Statement of Senator Richard J. Gordon on the Financial Turmoil and Possible Recession in the USA

The current global financial and capital market turmoil triggered by the sub-prime loan problems in the USA has raised the specter of a recession in the US, coupled with the fear that the Philippine economy may be dragged down by it. In consequence, some colleagues in Congress have proposed some extraordinary measures, including, suspending the VAT on crude-oil imports, which to me is ludicrous.

I believe the Philippines has newfound strengths that are sufficient to overcome the looming recession in the US. Our countrymen working overseas remitted income of about US$ 14 billion last year, based on estimates by the Bangko Sentral, making such remittances the single biggest foreign-exchange earnings of the country. The thing to do now is to accelerate completion of financial and capital market reforms still on the table so that new savings and hedging instruments will emerge that will be to the best advantage of overseas Filipino workers, while channeling those savings to productive investments. This is urgent given the unanticipated strengthening of the peso against the US dollar.

Let's also note that our total exports in 2006 had reached about US$47.4 billion. About US$27.8 billion, representing 59% of total, went to East Asia and ASEAN. About US$8.7 billion, or 18% of total, headed for the US. I say, let's pay attention to strengthening further our trade with ASEAN and East Asia, and ratify JPEPA, among other regional trading arrangements.

More importantly, however, is enhancing the newfound strengths of the economy. Competitiveness is key. In this connection, we have to address the high cost of electricity here, which is one of the highest in the region. If there is going to be a review of the tax system, it has to start with the effective tax on electricity. Definitely, we need to address double or cascading taxation if there is any.

In addition, the importance of passing the 2008 national government budget as soon as possible cannot be overstated. Spending for education, health, infrastructure, and safety nets for the poor are our best shields against any economic fallout from the unraveling problems of the US economy.

Finally, good governance must not be compromised. I dare cabinet officials who have been asleep at the wheel to resign, such as those responsible for the downgrade of our airport safety ratings.