MANILA, Philippines — Foreign companies in the Philippines, particularly from the US and Korea, are putting on hold major expansion plans in the country due to concerns about the government’s second tax reform package.

Philippine Economic Zone Authority (PEZA) director general Charito Plaza said a number of ecozone locators, which earlier indicated plans to expand, have decided to put on hold their expansion, while some are seriously considering to take their investments elsewhere in the region.

This was confirmed to The STAR by leaders of foreign business groups which count some of the companies as members.

“Companies receiving incentives are deeply concerned about the proposed reforms and may not continue to expand if the reforms make the Philippines much less competitive than elsewhere,” American Chamber of Commerce of the Philippines senior advisor John Forbes said.

“These are efficiency-seeking firms which measure multiple factors in deciding where to locate. Currently, the regional favorite location is Vietnam, and until recently the Philippines,” Forbes said.

Korean companies are also on a “wait-and-see” mode, according to Korean Chamber of Commerce Philippines Inc. president Ho Ik Lee.

“I know many Korean companies are putting on hold their plan for new investment and expansion here,” Lee said.

Lee said Korean companies are in support of PEZA’s call for a status quo of the current incentives, noting that “Korean locators in PEZA and other investment promotion agencies are so much concerned about the TRAIN 2.”

“Philippines should consider more incentives to investors, not take it away,” he said.

Meanwhile, European and Canadian business leaders are not aware of any of their members putting expansion plans on hold at present due to the government’s second tax reform package.

However, European Chamber of Commerce of the Philippines president Guenter Taus admitted that TRAIN 2 is among the issues “that will derail a lot of growth potentials” for the Philippines.

The Department of Finance intends to cover both reduction of corporate income tax rates and rationalization of fiscal incentives under the second tax reform package, the latter proving to be more concerning to foreign investors.

Last year, Korean investments registered in PEZA and the Board of Investments plummeted by 92.61 percent to P873.15 million from P11.82 billion in 2016.

Combined investment pledges approved by both agencies from American investors, meanwhile, plunged 69.62 percent to P8.357 billion from P27.51 billion in 2016.