Chinese companies are eyeing to relocate their operations in the Philippines with the ongoing trade friction between China and the United States, but investors want clear rules on fiscal incentives in the country, a government official said Monday.
Philippine Economic Zone Authority (PEZA) Director General Charito Plaza told reporters that at least three groups of Chinese investors visited the investment promotion agency (IPA) this month, expressing their intent to transfer their operations in the country.
“This is due in part of the trade war between China and the US with soaring tariffs for products traded between these nations,” Plaza said.
“The investors expressed, however, that is because of the uncertainties of TRAIN-2 (second package of Tax Reform for Acceleration and Inclusion) or TRABAHO bill (Tax Reform for Attracting Better and High-Quality Opportunities), they are still holding off their plans of transferring to the Philippines,” she added.
Plaza mentioned that according to their locators, their top reason for investing in the Philippines is because of the competitive fiscal incentives provided by PEZA.
However, with the rationalization of fiscal incentives under the TRABAHO bill, some of the perks in PEZA like the 5-percent gross income earned (GIE) incentive is feared to be scrapped.
“Because we are yet deficient in other factors. Utilities, power rates are the highest, our supply chain [is not complete]. Why is it important for exporters to have complete supply chain? It will minimize their production cost,” she said.
She cited that Chinese steel manufacturer Panhua Group is still bargaining for the lease rate of land with Phividec Industrial Authority for a 300-hectare land.
Plaza said the offer for the land lease came from an initial rate of PHP150 per square meter (sqm) before bringing it down to PHP40 per sqm.
Plaza, however, mentioned that the group is getting the land for free in China. Vietnam is also offering the same perk for the group.
These two markets even provided better infrastructure and lower power cost to big investors, she added.
Plaza said the expanded US Generalized System of Preferences (GSP) and the European Union Generalized Scheme of Preferences Plus (GSP) granted to the Philippines make it more attractive for companies to locate here. But competitive fiscal incentives, will make them decide to locate here, she added.
“The Philippines is at a prime spot to take advantage of the ongoing US and China trade war. To maintain its position as an attractive investment destination, the retention and enhancement of the incentives given to exporters is inherent,” the PEZA chief stressed.