The Philippine Economic Zone Authority (PEZA) said investors wishing to invest in the country are held back or are in a wait-and-see situation due to the revamp and uncertainty caused by the rationalization of tax incentives.
Charito Plaza, PEZA director-general, yesterday said in a statement investors from China and other countries had approached the agency but are wary of how the Comprehensive Income Tax and Incentive Rationalization Act (CITIRA) will affect them.
This developed as Chinese companies have reaffirmed their investment plans in the Philippines on the sidelines of President Duterte’s visit to Beijing last week.
Plaza appealed to Congress and the Department of Finance (DOF) not to tinker with the incentives and instead retain its globally-competitive perks in order to attract companies that are avoiding tariff wars and are shifting from China to other countries in Asia.
She said the country must take advantage of the global opportunity presented by the US-China trade war, the debacle in Hong Kong as well as its US Generalized System of Preferences (GSP) privileges in boosting its exports.
US President Donald Trump has directed American companies to move production out of China and transfer to other countries or return to the US while the political turmoil in Hong Kong may cause investors and regional headquarters of multinational companies to transfer.
Plaza said exporters should also maximize the US GSP extended to the Philippines until Dec. 31, 2020, granting to the Philippines a preferential and duty-free entry of goods to the US market. Under the scheme, goods made in the Philippines with 40 percent local content or material, which are destined to European countries, the US and other Asian countries enjoy zero tariff.
Plaza said exporters be exempt from the CITIRA and suggested that rationalization of incentives should first be tested on domestic enterprises to motivate them to be more productive.
“Exporters should be exempted because they can easily fold and pull out their firms to other countries. PEZA has no monopoly of economic zones and incentives, but there are many competitors abroad,” Plaza said.
Meanwhile, Ramon Lopez, secretary of the Department of Trade and Industry said that at the Philippines-China Business Forum on August 30, HBIS Group and local firm Steel Asia Manufacturing Corp. signed a memorandum of understanding (MOU) on the establishment of an integrated steel mill (ISM) in Batangas, which will support Philippines’ bid to be a major producer of high-quality and safe steel products by 2030.
Lopez said the ISM will allow the country to produce basic iron and steel products, including flat products that are not yet being produced in the Philippines.
The MOU signing follows a similar agreement signed in December for the $4.4 billion project.
President Duterte has instructed Lopez to immediately facilitate the processing of clearances and other requirements needed by the project.
Lopez said memoranda of agreements were also signed between Tranzen Group and their Chinese partners, which indicated progress of their projects related to the national WiFi and emergency services, socialized housing, expressways, as well as power plants.