THE GOVERNMENT should prioritize investments in telecommunications and energy to boost economic growth, the International Monetary Fund (IMF) said.
“The priority really is to invest more in telecom. If you want to promote the digitalization of the economy, you need to invest more in the telecom sector, in strengthening connectivity in the country, and broadband coverage,” IMF Representative to the Philippines Ragnar Gudmundsson told reporters on the sidelines of the International Tax Conference 2023 last week.
Mr. Gudmundsson said recent legislation, such as the amended Public Service Act, is a step in the right direction.
“Now, it’s about the implementation of legislation. Investing in telecommunications infrastructure is going to be key,” he added.
The amended PSA, which allows full foreign ownership in more public services such as telecommunications, airlines, and railways, took effect in April this year.
In March, the government approved 194 infrastructure flagship projects with a total investment of P8.2 trillion. These include 119 projects in physical connectivity and five projects in digital connectivity.
“Another priority is to invest in the energy transition… The Philippines is very well placed, being one of the countries most vulnerable to climate change, to precisely attract the interest of foreign investors in this area. For that, good projects need to be prepared,” Mr. Gudmundsson said.
Last year, the government opened up the renewable energy (RE) sector to full foreign ownership. These include solar, wind, biomass, ocean or tidal energy, among others.
The government is aiming to increase the share of RE in the country’s power generation mix to 35% by 2030 and 50% by 2040.
The IMF expects the Philippine economy to grow by 6% this year and 5.5-6% in 2024.
The government targets 6-7% gross domestic product growth for this year and next.
For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said investments in key infrastructure projects will be vital for the country’s sustained growth.
“Expanding the capacity of the country’s airports, seaports, mass transport systems such as subways and other railways, toll roads, bridges, among others to allow larger volume of tourists as a major source of economic growth, further improve the productivity of workers and other people through improved mobility and allow the faster movement of goods,” he said in a Viber message.
“Also, investments that have high multiplier effects such as high technology industries as well as further improvements on the country’s educational system to support other industries at the higher end of the global supply chain,” Mr. Ricafort added.
NEW TAXESMeanwhile, Mr. Gudmundsson said the government should consider reviewing its tax policy and ensure that revenues raised from taxes are used to invest in priority areas.
“The key thing is linking new taxes, new revenues, to public spending. That’s how you generate popular support for taxation. As long as the government demonstrates that additional revenue is used to invest in education, health, infrastructure, I think the debate around taxation becomes an easier one,” he said.
“It’s important to rationalize some of the spending and ensure the efficiency of spending, but also, to meet those consolidation targets and debt sustainability targets, something is needed on the taxation front. While you can generate some gains from better tax administration, some review of tax policy can help the government achieve significant gains in a fairly short time,” he added.
Mr. Gudmundsson also noted the potential of implementing a carbon tax.
“Putting in place a carbon tax is easy to implement and administer, revenue gains can be substantial very quickly, and as long as you demonstrate that the additional revenue is used to promote inclusive growth and can be used to provide more support to vulnerable households, it should be feasible to make progress in those areas,” he said.
The Department of Finance (DoF) earlier said it is studying the feasibility of a carbon tax, which is one of its priority measures.
“The DoF’s perspective for a carbon taxation is that we see it as a potential revenue source, aligned with the goal of promoting environmental sustainability to address some of the critical issues of climate change,” DoF Fiscal Policy and Planning Office Director Rowena S. Sta. Clara said in an e-mail.
“As a new tax imposition, a comprehensive study is needed to understand our baseline situation and to look at some of the global best practices. The overarching goal is for a carbon pricing policy that would support our carbon reduction commitments under the Paris Agreement, without constraining economic growth during this period of recovery, especially given the current economic and energy situation,” she added. — Luisa Maria Jacinta C. Jocson