BOI rapped for drawing up 2006 IPP sans public consultation

Industrialist and consumer advocate Raul T. Concepcion yesterday criticized the Board of Investments (BOI) for drawing up the 2006 Investment Priority Plan (IPP) without conducting enough public consultation and coordinating with the Department of Finance on the grant of incentives to certain industries.

According to Concepcion, the BOI has not coordinated properly with the Department of Finance in ensuring that the government’s revenue inflow is not compromised by the grant of such fiscal perks as income tax holidays to certain industries.

Concepcion stressed the need to rationalize incentives and stop granting income tax holidays to such industries as call centers.

Concepcion is also questioning the grant of incentives to the production of bio-fuels without first satisfactorily resolving three major issues.

These three important issues include the need to increase the acreage of sugar plantations for the production of sugar for ethanol production; the cost of ethanol production and ensuring the mandatory use of ethanol fuel.

The 2006 IPP has been approved by the Cabinet and is now awaiting 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.

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.

In a move to encourage more exports, the government has decided to include all types of export activity included in the Medium-term Philippine Development Plan and the Philippine Export Development Plan for listing in the 2006 IPP.

In the 2005 IPP, only a limited number of export activities were listed as preferred investment activities entitled to fiscal incentives.

These included information technology and IT-enabled services, electronics, mining, jewelry, fashion garments, health and wellness, tourism, shipbuilding and agribusiness.

Export activities of the furniture sector, in the past, were not a preferred investment activity and were thus not entitled to fiscal perks.

Likewise, wearables were also not considered a preferred investment activity.

Thus, with the expansion of all export activities as a preferred investment area, investors engaged in export activities listed in the MTPDP and PEDP would now be entitled to fiscal perks.