Duterte: Tough on crime, but how about the economy?

Last week, a broad outline of the incoming administration’s economic programme finally emerged, to the delight of the business community. Duterte’s transition team presented an eight-point economic agenda focusing on investments, infrastructure, tax reforms, social services and rural development.

The programme helped calm fears in the business sector with news that the president-elect will maintain the country’s current macroeconomic policy. No doubt, the Aquino administration is to be credited for a sustained expansion in gross domestic product averaging a decades-high 6.2 per cent anchored on a stable fiscal and monetary regime.

For ordinary wage-earners and corporate taxpayers, the good news is that the incoming administration is planning to lower income tax rates to 25 per cent from the current 32 per cent, which is among the highest in the region. As one of Duterte’s economic advisers pointed out, the Philippines needs to align its tax system with those of its Asean neighbours to be competitive. Investors will not come if they perceive the tax system here is too punishing.

This makes sense, as one of the economic thrusts of Duterte’s administration is to make the investment climate more attractive to foreigners. The plan is to ease economic restrictions on foreign direct investments. Currently, foreigners are barred by the constitution from investing in certain industries and restricted to owning no more than 40 per cent in others. Relaxing these restrictions had long been suggested by various business organisations, which contend that opening more sectors to foreign investors will bring an end to inefficient or underperforming monopolies.

Ease of doing business, especially when it comes to obtaining various permits from local government units, is also high on Duterte’s agenda. The plan is for the national government to follow the “Davao model”, where licences needed to start and operate a business are issued in the shortest possible time. It promises a regime in which the government will actually be of help rather than hindrance to investors seeking to open businesses.

Also on the agenda is the plan to develop rural areas, basically agriculture, by providing support services to small farmers to improve their productivity. The new regime will encourage more investors to put up processing businesses in agricultural areas. Promoting tourism in rural areas will also be a focus. And so is the strengthening of the basic education system and the provision of scholarships for tertiary education, which Duterte’s team believes will help meet market needs.

The new economic agenda will also maintain two pillars of President Aquino’s administration – the public-private partnership programme (which is stuttering) and the hugely successful conditional cash transfer scheme – the Pantawid Pamilyang Pilipino Programme.

Among names floated as possible members of the Duterte Cabinet, one stands out as far as the business community is concerned: Carlos Dominguez, a member of the Duterte transition team and Cabinet secretary under presidents Corazon Aquino and Fidel Ramos. The incoming administration has yet to formally name its economic managers, or those who will hold the portfolios for trade and industry, finance, public works, energy, budget and economic planning. The choice of people named to these posts will largely determine whether or not Duterte’s economic agenda achieves success. As such the new president needs to take time and care in choosing the right figures, with good track records and respect among business figures.

In the end, the Duterte administration will only be as good as the people who will serve in it.