In a letter to the House committee on ways and means, Amcham executive director Robert Sears said Philippine incentives must be considerably more attractive in order to compete with other countries that offer lower wages, lower power costs, more flexible labor laws, bigger domestic market, less pollution, better ground transportation, less bureaucracy, less judicial harassment, more stable policies, better security and less corruption.
Sears said Congress should make the country’s incentives package at par not only with other Asian countries, but also with the fiscal perks offered by countries in Latin America and Eastern Europe that have also been aggressive in attracting foreign investors.
"If the investments go to other countries, the Philippines gets nothing – no jobs, no transfer of technology, and no revenue from taxes and spending of those that would have been hired to work had the investors decided to locate in the Philippines,’’ Sears said.
The Board of Investments (BOI) is pushing a bill in Congress to amend the Investment and Incentives Code of the Philippines and beef up the fiscal perks package with a 12-year income tax holiday; duty-free imports of capital equipment; net operating loss carry-over; tax credits on purchased components of locally-produced equipment; deferred imposition of two percent minimum corporate income tax; investment tax allowance; and double deduction for training and research and development.
Amcham has suggested several fiscal incentives that could be adopted to attract investors in specific sectors such as export incentives for finished vehicles; eight to 10-year tax holiday for durable goods production; reduction of tariffs on imported building products and raw materials; special perks for information technology support industries and training provided to employees; and new incentives for legacy firms that continue to invest in the Philippines.
Total investments registered with the BOI and Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA) and Clark Development Corp. (CDC) plunged by 47 percent last year to P99.183 billion from P186.333 billion in 2001, mainly due to lack of investment opportunities and waning investor confidence.
Filipino investors signed up P53.135 billion in total investments in 2002, down by 57 percent from P123.896 billion in 2001. Foreign investors registered P46.048 billion worth of projects in 2002 from P62.436 billion in 2001.
PEZA had the biggest investment haul with P38.741 billion worth of projects registered last year, down 52 percent from P80.89 billion in 2001. BOI investments fell by 72.2 percent to P28.352 billion in 2002 from P102.036 billion in 2001.
Economic zones in the former American military bases, however, bucked the downtrend as they posted hefty increases in project registrations.
CDC posted a record-high P27.548-billion investment last year, up by 1,655 percent from P27.548 billion in 2001. SBMA chalked up P4.542 billion in investments last year, up 147 percent.
The bulk of investments went to manufacturing projects (P56.992 billion up by 36 percent), services (P16.613 billion down by 37.3 percent), and finance and real estate (P12.007 billion down by 75 percent).