Japanese companies are generally optimistic about the Philippine market but recent developments have given rise to some concerns, both local and Japanese bankers agree.
In a media briefing Wednesday, MUFG Bank, Ltd. Managing Executive Officer and Head of Financial Solutions Group Makoto Kobayashi said the bank’s Japanese clients prefer to invest and grow their businesses in the Philippines.
Proof of this are the 43 Japanese companies in the country this day for business-to-business meetings organized by MUFG and Security Bank Corp.
These Japanese companies joined other firms from the Philippines for the 2nd MUFG-Security Bank Business Matching Fair here. MUFG’s clients from Vietnam and Thailand are also taking part in the business matching event in Manila.
“In our conversation with our Japanese clients about Asia, they always mention the Philippines as a location where they want to invest and grow their business,” said Kobayashi.
“Of the 43 Japanese companies participating in this business matching, many come from the FMCG industry, fast-moving consumer goods including food products, manufacturers, cosmetics, and the dairy goods, and they are all hoping to reach out to Philippine consumers,” he added.
But they seem to be less ethusiastic about locating in special economic zones such as those under the Philippine Economic Zone Authority (PEZA) due to uncertainties created by the second package of the Tax Reform for Acceleration and Inclusion (TRAIN 2).
MUFG Bank Manila General Manager and Country Head Tatsuto Ishida said the number of Japanese firms that would like to register their projects here is “decreasing a little bit” because of TRAIN 2 jitters.
“Actually, recently the number of Japanese companies investing in PEZA is decreasing a little bit because they are waiting for the discussion of TRAIN 2. They are [in] wait-and-see [mode],” Ishida said.
The bulk of foreign investors in PEZA are Japanese companies.
“But the existing companies, [they] are very profitable, very stable, and doing very well. Existing companies are very good and the new investors are still waiting. That’s the general stand now,” he added.
Under the TRAIN 2, the Department of Finance (DOF) eyes to streamline fiscal incentives given out by investment promotion agencies (IPAs) nationwide.
The DOF also aims to limit the duration of income tax holidays and replace the 5-percent gross income earned (GIE) rate with a reduced corporate income tax of 15 percent based on net taxable income for five years.
PEZA-registered firms are enjoying the 5-percent GIE rate incentive.
“The reason why PEZA is so appealing to foreign companies is it gives, in a sense, a more controlled environment and more predictable, and in a sense, a counterparty that will manage the relationship over the long haul. And that’s why they are trying to go to extra effort, they are trying to go to PEZA versus just setting up outside,” Security Bank Executive Vice President and Wholesale Banking Segment Head Eduardo Olbes said on the other hand.
“[S]etting up and doing business here is one thing. Doing it in a secured environment where you have stakeholders who will help you succeed is better,” Olbes noted. PNA