Attracting investments

Attracting investments by: Joanna Grace Manuel

Many are confident that 2012 investments would increase from last year. This optimistic forecast had been backed up by the announcement of the National Statistics Office that Philippine exports had grown 3% year on year in January. Moreover, recent polls show expectations of higher economic growth for 2012 than last year’s 3.7%.
 
In line with the government’s effort to improve the country’s economy, Executive Order No. (EO) 70 was issued to encourage investments in the Philippines. The 0% duty on importation of capital equipment, spare parts and accessories which expired last June 2011 has been extended for five years. As with prior incentives, the exemption is limited to items that are not manufactured domestically in sufficient quantity, and of the same quality at reasonable prices. Only items that are reasonably needed and exclusively used by Bureau of Investments (BoI)-registered entities for their listed activities will be allowed to enjoy this incentive.

At the onset, when such privilege was granted to BoI-registered entities, this was treated as an exemption from taxes and duties on the importation of capital equipment with no mention as to the specification for use in registered activities. It was in 2004 that the exempt rate was changed to 0% rate and the availment of the incentive was limited for a period of two years. In 2006, the availment was extended for another five years, and thus expired in June 2011. However, last March 29, 2012 the government issued EO 70 to extend this 0% duty rate for another five-year period.

EO 70 provides that the 0% duty shall be granted to BoI-registered new and expanding enterprises, upon issuance of Certificate of Authority by the BoI, on articles or equipment classified under specific chapters of the Tariff and Customs Code of the Philippines. Samples of these articles are:

• rubber
• textile fabrics
• stone and plaster
• cement and asbestos
• ceramic product
• glass and glassware
• iron or steel
• aluminum
• base metal
• nuclear reactors, boilers, machinery and mechanical appliances
• electrical machinery and equipment, sound recorders and reproducers, television image and sound recorders and reproducers
• railway or tramway locomotives, railway or tramway track fixtures and fittings
• vehicles other than railway or tramway
• ships, boats and floating structures
• optical, photographic, cinematographic measuring, checking, precision, medical or surgical instruments and apparatus
• clocks and watches
• miscellaneous manufactured articles.

To ensure that such equipment, spare parts and accessories will be used in BoI-registered activities, the sale, transfer or disposition of the articles or equipment that enjoyed the incentive requires prior approval from the BoI if such sale or transfer shall be made within five-years from the date of importation.

The penalty clause for the violation has been enhanced. A violation would now result in a minimum amount of P500,000.

Incentives have to be maintained by the government to be more competitive in attracting investments in the Philippines.

In fact, other neighboring countries such as Vietnam, Thailand, Malaysia, among others, offer the same incentive to entice investors.

The government exerts effort to attract investments for the country’s economic improvement.

All we can do now is hope that incentives granted are not abused and that stricter implementation of the rules and regulations would ensure that their purpose is served.