IN the ongoing trade war between the United States and China, many Chinese companies have begun shifting their operations to Vietnam, Thailand, and Cambodia – but not to the Philippines, Director General Charito Plaza of the Philippine Economic Zone Authority (PEZA) said early this week, citing a World Bank report.
In Indonesia, President Joko Widodo had a similar observation on the World Bank report on migrating Chinese firms. He said that of 33 Chinese firms which had moved to nearby countries, 23 went to Vietnam, and 10 went to Malaysia, Thailand, and Cambodia. He asked his ministers why not one went to Indonesia.
In the case of the Philippines, PEZA Director General Plaza said the country is not attracting the Chinese firms because other countries now have far more developed and high-tech zones. In fact, she said, Philippine economic zones may soon lose many firms because of the Philippines’ unstable investment policies and laws. They are now waiting for the outcome of Philippine government efforts to withdraw or reduce many of the incentives granted by previous administrations, she said.
This move is in a bill originally called the Tax Reform for Acceleration and Inclusion (TRAIN) 2. TRAIN 1 was the law enacted in 2017 that imposed tariffs on diesel and other fuel imports, that was a big factor in last year’s zooming inflation.
The government later renamed TRAIN 2 to what it thought was a more attractive name – “Tax Reform for Attracting Better and High-Quality Opportunities” (TRABAHO), especially since TRAIN 1 had come to be associated with the inflation disaster of 2018. Still later, TRABAHO was further renamed Corporate Income Tax and Incentive Rationalization Act (CITIRA).
But the name changing has not hidden the fact that it proposes to eliminate many of the tax and other incentives the government offered to attract many foreign firms over the years. This proposed law now has them worried. Some companies have delayed expansion plans while waiting for the new law, Director General Plaza said, “Industries feel we have unstable investment policies and laws. They are scared to expand if we keep on changing the rules in the middle of the game.”
She is pushing for the exemption of PEZA-registered firms from CITIRA. “We are not the only game in town,” she pointed out. “Philippine economic zones are competing with the countries with far more developed ecozones.”
TRAIN 1 was a big factor in the zooming prices of 2018, although the government economic managers insist world oil prices and price manipulation were to blame. TRAIN 2 or TRABAHO or CITIRA may not have as much effect on prices, but it may cause the loss of so much employment as many foreign firms move to other countries which are offering the incentives we are now eliminating. As of the end of 2017, PEZA’s 4,147 enterprises employed 1,417,832 Filipino workers.
