Philippine Government Support to Investors

Philippine Government Support to Investors

Philippine Investment Climate

Philippine Investment Trends (In Billion Pesos)Source: National Statistical Coordination Board (NSCB)73% growth

Chart4

221.82

231.23

357

385.8

464.22

314.11

542.6

Approved Investments

Approved investments by IPAs

Total Approved Investments of Foreign and Filipino Nationals by Promotion Agency

1996 to 2009

(in Million Pesos)

199619971998199920002004200520062007200820092010

Approved Investments438,521.6743,117.5375,080.6283,296.2207,885.5221.82231.23357.00385.80464.22314.11542.60

2001186.33

200299.18

200363.79

2004221.82

2005231.23

2006357.00

2007385.80

2008464.22

2009314.11

Approved investments by IPAs

Approved Investments

Approved investments by IPA (2)

Total Approved Investments of Foreign and Filipino Nationals by Promotion Agency

1996 to 2009

(in Million Pesos)

AGENCY19961997199819992000200120022003200420052006200720082009

BOI396,431.2570,106.2267,367.7116,476.043,611.5102,036.528,352.128,340.7164,524.3163,878.7187,616.4215,342.7289,334.0124,171.8

CDC5,971.39,127.96,289.91,876.62,912.51,568.927,548.21,748.63,002.13,110.112,692.51,983.29,643.75,866.4

PEZA20,498.8159,752.495,781.6155,740.7156,697.780,890.838,741.131,346.150,561.162,761.283,761.1133,732.5154,783.6175,365.6

SBMA15,620.34,131.05,641.49,202.94,663.81,836.84,542.22,359.33,727.81,484.472,933.334,745.310,459.78,709.8

Total438,521.6743,117.5375,080.6283,296.2207,885.5186,333.099,183.663,794.7221,815.3231,234.4357,003.3385,803.7464,221.0314,113.6

Total Approved Investments of Foreign and Filipino Nationals by Industry

1996 to 2009

(in Million Pesos)

INDUSTRY19961997199819992000200120022003200420052006200720082009

Agriculture7,970.84,611.51,220.41,018.7143.32,398.81,215.82,855.7212.2770.54,734.11,856.12,498.02,873.5

Communication255,817.542,102.619,962.2207.014,877.558,305.82,290.31,258.60.02,079.547,042.114,221.82,186.05.7

Construction26,101.544,860.53,315.9653.97,509.91,708.6412.83,441.61,139.983.33,857.514,089.7215.9179.5

Electricity17,074.628,667.336,320.116,550.06,567.92,171.41,016.1632.48,564.321,659.445402.6139,078.3131,922.632,296.1

Finance & Real Estate10,316.8132,821.4136,296.7122,327.983,438.947,752.812,007.44,985.57,158.110,019.528,833.454,927.0114,088.289,111.1

Gas117.70.00.00.00.00.04,639.9106,521.0268.60.0561.00.016.8

Manufacturing64,653.9177,514.4145,326.4102,916.785,280.441,935.956,992.529,809.554,330.4150,160.6151,983.694,676.775,517.6106,299.6

Mining8,897.015,048.22,640.51,785.5171.93,366.80.03,999.21,511.78,293.816,146.713,775.648,269.12,018.9

Services21,792.521,374.58,725.518,308.16,609.426,481.716,613.39,792.941,005.615,343.929,105.337,631.371,416.929,352.7

Storage277.4884.71,187.52,917.3703.81,039.0183.6539.1388.426.235.31,340.51,059.40.0

Trade748.31,277.6344.85,145.4272.3536.11,207.01,205.2516.9357.026,332.3779.9531.32,155.4

Transportation24,634.98,762.919,740.711,465.72,310.2636.35,543.8514.5466.922,172.23,530.510,328.816,515.83,829.7

Water118.6265,192.00.00.00.00.01,701.0120.60.00.00.02,537.00.045,974.8

TOTAL438,402.9743,117.6375,080.7283,296.2207,885.5186,333.299,183.663,794.7221,815.4231,234.5357,003.4385,803.7464,220.8314,113.8

Notes:

1. Approved investments refer to the project cost or committed investments by Filipino and foreign investors.

2. Details may not add up to totals due to rounding.

Sources of Basic Data:

Board of Investments (BOI), Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA) and Clark Development Corporation (CDC).

