Information technology, manufacturing investments in ecozones continue to plunge

MANILA, Philippines — Coming off its worst year for information technology (IT) and manufacturing, investment pledges approved by the Philippine Economic Zone Authority (PEZA) grew by over a quarter last month despite the continued decline in new IT and manufacturing projects brought about by uncertainties in the government’s tax reform program.

PEZA director general Charito Plaza said yesterday approved investments rose by 27.20 percent to P14 billion in January from P11.01 billion in the same month last year.

Despite the higher value of investments, the actual number of projects approved last month paled in comparison to those registered in January last year. A total of 32 projects were registered with PEZA last month as compared to 56 in the same month last year.

PEZA manager for promotion and public relations Elmer San Pascual said bulk of the investment pledges for January were economic zone development projects.

Meanwhile, IT and manufacturing investments continued their slide which started last year.

A total of eight IT projects were registered with PEZA last month with total value of P529 million, a 73.23 percent decline from 22 projects amounting to P1.98 billion recorded in the same month last year.

Although no figures were provided, San Pascual said manufacturing investments last month also plunged 46 percent year-on-year.

In 2017, San Pascual said PEZA recorded its worst year for new IT and manufacturing investments.

Despite ending the year with an 8.89 percent growth in total investment approvals, San Pascual yesterday revealed that total IT investments of P15.56 billion and manufacturing investments of P48.36 billion in 2017 were the lowest for both sectors in PEZA’s history.

 “Manufacturing firms don’t want to invest if there is uncertainty because in manufacturing, it requires huge investment in equipment and machine,” San Pascual said.

“TRAIN is the number one cause of uncertainty and you cannot get investors if there is uncertainty. It has been one year that we have been affected, since the introduction of TRAIN 1,” he said.

Under the TRAIN, PEZA was particularly concerned about the planned removal of the zero value-added tax (VAT) exemption enjoyed by local suppliers of export-oriented firms or indirect exporters.

Plaza, however, said PEZA’s incentives to locators remain on status quo, with the agency receiving assurance from the Department of Finance (DOF) that it is not affected by a presidential line veto on zero VAT rating on sale of goods and services to separate customs territory under the TRAIN Law.

She said the DOF is set to come out soon with a directive that will clarify PEZA’s exemption from the presidential line veto, assuring investors that it would continue to receive incentives.

Meanwhile, the second tax reform package is now in the works and is set cover both rationalization of fiscal incentives and corporate income tax.

 “When investors ask us if our incentives will change, I cannot answer them. We believe stability is important,” San Pascual said.