INVESTMENT PLEDGES approved by the Philippine Economic Zone Authority (PEZA) — the second-biggest contributor to such commitments after the Board of Investments (BoI) — slid nearly a quarter in the first four months of the year as uncertainty mainly from the proposed alteration of tax perks made businesses stay on the sidelines and even look elsewhere for expansion.
Data which the investment promotion agency sent to reporters late last week show new project registrations declined 24.54% to P29.49 billion in the January-April period from P39.09 billion recorded in last year’s first four months.
Number of projects dipped by 1.24% to 159 from 161.
The same data showed direct employment went up 7.36% to 1.48 million last quarter from 1.379 million a year ago, while exports edged up 0.59% to $12.946 billion as of March from $12.869 billion a year ago.
The four months to April saw committed information technology investments drop 3.85% year-on-year in number of projects to 50 from 52 and by 7.08% in value terms to P4.632 billion from P4.985 billion.
Last quarter saw IT exports from PEZA’s economic zones rise 6.75% to $3.071 billion from $2.876 billion a year ago, while direct employment increased by 10.68% to 741,905 people from 670,300 a year ago.
“Andiyan pa ’yung TRAIN 2 (There is still uncertainty from the second Tax Reform for Acceleration and Inclusion package now awaiting approval in the Senate). Ang dami na gustong magtransfer, siguro mga 20 companies (About 20 companies are looking to relocate here). Pero ang (But the) next question, what about TRAIN 2?” PEZA Director-General Charito B. Plaza told reporters last week in Pasay City, noting that “big” investors concerned were mostly manufacturers based in China who flew in to inquire with her office personally.
The second tax reform package — which has been approved in final reading at the House of Representatives but is now dead in the water in the Senate, which has only until Tuesday left to act on any remaining bills under the 17th Congress — seeks to cut the corporate income tax (CIT) rate gradually to 20% by 2029 from 30% currently, the highest in Southeast Asia, and restructure tax incentives by removing those deemed redundant which have been blamed for hundreds of billions of pesos in foregone revenues each year. Senators have favored the CIT cut but have proven cautious on the move to change tax incentives for fear of driving away investors and leaving more Filipinos jobless.
The Finance department had pushed these two reforms in tandem, since additional collections from the removal of redundant incentives are supposed to cancel out revenues to be foregone as CIT rate goes down.
The first tax reform package, TRAIN under Republic Act No. 10963 that went into effect in January last year, cut personal income tax rates in a bid to put more money into households’ pockets in order to further spur spending — which contributes nearly 70% to gross domestic product — but increased or added levies on a host of items and removed several value added tax exemptions.
At the same time, Ms. Plaza said that lower investment numbers can be expected before elections since businesses usually choose to stay at the sidelines till the political noise dies down.
But she noted that other locators seem to be “slowly” transferring their production to other sites.
Semiconductor manufacturers — whose sales abroad contribute more than half of total merchandise exports — said late last week that they hope to meet with the new batch of lawmakers who will be assuming their posts on July 22, and Ms. Plaza said she hopes the new 18th Congress will be “friendlier” on this count.
Philippine Statistics Authority data show investment commitments approved by PEZA dropping by 40.97% to P140.242 billion last year — accounting for 12.94% of P1.084-trillion total commitments that made it the second-biggest contributor of such flows after BoI’s P914.96 billion — from P237.570 billion in 2017. — with Janina C. Lim