By Bernie Cahiles-Magkilat
The Board of Investments (BOI) is looking at a conservative 10 percent growth in the registration of new investment pledges this year to P680 billion from P617 billion in 2017 to be driven by the continued growth in the manufacturing sector and planned new incentives for foreign direct investments.
Trade and Industry Undersecretary Ceferino S. Rodolfo said the manufacturing sector is expected to grow higher because of the continued strong GDP growth where manufacturing contributed 10.9 percent in the third quarter last year.
“As the GDP grows, this would attract more local and foreign investors in the manufacturing sector because of the strong growth in domestic consumption and those infrastructure and construction projects both in the public and private sector,” Rodolfo said.
In addition, he said the BOI is looking at new incentives under Package 2 of the TRAIN Law. The second package of the TRAIN will touch on the reduction of corporate income tax to 25 percent from 30 percent.
At the same time, the government will rationalize the grant of incentives to investors and businesses. This means putting more incentives to where government help is more needed, and implementing a cap on perpetual incentives like the gross income earned granted to enterprises registered with the Philippine Economic Zone Authority.
Rodolfo further said that once the feasibility and technical studies being undertaken by the steel making, petrochemical and ship building indiustries are done will pave the way for the inflow of prospective projects.
These studies are being undertaken by projects signed during President Duterte’s visit to the other countries such as China, Russia and Japan last year.
Rodolfo, however, said that the projects identified during the President’s state visits will not all be registered with the BOI, but may also go to other investment generating agencies of the government as well.
“We are confident,” said Rodolfo.
Trade and Industry Secretary Ramon M. Lopez also projected investments climbing at least 10 percent in 2018 from P617 billion in 2017 driven by huge infrastructure projects and further liberalization of the Foreign Investments Negative List (FINL) to include the further opening up of the domestic retail trade
Lopez said that 50 percent of the projected P678-billion investments inflow next year are expected to come from infrastructure and public utilities sector.
For instance, there are big ticket power and transportation projects that are expected to be registered next year. The government’s huge “Build Build Build” program is a catalyst for big projects that may register with the Board of Investments next year.
Other major contributors would be in economic activities that were restricted under the FINL that may be opened to foreign investors.
He especially cited among these areas the further liberalization of the domestic retail trade sector. This is expected to lure more foreign retailers to enter the consumer driven-economy of the Philippines.
On Tuesday, Lopez reported that investment pledges registered with the BOI for 2017 hit a record R617 billion, the highest in the 50-year history of this government agency.
Lopez, who is also BOI chairman, said the unprecedented P616.7 billion in investment pledges, which represent the combined cost of projects approved, reflected a 39.5 percent increase from the P442 billion approved committed projects in 2016. The 2017 figure was also 23.5 percent more than the P500 billion investment goal of the BOI for the year.
The BOI’s previous highest approved investment level was in 1997 at P570.1 billion mainly due to investments from the privatization and deregulation of public utilities (water supply and telecommunications). The Aquino administration reached its highest investment approvals of P466 billion in 2013.
According to Lopez, the record-breaking 2017 figure comprised 426 projects, up 13 percent from last year’s 378 projects. All told, these projects will generate around 76,065 jobs upon full operations, up 12.5 percent from last year’s 67,634 jobs.
BOI Managing Head Ceferino Rodolfo said the surge in investments for the year are mainly due to the designation of focused strategic sectors under the 2017 Investments Priorities Plan (IPP), infrastructure, and power projects; and the strong growth in domestic demand.
With manufacturing as listed in the 2017 IPP, investments were noted in key manufacturing industries such as cement, sugar, and petrochem.
Investments in the manufacturing sector increased almost three-fold or by 256 percent to P96 billion in 2017 from only P27 billion in 2015. The figure is also 95 percent higher than the P49.259 billion reported in 2016.
The manufacturing sector is the third top performing sector for the year. Power and energy projects remain as the top performing sectors with P268.168 billion in approved investments, followed by infrastructure and PPP projects with P127.658 billion. Real estate and mass housing projects ranked as fourth top performing industry with P86 billion while transportation and logistics came in fifth with P15.909 billion.
“The increase in infrastructure projects this year supports the BOI’s push for the growth in economic activities outside Metro Manila and the ‘Build, Build, Build’ or the massive infrastructure program of the administration,” Rodolfo said.
“While BOI incentives are directed for strategic domestic projects, a number of foreign investment projects also registered with BOI.”
Japan is the number one source of foreign investment projects for the year with P8.864 billion, mainly in green ship recycling, chemicals, glass manufacturing, among others. This was followed by Singapore with P3.497 billion, Australia with P1.996 billion, British Virgin Islands with P1.084 billion — all in renewable energy, and The Netherlands with P1.074 billion.