By Alithea De Jesus
As the government rolls out its program to bring in more foreign investors to the country through “Make It Happen” in the Philippines, it also showcases our resiliency and robust economic recovery this year.
This was disclosed by the officers and members of the Toys Manufacturers’ Association of Hong Kong (TMHK) who recently (February 4, 2021) had an online information session with the Philippine government, through the Department of Trade and Industry (DTI) and the Board of Investments (BOI) on the many investment opportunities in the country.
TMHK is composed mainly of toy manufacturers with factories both in Hong Kong and China. The organization is committed to fostering the development of the Hong Kong toy industry and brand development of Hong Kong toy manufacturers. The association represents its industry players as an integrated body liaising with toy associations worldwide and governing bodies.
Led by its president Samson Ko, the 250-member toy makers’ association acknowledged the rising production costs that their members have been experiencing and, thus, are seriously considering the Philippines for possible relocation and expansion of their operations. The TMHK finds the latest Philippine legislative initiatives encouraging and believes that this can help their businesses grow in the country.
Trade Undersecretary and BOI Managing Head Ceferino Rodolfo acknowledged TMHK’s rosy prospects into the country and said that this further amplifies the country’s competitive advantage as an ideal investment destination. “We are positioning the Philippines as a complementary host country to target companies, particularly those looking into diversifying their business locations to sustain and enhance competitiveness. The Hong Kong toy association’s gesture of seriously considering expansion plans additionally strengthens this positioning”, said Undersecretary Rodolfo.
During the information session, Undersecretary Rodolfo highlighted to TMHK members the government’s commitment to making business in the Philippines competitive. “We have put in place incentives that create an investor-friendly landscape, allowing investors to set up their business at a lower cost compared to other neighboring Asian countries. Foreign companies can also benefit from corporate income tax exemptions where new and better rates are embodied in the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act that was recently ratified by Congress,” according to the Undersecretary.
The CREATE Act lowers the Philippines’ corporate income tax (CIT) rate from 30 percent to 25 percent and modernizes the country’s investment incentives, making them more competitive and transparent, time-bound, targeted, and performance-based. It also provides businesses with economic stimulus measures that will help them recover from the coronavirus pandemic.
The domestic toy and game industry is structured into traditional toys and video and online games. Traditional toys include dolls, action figures, building sets, games and puzzles while video and online games are those produced by renowned video game developers Nintendo and Blizzard, among others.
“Experts have noted that the impact of the COVID-19 pandemic on toys and games have globally reinforced the trends already shaping the industry sales pre-COVID-19 mainly through digital transformation. A COVID-19-generated shift towards home entertainment and online education has led to a further surge in video games, including e-sports, and digital education tools. While some traditional toy categories have seen a spike in 2020, the long-term trend is reflected in the strong repositioning of toy industry players as entertainment providers on multiple platforms,” Undersecretary Rodolfo said.
Undersecretary Rodolfo also pitched that the Philippines can offer wider market access to Hong Kong through its Free Trade Agreements (FTAs) and Global System of Preferences (GSP). Currently, Philippine exports enjoys preferential rates with partner countries such as Japan, India, Australia, New Zealand, and European Free Trade Agreement (EFTA) members like Switzerland, Norway, Liechtenstein and Iceland. Philippine exports also enjoy preferential rates to major markets such as European Union and the United States through the GSP.
“Aside from market access, the Philippines can also provide for a broader production network for the manufacture of toys given the existing manufacturers in the Philippines as well as the sources of raw materials that the FTAs can provide. Existing toy manufacturers include Academy Plastic Model Toy Co. Inc., Dunlop International (Philippines), Bandai Namco Philippines, Tanika Philippines, and Hansa Toy International Inc. The downstream industry for toy manufacturing is also established with the presence of suppliers such as plastics, rubber, cotton, textiles and others,” Undersecretary Rodolfo also noted.
There are plenty of suitable locations primed for a wide scale production of toys. To date, there are a total of 74 operating and five newly-proclaimed manufacturing economic zones in the country. There are also 20 industrial parks with available areas of 20 hectares and above, located in Central Luzon and CALABARZON and a total of five other suitable locations/industrial lands located in Bulacan, Batangas, Cavite and Ilocos Norte.
In terms of investments (from 1989 to present), there are 125 firms registered with the BOI which are engaged in the manufacturing of toys, amounting to a total of PhP450 million in investments. The biggest contribution came from Mattel Philippines, Inc. which invested Php39 million. The most recent investment was made in 2018 from the Malaysian company Carissa Balsam Sdn. Bhd. with a total project cost of Php2.65 million.
In 2019, Philippine exports of toys, games and sports requisites to the world amounted to US$176.1 million. This category referred mostly to traditional toys and games and included video consoles and similar units but did not include video game applications, in-game transactions for video games such as digital cosmetic purchases, or power-ups and lives that can be used in-game.
On the other hand, Philippine toy imports grew at an average rate of 17 percent from 2015 – 2019. The country imported US$487.3 million in 2019 with the biggest share coming from China valued at US$226.2 million or 46.4 percent of total toy imports, followed by Hong Kong with US$52.7 million (10.8 percent).