New Economic Zones in the Philippines to Attract Foreign Investment

• The Philippine government has approved 12 new economic zones in June 2020, which will comprise of IT centers, IT parks, and manufacturing zones.
• The country’s largest government investment agency, the Philippine Economic Zones Authority (PEZA), will manage the economic zones.
• There are currently more than 400 economic zones in the Philippines, each providing their own different fiscal and non-fiscal incentives to foreign investors.
• This is set to change if the CREAT Act is passed in parliament, which will give the President the power to offer such incentives.

In June 2020, Philippines announced the approval of 12 new economic zones, which will be managed by the Philippine Economic Zones Authority (PEZA).

These new economic zones comprise of nine IT centers, two manufacturing ecozones, and one IT park. The government is hoping these economic zones will yield more than P6.4 billion (US$129,614,000) in 2020.

PEZA is the country’s largest investment agency (IPA) backed by the government tasked with assisting foreign investors in facilitating their business operations in the country.

Previously, each IPA used to have the power to grant their own fiscal and non-fiscal incentives.

However, under the government’s proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), IPAs will no longer have this privilege and incentives will be decided by the President on the advice of Fiscal Incentives Review Board (FIRB).

What are the new economic zones?

The new economic zones are of the following types:

1. Abiathar Commercial Complex – IT center;
2. TDG Innovation and Global Business Solutions Center – IT center;
3. Millennium Industrial Economic Zone – Manufacturing;
4. Ayala Bacolod Capitol Corporate Center – IT center;
5. Silver City 4 – IT Center;
6. Davao del Sur Industrial Economic Zone – Manufacturing;
7. BatStateU Knowledge, Innovation and Science Technology Park – IT park;
8. GLAS Office Development – IT center;
9. Bench City Center – IT center;
10. Ortigas Technopoint Tower 1 & 2 – IT center;
11. NEX Tower – IT Center; and
12. Robinsons Luisita 2 – IT center.

The Batangas State University (BatStateU) Knowledge, Innovation and Science Technology (KIST) Park is the first of its kind in the Philippines.

This knowledge-based economic zone will provide state-of-the-art facilities to catalyze the collaboration between industry and academia, and foster innovation, techno-preneurship, and business incubation. The university itself is the only higher education institution in the country to be accredited by the United States Accrediting Board for Engineering and Technology for its Engineering and Information Technology programs.

Investors operating in the Park are eligible to receive simplified import-export procedures, income tax holidays, and other non-fiscal incentives. Investors should wait for further implementing regulations to be issued by the government in relation to the incentives provided in these new economic zones.

CREAT Act to rationalize tax incentives

The CREAT Act is proposed to be the largest stimulus program in the country’s history. Through the Act, the government will immediately reduce the corporate income tax rate from 30 to 25 percent, and the government will also be more flexible in granting fiscal and non-fiscal incentives to attract high-value foreign investments.

The FIRB will be given the authority to recommend to the President these incentives, ranging from tax holidays to logistics support and facilitating customs and certifications. The President, in turn, will have the power to give longer periods of applicability – up to 40 years – if the investment is deemed to have a positive impact on state revenue as well as job creation.

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