Senator Imee Marcos has urged the government to approve the creation of new economic zones and freeports in the country, citing Mindanao as the “brave new world” of foreign investment.
Marcos, who chairs the Senate committee on economic affairs, issued the call after the Department of Finance gave a cool reception to pending bills creating new ecozones in Ilocos Norte, Cavite, Surigao del Sur, and Saranggani provinces during a committee hearing Wednesday.
“Creating ecozones from Ilocos Norte to Saranggani take advantage of the country’s proximity to foreign investors based in China and Japan,” Marcos said.
The senator added that Chinese and Japanese investors have already signified interest in investing $100 billion in Surigao del Sur.
Marcos called “outrageous” a policy of the country’s economic managers to leave to the private sector the initiative of creating new economic zones to attract foreign investments.
Marcos exposed during Wednesday’s hearing that 84 ecozones created since 2016 were initiated by the private sector, based on testimony of the Philippine Economic Zone Authority (PEZA).
“So the score is 84 credits to the private sector, zero to our economic managers? What a pity!” Marcos said.
Department of Finance (DoF) policy and research director Juvy Danufrata said during the hearing that the agency intends “to transfer the fiscal burden of the government” to the private sector.
Marcos said that opportunities to generate revenue and create more jobs especially in the country’s far-flung provinces were being missed due to the “knee-jerk opposition” toward local governments seeking to establish ecozones.
The inflow of foreign direct investments (FDIs) to the Philippines has dwindled from $8.7 billion in 2017 to less than $5 billion in 2019, according to the UNCTAD World Investment Report 2020.
“Compare that to the increase in FDIs in other ASEAN nations like Indonesia, Malaysia, Cambodia, and especially Vietnam which raked in $16.1 billion worth,” Marcos said.
“Our foreign investment pie is shrinking, but our economic managers’ recipe for recovery has overlooked ecozones at a time the government is in dire need of more revenue. We must recover our losses,” she added.
Marcos cited that Philippine investment growth faces a “triple threat” due to the Covid-19 pandemic, the US-China trade war, and the uncertainty brought about by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.
The CREATE bill, now awaiting President Duterte’s signing it into law, will reduce corporate income taxes to as low as 20% but has “rationalized” incentives for local exporters, shortening the period of which they can be availed and subjecting these to regulatory approval.
“There is no longer any reason not to approve ecozones, when the Department of Finance itself chairs the FIRB (Fiscal Incentives Review Board) which will decide on what companies will get incentives and what incentives will be applied,” Marcos explained.
“The problem is that our economic managers see tax incentives as expenditures rather than investments in Filipino export potential,” Marcos said, after National Economic Development Authority assistant secretary Greg Pineda said during the hearing that the country lost 441 billion pesos to incentives.
As the CREATE bill awaits the President’s signature, foreign investors have adopted a wait-and-see attitude for their new projects and plans for expansion in Philippine export industries, which make up 60% of the total annual investments approved by PEZA, the agency said.
“This has resulted in job losses, with more than 27,000 workers laid off even before the pandemic,” Marcos said.
“We must reconsider this draconian regime of no ecozones and constantly rationalizing the already meager incentives,” Marcos said.