Despite CREATE law, foreign investment pledges down 45.8 percent

MANILA, Philippines—The value of foreign-led projects given tax and other perks by the government fell 45.8 percent year-on-year to P16.82 billion in the third quarter, despite the supposedly more attractive incentives aimed at luring big-ticket investments under a law signed by President Rodrigo Duterte this year.

The Philippine Statistics Authority (PSA) on Tuesday (Dec. 7) reported that combined foreign commitments approved by four of the country’s investment promotion agencies (IPAs) dropped from P31.03 billion from July to September in 2020.

IPAs grant tax breaks to qualified projects which generate jobs and create value-added in the economy. These fiscal perks, which had resulted in billions of pesos in foregone revenues for the government, were rationalized by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

The President, under CREATE Act, can grant hefty tax and other incentives to entice elephant-sized foreign investments, upon the recommendation of the interagency Fiscal Incentives Review Board (FIRB).

The PSA said the four IPAs which generated foreign investment pledges during the third quarter included the Board of Investments (BOI), Clark Development Corp. (CDC), the Philippine Economic Zone Authority (Peza) and Subic Bay Metropolitan Authority (SBMA).

Three of the seven IPAs covered by the quarterly PSA report—Authority of the Freeport Area of Bataan (Afab), BOI-Bangsamoro Autonomous Region in Muslim Mindanao (BOI-BARMM) and Cagayan Economic Zone Authority (Ceza)—failed to attract new locators in the third quarter.

The PSA said the top three sources of foreign investment approvals from July to September this year were Japan (P11.16-billion worth), the Netherlands (P1.56 billion) and the tax-haven British Virgin Islands (P698.32 million).

Among investment sectors, the top three beneficiaries of third-quarter foreign pledges were manufacturing (P11.01-billion), real estate (P2.7 billion) as well as administrative and support services (P2.38 billion).

Per region, the top three destinations of approved foreign commitments were Calabarzon (P8.45 billion), Ilocos Region (P3.4 billion) and Central Luzon (P2.12 billion).

The PSA said IPA’s third-quarter approvals would create 10,268 new jobs.

From January to September, total foreign investment approvals reached P58.87 billion, down by over a fifth from P75.63 billion in 2020.

When combined with homegrown projects—Filipinos remained the biggest investors in the Philippines—third-quarter IPA approvals amounted to a larger P100.48 billion, although down by over two-fifths from P176.55 billion in 2020.

TSB