Boosting The Philippine Economic Scene Through The Innovative Startup Act.
Legal News & Analysis - Asia Pacific - Philippines - FDI
6 December, 2019
According to the 2019 World Bank report, the Philippines ranks 124th out of the 190 economies in terms of ease of doing business. Meanwhile, its neighbors, namely: Malaysia, Vietnam, Singapore, Thailand and Indonesia, rank 15th, 69th, 2nd, 27th, and 73rd, respectively.
This in part shows that there is still so much more to be done to improve the Philippines’ competitiveness in terms of ease of doing business. Improvement in economic environment is needed; one that is more attractive and conducive to businesses, especially to new entrants with novel or innovative ideas that can help move and enliven the Philippine economy.
The Philippine Government is cognizant of this, and has stepped up the implementation of regulatory reforms. A welcome complement to its ongoing efforts is Republic Act No. 11337, or the Innovative Startup Act, which streamlines government and nongovernment initiatives in both local and international spheres to create new jobs and opportunities, improve production, and advance innovation and trade in the country. Aimed at encouraging the establishment and operation of innovative businesses crucial to Philippine economic growth and expansion, the law seeks to provide incentives and remove constraints for start-ups.
A start-up is any person or registered entity in the Philippines which aims to develop an innovative product, process or business model. A start-up’s innovation may be in the form of a new or significantly improved good or service, and the significant improvements may be in technical specifications, component materials, software in the product, user friendliness or other functional characteristics; or a new or significantly improved production or delivery method; or a new organizational method in business practices, workplace organization or external relations.
An interesting facet of this law is that it also takes into account start-up enablers, or persons or entities registered under the Philippine Startup Development Program that provides goods, services, or capital identified to be crucial in supporting the operation and growth of start-ups.
The Philippine Startup Development Program is composed of programs, benefits, and incentives for start-ups and start-up enablers promulgated through the respective mandates of national government agencies. This shall include those extended by nongovernment organizations in partnership with any national government agency. The lead agencies for the program are the Department of Science and Technology (DOST), Department of Trade and Industry (DTI), and the Department of Information and Communications Technology (DICT).
Host agencies are authorized to provide full or partial subsidy for the registration and cost in the application and processing of permits and certificates required for business registration, and for endorsement for the expedited processing of applicants with other government or private agencies or for the use of facilities, office space, equipment, and grants-in-aid for research, development, training, and expansion projects. To this end, the DTI is tasked to initiate and coordinate with national and local agencies involved with the registrations, licensing, and certification for start-ups and startup enablers endorsed by host agencies.
On the other hand, the Philippine Economic Zone Authority is tasked to promote the creation of Philippine Startup Ecozones to spur the growth and development of start-ups and start-up enablers.
To encourage start-up entrepreneurs from all over the world, the law also provides for the creation of start-up visas, which include the start-up owner visa, startup employee visa, and startup investor visa. The visas have an initial five year validity and may be renewed or extended with a three year validity. The application for start-up visas however requires endorsement from a host agency, on top of application requirements of the Department of Foreign Affairs (DFA). Meanwhile, multiple entry interim start-up visas valid for six months to one year shall be issued for free to prospective start-up owners, investors, or enablers upon the endorsement of the proper host agency.
Bearers of the visa shall be exempt from securing an Alien Employment Permit issued by the Department of Labor and Employment. As for qualified Filipino executives and qualified start-ups, they shall also be eligible to apply for an Asia Pacific Economic Cooperation (APEC) Business Travel Card, which allows for the streamlined entry to participating APEC economies. The DFA, DOLE, and Bureau of Immigration are tasked to promulgate the rules for the implementation of the provisions on start-up visas.
To serve as the primary source of information on statistics, events, programs, and benefits for start-ups and start-up enablers and related enterprises, the law also mandates the creation of the Startup Philippines Website. The website will show basic information on start-ups and start-up enablers, such as their business address, founders, contact information, and funding received.
For the education sector, the Department of Education, the Commission on Higher Education, and the Technical Education and Skills Development Authority are directed to develop and integrate in their curricula entrepreneurial programs that shall foster an environment conducive to innovation and extend incentives to academic institutions that provide funds and/or grants for the research of students and faculty.
With the passage of the Innovative Startup Act, businesses and would-be entrepreneurs with novel ideas will have a lot more support and incentives to look forward to. By encouraging innovative ideas through this legislation, the Philippines will not only create a more exciting environment for trade, but will also serve as a testament to its efforts to be globally competitive.
For further information, please contact:
Genie Celini D. Nuevo, Angara Abello Concepcion Regala & Cruz (ACCRALAW)