Increasing investments imperative; review of restrictions proposed

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The Philippines offers to foreign investors incentives for long-term growth and profitability. In his meetings with heads of state and business leaders, President Marcos has pitched the country’s value proposition that is anchored not just on pro-business regulations but, more importantly, on the depth and breadth of Filipino talent.

In an interview last week with South Korea’s Maekyung Media Group, he beamed the spotlight on the country’s ecozones, particularly the Clark Freeport Zone in Pampanga and the Subic Special Economic and Freeport Zone in Zambales. Recall that during his meeting with US President Joe Biden and Japan Prime Minister Fumio Kishida in Washington last month, the launching of the Luzon Economic Corridor was announced. This involves significant investments by the US and Japan on high-impact infrastructure projects in railways and ports; clean and renewable energy; agribusiness; and semiconductor supply chains.

The Luzon Economic Corridor will connect the country’s largest ports and economic zones in Subic Bay, Clark, Manila and Batangas, mirroring China’s Belt and Road Initiative and Maritime Silk Road. The US has launched its own initiative, the Partnership for Global Infrastructure and Investment in the Indo-Pacific region.

Ecozones offer special incentives such as tax breaks on import tariffs and sales taxes, as locator-companies do not sell their products or offer their services within the country. Prime examples are firms in the business process outsourcing (BPO) and semiconductor manufacturing businesses that have established themselves in major urban centers in Metro Manila, Luzon, Visayas, and Mindanao.

It is estimated that the BPO industry contributes more than 11 percent of the country’s gross domestic product (GDP) while employing about 1.3 million workers in some 3,000 companies. Around 2.5 million direct and indirect jobs have been created by the semiconductor industry. The Philippine Economic Zone Authority (PEZA) reported in 2023 that 34.38 percent of locator investments came from the electronics or semiconductors sector.

In a related development, former Finance Secretary Gary Teves has expressed the view that constitutional amendments are needed to provide foreign investors sufficient assurance in light of pending legal concerns. He noted that the amendments to the Public Service law enacted in 2022 are currently facing challenges filed with the Supreme Court. He believes that “outright removal of these restrictive economic provisions will open the (affected) sectors immediately.” He also called for the lifting of constitutional restrictions on ownership of land, natural resources and mass media. Concerning mass media restrictions, he said that other ASEAN countries also restrict foreign investors’ participation, but “these are not enshrined in their constitutions but are embodied in laws or administrative orders, making  them more flexible and easier to change in the future.”  

Meanwhile, we applaud the efforts of the Anti-Red Tape Authority (ARTA) to further improve the ease of doing business by ensuring efficiency in the permitting and licensing processes at the level of local government units (LGUs) so that businesses may thrive and prosper at the grassroots. The ARTA has partnered with the Buklod Bayani coalition that includes the Philippine Chamber of Commerce and Industry, Philippine Exporters Confederation, International Chamber of Commerce – Philippines, and the Rotary Club of Makati Central Foundation.