MANILA, Philippines -- Manufacturing and agro-industry, among others, are some of the sectors seen to continue attracting foreign direct investments (FDIs), according to Philippine Economic Zone Authority (PEZA) Director General Lilia De Lima.
De Lima stressed in an interview that the Philippines remains a conducive hub for these sectors because of the country’s economic growth, stable political condition, available human and natural resources, labor peace, lower cost of business operation compared to other neighboring countries, among others.
For PEZA’s part, manufacturing and agro-industry firms can benefit from the fiscal and non-fiscal incentives and also its one-stop-shop service -- making it easier for investors to put in and expand businesses here.
Majority of the PEZA’s investors are from the manufacturing sector while it also expands economic zones in agro-industry nationwide.
Further, aside from manufacturing and agro-industry the PEZA chief also mentioned that sectors of information technology (IT), business process outsourcing (BPO), medical tourism, and tourism will continue to attract FDIs.
PEZA also gives incentives for IT-BPO investments in the country, however, the government agency halted providing incentives for tourism projects in Metro Manila, Cebu, and Boracay pursuant to its November 2012 resolution.
Moreover, from 1995 to December 2013 total investments in PEZA zones reached Php 2.583 trillion in which 70 percent of the locators are foreign investors.
Of the said amount, 40 percent or a total of Php 1.02 trillion were invested during the three years and six months of the Aquino administration; 34 percent or Php 876.40 billion during the nine years and five months of Arroyo's administration; 13.9 percent or Php 361 billion during the two years and seven months of the Estrada administration; and 12.6 percent or Php 326 billion within the three years and four months of the Ramos administration.
Data from PEZA also showed that from 2009, it has approved investments of Php 175.4 billion, PEZA managed to attract Php 204.4 billion investments in 2010 which is 16.6 percent higher than the previous year.
During the first year of the Aquino administration in 2011, PEZA-approved investments surged by 41.1 percent to Php 288.3 billion from 2010’s value.
It continued to go up by 8.19 percent in 2012 to Php 311.9 billion.
In 2013, however, PEZA-approved investments declined to Php 276 billion, which De Lima said, resulted to the halting of, or provision of incentives to tourism projects in some areas as well as biofuel projects starting in 2012.
“Those are big projects. On tourism, it’s always multi-billion investments; also biofuels -- these are big projects,” the PEZA executive said in an April interview.
Aside from PEZA attracting investments in the manufacturing, agro-industrial, IT-BPO, and tourism sector, the government-owned Bases Conversion and Development Authority (BCDA) also has new development conducive for these businesses.
Foreign investors may now look into locating in BCDA’s Clark Green City (CGC) project in Central Luzon.
The CGC has a total land area of 9,400 hectares in which the Phase 1 is allocated for industrial projects as well as government offices, central business district, and academic centers while CGC Phase 2 is allotted for agro-industrial projects, she said.
BCDA has reserved Phase 2 a 3,000-hectare land for the agro-industrial investments, the PEZA chief added.
Last month, BCDA has announced perks for both local and foreign investors who will locate in the CGC which include:
- five percent special tax on gross income and exemption from all national and local taxes;
- tax and duty-free importation of raw materials, capital equipment, machineries and spare parts;
- value added tax zero-rating of local purchases subject to compliance with Bureau of Internal Revenue (BIR) and Philippine Economic Zone Authority (PEZA) requirements;
- exemption from payment of any and all local government imposts, fees, licenses or taxes; and
- exemption from expanded withholding tax.
Aside from the said fiscal incentives, BCDA will also offer non-fiscal incentives for CGC locators which include simplified import-export procedures; employment of non-resident foreign nationals in supervisory, technical, or advisory positions; and special non-immigrant visa with multiple entry privileges for certain non-resident foreign nationals.
Based on the World Investment Report of the United Nations Conference on Trade and Development (UNCTAD) published last month, the Philippines has surpassed its ASEAN neighbors in terms of growth in FDI in 2013.
The country recorded a 24 percent FDI growth while Malaysia grew its FDI by 19 percent; Indonesia by 17 percent; and Singapore by 15 percent.
On the other hand, Thailand has a negative growth of 12 percent in FDI last year according to the UNCTAD report.
Cielito F. Habito, United States Agency for International Development (USAID) chief of party for Trade-Related Assistance for Development (TRADE) Project, noted that “the Philippines had a phenomenal 118 percent FDI growth in the first three quarters (of 2013), but took a hit from typhoon ‘Yolanda’ (Haiyan) in fourth quarter.”
Despite leading the FDI growth, the country “still lags way behind” other ASEAN members in terms of FDI amount, Habito noted.
The Philippines only has USD 3.86 billion worth of FDI in 2013 which was behind Vietnam with USD 8.9 billion; Malaysia with USD 12.31 billion; Thailand with USD 12.95 billion; Indonesia with USD 18.44 billion; and Singapore with USD 63.77 billion.
Habito cited deterrents for FDI to persist in the country which include constitutional restrictions on foreign ownership, high cost of power, infrastructure inadequacies, trade transaction processes, and governance hurdles including at the local government levels.
In order to attract more FDI in the country, the USAID official urged the government to look into the following investment policy trends:
- policy measures mostly geared towards investments promotion and liberalization;
- share of regulatory or restrictive investment policies;
- investment incentives mostly focus on economic performance, less on sustainable development;
- and better alignment of incentives to sustainable development goals.