Approval of 1992 Investment Priorities Plan

April 30, 1992 MEMORANDUM ORDER NO. 427 APPROVING THE 1992 INVESTMENT PRIORITIES PLAN Pursuant to Article 29 of the Omnibus Investments Code of 1987, the attached 1992 Investment Priorities Plan is hereby approved. This Memorandum Order shall take effect upon its publication as required under Article 31 of the Omnibus Investments Code of 1987. DONE in the City of Manila, this 30th day of April, in the year of Our Lord, Nineteen Hundred and Ninety-Two. 1992 INVESTMENT PRIORITIES PLAN The 1992 Investment Priorities Plan continues the thrust of BOI to focus the IPP toward projects contributing to the general improvement in the investment environment and projects supporting the development of specific sectors. The focusing of the IPP started in the 1991 IPP as part of the government's move to promote investments by relying less on the grant of fiscal incentives and more on improving the investment climate and universalizing the availability of major investment incentives. The Foreign Investments Act of 1991 (Republic Act No. 7042) liberalized the entry of foreign investments without incentives and greatly simplified the investment process. Executive Order No. 470 rationalized and simplified the tariff structure and reduced to 10% or lower the tariff duties on most capital equipment. With these measures in place, the 1992 IPP is being further focused toward assisting highly desirable activities that are needed for the development of key sectors, and encouraging the private sector to undertake infrastructure and support facilities that are necessary to improve the investment environment. In preparing the 1992 IPP, the BOI reviewed the overall climate for investment and the current status of the various sectors in relation to the desired directions for their development. Projects and activities that need to be encouraged to reach these objectives were identified. It was then determined what type of government assistance, if any, were needed to promote these priority projects. Those requiring fiscal incentives were included in the IPP. The 1992 IPP contains 59 areas of economic activities compared to the 95 in the 1991 IPP. Of the 59 areas, 26 are carried-over from the previous plan without amendment, 24 carried-over with amendment and 9 are new inclusions. The new inclusions are: planting materials: two medical devices (prosthetics and diagnostics) and soft gelatin capsules that have been listed in support of the National Drug Policy of the Department of Health (DOH): aircraft manufacturing/repair/overhauling: three infrastructures projects in support of R.A. 6957 or the Build, Operate and Transfer (BOT) law (port infrastructure, public fish ports, and other infrastructure projects): and tourism estates. By sectoral distribution, the 1992 IPP lists 6 agricultural areas, 4 fishery, 1 forestry, 3 mining, 25 manufacturing, 1 energy-related, 5 public utilities, 9 infrastructure, 4 tourism-related and 1 research and development. It should be stressed, that the number of listed areas does not reflect the degree of importance accorded to the specific sectors. The areas in the 1992 IPP fall under four general categories: (1) basic industries; (2) infrastructure; (3) support facilities, including public utilities; and (4) projects in support of major government development programs. Although production for the export market continues to be a high-priority undertaking, the 1992 IPP adopts a more selective application of the existing BOI policy, of automatically registering projects that shall produce for export. Under the 1992 IPP, BOI shall be limiting partially or completely the incentives available to certain export products such as garments and products whose exports in 1988 exceeded $100 million. Basic Industries The 1992 Plan promotes the development of basic industries that have strong linkages with the other sectors of the economy, particularly the export-oriented industries. Agriculture, a basic economic activity, continues to be promoted but the emphasis is strongly placed on projects that could be undertaken through nucleus estates and other contract growing schemes in order to raise agricultural productivity, encourage the use of modern technology and extend assistance to small farmers who normally are not responsive to the incentives administered by BOI under E.O. 226. Agricultural inputs such as fertilizers, planting materials, animal breeders and genetic materials are also being encouraged. Other basic industries in the 1992 IPP are chemical fibers and filament yarns, petrochemicals, basic industrial chemicals, refined petroleum products, cement, primary and secondary processing of ferrous metals, metal and engineering processes, and shipbuilding and shiprepair. Also included are mineral exploration, mining and mineral processing. A new inclusion is aircraft manufacturing, repair and overhauling. Infrastructure Recognizing that the lack of infrastructure is a major deterrent to investment but the government has limited resources to undertake infrastructure projects, the BOI has been encouraging the private sector to undertake these projects by listing them in the IPP. Past IPPs have listed industrial estates, power generating plants, irrigation, post-harvest facilities and mass transport projects. The new Plan continues this support and includes additional projects promoted by the BOT law, namely, port infrastructure, public fish ports, and other infrastructure projects in support of R.A. 6957. Support Facilities Including Public Utilities The BOI program to improve the general investment environment covers the promotion of not only infrastructure projects but also facilities to support economic activities. Included under these are agricultural farm services, telecommunications, inter-island shipping, LRT and specialized mass transport systems, environmental support facilities, and subcontracting, activities for exporters. A major support activity is research and development activities. Project Supporting Major Government Programs The 1992 IPP continues to list projects supporting major programs of other government agencies which do not fall under the above categories. These are tourism promotion of the Department of Tourism and the National Drug Policy of the Department of Health. Thus, the 1992 IPP lists tourism-related activities, pharmaceuticals and medical devices. Deletions A number of projects were deleted from the IPP because they have sufficiently matured and no longer need fiscal incentives. These include livestock and poultry feeds, pulp, and certain cocochemicals. The BOI, however, would continue to assist these industries through non-fiscal measures. Incentives for certain projects were also limited such as the mining and processing of copper and gold which are no longer entitled to income tax holiday. Sectoral Highlights Agriculture, Fishery and Forestry . The 1992 IPP stresses the BOI's policy of promoting the integration of agricultural production with processing through the use of the nucleus estates scheme. In a departure from previous practice, agricultural crops as well as livestock and poultry are not listed separately anymore but have been included under the nucleus estates scheme. BOI supports the propagation of this scheme nationwide because it extends assistance to small farmers while encouraging the processors of agricultural products to gain higher value-added. The 1992 IPP continues to list fishery activities in support of the government's drive to modernize the industry