In February 2017, the National Economic and Development Authority (NEDA) board approved the Philippine Development Plan (PDP) 2017-2022, the first medium-term plan aimed at achieving the long term vision – AmBisyon Natin 2040 – aimed at tripling the Philippines’ per capita income to $11,000 in 24 years through sustained growth in gross domestic product (GDP) of at least 6.5 per cent annually, along with the implementation of policies making the Philippines a high-income country by 2040. The plan is primarily a comprehensive agenda for change, in line with the President’s 10-point socio-economic agenda. It aims to lay the foundation for inclusive growth, a high-trust society, and a globally competitive knowledge economy, and has set ambitious targets and delineated the strategies to achieve them.

Medium-term targets

In the medium-term, the Philippines government plans to increase its GDP growth rate from 7 to 8 per cent per annum. It also aims to achieve growth that is more inclusive, with a target set for reducing the overall poverty rate from 21.6 per cent to 14 per cent, and the incidence of poverty in rural areas from 30 per cent to 20 per cent by 2022. The government also aims to reduce the unemployment rate from 5.5 per cent to 3-5 per cent over the same period, besides focusing on developing a higher degree of trust in the government and society, more resilient individuals and communities, and greater drive for innovation.

  Strategies to be adopted

The plan is founded on three main pillars – Malasakit, Pagbabago and Patuloy na Pag-unlad. The first aims to regain the citizen’s trust in public institutions and among themselves. To achieve this, the government plans to promote awareness about anti-corruption measures, implement regulatory reforms, improve productivity of the public sector, increase access to legal aid, pursue corrections reform, and promote culture-sensitive governance and development.

The second pillar aims to reduce inequality by increasing opportunities for growth in output and incomes. To achieve this, the government plans to expand opportunities in agriculture by increasing the country’s presence in the global market and streamline bureaucratic processes for both foreign and local businesses. The government will further pursue strategies to achieve quality and improve access to basic education, enhance disaster risk reduction and management mechanisms, and adopt universal social protection.

The third pillar focuses on increasing the potential growth for which the demographic dividend will have to be maximised with vigorous advancements made in the areas of science, technology and innovation. Strategies adopted under this pillar will mainly aim to maintain macroeconomic and financial stability. The government will observe fiscal prudence during the period in which the tax system will undergo reforms to become simpler, fair and equitable and implement a strategic trade policy to complement measures taken to improve competition and create a level playing field.

Other bedrock strategies planned for adoption include attaining just and lasting peace; ensuring security, public order and safety; accelerating strategic infrastructure development; and ensuring ecological integrity and a clean and healthy environment. The plan also lays great emphasis on securing overseas Filipinos by identifying strategies to protect their rights, improve their overall quality of life, and involve them in the country’s development.

A National Spatial Strategy (NSS) has been developed and adopted in the PDP 2017-2022, which intends to guide public investments and catalyse private investments to maximise agglomeration efficiencies, enhance connectivity, and build up resilience against natural hazards.

Funding strategies and plans

To implement the plan, a three-pronged funding strategy has been identified. The first two are focused on devising a responsible, supportive and strategic fiscal policy that involves increasing the deficit spending to 3 per cent of the GDP and borrowings. The third involves the implementation of a new tax policy and tax administration reform package, termed as the comprehensive tax reform programme (CTRP), to enable the government to raise additional funds to support the programme.

While the CTRP has not proved to be popular with the public, the programme aims to transform the Philippines tax system from one that is outdated and not synchronised with those of its Association of Southeast Asian Nations (ASEAN) counterparts, to one that is simpler, fair and efficient. The House of Representatives approved the CTRP under House Bill No. 5636, termed “TRAIN”. TRAIN is expected to cut down personal income tax rates and impose uniform estate and donor tax rates. The consequent revenue loss will be covered by raising the excise on fuel, cars and sugar-sweetened drinks, and widening the value added tax base. Broadly, from a yield of PhP 133.8 billion derived in the first year of implementing TRAIN, a yield of PhP 233.6 billion is expected to be realised in 2019, PhP 272.9 billion in 2020, PhP 253 billion in 2021 and 269.9 billion in 2022.

