The Semiconductor and Electronics Industries of the Philippines Inc. (SEIPI) is seeking the review of the country’s incentive system if this has been effective in attracting foreign direct investments (FDIs).
In a letter to Trade Secretary Alfredo Pascual dated June 30, 2022, SEIPI president Dan Lachica reiterated industry’s fear of losing $400 million in potential investments on top of the $3.5-billion opportunity losses incurred following the rationalization of perks under Corporate Recovery and Tax Incentives for Enterprises (CREATE) law as well as other challenges faced by the electronics and semiconductor industry, the country’s top export winner.
Lachica identified high operating costs (e.g. power, labor, logistics), changes in government policies, supply chain issues, lack of ease of doing business in the country, shortages in qualified engineering talent as additional constraints in attracting FDIs into the country.
Lachica said SEIPI welcomes the reduction of the corporate income tax under CREATE but sees the need to review the effectiveness of the incentives rationalization.
“(We need to) understand the root causes and responses to mitigate the low FDIs in the Philippines compared to its neighbors such as Vietnam, Thailand and Malaysia,” he said.
Lachica said SEIPI seeks the restoration of the authority of the Philippine Economic Zone Authority to approve FDIs and reduce the layer of bureaucracy introduced by the Fiscal Incentives Review Board (FIRB) also under CREATE.
FIRB has the authority to review and approve big-ticket projects registered with investment promotion agencies.
Lachica also said constructive exporters or those which supply to other exporters should continue enjoying value-added tax (VAT) exemption and VAT-zero rating of constructive exporters.
He said adhering to Cross Border doctrine would resolve the confusion over the VAT treatment of constructive exporters.
Lachica also sought Pascual’s assistance with other agencies in resolving high operating costs, including power (Department of Energy), logistics (Department of Transportation and Department of Finance), and labor (Department of Labor and Employment).