which plays a crucial role in providing for the nutritional requirements of the country's growing population. In the case of the forestry sector, the 1992 IPP carries over the previous listing of forest product plantations and farms to give continued support to the government's reforestation program. The development of these plantations and farms also dovetails with the government's policy of promoting the regeneration of our natural forests by developing alternate sources of wood and other forest products required by local industries. Mining . Priorities activities to support the mining industry remain listed in the 1992 IPP. The continued priority accorded to the sector is in recognition of their significant contributions to employment creation, the development of regional communities and the generation of foreign exchange. However, copper and gold projects shall not be entitled to income tax holiday anymore as a measure to encourage mining proponents to consider the development of other mineral products which shall receive full incentives. Copper and gold projects shall nevertheless continue to be entitled to incentives on capital equipment which are highly meaningful in view of the large capital investments that they entail. Furthermore, copper and gold projects shall benefit from the passage of the Bill pending in Congress that would grant on a universal basis net operating loss carry-over and accelerated depreciation which are important fiscal incentives for capital-intensive projects like mining. Textile and Textile Products . The listing of IPP activities in this sector is basically intended to increase the backward linkage of the garment export sector. The rehabilitation and modernization of textile mills has been delisted on account of the sufficient amount of time given to existing millers to consider registration under the listing which remained in the IPP for five years. Chemical Products . Activities listed under this sector reflect the thrust of the 1992 IPP to include basic industries. Petrochemicals, basic industrial chemicals such as cocochemicals and sucrochemicals as well as other chemical products such as biotechnological/biosynthetic chemicals, essential oils and fine chemicals have been carried over because of their strong linkages to other industrial sectors and their extensive use as inputs to other priority industries. Biotechnological/biosynthetic chemicals and fine chemicals, for example, are important inputs to the production of pharmaceuticals. Pharmaceuticals . The inclusion of pharmaceutical products is in support of the National Drug Policy of DOH which seeks to promote self-reliance in the pharmaceutical/health care sector. Included under pharmaceuticals are the new inclusions of medical devices and soft gelatin capsules new inclusions. Cement . The listing of cement in the 1992 IPP is a carryover with amendment of the products amended listing in the 1991 IPP. The 1991 Plan was amended to remove the restrictions on the location of cement plants which limited them to areas outside the provinces of Bulacan and Rizal and to those with port facilities. The relaxation was effected to further liberalize the entry of investments in the area in response to the need to increase the supply base of the commodity. The 1992 listing removes the need for a certification of power availability from the National Power Corporation. Metal and Engineering Products . A strong metal and engineering capability is believed to be a key to industrialization. To support the development of the metal and engineering capability in the country, the 1992 IPP carries over the listings of engineering processes as activities considered to be preferred areas for promotion. Instead of listing registrable metal and engineering products, the IPP lists the processes that are being developed to strengthen the metal and engineering sector. BOI registers projects engaging in these processes to manufacture metal and engineering products. Motor Vehicle Parts and Components . Parts and components manufacturing for automobiles continues to be listed to encourage the development of the export capability of the industry. Electronics and Telecommunications . The modernization of semiconductor plants has been carried-over to assist local producers in coping with the high rate of obsolescence in the industry for both their products and production technology. This will enable local firms to keep abreast with competitors in other countries in the region. Another retention, telecommunications equipment, has been included to promote the local production of the hardware requirements of the telecommunications service industry. Being mostly intended for export, electronic components, computer software and magnetic database are not explicitly listed since they are automatically registrable as export products. Shipbuilding/Shiprepair/Shipbreaking . These activities have been retained to stress the importance of strengthening the country's capability in these areas. Their development is considered to be of strategic significance to the country given the archipelagic nature of its geography. Aircraft, Manufacturing/Repair/Overhauling . The inclusion of this activity aims to develop local capability in the manufacture of aircraft through the accessing of foreign technology. The listing also intends to encourage the development of the Philippines as a regional center for the repair and overhauling of aircraft serving the area. Energy-Related Projects . Power generating plants remain listed to indicate to the private sector that the government seeks their participation in power projects. To make it easier for investors to avail themselves of pioneer incentives, the 1992 IPP listing lowers the minimum size requirement from 50 MW to 30 MW in order to qualify as pioneer hydroelectric plants and non-conventional power generating plants which require huge capital expenditures for the establishment of even small generating capacities. The coverage of the listing has also been expanded to include rehabilitation of existing power plants. Furthermore, the listing itemizes the specific types of power generating plants registrable for incentives. Public Utilities . The 1992 IPP continues to list several public utility projects to help the government in addressing the lack of facilities in these areas. The listing hopes to encourage greater private sector investment in public utilities and help improve the investment climate by facilitating the conduct of business and economic activities in the country. Infrastructure/Industrial Service Facilities . The 1992 IPP contains a new category entitled "Infrastructure Projects." Classified under this heading are the carry-over projects or industrial estates, irrigation facilities, post-harvest facilities, and environmental support facilities. It also includes the new listings of port infrastructure, public fish ports and other infrastructure projects. These new inclusions have been listed in order to dovetail BOI's investment priorities in the sector with the infrastructure projects promoted by the BOT law. Tourism-Related Activities . Tourist accommodation facilities have been carried over into the 1992 IPP. A new inclusion is tourism estates. The listing of this area is in support of DOT's tourism development program which seeks to develop the infrastructure in the regions where tourist attractions are mostly located. 