FOLLOWING "encouraging" growth numbers in export sales of the mining and manufacturing sectors, an economist-lawmaker said that with the right government policy and support, these sectors can help boost the country's economic rebound.

House Committee on Ways and Means Chairman Joey Sarte Salceda made the comments in response to preliminary Philippine Statistics Authority (PSA) data showing merchandise exports in May went up by 29.8 percent year-on-year to $5.89 billion.

"As I've always discussed in all my presentations to the business community, the manufacturing industry, particularly the electronics sector, and the minerals sector will be among our economic saviors during this pandemic. The demand for electronics, and the minerals that make up their parts, has been impervious to the decline in overall consumption," Salceda said.

"These sectors will continue to be strong, as sales volumes increase even as prices remain elevated. Until the global semiconductor shortage is addressed—and it takes time to build new manufacturing capacity—we will continue to see both sectors have significant pricing power. The Philippines is a leading electronics manufacturer in the region, and is also among the most mine-rich countries  in the world," Salceda said.

Exports of manufactured goods grew by 35.2 percent to $4.96 billion in May. Manufactured goods accounted for 84.2 percent of total export sales over that period. Electronic products, comprising 69.1 percent of manufactured goods and 58.2 percent of total exported goods, expanded by 25.4 percent to $3.43 billion in May. Of these, semiconductors contributed $2.53 billion, an increase of 11.3 percent from last year.

The sales of mineral products also increased by 23.4 percent to $460.83 million from $373.44 million.

"Add to that the growing demand for electric vehicles, a trend that will only grow stronger as both China and the United States make major investments in the area," Salceda added.

Enabling policy

However, Salceda said both the manufacturing and mining sectors need policies that enable growth and encourage them to make the right business decisions.

According to the lawmaker, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act is the best tool for growth in these areas, as both the Mining and the Electronics export sectors are in the 2020 Investment Priorities Plan, all of which will be in the Strategic Investment Priorities Plan mandated by CREATE.

However, Salceda said the Department of Trade and Industry (DTI) must consider adding "value-added in minerals" as a higher tier in the grant of tax incentives.

"Value-added in minerals should have more tax incentives than mere extraction. The problem with our metallic mining sector is that much of our extracted resources is transformed into higher-value goods in places like Hong Kong," he said.

We can do better by creating value-added here in the Philippines. That will create more jobs and generate more compensatory revenues to rehabilitate mining areas and protect communities," Salceda added.

Under the CREATE Law, domestic industries get 4-7 years of income tax holidays, and 5 years of enhanced deductions. Exporters get 4-7 years of ITH and 10 years of enhanced deductions or a special corporate income tax rate of 5 percent of gross income.

"Value-added in mining will be export-oriented, so they will get more incentives, if we subdivide that as its own distinct classification in the SIPP. I recommend that the DTI take this direction when it finalizes the SIPP," Salceda said.

Fiscal regime

Meanwhile, Salceda revived calls to pass a fiscal regime for the mining sector, following the lifting of the moratorium on the approval of new mining agreements through the issuance of Executive Order 130.

"We still need a tax regime for mining, because the EO only clarifies who will negotiate with mining companies on the government's take from their revenues. The baseline regime upon which to negotiate is not yet there," Salceda added.

The House tax chief is also a principal sponsor of House Bill 6135, which creates a fiscal regime for mining

As the government needs money for Covid-19 relief, Salceda has already recommended to the leadership of the House of Representatives and Department of Finance actions to improve government revenues from mining under Executive Order 130.

In separate aides memoire to Speaker Lord Allan Jay Velasco and Finance Secretary Carlos G. Dominguez, Salceda proposed to have the new agreements taxed at better rates for the government, and to ensure that Congress and the DOF have a stronger role in determining the mining agreements.

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