Promoting Compliance of Locator Enterprises through the PEZA-DENR
Memorandum of Agreement
Vivian Cerrer – Toledo works at the Philippine Economic Zone Authority. Supported by a
team of environment professionals from different disciplines, they come up with
guidelines and implement policies that seek to further promote the sustainable
development of the economic zones. A registered chemical engineer, she finished her
Master’s degree in Public Policy and Management at Carnegie Mellon University
Australia.
Email: [email protected]
Contact no:
0917-806-0295
The partnership between PEZA and DENR was forged to establish a balance
between the need to spur economic growth in the countryside and the need to
identify and address the environmental impacts of the project through the EIA
process. Through the Memorandum of Agreement (MOA) between the two
agencies, clear-cut guidelines were established to streamline the requirements
for processing of Environmental Compliance Certificate (ECC) applications in the
ecozones and reduce processing time.
The physical setup of an ecozone has the elements to facilitate identification of
environmental impact of the project and to easily provide mitigating measures:
Developers of an industrial estate provide water and power to the various
locators; Locator enterprises share a centralized wastewater treatment facility
and has put up systems to ensure that emissions and discharge do not adversely
affect the prevailing environmental conditions; and, PEZA monitors the
movement of people, goods and industrial wastes into and out of the ecozone.
Majority of investments in the ecozones are classified as light to medium
industries.
The
investors
of
these
activities
are
implementing
non-
environmentally critical projects (non-ECPs) under the EIS system. Tools and
resources established by PEZA, with the guidance of the DENR, are used to
assist the investors at the earliest stage of the project cycle to easily identify and
manage the industrial wastes and emissions. Existing companies, through their
respective Pollution Control Officers (PCOs) have used these guidelines to
amend their ECCs whenever expansion projects have impacts to the
environment that are not addressed by previous studies. All these elements have
come together to simplify and promote compliance in the ecozones.
Promoting Compliance of
Memorandum of Agreement
Vivian Cerrer – Toledo
Locator
Enterprises
through
To be able to attract more investments and continue to
generate jobs for the Filipino people in a highly
competitive global market, the Philippines, together with
other countries around the world have been taking steps
to make it easier for investors to start a business. Though
there are areas where reforms have clearly made an
impact, especially in the economic zones, the Philippines
current rank of 138 (see Box 1) in the International
Finance Corporation’s (IFC) 2012 Ease of Doing Business
index ranks the country second from the bottom among
ASEAN nations.
the
PEZA-DENR
BOX 1: Doing Business 2012 i
Country
Singapore
Rank
1
Malaysia
12
Thailand
18
Brunei
79
Vietnam
99
Indonesia
128
Regulations to protect the environment are necessary to Cambodia
133
sustain our country’s development. But these regulations
138
need to be reasonable to allow businesses to grow. If the Philippines
requirements
are
too Lao
163
complex
or
costly,
it
will
BOX 2: FDI in 2012
Myanmar
No data
discourage investments. In
Country
$, B
spite of the strong GDP Source: IFC 2013
growth figures, foreign direct investment in the Philippines
Singapore
54.4
is still the lowest in the ASEAN Region. In 2012, we were
Indonesia
19.2
able to attract $ 1.5 billion ii worth of investments which is
not even one tenth of the amount invested in Indonesia.
Vietnam
8.4
Thailand
8.1
The implementation of the Philippine Environmental
Impact Statement (EIS) System in the economic zones
1.8
has evolved during the last decade due to the
Philippines
1.5
Memorandum of Agreement between PEZA and DENR.
Source: UNCTAD 2013
Locator enterprises are advised during the planning stage
about the requirements and with the help of the
streamlined procedures for securing an Environmental Compliance Certificate (ECC),
locators find it easy to evaluate the impact of their projects and come up with mitigating
measures to address the myriad of environment impact.