1992 INVESTMENT PRIORITIES PLAN PRODUCT/ACTIVITY POSSIBLE REGIONAL SITES I. AGRICULTURE, AGRICULTURAL INPUTS AND AGRICULTURAL SERVICES A. Production/Processing of Agricultural Inputs/By-Products 1. Feeds for aquaculture (P/NP) 1.6.7.8.9.12 Note: Must locate outside NCR. 2. Fertilizers (P/NP) All regions except NCR Note: The size and location of plants must be approved by the Fertilizer and Pesticide Authority. B. Development and Production of Planting Materials (P/NP) C. Production of Breeders and Genetic Materials 3.5.7.8.10.11 (Limited to Cattle, Hogs and Poultry) (P/NP) D. Pest and Disease Control Services (NP) E. Nucleus Estates, Small Farmholders and Other All regions except NCR Contract Growing Schemes Involving the Production up to Primary Processing of Agricultural Crops. Livestock and Poultry (NP) 1. Production of agricultural crops for processing a. Food crops 1) Tomato 2) Legumes 3) Cacao 4) Vegetable oil seeds 5) Fruits b. Industrial crops 1) Cotton 2) Rubber c. Sericulture d. Crops for feeds 1) Yellow corn 2) Soya beans 3) Root crops Note: For food crops and root crops, contract with processors geared towards the local market may be required. 2. Production of livestock and poultry a. Beef cattle including cow-calf and feedlot operation b. Hogs c. Poultry 1) Meat 2) Day-old chicks 3) Table eggs 4) Ducks 5) Other poultry species d. Dairy Note: May be integrated with feedmilling. II. FISHERY A. Purse Seining for Distant or International Water Operations Using Vessels of 100 G.T. and Above (NP) B. Aquaculture 1. Grow-out farm operation (NP) All regions with access to abundant fresh and brackish water 2. Mariculture or seafarming (NP) All regions with access to the sea. 3. Hatchery/nursery (P/NP) All regions except NCR III. FORESTRY Forest Product Plantations/Farms (P/NP) IV. MINING PRIORITY ACTIVITIES TO SUPPORT THE MINING INDUSTRY (P/NP) A. Exploration and Development of Mineral Resources Note: Not entitled to income tax holiday. B. Mining and Quarrying of Metallic/Non-metallic Minerals (Excluding River Bed Operations) Note: Copper and gold not entitled to income tax holiday. C. Processing of Minerals Such as Beneficiation All regions except NCR and Other Metallurgical Methods Note: Copper and gold not entitled to income tax holiday. V. MANUFACTURING A. Textile and Textile Products 1. Chemical fibers and filament yarns (P/NP) a. Polyester b. Rayon c. Nylon 2. Silk (spinning from cocoons) (P) Note: May be integrated with mulberry tree production. 3. Textile dying and finishing (P/NP) B. Chemical Products 1. Basic industrial chemicals a. Cocochemicals and their derivatives, 9 (excluding methyl) esters, glycerine, fatty alcohols, and fatty acids) (P/NP) b. Sucro-chemicals/fermentation products 3.4.6 (e.g. citric acid, sorbitol, acetic acid, etc.) (P/NP) 2. Petrochemicals (P) a. Olefins (includes derivatives of ethylene and propylene) b. Aromatics 3. Miscellaneous chemical products a. Biotechnological/biosynthetic chemicals (P) 2 b. Essential oils (P) 1,2,5,6,9,10 Note: May be integrated with production of essential oil bearing plants. c. Fine chemicals (P/NP) C. Refined Petroleum Products( P/NP) All regions except NCR Note: Limited to new and expansion projects. Expansion shall mean installation/establishment of new complete production lines in the same site or in another location. D. Pharmaceuticals 1. Soft gelatin capsules (NP) 2. Herbal medicines (P/NP) Note: May be integrated with production of herbal plants. 3. Medical devices a. Prosthetics (P/NP) b. Diagnostics (P/NP) E. Cement (P/NP) Notes: 1. Income tax holiday incentives availment shall be limited only to the following: a. Four (4) years for new projects; and b. Three (3) years for expansion projects. 2. For pioneer projects: a. More than 40% foreign ownership is allowed only for cement manufacturing, i.e., quarrying shall be limited to at least 60% Filipino ownership. b. Projects must have a capacity of at least 1,000,000 MTPY (clinker base). 3. Companies are encouraged to register in the 1992 IPP in view of the BOI plan to delete or limit the incentives for this activity in the 1993 IPP. F. Metal and Engineering Products Applying Any All regions except NCR of a Combination of the Following Processes: (P/NP) 1. Design and engineering, and/or machine buildings 2. Forging 3. Heat treating 4. Machining 5. Metal casting 6. Press working 7. Surface finishing and plating 8. Welding and joining Notes: 1. Metal and engineering products include tools, dies and molds, jigs, and fixtures; and machinery, equipment, parts and components thereof. 2. The manufacture of tools, dies, molds, jigs and fixtures as indicated in this listing may be granted pioneer status, in accordance with Article 17 of E.O. 226. G. Motor Vehicle Parts and Components (P/NP) All regions except NCR Note: Limited to parts and/or components that will contribute to the development of the export capability of the parts and components :manufacturing industry. H. Primary and Secondary Processing of Ferrous Metals (specifically, ironmaking integrated with slabmaking and steel plate rolling) (P) I. Semiconductor Devices and Components, and Raw Materials Needed for Their Manufacture (P/NP) Note: Including modernization of existing plants but not entitled to income tax holiday. J. Telecommunication and Information Handling Equipment and Their Parts and Components (P/NP) K. Shipbuilding/Shiprepair/Shipbreaking (P/NP) L. Aircraft Manufacturing/Repair/Overhauling (P/NP) VI. ENERGY-RELATED PROJECTS Power-Generating Plants (P/NP) Notes: 1. Projects must be accredited by NAPOCOR, by NEA or by the concerned government agency in the case of BOI projects (R.A. 6957). 2. To qualify for pioneer status, the project must meet the following criteria: a. The plant uses or converts to coal or non-conventional fuels or source of energy such as geothermal, solar, wind power, biomass, etc. in its production of electrical power; or b. It uses a method, process, or system of power generation which has never been tried on a commercial scale in the Philippines; and additionally c. It has a large power generating capacity, with no less than 30 MW for plants to be connected to NAPOCOR grids in Luzon, Mindanao, Cebu, Negros, Panay and Leyte. 3. The following; types of power plants may be registered: a. Cogeneration units, defined as the production of electric energy and forms of useful thermal energy (such as heat or steam), used for industrial, commercial, heating or cooling purposes through sequential use of energy. b. Electric generating plants selling their production to the grids, consistent with the development plans formulated by the NAPOCOR. c. Electric generating plants, intended primarily for the internal use of the owner, which also plan to sell excess production to the grid. d. Electric generating plants, outside the NAPOCOR grids, intending to sell directly to end users. e. Rehabilitation of existing electric generating plants. This type of project shall be: a) entitled only to limited incentives, which need not be fiscal incentives; and b) subject to guidelines to be developed by the BOI in consultation with pertinent government agencies. 4. Mini hydro-electric power plants having a capacity of 101 to 10,000 kilowatts should register with the Office of Energy Affairs under R.A. 7156. VII. PUBLIC UTILITIES A. Mass Transport Operations (NP) Notes: a. Subject to capacity/investment requirements and qualifications to be set jointly by the BOI and the Department of Transportation and Communications. b. Limited to capital equipment incentives. 