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Duterte presents 10-point economic agenda
President-elect Rodrigo Duterte presented a 10-point economic agenda, aimed at sustained economic growth
and ensure that its impact is equitable to all Filipinos, before some 300 business leaders at a consultation
workshop in Davao City on June 20-21.
T
he economic agenda seeks to at least duplicate, if not
improve on, the average GDP growth of 6.2% annually
achieved during the Aquino administration. It is anchored
on the incoming Duterte administration’s Filipino 2040 vision
(AmBisyon Natin 2040) and should guide the preparation of the
next medium-term development plan. The 2040 vision looks at
tripling per capita income to $11,000 in 25 years, making the
country a “high-income country” in 2040 by implementing “right
policies” as well as efficiency and productivity improvements.
The 10-point economic agenda modifies the 8-point agenda
announced by the Duterte transition team on May 12 (see Page
48, May 2016 Philippine Analyst), incorporating the need to
carry out the Reproductive Health (RH) Law to help in poverty
reduction and a focus on science, technology and the arts.
The 10-point agenda also stressed continuity, committing to keep
the sound fiscal, monetary and trade policies put in place by previous The 10-point economic agenda is as follows:
administrations. The next government will “build upon Aquino’s
1. Continuing and maintaining the current macroeconomic
[infrastructure development] reforms,” vowing to accelerate
policies, including fiscal, monetary and trade policies;
timelines for overdue projects and pushing for the completion
of 39 public-private partnership (PPP) projects in the pipeline. 2. Instituting progressive tax reform and more effective tax
Review of the tax system is also part of the agenda, with collection while indexing taxes to inflation, in line with the
the objectives of providing workers more disposable income plan to submit to Congress a tax reform package by September;
and adjusting corporate taxes to be at par with the rest of the 3. Increasing competitiveness and the ease of doing business,
region. Some tax incentives will be abolished to allow for drawing upon successful models used to attract business to
an updating (lowering) of corporate income tax rates. The local cities such as Davao, as well as pursuing the relaxation
tax base will be broadened to compensate for the lower rates. of the Constitutional restrictions on foreign ownership, except
with regards to land ownership, in order to attract foreign
direct investments;
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4. Accelerating annual infrastructure spending to account for 4. Improve internet and communication services to be
5% of the gross domestic product (GDP), with public-private competitive with the best in the region;
partnership playing a key role; 5. Improve services for farmers and fishermen;
5. Promoting rural and value chain development toward 6. Implement a responsible mining policy where responsible
increasing agricultural and rural enterprise productivity and mining is supported, and illegal and irresponsible mining
rural tourism; stopped;
6. Ensuring security of land tenure to encourage investments and 7. Develop a national strategy to take advantage of areas where
address bottlenecks in land management and titling agencies; the Philippines has a competitive advantage both domestically
7. Investing in human capital development, including health and and globally;
education systems, as well as matching skills and training to 8. Improve infrastructure with faster action on projects
meet the demands of business and the private sector; nationwide;
8. Promoting science, technology and the creative arts to enhance 9. Review the CCT program.;
innovation and create capacity towards self-sustaining and
10. And remove the bottlenecks in the PPP programs and commit
inclusive development;
to sanctity of contracts.
9. Improving social protection programs, including the
In the business conference “AIM for Change” in Manila on June
government’s conditional cash transfer program, in order to
22, prominent business leaders expressed support for the economic
protect the poor against instability and economic shocks; and
agenda. Manuel Pangilinan (MVP), chairman of the MVP Group of
10. Strengthening the implementation of the Responsible Companies, said “the business sector will definitely work with the
Parenthood and Reproductive Health Law to enable, especially new government and its 10-point agenda.” He added that “there’s
poor couples to make informed choices on financial and a positive energy in working with the present administration”.
family planning. Doris Magsaysay-Ho, president and CEO of the
During the consultation workshop dubbed as “Sulong Pilipinas: Magsaysay Group of Companies, identified tourism,
Hakbang Tungo sa Kaunlaran” (Philippines Onwards: A Step innovation and education as major areas of growth.
Towards Progress), the participating businessmen also presented She noted Davao’s success in growing its economy and
a list of issues that need to be urgently addressed by the incoming creating employment to the lowest sectors under Duterte.
administration. A number of these concerns are already included in Asian Institute of Management (AIM) founder and
the 10-point agenda, such as a comprehensive tax reform package, a highly respected 94-year old accountant Washington
infrastructure and CCT program review. The issues identified were: Sycip echoed a similar observation, expressing hope of
1. Adopt a comprehensive tax reform package; the success in Davao being replicated throughout the rest
of the country. “What he [Duterte] has done for Davao
2. Implement a national I.D. system;
is wonderful in terms of integrity and policies,” he said.
