Exports of electronic parts could hit an all-time high of $40 billion by the end of the year should it grow by over 3 percent in the fourth quarter, according to an industry leader.
Danilo C. Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation Inc. (Seipi), said the electronics industry is maintaining its target of 2019 growth of from flat to 3 percent. However, if things go the way of electronic parts makers, then their shipments could reach a record high $40 billion by year-end.
“While it’s possible to exceed, we maintain our maximum forecast of 3-percent [growth], which could take us up to $40 billion for the year,” Lachica told the BusinessMirror.
The Philippine Statistics Authority (PSA) on Wednesday reported exports in September slipped 2.64 percent to $5.89 billion, from $6.05 billion during the same month last year. This was the first time exports declined since March, and the steepest this year since the 6.72-percent drop in January.
Bucking this slowdown, electronic products, the country’s largest export item, improved nearly 4 percent to $3.59 billion, from $3.46 billion, PSA data showed.
After three quarters, shipments of electronic products rose 2.17 percent to $29.65 billion, from $29.02 billion in the same period last year. This put the electronics industry in a position to achieve its maximum growth target of 3 percent this year, which should boost its exports close to $40 billion in value.
This also plays well with the industry’s long-term objective of hitting $50 billion worth of exports by 2026, although Lachica said “incentives rationalization puts this at risk.”
Based on PSA records, exports last year grew flat to $69.3 billion, from $68.71 billion in 2017. Accounting for over 55 percent of this, shipments of electronic parts increased about 5 percent to $38.32 billion, from $36.53 billion.
However, instead of raising the industry’s ceiling, Seipi opted to set a target of flat to 3-percent growth this year, as manufacturers junked their expansion plans—which would have improved their operations—amid uncertainty over the government’s move to rationalize fiscal incentives.
The Seipi is one of several industry groups opposing the passage of the Corporate Income Tax and Incentives Rationalization Act bill. The Citira bill will cut corporate income tax to 20 percent by 2029, from 30 percent at present, but will overhaul the set of incentives granted to firms operating in economic zones in exchange.
When passed into law, the measure will lift incentives that investors find crucial in keeping their operations here, including the 5- percent tax on gross income earned paid in lieu of all local and national taxes.
Economic zone firms, mostly multinationals, warned they will pack up business here and relocate to another Southeast Asian country if their tax perks are removed from them. The Joint Foreign Chambers of the Philippines estimated more than 700,000 jobs will be lost as a consequence of this looming capital flight—a figure that Department of Finance officials have cast doubt on and would want them to validate.
Well below expectations
Meanwhile, for Sergio R. Ortiz-Luis Jr., president of the Philippine Exporters Confederation Inc., the electronics industry’s performance in September may be positive, but it is well below what is expected of it as the country’s leading exporter.
In a phone interview, Ortiz-Luis argued that exports of electronic parts should be growing at least 3 percent by now in the buildup toward the Christmas season, when demand for consumer items is at its highest. As such, he attributed the exports slowdown in September to the supposed underperformance of electronic parts makers.
“It’s disappointing that the electronics sector, while [its exports is] up 2 percent, is not pumping the usual expected figures. We were expecting for it to grow at least 3 percent by this time. Its underperformance is a big blow to our export performance,” Ortiz-Luis said.