KEIEI TO KEIZAI

Table 4. Approved and Registered Foreign Firms by Product and Zone, Thailand, 1995.

PRODUCT ZONE 1 ZONE 2 ZONE 3 N.A. TOTAL

FROZEN SEAFOOD 0.0 0.0 37.5 0.0 37.5

CANNED FOOD 0.0 0.0 1.2 0.0 1.2

GARMENT 0.0 0.0 221. 0 0.0 221. 0

SHOES 0.0 0.0 12.0 0.0 12.0

ELECTRICAL APPLIANCE 250.0 10.0 0.0 0.0 260.0 ELECTRONIC PRODUCT 411. 4 3,487.5 462.1 0.0 4,361. 0

JEWELLY 0.0 0.0 0.0 0.0 0.0

TOY 11. 3 0.0 0.0 0.0 11. 3

FURNITURE 0.0 125.0 0.0 0.0 125.0

RUBBER GLOVES 0.0 0.0 64.0 0.0 64.0

PLATIC BAG 0.0 0.0 0.0 0.0 0.0

ARTIFICIAL FLOWER 0.0 0.0 6.8 0.0 6.8

SPINNING, WEAVING, DYEING, PRINTING, KNITTNG 0.0 78.5 503.8 0.0 582.3 MACHINERY, COMPONENT & PART 21. 2 896.9 344.4 0.0 1, 262. 5 CERAMIC & GLASS PRODUCT 0.0 47.5 62.0 0.0 109.5

ARTIFICLAL LEATHER 0.0 0.0 18.6 0.0 18.6

SPORTING EQUIPMENT 11. 3 19.6 20.0 0.0 50.9 OTHER RUBBER ORODUCT 0.0 24.5 44.6 0.0 69.1 CHEMICAL PRODUCT 0.0 16.0 2,389.1 0.0 2,045.1 OTHER PLASTIC PRODUCT 12.0 77.3 115.2 0.0 204.5

PARA WOOD PRODUCT 0.0 25.0 83.1 0.0 108.1

ANIMAL PRODUCT 0.0 0.0 32.0 0.0 32.0

AGRICULTURAL PRODUCT 0.0 0.0 37.4 0.0 37.4

PROCESSING METAL 52.7 2,813.1 2,447.0 0.0 5,312.8 LOW OR MEDIUM INCOME HOUSING 60.6 0.0 4.9 0.0 65.5

FROSEN FOOD 0.0 0.0 4.9 0.0 4.9

LARGE SCALE CULT IV ATION 0.0 0.0 2.0 0.0 2.0

MEDICAL SUPPLIES 55.9 0.0 0.0 0.0 55.9

OTHER SERVICES 29.4 0.0 35.0 0.0 64.4

SHIP BUILDING/REPAIRING/BREAKING 0.0 1.4 0.4 0.0 1.8 LOADING & UNLOADING FACILTIES, CONTAINER YARDS 0.0 0.0 0.0 0.0 0.0 WAREHOUSING, GROP DYEING, SILO 0.0 0.0 0.0 0.0 0.0 WATER TRANSPORTATION 129.6 0.0 0.0 0.0 129.6 HIGH SPEED TOUR BOAT, FERRY 0.0 0.0 0.0 0.0 0.0 R&D, POLLUTION TREATMENT 0.0 0.0 1.6 0.0 1.6

COLD STORAGE 0.0 0.0 0.0 0.0 0.0

FACILITIES SERVICE & INFRASTRUTURE 0.0 0.0 140.0 0.0 140.0 MINING & REFINING 0.0 1, 400. 0 18.5 0.0 ^1, 418. 5

PAPER PRODUCT 0.0 0.0 352.8 0.0 352.8

CATTLE HUSBANDRY 0.0 0.0 8.0 0.0 8.0

HOSPITAL 0.0 0.0 75.0 0.0 75.0

HOTEL 0.0 0.0 38.0 0.0 38.0

INDUSTRIAL EST ATE 0.0 116.8 60.7 0.0 177.5

OTHERS 0.0 0.0 9.8 0.0 9.8

TOTAL 1, 045. 4 9,139.1 7,653.4 0.0 17,837.9 Source: BOI, Thailand

chinery, components and parts, processing of metal and mining and refining compared to 43% (7,653 foreign firms) in Zone 3. Similar industries that have located in Zone 2 have also decided to put up operations in Zone 3, notably, electrical products, machinery parts and components, chemical pro-ducts and metal processing (Table 4).

5.2. The Philippine situation

The economic and social inequalities between the urban and regions exist in the Philippines too. As the situation in Bangkok, the National Capital region has the highest gross regional domestic product (GRDP) so is the adjacent Southern Tagalog (Region 4) and Central Luzon (Region 3) due to their proximity to Metro Manila. In 1992, the per capita gross regional product of the Metro Manila and Southern Tagalog were Pesos 25,832 (in constant 1985 prices). and Pesos12, 968 respectively. Other regions such as the Bicol region had as low as Pesos 4,602 per capita GRDP. The poverty incidence in six out of the 13 regions is more than 50% in 1991. In terms of regional distribution, Region III has the highest investment (Figure 10) in the amount of Pesos 54Billion for 1995. Although investors have high preference for Region IV with 110 new and expansion projects totaling Pesos 32 B. Understandably Region IV is where most of the employment is generated as shown in Figure 11.

