THE Board of Investments (BOI) under the Duterte administration will shower manufacturers outside Metro Manila with tax incentives in its efforts to revive the country’s manufacturing sector.
In the draft Investment Priorities Plan (IPP) 2017-2019, BOI Governor Oliver B. Butalid said the lead investment promotion agency has included all manufacturing activities that serve the domestic market, as part of the government’s preferred investments over the next three years, unlike before when this was limited to exporters.
“Now, the emphasis is not anymore to support export activities because the market is here. We have a huge domestic market, pero may disconnect,” Butalid said, although he later on cleared that exporters will still continue to benefit from the incentives.
“And I think that’s bold because we came from a paradigm of limiting certain activities of opening it up. That’s how much we want to emphasize manufacturing,” he added.
Presently, the Philippine economy is largely driven by the services sector, “and manufacturing has been left behind,” said the BOI official.
However, there will be exceptions.
First, only manufacturing activities outside Metro Manila can be provided with tax incentives, including income tax holiday for four years and duty-free importation of equipment.
Only modernization projects in Metro Manila are eligible for the BOI incentives.
Second, mere packing or packaging is also excluded from the list. BOI said simple processing covering any or a combination of activities like cleaning, sorting, shredding, pulverizing, grinding, crushing, compacting, dissolving, and filtration are not qualified for registration.
Butalid said the production of liquor and cigarettes may also be excluded from the incentives.
For Mandaue Chamber of Commerce and Industry past president Phillip Tan, who is chairman and president of Wellmade Motors, enterprises such as his would prefer a better business environment over incentives.
While he welcomed the BOI’s move to include all manufacturing activities, he said what the government needs to do is improve infrastructure and the cost of doing business, saying power and the transport of goods within the country is still expensive.
Tan also worried that incentives were only accessible to large companies, citing huge capitalization requirements and tedious processes that would be burdensome to small and medium scale businesses.
“Sa tinuod lang, mabuhi ra man mi mga negosyante bisan dili sila muhatag og incentives (To be honest, businesses can survive without incentives). What we want is that they give us good infrastructure and create a supporive business environment. Bahala na wala na ang incentive,” he told Sun.Star Cebu.
He added that he did not bother to register his business with the BOI when he first started because registration was limited to large companies.
Aside from manufacturing, the preferred activities in the IPP 2017-2019 are agriculture and fishery; strategic services; drug rehabilitation centers; mass housing; infrastructure and logistics including public-private partnership participated by local governent units (LGU); innovation services; inclusive business models; and environment or climage change-related projects.
On inclusive business, BOI wants more large companies to tap small, and medium enterprises (SMEs) in their value chain. He said this is the answer to massive poverty.
“No amount of intervention of government to micro enterprise can really lift the many poor people. The trick is really for big companies who hold the market and technology to integrate the small farmers and micro (enterprises),” Butalid emphasized.
Asked if the bold IPP 2017-2019 will spell huge revenues on the part of the government, Butalid said it was the energy sector that were used to the big-ticket incentives.
The official, however, did not say how much in foregone revenues this could cost.
Under the proposed IPP 2017-2019, it delisted non-renewable energy projects.
“One of the major sources of foregone revenue is the energy sector. We delisted it because, moving forward, there is enough baseload capacity already,” underscored Butalid.
Before 2016 ends, BOI will submit to the Office of the President the draft IPP, and expects to have it approved by early next year.