Presentation of PEZA Director General Lilia De Lima at EuroMoney Conference 2012

„Creating The Next Business Hub For Manufacturers‟ A presentation for the: Euromoney Conference Workshop hosted by: RCBC Presented by: DR. LILIA B. DE LIMA Director General and Undersecretary, Department of Trade & Industry Manila Peninsula Hotel Makati City 3:35 PM, March 27, 2012

Philippine Economic Zone AuthorityAn investment promotion and incentive grantingagency attached to the Department of Trade andIndustry.Reinforce Government‟s efforts to: • Promote Investments • Create Employment • Generate Exports

TOTAL OF 257 ECONOMIC ZONES * BAGUIO CITY ECONOMIC ZONE JOHN HAY SPECIAL TOURISM ECONOMIC ZONE MARVIN PLAZA BUILDING DPC PLACE BUILDING as of 29 February 2012 FOOD TERMINAL INC. SEZ EMI SPECIAL ECOZONE CAVITE ECONOMIC ZONE LAGUNA INT‟L. INDUSTRIAL PARK SANCTUARY IT BUILDING MSE CENTER BATAAN ECONOMIC ZONE LIGHT INDUSTRY & SCIENCE PARK I SM BAGUIO CYBERZONE BUILDING TRAFALGAR PLAZA SUBIC SHIPYARD LIGHT INDUSTRY & SCIENCE PARK II FORT ILOCANDIA TOURISM ECONOMIC ZONE OCTAGON IT BUILDING PLASTIC PROCESSING CENTER SEZ LIGHT INDUSTRY & SCIENCE PARK III PANGASINAN INDUSTRIAL PARK II VITRO INTERNET DATA CENTER BUILDING HERMOSA ECOZONE TABANGAO SPECIAL ECONOMIC ZONE LUISITA INDUSTRIAL PARK WYNSUM CORPORATE PLAZA IT BUILDING LEYTE IND‟L. DEVELOPMENT ESTATE LAGUNA TECHNOPARK TECO SPECIAL ECONOMIC ZONE TRANSCOM CENTER MEGACENTER IT BUILDING LAGUNA TECHNOPARK ANNEXTARLAC PROVINCIAL INFORMATION TECHNOLOGY PARK II ORIENT SQUARE IT BUILDING LEYTE INFORMATION COMMUNICATION TECH. PARK FIRST CAVITE INDUSTRIAL ESTATE SM CITY PAMPANGA RIVERBANK CENTER ICT BLDG. I JOSE PANGANIBAN SEZ GATEWAY BUSINESS PARK ROBINSONS LUISITA RIVERBANK CENTER ICT BLDG II MISIBIS RESORTS AND ESTATES KEPPEL PHILIPPINES MARINE SPECIAL ECONOMIC ZONE CLARK TI SPECIAL ECONOMIC ZONE BLUE WAVE MARIKINA RAPU-RAPU ECOZONE GREENFIELD AUTOMOTIVE PARK ANGELES INDUSTRIAL PARK UP SCIENCE & TECHNOLOGY PARK (South) YTMI REALTY SPECIAL ECONOMIC ZONE PAMPANGA EXPORT PROCESSING ZONE UP SCIENCE & TECHNOLOGY PARK (North) LIMA TECHNOLOGY CENTER STA. MARIA INDUSTRIAL PARK COCOCHEM AGRO INDUSTRIAL PARK SUPIMA ECIRCLE PEOPLE‟S TECHNOLOGY COMPLEX PHILIPPINE PACKING AGRICULTURAL EPZ SAN LAZARO TOURISM AND BUSINESS PARK VICTORIA WAVE GOLDEN MILE BUSINESS PARK ROBINSONS PLACE NOVALICHES FIRST PHILIPPINE INDUSTRIAL PARK DILIMAN IT BUILDING TIGERLAND AGRO-INDUSTRIAL ECONOMIC ZONE CONVERGYS IT BUILDING CARMELRAY INDUSTRIAL PARK HTMT CYBER PARK CARMELRAY INDUSTRIAL PARK II EDSA CENTRAL IT CENTER CALAMBA PREMIERE INTERNATIONAL PARK SUN PLAZA TOYOTA STA. ROSA SEZ EDSA CENTRAL IT CENTER 2 AG&P SPECIAL ECONOMIC ZONE E-SQUARE INFORMATION TECHNOLOGY PARK DAIICHI INDUSTRIAL PARK TOTAL CORPORATE CENTER I ALLEGIS IT PARK MCKINLEY HILL CYBER PARK MANILA FILINVEST TECHNOLOGY PARK - CALAMBA MARKET! MARKET! EASTBAY ARTS, RECREATIONAL AND TOURISM ST. LUKE‟S MEDICAL CENTER GLOBAL CITY SM CITY BACOOR MULTINATIONAL BANCORPORATION LAKESIDE EVOZONE PEOPLESUPPORT CENTER IT BUILDING ROBINSONS BIG R SUPERCENTER NORTHGATE CYBERZONE STA. ROSA COMMERCIAL IT PARK METROPOLIS STAR ROBINSONS PLACE STA. ROSA MACROASIA ECOZONE SAINT FRANCES CABRINI MEDICAL TOURISM PARK ASAHI SPECIAL ECONOMIC ZONE PHILTOWN TECHNOLOGY PARK EUGENIO LOPEZ JR. COMMUNICATION CENTER ROBINSONS PLACE LIPA GLOBAL TRADE CENTER PAMALICAN ISLAND TOURISM ECOZONE EASTWOOD CITY CYBERPARK CAMARINES SUR IT PARK SMNE IT CENTER BORACAY ECO-VILLAGE RESORT EXPORTBANK PLAZA BUILDING MACTAN ECONOMIC ZONE THE ENTERPRISE CENTER BIGFOOT IT PARK RCBC PLAZA MACTAN ECONOMIC ZONE II BURGUNDY CORPORATE TOWER SYNERGIS IT CENTER HDMF-WTCI IT TOWER LIBRAN HOUSE IT CENTER CEBU IT TOWER MJ PLAZA MANGO SQUARE MANILA HARBOUR CENTER CEBU SOUTH ROAD PROPERTIES NEWPORT CITY CYBERTOURISM ZONE ARCENAS ESTATE IT BUILDING SM ICITY CEBU A. D. GOTHONG IT CENTER SM ICITY 2 JY SQUARE IT CENTER SM CYBERZONE 1 JY SQUARE IT CENTER III G.T. TOWER INTERNATIONAL CEBU LIGHT INDUSTRIAL PARK THE PASEO CENTER IT BUILDING LEXMARK PLAZA AMKOR TECHNOLOGY OAKRIDGE INFORMATION TECHNOLOGY CENTER PACIFIC INFORMATION TECHNOLOGY CENTER PHIL. BXT CORP. TOURISM ECONOMIC ZONE JGC PHILIPPINES BUILDING PIONEER HOUSE CEBU SDC IT BUILDING WEST CEBU INDUSTRIAL PARK ASIAN STAR BUILDING NEW CEBU TOWNSHIP THE PARAGON CORPORATE CENTRE MRI ECONOMIC ZONE ROBINSONS CYBERPARK HVG ARCADE IT PARK ROBINSONS-EQUITABLE TOWER INNOVE IT PLAZA PBCOM TOWER ASIATOWN IT PARK ANSON‟S CENTER FEDERATED IT PARK SUMMIT ONE OFFICE TOWER DAMOSA IT PARK PHILAMLIFE I.T. BUILDING ROBINSONS CYBERGATE CENTER 6750 AYALA AVE. BLDG. PUEBLO DE ORO IT PARK 6780 AYALA JASAAN MIS. ORIENTAL ECOZONE 6788 AYALA AVE. BLDG. BUKIDNON AGRO-RESOURCES EXPORT ZONE JG SUMMIT CENTER DBP IT PLAZA DELA ROSA E-SERVICES BUILDING THE BLOCK IT PARK SM MAKATI CYBERZONE BUILDING ONE SANPARQ SM MAKATI CYBER ZONE 2 BUILDING LOPUES EAST I. T. CENTER GLORIETTA 5 LUXUR PLAZA ITFORMATION CENTRE UNIONBANK PLAZA BPI BUENDIA CENTER * Legend: SMCI IT CENTER CIIF AGRO-INDUSTRIAL PARK ALLEGRO IT CENTER EAST CYBER GATE Manufacturing Economic Zones 64 RIO TUBA EXPORT PROCESSING ZONE SARANGANI ECONOMIC DEVELOPMENT ZONE WORLDWIDE CORPORATE CENTER Information Technology Parks / Centers 164 SRC ALLAH VALLEY ECONOMIC DEVELOPMENT ZONE GATEWAY OFFICE TOWER SRC CALUMPANG ECONOMIC DEV‟T. ZONE CYBER PARK BUILDING ONE Tourism Economic Zones 12 FIRST ORIENTAL BUSINESS & INDUSTRIAL PARK PACIFIC STAR BUILDING NCCC DAVAO IT CENTER PHILAMLIFE IT TOWER Medical Tourism Park /Center 2 LUISA AVENUE SQUARE IT CENTER NISCOM IT BUILDING NCCC DAVAO IT CENTER INSULAR LIFE BUILDING Agro-Industrial 15 MANTICAO ECOZONE CORPORATION SEZ INSULAR LIFE CORPORATE CENTER