1. Light railway transit systems 2. Other specialized mass transport systems such as trolley buses B. Telephone, Telegraph, Telex and Fax Including Public Calling Stations (NP) Note: Subject to the guidelines formulated jointly the BOI, Department of Transportation and Communications, National Telecommunications Commission and Municipal Telephone Public Office. C. Inter-island Shipping and Directly Related Facilities Essential to the Efficient Operation of Ships. Including Modernization of Existing Shipping Lines (NP) Notes: 1. Excludes full-time chartering of vessels. 2. Incentives will be limited only to vessels which are not more than 15 years old. 3. Modernization shall include any of the following: a. vessel replacement b. repowering/replacement of engine c. vessel conversion d. acquisition of brand new Communication and navigation equipment e. acquisition of support and cargo handling facilities f. modification of vessels to meet classification requirements 4. Modernization shall not be entitled to income tax holiday. 5. Subject to guidelines developed jointly by the BOI and the Maritime Industry Authority. D. Overseas Shipping (NP) Notes: 1. Not entitled to income tax holiday. 2. Excludes full-time chartering of vessels. 3. Incentives will be limited only to vessels which are not more than 15 years old. 4. Subject to the guidelines developed jointly by the BOI and MARINA. VIII. INFRASTRUCTURE/INDUSTRIAL SERVICE FACILITIES A. Infrastructure Projects for Public Use Note: Subject to guidelines to be formulated jointly by the BOI and pertinent government agencies. 1. Industrial estates, including science and All regions except NCR technology parks, technology incubation centers and science technology centers (P/NP) 2. Port infrastructure such as piers, wharves, quays, storage, handlings, ferry services and related facilities (NP) Note: Entitled to equipment incentives only. 3. Irrigation and related facilities (NP) Note: Entitled: to equipment incentives only. 4. Warehouses and post-harvest facilities (NP) All regions except NCR Note: Entitled to equipment incentives only. 5. Public fish ports including storage and processing facilities (NP) Note: Entitled to equipment incentives only. 6. Environmental support facilities (P/NP) Notes: 1. Subject to the provisions and guidelines of R.A. 6969 (Toxic Substances, and Hazardous and Nuclear Wastes Control Act of 1990). 2. Not entitled to income tax holiday. 7. Other infrastructure projects as determined by the BOI in consultation with concerned agencies in accordance with R.A. 6957 (An act authorizing the financing, construction, operation and maintenance of infrastructure projects by the private sector and for other purposes) (P/NP) B. Testing and Quality Control Services (P/NP) C. Subcontracting Activities for Exporters (NP) Note: Not entitled to income tax holiday. IX. TOURISM-RELATED ACTIVITIES A. Tourist Accommodation Facilities Note: Limited to Existing/Emerging and Potential Investment Centers for Tourism Development Identified by the Department of Tourism (Except Metro Manila) 1. Hotels (P/NP) 2. Resorts (P/NP) 3. Other tourist accommodation facilities such as apartels, pensione houses, tourist inns, etc. (NP) B. Tourism Estates (P/NP) Note: 1. Must locate outside NCR. 2. Subject to guidelines to be developed jointly by the BOI and the Department of Tourism. X. RESEARCH AND DEVELOPMENT ACTIVITIES WHICH ARE SCIENCE- AND TECHNOLOGY- ORIENTED (P/NP) Notes: 1. Subject to the guidelines developed jointly by the BOI and the Department of Science and Technology. 2. Activities must fall under the DOST Research and Development Priorities Plan. NOTES TO THE 1992 INVESTMENT PRIORITIES PLAN 1. Registration of Export Producers (P/NP), Export Traders (NP) and Service Exporters (NP) a. As a general rule, producers of non-traditional export products exporting directly or indirectly 50% of their production in the case of Filipino-owned firms, or 70% in the case of foreign-owned firms, may be registered for incentives under the Omnibus Investments Code of 1987 (E.O. 226). b. The BOI, however,-may limit completely or partially the incentives available to certain export products, such as: 1) Products whose exports exceeded $100 million in 1988 shall not be entitled to income tax holiday and equipment incentives. However, equipment incentives may be given in cases where the project needs government assistance in view of: a) location in a less developed area and/or b) opening of new export markets. 2) Rattan furniture Not entitled to income tax holiday and incentives on equipment. 3) Garment exports to quota countries No fiscal incentives. Garment exports to non-quota countries Subject to note 1.b.1. above: c. Export traders (NP) Limited to export trading of non-traditional export products which are not included in note 1.b. above. Existing export traders are not entitled to income tax holiday and capital equipment incentives. New export traders shall be entitled to the following incentives: 1) income tax holiday 2) capital equipment incentives (limited to packaging and quality control equipment): 3) exemption from wharfage dues and export fees, duty, impost and fees on the registered product only; and 4) tax credit for taxes and duties on raw materials used for its export products and forming part thereof. New export traders are defined as those engaged in export marketing of new products or in exporting to new markets, as follows: 1) A new export product is a product classified under the 7-digit commodity classification of the Philippine Standard Commodity Classification Code of which total Philippine exports did not exceed US$100,000 annually in any of the two calendar years immediately preceding the application for BOI registration. 2) A new export market is a country where the Philippines has no recorded export sales of the specific non-traditional, export product in any of the two calendar years immediately preceding the application for BOI registration. d. Service exporters (NP) The service activities must be rendered abroad and paid for in foreign currency. Existing service activities are not entitled to income tax holiday and to equipment incentives. 2. Change in Status of Projects The BOI reserves the right to change the status of an area listed in the IPP from Non-Pioneer (NP) to Pioneer/Non-Pioneer (P/NP) and vice-versa, after public hearing, based on the criteria for the grant of pioneer status under Article 17 of E.O. 226. 3. Possible Regional Sites The 1992 IPP identifies possible regional sites for certain promoted activities. The proposed locations are only indicative and have been identified to help investors in selecting sites for their projects. The sites are based mainly on the investment priority areas drawn up by the regional offices of the Department of Trade and Industry and are believed to be compatible with the priority projects in terms of markets and availability of raw materials, manpower, technology and infrastructure. Projects locating in sites outside the identified regions, except Metro Manila and other regions specifically excluded, are still registrable. 