Allow ecozones in Metro, Palace urged

The IT-BPM industry is banking on the mercy of Malacañang to approve the pending applications for economic zones in Metro Manila to at least give the sector some more room to grow.

Rey Untal, president and CEO of the Information Technology and Business Process Association of the Philippines (Ibpap), said he believed there was still a chance the proposals would be approved.

President Duterte imposed an indefinite ban on new economic zones in Metro Manila, a blow that hit an already underperforming industry by surprise. However, there were 22 proposals, worth around P34 billion, that managed to reach Malacañang before the ban.

“There are [22 proposals] with the Office of the President. At least we know that there is a big chance that those will be signed. I don’t have the exact figure right now [on] how much space that will give us,” he said.

These economic zones are essentially office spaces occupied by business process outsourcing (BPO) firms. Only companies in economic zones benefit from tax incentives, making these areas particularly attractive as they make doing business in Metro Manila less costly.

Untal also cited the 131 proposals, worth nearly P160 billion, that failed to reach Malacañang before the ban. These are still with the Philippine Economic Zone Authority (Peza) since their proponents still had to complete some requirements.

Peza had asked Malacañang to give the proposals more time so they could be submitted for approval, while also appealing to spare some cities of Metro Manila from the ban.

“This is what we’re thinking about to show we still have flexibility in getting some more space. All is not lost,” Untal said.

While around 60 percent of the 278 IT parks and centers across the country are in Metro Manila, Peza said there were 8 cities that either had just one or no ecozone at all.

These cities that Peza wanted spared were Manila, San Juan, Marikina, Las Piñas, Malabon, Caloocan, Pateros and Valenzuela.

The battle for space, which has lately been taken up by mostly Chinese offshore gaming operators, is not the only struggle facing the industry.

There is also the challenge to safeguard its tax perks as the Duterte administration pushes to rationalize tax incentives, which might make doing business more costly for existing IT-BPM players.

During the Digital Disruption 2.0, a forum cohosted by the European Chamber of Commerce of the Philippines on Tuesday, Untal shared how the industry’s growth in the past two years had “not lived up to expectations.”

“It’s unfortunate, in fact, that many of my time and many of my stakeholders’ time, are diluted because of distracting policy matters,” he said, when the industry could have focused on making it more competitive instead.

Ibpap tapped management consulting firm Everest Group to do an independent study that would show how much the country’s largest private sector employer could still grow until the end of the Duterte administration, after the disappointing growth in jobs and revenues.

The results would be announced this November.

Back in 2016, the industry group launched its 2022 road map wherein it targeted 1.8 million direct jobs and $38.9 billion worth of revenues.

To achieve this, Untal previously said the industry needed a compound annual growth rate of around 8 percent for job creation and about 9 percent for revenue.

However, the industry likely grew its revenues to only $24.5 billion to around $24.8 billion in 2018, Untal said.

At $24.8 billion, the industry would have grown close to only 6 percent from $23.4 billion in 2017, or below the 9-percent target growth.

The industry was supposed to create 100,000 new jobs each year. But last year felt short of that target, creating only 60,000 new jobs to end with a workforce of 1.23 million, a 5.1-percent growth as opposed to the 8-percent target.