By Bernie Cahiles-Magkilat
Committed export-oriented investments substantially declined by 40.97 percent in 2018 largely due to the uncertainty created in the minds of foreign investors on the country’s tax incentives policies, the Philippine Economic Zone Authority (PEZA) said.
Data showed that PEZA, which administers the tax incentives to export-oriented investors in the country’s various economic zones, was able to approve a total of P140.242 billion in investment pledges in 2018 or 40.97 percent lower than the P237.57 billion in 2017.
These forthcoming investments represent the combined cost of 529 manufacturing-related projects registered by PEZA that year. The number of projects was also 4.51 percent lower than the 554 projects registered by the agency in 2017.
Notably, the IT sector, which early in the year posted huge decline, was able to recover ending 2018 with an impressive 32.20 percent increase to P20.565 billion from only P15.556 billion in 2017. There were 187 IT projects approved from 188 in the previous year.
The sector also employs 733,479 people, 8.05 percent higher than the 678,799 jobs in 2017.
Exports from this sector reached $9.815 billion as of the third quarter of 2018 or 9.33 percent higher than the $9.977 billion in the same period in 2017.
Despite the lower investments and fewer number of approved projects in 2018, PEZA’s overall employment improved by 7.33 to 1,499,577 jobs from 1,397,040 in 2017.
PEZA’s overall exports also improved by 6.58 percent as of the third quarter of 2018 to $45.179 billion from $42.387 billion in the same period in 2017. PEZA accounts for as much as 60 percent of the country’s total exports.
PEZA Director-General Charito B. Plaza explained that the uncertainties were brought about by the planned overhaul in the incentives scheme for its locators under the proposed TRABAHO Bill, the second tax reform package of the Duterte administration.
Plaza said the uncertainties were removed by the Senate’s non-passage of the proposed bill.
But Plaza also said that the drop in new investments can also be traced to the forthcoming election where prospective investors fear that the next Congress might again attempt to change PEZA’s incentive scheme.
Anxiety over what the TRABAHO Bill might bring, Plaza said that PEZA locators were maximizing production resulting in higher employment and exports.
The same was true with the IT sector and they played catching up before the new laws and new policies maybe crafted.
Plaza said that despite the move to overhaul their incentives, “We continue to encourage our industries to expand and not to fear changes in policies because PEZA is doing its best to retain the benefits incentives that are effective and working and even enhance these existing incentives so we become very competitive with other countries in attracting investors.”
Plaza stressed that PEZA industries and exporters are efficiency seekers so they weigh the advantages and disadvantages of countries’ incentives and other factors of production given the huge capital they invest in the country of their choice.