4. Additional Incentives to Projects in Less Developed Areas Firms registered under Book of E.O. 226 shall be entitled to pioneer incentives if they locate in any of the less developed areas listed below. However, this privilege shall of be extended to projects engaged in mining, forestry and processing of minerals and forest products since they would naturally locate in certain areas to be near their sources of raw materials. List of Less Developed Areas Province Region Province Region Abra 1 Eastern Samar 8 Mountain Province 1 Northern Samar 8 Kalinga-Apayao 2 Southern Leyte 8 Isabela 2 Western Samar 8 Nueva Vizcaya 2 Sulu 9 Quirino 2 Basilan 9 Ifugao 2 Tawi-Tawi 9 Batanes 2 Zamboanga del Norte 9 Marinduque 4 Zamboanga de Sur 9 Palawan 4 Agusan del Norte 10 Aurora 4 Agusan del Sur 10 Oriental Mindoro 4 Bukidnon 10 Romblon 4 Surigao del Norte 10 Occidental Mindoro 4 Camiguin 10 Sorsogon 5 Misamis Occidental 10 Camarines Norte 5 Davao del Norte 11 Catanduanes 5 Surigao del Sur 11 Masbate 5 Davao Oriental 11 Aklan 6 North Cotabato 12 Capiz 6 Sultan Kudarat 12 Antique 6 Maguindanao 12 Negros Oriental 7 Lanao de Sur 12 Bohol 7 Lanao del Norte 12 Siquijor 7 (excluding Iligan City) 5. Industrial Location Policy In pursuance of an effective industrial location program, the BOI shall use the incentives package under the Omnibus Investments Code of 1987 as the main vehicle to influence industrial location. The Code grants additional incentives to firms that locate in less developed areas in the regions. As a complement to this, the Board limits incentives to firms that locate in congested urban centers. Initially, the locational restriction applies to Metro Manila as follows: a. Projects locating in Metro Manila are not entitled to income tax holiday and capital equipment incentives. This includes projects whose plants are located in the boundaries of one or two municipalities, one of which is in Metro Manila. b. Exemption from the above locational restriction may be given to: 1) Projects locating in government industrial estates, resettlement areas, or National Housing Authority sites and services projects in Metro Manila, including peripheries around government resettlement areas to provide employment to resettled families; and 2) Service-type projects with no manufacturing facilities, such as software development, data encoding and film animation. c. New, expansion and modernization projects locating in Metro Manila which are engaged in activities that have been identified by the Environmental Management Bureau to be generating harmful pollutants shall not be registrable under E.O. No. 226. d. New and expansion projects falling under the scope of Proclamation No. 2146, i.e., the declaration of projects and areas deemed environmentally critical, shall be required to secure an Environmental Compliance Certificate from the Environmental Management Bureau of the Department of Environment and Natural Resources pursuant to P.D. No. 1586 also known as the Philippine Environmental Impact Statement System. e. All projects that would involve handling, transport, processing and storage of toxic and hazardous substances and nuclear wastes shall be subject to the provisions of R.A. No. 6969 (Toxic and Hazardous Substances and Nuclear Wastes Control Act of 1990). ANNEX PROPOSAL/COMMENTS RECEIVED ON THE PROPOSED 1992 IPP AND THE CORRESPONDING BOI POSITIONS PROPOSALS/COMMENTS BOI POSITIONS 1. Retention of shrimp and prawn feeds. Agree. (Philippine Federation of Prawn Growers. Inc./Dept. of Agriculture/NEDA) 2. Retention of livestock and poultry feeds The BOI has listed livestock and poultry outside the Nucleus Estate Scheme to feeds in the IPP since 1981 and sufficient allow existing mills to upgrade their capacity has been registered. Existing process technology and enhance feed livestock and poultry feed millers should formulation capability. (San Miguel already be capable of upgrading their Corp.) facilities even without incentives. The thrust of the 1992 IPP production under NES. 3. Retention of the production of shrimps Agree. and prawns. (Philippine Federation of Prawn Growers, Inc./Capiz Prawn Growers Multi-Purpose Cooperative) 4. Production of cattle breeders and genetic Agree: regions shall be indicated in the materials should be intensified in listing. Regions III, VI, VII, VIII, X and. XI due to the abundance of feed resources and the existence of viable organizations which could provide the proper training for small farmer organizations. (NEDA) 5. The inclusion of production-related Noted. agricultural farm services is supported in view of the government's objective of promoting agricultural mechanization. (NEDA) 6. Inclusion of the production of livestock The BOI has given sufficient assistance to and poultry outside the Nucleus Estate non-NES livestock and poultry growers by Scheme to encourage producers/ listing the areas in the IPP since 1981. The processors to expand production, thrust now is production under NES and use more advance technology and other contract growing schemes to spur modern facilities in their operations, and accelerated countryside development. This encourage integrators to establish more does not preclude transfer of technology processing facilities using sanitary and and use of modern facilities from the hygienic processes and help reduce the integrator to contract growers to upgrade incidence of disease. (San Miguel Corp.) production activity even up to primary processing. 7. Inclusion of processed meat foods to Local meat manufacturers, including encourage the utilization of improved backyard processors, can sufficiently supply process technology and consequently, the requirement of local consumers in terms improve the quality of the country's of quality and quantity without BOI processed meats and enhance their incentives. What needs to be given international competitiveness. incentives is production for exports. (San Miguel Corp.) 8. Inclusion of plant genetic materials. Agree. (Dept. of Agriculture) 9. Inclusion of the production and processing Vegetables, fruits and cotton are included of fruits, vegetables, fibers, tobacco under Nucleus Estate Scheme. Processed and cotton. (Dept. of Agriculture) fruits for export are registrable. Tobacco is not qualified for incentives since it is a traditional export product. 10. Inclusion of cutflowers. (Dept. of The production of cutflowers is registrable Agriculture) for incentives if at least 50% of production is exported. Production solely for the local The inclusion of cutflowers under the market is not a priority activity for Nucleus Estate Scheme is suggested in incentives. BOI does not impose any view of the bright prospects for this restriction on the location of cutflower commodity in both the local and projects. However, BOI does not grant international market. Production should income tax holiday and capital equipment be intensified in the major production incentives to projects locating in Metro areas such as Metro Manila, Benguet, Manila. BOI shall promote among Tagaytay, Laguna, Cebu, Iloilo, Negros prospective investors the sites recommended Oriental, Zamboanga, Davao and by NEDA for cutflower projects. Bukidnon to ensure enough volume for export purposes. (NEDA) 11. Inclusion of the production and Production for export already registrable. processing of carageenan. (Dept. of Agriculture) 12. Inclusion of the production of fresh Already registrable. pineapples for export. (Davao Agricultural Ventures Corp.) 13. The IPP should be more explicit in The specific types of grow-out and hatchery/ identifying the types of grow-out nursery operations are not explicitly listed and hatchery/nursery operations that because BOI promotes all species, letting should be granted investment incentives. the proponent and the market decide on the Priority should be granted to grow-out projects to be undertaken. Nevertheless, and hatchery/nursery operations for BOI shall give emphasis to the promotion groupers, siganids and tropical aquarium of the species being recommended by fishes. (NEDA) NEDA among prospective investors. 