This is a re-posted opinion piece.
Part 1 (of a two-part series)
The Philippine Economic Zone Authority or PEZA was created on Feb. 24, 1995, by virtue of Republic Act 7916, or the PEZA Law, evolving from the Export Processing Zone Authority (EPZA). The PEZA Law mandates the creation of economic zones all over the country. PEZA is an agency attached to the Department of Trade and Industry (DTI) and it is now on its 16th year.
In that life span, we have established 247 economic zones throughout the country, over and above the 16 original economic zones by our predecessor agency. Even as I speak, more new economic zones are in the pipeline. These economic zones now include not just the traditional export manufacturing but also Information Technology Parks and Centers and we have added new areas like tourism, medical tourism, and agro-industrial economic zones, all of which are export-oriented. We are now finalizing the guidelines for domestic economic zones.
The name of the game is innovation.
In brief, these economic zones have brought in a total of 2,498 export-oriented companies, total investment of over 1.8 trillion pesos and exports of 417.87 billion US dollars. Eighty percent of the total Philippine exports and 87% of Philippine manufactured exports come from these PEZA zones.
To date, the PEZA economic zones have generated 808,735 direct employment and about 5 million more jobs are indirectly generated from these zones.
Certainly, this did not happen overnight. We humbly share with you that these statistics are a result of PEZA’s responsiveness to the dynamics of business and to the rapid changes in the global environment. Our focus is to aggressively pursue and fulfill our mandate to generate investments and create jobs for Filipinos.
When PEZA took over EPZA in 1995, it inherited from its predecessor agency 16 export processing zones — four of which were developed and owned by EPZA.
When then President Fidel V. Ramos appointed me director deneral of PEZA and hardly warming my seat, we issued our first major policy pronouncement — PEZA itself will not develop Special Economic Zones; instead, we will leave this task entirely to the private sector. More than that, PEZA will not identify the areas where special economic zones should be developed, leaving this task likewise to the keen business instinct of private developers. By this same policy, we also allowed the private sector to construct factory buildings, utilities and all other facilities and services inside these economic zones.
This is in line with our fundamental guiding principle that the task of government is to be an enabler to business, not to be a competitor. We recognize that business knows its business, and government’s role should be to provide a responsive and focused policy environment that will induce private capital into government’s nation-building efforts.
This major policy also addressed our own financial concern. The law mandates us to develop economic zones all over the country. However the same law did not provide for the budget to develop these economic zones. As a government-owned corporation, we do not get a single centavo of budget from the national government. Not only do we have to earn enough to run our own nationwide operations, we also inherited loans that were incurred by EPZA, the predecessor agency, for the development of the four government-owned zones. On top of that, we cannot increase the fees we charge investors for our services because while we must give them efficient service, we must also keep their costs low. Otherwise, we will not be able to attract foreign investors amidst fierce competition from our neighbors in the region.
Thankfully, private sector developers enthusiastically responded to our call for them to develop economic zones. The figures now speak for themselves. PEZA effectively harnessed private capital for a major economic program of government and just as significantly, spared government from having to spend billions to build, operate and maintain these economic zones.
In 1999, on a visit to an Information Technology (IT) Park in Taipei, I was convinced that the Philippines could compete for investments in this industry, given our highly literate and English-speaking Filipino workforce. While all PEZA zones then were industrial zones catering to export manufacturing companies, we proposed to our board that we also grant incentives to IT projects.
Corollary to this, recognizing that the infrastructure requirements of IT companies are tangential to the requirements of manufacturing plants, and since PEZA can grant incentives only to special economic zones proclaimed as such by the President of the Philippines, we also proposed that Information Technology Parks be proclaimed as PEZA economic zones.
At about the same time, former Prime Minister Cesar Virata, when informed of our minimum requirement of five hectares for an IT Park, asked, “What if you have five hectares of floor area instead of land area?” We thought that proposition made sense. We were convinced that nothing in the law prevented the proclamation of a vertical development — a building, if you may — as a Special Economic Zone.
The rest, as they say, is history. The IT industry is now the country’s sunshine industry, hiring thousands of highly paid IT associates. In the process, we were able to tap our talented IT-literate workforce — what one investor said we have been hiding all those years. As a result, the Philippines is now the Southeast Asia market leader and one of the top countries providing Offshoring and Outsourcing IT services globally: Number one in call centers and number 3 in non-voice.
Having said that, what PEZA is today was made possible because of the trust and confidence of the private sector who have been responsible for the development of all except four of the PEZA economic zones. The same trust and confidence we likewise enjoy from the companies inside these zones which are mostly foreign-owned, many of which are Fortune 500 listed. This is manifested in the constant stream of applications we receive from private sector developers for areas to be developed as PEZA economic zones.
Just as significantly, about 60% of new investments inside the PEZA economic zones are re-investments or expansions of companies already operating in the Zones. At the height of the global financial crisis, PEZA was the only agency that netted a positive growth in investments of 13.3%.
This trust in our organization would not also have been possible without the culture of integrity that we have inculcated and engendered among all PEZANS.
As defined by MAP, “Culture is a way of life” and “Integrity is adherence to the highest ethical standard.”
While companies operating in PEZA economic zones enjoy fiscal incentives like tax holidays, duty-free importation of raw materials and equipment, etc., other countries also offer similar perks.
We realize however, that these fiscal incentives provided by law alone wouldn’t cut it.
To entice foreign investors and to be truly competitive, our institution must be freed from inefficiency, red tape and corruption, and other “disincentives” for investors. It was an uphill battle to breach what often ails government bureaucracy.
From July 12, 1995, my first day as PEZA director general, our battle cry has since been immutable — absolute honesty and integrity. This is the operative spirit behind PEZA’s goal to turn things around. To gain the confidence and trust of investors as well as to make it easy for them to put up their business in these zones, we have institutionalized the four pillars of the PEZA BRAND as follows:
First, PEZA is a one-stop shop. Through a series of Memoranda of Agreement with other government agencies, Building and Occupancy Permits, Visa Processing for foreign investors, Environmental Compliance Certificates, Import & Export processing, etc. are done or pre-processed by PEZA.
Second, PEZA is also a non-stop shop.
We consider this our unbeatable quality service because if any other agency both here and abroad can beat this service we will feel sad.
We realize that other government agencies abroad also have their own “one-stop shop” service, so we upped the quality of our services by another notch, by being a “non-stop shop”.
In the manufacturing and agro-industrial zones PEZANs render service 24 hours a day seven days a week, including Saturdays, Sundays, and holidays. Yes, including Christmas day and New Year, except Good Friday. And in the airports, PEZANs are there round-the-clock to process the transit of incoming raw materials and parts which are whisked from the ports to the zones where these will be immediately manufactured for timely export.
To be continued
*Speech delivered by the author during the 9th MAP International CEO Conference at the Makati Shangri-La. The author is director-general of the Philippine Economic Zone Authority, and the first female recipient of the “MAP Management Man of the Year” award. Feedback at [email protected]. For previous articles, please visit <map.org.ph>.
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By: Lilia B. De Lima – Map Insights
Source: Business World, Sept. 26, 2011
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