All over Asia, industrial parks have become a preferred place for international businesses to set up shop. These parks are usually located in countries with a comparative cost advantage in labor and logistics.
In the Philippines, there are hundreds of industrial parks, about 400 of which are designated as special economic zones (SEZs) under the administration of the Philippine Economic Zone Authority (PEZA). These SEZs are developed by a number of parties; some of them are quite small, primarily catering to just one business, while others may span several square kilometers and contain several hundred locators. These larger SEZs tend to offer an especially wide range of incentives to foreign investors separate from the basic incentives offered by PEZA.
Here are just 8 of the things foreign investors can expect when locating a top Philippine industrial park:
1. Special Visas and Multiple-Entry Privileges
Foreign investors, along with foreign employees in supervisory or technical positions and company officers working in PEZA-registered economic zones, get to enjoy special visas and multiple-entry and facilitation assistance privileges. These privileges are also extended to spouses and unmarried children under the age of 21.
2. Long-term Land Leases
Foreign nationals investing in PEZA-registered economic zones could lease land assets for up to 75 years, much longer than the standard 50 years provided for in the Investor’s Lease Act. This allows foreign investors to establish a very long-term presence in the Philippines, taking full advantage of all the other perks of locating in the Philippines.
3. Employment of Foreign Nationals
Unlike comparable economic estates in other countries, PEZA-accredited economic zones allow for the employment of foreign workers, provided they are employed in a supervisory, technical or advisory capacity. This makes it much easier for foreign investors to quickly set up shop and have operations running at high-performance levels.
4. Quality Infrastructure
While visa and leasing perks are good to have, it’s also important to have the infrastructure in place to support industrial and commercial activities. Those other perks would be inconsequential if the economic zone does not have sufficient power, communications, water, and transportation infrastructure.
In the Philippines, top economic estate developers are already building infrastructure to support the kinds of commercial and industrial activities that will be commonplace in the next generation. Apart from providing the requisite power, water, and communications facilities, these major developers also set up logistics infrastructure to make their land developments more compelling to foreign locators.
5. Tax Benefits
Operating within a PEZA SEZ entitles foreign investors to a number of tax perks and incentives that are unavailable in other parts of the country.
Tax incentives include but are not limited to the following:
- Duty-free imports
- Value-added tax (VAT) exemptions if sourcing raw materials or capital goods domestically
- Tax rebates
- Tax holidays and other temporary tax breaks
When taken together, the tax benefits and duty exemptions at PEZA-certified economic zones make it possible for investors to start doing business even with relatively limited capital investments. When combined with the cost-saving perks of SEZs, these exemptions can make locating at a top Philippine economic estate even more compelling.
6. Reduced Foreign Ownership Restrictions
PEZA economic zones are designed to attract foreign investments with exemptions to foreign business ownership laws. Locating outside of these zones will normally subject a foreign business to ownership restrictions that limit its equity in local ventures. These restrictions are mostly lifted or relaxed inside PEZA economic zones, allowing businesses more freedom to make business decisions and send earnings abroad.
7. Easy Access to High-Quality Labor
All the country’s best economic estates are located in strategic areas that offer good logistics and a labor pool of highly educated workers. Notably, many of these zones are in a “sweet spot” that puts them relatively far from areas with high real estate prices but within reach of educated workers who require minimal training.
This is a key advantage, as much of the cost of training labor is effectively absorbed by the local education system, freeing up investors to focus on specific technical training. Not only do investors get to save more on labor development costs, but they also get to enjoy more flexibility in hiring due to the proximity of many qualified workers.
8. Modern Planned Communities
One key difference between modern economic estates compared to previous generations of industrial parks is that there is now a focus on people- and environment-centered design. This makes these newer developments more than just a place for manufacturing goods or providing back-office services.
Indeed, the country’s top economic estates are considered to be highly desirable places to live. These developments are fitted with modern amenities, hospitals, schools, and diversions, as well as planned living accommodations for investors, employees, and their families. These are also continuously improved to provide healthy and highly livable communities for all stakeholders.
Building Better Industrial Parks
Even though existing models for PEZA SEZs and other industrial parks are already proven, there are still developers trying to push the envelope. In the Philippines, major economic estate developers are betting that many foreign investors want more than just tax breaks and basic infrastructure. They predict that, in the near future, more investors will desire industrial parks that not only reduce their overheads but also enable a newer, more conscious way of doing business.