Analysts reward Marcos veto of Bulacan financial zone invoice


By Kyle Aristophere T. Atienza, Reporter

ANALYSTS mostly welcomed newly installed President Ferdinand R. Marcos, Jr.’s veto of a bill that would have created a special economic zone north of the Philippine capital, saying it sent a message that public interest should trump business gains.

Mr. Marcos made the right decision in rejecting that bill that would have given tax perks to companies in the planned ecozone including San Miguel Corp.’s P740-billion international airport project, said Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH.

“These are unprecedented tax perks granted to the Bulacan airport, particularly the indefinite exemption from income and property taxes, as the franchise provides no hard deadline on when the government can finally levy income and property taxes on the airport,” he said in a Facebook Messenger chat at the weekend.

The project had already been given “massive tax perks” through a legislative franchise, Mr. Ridon said.

San Miguel President Ramon S. Ang did not immediately reply to a Viber message seeking comment.

Mr. Marcos fully supports the Bulacan Airport City Special Economic Zone and Freeport, and his decision to veto the bill was meant to cure its defects, Press Secretary Rose Beatrix Cruz-Angeles said in a statement on Sunday.

“Presidential Veto is the fastest way to cure the defects of House Bill 7575, especially the provision which exempts the Commission on Audit to look into the financial transactions on the special economic zone and freeport,” she said.

“The construction of the Bulacan International Airport and Aero City is not affected by the veto,” Ms. Angeles said, noting that the San Miguel group has a separate franchise for it.

In his veto message to Congress on July 1, Mr. Marcos cited the need for fiscal prudence especially in times “when resources are scarce and the needs are abundant.”

Creating a new special economic zone, which offers lengthy tax breaks to investors, would pose a “substantial financial risk to the country,” he added.

His sister Senator Maria Imelda Josefa Remedios R. Marcos, who sponsored the bill, said she did not take the veto personally.

Mr. Ridon said the government could lose as much as P150 billion in income taxes for a 40-year income tax exemption. “With no hard cap or specific sunset provision on when the tax incentives end, the government will certainly lose even more.”

In his veto message, Mr. Marcos said the bill would “significantly narrow” the country’s tax base. It is not “aligned with the government’s objective to develop a tax system with a broad base and low rates.”

“The veto sets the stage towards leveling the playing field for private investments in the public sector, as it indicates that there should be no sacred cows in the treatment of large businesses dealing with government,” Mr. Ridon said.

The veto showed that public interest should always be at the core of any government investments, he added.

Mr. Marcos’ decision also “affords government other alternatives in pursuing similar flagship projects that will not disadvantage the public.”

Mr. Marcos said the proposed economic zone is near the special economic zone in Clark, Pampanga, which goes against the state policy of creating this in strategic locations.

Eligible enterprises outside economic zones can apply for tax incentives provided by a Singapore-inspired tax law that significantly cut corporate income tax, he added.

In one of his first few decisions as president, Mr. Marcos sent a signal that “benefits should outweigh the cost and the benefits should outweigh the risk,” said John Paolo R. Rivera, an economist at the Asian Institute of Management.

“He’s being strategic. We can devote resources to value-adding economic activities,” he said in a Viber message. “He’s making economic sense. He gives an emphasis on overall economic welfare.”

The bill disagrees with existing laws since it lacks audit provisions, land expropriation procedures and a master plan, said Mr. Marcos.

He added that the measure gives the economic zone authority blanket powers to handle technical airport operations in violation of existing aeronautical laws.

Some analysts were skeptical about the veto, saying people should watch Mr. Marcos’ future dealings with the business community.

While the veto might have been “carefully considered,” it might “send a negative signal to investors,” said Antonio A. Ligon, a law and business professor at De La Salle University.

“This has been studied by those who proposed it,” he said by telephone. “He has to clarify why, especially to those who are optimistic about this freeport zone.”

Mr. Ligon said the ball is now in Congress, and that would give a preview of how it will deal with Mr. Marcos during his six-year term. “If lawmakers want to override the veto, they will address the objectionable features of the bill.”

He said it might also prompt lawmakers to revisit the law on special economic zones and consider changing provisions that give wide-ranging tax perks.

Ateneo de Manila University Political Science Professor Arjan P. Aguirre said the public should be critical of the points raised by Mr. Marcos.

“We expect a new set of powerful stakeholders who will have a privileged place in the determination of the new administration’s agenda,” he said in a Messenger chat.

The veto is a “curious case” because it would affect the interest of one of the country’s most influential and richest citizens, said Robin Michael U. Garcia, a political economy professor at the University of Asia and the Pacific.

“He issued the veto just a day after his inauguration,” he said, adding that it was “a show of strength.”

“It is really telling of how he will deal with the business sector,” Mr. Garcia said, noting that his father, the late dictator Ferdinand E. Marcos, had a “love-and-hate relationship” with the business sector during his two-decade rule.

Mr. Garcia recalled how the elder Mr. Marcos favored his own set of businesses and cronies “at the expense of the whole business community.”

The academic said the public should be wary of the political implications of the decision more than the economic costs.

San Miguel, one of the country’s biggest and most diversified companies, is investing P740 billion to turn a 2,500-hectare property in Bulacan province into an aerotropolis featuring a world-class gateway that can handle 100 million passengers yearly.