The Philippines is planning a radical overhaul of economic focus and development, the country’s finance minister has told GlobalMarkets, starting with a rapid pivot toward China, and a push to cut red tape, slash poverty rates, and suck in fresh foreign investment capital.
Carlos Dominguez said the first major foreign policy step under president Rodrigo Duterte, who took office in June, was to rebuild the nation’s ragged relations with China. “We are rebalancing our foreign relations toward China,” he said in an exclusive interview. “Under the last administration [of former president Benigno Aquino] our relations with China were rather adversarial.”
Pointing to the July arbitration case that ruled against China’s claims of dominion over the majority of the South China Sea, Dominguez said the country was now ready to enter into “serious negotiations” with China and Vietnam, to determine sovereign maritime borders once and for all.
Détente, he added, would “open up new doors to investment from China. As a concrete first step, we are joining the Asian Infrastructure Investment Bank, which China is fostering and promoting. What we are saying is that we are open for business with everyone, including China.”
LEVEL PLAYING FIELD
Dominguez also promised to help build a government focused on the needs of the people and the business sector. President Duterte, he said, would in the next few days “call for a constitutional change to open up the entire economy to foreign investors and foreign capital, including power plants, natural resources, banking, and telecoms, which [Duterte] is particularly keen to foster competition in.” Only land ownership, still a cultural sensitive issue, would remain off limits for foreign investors.
The focus would be on “creating a level playing field for all businesses, local and foreign”, and on slashing red tape at local and central levels. Duterte, he added, planned “to cut the amount of time it takes to secure a permit to start a company to as little as three days”, echoing the business-friendly legislation he enforced as mayor of Davao, a city on Mindanao island.
Infrastructure would remain a key focus on the new administration, Dominguez insisted. He said the government would open its chequebook in order to focus on the kinds of infrastructure projects, including telecommunications masts, power plants, highways, schools, and hospitals, which would help raise development levels, reduce inequality and slash poverty rates, which have not fallen in 10 years.
“Expansionary fiscal policy will be a key focus for this government,” he pledged. “Therefore, we plan to increase overall government debt by two to three percentage points during this administration, in order to free up fresh domestic investment capital. That means freeing up P$165bn ($34bn) in new spending this year alone.” The Philippines’ public debt-to-GDP ratio stands at 45%, on a par with its sovereign peers, but far lower than in the developed world.