BOI-PEZA Approved Investments (In Billion Pesos)69% growthSource: National Statistical Coordination Board (NSCB)

Chart5

187.6283.76

215.34133.73

289.33154.78

124.17175.36

302.1204.39

BOI

PEZA

Sheet1

In Million Pesos

20062007200820092010

BOI187,616.40215,342.70289,334.00124,171.80302,099.50

PEZA83,761.10133,732.50154,783.60175,365.60204,394.60

In Billion Pesos

20062007200820092010

BOI187.62215.34289.33124.17302.10

PEZA83.76133.73154.78175.36204.39

Sheet1

BOI

PEZA

Sheet2

Sheet3

Non-Philippine Nationals (individual or juridical) may invest in domestic or export-oriented (at 60% export) activities up to 100% of its capital provided these are not listed in the Foreign Investments Negative List (FINL):The Foreign Investments ActLIST AAreas of activities reserved to Philippine nationals where foreign equity participation in any domestic or export enterprise engaged in any activity listed therein shall be limited to a maximum of 40% as prescribed by the Constitution and other specific laws.LIST BAreas of activities where foreign ownership is limited pursuant to law for reasons of security, defense, risk to health and morals, and protection of SMEs

Government Support

Investment Promotion Agencies (IPAs) in RP

I. Preferred ActivitiesRegular List:Agriculture/ Agri-business and FisheryShip BuildingMass HousingEnergyInfrastructureResearch and DevelopmentGreen ProjectsStrategic ProjectsMotor VehiclesTourismPPP Projects

II. Export ActivitiesIII. Mandatory ListProduction and Manufacture of Export ProductsServices Exports (including IT& IT Enabled services)Activities in Support of ExportersProposed Investment Priorities Plan 2011IV. Export ARMM List

Comparison of IncentivesAttractive Investment Incentives

INCENTIVEBOI(Executive Order No. 226, as amended)PEZA(Republic Act No. 7916, as amended)CDC / SBMA(Republic Act No. 7227 Bases Conversion Devt AuthorityIncome Tax Holiday(ITH)4 6 years (max of 8 years)Exempted from all local and national taxes - value-added taxes, franchise taxes, excise and ad valorem taxes)ITH Bonus3 years provided the firm meets certain conditionsSpecial Tax Rate of 5% on Gross IncomeSpecial Tax Rate of 5% on Gross IncomeImportation of Capital Equipment, Spare Parts and SuppliesDuty-freeTax and Duty-FreeWharfage Dues and Export Tax, Duty, Impost and FeesExemptedNo exemptionSimplification of Customs ProceduresAvailableEmployment of Foreign NationalsForeign nationals may be employed in supervisory, technical or advisory positions within 5 years from a projects registration, extendible for limited periods. The positions of president, general manager, and treasurer or their equivalents, of foreign-owned registered firms may be retained by foreign nationals for a longer period.All foreign employees may bring with them their spouses and unmarried children under 21 years of age.

Due diligence assistanceInformation supportVisit program development & investment briefingBusiness matching

Business registration facilitationNetworking with IPUs and other government agencies on pre-operational business requirementsFast tracking with registration proceduresAssistance with local government requirements

Aftercare servicePresence of government network to quickly respond to concernsRegular supervision & monitoringIPA Services

Strategic Investors Aftercare Program (SIAP) SIAP is a PROACTIVE program designed to create a high quality, trust-based, working relationship between BOI and existing investors in ensuring continuing business in the country.The BOI ensures that investors issues and concerns are addressed and managed with the following partners:Investments Promotion Unit (IPU) NetworkNational Economic Research and Business Assistance Centers (NERBACs)Fast facilitation of investors issues and concernsOpen access to public sector on investment related policyEffective and sustained interaction

IPU NETWORKdispatcher / monitorAct on I/C within 5 working days for simple transaction and 10 working days for complex transaction per Anti-Red Tape LawThe OMB has discussed its intention to facilitate Issues raised by the investors to NGAs thru their resident ombudsman for recommendation to OMB

Discover the Philippine Advantage!

