IPP designed to make growth inclusive

INCENTIVES will be granted to new ventures that will help spread the benefits of the country’s fast economic growth to the countryside, according to the current administration’s draft first Investment Priorities Plan (IPP) shown to reporters yesterday.

The 2017-2019 IPP, read a draft message to be signed by President Rodrigo R. Duterte, aims to help make sure that benefits of the country’s blistering gross domestic product ( GDP) expansion — which averaged seven percent in 2016’s first nine months against a 6-7% government target for that year and which has convinced a number of multilateral agencies, credit raters and banks to upgrade their own growth projections for the country to be among Asia’s fastest next only to India — will be “accessible to all Filipinos, particularly those who remain poor.”

Under the Duterte administration’s economic blueprint, GDP growth is targeted to speed up to 7-8% annually from 2018 to 2022 from 6.5-7.5% this year, helping to trim poverty rate to 16% in 2022 from 2015’s actual 21.6%.

The President’s draft IPP message noted that while poverty rate has improved from 25.2% in 2012, “having more than 20% of the population remaining poor is not acceptable in a country producing the highest economic growth in Asia.”

A draft IPP foreword to be signed by Trade Secretary Ramon M. Lopez, who also heads the Board of Investments (BoI) as chairman, showed that the new list will depart from the 2014 IPP “with the inclusion of more MSME ( micro-, small- and medium-scale enterprises)oriented, innovation-driven, health- and environment- conscious activities that look at expanding job opportunities for more segments of the population and bringing more firms into the local and global value chains.”

Moreover, the foreword read, “there is a deliberate policy to shift investments to the countryside.”

The 2017 IPP will count as “preferred” investment areas:

• manufacturing including agri-processing; • agriculture, fishery and forestry; • strategic services; • infrastructure and logistics including local government unit public-private partnerships;

• healthcare services including drug

rehabilitation;

• mass housing; • inclusive business models;

• environment and climate change; • innovation drivers; • and energy. Also deemed priorities are:

• export businesses including services, and activities in support of exporters;

• activities based on special laws that

grant incentives like Republic Act (RA) No. 7942 or the Philippine Mining Act of 1995, RA 9513 or the Renewable Energy Act of 2008 and RA 9593 or the Tourism Act of 2009, among others; • and the Autonomous Region in Muslim Mindanao.

Moreover, the new IPP slashes the ceiling price for BoI-registered mass housing units to P2 million from P3 million previously. And — except for in- city low-cost housing for lease — only projects located outside Metro Manila may qualify for perks.

Trade Undersecretary and BoI Managing Head Ceferino S. Rodolfo told reporters yesterday that the new IPP will have a broader base for manufacturers that will qualify for incentives, noting how BoI wants “to capture the manufacturing activities that either died down or transferred to other counties.”

Both government planners and private sector economists have cited the need to improve the manufacturing and agriculture sectors, since these have the greatest ready potential to generate jobs for unskilled workers, unlike business process outsourcing (BPO) which is increasingly a key driver of the Philippine economy but which requires employees with university degrees.

The previous IPP outlined specific manufacturing subsectors that would receive perks such as aerospace parts, as well as vehicle parts and components, among others.

Manufacturing projects that will qualify for perks, Mr. Rodolfo said, will be spelled out in the IPP’s implementing rules and regulations. There, the BoI will specify criteria that manufacturers need to meet to qualify for incentives, such as requirements on employment generation, investment and technology transfer.

What is clear in the draft IPP, however, is that “[ e] xcept for modernization projects, only projects located outside Metro Manila may qualify for registration” with the BoI for incentives.

For agriculture, fishery and forestry, only projects for commercial production and those located outside Metro Manila — except, again, for modernization projects (and these only for support services and infrastructure) — will qualify for incentives.

“Strategic services” consist of integrated circuit design; creative and knowledge- based services like information technology business process management; aircraft maintenance, repair and overhaul; charging or refueling stations for alternative energy vehicles; industrial waste treatment facilities; state- of- the- art engineering, procurement and construction services; and telecommunications ( though only new players may qualify for perks).

“Innovation drivers” involve research and development that lead to commercialization of new technologies as well as business incubation.

BPOs will also have to move towards the provinces if they are to qualify for incentives.

“Contact centers and nonvoice business processing activities that will be located in Metro Manila may no longer be qualified for incentives availment with the Board of Investments under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, as amended, by year 2020,” the IPP read.

“Sabi ko sa kanila, baliktarin nila ang goals nila (I told the BPO industry to adjust its goals). Kung dati certain percentage ang Metro Manila in terms of jobs from that outside of Metro Manila, gusto ko baliktad. Mas malaki dapat ‘ yung percentage outside of Metro Manila than in Metro Manila kaya binigyan namin sila ng window na hanggang ( BPO operations outside Metro Manila should increase their percentage of total jobs generated by their industry, that is why we gave them a window for perks until) 2020,” he said.

A ranking officer of the Information Technology and Business Processing Association of the Philippines, who requested anonymity, said around 90% of BPO firms are registered with the Philippine Economic Zone Authority (PEZA), rather than BoI, since PEZA offers more incentives. — with a report from