CEZA Doubles down on blockchain and fintech. Chief Presidential Legal Counsel Juan Ponce Enrile praises the new tech direction of the special economic zone, originally created through an act he authored in 1995.
November 21, 2022
Digitizing CEZA
Special economic zones in the Philippines and around the world are largely thought of as regulatory environments: They grant special economic and legal privileges to the enterprises that choose to do business there, such as fiscal incentives and special tax rates. Some may start operations there, relocate there, or set up a regional office there. No matter the case, they enjoy the privileges and benefits due to them by the zone.
This has been the model for some time: By offering fiscal incentives, these zones lead to investments, job creation, and economic growth. To look at it another way, no one has thought of special economic zones as tech hubs, comparable to business clusters like Silicon Valley that arise organically, owing to the surrounding resources, such as universities.
The Cagayan Economic Zone Authority (CEZA) is reimagining the economic zone, leading a paradigm shift in what they can become. Under the leadership of Secretary Jaime R. Escano, the new executive team is redefining CEZA as not only a special economic zone distinguished by economic and legal privileges, but as a jurisdiction embedded with and driven by technological innovation, as part of a renewed effort to digitize the Philippines.
More specifically, the CEZA leadership is launching an aggressive new campaign to ramp up infrastructure development within the zone, especially through the provision of new technologies. The goal of this new initiative is to attract more global investments into the region to better the economy within CEZA and indeed across the Philippines. The goal is to bring in investments regardless of industry, including everything from tourism, agriculture, and finance to healthcare, retail, and real estate.
This new initiative is in keeping not only with the original vision of CEZA to be tech-driven, but also with the efforts of President Bong Bong Marcos Jr. to digitize the Philippines.
There is no one in the Philippines who can attest to this fact other than Juan Ponce Enrile. Now the Chief Presidential Legal Counsel under President Marcos Jr., Secretary Juan Ponce Enrile was also incidentally the principal author of Republic Act 7922 (CEZA charter), which gave birth to the economic zone in 1995.
“We must celebrate CEZA’s recent efforts to reinvent the Cagayan Freeport through further digitization. By doing so, CEZA will be an example to other regional locations in the Philippines who can also transform by utilizing technology and innovation. A revitalized CEZA will definitely attract investors and enterprises to invest and operate in the zone,” said Sec. Enrile.
Enrile added that history is on CEZA’s side. The economic zone has always been at the forefront of technology in the Philippines. In 2001 - just six years after its inception - became the first and only online gaming-regulated jurisdiction in Asia Pacific. This breakthrough accelerated the growth of gaming not only in the Philippines, but for the entire region. This renewed effort to further innovate CEZA through technology will only advance the zone’s competitive advantages.
Blockchain and other initiatives
While the mandate for digitizing CEZA is broad and the leadership is sure to implement new innovations as they arise, there are already several developments underway, each of which will provide significant value to the people of Cagayan and the businesses that are based there.
Its first major initiative is in blockchain. There were many global blockchains that approached CEZA to be its tech backbone, especially as the region was attracting many top web3 companies as part of its Crypto Valley of Asia program. In the end, CEZA chose BLX, a global blockchain registered as a decentralized autonomous organization (DAO) in Wyoming, United States.
While blockchain has many advantages, CEZA is using BLX for a primary reason: transparency. Since a blockchain is a digital public ledger, and BLX has a public explorer, which allows anyone to track the inflows and outflows of all accounts, there will be unprecedented transparency into business transactions, including everything from payment and banking solutions to license applications.
Take the example of the latter. Imagine an enterprise from Singapore applies for a special business license in an economic zone. If this was another market, there would be enormous opacity around the process. After submitting the application, the business is left in the dark, not knowing where it stands. At CEZA, in contrast, they would be able to know the exact status of any given business activity.
CEZA is pushing for transparency via BLX not because it’s a buzzword, but because it also creates ease of doing business.
“What transparency means in business is operational integrity: Enterprises should have an insight into the status of any transaction or process at any given time. Having this real-time view into what’s going on business-wise is not only convenient, but it’s efficient. Enterprises can easily plan, strategize, and execute when they have this privilege,” Sec. Enrile added.
Businesses of all kinds operating in CEZA - locators, investors, registrants and licensees - will be able to manage, monitor, and track any technical activity at CEZA.org. The rollout of BLX in CEZA represents a major milestone: The economic zone is the first not only in the Philippines but across the world to implement an end-to-end custom blockchain for internal and external stakeholders.
In this incarnation of CEZA, the zone will be a regulatory sandbox. There will be transparent and pragmatic regulations, due diligence and probity checks, entry controls of licensees, client protection, and risk-based supervision of licensees. In this kind of environment, businesses can focus entirely on what matters most for them and their stakeholders: building innovative products and services.
“This feat is significant because it’s a sign of things to come. Once you have a strong foundational blockchain like BLX and the technical infrastructure around it, you can more easily build other technologies on top of it. Innovation, after all, is self-perpetuating: The best innovations are made atop of other great innovations,” said Sec. Enrile, pointing out that fintech and blockchain will make it easier for other innovations - such as work digitization, internet of things, and artificial intelligence - to take hold among consumers and enterprises in the zone.
It would be necessarily impossible for CEZA to anticipate all the coming innovations in web3, so the economic zone plans to continue being legally progressive. The CEZA leadership has committed to regularly updating policies and laws within the zone to keep up with the next generation of technology and make it as easy as possible for entrepreneurs to do what they do best: innovate.