Commentary

Incentives that hinder growth

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Incentives can help or hinder growth. The incentives given to the Thai firm Charoen Pokphand Foods Philippines (CPFP) actually hinder overall economic growth. The Alyansa Agrikultura, a coalition of 42 federations and organizations representing all the major agricultural sectors, has taken this position. This is because in this case, there appears to be a violation of the principle of providing a level playing field.

On top of this, the Philippine swine and poultry industries have recently been beset with rampant smuggling. According to Rosendo So, Swine Development Council Director, smuggling is the main reason behind the P285 billion industry losses for the past three years. Worse, incentives are now being given to a new investor but are not being given to the local agricultural stakeholders.

For example, CPFP is being given a 4- to 7-year income tax holiday. The current players do not have even one year of this. What is so special about CPFP?

Size

The answer is given in an official Board of Investments (BOI) letter: “CPFP is applying for pioneer status based on the magnitude of its investments. The firm’s broiler project costs P2.326 billion (roughly equivalent to $55.394 million), which amount far exceeds the minimum investment required to qualify Agriculture/Agribusiness and Fishery Projects for Pioneer status espoused under the 2012 IPP Specific Guidelines.”

When I was a BOI governor, I argued that incentives should only be given if, without these incentives, the investor would not come in. In a risky investment area, these incentives are recommended. But they should likewise be given to other such investors regardless of size. The main objective should not be to show large investment numbers, but to promote economic development and create jobs through these investments. So laments that in addition to the government not adequately addressing smuggling, it is violating the principle of a level playing field by giving these incentives only to CPFP.

Edwin Chen, Alyansa Agrikultura vice president and Pork Producers Federation of the Philippines president, said: “This will surely kill our backyard and commercial hog raisers. That is too much. They should also grant local producers the same incentives.”

Road maps

In the Feb. 10-11, 2011, Agriculture Fisheries 2025 (AF2025) Conference, Alyansa Agrikultura leaders recommended the formulation of agriculture subsector master plans or road maps with specific action recommendations to achieve the 2025 agriculture vision. In line with this, we commend the BOI for helping complete two separate road maps for the hog and poultry subsectors.

The government should support these road-map recommendations, such as a strategic global approach, increased organizational support, and technical assistance.

In the anti-smuggling area, a road-map key recommendation is that the Bureau of Customs give the Department of Agriculture effective access to anti-smuggling tools like the Inward Foreign Manifest.

This has not yet been done.

Conclusion

The BOI should be commended for having achieved record investment levels for our country. In fairness to BOI, it is trying to do its job by strictly implementing agreed upon BOI guidelines.

At this time of complex economic global realities, we recommend that BOI revisit and modify the incentive guidelines to be consistent with the sectoral road maps they are supporting.

This way, we will be assured that incentives will consistently help, rather than hinder, economic growth.

(The author is chairman of Agriwatch. For inquiries and suggestions, e-mail agriwatch_phil@yahoo.com or telefax (02) 8522112.)

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