Investments at the economic zones fell 24 percent in the first four months from a year ago amid lingering concerns over the government’s proposal to reform the tax incentives given to companies.
Data from the Philippine Export Zone Authority showed that ecozone investments amounted to P29.5 billion in January to April, down from P39 billion in the same months in 2018.
Peza communications manager Elmer San Pascual said the agency was having a hard time asking existing investors to move forward with their planned expansion amid concerns over the next package of the tax reform bill.
The proposed Tax Reform for Attracting Better and High-Quality Opportunities or Trabaho bill which was endorsed by the Finance Department aims to reduce the corporate income tax rate to 25 percent from 30 percent and rationalize tax incentives by making them performance-based, targeted, time-bound and transparent.
“We just could not convince yet a number of those Peza export manufacturing and IT companies who have withheld their expansions to proceed with their expansion despite us assuring them that there is a good chance to have a grandfather rule included in the Trabaho bill,” San Pascual said over the weekend.
The Semiconductor and Electronics Industries in the Philippines Inc. said earlier that members put off $1 billion worth of potential investments in the country after learning the unclear status of the tax incentives. The Trabaho bill is being debated in Congress.
Peza also said the number of projects approved in the first four months also decreased by 1.24 percent to 159 from 161 projects a year ago.
Direct employment in economic zones still increased 7.36 percent to 1,480,134 from 1,378,655 in 2018 while exports rose slightly by 0.59 percent to $12.95 billion from $12.87 billion.
Peza said investments in the information and technology sector suffered a 7.08-percent setback in the four-month period to P4.6 billion from P5 billion a year earlier. The number of new IT projects also went down to 50 from 52 a year ago.
Direct employment in the sector grew 10.68 percent to 741,905 from 670,300 while IT exports from economic zones rose 6.75 percent in January to April to $3 billion from $2.88 billion.
Investors were worried about the possible changes in the investments trend and the incentive regime.
San Pascual, however, said new investors who reached the due diligence stage were impressed by what they learned about Peza and the ease of doing business in economic zones.
“However, their unanimous question highlighted changes in the incentives regime once the Trabaho bill is signed and imposed,” he said.
Peza is the country’s second-largest investment promotion agency, next to the Board of Investments.