Last month, the Philippine Economic Zone Authority (PEZA), the government agency tasked with promoting investment and facilitating investments in various economic zones throughout the Philippines, released Resolution No. 12-329 amending the incentives provided to developers of Information Technology (IT) parks and facilities. The publication of the resolution initially brought confusion as it was not clear how the resolution would affect developers, offshoring and outsourcing (O&O), and IT firms, the main occupants of IT parks and office buildings.

The resolution mandated the removal of incentives for future IT office building projects not yet accredited by the PEZA, which are located in the first four PEZA-registered IT parks in Metro Manila, namely Eastwood City Cyberpark, Northgate Cyberzone, Robinsons Cyberpark and the E-square IT Park in Bonifacio Global City, with another, the Cebu IT Park in Cebu City, outside Metro Manila. All IT buildings, whether completed, under planning or construction, that were already registered with the PEZA prior to the resolution are entitled to the incentives. Meanwhile, the resolution also granted the developers of future IT parks and buildings outside Metro Manila and Cebu City such fiscal incentives as a much discounted 5% tax on gross income instead of the normal 35% corporate tax. It should be noted that O&O occupants within IT parks and buildings are not affected by the resolution.

According to the PEZA, the main purpose of this resolution is to encourage the development of new IT parks and buildings outside Metro Manila and the regional centre of Cebu City. In general, developers are primarily encouraged to construct IT buildings where there is potential demand for space in such projects, with this demand coming mainly from O&O and IT firms.

O&O firms have their own criteria in determining a location for their operations. Among these major criteria include the availability of a qualified labour pool, reliable and redundant telecom and power infrastructure and ample supply of real estate. The presence of a highly qualified labour pool is the top criterion, followed by the availability of a reliable, highly sophisticated and foolproof infrastructure network to transmit voice and data in order to ensure a high level of service to their clients. Of course, the availability of the appropriate real estate in a specific area is also an important requirement, and O&O firms prefer open-plan, column-free office spaces, an uninterrupted power supply and accreditation with the PEZA so that they can take advantage of the various incentives offered.

To sum up, the PEZA may have had good intentions in creating this resolution but, to truly encourage the development of IT parks and buildings outside Metro Manila and Cebu City, it will take more than just these incentives provided by the PEZA. The private and the public sectors need to cooperate to improve the quantity and quality of the labour pool, and enhance the telecom and power infrastructure in provincial areas. Only then can these provincial areas attract more O&O firms, stimulating the development of more IT parks and buildings.

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