How does the Philippines attract more foreign investment?
Last week, big business groups, including the American Chamber of Commerce of the Philippines and investors inside Clark and Subic freeports, appeal the review and amendment of pertinent rules issued by the tax bureau to preserve the original intent of the Create Act.
According to the group, the IRR and the BIR issuances “effectively stopped” the enjoyment of the tax incentive and other fiscal perks, as some investor firms are now levied with VAT and other taxes.
The group cited data from the World Bank, which showed that the Philippines only account for 5 percent of the total average foreign direct investment in the Asean (2011-2021) while neighbors like Singapore, Indonesia, Thailand, Malaysia and Vietnam account for 53 percent, 11 percent, 11 percent, 9 percent and 8 percent, respectively.
They warned that, if the issue is not resolved, the Philippines’ ranking in global competitiveness might further slide down.
In fact, Taiwanese businesses inside Clark and Subic freeports have been appealing to the authorities about these benefits issue for some time.
As it is widely known, while Filipinos have high English proficiency, high electricity rates, poor infrastructure, transportation systems inadequacy, supply-chain shortages and lack of tax incentives are among the issues businesses are facing in the Philippines.
Vietnam and Singapore have been top investment destinations for Taiwanese companies in the Asean. It is estimated that the overall volume of investment from Taiwan to the Philippines is only 1/16 of overall Taiwanese investment in Vietnam.
To create a more amiable environment for FDI, it takes the government to be more determined to invest in infrastructure projects and address these pressing issues with all-out effort.
In recent months, the Taiwan Semiconductor Manufacturing Co., referred to as “the sacred mountain” that protects Taiwan, has declared several investment plans in the US, Japan and Germany.
These projects have raised global attention and it is worth noting that the German government reportedly will contribute up to €5 billion (P306 billion) to the European Semiconductor Manufacturing Company plant in Dresden, Germany, which will be 70-percent owned by TSMC, with German multinational engineering and technology company Bosch, German semiconductor manufacturer Infineon and Dutch semiconductor designer and manufacturer NXP each holding 10 percent equity stake.
German public broadcaster Deutsche Welle reports that the reason TSMC chose Dresden to build the factory is most likely because of the cluster effect.
Dresden is the capital city of the German state of Saxony where it has been the epicenter of chip production in Europe.
It is reported that every third semiconductor made in Europe comes from Saxony. The region also benefits from the presence of prominent research institutes and universities to provide talents, such as Fraunhofer and Technical University Dresden, one of the foremost technical institutions in Germany.
Simply put, while investment incentives are not something required for companies when they make decisions to invest in a certain country, it does play a significant role and the authorities have to consider how much they want to attract foreign investment and use these critical tools wisely.