PEZA to seek GOCC status to fend off diminished TRAIN 2 role

THE Philippine Economic Zone Authority (PEZA) is proposing amendments to the law that created the investment promotion agency to convert it into an independent government-owned and controlled corporation (GOCC).

PEZA Director- General Charito B. Plaza said the agency is in the process of preparing amendments to Republic Act 7916 or the Special Economic Zone Act of 1995.

The push to become a GOCC appears to be an attempt to head off a diminution of PEZA powers being contemplated in reforms to the investment incentive system under the proposed package 2 of the Tax Reform for Acceleration and Inclusion (TRAIN) law.

“The PEZA law is now 23 years old. There are so many weaknesses,” Ms. Plaza said in a news conference on Monday.

PEZA is hoping to become a GOCC and be transferred to the control of the Office of the President from the Department of Trade and Industry (DTI).

“As a GOCC, we will fully independent, and have all the authority provided by law. No need for another body,” Ms. Plaza added, noting that PEZA is acting like a de facto GOCC at the moment as it generates its own revenue.

She said TRAIN package 2 is hoping to centralize all incentive approvals through the creation of a Fiscal Incentives Review Board (FIRB) combining the functions of the various agencies currently authorized to offer incentives.

She said an FIRB will have the effect of “abolishing” the agency’s primary function and “diminishing” it to a registry of investments.

She added that the FIRB will create redundancies as the PEZA board, the interagency decisionmaking body that approves incentives, includes some of the same regulators that will make up the proposed FIRB.

“The more red tape, the more interference of various bodies and agencies, the more that our investors will be discouraged. The number one thing that they consider is the ease of doing business in the Philippines and PEZA is providing that,” Ms. Plaza said.

“We will propose in the PEZA law (amendments) to authorize the PEZA board to grant incentives instead of giving these to the proposed FIRB under the TRAIN 2,” she added.

In response to TRAIN 2, the agency will recommend a freeze to the proposed changes on incentives currently enjoyed by 4,202 locators.

“Incentives are proven to be good at attracting investors. They are happy. PEZA is gearing up to providing more and better packages that will attract more investors, so we will ask Congress to allow PEZA to continue with an enhanced role,” Ms. Plaza said.

In addition to its proposed amendments, PEZA is proposing an overhaul of incentive categories.

These will be divided into general incentives, to be given to all types of industries; customized incentives, for strategic industries in pioneer sectors; and incentives conforming to the Finance Department’s preference for perks that are performancebased and time-bound.

The generalization of incentives is expected to save PEZA the need to meet with the Department of Finance periodically to consult on incentive approvals.

Meanwhile, PEZA will also be recommending a provision authorizing the PEZA board to recommend to the President subsidies to grant to locators, especially those who will be bringing in projects worth at least $1 billion.

The PEZA said China’s Panhua Group, which is considering investing in a $3.5-billion integrated steel hub in the Philippines, is seeking support from the government in the form of subsidies.

Ms. Plaza said the government should consider power subsidies for Panhua.

The Panhua Group is expected to manufacture 10 types of steel products at volumes that will satisfy domestic demand.

Asked on the timeline the agency intends to submit its suggested amendments, Ms. Plaza said: “We will soon file in Congress. We hope to have this filed before the State of the Nation Address (SONA) or immediately after the SONA.”

“The Senate is 99% very supportive of PEZA. The ULAP (Union of Local Authorities of the Philippines) even assured PEZA that they will also lobby their respective congressmen to support PEZA,” she added. —