Finance Secretary: Chinese partners will be up for review

Metro Manila (CNN Philippines) — There is a safety net for evaluating multi-million-dollar infrastructure project proposals between the Philippines and China, the Finance Department said.

Finance Secretary Carlos Dominguez III made the statement following concerns over one of the signatories in the potential partnerships President Rodrigo Duterte took home from his state visit to China.

"The President has given his verbal agreement to a proposal whereby all the projects that we will be submitting for review by China will be passing through an existing organization in our government," Dominguez told CNN Philippines' "The Source" on Wednesday.

The lead organization vetting these proposals is the Investment Coordinating Committee (ICC) under the National Economic and Development Authority, of which Duterte is chairman.

President Duterte and Chinese President Xi Jinping "agreed that the ICC will approach the Chinese government and ask them to accredit companies that we are going to deal with," Dominguez said.

"Some of the responsibility for vetting the companies will be on the Chinese government. I have spoken quite informally with officials in China and they have agreed to this procedure," he added.

In a press briefing with palace reporters on Wednesday, Dominguez said the ICC will request China for a lead agency it can coordinate with to help move forward the memorandum of understanding that the two sides agreed to during the state visit to China in October.

"The ICC will ask the Chinese government to designate and accredit the companies that they believe can do the projects to accredit them so that the Philippine side will know which companies to deal with in China," Dominguez said at the press briefing.

This, as reports emerged last week that one of the Bases and Conversion and Development Authority's potential Chinese partner was blacklisted by the World Bank.

Related: Gov't says infra deals haven't been committed to China

The Bases Conversion and Development Authority clarified that what was signed was a Memorandum of Understanding and did not mean that the project was awarded to the Chinese company.

"This project that was signed between BCDA and as you say a subsidiary of this Chinese company is really up for review first by the ICC," Dominguez said on "The Source."

"We want to avoid any question about the integrity of the companies that we deal with," he said in the interview.

Doing so would "avoid fiascos" like the ZTE-NBN and North Rail controversies, he added. These involved Philippine government deals with China that were steeped in allegations of corruption. The deals were made during former President Gloria Macapagal Arroyo's term.

 

Trade Secretary Ramon Lopez also previously said that the documents signed with these companies have an escape clause in case the government decides it wants out.

Related: Agreements with Japan to generate 250,000 jobs-Trade Secretary

 

Addressing "infrastructure gap"

For Dominguez, these investments are necessary to close "an infrastructure gap."

"The Philippines has (lagged) far behind in our neighbors in the construction of infrastructure," he said on "The Source."

"What we are trying to do is make sure that infrastructure is there to support the growth of the economy and to bring out of poverty about 10 million people."

Dominguez estimates infrastructure expenses to hit ₱8 trillion in the next six years, so the finance department "has to be very creative in raising funds."

"We're working very hard on those and I think we have succeeded in increasing our grants and loans," said Dominguez.

"The point of the matter is we want to direct people to go to public transport and we are making big investments (there), particularly the rapid bus transit system. We're fixing up the trains," he said, adding that this will also apply to cities like Davao and Cebu, where traffic is worsening.

Public transportation is part of the infrastructure investments the government is pursuing. Plans for a Manila-Bicol railway worth ₱200 billion are underway.

 

Pushing tax reforms

"The second program... is to increase the amount of taxes we collect," he added.

 

Under the government's tax reform program, a drop in income tax rates is being pursued for those earning less than ₱250,000 annually.

Dominguez estimates that a call center agent with a regular salary of ₱21,000 will experience a tax drop to ₱7,000 from ₱28,000.

Related: Income tax return to benefit poor, middle-class the most

But to make up for lost revenue, an increase in other taxes is being eyed.

The finance department is pushing for tax reforms such as an increase in excise taxes of oil products that would mean a P6-increase per liter of fuel, and taxes on luxury goods like cars.

Dominguez said that they also plan on setting a more "realistic" target for revenue collection at the Bureau of Customs.

He added that they will study the amount of imports to adjust VAT and import duties accordingly. The growth of the economy is also influence the target for collection.

If approved, the reforms will be implemented in 2018.

Related: What are the government's tax reform plans?