Classifications of Economic Zones in the Philippines

Under Republic Act No. 7916, as amended, otherwise known as “The Special Economic Zone Act 0f 1995” administered by the Philippine Economic Zone Authority (PEZA), ECOZONES or “special economic zones” (SEZ) are established as a separate customs territory to promote flow of local and foreign investments that would generate employment opportunities, simulate the repatriation of Filipino capital by providing attractive climate and incentives for business activity,  and for other purposes.

What are Ecozones in the Philippines or “special economic zones” (SEZ)?

Ecozones in the Philippines or “special economic zones” (SEZ) are selected areas of highly developed or which have the potential to be developed into agri-industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamation.

How are ecozones in the Philippines classified?

Ecozones in the Philippines or “special economic zones” (SEZ) may contain any or all of the following classifications of economic zones in the Philippines:

  • Industrial Estates in the Philippines

Industrial Estates in the Philippines refers to a tract of land subdivided and developed according to a comprehensive plan under a unified continuous management and with provisions for basic infrastructure and utilities, with or without pre-built standard factory buildings and community facilities for the use of a community if industries.

  • Export processing Zones in the Philippines

Export processing Zones in the Philippines (EPZ) refers to a specialized industrial estate located physically and/or administratively outside the customs territory and predominantly oriented to export production. Enterprises located in export processing zones are allowed to import capital equipment and raw materials free from duties, taxes and other import restrictions.

  • Free trade zones in the Philippines

Free trade zones in the Philippines refers to an isolated policed area adjacent to a port of entry (such as a seaport) and/or airport where imported goods may be unloaded for immediate transhipment or stored, repacked, sorted, mixed, or otherwise manipulated. However, movement of these imported goods from the free-trade area to a non-free trade area in the territory shall be subject to customs and internal revenue rules and regulations.

  • Tourist / Recreational Centers in the Philippines

Tourist or Recreational Center in the Philippine refers to an area within the ECOZONE where tourist accommodation facilities such as hotels, apartelles, tourist inns, pension houses, resorts, sports and/or recreational facilities are provided to render tourism services for both local and foreign tourists, travellers and investors in accordance with guidelines issued by PEZA.

Is there a criteria in establishing an ecozone in the Philippines?

The Implementing Rules and Regulations of Republic Act No. 7916 provides specific general criteria in Rule IV to ensure their viability and geographical dispersal such as the following, and other specific criteria may be provided in line with other laws and regulations upon application:

  1. Identification of the proposed areas as a regional growth center in th Medium-Term Philippine Development Plan or by the Regional Development Council;
  2. The existence of required infrastructure in the proposed ECOZONE, such as roads, railways, telephones, ports, airports, etc., and the suitability and capacity of the proposed site to absorb such improvements;
  3. The availability of water source and electric power supply for use of the ecozone in the Philippines;
  4. The extent of vacant lands available for industrial and commercial development and future expansion of the ecozone in the Philippines as well as of lands adjacent to the ecozone available for development of residential areas for the ecozone workers;
  5. The area must have significant incremental advantage over the existing ecozone and its potential profitability can be established;
  6. Strategic location of the area for economic zone in the Philippines;
  7. The area must be situated where controls can easily be established to curtail smuggling activities.

How many economic zones are there in the country?

According to PEZA, there are two hundred seventy seven (277) operating economic zones all throughout the Philippines as of December 31, 2012 broken down as follows:

  • 17 Agro-industrial Economic Zones
  • 178 IT Parks / Centers
  • 65 Manufacturing Economic Zone
  • 2 Medical Tourism Parks / Centers
  • 15 Tourism Economic Zones

References:

  • Republic Act No. 7916 – Special Economic Zone Act
  • Implementing Rules and Regulations of RA No. 7916
  • Philippine Economic Zone Act Website (www.peza.gov.ph)

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at info@taxacctgcenter.orgor you may post a question at Tax and Accounting Center Forum and participate therein.


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