From legislation to execution

SharePHIL’s online summit From Vision to Reality: The Road to Economic Recovery was held last Oct. 21, headlined by Senate President Pro Tempore Ralph Recto who delivered the keynote address followed by a panel discussion with Cherrie Atilano, Manuel Dayrit, and former NEDA chief Ernesto Pernia.

A medicine cabinet approach to COVID-19 response

Sen. Recto believes that the “medicine cabinet” approach in proposing bills, as opposed to a “band-aid“ approach, would provide a more holistic solution to counter the brutal effects of the pandemic on lives and livelihood. Among the bills prioritized in the Senate are the Bayanihan 2, which is being implemented and the 2021 national budget.

Sen. Recto presented tax reform recommendations that aim to support businesses and spur job-creation through a more equitable progressive tax system such as in the CREATE bill. With proposed multiple rates for corporate income tax, which may be based either on income or assets that favor MSMEs which comprise 99 percent of registered businesses and employ 65 percent of the population. The first option is a five-tier tax rate on income with zero percent on enterprises earning below P250,000 and the highest rate of 25 percent at par with our ASEAN neighbors; while the second option is a three-tier tax rate that starts at 15 percent for enterprises with assets below P15 million. He also recommends the tax exemption of schools and hospitals for the next three years, and raising of the VAT-exempt thresholds on the sale of real property. Sen. Recto further proposes the exemption of foreign dividends from tax, the suspension of the minimum corporate income tax for the next three years, and the repeal of the improperly accumulated earnings tax. Recommendations were also made on the rationalization of fiscal incentives to promote investments and encourage foreign firms to remain in the country and continue to provide jobs.

To transform this vision into reality, Sen. Recto said that proposed legislations must first be written clearly and properly by the legislature to lessen room for interpretation as there have been cases wherein the implementing rules and regulations (IRRs) did not reflect the intention of the bill. Oversight committees are also assigned in Congress to help ensure the faithful execution of the laws and who would notify the Executive branch if they observe a deviation in implementation.

Health is economy

In support of Sen. Recto’s focus on legislations concerning the economy, former NEDA Secretary  Ernesto Pernia explained that the country’s poor health system capacity, combined with the government’s late imposition of lockdowns, slow pandemic response, and conservative spending unfortunately gravely affected both public health and the economy. The Philippines has the lowest COVID-19 response spending amounting to only 5.83 percent of GDP compared to its ASEAN neighbors, while credit ratings remained between BBB to BBB+ in Q3. Despite the economic crisis and a spike in national spending, other ASEAN countries also maintained their credit ratings. This means the Philippines could increase its COVID response spending to 10 percent of GDP (or about P1 trillion in additional funds) without suffering a downgrade in credit ratings.

Supporting the agricultural sector

AGREA president and CEO Cherrie Atilano believes that support for the agriculture sector is one of the easiest ways for the country’s economy to bounce back from the pandemic. Farmers continuously produce food which resulted in the agricultural sector’s growth of 1.6 percent while most industries contracted. By investing in Filipino farmers, agricultural research, and mechanization, the government can further help boost farm productivity and competitiveness.

As a young female entrepreneur with a small business, Ms. Atilano also spoke about how MSMEs are suffering from cash flow problems, layoffs, and closures, with small businesses resorting to “sariling diskarte.” The government can assist MSMEs by designing evidence-based policies on taxes, loans, and investment opportunities, assisting firms in the transition to a work-from-home setup to avoid layoffs, and promoting the shift to digital transactions.

Opening the economy safely

Dr. Manuel Dayrit supports the opening of the economy as we have seen negative growth in COVID-19 cases in NCR over the last two month, and says now is a good time to open the economy gradually while avoiding complacency to avoid overwhelming the weak health system capacity of LGUs. In a previous statement, he rated the country’s pandemic response at 75 percent and now a month later despite systemic improvements, rates it at 78 percent mainly because new case rates are still at ~2,600 per day due to gaps in quarantine and isolation as cases continue to spread outside of NCR. Had we been able to reduce this to under 100 cases per day, that rating would have been at 95 percent.

To open the economy safely, Dr. Dayrit recommends ensuring coherent policies, budget, and implementation of COVID-19 control; practicing minimum health standards; helping LGUS on effective implementation of surveillance, prevention, testing, tracing, isolation, treatment, and recovery; providing a safe and effective vaccine; increasing public transport capacity; and ensuring Bayanihan 2 support for health systems at the LGU level.

The role of the private sector

When asked about the role of the private sector in economic recovery, Pernia explains that there is a need for more partnerships between the government and the private sector not only in infrastructure projects, but also in COVID-19 response initiatives. Increased private sector representation in task forces is needed to determine what is good for the economy. Government and private sector collaborations for these activities would, therefore, yield more impactful results in the overall COVID-19 response and measures towards economic recovery.

To view the full discussion and speakers’ presentations from this event, visit the SharePHIL website at www.sharephil.org.

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Ma. Aurora “Boots” Geotina-Garcia is vice president of SharePHIL and treasurer of the Institute of Corporate Directors. She is also chairperson of the Philippine Women’s Economic Network (Philwen) and co-chair of the Philippine Business Coalition for Women Empowerment (PBCWE). She is president of Mageo Consulting Inc., a company providing corporate finance advisory services.