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‘Changing investment climate’ forces Daikin’s production out of Philippines

Mar 04. 2018
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ONE OF THE country’s leading firms in the airconditioning industry could not convince its Japanese parent company to put up a production hub in the Philippines, partly because investors feel they are “not protected” under the constantly changing investment climate.

At the sidelines of a press conference last week, top officials of Daikin Airconditioning Philippines Inc complained about the lack of long term continuity in the country’s policies, noting that investors want to see the rules that are sustained beyond one administration.

Partly because of this, they said their parent company, Daikin Industries, Ltd, had decided to open a production hub in Vietnam in order to help meet the growing global demand for its products, instead of putting it up here in the Philippines.

Daikin’s operations in Vietnam sell a million units annually, around ten times larger than its sales here in the Philippines, wherein only less than a hundred thousand units are sold in a year.

However, in spite of the sales difference, the country could have hosted the production facility if there were “attractive” tax packages and a sense of continuity in its policies, according to Bart Roa, deputy division manager under the company’s sales operations.

“Even though our unit sales are not big, if our [tax] packages are very attractive for investors, of course, they would choose the Philippines as their production hub. But that’s not the case. Here, they’re scared because they’re not protected,” he said in Filipino.

The complaint did not necessarily centre around the Duterte administration, as officials noted that the policy changes from one president to another. Previous administrations were also guilty of this.

However, this comes as the Duterte administration is introducing a series of tax packages, including one which would rationalise the tax incentives that companies like Daikin could have benefited from.

If the company set up in an economic zone, it would eventually only pay five per cent gross income earned (GIE) tax in lieu of all taxes, a perk which essentially has no expiration date. This is under the currently available tax incentives.

However, according to the proposed second tax package from the Department of Finance, the perk would be replaced with a reduced corporate income tax rate of 15 percent based on net taxable income This 15 per cent tax rate could be continued for another five years on a per-project basis.


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