22 February 2020 via Zoom
[Acknowledgements]
Ladies and gentlemen, magandang hapon po sa inyong lahat.
We would like to thank the Philippine Competition Commission (PCC) for inviting us to speak in today’s forum on how competition can build resilient supply chains and innovation spaces in today’s “New Normal.”
The Department of Trade and Industry (DTI) remains committed to strengthening our country’s competitiveness by adhering to the principles of competition, supporting liberalization, and the further opening of markets. For example, we’ve allowed importation and the lowering tariffs—or tariff liberalization—so that businesses can become more competitive. Through this adherence to free-market policies, competition will draw out the best from all players. As companies learn how to survive, innovate, and become relevant in the market through competition, they become more efficient and competitive.
To this end, DTI supports an open market as this benefits companies by allowing access to bigger markets and increasing their scale of their production. The free movement of goods also benefits consumers as more choices for goods and services become available. A competitive environment for businesses ensures that goods and services of higher quality will be available at lower prices. This would protect the purchasing power of consumers while also encouraging innovation among firms. Likewise, companies can scale up due to technology spill-overs, which would lead to more jobs and better wages as a result of enhanced productivity.
To boost industries’ competitiveness, DTI is building an innovation ecosystem, embracing Industry 4.0 technologies, and using these new technologies to become more innovative and more competitive. We are supporting industries—especially Micro, Small, and Medium Enterprises (MSMEs)—in their shift towards digital transformation and providing information and resources on technological advancements in trade and services. We also encourage their participation in the global value chains, as well as promote research commercialization in the creation of new products, services, and business models
This is part of our Inclusive Innovation Industrial Strategy (i³S) to grow innovative and globally competitive manufacturing, agriculture, and services industries, while strengthening their linkages in domestic and global value chains. What’s more, our Inclusive Filipinnovation and Entrepreneurship Roadmap will increase our ability to innovate as we establish an inclusive innovation and entrepreneurship ecosystem in the country through Regional Inclusive Innovation Centers (RIICs).
DTI is also supporting the greater digital participation of our MSMEs, given the growing e-commerce landscape in the country. According to a Google Temasek study, the Philippine Internet economy hit USD 7.5B in 2020 from USD 7.1B in 2019, having grown 6% year-on-year. What’s more, there were more new online retailers last year, reaching around 80,000 because of the pandemic. That’s why last January, we launched the e-Commerce Roadmap to develop and promote e-commerce in the country. Our goal is for the e-commerce sector to share 5.5% of the economy by 2022. To this end, we have programs that provide digital training and onboard MSMEs so that not only will they have an online presence, they will have sales during the pandemic.
With the growing e-commerce, complaints related to online transactions numbered 15,947 in 2020, and 857 just for January of this year. In this regard, we’ve been working to protect both consumers and the competition process by addressing these complaints. Through stronger consumer protection, we hope to revive consumer confidence to boost demand, which would encourage businesses to produce more. This, in turn, would protect jobs and ensure people will have income despite the pandemic.
Our adherence to the principles of competition also applies to the government policies we make, as well as policy reforms we institute. These will provide additional incentives for both domestic and foreign enterprises, which would enhance their competitiveness.
For example, the Philippine participation in the Regional Comprehensive Economic Partnership or RCEP Agreement will not only benefit us through tariff liberalization leading to increased competition and trade but also by attracting investments. By providing a more stable and predictable rules-based system of trade, the lowering of trade barriers in RCEP will secure improved market access for Philippine goods and services in the region.
We also ensured that RCEP is molded as a supporting mechanism for the updated Philippine Development Plan for 2017-2022, as well as the country’s industry roadmaps. This is a means to promote not only the economic growth of our key industries, but also the development and participation of our MSMEs in the global value chains.
Another example is the game-changing Corporate Recovery and Tax Incentives for Enterprises Act or CREATE, which will modernize our tax and incentive system. This will benefit investors through the reduction of corporate income tax rate, from 30% to 20% for MSMEs, and 25% for large corporations. This will also make our system more competitive through time-bound, performance-based, and targeted incentives. These incentives include the Income Tax Holiday (ITH), the Special Corporate Income Tax Rate (SCIT), and the Enhanced Deduction (ED) schemes available to priority industries, whether export-oriented or serving the domestic market.
With that in mind, we remain committed to supporting liberalization to enhance our country’s competitiveness. This means amending laws like the Retail Trade Liberalization Act (RTLA), the Foreign Investments Act (FIA), and the Public Services Act (PSA).
Liberalizing retail trade by lowering the required minimum paid-up capital for foreign retail investors to USD 300,000 from the present law’s USD 2.5M will allow foreign companies to enter the retail trade. This would mean more competition and equate to more affordable prices and options for consumers. Likewise, allowing 100% foreign ownership of small and medium-sized enterprises (SMEs) would attract foreign direct investments (FDIs) and bring in advanced technology. It would also attract more skilled foreign professionals so that Filipinos can gain new knowledge and broaden their existing skills set. More players in the retail industry would also lower the existing fees paid by manufacturers especially the MSMEs who would like their products to be carried on the shelf of retailers. This would grant them better exposure for their products to be discovered and sold.
Meanwhile, redefining public services through the PSA will open up public utilities and liberalize critical infrastructure and public utility sectors in the country—including ports, which would lead to improved supply chain and logistics. Given the high cost of logistics and the capital-intensive nature of the industry, allowing the entry of foreign companies in this sector would bring in new players, new technologies, and more competition. Together with CREATE, retail trade liberalization and amending the PSA and FIA will remove the restrictions on foreign ownership to help boost our country’s competitiveness.
DTI is also collaborating closely with PCC in promoting a competitive business environment, as well as drafting a National Competition Policy. We’ve likewise signed a Memorandum of Understanding (MOU) to facilitate data-sharing, recommend coordination schemes on jurisdiction, and provide investigation and enforcement support. In relation to this, we are also implementing the Philippine Innovation Act and the Innovative Startup Act to promote greater innovation in the country.
By adhering to the principles of competition and liberalizing trade and investment, we will have more efficient and innovative companies, with technology helping to enhance their efficiency, bring down the cost, and improve their output.
Likewise, we shouldn’t forget that creating competitive and innovative industries that are well-integrated in the world’s supply and value chains serves to create decent jobs and employment for our people. This, in turn, helps us give them a more comfortable and higher quality of life as promised by President Rodrigo Roa Duterte, and build a “Better Normal” for our country.
Maraming salamat po at mabuhay tayong lahat. ♦
Date of Release: 22 February 2021