Looking at Table 5 carefully, foreign direct investments are very prominent in Region IV and the National Capital Region. In the other regions, most of the projects approved by BOI are locally owned and operated. In Region IV,

54 KEIEI TO KEIZAI

foreign companies prevail in the provinces of Cavite, Laguna and Rizal and in the province of Zambales in Region III primarily due to the IEs in these areas.

The Philippines being an archipelago of 7, 000 island unlike Thailand has great disparity as far as infrastructures are concerned. Telephone density in the Metro Manila stood at 90% in 1994 and 2% in the Bicol, Cagayan Valley, and Eastern Visayas regions. Other telecommunications, power and water supplies seem inadequate in the countryside that firms prefer to establish business in the urban areas.

Table 5. Equity Investments, by Percentage, by Region, Philippines 1995.

Regions Local Equity Foreign Equity

Region 1-Ilocos Region 72 28

Region 2--Cagayan Valley 99 1

Region 3--Centra1 Luzon 57 43

Region 4-Southern Tagalog 19 81

Region 5-Bicol Region 99 1

Region 6-Western Visayas 97 3

Region 7--Central Visayas 91 9

Region 8-Eastern Visayas 91 9

Region 9-Western Mindanao 97 3

Region lo-Northern Mindanao 81 19

Region II-Southern Mindanao 95 5

Region 12-Centra1 Mindanao 100 0

Autonomous Region of Muslim Mindanao 100 0

Cordillera Admin. Region 76 26

National Capital Region 40 60

Source:BOI, Philippines.

Figure 10. BOI-Approved Projects by Region, Philippines, 1995 (Million Pesos).

III 53,768.07

IV 32,186.83

NCR 18,960.49

VI 11,152.59

VII 7,231.60 II

V XI X IX VIII CAR XII I

2,601.30 2,354.86 1,445.00 1,005.49 613.76 213.10 175.67

SEVERAL LOCATIONS

1======~~~ •••••••••••

NOT INDICATED] 37,494.37

Source: BOI, Philippines.

Figure 11. Total Labor Generated by Region by New and Expansion Projects, Philippines, 1996.

IV III NCR VII X XI VI

II 750 V ⁶⁰² IX ⁵⁷⁰ XII ⁴⁸⁸ VIII 318

I 172 CAR 155

SEVERAL LOCATIONS • • • • • • • • • • • • • • • • • • 25,709 NOTINDICATED . . ________________________________________ ~

Source: BOI, Philippines.

56 KEIEl TO KElZAl

6. Approaches to Decentralize DFls

6. 1. Decentralization strategies in Thailand

To correct the imbalance among the regions and to remove the rural/urban dichotomy and the prevailing disadvantages in the countryside, the govern-ment has pursued ways and means to decentralize developgovern-ment primarily through an Economic Decentralization and Prosperity Distribution Policy in 1992. The main goal of this policy is to disperse the prosperity, employment opportunities and income to the regions. To carry out this policy and ex-pedite its implementation, the National Development and Decentralization Committee (NDDC) was established.

The BOI is in charge of the investment promotion measures to stimulate regional investments targeting Zone 3. In light of this, the government has initialized capital decentralization and capital mobilization in the stock market. State financial institutions were encouraged to expand credit ser-vices to the regions at low interest, specially to the small and medium enter-prises in the Zone 3 area. Companies who operate and have their head-quarters in the regions are given the opportunity to be listed and mobilize capital in the Thailand's stock market. The government allocates a budget (that amounted to Baht 700 Million in 1993 and Baht 800 Million in 1994) to develop the regional infrastructure, to provide funds to the private sector and local authorities that may result in the government being a partner in a joint venture, and to urge the provinces to make their own investment plans.

The government through the Board of Investments provides incentives to further spur decentralization. The list of activities eligible for promotion has been expanded for projects locating way out of Bangkok under the policy from 148 to 160. Factories relocating away from Bangkok are eligible for BOI promotional privileges such as the following:

From Zone 1 to Zone 2

Exemption from corporate income taxes for 3 years, and for 7 years in industrial estates or promoted industrial zones.

From Zone 1 or 2 to Zone 3

Exemption from corporate income taxes for 8 years and 50% reduction for another 5 years after the initial exemption period

Double deduction from taxable income of water, electricity, and transport costs for 10 years,

Twenty-five percent deduction (from net profits) of the costs of in-stallation of the project's facilities.

Among other fiscal incentives offered by the BOI according to the Zone where the investor would locate are:

Zonel

Fifty percent reduction of import duty on machinery for projects which export at least 80% of total sales or locate their factories in industrial estates or promoted industrial zones

Exemption from corporate income taxes for 3 years for projects which export at least 80% of total sales and locate their factories in industrial