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Fiscal Reform in the Philippines

This case study explores fiscal reform in the Philippines, showcasing the country's journey towards investment grade status and sustainable economic growth. It outlines the 10 key lessons learned, such as the importance of institutionalizing reforms, leveraging technology, and engaging stakeholders creatively to ensure lasting impact. The text highlights the tug of war between progress and regression, shedding light on ongoing reforms initiated under President Rodrigo Duterte's administration. The narrative emphasizes the significance of fiscal discipline, reduction in debt burden, and the role of stakeholder collaboration in driving successful reform initiatives. The study concludes with a forward-looking approach, underlining that reform is an ongoing, dynamic process essential for sustainable economic development.

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Fiscal Reform in the Philippines

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  1. Fiscal Reform in the Philippines A Case Study

  2. The Philippines Today Investment Grade 6.2% GDP growth in 2018 • 6% average from 2010-present • 20 years of uninterrupted economic expansion Declining Debt Burden Average fiscal deficit over 10 years at 2.2% 5.3% unemployment in 2018 Moderate inflation pressures in 2018 at 5.2%

  3. Tug of War Between Reform and Regress

  4. Overview of Reforms after the 1986 Revolution refers to fiscal reforms

  5. Overview of Ongoing Reforms under Rodrigo Duterte refers to fiscal reforms

  6. 10 Lessons Learned

  7. Virtuous Cycle 1 Confidence as our first currency • Higher Investment • Good Governance • Ratings upgrades • GDP growth • Investor Confidence

  8. 2 There’s more to fiscal reform than revenues Increase in revenue + reduction in expense wastage + reduction in interest expense = expanded fiscal space for public investments

  9. 3 Trojan horses can house fiscal reforms Logic of Reform Packaging and Selling the Reform reflects the logic of reform Intended Outcome (e.g. expanded health coverage, better infrastructure) Fiscal Reform

  10. 4 Institutionalize reforms to make them last

  11. 5 Using technology and media to disrupt the status quo

  12. 6 Think Holistically: fiscal reform as part of larger whole

  13. 7 Fear not the multilaterals

  14. 8 Compromise is not only acceptable, but necessary example 1: earmarking tobacco taxation to the health budget example 2: negotiating with the Department of Trade and Industry on Tax Incentives Management and Transparency

  15. 9 Stakeholders strengthen the reform process • employing creative approaches to weaken or deal with entrenched interests (case: sin tax reform of 2012) • consulting each antagonistic stakeholder group and finding a way to bypass opposition (case: subsidies for public utility vehicle drivers in raising fuel excises taxes) • this inclusive approach ensures that reforms are less likely to be reversed as there are more groups with interests vested in the enacted reform

  16. 10 Reform is always a work in progress • Ongoing process in an infinite continuum • Not always a straight line, often incremental at best • What’s on the horizon?

  17. END Cesar V. PurisimaAsia Fellow, Milken InstituteSecretary of Finance, Republic of the Philippines (2005, 2010-2016)

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