Philippine Business Magazine: Volume 8 No. 4 - Policy
No Tipping Over
Strong fiscal discipline, high standards of good governance, and a range of market-oriented reforms will lead to economic growth

Our economic philosophy is centered on maintaining strong fiscal discipline, promoting high standards of good governance, and initiating a range of market-oriented reforms

Excerpts of speech delivered by Finance Secretary Jose Isidro N. Camacho before the Makati Business Club on 18 July 2001:

Your government’s gameplan can be broken down into four sections. First, macroeconomic measures and concerns; second, agricultural modernization founded on social equity; third, social bias to balance economic development; and fourth, justice and enforcement of law and order.

Gameplan
More than 50% of our population is dependent on the agricultural sector. With its modernization, we believe that as much as one million jobs can be created in agriculture and agribusiness. For this reason, the government is committing to implement the Agricultural Modernization Fund Act by allocating P20 billion a year for this purpose.

The social bias consists of measures to provide the safety nets for the poor as we simultaneously work on enlarging our economic pie. The provision for housing — particularly for the urban poor — emergency employment for out-of-school youth, micro-credit for small businesses, and cheap rice through the rolling stores of the National Food Authority are some of the immediate measures. In the medium to long-term, programs to cut costs into half of often-used medicines by the poor, the promotion of national health insurance, rice sufficiency, and the decongestion of the Metro Manila population through transportation infrastructure are some of the time-bound deliverables.

Requisites for Development
Economic development cannot be sustained unless there is justice as well as law and order. The President has demonstrated a firm and decisive stance to peace and order and related issues. Last 1 May, we have seen her call the Armed Forces to assist in restoring peace in Metro Manila. More recently, she has ordered a massive offensive against the Abu Sayyaf and its supporters. She has also created the National Anti-Crime Commission which links the police, the National Bureau of Investigation, and the Armed Forces in combating criminality. The reorganization of the Philippine National Police has also been effected. Time-bound targets in dealing with the Abu Sayyaf and urban kidnapping have been set. Truly, the President has acted in the role of Commander-in-Chief more aggressively than the military establishment itself.

For long-term security and peace and order, the administration is pushing for the implementation of the AFP Modernization Program--which never got implemented in the last six years since its enactment--as well as the professiona-lization and the modernization of the PNP. Peace efforts in Mindanao and with the National Democratic Front have also been initiated with some measured success.

Fiscal Discipline
Our economic philosophy is centered on maintaining strong fiscal discipline, promoting high standards of good governance, and initiating a range of market-oriented reforms. The fundamental way to win the war against poverty is to create jobs. This requires investment capital that will be attracted by an environment of free enterprise, available domestic capital, adequate infrastructure, and a streamlined government.

One of the key aspects of our economic program is fiscal discipline. Notwithstanding the economic slowdown, we are maintaining our national fiscal deficit target at P145 billion. We are doing this through a combination of cost-cutting measures and revenue-generating initiatives.

On the expenditure side, we have been quite successful in cutting expense items without hurting basic services. The May year-to-date expenditures show a positive variance compared to target by close to P10 billion. This is quite a feat when one considers that the Year 2001 expense budget is the re-enacted budget which is flat from Year 2000.

On the revenue side, BIR revenues are underperforming by about P11 billion as of end-May and are expected to be P20 billion below the year’s target. This has been affected by both the sluggish economy as well as perceived resistance to the changes being undertaken by Commissioner Rene Bañez in the BIR.

Fortunately, we are achieving better-than-expected results in the other revenue components. The Bureau of Customs has turned the corner and, over the last six months, has met its revenue target. Non-tax revenues from government fees, the Bureau of Treasury income and grants have also generated more than their projected levels. Together with a more vigorous privatization effort including the pursuit of securitizing future revenue flows give us the confidence to meet our stated target.

Aside from tax administrative reforms being carried out in the BIR, we will also be proposing to Congress the adoption of a modified gross income tax system. This proposal seeks to simplify tax administration, minimize the discretion of tax payers and tax examiners, broaden the tax base, and make the system more equitable. It will also align the tax treatment of corporations and self-employed individuals and professionals, lower the tax rate, and adjust the tax brackets for salaried individuals.

Other Sectors
On the banking sector, we will work with the Bangko Sentral to remove ourselves from the money laundering blacklist. We will support the bill on anti-money laundering which will cover proceeds of all crimes punishable under our existing laws including plunder, graft and corruption, illegal drugs and gambling, kidnapping for ransom, financial and tax frauds, and smuggling activities. We will likewise support the initiatives of the BSP to strengthen its supervisory capacity.

Measures proposed by the private sector to promote the domestic capital markets will be endorsed to Congress: the Personal Equity Retirement Act, Investment Company Act, Securitization Act, as well as new amendments to the Securities Regulations Code. I will also be persistent in pushing for the demutualization of the Philippine Stock Exchange.

In terms of sectoral focus, we will promote growth industries that use our most effective area of competitiveness which is skilled human resource. Specifically, the sectors are Information Communication Technology (ICT) and tourism. This is in addition to the special attention to the agricultural sector as I discussed earlier. To provide for adequate infrastructure in support of our target sectors, including the decongestion of Metro Manila, we will continue to encourage the private sector participation through the Build-Operate-Transfer scheme and any of its variants. This is particularly practical for us given our fiscal constraints.

Good Governance
Let me now go to the management style of this administration. As often mentioned, the Arroyo government is characterized by “good governance.” But what exactly is “good governance?”

Good governance under the Arroyo government is governance practiced with the highest level of integrity. In this regard, I wholeheartedly commend and support the efforts of Commissioner Bañez at the BIR. We will not relent in our drive to turn this agency into a showcase of good governance. Let this be a warning to those who think they can sabotage the efforts by going slow on collection and harassing the Commissioner. Obstructing change will only hasten their departure. I call on the business community to back us up in this crucial crusade.

Good governance under this government is governance practiced with efficiency. This is the kind of efficiency that pushes the Department of Finance’s one-stop shop duty drawback center to process tax credit claims for the Board of Investments and the Bureau of Customs from 60-70 days to 30 days, or the BIR to issue the taxpayer ID number from 2-3 days to within the same day, or the Bureau of Customs to release shipments under the Valuation Classification Review Committee from within 30-60 days to 5-15 days, or the SSS to process salary loans from 17 days to 3 days, or the GSIS to process housing loans from 10 days to 5 days.

Good governance under this government is governance practiced with strong work ethics as led by President Arroyo herself. Good governance under this government is governance practiced with competence and expertise. Good governance under this government is governance practiced with transparency. This is a government prepared to face any public forum to explain its decisions and actions. Good governance under this government is governance practiced with consultation just as I led the extensive public consultations for the Power Reform Bill. Good governance under this government is governance practiced by asking for measurable and time-bound deliverables from its managers. Good governance under this government is governance practiced with follow through. And finally, good governance under this government is governance practiced with a strong sense of urgency and the need to act or decide.

We may be sailing in stormy weather but your captain and her crew are well-equipped to steer our boat to calmer waters. The boat may rock back and forth, but not to worry – I see no risk of tipping over.