DTI readies ecozones for ‘disruptive’ startups

The Department of Trade and Industry (DTI) will release next month a set of rules that will allow startups to have their own economic zones.

Trade and Industry Secretary Ramon Lopez said on Monday that they were working on the implementing rules and regulations (IRR) of the Innovative Startup law, which includes the creation of startup ecozones.

Lopez told reporters on the sideline of the Inclusive Innovation Conference that the IRR would help give a support system for Filipino startups that were unique, new and disruptive.

“We will really try to screen the good ones. Those are the one’s we’ll give support to,” he said, noting that the government would promote these kinds of startups as opposed to the new players with platforms that are already present in the market.

“Normally, what they need is support on their cost of operation while they’re developing and fine-tuning their models. [For example], giving them an office space,” he added.

Among the incentives that the law would provide include the partial or full subsidy for the use of facilities, equipment, repurposed government offices and even grants-in-aid for research development, training and expansion projects.

A 2017 survey by accounting firm PwC Philippines showed that 88 percent of startups in the country said that looking for capital requirements was one of the “challenges” in starting a business.

A new company is not necessarily a startup. According to Katrina Rausa Chan, director of Qbo Innovation Hub, the country’s first public-private initiative for startups, a small new business is not necessarily a startup unless it has an innovative model, such as that of Uber, and a scalable model.

Lopez said that the economic zones would not be part of the Philippine Economic Zone Authority since the DTI-attached agency was in charge of export-oriented companies, while the startups targeted by the law would likely first cater to the domestic market.

But the law says that Peza “shall pursue and promote the creation” of such ecozones which will be made available to startups and startup enablers. The law also allows for “applicable benefits” to them, without specifying which are applicable in this case.

Also known as Republic Act No. 11337, the law described startup enablers as persons or businesses providing goods, services or capital that were important in the operation and growth of startups.

Lopez said that the locators in these startup ecozones would not be subject to the Strategic Investment Priorities Plan, which listed the industries that could avail themselves tax perks under the new tax incentives that the Duterte administration was pushing.

Lopez said this was due to the fct that these incentives for startups were just “operating costs support,” accounting for a “really small” amount on the part of the government.