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PEZA’s last appeal: retain PEZA’s powers and tried, tested, globally competitive incentives, consider the impact of the COVID-19 pandemic 

PEZA’s last appeal: retain PEZA’s powers and tried, tested, globally competitive incentives, consider the impact of the COVID-19 pandemic 
September 23, 2020
PEZA’s last appeal: retain PEZA’s powers and tried, tested, globally competitive incentives, consider the impact of the COVID-19 pandemic 

23 September 2020 (Monday)

Pasay City – The Philippine Economic Zone Authority (PEZA) has passed its final appeal to the Senators for the retention of its powers, authority, and fiscal incentives being granted to its registered enterprises, as the Senate deliberate the passage of the “Corporate Recovery and Tax Incentives for Enterprises Act,” most commonly known as CREATE bill.

“For the last time, PEZA and its partner industry associations and stakeholders call for the retention of the tried, tested, and globally competitive current package of incentives that PEZA grants to its registered enterprises given also the experience and impact of the COVID-19 pandemic,” stated PEZA Director General Charito B. Plaza.

“While PEZA fully supports the goals of rationalizing corporate incentives, the current situation of global economy is not the appropriate time to change the current incentives’ regime. What the country needs now is stable economic policies and guarantee the sanctity of existing contracts. Philippine government must focus on reducing the cost of doing business and increase the international competitiveness of the Philippines in export-oriented industries,” noted Plaza.

In a letter dated September 10, 2020, the PEZA Chief wrote a letter regarding this last appeal addressed to Senator Pia Cayetano, Chair of the Committee on Ways and Means of the Senate, and copy furnished all Senators of the 18th Congress and all Congressmen members of the Ways and Means Committee.

Continue the tried, tested, and globally competitive incentives

In the context of global pandemic, PEZA has reiterated its appeal to Congress for the retention and enhancement of the current fiscal incentives and add non-fiscal incentives.

“The disastrous effects of the pandemic to our economy supports the position of PEZA all along for the continued grant of incentives under Republic Act No. 7916, as amended and at the same time its further enhancement to make the country more competitive, to keep the existing investors and to attract more foreign investments,” explained Plaza.

Plaza noted that “The current fiscal incentives of PEZA are proven as globally competitive, tested, and tried to continually attract exporters and ecozone developers over the years. These incentives in fact compensates the high cost of doing business in the Philippines. With the global pandemic, we need to do enhance our incentives to make it more attractive for getting investors who are moving out of other countries like China.”

The same call has been done by the lead 24 economists including Ateneo School of Governance Dean Ronald Mendoza, UP School of Economics Professor Dr. Ramon Clarete, and National Scientist Raul Fabella in their petition to the Congress regarding CREATE. “The status quo for PEZA must be maintained, pending the enactment of a consolidated incentive act.”

In its letter to Sen. Cayetano dated 21 September 2020, the Mactan Export Processing Zone Chamber of Exporters and Manufacturers (MEPZCEM) noted that “[because if its incentives,] PEZA enjoys the trust and confidence of companies both from its parent, local and subsidiaries worldwide [that is why they] should retain its authority to grant incentives to its registered export-oriented enterprises.”

PEZA also explained that the appeal for continuous retention and enhanced incentives at this time of the pandemic afford stability and confidence among registered enterprises and sustain the reputation of the government that it honors and respects existing contracts and/or agreements.

PEZA’s incentives will likewise be valuable to comply with the directives of President Rodrigo Roa Duterte under Administrative Order No. 18, which calls for the creation of more ecozones in the countryside, and Executive Order No. 114, or the Balik Probinsya, Bagong Pag-asa Program.

CREATE for Domestic Enterprises first

Moreover, the Authority maintains its recommendation that CREATE should be implemented first for the Domestic Enterprises as they will benefit the most from the reduction of the corporate income tax and enjoy for the first time incentives in rationalized manner. This will in turn maximize the micro, small, and medium enterprises (MSMEs) production, manufacturing export capabilities, complete supply chain, and encourage exporters to minimize import dependence.

“We have to empower, capacitate, and enrich economically first the LGUs, our farmers, MSMEs, and our people in general to contribute in enhancing our idle land assets and available rich natural resources,” said Plaza.

