Government urged to remove focus on incentives to draw investors

MANILA, Philippines - The government must remove focus on the grant of incentives as investors are more interested on the ease of doing business in the country, an Asian Institute of Management (AIM) official said.

“There is nothing to be gained by further lowering our tariffs. We will not gain anything by putting more incentives,” AIM Policy Center executive director Ma. Lourdes A. Sereno said during the State of Philippine Competitiveness convention at the SMX Convention Center.

She said the government has been overly concerned on the rationalization of fiscal incentives yet businessmen rarely anchor their decision on how much income tax holiday is given.

“We have more problems like distribution and infrastructure,” Sereno said.

For instance, the ranking of the Philippines in distribution infrastructure in the 2010 World Competitiveness Yearbook is 57. Likewise, the study showed that the country ranked 56th in the future of energy supply.

“The government has no effective energy plan and executives are scared they will not have the energy they need in the future,” Sereno pointed out.

She noted there are countries like Malaysia which have poor incentive programs but are able to attract investors. Thus, for the Philippines to be competitive and to attract more investors, proper legislation must be in place.

“We have very rigid labor regulations. We have no problem with incentives. The government should not be spending too much time on it,” Sereno emphasized.

For his part, John D. Forbes, legislative committee chairman of the American Chamber of Commerce in the Philippines (AmCham), said the rationalization of fiscal incentives must be completed since it has been in Congress for several years.

He said while he agrees that instead of focusing more on incentives, the government should dwell on improving the ease of doing business in the country by building more infrastructure, he conceded that incentives are still an important consideration for firms.

“I know of some instances wherein the Philippines lost big investors because other countries offered more benefits,” Forbes said.

In competing for big investments, especially those that will translate to thousands of jobs generated, Forbes said the government must not be handicapped in handing out good investment packages. “If it will create more jobs then the government must be prepared to offer generous income tax holidays.”