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: vrcerrer@peza.gov.ph 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 Locator Enterprises through the PEZA-DENR Memorandum of Agreement Vivian Cerrer – Toledo 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. Regulations to protect the environment are necessary to sustain our country’s development. But these regulations need to be reasonable to allow businesses to grow. If the

requirements are too complex or costly, it will discourage investments. In spite of the strong GDP growth figures, foreign direct investment in the Philippines is still the lowest in the ASEAN Region. In 2012, we were able to attract $ 1.5 billionii worth of investments which is not even one tenth of the amount invested in Indonesia.

BOX 1: Doing Business 2012i

Country Rank Singapore 1 Malaysia 12 Thailand 18 Brunei 79 Vietnam 99 Indonesia 128 Cambodia 133 Philippines 138 Lao 163 Myanmar No dataSource: IFC 2013

The implementation of the Philippine Environmental Impact Statement (EIS) System in the economic zones has evolved during the last decade due to the Memorandum of Agreement between PEZA and DENR. 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.

BOX 2: FDI in 2012

Country $, B Singapore 54.4 Indonesia 19.2 Vietnam 8.4 Thailand 8.1 Cambodia 1.8 Philippines 1.5 Source: UNCTAD 2013

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 developer-operator 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 non-ECPs 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 DENR-EMB 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.

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 2003-30 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 enterprise is summarized in Box 4. The reduced processing time in processing of their ECC application is one of the non-fiscal incentives that a locator enjoys as a

registered enterprise in the economic zone.

BOX 4: Locators per type of registered activity

Export 1,223 IT 742 Domestic market 1 Agro-industrial 3 Free trade 2 Service 3 Facilities 283 Logistics 221 Medical tourism 4 Tourism 30 Regional warehouse 2 Utilities 21

Total 2,535 Source: PEZA (as of 30 April 2013)

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 application documents are complete, PEZA also conducts inspection of the facilities and provides a report to the DENR on the condition of the site during the 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

Box 5: Comparison of processing time

Actual processing time Official processing time

WB/ADB report 104 days* 60 days

Within EZ 14 days** 10 days

Source: *Tuyor, 2007; **DENR-EMB Calabarzon 2013

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 Philippinesv 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 ii http://www.scribd.com/doc/121924720/UNCTAD‐Global‐Investment‐Trends‐Monitor iii PEZA Homepage. http://www.peza.gov.ph/  iv IRR of RA 7916.  vIMD World Competitiveness Center http://www.imd.org/wcc/news‐wcy‐ranking/   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.

http://www.peza.gov.ph/http://www.imd.org/wcc/news-wcy-ranking/

Promoting Compliance of

Locator EnterprisesThrough the PEZA-DENR Memorandum of Agreement

19 June 2013 Vivian Cerrer - Toledo

What is theAgreement all about?

Balance

need to spur

Economic Growth

need to identify and address

EnvironmentalImpact

Achieving between

Before implementation of the MOA

Government Industry

• DAO 96-37 as basis for implementation

• first comprehensive procedural manual

• no limiter for determining coverage

• EMPAS reviews ECC application

• RED issues ECC

• ECC processing limited to consultants

• Difficulty in complying with

requirements

• Delays in start of project because of

uncertainty in ECC issuance

Milestones on ECC processing in the EZ

1999 2004

2005 2006

2012MOA signing

IRRFirst ECC application

IEE Checklist approved by EMB

EPMRP Checklist approved

Joint workshop 1Policy clarification

DRR CCAJoint workshop 2

2002

EMB as line bureau

AO 42, prescribes processing time, consultation with DTI

Milestones in the implementation of the PEZA-DENR MOADate 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)

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

Investors know the coverage during feasibility study stage

Category A

Category B

Category C

Category D

only non-ECPs and those outside the purview of EIS system are covered by the MOA

#1 Proponent is advised on type of coverage

ECC application is done concurrently with PEZA registration

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

Locators per type of

registered activityExport 1,223

IT 742

Domestic market 1

Agro-industrial 3

Free trade 2

Service 3

Facilities 283

Logistics 221

Medical tourism 4

Tourism 30

Regional warehouse 2

Utilities 21Total 2,535

Source: PEZA (as of 30 April 2013)

• 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

#2 Streamline requirements for non-ECPs

Category A

Category B

DAO 92-21

DAO 96-37

DAO 03-30

Source: Tuyor (2007)

~

Why can we / did we

streamline?

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

Why not??

Since owner of EZ has conducted the above, no need for the

locators to duplicate the study / permits

#3 Reduce processing time

14days** Within EZ

104 days*

WB/ADB Report

Typical processing time

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

Promote investments

Generate exports

Create jobs

Role of PEZA

In the Economic Zones

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

While regulation is important, government needs to simplify processes so that the Philippines will be viewed as a competitive business destination!

#138 Rank in Ease of Doing Business

Slightly higher than Laos

$ 1.5 BFDI in 2012 lowest in Asia

# 38Rank in World

Competitiveness Report

Singapore $ 54.4 BVietnam $ 8.4 BCambodia $ 1.8 B

Singapore # 1Vietnam # 99

Cambodia # 133

Where compliance is simple, straightforward and inexpensive, all stakeholders will benefit from the efficientimplementation of regulations

Promoting Compliance of Locator Enterprises (PEZA).pdfPromoting Compliance of Locator Enterprises (PEZA).pdfSlide Number 1Slide Number 2Slide Number 3Slide Number 4Milestones on ECC processing in the EZSlide Number 6The partnership aims to: Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14Notes on the ChecklistsSlide Number 16Slide Number 17Slide Number 18Slide Number 19Slide Number 20Slide Number 21