The Philippines eyes significant investments from Europe, targets electronics and IT-BPM firms

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The Philippines is eyeing significant investments from Europe, Trade Secretary Ramon Lopez said during a virtual investment roadshow recently, dubbed as “Make It Happen In the Philippines: A Forum on the Philippines’ Role in your Business,” targeting European companies.

“It is still a good time to do business in the country despite the pandemic. The Philippines considers Europe an important trading partner. We enjoy a very special trade relationship with them as we have a Free Trade Agreement (FTA) with the European Free Trade Association (EFTA) and we are the only country in ASEAN to benefit from the European Union’s Generalized Scheme of Preferences Plus (GSP+),” Lopez said.

European companies have invested EUR406.5 million (US$488 million or Php23.4 billion) in the country in 2020. Among the top European investors were the United Kingdom, The Netherlands, and France.

Bilateral trade between the Philippines and Europe totaled US$13.8 billion last year, serving as the Philippines’ 5th largest trading partner with exports amounting to US$7.3 billion and imports at US$6.5 billion.

“There is still much room for growth considering the level of consumer demand from respective markets and the supply chains that can be developed from complementary industries. Beyond these figures, the nature and quality of investments from European companies and business partnerships formed with our companies have helped move the Philippines up the value chain. In particular, we’ve advanced about innovation-based manufacturing and high-value technology-based services,” Lopez said, citing the Lufthansa Technik Philippines (a joint venture between MacroAsia Philippines and Lufthansa AG) as the country’s preeminent provider of MRO services with its main hub in Manila and eight other hangars with a tenth under construction.

Lopez emphasized that the country is now stepping up its investor-friendly environment with the passing Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which lowers the corporate income tax rate from 30 percent to 25 percent for big firms and 20 percent for micro, small and medium enterprises (MSMEs). “As the Philippine economy recovers, we are confident of achieving our pre-pandemic growth rates and beyond. To this end, we are facilitating greater trade and investment by continuously pursuing reforms to foster a better business environment,” Lopez added.

While the Philippine economy contracted in 2020 because of the pandemic, the country is projected to bounce back stronger in 2021 thanks to the Philippines’ advantages in its people, with a demographic sweet spot, boasting a large, young, highly-skilled and fast-growing workforce, and policies, including its trade policy providing access to key markets through Free Trade Agreements (FTAs) and Generalized Scheme of Preference (GSP) and the newly approved CREATE Act, which provides flexibility to the government to grant fiscal and non-fiscal incentives to activities that are deemed strategic.

DTI Undersecretary and Board of Investments (BOI) Managing Head Ceferino Rodolfo said that investments have continued here even during the pandemic as the BOI recorded Php1.04 trillion in approved investments last year, which the second-highest investment figure in the Agency’s history and at the start of 2021, the Agency have posted Php122 billion in approved investments as of February, a 156 percent increase from Php48 billion in the same period in 2020.

“We are targeting two sectors, the Electronics and Information Technology-Business Process Management (IT-BPM) for Europe to invest. Electronics accounted for the biggest share of contribution in our exports with 62 percent or US$39.7 billion in 2020. We are home to about 500 semiconductor and electronics companies, offering capabilities in various subsectors from Electronics Manufacturing Services (EMS), Original Design Manufacturing (ODM), Design and Development services with IC Design as next frontier. As for IT-BPM, we are first in the world in voice-related services, second in non-voice services with 13 percent of the global market share. We have evolved as an alternative destination for low-cost services to providing high-value services such as finance and accounting, HR, IT and software development, engineering services outsourcing, data analytics, procurement, supply chain management as well as vertical-focused solutions such as healthcare information services at competitive price points,” Rodolfo elaborated.

Mr. Jaime Augusto Zobel de Ayala, Chairman and CEO of Ayala Corporation, shared the corporation’s experience in expanding their operations out of the Philippines, highlighting IMI, which grew to be the 5th largest automotive supplier in the world with a partnership with KTM motorcycles in producing 23,000 units for export to China and Southeast Asia. He was followed by Mr. Elmar Lutter, President and CEO of Lufthansa Technik Philippines, who shared that the company’s decision to locate in the Philippines due to the country’s potential within the aviation industry and the supply of talented workforce in the Philippines. He added that the company has received continuous government support through the different administrations which readily assisted Lufhtansa Technik in its local operations. Finally, Mr. Gordon Blaikie, Chief Operating Officer of Global Invacom, shared the company’s decision to subcontract their production activities with a Filipino company, highlighting that, more than the country’s offering on the cost and labor aspects, the Filipino workforce showed a sense of community, trust and leadership that put the country above its ASEAN neighbors.

Electronics and IT-BPM are part of DTI-BOI’s Make It Happen in the Philippines campaign’s promotion of five key sectors along with aerospace, automotive, and copper.

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