Japanese firms see PH’s economic recovery in 2021

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JETRO urges better permit and tax procedures

By Monsi A. Serrano

Despite the COVID19, the majority of the Japanese firms doing business in the Philippines see an economic rebound this year given the fact that 2020 resulted in the global economic slowdown.

In the survey conducted by the Japan External Trade Organization (JETRO) from August to September 2019 to 133 Japanese companies operating in the Philippines, it revealed that around 60% of the respondents think that their operating profit in 2020 will be worse than in 2019, but 2021 will improve better than 2020.

This is the reason why other companies are planning to expand their business, but the majority will keep a “status quo” on their expansion, while there are a few that consider downsizing their business operations.

With regard to employment opportunity, one-third of them said they would be increasing their Filipino staff this year. However, the majority remains to keep the number of their employees the same for this year.

Post-COVID action plans

Looking forward, 80% of the respondents think their market size would be same or slightly smaller than that before COVID-19. This resulted to the inevitable revision of their business strategies/models amid the pandemic, including work- from-home or telework. However, many pointed out that while the need for digitalization is empirical especially in the time of pandemic, this has not made significant progress due to insufficient telecommunication infrastructure, high cost for digital transformation, and lack of skilled human resources.

While the Japanese manufacturers in the country have been trying hard to increase local procurement, the need to import many parts and raw materials from abroad is necessary given the fact that the accumulation level of suppliers in the Philippines is much lower than that in neighboring countries.

Furthermore, the production cost of Vietnam gets lower than that of the Philippines. While the international cost competitiveness of the Philippines gets weaker than last year. Consequently, many respondents can no longer find any room for them to cost cut. This prompted some Japanese manufacturers to diversify their production base in other countries to ensure and strengthen their global supply chain.

Advantages and challenges of PH as an investment destination

Pre-COVID, the Japanese firms doing business in the Philippines expressed their concerns in the government to address some issued that would attract more investors to the Philippines such as burdensome tax procedures, time consuming custom clearance, and rules related to custom clearance are not informed to officials concerned.

But they are hopeful that the government will see these concerns and timely addressed them.

Speaking to THEPHILBIZNEWS JETRO Manila Executive Director, Mr. Takashi Ishihara revealed that many Japanese companies pointed out that they spent much time for tax/custom clearance procedures.

“As there are too many rules and advisories, even the government officials cannot catch up /understand all of regulations. The heavy paperworks also become a burden for Japanese companies. We hope that these procedures will be more simple and efficient,” Mr. Ishihara added.

The Executive Director of JETRO Manila also emphasized that the Japanese companies in the Philippines have been docilely following all the government’s order with eagerness.

“The Japanese companies are serious and compliant, however, too many rules may confuse them, and too much procedures can bother them,” he explained.

“Lastly, the Japanese companies in the Philippines do not want to relocate, but simply wish to do business under stable business environment,” Mr. Ishihara concluded.

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