Aquino successor needs to upgrade BOI incentives
March 9, 2016 at 12:18
Aquino successor needs to upgrade BOI incentives
Even the country’s top investment official is no longer convinced that the Philippines has the right incentives on the menu to attract more global investors.
So for the next administration, Trade Secretary Adrian S. Cristobal Jr. said a serious upgrade in the country’s incentives regime—especially the perks being offered by the Board of Investments (BOI)—is a must.
“I think in the next six years we have to change our incentives regime. There is a need to change it; Executive Order [EO] 226 [the Omnibus Investments Code], signed into law in 1987, is already becoming unresponsive to the way the world has changed,” Cristobal told the BusinessMirror.
Cristobal noted that the Philippine Economic Zone Authority (Peza)—which administers the perks being given to locators in economic zones—still has a competitive incentive package for exporter-oriented enterprises.
For the BOI, however, Cristobal said the incentives should be “seriously reviewed.” The BOI offers to its registered enterprises incentives, such as duty-free importation of capital equipment and income-tax holidays (ITH) ranging from four to six years, depending on the status of the projects.
A review of the set of perks is also key in the promotion of nascent sectors, such as e-commerce, Cristobal said. “It’s been 30 years since [the EO] has been passed. It’s about time we review it because, for example, we want to promote innovation, entrepreneurship and digital start-ups, the ITH is not relevant to them, they need a different source of incentive,” Cristobal stressed.
The Department of Trade and Industry (DTI), with private sector stakeholders, launched the Philippine E-Commerce Roadmap to promote wider e-commerce adoption in February. It seeks to encourage micro, small and medium enterprises (MSMEs) to take advantage of the digital space in gaining a larger customer base.
Aside from catering to local MSME enterprises, the road map also seeks to attract global e-commerce players to do business in the Philippines.
Crafting an incentive package for digital start-ups is in the E-Commerce Roadmap to promote investments in the sector.
“There is a need for the government to come up with policies and programs to nurture these digital start-ups, from the development stage up to the point when their ideas will become commercially viable and rolled out within the country. This may require a good amount of investments. However, our existing investment policies and procedures are not conducive for foreign investments in digital start-ups,” the road map read.
The objective of the road map is for e-commerce to contribute 25 percent to the country’s GDP by 2020, from 10 percent of GDP in 2015, based on the data generated by i-Metrics Asia Pacific Corp.
The need to update the 30-year-old incentives regime is also in line with the DTI’s push to reinvigorate the country’s manufacturing sector.
“We can look at the profile of top BOI investments. The top sectors are energy and real estate…manufacturing is third or fourth [top sector]. We’re seeing that these are the top utilizers of fiscal incentives and from there we have to analyze, why we aren’t getting more manufacturing investments, for example,” Cristobal explained.
The DTI is among the key agencies implementing the multiagency Manufacturing Resurgence Program, a government priority program that was initiated to push for a 30-percent increase in gross value added in the sector, and a 15-percent increase in employment by 2025. This is being done by the DTI through its Industry Roadmapping initiative, which focuses on improving competitiveness of specific manufacturing subsectors in the country.
The DTI chief did not expound on the possible changes that the incentive package should have. But when asked if the current ITH offering of four years is too short to attract more manufacturing investments and, thus, needs to be upgraded, Cristobal replied: “It’s possible.”
Source: www.businessmirror.com.ph
