Photo: Philippine finance Secretary Carlos Dominguez
Finance Secretary Carlos Dominguez III is pushing a more proactive, targeted investment promotion strategy of directly approaching the kind of foreign investors that the government wants to relocate here and offering them a set of tax and non-tax incentives tailor-fit to their needs, as part of the efforts to reenergize the economy and create more jobs under a post-quarantine environment.
Dominguez said at a recent online workshop that the government should discard its old “one-size-fits-all” incentives program, and shift to a demand-driven approach where it identifies the types of industries that the economy needs to flourish, so that incentives can be granted based on the specific requirements of the industry players that it wants to set up shop in the country.
These industries include those that are labor-intensive and thus create stable, decent-paying jobs; provide excellent technology transfers that improve the skills of the country’s workforce; and have stable markets, Dominguez said.
“What we should be doing is identifying these industries and then going to each of the companies--each of the leading companies in those industries around the world—and asking them: what do you need for you to come to the Philippines? Instead of waiting for them to apply, we should be going to them and offering them a package,” Dominguez said during a virtual press briefing held on the sidelines of the recently concluded online "Sulong Pilipinas: Youth Partners for Progress" workshop.
Dominguez noted, for instance, that companies manufacturing microchips have a different set of needs from businesses that grow flowers for export, hence the need to tailor-fit incentives for specific industries.
He said President Duterte`s economic team and the Congress are now in the process of crafting a comprehensive stimulus program to revive the economy waylaid by the coronavirus disease 29019 (COVID-19) pandemic.
Dominguez said the obsolete “one-size-fits-all” formula of attracting prospective investors has failed to make the Philippines an investment magnet, with the country persistently lagging behind its Southeast Asian counterparts in terms of the volume and amount of foreign direct investment (FDI) inflows despite being among the first economies in the region to offer fiscal incentives.
On top of the massive infrastructure gap, which the Duterte administration is now fixing through its “Build, Build, Build” program, and the constitutional restrictions on foreign ownership, Dominguez pointed to this outmoded investment promotion strategy as among the reasons why the country lags behind in the region in terms of FDI inflows despite the Philippines` status as one of Asia`s fastest-growing economies.
Dominguez earlier said in a teleconference with institutional investors that the Philippines’ investment promotion roadshows held overseas should be specifically targeted to attract the right types of investors that the country needs.
“Let’s say we want to be in the optics industry. Let’s choose the best optics company in the world and go to them and ask them exactly what they need to relocate here. And we will also tell them what we want from them,” Dominguez said.
In his presentation during the online Sulong Pilipinas workshop, Acting Socioeconomic Planning Secretary Karl Kendrick Chua said that on top of Dominguez’s proposed targeted and demand-driven investment promotion strategy, the government would also push the immediate lowering of the corporate income tax (CIT) from 30 percent to 25 percent under the recovery stage of its three-phase Philippine Program for Recovery with Equity and Solidarity (PH-PROGRESO).
This new incentives program under the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE)—the new version of the Corporate Income Tax and Incentives Reform Act (CITIRA) bill—also includes extending the net operating loss carryover (NOLCO) from 3 to 5 years for the 2020 losses incurred by businesses which are not large taxpayers.
The first-ever online Sulong Pilipinas held last May 14 was participated in by over 400 youth leaders from 100 schools and 35 organizations.
Their proposals at the end of the four-hour virtual workshop ranged from ensuring food security via higher farm productivity and upscaling Internet service to implementation of the National Identification (ID) system and attuning micro, small and medium scale enterprises (MSMEs) to the digital economy.