The Philippines' incoming finance minister Carlos Dominguez says he is open to diversifying the country's borrowings to fund infrastructure projects and will push for a cut in income taxes to keep the Southeast Asian country on track for growth. Boosting infrastructure spending is among the priorities for the new government of Rodrigo Duterte, the firebrand mayor from Davao city in the south, who won the May 9 election by promising he will go hard against crime and corruption and improving basic government services.
That includes addressing the Philippines' horrific traffic jams that have weighed on economic growth, and Dominguez told Reuters he will ensure there are enough funds for new infrastructure projects. Sukuk bonds "are certainly in the menu", as well as yuan borrowings, in terms of fund-raising. "It's not diversification for diversification's sake, it's (getting) the best deal. It depends on who gives us a better deal, will it be the local market or the international market?"
The Philippines, which used to be one of Asia's most active sovereign bond issuers, last went to the debt market in February selling $2 billion of 25-year bonds that drew huge demand. Dominguez is also planning to impose new taxes on other "unhealthy products" in addition to alcohol and cigarettes to compensate for a planned cut in income taxes as he vows to widen the tax base and make the revenue raising regime more equitable.
The income tax rate for individuals and companies should be slashed to "mid-20s" percent from as high as 32 percent, but he said he isn't keen to raise the current 12 percent sales tax. "Almost half of your (income goes to) the government. You think that's smart? I don't think so," the 71-year-old businessman and former classmate of Duterte said.
Dominguez, who is returning to the Cabinet after 27 years, plans to review the Philippines' Real Estate Investment Trust regulations and to rid the internal revenue and customs agencies of massive corruption. Dominguez served as minister of agriculture and head of the environment and natural resources from 1986 to 1989, during the presidency of the late Corazon Aquino. The Duterte leadership is not shy about planning to copy and expand some of the reform measures instituted by the outgoing government of President Benigno Aquino, Corazon's son, including a public-private partnership on infrastructure investment.
"We will change the focus on making the economy more inclusive," Dominguez said. He plans to open up more sectors to foreign ownership, except land, to increase competition and boost services in areas such as telecommunications and power. At the same time, Dominguez said the unnecessary contractualisation of jobs by big Philippine companies will end.
"Our administration is not in favour of a system where people cannot plan their lives, cannot say whether or not they can send their kids to school after six months." Dominguez would also push for the lifting of the country's bank secrecy law and put casinos under an anti-money laundering legislation to avoid a repeat of the Bangladesh Bank heist where stolen funds found their way to Manila.