Wednesday, April 30, 2025

Closures, lost FDIs in electronics feared

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After losing $100 million in investments and $20 million exports due to uncertainties that surrounded the tax reforms and the pandemic, the Philippines need to catch up and capture $110-million expansion projects of five companies in electronics.

Dan Lachica, president of the Semiconductor and Electronics Industries of the Philippines Foundation Inc. in a webinar on the Corporate Recovery and Tax Incentives for Enterprises (CREATE) yesterday expressed fears of possible closure of some existing companies after the transition period of the law when they eventually lose their existing preferential tax rates.

Electronics investments approved by the Philippine Economic Zone Authority (PEZA) stood at P1.5 billion in the first half of the year, down 63 percent from P4 billion in the same period in 2020.

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Lachica laments the fact the Philippines’ Asean neighbors are getting most of the foreign direct investments (FDIs).

“ It’s really a cost per unit kind of game. With our high operating costs, hopefully the incentives will offset these and even make it attractive for Philippine to be a destination.

With the electronics industry, you don’t get expansions. We depend on new products or new technologies. And if we don’t get that and they continue to go to our neighboring countries, after the transition period, then it’s likely that some of these companies may close and employment will be will be diminished,” Lachica said.

Lachica who earlier suggested giving PEZA more powers in approving projects, recommended a number of measures to attract FDIs especially in the electronics sector.

One is to allow for flexibility in enforcing the performance criteria set by the Strategic Investment Priorities Plan, specially for force majeure situations, including lower export sales, lower employment targets, etc.

Lachica also recommended that government agencies follow the standard lead times for approval processes consistent with the Ease of Doing Business Act.

He also called on the need to improve CREATE’s implementing rules and regulations to be more explicit in the descriptions of allowable deductions and include missing items and remove inconsistencies with a revenue regulation implementing value-added tax on constructive exports.

Lachica said at the onset of the pandemic, about $20 million exports have been transferred to outside the Philippines and over $100 million of expansion were mostly decided upon by the multinationals before CREATE was implemented.

“There are some investments today, and these are expansions… about $110 million (of) about four or five companies,” he added. – Irma Isip

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