Dominguez tells US investors now is best time to do business in the Philippines
Finance Secretary Carlos Dominguez III pitched before American investors Thursday night (Manila time) the Philippines as a “growth leader in the region and a reliable host for international partnerships,” where they can bring in their capital on a broader scale as a result of a fresh set of economic liberalization measures either being carried out or about to be implemented by the Duterte administration.
“Now is the best time to do business in the Philippines,” Dominguez said at a briefing for American business leaders and policy makers. “This year, we are well on our way to returning to normal with the Philippine economy expected to expand further between 7 and 9 percent.”
“Our economy is recovering rapidly. In the last quarter of 2021, our GDP (gross domestic product) grew by 7.7 percent, making the country’s expansion the highest in the ASEAN (Association of Southeast Asian Nations) region and among our credit rating peers globally,” Dominguez said.
Dominguez said the recent enactment of the amendatory bill to the Retail Trade Liberalization Act (RTLA), along with the Congress-approved amendments to the Public Service Act (PSA) and Foreign Investments Act (FIA) that will soon be signed into law by President Duterte, complete the set of economic reform initiatives that make the Philippines’ a premier investment destination in the region.
“These three forward-looking measures widen the horizon for investments. They create numerous opportunities for synergy between local and international firms. There is now enough space for international firms to form joint ventures with Filipino companies, especially those at the cutting edge of information technologies,” Dominguez told about 200 American business leaders and policymakers gathered via teleconferencing for the virtual Philippines’ Economic Briefing (PEB) hosted by the Philippine Embassy in Washington DC.
With the Philippines also committing to reduce its greenhouse gas emissions by 75 percent by 2030, Dominguez said he also expects a sharp rise in green investments in the country in the years ahead.
Dominguez urged American investors to establish or expand their retail trade operations in the Philippines, now that the new RTLA has already lowered the minimum paid-up capital requirement for foreign corporations from $2.5 million to about $500,000.
Foreign retailers who want to open more than one physical store can now expand through a lower minimum investment of $200,000 per store, compared to the previous requirement of $830,000 per store.
The law likewise simplified the qualification requirements of foreign retailers by removing the required net worth, the number of retailing branches, and retailing track record conditions.
Dominguez said that experienced and strategic investors from the United States (US) can bring in their capital to the Philippines to invest in the fields of telecommunications, media and private transportation vehicles once the PSA is enacted.
Under the amended PSA, public services will be open to 100-percent foreign ownership, while retaining public utilities as majority owned by Filipinos, subject to the 60-40 ownership rule under the Constitution.
The list of public utilities will be limited to distribution and transmission of electricity; water pipeline distribution system, wastewater, and sewerage pipeline systems; petroleum and petroleum products pipeline transmission systems; seaports; and public utility vehicles (PUVs) under the amended PSA.
US-based businessmen can also look forward to the amendments to the FIA as this mandates a review of the Foreign Investment Negative List every two years, and liberalizes the practice of certain professions, so that enterprises that would otherwise be unable to do business in the Philippines without foreign talent would now be able to set up shop in the country.
“I invite you to look closely at the Philippine economy in the light of the pro-business policies instituted over the last five and a half years. The Philippines is a growth leader in the region and a reliable host for international partnerships,” Dominguez said.
The Philippines’ 2021 full-year GDP growth of 5.6 percent which exceeded the government’s target, is among the best compared to its neighbors and its credit rating peers.
Last year’s tax collection was already 9 percent higher than in 2020, signaling a return to robust economic activity, while trade volume recovered to pre-pandemic levels, Dominguez said.
The Philippines’ foreign direct investments (FDIs) in 2021 already surpassed the full-year level of 2020, and remittance inflows from overseas Filipino workers (OFWs) rose 5 percent, fueling consumer demand.
The gross international reserves also grew steadily to $109 billion as of end-December 2021.
COVID-19 cases are also subsiding rapidly owing to the Philippines’ accelerated vaccination program, allowing more people to return to work and the unemployment rate to go down, Dominguez said.
“Clearly, these bullish signs of recovery are a product of our hard work and preparation before the pandemic hit us,” Dominguez said.
He said the three economic liberalization measures to be implemented soon complement the earlier array of reforms put in place under the Duterte administration, which include two tax reform programs that lowered tax rates for both individuals and corporations; an accelerated digitalization program and strengthened tax enforcement; the President’s signature “Build, Build, Build” infrastructure modernization program; a National ID System; the Ease of Doing Business (EODB) Act; and rice tariffication.
Dominguez pointed out that even with a pandemic, the government never wavered in its commitment to institute reforms as shown by the enactment in 2021 of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, which reduced the corporate income tax rate from 30 percent to 20 percent for micro, small and medium enterprises (MSMEs) and 25 percent for all other businesses.
CREATE also enabled the government to choose the kind of investors it wants to bring in as the law allows it to tailor-fit incentives that are performance-based, time-bound, targeted, and transparent for prospective businesses, he said.
The implementation of the long-dormant Real Estate Investment Trust (REIT) Law, which has brought in $6 billion-worth capital to the property development sector in just two years, is also among the game-changers under the Duterte presidency, Dominguez added.
Dominguez also cited the Duterte administration’s accomplishments on the peace and order and good governance fronts; and its investments in the country’s greatest asset—the Filipino people—through improved social services and free tertiary education in state universities and colleges (SUCs).
“All of these increased the Philippines’ competitiveness and provided us with the financial strength to weather the worst of the (COVID-19) crisis,” Dominguez said. DOF
