The BOI approved the investment on a pioneer status but granted non-pioneer incentives which would, thus, limit South Western Cement to a four-year income tax holiday only.
A week earlier the BOI had approved the P6.731 billion cement plant investment of Eagle Cement.
South Western Cement’s availment of its ITH incentives would require its compliance with two conditionalities.
The first condition is that South Western Cement must get BOI approval for it ex-plant cement pricing before the start of its commercial operation in January 2011.
South Western must submit to the BOI the basis for its price computation based on current domestic and international prices.
Second, any upward price adjustment must also be submitted to the BOI prior to implementation.
The two conditionalities imposed by the BOI is part of the safety nets to ensure that the grant of ITH incentive would translate to price benefits for consumers.
The chairman of South Western Cement is former Trade Secretary Rizalino Navarro who is also a director of the Yuchengo-owned House of Investments which has a 13.21 percent stake in South Western Cement, and chairman of EEI.
Under the revised guidelines of the 2006 IPP, the BOI is allowing investments in new cement plants provided that they will put up completely new clinker-base cement production with a minimum capacity of one million metric tons per year.
Foreign investors would be allowed to register their project on a pioneer status but would only be given non-pioneer incentives which would entitle them to only a four-year income tax holiday.
The BOI would also allow existing cement firms to put up a completely new clinker-base production line provided that the new production line operates at 85 percent capacity utilization which must be maintained at any given time.
The Cement Manufacturers Association of the Philippines (CeMAP) had welcomed a possible investigation of the cement industry’s operational capacity in light of conflicting claims that there will be a shortfall of cement supply by 2007 or 2010 even as local cement companies claim under-utilization of existing kilns.