Taguig City – Industry associations have sought for the retention of the Philippine Economic Zone Authority’s (PEZA) functions amid the creation of the Fiscal Incentives Review Board (FIRB) under the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA).
According to the joint statement of the Joint Foreign Chamber (JFC), Information Technology and Business Process Association of the Philippines (IBPAP), and the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), “Given PEZA’s proven track record of efficiency for so many years, the trust and confidence of foreign investors in PEZA as a corruption-free agency, and its ability to promote the Philippines and attract foreign investments into the country, the said body should be allowed to retain its powers and functions.”
Under the pending CITIRA, the FIRB’s functions shall be expanded and it will remove PEZA’s authority to administer and manage its existing economic zones and to recommend the proclamation of new economic zones. The said proposal is contrary to Sections 13, 15, and 21 of the Republic Act 7916 or the Special Economic Zone Act of 1995, the enabling law of PEZA.
PEZA’s internationally recognized performance
Plaza and the export industry associations underlined that PEZA has been acclaimed internationally through the IFC – World Bank for its “Best Practice among Economic Zones worldwide”. Such best practices include the ease of doing business and one-stop-shop.
Under the leadership of Plaza, PEZA has remitted P1.8 billion within two years from 2016 to 2018 of dividends, while the 6-year term of previous administration’s combined dividends is P2.2 billion pesos. PEZA is the top investment promotion agency in terms of dividends remitted to national government.
“During the first year of President Duterte, there was a very positive investment climate. As shown in our figures, investment soar, but new investments went down in 2018 and 2019 due to the uncertainties created by CITIRA, having a ‘wait-and-see’ attitude where existing industries hold expansion projects and new investors awaiting and hoping for an investor-friendly CITIRA,” said Plaza.
The PEZA Chief however said that the Authority remained to keep the investors from leaving and continue to trust and keep their business confidence here in the country, despite the lowered expansion or new investment projects in 2018 and 2019 in the context of the pending CITIRA bill.
Plaza pointed out that “PEZA's brand of service and package of fiscal incentives have become a magnet for foreign investors to locate in the Philippines and the reason they still opt to be in the country despite the high cost of doing business, higher competitiveness and lack of efficiency factors compared to other ASEAN countries.”
Plaza reiterated that “PEZA’s incentives have been tried, tested, and proven for years because incentives compensate for the high cost of doing business in the Philippines such as high power rate, lack of infrastructure, transportation, logistics hubs, and communication facilities and the mismatch or the lack of skills of Filipino workers.”
To date, PEZA’s industries are able to directly employ 1,601,492 million directly employed and 7 million indirectly employed Filipinos. For its 2019 performance, PEZA has generated P117.54 Billion investments and US $54.59 Billion exports, 540 number of projects, and employed 1,601,492 Filipino workers. In the same year, PEZA has also remitted not lower than P750 Million in annual dividends to the National Government.
Further, PEZA is taking its own initiative to create a technical working group (TWG) to review its present sources of income and formulate new income streams in line with its support to the Department of Finance’s (DOF) revenue efforts. According to the Director General, the creation of a TWG aims “to enhance and discover new ‘income streams’ and contribute to the DOF more sources of revenues to finance President Rodrigo Roa Duterte’s Build, Build, Build project and other economic agenda.”
FIRB's Implication to PEZA's Ease of Doing Business
Industry associations and the PEZA chief shares the concern that the said “expanded functions of the FIRB will badly affect the ease of doing business and one stop shop service of PEZA.”
“CITIRA’s mandate to the FIRB to approve or disapprove the grant of fiscal incentives is said to be putting difficulty and inefficiency to what is now a very simple, straightforward, and uncomplicated PEZA application and approval process,” said Plaza. In the present, PEZA only give incentives as provided for in the PEZA Law and PEZA’s incentives are all geared towards export oriented activities or activities in support of exports.
CITIRA bill says that FIRB will approve or disapprove the grant of tax incentives upon the recommendation of the investment promotion agency (concerned) provided that the application shall be deemed approved if not decided by the FIRB after 45 working days.
The PEZA Chief notes, “We appeal to lawmakers for crucial consideration and for the wise judgment of our lawmakers to pass an investor-friendly CITIRA law, to put order and stability in our investment and economic policies, laws and program.”
“The COVID-19 and Taal Volcano eruption, which have affected the production, exportation and importation deliveries, and travel bans, have slowed down the movement and production of export goods as well as the retrenchment of workers, which shows our exporters, as global players, are very vulnerable. Therefore, we must not change our investment rules so easily or our export industries will feel the instability and may just exit and transfer to their other branches in the world,” explained Plaza. #