Contact details:

Asst. Secretary FELICITAS AGONCILLO-REYESInvestments Promotion GroupBoard of InvestmentsIndustry and Investment Building385 Sen. Gil Puyat Avenue,1200 Makati City, PhilippinesTel: (632) 896-9212/ 897-6682 ext. 327-28 Fax: (632) 8972781Email: [email protected] Website: www.boi.gov.ph

Good Morning!

First of all, I would like to thank the organizers of this event for inviting me to be part of this occasion and for giving me the opportunity to do this presentation.

Earlier, you were briefed on the specific opportunities in the Philippines available for Italian investors.

Now, I would like to share with you pertinent information on the kind of support/assistance the Philippine government extends to investors to help them do business in the Philippines with greater ease. I believe government support is one of the critical factors companies consider when deciding on a new investment location.

So I hope that my presentation would give you an idea how the Philippine government handholds investors throughout the entire investment process, from the time they do exploratory/due diligence work, until after they have established their business in the country, to help them achieve their business goals.But before we proceed with that, let me first give you an overview of the current investment climate in the Philippines. As the next slides will show, we have been growing in the investment arena for several years now, and I think that one of the factors contributing to this is governments support to investors that helps create a business-enabling environment for them.Here are some historical figures on total Philippine investments.

An accelerating trend, particularly during the 5-year period 2004-2008, may be noted as total investments more than doubled from P221.82 billion in 2004 to its peak of P464.22 billion in 2008.

In 2009, the global economic crisis took its toll on the countrys investment performance as total investment approvals declined to P314.11 billion.

Investments, however, rebounded in 2010 as total investments soared by 73% to P542.6 billion compared with the approved investments posted in 2009.

Please note that there were no investments from Italy for the last three (3) years. The last recorded FDI from Italy to the Philippines was in 2007 at PHP 21.1 million, which made a negligible contribution to total FDI at 0.01%. This is why we would like to encourage more investments from Italy. As for approved investments from BOI and PEZA, the strong growth in investments in 2010 was largely due to the staggering 143% rise in total investments committed through BOI (from P124 billion in 2009 to P302 billion in 2010).

The combined BOI-PEZA approved investments, on the other hand, increased by almost 70% to over P506 billion in 2010 compared with the P300 billion posted in 2009. Investor confidence remained high with foreign investment inflows continuing to reflect a positive outlook on the economy. FDI has been an important source of economic growth for the Philippines. As such, as early as 1991, the government has liberalized the entry of foreign investments into the country through the passing of the the Foreign Investments Act. This Act is considered as one of the major catalysts of FDI inflows into the Philippines.

So what is the FIA?

Under the FIA, Non-Philippine nationals are permitted up to 100% ownership in many areas of investment, except in areas that are identified in the Foreign Investments Negative list (FINL), which is reviewed every two (2) years. List A of the Foreign Investments Negative List consists of (read from the slide), while List B consists of (read from the slide)

For Foreign owned firms catering mainly to the domestic market, a paidin capital of at least US$200,000 is required. This can however be lowered to US$100,000 if the activity involves advance technology or if the company employs at least 50 direct employees. Of course, the government encourages not only foreign but also local investments. The following slides will show you the various kinds of support the government extends both to foreign and local investors.

To facilitate the provision of support to investors, the government has created several investment promotion agencies throughout the country. Currently we have 13 IPAs and they are as follows: Board of Investments (BOI) Philippine Economic Zone Authority (PEZA) Subic Bay Metropolitan Authority (SBMA) Clark Development Corporation (CDC) Bases Conversion and Development Authority (BCDA) Philippine Retirement Authority (PRA) Regional Board of Investments Autonomous Region of Muslim Mindanao (BOI-ARMM) Phividec Industrial Authority (PIA) Cagayan Economic Zone Authority (CEZA) Aurora Pacific Ecozone and Freeport Authority Zamboanga City Special Economic Zone and Freeport Authority (ZamboEcozone) Authority of the Freeport Area of Bataan (AFAB) Tourism Infrastructure and Enterprise Zone Authority (TIEZA)

Aside from promoting investments, these IPAs extend assistance, register, and grant incentives to investors. For the ecozones such as PEZA, SBMA, CDC, etc., their services include the facilitation of the business operations of investors in export-oriented manufacturing and service facilities inside the economic zones.

