Cabinet okays 2006 IPP

The Cabinet has approved the 2006 Investment Priority Plan (IPP) which will now await President Arroyo’s signature before publication.

The 2006 IPP basically carries over the provisions of the 2005 IPP but includes three new provisions that would help the government hold on to its investors and attract investors looking to relocate their investments within the region, extend incentives to all types of exports and provide incentives for producers of capital equipment, raw materials and supply chain providers for manufacturers in the Philippines.

The BOI has also decided to include in the 2006 IPP the grant of incentives to new investors in the cement industry to address a projected shortfall in cement production in the country.

However, the grant of incentives to the cement industry has been placed under the mining section, specifically involving clinker production.

Thus, a cement firm’s clinker production would be entitled to incentives such as those provided for pollution control devices.

These incentives include duty-free importation of capital equipments as well as accelerated depreciation resulting in less income tax.

Separately, regular cement production would be entitled to incentives granted under Executive Order 226 otherwise known as the Omnibus Incentives Act.

These incentives include income tax holiday.

Last year, the government, through the Department of Trade and Industry had launched its RED (Retention, Expansion and Diversification) program which would encourage investors to retain, expand and diversify their activities in the country.

To further strengthen the RED program, the National Economic and Development Authority (NEDA) Board approved the inclusion of the RED program as a preferred investment activity, entitling it to fiscal perks.

Hernandez had earlier explained that the Philippines wants to provide "the necessary environment" for investors to come in.

However, availment of the RED program would still face some limitations and restriction as provided for in Article 11 of the Omnibus Investment Code.

Thus, specifically restricted to avail of the RED program would be commercial banks, savings and mortgage banks, rural banks, savings and loan associations, building and loan associations, development banks, trust companies, investment banks, finance companies, brokers and dealers in securities, consumers’ cooperatives and credit unions, and other business organizations whose principal purpose or principal source of income is to receive deposits, lend or borrow money, buy and sell or otherwise deal, trade or invest in common or preferred stocks, debentures, bond or other marketable instruments generally recognized as securities, or discharge other similar intermediary, trust or fiduciary functions.

The Philippines, in the past, has lost some big investors which chose to locate in other countries in the region due to more attractive incentives offered.

These included Toshiba and Intel which left and then returned.

Philippine economic authorities have thus come up with a program that would now encourage and even reward existing investors that choose to retain their investments, expand or diversify their activities.

Incentives would also be extended to companies that are planning to relocate to the country.

Incentives are normally given only to new investors and are for a specified number of years only.