Even before this recent focus on decentralisation, the ASEAN countries already had an extensive slate of incentives for businesses to use a wide range of special economic zones, some of which are outside the capital cities. There are now almost 800 of these zones spread across the region from more conventional free trade and export processing zones to newer medical tourism parks, all with different incentives to attract business.
The Philippines is one of Southeast Asia’s biggest users of special zones3, led by its information technology parks, which underpin the country’s business process outsourcing industry. But it also has manufacturing, agriculture and tourism economic zones. Mr Brennan identifies several economic zones in particular as the country’s main “next-wave” cities, including Cebu in the central Philippines, which is focusing on agro-industrial investments; and Davao in the south, which aims to attract investment in manufacturing. “Similar to Manila, these cities are bustling with commercial activities, with modern infrastructure in place,” he says.
Another special zone highlighted by Mr Brennan is Clark. Once a US military base, Clark is now designated a Freeport and Special Economic Zone and has become a commercial hub and international centre for industry, leisure and recreation. Clark also looks set to benefit from the government’s planned US$150 billion ‘Build, Build, Build’ infrastructure programme. The North-South Corridor mass transit rail system, which connects to Clark’s urban development and airport, has attracted bids from nine international construction firms. The government has also been successful in winning substantial multilateral lending support from Japan, China and the Asian Development Bank for ‘Build, Build, Build’ projects, suggesting a sustained infrastructure construction boom is now underway.
This promotion of next-wave cities and regional economic zones has seen many organisations relocate outside the capital. One company that moved their operations to Clark is L&T International Group Philippines Inc, which operates a major apparel manufacturing facility in Clark on behalf of its parent company Luen Thai. A major garment firm, Luen Thai is a both a producer of apparel and accessory products and a leading player in the apparel supply chain.
As one of HSBC Philippines’s clients, L&T International Group Philippines’s cash management and banking needs are supported through HSBC’s online banking portal, HSBCnet. HSBC is also able to provide solutions such as check outsourcing, advice on payments, government payment solutions, and online forex transactions. These services enable the company to streamline their business processes and allow them to operate seamlessly while taking advantage of the incentives offered by the government.
This example of an organisation shifting its operations from Manila to the outlying regions and next-wave cities of the Philippines is likely to be repeated, believes Mr Brennan. “With the Philippines currently in ‘Build, Build, Build’ mode and aggressively partnering with public and private corporations for infrastructure investment, there’s actually a lot of potential and interest in developing commercial hubs outside Metro Manila.”