Silicon Valley-type zone mulled for local tech startups

THE DEPARTMENT of Trade and Industry is mulling to grant a more attractive incentive and tax regime for technology startups through the creation of an economic zone-type of area, similar to San Francisco’s Silicon Valley.

Trade Secretary Gregory L. Domingo said the concept was part of plans to create a conducive policy environment for local tech startups as well as research and development-based companies.

“Definitely, we will provide incentives and some of the ideas that we’ll try to look into is to declare a certain area, a special type of zone that will have different and simplified regulations. In effect, it will be similar to the ecozones of the Philippine Economic Zone Authority, except that it will be for tech startups and R&D type of work where you have minimal regulations and so you allow the ideas to thrive,” Domingo said last Friday.

He said the proposed hub was also seen to attract international tech companies.

Like the original Silicon Valley, it is envisioned to become a community that has universities and other infrastructures. It would also allow the employment of foreign nationals with high-level degrees and specializations.

Part of the proposal is to grant income tax holidays for companies and employees during the first years of operations. They will later be subjected to a 15 percent income tax rate.

“We have to make our own environment better than the existing ones so we can attract more international companies to come in,” he said.

Domingo admitted that this concept may need time to take off.

He said this may even no longer be completed before President Aquino steps down from office since the proposal will need the issuance of a law calling for a change in the tax and labor structure.

“We need to build on this concept first. But we will see. We have to do informal discussions with provincial governments, identify the potential sites, and talk to local governments and Congress to check whether this is possible,” he added.

Domingo said the government needs to take a very serious look on how to support Philippine tech startups, which have the potential to grow even bigger than the local business process outsourcing industry.

He said he is hopeful that with the right business and policy climate, local tech startups would grow to companies with valuations of $100 million to $300 million in the next three to five years, and at least one firm with a valuation of more than $1 billion.