Economic zone proclamations hit snag for IT industry — PEZA

Janina C. Lim | BusinessWorld | June 25, 2019

The Philippine Economic Zone Authority (PEZA) and the business process outsourcing (BPO) industry said they will seek more time to meet the requirements of the Office of the President (OP) to obtain an official proclamation for economic zones.

PEZA said it will lobby for more time than the 30 days currently provided for Metro Manila economic zone applications.

PEZA Director-General Charito B. Plaza said the applications affected by the current processing period are 153 information technology (IT) centers and 10 IT parks. PEZA approvals for Metro Manila only cover IT enterprises.

Of these, 22 have been endorsed to President Rodrigo R. Duterte and 131 approved by the PEZA board but not elevated to the OP.

Executive Order 18, which took effect in June and set a deadline for the processing of applications for the establishment of economic zones in the National Capital Region, did not provide guidelines for how the applications are to move forward.

PEZA’s Policy and Planning Deputy Director-General Tereso O. Panga said the agency is initially seeking for a “minimum of six months” to allow these firms to seek endorsement to the OP which has the final say on granting enterprises special economic zone status.

“The intention of the DG and the PEZA management is to write the Office of the President to allow for a longer transition period because it will be unfair… because they just got (the order) quite recently, and their projects were already approved, and will not be given a chance to vie for presidential proclamation,” Mr. Panga said in a briefing Tuesday at PEZA headquarters in Taguig City.

PEZA said companies need to comply with the new documentary requirements set by the OP for the PEZA endorsement process.

The additional documentary requirements, such as land titles, have “no bearing at all” as PEZA grants incentives on the basis of the physical infrastructure or facility that will be involved in the enterprise activity.

“Lot segregation is so difficult to comply so it’s a new requirement because the intention is they want the lot where the building is located somehow proportionate to the footprint of the building… That has no bearing at all but that was the requirement so all the developers are now compelled to comply,” he added.

Applicants that fail to submit all requirements to beat the July 22 deadline will not be rejected but “will be shelved temporarily,” according to Ms. Plaza.

The new process has led some locators to transfer to other countries while others have moved projects to other provinces like Palawan, which offers fiscal incentive packages to investors, Ms. Plaza added.

PEZA will also look into the readiness of rural areas to host IT parks and centers considering the infrastructure demands of these enterprises.

“While it is good to expand IT industries in the countryside, we still lack the IT infrastructure. So this should be considered by the President,” Ms. Plaza added.

Ms. Plaza said PEZA will look into the possible implications of the EO, specifically whether it will affect countryside investment.

“Does this EO 18 mean we will continue with our present incentives because how can we attract investors to the countryside?” Ms. Plaza added.

PEZA will draft its letter to the OP together with the Information Technology and Business Process Association of the Philippines (IBPAP).

“There’s going to be a near-term detrimental impact in our assessment, “ IBPAP President and CEO Rey C. Untal told reporters yesterday in Taguig City before meeting the PEZA officials.

“A lot of the growth is poised to happen in Metro Manila this year. There are potentially new locators, so the question is whether the previous availability of PEZA zones in Metro Manila are going to be sufficient in comparison to the demand picture that we are seeing,” Mr. Untal said.

Ms. Plaza has said the NCR has sufficient space to meet demand for new IT parks and centers.

However, Mr. Untal believes “a significant number of application for PEZA has pushed the availability to a reasonably low number.”

Mr. Untal added that although IBPAP is” very supportive of going to the countryside,” Metro Manila remains an important take-off point for IT-BPOs.

“There’s this concept of the hub and spoke model. For us to enable spokes, which is the countryside, to be effective and strong, we need to retain a very strong hub, which is the Metro Manila cities,” Mr. Untal said.

“As we continue to grow in Metro Manila, it becomes easier to expand in the countryside,” he added.

Mr. Untal said IBPAP projects the industry’s take-up of office spaces in Metro Manila to reach 400,000 to 450,000 square meters this year.

In 2018, the industry saw 420,000 sqm. new spaces. The IT-BPO industry accounts for 30% to 35% of the total office space take-up in the metropolis.

In the four months to April, IT-related investment pledges at PEZA declined 7.08% year on year to P4.632 billion.

In the first quarter, exports from the sector grew 6.75% to $3.071 billion while employment rose 10.68% to 741,905 persons.

Of the 395 operating economic zones registered with PEZA nationwide, 70.13% or 277 are IT parks and centers.

Including those proclaimed but not yet occupied by locators, IT economic zones number 381 nationwide, of which 56.17% or 214 are in Metro Manila.

Source: https://www.bworldonline.com/economic-zone-proclamations-hit-snag-for-it-industry-peza/