New northern Philippines airport to support a ‘Crypto Valley of Asia’

Summary

• A new airport is planned for the north of the Philippines in conjunction with an extension of a special economic zone.
• They would jointly seek to attract fintech companies, including those connected to blockchain development and cryptocurrencies.
• There is a great deal of competition for what might be viewed as a speculative venture.
• An alternative would be for the existing, and fairly new, airport to be developed further instead.

'Crypto Valley of Asia' could be the new Silicon Valley

The Cagayan Economic Zone Authority (CEZA) plans to develop a new USD80 million airport in the Cagayan Special Economic Zone and Freeport to attract further investment in the zone. (The Cagayan Economic Zone & Freeport is a special economic zone in Cagayan Province, northern Luzon, in the Philippines.)

A spokesman said, "the construction of a new airport is an important facility in the establishment and realisation of the so-called Crypto Valley of Asia concept that we have embarked on".

The 'Crypto Valley of Asia' concept was jointly developed by CEZA and private developer Northern Star Gaming and Resorts to create a secure environment for cryptocurrency trading and blockchain developers.

It is not the purpose of this report to discuss the benefits and disadvantages of cryptocurrencies. It does appear that there is a 'love-hate' relationship with them in Asia - some firms staying away from the sector, which they perceive as lacking investor protections, while others are pumping investment into blockchain hubs, with the hope of becoming the self-styled 'Crypto Valley of Asia.'

This is happening as regulators and policymakers in the region are easing up on rules, and a series of new projects to lure fintech investment have been unveiled.

New entrants challenge the 'crypto-friendly' nations

Indeed, the race to claim the title of Asia's crypto valley is gaining momentum, with new entrants such as the Philippines and Thailand challenging crypto-friendly nations such as Japan, Vietnam and Singapore.

The Philippines is a fairly late entrant. In Aug-2019 the government announced the launch of a new USD100 million blockchain and crypto hub, set to be built at the country's Cagayan Special Economic Zone and Freeport in the north of the country. The hub will model Zug in Switzerland, the birthplace of Ethereum, a sort of Bitcoin +, and has already secured commitments from 25 'tech' companies.

Location of Cagayan Economic Zone, Philippines

Source: Google Maps.

The new hub is intended not only to spread awareness and to help "educate" the public, but also to facilitate greater participation from dominant players in the corporate world by providing a dedicated space with infrastructure support for fintech and blockchain development.

South Korea has similar intentions

The country is up against South Korea, which has similar hopes for a blockchain crypto hub on Jeju Island, with an investment of USD4 billion in 2019 to develop pilot projects and a platform economy built on data analytics.

Meanwhile, the Singapore government has also been delving into the sector, buying into Binance - one of the largest cryptocurrency exchanges in the world.

All are lagging one of the early adopters of bitcoin, Japan, where cryptocurrencies are legal tender and the country also holds one of the world's first self-regulatory bodies for crypto exchanges.

The Cagayan Economic Zone Authority (CEZA) is a government-owned and controlled corporation tasked to manage and supervise the development of the Cagayan Special Economic Zone and Freeport (CSEZFP). It is the first economic zone in the Philippines to offer hosting of financial technology companies in the fintech industry.

Existing airport is domestic only so far

There is already an airport serving the zone: the Northern Cagayan International Airport is located near Lal-lo in northeast Luzon.

The USD34.2 million airport opened for operations on 12-Oct-2014 with a 2100m runway and is capable of handling narrowbody aircraft. The airport was a JV project between CEZA and a private consortium: Cagayan Land Property Development Corporation (CLPDC). Traffic figures are not known.

The 150-hectare airport is the result of a 50-year agreement between the two entities, with the private consortium contributing 58.3% in equity while CEZA's share is 41.7%.

The airport was envisaged to be the international gateway in Northeast Luzon. Initially, it was constructed to serve domestic flights to other airports in the country and international flights to Japan, Hong Kong, Taiwan, Singapore and China, which have not as yet materialised. An aviation park and hangar hub was also envisaged for the airport, where business and private jets could park.

In Jun-2016 the Civil Aviation Authority of the Philippines (CAAP) granted the airport new certification allowing it to handle aircraft with a capacity of up to 100 seats - up from only 29-seat capacity aircraft under the previous certification.

The new certification allowed the possibility of regular commercial flights to begin operation at the airport. At the time of the new certification the airport had fielded flights ranging from tourism through diplomatic visits to emergency services, with the first two commercial flights landing in Mar-2018.

Northern Cagayan airport remains a domestic airport, all flights being operated by Royal Air Charter Service Inc, a Philippine registered operator established in 2002. The airline operates domestic and international scheduled and charter services, including freight services.

Currently the only route is to and from Clark International, the secondary level airport serving the Metro Manila region. But Royal Air has a wider route network, including scheduled international services connecting Manila's Ninoy Aquino International Airport with eight Chinese cities (not Beijing or Shanghai), plus Sihanoukville in Vietnam.

It is not clear why an entirely new airport is needed and why the existing one, only five years old but still at fledgling status, cannot be further developed.

So the existing airport, and any new airport, at least would have an airline with experience of international operations, but it would also need an airline willing to put on flights to where cryptocurrency transactions are centred, such as Japan, Korea and Singapore.