14. Incentives for mariculture or seafarming Already included. should be continuously provided to maintain the country's comparative advantage in the world market for seaweed products. (NEDA) 15. Retention of purse seining in distant/ Agree. However, registration is limited to international waters. The activity is a projects that will utilize vessels with at least risky investment and capital-intensive. 100 G.T. (Frabelle Fishing/South Cotabato Purse Seiners Association of Gen. Santos) 16. There is a need to continue providing Already included. incentives for Industrial Forest Plantation (IFP) projects in view of: i) the natural forest raw material supply and demand projections show a severe shortage in the future; ii) the development of IFP's contributes to employment creation; and iii) the IFF's promote sustainable development practices by moving away from the purely extractive type of production in the past. Moreover, the establishment of IFP's has become imperative in view of the present ban on the logging of virgin forests and environmentally critical areas. (NEDA) 17. Retention of income tax holiday for Copper and gold, which are traditional mining and processing of copper and exports, have been given full incentives by gold. being listed in the IPP since 1968. Income (Philex Mining) tax holiday is being removed to make the development of other non-traditional mineral resources relatively more attractive. Copper and gold, however, would continue to receive equipment incentives which are substantial assistance to capital-incentive projects like mining. The BOI is also working for passage of the bills to grant net loss carry-over and accelerated depreciation to all sectors. 18. Retention of coco-fatty alcohols. The product would continue to receive (Pilipinas Kao) incentives if 50% is exported. There is already more than sufficient local capacity to supply the domestic requirements for fatty alcohols. Thus, major local fatty alcohol producers have geared their expansion capacities toward the export market. 19. Inclusion of benzene toluene, m-xylene Included under "aromatics" under hexane and other solvents and aromatics. petrochemical manufacture. Presently, there is no domestic production for the said products. (Konsulta Philippines, Inc.) 20. Inclusion of modified starch. The The mere existence of a domestic market is product, which is presently being totally not enough justification to warrant the imported into the country, has various listing of modified starch in the IPP. The applications in the textile, pulp and current thrust of the BOI is to focus the paper, packaging (cartons), adhesive, IPP and limit the granting of incentives to and other industries. Proponent's areas of activity which may be considered project is part of a BOI-registered as strategic and are vital to accelerating proposed corn chemicals complex. industrialization in the Philippines. Modified (Indo Phil Textile Mills, Inc.) starch production would serve only one principal market, the corrugated carton industry, although modified starches may be used in food processing, gummed tape production and paper production. Although the activity does have a possible backward linkage with the agricultural sector, the type of corn from which the modified starch of Indo Phil is to be produced (waxy corn) is not currently produced in the Philippines and would thus have to be imported. Although waxy corn, which is a hybrid type of corn, can perhaps be grown locally, it would take time to introduce such type of corn to the farmers who are used to the existing varieties. One firm, Corr-Plus Industries Inc., has been registered with the BOI as export producer of modified starch. 21. The inclusion of pharmaceuticals is in Noted. line with the health sector's thrust of encouraging investments towards self-sufficiency in pharmaceutical needs. (NEDA) 22. Inclusion of soft gelatin capsules. Many Agree. To date, there is no local producer local drug manufacturers are of soft gelatin capsules. Putting up our subcontracting to foreign countries the own soft gelatin capsule plant will result to conversion into vitamins, minerals, etc. substantial foreign exchange savings. using the soft gelatin capsules, which otherwise could be done locally (Lloyd Soft Gelatin Capsule Company) 23. Inclusion of printing and publishing for What the BOI is encouraging is production the local market. for the export market. Printers and (Mr. Gabby Lee) publishers can be registered as either direct exporters or indirect exporters supplying packaging materials to exporters. 24. Inclusion of pc wires, pc strand and The activity does not fall within the Board's galvanized steel wires. criteria for IPP inclusion since it has weak (AVESCO Marketing Corp.) backward and forward linkages with other existing industries. 25. Inclusion of plastic pallet. Plastic The activity does not fall within the purview pallets are considered environment of the Board's criteria in the preparation of friendly because they replace wood as the 1992 IPP. raw materials and are also recyclable. Damaged or worn-out plastic pallets may be pelletized and used as material to produce new pallets. (San Miguel Corp.) 26. Inclusion of cullet recycling projects. The activity does not fall within the Board's The recycling facilities, once upgraded, criteria for IPP inclusion. Moreover, the will reduce the melting costs of glass BOI had already embarked on a glass and improve glass forming efficiency. (container) modernization program where An effective bottle collection network upgrading activities in any stage of glass will also improve environmental container production including cullet sanitation. processing may be undertaken with (San Miguel Corp.) incentives. 27. Inclusion of the production for the local The activities are already registrable as market of glass-based, tin-based, direct or indirect export producer. paper-based and plastic-based packaging materials. (Dept. of Agriculture) 28. Inclusion of mass housing projects to The area is already profitable even without improve the economic and social incentives. The high cost of housing is conditions of the low-income sector. mainly due to high land prices as well as (San Miguel Properties Philippines, financing problems which beset all other Inc.) sectors. The BOI is assisting the industry by granting incentives to the production of construction materials such as cement, glass and steel products. 29. Inclusion of housing projects for The area is already profitable even without overseas Filipinos. The activity will incentives. Affordability is not the issue generate substantial foreign exchange but the perception of peace and order and for the country. economic/political stability in the country. (San Miguel Properties Philippines, Inc.) 30. Construction materials using non- Projects can be registered if production is traditional indigenous materials is being for export. The activity has no takers for deleted. Is this no longer a priority area? the local market. What is needed to identify (Dept. of Finance) specific products that can be mass produced following standardized modular specifications, are energy and water-efficient and make use of non-traditional materials (i.e., not cement and wood). The BOI is working with the DTI Construction Industry Authority of the Philippines in the development of standard specifications for modular construction components. 