THE Philippine Economic Zone Authority (Peza) wants to be under the direct supervision of President Duterte, but the country’s trade chief and top business leaders thumbed down the investment promotion agency’s proposal.
Peza Director General Charito B. Plaza announced her intent to separate her agency from the Department of Trade and Industry (DTI) and be placed under the
Office of the President (OP). This is the Peza’s response to the looming creation of the Fiscal Incentives Regulatory Board (FIRB) under the second package of the Comprehensive Tax Reform Program (CTRP).
“We are proposing an amendment to the Peza law because the Peza law is now 23 years old. There are so many weaknesses and [provisions are] lacking, like, for example, we want [the] Peza to be directly under the OP already as a GOCC [government-owned and -controlled corporation],” Plaza said in a recent news briefing.
“Right now, we are attached to the DTI and we don’t know our personality. Some say we are a GOCC; others say we are just a government instrumentality,” she added.
Under Republic Act 7916, or the Special Economic Zone Act of 1995, the Peza is attached to the DTI, with the trade chief heading the Peza Board. However, the Peza Board’s function will soon be superseded by the FIRB. The latter will approve tax incentives and will be chaired by the finance minister once the second CTRP package is approved.
The amendment to the Peza law, however, will challenge the FIRB, as it will retain the power to grant tax perks to locators under the Peza Board, Plaza explained.
DTI chief says no
Even before the proposal was delivered to lawmakers, the plan to move the Peza to the OP is already facing resistance—from no other than its board chairman, Trade Secretary Ramon M. Lopez. In a text message to the BusinessMirror, Lopez gave the proposal a stern “nope.”
“It has to be under [the] DTI because it concerns trade, exports and economic zones. If they have a different mandate, then I won’t object to transferring them,”
Moreover, how can programs aimed at magnetizing investors to the country be coordinated if the Peza is relocated to the OP, Lopez asked. “It has to be under [the] DTI to be aligned with our investments promotion [programs],” he added.
The trade chief argued the Peza can only become a GOCC if a new law is enacted giving it a wholly different Charter. He also said the DTI will block any proposal—whether through revising the Peza law or passing a new one—freeing the Peza from its clutches.
“[The Peza] is governed by law and it will take a law to change that, and [the] DTI will oppose the proposal,” Lopez said.
George T. Barcelon, chairman of the Philippine Chamber of Commerce and Industry (PCCI), agreed with Lopez, and said, “it is a bit premature to request the whole functions [of the Peza] be transferred to the OP.” He said the plan will only overload the OP, which currently oversees dozens of agencies.
“When it comes to investment and matters of trade, I think, as of now, it is under [the] DTI, and that is the most prudent in the sense that all of these data [about] investors, trade and everything, it is [the] DTI that has those information. Can you imagine the [duplication] that will occur if it is [under] the OP?” Barcelon told the BusinessMirror.
He is also of the view that locators may abuse the tax incentives granted by the Peza if the agency will be autonomous from the proposed FIRB. “Again, if it is going to the OP—or even if they stand alone—at the end of the day, there is a huge implication on the incentives that will be given, [as] it will effect also the revenue side of the government,” Barcelon said in a mix of English and Filipino.
“On the part of the government, it also needs the money for [its] coffers, for all the projects it has in mind. My suggestion is they [the Peza and the DTI] must be in sync, in tandem, on what to do [with the tax incentives],” Barcelon added.
The PCCI chairman also thinks Peza executives are being “a bit overly aggressive” in trying to spare their agency from the coverage of CTRP’s second package.
“Right now, we have an issue on check and balances [in the power to grant tax perks], what more if you expand? I definitely would not agree that [the Peza] be a separate branch under the OP,” Barcelon said.
Blame labor, not tax reforms
Sergio R. Ortiz-Luis Jr., president of the Philippine Exporters Confederation Inc., said the Peza should not pin the blame on the second tax-reform measure for its plunging investment pledges. In an interview with the BusinessMirror, he pointed to the government’s labor reforms as the main factor for the reduced commitments to the Peza.
Investments committed to the Peza were down by 55.86 percent in the first half of the year. Plaza said the only way to prevent pledges from falling further is to exempt the agency from the coverage of the CTRP’s second package.
Potential investors are reportedly holding on to their money, while existing locators are thinking twice about expanding operations. The CTRP’s second package seeks to rationalize tax perks and reduce corporate income tax.