THE good news is that the Philippines has been ranked first among countries “worthy of investment,” following a survey conducted by the US News and World Report. The report cited the country’s $304.9-billion Gross Domestic Product (GDP), its 103-million population, and its $7,739 GDP per capita as the factors that led to this assessment.
Next to the Philippines in the list were Indonesia, Malaysia, Poland, Singapore, Australia, Spain, Thailand, India, and Oman.
Our own Board of Investments (BOI) reported that in the first two months of this year, investment pledges from various countries were filed with the BOI amounting to P131.6 billion worth of projects. This compares with P26 billion in the first two months of 2017 – an increase of 402 percent. Leading the new investments are five solar power projects for P60 billion.
The Philippine Economic Zone Authority (PEZA), however, has expressed concern that all this optimism about new investments may be overturned by the Tax Reform for Acceleration and Inclusion (TRAIN) Law. The first part of the new tax law (TRAIN 1) called for the lowering of individual income tax rates, while raising taxes on diesel and other petroleum fuels, on coal, and on sweetened beverages. The second part of the law (TRAIN 2) has yet to be announced but the PEZA fears that in its efforts to raise government funds through taxes, some of the incentives that drew foreign investors to the Philippines may be reduced or removed.
PEZA Director General Charito Plaza disclosed that some investors who have long done business in the Philippines are worried. They are grateful that in TRAIN 1, PEZA firms had the incentive of zero Value-Added Tax (VAT). But now there is TRAIN 2 which will set criteria for granting incentives.
She said that foreign investments in the country’s export zones in the past 22 years since 1995 now stand at P3.6 trillion. These PEZA firms directly employ 1.42 million Filipinos, with indirect employment for another 7 million.
There are now over 4,000 locators, which invested $706 billion in the last 22 years; their local purchases totaled P296 billion.
Since the start of the year, consumer prices have been rising and TRAIN 1 is believed to be the cause, particularly the increased excise tax on diesel and other petroleum products. The PEZA has now expressed concern about the impact TRAIN 2 may have on the foreign investors now operating in the country’s export zones.
We need the funds being raised by the TRAIN law but our economic managers must make sure the program does not have such great ill effects on our people and on our economy. We have such good news from the US News and World Report survey that said the Philippines is No. 1 in the world today among countries “worthy of investment.” But PEZA has also expressed concerns, reflecting those of investors already in our export zones.
These must be carefully studied and assessed by the Department of Finance and Congress, lest all our efforts in the last 22 years be negated by an ill-conceived TRAIN 2 law.
