Investments in IT-BPM sector rising

IT-BPM investment pledges are showing signs of recovery, after the Philippine Economic Zone Authority (Peza) convinced some companies to expand before the second tax reform package takes effect.

According to Peza data, investment pledges from information technology and business process management (IT-BPM) companies grew 8.82 percent to P12.39 billion up to September.

This marked the second month in a row that pledges from this industry grew despite the uncertainty over tax perks. Peza said commitments started growing in August, marking a 12-percent growth that time.

Elmer San Pascual, manager of Peza’s promotion and public relations, said that they have been asking companies to expand while they can before lawmakers pass the Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) bill.

“On the side of Peza, Director General (Charito Plaza) talked to companies, particularly [IT-BPMs]. If you have expansion plans, expand now. At least if you expand, there is a tinge of optimism that we will be able to protect what we signed with you,” he said on Monday.

“That’s what’s happening. At least the director general was able to convince [IT-BPM] companies starting August,” he added.

The Trabaho bill, which has already been passed in the lower house, will slowly lower the corporate income tax while rationalizing tax incentives.

The tax package has largely received the blame for the recent decline in overall Peza investment pledges.

Peza Director General Charito Plaza also attributed the growth to hopes that Peza might have likely allies in the Senate, after senators pushed for a more Peza-friendly “Train” law although these did not end up in the final form of the tax package.

While the IT-BPM industry may show signs of recovery, manufacturing and ecozone development—which together make up more than 76 percent of total Peza pledges so far—are still falling under the weight of tax reform.

In the first nine months of the year, Peza’s investment pledges fell 55.28 percent, reaching P87.85 billion from P196.46 billion in the same period in 2017.

Manufacturing, for its part, declined 46.17 percent to P24.27 billion from P45.09 billion in the same nine months. Pledges for ecozone development, meanwhile, dropped 65.31 percent to P42.91 billion from P123.72 billion.

The continuous decline in investment pledges has pushed Peza to be bearish about the agency’s outlook for the end of the year. Plaza has previously pegged the target growth for pledges this 2018 at 10 percent.

“Because of the forthcoming election, I don’t think we’ll get a bigger projection because it is usually the process whenever it is election year. [On election year], investors are on hold,” she said.

Pledges, she said, might pick up after elections and if a ‘Trabaho’ bill favorable to Peza gets passed.

However, Peza’s fate under the Trabaho bill remains to be seen.