By Bernie Cahiles-Magkilat
The Philippine Economic Zone Authority (PEZA) and the IT-business process management (BPM) industry are seeking longer transition period from Malacanang’s 30-day deadline to complete all requirements for special IT economic zone development applications for Metro Manila so they can be granted Presidential Proclamations.
PEZA Director-General Charito Plaza said they are seeking at least 6 months extension from the transitory provision granted under Administrative Order No. 18 issued by Malacañang on June 17, 2019. The order took effect immediately after its publication on June 22, 2019. The order indefinitely bans IT parks and buildings special ecozone developments in Metro Manila on efforts to push these companies to locate in the regions to help develop the countryside.
For applications that have been approved and endorsed by PEZA to Malacanang, IT ecozone developers are given 30 days to complete their requirements.
PEZA Deputy Director-General Tereso Panga said there are a total of 42 IT special ecozones endorsed to Malacanang of which 22 are supposed to locate in Metro Manila since the President took office in June 2017. PEZA has also approved 131 special IT ecozone projects for Metro Manila but have not yet endorsed to Malacanang. Of this figure, 121 are IT centers and 10 are IT parks.
Should this transitory provision in the AO will not be amended, Plaza said these projects will be shelved.
As of February this year, PEZA has a total of 278 operating IT ecozones of which 167 are in Metro Manila. There are also 47 that have been proclaimed in the National Capital Region but are not yet in operation because they are still awaiting some locators.
IT special ecozone developers in Metro Manila no longer receive tax incentives from the government since 2008, but their locators are still entitled to government perks.
Plaza said that those pending with Malacanang have accumulated since President Duterte came into office in June 2016. These PEZA approved and endorsed special IT ecozones are still completing the new requirements imposed by Malacanang like land title and lot segregation documents which are difficult to procure.
“We are asking the President to allow for a longer transition period because we just got this notice,” said Plaza, who admitted being caught by surprise of the new order on the moratorium on the approval of applications for special IT ecozones in Metro Manila.
In addition, there are still other areas in Metro Manila like Caloocan and even Quezon City that do not host IT-BPO centers and parks. Also PEZA said the infrastructure like internet connectivity and telco services in the provinces are not yet that developed to host these companies.
PEZA has called for a meeting with the IT-BPM industry led by the IT-Business Process Outsourcing Association of the Philippines (IBPAP) and the Contact Center Association of the Philippines to come up with their joint position on AO 18.
IBPAP President and CEO Rey Untal, who bumped into reporters on his way to the PEZA meeting, said they will discuss the AO with PEZA, particularly the transitory provision which they said has “near-term detrimental impact” because Metro Manila is expected to drive growth in the IT-BPM industry this year.
The industry, he said, has been very supportive of the government’s effort for locators to locate outside of Metro Manila to develop the countryside, but he likewise stressed that firms would still prefer Manila as its headquarters based on their “hub and spoke” model. To make the countryside a success, Untal said, the hub in Metro Manila must also be strong.
Panga also supported the industry as he quoted their position that while the industry fully supports countryside development, the IT-BPM players also equally emphasized that it is “non-negotiable to locate their headquarters in Metro Manila.” Metro Manila is still the preferred hub.
According to Untal, the significant number of pending PEZA applications has pushed a low space availability of IT spaces in Metro Manila.
For this year, IBPAP anticipates demand of between 400,000 to 450,000 square meter space.
However, property management firm Leechiu Property Consultants pointed out there are only 216,000 square meters of Peza-accredited office space that are coming in as against forecast demand of 450,000 square meters.
Historically, the industry, which is one of the country’s top two dollar contributors, accounts for 30-35 percent of total office space.
Untal said they are going to release a recalibrated growth target at the upcoming IT-BPM Summit taking into consideration the recent developments affecting the sector.
Despite the fact that “Peza has been threatened and challenged by sectors who want to change the PEZA picture,” Plaza expressed hopes that AO 18 can be a prelude to their exemption from the TRABAHO Bill, the second package of the Duterte administration’s comprehensive tax reform program that seeks to overhaul PEZA incentives regime.
Should they still be included in the TRABAHO Bill, PEZA said this would result in the IT-BPM sector getting tightly squeezed. Plaza has been urging their applicants to hang on, hoping the moratorium, which means temporary, will only last for a shorter period of time.