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The 2017 Investment Priorities Plan

Tata Panlilio Tata Panlilio

On Feb. 28, President Rodrigo R. Duterte, through Memorandum Order No. 12, approved the 2017 Investment Priorities Plan (IPP), as drafted by the Board of Investments (BoI). The IPP is issued every three years and lists the priority investment activities that may be eligible for incentives. The IPP is aligned with the goals, priorities and strategies under President Duterte’s 10-point socioeconomic agenda and the framework on the Comprehensive National Industrial Strategy. After publication, the 2017 IPP took effect on March 18, 2017. At present, the BoI is finalizing the general policies and specific guidelines of the 2017 IPP which will set out in detail the criteria and other parameters that the investment activities must meet to qualify for incentives.

In 2016, BoI-approved investments grew by 20.4% to P441.8 billion, up from P366.7 billion registered in 2015. This is the second-highest level since 2000, with the highest amount of investments registered in 2013 at P466 billion. The 20.4% increase in investment exceeded the BoI’s 7% growth target for 2016.

Formulated with the theme “Scaling Up and Disbursing Opportunities,” the 2017 IPP aims to generate more investments to jumpstart manufacturing resurgence; spur inclusive growth and create more jobs especially in the countryside.

In his foreword to the 2017 IPP, BoI Chairman and Trade Secretary Ramon M. Lopez explained that the list of priority investment areas significantly differs from the 2014 IPP “with the inclusion of more MSME (micro-, small- and medium-scale enterprises)-oriented, innovation-driven, health- and environment-conscious activities that look at expanding job opportunities for more segments of the population and bringing more firms into the local and global value chains.” Moreover, “there is a deliberate policy to shift investments to the countryside.”

Under the 2017 IPP, the preferred activities are: 

1. All qualified manufacturing activities including agri-processing;

2. Agriculture, fishery and forestry;

3. Strategic services -- including integrated circuit design; creative industries/knowledge-based services; maintenance, repair and overhaul (MRO) of aircraft; charging/refueling stations for alternative energy vehicles; industrial waste treatment; telecommunications; state-of-the-art engineering, procurement and construction (EPC);

4. Health care services including drug rehabilitation centers;

5. Mass housing -- with reduced price ceiling for mass housing units to P2 million from P3 million previously. Except for in-city low-cost housing for lease, only projects outside Metro Manila may qualify for incentives;

6. Infrastructure and logistics including local government unit public-private partnerships (LGU-PPPs);

7. Innovation drivers -- research & development (R&D) activities; conduct of clinical trials (including drug trials); establishment of Centers of Excellence; business incubation hubs; fabrication laboratories; commercialization of new and emerging technologies and products of the Department of Science and Technology or government-funded R&D;

8. Inclusive business models -- covers business activities of medium and large enterprises in the agribusiness and tourism sectors that provide business opportunities to MSMEs as part of their value chains. These projects may qualify for pioneer status;

9. Environment or climate change-related projects; and

10. Energy -- covers power generation projects utilizing conventional fuels, waste heat and other wastes and establishment of battery energy storage systems. 

Also included as preferred investment activities are:

* Export activities -- including production and manufacture of export products; services exports and activities in support of exporters;

* Mandatory inclusions based on special laws that grant incentives like the Philippine Mining Act of 1995, the Renewable Energy Act of 2008 and the Tourism Act of 2009, among others; and

* The list of priority investment areas for the Autonomous Region in Muslim Mindanao.

A key feature of the 2017 IPP is that it seeks to transform and accelerate the growth of the manufacturing, agriculture and tourism sectors by encouraging them to adopt inclusive business models by expanding their backward and forward linkages to MSMEs and integrate the latter into their value and supply chains. In so doing, the hope is to attract investment, and new capital as well as to accelerate job creation in sectors and regions that are currently underserved. These initiatives can help make a significant dent on the inequality of growth/income and the incidence of poverty which, in the long run, will pave the way for sustainable socioeconomic growth.

The BoI certainly deserves credit for developing an IPP that has a strong emphasis on involving MSMEs. The other government agencies can certainly take their cue from the clear mandate in Memorandum Order 12 that all government agencies “regulate the implementation of the IPP, which is aimed at sustaining inclusive growth and generating more jobs in the country.” Moreover, “all government agencies and entities are enjoined to issue the necessary regulations to ensure its implementation in a synchronized and integrated manner.” 

For example, the Securities and Exchange Commission (SEC) can continue to enhance its current efforts to simplify the registration forms to set up MSMEs; establish more satellite offices in key cities outside Metro Manila to make it more convenient for MSMEs in those areas; and increase its investment in technology to make services more accessible.

In addition, the Bureau of Internal Revenue can revisit the strong clamor to simplify registration steps for MSMEs as well as to develop a simplified “starter kit” for the books of account, invoices, official receipts and other forms for MSMEs.

The various local government units can also come up with standard, simplified and expedited processes for the issuance of business permits and other permits for MSMEs.

Finally, boosting investment by granting tax and other incentives is just one of the items in the “wish list” of the local business community and foreign investors. Their overarching concerns about doing business in the Philippines include a cohesive and consistent set of economic policies and tax rules; a level and predictable playing field and a good peace and order situation.

Of course, improved transportation and infrastructure systems; and lower cost of electricity, internet and communication will also go a long way in solidifying our country’s image as a preferred investment destination. 

Tata Panlilio-Ong is a Director with the Tax Advisory and Compliance division of P&A Grant Thornton. P&A Grant Thornton is one the leading audit, tax, advisory and outsourcing services firm in the Philippines.

 

As published in BusinessWorld, dated on 30 May 2017