After a presentation before the Cabinet, the President is expected to approve the list of preferred sectors that are eligible for government incentive packages before the end of this month.

Consistent with the Medium Term Philippine Development Program (MTPDP), the Board of Investments and the Philippine Economic Zone Authority are targeting a 10 percent growth in investments this year from their last year’s combined investments of P231 billion.

The three new inclusions in the 2006 IPP are the RED (retention, expansion, diversification) and relocation program, cement and the granting of full incentives to all export enterprises as long they are listed under the Medium Term Philippine Development Program.

"We practically carry the 2005 IPP plus the three new inclusions," said Trade and Industry Undersecretary Elmer C. Hernandez, also Board of Investments managing head, said.

"We put in additional sectors because of the need of the times to attract investments," Hernandez said.

According to Hernandez the RED program aims to retain existing companies and encourage them to expand and diversify here rather than in other countries.

At present, the RED program is aimed at retaining existing enterprises in the country and not losing them out to other countries like China but it has now expanded to include relocation or projects from outside the country country and relocating here.

The RED program was conceptualized last year by the BoI and supported by the Multilateral Investment Guarantee Agreement of the World Bank.

The second new inclusion is the granting of full incentives to export sectors listed under the MTPDP and the Philippine Exports Development Plan (PEDP) to encourage the use of indigenous raw materials and intermediate inputs for the priority sectors.

"This is also to give full support to all export sectors," Hernandez said.

Both the MTPDP and PEDP are targetting a $ 50 billion exports level by this year. Last year’s exports reached over $ 44 billion.

Under the present policy, the BoI only grants incentives to export-oriented enterprises that are listed under the IPP. Other export sectors may be considered for registration with the BoI but with limited incentives only or they do not enjoy income tax holiday incentives.

With the new BoI policy, all export sectors are eligible for full tax perks such as ITH of as long as six years, one percent duty on imported capital equipment, employment of foreign nationals, among others.

The 11 priority sectors listed under the existing IPP include agriculture, healthcare and wellness products and services, information and communications technology, electronics, motor vehicle products, energy, infrastructure, tourism, shipbuilding/shipping, jewelry, and fashion garments.

The third inclusion is the restoration of the cement sector in the proposed IPP to pave the way for new cement projects to be put up here and prevent the expected shortfall in local cement supply by 2010.

The restoration of incentives under the 2006 IPP was based on the assumed 12 percent growth in the construction industry for the next five years under the MTPDP.

According to Hernandez, data from the Cement Manufacturers Association of the Philippines (CeMAP) showed that total industry’s kiln capacity is placed at 462 million bags a year. Local cement demand in 2005 was at 265 million bags.

Based on the 12 percent annual growth of the construction industry, demand is expected to reach 468 million bags by 2010 as against total industry capacity of 462 million bags.

This means that while there is a surplus in local cement supply until 2009, shortage in supply is expected by 2010. Cement consumption is based on the growth of the construction industry.

The BoI has also taken into consideration the long gestation period of between three to three and a half years to construct a cement plant.

It could be recalled that since the delisting of cement production in the IPP three years ago, no new cement plant was put up. This time, however, there are new parties that have expressed interest to put up cement plants.

What happened then was pure acquisition of existing plants by global players such as CEMEX, Lafarge and Holcim. What remains now are two small cement plants, the Northern Cement and Pacific Cement in Surigao.