This network of IPAs has also been tasked to develop and adopt a national marketing plan, called the PIPP (Philippine Investment Priorities Plan). The general objective of having this Plan is to harmonize the investment promotion efforts of IPAs (i.e., conducting common activities and using common collateral) to maximize the use of the countrys limited resources. As part of these synergy efforts, IPAs shall focus their marketing activities on those specific sectors identified as having visible and realistic potential. The IPAs shall also conduct image and awareness-building initiatives for the Philippines through intertwined approaches, as well as jointly advocate for improved investment climate in the country.** Similar to the PIPP is the IPP or the Investment Priorities Plan. The IPP is a list of specific economic activities wherein investments are to be encouraged for the domestic or export market. It aims to improve the efficiency and effectiveness of IPAs in attracting investments by focusing their promotion activities on certain sectors that have exhibited viability and have posed advantages to the Philippines in recent years and on sectors that have been identified as next priority sectors.

The IPP promotes the government mandate of creating jobs for the people and economic development through the grant of fiscal or monetary and non-fiscal incentives for those investors whose proposed activities are deemed qualified for registration.

The 2011 IPP, which is yet to be signed by the President, covers several areas of activities encouraged for investments as shown.

A new addition to the list are the Public-Private Partnership or PPP projectsbeing the governments cornerstone strategy for national development.

*As mentioned in the previous slide, the governments primary support to investors is the granting of attractive investment incentives.

The government has come up with a liberal program of fiscal and non-fiscal incentives to attract foreign capital and technology that complements local resources.

Different incentives schemes are available relative to the location and registration of the proposed business activity. Thus, there are several options for an enterprise to choose from.

For projects listed on the Investment Priorities Plan, specifically infrastructure, government incentives are in the form of 4 to 8 years of Income Tax Holiday, zero percent duty on imported capital equipment, exemption from 12% input VAT on allowable local purchase of goods and services, unrestricted use of consigned equipment, and employment of foreign nationals.

Our complete menu of incentives for other sectors which could locate in any of our economic zones include 5% tax rate on gross income after the lapse of ITH and tax and duty exemption on imported capital equipment.

*Aside from incentives, IPAs provide other forms of support/assistance to investors. The following services are extended to both existing and potential investors in the Philippines.

Due diligence assistanceInformation support for all those needing any information about the Philippines and its investment policiesVisit program development & investment briefing for incoming delegationsBusiness matching with local partners, if requested by foreign or even local investors

Business registration facilitationFast tracking with registration procedures with concerned agencies of the governmentAssistance with local government requirements, particularly for their business permits and licenses

Aftercare servicePresence of government network to quickly respond to concerns of existing investors with the end goal of making them stay in the Philippines and grow their business even strongerRegular supervision & monitoring of activities to avoid problems, if possible and if there is one brewing already, maybe to assist in resolving the concerns in the shortest time possible.

*For the aftercare service, the government, specifically the BOI, designed a proactive program called the Strategic Investors Aftercare Program (SIAP) that aims to create a high quality, trust-based, working relationship between BOI and existing investors in ensuring continuing business in the country.It aims to provide a mechanism that ensures a smooth and sustained interface between the BOI and existing investors when investors avail of the services of the government.Investor issues and concerns are addressed and managed with the following partners:Investments Promotion Unit (IPU) NetworkNational Economic Research and Business Assistance Centers (NERBACs)

The Investment Promotion Unit (IPU) Network is a group of 28 government agencies with MOA signed last 25 April 2007 aiming to fast track the investors issues and concerns. The BOI provides the secretariat functions thru its Investment Aftercare Services Department. As secretariat, the BOI acts as the dispatcher of investor issues and concerns and monitors its progress. All 28 government agencies, including the BOI are bounded by the MOA to act on all investor issues and concerns within 72 hours from receipt whenever possible but not later than the 15 working days deadline per the code of ethics of government officials and employees (RA 6713).

*So that ends my presentation.

I hope that my presentation was able to show you our governments serious intent to provide a stable and strategic investment environment for investors. Rest assured, the Philippines will remain committed in improving the investment climate in the country to ensure that businesses that locate here continue to grow and prosper.

Thank you and again, good morning to all.

*