31. E.O. 215 provides that NEA may allow Agree: Listing has been revised accordingly. the private sector to generate electricity in areas not covered by NAPOCOR's grids. Power generation can also be done under the BOT Law (R.A. 6957) and it need not be NAPOCOR or NEA to accredit private firms wishing to undertake said activity. Thus, the first note under power-generating plants should be revised to include accreditation by NEA or by the government agency charged with the implementation of the provision relating to BOT projects. (NEDA) 32. Inclusion of rehabilitation, leasing and Agree. However, this activity shall be operation of power generating plants. entitled only to limited incentives, which MIESCOR'S rehabilitation of Ambuklao need not be fiscal incentives, and subject to Hydro Power project will restore 75 guidelines to be developed by the BOI in MW to the Luzon grid. consultation with pertinent government (Meralco Industrial Engineering agencies MIESCOR's primary interest in Services Corp.) registering its rehabilitation project with the BOI is not to get BOI incentives but to qualify for the CB debt-equity swap program. 33. Reduction of the minimum requirement Agree. The minimum requirement will be of 50 MW for power plants to be reduced to 30 MW. considered pioneer in order to allow small hydro-electric generating plants to be qualified as pioneer. (MCCI Corp.) 34. Inclusion of energy efficient reheating For further study in consultation with the furnace in view of the present energy Office of Energy Affairs. crisis. The activity will also encourage the adoption of energy efficient technologies. (Office of Energy Affairs/Association of Phil. Steel Mills, Inc.) Priority attention should be given to For study with the Office of Energy Affairs. energy-efficient technologies. Specific activities which may be included are: 1) Plants manufacturing energy saving lamps. (Note: Projects must be accredited by the OEA under the Energy Conservation Program); and 2) Plants manufacturing briquetted, pelletized or densified coal and/or the equipment and devices for producing these types of coal fuel. (Note: Projects must be accredited by the OEA under the Energy Conservation Program). (NEDA) 35. The following are proposed to be The recommended activities are already included under energy-related projects: covered under the heading "Metal and 1) Manufacturing plants for equipment engineering products" . . . BOI, however, and devices used in the installation shall give emphasis to the recommended and operation of the following products in its information dissemination non-conventional energy systems: and investment promotion campaigns. i) biomass-fired combustion, steam and power systems; ii) biomass fuel pretreatment systems such as densification, carbonization, size reduction and drying systems; iii) gasifiers, biogas systems, alcohol-fuel systems and vegetable oil-fuel systems; iv) solar driers, solar water heaters photovoltaic (PV) systems, including solar batteries and electric control units for PV systems; v) micro-hydro systems (below 100 KW) and mini-hydro power systems (101 KW to 10 MW); and vi) windmills and wind electricity conversion systems. 2) Processing plants for biomass- For study with the Office of Energy Affairs. derived liquid fuels such as coconut oil and ethanol blends. For both 1) and 2), projects must be accredited by the Office of Energy Affairs. (NEDA) 36. Inclusion of bus transport industry. The activity was included in the 1989 IPP, (Provincial Bus Operators Association as an amendment to the Plan, and the 1990 of the Philippines) IPP. The BOI has registered enough capacity although some of the registered firms have not fully implemented their projects. Should these firms fail to acquire their buses by the deadline given by the BOI, relisting of the area in the IPP will be considered. 37. Retention of overseas shipping. The Agree. However, incentives will be limited number of Philippine beneficially-owned only to vessels which are not more than vessels has continuously declined since 15 years old. 1988 and the removal of incentives will hasten the decline of the overseas shipping industry. The increase in beneficially-owned vessels is expected not only to generate much needed foreign exchange but will also result in considerable foreign exchange savings in terms of freight payments by Phil. exporters/importers. (Maritime Industry Authority) 38. On "telephone, telegraph, telex and Noted. fax." The BOI incentives to be offered are among the financial strategies identified in the National Telecommunications Development Plan which the government may implement in order to facilitate and sustain the development and growth of the telecommunications sector. (NEDA) 39. To complete the coverage of public The BOT guidelines lists as one of the utilities, there should perhaps be an promoted infrastructure projects "water entry for water distribution systems on supply, sewerage, drainage and related a nationwide basis in view of the facilities." Should there be an interested primacy of water either as an input applicant for BOI incentives, it can be to production or a component of considered under the 1992 IPP listing of households' basic needs. (Dept. of "Other infrastructure projects. . . ." Finance) In addition to irrigation under The project. is already included under the infrastructure projects, water supply listing "Other infrastructure projects. . ." It projects should be included in the IPP is not separately listed pending consultation to encourage private sector participation. by the BOI with concerned agencies on the (NEDA) guidelines to govern registration. 40. Inclusion of the importation of irrigation Irrigation is registrable if undertaken to equipment for drought-hit areas provide water to farmers in an area. (similar to power generator sets) with Registered new and expansion agricultural limited time-frame. (Dole Philippines) projects can also acquire irrigation equipment with incentives. Existing projects, like Dole Philippines, should be able to finance importation of irrigation equipment without incentives. 41. Expansion of coverage of "public utilities", The said activities are confined only to "infrastructure and industrial service those that will serve the public and not facilities", and "energy-related projects" merely for own use. Infrastructure projects to include facilities for internal/own use. to be undertaken for internal use are already The establishment of such facilities by covered if the firm locates in a less private enterprises would free up the developed area. In the case of power equivalent capacity of common or public generation, the BOI allows registration of facilities and in turn, make these available power projects intended even for to other industrial users. Private sector internal use. involvement will reduce the pressure on the government to infuse capital outlays for projects of this nature without dampening the momentum of increased investments. (San Miguel Corp.) 42. Expansion of coverage of "industrial The intent of the IPP listing is to reduce waste management and treatment" to the cost of pollution control by encouraging include projects intended either for own independent environmental support projects use or for own use but with the excess which service several firms. Manufacturing being made available to other users. projects registered with the BOI for new and (San Miguel Corp.) expansion capacity may acquire with Granting of incentives to existing firms incentives their own environment-related installing pollution control equipment. equipment as part of their manufacturing (San Miguel Corp.) plants. However, existing projects which are Provision of incentives for the required by law to comply with acquisition of pollution abatement environmental standards should not be equipment (Dept. of Environment and given incentives on the ground that these Natural Resources) firms should be penalized for polluting the environment. In view of the global concerns on Agree. "Environmental Support Facilities" environment, it is suggested that include pollution abatement facilities "environmental support facilities" include intended for common use. pollution abatement facilities, particularly those relating to energy generation and industrial wastes. (NEDA) 43. Provision of incentives for the Already covered under the listing of metal manufacture of pollution abatement and engineering products. equipment (Dept. of Environment and Natural Resources) 44. Provision of incentives for the E.O. 226 grants incentives only for raw importation of less polluting raw materials that form part of export products. materials. (Dept. of Environment and Natural Resources). 