Ecozone ban to hurt BPO sector

More than P34 billion worth of projects to put up buildings for IT-BPM companies are now at the mercy of President Duterte after Malacañang slapped a ban on new economic zones in the country’s capital district.

According to the Philippine Economic Zone Authority (Peza), these represent the value of 22 Metro Manila-based projects awaiting final approval of Malacañang.

These refer only to the investment commitments that have been endorsed to the Office of the President before Administrative Order (AO) No. 18 took effect. In an effort to boost countryside development, AO 18 slapped a moratorium on new ecozones in Metro Manila starting June 22, giving pending economic zone developers whose papers are in Malacañang about a month to iron out deficiencies in their submissions.

However, a bigger number of projects could be set aside by the ban, which caught Peza and the information technology and business process management (IT-BPM) industry by surprise. This sector is more popularly known as the business process outsourcing or BPO industry.

Peza earlier said that there were still 131 Metro Manila-based projects that did not make the June 22 cutoff date, even though these had already been partially approved by Peza. The total value of these projects was not yet made available by Peza.

These pledges, according to Peza Director General Charito Plaza, were not yet endorsed to Malacañang because they first had to comply with requirements from other government agencies.

Talks of an ecozone moratorium have been ongoing as far as 2017. Tereso O. Panga, Peza deputy director general for policy and planning, said they appealed to Malacañang as early as January last year to give a transition period of at least six months.

Asked for comment, Trade and Industry Secretary Ramon Lopez told reporters on Friday that the policy was “really good,” given how Filipinos flock to Metro Manila in search of jobs.

While Peza is under the Department of Trade and Industry (DTI), the investment promotion agency and DTI do not always see eye to eye such as in the matter of rationalizing fiscal incentives.

In the ban on new ecozones in Metro Manila, Lopez is supportive of even a shorter timeframe, saying he might send a memo to Malacañang asking for a three-month transition period instead.

A sudden change in the direction of the industry is not as easy as it sounds, especially given these investment pledges were results of careful business planning among IT-BPM companies.

Panga had previously explained how Metro Manila served as the headquarters for these companies before they expanded to the countryside.

However, it seems the industry itself is also divided on the policy.

Rey Untal, president and CEO of the Information Technology and Business Process Association of the Philippines (IBPAP), said there might be a “near term detrimental impact” on the industry, noting the need for a transition period.

On the other hand, the Contact Center Association of the Philippines (CCAP) did not show any sign of concern in their press statement last week.

CCAP, which has the biggest group of workers in the IT-BPM industry, said the order was “consistent with the intent” of the government’s push to rationalize tax incentives because of its effort to encourage industries to invest in the countryside.

“As an association representing an industry sector that benefits from fiscal incentives, CCAP, with its over one hundred member companies and over 850,000 employees, is supportive of moves to rationalize the incentive regime and make provincial locations attractive to investors,” the statement read.