The inter-agency meeting kicked-off a series of consultations and public hearings on the proposed 2006 IPP, a list of preferred projects that are eligible for a package of fiscal and non-fiscal incentives and priority promotions of the government.

Based on the proposed draft, the list has maintained the 11 preferred activities: agribusiness, healthcare and wellness products and services, information and communications technology, electronics, motor vehicle products, energy, infrastructure, tourism, shipbuilding/shipping, fashion jewelry and garments.

An industry cluster approach shall be applied to all the 11 preferred areas to encourage industry integration and build up local capacities particularly in developing raw materials sourcing.

Industry cluster shall cover horizontal and vertical linkages. Horizontal and vertical-backward linkages are limited to first-tier activities only. Raw materials for vertical-forward linkages under agribusiness and mining should be wholly obtained. The industry cluster approach is also applicable to modernization and or research and development projects.

The draft also maintained the listing of eight special laws under mandatory listings. These special laws grant incentives to specific sectors such as industrial tree plantation; iron and steel; exploration, mining, quarrying, and processing of minerals; publication or printing of books or textbooks; refining, storage, marketing and distribution of petroleum products; ecological solid waste management; clean water; rehabilitation, self-development and self-reliance of disabled persons; and activities covered under bilateral agreements.

2006 IPP to limit perks to deserving projects only

The proposed draft still continues to grant perks to export activities and activities considered in support of exporters but it puts a qualification to such incentives’ availment.

To qualify for incentives, industrial goods for export should have undergone manufacturing and mineral products for exports should have undergone processing. Simple processing shall not be entitled to incentives.

Exports of mineral products without processing like mineral production without processing such as quarrying and mining only, mining of direct shipping ore and minor processing shall not be entitled to income tax holidays. But activities in support to exporters are entitled to incentives as part of the IPP’s objective to encourage industry clustering.

These activities include services comprising a portion of the manufacturing process; sub-assembly of parts/components of the final export product; fabrication of parts/components of final products wherein the raw materials are provided by the direct exporter; product testing and inspection; and repair and maintenance.

To prevent firms from relocating to other countries, the draft IPP put more emphases on its RED (retention, expansion and diversification) program.

Retention projects shall be granted non-fiscal incentives only while expansion projects, which must be projects of active BoIregistered enterprise, may be eligible for both fiscal and non-fiscal incentives.

Diversification projects, which must be projects of existing BoI-registered enterprise or of previously BoI-registered enterprises whose registration has already been cancelled, may also be eligible for both fiscal and non-fiscal incentives.

Non-fiscal incentives include the simplification of customs procedures, unrestricted use of consigned equipment, employment of foreign nationals, and access to bonded manufacturing/trading warehouse system.

On the other hand, the fiscal incentives include as much as eight year in income tax holiday, tax credits on imported raw materials, one percent duty on imported capital equipment and spare parts, exemption from contractor’s tax, and additional tax deduction for labor expense.

This year’s proposed IPP also aims to promote the growth of micro, small and medium enterprises, accelerate the promotion of foreign and local investments, modernize the infrastructure system to ensure efficient movement of goods and people, support the development and utilization of new technologies to increase productivity, ensure effective and efficient use of scarce government resources and encourage investors in other countries to relocate into the country.(BCM)