The passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and the implementation of the Regional Comprehensive Economic Partnership (RCEP) Agreement will play major roles in the country’s growth strategy as it implements its economic recovery plan. This was underscored by Trade Undersecretary and Board of Investments (BOI) Managing Head Ceferino Rodolfo during the online Roundtable Discussion on the Reconfiguration of Global Value Chains (GVCs) in the Philippines jointly organized with the World Bank held on 2 February 2021.
The House of Representatives and the Senate recently ratified a bicameral committee report (3 February 2021) on the proposed CREATE Act that will reduce the corporate income tax rates and grant incentives to exporters and critical sectors to allow the country’s economy to recover amid the pandemic and boost its growth in the long-term. Rodolfo said, quoting Rep. Joey Salceda’s bicameral report, ‘’CREATE will be a game-changer for us as it is expected to generate P12T in combined domestic and foreign investments over the next ten (10) years, including an estimated USD 90B in foreign investments. Once implemented, it stands to generate around 1.8 million jobs and along with the proposed economic amendments to the Constitution, it could provide up to 8.4 million jobs.”
He also added that the RCEP will complement the government’s existing initiatives to develop the country as a manufacturing and services hub in the region, including through investment incentives reform and addressing its value chain gaps. The National Economic and Development (NEDA) has said RCEP will result in better trade facilitation and estimated that the country’s exports will add around USD 47 to 60 billion by 2025.
RCEP is a free trade agreement between the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam. As of 2020, the 15 member countries accounted for about 30% of the global population (2.2 billion people) and nearly a third of global GDP (USD 26T), easily among the largest trading blocs in the world. The RCEP was signed on 15 November 2020 at a virtual ASEAN Summit hosted by Vietnam.
The objective of the RCEP is “to establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development. Accordingly, it will bring about market and employment opportunities to businesses and people in the region. The RCEP Agreement will work alongside and support an open, inclusive, and rules-based multilateral trading system.” (asean.org)
During the discussion, Mr. Souleymane Coulibaly, World Bank Lead Economist and Program Leader for Equitable Growth, Finance and Institutions, highlighted that “the Philippines post-COVID-19 recovery could also benefit from the reconfiguration of its leading export sectors in three (3) GVC clusters: Industrials, Manufacturing and Transport (IMT); Technology, Media and Telecommunication (TMT); and Health and Life Science (HLS).”
He elaborated that the IMT should build on the country’s robust position in electronic intermediates which account for the majority of its total exports while TMT should leverage the country’s strong IT-BPM services. On the other hand, the country’s healthcare professionals and pharma sector can serve as the anchor for the growth of the HLS cluster.
During the breakout sessions, stakeholders discussed pressing issues such as the disruption of supplies, logistics problems and weak demand and the need to address them. Some of the recommendations tabled include revising the college curricula to adapt with the times, focusing more on Research and Development (R&D), streamlining of regulatory process to allow easier access to products and lessening the reliance on imported raw materials by further developing domestic industries and buying local products.
“Challenges remain especially with weak consumer demand, increasing manufacturing input prices and longer delivery times. Our economic strategy is now hinged on revitalizing domestic demand and empowering our industries to capture that demand. We are already seeing signs of economic recovery but we should not be complacent. The recommendations in today’s discussion will serve as important inputs as we realign our industry development initiatives to better suit the needs of the industries,” BOI Executive Director Ma. Corazon Halili-Dichosa said at the conclusion of the event.
She added these recommendations will be brought up in the Recovery Cluster of the National Task Force especially in the Task Group on Economic Recovery (TGER) to ensure that it will sustain the growth of these sectors in the coming months.
The roundtable was organized by the DTI-BOI and the World Bank to discuss how GVCs can rethink, diversify and redeploy their strategies to better adapt with the changing times. Public and private stakeholders attended the session. Among government agencies and representatives in attendance were the National Economic Development Authority, Bureau of Import Services, Foreign Trade Service Corps, Mindanao Development Authority, Subic Bay Metropolitan Authority and Philippine Retirement Authority. Private groups included the Pharma and Healthcare Association of the Philippines, Philippine Pharma Manufacturers.
Associations, Healthcare Information Management Association of the Philippines, AMCHAM Philippines, Coalition of PPE Manufacturers of the Philippines, Semiconductor and Electronics Industries in the Philippines, Inc., Electric Vehicle Association of the Philippines and Chamber of Automotive Manufacturers in the Philippines, Inc. ♦
Date of Release: 11 March 2021