Bernie Cahiles-Magkilat | Manila Bulletin | September 23, 2019
After investing heavily to expand and build new economic zones, developers are now facing oversupply of available spaces as locators held off expansion plans due to the uncertainty caused by the proposed overhaul of the tax incentives granted to ecozone locators.
F. Francisco S. Zaldarriaga, president of the Philippine Ecozones Association (PHILEA), revealed during a recent press conference called by the Philippine Economic Zone Authority (PEZA) that ecozone developers are the worst hit in the uncertainty created under by the CITIRA Bill, which seeks to replace the current 5 percent tax on gross income earned (GIE) offered to ecozone locators with the corporate income tax (CIT) regime.
“In the horizon of investors, ang pinakamalaking matatamaan (biggest loser) are ecozone developers who pumped in billions of dollars and the recovery period is very long. So, if these guys start to exit we will be left with blank buildings and empty spaces. That is a major hit on this industry,” said Zaldarriaga. He stressed that while locators can easily pack and leave when the goings get rough, ecozone developers are left and stuck with their empty lots.
PEZA Director General Charito “Ching” Plaza said ecozone developers spend between P3 billion to P5 billion per project. “Who will fill this up?” she said.
“Magbenta na lang kame ng kangkong (We might sell water spinach,” joked Zaldarriaga. It could be recalled that there was a shortage of available ecozone spaces for PEZA locators in 2012-2013 because of the robust demand by existing locators and the influx of new investors.
At that time, PEZA also encouraged the expansion of ecozones because the projected influx of investors was seen to saturate the existing ecozones if there were no new developments. In the first six months alone in 2012, at least six private economic zone developers with combined investments of P6.37 billion were approved by PEZA. According to Zaldarriaga when they felt the momentum building, PHILEA members expanded and built new ones to accommodate the investors.
“A lot of our members have acquired additional inventory precisely to start servicing the boom in additional investments, but with this thing we are suddenly faced and left with lots of vacancies,” he added.
Some PHILEA members who are still in the implementing stage have already held off their expansion programs.
PHILEA even submitted their position on the TRABAHO Bill, which was replaced by the CITIRA Bill. In their submission, PHILEA said the removal of incentives granted to existing registered enterprises, is tantamount to a “breach of our contract with government, hence, violative of the constitutional prohibition against impairment of contracts.” “The primary goal of the creation of the special economic zones is not to cater to the certain public needs that need to be served, but rather, these ecozones were created to help spur economic growth. The incentives were established under the reliable permanence of legislation, as opposed to mere government regulations that easily change from administration to administration, have often been used in representations by the country’s authorities in enticing foreign investors to come to the Philippines,” PHILEA concluded.
As of December 2018, there were a total of 395 operating ecozones in the country with the bulk of 178 located in the National Capital Region followed by 56 in Region 4-A and Region 7 with 51.These ecozones host a total of 4,341 enterprises with poured in investments of P3.299 trillion in cumulative investments for the period 1995-2018. These PEZA registered firms, which employ a total of 1.508 million workers, also exported $760.479 million from 1995-2018.
Source: https://business.mb.com.ph/2019/09/22/ecozone-developers-facing-supply-glut/