeveloped capital market
32POLICY OBJECTIVES
- Broaden and deepen the financial system
- Develop the domestic capital market
- Strengthen the supervisory and regulatory powers
of the financial regulatory agencies - Create an environment of transparency and
accountability in accordance with international
standards
33ACTION PLAN
- A. Proposed Legislative Measures
- Amend BSP Charter to strengthen its supervisory
capacity - Amend the Corporation Code to include stronger
provision on governance
34ACTION PLAN
- Establish a Central Credit Information Bureau and
domestic credit rating agencies - Enactment of the Corporate Recovery Bill,
Pre-Need Code, Personal Equity Retirement
Account, Lending Investors Bill, Revised
Investment Company Bill
35ACTION PLAN
- Administrative Measures
- Allow SSS to increase members contribution to
narrow funding gap - De-politicize appointments to the Boards of SSS
and GSIS - Diversify and professionalize the management of
pension funds
36ACTION PLAN
- Have BSP and PDIC compel banks to clean up their
balance sheets and increase their equity base - Push for fresh listings in the Philippine Stock
Exchange - Strengthen the credit cooperative sector through
regulation and supervision
37INCREASING EXPORTS, INVESTMENTS AND EMPLOYMENT
38CURRENT SITUATION
- Stiff global competition affecting our exports
- Insignificant increase in FDI inflows from
US1.43 B in 2002 to US1.49 B in 2003 - High cost of doing business
- Limited government funding for infrastructure
projects reducing global competitiveness
39- Promote investments in infrastructure
- Promote investments and exports
- Promote entrepreneurship and SME development
40ACTION PLAN
- Administrative Measures
- Create the Philippine Infrastructure Corporation
(PIC) as a subsidiary of NDC - Amend IRR of the BOT Law to promote wider private
sector participation - Draw up a more competitive incentives package
with focus on priority areas Infrastructure,
Information Technology, Automotive, Electronics,
Mining, Health Care, Tourism and Housing
41ACTION PLAN
- Revitalize the mining industry
- Declare Subic and Clark as logistics hubs
- Declare Southern Mindanao as a Halal food
production area - Declare Palawan as an eco-tourism zone
- Conclude JPEPA, ASEAN PIP, ASEAN-China
42ACTION PLAN
- Promote trade agreements by maximizing exports
and investment opportunities offered by trade
agreements - Empower existing SMEs to generate additional
employment through increased lending and
promotion of Big Brother-Small Brother program - Tap returning OFWs as sources of capital
- Continue Product Development
43Congressional Initiatives on Proposed Revenue,
Expenditure and Financial Measures
A. TAX BILLS
1. On Shift to Gross Income Taxation
House Bill No. 1470 (Introduced by Cong. Eric D.
Singson)
- Proposes a 15 tax on gross income of
corporations and self-employed individuals
2. On Rationalization of Fiscal Incentives
House Bill No.122 (Introduced by Cong. Joey
Salceda)
House Bill No. 271 (Introduced by Speaker Jose de
Venecia)
- Streamlines the grant of fiscal incentives to a
focused list of promotable investments
44Congressional Initiatives on Proposed Revenue,
Expenditure and Financial Measures
3. On General Tax Amnesty House Bill No. 552
(Introduced by Cong. Danilo Suarez)
- Mandates all taxpayers to file a Statement of
Assests, Liabilities and Networth as of December
31, 2003 and grants a tax amnesty on all unpaid
internal revenue taxes
4. On Sin Taxes
House Bill No. 1558 (Introduced by Cong. Danilo
E. Suarez)
- Adopts ad valorem excise tax system on fermented
liquor and cigarettes
- Increases the specific excise taxes on wines and
another 20 increase after 3 years
House Bill No. 1591 (Introduced by Cong. Eric D.
Singson)
- Increases the specific excise tax rates on
alcohol and tobacco by 18, and by another 15
after 3 years
45Congressional Initiatives on Proposed Revenue,
Expenditure and Financial Measures
5. On Petroleum Excises
House Bill No. 1323 (Introduced by Cong. Danilo
E. Suarez)
- Increases the specific excise tax rates on
petroleum products by P2.00
6. On VAT
House Bill No. 1468 (Introduced by Cong. Eric D.
Singson)
- Increases the VAT rate from 10 to 12
7. On Taxation of Telecoms
House Bill No. 1469 (Introduced by Cong. Eric D.
Singson)
House Bill No. 1560 (Introduced by Cong. Danilo
E. Suarez)
- Re-imposes the franchise tax on telecom companies
at 5 (HB 1469) and 7 (HB 1560)
46Congressional Initiatives on Proposed Revenue,
Expenditure and Financial Measures
8. On Lateral Attrition
House Bill No. 554 (Introduced by Cong. Danilo
E. Suarez)
- Provides for the grant of special incentives and
rewards for exemplary service and imposes a
Lateral Attrition scheme for non-performers in
revenue generating agencies of the government
B. EXPENDITURE BILLS
Re-engineering the Bureaucracy
- House Bill Nos. 193 and 1532 introduced by House
Speaker Jose De Venecia and Cong. Victor
Sumulong respectively
47Congressional Initiatives on Proposed Revenue,
Expenditure and Financial Measures
C. FINANCIAL AND CAPITAL MARKET DEVT
Bills have also been filed in the Lower House on
- Proposed Corporate Recovery and Rehabilitation
Act
- Establishing a Pre-Need Code
48Thank You
W01/3868