On November 11, 2024, Philippine President Ferdinand ‘Bongbong’ Marcos Jr. took a significant step to bolster the nation’s economy by signing the CREATE MORE Act into law. Building on the previous Comprehensive Recovery and Tax Reform for Economic Enterprises Act (CREATE Act), this new legislation aims to make the Philippines a more conducive environment for investment, particularly in emerging technology.
A New Dawn for the Tech Sector
Reducing Corporate Taxes and Streamlining Business Processes
The CREATE MORE Act targets reductions in corporate taxes, streamlining business processes, and providing specialized incentives to attract high-value investment. By lowering corporate income taxes from 25% to 20% for registered businesses, the Act directly addresses key financial and operational barriers faced by tech companies. Simplifying tax procedures and doubling deductions for power-related expenses are crucial measures for blockchain and tech startups, given their high initial costs. These changes are expected to have a ripple effect, attracting more startup founders and foreign investors to establish operations in the country.
Moreover, the streamlined business processes included in the Act aim to reduce bureaucratic red tape significantly, often cited as a major impediment in business expansion. For instance, setting up new ventures and obtaining necessary permits will now be quicker and more straightforward. These enhancements are particularly beneficial for small to mid-sized enterprises that lack the extensive administrative frameworks to navigate complex regulatory landscapes. Combining lower taxes with simpler business operations creates an appealing environment for tech entrepreneurs and investors, making the Philippines a fertile ground for innovation and technological advancement.
Supporting Research and Development
One of the Act’s significant provisions is an emphasis on supporting research and development (R&D). By offering extended incentives and tax deductions to companies investing in R&D, the Act motivates local entrepreneurs and foreign investors alike to experiment with new ideas and develop cutting-edge technologies domestically. This provision also allows businesses to arrange up to 50% of their workforce in remote settings without losing tax benefits, a feature particularly relevant to the contemporary needs of tech companies. Remote work flexibility has become essential, allowing businesses to tap into a global talent pool while maintaining economic incentives.
Additionally, the Act earmarks funds specifically for R&D initiatives aimed at developing emerging technologies like artificial intelligence, blockchain, and biotechnology. These fields require intensive research, significant capital investment, and a long-term commitment, all of which the Act supports comprehensively. By fostering an environment conducive to innovative breakthroughs, the Philippines stands to gain not only in economic terms but also in global technological standing. Effective implementation of these provisions could see the country producing homegrown tech solutions that meet both local and international market needs, further enhancing its reputation as a hub for tech innovation.
Positioning the Philippines as a Regional Leader
Boosting Competitiveness in the Global Tech Market
From a regional perspective, the CREATE MORE Act aims to boost the Philippines’ competitiveness in the global tech market. The Philippine Economic Zone Authority (PEZA) has cited that this law brings the Philippines in line with ASEAN competitors and provides an edge over them by offering some of the region’s most generous tax benefits. These incentives position the Philippines as a favorable option for export-driven tech companies that might otherwise look to neighboring countries. The tax benefits, combined with a workforce increasingly skilled in emerging technologies, make the Philippines an attractive destination for global tech firms seeking to expand their operations in Southeast Asia.
Moreover, PEZA has highlighted that the Act aligns the Philippines with global best practices, thereby enhancing its appeal to multinational corporations looking for stable investment climates. This strategic alignment with other leading tech hubs ensures that the Philippines is not only competitive within the ASEAN region but also on a global scale. High-quality infrastructure projects and an increasingly business-friendly environment support this initiative, making the Philippines an irresistible option for companies involved in software development, data analytics, fintech, and other tech-driven industries. The anticipated influx of foreign direct investments will likely catalyze further growth and innovation within the country’s tech ecosystem.
Attracting Foreign Investment and Talent
Donald Lim, chairman of the Blockchain Council of the Philippines, was notably optimistic about the Act’s potential impact on the tech sector. He articulated the significance of this legislative effort, stating that the Act “encourages more foreign investors to come in” and supports R&D, vital for “innovative solutions like blockchain.” The resultant influx of local and foreign investments could help the Philippines emerge as Southeast Asia’s blockchain technology leader. By creating a stable and enticing environment for investments, the Act helps mitigate previous challenges faced by blockchain companies such as regulatory uncertainties and limited access to talent pools.
