PEZA investment pledges plunge by half
Committed investments registered by the Philippine Economic Zone Authority (PEZA) plunged 55.86 percent in the first half of the year as investors held off their expansion and new projects in the country due to the dark cloud of uncertainty brought about by the proposed second package of the government’s comprehensive tax reform program (CTRP) which seeks to remove incentives and emasculate the export-generating agency.
Data from PEZA showed that investments in the January-June period this year went down by more than half from P120.220 billion from P53.067 billion in the same period in 2017. The number of project registration also decreased by 14 percent to 258 from 300 in the same first semester of 2017.
“Yes, because of uncertainties brought about by the second package or TRAIN 2,” said PEZA Director-General Charito B. Plaza.
Although the objectives are meaningful, Plaza said “The bill sends different interpretations and investors are also worried because their interpretation is that PEZA will be demolished because the present authorities will remove the incentives and PEZA will be replaced by the Fiscal Incentives Regulatory Board (FIRB).”
The proposed second tax package seeks to remove the 5 percent gross income earned to PEZA locators, which can be enjoyed on a perpetual basis; rationalize the income tax holiday; and render PEZA Board inutile with the creation of an FIRB that will decide on incentives to be granted to locators.
Already, some PEZA locators with plans to expand their operations in the country have already raised the possibility of “pulling out” instead. “Some have even been given signals or authority by their principal offices to start considering of looking at possible countries to transfer their operations if the current bill is passed into law,” said Plaza.
To arrest this plummeting investments trend, Plaza appealed to the government particularly the Department of Finance, the Lower House and Senate to address this apprehension immediately because the impression really is that “there is no stability of laws and policies in the Philippines.”
“They (investors) are happy with the PEZA but why are they changing the rules of the game. The performance of PEZA has proven that our incentives are working,” she said.
Instead of removing the PEZA incentives and emasculate the agency’s tax-granting powers, Plaza said the government should even enhance the agency’s incentives program rather than remove them stressing, “We believe we can never be developed, progressive and industrialized if we do not bring investments,” she said.
According to Plaza, just one word from any of the PEZA locators to the world saying that they are frustrated and dissatisfied by the Philippines and the incentives are no longer competitive will create a big negative implication to foreign investors worldwide. Worse, the trend nowadays among governments is to create economic zones where they provide juicy incentives packages to attract investors.
PEZA will be sending their position paper to the Senators and Congress. Various industry associations are also sending their manifestations of support to PEZA expressing their satisfaction of the PEZA incentives and the agency’s performance.
Plaza further cited that the number one reason for their investors in choosing the Philippines is the incentive packages that are being granted to them. Qualified labor pool is only second.
The incentive package is key to attracting foreign investors and would make up for all the disadvantages of the country such as lack of infrastructure and high cost of power.
Despite the huge decline in investments in the first half of the year, PEZA still managed to increase its direct employment to 1,394,873 or 3.5 percent higher than 1,347,662 in the same period last year. But direct and indirect employment of PEZA could reach 7,089,160 given the 5 times multiplier effect of every job created, especially in the electronics sector.
Exports also went up by 5.27 percent in the January-May period this year to $21.809 billion from $20.716 billion in the same period last year. PEZA accounts for 80 percent of the country’s services exports and over 64 percent of merchandize.