Strategic and reliable trade control

TAKING ADVANTAGE OF THE SITUATION -Looking at long-term demand may mean accepting short-term pain. What to do? The World Bank (WB) still insists that even if the economics aren’t really crushing the Philippines still needs additional assets to beef up its capability to take advantage of new growth opportunities. Still, while the big economic picture has impressed somewhat, the corporate outlook seemed sound, but not really good enough. The WB stressed that the country together with few developing economies in the Asian region has to invest in technology, projects and programs that will boost domestic productivity and to remain at par with the rest of world.
Within this framework, the WB is highly confident that higher productivity would in turn help the country service the growing needs for various goods of other well-developed countries. However, that is a lot easier said than done. While it is widely believed that higher productivity spurs increased consumption and likewise requires increased production, and more jobs, labor productivity has drastically declined due to lack of job opportunities.
Mindful that the uncertainties raise the possibility of continued post lackluster growth in the US and Europe in the wake of the previous global recession, the WB expects that the Philippines and its neighbors in the Asian region can boost growth by intensifying regional trading activities. Nevertheless, another important step following the post economic meltdown in the US and European economies, the country according to the WB must take advantage of the situation by shifting from being export oriented to boosting income through domestic sources.
Such a move by few countries in the region could at least be considered by the Philippines as a growth opportunity, the WB said in its economic report. Some of our neighboring nations are seen to require more imported goods needed to boost their domestic production and the country should take advantage of the situation by selling more intermediate goods to them including the well-developed nations.
Although the country’s export industries have slowly redefined competitiveness and economic advantage worldwide, its far-larger domestic sector- agriculture, has languished. One glaring example is the recent banning of world-class Cavendish bananas produced in the Philippines to China due to strict phyto-quarantine requirements and other stringent barriers to the detriment of our local producers and exporters. Adding more agony to the problem confronting the agriculture sector is the successive typhoons that devastated billion-worth of crops and properties in many parts of Mindanao. The situation has spurred a never-ending cycle of depressed and low growth.
Now let’s go back to the tax hike suggested by WB. Is increasing taxes through the dictation of the WB a quick solution and advantage of the so-called new growth of opportunities? Can the Philippines still be regarded as a haven for investors with a looming tax hike? From a point of view of an investor looking for safe haven, raising taxes on WB’s terms certainly signals that considerable amount would be set aside for additional taxes, thus their earnings will be greatly affected as well. It will be expected – but not certain – that the taxpaying public notably the business sector will accept the WB tax hike scheme.
Sure, the government will be on shakier ground when it realizes the implication of the WB proposed tax increase. It has genuine economic concerns and few in the business sector thinks a new round of tax hike will do much good. If the government wants to attract entrepreneurs to invest in high technology projects as desired by the WB to boost domestic productivity, then the most important thing for government to do to be able to establish that is to have a well-educated workforce and to make sure our strategic trade controls are reliable.
Perhaps inevitably at this stage there’s more emphasis on providing the basic needs of the people and less emphasis on tax increases. The Philippines has been going through socio-economic and political crunch and a new tax hike, probably the World Bank’s own “modest way” to help the country, is either part of the solution or part of the problem and on such situation that the government prefers the latter.