Moratorium puts 130 ecozone plans in limbo

More than 130 proposals to put up buildings for IT-BPM companies might now be stuck in limbo after the government banned new economic zones in Metro Manila for an indefinite period.

Malacañang has imposed a moratorium on new ecozones in Metro Manila, leaving room only for project proposals that are already pending President Duterte’s approval, according to Administrative Order No. 18.

The order immediately took effect upon publication last June 22, giving pending economic zone developers around a month after to iron out deficiencies in their submissions.

The Philippine Economic Zone Authority (Peza) said it has approved and endorsed 22 Metro Manila-based proposals to Malacañang. These will be considered, although the presidential order did not give any guarantees.

The problem, however, is that there are 131 ecozone development proposals that did not make the cut, even though these were already partially approved by Peza as of June 20. The total investment costs of these projects were not immediately available.

Peza Director General Charito Plaza said in a press briefing on Tuesday that these pledges were not yet endorsed to Malacañang because they had to comply with the requirements from other government agencies first.

Although Peza will likely appeal for a longer transition period for the order to give time for companies to adjust their plans, Plaza said that the 131 projects would be “shelved” unless Malacañang reconsidered its position.

The order poses a risk for the ever-growing information technology and business process management (IT-BPM) industry. Not only does it face an uncertain fate over tax perks amid the government’s move to rationalize tax incentives, IT-BPM companies will also have to compete over the remaining available commercial space in Metro Manila.

“If I may cite the industry position, the [IT-BPM] industry fully supports countryside development, except it is non-negotiable for them to locate in Metro Manila as their main headquarters,” said Tereso O. Panga, Peza deputy director general for policy and planning.

Rey Untal, president and CEO of the Information Technology and Business Process Association of the Philippines (IBPAP), explained this further by citing the “hub and spoke” model that is being practiced by the industry, wherein the spokes pertain to the countryside and the hub pertains to metro cities.

“As we continue to grow in the metro cities, it becomes easier for us to also expand in the countryside,” Untal said.

Based on the IBPAP’s initial assessment, the order will have a “near term detrimental impact,” Untal said without expounding. He had a meeting with Plaza after the interview.

In Peza’s history, the industry has been concentrated in Metro Manila, data showed. Out of 278 IT parks and centers as of February this year, around 60 percent or 167 parks and centers are based in the metropolis.

The same also applies in terms of jobs. According to a Peza presentation this month, Peza-registered companies had 1.5 million people under their payroll, nearly half of which or 560,336 are in Metro Manila.

Leechiu Property Consultants, one of the leading real estate services firms in the country, said in a recent press release that the industry demand for office space in Metro Manila might reach the forecast 450,000 square meters (sq m) this year.

However, company CEO David Leechiu said that “it looks like we only have 216,000 sq m of accredited space coming onstream this year.”

The numbers point to the key role Metro Manila has played for the industry. Although the direction is to ultimately go for countryside development, Peza’s Panga said the industry “cannot do away with Metro Manila.”

Panga noted how many IT-BPM companies were located in central business districts like Makati City, but there were still other parts of the metropolis that have few to no IT-BPM firms—a growth potential that would now be at risk since the ban applied to the entire Metro Manila.

But talks of an ecozone moratorium have been ongoing for a long time now. Panga recalled appealing to Malacañang as early as January last year to give at least a 6-month transition period.

He cited some earlier signs that foreshadowed the order, such as the slower-than-usual presidential proclamations for new ecozones last year.