Relieving Country's Investment Confidence through Ecozones

by PRIME Philippines Research & Advisory  June 3, 2020

The COVID-19 pandemic had numerous economic implications to the country including business and operations involved in investments, exports, imports, and overall employment. Its spread created uncertainty in the local and international market - jeopardizing the status of globally competitive investors in the Philippines. Despite the struggles and losses faced by the country, the Philippine Economic Zone Authority (PEZA) continues to support the national economy through global competitiveness and investment confidence.

 

PEZA’s ecozone programs give businesses operating within its borders the incentives of tax-free importations, years of tax holidays, and exemption from payment of any government fees, among others. But due to the scarcity of space supply and the decentralization initiatives in Metro Manila, the government had taken measures to ensure that cities would not be over-capacitated and to avoid the surge of rental fees that can result in an uptick in the cost of doing business in the metro. 

 

Last year, Malacañang imposed a moratorium on new ecozones in Metro Manila according to Administrative Order No. 18.  This was mandated in order to promote rural developments, ensure inclusive growth in the countryside, and create robust economic activity and wealth generation in areas outside Metro Manila. The program was able to support countryside development and investment engagement in the past year as well as decentralize the metro. 

 

For its 2019 performance, PEZA has generated PHP 117.541 billion investments and USD 54.597 billion exports, and 540 number of projects. It slipped by over 16 percent from P140.24 billion in 2018, mostly due to uncertainties brought about by the government’s move to rationalize fiscal incentives.

 

Earlier this year, PEZA was faced with another challenge as the onslaught brought by the Taal volcano eruption and the on-going pandemic caused a stir in the operations of businesses and approval of new ecozones in the country. Heavily affected during the first quarter of the year, investments registered under PEZA crashed by almost 28% to PHP 16.49 billion, from PHP 22.9 billion during the same period last year, as not a single peso was recorded in March with board members unable to convene. Further, shipments made by economic zone locators during the first quarter slowed down by more than 66% to USD 4.36 billion, from USD 12.94 billion. But as the country slowly resumes nationwide operations, PEZA has come up with a way to restart generation of investments, jobs and exports.

 

To further uphold the trust and confidence of investors and business groups even in this worldwide crisis, PEZA has approved 26 projects worth PHP 13.1 billion last May 21. More than two-thirds of the 26 projects were tendered by foreign firms mostly from the United States, Japan, Taiwan and China, while the remaining one-third was submitted by local investors. Its board approved the proposals in response to the need to maintain the country’s competitiveness. Aside from this, PEZA Director General Charito Plaza further elaborated that not only will these projects bring in capital and generate export income, but also provide employment to around 20,000 Filipinos. This also comes as an advantage to the aggressive growth of the industrial sector and office sector, specifically the  Information Technology and Business Process Management (IT-BPM) industry, within and outside the borders of Metro Manila. 

 

Currently, PEZA has a total of 408 economic zones, 4,542 locator companies, 1.6 million workers and PHP 3.894 trillion total investments nationwide. The recent approval of these new ecozone projects will support the growing number and continuous operations of businesses despite the sudden downturn in the country’s economy. With this initiative, the Philippines will still maintain its competitiveness for investments despite the impact of the coronavirus outbreak.

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