The Philippines, being a developing country, is establishing itself as one of the fastest-growing economies in Asia, thanks to the Business Process Outsourcing (BPO) industry. With the ongoing Build, Build, Build project, foreign investors are continuously encouraged to invest and establish businesses in the country to develop more jobs and opportunities for the Filipinos.
However, BPOs are not the only ones in the government’s agenda for development. In this article, we’ll delve into the agency that handles it all – PEZA, its purpose, its membership perks and its contribution to the BPOs in the Philippines
What is PEZA?
The Philippine Economic Zone Authority (PEZA) is an agency attached to the Department of Trade and Industry (DTI). Founded in 1995 under the Republic Act 7916, the agency is tasked to promote, oversee, and assist the business operations of foreign investments specialized in export-oriented industries. They facilitate these businesses within the different special economic zones in the country.
Being a PEZA-registered company has its perks, and the BPO industry benefits the most from it. The agency even encourages more BPO companies to invest in the Philippines in order to promote and develop the IT sector in the Philippines.
Benefits of a PEZA-registered company
A PEZA-registered company is entitled to both fiscal and non-fiscal incentives, which can be enjoyed by the investors and their families.
Other than the opportunity to establish a business at one of the economic centers in the Philippines, registered companies are also entitled to:
- Income Tax Holiday (ITH) of up to six years
- A special tax rate of 5% of gross income after ITH and exemption to pay all national and local taxes
- Tax-free and duty-free importation of machinery, raw materials, and equipment
- VAT zero-rating of local purchases of goods and services
- Exemption from wharfage dues on import shipments of equipment
- Exemption from expanded withholding tax
These incentives include perks for foreign investors and their families, such as:
- Simplified import-export procedures
- Employment of non-resident foreign nationals in supervisory, technical, or advisory positions
- Special Non-Immigrant Visa with multiple-entry privileges
- Extended visa assistance to foreign nationals, their spouses, and dependents
Advantages for the BPO industry
With the given incentives and the chance to be in one of the economic centers in the country, the BPO Industry will surely thrive in the country while enjoying the cheap cost of labor and equipment as well.
BPO companies, from SME to enterprise, have the opportunity to expand their businesses to prime locations and special economic zones within the country, enabling them to cater to more clients and create more jobs for the Filipinos in farthest locations. Not only does it benefit BPO companies, but they can also help their employees have a better take-home pay for their families and bigger benefits through investing in their employees’ skills. This also opens job opportunities for more Filipinos below the poverty line.
Eligible sectors and services
PEZA registration is available to the following sectors:
- Information Technology (IT) sector
- Tourism sector
- Medical Tourism sector
- Agro-Industrial sector
- Manufacturing sector
In an effort to promote the IT sector in the Philippines, PEZA and DTI encourage more foreign IT businesses to invest in the country. As such, different IT Parks and buildings in the Philippines are constructed for this.
Eligible IT service activities eligible in PEZA registration include:
- Software development
- IT-enabled services such as data entry, transcription, call center, etc.
- Content development
- Knowledge-based and computer-enabled services, such as architectural and engineering consultancies, etc.
- Business Processing Outsource (BPOs)
- IT research
- Other IT-related services
Requirements for registration
To avail of these benefits, companies must register their businesses and locate them to a building or an establishment inside a PEZA special economic zone. In addition, companies must submit sets of Documentary, General and Technical, and Financial Requirements.
These requirements may vary depending on the sector. For the IT sector, these are:
- Duly-filled Application Form (notarized)
- Corporate profile, which contains:
- A brief history of the company
- Existing and/or proposed business activities and projects
- Affiliated PEZA-registered companies
- Affiliated Bureau of Investments (BOI)-registered companies
- Principal officers and bio-data
- Audited Financial Statements for the past 3 years
- SEC Certificate of Registration
- Board Resolution for authorization of PEZA application and designation of a representative
- Project Brief
- Project Feasibility Study
- Anti-graft certificate
General and technical requirements (for preparation of feasibility study)
- Parent company and product brochures
- Description of a new project
- Detailed organizational chart
- Project timeline
- Potential market
- Service/process flow chart
- Detailed list of equipment, including country of origin, capacity, and costs
- Detailed list of materials, including sources and prices
- Area requirement
- Equipment layout
- Electricity/water requirement
- Waste and water disposal plan
- Principal officers and corresponding bio-data
- SEC Certificate of Registration
- Articles of Incorporation
Financial data and documentary requirements
- Matrix of employees with salary and position
- Matrix of foreign experts to be hired
- The projected volume of sales
- Breakdown of other USD costs
- Number of workdays and shifts per year
- Sources of financing
- Latest Audited Financial Statement. If any
- Parent company’s latest volume and value of sales, net income, total assets, and number of employees, if applicable
Upon completion of the given requirements, the application will then be evaluated and submitted to the PEZA Board for approval. Once approved, the application will be issued a PEZA Board Resolution. Then, additional requirements may be requested by the agency if needed.