64 Manufacturing164 IT Parks (35) and IT Centers (129) 12 Tourism Ecozones 2 Medical Tourism Park / Center 15 Agro-Industrial Parks

300 ECONOMIC ZONE INVESTMENTS 41.1 %270 EPZA „86 -‟93 12.7 B240 1994 9.6 B PEZA 16.6 %210 1995 52.5 B 1996 65.3 B180 1997 159.7 B 1998 96.9 B 13 % 144 % 61 % .6% 16 % 1999 155.7 B150 2000 156.7 B 2001 80.8 B 60 % 2002 38.7 B120 2003 31.7 B 2004 50.5 B 2005 67.2 B 90 2006 83.7 B 25 % 2007 133.7 B 24% 33 % 2008 154.8 B 449% 60 2009 175.4 B 57 % 2010 204.4 B 2011 288.3 B 30 0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 1995 – 2011 Economic Zone Investments : P 1.995 Trillion

LOCATOR INVESTMENTS BY NATIONALITY ( 1995 – 2011 ) 20.89 % Filipino 18.32 % American 33.58 % 7.80 % DutchJapanese 6.35 % British 3.86 % Korean 2.52 % Singaporean 1.50 % German 1.29 % Swiss 3.89 % Others

LOCATOR INVESTMENTS BY PRODUCT SECTOR ( 1995 – 2011 ) 10.33 % Metals/Fabricated Metal Products 7.70 % Information Technology Services 6.22 % Tourism 5.91 % Transport (Shipbuilding, 42.52 % Car Parts, Equipment) 5.08 % Electrical Machinery Electronics / and ApparatusSemiconductors 2.45 % Medical, Precision and Optical Instruments 1.92 % Medical Tourism 1.32 % Rubber and Plastic Products 0.95 % Chemical and Chemical Products 15.60 % Other Manufactures

1994 : US $ 2.739 ECOZONE EXPORTS1995 : US $ 4.284 In Billion US Dollars 56.4 %1996 : US $ 6.500 51.7 %1997 : US $ 10.626 63.5 %1998 : US $ 13.270 24.9 %1999 : US $ 15.807 19.1 %2000 : US $ 20.025 26.7 %2001 : US $ 19.498 - 2.5%2002 : US $ 22.775 16.8%2003 : US $ 27.313 19.9%2004 : US $ 30.924 13.2%2005 : US $ 32.030 3.6%2006 : US $ 36.077 12.6%2007 : US $ 40.889 13.3%2008 : US $ 40.543 - 0.84%2009 : US $ 32.898 -18.86%2010 : US $ 40.473 23.02%2011 : US $ 42.144 4.13%

PHILIPPINE MANUFACTURED EXPORTS ( Billion U.S. Dollars ) Economic Zone Manufactured Exports 2.7 4.3 6.5 10.6 13.3 15.8 20.0 19.5 22.7 27.2 30.7 31.6 35.1 36.9 37.9 28.9 45 44.0 42.8 41.1 40 36.9 34.3 35.5 35 31.7 32.0 33.2 31.5 30 28.6 26.1 25 21.6 20 18.5 15.8 50% 15 58% 51% 50% 12.2 27% 35% 42% 49% 22% 49% 10 65% 68% 72% 73% 51% 78% 32% 28% 86% 86% 86% 86% 85% 85% 5 14% 14% 87% 14% 14% 15% 15% 13% 0 9.5 11.5 12.0 11.0 12.8 15.9 14.3 9.1 8.8 4.8 4.8 5.3 6.0 5.9 6.1 4.3 Other Philippine Manufactured Exports 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

ECOZONE DIRECT EMPLOYMENT1994 91,8601995 121,8231996 152,2501997 183,7091998 219,7911999 247,0762000 278,4072001 289,5482002 328,3842003 362,8512004 406,7522005 451,2792006 545,0252007 593,1082008 608,3872009 611,0582010 735,6722011 840,945 14.31%

WHY INVEST INTHE PHILIPPINES

BUSINESS-FRIENDLY POLICIES• 100% Foreign Ownership of Companies;• Basic rights of Investors are guaranteed (right to remit profits and pay foreign obligations, right to repatriate investments)

FILIPINO WORKERS Among the Best in the WorldTHE COUNTRY‟S COMPETITIVE EDGE Literate, English – speaking, easy to train, hardworking , very friendly, and always smiling

VERY FAST LEARNING CURVE OF FILIPINO WORKERS• 8 weeks (2 months) to train Filipino workers• Compared to 16 to 24 weeks (4 to 6 months) to train workers in other countries.

