Foreign business groups target a more bullish $50 billion foreign direct investment inflows to Philippines and creation of 3 million jobs over the next ten years with new capital flows into IT-business process management, manufacturing, infrastructure, tourism and mining sectors, encouraged by the approval of a better Corporate Recovery Recovery and Tax Incentives for Enterprises (CREATE) bill at the Senate.
The new target for the next decade was announced by Peter Hayden, president of the American Chamber of Commerce of the Philippines, at the 9th Arangkada Philippines Forum 2020 on Foreign Investment in the Post-Pandemic Philippines. The new FDI target for the next decade or until 2030 is five times higher than the previous decade target of $10 billion with one million jobs, which Hayden said had already been achieved.
“We can achieve this target only with the support of our partners in government and business partner groups,” said Hayden. Arangkada is a Filipino term, which means to accelerate. The Arangkada project was launched in 2010 by the Joint Foreign Chambers (JFC) and the Department of Trade and Industry and the Philippine Economic Zone Authority to help the government in accelerating FDI inflows.
Leaders from the various foreign business groups that make up the JFC all agreed that the approved Senate CREATE bill is a lot better version from the original TRABAHO bill that the Duterte administration tried to pass for the past three years. CREATE will reduce the current 30 percent corporate income tax to 25 percent upon effectivity of the law and provide longer transition period for existing companies to migrate to the new tax incentives regime.
JFC business leaders, however, stressed that the government needs to act decisively and quickly to help realize these FDI potential. The JFC said the $50 billion projected FDIs over the next decade will come from the IT-BPM, manufacturing, infrastructure, tourism and mining.
Nabil Francis, president of the European Chamber of Commerce of the Philippines, said that despite the pandemic the fundamentals of the country remained “good, healthy and strong, and the future of the Philippines, is not cancelled, it is just postponed.”
“And yes, we are optimistic. Yes, we have the potential but on the other hand, it's important for us to be in a position to unfold this potential, and in total if we want to deliver if we want to achieve this target.
We will have to decisive, and to work hand in hand with the government as the JFC has always been doing to unfold this potential. So that's, that's extremely important in my opinion, if we just sit there, this will not be realized. We need to act decisively and don't have much time to,” said Francis.
The sense of urgency was also echoed by Julian Payne, president of the Canadian Chamber of Commerce of the Philippines, as he expressed hope that the government will not take too long to act on what must be done to realize the huge FDI potential noting that it took three years to finalize the CREATE Bill.
Payne estimated the CREATE bill to make an impact in the two or three years.
Despite the CREATE, he said, there are other things that will help realize the FDI target that includes policies on free trade agreements, infrastructure, labor code, among others.
Hayden cited the Philippines resiliency as one great factor working for the Philippines and its IT-BPM industry. Despite the global Black Swan event, Hayden said the Philippines remained one of the best places in the world to have customers taken care of. “I don't see that changing anytime soon I think a decent chunk of growth in the future. Again, as companies to economic savings and reinvest some of that savings in growth,” he said adding that what investors want is just predictability of policies. With CREATE, he expects smooth legislation process so investors can move forward.
Francis, who is from the cement manufacturing sector, further noted the potential of domestic manufacturing because 70 percent of the country’s GDP growth is driven by private consumption.
But competition is fierce, he said. This calls to be more attractive than the neighbors like Vietnam. “If we really need, if we want to deliver, we really need to go the extra mile. If we don't do anything, we will not manage to get to this target,” he added.
Keiichi Matsunaga, president of the Japanese Chamber of Commerce of the Philippines, believes the biggest driving force for FDIs in the Philippines in the next decade must infrastructure. He cited the big support the Japanese government on the Philippines massive drive to build railways systems in the country.
John Forbes, senior advisor of AmCham and head of the Arangkada Philippines project, added that aside from power and telecommunications, the government is spending $20 billion annually, which is 2.5 times of what it was six years ago in terms of GDP contribution. “There's going to be a lot of spending on infrastructure and opportunities for foreign investors in that area,” he pointed out.
Daniel Alexander, President of ANZCHAM- Australian-New Zealand Chamber of Commerce Philippines., Inc., also noted of the wonderful opportunities here in the Philippines and the underdeveloped resources of the country.
“Freeing up and welcoming in some of these more responsible miners and the ones that are already here will go a very long way into achieving the $50 billion target and also you just think about the job creation in some of these far-flung areas. I think they'd have a wonderful impact on the Philippines, but also you would certainly help us achieve these targets,” he added.