THE Philippines is missing out on the opportunity to attract investors during a period of trade tensions between the United States and China, due to uncertainty surrounding the country’s tax incentive regime, the head of the economic zone regulator said.
“TRAIN 2 (or package two of the Tax Reform for Acceleration and Inclusion law) is really badly timed. You know why? Because of the trade war between US and China,” Philippine Economic Zone Authority (PEZA) Director-General Charito B. Plaza told reporters on the sidelines of an awards event in Makati City on Wednesday evening.
“I have received many expressions of intent from companies in China looking to transfer to the Philippines so they can export to the US and Europe,” she added.
The Philippines benefits from US and European Union generalized system of preferences programs or preferential tariffs allowing selected developing countries to pay reduced or zero duties on exports, making it an attractive export base for manufacturers taking cover from the trade war, she said.
The potential relocators that have approached PEZA are engaged in manufacturing, information technology-business process outsourcing, and other industries. She said they remain wary of the Philippines pending the passage of the second phase of tax reform, which is known in Congress as the TRABAHO bill.
She said the investors are also considering other Southeast Asian countries like Indonesia and Vietnam which enjoy similar GSP privileges and offer lower costs for power and labor.
In a mobile message, Trade Secretary Ramon M. Lopez said his department had received at least four inquiries to relocate here, including a bag manufacturer a manufacturer of bags.
The Confederation of Wearable Exporters of the Philippines confirmed receiving such interest at midyear, losing out to Myanmar.
“There was one that was supposed to come here in the fourth quarter of the year They pulled out and they went to Myanmar. That’s about 2,500 workers,” Teresita Jocson-Agoncillo, executive director of CWEP, said in a phone interview.
“It did not go through because of all our uncertainties,” she added.
Ms. Jocson-Agoncillo said the Philippines is currently unable to compete with Myanmar, whose apparel exports are about $3 billion annually, against the $1.02 billion posted by the Philippines last year.
Ms. Plaza said incentives are one way for the Philippines to make up for its infrastructure deficiencies.
“We have a lot of deficiencies on infrastructure, it infrastructure. Our power costs are one of highest. The thing that attracts investors now is incentives,” Ms. Plaza added.
She added that some PEZA locators are preparing to move operations out of the Philippines once the tax reform bill rationalizing incentives is passed.
“They are now preparing to transfer because they are multinationals, they have other branches. It’s easy for them to transfer,” Ms. Plaza said, without naming any companies.
During her speech at the 27th Business Journalism Awards of the Economic Journalists Association of the Philippines, Inc., Ms. Plaza also revealed her plan to take the matter up with President Rodrigo R. Duterte.
“Enough of the scolding, enough of the bullying from other leaders of government… I am now very vocal (about) not pushing through with TRAIN 2,” Ms. Plaza said.
On the sidelines, Ms. Plaza said PEZA has given up trying to plead its case to the Cabinet’s economic managers.
“The technocrats like the DoF (Department of Finance) people see it differently… All they are thinking is where to get taxes,” Ms. Plaza said.
She said Finance Undersecretary Karl Kendrick T. Chua’s “exposure to the realities on the ground is not credible.”
Ms. Plaza has sought an appointment with President Rodrigo R. Duterte.
“I still hope the President will understand, especially now with inflation,” which she claims was caused by excise taxes imposed under TRAIN 1. “The President, I think will listen,” Ms. Plaza said. — Janina C. Lim