Malacañang designates more IT buildings

i.t. matters
Wednesday March 08, 2006 | MANILA, PHILIPPINES

News

Malacañang designates more IT buildings

President Gloria Macapagal-Arroyo proclaimed three more information technology (IT) buildings and one IT park last month, granting tax cuts to existing and prospective locators of these facilities.

These facilities will be granted incentives by the Philippine Economic Zone Authority -- the country’s largest incentives-giving body under Republic Act. No. 8748 or the amended Special Economic Zone Act of 1995, designed to help the country compete with neighbors in luring foreign direct investments.

Two of the four facilities are in Metro Manila, namely: the 1,749-square meter Wynsum Corporate Plaza and the 1,779-square meter Octagon IT Building, both located in Ortigas Center in Pasig City.

The two other facilities are the 2,310-square meter Cebu IT Tower at the Cebu Business Park and Tarlac Provincial Information Technology Park III at Barangay Tibag, San Isidro Tarlac City that has a total area of 13,968 square meters.

The PEZA incentive package includes four- to six-year income tax holiday and exemption from paying the value-added tax, the rate of which rose to 12% just last month from 10% previously.

As of end-December, there were 99 IT parks and buildings approved by PEZA. Only 28 of the total facilities have locators, 19 are still awaiting for locators, while development is still under way for the remaining 52 facilities.

GROWING TREND

A growing lack of sprawling space -- complete with the required infrastructure -- for IT parks has led to the concept of the IT building, whose locators enjoy the same perks as those operating in IT parks.

But one senator warned that PEZA may not have the power to designate "vertical" -- or building -- "economic zones."

During a Senate hearing on the PEZA budget, Senator Juan Ponce Enrile said Republic Act 7916, the Special Economic Zone Act of 1995, does not specifically empower PEZA to do so.

LEGAL QUESTION

He said such authority of the President to proclaim, upon recommendation of the PEZA board, a building -- or even just a portion of it -- as a special economic zone could be challenged in court, hence, putting locators in such zones at risk.

But PEZA director-general Lilia B. de Lima said the Special Economic Zone Act gives government the leeway to do so. She said Section 3 of that law allows other types of economic zones to be formed.

She also said if PEZA did not allow the declaration of vertical economic zones, the country could have missed out on investment opportunities from information technology services, the fastest-growing sector so far. She noted it is natural for information technology zones to be built upwards due to the needed infrastructure, and that this is the trend in other countries.

CORRECTIVE MEASURE

Mr. Enrile said PEZA should have approached Congress first to ask specifically for such authority.

He said Congress is now considering bills to correct the vagueness of the law on this point, and allow the creation of vertical economic zones. He also assured PEZA that he does not intend to question the matter with the courts.

He recalled that when Congress was deliberating the Special Economic Zone law, it was never contemplated that buildings could be declared special economic zones.

Moreover, courts will always refer to the intent of the authors of specific laws to settle debates on the interpretation of vague provisions of laws.

 -- M. E. Estavillo and F. Y. Capistrano