Potential Australian IT-BPM investors into the Philippines are weighing the impact of the implementation of higher excise tax, the removal of the perks for those engaged in regional headquarters operations in the country, and a diluted incentives regime in the upcoming Package 2 of the comprehensive tax reform program (CTRP) of the Duterte administration.
Elodie Journet, senior trade and investment commissioner of the Australian Embassy in the Philippines, told business journalists that decision of Australian investors would really depend on what sectors they belong and if they are new or are already existing in the country.
Journet said that for those already in the country, they have to take into account how to strategically maximize their presence here stressing that one of the reasons for investing in the country was the incentives granted to them.
For those still looking at investing or expanding in the Philippines, Journet said they will likewise make assessments of the country’s tax and incentive regimes.
She, however, said they will start conducting a survey among the 280 Australian companies operating in the country by next month (Febuary) to assess how they are responding to the government’s new tax reform program. Package 2 of the CTRP will reduce corporate income tax rate on lower tax breaks.
According to Journet, there 280 Australian firms in the country have total investments of A$9.3 billion and these firms employ an estimated 40,000 Filipinos. These are also engaged in various fields such as mining and IT-BPM industries.
One sector though, that Australian companies are looking in the Philippines is the domestic retail as the government is planning to further liberalize to entice more foreign retailers.
At present, Australia is the country’s fastest-growing outsourcing destination because it is relatively closer with a manageable time difference.
Philippine exports to Australia in 2016 reached A$907 million on strong IT-BPM and Australian tourists going to the Philippines. Australian exports to the Philippines also reached A$767 million.
Bilateral trade between the Philippines and Australia soared by 70 percent in the past 7 years and growth is expected to be further sustained as more tariffs go down to zero with the implementation of the ASEAN-Australia-New Zealand free trade agreement.
Journet said it is now becoming very competitive to trade across the ASEAN region because of the implementation of the ASEAN-Australian-NZ FTA, which was established in 2010.
“Since ASEAN-ANZ FTA was forged in 2010, we’ve seen an increase in trade between the Philippines and Australia by 70 percent,” said Journet.
She further expects trade to continue to grow because lots of tariffs are gong down to zero, making it very competitive to trade across the region.
In addition, she said, there is now a strong synergy between the two countries making bilateral trade less of a one-way street.
Bilateral trade between the Philippines and Australia in 2016 was valued at A$4.3 billion. There are 280 Australian firms based and have invested a combined A$9.3 billion to the Philippines. These firms are employing 40,000 Filipinos.
Merchandise trade has gone up by 28.8 percent year-on-year. The Philippines biggest export to Australia, so far are gold and electronics while Australia’s biggest export to the Philippines is wheat. Australia is now the Philippines fastest growing country for outsourcing with more firms setting up back office operations here.
In addition, there has been increased growth in Filipino investments to Australia led by the foray of businessman Enrique Razon’s ICTSI to invest and operate an international port in Melbourne.
“We don’t see us as a one-way street because we are also seeing great appetite and interest from Filipino organizations to invest and engage in Australia, as well,” she said.
Source: Manila Bulletin