THE Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) is urging the government anew to revisit the incentives rationalization in the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) law to avoid the diversion of expansionary plans from the Philippines to other Asian countries.
As a recent example of such diversion, SEIPI President Danilo C. Lachica revealed that a battery manufacturer was “going to build an expansion in Asia.” However, he said, “Unfortunately they chose Malaysia instead of the Philippines.”
Lachica said this has been the trend because of some parts of the incentives rationalization in the CREATE law that need tweaking.
“I’ve been telling the Senate and the previous administration that the electronics industry today will not look like what we have today in nine years,” the SEIPI chief told a recent forum organized by the Board of Investments (BOI).
“Why 9 years? CREATE gave a 10-year transition period. We’re on the first year already and you can see that the [foreign direct investment] FDI winners are Vietnam and even India,” Lachica noted.
In fact, he said, when the Semiconductor Industry Association (SIA), SEIPI’s partner in the US, met with cabinet-level officers, one of the issues raised was Asian countries’ performance in terms of foreign direct investments.
“The leaders are India and Vietnam and the laggards are the Philippines and Malaysia; but surprisingly Malaysia is getting more investments than the Philippines,” Lachica pointed out.
While the reduction of corporate income tax in the CREATE law is good, he said the incentives rationalization “is bad, at least for the electronics industry.”
The SEIPI chief explained that electronics depends on new products and technologies, adding that “if you don’t get new products to the Philippines, guess what, we’re going to be stuck with legacy products which are eventually going to be obsolete.”
When the factories are obsolete, he said they are going to shut down the company.
“I don’t want to be the bearer of bad news but we’re working with the government with Secretary Fred (Pascual of trade and industry), Ben (Diokno, of finance), but we’re hoping that the government will revisit the incentives rationalization so that we can reverse the trend,” Lachica said.
Moreover, he stressed that while “we can pat ourselves on the back and say ‘yeah 2022 investments is better than 2021 for the Philippines’s, we cannot afford to look internally, let’s look at the competition outside and that’s a big challenge.”
Meanwhile, according to Oxford Economics, India has often been named a potential beneficiary of the “China plus X” strategy as global manufacturers look to diversify supply chains away from China, “against a backdrop of rising geopolitical strains, higher labor costs and environmental pressures.”
The UK-based think tank noted that while other Asian high-tech sectors have benefited more from the search for alternative suppliers, government incentives and pledges by large technology companies to relocate production to India “bode well” for Indian high-tech growth.