The Philippines’ new finance secretary appointed by the hard-nosed incoming president, Rodrigo Duterte, has vowed that the new government won’t destroy the economic gains of the outgoing Aquino administration, but will work to spread them to ordinary Filipinos.
“We are here to build on, not destroy, those gains,” said Carlos Dominguez, who last served as minister two decades ago. He currently owns the Marco Polo Hotel in Davao City on southern Mindanao island, where his childhood friend, Mr. Duterte, is the longtime mayor.
The tough-talking Duterte won the presidential election in early May on a platform of extending the measures to stamp out crime he used in Davao across the country. He has advocated killing criminals and suspending human-rights laws, and has gained attention for controversial comments about rape and the pope. Critics question his temperament in assuring investors he can run a country that just recently shed the label, “sick man of Asia.”
Mr. Dominguez previously served as secretary of agriculture and chief of the environment and natural resources agency under Corazon Aquino, president from 1986 to 1992. For the past three decades, he has focused on business and sat on the boards of various companies. He said Mr. Duterte will adopt the best ideas available, including some from outgoing President Benigno Aquino III, son of the former leader.
Can the Philippines Stay on Track?
“As Rody says, there is nothing wrong in copying,” Mr. Dominguez said in an interview. “This government has done some things that are very good. They have achieved a certain growth rate and exceeded their targets. Obviously, we want to do the same.”
Mr. Dominguez, who like Mr. Duterte is 71 years old, admits he doesn’t have the energy that sustained him in Mrs. Aquino’s hectic tenure after she led the People Power revolution that toppled the dictator Ferdinand Marcos. In fact, he skipped the last few days of the presidential campaign to rest.
“I still have my magic box, but someone carries it for me now,” he said, pointing to a blue cardboard box containing documents and “cheat sheets.”
Mr. Dominguez has been poring over the tax-reform package that outgoing Finance Secretary Cesar Purisima handed him recently to work out a smooth transition of power. He said the proposal may be adopted if it eases the burden on taxpayers, corrects inequities and broadens the tax base.
At 32%, corporate income tax in the Philippines among the highest in Asia. Mr. Dominguez said it needs to fall to 25% to be competitive. Individual income-tax levels need to be updated and indexed to inflation, he said.
Mr. Aquino fought to improve governance and consolidate the country’s finances. That enabled the Philippines to grow at an average 6.01% annually in the last five years, the fastest in decades. Credit-rating firms have upgraded the sovereign rating to investment-grade, while foreign investors poured in funds.
“What they have failed to do is to make sure that the average Joe feels that he has also benefited from that growth,” said Mr. Dominguez, noting that the 22% gain in per capita income over the last five years hasn’t significantly reduced poverty.
Nearly three in 10 Filipinos live below the poverty line. Living conditions in metropolitan Manila have worsened because of the influx of people from the countryside in search of better jobs. Crime has grown. Mr. Duterte entered the presidential race late, but his tough talk on drugs, crime and corruption yielded a landslide victory.
“We will lower the crime rate. It is the basis on which this economy will grow,” said Mr. Dominguez, recalling how investment in some parts of Mindanao suffered because of crime concerns. He said businesses have invested in Davao because of the progress Mr. Duterte made on bringing down crime.
Mr. Duterte has taken a particular interest in the internal-revenue and customs bureaus—the finance ministry’s two biggest revenue-generating agencies, but widely seen as the most corrupt. Mr. Dominguez indicated he would give up the finance secretary’s traditional prerogative of choosing the heads of the agencies and let the president do so instead.
Mr. Dominguez estimated that around 300 million pesos ($6.4 million) are lost each day due to corruption at the customs bureau alone—enough to support a subsidy program for the poor.
The administration is looking at further liberalizing the business environment, and will hold a meeting with local business groups in late June on how to attract more investment. Mr. Duterte is ready to amend the Constitution to allow more foreign investment, but not necessarily to allow foreigners to own land.
“We are going to make a big push to liberalize the investment climate here,” Mr. Dominguez said. “And if that requires a constitutional change, we are willing to undertake that.”
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