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2017 can make or break PH

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2016 was a tough year.  Although  the economy  grew apace,  the  year ushered insweeping changes in the world order. From Brexit, to American protectionism, to a weakening NATO,  to China’s aggressive expansionism  and President Duterte’s bias against western democracies – all these changed global geopolitical conditions for us completely.

The writing on the wall is clear.  Our traditional allies are now looking inwards and we can no longer rely on  them for military protection or preferential  treatment for trade and aid.  To survive, we need to be more self sufficient, economically and militarily.

Change brings its fair share of threats – but also opportunities.  We must work smart in 2017  by making these changes  work to our advantage.

The good news is that the Philippines possesses certain competitive advantages that allow it  to leverage upon shifting global conditions.Among them  is our  strong consumer-driven economy. The voracious consumer  appetite of our 102 million population insulates our manufacturers and service providers  from weakening markets abroad.

Too, we possess a  demographic advantage where the majority  of  the population are now of working age.  In addition, some 350,000  workers enter the professional pool every year contributing to productivity and further firing-up  domestic demand.

Finally, our fiscal position remains strong  with a low debt to GDP ratio and comfortable Gross International Reserves  of more than 25 percent of GDP (or some $82 billion).  Our robust fiscal status allows us easy access to loans  for developmental projects at prime rates.

Unlocking our potentials, however, requires the right mix of policies. For lack of space,   let me enumerate  five policies which I believe should beprioritized.

First is the obvious need to  bridge the  infrastructure gap.   There is no way out of it.   We must  build the infrastructure today to  avoid the economy choking on itself tomorrow.  Fortunately, government has a plan to spend P8 trillion on vital infrastructure projects within five years. The caveat is that it needs emergency powers to do it without being encumbered bylegalities.    The sooner Congress grants the executive branch emergency powers, the better.  Its importance cannot be over-emphasized.

Second,    “The  Comprehensive National Industrial Strategy” is an existing  program designed to foster aresurgence of the manufacturing sector.  It must be pursued  aggressively even if it was  designed by the previous administration. Inthe  heart of the programis what is called “development roadmaps.” These roadmaps provide the framework and chronological  steps to elevate   certain  industries from its current  state   to a level of global competitiveness.   There aresome 45 industry roadmaps including those for  automobile manufacturing,  electronics, consumer appliances,  IT-BPM, chemicals, etc. For us to take advantage of our consumer-lead economy, we must manufacture more and import less.  Manufacturing is key because  it generates jobs, boosts productivity and reduces our import bill.

Third,  the drop in Foreign Direct Investments (FDIs) must be arrested. Government’s confusing   foreign policy and seeming  animosity towards western democracies have caused FDI’s to drop by 45 percent in the 3rd quarter across all seven of our  investment promotion agencies.  Government needs to work in concert to attract FDI’s,  not dissuade them.   FDI’s build economic capacities and infuse technology.

Fourth, personal and corporate income tax structure must be amended.  The  present tax code was enacted in 1997 when one peso was worth P2.27 in today’s terms. Through the years, currency depreciation and inflation have eroded the peso’s purchasing power.    Hence,  what P10,000 could  buy in 1997  can   only afford   P4,400 worth of goods  today.  The tax brackets must be adjusted   to today’s conditions so as not to erode the purchasing power of the low income sector. The ability of the masses to consume  moregives the economy the legs it needs to grow not withstanding  weakening exports.   In terms of corporate income tax, our 30 percent must be rationalized to the level of Indonesia’s 25 percent or even Thailand’s 20 percent, if we are to be competitive.

Fifth, we need to unite the nation towards our common goals and challenges, not divide it. The Presidential Election Tribunal is set to decide on Bongbong Marcos’ petition to invalidate the ARMM votes.  The intentions of the Marcoses will undoubtedly drive a wedge across the nation not to mention perpetuate social unrest and political turmoil.  In these trying times, the last thing we need is political instability. It is a cancer that can negate the economic advantages we have.

2017 could make  us or break us.  Its all in the hands of our leaders.  Let’s hope they work smart and not let politics get in the way

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Andrew is an economist, political analyst, and businessman. He is a 20-year veteran in the hospitality and tourism industry. For comments and reactions, e-mail andrew_rs6@yahoo.com. More of his business updates are available via his Facebook page (Andrew J. Masigan). Follow Andrew on Twitter @aj_masigan.

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