By Bernie Cahiles-Magkilat
Business expectations among German companies in the Philippines have declined amid local economic policy uncertainty with the planned overhaul in the country’s tax incentive regime, labor tenure and talent supply issues, and global challenges.
This was revealed in the 2019 AHK World Business Outlook Survey conducted by the German-Philippine Chamber of Commerce and Industry (GPCCI-AHK Philippinen).
The five-year assessment entitled “The Philippines: An Analysis – AHK World Business Outlook Survey 2015 – 2019” showed that the Philippines still remained an attractive market for German companies but their expectations dimmed.
According to the survey, more than 70 percent of the 170 firm respondents evaluate their current business situation in the country as “better” than the year before. This showed a remarkable recovery from its decline to almost 50 percent in 2017.
Additionally, workforce intentions also improved this year from last year’s report.
However, the report also noted that although the figures stay high, the results on the expectations in the areas of business development, investment intentions and general economic development show a downtrend from last year by 8 percent, 6 percent and 8 percent, respectively.
The survey attributed this decline largely to the impending changes in the corporate income tax and fiscal incentive structure under the proposed TRABAHO Bill, the progression of the security of tenure bill and other interventions that have adverse effects to regular business activities (e.g. in the field of medicine pricing), the report added.
The businesses involved in the German-Philippine economic relations continue to see various challenges for their engagement in the Philippines.
The survey showed that about 46 percent of respondents still account that economic policies will have a strong influence on their business in the next 12 months.
The second factor is the exchange rate volatility at 36 percent of respondents, although its importance has lost 10 percent compared to last year.
Sharing the third place (34%) are challenges in securing skilled labor and potential changes in domestic and international market demand. Noticeably, the worries on the latter have almost doubled in the last two years.
The government’s $160-billion “Build, Build, Build” program has somehow appease concerns on infrastructure as the survey showed this issue seemed to have lost momentum.
But concerns about increasing inflation rates in the country still continue to hound German firms by which 70 percent of the total respondents sees a high impact.