MANILA, Philippines — The Philippine Economic Zone Authority (PEZA) fears the global recession might prompt companies to cut down on costs, forcing them to pull out of the Philippines and focus operations on more investor-friendly countries instead.
PEZA Director General Charito Plaza said in a press briefing on Tuesday that it is doing what it could to keep its current locators, but she could not shake off the fear that they might leave at some point.
For now, no locator has left yet. However, she said the agency, which provides tax breaks to exporters such as income tax holidays, cannot stop them from leaving in case they decide to do so.
“What I’m afraid here is that with the world in recession, there might be export companies who will consolidate their resources, so they have to stop or close their other branches in the world and concentrate their resources in countries which are investor-friendly [and] where the cost of doing business is low,” she said.
“In this COVID pandemic, in a world in recession, it’s difficult to look for new investors. We must create an impression that investing in the Philippines will cost them less,” she said.
An exodus of companies to save on costs can be an opportunity for other countries, as made evident by other nations in Southeast Asia that are aggressively inviting foreign investors with longer tax breaks and bigger tax cuts.
For example, Indonesia plans to cut its corporate income tax to 22 percent this year from the current 25 percent, according to a report from Nikkei Asian Review.
The Duterte administration, on the other hand, wanted to lower its CIT from 30 percent to 25 percent this July, but the bill that would have made this happen failed to pass in Congress back in June.
The bill is called Create, or the Corporate Recovery and Tax Incentives for Enterprises Act. It will also rationalize tax breaks, a battle which Peza has fought against for a few years now since it might drive up costs for current exporters.
“[We must create an impression that] investing in the Philippines will protect and respect their investments because the laws and the policies are stable. It will not be changed every time we change administration,” she said.
From January to May, PEZA only registered P29.54 billion in investment pledges, nearly 32 percent lower than the pledges registered in the same period last year.
Plaza said the PEZA Board was not able to meet last June because the building it shared with the Department of Energy in the Bonifacio Global City had to temporarily close because some DOE staff tested positive for the virus that causes COVID-19.
She said the board will meet again this Friday to approve 27 pending projects. As of press time, these only reflect a total of P2 billion worth of new investments since the end of May, suffering another huge drop. She clarified that more projects might register before their meeting.
PEZA has already allowed companies some relief from the impact of the virus and the lockdown, from deducting COVID-19 related expenses against their taxable income to allowing locators such as call centers to work from home.
The agency will also launch a program next week called the Dollar Program, or the Development Outreach for Labor, Livelihood and Advancement of Resources. This includes a job fair that so far has more than 40,000 job openings, excluding the job opportunities once the pending projects start operation.
Further information, such as a list of these job vacancies and their office locations, were not yet available as of press time.