THE Philippine Economic Zone Authority (PEZA) said investment pledges, as measured by projects registered for incentives, fell nearly 41% in 2018, with the agency blaming the uncertainty stemming from the upcoming elections and the tax reform bill that proposes to overhaul the incentives system.
“The drop is for new investments caused by the uncertainties of change of policies, incentives,” PEZA Director-General Charito B. Plaza said in a mobile message last week.
The investment promotion agency said projects registered for investment were worth P140.24 billion, down 40.97% from a year earlier.
The registrations cover 529 projects in 2018 as compared to 554 in 2017.
The second round of tax reform legislation, known as Tax Reform for Attracting Better and High Quality Opportunities (TRABAHO) Bill, hopes to rationalize the investment incentives regime by making them more time-bound and performance-based.
“New investments dropped also because of the forthcoming election where the next Congress might change again the policies!” she added.
New investment in information technology, among the key drivers for PEZA revenue, rose 32.20% in 2018 to P20.57 billion.
The number of registered projects for IT rose to 188 in 2018 from 187 a year earlier.
“IT increased also because they’re (trying to beat) the new laws and changing of policies. Also, IT can easily pull out and transfer if they’re unhappy of the new policies,” Ms. Plaza added.
She noted, however, that locators’ export income and jobs contribution increased as businesses “are maximizing their production before TRABAHO bill (comes into force).”
In the 10 months to October, revenue from exporter-locators grew 6.58% to $45.18 billion.
Employment during the period expanded 7.33% to 1.5 million.
The TRABAHO Bill’s most contentious change is to remove the option to be taxed at the 5% gross income earned (GIE) rate, as offered by PEZA.
The agency backs keeping the GIE as preserving the one-stop shop feature of PEZA particularly in dealing with local government units who receive 2% of the GIE payment. — Janina C. Lim

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