Eventually, TRAIN is expected to reduce the country’s debt-GDP ratio to 36.7 per cent in 2022 from 42.2 per cent in 2016. Further, the poverty rate is expected to decline from 21.6 per cent in 2015 to 14 per cent in 2022, lifting around 6 million Filipinos out of poverty to reach an upper-middle-income status by 2022.

In comparison, the Senate version under Senate Bill No. 1408 will yield PhP 1.344 trillion during the same five-year period, with PhP 169.1 billion realised in 2018, PhP 262.5 billion in 2019, PhP 305.8 billion in 2020, PhP 290.1 billion in 2021 and PhP 316.6 billion in 2022.

Overall, the government’s plans and initiatives have been widely acknowledged across all international financial and investment houses. While Fitch Ratings deemed TRAIN as “feasible”, Moody’s Investors Service rated it as “credit-positive”.

Progress so far

In 2017, the groundwork for change was initiated across sectors, with some reaching a successful conclusion either through legislation or executive action. The changes inititied on the legislation side were achieved through the renewal of the Legislative-Executive Development Advisory Council.

In 2017, the gross national income per capita increased by 6.5 per cent, which exceeded the 4.5 per cent target set for the year. However, there was also an increase in food inflation from 2.6 per cent in 2016 to 3.7 per cent in 2017, well within the rate the government sought to cap inflation at. A family income and expenditure survey will be undertaken every two years to keep better track of the poverty levels of the country.

Preliminary estimates indicate an unemployment rate of 5.7 per cent for the year 2017, up 0.2 percentage points from the 5.5 per cent recorded in 2016. This stood considerably above the 5.1-5.4 per cent target set for the year. The creation of employment will remain a challenging task. A net employment loss of 0.65 million was recorded in 2017, against the target of increasing employment to 0.9-1.1 million per year. The youth unemployment rate also increased to 11.9 per cent in October 2017 from 11.6  per cent in October 2016. Overall, the youth unemployment rate value stood at 14.4 per cent during the year 2017, which was far above the target of 11 per cent.

Considerable progress was made in reducing the underemployment rate in areas outside the national capital region (NCR). Underemployment was down by 2.3 percentage points at 17.4 per cent in 2017 from 19.7 per cent in 2016. This development has been considered key in line with the country’s objective of ensuring progress outside the NCR.

As per the 2017 Global Innovation Index Report, the Philippines ranked 73 out of a total of 127 economies. Going forward, the year 2018 is expected to be a major transition period for the country, with all changes targeted for implementation by 2019.

The road ahead

Going forward, NEDA will draft an executive order mandating all government agencies to align their programmes, projects and activities with the PDP 2017-2022. It further plans to prioritise identified policies and programmes, and work closely with national government agencies to promote the country’s development goals. Additionally, the authority will monitor the progress with various inter-agency committees, and regularly share its accomplishments through socio-economic reports.

The government is expected to launch the national competition policy in 2018, aimed at ensuring a level playing field for state-run corporations as well as private organisations. It will provide a holistic framework that will guide all branches of the government in their work towards promoting a culture of competition in the country.

On the execution front, the implementation of a number of reforms has already begun, the results of which will be fully felt in 2019. Several changes are expected in the market, with the entrance of new players, emergence of new production patterns, changes in the way goods and services are provided by the government, and changes in the means by which citizens transact with the government. However, during this transition, some sectors might be adversely affected, requiring assistance during the period. This should be provided with extreme sensitivity to facilitate a smooth transition.

Besides, the “Build, Build, Build” infrastructure programme is expected to boost the economy’s growth rate even higher, with plans to roll out 75 flagship projects, of which at least half have been targeted for completion within President Duterte’s term. The planned expenditure of over PhP 8 trillion on infrastructure until 2022 is expected to usher in the “golden age of infrastructure” for the country.