To attract investors under the new normal, the Finance Department is studying to “tailor-fit” tax and non-tax incentives, according to Finance Secretary Carlos Dominguez III.
Dominguez said he is pushing for a more proactive investment promotion strategy targeting specific types of foreign investors that the government wants to relocate here by offering them tax and non-tax incentives tailor-fit to their needs.
This is part of government efforts to reenergize the economy and create more jobs.
Dominguez is suggesting that government abandon the current “one-size-fits-all” incentives program, and shift to a demand-driven approach where it identifies the types of industries that the economy needs to flourish.
Thus, incentives should be given based on specific requirements of industry players who should be setting up their business in the country.
Such industries should be labor-intensive to be able to create stable, decent-paying jobs; provide excellent technology transfers that improve workers’ skills; and must have stable markets, according to Dominguez said.
“What we should be doing is identifying these industries and then going to each of the companies—each of the leading companies in those industries around the world—and asking them: what do you need for you to come to the Philippines? Instead of waiting for them to apply, we should be going to them and offering them a package,” Dominguez said.
Dominguez explained that companies manufacturing microchips had a different set of needs from those that grow flowers for export, hence the need to tailor-fit incentives for specific industries.
Malacanang’s economic managers and Congress have been drafting a comprehensive stimulus program to revive the economy impacted by theCOVID-19 pandemic.
Dominguez said the old “one-size-fits-all” strategy of attracting investors failed to make the Philippines an investment magnet.
The country had been lagging behind its Southeast Asian neighbors in terms of volume and amount of foreign direct investment inflows despite being one of the first economies in the region to offer fiscal incentives.
Dominguez cited as reasons why the country lagged behind in the region include the massive infrastructure gap (currently being addressed by Duterte’s “Build, Build, Build” program), the constitutional restrictions on foreign ownership, and the outmoded investment promotion strategy – despite the Philippines rated as one of Asia’s fastest-growing economies.