PEZA told not to blame TRAIN 2 for weak investment

THE Department of Trade and Industry (DTI) said the Philippine Economic Zone Authority (PEZA) needs to stop blaming the second phase of the Tax Reform for Acceleration and Inclusion law (TRAIN 2) for the decline in its investment pledges.
Trade Secretary Ramon M. Lopez said other investment promotion agencies (IPAs) are posting annual increases in their project registrations, adding he does not know why PEZA’s totals have registered a downward trend.
“The question is, why are PEZA’s totals lower while those of BoI [Board of Investment] are higher. And other IPAs, even CEZA [Cagayan Economic Zone Authority] are showing increases,” he told reporters last week in Pasay City.
Ahead of the official data release, Mr. Lopez said the BoI’s six months to June investment pledges rose nearly 28% year-on-year.
PEZA’s new projects over the same period dropped 55.86% year-on-year to P53.067 billion. The number of projects also fell to 258 from 300 a year earlier with all industry-sector segments posting declines.
PEZA has blamed the drop on foreign investor apprehension over TRAIN 2, which hopes to rationalize investment incentives, including the replacement of the 5% gross income earned (GIE) tax incentive, in lieu of all local taxes, with a phased reduction of the corporate income tax rate.
“These foreign investors go to countries where incentives are time-bound,” Mr. Lopez said, adding that the only uncertainty he sees in TRAIN 2 is the transition period for current investors to adapt to the new regime.
“That’s the only uncertainty for PEZA locators. That alone. There should be no problem. So it is wrong to blame TRAIN 2 for the uncertainty. There must be something else that wasn’t there before,” Mr. Lopez added, citing trade tensions because PEZA locators are export-oriented.
As such, Mr. Lopez said he will take the lead in presenting the country’s investment climate to foreign businessmen.
“More clarity is needed for investors. I also don’t know what’s being presented. We have to see what the presentations are saying. That’s why I’d like to get more involved in the way things are being presented,” Mr. Lopez said.
“I’ll be talking also to potential PEZA investors. Whatever Plaza is saying about uncertainty, that’s her statement. We’d like to validate that,” he added, referring to PEZA Director-General Charito B. Plaza.
Regarding PEZA’s plan to become a government-owned and controlled corporation (GOCC) and leave the DTI for the Office of the President, Mr. Lopez said: “Nope. That cannot happen. They’re an investment promotion agency and part of their mission is industrial development.”
PEZA said it is seeking GOCC status as part of a proposal to amend the 23-year-old Republic Act 7916 or the Special Economic Zone Act of 1995.
PEZA said that as a GOCC, it will be “fully independent,” amid plans under TRAIN 2 to centralize investment promotion functions under a Fiscal Incentives Review Board (FIRB). — Janina C. Lim