EU investors pick Philippines as 2nd option in Asean

by Louella Desiderio (The Philippine Star), 24 Jan 2020

MANILA, Philippines — The Philippines is now viewed as a secondary market for investments by European Union (EU) investors in the Southeast Asian region amid uncertainties on the country’s plan to change the incentives regime and concerns on government’s review of contracts with the private sector.

Speaking at the launch of the Doing Business Philippines 2020 guide book for investors by the European Chamber of Commerce of the Philippines (ECCP) yesterday, Thomas Wiersing, charge d’ affaires of the delegation of the EU to the Philippines, said while the Philippines is seen as an important fast-growing economy, EU investors consider the country as a second option for investments compared to its neighbors in Southeast Asia.

“Despite the efforts of government to streamline processes and attract more business and create investment in the country, the business climate still requires upgrade,” he said.

He said among the challenges foreign investors, including those from the EU, face in the Philippines is the uncertainty over the government’s plan to rationalize fiscal incentives under the proposed Comprehensive Income Tax and Incentives Rationalization Act or CITIRA.

The CITIRA bill approved on third and final reading by the House of Representatives would cut the corporate income tax rate to 20 percent from 30 percent over a 10-year period and make changes to the incentives system.

As part of the changes in the incentives regime, firms operating in economic zones under the Philippine Economic Zone Authority would no longer be allowed to enjoy the five percent tax on gross income earned (GIE) paid in lieu of all taxes.

The bill has yet to be approved at the Senate.

“We call for the speedy passage of the bill that contains fair provisions for both existing investors and newcomers,” Wiersing said.

Asked if there are also concerns over government’s move to revisit contracts with the private sector, Wiersing said it is necessary for investors that agreements entered into are honored.

“It is obviously for business, it is important that certain contracts concluded would be respected,” he said.

After putting the agreements entered into with water concessionaires Maynilad Water Services Inc. and Manila Water Co. Inc. under scrutiny for alleged onerous terms, the government is also revisiting contracts with property giant Ayala Land Inc. for the development of the UP Technohub in Quezon City, and with Chevron Philippines for the lease of a property in Batangas.

ECCP president Nabil Francis said other concerns of investors in the country are lack of infrastructure and the bureaucratic process.

He said the government’s implementation of projects under the Build Build Build program for infrastructure development and move to improve ease of doing business would help.

Wiersing said legislative reforms would also allow the country to attract more investments.

“Further liberalization of foreign investment, amendment of Public Service Act and Retail Trade Liberalization Act, as well as reform in the public sector would certainly boost the country to attract more investment, to be more competitive as most other ASEAN (Association of Southeast Asian) countries,” he said.

Wiersing said six percent of the total approved investments in the country last year came from the EU.

As the EU would want to encourage more investors to come to the Philippines, it also wants to promote greater trade and see an increase in the country’s utilization of the Generalized Scheme of Preferences Plus (GSP+).

Under the EU GSP+, the Philippines could enjoy duty-free entry of 6,274 products to the trade bloc.

Wiersing said it is estimated that around 25 percent or two billion euros worth of Philippine exports to the EU enjoyed the preferential access under the GSP+ last year.