Cambodia
About PEZA
The Philippine Economic Zone Authority (PEZA) was established in February 1995 with
the enactment of Republic Act 7916. The implementing rules and regulations were
approved by its Board of Directors in May of the same year. As an attached agency to
the Department of Trade and Industry (DTI), PEZA is tasked to promote investments,
extend assistance, register, grant fiscal and non-fiscal incentives to and facilitate
operations of locator enterprises in areas throughout the country proclaimed by the
President of the Philippines as an economic zone. iii
Requirement for operating in an economic zone
As required in RA 7916, prior to obtaining a status as an economic zone, the developeroperator is required to provide proof of land ownership and that its use as an economic
zone coincides with the intended beneficial use of the land. The developer-operator
secures certifications from several government agencies in support of its proposal to
develop the economic zones, at the very least, these certifications/ endorsements are
provided in the recommendation for Presidential Proclamation of the economic zone:
Housing and Land Use Regulatory Board (HLURB) Zoning Certification or a DAR
Conversion
clearance/exemption;
Endorsement
of
the
Sangguniang
Bayan/Panglungsod; Certification from the National Water Resources Board (NWRB)
that the identified source of water shall not cause a supply problem for the adjacent
communities. iv
Even before the economic zone starts its operation, the developer-operator is required
to secure an ECC to ensure that the impact of its land development activities (i.e.
establishing infrastructure facilities, utilities, communication system, sewerage and
drainage systems, garbage collection system, pollution control devices, green areas
and other public amenities) shall be addressed properly at each stage of the project. An
economic zone is operated and managed as a separate Customs territory, thus, the
developers install perimeter fences to segregate the economic zone from adjacent
areas.
PEZA’s control measures in the operation of locator enterprises
As a separate Customs territory, the movement of persons, vehicles and goods (even
wastes) are restricted and monitored by PEZA in the economic zones. An investor,
seeking to locate inside the economic zone will be required to secure an ECC prior to its
registration. This is to ensure that the environmental impact of its operations are
addressed at each stage of the project cycle. Prior to its operation, the locator
enterprise is required to connect to the centralized wastewater treatment facility, get the
services of a residual waste hauler that has a partnership with a sanitary landfill and
establish a procedure for on-site management of hazardous wastes before these are
sent to a DENR-registered hazardous waste treatment, storage and disposal facility
(HW TSD). PEZA, as an ISO 9001:2008 certified company in all processes and in all
facilities nationwide has a system in place to enable zone officials to check that locator
enterprises consistently follow the requirements and economic zone operations do not
adversely affect the safety of the community or the condition of the environment.
Implementation of the Philippine EIS System in the economic zones
Though the ECC is a planning tool, it is also viewed by the regulated community as a
permit because a locator enterprise cannot start its operations without first securing an
ECC from the DENR. Otherwise, the locator will be in violation of PD 1586. Majority of
projects of locator enterprises in the economic zones are considered as Category B or
those classified as non-environmentally critical projects (non-ECPs) located in
environmentally critical areas (ECAs). From the implementation of the Special
Economic Zones Act in 1995 up to 2004, PEZA have been receiving complaints from
locators who are unable to start their projects citing unclear classification of coverage of
the project during screening, numerous permits required from other agencies/LGUs
even if these requirements have been addressed by the developer-operator during its
own ECC application and the multiple requests for information as the cause of delay in
processing and issuance of ECCs.
President GMA in 2002 recognized the need to rationalize the implementation of the
Philippine EIS System through the issuance of Administrative Order 42 (AO 42). Section
3 of AO 42 required the DENR-EMB to conduct regular consultations with DTI, affected
industry groups and other stakeholders to improve processing of ECC applications. This
set the tone for PEZA, as an attached agency of the DTI to work on the implementing
rules and regulations to fulfill the agencies’ respective commitments in the MOA.
Bearing in mind the engineering and administrative controls that are inherent in the
economic zones, streamlining of the requirements for ECC application of typical nonECPs is a logical step in simplifying the EIA process in PEZA.
