AMERICAN electronics firms are looking to set up shops in the Philippines as they seek alternative location in Asia, the Department of Trade and Industry (DTI) said.
DTI Undersecretary Ceferino Rodolfo said at the Philippines-US Business Dialogue on Tuesday that US electronics manufacturers have been on the move to secure sustainable and resilient supply chains amid the uncertainties in pandemic.
“[As such], there has been strong interest from highly innovative, labor-intensive companies in the electronics sector, trying to look at the Philippines as an alternative or a complementary location for their factories here in Asia,” he added.
The US is among the top export destinations of the local electronics industry, which include Hong Kong, China, Singapore and Japan. Electronics comprise bulk or 62 percent of Manila’s total exports.
Among the US electronics firms currently operating in the country are ON Semiconductors and Texas Instruments Inc.
Rodolfo said the recently passed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act has sparked interest from US investors. “This [CREATE] is one of the reform efforts that the private sector has been waiting for,” he explained.
Following the enactment of CREATE, the CIT rate is reduced to 20 percent from 30 percent for domestic corporations with net taxable income of P5 million and below, and have total assets of P100 million and below effective July 1, 2020. All other local firms and resident foreign companies are imposed a 25-percent income tax.
“In terms of private sector interest from US companies, we have seen strong interest coming mainly from…infrastructure-related companies,” Rodolfo noted. “For example, there were already registrations that have applied for third-party telco towers.”
Moreover, Lopez said, they have gotten as well many inquiries from innovated-driven companies engaged in artificial intelligence (AI) regarding the investment opportunities in the Philippines.
“In addition, we have also been getting a lot of queries when it comes to hyperscale data centers,” Rodolfo said. In May, the DTI launched its AI road map with the goal of making big data processing the next sunny sector in the Philippines after the business-process outsourcing industry.
‘Important’ partner
Meanwhile, Trade Secretary Ramon Lopez stressed that Washington is an “important” partner in trading and investment source in several areas including electronics, transport and storage, administrative and support services, manufacturing, real estate and information technology-business process management.
“But more than the figures, the nature and quality of investments from American companies and the business partnerships being formed with local companies have helped move the Philippines up the value chain,” Lopez said. “The Philippines aims to be both a valuable contributor to your global business’ growth, as well as a strong partner of the US in building back towards a better, brighter post-pandemic future.”
Currently, the Philippines is awaiting the US Congress’s renewal of the Generalized System of Preferences (GSP) program.
The GSP deal is a unilateral preferential trade arrangement by the US to 122 beneficiary developing countries and least developed beneficiary countries, including the Philippines. It aims to promote economic growth, development and trade by providing duty-free market access to about 5,000 products into the US.
While the GSP is a big boost for the country, Lopez said that the US-Philippine economic ties can be strengthened with a free trade agreement (FTA).
“But we hope to strengthen our relationship beyond the GSP and graduate towards an FTA that would provide a long-term rules-based, and predictable trade environment for our two nations,” he said.
The total trade between Manila and Washington fell by nearly 14 percent to $16.9 billion last year from $19.6 billion in 2019, according to the Philippine Statistics Authority. Broken down, Philippine exports to the US fell by about 14 percent to $10 billion while imports from Washington slid by almost 15 percent to $6.9 billion year-on-year.
Investment pledges from the US grew by more than two-fold to P24.28 billion last year from P11.51 billion in 2019, data from the Board of Investment and Philippine Economic Zone Authority showed.