26 February 2021 via Zoom
Ladies and gentlemen, good afternoon!
We would like to offer our warm greetings to the guests and participants of today’s webinar. We hope that everyone is keeping safe against the COVID-19 pandemic. We would also like to thank the organizers, the Federation of Indian Chambers of Commerce (FICCI) and the India Business Forum (IBF), for the privilege of addressing your audience.
India has always been one of our strongest trade and investment partners. In 2020, you were the Philippines’ 14th top trading partner, our 13th top export market, and our 13th foremost import supplier. What’s more, you were our 15th top investment partner for 2019, with the same ranking as of January to September 2020. However, investors to the Philippines can still tap many economic opportunities to help our bilateral relations reach its full potential.
We recognize the presence of major investments from India, like GRM Group that partnered with Megawide Philippines to expand and modernize our Mactan – Cebu International Airport. Other investments include PetValue Philippines Corp., Greenergy Solutions, Prasad Seeds Philippines, and Greentech Solar Energy, which are in the agro-processing and renewable energy sectors. Moreover, there are many Indian BPOs operating in the Philippines, like Hinduja Global, Infosys, Teleperformance Global, and Concentrix, among others. We also recognize the thousands of Indian businesses in manufacturing and retail-based in the country.
Despite the pandemic, the Philippines and India were able to hold a virtual meeting of the 13th Philippines-India Joint Working Group on Trade and Investments (JWGTI) last year. During the meeting, both nations agreed to consider a possible Preferential Trade Agreement as a means to improve the current market access conditions for products of interest. More importantly, both sides discussed potential collaboration and cooperation initiatives in a wide range of areas.
To further strengthen our country’s infrastructure, our Board of Investments (BOI) presented during the JWGTI discussions six Public-Private Partnership (PPP) rail projects under our massive “Build, Build, Build” infrastructure program. Meanwhile, the Philippines also conveyed its interest to participate in India’s port modernization and new port development projects under the Sagarmala and the Bharatmala Projects.
Aside from infrastructure, there are other investment opportunities in the Philippines for investors to take part in. These include: agro-processing, automotive manufacturing, copper wire manufacturing, hospitals and healthcare services, pharmaceuticals, education services, tourism and hotel, and IT-BPM, as well as healthcare information and management.
We also wish to congratulate India for their country’s recovery from the economic challenges of the pandemic into positive growth. Here in the Philippines, we’re already seeing signs of economic recovery as we push for the gradual and calibrated reopening of our economy. Despite our GDP falling to -9.5% in 2020, the following quarters last year climbed from a record-low -16.5% in the 2nd quarter to -11.5% in the 3rd quarter and -8.3% in the 4th quarter. Growth is seen quarter on quarter as our GDP grew by 8% from 2nd to 3rd quarter, and 5.6% from 3rd to 4th quarter.
To facilitate greater trade and investment in the country, the Philippines is continuously pursuing reforms to foster a better business environment. That’s why we have the game-changing Corporate Recovery and Tax Incentives for Enterprises Act (or CREATE) awaiting the signature of Philippine President Rodrigo Roa Duterte.
Making the investment climate in the Philippines significantly more attractive, the CREATE bill will rationalize, modernize, and offer more relevant incentives to investors. Under the ratified version of the bill, qualified activities or projects can enjoy the incentives package for a maximum of 17 years. These include:
- Four to seven years of Income Tax Holiday (ITH)
- 5% Special CIT rate based on Gross Income Earned (GIE) for 10 years, in lieu of all national and local taxes
- Enhanced deductions, including: Depreciation Allowance of Assets; Machinery and Equipment; Additional Deduction on Labor Expense, R&D Expense, Training Expense, Domestic Input Expense, Power Expense, and Reinvestment Allowance to Manufacturing Industry; Enhanced Net Operating Loss Carry Over (NOLCO)
- Duty exemption on importation of Certificate of Eligibility (CE), raw materials, spare parts, or accessories
- VAT exemption on importation and 0% VAT on local purchases
- VAT and Duty Exemption on the importation of COVID-19 vaccines
- VAT and Duty refund on the importation of petroleum products
- VAT and Duty exemption for the importation of crude oil for the refining process
Other key features of the bill that can be enjoyed by investors include:
- Removal of export and nationality bias – Companies will no longer be required to have a pioneer project or export 70% of their total production to have 100% foreign ownership of the company
- Reduction of CIT Rate from 30% to 25% for domestic corporations, foreign corporations, and non-resident foreign corporations; rate of 20% for domestic corporations with Net Taxable Income not exceeding Php5M and with total assets (excluding land) not exceeding Php100M.
- President’s flexibility in granting incentives for highly desirable projects with minimum investment capital of Php50B or at least 10,000 job generation, but noting that total period of availment will not exceed 40 years.
Upon the recommendation of the Fiscals Incentives Review Board (FIRB), the President may:
- modify the mix, period, or manner of availment of incentives provided under this code; or
- craft the appropriate financial support package for a highly desirable project or a specific industrial activity based on defined development strategies for creating high-value jobs building new industries to diversify economic activities and attracting significant foreign and domestic capital or investment.
We also 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). Together with CREATE, these reforms and the review of other economic restrictions being conducted by members of Congress with the intention of removing barriers for entry will attract more investments and create more jobs in the Philippines.
Lastly, given that India did not pursue its membership in the Regional Comprehensive Economic Partnership or RCEP, Indian businesses can still benefit from the mega free trade agreement through the Philippines’ own participation. By making the Philippines the hub of your manufacturing activities, your products can target the RCEP-partner countries. Once the agreement becomes effective, RCEP is expected to boost intra-regional investment and trade with ASEAN expected to play a vital role in this agreement.
As the Philippines and India continue to build stronger trade and investment ties, we hope that you will partner with us to build back better towards a better and brighter post-COVID future. And through the jobs and employment generated by the business and investments you bring in, the Filipino people will also gain a more comfortable and higher quality of life as promised by our President.
Thank you and mabuhay po tayong lahat. Namaste. ♦
Date of Release: 26 February 2021