DOF nixes conversion of Bataan facility into a special ecozone

MANILA, Philippines - The Department of Finance (DOF) has thumbed down the proposal to convert the Bataan Economic Zone (BEZ) into a special economic and freeport zone, saying the move is no longer necessary.

In a position paper addressed to Sen. Mar Roxas, vice-chairman of the Senate committee on economic affairs, the DOF said the BEZ has been performing well and therefore needs no fixing.

Senate Bill 2118, pending at the Senate, calls for the conversion of the BEZ into a special economic and freeport zone. It was filed by Senators Loren Legarda, Richard Gordon and Juan Ponce Enrile.

Citing data from the Philippine Economic Zone Authority (PEZA), the DOF said that from 1994 to 2007, the number of locators in the economic zone increased by 29 percent to 49 entities from 38 previously.

Furthermore, from 1995 to 2007 when PEZA took over, total investments in BEZ increased to P7.764 billion as compared to only P1.398 billion from 1982 to 1994. This shows an increase of 455 percent, the DOF said.

Total exports during the period jumped to $5.172 billion from only $1.315 billion or an increase in total exports of 293 percent, the DOF added.

These figures show that it is no longer necessary to convert BEZ into a freeport and special economic zone, the department pointed out.

It also said that creating more freeport zones would also stand in conflict with the role of the Bureau of Customs.

“We strongly take the position that there should be a moratorium in the creation of more freeports. The five freeports that are currently existing already pose a challenge to customs administration. Because of the free flow of goods into the freeports and the non-imposition of taxes and duties, the freeports become very vulnerable to smuggling activities,” the DOF said.

The five freeport zones in the country are the Subic and Clark Freeport zones in Zambales and Pampanga and the Cagayan, Zamboanga and Poro Point Freeport Zones.

The department said tax incentives for these freeport zones are more generous than those given to ordinary economic zones, leaving a bigger dent on state coffers.

The finance department said SB 2118 if implemented would mean a yearly revenue loss of P12.5 billion to P15 billion for the government.

“This would cause us to rely on more borrowings to finance our developmental concerns,” it said.

However, while it proposed a status quo in the operation of the BEZ, the department also urged PEZA to address the need for improved physical infrastructure in the BEZ “to make it a more attractive investment site.”