45. Provision of incentives in environmental We agree that these activities should be training and environmental awareness encouraged but they are not qualified for program. (Dept. of Environment and incentives under E.O. 226. Natural Resources) 46. The continued promotion of "testing Agree. and quality control laboratories" under industrial service facilities is proposed in recognition of the government's inability to accommodate the growing and now diversifying demand for product testing and analysis. (NEDA) 47. Inclusion of "subcontracting activities Already included. for exporters" in the IPP will enable local subcontractors to compete for work opportunities abroad and help promote the country's image as a supplier of skills and/or technology for such projects. (NEDA) 48. Inclusion of specialized tour transport Transport facilities for tourists was listed system such as tour coaches, aircraft as a separate activity in the 1988 and 1989 and cruise vessels. (Dept. of Tourism) IPP. Based on BOI experience in supervising registered firms, it was administratively difficult to ensure that the transport facilities are not used for non-tourists. Under the present IPP listing, cruise vessels are already registrable under inter-island shipping while tour coaches and aircraft can be acquired as part of the operations of a registered tourist accommodation project. 49. Inclusion of tourism estates. (Dept. of Agree. Tourism) 50. The reinclusion of tourist accommodation Noted. facilities is recommended in order to meet the demands of the sector in the coming years. The Tourism Master Plan recommends, among others, that additional hotel accommodation should be developed outside Manila while resort accommodation should be focused on the proposed resort estates on Samal and Panglao Islands as well as in Cebu, the Batangas Coast, La Union and Northern Palawan areas. In this regard, consideration should be given to extending BOI incentives and targetting these to ensure that tourist accommodation is developed where and when it is needed. (NEDA) 51. Rehabilitation and modernization of Listing of the modernization program in the tourist accommodation facilities, including 1989 and 1990 IPP has given them sufficient those in Metro Manila. (Dept. of time to rehabilitate and modernize. Tourism/Century Park Sheraton Hotel) 52. Granting of incentives to the importation Catering vans cannot be given incentives. of catering vans and elevators for However, elevators are allowed for hotels. (Admiral Hotel) registered new and expansion projects. Other issues 53. The BOI, as the regulatory agency for The BOI already takes into account policy facilitating fiscal and financial policies, changes when the IPP is prepared. It should ensure that local producers and should be recognized, however, that E.O. manufacturers that may be hurt by 226 is only one of the government measures policy reforms like E.O. 470 are that can be used to compensate for provided the equivalent compensatory adjustment costs resulting from policy adjustment in the interim. The 1992 reforms. IPP should therefore focus on these sectors. (Dept. of Agriculture) 54. As with the 1991 IPP, the NEDA The objective of focusing the IPP is not Secretariat is fully supportive of a more the reduction in the number of areas as a focused IPP for 1992 to boost BOI's goal by itself but focusing the Plan toward promotional thrust. However, although a more concrete direction. As compare to the number of areas has been reduced, the 1991 Plan, the 1992 IPP has been certain activities under generic headings focused further toward assisting highly were included in the 1992 IPP, e.g., desirable activities that are needed for the petrochemicals. (NEDA) development of key sectors and promoting the private sector undertaking of infrastructure and support facilities for industries. The 1992 IPP contains 12 generic activities. These generic categories have been listed only in instances when all of the products under these activities are promoted by BOI. In the case of infrastructure projects, for example, the generic listing is in accordance with the BOT law which seeks to encourage private sector participation in all infrastructure projects. In the case of other generic listings such as the development and production of planting materials specific promoted activities are not itemized because BOI leaves the choice of which projects to undertake to the investors themselves based on their assessment of the market. As a measure to safeguard against the abuse of generic listings, BOI undertakes a pre-acceptance evaluation of projects applying for registration under generic activities in the 1991 IPP in order to ascertain their desirability. The guidelines for the registration of generic projects were formulated last year in consultation with NEDA. A total of 9 projects have been evaluated under these guidelines since they took effect on July 11, 1991. These guidelines shall remain in effect during the implementation of the 1992 IPP. 55. BOI's proposal to limit incentives Noted. available to export products exceeding $100M in 1988 is supported as it is consistent with the provisions of GATT and will limit the export-oriented activities qualified for registration under E.O. 226. (NEDA) 56. There is a need to view the IPP The BOI through the DTI and BOI regional vis-a-vis the investment promotion efforts offices, is working closely with LGU's on of local government units given that the implementation of the Local Government Sec. 109 (4) of the Local Government Code in relation to investment promotion. Code provides LGU's with the authority The BOI is of the position, however, that to grant incentives to promote an LGU's authority to grant tax exemption investments in their locality. (NEDA) privileges extends only local taxes, fees and charges which it may legally impose under its taxing powers and not to taxes imposed by the national government. Thus, there will be no duplication of tax privileges. 57. DOLE does not interpose any objection, Employment creation has always been one to the proposed 1992 IPP. It expressed of the criteria employed by BOI in its concern, however, that employment evaluating the desirability of projects creation be a major criterion in the applying for incentives. The projects actual selection of projects to be given capacity to generate employment incentives under the 1992 IPP. (Dept. opportunities directly and indirectly is of Labor and Employment) examined as a major factor in their evaluation.