Top ecozones for FDI focused on IT — study

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SOLID INFRASTRUCTURE, and clusters of information technology (IT) service providers are what the most successful Philippine economic zones have in common in terms of attracting foreign locators, the Association of Southeast Asian Nations (ASEAN) said.

“These successful zones vary in size, ownership and investment arrangements (e.g. public-private partnership or private sector developed zones). They share some common features: provision of good infrastructure facilities, easier access to national infrastructure (e.g. road networks, ports, airports) and strategic location,” the ASEAN Investment Report 2017 read.

Among those successful economic zones cited were the government’s Cavite Economic Zone, with a 280.7-hectare land area and 851 tenants. Ayala Land, Inc. meanwhile weighs in with its 337.2-hectare Laguna Technopark which has attracted 698 locators, and First Philippine Industrial Park with 343.8 hectares and 264 tenants.

According to the ASEAN, foreign direct investments (FDI) in these economic zones is attracted by low-cost operations and logistics potential.

“For example, companies such as JP Morgan and QBE have relocated their support operations to a Philippine ecozone. Other (multinationals) whose business is offering IT/BPO (business process outsourcing) solutions to other companies — such as Convergys, Teletech, Teleperformance, Ubiquity, Aegis, Transcom, Iqor, Skyes and Sutherland — have established their service delivery centers in the country’s IT ecozones.”

“A significant feature in the development of economic zones is the rapid rise of IT-related and BPO activities,” it added.

Philippine Economic Zone Authority (PEZA) data show that IT-related locators outnumber manufacturing companies 216 to 182. The services sector on the other hand accounts for 361 companies.

“Foreign firms operating in logistics services to serve members of the group, encouraged by logistics business opportunities in the country. They include not just transportation services but also in other areas such as warehousing,” the report read, noting that Japanese companies have been active in logistics investments as 116 of the 201 foreign-owned storage and warehousing companies are Japanese.

ASEAN has also detected a trend in foreign locators moving to economic zones outside Metro Manila, such as those in Bulacan, Pampanga, Tarlac, Clark, Baguio, Batangas, Cebu City, Bacolod City, and Cagayan de Oro City.

This is to bring down construction, labor, facilities, and power costs while not sacrificing access to a quality labor pool, ASEAN said.

It noted that two of the largest IT-BPO companies in terms of revenue, Accenture and Convergys, have established offices or service delivery centers in other major cities aside from Manila.

“The Philippines’ status as a major global call/BPO center that offers a conducive BPO support environment, the low-cost labor supply with proficient English language skills, the adaptability of the work force to the North American or Western culture, the existence of IT-related economic zones (IT parks and centers) in urban areas with facilities and amenities that support people working in the industry, the fiscal incentives offered by the PEZA, and the presence of competitive IT infrastructure that supports development of the industry,” the report read.

“Interviews also reveal the inherent tendency of IT-BPM/BPO companies to cluster together in an IT ecozone in order to maximize value and execute their operational strategy. Tenants and advantages in being near each other such as ease of networking and discussing issues of common interest, access to a low-cost work force, ability to share knowledge, and the benefits of the industry’s infrastructure. The competitive environment also helped boost the industry standard of service,” it added. — Elijah Joseph C. Tubayan