3. Streamline the bureaucratic system and thereby reduce
corruption;
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Impact of Brexit on PH manageable Nonetheless, the impact on the local market is seen
to be temporary, as fundamentals remain strong. The
The United Kingdom (UK) vote on June 23 to break away Philippine economy can look forward to sustaining a high
from the European Union (EU), or Brexit, is expected to rate of growth based on domestic boosts alone especially
impact on Philippine exports, foreign direct investment (FDI) rising disposable incomes and infrastructure spending.
inflows, and overseas Filipino workers (OFW) remittances,
but only mildly. It will also have a short-term effect on the
country’s financial market. Net optimism stays at record high in 1Q16 -
SWS
Uncertainty over the status of duty-free access under the
EU-sponsored Generalized System of Preferences Plus (GSP+), Net optimism in the respondents’ quality of life in the next
coupled with a weakening of the British economy as its products 12 months reached +40 in the 1st quarter of 2016, tying
lose market access privileges with EU as a result of its exit from the all-time high recorded in the previous quarter. Those
the bloc, will slow Philippine exports to the UK. Philippine expecting their lives to improve (“optimists”) over the
exports to Britain, though, was just $478 million or hardly 1% 12-month period accounted for 43% of the respondents, while
of total exports in 2015, mostly food and agricultural products
those who believed it would get worse (“pessimists”) were
and automotive parts. The indirect effect, in case Brexit also
4%. Net optimism is the difference between the percentage
hurts other countries in the EU with strong trade links with
of optimists and pessimists.
the UK, could be a more perceptible adverse impact as exports
According to the Social Weather Station (SWS), which
to the EU account for about 12% of total Philippine exports.
conducted its latest Social Weather Survey from March 30 to
Also as a consequence of a possible weakening of the British
April 2, +40 can be classified as a “very high” score (+30 and
economy, the appetite and capacity of British companies to invest
up), SWS’s highest classification. It was attained in 16 out
overseas could wane. FDI from UK, however, is less than 2%
of 23 instances during the administration of former president
of the total during the past 4 quarters, i.e., from 2Q15 to 1Q16.
Benigno Aquino III. It only occurred once each during the
The impact on OFW remittances is hard to determine
Arroyo and Corazon Aquino administrations, and twice
at this point. It is estimated that there are at least 200,000
during the term of Fidel Ramos. Net optimism never reached
Filipino migrant and contract workers in Great Britain. Official
“very high” classification during the Estrada government.
data showed they sent around $1.4 billion to the Philippines,
Positive outlook ahead of the presidential election
nearly 6% of all OFW remittance inflows, in 2015. The
results was seen by many analysts as added boost in
remittances could take a hit with the combined decline of
sustaining the record high net optimism score in 1Q16.
the British Pound and the narrowing of job opportunities for
Among all of the socio-economic classes, the ABC group
migrant workers as the British economy suffers a tailspin.
posted the highest score at +47, also a 2-year high for the
There will also be volatility in the financial markets in
group since +49 in 3Q13. The D class recorded +41, a new
the near-term, as markets react to the uncertainties caused
record high for the group, besting the previous high of +40 a
by Brexit. The Philippine stock market lost 2% of its value
quarter ago. Class E, or the poor, experienced a decline to +35
from the UK referendum to the announcement of the voting
(albeit still a “very high” score) from +42 in December 2015.
results, although it subsequently recovered part of this loss.
In terms of geographical location, net optimism was highest
As demand shifted to “safe haven” currencies like the U.S.
in Metro Manila at +43, hardly changed from the previous
dollar and the Japanese yen, the peso also slid against these
quarter, although Balance (Rest of) Luzon at +42, a 5-year
currencies. It was down to P47:$1 a week after the voting.
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high, and Mindanao at +41, slightly up from the previous excess liquidity in the system, according to analysts.
quarter, weren’t far behind. Visayas recorded the lowest albeit The BSP intends to maintain the issue size to P30 billion, P10
still “very high” +34, but nonetheless a new all-time high. billion in 7-day deposits and P20 billion in 28-day deposits, for the
Net optimism about the economy reached +28 in whole month of June. But it may scale up the amount eventually to
1Q16, which SWS considered as within the “very high” enable convergence of the market interest rates to the BSPpolicy rate.
classification (+10 up for expectations on the economy), The TDF auctions use a web-based platform Monetary
although a slight decline from +30 in 4Q15. The percentage Operations System (MOS) operated by the central bank. The BSP
of respondents who believed the economy would be better again clarified that the IRC system simply provides guidance to short-
was 35%, while those who thought it would be worse was 7%. termmarketinterestratesbutdoesnotaltertheBSP’smonetarypolicy.
Meanwhile, the SWS survey disclosed that those who felt
that their lives improved (“gainers”) during the past 12 months Unemployment saw only a modest reduction
reached 29%, while those who perceived it to have worsened
(“losers”) accounted for 26%, for a net gain of +3. This was in 2Q16
down from +5 in the December 2015 survey and the all-time
Net new job creation was 398,000 during the past 4 quarters,
high of +6 in 1Q15. Nonetheless, this still reflected the highest
classification of “very high” (+10 up) for the net gain score and bringing employment to 39.92 million and reducing
still belonged to just the 5 survey periods with a positive score. unemployment by 87,000 to 2.59 million (6.1% of the labor
The April 2016 Social Weather Survey had a sample of 1,500 force) in April (2nd quarter) 2016. The improvement on the
adult (18 years old and above) respondents nationwide, 300 each in labor force picture was helped in part by the decline in the
Metro Manila, Rest of Luzon, Visayas and Mindanao. Face-to-face labor force participation rate (LFPR) to 63.6% in 1Q16
interviews were conducted. The margin of error is +3% for the from 64.6% in April (2nd quarter) 2015. One assumes
national percentages, and +6% for the geographic area percentages. many didn’t participate because they’d given up. If the
LFPR had steadied, unemployment would have been 3.26
Interest corridor system launched million (7.6%).
