Pernia warns of “small Build, Build, Build” infra program if tax reform bill is derailed

May 30, 2017

Socioeconomic Planning Secretary Ernesto Pernia warned on Tuesday the government's ambitious "Build, Build, Build" infrastructure program could be derailed and would end up "small" or "no build" at all if Congress fails to pass the first package of the tax reform measure immediately . President Rodrigo Duterte has certified as urgent the passage of Tax Reform for Acceleration and Inclusion Act (TRAIN), which aims to generate P162 billion additional revenue. Pernia said it would not mean "end of the world" if Congress would not pass the tax bill. But he said, "we will be unable to fund the Build, Build, Build. It will be small build, small build, small build...maybe no build, no build, no build." With the "Build, Build, Build" program, the Duterte administration has promised that this will be the "golden age" of infrastructure, with the budget of P795 billion in 2016 to P1.832 trillion in 2022. The government is banking largely on the revenue it could generate from tax collection and not so much from borrowing despite offers from bilateral partners, such as Japan and China. Pernia said, "we’ll have to go slow on, you know, accepting or entering into ODA (official development assistance), you know, agreements with China. "We need to balance, you know, spending, indebtedness on one hand and capacity to pay and service the debt on the other hand. So instead of 10 projects, maybe just one or two. So it’s not going to be the golden age of infrastructure. It will be the bronze age maybe of infrastructure or maybe dark age --- dark age of infrastructure," he explained. But he noted ODA loans from Japan are more concessional than that of China. Japan's interest charge is less than one percent and loans are payable for a much longer period compared with China's "two to three percent," he said. "So it’s (Japan) really the cheapest you can get. Long grace period, long, you know, long repayment period. So, it’s going to be easier to incur," he said. Pernia expressed hope that Congress will pass the first package of the tax reform measure "in toto." The version in the House of Representatives, where tax bills emanate, has made some changes, which in effect government could only generate P82 billion. "I mean, you know, they should have passed it, Congress should have passed it in toto. Yeah, because you know, they should realize that we in the economic team, our interest is really just the country’s development. The improvement of society. We have no personal agenda at all," Pernia said. He said the government's economic team is "trained to do economic analysis, tax analysis. Hence, we know what is best, what is optimal. So that is my message really." He expressed belief that not all legislators "are as well-versed as the economic team is. "Some of them may be experts but not all of them. And they work as a whole. And the economic team also works as a whole and therefore, you know, they should have more trust in the economic team." (Celerina Monte/DMS)