Freeze on MM ecozones

The government’s desire to bring progress to the provinces is understandable, especially given the fact that Metro Manila has become very crowded. However, rushing the move, without careful consideration of the consequences and adequate planning to prevent disruptions, could be dangerous.

Such is the case with the booming information technology and business process management (IT-BPM) industry, whose members are mostly in buildings designated as economic zones in the metropolis. Their location is based on the availability of manpower, reliable telecommunication facilities and adequate power supply, among others.

Last month, Malacañang issued Administrative Order No. 16, which imposed a moratorium on new ecozones in Metro Manila, allowing only proposals that are already pending President Duterte’s approval.

The order took effect upon publication last June 22. The Philippine Economic Zone Authority (Peza) said it had approved and endorsed 22 Metro Manila-based proposals to Malacañang. These will be considered, although the presidential order did not give any guarantee of approval.

The bigger problem, however, is that there are 131 ecozone development proposals that did not make the cut, even though these were already conditionally approved by Peza as of June 20.

Peza Director General Charito Plaza explained that these proposals were not yet endorsed to Malacañang because they had to comply first with the requirements from other government agencies, including permits from local government units that sometimes take forever to secure.

Although Peza is expected to appeal for a longer transition period to give time for companies with proposals already up for the President’s approval, Plaza warned that the 131 projects would be shelved unless Malacañang reconsidered its position. In short, there is no guarantee that those 131 proposals will simply move outside Metro Manila.

Peza pointed out that the IT-BPM industry fully supports countryside development, but it was nonnegotiable for its members to have their headquarters in Metro Manila. Rey Untal, president and CEO of the Information Technology and Business Process Association of the Philippines, explained this by citing the “hub and spoke” model practiced by the industry—the spokes pertaining to the countryside and the metropolis as the hub. As its members grow in the capital, it becomes easier for the industry to also expand to the countryside.

Peza data showed that the industry has indeed been concentrated in Metro Manila. Out of 278 IT parks and centers as of February this year, around 60 percent, or 167 are in the metropolis. Peza-registered companies also had 1.2 million people under their payroll, and nearly half or 560,336 are in Metro Manila.

Real estate services firm Leechiu Property Consultants expected industry demand for office space in Metro Manila to reach 450,000 square meters this year, and that the country will have only 216,000 sq m of accredited space coming onboard this year. Thus the need for new buildings to accommodate the industry’s growth.

For the long term, there is no question that the government’s intention is good — to make the provinces grow and decongest Metro Manila. However, banning ecozones in Metro Manila does not automatically make them go to the provinces. Key cities in the provinces like Cebu and Davao may be ready, but few urban centers outside Metro Manila are fully equipped to accept IT-BPM facilities. Barred from the nation’s capital, these mostly foreign-owned investors may eventually decide to decamp and go to other countries.

There is wisdom in the appeal of Peza not to rush the moratorium, as there is so much at stake. The IT-BPM sector is a major source of foreign exchange for the country. It generated revenues of more than $20 billion last year and employed some 1.2 million Filipinos. Its 2022 road map targets 1.8 million direct jobs and $39 billion in revenues. But that ambitious objective may be placed in jeopardy with Malacañang’s moratorium on new ecozones in Metro Manila.