Speech for the Global Investment Forum

Posted on November 23, 2016

Sec. Benjamin E. Diokno (Global Investment Forum, 23 November 2016, F1 Hotel Manila)

Esteemed guests, investors, entrepreneurs, fellow workers in government, ladies and gentlemen: Good morning!

7.1 percent – that has been the growth rate of the economy in the third quarter of 2016. We have beaten market expectations as we have sustained the economy’s rapid growth despite election-related spending tapering off.
Comparative data also suggest that we are now the fastest growing emerging economy in Asia, ahead of countries like Indonesia, Vietnam and even China. So welcome to the fastest growing country in the fastest growing region in the world.
As Budget and Management Secretary, my task is to make sure that public policy continues to support growth.

The Duterte Administration has ambitious goals and visions for the Filipino people. By 2022, we expect the Philippines to be a high-middle income country, at par with our neighbors like Thailand and China. But we want growth to be inclusive. For the next six years, we expect the poverty rate to decline by 1.25 – 1.5 percentage points annually. We hope that all of our reforms will catapult the Philippines into a high income country by 2040.

However, unless we sustain economic growth, prosperity and poverty reduction will remain to be mere aspirations. We estimate that the Philippine economy needs to grow by at least 7 percent every year, for one generation, to achieve this vision. And this is where investments are brought to the fore – they are necessary conditions in realizing the “Filipino dream”.

So, what exactly has the Department of Budget and Management been doing, and what does it set out to do in the next six years to secure for us a steady stream of investments?

First, we have prioritized infrastructure development. Infrastructure plays a major role in national productivity, employment generation, investment inflows, ease of doing business, among other economic variables. It also improves the mobility of people and the accessibility of basic services. These are obvious gains and will make the Philippines a more desirable foreign direct investment destination.
And we put our money where our mouth is: these pronouncements are backed by government resources. The Proposed Budget for 2017, which has already been approved in record time by the Lower House and is awaiting approval by the Senate, allocates P860.7 billion for infrastructure development. This is just for next year and is equivalent to 5.4 percent of our Gross Domestic Product (GDP). From now until 2022, I estimate that a total of P8.2 trillion to P9.0 trillion (or approximately $200 billion) will be spent on public infrastructure.

Transport infrastructure will be pursued to address the traffic crisis costing us, as a JICA estimate 3 years ago, P2.4 billion pesos daily. We will link rural sectors to growth centers. Lagging regions will be made more accessible to spur economic activity all throughout the archipelago.
The poor, who are vulnerable to natural calamities like floods, will benefit from structural mitigation measures.

Transport infrastructure is a priority with road networks alone receiving P328 billion next year. Alternative modes of transport to decongest urban areas will also be pursued, such as the P1.0 billion allocation for the Metro Manila Bus Rapid Transit Line 1 and the P25 billion for rail transport systems all over the country. The Mindanao Logistics Infrastructure Network is another big-ticket project that will cost P31.5 billion pesos to improve trade and transport in Mindanao.
A key factor to unlocking the potential of Mindanao is upgrading its infrastructure. This is especially true with Mindanao being the poorest island group in the country, particularly ARMM whose poverty rate is still at 54%.

Next, school buildings and health facilities will have respective allocations of P125 billion and P10 billion, respectively. This will also complement our thrust for human capital development.
Irrigation systems will have P26 billion to support agriculture and rural development. Specifically, the National Irrigation Administration (NIA) will extend its irrigation systems to cover an additional 30,000 hectares of land. These provisions are essential to our promise of pursuing growth in lagging regions, while enabling our rural sector to catch up with our ASEAN neighbors in terms of agricultural productivity.

A bigger budget will allow us to make up for the past neglect on infrastructure. For more than 3 decades, infrastructure spending in the Philippines had fallen short of the ideal level of 5 percent of GDP. It averaged 2.9 percent from 2010 to 2016. The consequences of low infrastructure spending are staggering: crumbling infrastructure, high transactions costs and low mobility.

To fully tap the potential of the private sector, we will continue the Public-Private Partnership program but with a twist.
We have changed the rules of engagement. We now entertain unsolicited proposals, subject to Swiss challenge. At the same time, the economic managers recommended, and the President approved, that we will not use PPP as a way of raising revenues for the government. We feel that asking for a premium on PPP projects is taxation without representation. More importantly, it will make public services costlier, perhaps even unaffordable to users.
We prefer what we call Hybrid PPPs, where the government takes care of the financing and the construction, while the operations will be entrusted to the private sector. This way, the government can take advantage of lower borrowing rates through development assistance. At the same time, it will allow the private sector to efficiently manage operations of PPP projects.
As of November 16 2016, 14 PPP projects have been completed or are under implementation worth P293.3 billion. The entire PPP pipeline is now worth more than P1.6 trillion pesos.
In addition to public infrastructure, human capital development will be pursued urgently. We have a young population and it is necessary to provide them with the tools – quality education, appropriate healthcare, effective social safety nets et cetera – to be an agile, competent and productive workforce. A dynamic labor force will increase or expand bustling industries in the country. We have experienced this with the Business Process Outsourcing and the Information Technology sectors. We must continue preparing our youth to be a productive part of economic growth.

The education sector will receive P700 billion, with the Department of Education alone receiving P570 billion for its goal of universal basic education. Beyond school buildings, seats, learning resources and additional manpower will be provided to our young students. State Universities and Colleges (SUCs) shall also receive P60 billion for quality college education to deserving students. In addition, technical-vocational education will be given P7 billion.
These spending priorities – infrastructure and human capital development – are pressing concerns, lest we risk losing out on another decade of growth and development. The Philippines has been dubbed as the “Rising Tiger in Asia” many times in the past. With strong macroeconomic fundamentals and well-planned and intensely-implemented policies, it is a travesty if we fail to live up to our billing. The Duterte Administration promises to fulfill its role as an enabling government that will propel the Philippines to a fairer, safer, more prosperous and more beautiful society.
Thank you!