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Cablegate: Texas Instruments to Invest $1 Billion in Philippines

VZCZCXRO9056
OO RUEHCHI RUEHDT RUEHHM
DE RUEHML #1622 1380320
ZNR UUUUU ZZH
O 180320Z MAY 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6547
INFO RUEHZS/ASEAN COLLECTIVE IMMEDIATE

UNCLAS MANILA 001622

SIPDIS

STATE FOR EB/IFD/OIA

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: EINV ECON RP
SUBJECT: Texas Instruments to Invest $1 Billion in Philippines

SENSITIVE BUT UNCLASSIFIED

1. (SBU) Summary: Texas Instruments announced a $1 billion new
investment in the Philippines on May 3 to expand its production of
microchips by building new facilities at former Clark Airbase. The
announcement once again reaffirmed the economic potential of the
Philippines, while the specific conditions for the investment
illustrate some of the reasons why the country has not been able to
live up to that potential. End Summary.

A Spectacular Victory
---------------------

2. Announced in a Malacanang ceremony by President Arroyo, TI's
decision has Manila abuzz with optimism. Clark officials say they
had several new inquiries by potential investors within hours of the
announcement. Since TI spent months comparing the Philippines and
China before coming to its deision, many had assumed
pessimistically that thecompany would go to China. GRP officials,
many f whom had been to Texas and worked hard developing incentive
packages to get TI here, are ecstatic.

3. TI is also happy. With the worldwide marke for cellular phones
booming and TI providing th key communications chip for 95% of them
from it Baguio facility, it needed to expand. The GRP demonstrated
great flexibility and determination in eveloping an incentive
package. While the new ivestment will be located on Clark, it will
operae under Philippine Export Zone Authority (PEZA), gving it
different set of incentives (and the sae incentives as TI's current
investment). Incentives provided include a variety of tax
exemptions and benefits, including a temporary corporate income tax
holiday and a permanent cap on corporate income tax, duty-free
imports, and simplified customs procedures.

The Real Reason
---------------

3. The company says publicly that the key factor in its decision
was the quality of the workforce in the Philippines. Officials told
EconCouns that the real bottom line was a bit more subtle. Although
the qualified workforce the company finds in the Philippines is
attractive, the deciding factor was the trained, high quality people
already on the ground at TI's Baguio facility. Being able to build
on this already-established cadre will make the expansion much
easier and faster. "If we were not already here, we wouldn't come,"
one TI executive concluded.

4. TI celebrated its decision with a dinner at Clark, an hour from
Manila. The highest GRP official at the dinner was the
Administrator of the PEZA. Local officials were also in attendance.
Neither the economic elite, nor the press were invited.

Comment: Being In the Philippines, or Not
-----------------------------------------

5. Although the investment announcement, coming only ten days
before national elections, got the presidential treatment, it was
interesting to see how low-key TI's celebration was. In fact, it
seemed indicative not only of TI, but of most major foreign
investors in the Philippines. While they come here to take
advantage of an excellent location and a highly-qualified workforce,
they steer clear of contact with the Philippine government and
business circles. PEZA serves as a waterbreak against political
interference in their businesses and against corruption, providing
one-interface through which most GRP requirements can be dealt with
and an ombudsman to represent their interests before the government
whenever necessary.

KENNEY

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