A major motorcycle manufacturer is relocating its engine production and assembly facilities from two ASEAN countries for consolidation in the Philippines, while a copper processing venture is keen on locating in Leyte, according to the Board of Investments (BOI).
BOI Managing Head Ceferino S. Rodolfo announced the two major prospective investments at the 9th Arangkada Philippines Forum 2020: Foreign Investments in the Post-Pandemic Philippines on the topic “How Should the Philippines Compete Better” attended by mostly foreign investors that comprise the Joint Foreign Chambers in the country.
According to Rodolfo, BOI is now dealing with a major investor in the motorcycle sector. The foreign firm, which he did not identify, has been looking at the Philippines for purposes of consolidating here their motorcycle engine manufacturing and assembly operations.
The motorcycle company, which has operations in three ASEAN countries, is going to close the two plants to consolidate their operations in the Philippines, Rodolfo said.
In addition, the BOI has already registered a copper processing joint venture by American and British investors with a patent technology registered in Australia. Rodolfo did not divulge the amount of investment for this copper project but said this will probably be located at the Leyte Ecological Industrial Zone, which will be launched this month. The project will produce copper product for export.
The zone, which is masterplanned by Palafox and Associates, is aimed to create a hub for copper and copper-based products in Leyte.
Rodolfo said that development of the copper industry in the country is deemed important as he stressed the need “to fill in the gaps that we have from copper mining, all the way to production of electric components and also automotive parts.”
At present, the Philippine Associated Smelting and Refining Corp. operates a copper smelting facility in Leyte, but the copper concentrates are exported to Japan for further processing into copper wires and reexport to the Philippines to be part in the country’s supply chain for wiring harness.
“So, we need to be able to fill in that gap,” he said.
Rodolfo explained that once the CREATE Bill is passed into law, there will be more foreign direct investments that will be attracted to invest in the country. CREATE will reduce corporate income tax to 25 percent from the current 30 percent upon effectivity of the law and down to 20 percent BY 2027.
On the motorcycle investment, Rodolfo said what has been holding them back before is that they were not eligible for incentives under EO 226 or the Omnibus Investments Code of the Philippines because they are a foreign company, investing in the Philippines for the domestic market and also for export. The CREATE Bill has removed the nationality bias and thus entitle all investors, whether for export or domestic market, a menu of tax incentives that they can choose from.
He added that motorcycles are among the fastest growing import categories for the country and in fact contributes as third biggest contributor now to the country’s trade deficit with the two countries that this prospective investor is currently located.
“So that's, that's one clear way by which CREATE would help us to be able to bring in foreign investments and take advantage of our domestic market,” he said.
He cited that CREATE has a very reasonable length of time for investors to be enjoying the incentives, four to seven years of income tax holiday and another 10 years if you are going to be located in zones. Investors are eligible for either special corporate income tax, or choice of the menu of incentives if they are not in any of the export zones. In addition, there will be additional deductible expenses from their income tax.
Rodolfo also noted that the recently signed Investment Priorities Plan 2020 has added two new categories: commercialization of intellectual property rights (IPRs) and activities that will support jobs generation for the regions like the Balik Probinsya program.
Granting of incentives to projects to commercialize IPRs would stimulate the local creative economy and encouraged innovation because in the previous IPPs only the commercialization of government funded R&D are eligible for incentives.
“These activities would be eligible for up to six years of income tax holiday. We are currently crafting the guidelines, hopefully this will be out by next week,” said Rodolfo.