Philippines loses $3.6 billion in potential investments in electronics

MANILA, Philippines — Over $3 billion worth of investments in the manufacture of electronics products were diverted from the Philippines to other countries amid investor concerns on the rationalization of incentives, the Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) said.

During the signing of a memorandum of understanding between the Philippine Economic Zone Authority (PEZA) and Department of Environment and Natural Resources (DENR) yesterday for cooperation in identifying lands that can be developed as ecozones, SEIPI president Dan Lachica said five companies have opted to bring their $3.6 billion worth of investments to Vietnam, Thailand and China instead of the Philippines.

“This is $3.6 billion, 25,000 workers that we could have had,” Lachica said.

He said the companies decided to go to other countries due to concerns on the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, particularly the rationalization of fiscal incentives.

Under the CREATE, changes were made to the grant of incentives to make these performance-based, targeted, time-bound and transparent.

Qualified exporters will be able to enjoy four to seven years of income tax holidays (ITH), followed by 10 years of five percent special corporate income tax or enhanced deductions under the law.

Meanwhile, domestic enterprises will be able to enjoy four to seven years of ITH to be followed by five years of enhanced deductions.

Lachica has also raised concerns over the changes introduced in terms of approval of incentives.

Under the CREATE, the interagency Fiscal Incentives Review Board (FIRB), chaired by the Department of Finance and co-chaired by the Department of Trade and Industry, is mandated to oversee the grant of incentives for projects with investments amounting to more than P1 billion.

Meanwhile, those below the threshold are cleared by investment promotion agencies including PEZA.

“FIRB basically has reduced the effectiveness of PEZA,” Lachica said.

He said the SEIPI is coming up with suggestions on legislative changes for the next administration to address industry concerns.

Under the MOU signed by PEZA and DENR, the two agencies will work together for the establishment of special economic zones in potential areas within the jurisdiction of DENR that are suitable for the development of agro-industrial, agroforestry, mineral processing and ecozone tourism.

The agencies have chosen CARAGA as the pilot area for the initiative.