Planned ecozone projects decline 56% in 6 months

MANILA, Philippines — Investment pledges for projects registered with the Philippine Economic Zone Authority (PEZA) declined by 56 percent in the first semester from a year ago, amid continued concerns on the proposed second package of the government’s tax reform program which would rationalize incentives given to investors.

In a briefing yesterday, Elmer San Pascual, PEZA group manager for promotions and public relations group, said the agency approved P53.07 billion worth of investments from the January to June, lower than the P120.22 billion in the same period last year.

The number of projects also slid 14 percent to 258 as of end-June from 300 in the previous year.

Investment pledges for all industry sectors also registered year-on-year declines during the first half.

In particular, investments committed for the manufacturing sector dipped by more than nine percent to P19.55 billion in the first semester from P21.54 billion in the same period last year.

Investment pledges for the information technology sector also dropped by 13.66 percent to P6.98 billion in the January to June period from P8.09 billion a year ago.

ln terms of ecozone development, investment commitments fell 65.15 percent to P26.30 billion as of end-June from the previous year’s P75.46 billion.

As for other industry sectors, investment pledges plunged 98.44 percent to P234.54 million in the first semester from the P15.12 billion last year.

PEZA director general Charito Plaza attributed the decline in approved investments to the concerns raised by both existing and potential investors on the second package of the government’s Tax Reform for Acceleration and Inclusion (TRAIN).

“Decline in investments is because of uncertainties brought by TRAIN 2,” she said.

TRAIN’s second package seeks to reduce the corporate income tax rates and rationalize the fiscal incentives system.

San Pascual said many companies are now in panic mode particularly those who deferred their investments last year because of TRAIN 1.

TRAIN 1, which took effect earlier this year, reduces personal income tax rates and imposes higher taxes on certain products like petroleum and automobiles to offset foregone revenue.

“They were hoping everything will stabilize in 2018 only to be welcomed by TRAIN 2 package and that has created a lot of uncertainty. In fact, the expansions of our companies are the ones directly affected,” San Pascual said.

He said while the companies have expressed interest to expand operations in the country, they want assurance there would be no changes in incentives enjoyed by investors.

Plaza said the main reason the Philippines is an attractive location for investors is because they can avail of incentives such as income tax holidays from the government.

“What attracted investors to Philippines is incentives so, let us continue with incentives. Enhance it. Do not remove it,” she said.

Asked if the 10 percent growth target for investments approved by the PEZA could still be achieved this year, she said it would depend on the fate of TRAIN 2.

“It will depend now on how fast we lobby and if Congress will understand us and I am very optimistic because the ULAP, the Union of Local Authorities (of the Philippines), these are the governors and mayors, are also expressing to PEZA that they are going to help us by lobbying to their respective congressmen and to the senators,” she said.

Earlier, ULAP passed a resolution urging President Duterte and Congress to exempt the PEZA from TRAIN 2 to preserve the authority of the agency to administer incentives and sustain the momentum and effectiveness of the investments promotion campaign.