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Economic Policy Imperatives

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Title: Economic Policy Imperatives


1
Economic Policy Imperatives
W01/3868
2
I 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
3
ECONOMIC 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

5
THE 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

6
THE 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

7
THE 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

8
REAL 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
9
INVESTMENTS TO GDP RATIO, 2002 Select Asian
Countries
Source SPEI, Bangko Sentral ng Pilipinas
10
INFLATION RATES,2003SELECT ASIAN COUNTRIES
Indonesia
China
Korea
Philippines
Thailand
Malaysia
Singapore
Source SPEI, Bangko Sentral ng Pilipinas
11
UNEMPLOYMENT RATE,2003 SELECT ASIAN COUNTRIES
China
Korea
Singapore
Thailand
Malaysia
Philippines
Source SPEI, Bangko Sentral ng Pilipinas
12
NG 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
13
NG 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
14
TAX EFFORT, 2002 Select Asian Countries
Source SPEI, Bangko Sentral ng Pilipinas
15
NG 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
16
CAPITAL EXPENDITURES TO TOTAL GOVT EXPENDITURES,
2002 Select Asian Countries
Source SPEI, Bangko Sentral ng Pilipinas
17
NG DEFICIT TO GDPRATIOS, PHILIPPINES
Source DOF
18
REVENUES TO GDP VS. TAX EFFORT, PHILIPPINES (IN
PER CENT)
Source DOF
19
NG EXPENDITURE TO GDP, PHILIPPINES
Source DOF
20
NATIONAL GOVERNMENT EXPENDITURE PROFILE 1997 vs.
2003

Source DOF
21
POLICY 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

22
ACTION 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

23
ACTION 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

24
ACTION 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

25
ACTION 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

26
ACTION 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

27
ACTION PLAN
  • Implement a debt reduction plan
  • Bond exchange to lengthen debt maturity
  • Make more use of ODAs than commercial borrowings
  • Limit guarantees to GOCCs

28
RESTRUCTURING AND REFORMING THE FINANCIAL SECTOR
29
THE 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.

30
THE 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

31
THE 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

32
POLICY 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

33
ACTION PLAN
  • A. Proposed Legislative Measures
  • Amend BSP Charter to strengthen its supervisory
    capacity
  • Amend the Corporation Code to include stronger
    provision on governance

34
ACTION 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

35
ACTION 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

36
ACTION 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

37
INCREASING EXPORTS, INVESTMENTS AND EMPLOYMENT
38
CURRENT 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
  • POLICY OBJECTIVES
  • Promote investments in infrastructure
  • Promote investments and exports
  • Promote entrepreneurship and SME development

40
ACTION 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

41
ACTION 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

42
ACTION 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

43
Congressional 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

44
Congressional 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

45
Congressional 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)

46
Congressional 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

47
Congressional 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

48
Thank You
W01/3868
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