Finance Secretary Carlos Dominguez III
MANILA – Finance Secretary Carlos Dominguez III said Tuesday the reforms being initiated and pushed by the Duterte administration to further deepen the Philippines’ capital markets will let the economy emerge stronger and more resilient in the aftermath of the prolonged coronavirus disease 2019 (Covid-19) pandemic.
Dominguez said these reforms aimed at building a “truly broad-based and inclusive financial system fit for the 21st century” include the proposed Capital Market Development Act and simplifying the taxation of passive income and financial services and transactions.
While these reforms require the approval of the Congress, Dominguez said the Department of Finance (DOF) and the Capital Market Development Council (CMDC), which he chairs, have initiated several measures from their end to make the processes in the financial system more efficient and accessible to both bond issuers and retail investors.
Dominguez cited, for instance, the recent launch of the electronic Securities Issues Portal (e-SIP) by the Philippine Dealing System (PDS), which had Ayala Land Inc. (ALI) as its pioneer corporate bond issuer; and the introduction of mobile software such as the Bonds.PH and Overseas Filipino Bank apps, which have allowed the Bureau of the Treasury (BTr) to widen its reach to individual investors in offering government bonds.
“All these efforts should open the door to a steady stream of new listings and new investment products. We are very optimistic to bounce back from the Covid-19 crisis stronger and more resilient than ever. The capital markets, I believe, will lead us in this recovery,” Dominguez said at the opening of the virtual initial public offering (IPO) forum organized by the Philippine Stock Exchange (PSE).
The online forum led by PSE president-chief executive officer Ramon Monzon was held as part of the PSE’s information campaign on the amended listing rules of its Main, and Small, Medium and Emerging Boards.
This forum also discussed the advantages and expansion opportunities for small, medium enterprises (SMEs) in the stock market.
The proposed Capital Market Development Act now pending in the Congress seeks to develop a sustainable corporate pension system to help secure the future of Filipino workers and their families while making more capital available in the financial sector to stimulate economic growth.
Another priority measure that the DOF is lobbying the Congress to pass this year is the bill simplifying the taxation of passive income and financial intermediaries.
This proposal to reduce the number of combinations of tax bases and rates in the financial sector from 80 to about 40, represents Package 4 of the Duterte administration’s Comprehensive Tax Reform Program (CTRP).
“Package 4 aims to shift from the traditional bank-centric funding to capital market financing. It will help us provide long-term funding for our infrastructure program,” Dominguez said. “With their high multiplier effect, infrastructure investments will be the cornerstone of our economic recovery.”
In his pre-recorded message, Dominguez assured forum participants that as CMDC chairman, he is committed to do his utmost for “better investor protection, improved corporate governance, the centricity of shareholders, and broader investor participation.”
Retail investors accounted for 74 percent of stock market transactions in the first quarter of this year, compared to just 53 percent in 2015, which reflects the growing trust and confidence of the public in the regulatory bodies that are tasked to keep their capital and investment returns safe, he said.
Dominguez said he will also continue to encourage reforms in the government securities market that will “diversify the investor base, tap the retail segment, and promote financial literacy and inclusion.”
He said that alongside these initiatives to build the capital markets, the Duterte administration has also encouraged the digitalization of transactions to achieve the least friction in the financial system, and successfully resolved issues hampering the development of powerful financial instruments, such as the Real Estate Investment Trust (REIT).
After the Duterte administration was able to resolve issues plaguing the REIT law, two major real estate players have since entered their REITs in the market.
Dominguez said REITs not only fund property development, but also help drive economic growth, and democratize wealth by opening access for thousands of small investors wanting to be shareholders in secure and profitable real estate projects.
The government likewise fully implemented the first package of its CTRP --the Tax Reform for Acceleration and Inclusion Act (TRAIN)-- which ensured a reliable flow of revenues for the government while enabling 99 percent of workers to boost their disposable incomes with a lower individual tax rate, which, in turn, allowed more people to save and invest in the capital markets.
“Wider public access to investment opportunities and a broad-based financial system are key conditions for achieving financial inclusion among our people and realizing our goal of inclusive growth,” Dominguez said.
The Duterte administration’s policy of fiscal stability has also supported businesses by ensuring that the Philippines continues to maintain its high sovereign credit ratings, which has led to lower interest rates and more accessible financing for enterprises, he said.
Dominguez said the government exerted its best efforts to keep the capital markets open when the pandemic broke out last year, and adjusted disclosure requirements and procedures to ensure transparency even as the global health emergency limited physical transactions.
On top of supporting businesses, the country’s sound fiscal position also kept its financial and banking system strong, and its foreign exchange reserves at record-high levels, he added. (PR)
