MANILA, Philippines – According to the Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI), over $3 billion in investments in the creation of electronics products were diverted from the Philippines to other nations due to investor concerns over incentive reduction.
SEIPI president Dan Lachica said five companies have chosen to invest $3.6 billion in Vietnam, Thailand, and China instead of the Philippines during the signing of a memorandum of understanding between the Philippine Economic Zone Authority (PEZA) and the Department of Environment and Natural Resources (DENR) yesterday for cooperation in identifying lands that can be developed as ecozones.
“This is $3.6 billion, 25,000 workers that we could have had,” Lachica said.
According to him, the enterprises chose to go to other countries because of concerns about the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, including the rationalization of fiscal incentives.
Changes to incentive grants were introduced under CREATE to make them performance-based, targeted, time-bound, and transparent.
Qualified exporters will be able to take advantage of income tax holidays (ITH) for four to seven years, followed by a ten-year period of 5% special corporate income tax or improved deductions under the bill.
Meanwhile, domestic businesses will be able to take advantage of ITH for four to seven years, followed by five years of increased deductions.
Lachica has also expressed reservations about the alterations made to the incentive approval process.
The interagency Fiscal Incentives Review Board (FIRB), led by the Department of Finance and co-chaired by the Department of Trade and Industry, is responsible for overseeing the grant of incentives for projects worth more than P1 billion under the CREATE.
However, those who fall below the criteria are cleared by investment promotion organizations such as PEZA.
“FIRB basically has reduced the effectiveness of PEZA,” Lachica stated.
He stated that the SEIPI is preparing legislative proposals to address industry concerns for future administration.
PEZA and DENR have signed a memorandum of understanding (MOU) to collaborate on creating special economic zones in potential DENR jurisdictions that are ideal for the development of agro-industrial, agroforestry, mineral processing, and ecozone tourism.
CARAGA has been chosen as the initiative’s pilot location by the agencies.