Words Paolo Mercado
Illustration Michaela Macalinao
Philippine Export Zone Authority (PEZA) Special Economic Zones have been around for some time. These Zones are instrumental for encouraging investments in manufacturing and service industries geared towards dollar earning exports. From the late 1970s to the 1990s, PEZA Special Economic Zones focused on manufacturing focused industrial parks in Calabarzon, Cebu, Subic, and Baguio. Companies like Texas Instruments, Timex, Acer, and many others had manufacturing facilities in the country, enjoying tax benefits and other incentives within these Zones.
In the last decade, the rise of the business process outsourcing (BPO) industry has given birth to a new type of PEZA Zone, ones focused on outsourced service centers rather than manufacturing. Through the lobbying of the Internet & Business Process Association of the Philippines (IBPAP), the Department of Trade and Industry (DTI) expanded and liberalized the PEZA qualifications to allow BPO facilities to enjoy PEZA status and incentives as well. To a great extent, this simple change in PEZA qualifications, matched by aggressive international marketing for the sector, allowed BPOs to grow and become the fastest growing dollar earning sector in the country. To date there are 243 IT-BPO PEZA Zones in the country, as compared to 73 Manufacturing PEZA Zones.
Apart from 73 Manufacturing and 243 Services, other PEZA Zones include 21 Agro- Industrial Zones, 19 Tourism Zones, and two Medical Tourism Parks. As those aren’t enough, there are plans to build quite a few more.
So with more than 500 operating and planned PEZA Zones, why isn’t there a “Creative Zone” in the list? In previous articles, I have written about Creative Hubs and Clusters around the world where creative work, whether in content or coding, is done in a highly visible, iconic and incentivized zone. Today, we have several Creative & Culture Hubs in different parts of the country as evident in a recent study done by the British Council in partnership with the Ateneo Art Gallery. Yet while these hubs nurture vibrant creative communities, none of them take advantage of the enabling instruments from DTI to setup an exports oriented Creative Zone for production or services.
This is one of the key challenges of the Creative Economy Council of the Philippines (CECP). Working with DTI, the CECP wants to identify and pilot lighthouse model Creative Zones that generate significant dollar revenue through product exports, service employment, and in the long term, Intellectual Property value.
One concrete concept that the CECP is working on is the Creative Hub for Advertising Production (or CHAP). The Philippine Advertising Industry is among the most mature and professional creative industries in the country. The long-standing presence of multinational consumer goods companies in the country such as P&G, Unilever, Nestle, & Colgate-Palmolive, matched with the investment of international ad agencies into the country, have pushed Filipino advertising talent and output to rank among the best in the region. This is evident not only in the number of creative awards Filipino agencies win abroad, but also in the fact that many Filipinos are hired as advertising professionals overseas.
Yet one puzzle about Philippine advertising is that while the industry is sizable and profitable domestically, very little international work is actually done in the country. Sure there are the odd projects here and there, but the Philippines as a whole is not regarded as a regional center for advertising creation nor production. Having worked internationally for many years (both at Nestle and Publicis), such advertising hubs do exist. In Europe, creation work for global brands is done mostly out of London, while majority of television commercial production is done out of Prague. In the Association of Southeast Asian Nations (ASEAN), Singapore is the regional headquarters for most of the western ad agencies, while Bangkok captures more than its fair share of advertising production thanks to P&G and Unilever regional hubs. While we do most of our work in Nestle locally, the few times that we do have regional projects, Bangkok is often the top of mind choice for production.
This is a puzzle because the Philippines certainly has the talent, experience and cost competitiveness that can match Thailand’s advertising production industry. Perhaps in a few narrow areas we are at a disadvantage (such as computer post production for hair ads), but for the most part, I have found Philippine advertising production to be at par with work I have done overseas.
So why isn’t the Philippines considered a destination for advertising production? I believe the answer simply is that the Philippine advertising production industry is invisible. It is invisible because no one is actually going outside the country to promote it. Without active marketing and prospecting, we lose out to regional production opportunities just because of a lack of awareness. Furthermore, the lack of a highly visible, iconic “media park” such as those in Dubai and Singapore, would not give overseas advertising producers confidence that the Philippines can do great work. While I know from experience that production outfits such as Pabrika or Unitel do indeed produce great work, their current low-rent office locations would not be confidence building for a global ad buyer.
Thus a solution would be the creation of a specific hub for advertising production. Such a location could colocate several production outfits together as a cluster, with potentially shared resources such as studios, props & sets production and editing suites. Colocation in a single space would facilitate PEZA accreditation provided that, together, the businesses are able to generate 70% of its revenue from overseas contracts. Tax incentives from PEZA accreditation could then be reinvested in marketing activities that sell the hub’s services to a the global advertising marketplace.
While such a concept may sound daunting, there are enough proof points that the business model works in other countries, and that the quality of Filipino talent in advertising production management is up to international standards. However for this to become reality, the most critical element is for the industry to take ownership of their own strategy towards international competitiveness whether via this idea or other better ones.
Creating Our Creative Economy: I am a business professional convinced in the value generating power of creativity for private businesses as well as local and national governments. This column explores and investigates how others have successfully turned creativity into economic value for themselves and their community. I am a marketing professional, raised in a family of advertisers and writers, with a passion for teaching and an obsession for the performing arts.