Tag Archives: Green projects

Tax holidays to attract new investments

The Philippine Star
April 02, 2011

The Investment Priorities Plan for 2011 is off the press, so to speak, and is now up for approval in the Cabinet.

The priority projects include Agriculture, Ship Building, Low Cost Housing, Development of Indigenous Energy Sources, Infrastructure, Research & Development, Green Projects (in terms of manufacturing goods and efficient use of energy and natural resources), Tourism and Motor Vehicles. A special criterion has been included –this is Strategic Projects.

For the low-cost housing projects, the Board of Investment (BOI) lowered the cost per housing unit from P4 million to P2.5 million, only for purposes of qualifying under the BOI incentives scheme. For tourism projects, the BOI has considered projects which are otherwise not covered by the Tourism Development Act, which supported only tourism-related projects located in tourism zones. Now the agency is coordinating closely with the Department of Tourism (DOT) to identify worthy projects outside of the tourism zone, so this should be good news for developers who wish to qualify under the BOI laws.

Of course, motor vehicle development is a high priority in the 2011 IPP, and it’s high time we gave the auto industry this much-needed boost. I was in Thailand about a week ago for the all-new Ford Ranger launch and also for the Bangkok Motor Show. Much as I enjoyed the hospitality of my host, Ford Group Philippines, enjoyed Thai cuisine and their shopping, and found the Thais a very friendly people, I couldn’t help but feel pangs of regret that we have not achieved as much as the persevering and hardworking Thai people have in terms of the automobile industry. Thailand is now considered the hub as far as motor vehicle manufacturing is considered in the region, and for good reason. They are not plagued by excessive taxes, have no labor problems, and are not burdened by the high costs of doing business – permits and licenses, power costs, etc. The government has been very supportive of the auto industry and look where they are now.

For the motor vehicle criterion, the BOI is set to give incentives for parts and components locally fabricated as well as use of alternative sources of energy in the manufacture of these. What are these incentives?

The Executive Order (EO) that is still in effect grants zero duty on all importation of capital equipment for projects listed in the IPP. Sadly, this EO ends in June 2011, but BOI, has been pushing for another Executive Order to extend the effectivity of the zero duty on capital equipment. A public hearing has been set through the efforts of the Tariff Commission, but the President has yet to sign the EO.

Another incentive is the Income Tax Holiday (ITH) for these BOI-approved projects under the IPP. The duration of the ITH would depend on whether the project is a pioneering effort or not. If it is, the project proponents can enjoy as much as 6 years holiday. If this pioneering project generates foreign exchange earnings, it earns a bonus of one year in the tax holiday. If the project’s direct labor to capital equipment ration will not exceed $10,000/work force, another one year bonus is earned in the ITH. Further, if the project makes use of indigenous raw materials, about 50 percent or more, in the project, they stand to earn another year bonus in the ITH.

For non-pioneering projects, the Income Tax Holiday is good only for four years. In total, though, a project can only enjoy ITHs for not more than eight years.

This is covered by a Memorandum of Agreement between the BOI and the Bureau of Internal Revenue (BIR), so project proponents can run to the BOI if, while one’s project is still covered, you suddenly find a letter of authorization from the BIR in the mail informing you of an impending audit. The BOI promises to arm you with all the necessary documents to preempt the audit. The BOI will issue a certificate of ITH entitlement for all those qualified under their laws. However, BOI also reserves the right to validate the amounts claimed in the income tax returns of these projects and evaluate the full claims based on their own computations. The BOI annually forwards the list of companies/projects entitled to ITH based on a taxable year.

For 2011, the Board of Investments vows to be more strict and vigilant in granting income tax holidays, presumably because of some abusive companies who have used the BOI as a shield against the BIR. All companies/projects will be advised of the procedures they will have to comply with in order to avail of the ITH. Meanwhile, the BOI clarifies that a single company can have two or more projects listed with the BOi for purpose of availment of incentives. In 2009, for example, there were 844 projects listed, but only 699 companies. The year before that, 924 projects were approved, but only 780 companies were listed.

The BOI laments that some camps view these incentives as revenue foregone for the government. However, there is a fixed duration of these tax holidays, so after 4 to 8 years, these companies will have to pay their regular income taxes. Also, the projects are certain to generate employment for hundreds of thousands of our countrymen. For the 2011 IPP, BOI is targeting one million in employment. There is also the foreign exchange that will be generated by these projects (Note: export projects are automatically included, subject to procedures) and the country can certainly use the foreign exchange.
BUSINESS & LEISURE By Ray Butch Gamboa.

Putting the ‘E’ in real estate — the ‘BERDE’ way

November 11, 2010

FROM buzzword to a quide word, eco-living standards in the Philippines just got a boost from property market stakeholders.

This means that local developers now has a criteria to match the soundness of their individual green projects as the Philippines establishes its own accreditation standard for ecologically-sound developments.

Movers of this standard, aptly called BERDE, hopes that the unveiling of this criteria would give way to adoption of more environment-friendly technology in putting up projects in the Philippines.

The adoption however can still be considered a leap-of-faith among market players given the limited market that is currently available.

What is BERDE?

BERDE stands for Building Ecologically Responsive Design Excellence, which is being espoused by the Philippine Green Building Council (PhilGBC), who for the last two years has been consulting with industry stakeholders to bring forth a building standard that is adapted into the local environment in response to the growing call for environmental protection, with experts warning of the effect of pollution and global warming.

PhilGBC, an organization established by real estate stakeholders, laid down the groundwork for BERDE by coordinating with various entities to push the debate for adopting “green” technology standards in putting up building structures to help reduce energy consumption and wastage.

