Philippine Business Magazine: Volume 9 No. 4 - Policy
Chosen Ones
SMEs and rural development projects are the ventures to go into to avail of government incentives
By Pamela Sio

The annual Investment Priorities Plan (IPP) represents the government’s effort to stimulate new investments in economic sectors and activities deemed crucial to the country’s economic progress. As such, incentives are provided to investors who pursue new business projects in sectors identified in the yearly IPP. In general, these priority investment areas include export-oriented industries, activities deemed “mandatory” by specific laws and regulations, key sectors such as infrastructure, and those deemed as supportive of government programs.

Under the theme “Sustaining Economic Development Through Globally Competitive Industries,” the IPP for 2002 is largely consistent with the previous year’s IPP in its focus on national and regional development through industry clustering and an emphasis on small and medium enterprises (SMEs). At both the national and regional levels, export activities are still identified among the key investment areas as government seeks to continually support the modernization effort of exporters. Indeed, the government firmly encourages the export orientation of firms by providing incentives to companies that export at least 50-70% of their production even if their investments are not in sectors listed in the annual IPP.

What’s New?
Many of the changes in this year’s IPP are reflected in the coverage of investment priority areas under “Support to Government Programs.” Though already listed in the previous IPP, the coverage of critical economic sectors such as Energy Sources, Logistics, Drugs & Medicines, and Engineered Products was enhanced to include a greater variety of possible projects. The sector of shipbuilding and ship repair, however, was removed from this part of the IPP but incorporated in the regional list of priority investments. Two new categories were added, both of which highlight unique areas that the government aims to develop through new investment projects.

One of the new categories listed for incentives is that of motion pictures, “limited to films with historical and socio-cultural significance, films exhorting Filipino values, and documentary films.” Another category is that of new and biotechnology projects worth at least US$2 million not yet commercially undertaken as of end-2001.

Furthermore, this year’s IPP continues with the industry clustering approach adopted for regional or countryside development. Seen as a focused approach in promoting investments in the different regions of the Philippines, industry clustering works through the identification of priority areas of investment for specific regions.Industry clustering entails the grouping of firms and companies in an industry along with related and support services. Given this, particular industry clusters that can meet and further enhance the human, natural, and infrastructure resources of a specific region are assigned to that appropriate area. The Board of Investments implements this approach by working closely with the Small and Medium Enterprise Development Council in line with the government’s aim of generating various business opportunities for SMEs.

In addition, investments in the Autonomous Region of Muslim Mindanao (ARMM) are given particular emphasis by the IPP as a broad array of economic activities and sectors have been identified as priority areas for investment. The IPP list for ARMM reflects the government’s effort to tap the rich agricultural and natural resources of the region and to spur the construction and provision of important infrastructure and services. As such, incentives are provided for investments in diverse activities such as fruit processing and plantation, aquaculture, cutflower production, coffee processing, textile production, power generation, specialized mass transport systems and tourist transport facilities, and industrial service facilities. Moreover, a new sub-category of economic activity – the production of electronics and telecommunication goods – was added to the ARMM list of priority investment areas.

The government’s current strategy of addressing security issues through economic initiatives is reflected in the addition of Basilan in the ARMM Priority and Tourism Areas. Identified as “potential tourist destinations which need further exploration and evaluation for intensified promotions, development and marketing,” the ARMM Priority and Tourism Areas lists five rather far-flung places that may require particular incentives to draw potential investors.

On the whole, the 2002 IPP continues to reflect the need for further investments in many fundamental economic sectors and activities, such as infrastructure, agribusiness, tourism, pharmaceuticals, energy, and various social services. The IPP aims to support the Medium-Term Philippine Development Plan of 2001-2004 as well as the specific policy thrusts outlined in the Socio-Economic Pact of 2001. As such, the Investments Priority List is drawn up through simultaneous public hearings in Manila, Cebu, and Davao that are attended by representatives of various sectors.

Likewise, departmental consultation among key government agencies such as the Board of Investments, Presidential Management Staff, National Economic Development Authority, Department of Agriculture, and the Department of Finance occurs to ensure that incentives are provided to investments projects in sectors crucial to the country’s continued economic development.