THE JOINT Foreign Chambers of the Philippines is targeting to generate $50 billion in foreign direct investments (FDI) and three million new jobs in the next decade.
“The target is substantially above the current annual FDI of $8.3 billion for the five-year period of 2015 to 2019. We can achieve these targets, but only with the support of our many partners in government and with the Philippine business groups,” American Chamber of Commerce of the Philippines President Peter Hayden said at the Arangkada press conference on Wednesday.
The foreign chambers referred to potential investments in several sectors, including outsourcing, manufacturing and infrastructure.
The Philippines can continue to attract business process outsourcing (BPO) investment, with the sector potentially growing as companies look to reinvest economic savings after the pandemic, Mr. Hayden said.
“Through the challenges of the pandemic, one of the things that has been great for the Philippines is how resilient the BPO industry has been through this global black swan event. I think there is additional opportunity ahead as companies look to create really great service options with great economic advantages,” he said.
European Chamber of Commerce of the Philippines President Nabil Francis said that manufacturing has room to develop because the Philippine economy is driven by private consumption.
“If we want the Philippines to become a magnet for foreign investors, it’s essential to act quickly and decisively because the competition is fierce,” he said.
“We are extremely anxious looking at what’s happening in the neighboring countries, especially countries like Vietnam that seems to be bouncing back much better than the Philippines in this COVID-19 crisis.”
According to a September survey done by the Economic Research Institute for ASEAN and East Asia (ERIA), 13.5% of foreign firms with operations in China are planning to move their operations to another country. Among them, more than 60% are looking to transfer to Vietnam, when choosing among Association of Southeast Asian Nations (ASEAN) countries. This was followed by Thailand at 23%, while the Philippines was tied with Malaysia at 15.4%.
“It’s essential for the Philippines to be attractive for foreign investors so we get stable and predictable regulatory framework, level playing field competition, and to be more attractive than our neighbors.”
Japanese Chamber of Commerce of the Philippines President Keiichi Matsunaga said that infrastructure should drive foreign investment in the country, citing transportation projects.
“There is a big potential for the railway system,” he said.
The joint chambers in 2010 set $10-billion FDI and one million new jobs targets over the decade, which Mr. Hayden said was achieved.
The foreign chambers announced the $50-billion target after the measure cutting corporate income tax and rationalizing tax incentives was approved by the Senate.
Foreign chambers in previous press conferences and statements have said that the potential loss of fiscal incentives through Senate Bill No. 1357, or the “Corporate Recovery and Tax Incentives for Enterprises Act (CREATE)” would worsen unemployment and risk investment attractiveness.
The Finance department had been pushing to make tax incentives performance-based and time-bound, noting the country has been giving some investors the special rate of 5% on gross income earned (GIE) in lieu of all taxes with no time limit.
Under CREATE, exporters and domestic industries will now be given between four to seven years of income tax holiday. Exporters and critical domestic industries may later pay the 5% on GIE for 10 years in lieu of all local and national taxes. The bill also increased the sunset provisions to 10 years from the initial proposal of four to nine years.
The electronics exporters industry group has already indicated pessimism about longer-term growth prospects once CREATE is signed into law.
Canadian Chamber of Commerce of the Philippines President Julian Payne said that the FDI target can be achieved with the right policies, in addition to CREATE.
“That includes many other things despite CREATE. It includes FTAs (free trade agreements). That includes infrastructure, the labor code, you can go on and on. It includes moving CIT (corporate income tax) down to the ASEAN average of 20%,” he said.
“What the target represents is a potential with all the appropriate policies put in place. The concerns expressed with CREATE was what was gonna be the immediate impact without this longer term potential being taken into account.”
Mr. Francis said that despite the pandemic, Philippine economic fundamentals remain healthy. To achieve the target, he added, the private sector and government must collaborate.
FDI inflows in the first eight months dropped 5.6% to $4.432 billion from $4.693 billion in the same period last year, data from the central bank showed. — Jenina P. Ibañez