Cesar V Purisima, Secretary, Department of Finance: Interview

Interview: Cesar V Purisima

To what extent has good governance translated into strengthened economic fundamentals and improved revenue collection?

PURISIMA: Good governance lies at the heart of the economic success of President Benigno Aquino III’s administration, having enabled us to create the fiscal space to invest in infrastructure, social services and our people. And due to the resulting confidence in the financial markets, our interest expenses as a percentage of our budget decreased from more than 20% to about 15%, allowing us to maintain our investment grade and reduce borrowing costs. Good governance has also reduced the cost of loans for corporate players, allowing them to cut down expenses and create a stable platform for longer-term investments. Our citizens also have more confidence to make financial commitments in the form of housing or vehicles.

The best way to encourage the private sector is to adhere to good governance to create a more stable macro-economic environment. We are also using technology to improve the ease of doing business in the Philippines; however, ultimately the major incentives will be business opportunities and good returns, both of which the Philippines can offer. To institutionalise good governance it is essential to introduce meritocracy. In the civil service, we now have performance-based budgeting, which requires a performance evaluation of requests for funds. We are also introducing performance-based incentives to ensure that good governance lasts beyond the current administration.

How is fiscal policy helping to stimulate economic growth and encourage foreign direct investment while ensuring diversification of the economy?

PURISIMA: The best incentive a country can give to businesses is quality infrastructure. The government has dramatically increased its infrastructure budget, aiming for 5% of GDP by 2016, up from the current 2%. Furthermore, we have been quite aggressive in implementing our public-private partnership programme, which has also generated several opportunities for investors. Secondly, we have increased investment in our people as they are the principal drivers of the economy. The Philippines has one of the largest populations in Asia and is about to enter its demographic sweet spot, meaning the bulk of our populace will be of working age. We have improved our education system by adding two years onto primary and secondary schooling, and invested in teachers, classrooms and supplies. We also increased the number of scholarships that are available at the vocational level, as well as better aligning our educational system and industry. Existing incentives and special economic zones will be maintained; however, the more lasting incentives will be infrastructure and the quality of human capital.

What fiscal incentives are in place to encourage local entrepreneurship and boost employment?

PURISIMA: The best way to nurture and promote small and medium-sized enterprises (SMEs) is not fiscal incentives, but ensuring they can endure the challenges of the marketplace by strengthening their ability to obtain information and to facilitate access. The concern should not be taxation, but SMEs’ capabilities to achieve competitiveness in a dependable manner. Our focus is on ensuring SMEs are globally competitive, add value and are sustainable. Additionally, the Philippines has one of the highest penetration rates for microfinance in the region and is similarly trying to expand microinsurance.

How will the National Single Window (NSW) and Customs reform programme improve collection?

PURISIMA: We have started a reform programme in the Bureau of Customs, consisting of changes in personnel and technology, which has led to unprecedented growth in revenue collection. The NSW aims to streamline Customs processes as the country moves towards electronic filing to allow for efficient and accurate collection of data, as well as minimise person-to-person contact, reducing opportunities for corruption.