STRATEGIC LOCATION Russia Canada United GermanyKingdom EUROPE France United States Korea of America China Japan Middle Taiwan East Atlantic Ocean Hong Kong Philippines Africa India Thailand Malaysia Singapore Pacific Ocean South Indonesia America Australia

VERY HOSPITABLE and COMFORTABLE SECOND HOME to EXPATRIATES• Very friendly attitude of Filipinos towards foreigners• Availability of quality primary and secondary education Presence of International Schools• Housing closest to meeting western standards at very reasonable rental rates• Best sporting and recreational facilities Many world-class golf courses.• World class health care services (Result of a survey conducted on expatriates in Asia)

WHY INVEST IN PEZA ECONOMIC ZONESA. FISCAL INCENTIVESB. NON-FISCAL INCENTIVES

FISCAL INCENTIVES for EXPORT COMPANIES• Income Tax Holiday (ITH) or Exemption from Corporate Income Tax for four years, extendable to a maximum of eight years;• After the ITH period, payment of the special 5% Tax on Gross Income, in lieu of all national and local taxes;• Exemption from duties and taxes on imported capital equipment, spare parts, supplies, and raw materials;• Domestic sales allowance of up to 30% of total sales;• Zero Value-Added Tax (VAT) Rate on local purchases to include telecommunications, power, and water bills;• Exemption from payment of local government taxes and fees.

NON-FISCAL INCENTIVES for EXPORT COMPANIES• Employment of foreign nationals;• Special visa for foreign investors and immediate family members.

FAST TURNAROUND ESPECIALLY FOR ELECTRONICS96 HOURS OR 4 DAYS TO COMPLETE THE PRODUCTION CYCLE:DAY 1• Japanese or Asian company sends raw materials to the Philippines.• Raw materials arrive in the Philippines on the same day.• Cleared by Customs on the same day.• Received by the Economic Zone Company on the same day.DAY 2 - DAY 3• Products are manufactured.DAY 4• Finished products brought to the Port.• Cleared by Customs on the same day.• Shipped to Japan or Asian country on the same day.• Arrive in Japan or Asian country on the same day.

PEZA IS A ONE-STOP SHOP• Building and Occupancy Permits are issued by PEZA.• Import and Export Permits are issued by PEZA.• Automated and web-based Import & Export Procedures and e- Payment System (Paperless Transactions).• Special multiple-entry non-immigrant visa processed in PEZA.• Environment Clearance processed thru PEZA.• Registration requirements simplified, registration forms downloadable from website and uncomplicated, approval made easy.

PEZA IS A “NON-STOP SHOP”• At the zones, PEZA provides 24 hours a day, 7 days a week of continuous service to locator companies.• The Director General herself and other PEZA officials are on call 24 hours a day, 7 days a week.

In PEZA,• NO RED TAPE• ONLY RED CARPET TREATMENT

In PEZA, there is NO GRAFTNO CORRUPTION

SUPPORT SERVICES TO MANUFACTURING ANDAGRO-INDUSTRIAL SECTORS

INCENTIVE FOR LOGISTICS ENTERPRISES Tax and duty free importation of raw materials.INCENTIVE FOR FACILITIES ENTERPRISES (They provide build-to-suit or lease buildings.) Special 5% Gross Income Tax, in lieu of all national and local taxes.

• Accredited Brokers, Truckers and Forwarders To ensure companies deal only with legitimate entities and so that PEZA can also monitor performance of these service providers• Encouraged Developers to have developed areas available for manufacturing• Assisted in reduction of power. Now we are assisting companies to prepare for open access.• Strategic Location of Batangas Port - strongly pushing for Batangas Port as primary port for CALABARZON locators - reduced PEZA fees by 50% for shipment using the Batangas Port - assigned Staff to process shipments in the Batangas Port

ISO 9001:2008 PEZA‟s Quality Management System is certified ISO 9001:2008. PEZA is certified ISO 9001:2008 for all itsprocesses, at all levels, in all sites, nationwide.

