The decline of the Philippine Stock Exchange Index (PSEI) from November 6 to November 14—from 7,245.92 to 6,559.27—occurred in seven consecutive days. This, to me, is alarming, as such decline is seldom felt in a supposedly robust economy as the Philippines’. Another such plunge that happened last April 2 to April 16 was not so concerning as this was followed by a slight recovery.
Statistics showed that the net foreign direct investment (FDI) in the Philippines fell 14.5 percent year-on-year to US $ 0.81 billion in August 2024, mainly attributed to decreases in debt instruments and reinvestment of earnings.
The Marcos administration has tried to push economic development and growth through the enactment of CREATE Act of 2021 that embodied new pro-business policies such as incentives and tax cuts,
They thought that this could even be improved, so last week President Bongbong signed another law, the CREATE MORE Act that lowers corporate income tax rates and grants more fiscal incentives to qualified companies.
The new legislation is designed to entice both foreign and local investors to do business in the country, and for those who are already here, to expand their operations. The ultimate aim is to perk up the overall economic activities in the country, create more jobs for the people, and achieve a more enviable level of economic growth.
The numbers should prod President Bongbong’s economic team to seriously rethink what we are doing wrong, and return to the drawing board to plan anew. According to the United Nations, some $6.2 billion in foreign direct investments flowed into the Philippines last year, smaller compared to Singapore's $159.7 billion, Indonesia's $21.6 billion and Vietnam's $18.5 billion.
This dismal performance vis-a-vis our neighbors is ironic, since our officials had been touting the Philippines as one of the fastest-growing economies in Asia, which is not entirely false.
The new law called Republic Act 12066 prunes income tax rates of registered business enterprises (RBEs) to 20 percent from 25 percent. Proponents said it will make the country’s tax incentives regime more globally competitive, investment-friendly, predictable and accountable.
The Department of Trade and Industry (DTI) said it is a "game-changing" legislation poised to transform the Philippine economic landscape. It would strengthen the country's position as an attractive investment destination through significant tax incentives and regulatory reforms.
One feature of this law that could redound to palpable benefits for business is the establishment a 100-percent additional deduction for power expenses, to help firms cope with high power costs in the Philippines.
It also extends tax perks for strategic investments for up to 27 years from 17 years and clarifies the exemptions companies can claim for sales taxes. It also institutionalizes the allowance for up to 50-percent of employees to work from home while still keeping their incentives.
As expected, Special Assistant to the President for Investment and Economic Affairs Frederick Go hailed CREATE MORE as the country’s “main attraction tool” for foreign direct investments.
He envisions the arrival of investors—from Americans to Japanese to Koreans to Australians to British to Chinese, and they would be putting their money in various sectors, including electronics, steel, offshore wind, renewable energy and shipyard building.
It appears that the Marcos government’s tact in scaling up foreign investments is by way of legislation. Can this be the correct path toward a vibrant PH economy?
While we are at it, do we hear anything from the Maharlika Investment Corp.? What are they doing?
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