Box 3: Milestones in the implementation of the PEZA-DENR MOA
Date
Signatory/ Issuance
PEZA-DENR MOA
25 Aug 1999
Sec. Antonio Cerilles (DENR)
IRR of the PEZA-DENR MOA
11 Feb 2004
Sec. Elisea Gozun (DENR)
IEE Checklist for new projects (EMB MC 2004-04)
05 Oct 2004
Engr. Julian Amador (EMB)
EPRMP Checklist for EZ (EMB MC 2005-07)
14 Nov 2005
Atty. Lolibeth Medrano (EMB)
Memorandum clarifying EIA policy
10 Jan 2006
Atty. Lolibeth Medrano (EMB)
Letter on use of DRR-CCA checklists
23 Jul 2012
Atty. Juan Miguel Cuna (EMB)
In coming up with the ECC application in checklist format, PEZA was guided by the EIA
Division of the EMB Central Office, under the leadership of the late Reynaldo Alcances
and the Regional Directors and EIA Chief of the appropriate Regions (i.e. Calabarzon,
NCR, CAR and Region 7) where economic zones are clustered. Using the outline
prescribed in the procedural manual of DENR Administrative Order 2003-30, the IEE
Checklist was formally approved in 2004 by the DENR-EMB as the ECC application
document for new projects. The checklists replaced the need to come up with a
narrative format for the project description and its impact and proposed mitigating
measures. It also removed the need to describe the baseline environmental conditions
since this will just be a duplication of the study conducted by the developer-operator on
the land, water, air and the community for its own ECC application. For proponents who
will be introducing project activities not covered in previous EIA study or expand existing
projects, an Environmental Performance Report and Management Plan (EPRMP)
checklist was crafted and its use in the economic zone was approved by the DENREMB in 2005. Box 3 provides a summary of issuances in support of the implementation
of the MOA in the economic zones. EMB followed suit with its own set of IEE Checklists
that are industry-based, an example of this is EMB MC 2006-03 for the IEE Checklist for
wind energy projects. Currently, ECC applications for new projects use the format
prescribed in EMB MC 2011-05, incorporating considerations on Disaster Risk
Reduction – Climate Change Adaptation (DRR-CCA) in the EIS process.
BOX 4: Locators per type of
registered activity
Export
IT
1,223
742
Domestic market
1
Agro-industrial
3
Free trade
2
Service
3
Facilities
283
Logistics
221
Medical tourism
Tourism
Regional warehouse
4
30
2
PEZA has been conducting procedural screening of all
ECC and CNC applications of locator enterprises inside
the economic zones since 2004. As of 31 May 2013,
PEZA has already processed 2,368 (2,108 HO, 345 CEZ,
25 BCEZ) applications nationwide. Using the DAO 200330 revised procedural manual, PEZA evaluates at the
feasibility study stage whether a project will be considered
as Category A (ECP), Category B (non-ECP but located in
an environmentally critical area (ECA)) or Category C or
D, outside the purview of the Philippine EIS System. In
cases where there are gray areas, PEZA confers with the
concerned EMB Regional Office. Investors, both foreign
and local, have found the Checklists easy to use and
rarely employ the services of consultants in accomplishing
their ECC application. For existing projects, Pollution
Control Officers (PCOs) regularly come to the PEZA office
to inform about expansion projects and clarify the
requirements in the EPRMP Checklist.
Currently, there are 2,535 locator enterprises registered in
the economic zones nationwide. The type of export
Total
2,535
enterprise is summarized in Box 4. The reduced
processing time in processing of their ECC application is
Source: PEZA (as of 30 April 2013)
one of the non-fiscal incentives that a locator enjoys as a
registered enterprise in the economic zone.
Utilities
21
As part of PEZA’s commitment in the MOA, procedural screening is conducted within
ten (10) days in PEZA and another ten (10) days are allocated for the DENR for the
substantive review. PEZA guides
the locators to ensure that Box 5: Comparison of processing time
application
documents
are
Actual processing time Official processing time
complete, PEZA also conducts WB/ADB report
104 days*
60 days
inspection of the facilities and
Within EZ
14 days**
10 days
provides a report to the DENR on
the condition of the site during the Source: *Tuyor, 2007; **DENR-EMB Calabarzon 2013
inspection. This arrangement has dramatically reduced the processing time of ECC
applications in the economic zone as provided in Box 5. Tuyor et al. (2007) in a World
Bank study of randomly sampled projects, have reported that the average processing
time from submission of EIS for Category B projects will take up to 104 days. In
contrast, a review of the recent ECC applications endorsed to DENR-EMB Calabarzon
havs shown that the processing takes an average of 14 days for non-ECPs in ECAs.
