First veto: Bongbong Marcos nixes Bulacan freeport bill

President Ferdinand “Bongbong” Marcos Jr., during the inauguration ceremony at the National Museum in Manila, Philippines, June 30, 2022. REUTERS/Eloisa Lopez/File Photo

MANILA, Philippines — President Ferdinand “Bongbong” Marcos Jr. has vetoed a bill that would have granted tax perks to a proposed special economic zone backed by a key campaign supporter.

The surprise move was one of his first acts as the country’s new chief executive.

The project, the Bulacan Airport City Special Economic Zone and Freeport, would have been located adjacent to the New Manila International Airport in Bulakan, Bulacan, which is being built by billionaire Ramon S. Ang’s San Miguel Corp. as a private P740-billion venture.

Ang apparently got no hint of the veto when he was invited as one of the guests on the stage at the president’s inauguration on Thursday.

“At the foreground, fiscal prudence must be exercised particularly when resources are scarce and needs are abundant,” Mr. Marcos said on Friday in his veto message to the lawmakers on the enrolled House Bill No. 7575.

“While this administration recognizes the objective of the proposed measure to accelerate economic growth in its locality, I cannot support the bill considering the provisions that pose fiscal risks to the country and its infringement on or conflict with other agencies’ mandates and authorities,” he said.

San Miguel, one of the country’s biggest conglomerates, is investing P740 billion to turn a 2,500-hectare property in Bulacan into an aerotropolis featuring a world-class gateway capable of handling 100 million passengers annually, plus an adjacent urban and industrial hub.

Sister’s measure

The bill was sponsored in the Senate by Marcos’ sister, Sen. Imee Marcos. There were no immediate comments from the senator.

The measure would have granted incentives to locators that invest and set up shop in the ecozone, the airport, the airport city adjacent to it, and the adjoining lands later.

According to the president, the bill did not provide procedures for expropriation of lands awarded to agrarian reform beneficiaries and granted “blanket powers” to the economic zone authority to handle technical airport operations, which would violate aeronautical laws.

He pointed out that the proposed ecozone would be located near the Clark Special Economic Zone in Pampanga province that borders Bulacan. This is against government policy on creating special economic zones in strategic locations, Marcos said.

He said that under Republic Act No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, eligible enterprises could apply for and avail of tax incentives outside economic zones.

“Contrary to the government’s objective of developing a tax system with low rates and a broad tax base, the enrolled bill will significantly narrow our tax base with its mandated incentives applicable to registered entities,” Mr. Marcos said.

The president could have anticipated the potential relocation of companies from places where they are paying taxes now to the ecozone to enjoy the tax breaks.

With these considerations, Marcos said he was “constrained” to veto the bill.

RSA defends project

In a text message to the Inquirer on Saturday, Ang defended the ecozone project, saying that it would be built on land owned by the conglomerate but would, in fact, “be managed by the Philippine government.”

Any tax incentives that will be granted to companies that plan to relocate there will have to be first reviewed and approved by the Department of Finance and its Fiscal Incentives Review Board.

Most importantly, Ang said the bill was “aligned” with the CREATE law, which is a set of tax reform measures enacted by the previous administration.

“My intention is to help create a science and technology export hub with the cheapest logistics cost because of the nearest airport and Manila’s seaport,” he said.

Ang said that world-class manufacturers of semiconductors, battery storage for electricity, electric vehicles, and modular nuclear power assembly plants which he invited to the planned ecozone are targeting to export products worth up to “$200 billion annually to help our gross domestic product growth.”

The San Miguel chief stressed that the conglomerate’s privately funded airport project — the single most expensive public or private infrastructure project in the country’s history — would proceed as planned even without the tax perks in the proposed ecozone.

The airport project is governed by a separate 50-year congressional franchise which became law in December 2020.

Positive signal

Michael Sagcal, the country representative at infrastructure consultancy firm Astris Finance, said the veto sends a positive signal as it reflected the “hard reality that our government can’t afford to forego much-needed revenues in today’s economy.” “It is important for this administration’s position to remain consistent though, otherwise it may be perceived to be a simple changing of personalities rather than a genuine improvement of policies,” said Sagcal, a former transportation official who served under the late President Benigno Aquino III.

Ang’s aerotopolis has been criticized by environmentalists and residents in the areas affected by the massive project.

In December 2020, they asked the Supreme Court to stop the project, saying it would jeopardize Manila Bay’s marine life and ecosystem, and the livelihood of local farmers and fishermen.The petitioners said in their request for a writ of kalikasan that the project was not compliant with environmental laws and regulations, and it “flouted existing laws” when it started construction before securing the required permits.

The high court dismissed the petition in January for lack of “sufficient form and substance.”

Conflict

The Bulacan airport also came into conflict with proponents of other airports who supported Marcos in the presidential campaign.

Once completed, Bulacan airport was seen to lure traffic away from the Clark, about 72 kilometers to the west in the home province of former President and Pampanga Rep. Gloria Macapagal-Arroyo.

Clark’s airport operations are now privatized and operated by a venture led by the Gokongwei and Gotianun groups.

The Remulla clan of Cavite is also pushing for the construction of an international airport at Sangley Point, 82 km to the south of the Bulacan project. One of its prominent members, former Cavite Rep. Jesus Crispin Remulla, will serve as Mr. Marcos’ justice secretary.

There was no immediate reaction to the veto from former Sen. Richard Gordon, one of the main proponents of the bill in the Senate. In May, 21 senators approved the bill.

Up to next Congress

Albay Rep. Joey Salceda, one of the principal authors of the measure, said the incoming 19th Congress will address the concerns of the President and he would refile the bill with the veto message serving as “a guide.”

“Essentially, the concerns are that the authority being created has extraordinary powers, the metes and bounds are undefined, and the costs and benefits of the proposal appear to not yet be clear in the determination of the executive branch. I acknowledge the wisdom in his concerns,” Salceda said in a statement sent to the Inquirer on Saturday.

“The revisions, then, should revolve around these questions,” he said.

Bulacan Gov. Daniel Fernando also accepted the veto, saying the President “knows better what is best for the country.”

Fernando said Bulacan’s economic growth prospects are expected to be propelled by the world-class international airport under construction, not by the planned ecozone.

“We believe and support the President. He is correct that there is a need to increase tax collection. Our country really needs a high collection of taxes,” the governor said in a phone interview with the Inquirer.

—WITH REPORTS FROM JULIE M. AURELIO, CARMELA REYES-ESTROPE AND INQUIRER RESEARCH

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