By Chino Leyco
Finance Secretary Carlos G. Dominguez III said the heightened cooperation between the Philippines and China, which both displayed resilience in the face of global challenges to growth, will help the two countries defy threats to sustained economic expansion in the years ahead.
Dominguez said that like China, the Philippines is well-positioned to maintain its high growth trajectory “long into the future,” such that the government has retained as its fighting target a gross domestic product (GDP) expansion rate of 7 percent for 2019 despite adverse trends in the global economy.
The source of the Philippines’ growth, he said, is its increasing shift from consumption to investments, which is well supported by a growing domestic market as well as more intensive regional integration among Southeast Asian economies.
Dominguez said that on the part of China, it is preparing to overcome the forecast of slower global growth this year by a policy mix that includes an expansionary monetary policy and boosting domestic consumer demand.
Economies of two countries
“The economies of our two countries are leading the region in growth. Both our economies demonstrated resiliency in the face of global challenges. With our increased cooperation, we can better defy the adverse developments at the global level and continue our rapid expansion to benefit our peoples,” said Dominguez, who delivered the keynote speech during the Philippine Economic Briefing (PEB) in Beijing.
He said that with “the rest of the region depending much on China’s impressive growth, we are confident this great nation will continue its remarkable economic transformation.”
This PEB event, which aims to showcase the Philippines’ strong economic performance and its myriad investment opportunities, brought together some 500 investors and infrastructure players based in China. A previous PEB was held in Shanghai in 2017.
PH’s ‘secret weapon’
Dominguez said the Philippines has as a “secret weapon” to offset the effects of the expected global economic slowdown – its $170 billion “Build, Build, Build” infrastructure program, which has numerous multiplier effects, such as creating new jobs and new businesses as well as lowering the costs of transporting goods and people across its islands.
For this ambitious infrastructure program of President Duterte, he said the Philippines has China to thank for its generous support that has “greatly helped push our infrastructure projects forward.”
According to Dominguez, the “Build, Build, Build” program “works in concert” with China’s much larger and broader Belt and Road Initiative (BRI), a program spearheaded by Chinese President Xi Jinping that aims to strengthen infrastructure, trade and investment links across the region.
“Improved interconnections between the economies in this part of the world will raise all ships. We look forward to a seamless network for the flow of goods, the exchange of best practices and boundless cooperation in the coming years,” Dominguez said.
Young and skilled workforce
He said that on top of a tax reform program that has already provided increased spending power for Filipinos and improved revenue flows for the government to help finance its infrastructure program, the Philippines is also banking on its greatest asset – a very young and skilled workforce – to power its economy over the long term.
“Our median age is 24. This is significantly lower than the median ages in the more mature economies of Northeast Asia. A large wave of skilled workers enters the workforce over the next few years,” Dominguez said. “We have invested heavily on our education system to prepare young Filipinos to be globally competitive. Last year, we passed a law granting free tuition fee in state-owned colleges and universities.”
Aside from this “unspoken factor,” Dominguez said the Philippines has several positive developments working in its favor to ensure the economy’s long-term high and inclusive growth.
These include sustained robust foreign direct investment (FDI) inflows, which have reached a combined US$20.1 billion in 2017 and 2018; the rest of the Duterte administration’s tax reform packages, including the reforms in corporate taxation and the rationalization of fiscal incentives; the government’s high expenditure effort; aggressive infrastructure spending that is expected to reach 7 percent of GDP by 2022; a strong fiscal position with manageable debt and high international reserves; and game-changing policy reforms to eliminate red tape, improve the ease of doing business and encourage more investments.
“I invite all our friends here in Beijing and [across] China to take a closer look at how things have improved in the Philippines. Examine the many opportunities for investment,” Dominguez said.
He cited the increased bilateral trade between the Philippines and China totaling US$43 billion in 2018; the high number of Chinese tourist arrivals in the Philippines at 1.38 million last year; China’s rising investments of US$479 million, which made it the Philippines’ second largest source of FDIs in 2018; the success of the Philippines’ maiden issue of renminbi-denominated “Panda” bonds last year; and an agreement between 13 Philippine commercial banks and the Bank of China on the creation of a Philippine Renminbi Trading Community as among the developments that demonstrate the heightened cooperation between the two countries.
Executive Secretary Salvador Medialdea; Secretaries Mark Villar of the Department of Public Works and Highways (DPWH), Arthur Tugade of the Department of Transportation (DOTr), and Alfonso Cusi of the Department of Energy (DOE); Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo; Vivencio Dizon, the president-CEO of the Bases Conversion and Development Authority (BCDA); and officials from the Department of Budget and Management (DBM) and the National Economic and Development Authority (NEDA) also took part in the PEB and presented updates on Philippine economic developments.