Foreign investment exodus seen with TRAIN enforcement

CLARK FREEPORT — Investors and locators inside the freeports of Clark and Subic have expressed apprehension that the full enforcement of the Tax Reform for Acceleration and Inclusion (TRAIN) will drive away existing and potential investors in the country.

During a media forum at Midori Hotel last Monday, the locators stated the scrapping of benefits inside freeports and economic zones under the TRAI N l aw w i l l scar e away foreign director investments (FDIs).

Francisco “Frankie” Villanueva, president of the Clark Investors and Locators Association (CILA), said that FDIs play an important role in development strategies in developing countries like the Philippines.

Economic zones have been recognized as effective platforms for attracting FDIs, according to VI l l anueva.

Free zones have proliferated over the past few years, from less than 80 worldwide in 1975 to about 3,500 by 2006 operating in about 133 countries, the CILA official said.

“We are talking here of 1.4 million jobs in PEZA-registered companies,” Villanueva said.

Economic zones in the Philippines have made substantial contribution to the economy accounting for 84 percent of FDIs by 2005, 87percent of manufactured export by 2010, 1.4 million jobs in PEZA-registered companies by 2016 and more than 270,000 jobs in Clark Development Corporation, Subic Bay Metropolitan Authority and Freeport Area of Bataan.

While the Philippines has been able to attract foreign investments in its economic zones, there is still a need to address the country’s comparative disadvantages in attracting FDIs to increase its share in the ASEAN region, the locators’ group stated.

The Philippine Economic Zone Authority (PEZA) earlier revealed that a lot of pledged FDIs are planning to pull out because the guidelines creating new economic zones in the country were held in abeyance.

For his part, CILA Chairman Irineo “Bong” Alvaro said that taxes including the 12 percent value added tax (VAT) which the local suppliers to economic zone locators will affect the competitiveness of firms engaged in importations.

Alvaro said that CILA supports the TRAIN tax reform program to allow the government to fund its “Build Build Build” program and other infrastructure development projects.