On October 2, 2024, Philippine President Ferdinand Marcos Jr. signed a law imposing a 12% value-added tax (VAT) on digital services, including popular platforms like Netflix and HBO. This move aims to generate approximately 79.5 billion pesos (around $1.4 billion) over the next four years, as the government seeks to ensure that digital platforms benefiting from the local economy contribute to its growth [c014d554].
In the context of the Philippines' economic landscape, Secretary Alfredo E Pascual of the Department of Trade and Industry (DTI) previously highlighted the country's focus on infrastructure development and strategic policy reforms. The 'Build, Build, Build' program has evolved into the 'Build Better More' initiative, with 185 flagship infrastructure projects valued at over $161 billion. The Maharlika Investment Fund, the first sovereign wealth fund in the country, is expected to bolster these projects. The government is also promoting public-private partnerships (PPPs) to enhance infrastructure and connectivity [383457ec].
President Marcos Jr. has actively encouraged foreign investments, particularly from South Korean firms, by opening economic zones that offer attractive arrangements for businesses. He emphasized the need to amend the economic provisions in the 1987 Constitution to attract more foreign investors, focusing on economic matters alone. The Luzon Economic Corridor aims to accelerate investments in high-impact infrastructure projects, further enhancing the investment climate [383457ec].
The Philippines has seen a significant influx of foreign investments, with around $14.2 billion in investment promises over the past 16 months. Notably, during a working visit to Germany, President Marcos Jr. secured at least $4 billion in investments from German companies across various sectors, including healthcare and renewable energy [383457ec].
However, the Philippine economy faces challenges, particularly in diversifying its sources of growth. NEDA Secretary Arsenio M. Balisacan has stressed the importance of resilience in light of potential economic downturns, particularly from the US. The electronics and semiconductor industries are particularly vulnerable, as evidenced by a 17.3% year-on-year drop in exports in June, with electronic goods exports falling 24.4% [383457ec].
In contrast, Oracle recently announced a $6.5 billion investment in Malaysia to establish a cloud services hub, joining other tech giants in expanding their presence in Southeast Asia. This highlights the competitive landscape in the region as countries vie for tech investments [c014d554].
Overall, while the Philippine government is taking steps to enhance its economic framework and attract foreign investments, the recent VAT on digital services reflects a broader strategy to ensure that all sectors contribute to national growth amid evolving economic conditions [c014d554].