(pushAUX: Jesus H. Christ. What the Duterte government implemented, this BPO moratorium in Manila, combined with the devastating torpedo impact of TRAIN, will really lead to an industry contraction. Government revenues will be lessened – job generation will shrink – Good luck to us.)
[pushAUX.com] The government was urged to dissolve or retract Administrative Order 18 (AO 18) which bans the creation of new economic zones in Metro Manila.
Economic zones are buildings or building floors that are rented out to IT-business process management (IT-BPM) corporations. These office spaces offer a certain level of fiscal and non-fiscal incentives to those that occupy them. Removing the creation of new eco zones means that less and less BPO’s will choose to set up shop in the capital.
The Philippine IT-BPM industry yearly generates around USD24B to the local economy, and it currently provides employment to as much as 1.3M workers.
Does It Make Sense?
According to the administration, this economic zone ban will help spur economic growth in the provinces. The logic is that if a BPO can’t set up operations in Manila, it will choose to locate to the countryside instead.
But if a foreign investor cannot put up a business in Metro Manila, and is unwilling to set up operations in the provinces, then what happens next?
According to Colliers International Philippines, only 30-40% of Metro Manila office space is registered with the Philippine Economic Zone Authority (Peza).
The real estate consultancy firm added that AO 18 adds stress to the supply and demand market for Peza zones, which leads to unhealthy situation where corporations have to compete for the dwindling eco-zone office spaces. This problem is compounded by building owners charging more versus what is the fair market price.
Alaine Yap, Colliers Director for Office Services
“While the effectivity of the moratorium is immediate, it is critical for the government to extend time and consideration for Peza-registered companies to plan for this outlook… Addressing the immediate growth needs of the outsourcing industry—a major contributor to the current landscape—ultimately adds notable value to the economy.”
Colliers provides a suggestion on how to mitigate the government ban for the creation of new economic zones in Metro Manila: check with the Board of Investments (BOI).
“While Peza limits companies to registered buildings and/or IT-parks, BOI grants tax incentives regardless of a firm’s location. The benefits of this solution may be short-lived however, with the Package 2 of the Comprehensive Tax Reform Program*, likely to be refiled when Congress resumes. The Trabaho Bill intends to rationalize the tax incentives given to both BOI- and Peza-registered enterprises and prescribe a single agency to grant tax incentives. This affects the economy as companies are on a wait-and-see stance until the incentives under the bill are finalized.”
The Contact Center Association of the Philippines (CCAP) has openly declared that the eco-zone moratorium will negatively impact the industry.
The call center interest group has sought a dialogue with the administration to air their concerns.
Benedict Hernandez, CCAP chairman
“CCAP sees that more dialogues between the industry and government is needed to alleviate these concerns. CCAP, likewise, continues to advocate that we support a ‘hub and spoke’ model for investors as locators need Metro Manila as their first landing destination in the country before they start expanding in the provinces.”
CCAP predicts that the Philippine contact center industry will grow by 7-8% in 2019 – though it admits that it is yet to consider the impact of Peza moratorium in this year’s growth forecast.
Metro Manila Versus the Provinces!
CCAP has pointed out that there are challenges with forcing BPO locators to position themselves in the provinces. For one, the right infrastructure may not be at par as what is available in Metro Manila. Then, there’s the difference in talent pool levels.
CCAP added that Fortune 500 corporation prefer to set up operations in the capital due to the accessibility-availability of resources.
Is Cebu Next?
Wilfredo Sa-a, representative of a Cebu IT-BPM organization, has gotten assurances from Peza that Cebu will not be subjected to the same eco-zone moratorium.