IPP draft eases rules for ‘strategic’ investments

Strategic investment projects that cost less than $300 million may still enjoy tax perks under the government's proposed investment priority plan (IPP) this year as long as these meet at least three other requirements, which the state said are meant to capture growth prospects of the global rebound. The policy shift should help the Philippines take advantage of firms’ investment decisions amid the global economic recovery, according to a draft released in a public hearing at the Board of Investments (BoI) office on Monday. The draft proposes laxer screening of investments under the listing "Strategic Activities." This heading will cover business activities otherwise not included in the IPP as long as it satisfies several criteria. Instead of requiring a minimum cost to qualify as was the case in previous plans, a project may qualify for tax incentives if it accomplishes any three of the following: • a minimum $300-million investment cost; • employment generation of at least 1,000; • the use of new and internationally accepted high-level technology; • and creation of added value. New entries in the 2010 plan also seek to encourage activities that will allow firms to recover from and prepare for the impact of climate change after two storms wrought billions of pesos worth of damage last year. "The objective of this investment priority plan is the promotion of economic activities that will capture growth prospects of the global rebound," the draft states. But even with this proposed easing, the Philippine Economic Zone Authority (PEZA) sought a lower minimum investment cost. "Since we are taking advantage of the global recovery, $300 million may be too [much]. That amount might limit certain industries," PEZA public relations head Elmer C. San Pascual said, suggesting that it be lowered to $100 million. BoI staff took note of the proposal. Position papers will be accepted until February 19 before the agency turns in the final draft for the President’s approval by March. The global recovery was again cited as the reason behind the decision to remove a listing in the 2009 investment priority plan that awarded incentives to troubled firms that retained workers. "The contingency list has been taken out following a pronouncement that ‘the worst is over’ and with the main markets of the Philippines exiting the recession," Raul V. Angeles, executive director of the Investments Servicing Group, said at the hearing, confirming earlier BoI announcements. The Federation of Philippine Industries (FPI) welcomed the delisting, agreeing that it might no longer be needed as the economy recovers. "Maybe they’re right. The global economy has indeed begun to recover," FPI Chairman Meneleo J. Carlos, Jr. said on the sidelines of the hearing. The Employment Confederation of the Philippines earlier asked the government to retain the provision at least for select industries. The draft said the 2010 plan seeks to "promote a green economy." It proposed a new entry that will grant tax perks for the production of goods... or application of processes that would prevent or minimize pollution. Disaster prevention, mitigation and recovery projects will also qualify for incentives this year under the proposal. This covers the installation of flood control systems, early warning systems, dikes, projects to rebuild roads and bridges, and training for disaster preparedness. Other new entries include the manufacture of cement, operation of provincial buses, and any new projects of micro and small enterprises. Small firms may register activities just by virtue of their size as long as these investments are not about retailing, banking, small-scale mining, activities regulated by law for reasons of security or risk to health and morals, production of nonagricultural consumer goods and personal care products, and infrastructure projects covered by state guarantees, among others. The FPI’s Carlos lauded the support for small entrepreneurs, while Cement Manufacturers Association of the Philippines (CeMAP) President Ernesto M. Ordoñez opposed the listing of cement manufacture. Majority of CeMAP members, he said, are against the grant of tax perks to new entrants since it is unfair to existing cement industry players.