Electronic exporters will likely set their export growth target for 2020 at only 0 to 3 percent, as the uncertainty over their tax breaks and the US-China trade war make it difficult for the industry to grow beyond that range, according to Semiconductor and Electronics Industries in the Philippines Foundation Inc. (Seipi) president Danilo Lachica.
Seipi’s board sets the growth target for the industry yearly. Lachica, however, said that although the board has yet to meet to discuss the 2020 target, it would likely just be 0 to 3 percent, the same as the target for 2019.
“We haven’t really had our board meeting to project 2020 but it’s going to be very challenging,” he said in a recent chance interview.
“Beyond 0 to 3 percent, it’s hard to see because there are a lot of global and local forces at play,” Lachica added.
Latest available data from the Philippine Statistics Authority suggest that the industry, which is the country’s largest exporter, will likely land within its range this year. From January to October, the industry’s exports reached $33.2 billion, 2.7 percent higher than the level in the same period last year.
While Lachica claims the US-China trade war has not left a huge dent on the industry so far, there may be “greater effect” if the tensions between the world’s two largest economies would escalate.
“If we see an escalation in the trade war, we might see an impact on consumer products,” he said.
Seipi is also worried over its tax breaks, which are set to be rationalized under the Duterte administration’s Citira, or the Comprehensive Income Tax and Incentive Rationalization Act.
Citira will gradually lower the corporate income tax, an aspect that many companies —including Seipi members— welcome since the current level is currently one of the highest in Southeast Asia.
But the bill, which was already passed in the House of Representatives, has drawn a lot of criticisms for its provision for the rationalization of tax incentives.
Lachica previously said the electronics export industry might be forced to lay off 38,000 workers every year for five years from 2022 to 2026, if exporters would not find the Citira that would be passed in Congress acceptable. The job loss would accumulate to 190,000 in five years.
“Given the way our industry works, we will continue to run (existing facilities) until they become obsolete. If we don’t have expansions, and the multinationals would decide to locate elsewhere, then the factories here will shut down.”