The Department of Finance (DOF) is urging the Department of Trade and Industry (DTI) to identify at least two leading companies per industry tier classification, and find out what incentives should be offered to them.
The DOF said in a statement over the weekend the Fiscal Incentives Review Board (FIRB) has adopted the framework for the grant of incentives to qualified industries under the government’s Strategic Investment Priorities Plan (SIPP).
As provided in the newly signed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law that rationalized the country’s corporate tax incentives for investors, this framework puts flesh into the SIPP.
The menu and length of incentives that would be offered to corporations or investors will depend on the tier classification of the enterprise applying for the investment perks.
The three-tier structure of the incentives offered to priority investors is already contained in the CREATE Law.
After the adoption of the framework, Dominguez called on the DTI to pick out at least two top companies per industry tier, find out the incentives to offer to these potential investors and encourage them to set up shop in the Philippines.
“Let’s already identify these firms. Let’s take a couple in Tier 1, a couple in Tier 2, and a couple in Tier 3, and let’s do the research on them,” Dominguez said during the FIRB’s second meeting last week.
“Then, offer them and ask them: ‘what will it take for you to come here?’’ he added.
Dominguez said the investment promotion agencies (IPAs) can undertake these tasks.
Ramon Lopez, DTI secretary, agreed with the proposal, which will now transform IPAs into “marketing arms” rather than for them to merely function as processing agencies for investment applications.
Under the SIPP, Tier 1 covers investments with high potential for creating jobs, value creation, and providing essential support to sectors critical to industrial development, as well as emerging industries with potential comparative advantage, Rafaelita Aldaba, DTI undersecretary, said during the meeting.
Falling under this category are, among others, modern agriculture and food processing; agricultural production using modern technologies; design-focused industries such as furniture, games and toys, jewelry and garments; energy efficiency and environment-friendly activities; health and medical products; industrial parks; and ports, airports and seaports.
Aldaba said Tier 2 includes the manufacture of supplies, parts and components not produced in the country, to encourage import substitution and address gaps in the domestic supply/value chain.
These activities, among others, are the production of iron, steel and non-ferrous metals, copper rods, plastics and synthetics in primary form, basic chemicals, and pharmaceuticals.
The production of fiber optic cables, refined petroleum, semiconductor devices and other electrical components, and machinery and equipment are also classified under Tier 2.
Tier 3 involves research and development activities that yield significant high-value added results and higher productivity; breakthroughs in health and science; generation of new knowledge; commercialization of patents, industrial designs, copyrights and utility models; and highly technical manufacturing.
Samples of activities under this Tier include vaccine development and production; manufacture of 3D printers, drones, robots, electrical vehicles, plug-in hybrid electrical vehicles, and optical image devices; establishment of smart factories and smart cities, and predictive agriculture, Aldaba said.
Also covered by Tier 3, she said, are the introduction of new products that embed new technologies; adoption of innovative processes using industry 4.0 technologies such as Artificial Intelligence, Machine Learning and the Internet of Things.
Also during its second meeting, the FIRB gave the go-signal to Dominguez’s recommendation to let the Board approve tax incentives for all investments amounting to over P1 billion per venture until the end of 2022.
After this period, the approval of incentives for investments of more than P1 billion but not more than P3 billion per venture will be delegated to the FIRB Technical Committee.
The FIRB also approved during the meeting a proposal to put in place an appeals process for investment projects disapproved by the Technical Committee. Such actions may be appealed with the FIRB board proper.
A recommendation to provide the Board with a list of approved and disapproved investment projects was also approved.
During the meeting, the FIRB also approved the key features of the online Fiscal Incentives Registration and Monitoring System (FIRMS) for investors applying for incentives, with some modifications to ensure that the process would be fully compliant with the provisions of the Ease of Doing Business Law.
FIRMS would be set up to make it easy and convenient for potential investors to apply and track the progress of their applications. – Angela Celis
