WBF Roundtable Presentation Manila Peninsula, 26 October 2017 Mr. - - PDF document

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WBF Roundtable Presentation

Manila Peninsula, 26 October 2017

• Mr. VINCE DIZON

President and CEO, Bases Conversion and Development Authority (BCDA)

The BCDA in partnership with the entire economic team is doing what it can to contribute to the “Build, Build, Build” program of the President. BCDA right now is all about spending in Clark and in the Clark‐Subic

• Corridor. And the investment in Clark is part of larger and integrated infrastructure plan. The

infrastructure development plan has the end goal of interconnecting and making all of the projects interdependent and complementary. Fort the Clark‐Subic Area, there are 4 big‐ticket projects:  Clark International Airport – 2,400 hectares, or 4 times the size of Ninoy Aquino International Airport (NAIA), with the best runway in the country, left by the Americans in 1991 after the Senate vote on US bases. The runway was designed to accommodate a space shuttle. Ground‐breaking for the construction of a new terminal will start in December 2017, with the first phase of the project competed in the first quarter of 2020.  Manila‐Clark Railway – a railway system between Tutuban in Manila and the New Clark City, passing through Malolos, Bulacan and the Clark International Airport. Ground‐breaking is targeted by year‐ end and completion by 2021.  Subic‐Clark Cargo Railway – initially involving the construction of a cargo facility and later on upgrading it to both a cargo and commuter rail. This project supports the goal of making the Subic‐ Clark Corridor a major logistics hub.  New Clark City – a new city covering 9,450 hectares. The master plan has already been completed. It will be the country’s first smart, sustainable and disaster‐resilient city. In the next 2‐½ years, BCDA estimates upwards of a billion US dollars in public and private investments going into the Clark area. The largest would be Phase 1 of New Clark City. Then you have the airport and access roads, amounting to about P12 billion to P15 billion or $250 million, and other infrastructure development. The Clark Economic Zone is 32,000 hectares. It consists of the Clark Airport and the Clark Freeport, about 4,400 hectares of developed land; the middle portion called the Sacobia area, which is close to 18,000 hectares; and the upper portion covering the municipalities of Bamban and Capas in Tarlac province, which is 10,000 hectares and where the New Clark City will rise. A 15‐kilometer road is being built from the airport to the New Clark City, and another 7‐½ kilometres of road from New Clark City to the Subic‐ Clark‐Tarlac Expressway (SCTEX). Filinvest Land will start building the 280‐hectare commercial center and mixed‐income housing in New Clark City next year. SMRT of Singapore will plan, implement and operate its mass transport system. There will be an innovation park similar to those in Zhangjiang, Guangzhou, Yokohama, etc., and an ASEAN Food

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• Hub. National offices of government agencies will also be transferred to the National Government

Administration Center in Clark soon. Phase 1 development of New Clark City, covering 50 hectares, will be implemented in 2017‐2022, based on the master plan prepared by Aecom.

• Hon. CHARITO PLAZA

Director‐General, Philippine Economic Zone Authority (PEZA)

In my first year as PEZA Director‐General, PEZA generated P302 billion in new investments and $42.561 billion in export income. A theme “Revolutionizing PEZA” has been adopted, with new applicants for economic zones now being required to conform with standards of what is a green economic zone and a green industry. This has started in 4 public ecozones in Cavite, Mactan, Baguio and Angeles, Pampanga. This involves installing solar panels in factory roofs, use of LED lights, water re‐piping projects, etc. Revolutionizing PEZA also means enhancing one‐stop shop services, no bureaucratic red tape and no graft and corruption (tell PEZA if there is by simply calling 888). Moreover, the major factors global investors are looking at in investing in a particular location are also being addressed, specifically:  Provision of more locations for investors to build their industries – PEZA is identifying public lands with potential for being developed into ecozones, and will prepare a Philippine Ecozones Map once the locations are identified  Identification of IT parks in urban centers of provinces and cities to enable business process

• utsourcers (BPOs) to spread their branches all over the country

 Partnership with national agencies which are managing public lands to develop lands, for example, for mineral processing industries in the case Department of Environment and Natural Resources (DENR)‐managed lands. Another potential partnership is with the Department of Tourism (DOT) for developing islands, attracting an international investor for each island to transform the island an international tourism destination. Together with state colleges and universities, PEZA will put up the Education, Science, Technology and Innovation Park.  Establishment of a defense industrial complex, starting with the Defense and Government Arsenal in

• Bataan. Defense industries around the world will be invited to locate in PEZA’s economic zones.

 Development of economic zones for renewable energy (RE), where manufacturers of solar panels, windmills, and other RE sources can locate. Addressing the utilities, facilities and infrastructure needs, PEZA is partnering with the Department of Energy (DOE), which will provide power subsidy to basic industries and to Mindanao economic zones and

• industries. Potential ecozone locations will also be near power sources. PEZA will also partner with the

Department of Transportation (DOTr) in providing transportation facilities – land, air and water – to service the different economic zones of the country. Also, there will be a partnership with the Department

• f Information and Communications Technology (DICT) to provide for the IT infrastructure needs of the

economic zones especially IT parks.

