Foreign business chambers and the electronics industry have rallied behind the proposal of Senator Ralph Rector for a “grandfather” incentives system in the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) Bill to ensure that existing investors will continue to invest in the country in the long-term and signal prospective investors that there is stability and consistency in the implementation of tax incentive policy in the country.
The Joint Foreign Chamber of Commerce issued this statement of support as the Senate is close to the finishing line in crafting the long delayed CREATE bill, which aims to overhaul the country’s incentives regime to investors, particularly export-oriented enterprises.
“In particular, we strongly support the amendments proposed by Senator Recto and the points he raised during his interpellation which successfully underscored the fierce competition exporters based in the Philippines face in the global export market. The difficult conditions faced by exporters, especially during a once-in-a-century pandemic, make it imperative that the Senate, as it has been doing, carefully ensures that a reform measure as significant and consequential as CREATE will boost rather than harm Philippine competitiveness,” the JFC stated.
According to the JFC, Recto’s proposal will not only benefit foreign and Filipino companies but, more importantly, continue to allow global export firms to provide jobs to millions of Filipinos and help to power-up the restart of the Philippine economy.
Meantime, the Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) also batted for Recto’s proposal to amend the Senate version of the proposed CREATE incentives rationalization. SEIPI said that Recto’s proposed options demonstrate an astute understanding of the business decision factors that multi-national companies, which have factories in other Asian countries, consider in order to retain and/or increase investments in the Philippines. He has a good grasp of the risks of rolling out incentives that are not competitive with Vietnam, Thailand and other ASEAN countries, considering the high cost of operations (power, industrial water, logistics, labor, etc.) in the Philippines.
Without competitive incentives, SEIPI said, it would be extremely difficult to attract new investments. In fact, without competitive incentives to attract investments in new products, existing electronics companies will run mostly legacy products until obsolescence, after which they may shut down. The country runs the risk of significant job losses over the next 5 years.
“We appeal to our Senators to retain our fiscal incentives to ensure the continuity of operations and jobs, as well as investments, for the survival of the electronics industry,” said SEIPI, the leading organization of multinational and Filipino-owned semiconductor and electronics companies in the Philippines with over 340 members, including manufacturing firms, allied and support industries, and the academe.
The Philippine semiconductor and electronics industry is a significant driver of the Philippine economy and the largest contributor to the country’s manufacturing sector. In 2019, the industry accounted for $43.32 billion, or 61.60%, of the country’s total exports and employing over 3 million direct and indirect workers. As of September, the industry exported $28.07 billion, or 61.2 percent of total Philippine exports.