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NEWS UPDATES 2 July 2010

Philippines eyes new state investments

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After ditching the previous administration’s balanced-budget goal, the Aquino government plans to give the state a greater role in business by investing the proceeds of asset sales in lucrative industries, the Department of Finance (DOF) told the Manila Times.

“It is not sustainable if the proceeds of the privatization program would only be used to cover the budget shortfall. Instead, the expected proceeds from there could be invested to sectors that could generate money for the government,” newly appointed Finance Secretary Cesar Purisima told reporters during turnover ceremonies at the Finance department on Thursday.

“We will conduct an inventory of all the government assets that could likewise be sold and recommend it to the President. Then, when approved, we would do it,” he said.

“It is sufficient that the budget deficit would be on the manageable range,” the new finance chief said, reiterating a statement he made during Wednesday’s press conference at Malacañang that the new government would ditch the balanced-budget goal.

Purisima said that he does not see the urgent need to balance the budget as there are “more important things to look into in order to generate more profit for the government.” The new finance chief, however, declined to identify which industries the government would invest in, saying only that the agency has yet to pick the favored sectors.

“We would review this matter once I get hold of all the details, and recommend to the president that instead of using the proceeds to narrow the fiscal gap, we invest the returns that would in turn give sustainable revenue for the government,” Purisima said.

If the Aquino administration pursues this tack, then this would be a reversal of the decades old policy of shedding government involvement in the private sector.

The privatization program of the former administration was expected to generate P30 billion in revenues this year.

It had wanted to sell the government’s shares in Philippine National Oil Co.-Exploration Corp. and the 103-hectare property of Food Terminals Inc. in Taguig City. The government had also lined up the long-term lease of the Fujimi property in Tokyo, Japan.

All of these were supposed to have been disposed of in the first quarter, but the department eventually moved the scheduled sale to the second half of the year.

During Wednesday’s first press conference of select members of President Aquino’s Cabinet, Purisima said the new government wants to lower the budget deficit to 2 percent of gross domestic product (GDP) in the next three years.

For this year, former President Arroyo’s economic managers had raised the fiscal deficit ceiling from P293 billion to P300 billion, but the higher figure still accounted for 3.6 percent of GDP.

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