Special economic zones for creative industry sought

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The Creative Economic Council of the Philippines (CECP) wants creative industry clusters to be designated as special economic zones to allow companies to benefit from fiscal incentives. At Tuesday’s Arangkada forum held in Makati City, CECP Founder and President Paolo A. Mercado said the group is pushing for the identification of creative clusters as special economic zones (SEZs) as part of its road map.

The CECP is targeting to have one to five creative cluster SEZs established between 2016 to 2020; five to 10 from 2020 to 2025; and over 10 by 2030. At present, Philippine Economic Zone Authority has not identified any creative industry cluster as an SEZ. The identification of SEZs is a government strategy to attract investments in high priority sectors.

Under the SEZ Act of 1994, an SEZ refers to selected areas “with highly developed or which have the potential to be developed into agri-industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations.”

Creative economy sectors such as arts and culture (books, crafts, film, music, etc.); design (architecture, fashion, and toys); media (advertising, press, television and radio); and innovation (research and development and software) were not mentioned.

Current ecozone locators enjoy an exemption from national and local taxes and licenses in lieu of a payment of a 5% tax on its gross income; additional deduction for training expenses, among other incentives provided by other laws.

In a separate interview, Mr. Mercado said the group will take a look at the pending Tax Reform for Attracting Better and Higher-Quality Opportunities (TRABAHO) bill, which modifies the current incentive program. The CECP also pushed for the creation of an agency that will focus on spurring the growth of the industry.

“Even without the agency the road map will still be possible but slower. An agency can act as an accelerator in defining for example the incentive packages specific to the creative sector and making it a one-stop application, facilitating those things,” Mr. Mercado added.

CECP’s push was backed by the Joint Foreign Chambers of the Philippines (JFC) who, in a November 10 issued policy brief tackling creative Industries, noted that such an agency “could follow a similar path” by the National Commission for Culture and the Arts.

On incentives, the JFC recommended government “to encourage and incentivize the development of creative hubs and creative clusters as places for incubation, production, education, and research and development.”

The policy brief, distributed at the forum yesterday, cited creative clusters in cities like Makati, which is a hub for majority of the local advertising firms and production houses. Another is Quezon City which is tagged as home to both film and television industries.

“A PEZA or BOI (Board of Investments) incentivized cluster for Advertising Production would make sense in Makati, while a Film Production and Development Center would be welcome in Quezon City,” read the policy brief.

During a briefing at the end of the forum, Canadian Chamber of Commerce of the Philippines Julian H. Payne said a key takeaway in the forum is the need to globalize creative talent in the Philippines.

“You need partners outside you. Most of the creatives are covered by foreign investment restrictions like professions, or the media, or cultural industries, and therefore if you really want to globalize your creative industries, you have to globalize your connections in international investments, you’re going to have to ease those restrictions to accomplishment it,” Mr. Payne said.

But before looking at the future growth it intends to achieve, the Philippine creative industries should first measure its current status, the JFC recommended, as no reliable and consistent data has been produced to evaluate the growth of the creative industries.

“There is need for priority funding for updated and consistent measurement of the value generated by creative industries,” the group said, adding that such move should involve the Philippine Statistics Authority (PSA) “so that reliable data can be obtained on local levels for each sector.”

The World Intellectual Property Organization (WIPO) data which Mr. Mercado cited dates back to 2010. It showed that creative industries contributed $65 billion or 7% to the country’s GDP.

The industry also generated 530,000 jobs, excluding the freelancers which today are estimated at around 1.5 million.

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