“Green building,” as PhilGBC puts it, is the practice of designing, constructing, operating, or reusing buildings in an ecological and resource efficient manner; focusing on the promotion and practice of sustainable site development, improvement of indoor air quality, use of efficient energy, and improvement of water management, and utilization of green materials, among others.

It has also included in its principle the need to preserve cultural “heritage.”
The description defines the rating system of BERDE, in which 11 criteria were made.
The more criteria hurdled the more points a project gets.

BERDE different from other standards

PhilGBC chairman Christopher C. dela Cruz, in an interview with Malaya Business Insight, stressed the need for a local standard that will embody the need for “green” buildings in the Philippines.

Prior to BERDE, developers adopt the standards established in other countries like the US Leadership in Energy and Environmental Design (LEED) pushed by the US Green Building Council (US), which has been adapted by several building projects in the Philippines, including the Zuellig building along Makati Avenue, still being constructed.

In the Zuellig project, LEED measures the design and building process in the areas of sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality.

Real estate consultant CB Richard Ellis, which has been tapped to market the units of the project, expressed confidence of the attractiveness of the project among multinational and local companies who have environment conservation as part of its responsibility.

Dela Cruz said there are about 20 buildings vying for LEED certification, but only two have been certified so far due to the long process of certification.

Other certification standards include : Building Research Establishment Environmental Assessment Method (BREAM) of the UK Green Building Council; the Hong Kong Building Environmental Assessment Method (BEAM) of the HK Beam Society; Comprehensive Assessment System for Building Environmental Efficiency (CASBEE) of Japan’s Sustainable Building Consortium; Green Star by the Green Building Council Australia; Green Mark by the Singapore Building and Construction Authority; SBTool by the International Initiative for Sustainable Built Environment; and Green Globes of the Green Globes which is implemented in Canda and US.
CB Richard Ellis lumps BREAM and LEED as the most used standard globally.

BERDE benefits

BERDE is presently being pilot-tested by two developers — Ayala Land, Inc., and The Net Group.

Ayala Land is using the standard’s requirement for refurbishing existing buildings while The Net Group is implementing the standard for new buildings.

As one of the prime mover in the industry, real estate giant Ayala Land, Inc. is pioneering BERDE in retro-fitting existing buildings.

Long been looking at green technologies to save on power costs, Ayala Land Asset Management Corp.’s Ericberth Calupe said their practice has been incorporated into the standards of BERDE, being one of the pioneers of the council.

The company first changed its lamps in the Glorietta malls, buildings like Tower One and Makati Stock Exchange, to compact florescent lamps (CFL) for a more efficient lighting. Ayala Land then adjusted its preconditioning system to enable a similar cool temperature but lesser power consumption.

“Our main motivation was to bring down cost, because 70 percent of our cost is from energy… especially on malls,” said Calupe.

Calupe said one benefit of tapping green technology is that payback comes within two to three years time.

“In the next two to three years, you may already be receiving dividends from the investment,” said Calupe.

PhilGBC adds that Ayala Land’s approach also results to reduced demand for the government to build more power plants.

In other “green” approach like improved resource management, the benefit comes in enabling businesses to reduce waste generated at job site, which results for less expenses on the business and less demand for more landfills for the community, adds PhilGC.

“Sustainable building improves the productivity of businesses. Healthier workspaces promote building occupant’s comfort and health and boosts employees’ morale,” PhilGBC added.

Is the market ready for BERDE standard?

A main challenge in adopting the standard is the added costs of green technologies. There is also the question of the market being ready to patronize green projects, which would consequently come at a higher price because of the higher cost of the technology.

CB Richard Ellis in a study it released a year ago, said that achieving the “more basic” levels of certification may raise costs by 2-3 percent for new constructions, while a “greener” building — designed to achieve one of the higher standards — is likely to add between 5 percent to 7.5 percent to construction cost.

In Ayala Land,’s case, Calupe noted that in energy-related products, the premium goes around 30 percent of conventional products.

This cost is not something that is not borne by developers but is transferred to consumers in the form of added value in the price tag of the unit or rent.

In a world where cost-effectiveness is the rule, finding a sizable market for green buildings remains a challenge.

CB Richard Ellis in the same study noted that even in the business sector, the whole market does not see the advantage of choosing a green building over a conventional one — everything boils down to economic sense.

“While some corporates see genuine social and marketing advantage in occupying green buildings, investors and developers will ultimately only adopt green practices if they make good commercial sense,” it said.

“As a green building, it should be expected that the developer will receive some reward in the form of higher rents and/or lower yields in the investment market,” it added.

Only further evidence will fully establish the idea that a green building is a cost-effective investment, according to the real estate consultancy firm, though it also noted that initial arguments and evidence point to the economic viability of having green buildings.

“Crucially, by boosting the availability of commercial evidence and reducing the need for developers to make a ‘leap of faith’, this will increasingly encourage the development and occupation of sustainable buildings,” CB Richard Ellis said.

Dela Cruz adds that as more developers adopt the standard, it could come to a point where expenses like insurance premium and financing can be negotiated to be lowered since green buildings provide better living conditions and thus less risks to its inhabitants.

For now, the most visible benefit being eyed of green buildings is in the areas of

operational energy efficiency and sustainable development, according to CB Richard Ellis.

All systems go

As far as PhilGBC is concerned, things have started on the right foot, as they formally launches BERDE next week.

Dela Cruz said that PhilGBC is already down with standards that cover new projects, existing buildings, and educational institutions, and their next task is to come up with standards that will cover communities.

By next year, they also plan to come up with standards that will cover, industries as well as hospitals.

For now, PhilGBC’s thrust is to have more companies adopt the standard for their upcoming or already existing projects.

Dela Cruz said that by adopting the standard, companies get to show “how responsible they are to protect environment.”

“(This is) a way to show how companies become environmental stewards,” said dela Cruz.