- Incoming government will keep policies that boosted ratings
- Dominguez says president-elect must be judged on Davao success
Philippines’ incoming finance chief, Carlos Dominguez, sought to reassure investors that his new boss is a pragmatic leader who’ll build on the gains that’s made the Southeast Asian economy one of the fastest growing in the world.
While president-elect Rodrigo Duterte makes the headlines mainly for his brashness, foul language and anti-crime rhetoric -- including threats to kill criminals -- Dominguez wants investors to look beyond that to Duterte’s track record as mayor of Davao city. Duterte plans to spread the policies that helped the wider Davao region, which includes the city, expand 9.4 percent in 2014, the fastest in the country, he said.
“He has done it by, first of all, assuring there is peace and order, that the laws are fair and uniformly implemented and he has been business friendly,” Dominguez, a childhood friend of Duterte and a former agriculture secretary under the late President Corazon Aquino in the 1980s, said in an interview in Manila on June 3.
“You can ask the medium- and small-sized businesses and I think they will all tell you that the president-elect runs a city where the red tape is minimal, where corruption is absent in all levels, where the laws are strictly implemented,” he said. “Just look at that and judge for yourselves.”
Duterte, who will take office on June 30, inherits an economy that grew faster than China last quarter, won its first investment-grade credit rating under outgoing President Benigno Aquino and has ample fiscal room for the new government to boost spending. Duterte plans to pursue policies that will create jobs, boost economic growth and lead to higher credit ratings, Dominguez said.
“We are going to certainly keep the successful macroeconomic policies that have allowed our ratings to be improved, that have stabilized our finances,” he said. The new government will seek at least another two rating upgrades, he said.
Dominguez, a 70-year-old businessman who owns Marco Polo Hotel in Davao, outlined plans to cut income taxes and increase borrowing as the new government seeks to invest more in infrastructure and create more jobs. The unemployment rate was 5.8 percent in January, among the highest in Asia.
“The big elephant in the room here is the underemployment and the unemployment and we have to grow faster to give those guys more participation in the economy,” he said. “We have to make sure we have strong investment in human capital, in physical capital where we encourage competition, where the business regulations are not restrictive and where we look toward creating that environment and confidence in the Philippines.”
For more on the Philippines’ plan to cut taxes, see this story: Philippines New Finance Chief May Cede Revenue for Growth
Duterte won the May elections with his tough talk to fight crime and deal decisively with transport bottlenecks, especially traffic-clogged roads in Manila. The economy, which expanded 6.9 percent in the three months through March from a year earlier, is forecast by the International Monetary Fund to grow 6 percent in 2016.
The Philippine Stock Exchange Index rose 1 percent to the highest in 10 months while the peso gained 0.5 percent, the most since May 10, to 46.22 per dollar as of 12 p.m. in Manila on Monday. The yield on the benchmark five-year peso bonds fell to 2.98 percent, the lowest since February 2015, according to Philippine Dealing & Exchange Corp.
Ben Diokno, who will take over the budget portfolio, said in an interview last week the new government is seeking to cut income taxes and borrow more as it widens the budget deficit to a “comfortable” target of 3 percent of gross domestic product. That would be the biggest shortfall since 2010.
Dominguez said he is open to borrowing in dollars and local currency and may consider diversifying to yuan and sukuk debt, depending on what is the “best deal.”
The government will focus on boosting tax revenue, with Dominguez saying he has strong confidence in the new tax and customs chiefs.