‘Court Japanese firms, others moving out of China’

THE business sector is backing calls for the Philippine government to look into attracting companies planning to shift production out of China.

“By all means, we should try and get those Japanese firms moving out of China to come to the Philippines,” Mandaue Chamber of Commerce and Industry president Steven Yu said.

Japan, for one, is looking to reduce its reliance on China as a manufacturing base amid supply chain disruptions caused by the coronavirus pandemic.

Yu, however, raised that the country hasn’t cleared up yet its direction on tax incentives meant to attract overseas investments.

“It would be best if we have a clear direction on our tax incentives by now. Unfortunately, this Covid-19 crisis came and it is of higher priority,” the Cebuano business owner told SunStar Cebu.

Yu though pointed out that not all Japanese firms are reliant on certain tax incentives.

“Some are looking at access or sources of raw materials and pool of labor talents,” he said.

Earlier this month, the Japanese government announced it has set aside US$2.2 billion of its economic stimulus package to help its manufacturers move production out of China and into Japan or Southeast Asia.

“Despite the enhanced community quarantine, our government should organize a team to identify, invite, lure and convince these prospective Japanese firms to transfer to the Philippines, and it has to be sooner than later,” Yu said.

Philippine Chamber of Commerce and Industry president Benedicto Yujuico also echoed such call earlier, saying that the government should maneuver its policies in attracting these investors by offering generous incentives.

The Duterte administration is pushing for the second package of its comprehensive tax reform program, the Corporate Income Tax and Incentives Rationalization Act, which aims to rationalize tax perks mostly enjoyed by big companies.

But the Philippines might have to struggle in luring these Japanese investors, as more competitive Southeast Asian nations such as Vietnam, Indonesia and Thailand are also potential relocation choices.

Survey

A recently released 2019 survey by the Japan External Trade Organization (Jetro) showed that some Japanese firms are mostly shifting supply chains from China to Vietnam or Thailand.

“Among all respondents in this survey, a total of 159 production bases have been transferred (including partial transfers and plans to transfer) in response to trade protectionism,” the survey report said.

Most of the Japanese firms’ transfer of production are from China, accounting for 69.2 percent.

Moreover, 61 percent of Japanese firms listed Southeast Asia as a major transfer destination.But Thailand and Vietnam emerged as the top relocation choices of Japanese companies.

Looking at the major restructuring patterns of the production bases, transfers from China to Vietnam accounted for 24.5 percent (39 cases), followed by transfers from China to Thailand at 14.5 percent (23 cases).

The Philippines, however, accounted for only 3.8 percent with six cases of transfer.

The Jetro survey noted 37.7 percent of these production base transfers are scheduled for 2020 or later.

The Japanese Chamber of Commerce and Industry of the Philippines has over 600 member firms.

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