By Victoria “NIKE” De Dios
Department of Trade and Industry (DTI) Secretary Ramon Lopez discussed with six (6) Japanese foreign direct investors the opportunities to expand their wiring harness operations under the new CREATE (Corporate Recovery and Tax Incentives for Enterprises) Act. The online and sector-specific roundtable on 20 April 2021 organized by the Philippine Trade and Investment Center (PTIC) in Tokyo involved the participation of senior executives from Sumitomo Wiring Systems, Ltd. and Yokowo Co., Ltd., among others.
“Wire harness is one of our biggest exports and for 2020 the Philippines exported USD 1.886 billion worth of wire harnesses to the world. Wire harness exports to Japan of USD 857 million comprise about 45.44% of our total wire harness exports. For last year, Japan was our biggest market for wire harnesses followed by the United States of America, South Korea, Canada, and Thailand,” said Secretary Lopez.
The Philippines is the fourth largest exporter of wiring harnesses to the world. The automotive wiring harness market is expected to surpass USD 93 Billion by 2023. During the meeting, the trade chief highlighted that the demand for greater fuel efficiency and electric vehicles will continue to fuel this growth for many years to come.
“With wiring harness applications expanding beyond the automotive industry to the telecommunications, aerospace, medical fields, and other ICT areas, support for upgrading Philippine-based wiring harness operations have become all the more imperative,” he said.
DTI Undersecretary Rafaelita Aldaba, who gave a presentation on CREATE and the Special Investment Priority Plan (SIPP), added, “As a prime generator of jobs, provider of support for sectors critical to industrial development, its potential to create value through innovation, and the country’s comparative competitive advantage in global manufacturing and the export market, investment in wiring harness production may qualify as Tier One under CREATE.”
Under the modernized incentives system in CREATE, qualified industries may avail of incentives such as income tax holiday (ITH), special corporate income tax rates (SCIT), or enhanced deductions (ED).
Export-oriented industries that qualify under Tier I may avail of ten (10) years of ED/SCIT. This is in addition to four (4) years of ITH for industries located In the National Capital Region (NCR), five (5) years of ITH for those in metropolitan areas or areas contiguous and adjacent to NCR, and six (6) years of ITH for all other areas. Further, a longer transition period is given to industries currently granted incentives, making the incentives more performance-based, focused, and timebound.
The DTI chief also explained that “Confidence building sits as one of the main reasons why this roundtable was organized. By initiating dialogues and addressing issues in a pro-active manner, we are sending a clear message of our unwavering commitment towards the continued and smooth operations of Japanese investors’ operations in the country, even amidst an environment of great uncertainty. The Philippines will work with Japan in the non-disruption of the global supply chain for key industries.”
Commercial Counselor and Special Trade Representative Dita Angara-Mathay, who leads the DTI Field Office in Japan, reported that of the six (6) Japanese companies in the meeting, two (2) are new investors, and two (2) have confirmed expansion projects.
“The remaining companies are still completing their expansion and diversification plans. The rise of new factories, more high-tech products, and new jobs will not only enhance economic activity in regions outside the NCR but also relieve congestion thereat,” said STR Angara-Mathay.
Sec Lopez added, “The total collective value of the new and expansion investment projects from this group of Japanese locators is conservatively estimated at PHP 10.5 billion. Additional jobs created by the same investments are projected to reach 18,650. Despite the pandemic, it is encouraging to note that the Philippines is able to attract new business in strategic sectors.”
Secretary Lopez has been giving strategic directions on how DTI officials and personnel should work with the business community towards balanced economic recovery. These include institutional programs that foster inclusivity, region-wide development, and support for MSMEs, as well as emerging and strategic programs such as digital transformation and support for industries where the Philippines is competitively positioned in the global value chain. It is for this reason that the meeting also incorporated an exchange of ideas on how the government could effectively build a sustainable ecosystem that will help cement the Philippines’ position as a global hub for wire harness manufacturing operations and possibly move up its ranking from 4th to a higher notch.
In addition to the Trade Secretary and Undersecretary Aldaba, other officials who joined the meeting included DTI-Board of Investments (BOI) Executive Director Corazon Dichosa of the Industry Development Group; Executive Director Bobby Fontavilla of the Investment Servicing Group; Lanie Dormiendo, OIC of the Investment Promotions Group; and Atty. Elyjean Portoza, Director of the Legal and Compliance Service Group. The wide DTI participation ensured that issues raised by Japanese companies on their new, expansion and ongoing projects were adequately addressed by the concerned DTI officials.
