Industries warn of 1.4M job losses

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    Diversification. Electronics and semiconductor products, the Philippines’ top export, are moving up the value chain by moving away from pure assembly. (Reuters file photo)
    At a semiconductor factory. (Reuters file photo)

    Business groups yesterday warned job losses could top 1.4 million if the current incentives are diminished, stunting further the country’s growth made worse only by the ongoing new coronavirus disease 2019 (COVID-19) pandemic.

    While all agree to a looming version of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) in the Senate, they believe any changes to the incentive will lead to mass exodus of existing investors and opportunity losses that would aggravate the current state of industries already hit by the pandemic.

    The business groups — Semiconductor and Electronics Industries of the Philippines Inc. (SEIPI), the Information Technology Business Process Association (IBPAP), the Joint Foreign Chambers and the Philippine Ecozones Association yesterday made a last-minute appeal to Congress to pass a competitive package that offsets the high cost of operating in the Philippines, which is 30 percent more than in Vietnam.

    Dan Lachica, SEIPI president, said a transition period offered under option 2 of Sen. Ralph Recto in CREATE will ensure investors will stay put.

    But he cautioned if incentives are not competitive past that, “it will be an open season.”

    “The danger even during the transition period is, there is no guarantee expansion new technologies and new businesses will come.

    That is the risk,” Lachica said.

    Speaking also in behalf of other industries, Lachica said business groups would “rather
    hope for the original version (of Recto’s bill) retaining the grandfathering rule” that will enable existing investors to retain their incentives.

    That version, he said, also provides incentives to local businesses.

    While there will be no change in current incentives for export enterprises — they will only enjoy 5 percent income tax rate in perpetuity as long as they remain export enterprises.
    For both domestic and export enterprises, the tax holiday period is four to 7 years.

    Electronics in particular need competitive incentives to attract investments in new products. Otherwise existing electronics companies will run mostly legacy products until obsolescence, that will eventually lead to their shutdown.

    “The country runs the risk of significant job losses over the next five years,” Lachica said.

    The 1.4-million estimate was made pre-COVID and Lachica expects this to even go higher.

    That number is on top of the 5 million lost jobs due to the pandemic.

    “We appeal to our senators to retain our fiscal incentives to ensure the continuity of operations and jobs,” he added.

    Rey Untal, IBPAP president, for his part expects the information technology-business process management (IT-BPM) to run flat in revenues this year, a stark contrast from its double-digit growth rates the past years.

    Untal said competitive incentives would ensure the industry to catch the expected pentup demand in the second half of 2021.

    Electronics and IT-BPM account for bulk of Philippine exports.