The head of the Philippine Economic Zone Authority (Peza) blamed the nearly 35-percent drop in new IT-BPM investments in the first five months of the year to US President Donald Trump’s protectionism stance and President Duterte’s independent foreign policy.
Peza Director General Charito Plaza said new investments in information technology and business process management (IT-BPM) sector fell by 34.96 percent to P7.08 billion in the first five months of the year from P10.88 billion in the same period last year.
Plaza pinned the blame mainly on Duterte’s move to court Russia and Chinese trade as well as President Trump’s America First policy.
The Philippine government has been pivoting toward non-traditional allies such as Russia and China, which Plaza described as “America’s arch rivals,” in a bid to boost economic cooperation.
At times, such a move came at the expense of the country’s relationship with the U.S.—a long time ally of the Philippines and a main contributor of clients and investments to the IT-BPM sector —such as when Duterte called for a “separation from the US” after then President Obama criticized his war on drugs.
When asked if domestic political uncertainty and the looming reduction in tax perks were among the reasons for the investment drop, she said “both have effects although investors look at other advantages such as competitive labor wage rates, the quality of the workforce here, as well as the current ease of doing business.”
The Duterte administration is pushing a comprehensive tax reform program, composed of five packages that include proposals to remove the value added tax (VAT) exemption currently enjoyed by IT-BPM companies.
Plaza said Peza had been fighting hard for a status quo in the incentive system for this sector.
Under the first package, which was passed in the House of Representatives last month, personal income tax would be
lowered, while offsetting the revenue loss by either increasing or adding new taxes on consumption and broadening the VAT base. The package is now up for Senate approval.
House Bill 5636 includes provisions that would remove the value added tax exemption of certain transactions of export-oriented firms.—ROY STEPHEN CANIVEL