The Market Monitor Minding the Nation's Business
A golden age for trade primarily among micro, small and medium enterprises (MSMEs) is expected due to increased infrastructure spending and business opportunities brought about by free trade agreements (FTAs) and the Association of Southeast Asian Nation (Asean) Economic Community (AEC), Philippine Exporters Confederation Inc. (Philexport) President Sergio R. Ortiz-Luis Jr. said.
He said in a forum organized by the Philippine Chamber of Commerce and Industry (PCCI) last week the 12 priority manufacturing and service industries are set to benefit from the government’s infrastructure convergence program.
Ortiz-Luis noted the Roads Leveraging Linkages for Industry and Trade (ROLL IT) program aligns the country’s infrastructure development with thrust to develop local industry and trade.
He said the scheme will mainly benefit electronics manufacturing services, automotive and auto parts, aerospace parts, chemicals, shipbuilding, furniture and garments, tool and die, agribusiness as part of the manufacturing sector, information technology-business process management, transport and logistics, tourism and construction industries.
Considered as one of the platforms of the administration with a national infrastructure budget of around P8 trillion through 2022, Ortiz-Luis said the qualified project proposals will be included in the Department of Public Works and Highways’ (DPWH) budget line items for fiscal year 2018.
The Board of Investments (BOI) has urged industry stakeholders to already prepare their infrastructure project proposals meant to further spur the local industries’ growth, development and competitiveness.
Ortiz-Luis underscored the government’s increasing investments in infrastructure for further growth.
“The infrastructure impetus is just one good break we need, as exports surged 22.5 percent in January, backing our trade performance which grew by 14.2 percent,” he noted.
Ortiz-Luis said he is also banking on opportunities that the FTAs and AEC integration will represent to Philippine MSMEs.
“Don’t forget the many free trade agreements just waiting to be tapped. We cannot overemphasize the cost-competitive advantage of availing the FTAs, once the non-tariff measures are hurdled,” he said.
Ortiz-Luis cited as an example the Asean FTA net work which offers a population of 3 billion people and gross domestic product (GDP) of $22.7 trillion.
He said there are seven of them existing namely, the Asean FTAs with China, Korea, Australia-New Zealand, Japan and India, and the country’s FTA with Japan.
Also in the pipeline are the FTA of the Asia-Pacific Economic Cooperation or APEC called the Regional Comprehensive Economic Partnership (RCEP) and the Philippine-European Union FTA, he added.
Ortiz-Luis also underscored the Philippine hosting this year of Asean conferences and summits in celebration of its 50th founding anniversary, another golden event.
With focus on the MSMEs toward an inclusive growth, he said various events throughout the year will address the Asean-led development of MSMEs, the pursuit of sustainable urban development; and support for food manufacturing, businesswomen, young entrepreneurs and start-ups.
“All these point to the tremendous opportunities that have unfolded and continue to emerge especially for MSMEs.
What is left to do is to capitalize on this momentum and harness private public partnership towards an inclusive, sustainable growth,” he added.
Finance Secretary Carlos Dominguez III added the Duterte administration’s move towards greater integration with other Asian economies would lead to substantial investment inflows this year, as well as rapid tourism growth and robust exports.
Some P326 billion worth of projects that have begun construction or will be built starting this year are among the investments that Dominguez said would lead to a “blossoming of opportunities for Filipino businessmen.”
More savings needed
As the country shifts its source of growth from consumption to investments, Dominguez also said one key factor that needs to be addressed is improving the country’s low savings rate, as he pointed out that 86 percent of Filipinos today remain “unbanked.”
“To be an investments-led economy, we need to improve our savings rate. The key to this is the deepening of the country’s capital markets and the broadening of access to the formal business sector,” said Dominguez.
The finance chief said businesses should expect themselves to be busy starting this year, as the Duterte administration rolls out its big-ticket infrastructure projects, which would, in turn, stimulate the economy, create jobs and generate more financing opportunities for the country’s banking and insurance sectors.
“It is not only the large businesses that will benefit from the multifold opportunities that will open up in the near future. Our closer relationship with China, Japan, South Korea and the Asean (Association of Southeast Asian Nations) will translate into rapid tourism growth and bountiful export markets. This will mean stronger demand for processed food, in-person service enterprises, household items and consumer electronics,” Dominguez said.
He said “the stronger linkages we now forge with our development partners and regional neighbors will provide new drivers for the growth of our domestic economy.”
Among the large-scale infrastructure projects that would commence starting this year are the Clark-Subic Rail, Tutuban-Clark Rail, and the 581-km South Line of the North-South Railway Project connecting Tutuban, Calamba, Batangas and Bicol, Dominguez said.
He said construction has already begun on the Panguil Bay Bridge in Mindanao, while groundbreaking rites are set this year for the Clark International Airport, the Metro Manila Bus Rapid Transit System, and three bridges across Pasig River, two of which will be built through Chinese grants.
The government, according to Dominguez, is “also closely working with our Chinese partners” to finally start the construction in 2017 of the Kaliwa Dam, which will help ensure a stable water supply to Metro Manila, and the Chico River Pump Irrigation project in the Cordillera region.
According to Dominguez, these projects alone are worth a combined total of P326 billion.
“The administration envisions one trillion pesos a year in infrastructure investments. This alone should help sustain our growth momentum,” Dominguez said.
Beyond 2017, the Duterte administration will start the construction of long-span bridges between Bicol and Samar, and between Leyte and Surigao that will finally make land travel between Luzon, Visayas and Mindanao possible, Dominguez said.
Regional airports will also be rehabilitated or new ones built, to ease travel across the country’s three island groups, while in Mindanao, a 2,000-kilometer railway that will connect its key cities and boost the economies of the country’s poor regions is also in the pipeline, he said.
“I am well aware that the congestion at the ports imposed heavy costs on our manufacturers, especially those whose competitiveness depends on just-in-time deliveries of both raw materials and finished products.
The congestion is both an infrastructure and administrative problem. As we upgrade our port infrastructure, we should also remove unnecessary procedural hindrances to the flow of goods,” Dominguez said at the same forum.
Urban decongestant set
While the government plans to invest more outside Mega Manila, Dominguez said it will also address the congestion in the country’s premier urban hub through projects such as the Mega Manila Subway, almost a dozen more bridges across Pasig River, and the development of Clark Green City “to attract businesses and people out of the Mega Manila area.”
“When I said we will start these projects, we do not mean just bidding out projects, signing contracts, or attending opening ceremonies. In this Administration, ‘start’ means groundbreaking and actual construction. We will no longer tolerate the wishy-washy promises that implementing agencies have been accustomed to making in the past,” Dominguez said.
“You can count on this administration to be aggressive in building these infrastructure,” he added.
Besides focusing on infrastructure, Dominguez said the Duterte administration is also committed to address other factors that have made the Philippine economy unattractive to investments, such as its high energy costs, restrictive economic policies, corruption and uncertainty over contracts.
“In a word, increasing investments in our economy requires an all-rounded strategy. It requires both adept and far-sighted governance as well as a dynamic private sector that is always ready to seize opportunities offered by the market,” Dominguez said.
“The key to this strategy is to bring up the quality of our infrastructure backbone to match those of our neighbors. We need to invest in training our labor force and in strengthening our human capital. In the comprehensive tax reform package we submitted to Congress, we are seeking to align our income tax rates with those prevailing in the region.
Exceedingly high tax rates are a disincentive to investments,” he added. LUIS LEONCIO