3 On April 4‐6, 2018, PEZA will sponsor the first economic zones convergence in Manila. That would be a major roadshow for PEZA. Other economic zone authorities, investors covering all global industries, and business an industry groups will be invited to participate in the event. On fiscal incentives, PEZA is seeing to it that they would not be changed under the tax reform bill, especially the zero VAT on local purchases, the 5% gross income tax after the tax holiday, and the special tax that will be shared to the government by the investors. The following are the incentives given by PEZA to investors presently:  Income tax holiday (ITH) – 6‐8 years for pioneer projects, 4‐6 years for non‐pioneer projects; 5% tax

• n gross income less allowable deductions after the ITH

 Tax‐ and duty‐free importation of capital equipment, spare parts and raw material  Domestic sales allowance to a foreign industry – up to 30% of their production, and in other exceptional cases more than 30%, can be sold in the domestic market PEZA will continue to fight for the retention of all incentives and for stability of policies and laws for locator

• companies. We will also continue to work for the issuance of Presidential Proclamations on new economic

zones, as this has already been delayed and there are some 20 pending proclamations out of the 78 PEZA is proposing to be declared as ecozones. PEZA is most importantly promoting political stability. Local government units (LGUs) are being constantly reminded to provide additional incentives, maintain peace and order and improve governance. LGUs are being told to look at the industries as the goose that lay the golden eggs.

Questions and Answers

 Question: May we know a timeline for all pending applications for PEZA accreditation of spaces in Manila? Answer (DG Plaza): As mentioned in the presentation, PEZA will have a dialogue with the Executive Secretary for the speeding up of pending Presidential Proclamation for 20 new ecozones and for the 50 other potential locations that will soon be submitted to the President. PEZA is in a hurry to secure proclamation for the sites so investors can already occupy these spaces and not transfer to Vietnam and other countries because of the delay.  Question: Can PEZA confirm that it is lobbying against the changes in the VAT system under the proposed TRAIN tax system? Answer (DG Plaza): The Senate version of the bill support PEZA’s request of status quo, i.e., the zero VAT for local purchases and all other incentives being provided to investors. The Department of Finance (DOF) also announced during the Senate hearing that it is supporting the continuation or status quo of the incentives.  Question: One of the major concerns of the locators is the increase in the militancy of labor in the Laguna and Quezon area. While this is a Department of Labor and Employment (DOLE) issue, maybe

4 this is something PEZA can also look into, particularly since DOLE has some new appointees associated with the other side. What can PEZA do to help out and decide? Answer (DG Plaza): There will soon be a memorandum of agreement with the Armed Forces of the Philippines (AFP) and Philippine National Police (PNP). It is actually in the law that whenever economic zones are being threatened by insurgency, criminality, etc., we can request for military or police detachments to be located near the ecozones. PEZA will also put up its own security program, and we are partnering with the LGUs for the security requirements of the ecozones.  Question: Can PEZA declare an area as a strike‐free area where strikers can only do it outside of the zone? Answer (DG Plaza): Please write all your concerns, issues and problems, including your

• recommendations. So we can sit down with appropriate authorities who can help PEZA address these

issues and concerns.  Question: The government is promoting public private partnership (PPP). But recently, Secretary Dominguez has been saying it is shifting to ODA funding rather than PPP. How do you interpret this? Answer (V. Dizon): There is a misunderstanding of what Sec. Dominguez said. What he clearly said was that the priority of the Duterte government is to get things off the ground. The point of the matter is we do things quicker, not what modes to use. For example, BCDA decided to use its own corporate funds for the development of Clark International Airport Stage 1 instead of PPP, with the latter coming in later for the operations and maintenance (O&M), which enabled us to start project construction in July instead of 3Q2018 if under PPP. If the private sector can do it faster, and we are confident about that, then PPP will come in. The development of New Clark City is open to PPP. Unlike the previous administration which disallowed unsolicited proposals, this government is accepting unsolicited proposals, such as the Bulacan Airport of San Miguel which is moving already.  Question: Clark terminal is actually looking for hybrid assistance where the government will fund the construction but the private sector will build it using the government funding. But the funding will be provided after the construction. You might want to explain why. Answer (V. Dizon): The private sector will be building the Clark airport because the government does not have the capability to build a world class airport. There are now 12 bidders, 8 international and 4

• Filipino. The mode of construction will be turn‐key. This is a major policy shift in government, to

ensure that the project is completed and are not subpar, and that the contractor is qualified.  Question: Are we going to see tree parks – with green grass and a little bit of water – in BCDA? Answer (V. Dizon): As seen in the plans and the rendering, there will be green space to provide people a better quality of life. This will surely happen in New Clark City which is purely greenfield so it can be planned out to promote equity and very generous public and green space.  Question: Aside from Clark, Southern Luzon and Cebu, what are the other areas that could become industrial parks?

5 Answer (DG Plaza): PEZA is now identifying potential ecozones. It is building different types of ecozones depending on the potential of the land and the resources available within the vicinity, such as agro‐industrial, agro‐forestry, tourism, island cities, etc. We’ll put these all in the Philippine Ecozone Map, which will be launched during the 1st Ecozone Convergence next year.  Question: For Clark, what is the guarantee that there will be no delays in the construction of big projects such as those involving transportation? At the end of the day, companies will be making commitments to be in this place on specific timelines, and if there are delays in these projects it could affect their operations. Answer (V. Dizon): There are no guarantees, but rest assured the government is keeping its head on deadlines and is making sure that there are no delays.