The Philippines v has improved its ranking in the latest World Competitiveness
Scoreboard. From a rank of 43 in 2012, we are now rank 38, one step ahead of our
neighbour Indonesia. Through the participation of a large number of people across
government agencies, local government units, the private sector and academe,
collective efforts are being made to raise governance standards to boost the country’s
competitiveness. Rationalization of requirements for ECC applications is just one of the
many steps taken by DENR and PEZA to contribute to improved compliance of locator
enterprises. This has resulted in less issuance of sanctions by the DENR-EMB in
relation to PD 1586 and has caused a more positive perception on the ease of investing
and starting a business in the economic zones. More steps will be taken by both
agencies in relation to the targets in their respective 2013-2016 Balance Scorecard
management tool. This is with the end view that compliance to government regulations,
especially on environment, will be simple, straightforward and inexpensive.
i
http://www.doingbusiness.org/rankings http://www.scribd.com/doc/121924720/UNCTAD‐Global‐Investment‐Trends‐Monitor iii
PEZA Homepage. http://www.peza.gov.ph/ iv
IRR of RA 7916. v
IMD World Competitiveness Center http://www.imd.org/wcc/news‐wcy‐ranking/ ii
References
Environmental Impact Assessment PD 1586
EPRMP Checklist for Economic Zone Enterprise, EMB Memorandum Circular 07 Series of 2005
IEE Checklist for Economic Zone Enterprise, EMB Memorandum Circular 04 Series of 2004
IEE Checklist for Wind Energy Projects, EMB Memorandum Circular 03 Series of 2006
Incorporating Disaster Risk Reduction (DRR) and Climate Change Adaptation (CCA) concerns in the Philippine EIS
System, EMB Memorandum Circular No 05 Series of 2011
Ouano, E.A.R. 2010. Commentaries on the EIA Practices. Central Book Supply, Inc., QC
PEZA-DENR Memorandum of Agreement and its implementing rules and regulations
Rationalizing the Implementation of the Philippine Environmental Impact Assessment and giving authority in addition
to the Secretary of DENR, to the Director EMB and Regional Directors of EMB to grant ECC, AO 42 of 2002
Revised Procedural Manual for DENR Administrative Order No 30 Series of 2003
Special Economic Zone Act RA 7916 and its implementing rules and regulations
Tuyor, Josefo B. et al. 2007. The Philippine Environmental Impact Statement System: Framework, Implementation,
Performance and Challenges. Discussion papers, East Asia and Pacific Region. Rural Development, Natural
Resources and Environment Sector. Washington, DC: World Bank.
Promoting Compliance of
Locator Enterprises
Through the PEZA-DENR Memorandum of Agreement
19 June 2013
Vivian Cerrer - Toledo
What is the
Agreement all about?
