Finance Secretary Carlos Dominguez III has called on Japanese companies to invest more in the Philippines’ fast-growing economy, where higher consumer demand fueled by tax reform and an aggressive infrastructure program, along with improving peace and order, open wide business opportunities for foreign investors.
Dominguez likewise assured a delegation from the Kansai Economic Federation (KANKEIREN) based in Osaka, Japan that the second package of the Duterte administration’s tax reform program, which aims to cut the corporate income tax (CIT) rate and rationalize investment incentives, will be a gamechanger that would expand, rather than curtail, opportunities for them to do business in the Philippines.
Fiscal incentives under the tax reform program, Dominguez said, would not be removed but would instead be rationalized or improved to ensure that these are performance-based, targeted, time-bound and transparent.
“Rather than look at the effect of tax reform on some companies, look at the effects of tax reform on the entire economy because it is making it better. Instead of looking at the place where you might lose, look at opportunities in the larger economy,” Dominguez said during his recent meeting with KANKEIREN members led by their chairman, Masayoshi Matsumoto.
Matsumoto, who is also the chairman-CEO of Sumitomo Electronic Industries, said he is “very satisfied with the explanation” of the Finance chief about the need to rationalize fiscal incentives in the country.
Also at the meeting were, among others, Japanese Ambassador to the Philippines Koji Haneda; Masayuki Matsushita, KANKEIREN vice chairman and chairman of its International Committee, and vice chairman of Panasonic Corp.; Takamune Okihara, special advisor, KANKEIREN and senior advisor at MUFG Bank, Ltd; and Koji Yanagida, vice chairman of the International Committee and executive director of Azusa Sekkei Co., Ltd.
“We would like to point out that actually, our economy is growing very quickly. If you want to participate in the local economy, you have to better invest here,” Dominguez said. “We’d like to make you feel welcome, but what will make you feel welcome is the improving disposable income of our people, improving infrastructure, improving peace and order, and I’m sure many Japanese companies can certainly benefit here.”
Dominguez said the current system of fiscal incentives despite being “the longest and most generous” among the ASEAN economies, have not attracted more investors to the Philippines, which remain among the lowest recipients of foreign direct investments (FDI)s in the region.
Investors are more concerned with the country’s poor infrastructure, which drives up logistics costs, Dominguez said, as he pointed out that this is among the reasons why the Duterte administration has been investing heavily in its “Build, Build, Build” program as well as spending more on education and healthcare to develop the country’s human capital.
“Following the example of Japanese policies implemented in the 50’s, we are investing very heavily in infrastructure with the generous help of your taxpayers,” said Dominguez, referring to Japan’s generous funding support for “Build, Build, Build.”
On top of retaining fiscal incentives, Dominguez said the second tax reform package would also help attract investors because of the reduction in the current CIT rate of 30 percent to 25 percent, and eventually to 20 percent, on the par with the other ASEAN economies.
Dominguez said: “There is no danger that we are abandoning fiscal incentives. But as I described to you, it is really necessary for us to rationalize it. I hope for your understanding and support because we certainly don’t want to hurt companies that are making a good contribution to Philippine society.”
He also assured KANKEIREN that the “one-stop shop” that Japanese investors are currently enjoying through the Philippine Economic Zone Authority (PEZA) would not only be retained but would also be the norm for all business applications in the future, following President Duterte’s signing into law of the Ease of Doing Business Act last year.
“Everything that makes biz easier, we will keep and we will improve,” Dominguez said.
Officials of Marubeni Corp., Daikin Industries, Kyoei Steel, Mitsubishi Corp., Mitsui & Co. Ltd., All Nippon Airways, and Kinki Nippon Tourist Kansai Co. Ltd. were also present at the meeting.
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