Philippine business groups gathered at the New World Hotel in a press conference to discuss the current Trabaho bill proposed by the Duterte regime. The business groups led by the Philippine Ecozones Association (PHILEA), Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI), IT and Business Process Association of the Philippines (IBPAP) and Confederation of Wearable Exporters of the Philippines (CONWEP), exchanged views as to why PEZA incentives should be retained.
“We understand the desire of the government to raise revenues and strengthen our fiscal position and we believe there are ways of achieving this goal that do not jeopardize the jobs, investments and tax revenues that the country already has,” read a collective statement issued by business groups.
Francisco Zaldarriaga (PHILEA) prefaced the discussion with the current status of the Philippine economy in comparison to Vietnam. Vietnam, an ASEAN competitor, received over $17.3 B in investments through known Korean manufacturer, Samsung by offering a significantly longer income tax holiday, a free 12-hectare facility, and a 0% CIT for its first 4 years, amongst other incentives. Through the manufacturer’s involvement, the two provinces where Samsung built its factories, prove to be two of Vietnam’s richest provinces today with the provinces’ individual GSP three times that of the country’s GDP. In addition, through Vietnam’s more aggressive incentive policies, about 100,000 direct or indirect jobs were added.
Zaldarriaga underscored how detrimental the removal of incentivizing would be in the Filipino job market. Through studied variables, an approximation of 1.5 million direct jobs would be affected and coupled with the multiplier of 5, about 7.5 million people would be impacted. Florian Gottein of the European Chamber of Commerce in the Philippines (ECCP) also stated that while European Investors are actively looking into the ASEAN countries, Vietnam proves to be a preferred location due to its aggressive incentivizing tactics.
According to Ho Ik Lee of the Korean Chamber of Commerce Philippines (KCCP), the discourse on the Trabaho Bill and its circulation has caused many investors to postpone expansion plans. He also expressed that the Philippines’ corporate income tax of 30% is very rare, higher than Vietnam’s 20% which results in an inability to sustain as a product. Coca Cola, for one, had already pulled out, with Nestle also sounding the alarm. Among the ASEAN countries, the Philippines ranks 7th, below Vietnam and Indonesia and is said to be one of the worst-performing countries in the ease of doing business, ranking 121st out of 124 economies.
A decline in investments in 2018 has been attributed to the persistence of the TRAIN or Trabaho Bill. Nobuo Fujii of the Japanese Chamber of Commerce and Industry of the Philippines (JCCI) stated that while Japanese investors had been looking into PEZA areas because they deemed it safe, many have pulled out due to the bill. Lee (KCCP) acknowledged that about 8000 Korean companies go to Vietnam – a great disparity in number when pitted against the 400 of PEZA. JCCI and KCCP both agreed that to rectify the current investment issue, the Philippine government needs to look into enhancing and improving incentives instead. A consensus was agreed upon that there are other, perhaps better ways to increase government funds for infrastructure and further development that would not have significant effects on foreign investments.
Dan Lachica of Semiconductor and Electronics Industries in the Philippines (SEIPI), reiterated that PEZA does not aim to oppose the entirety of the Trabaho bill. He claims that business groups are simply opting for a slight modification of the current regime as to not make the companies severely uncompetitive in the global scheme. Possible incentives were highlighted such as innovation and research development, and the upscaling of the workforce. The concerns in the reduction of tax incentives for the investors remain and Lachica placed forward that the rationale behind the aforementioned is to level the playing field in terms of taxes.