Imee: Dark Cloud Of Covid-19 Has A Silver Lining
Recent news that the United States was transferring a number of its China-based factories to Indonesia confirms a growing economic trend favoring Southeast Asian countries as alternative sites for manufacturing, Senator Imee Marcos said.
Marcos, who chairs the Senate committee on economic affairs, called the planned relocations “the silver lining to the dark cloud of COVID-19, from which the Philippines should not blink.”
Using a term from the country’s favorite sport, Marcos said the government’s economic managers must now apply a “full-court press to score more points toward greater foreign investment and economic recovery.”
Marcos is pushing for a deeper and swifter cut on corporate income tax from the present 30% rate, for the Philippines to be more competitive with the 20% rate in Vietnam and Thailand, and also in Indonesia by next year.
If the government decides on a slower rate of reducing corporate income tax, incentives to foreign investors can include tax deferrals and exemptions, Marcos said.
Marcos also cited that Western countries facing recession due to the pandemic are now compelled to outsource as much of their production as they can to cheaper suppliers, in order to maintain prices.
“As a result, I think our BPO (business process outsourcing) sector will recover sooner than predicted. If we gear up for outsourcing, we may finally derive investments in manufacturing and other essential sectors,” Marcos said.
However, Marcos also alerted the Department of Finance (DoF) and the National Economic Development Authority (NEDA) to some $20 million, or more than P1 billion, in export production volumes exiting the country in the past two months.
“How do we convince MNCs (multinational corporations) to keep or bring back hundreds of millions of dollars for the rest of the year? It’s a practical question that NEDA and the DOF should consider in updating the Corporate Income Tax and Incentives Reform Act (CITIRA),” Marcos said.
If the new CITIRA fails to impress, Marcos warned that semiconductor manufacturers, which made $37.6 billion (P1.9 trillion) or more than half of the country’s exports in 2018, may hold off upgrading their factories.
“They may choose to just limit production to the present line of so-called legacy products that will become obsolete over time. Eventually, factories may just shut down and transfer production of newer products elsewhere,” she explained.
“Finally, we should also turn our sights inward. After all, with COVID-19, our circle of life and living has become much smaller. Now is the best time to build our health infrastructure, our universal insurance packages, increase investment in hospitals and medical schools,” Marcos said.
“There are also clear opportunities in agriculture and growing a self-reliant and secure domestic food supply chain,” Marcos added.