Special Report: Local and foreign businesses cautiously optimistic for 2010

By VERONICA C. SILVA

Published January 14, 2010 3:30pm

Sitting on pending bills

Here is a rundown of some of the legislative measures that have been languishing in Congress in the past years. Time and again, these have been branded as "urgent" measures that need action. â€¢ Rationalization of incentives The rationalization aims to strike a balance between rewarding investors for parking their investments in the country and generating revenues to fund government projects, such as infrastructure. Both sides of the balancing act are aimed at attracting the business sector to invest here. The rationalization bill is expected to bring in P10 billion to state coffers. According to a paper by the Makati Business Club, the bill that seeks to rationalize fiscal incentives has been on the agenda of the Philippine Congress since 1997. As of December, there was still no commitment from lawmakers to pass the measure. It is still pending at the Senate committee level. â€¢ Simplified net income taxation A simplified net income tax system was introduced during the Ramos administration, which led to lower tax collections. By rationalizing which expenses can be deducted from companies, the more recent version of the proposal is expected to generate more revenues for the government. This and other tax measures, including one that seeks to restructure the excise tax on alcohol and tobacco, have been met with much opposition from different camps, which is why it is still pending in Congress. The simplified net income tax system, expected to bring in P5 billion, is pending approval by a Senate committee, while the bill restructuring alcohol and tobacco taxes, which will add P22 billion to state coffers, is pending approval by a committee of the House of Representatives. â€¢ Creation of a DICT The Philippines has been clamoring to be on the world IT map. Unfortunately, in the 21st century, it remains one of those countries in the Asian region with no clear-cut top-level IT agency. After several Malacanang-appointed committees and commissions were formed during the time of Presidents Ramos and Estrada, several lawmakers sought the creation of a department-level IT agency, dubbed as the Department of Information and Communications Technology. The department is supposed to put together the different ICT-related functions of existing agencies, such as the Malacanang-attached National Computer Center, Department of Transportation and Communications, Department of Science and Technology and Commission on Information and Communications Technology. There are several bills and resolutions in both houses of Congress creating a Department of Information and Communications Technology, but not one is a priority. â€¢ Freedom of Information bill The Constitution's Bill of Rights guarantees the people's right to access information on matters of public concern. "Access to official records, and to documents and papers pertaining to official acts, transactions or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law." But since the present Constitution was ratified in 1987, Congress has yet to approve an enabling law that will give flesh to this constitutional right. Businessmen think that access to information will promote transparency and accountability in government, and make sure transactions between it and the private sector are aboveboard. Both the Senate and House versions have been passed, but lawmakers have yet to reconcile the two under a bicameral conference committee. â€” Veronica C. Silva, GMANews.TV

Local and foreign business groups are cautiously optimistic this year, when a new administration takes over and global economies slowly recover from the slump, while risks to a smooth political transition and the country's widening fiscal gap hang tough. "If there is a normal political transition later this year, we are very optimistic that the economy will flourish. Business confidence will be renewed by the fresh wind of a leadership change," said Alberto Lim, executive director of the Makati Business Club (MBC). Filipinos will troop to polling precincts on May 10 to elect their new President and other national and local officials, and optimism runs high not just for ordinary citizens but for the business sector as well. Most business groups hesitate to openly endorse a candidate, particularly for national posts, and businessmen interviewed by GMANews.TV said the identity of the next President is less of a concern compared with the need to make elections clean, honest and credible.

