A leader of the House of Representatives on Monday said the decision of some multinational companies to shutter their operations in the Philippines has trained the spotlight on some of the weaknesses of the country’s manufacturing sector.
In an aide memoire to the leadership of the lower chamber, House Committee on Ways and Means Chairman Joey Sarte Salceda said Congress may explore policy options related to power costs, logistics, and trade remedies and safeguards. Salceda also said his committee will study “national factors” like the cost of doing business.
Salceda added that the Department of Trade and Industry (DTI) and other relevant agencies should study possible trade remedies.
He said the DTI may be called to the House to brief the leadership on its proposals, given the trade-related aspects of manufacturing issues in the country.
“Tariffs are the immediate jurisdiction of the Committee on Ways and Means. The committee is studying how to optimize tariff rates as a safeguard. Antidumping, countervailing, and other trade laws now in effect were also authored by this representation,” he said.
However, Salceda said Honda, Wells Fargo & Co., and Nokia are leaving the Philippines not because of country-specific reasons, but because of issues of cost and competitiveness within their respective companies.
“There are firm-specific issues among all the cited companies. Wells Fargo was slapped with a $3-billion fine in the United States. Honda has been overwhelmed by competition in the small-sedan segment. And Nokia has retreated globally as a technology firm,” he said.
“Nonetheless, the Philippines can improve on basic issues of power cost, logistics and trade remedies. Decisive action from the Executive is needed to cushion the impact on displaced workers. In the medium to long term, we must ensure that there is an adequate social safety net for unemployment and labor displacement,” he said.
By Honda’s own admission, the lawmaker noted that its main issue is cost competitiveness, with the company saying that it hopes to meet “customer needs in the Philippines for reasonably priced and good quality products.”
“My office is studying what impact trade remedies and safeguard measures could have [been] done to protect the company [Honda]. We may be able to learn something that allows us to protect the other car manufacturers this time,” he said.
“As historical car sales data would show, the company’s competitiveness issues have been years in the making, as its market share has been chipped away by competitor Toyota,” said Salceda.
He also noted that US-based bank Wells Fargo & Co.’s decision to downsize its Philippine operations is part of the company’s “global workspace strategy,” which “indicates that the company wants to reduce costs after having been hit by a $3-billion fine.”
The planned closure of Nokia Technology Center Philippines, Salceda said, is due to the company’s problems in its home country, Finland, where it will slash 180 jobs to save €500 million on operating costs.
‘Pass Citira’
Salceda said the immediate passage of the Corporate Income Tax and Incentives Rationalization Act (Citira) will allow the local business sector to recover from the decision of some multinationals to leave the Philippines. Citira is now awaiting Senate approval.
“As soon as Citira is passed, we will be able to end the wait-and-see mode of companies, and turn these pledges into actual investments and, hence, create jobs to offset losses from recently announced closures,” he added.
He said the House Committee on Ways and Means is open to adopting a Senate Citira that is “fiscally acceptable,” includes the Fiscal Incentives Review Board expansion, and does not facilitate transfer pricing and other “corporate maneuvers” to avoid taxes.
Job losses
Salceda said the the Department of Labor and Employment (DOLE) should ensure that adequate measures are in place to assist workers that may be displaced by decision of multinationals to shutter or downsize their Philippine operations.
He said displaced workers should be prioritized in the skills retraining from Technical Education and Skills Development Authority.
“We will need to act decisively in support of displaced workers. Definitely, the government must bring the necessary support, such as reskilling, the Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers [TUPAD] of the [DOLE], and some form of financial support to those who will lose work,” he added.
He said his committee is drafting a framework for unemployment insurance in the country in the coming weeks, saying the government needs to strengthen the social safety net.
“There are factors we could improve on, like labor productivity and research and development support—both of which need to be strongly incentivized and are, in fact, at the heart of Citira,” he said.