6 August 2014
The nation’s export zones constitute one of the greatest economic successes of the Aquino administration. Of the P2.7-trillion investments poured into Philippine export zones since 1995, P1 trillion or 42 percent came in the last four years, during the Aquino administration.
In 1995, these special economic zones, designed to attract foreign investments, numbered 16. Today there are 306, of which three are run by the government. The 3,313 companies in the ecozones employ 1,076,999 personnel. They have exported a total of $536 billion worth of products. Exports from ecozones make up 65 percent of the country’s total exports.
Key to the success of ecozones is the program of government incentives that attracts enterprises, including foreign enterprises, to set up operations in these enclaves. The incentives include a 5 percent tax on gross income, in lieu of the regular 30 percent on net income. Also a key factor is the management of the Philippine Export Zone Authority (PEZA) led by Director General Lilia B. de Lima, which looks after the needs of the ecozone enterprises. The PEZA spares them from many difficulties faced by ordinary businesses dealing with government agencies.
The success of the nation’s economic zones for the export market has now prompted the government to set up a similar program for enterprises catering to the domestic market. This means the same lower tax rate and the same helpful services that save so much time and resources, such as those needed in getting permits of all kinds. The domestic ecozones will be set up only in less developed areas of the country, not in Metro Manila and similar progressive areas. The basic goal of the new program is to spur development in the poorer sections of the country.
But it should be realized that there are today many things that are holding back economic development in the country. Are the tax rates, both national and local, as judicious and as fair as they should be? Are there too many business requirements, such as permits that take months to process? Can the ecozone system with some modifications be applied in all of the country, not just in the poorer areas?
An extended and more intensive study should be held to determine what else can be done to encourage our entrepreneurs to set up shop so we can produce more of our needs and – even more important at this time – provide more jobs for our people.
Courtesy of the Manila Bulletin
Opinion – Economic zones for domestic market
6 August 2014