Ecozone investments decline 27%

MANILA, Philippines — Investments approved by the Philippine Economic Zone Authority (PEZA) dropped 27 percent in the January to October period amid the pandemic and investor uncertainty on the country’s incentives regime.

Data presented by PEZA director general Charito Plaza at the Fourth Quarter General Membership Meeting of the Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) yesterday showed investments approved by the agency reached P72.65 billion as of end-October, lower than the P99.32 billion in the same period last year.

The approved investments are for 248 projects, down 45 percent from the 454 projects the previous year.

In terms of employment, the approved projects are expected to create 1.53 million direct jobs, slightly lower than the 1.57 million a year ago.

While total investments were down, exports from the  economic zones rose to $40.80 billion from $40.54 billion last year.

Plaza attributed the reduction in investments to the pandemic.

She said the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which seeks to reduce the country’s corporate income tax rate to 25 percent from 30 percent, and rationalize fiscal incentives, also affected firms’ decisions to invest.

“CREATE created uncertainties to existing investors hesitant to expand [and] new investors are all watching the result. If they’re not happy, they’re ready to transfer to their other branches,” she said.

As the proposed measure is still being discussed at the Senate, she is urging the Congress and the President to exempt export enterprises from the CREATE.

“We’re appealing to our senators and to congressmen and of course to the President to maintain the status quo because if we will recall the present investors, their feasibility studies were based on the incentives that we have provided them and we are in contract with these investors. We will be reneging on the contract with them if we will change the rules in this very trying times that we are in this pandemic,” she said.

For its part, SEIPI said the electronics industry appreciates the efforts of Senate president pro tempore Ralph Recto and other senators for introducing amendments to the proposed CREATE on incentives rationalization.

Recto’s proposed three options to amend the CREATE are: excluding PEZA, Subic Bay Metropolitan Authority, Clark Development Corp., Authority of the Freeport Area of Bataan, and Aurora Pacific Economic Zone and Freeport Authority from the bill; making a distinction between domestic and export enterprises; and applying the grandfather rule.

SEIPI said it supports the retention of incentives under Options 1 and 2.

Without competitive incentives, the group said it would be extremely difficult to attract new investments and the country runs the risk of significant job losses over the next five years.

“We appeal to our senators to retain our fiscal incentives to ensure the continuity of operations and jobs, as well as investments, for the survival of the electronics industry,” the group said.

The Joint Foreign Chambers (JFC) of the Philippines said they also support Recto’s proposed amendments as it is necessary to ensure the measure would boost rather than harm Philippine competitiveness.

“We believe Sen. Recto’s proposal for grandfathering incentives will ensure that existing investors will continue to invest in the country in the long-term and signals to prospective investors that there is stability and consistency in the implementation of policy in the country,” said JFC, which consists of the American, Australian-New Zealand, Canadian, European, Japanese, Korean chambers and Philippine Association of Multinational Companies Regional Headquarters Inc.