The PEZA Chief added, “We must think globally while acting locally, continuing to contribute in the global supply chain while establishing an economy that is production- and export-driven rather than forever an import- and consumption-dependent economy.”

Retention of powers as mandated under RA 7916

Furthermore, PEZA calls for the retention of its authority to administer and manage its existing ecozones and to recommend the proclamation of new ones, all which will be repealed and/or amended by certain sections under the proposed bill.

“Amending these powers of the PEZA Board and the general powers and authority of PEZA will cripple the Authority and render it as an ineffective IPA. These provisions should be retained in our Charter since their amendment will create a vacuum in the management and regulation of PEZA-registered economic zones,” noted Plaza.

Likewise, the PEZA recommends for the power of the FIRB to be limited to the approval of incentives as recommended by the IPAs, however the regulation of registered enterprises should remain to be with the IPAs.

Ease of Doing Business

Under the proposed CREATE bill, export-oriented enterprises will be exposed to lengthy and arduous process that will surely expose them to corruption and red tapes, killing PEZA’s admired ease of doing business.

PEZA’s ease of doing business endeared the Authority to its 4,587 locator investors having 4,501 multisite projects in 408 economic zones all over the country. The efficiency and best practices of PEZA over the last 25 years is recognized by foreign investors and international institutions such as the IFC World Bank.

“We have to do everything we can to make sure that those already with us stays us. The least that we can do is to honor our contracts with them,” noted Plaza.

IBPAP also requested to take into consideration PEZA’s ease of doing business. “Keep the one-stop-shop nature of PEZA as they have been an effective proponent of the country as a premier investment destination,” said IBPAP President and CEO Rey Untal in its letter to Sen. Cayetano dated May 28, 2020.

Maintaining the economy, exports amidst COVID

According to the Director General, “The COVID-19 pandemic has highlighted the relevance of export-oriented companies in the protection of the economy and the jobs.”

Even with the imposed community quarantine, PEZA-registered enterprises continued its operations to ensure the unhampered flow of goods and services while complying with the guidelines and health protocols issued by the Inter-Agency Task Force on Emerging Infectious Disease (IATF-IED).

In the September 2020 status of operations of PEZA-registered companies, a total of 2,634 companies or 85% are now operating nationwide. Continued operations have allowed 1,181,115 workers or 76% of the workforce to work even under skeletal or work-from-home arrangements.

Among the companies, 77% of the IT-BPO sector are now operating while in the manufacturing sector, 91% are already operational.

The MEPZCEM Chamber, Inc. noted that, “Companies from the PEZA Economic Zones including the Supply Chain supporting these companies made utmost efforts to continue operations during the quarantine periods despite incurring huge losses. These efforts have sustained the most basic needs of workers preventing social unrest.”

The PEZA Chief explained that “PEZA’s ecozone locators are the ones helping to keep the economy afloat by ensuring the continuous operations of locators and thereby, sustaining the created jobs, livelihood and other economic opportunities. Their operations helped to continuously earn export income for the country, which strengthened the value of the peso with the reduction of the domestic importation.”

According to the Director General, “The COVID-19 pandemic offers us lessons and opportunities on the importance of having industries that complete the supply chain, export-oriented industries continuously operating to bring in dollars to the economy.”

She added, “In the light of the COVID-19 pandemic, it is just as important to retain existing incentives, investments and jobs to create and attract new investments and jobs. Let us think globally while acting locally.”

The 24 lead economists also proposed that, “To help promote a more inclusive recovery from the COVID-19 pandemic, the priority should be on direct measures to strengthen the country’s health and social protection systems as part of a “build-back-better” plan.”

In a joint position paper by the PHILEA, SEIPI, IBPAP, CONWEP, PAMURI, MAP, US-ASEAN Business Council, Makati Business Club, and the American, Australian-New Zealand, Canadian, European, Japanese, Korean, and Filipino-Chinese Chambers of Commerce, “if existing investors face provisions that still degrade their financial projections - at a time when COVID-19 has harmed their operations – some will lose confidence in the Philippines as an investment location.”

“Together with our industries, we strongly APPEAL and PRAY for WISDOM be granted to our Honorable Senators and Congressmen on the final version of the CREATE Law,” noted Plaza.