THE 18th Congress must immediately decide on the fate of the Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) bill if it wants to increase foreign direct investment (FDI) inflows into the Philippines, economists said on Monday.
First Metro Investment Corp. (FMIC) Vice President and Department Head of Research Cristina S. Ulang told reporters in a news briefing that Congress should put an end to the uncertainties being created by the nonpassage of the Trabaho bill.
“The concern is just the speed [that’s the issue]. The uncertainty should be removed. So it should happen this year; we’re expecting Congress to pass it this year and then maybe address some of the concerns. If the uncertainty is removed, then the FDI can come in,” Ulang told the BusinessMirror on the sidelines of the briefing.
“We’re not against it, we’re not against Trabaho bill,” she added. “It should happen and whatever is the transition period, then the investor should know. If they know, they can decide.”
Ulang said FMIC supports the passage of the Trabaho bill since they believe in a number of the provisions, such as the time-bound and performance-based incentives for investors.
While she agreed that incentives cannot be extended forever, Ulang said Congress should address the concerns of businessmen on the final version of the bill.
In May, Philippine Ecozones Association (Philea) President Francisco S. Zaldarriaga told the BusinessMirror that economic zone developers are in a wait-and-see mode on whether the Trabaho bill will be transmitted to Malacañang under the 17th Congress.
Zaldarriaga said the group has yet to evaluate investment losses from the uncertainties, but claimed it “definitely” took a toll on capital inflow to the Philippine Economic Zone Authority (Peza).
Investments registered with the Peza last year slumped 40.97 percent to P140.24 billion, from P237.57 billion in 2017. A total of 529 fresh projects represented these investment pledges, from the 554 projects in 2017.
The passage of the Trabaho bill is just one of the things that the FMIC is expecting to come out of the last three years of the Duterte administration.
Other things that the government should prioritize, FMIC Chairman Francisco C. Sebastian said, is its “Build, Build, Build” (BBB) program so it can continue and deliver on its promises of growth and development.
Sebastian said infrastructure projects are “difficult” in terms of implementation and funding. However, he said it was encouraging to see the Duterte administration shore up funds for the program.
He noted that the government was able to obtain funds for the BBB using Official Development Assistance (ODA) and even through the capital markets.
FMIC’s chief said the government’s recent foray into the Renminbi market was “well-received.” This, he said, is a testament to the recent credit rating upgrades received by the country such as the BBB+ from S&P Global Ratings.
“Even more heartwarming is the credit upgrade which is a very pleasant surprise. This is important not just for the peso, not just for the Philippines, but the Philippines’s ability to tap foreign markets to fund infrastructure. So if there’s one singular thing that we want to happen, its infrastructure,” Sebastian said.
Former Central Bank Deputy Governor Diwa C. Guinigundo earlier said a credit rating upgrade from the Japan Credit Rating Agency (JCRA) was also imminent since the Philippines was given a rating of “BBB” with a positive outlook from the ratings agency.
With these developments, FMIC President Rabboni Francis Arjonillo said they would also like to see an “A” credit rating happen before the President steps down from office in 2022.
“[This is] premised on the fact that despite our aggressive infrastructure activities, our financial position remains strong and it remains at the back of new taxes that were created, basically part of the Train initiative,” Arjonillo said.
In May, the Department of Finance (DOF) reported that revenues for the first year of the Train law’s implementation surpassed the government’s target.
In a statement, the DOF’s Strategy, Economics, and Results Group (Serg) led by Undersecretary Karl Kendrick T. Chua said revenues attributable to the implementation of the TRAIN law reached P68.4 billion for 2018, which is 8.1 percent higher than the full-year target of P63.3 billion.
The Serg reported in a recent Executive Committee meeting that the largest gains for the year under the Train were seen in tobacco excise, auto excise and documentary stamp tax (DST) collections. Personal income tax (PIT) collections were also higher than expected due to better compliance and an increase in the number of registered taxpayers.
Taken together, these highest gainers contributed around P51.5 billion of the P68.4-billion revenue from Train, according to the DOF.
The DOF said that total auto excise tax revenues for 2018 went beyond the target of P6.2 billion, owing in part to higher purchase for vehicles, while DST revenue was also above target by P4.7 billion on higher transactions value and better collection efficiency.