How to make foreign investors stay in PHL

“I have tears in my eyes! So, I beg you. Let us watch every step we make.” These were the emotional words of Sen. Richard Gordon in 2020 at the Senate’s plenary session when he objected to the inclusion of Subic Bay Metropolitan Authority and the country’s other Freeport zones under the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. The senator objected to the power being given to the Fiscal Incentives Review Board (FIRB) in approving tax incentives under the bill.

Fast-forward to March 2022:  The FIRB has rejected the Philippine Economic Zone Authority’s request to allow the extension of the implementation of work-from-home arrangement for 10 percent of the workers of the Information Technology and Business Process Management (IT-BPM) sector companies beyond the end of March. This means that starting April 1, they are required to go back to their offices. Finance Secretary Carlos Dominguez III, FIRB chairman, said the WFH arrangement is only a time-bound temporary measure adopted during the surge of the Covid-19 pandemic.

Employing 1.3 million people and contributing about  $29 billion to the economy, the IT-BPM sector is one of the primary pillars of the Philippine economy. The sector contributed 7.3 percent to the country’s GDP in 2019, according to a World Trade Organization report.

In the BusinessMirror’s March 14 Editorial, we wrote that the FIRB decision obviously disregards the welfare of the IT-BPM workers who have embraced remote work without affecting efficiency and company bottom line. Worse, it comes at a time when oil prices are skyrocketing. We said a good compromise would be to allow WFH arrangement for 10 percent—or even 20 percent—of the workers of IT-BPM companies. This way, we can help small businesses that depend on IT-BPM employees for their livelihood, and at the same time free some workers from commute-related stress.

Now the problem rears its head.Some IT-BPM companies are willing to forego their tax incentives rather than lose employees because of the return-to-office work requirement imposed by the government on locators. This comes amid a trend of high attrition rates in the sector, as IT-BPM workers are willing to sacrifice their current jobs for other work that allows WFH or work-from-anywhere (WFX) arrangement. The Alliance of Call Center Workers (ACW), a newly formed group of over 1,500 employees, said that some workers are already planning to resign should they be mandated to return to office starting April 1 (Read, “BPOs: Better to lose tax perks than workers,” in the  BusinessMirror, March 24, 2022).

“Some of our members are planning to resign already if they will be asked to return to office by their employers. Some companies have actually deferred the return to office and allowed us to continue with the WFH arrangement,” ACW co-convenor Emman David said. “For our members, the transition to work on site is not that easy. Most of the BPO workers went back home to their province during the pandemic and gave up their living arrangements in Metro Manila,” he said.

“Some smaller IT-BPM companies have decided to forego the tax incentives because their employees are not ready yet for the return-to-office mode. They weighed the impact of losing the tax incentives versus the amount of workers that they might lose,” ACW co-convenor Lara Melencio said.

The FIRB has twice rejected a plea by the IT-BPM sector, backed by the Philippine Economic Zone Authority, for them to be allowed to continue the WFH setup until end-2022. This intransigence is sending a bad signal to foreign investors, who might just choose to invest elsewhere if the FIRB continues to ignore the appeals of IT-BPM companies. Government has no business meddling with the work arrangements adopted by private companies and their workers to sustain productivity and efficiency. Taking care of foreign companies operating in the country by helping them navigate the challenges arising from the pandemic is a great way to attract more foreign investors.

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