House probe on Thai firm perks to continue

MANILA, Philippines - The House committees on Food Security and on Agriculture and Food will continue their joint hearing on the alleged preferential treatment and tax incentives given by the Board of Investments to Thai company Charoen Pokphand (CP) Foods Corp. that, according to lawmakers, are detrimental to the local livestock industry.

In their recent hearing, the committees decided to await the final report of the BOI to verify alleged violations of CP, which could be basis for the revocation of its fiscal incentives. The company is presently engaged in livestock (broiler, layer and swine) and aquaculture (shrimp and fish) businesses in the country.

“We are still awaiting final report of BOI to consider the reported violations of CP which are grounds for the cancellation,” said Rep. Agapito Guanlao (Party-list, Butil), chairman of the Committee on Food Security.

Last year, Guanlao delivered a privilege speech detailing that the BOI allowed the operation of a P2-billion CP agricultural project in the country and the granting of a seven-year tax holiday and duty-free importation of raw materials that local hog and poultry raisers criticize.

Another basis for the joint hearing is House Resolution 2921 filed by Rep. Angelo Palmones (Party-list, Agham) seeking an inquiry into the incentives granted to CP and how this affects local agricultural producers, and its impact on domestic food production.

Guanlao said the Thai company has been operational since 2009 when it already applied for incentives but these were not approved.

“They claim that they are pioneering and a new investment. Their three projects were approved with different types of incentives,” he said.

Aside from the issues on tax privileges, Guanlao also questioned if CP owns or just leases the lands serving as operation sites for its projects. He asked for verification with the Land Registration Authority (LRA) about the status of these lands.

During the hearing, Agrarian Reform Secretary Undersecretary for Legal Affairs Anthony Parungao said that DAR approved on November 8, 2011 the disposition of 34 hectares of land located in Sta. Rosario, Floridablanca, Pampanga and their conversion from agricultural to agro-industrial. The land serves as one of the project sites in Central Luzon of the CP.

Meanwhile, DAR Assistant Secretary Teofilo Inocencio said the project sites of the company in Bataan, Bulacan and Tarlac are covered by lease agreements between CP and the landowners, and that these lands were all approved for conversion

Rep. Teddy Casiño (Party-list, Bayan Muna) said the least that the BOI could have done was to consult stakeholders before granting incentives to CP.

“The BOI is mandated to promote investments, and at the same time it is mandated to protect local industries. The giant CP will be directly competing with our local farmers, so the least the BOI could have done was to consult with the stakeholders,” said Casiño.

Casiño said they would be discussing the basis for withholding the incentives granted by BOI to CP. As early as December 2012, he said the two committees agreed on working for a resolution that will ask the BOI to revoke the tax holidays and tariff free importation of raw materials granted to CP.

He said he is in favor of the cancellation of the BOI incentives and tax breaks as these would knock out majority of small local players in the livestock and feeds industry.

According to the BOI, CP plans to infuse an estimated P6 billion foreign direct investment and the incentives given to the firm is well within the Omnibus Investment Code of 1987 and the Agricultural and Fisheries Modernization Act of 1997.

Executive Director Lucita Reyes of BOI assured lawmakers that starting this year; the BOI will be consulting with stakeholders on a per project basis.

She also said the request to suspend, cancel or revoke the CP registration will only be given due course if there is strong basis of misrepresentation and if the company breached the terms and conditions provided in the contract.

Meanwhile, the BOI provided an unpublished paper by UP School of Economics Dean Ramon Clarete titled “CP and the local livestock industry” which cited that while chicken producers may experience a minimal 1.5 percent decrease in prices, this would ultimately benefit not only consumers with lower chicken prices but also local corn farmers.

In his paper, Clarete said that the entry of CP would be advantageous to both small chicken farmers since the company will eventually go into contract growing arrangements and the country’s corn farmers.

Clarete added that while introducing competition in the industry is a big step to reduce the real prices of chicken meat, more work needs to be done to cut the price of chicken to make it more affordable to the poor.