Press Release
December 5, 2018

Drilon alarmed by companies leaving PH due to Train 2; poor export performance

At least 1,200 companies are poised to leave the country while a good number of investors are having uncertainties about investing in the country if fiscal incentives are removed under the government's proposed second package of tax reform.

This was revealed during Senate Minority Leader Franklin M. Drilon's interpellation of the budget of the Department of Trade and Industry (DTI) late Tuesday.

"At least 1,200 enterprises might leave the country due to a sudden shift in the policy, which would cut the incentives given to foreign investors," Drilon said.

Aside from that, the country stands to lose about 150,000 jobs generated through the grant of incentives by the country's top investment promoting agencies, namely the Board of Investment (BOI) and Philippine Economic Zone Authority (PEZA), due to TRAIN 2.

"All of these will be in jeopardy once the TRAIN 2 is passed," Drilon said.

"I see a very dark future insofar as the foreign direct investments are concerned. We will not be surprised if next year, we will still be kulelat(bottom-dweller) again because of the lack of correct policy," Drilon said.

Drilon is referring to a sudden shift in the policy, in which the government now seeks to cut incentives given to investors.

This is considering the fact that the government is relying heavily on incentives to attract investors, he noted.

"We have established that the principal tool for attracting foreign direct investments (FDIs) to come to our shores is the incentives granted under the law," Drilon said.

"However, it is not consistent with the reduction of fiscal incentives granted by investment promoting agencies to registered foreign companies, which the government is proposing under TRAIN 2," said Drilon.

"How do we reconcile these two conflicting policies?" he asked.

Drilon said that it appears that the new policy being pushed by the economic managers does not sit well with companies currently enjoying these incentives, which would make them think twice about expanding their business if the incentives are removed.

"The conclusion that we can draw from these debates is that there is no deliberate and clear path to attract more FDIs, because the only tool that we have is incentives. Now, this grant of incentives is being muddled by these debates on TRAIN 2," Drilon said.

Drilon also expressed concerns over the poor performance of the country's export industry, where the Philippine is lagging behind its Southeast Asia neighbors.

In 2017, the export in Singapore was at a staggering $373 billion; Indonesia at $169 billion; Thailand at $237 billion, Malaysia $218 billion; and Vietnam $215 billion. The Philippines's export would pale in comparison at $69 billion.

"We are kulelat. We are sixth in terms of export performance in Southeast Asia and we are even overtaken by Vietnam," Drilon said.

"We are lagging behind and we are not improving at all, notwithstanding all the programs that we have," he observed.

Drilon thus urged the DTI to adopt measures to improve the export industry, citing its contribution to the country's gross international receipts.

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