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7 economic activities in draft 2014 IPP

The Board of Investments (BOI) yesterday unveiled a preliminary list of 7 preferred economic activities for 2014 Investment Priorities Plan (IPP), which could be eligible for government tax incentives and other policy interventions in the next three years in an effort to create more quality jobs and achieve inclusive growth for most Filipinos.

The draft list includes manufacturing, agro business and fishery, services, economic and low-cost housing (horizontal and vertical), energy (exploration and development of energy resources and power generation plants), public infrastructure and logistics, and Public-Private Partnership (PPP) projects.

Activities identified under manufacturing are motor vehicle assembly; engineered products like body panel stamping, engines; and chemicals such as fertilizers, pesticides, oleochemicals, and petrochemicals and derivatives,  copper wire rod, pulp and paper, and tool and die.

Under the agro-business and fishery sector, activities identified include extraction of natural ingredients, mechanized agri support services and agri support infrastructure.

The services list includes IC design, ship repair, testing facilities, and charging stations for e-vehicles.

Public infrastructure and logistics refer to airports and seaports to include RO-RO ports for cargo and passengers. This, however, may be limited only to newly purchased ships, aircraft and seaplanes.

There has been no changes on the Exports List. For the Mandatory List, which are special laws that grant incentives, the BOI has initially included 7 mandated laws — industrial tree plantation, mining (limited to capital equipment incentives), oil refining, storage and distribution of petroleum products; tourism, rehabilitation self development and self-reliance of persons with disability, and  publication and printing of books.

After this first public hearing, a series of nationwide consultations on the 2014 IPP is being scheduled by the BOI this month. Consultations will also be held in Cebu on May 12 and in Davao, on May 13.

Trade and Industry Undersecretary Adrian S. Cristobal Jr. said the 2014 IPP is expected to be submitted to Malacanang by June this year. Under the law, the IPP should have come out end of March each year.

Trade and Industry Assistant Secretary Rafaelita Aldaba in presenting the draft 2014 IPP stressed the selection of economic activities have to adhere to four criteria: potential to create employment; Potential to move up the value chain; potential to create spillover effects — horizontal, vertical spillover effects; backward and foreword linkages and output multipliers; and potential to create a competitive market.

As such, Aldaba also presented sample analysis of five activities — electronics, cement, agribusiness/fishery, tool and die, and IT-BPM — based on the four criteria.

Addressing the contentious issue of fiscal incentives,  Cristobal has assured that government has  recognized incentives as a critical component in the country’s industrial policy.

“Incentives is recognized as critical component of industrial policy but there may be different ideas on how to enhance incentives regime, the very premise is that incentives has a role to play that is not under dispute,” said Cristobal.

Likewise, Aldaba said during her presentation on the significance of incentives and even quoted studies justifying the grant of incentives to investors by Morriset and Pirnia in 2002.

“The market environment now is very much different in the past and we are facing within this context and studies showed incentives needed have become a more significant factors in location decision of investors,” Aldaba said.

Aldaba said the grant of incentives is also provided under the Omnibus Code of Investments or Executive Order 226, which also provides that fiscal incentive system shall be devised to compensate for market imperfection.

During the public hearing, the DTI also presented a comparison of incentives granted by neighboring countries. The Philippines grants 30 percent corporate income tax (CIT) with income tax holiday of up to 8 years.

Comparatively, China grants 2-3 years of income tax holidays and 25 percent CIT; Thailand with 20 percent CIT and 3-8-year ITH; Vietnam is with 22 percent CIT and 1-8-year ITH; Indonesia with  25 percent CIT and  3-8-year ITH;  Malaysia with  25 percent CIT and 5-10-year ITH; and,  Singapore with 17 percent and 15 year ITH. (Bernie Magkilat)