In just over a year, the Cagayan Economic Zone Authority (CEZA) has transformed its free port zone into a hub for fintech or financial technology firms in northeastern Luzon. As a freeport, it operates as a separate Customs territory similar to Hong Kong and Hamburg, Germany.
This ecozone straddling the northern Cagayan towns of Aparri and Sta. Ana used to be known as a haven for luxury vehicle smuggling and illegal online gaming.
All that has changed ever since President Rodrigo Duterte appointed a new management team headed by Presidential Adviser for Northern Luzon Raul Lambino in July last year. Aside from being a Cabinet member, Secretary Lambino is CEZA’s Administrator and Chief Executive Officer on a concurrent basis.
CEZA is set to build the “Crypto Valley of Asia” at the Cagayan Special Economic Zone and Freeport (CSEZFP), with the majestic Sierra Madre Mountains as its backdrop. It will serve as the domicile of fintech companies and will also house a world-class Internet data center, self-contained power production plants, crypto-mining firms, and a state-of-the-art cybersecurity facility.
According to Lambino, “the first phase of the project will consist of a 25-shop housing development inside the cyberpark developed in compliance with the security requirements of licensed offshore virtual asset exchanges locating at CEZA.”
China State Construction Overseas Development Co. Ltd. (CSCOD) and LongRunn Capital Pte. Ltd. (LRC) of Singapore signed a memorandum of understanding (MOU) with CEZA last week to jointly develop the CSEZFP.
It may be noted that CSCOD is a subsidiary of China State Construction Engineering Corp. Ltd., the world’s largest construction group, while LRC is the investment arm of the LongRunn Group that specializes in integrated resort and large-scale property development. They have formed a joint venture called CSCLR, which is present in 30 countries across four continents, whose master-planning expertise includes infrastructure and zonal development.
Another MOU was recently signed between CEZA and Pay8, a fintech company specializing in payment solutions. A subsidiary of Hatch Asia, Inc. which has filed for a listing by way of introduction with the Philippine Stock Exchange, Pay8 will provide the CSEZFP with last mile connectivity using its proprietary platform to enable online payment in remote areas.
This project is in line with the Duterte administration’s vision of financial inclusion, providing access to the banking network for the Philippines’ unbanked majority, estimated at 80% of the country’s total population.
Pay8 Chairman Kirk Arambulo said the payment gateway utilizes a portable point of sale system that brings mass transactions online for isolated Filipino communities. It dovetails with the government’s ecotourism push, allowing hotels and resorts in CSEZFP to accept tourist payments through credit and debit cards.
The connectivity takes advantage of the new Cagayan North International Airport’s proximity to major North Asian cities, such as the coastal cities of China and Taiwan that are 45 minutes away from Cagayan, or those in Japan and South Korea that are less than two hours away.
During the first nine months of 2018, CEZA’s income soared by a record high of 212% due to hefty revenues from blockchain-based technology firms, offshore virtual currency exchanges (OVCE), and their business process outsourcing (BPO) subsidiaries.
Last July, CEZA awarded its first fintech services and OVCE license to Golden Millennial Quickpay Co. Ltd. of Hong Kong. Since then, 16 more firms have been granted such licenses. Soon, the cyberpark will showcase the following amenities: Co-working and co-living spaces; business incubation and acceleration hubs; back offices of OVCEs and service providers to the global fintech industry.
With a new wave of crypto companies operating within the CSEZFP, the $100-million fintech hub will foster a thriving ecosystem of networked firms. The Crypto Valley project is expected to generate more than 10,000 jobs for the BPOs servicing the international market – and eventually become a catalyst for the next economic boom spreading from Cagayan to the rest of Northern Luzon.