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Some PHL-based foreign companies plan to reduce operations, survey shows

A BIGGER percentage of foreign firms in the Philippines are considering reducing their operations as a result of the coronavirus pandemic compared with those in other Asian economies, a survey released on Monday said.

The Economic Research Institute for ASEAN and East Asia (ERIA) and the American Chamber of Commerce in Indonesia in September conducted a survey on 264 firms that have operations in the Association of Southeast Asian Nations (ASEAN) region —  majority of which have a primary office in the Philippines, Indonesia, and the United States.

The survey found that 11% of foreign firms in the Philippines plan to reduce operations or production, more than other countries included in the scope of the survey.

To compare, 8% of foreign firms surveyed in Indonesia said they plan to downsize operations, while 7% of Thailand-based firms said the same. About 6% of firms in Singapore, Vietnam, and Malaysia are also looking to reduce operations.

The number is smaller in East Asia, with only 3% of foreign firms surveyed in China saying they would trim operations, and 2% of firms in both Japan and South Korea are seeking to do the same.

However, most of the foreign firms surveyed are not planning to reduce operations at all, with 57% saying that they will not cut operations, while 19% said that they do not know if they will do so.

According to the survey, more than half of those with operations in China are not planning to move their operations to another country.

Among the 13.5% who are planning to leave China, more than 60% are looking to transfer to Vietnam when choosing among ASEAN countries. This was followed by Thailand at 23%, while the Philippines was tied with Malaysia at 15.4%.

ERIA Senior Economist Dionisius A. Narjoko said in the online launch event on Monday that foreign direct investments can be expected to be more capital and technology intensive.

“The key here is somehow investment in human capital in many countries that relied earlier on unskilled labor needs to be done,” he said.

More than 30% of foreign firms in ASEAN economies experienced a “moderately adverse” impact from the pandemic, while almost 30% said they experienced significantly negative impact.

“By far the greatest factor contributing to the negative impact is demand, with 78% of the respondents citing it as the main reason for decreased output/revenue/sales,” the report said.

“In addition to demand shock, several respondents identify lockdown and travel restrictions as the main cause of the difficulties. This affected firms in various ways, ranging from the inability to send staff to project sites to the inability to acquire key goods (for instance, laptops for staff to work at home). Others note significant slowdowns with customs and border crossings.”

More than 70% of respondents said it will take at least the second quarter of 2021 or longer before business activities stabilize.

The firms also named the top issues that ASEAN should work on to support business recovery, including immigration rules and permits, the free movement of people, and tax incentives. — Jenina P. Ibañez

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