It was a good SONA. President Ferdinand Marcos, Jr fiThe first State of the Union (SONA) address was the least populist I’ve heard in a long time. Except for one case in which he suggested allowing unpaid amortization through agrarian reformfiIn his speech, the President did not endorse any other sector or constituency. In fact, he even proposed certain laws designed to balance the interests of his closest allies. These laws include the passage of the National Land Use Law, the EPIRA (Electric Power Industry Reform Act) Amendment, the Internet Transaction Act and the Tax Valuation Reform Bill. The SONA-inspired warned Confiespecially for those who thought crony capitalism was going to make a comeback.
The President’s assessment of the state of the country was fairly accurate. Turning to the economy, he recognized the need to increase government revenues and streamline spending to better manage the budget deficit and heavy debt burden. To that end, he proposed raising funds by imposing VAT on the digital economy and banning under-declaration of taxable transactions and smuggling. On the spending side, he suggested sizing the bureaucracy right and prioritizing spending. I agree with all of that.
The President clearly defiset its quantitative goals for the next six years. By 2028 he wants to reduce the poverty rate to 9%; reduce inflation to 3%; cut the budget enficit to 3% of GDP; and keep the peso-dollar rate at P55 to $1. He also aims to expand the economy by 6.5% to 8% from 2022 to 2028. All this I find realistic, with the exception of the exchange rate, which is tied to external forces, not least the Fed’s dovish policies.
He proposed the establishment of a medium-term budgetary strategy, spanning six years. This strategy is intended to form the basis for future budget allocations by Congress. It promotes transparency while ensuring continuity of projects and expensesfiefficiency I agree.
What I lacked, however, was an aspiration to stage a manufacturing revival and make the Philippines a premier investment destination and manufacturing center to rival Vietnam. While he casually mentioned that we need to attract more foreign direct investment (FDI), he neither emphasized its importance nor explained how this would be achieved.
There is no way around it – we need to increase our foreign direct investment intake to accelerate our industrialization, reduce import dependency and generate more export earnings. We must wean ourselves from a predominantly consumer-oriented economy to a production-balanced economy. Through foreign direct investment, we can establish our supremacy not only in manufacturing but also in artficial intelligence, robotics, virtual and augmented reality and nanotechnology. Only then can we generate real wealth and achieve the President’s quantitative goals.
However, facilitating business operations and reducing manufacturing costs must be high priority areas. We should also give teeth to the Inter-Agency Investment Promotion and Coordination Committee to focus on promoting foreign investment.
On infrastructure, I commend his commitment not to suspend any of the projects that are in the pipeline and to keep infrastructure spending at 5-6% of GDP. It is also a wise decision to use private capital through public-private partnerships.
The President spoke at length about the importance of the railways and his commitment to their development. However, he failed to address the issue of airports, particularlyfiThe overload of NAIA. How are we supposed to cope with the acute traffic jam when Bulacan Airport is still seven years away? And if Caticlan Airport is any indication of how San Miguel builds airports, then I think we will fiWe nd ourselves with a smoldering problem of working with poorly built barebones edifices. It makes sense for the government to go ahead with its plan to privatize and modernize NAIA.
In terms of energy, the choice of Raphael Lotilla as secretary inspires confidence. We were even more heartened when the President called for the EPIRA bill to be streamlined, while also directing the Department of Energy to build more power plants that use a mix of traditional and renewable sources. He also called for improving our transmission and distribution network. All of this combined should bring the cost of electricity down once and for all.
The President spoke about the possibility of including nuclear power in our power source mix. Perhaps that was more of a political statement than anything else. As we all know, most economies are turning away from nuclear power because of its cost, safety concerns and environmental impact.
The President highlighted tourism not only as a driver of national revenue, but also as an opportunity to enhance our country’s branding. The President correctly observed that branding leads to national pride and a strong national identity. Branding also means soft power or the ability to influence global decisions not through coercion but through persuasion.
Nobody knows the power of branding better than the Marcoses. We hope that within the next six years, the Philippines will increase its global prominence in the areas of culture and heritage, good governance, reputation, diplomatic alliances and global connections, openness to business, acceptance of technology, etc. Strength of our diplomatic missions abroad and the talent level of our people.
On the subject of education, many were relieved when the President announced that face-to-face classes would resume this August. He spoke about improving classrooms and expanding learning tools with internet connections and gadgets. We can only hope that the Ministry of Information and Communications Technology can speed up broadband connectivity on faraway islands and the state budget can support capital spending on equipment.
The President reiterated the need to maintain our children’s English proficiency. I totally agree. He spoke fleetingly about the need to improve STEM (science, technology, engineering and math) learning, which I believe is critical to future competitiveness.
The problems in the education sector are complex. sufffice to say that all Department of Education programs need to be reviewed and streamlined. Problematic programs include performance-based bonuses for teachers and examiners; primary and secondary school curricula; school-based management program; Native language multilingual education; (lack of) high-touch high-tech learning; and the high administrative burden of the teacher, to name a few.
On foreign policy, the President unequivocally stated that he would not allow even an inch of our territory to be taken by a foreign power. I gave thunderous applause for this, even when I saw the SONA alone in my office.
President Marcos’ SONA exceeded my expectations. It was professional, comprehensive and well articulated. In particular, the 19 proposed priority bills were well considered. We hope to see more of this style of governance. Marcos Jr. is off for a good start.
Andrew J. Masigan is an economist