Electronics industry eyes sustained growth

The country’s electronics industry is poised for continued growth this year, with exports seen accelerating by another six percent amid the sector’s concern on certain provisions in the second package of the tax reform program and an upcoming executive order (EO) by President Duterte against “endo.”

Semiconductor and Electronic Industries in the Philippines Inc. (SEIPI) president Dan Lachica told The STAR the group’s exports growth forecast for this year stands at six percent, almost similar to its six to eight percent growth target for 2017.

“The full year results will not be available until Feb. 10 when the Philippines’ Statistics Authority releases the December numbers. That said, we will exceed 2016 exports level. This can be attributed to some recovery from the 2016 negative growth and the demand for electronics products to support emerging technologies,” Lachica said.

In 2016, total outbound shipments of electronics amounted to $28.6 billion from $28.9 billion in the previous year.

“As for foreign direct investments (in the electronics industry), we hope the TRAIN program does not cause FDI to decline further,” Lachica said.

Lachica said the group is concerned about the potential negative impact to the industry of the imposition of value added tax on local suppliers under the alreadyapproved first package of the tax reform program.

For package two which has already been submitted to Congress, Lachica said the group is also worried with some of its provisions such as the proposed change from five percent gross income earned (GIE) tax to 15 percent corporate income tax (CIT) as well as proposals to put a cap on incentives.

“The switch from five percent GIE to 15 percent CIT would cause a 30 to 40 percent increase in operating cost,” he said.

“The good news is Finance Undersecretary Karl Chua agreed to meet us to discuss our industry concerns,” he said.

Lachica also pointed out industry concerns arising from the uncertainty on the version of the EO covering endo or labor contractualization.

“On endo, the nature of the fluctuating customer demands of electronic companies require engagement of project employees through legally compliant service providers,” Lachica said.

Duterte is expected to come out with an EO soon prohibiting all forms of labor-only contracting arrangement, according to Labor Secretary Silvestre Bello.