Achieving
Balance
need to spur
Economic
Growth
between
need to identify and address
Environmental
Impact
Before implementation of the MOA
Industry
Government
• ECC processing limited to consultants
• DAO 96-37 as basis for implementation
• Difficulty in complying with
• first comprehensive procedural manual
requirements
• no limiter for determining coverage
• Delays in start of project because of
• EMPAS reviews ECC application
uncertainty in ECC issuance
• RED issues ECC
IRR
MOA signing
1999
First ECC application
IEE Checklist approved by EMB
DRR CCA
Joint workshop 2
2004
2002
EMB as line bureau
AO 42, prescribes
processing
time, consultation with
DTI
2005
EPMRP Checklist
approved
2012
2006
Joint workshop 1
Policy clarification
Milestones on ECC processing in the EZ
Milestones in the implementation of the PEZA-DENR MOA
Date
Signatory/ Issuance
PEZA-DENR MOA
25 Aug 1999
Sec. Antonio Cerilles (DENR)
IRR of the PEZA-DENR MOA
11 Feb 2004
Sec. Elisea Gozun (DENR)
IEE Checklist for new projects
(EMB MC 2004-04)
EPRMP Checklist for EZ
(EMB MC 2005-07)
Memorandum clarifying EIA policy
05 Oct 2004
Engr. Julian Amador (EMB)
14 Nov 2005
Atty. Lolibeth Medrano (EMB)
10 Jan 2006
Atty. Lolibeth Medrano (EMB)
Letter on use of DRR-CCA checklists
23 Jul 2012
Atty. Juan Miguel Cuna (EMB)
The partnership aims to:
# 1 Advise proponents on type of coverage
# 2 Streamline requirements for non-ECPs
# 3 Reduce processing time
# 4 Enable proponents as preparers
#1 Proponent is advised on type of coverage
Investors know the
coverage during
feasibility study
stage
ECC application is done
concurrently with PEZA
registration
Category A
Category B
Category C
Category D
only non-ECPs and those outside the
purview of EIS system are covered by
the MOA
Locators per type of
PEZA-registered
companies enjoy the
one-stop shop service
(i.e. building
permit, ECC / LC and
visa application) as
part of their non-fiscal
incentives
registered activity
Export
IT
Domestic market
Agro-industrial
Free trade
Service
Facilities
Logistics
Medical tourism
Tourism
Regional warehouse
Utilities
Total
Source: PEZA (as of 30 April 2013)
1,223
742
1
3
2
3
283
221
4
30
2
21
2,535
#2 Streamline requirements for non-ECPs
• IEE / EPRMP Checklists
• No more baseline environmental
conditions
• No more locational clearance from LGU
• Adoption of PEZA's inspection report
• ISO 9001:2008 certified system for
feedback on request for additional
information
Average Annual No. of ECC applications issued with an ECC by EMB (all projects)
DAO 03-30 2003 - 06
DAO 96-37
1997 - 02
DAO 92-21
1993 - 96
4254
13
2513
~ <0.5%
~ <2%
39
Percentage of ECP
for all projects
issued with an ECC
1377
~ <4%
51
0
Category A
1000
2000
3000
4000
5000
Category B
Majority of projects in the economic
zones are non-ECPs... same as the ones
outside PEZA
Source: Tuyor (2007)
Why can we / did we
streamline?
Why not??
Developer operator has conducted its own
EIS study and has the ff :
• HLURB permit / DAR certification
• Endorsement from the LGU on the EZ
• NWRB certification on water source
• Centralized WTP
Since owner of EZ has conducted
the above, no need for the
locators to duplicate the study /
permits
#3 Reduce processing time
Typical processing time
104
days*
14
days**
WB/ADB Report
Within EZ
Commitment during processing
Procedural
screening incl.
inspection
Substantive
review & ECC
issuance
Notes on the Checklists
• Singular IEE (2004) and EPRMP (2005) Checklists for all
non-ECPs in the EZ
• Derived from prescribed outline of DAO 2003-30
• Drafted under the supervision of EMB CO
• Joint workshop with EMB regions where EZ are located
Simple and easy to understand
requirements translates to easier
evaluation
#4 Enable proponents as preparers
PCOs are:
• Familiar w/ the operations
• Knowledgeable about w/c
measures will be applicable
Role of PEZA
In the Economic Zones
Promote investments
Generate exports
Create jobs
Economic Zones are
separate customs
territory
Movement of
persons, vehicles, goods
and wastes are monitored
by PEZA
Industrial wastes can only
be allowed to be transported
out of the zone if...
HW will be sent to a TSD facility
RW will be sent to a sanitary landfill
Fast facts
#138
Rank in Ease of Doing Business
Slightly higher than Laos
Singapore # 1
Vietnam # 99
Cambodia # 133
$ 1.5 B
FDI in 2012
lowest in Asia
# 38
Rank in World
Competitiveness Report
Singapore $ 54.4 B
Vietnam $ 8.4 B
Cambodia $ 1.8 B
While regulation is
important, government needs to simplify
processes so that the Philippines will be
viewed as a competitive business
destination!
Where compliance is
simple, straightforward and
inexpensive, all stakeholders
will benefit from the efficient
implementation of regulations