The Board of Investments (BOI) is poised to miss its target investment pledges this year by a wide margin of at least 30 percent, despite the passage this year of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act that was expected to lure in more investors.
BOI Managing Head Ceferino Rodolfo said in a briefing on Thursday that the BOI expects to end the year with around P600 billion worth of investment pledges, way below the already readjusted target for 2021 of P905 billion. Originally, the BOI was hoping to record investment commitments worth P1.25 trillion in 2021. But as of end-October, the BOI had only registered P376 billion in pledges. The subpar performance could be attributed mainly to quarantine restrictions which, for example, made it difficult for interested investors to do their due diligence in the country, according to Rodolfo, also an undersecretary at the Department of Trade and Industry.
“I don’t think we can meet [the target for the year]. I think we’ll need more time. We have positive leads, strong leads. But I don’t think that with the two months that’s remaining for the year [that] all of them will materialize this year. We will definitely need until at the very least the first quarter of next year to realize this lead,” he said.
Rodolfo said there are about P700 billion of projects in the pipeline that the BOI is looking into, with another P300 billion being checked to see if they have the complete requirements. Nevertheless, the BOI is only expecting to approve about P225 billion worth of projects in the last two months of the year.
Trade Secretary and BOI Chair Ramon Lopez had projected that the CREATE Act, which cut corporate taxes and rationalized tax breaks, would be a “game-changer.” But so far, the law has not been able to bring in the “massive inflow of investments that will create more jobs” that was expected following its signing in March this year.
When the CREATE bill passed the Senate in November last year, Finance Secretary Carlos Dominguez III also called it “one of the largest economic stimulus measures in the country’s history.”
In 2019, the BOI marked a record year with P1.14 trillion in investment pledges. This was followed by another P1 trillion in 2020 despite being a pandemic year, in part because of San Miguel Corp.’s airport project in Bulacan province.
When asked about the implications of the missed 2021 target with regards to the CREATE Act, Rodolfo said the tax reform law still helped, but it could only do so much.
“[The] Create [Act] was actually helpful [in attracting investments]. But the global environment is difficult and the situation in the Philippines is hard, too, tax incentives wouldn’t be enough. So we really need to open up the economy and allow investors to come in,” he said .
“While we’re easing restrictions, we can see the investments coming in. It’s very important because, for example, due diligence teams that really want to commit to us would also want to go here. But we had to restrict our quarantine protocols with the Delta variant,” Rodolfo added.