IMF pushes legislative priorities outlined in SONA

MANILA, Philippines - Legislative priorities outlined by President Aquino in his State of the Nation Address (SONA) are structural reforms which should be enacted soon to help foster sustainable growth, the International Monetary Fund (IMF) said.

“What the President said constitutes structural reforms which we hope could be passed as soon as possible,” IMF resident representative Shanaka Jayanath Peiris told The STAR in an interview.

Focus should be given on the rationalization of fiscal incentives, which the multilateral agency deems a “very important law” as far as the continuation of fiscal consolidation efforts and attracting foreign investments are concerned.

Aside from this, Aquino also mentioned the Cabotage and land administration reform bills as measures he wants the 16th Congress to prioritize. He also pitched for the support of his allies to amend the state’s pension system.

According to Peiris, the SONA was comprehensive in a sense that it dealt with the strong stature of the economy today and how it could be sustained — through the enactment of laws — over the medium-term.

As far as fiscal incentives reform is concerned, the IMF official pointed out that official figures have shown that the current system does not give the country the benefit of having more foreign direct investments (FDI).

Net inflow of FDI amounted only to $1.505 billion as of April, 2.8 percent lower than a year ago level, based on latest central bank data. The projection of $3.2 billion by year-end, if attained, however does not offset foregone revenues.

“There is also no central kind of coordination on many agencies that provide incentives” which hamper administration of the incentive system, Peiris said.

The incentives reform law would also “level the playing field” among those big companies that get incentives and small and medium enterprises, something the Cabotage law would also address.

The Cabotage measure aims to promote competition in shipping lines in a bid to lower transportation costs and attract more investments in that area. It will amend certain provisions in the Tariff and Customs Code.

On the land administration reform, Peiris said the measure would be welcome if only to “potentially reduce the cost of doing business” since it would give more land ownership security to landowners.

“In effect, anything that creates more agricultural productivity will be positive. It will also be positive in a sense that land can serve as good collateral for business or (other) investments,” he explained.

As for the government, more budget space for public projects could be created once the Social Security System pension scheme is amended as this would reduce the government’s contingent liabilities.

“The more money there are (in pension systems), the more could also be invested by these pension funds,” he pointed out.

Aside from these measures, Aquino also called for the timely passage of his P2.268-trillion national outlay for next year.