The new Senate’s economic agenda

Dindo Manhit, President of the Stratbase ADR Institute

The overwhelming victory of the allies of the administration in the senatorial race is expected to lead to the rise of a new “supermajority” in the Senate. Nine out of the 12 winners are allies of the administration. Of the 12, only three were not personally endorsed by President Duterte or his daughter, Davao Mayor Sara Duterte: reelected independents Grace Poe, Nancy Binay and the returning Lito Lapid.

Some are apprehensive that the entry of more Duterte allies will make the upper chamber a rubber stamp rather than the independent institution it is supposed to be.

International experts are optimistic that the outcome of the elections will allow the executive to push ahead with its reform agenda and pave the way for a policy of continuity in the Senate. However, there is also apprehension that the dominance of proadministration senators will erode the needed check and balance in the country’s democratic system.

The big challenge for the new members of the Senate is how to pursue important economic legislation that will sustain higher productivity growth. This is imperative if the Philippines wants to become a prosperous middle-class country free from poverty by 2040.

The Senate must heed the urgent concerns of controlling inflation, improving the pay of workers, creating more jobs, fighting criminality, reducing poverty, fighting corruption and enhancing national security. It needs to pass more legislative reforms that are responsive to the needs of the domestic economy and, at the same time, can accommodate the dynamics of the regional and global environment. As the Philippines continues to lag behind other Asean countries in terms of foreign investments, it is necessary for the country to reform its relatively restrictive and less competitive economic policies.

The National Economic and Development Authority has been pushing for the passage of key economic legislative measures, such as amendments to the Foreign Investments Act, the Public Service Act and the Retail Trade Liberalization Act, which are meant to encourage investments in industry and services and boost private construction.

As envisioned by the Philippine Development Plan 2017-2022, the Philippines needs to keep up or surpass its 7.1 percent economic growth rate for 24 more years to be a middle-class society. According to economic managers, this will only be possible if the government is able to double the number of jobs created under the Aquino administration. This means producing 1.3 million to 1.5 million jobs every year for the next 20 years. The country’s gross domestic product, on the other hand, should grow at an average of 6-7 percent for three decades.

The World Bank has identified key policy options to boost growth and productivity in the Philippines. These include: (a) improving market competition by eliminating restrictions on foreign vis-à-vis domestic investors; (b) streamlining burdensome administrative procedures for existing and new businesses, starting a new business and paying taxes; (c) shortening the foreign direct investment negative list; (d) reducing limits on foreign equity; (e) easing nontariff barriers (especially procedural obstacles); (f) lowering labor market rigidities by reducing the cost of firing nonperforming workers by simplifying dismissal procedures and lowering severance pay; (g) making regular employment contracts more flexible by linking severance pay with tenure; and (h) aligning the minimum wage with productivity by considering the wage level of the informal sector.

As the country pursues much-needed reforms in the economy, legislators, executive officials and other leaders need to set aside hyperpartisan politics that continue to divide the nation. The administration also has to move beyond the populist legislation prominent in the past three years, and focus on more sustainable and rational solutions to the country’s long-standing problems.

For now, legislators should focus more on institutionalizing reforms that will encourage the influx of more investments, the creation of more jobs, improvement in human capital investment, and the building of better infrastructure.

Unless our policymakers move to amend or repeal ineffective and counterproductive laws, the Philippines cannot boost its competitiveness and provide a better investment climate conducive to sustainable economic growth.

 

 

This article was originally published in the Philippine Daily Inquirer.

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