Government urged to give perks to high-impact startups

MANILA, Philippines — The Philippine government is urged to provide incentives and establish co-financing schemes to encourage the creation and growth of startups in high development impact sectors such as agriculture (agritech), education (edtech), environment (greentech or cleantech) and health (health tech), the Asian Development Bank (ADB) said.

In a report titled “The Philippines Ecosystem for Technology Startups,” the multilateral lender said while the government’s support for startups has improved, there is room to strengthen efforts to encourage startup growth, particularly in the agritech, edtech, greentech and healthtech sectors.

This, as most of the active startups in the country are engaged in fintech, media and entertainment, and e-commerce, while startups in the high development impact sectors are still in the early stages of development.

“There is a need to attract investors for agritech, cleantech, edtech, and healthtech to give these sectors a greater chance of development,” ADB economist Paul Vandenberg said.

The ADB said startups in the four sectors do not only make an economic impact, but also promote human and sustainable development by improving health and education, assisting poor people in rural areas by increasing farm productivity, and helping create a cleaner environment through mitigation and adaptation to climate change.

It said finance has been cited as a key constraint for young startups.

To encourage the creation and success of startups in agritech, cleantech, edtech, and healthtech, among the ADB’s recommendations is to provide incentives through the creation of a tax credit for investors in early-stage startups for a failed investment, which could be credited against other taxes payable.

“This will encourage investors to invest in startups and thus provide more early-stage funding,” the ADB said.

The ADB also recommends setting up a co-financing scheme involving the national government and local government units (LGU) to reduce the concentration of startup support in Metro Manila and develop local ecosystems.

“For every P1 an LGU provides in grants to incubators or startups, the national government could provide another P2 to P3,” the ADB said.

To enable the government to develop innovation policies and programs to strengthen the startup ecosystem, the ADB is recommending the appointment of startup champions in the National Innovation Council chaired by the President and composed of government agencies and the private sector.

It also said the implementation of laws such as the Innovative Startup Act and Philippine Innovation Act, as well as programs to support the startup ecosystem need to be monitored and reviewed to detect issues and ensure the startups get the support they need.

Other recommendations include promoting accelerator programs for advanced-stage startups; improving digital infrastructure; increasing startups’ awareness of public procurement opportunities; creating a voucher system to encourage students to choose science, technology, engineering and mathematics (STEM) pathways; and integrating STEM elements in agriculture courses.