PEZA special economic zones
To date, there are 379 operating economic zones in the country, the majority of it comprised of IT parks and centers. Most of these are located in Metro Manila, particularly in Quezon City, Makati, and Taguig. However, efforts are also put in different regions, especially those near the Metro, to create more jobs and to develop the municipalities. This can also help in veering the heavy traffic in Manila due to its congestion. There are also 139 economic zones under development with 99 of them being IT parks and centers.
Baguio City Economic Zone
The Baguio City Economic Zone is one of the three economic zones in the famous tourist destination, aside from John Hay Economic Zone and the SM Cyberpark. The economic zone started to thrive in 2013, with the rise of expansions of BPO companies such as Sitel. As of 2016, the economic zone produced more than 12,000 employees from different sectors, with more than 8,000 accounted to BPOs.
Cavite Economic Zone
Cavite Economic Zone is one of the economic zones in the province of Cavite. The economic zone is located in Rosario and General Trias City, 30 kilometers south of Metro Manila. Founded in 1980, Cavite Economic Zone was developed in five phases, which consists mostly of industrial power plants and sewerage facilities. To date, the fully-occupied CEZ has around 426 companies.
On January 2019, President Rodrigo Duterte signed the proclamation creating another special economic zone in Cavite named the Cavite IT ecozone or VistaHub BPO Molino. It is formed in the continuous aim to encourage foreign investors to generate employment and establish linkage to different industries in the Philippines.
Clark Freeport Zone
PEZA, in coordination with the local government, the Bases Conversion and Development Association (BCDA) and Clark Development Community (CDC), drove more foreign businesses to the country, including the BPO Industry through establishment of Clark Freeport Zone. it is one of the four districts being developed in Clark, Pampanga, with the three others as Clark Global City, Clark International Airport, and New Clark City.
BCDA and CDC aims it to be a hub of business, lifestyle, leisure, and modernity. They won’t need to relocate elsewhere to find a job since it’s already in their area. They can now live a comfortable life and even spend more time on recreation, bonding with their families, and developing their passion.
Mactan Economic Zone
The Mactan Economic Zone, formerly known as Mactan Export Processing Zone, is a 119-hectare economic zone located in Cebu. It is managed by PEZA and Mactan Export Processing Zone Chamber of Exporters and Manufacturers since 1984, which currently has 148 member companies as of 2018.
Mactan Economic Zone is set to become a township to cater business owners and workers in the near future.
Metro Manila IT Parks and Centers
Based on the latest Tholons 2019 Report, Manila still places at the 2nd spot of Top 100 Super Cities, next to Bangalore. The construction of IT parks and centers contribute to this ranking.
It is no wonder that Metro Manila still has the largest number of IT parks in the Philippines. Most prominent of these are located in McKinley Hill in Taguig, Rockwell Business Center in Makati, Eastwood City, and UP-Ayala Technohub in Quezon City. One of the advantages in setting up a business in Manila is the access to government agencies, with it being the business center in the Philippines.
At the end of the first quarter of 2019, PEZA announced that its economic zones will be converted into townships, with the Mactan City Economic Zone to be set as an example. These “townships”, or smart cities, will have housing facilities, banks, and commercial centers like shopping malls. This is so that company officials won’t have to travel in and out of the economic zones, and workers will have the chance to live, learn, work and play. Read all about it here.
Meanwhile, at the second quarter of the year, PEZA aims to rebrand and improve its offering with the addition of knowledge and technology innovation zones to be put up by public and private universities in the country, modeled after the Silicon Valley in California. The agency will start its rebranding by April 30.
The agency also targets to put up economic zone institutes that will train workers for businesses leased in the economic zone to lessen labor skill mismatch. Learn more about this in this article.