Moreover, as the Philippines attracts more foreign investment, it is also poised to draw in global talent. The Act enables tech firms to employ a significant portion of their workforce remotely, thus opening doors to a worldwide talent base. Key provisions that support talent acquisition include visa facilitation for foreign tech workers and collaboration opportunities with international research institutions. These measures ensure that the Philippine tech sector remains at the cutting edge, fostering an ecosystem where innovation can thrive. By becoming a magnet for both capital and talent, the Philippines can solidify its position as a regional powerhouse in the tech industry.
Long-Term Economic Impact
Stimulating Partnerships and Collaborations
The Act’s long-term economic impact could stimulate more partnerships and collaborations within the tech sector. With the expected growth in foreign direct investments (FDI), tech companies are likely to form alliances with local businesses, universities, and government agencies. This development could give rise to collaborative tech hubs, incubators, and innovation centers, contributing to a self-sustaining tech ecosystem that thrives beyond the initial incentives provided by the Act. Such collaborations pave the way for a synergistic environment where knowledge sharing and resource pooling become the norms, driving technological advancements at unprecedented rates.
Furthermore, these partnerships can extend into specialized sectors, such as health tech, fintech, and green technology, where focused collaborative efforts could yield significant breakthroughs. Universities and research institutions in the Philippines stand to benefit considerably, as they gain access to funding, technology, and expertise through these partnerships. Government agencies could also play a crucial role in ensuring regulatory frameworks keep pace with technological innovations, thereby maintaining a conducive atmosphere for continued growth. The Act sets the stage for a dynamic and interactive tech landscape where diverse stakeholders work together toward common goals, enriching the overall ecosystem.
Job Creation and Skill Development
Job creation and skill development are crucial facets of this tech-driven growth. As more tech and blockchain companies establish operations in the Philippines, the demand for skilled professionals will increase, fostering job creation within the sector. By nurturing partnerships with educational institutions, the CREATE MORE Act enables tech companies to contribute to building a capable workforce, adept at meeting the evolving demands of emerging technologies. Initiatives like specialized training programs, internships, and industry-academia collaborations can bridge the gap between educational curricula and industry requirements, ensuring graduates are job-ready from day one.
Moreover, the Act’s emphasis on R&D extends to human capital development, encouraging tech firms to invest in upskilling their employees. This focus on skill enhancement is not only vital for meeting the immediate demands of the tech sector but also for ensuring long-term adaptability and innovation. Programs aimed at continuous learning and professional development can help workers stay abreast of the latest technological trends and tools. The proliferation of such programs aligns with the broader goal of creating a robust and resilient tech ecosystem capable of sustaining long-term economic growth and maintaining a competitive edge in the global market.
Comparing with ASEAN Competitors
Combining Financial Incentives with Business-Friendly Measures
In comparison to other ASEAN countries, the Philippines has made an ambitious move with the CREATE MORE Act. While other Southeast Asian nations also offer tax incentives, this Act combines these benefits with measures that streamline business processes and simplify regulatory requirements. Such an approach makes the Philippines an appealing destination for tech companies seeking both financial incentives and a favorable business environment. By harmonizing both elements, the country not only attracts new businesses but also retains existing ones, reducing the risk of capital flight to more attractive markets.
Moreover, the Philippine government has committed to ongoing assessments and updates to the regulatory framework, ensuring it remains relevant and supportive of tech advancements. This adaptability is a significant advantage, allowing the Philippines to quickly pivot and incorporate new policies that address emerging challenges and opportunities. The Act’s balanced focus on financial and operational aspects provides a comprehensive support structure for tech companies, lower operational costs, and fostering a conducive environment for innovation. Such a dual focus is particularly advantageous in a rapidly evolving field like technology, where flexibility and foresight are key to sustained growth.
Establishing a Competitive Landscape
On November 11, 2024, Philippine President Ferdinand ‘Bongbong’ Marcos Jr. enacted the CREATE MORE Act, marking a decisive move to enhance the nation’s economic landscape. This new law builds upon the foundation laid by the previous Comprehensive Recovery and Tax Reform for Economic Enterprises Act, commonly known as the CREATE Act. The primary goal of the CREATE MORE Act is to create a more attractive investment climate in the Philippines, with a particular focus on attracting investments in the burgeoning field of emerging technologies.
The CREATE MORE Act represents a strategic effort by the Philippine government to stimulate economic growth and development. By fostering a more investment-friendly environment, the Philippines aims to position itself as a competitive player in the global market, especially in sectors involving innovative technology. This legislative move is expected to encourage both local and international investors to engage more actively in the country’s economy, thereby driving progress and potentially leading to significant advancements and opportunities in various industries, including tech and innovation.