ONLY PEZA CITED FOR BEST PRACTICEAMONG ECONOMIC ZONES WORLDWIDE“Under PEZA, the Philippines has shown dramaticimprovements in Investment Climate.End Result – PEZA is a shining example ofsuccessful regulatory reform improving overallinvestment climate in the country”Study of Gohan Akinci, Foreign Investment AdvisoryServices (FIAS), International Finance Corporation of theWorld Bank (IFC-WB)

We now have aReformistGovernment thatis open forbusiness.President Aquino‟sPolicy Thrusts:1. Good Governance2. Level Playing Field3. Transparency4. No Corruption

CREATINGJOBS, LIVELIHOOD, INCOME FOR FILIPINOS IN THE COUNTRYSIDE

Philippines‟ Competitive Advantage onBusiness Environment in Comparison to other Asian Countries January 2012 Japan External Trade Organization (JETRO) Manila

1. Moderate Cost

1.1 Problems of increasing financial costs (%) 0 10 20 30 40 50 60 70 China 64.1 Malaysia 61.5 Thailand 56.7 India 54.6 Vietnam 53.6 Indonesia 51.9 Philippines 46.7Source: JETRO, 2011 Survey of Japanese-Affiliated Firms in Asia and Oceania (Aug-Sept, 2011)* All the succeeding data has the same source.

1.2 Problems in shortage of land/offices, rising land prices/rental 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 (%) India 32.0 Vietnam 18.0 Indonesia 17.2 Thailand 12.7 Malaysia 9.8Philippines 5.8

1.3 Problems in skyrocketing payroll costs (%) 0 10 20 30 40 50 60 70 Vietnam 61.3 Thailand 48.1 India 45.2 Indonesia 40.8 Malaysia 27.5Philippines 18.2

2. Sufficient Labor Supply

2.1 Difficulty in recruiting general staff (%) 0 5 10 15 20 25 30 35 40 Vietnam 36.7 Malaysia 31.2 Thailand 31.1 China 28.6 Indonesia 4.4 India 4.2Philippines 3.2

2.2 Difficulty in recruiting executives (%) 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Myanmar 64.3 Vietnam 52.8 India 46.9 Indonesia 43.0 China 41.9 Thailand 40.0Philippines 39.0 Malaysia 37.9

2.3 Low rate of worker‟s employment retention (%) 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Vietnam 48.7 Malaysia 42.5 India 41.6 China 39.0 Thailand 33.6Philippines 30.6

2.4 Problems of worker‟s competency (%) 0 10 20 30 40 50 60 Myanmar 56.3 Vietnam 48.7 China 47.6 India 45.8 Malaysia 44.7 Indonesia 42.2 Thailand 40.9Philippines 37.9

2.5 Difficulty in Quality Control (Manufacturing only) (%) 0 5 10 15 20 25 30 35 40 45 50 India 45.5 China 43.4 Malaysia 41.0 Thailand 40.7 Vietnam 39.3 Indonesia 28.7Philippines 26.7

3. Reasonable Salary

3.2 Annual Salary * Manufacturing Staff (US $) - 1,000 2,000 3,000 4,000 5,000 6,000 7,000Malaysia (n=170) 6,340 China (n=474) 5,765 Thailand (n=470) 5,662 India (n=70) 4,495Philippines (n=66) 4,048 Indonesia (n=78) 3,980 Vietnam (n=89) 2,196 * including bonuses, allowances, SSS, etc

3.3 Annual Salary Manufacturing Engineer (US $) - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000Malaysia (n=165) 16,092 Thailand (n=449) 11,464 India (n= 71) 10,559 China (n=424) 9,937 Indonesia (n=68) 7,093Philippines (n=59) 6,494 Vietnam (n=86) 4,793

3.4 Annual Salary Manufacturing Managers (US $) - 5,000 10,00015,00020,00025,00030,00035,000Malaysia (n=168) 30,999 Thailand (n=445) 26,580 India (n= 78) 24,596 China (n=436) 17,830Philippines (n=63) 17,593 Indonesia (n=77) 16,544 Vietnam (n=80) 11,526

3.5 Annual Salary Non-Manufacturing Staff (US $) - 5,000 10,000 15,000 20,000 Malaysia (n=78) 14,554 China (n=226) 12,344 Thailand (n=262) 10,379 India (n=95) 10,088Philippines (n=40) 7,324 Indonesia (n=39) 6,852 Vietnam (n=27) 5,199

3.6 Annual Salary Non-Manufacturing Manager (US $) - 5,000 10,00015,00020,00025,00030,00035,00040,000 Malaysia (n=76) 35,117 China (n=205) 27,610 Thailand (n=239) 25,842 India (n=88) 25,179 Indonesia (n=40) 23,068Philippines (n=37) 19,187 Vietnam (n=24) 14,977

Presentation of PEZA Director General Lilia De Lima at EuroMoney Conference 2012

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Presentation of PEZA Director General Lilia De Lima at EuroMoney Conference 2012 Presentation Transcript