DTI to ease rules to attract investors

Desperate to attract investments, the Department of Trade and Industry (DTI) wants the lowest possible investment hurdle for companies seeking the 12-year income tax holiday under the pending amendments to the Omnibus Investments Act.

Trade and Industry Secretary Manuel Roxas II said yesterday the department wants an even lower minimum investment requirement than the $300 million set by the House of Representatives that would entitle companies to the 12-year income tax holiday.

Speaking at the sidelines of yesterday's meeting of the Philippine Chamber of Commerce and Industry (PCCI), Roxas welcomed the move to lower the hurdle from $1 billion earlier set by the DTI to $350 million or even lower.

"We are batting for the lowest it could go," Roxas said. "The name of the game now is attracting investments. One company that locate elsewhere in Asia is one less company that could generate jobs here."

Under the original amendment agreed upon by the DTI and the Department of Finance, only companies in catalytic industries with investments of at least $1 billion would qualify for the 12-year income tax holiday.

This proposal was literally tailor-made for information technology (IT)-related companies, specifically Texas Instrument and Intel Corp. of the US which were then planing to set up their wafer fabrication plants in the Philippines to support the operations of their Asia pacific operations.

Texas Instrument has since picked Thailand over the Philippines and Intel has deferred its plans altogether. After failing to convince the two giant firms to locate their plants here, the Estrada administration has been scampering to improve its investment program for foreign investors.

"Our Asian neighbors are already offering the same incentives that we are no just beginning to consider," Roxas said. "We need to make these moves in order to become more competitive in terms of attracting investments."

Roxas pronouncement was a departure from his earlier position that incentives should not form the major part of government's program for attracting investments into the country.

"In incentives are the only thing we have going four, then we would be facing long-term and fundamental weaknesses in the value chain that we could be neglecting," he said earlier.

With the DOF now supporting hefty incentives to foreign investors, however, Roxas said the Estrada administration is no longer looking at the 12-year tax holiday as foregone revenues but as government investments into future development projects, especially for catalytic projects with high multiplier effect in terms of value added.

"There is an merging trend where companies with off-shore operations are consolidating," Roxas pointed out. "The question is where this consolidation will happen. Naturally, we want them to come here."

Providing Incentives has been a point of conflict for the DOF and the DTI in the past . The DFI considered incentives as foregone revenue while the DTI considers these as investments that generate even more revenues over the long term.

With a former trade secretary now heading the Department of Finance, however, the two line agencies have aligned each other's policy direction towards providing huge incentives to attract foreign investments.

Also pending for congressional approval are other amendments to the investments act, including double deductions for research and development, net operating loss carry forward, deferment of the minimum corporate income tax and tax-free importation of capital equipment.