The domestic electronics industry has urged for a review of the effectiveness of the incentives rationalization program of the government stating the country could potentially lose $400 million worth of investments to other countries, on top of the earlier $3.25 billion losses, should there be no improvement in the situation.

In a congratulatory letter to Trade and Industry Secretary Alfredo E. Pascual signed by Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) President Dan C. Lachica, the group listed several recommendations to “avoid further capital flight and discouraging investors.”

Foremost, SEIPI’s June 30, 2022 letter recommended that the new DTI chief should review the effectiveness of the incentives rationalization in promoting foreign direct investments (FDIs) and employment, resolve the high operating costs, including power, logistics, and labor.

While the reduction of the Corporate Income Tax is good for the business sector, SEIPI said the rationalization of incentives combined with other challenges that are being faced by the industry have already resulted in an estimated investment loss of $3.25 billion, most of which have gone to Vietnam, China and Thailand.

“Electronics exports accounted for $45.92 billion or 61.5 percent of the country’s total commodity exports last year, the sector may potentially lose $400 million to other continue should there be no improvement in the situation,” said Lachica in the letter.

The group cited data from the Bangko Sentral ng Pilipinas, which showed that the Philippines lagged behind other countries in FDI inflows with only $10.52 billion in 2021 as against Indonesia’s $20.52 billion, Malaysia’s $17.66 billion, Vietnam’s $15.66 billion and Thailand with $11.42 billion.

SEIPI also urged Pascual to push for the restoration of the authority of the Philippine Economic Zone Authority in the approval of FDIs and reduce the bureaucracy introduced in the Fiscal Incentives Review Board.

The group further for the continuation of value added tax exemption and VAT-zero rating of constructive exporters and adherence to the cross border doctrine and resolve VAT confusion.

The government should also entice more raw material suppliers and locators by providing added incentive, evaluate the viability and support higher value electronics industry activities, such as wafer fabrication and IC design.

To implement these proposals, SEIPI has called for the passage of legislative measures, including the amendments to the CREATE Law, PEZA Law, Philippine Ports Authority Charter and IP Code. Congress should pass the Pandemic Protection Act, Shippers Bill/International Maritime Trade Competitiveness Act, National Digital Careers/Workforce Competitiveness, and Departmentalization of TESDA.