BOI eyes perks for storm rehab projects

Business activities needed for post-storm rehabilitation may be included in this year's list of projects qualified for tax perks, Board of Investments (BoI) managing head Elmer C. Hernandez said on Wednesday. Operations such as cement and steel manufacturing, mass housing and disaster risk management should be encouraged through the 2010 Investment Priority Plan to meet needs that arose in the aftermath of two destructive storms last year, Hernandez told reporters. The BoI is also considering retaining a 2009 entry that granted incentives to distressed firms that keep or expand their workforce despite the economic downturn, he said. Hernandez clarified, however, that the priority plan would only be submitted for the President's approval after state agencies and the public are consulted. "We're including cement production and not just greenfield investments," he said, noting that the former did not make an appearance in the 2008 and 2009 investment priority plan. The BoI has yet to decide what it will require from existing cement manufacturing operations, but it may revive a provision in the 2007 plan that granted tax perks to cement firms that used at least 85 percent of their factory's capacity. The production of flat and long steel products, absent in last year's list, should be granted incentives this year, Hernandez said. "We have to ensure there is enough of these in support of the construction sector," the BoI chief said. Cement prices have recently risen to as much as P270 per 40-kilo bag over their P205-210 suggested price, the Trade department earlier said, as consumers repaired their homes damaged by storms. The public sector is also expected to add to demand for building materials with reconstruction projects in the pipeline. "[We also want to include in the 2010 plan] disaster risk management projects," Hernandez said, citing as an example operations that reinforce slopes to prevent landslides. Horizontal and vertical mass housing in Metro Manila and across the country, he added, should be retained in the yearly listing given damage wrought by the typhoons. "Some 200,000 units were destroyed... because of storms Ondoy and Pepeng," Hernandez said. Another entry the BoI hopes to retain is a provision introduced last year that covers crisis-hit projects that still retain or expand their workforce. The 2009 plan offered up to three years of income tax holiday to these firms, an incentive that will kick in once they start posting losses. This contingency list that sought to deter firms from cutting jobs had no takers last year. "The main reason is those affected by the crisis couldn't make decisions yet last year. But we've been receiving inquiries [on this listing]. It is only now that they can decide," Hernandez said. "The board decided to carry over the contingency list [from the 2009 plan] but only for six months [after this takes effect]. But if the National Economic and Development Authority says the crisis is over, we will close [this provision]," he added. Sought for comment, University of the Philippines economist Benjamin E. Diokno said hiring-based incentives are a bad idea. "That's tantamount to micro-managing. How much tax revenues would the government give up to protect or create a job? That's a tough choice for a bureaucrat... The long-term solution is to rationalize fiscal incentives [instead]," Diokno said in a text message. Incentives for cement and steel manufacturers are likewise unnecessary, he said. "[Manufacturers] will willingly increase output as long as there is no price control. The tax perks become redundant," Diokno said. But cement maker Holcim Philippines, Inc. supported the BoI's plan. "Certainly we would welcome policies that will level the playing field for anyone in the industry. Cement remains to be critical for our country's development," the firm's senior vice-president for sales, marketing and distribution, Eduardo A. Sahagun, said in a text message. — Jessica Anne D. Hermosa, BusinessWorld