July 08, 2014

2014 IPP to include seven sectors for three years

The Philippine Daily Inquirer today quoted a Trade department official as saying that the final draft of the 2014 Investments Priorities Plan (IPP) will include economic and low-cost housing, energy, public infrastructure and logistics, Public Private Partnership (PPP) projects, manufacturing, agribusiness and fishery, and services. Inclusion in the PPP will entitle these sectors to fiscal and non-fiscal incentives. More importantly, instead of the usual annual revision of the list, government is looking to keep these sectors in the IPP list until 2016. An annual review will be conducted but only to consider additions to the list.

Our take: This is a departure from the previous tedious practice of reviewing and revising the IPP list annually. Oftentimes, the old practice would open room for disagreements among government agencies thereby resulting in delayed release of the IPP list (last year’s list was finalized only in November). This rendered the IPP less effective in attracting investments as lengthy negotiations and delays would prompt investors to defer investment plans until the list is finalized.In this light, keeping the IPP list for three years is a good idea as this will assure investors that their projects will be eligible to the incentives for a longer period.

This should be particularly good for the mass housing developers which will benefit fromthe tax perks while complying with the mandate to allocate 20% of their development projects to socialized housing. The income tax holidays will help in boosting their net margins and render their projects profitable. Ayala Land Inc (ALI), Filinvest Land Inc (FLI), Vista Land and Lifescapes (VLL), and 8990 Holdings Inc (HOUSE) are the key beneficiaries in the sector.

Those with infrastructure projects as well as the winners of PPP contracts should also benefit from the extended application of the IPP list. These include Ayala Corp (AC), Metro Pacific Investments Corp (MPI), San Miguel Corp (SMC), Megawide Construction (MWIDE) and Aboitiz Equity Ventures (AEV). Companies with new projects like AC, Aboitiz Power Corp (AP), First Gen (FGEN), Energy Development Corp (EDC), Trans-Asia Oil and Energy Dev’t Corp (TA), and Manila Electric Co (MER) should also continue to enjoy incentives.– WealthSec