Prospects for the electronics sector has brighten up with Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) now projecting a 7 percent growth in 2021 and an upgraded growth projection for 2020 from negative 15 percent to only 5 percent contraction.
SEIPI President Dan Lachica said this after the SEIPI Board approved its revised growth projections for 2020 and 2021.
Electronics exports of the Philippines went down by 14.9 percent in the first six months of the year to $16.1 billion from $18.9 billion in the same period in 2019. Thus, the earlier SEIPI projection that the group’s exports could drop to $32 billion this year from $42.32 billion last year.
“But the prospect for exports in the third to fourth quarters is getting better,” said Lachica.
The negative 5 percent growth for this year would be attributed to additional and unplanned cost of operations of companies as a result of the pandemic. The additional costs include higher expenses for logistics due to the global disruption in supply chains.
The expected recovery in the second half of the year has led the SEIPI Board to approve in their meeting Tuesday, (Nov. 10) for an already bullish 7 percent growth forecast for 2021.
Lachica, however, said that the 7 percent growth forecast for 2021 already factored in the passage of a more favorable Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill and availability of COVID-19 vaccines.
Lachica said the industry suffered a huge loss of $4 billion due to global supply chain disruption and volume transfers made by companies to their other sites overseas. Of the estimated $4 billion loss,
Lachica said this include $500 million worth of transferred volumes that may no longer be recovered.
“SEIPI requested for a moratorium on any incentives rationalization until we recover lost ground from pandemic,” said Lachica as the association stood behind the Philippine Economic Zone Authority (PEZA) in jointly appealing to the Senate in last ditch efforts to protect the current incentives of existing export-oriented enterprises in the country as legislator are now in the last stretch of finalizing the CREATE Bill.
“SEIPI supports PEZA’s position to retain the current incentives and separate the incentives for domestic versus export industries like electronics,” said Lachica.
Lachica made it clear that SEIPI supports CREATE’s proposed immediate reduction of Corporate Income Tax (CIT). “However, we are concerned about CREATE’s proposed incentives rationalization,” said Lachica.
The PEZA position has been to create two separate tax incentive regimes for export and domestic businesses amid the pandemic under the CREATE Bill, which aims to rationalize fiscal incentives for both export and domestic companies.