A Special Economic Zone is defined as a geographical region that has economic and other laws that are more free-market-oriented than a country’s typical or national laws. This means that in these zones business and trade laws differ from the rest of the country. The aims of these zones include: increased trade, increased investment, job creation and effective administration. Liberal policies on investing, taxation, trading, quotas, customs, and labour regulations are also created to encourage businesses to set up in the zone. As a matter of fact, companies may be offered tax holidays.
The desire to attract foreign direct investment which means that a country can produce and trade goods at a globally competitive price is a motivation to create such special economic zones in the country.
In the Philippines, economic zones are collections of industries, brought together geographically for the purpose of promoting economic development. These ecozones were established through Republic Act No. 7916, otherwise known as “The Special Economic Zone Act of 1995” as amended by Republic Act No. 8748.
Economic Zones in the country are generally administered by the Philippine Economic Zone Authority through a Board (PEZA Board), attached to the Department of Trade and Industry. The PEZA Board sets the general policies on the establishment and operations of the Ecozones, industrial estates, export processing zones, free trade zones, and the like. They also review proposals for the establishment of Ecozones, which they subsequently endorse to the President of the Republic of the Philippines. In addition, the PEZA Board regulates and undertakes the establishment, operation and maintenance of utilities, other services and infrastructure in the Ecozone, such as heat, light and power, water supply, telecommunications, transport, toll roads and bridges, port services, and the like.
Several incentives are granted to business establishments operating within Philippine Ecozones, particularly those found in the Omnibus Investments Code of 1987. These incentives include income tax holidays; zero percent (0%) duty on importation of capital equipment, spare parts, and accessories; exemption from wharfage dues and export tax, impost or fees; and the simplification of customs procedures, among others. In addition, The Special Economic Zone Act of 1995 exempts business establishments operating within Ecozones from all taxes. In lieu of paying all other taxes, business establishments are only required to pay five percent (5%) of their gross income to the national government.
Activities Eligible for PEZA Registration and Incentives include but are not limited to (1) Export Manufacturing; (2) Information Technology Service Export; (3) Tourism; (4) Medical Tourism; (5) Agro-industrial Export Manufacturing; (6) Agro-industrial Bio-Fuel Manufacturing; and (7) Logistics and Warehousing Services.
Although designed to operate separately from the political and economic milieu of surrounding communities, Philippine economic zones do in fact interact with their neighbors. As of 31 May 2010, there were more than 200 Ecozones in the Philippines. Of these, seven (7) are Agro-Industrial Economic Zones, 134 are Information Technology Parks and Centers, 65 are Manufacturing Ecozones, two (2) are Medical Tourism Parks/Centers, and nine (9) are Tourism Economic Zones. Some of the ecozones are the Subic Bay Metropolitan Authority, Clark Special Economic Zone, Freeport Area of Bataan, Zamboanga City Special Economic Zone Authority and Cagayan Special Economic Zone.
The Cagayan Special Economic Zone and Freeport is managed by the Cagayan Economic Zone Authority (CEZA), a government owned and controlled corporation that was created by virtue of Republic Act 7922, otherwise known as the “Cagayan Special Economic Zone Act of 1995.” It was authored by Senator Juan Ponce Enrile, a native of Cagayan Province, and approved by then President Fidel V. Ramos.
The Cagayan Special Economic Zone and Free Port (Cagayan Freeport) is located at the country’s northeastern tip, a strategic location for dynamic enterprise development. The location is at the crossroads of international shipping lanes and is thereby open to a number of lucrative markets which include Japan, China, US West Coast, Hong Kong and Taiwan. It encompasses the entire municipality of Sta. Ana in Cagayan Province as well as Fuga, Barit and Mabbag islands in the municipality of Aparri. These areas are characterized by its untapped natural and economic resources. The Zone, 54,118.95 hectares large, has become one of the country’s most important agro-industrial, commercial, tourism, recreational and transshipment hub.
Investment areas abound at the Cagayan port. These are gaming activities, tourism and resort services, business outsourcing, mining and quarrying, marine products processing, real estate development, port operations, power generation and distribution, and agro-industry.
Among these investment areas, considered to be the most lucrative are the gaming activities, mining and port operations.
Cagayan is rich not only in agriculture and marine resources, but also with mineral resources. Many sites in the region have been identified to be abundant in metallic and non-metallic reserves. Processing and exportation of sand, gravel, armored rocks and limestone is another viable investment area.
The existence of Port Irene makes the Cagayan Freeport a viable shipping and transshipment hub in Asia. There have been reports and rumors circulating that there are allegedly ‘big time’ transactions going on in the port. Local residents are quite uneasy that there may be many shady deals happening over there.
Last year, Port Irene and CEZA were the subjects of controversy particularly the breakwater project said to cost P5.1 billion. As a matter of fact, if you remember, sometime ago, Senator Mirriam Defensor Santiago called for a probe to find out the extent of Senator Juan Ponce Enrile’s involvement on the project.
According to Senator Santiago, a company called Sta. Elena Construction built the P5.101 billion breakwater in Port Irene. Its president and chief executive officer, Alice Eduardo, is also the president of Sta. Fe Builders. Further investigation showed that Sta. Fe Builders board of directors include members of Gigi Reyes’ family (Enrile’s chief of staff). Her brother, Neal Jose O. Gonzales, is board chair and her mother, Maria O. Cooper, is a board member and one of the directors.
These findings led to the belief that Enrile used the family of Reyes to cover up his personal financial interest in both Sta. Fe Builders and Sta. Elena Construction. To all these innuendos, Enrile remained brazen, even daring DOJ to go ahead and investigate.
Wow! This is big money, very big! Here we are talking about Drilon’s alleged involvement in the construction of the Iloilo Convention Center amounting to P740 million while over there in that supposedly sleepy town of Sta.Ana is a breakwater project costing P5.1 billion, that’s 7 times the cost of the Iloilo Convention Center. Why is no one talking about this? And what’s more interesting is that both are projects of Senate presidents in their home province. Sanamagan!