THE Japan External Trade Organization (JETRO) said Japanese businesses expressed confidence in the Philippines’ current tax regime, human resources and wage structure compared to the rest of Southeast Asia, adding that proposals to roll back incentives are causing “anxiety” among investors.
Citing a recent report issued by the organization, JETRO Executive Director Takashi Ishihara told reporters Japanese businesses gave the Philippines a 40% rating in “positive appreciation” of the country’s tax incentive regime, higher than the satisfaction rates posted for Indonesia, Malaysia, Thailand and Vietnam.
The Philippines also scored highest in the region among Japanese businesses in terms of human resources and competitive compensation levels.
Of the nine indicators rated in the business environment appreciation survey, the Philippines rated highest in three categories.
“The study, “2018 JETRO Survey on Business Conditions of Japanese companies in Asia and Oceania,” had 127 respondents with operations in the Philippines.”
A majority of Japanese businesses who participated in the survey said they have plans to expand their Philippine operations through 2020.
“In 2019-2020, 63% of PHL respondents are planning to expand their business in PHL, while 35% will keep the current size,” the report said.
Some 55% indicated plans to increase local staffing, while 39% said they will keep headcount unchanged.
“They appreciate tax incentives in Philippines. They also appreciate human resources in Philippines, English-speaking, talented human resources,” Mr. Ishihara told reporters in Makati City on Monday.
As such, the proposed second package of tax reform which intends to rationalize the incentive structure is making “many respondents… anxious and concerned about stronger taxation,” he said.
Other concerns expressed by Japanese businesses include rising waged and labor issues which are seen “to likely reduce the advantages of the PHL as an investment destination.”
In addition, the report revealed that respondents with operations in the Philippines are seeking to reduce administrative costs to make up for rising costs elsewhere.
“They are also considering changing procurement methods, so that they can be cost-competitive. Although they wish to raise local procurement, they still have some difficulties in identifying local suppliers,” the report added.
JETRO works to promote mutual trade and investment between Japan and the rest of the world. — Janina C. Lim