MANILA, JUNE 26, 2007
(STAR) By Mary Ann Ll. Reyes - Telecommunications companies can finally heave a sigh of relief after President Arroyo emphasized that there are no plans to levy new taxes on the telecommunications sector, one of the country’s main engines of growth.

The threat of new tax measures has been a sword of Damocles hanging over the heads of the country’s top telecom companies which believe that they are already overtaxed.

During an exclusive roundtable forum with The STAR’s Business staff in Malacañang, the President said new tax measures are not the main key now to the country’s development, but rather technology which she emphasized remains a growth sector.

She explained that the earlier proposal to impose taxes on text messaging was made before the new value-added tax law. “That was before we got our value-added taxes,” she said.

In the Philippines, the entire telecommunications sector accounts for about six percent of government’s total tax receipts.

The sector also contributes about four percent of total gross domestic product (GDP). In 2005, mobile operators contributed two percent of GDP, and with the industry’s spill-over effects, the contribution rises to 7.5 percent of GDP.

Telecoms accounted for six percent of total fixed asset investments in the entire country between 1999 and 2003; employs 20,000 people directly and another 40,000 to 60,000 in supporting industries; and paid wages and salaries for direct employment amounting to more than $300 million last year.

“We plan to fill the gap (on revenues) by accelerating privatization of government’s stake in San Miguel Corp., Philippine National Oil Company-Energy Development Corp., and the Manila Electric Co., as well as certain power assets which we intend to privatize this year or next year,” Mrs. Arroyo said.

The President also revealed that government is still pushing through with the planned privatization of government stations RPN 9 and IBC 13. “I am just awaiting a memo from Dodie Limcaoco. These stations are under him,” she said.

The President said that as part of the government’s thrust to push technology, Malacañang is pushing for the creation of the Department of Information and Communications Technology. “We have been pushing for this since 2001 and we continue to support it,” the President stressed.

Mrs. Arroyo explained that after taming the deficit, creating six million jobs, and strengthening the peso, the goal now is to invest in human and physical capital.

“The country has reached a stage of economic maturity. The goal now is to translate this into benefits and we want the private sector to do it, and for the people to support these efforts in the next three years,” she pointed out.

She cited the phenomenal growth of the call center and business process outsourcing (BPO) sectors in the country and said that education and technology play a key role in further boosting these two sectors. “Our competitive advantage is definitely in services,” she said.

The high quality of telecoms has also been instrumental in attracting direct foreign investment to the Philippines. Global investors are increasingly viewing the Philippines as the preferred location for their business process outsourcing and offshoring (BPO&O) operations, such as call centers, help desks, and IT maintenance and support. BPO&O currently generates around $1.5 billion in revenue and employs nearly 150,000 people directly.

Industry studies show that the BPO&O sector has the potential to generate an additional 500,000 direct jobs and $10 billion in revenues per year (equivalent to OFW remittances today). Industry observers estimate this will require $2.5 to $3 billion in additional investment over the next four to five years.

Chief News Editor: Sol Jose Vanzi

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