Dominguez cites ‘robust, mutually beneficial’ Philippine-Japan ties

September 27, 2017

TOKYO— Finance Secretary Carlos Dominguez III has cited the “robust and mutually beneficial relationship” between Manila and Tokyo for the past six decades as he thanked Japan for its continued support for the Philippines’ economic development on the watch of Japanese Prime Minister Shinzo Abe, who has pledged a 1-trillion yen ($9 billion) investment and development aid package to the country.

Dominguez said the Philippines’ planned first subway line, made feasible and possible through Japanese financing and technical support will be “a great monument to the friendship” between the two countries.

As the Duterte administration pursues its ambitious program to modernize infrastructure and accelerate inclusive growth, Dominguez told potential Japanese investors at a briefing here on the Philippine economy the Philippine government was looking forward to increased investment flows from Japanese companies.

“We are impressed with the commitment to excellence that imbues your corporate culture. We hope to benefit from the transfers of technology that invariably tracks investment flows,” Dominguez said in noting Japan has been a major source of industrial investments in the Philippines.

“We look forward to an even stronger partnership with the Japanese people,” said Dominguez at the Philippine Economic Briefing held at Conrad Hotel Tokyo.

On the part of the Duterte government, Dominguez said, “We commit to further improve the ease of doing business, respect the sanctity of contracts, and promote a more conducive climate for investments.”

He pointed out Manila’s accelerated spending beginning in this year’s second quarter illustrates mot only the Duterte government’s greater absorptive capacity but also its strong political resolve to embark on an unprecedented investment program anchored on higher public spending on infrastructure and social services that is designed to spell economic inclusion for all Filipinos.

Dominguez said the Philippine government is working with its Congress on tax policy and administration reforms to ensure a steady revenue stream that would enable it to carry out this capital-intensive high-growth program while maintaining fiscal discipline.

“The fiscal discipline we maintained over the past few years enabled the country to achieve investment grade credit ratings. Those ratings enable us to borrow at significantly lower rates. We intend to continue deserving those credit ratings,” Dominguez said.

He said the Philippine economy has become “an engine of growth” in Asia, with its second quarter GDP expanding by 6.5 percent, which is well on track in meeting the full-year target growth rate of 6.5 to 7.5 percent.

“The strong growth our economy exhibits could not be possible without strong partnerships with our friends in the region,” Dominguez said, citing the generous assistance that Japan has extended to the Philippines to support its economic development.

An even more significant development is that GDP growth was led by the industry sector at 7.3 percent, and agriculture at 6.3 percent, which is a “departure from the earlier pattern where growth was led by the services sector,” Dominguez said.

OFW remittances accounted for about a tenth of the GDP and the country’s high domestic consumption demand, while government spending sped up by 7.1 percent year-on-year during the second quarter.

“We are also expecting more investments coming in as we modernize our infrastructure and reform our economic policies to spur business activity,” Dominguez said.

“Investment-led growth will make our domestic economy more inclusive and create quality jobs for our people,” which would, in turn, help bring down poverty incidence from the current 21 percent to 14 percent by 2022, he noted.

Dominguez  said a  low-interest environment encouraged a property development boom and increased business activity, while pulling down the country’s public debt to “more than manageable levels.”

“Over the coming years, we expect that benign interest environment to persist,” he said.

Despite the increased spending on infrastructure and social services, Dominguez told the Japanese business community that the Philippines expects inflation to hover between two percent and four percent through the medium term.

Public sector deficit will be limited to 3 percent of GDP and a 80-20 ratio on loans in favor of domestic borrowings will be a matter of policy  to lessen foreign exchange risks, he said.

“Over the past few years, our GDP grew faster than our debt accumulation. Prudence dictates that we strive to maintain this trend. Fiscal stability is key to the sustainability of our economic expansion. We are further modernizing our capital markets to enable the consolidation of capital to support long-term growth,” Dominguez said.

Dominguez also cited the government’s continuing efforts to improve the ease of doing business by cutting red tape, curtailing corrupt practices and limiting its negative list for foreign investments, and training the country’s young and talented workforce to be more globally competitive, as among the factors that would keep the economy on its high-growth path and haul in more long-term investments. DMS