The Duterte administration is expanding the list of manufacturing activities that would enjoy fiscal perks in its three-year incentives plan to bolster the competitiveness of local industries.
The Investment Priorities Plan (IPP) 2017-2019 is also expected to bring changes not just in the country’s manufacturing sector, but also in the robust information technology and business process management (IT-BPM) sector.
For one, the draft IPP has broadened the scope of manufacturing activities entitled to fiscal perks beyond the positive list in the previous plan.
“In the previous IPP, you have the manufacturing sector and you have a positive list of around eight subsectors. Now, we just put in the IPP all qualified manufacturing sectors, including agro-processing and we removed the specific subsector list,” Trade Undersecretary Ceferino S. Rodolfo said in an interview.
Rodolfo said this move will support the government’s manufacturing resurgence program (MRP), which aims to rebuild the existing capacity of industries, strengthen new ones and maintain the competitiveness of industries with comparative advantage.
He said the implementing rules and regulations (IRR) of the IPP will specify a set of investment and employment requirements to enable firms to qualify for incentives. Rodolfo, however, assured that the rules have been eased.
As for the IT-BPM sector, the IPP has put in place a sunset clause for incentives granted to business-process outsourcing (BPOs) firms in Metro Manila that are registered with the Board of Investments (BOI).
“BPOs applying to the BOI under the Omnibus Investments Code [Executive Order (EO) 226], if located in Metro Manila, will only be granted incentives until 2019,” Rodolfo said, adding that this is a “strategic move” to create jobs in areas outside of Metro Manila.
Most BPO companies register with the Philippine Economic Zone Authority but only to enjoy the income tax holiday under EO 226, which is under the purview of the BOI.
The IT-BPM sector has its own blueprint, which has targeted to increase the ratio of BPOs within and outside of Metro Manila to 50:50 from the existing 70:30.
However, the BPO industry may be forced to scrap this target as the BOI wants more workers outside of Metro Manila to be employed by call centers.
“I told [the Information and Business Process Association of the Philippines] to reverse their goals. There should be a bigger percentage [of workers employed by BPOs] outside of Metro Manila and they are given until 2020 to do that,” Rodolfo said.
To bolster the IT-BPM sector, the official of the Department of Trade and Industry (DTI) said the IPP has listed telecommunications infrastructure as eligible for fiscal perks, but only for new players.
“This is why we put telecommunications under infrastructure in the IPP, so that the provision of IT infrastructure would be incentivized, wherever they may go in the country. But this is only for new players, because we’d like new ones,” Rodolfo said.
The BOI also included “innovation-driven sectors” and “inclusive businesses” as separate categories of preferred activities.
“We’re also incentivizing commercialization of technologies developed by Department of Science and Technology, like say a mobility technology,” said Rodolfo, who is also head of the BOI.
The BOI removed the “locational restrictions” for developers of accommodations and tourism infrastructure to avail themselves of incentives, except in Boracay.