Source: House of Representatives

Donald G. Dee, chairman emeritus of the Philippine Chamber of Commerce and Industry (PCCI), said the new administration must be free from questions of legitimacy, something that the Arroyo administration has had to deal with during the course of its tenure. "Election results must be accepted by all. The country cannot afford another six years of divisiveness," Dee pointed out. Pending bills Dee said the business sector has always sought a "business-friendly government." Ever year, the PCCI presents to the President a list of proposals they want the government to prioritize to make sure policies encourage investments and support economic growth. Last October, the PCCI submitted a list of legislative measures that they wanted the outgoing Congress to pass before the May 10 elections. These included a bill creating the Department of Information and Communication Technology (DICT), proposed amendments to the Customs Brokers Act, a Freedom of Information Act, rationalization of fiscal incentives, a simplified net income taxation, and changes to the central bank charter. The group also sought approval of the proposed Land Use Act, residential free patent, amendments to OECD tax compliance, ratification of the revised Kyoto Convention, a new Pre-need Code, incentives to real estate investment trusts, changes to the Clean Air Act and Tax Amnesty Law, and a measure that seeks to eliminate monopolies and cartels. The local chamber of commerce likewise submitted a list of items they wanted the government to enforce in the short and medium terms. Foreign business chambers' wishes were similar. Peter Wallace, president of the Wallace Business Forum and a director of the Australia-New Zealand Chamber of Commerce, said some of the bills that the foreign business community wants the government to enact include those that involve the rationalization of fiscal incentives, freedom of information, reproductive heath, residential free patent, creation of a DICT and ratification by the Senate of the revised Kyoto Convention. Most of these measures have been languishing in both houses of Congress, while at least two â€” providing incentives to real estate investment trusts and the New Pre-need Code â€” have become law (check Sidebar). MalacaÃ±ang earlier said it was open to calling for a special session if Congress, with only nine session days left, fails to act on priority measures before it adjourns next month. Congress has only nine session days left when lawmakers return from their holiday break on January 18. By February 5, the session will be adjourned again to allow legislators who are running in the May elections to campaign. After the elections, the 14th Congress will return to work one last time from May 31-June 4.

Source: Philippine Senate

While most measures require legislation, the government can promote an investor-friendly environment by merely exercising political will, MBC's Lim, noting that the country has enough number of laws. The state, he added, just needs to work on really enforcing these. "If the next administration practices good governance, some of these bills do not become as urgent anymore since we already have enough good laws. What has been lacking in the past and especially in this administration, is proper enforcement of the laws," he said. Fiscal plan One of the perennial problems of the government is the budget deficit, which has been keeping the business community on its toes. Dee said the incoming administration must be able to balance spending to stimulate the still lethargic economy and the need to keep the fiscal gap at bay. He noted that the recovery from the global economic slump is expected to be slow this year. "The government must carefully balance expenditures against revenues," Dee said, adding that there are no hard and fast rules on how the next administration should handle this. "There will be instances that will call for changes and we must act accordingly. It is impossible to predict the coming events. We only know for now that the recovery will be slow and we must keep our ears close to the ground." The central bank earlier said the next administration must lay down a clear fiscal consolidation program after the global financial crisis derailed the countryâ€™s goal to balance the budget in 2008. Bangko Sentral ng Pilipinas Governor Amando Tetangco, Jr said a clear fiscal consolidation program would be a major confidence-building factor for the next government. The Arroyo administration has put in place several fiscal reforms aimed at balancing the budget by 2008 or two years ahead of the original 2010 schedule under the medium-term Philippine development plan. The National Government managed to trim the budget deficit to P12.4 billion or 0.2 percent of the gross domestic product (GDP) in 2007 from a record level of P210.7 billion or 5.3 percent of economic output in 2002. But the global financial turmoil forced the government to abandon both commitments and is now looking at 2013 as the target. The budget gap ballooned to P68.1 billion or 0.9 percent of economic output in 2008 and is now in danger of reaching a new record of about P290 billion or P40 billion more than the deficit ceiling of P250 billion. The emerging figure is 3.7 percent of economic output. Manila was originally looking at limiting this yearâ€™s fiscal shortfall to P233.4 billion, or 2.8 percent of economic output. Poor tax collections and unrealized gains from the sale of government assets led to a P6.4-billion budget deficit in November and a worse-than-projected gap of P272.5 billion for the 11-month period. For his part, Lim noted that "turning inward is the wrong way to manage the risks of a globalized economy." He said the government should continue to invest in infrastructure and human resources to improve the country's competitiveness in global markets. Business groups said they prefer a President who will listen to them. "Hopefully, the next government will have better listening skills and will consult our sector as well as other sectors of society," Lim said. "Weâ€™d like a President who can listen to criticisms openly," added Wallace. They also cited the importance of a President who can work well with Congress to ensure the passage of key legislation. The businessmen admitted that until after the elections, nothing is certain. In the meantime, they are keeping their ears close to the ground, while making sure that presidential candidates know what they want. â€” NPA, GMANews.TV

Tags: specialreport, legislation, foreignchambers, businessoutlook