Clean governance is good economics
2025 began with controversy over the national budget approved by a closed bicameral committee and described by the Makati Business Club (MBC) as “hijacked” by patronage politics, with the May 2025 midterm elections seen as a key driver of questionable increases.
Under the 2025 General Appropriations Act, the Department of Public Works and Highways received P1.1 trillion, up by nearly P289 billion year on year. This surpasses the Department of Education’s budget and violates the constitutional mandate to prioritize education. Congress also approved a P19 billion increase in its own budget without clear justification.
There was a P26 billion allotment for the Ayuda Para sa Kapos ang Kita Program, a cash subsidy to “near-poor” families with no clear implementation guidelines, conditionalities, or list of target beneficiaries.
The Department of Economy, Planning, and Development set a 5.5 to 6.5 percent gross domestic product (GDP) growth target. Growth rose to 5.4 percent in Q1 2025, due to election-related spending and an 18.7 percent rise in government spending. This growth continued at 5.5 percent in Q2. However, GDP growth fell sharply to 4 percent in Q3, well below target, after corruption investigations led by the government resulted in the suspension of infrastructure spending, which led to a 26.2 percent drop in public construction spending.
In September, the Bangko Sentral ng Pilipinas (BSP) reported that net foreign direct investment inflows fell to their lowest monthly level in over five years, suggesting that, aside from reduced public spending, foreign investors were holding back due to rising political uncertainty.
A 2018 study by the United Nations Office on Drugs and Crime and the Organisation for Economic Co-operation and Development found that 10 to 25 percent of the value of public contracts is lost to corruption—equivalent to about $2.35 trillion in global economic losses annually, a figure likely higher by 2025. This underscores the importance of transparent procurement, strong anticorruption measures, digitalization, and improved ease of doing business.
However, reducing or eliminating corruption alone does not automatically lead to economic growth. The government must focus on: (1) implementing recently passed economic reforms; (2) enacting remaining economic and governance reforms; and (3) strengthening the ease of doing business and transparency mechanisms.
The benefits of the recently passed economic reforms will not have positive effects without proper implementation and improvements in the ease of doing business. These reforms include: opening of renewable energy to 100 percent foreign equity, Corporate Recovery and Tax Incentives for Enterprises Act, Tax Reform for Acceleration and Inclusion Act, Ease of Paying Taxes Act, E-Governance Act, and Konektadong Pinoy Act.
The Philippine economy has already been significantly liberalized in the last few years through the reforms mentioned above. The MBC believes that the most critical areas should be in transparency, governance, and ease of doing business:
People’s Freedom of Information—The FOI bill seeks to guarantee public access to government records and data to strengthen transparency. It also requires agencies to proactively disclose key information in offices and on official websites.
Amendments to the bank secrecy law—Senate Bill No. 1047 would allow the BSP and courts to examine bank accounts linked to serious crimes, subject to Monetary Board approval. This reform would strengthen efforts to detect financial crimes and combat corruption.
Improving implementation of the Ease of Doing Business Act—Although Republic Act No. 11032 requires local government units to set up electronic business permitting systems, compliance remains low, with only 115 of 1,642 LGUs meeting electronic business one-stop shop requirements as of May 2025. Weak enforcement powers and uneven implementation continue to limit the law’s impact.
Ensuring continuity in budget process transparency—Recent gains in budget transparency should be institutionalized by keeping budget hearings open to civil society, live streaming bicameral deliberations, and publishing budget documents on time. Greater transparency can improve the quality of public spending and boost investor confidence.
In the MBC’s view, the quality of governance determines whether economic growth leads to real gains in investment, jobs, and public services. While the Philippines has passed key economic reforms such as sector liberalization, better tax administration, and digital government, these reforms will deliver their full benefits only if matched by strong governance and transparency reforms.
Transparent, rules-based institutions reduce corruption, improve public services, and create a more predictable environment that lowers the cost of doing business and attracts long-term investment.
The role of the MBC and similar organizations as watchdogs and thought leaders is all the more important. Holding both public officials and fellow private sector stakeholders accountable to the highest standards of integrity will attract not just any investor, but the right kind of investor—one who is here to build, transfer skills, and create quality jobs that will uplift the lives of Filipinos.
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Bettina Bautista leads the economic policy initiatives of the Makati Business Club. For queries, you may contact bettina.bautista@mbc.com.ph
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Business Matters is a project of the Makati Business Club (makatibusinessclub@mbc.com.ph).
