A group of toy manufacturers based in Hong Kong plans to explore investment opportunities in the Philippines after learning the country’s growth potential despite the pandemic.
Toys Manufacturers’ Association of Hong Kong president Samson Ko said the rising overhead and production costs have been a growing concern for the group that prompted many toymakers to seriously consider the Philippines as a possible site to relocate their hub.
Ko said the group found the latest Philippine legislative initiatives encouraging and believed that these measures could help their businesses achieve their potential in the Philippines.
Board of Investments managing head and Trade Undersecretary Ceferino Rodolfo highlighted to TMHK members the government’s commitment to making business in the Philippines competitive.
“We have put in place incentives that create an investor-friendly landscape, allowing investors to set up their business at a lower cost compared to other neighboring Asian countries. Foreign companies can also benefit from corporate income tax exemptions where new and better rates are embodied in the Corporate Recovery and Tax Incentives for Enterprises Act that was recently ratified by Congress,” he said.
The CREATE Act lowers the Philippines’ corporate income tax rate from 30 percent to 25 percent and modernizes the country’s investment incentives, making them more competitive and transparent, time-bound, targeted, and performance-based. It also provides businesses with economic stimulus measures that will help them recover from the coronavirus pandemic.
Rodolfo said the Philippines can offer wider market access to Hong Kong through its free trade agreements and Global System of Preferences.
Philippine exports enjoy preferential rates with partner countries such as Japan, India, Australia, New Zealand and European Free Trade Agreement members like Switzerland, Norway, Liechtenstein and Iceland. Philippine exports also enjoy preferential rates to major markets such as European Union and the United States through the GSP.
“Aside from market access, the Philippines can also provide for a broader production network for the manufacture of toys given the existing manufacturers in the Philippines as well as the sources of raw materials that the FTAs can provide. Existing toy manufacturers include Academy Plastic Model Toy Co. Inc., Dunlop International (Philippines), Bandai Namco Philippines, Tanika Philippines, and Hansa Toy International Inc. The downstream industry for toy manufacturing is also established with the presence of suppliers such as plastics, rubber, cotton, textiles and others,” Rodolfo said.
He said there are plenty of suitable locations primed for a wide scale production of toys. The country has 74 operating and five newly-proclaimed manufacturing economic zones, including 20 industrial parks with available areas of 20 hectares and above in Central Luzon and CALABARZON and five other suitable locations/industrial lands in Bulacan, Batangas, Cavite and Ilocos Norte.
There are 125 firms registered with the BOI which are engaged in the manufacturing of toys, with combined investments amounting to P450 million.
The biggest contribution came from Mattel Philippines Inc. with investments of P39 million. The most recent investment was in 2018 from Malaysian company Carissa Balsam Sdn. Bhd. with project cost of P2.65 million.
Philippine exports of toys, games and sports requisites to the world amounted to $176.1 million in 2019. These were mostly traditional toys and games, video consoles and similar units but did not include video game applications, in-game transactions for video games such as digital cosmetic purchases, or power-ups and lives that can be used in-game.
Philippine toy imports grew at an average rate of 17 percent from 2015 to 2019. The country imported $487.3 million in 2019 with the biggest share coming from China at $226.2 million or 46.4 percent of total toy imports, followed by Hong Kong with $52.7 million or 10.8 percent.
“Experts have noted that the impact of the COVID-19 pandemic on toys and games have globally reinforced the trends already shaping the industry sales pre-COVID-19 mainly through digital transformation. A COVID-19-generated shift towards home entertainment and online education has led to a further surge in video games, including e-sports, and digital education tools. While some traditional toy categories have seen a spike in 2020, the long-term trend is reflected in the strong repositioning of toy industry players as entertainment providers on multiple platforms,” Rodolfo said.
TMHK is a group 250 toy manufacturers with factories both in Hong Kong and China. The group has significant contribution to the development of the Hong Kong toy industry and brand development of Hong Kong toy manufacturers.