Press Release
October 6, 2012


Speaking before an inter-university conference on business economics at Adamson University today, 6 October 2012, Senator Miriam Defensor Santiago outlined her proposals to fix the Philippine economy.

According to Santiago, the Philippines has a "credibility problem."

"Compared to our ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand, and Vietnam) neighbors, the Philippines is one of the poorest performing countries in terms of governance. It is the most politically unstable and second worst in terms of corruption, among the ASEAN-5 countries," she said.

Santiago added that in terms of changes in perceptions over the past decade regarding corruption, the Hong Kong-based PERC rated the Philippines the worst in the Asia Pacific region in 2012.

"As a result of this credibility problem, the Philippines receives the lowest foreign direct investments (FDIs). Yet we need a lot of FDIs to sustain strong, inclusive economic growth. Foreign investors are not coming to the Philippines. They are going elsewhere--to Vietnam, Indonesia, Thailand, and other places," Santiago said.

"First, we need to fix the dysfunctional political system. What's happening in the economy goes beyond economics," the senator said. "The sad state of the economy now, and what appears to be its future trajectory, is the result of a flawed political system, rampant rent-seeking, and a political and economic elite with a propensity to resist change."

"When bad politicians and their counterparts in the private sector remain satisfied with the status quo, it would be difficult to expect real reform. This cozy relationship between bad politicians and business interests are reflected in many tax incentives laws, old and new economic zones, awards of government contracts, large and small, and appointments in key public positions," Santiago said.

The feisty senator said that the political system should be transformed so that competence, public accountability, and good performance are rewarded.

"The government should recruit and keep the best and the brightest. Hiring political lackeys, rather than experts, lead to mediocre performance," she said.

"We should enact reforms to strengthen the party system, and give teeth to the constitutional provisions on political dynasty," Santiago said. "The pork barrel system has to be scrapped. Legislators are expected to pass laws, not build roads, bridges, or school buildings."

Santiago also said the government must invest heavily in public infrastructure--such as roads, bridges, airports, seaports, urban transit systems, irrigations systems, and power plants--in order to fix the economy.

"During the last 12 years, the government has invested very little in public infrastructure. We have only spent less than two percent of our GDP on public infrastructure. Other Asian countries spend the equivalent of five percent or higher on infrastructure," Santiago said.

"If we want to be like our more fast-growing Asian neighbors, we should be spending about P500 billion annually, not P500 billion for the next five years, but P500 billion annually for public infrastructure," Santiago explained.

"Aside from public infrastructure, the government should also invest more in education, health, and social welfare in order to build a more productive and intelligent work force," she said.

"The question is, where are we going get all that money to invest in social services and public infrastructure?" Santiago said. "The answer is, we should reform our tax system to increase its efficiency and revenue yield. These reforms should include higher consumption tax accompanied by lower personal income tax; rationalization of fiscal incentives to broaden the tax base and make taxation neutral accompanied by reducing the corporate income tax; higher tax on commodities which impose negative externalities (cigarettes, liquor, petroleum products, soft drinks, and bottled water); and higher tax on real property, especially on the second, third and succeeding homes."

Santiago also proposed the adoption of a "multi-year budget."

"Most of the problems in government - poverty, poor literacy, inadequate health care, crumbling infrastructure, peace and order, an unfair justice system - cannot be solved in a year or two," she explained. "The government should be looking at a multi-year budget system rather than annual budget process. The Executive and Congress should agree on a common agenda for addressing past neglect in infrastructure, education and health. The Executive should submit a medium term expenditure framework, and Congress should approve it through a joint resolution."

"The multi-year budget will force the Executive to reveal what it intends to do during any administration's incumbency. Yes, we want a matuwid na daan, but where is this going? We need a clear roadmap," Santiago said.

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