Locators at the Clark Special Economic Zone are again eligible for incentives after President Gloria Macapagal-Arroyo placed the area under the Philippine Economic Zone Authority (PEZA). Proclamation 1035, signed March 10, effectively restores incentives lost by Clark when the Supreme Court last year ruled that perks provided under the Bases Conversion and Development Authority (BCDA) charter were limited to its fellow former US base, Subic. The proclamation - entitled "Creating and Designating Certain Parcels of Land of the Public Domain Situated at Angeles City, Municipalities of Mabalacat and Porac, Pampanga and the Municipalities of Capas and Bamban, Tarlac as a Special Economic Zone Pursuant to Republic Act No. 7916 as Amended by Republic Act No. 8784." - will allow the 357 export company locators in the Clark economic zone to avail of PEZA incentives from the date of the order’s signing Mrs. Arroyo cited RA 7916, which created the PEZA, and PEZA Board Resolution 06-036 dated February 15, 2006, in placing the 337,650,00-square meter area - defined by Proclamations 163 and 805 issued by President Fidel V. Ramos - as a PEZA special economic zone. PEZA incentives include a preferential 5% final tax in lieu of all local and national taxes, and tax and duty free imports of capital equipment, supplies and raw material. Perks under the Omnibus Investment Code may also apply. Clark, along with Poro Point in La Union, Morong Special Economic Zone in Bataan and Camp John Hay in Baguio City, lost their tax and duty incentives after the Supreme Court limited such perks to the Subic freeport. The Supreme Court overruled Section 5 of Executive Order 80, as well as Section 4 of BCDA Board Resolution 93-05-034, which gave Clark and the three other economic zones the same tax and duty-free privileges enjoyed by businesses in the Subic Special Economic Zone by virtue of Republic Act (RA) 7227, which formed the BCDA. The Supreme Court said fiscal exemptions should be categorically stated by the law. Since only Subic was named under RA 7227, the other economic zones were not entitled to the same privileges. Clark Development Corp. President Antonio Ng said the government decided to restore Clark economic zone’s perks ahead of the three others because Clark hosts the most number of locators. Last Monday, Mr. Ng met with Mrs. Arroyo, Trade Secretary Peter Favila, PEZA director-general Lilia de Lima for the signing of the "registration agreement" which marked the official transfer of Clark loca-tors to the PEZA. It is estimated that the 357 locators in Clark employ some 37,000 people. As of last year, these companies released some P4.5 billion in salaries and paid some P1.2 billion to the Bureau of Internal revenue and Bureau of Customs. Mr. Ng said the remaining three economic zones affected by the Supreme Court ruling will still need to wait for enactment of two new legislative measures. Two resolutions, both sponsored by Tarlac Rep. Jesli Lapus, are now up for deliberation. Mr. Ng said Clark is " really lobbying for the approval" of these resolutions. HB 4900 calls for the declaration of a one-time amnesty on tax and duty free liabilities, including fines, penalties and interests incurred by locators inside special economic zones and freeports, while HB 4901 calls for amendments to RA 7227, transferring the four economic zones to the PEZA. Mr. Ng said the proclamation will only cover tax incentives from "March 10 and moving forward." As the Supreme Court had nullified the tax incentives given since 1993, Clark companies still owe the government "billions of pesos in foregone tax revenues." Mr. Ng said a tax amnesty is necessary since companies went to Clark "in good faith." In a separate interview, Ernesto B. Santiago, executive director of industry group Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) said the proclamation is a sound government decision. But Mr. Santiago added the government should work on the tax amnesty for affected companies. The trade group sent a letter to House Speaker Jose C. De Venecia, Jr. in February requesting for the "expeditious passage" of HB 4900 that will grant a tax amnesty, and HB 4901 that will make tax perks permanent. Confusion as a result of the Supreme Court ruling is hurting the country as a whole, Mr. Ng said. He said one call center company is having second thoughts on setting up a facility that will immediately employ 2,000 agents, while one manufacturer transferred somewhere else. "It now becomes so hard for these companies to invest in the Philippines. And we might be driving away investors to China, Thailand and Vietnam," he said. "Exports from Clark grew by 15% last year, higher than the overall exports growth of 3.9%." - Maricel E. Estavillo/BusinessWorld
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