MANILA, Philippines — Two German electronics firms are shutting down operations in the country due to the uncompetitive business environment, the Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) said.
SEIPI president Dan Lachica said in a statement yesterday one firm has shut down and another is set to halt operations, citing the current unfavorable business environment.
He declined to name the firms but noted both are German companies.
“The first to shut down manufactured electronic lighting equipment. The other, which will shut down next year, produces automotive electronics accessories,” he said in a Viber message.
Both companies employ around 1,000.
This may be just the tip of the iceberg,” Lachica said.
The Senate is currently tackling the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, the repackaged version of the Corporate Income Tax and Incentives Rationalization Act (CITIRA), which seeks to cut the corporate income tax to 25 percent from 30 percent, and make incentives granted to investors performance-based, targeted, time-bound and transparent.
As part of the changes, the CREATE bill provides a transition period of up to nine years for business activities registered with the Philippine Economic Zone Authority (PEZA) to continue to enjoy the five percent tax on gross income earned (GIE) incentive.
“SEIPI supports Sen. Ralph Recto’s proposal for the grandfathering of current investments in PEZA and other IPAs (investment promotion agencies). Grandfathering is better than a nine-year transition,” Lachica said.
Citing a study conducted by the University of Asia and the Pacific and presented during the first Senate ways and means committee hearing on CITIRA, he said SEIPI expects 38,000 direct and 266,000 indirect job losses in the sector after the first year of removal of incentives.
Without competitive perks similar to those offered by Vietnam and other neighbors in Southeast Asia, he said there is a small chance expansions would be seen in the country.
He said multinational corporations (MNCs) would likely expand in countries with lower operating costs and offering competitive incentives.
“There will be MNCs who will either manufacture legacy products or just run out their existing products until obsolescence, which could take two to five years depending on the application,” he said.
“We hope that the Senate will heed our appeal for the preservation of jobs,” he said.