After the establishment of the 26-hectare North Luzon Aero Industrial Park (NAIP), the first industrial park in Pangasinan corporations such as Sumitomo Wiring Systems Ltd., a domestic subsidiary of Japanese conglomerate Sumitomo Electric Industries Inc., have already started operations in the park, generating thousands of jobs for the Ilocos Region[i].

“NAIP was born during challenging times, developed at the height of the pandemic with invaluable support from PEZA. Since its inception, the BOC has worked tirelessly to support locators, ensuring supply-chain needs are met and factories remain operational. The impact of Special Economic Zones extends far beyond industry — transforming communities like Binalonan into thriving hubs of growth and opportunity, with ongoing developments paving the way for even more progress.”

– Atty. Miguel Fernandez, NAIP President & FLO Managing Partner

In 2024, Sumitomo Wiring Systems commended Bureau of Customs (BOC) North Luzon Aero Industrial Park – Special Economic Zone (BOC NAIP-SEZ) for its outstanding dedication in facilitating trade and business operations through its 24-hour service[ii]. Thanks to BOC NAIP-SEZ, Sumitomo enjoyed various streamlined and digital measures that significantly reduced processing times and improved operational efficiency.

The Philippines has long utilized Special Economic Zones (SEZs) as a strategic tool for economic growth. These zones, established to attract foreign investment, boost exports, and create employment opportunities, have become a critical component of the country’s economic framework. However, beyond large-scale industries, a crucial sector that can benefit from SEZ-inspired strategies is the startup industry. Startups serve as vital drivers of innovation, job creation, and economic diversification, yet they face significant barriers to growth. By adopting SEZ principles to support startups, the Philippines can cultivate a more dynamic and competitive economy.

Despite the country’s growing entrepreneurial spirit, startups in the Philippines encounter several obstacles that hinder their success[iii]:

1. High Costs of Business Operations – Startups often struggle with high rental fees, taxes, and operational costs that limit their ability to scale.
2. Complex Regulatory Environment – Lengthy and bureaucratic business registration and licensing processes discourage many entrepreneurs from formalizing their ventures.
3. Limited Access to Funding – Many startups lack access to venture capital, bank loans, or government grants, making it difficult to sustain and expand their operations.
4. Inadequate Infrastructure and Connectivity – Poor transport and digital infrastructure outside major cities limit opportunities for startups in emerging regions.
5. Talent and Skills Gap – While the Philippines has a strong labor force, many startups struggle to find employees with the technical and managerial skills needed to compete in global markets.

 Reduce Costs to Benefit Startups

To ease the cost burden and simplify processes for startups, the Philippine government and private sector can implement SEZ-inspired strategies that remove bureaucratic inefficiencies and lower the barriers to entry.

One of the biggest hurdles for startups is navigating the complex business registration and compliance landscape. The government can address this by[iv]:

• Reduce licensing and permit fees for startups, significantly lowering the financial burden for new enterprises.
• Implement regulatory sandboxes, allowing startups in innovative industries to operate under relaxed regulatory conditions while they refine their business models
• Promote accelerator programs for advanced-stage startups[v] so they also gain access to essential resources and infrastructure. Many programs provide office space, technical support, and access to cutting-edge technology. This reduces operational costs and allows startups to focus on product development and growth.
• Increase access to low-cost digital services. Many startup innovations are provided to customers on or through the internet. Therefore, improving internet coverage and use, especially in rural areas and among farmers and the elderly, will help expand the market for startups. Digital infrastructure and services in the Philippines have improved considerably in recent years and continued progress can be encouraged.

Even with streamlined processes, navigating the regulatory environment can still be challenging for new entrepreneurs. This is where legal experts and law firms can provide crucial assistance:

• Lawyers can help startups choose the most appropriate business structure—whether a sole proprietorship, corporation, or partnership—to optimize tax benefits and liability protection.
• Legal professionals also play a vital role in intellectual property protection, ensuring startups safeguard their innovations through trademarks, copyrights, and patents.
• Law firms can assist with drafting contracts, lease agreements, and regulatory documents to help startups avoid potential disputes and minimize risks.
• Finally, ensuring tax compliance and corporate governance through legal guidance can prevent costly penalties that could otherwise derail a startup’s growth.

Reducing business costs is essential for fostering a vibrant startup ecosystem in the Philippines. By adopting SEZ-inspired strategies, the government can make entrepreneurship more accessible. Overall, moving towards a more startup-friendly regulatory and economic environment will encourage innovation, create jobs, and drive long-term national growth.

SOURCES:

[i] Bernie Cahiles-Magkilat. (2020). Sumitomo expands wiring harness operation in ph.  https://mb.com.ph/2020/09/18/sumitomo-expands-wiring-harness-operation-in-ph/

[ii] Bureau of Customs (2024). BOC NAIP-SEZ Recognized for its Commitment to 24-Hour Service. https://customs.gov.ph/boc-naip-sez-recognized-for-its-commitment-to-24-hour-service/

[iii] The Asian Business Review (2024). Philippine startups tied up in red tape struggle to take off. https://asianbusinessreview.com/economy/in-focus/philippine-startups-tied-in-red-tape-struggle-take-off

[iv] World Bank (2021). Starting a business: good practices. https://subnational.doingbusiness.org/en/data/exploretopics/starting-a-business/good-practices

[v] Teves, et al. (2023). THE PHILIPPINES’ ECOSYSTEM FOR TECHNOLOGY STARTUPS. https://www.adb.org/sites/default/files/publication/884641/philippines-ecosystem-technology-startups.pdf