DTI, PEZA push for lifting of ban on new BPOs in MM

Published May 3, 2021, 5:00 PM

by Bernie Cahiles-Magkilat

The Department of Trade and Industry (DTI) has strongly batted for the lifting of locational investment restrictions, including business process outsourcing (BPO) operations in Metro Manila, to create more jobs, especially in the country’s capital.

Trade and Industry Secretary Ramon M. Lopez said during the TGER-NERS Job Summit on Labor Day, May 1, that DTI and the Board of Investments (BOI) support the recommendations of the business sector to the review of the Investment Priorities Plan (IPP) and to remove the geographical qualifications in availing subsidies, incentives, and programs, among others.

Trade and Industry Secretary Ramon M. Lopez (Bloomberg file photo)

Already, the Philippine Economic Zone Authority (PEZA), which is chaired by Lopez, is preparing for a new letter urging the Office of the President to lift the moratorium under Executive Order No. 18 on the establishment of new BPO operations in Metro Manila in accordance with the provisions of the new CREATE Law.

PEZA Deputy Director General Tereso O. Panga said a new letter is being prepared using the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) Law as basis in the lifting of EO 18, which was issued in June 2019 banning the establishment of BPO operations in Metro Manila on hopes to disperse the labor-intensive industry into the provinces and create more economic activities in the regions.

“Our letter is up for signature by Director-General Charito B. Plaza after which it will be transmitted to the Office of the President today or tomorrow,” said Panga.

Because EO 18 disallowed the grant of tax incentives to new BPOs locating in Metro Manila, some companies did not pursue expansion in the Philippines as they insist that Manila is still their chosen location in the country. Existing BPO operators also refused to expand to the provinces because of certain reasons, including security risks. This resulted in shortage of BPO capacities for Metro Manila and slower take up in office spaces in the capital.

Panga said that PEZA has no concrete data as to the impact of the moratorium on job losses and impact on office economic zone spaces in the National Capital Region, but he said that a letter from the IT-Business Process Association of the Philippines pointed to job loss of 40,000-50,000 BPO seats in the NCR. Demand for office space was also estimated to go down to 126,940 square meters from the annual demand of 450,000 sqm.

Panga explained that the CREATE Law allows the grant of incentives to new BPO operations locating in Metro Manila, but said that the OP has to amend the EO 18 or amend the current Investment Priorities Plan (IPP) of the BOI as part of the transitional Strategic IPP while government agencies are still drafting the CREATE Implementing Rules and Regulations and the final SIPP.

Panga said that BPO operations in Metro Manila are among those allowed with incentives under TIER 1 of the CREATE Law.

(Mark Balmores, MB FILE)

Section 296 on the period of availment of incentives by registered enterprise defines TIER 1 activities to include investments with high potential for job creation; take place in sectors with market failures resulting in underprovision of basic goods and services; generate value creation; provide essential support for sector critical to industrial development; or emerging owing to the potential comparative advantage.

“The activities shall include agriculture, fishing, forestry, and agribusiness activities, including handicrafts intended for export, and energy; ecozone and freeport zone development;…” the law stated. It also added that the period of availment of incentives is based on the combination of both location and industries priorities as determined in the SIPP.

TIER 1 activities for exporters and critical domestic industries located in NCR are entitled to 4-year income tax holiday plus ten years of enhanced deduction/special corporate income tax (SCIT). All other areas are entitled to higher 5 to 6 years of ITH plus 10 years in ED/SCIT.

BOI Managing Head Ceferino S. Rodolfo also noted that they are requesting to forego the location restriction in terms of incentives availment in NCR because of the massive unemployment in the country, especially in Metro Manila.

Even as the current IPP is also anchored on the “Balik Probinsya” program which grants additional incentives to investors locating in the regions to disperse and create jobs in the countryside, Rodolfo also said this goal can still be accomplished because digital technology can enable work from home arrangements and make projects viable.