THIS was not how the Philippine Economic Zone Authority (Peza) pictured it. Entering the year, the regulator of economic zones set a target of growing its investment haul by 10 percent, only to begin the first quarter with a double-digit slump on the confluence of numerous crises.
Investments registered with the Peza in the first quarter declined close to 28 percent to P16.49 billion, from P22.9 billion during the same period last year, according to official records. Worse, not a single peso was recorded in March, as board members were unable to convene.
The first-quarter registrations translated into 87 fresh projects as against the 128 in 2019.
Further, shipments made by economic zone locators crashed by more than 66 percent to $4.36 billion, from $12.94 billion. The Peza traced the steep declines in both investment and export figures to the calamities that struck the Philippines, particularly Taal Volcano’s eruption in January and the Covid-19 pandemic.
As the whole of Luzon remains under community quarantine—extended by President Duterte up to April 30—exporters were allowed to keep operating for as long as they house their workers near plants to spare them of the hassle of passing through checkpoints daily.
However, not everyone has the liquidity to shell out more money for workers’ temporary shelter. This is one of the reasons, on top of restricted movement of people and goods, that only 78 percent of economic zone firms in Luzon are operating as of weekend.
Peza’s view
In an interview with the BusinessMirror, Peza Director General Charito B. Plaza said many investment applications were submitted to the agency before things got worse, but are now on hold, as it will be difficult to implement projects with a lockdown in place.
She said the issue lies in the suspension of work and disrupted transport of goods, making it difficult to build new factories for lack of labor and raw materials. Moreover, some investors just lack the financial capacity to provide temporary shelter for their workers.
“Everybody is at halt,” Plaza admitted, “though we have many pending applications before the pandemic [reached here], affecting expansion plans; construction of plants of new investors for lack of workers [and] raw materials, and costly housing; and other quarantine measures to be complied with as our requirement to continue operations despite Covid.”
Plaza was really expecting the President to extend the quarantine in order to flatten the curve on Covid-19 cases. However, she was hoping changes would be introduced in the protocols, such that regular work will resume and containment efforts be concentrated on hotbed areas of the virus.
She and several business groups have been pushing a selective, or modified or targeted lockdown so that only areas deemed virus hot zones are affected.
The Peza can no longer take another year of investment losses, as it tries to recover from two consecutive double-digit declines. Last year investments applied to the agency slipped by over 16 percent to P117.54 billion, from P140.24 billion in 2018, on uncertainties brought about by the government’s move to rationalize fiscal incentives.
Economic zones, which the Peza regulates, employ nearly 1.6 million workers nationwide and contribute a huge sum of the country’s export total.
For two years now, the Duterte leadership has been pushing for the passage of the Corporate Income Tax and Incentives Rationalization Act (Citira) bill, a measure opposed by companies operating in economic zones. The Citira bill will cut corporate tax to 20 percent in 10 years on one end, but will overhaul incentives granted to investors on the other.
Locators, mostly multinationals, warned that lifting their tax perks, particularly the 5-percent tax on gross income earned in lieu of all local and national taxes, will compel them to pack up their operations here and transfer to another Southeast Asian economy.
The Joint Foreign Chambers of the Philippines put potential job losses at above 700,000 once the Citira bill is passed. The measure was approved by the House of Representatives last year and awaits passage in the Senate.