OBG Talks to President Rodrigo Roa Duterte

Interview: Rodrigo Roa Duterte

How could the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) affect micro-, small and medium-sized enterprises (MSMEs)?

RODRIGO ROA DUTERTE: The TRABAHO package is designed to strengthen the sustainability, competitiveness and productivity of MSMEs by lowering corporate income taxes. Since MSMEs comprise 99% of the country’s businesses and employ 65% of the workforce, TRABAHO will ensure near-term job creation. Moreover, the package will incentivise MSMEs to invest in innovation and technology, especially in the provinces. By enjoining big businesses to share their tax incentives with smaller entrepreneurs, TRABAHO will help businesses to hire more workers and Filipinos to improve their livelihoods.

What can be done to offset investors’ concerns about TRABAHO’s rationalisation of incentives?

DUTERTE: Foreign direct investment (FDI) is a major driver of our economic growth. In 2017 almost P620bn ($11.5bn) in FDI was spent on roughly 440 projects, and net inflows exceeded realised inflows for 2016 and the $8bn projection for 2017. These are indicators of strong investor confidence, founded on solid macroeconomic fundamentals and the country’s growth prospects. The Tax Reform for Acceleration and Inclusion (TRAIN) law was passed in 2017 to attract investments and promote the country’s competitive products and services to the global market. Moreover, in an effort to strengthen partnerships in and beyond the region, in 2018 we enacted the Ease of Doing Business and Efficient Government Service Delivery Act, which assures the protection of foreign investments and addresses bottlenecks in business-permitting processes.

To what extent has official development assistance (ODA) helped to develop infrastructure?

DUTERTE: The Philippines needs partners that will provide training, professional support and financial aid for the realisation of our development goals. The shift towards ODA to fund the Build, Build, Build programme is very crucial. As of end-2018 Japan remained the Philippines’ largest source of ODA at 40.3% – or $6.3bn – of our total portfolio. Japanese funding covers projects in agriculture, natural resources, agrarian reform and infrastructure, including the Metro Rail Transit Line 3 Rehabilitation Project; the Metro Manila Subway Project; the North-South Commuter Railway Project from Malolos to Tutuban; and the Capacity Enhancement of Mass Transit Systems in Metro Manila Project.

The involvement of businesses in public-private partnerships is best illustrated by infrastructure projects, such as the construction of bridges, roads, ports, airports, railways and other public facilities. Such investments comprise a pivotal strategy for the private sector to accelerate domestic commercial growth.

Where do you see potential for further cooperation in de-escalating tensions in the West Philippine Sea?

DUTERTE: An independent foreign policy that builds bridges of friendship and understanding through regional peace and stability is a priority of this administration. The Philippines and China have gradually resumed bilateral dialogue, and we keep our communication lines open through means like the Bilateral Consultation Mechanism on the South China Sea.

We are resolved to ensure that the sea remains a place of peace, stability and prosperity. As such, we have encouraged China and our fellow ASEAN nations to expedite the conclusion of a code of conduct at the earliest opportunity, which will help to ensure safety and freedom of navigation, prevent and manage incidents at sea, and contribute to regional stability.

What changes do you perceive in the evolution of bilateral relations with China and the US?

DUTERTE: While the current tariff disputes between the US and China might affect the global economy, the Philippines’ historical alliances and renewed partnerships with our neighbours will enable us to sustain our current economic trajectory.

Our traditional alliance with the US notwithstanding, we pursue an independent foreign policy that seeks to reinforce links with non-traditional allies. For example, we have explored new areas of engagement with China, especially in political and security cooperation, while the Belt and Road Initiative has broadened our economic exchanges and will create opportunities that can anchor our countries’ mutual interests in the region.

How can public policy drive equality and inclusivity?

DUTERTE: We continue to provide social protection and growth opportunities that can build socio-economic resilience, especially on behalf of the poor, the marginalised and the vulnerable. This includes the provision of housing for the poor and the development of schemes to finance affordable homes. Household electrification is also of paramount concern, though it should not be confined to the supply side to empower consumers by teaching them about conservation and responsible use.

Education is a way out of poverty, and the enactment of the Universal Access to Quality Tertiary Education Act in August 2017 has enabled more Filipinos to learn in tertiary and vocational institutions.

Providing safe, decent and humane working conditions is also of utmost concern, which involves enhancing worker employability and competitiveness by providing relevant training and work experience.

Fostering a dynamic and competitive environment for MSMEs is likewise key. In this area, our interventions include the provision of an alternative source of financing for micro-enterprises through the Pondo sa Pagbabago at Pag-Asenso, or P3, as well as the establishment of several Negosyo Centres to assist entrepreneurs. The Kapatid Mentor ME Programme provides coaching and access to the Shared Service Facilities Project, while the Go Lokal! programme encourages large corporate businesses to make market space available to MSMEs.

Regarding poverty alleviation, the Department of Social Welfare and Development works with local governments to deploy the Pantawid Pamilyang Pilipino Programme (4Ps), the Unconditional Cash Transfer Programme and the National Household Targeting System.

Public health policy is geared towards expanding insurance coverage and benefits to cover medical assistance for indigents; a programme of free medicine for poor families; the removal of value-added tax on certain maintenance medicines; and the creation of an endowment fund that provides financial support to government hospitals and patients in the charity ward.

In which ways does the administration provide support to 10m overseas Filipino workers (OFWs)?

DUTERTE: In order to look after OFWs throughout the migration cycle, we have streamlined services that cater to their concerns through one-stop service centres. It is also a priority to foster stronger ties with countries where OFWs work, and we have entered into bilateral labour agreements with several countries to ensure that our citizens’ rights are always upheld. The system also responds to their repatriation needs in times of distress and facilitates their productive reintegration into our local economy. Lastly, we have established the Overseas Filipino Bank, which will strengthen the government’s presence in the remittance market and influence other banks to lower their remittance fees.

What kind of investors do Marawi bonds appeal to?

DUTERTE: We continue to enjoy healthy partnerships with foreign investors in the reconstruction of Marawi City. Japan, for example, has remained supportive by providing loans and grants for the implementation of infrastructure plans. We are also working to assure all investors of our commitment to carrying out the Bangon Marawi Comprehensive Rehabilitation and Recovery Programme to help the city and its surrounding communities become peaceful and resilient by 2022.