The Bangko Sentral ng Pilipinas (BSP) or central bank Essentially, net job creation was relatively small at 398,000,
offered P305 billion worth of overnight reverse repurchase but unemployment still dropped in both percentage and absolute
(RRP) facility on June 3, signaling the start of the interest terms as there was a significant decrease in the working age
rate corridor (IRC) system. The offer, which attracted population who were actively seeking and were available
for work. But many of those who were no longer actively
tenders of P574 billion, was set at a rate of 3%, down from
seeking for work could be part of the unemployed, forced out
the previous rate for the RRP facility of 4%, and served as
of the labor market due to perceived lack of worthwhile jobs.
the policy rate for the IRC.
Assuming that the LFPR had remained the same as last year,
this would mean unemployment was reduced by only 20,000.
The IRC is now the BSP’s main tool to mop up excess liquidity
The underemployment rate, or the percentage of employed who
and to temper volatility in short-term market rates, moving the
are still seeking additional hours of work or work with better pay,
market rates towards the policy rate. Subsequent weekly auctions
remainedhighat18.4%inApril2016,worsethan17.8%inApril2015.
(every Wednesday) of term deposit facility (TDF) siphon off
In terms of sector, agriculture lost a large number of jobs,
liquidity from the financial system, with banks and trust companies
roughly 1.5 million, due in large part to El Niño, reducing
allowed to bid for a minimum of P10 million and a maximum
its share to total employment to 25% in 2Q16 from 29.3% in
of 20% of the amount of term deposits to be auctioned. Rate
2Q15. The losses were largely absorbed in services, where 1.4
bids can range between pre-set ceiling and floor or a corridor.
million were created, resulting in employment of 22.62 million
The overnight lending or RP rate defines the ceiling, at 3.5%
(56.7% of total employment) in the sector in 2Q16. Industry
most recently, while special deposit account (SDA) rate sets
(18.3% of employment) generated an additional 843,000 jobs.
the floor, which was at 2.5%. The SDA placements, though,
In terms of class of workers, wage and salary workers
will be wound down and replaced with overnight placements.
were the largest at 24.79 million (62.1% of total employment)
The maiden issue of term deposits on June 8 attracted
in 2Q16, also the top source of job creation at 2.16 million,
P194.7 billion worth of bids, well in excess of the TDF issue
from 21.22 million (57.8%) a year ago. The other major
size of P30 billion. The 7-day term deposits got bids of P82.4
source of job growth was employer in own farm/business
billion, 8 times more than BSP’s issue of P10 billion. The
with increase in employment of 102,000. In contrast, workers
28-day term deposits had offers totaling P112.3 billion, well
without pay working on family farms or businesses declined
above the P20 billion put up for auction. Consequently, the
to 3.21 million (8.1%) from 4.35 million (11.1%). The self-
oversubscription drove the rates down to the 2.5% floor.
employed without paid employees reached 10.62 million
The 2nd weekly auction held on June 15 was again
(26.6%) in 2Q16, albeit down from 11.04 million (28.2%).
oversubscribed, with bids reaching P63.9 billion for the 7-day term
deposits and P92.9 billion for the 28-day term deposits. The BSP’s
offer was unchanged at P30 billion, P10 billion in 7-day TDF’s and
P20 billion in 28-day TDF’s. Hence, the rates remained at 2.5%.
The excess of bids meant that there was still significant
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Source: Philippine Statistics Authority’s (PSA) Labor Survey
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RESULTS OF THE LABOR FORCE SURVEY* (%)
April 2016 January 2016 April 2015
Labor Force Participation Rate (%) 63.6 63.3 64.6
Size of labor force (million) 42.49 41.46 41.86
Employed (million) 39.92 39.06 39.16
Unemployed (million) 2.59 2.47 2.68
Unemployment Rate 6.1 5.8 6.4
Underemployment Rate 18.4 19.7 17.8
Employed by Class of Workers (% share)
Wage and Salary Workers 62.1 63.2 57.8
Self-Employed w/o paid employee 26.6 25.8 28.2
Employer, family-owned farm or business 3.1 3.3 2.9
Worked without pay in own family operated farm or
8.1 7.1 11.1
business
Employed by Sector (% share)
Agriculture 25.0 27.0 29.3
Industry 18.3 16.7 16.5
Services 56.7 56.3 54.2
*Excluding Leyte
Source: PSA, Labor Force Survey
Philippine ANALYST ECONOMY June 2016
