INVESTMENT AND INCENTIVES LAW

I. Philippine Constitution (relevant provisions)

ARTICLE II

SECTION 7. The State shall pursue an independent foreign policy. In its

relations with other states the paramount consideration shall be national
sovereignty, territorial integrity, national interest, and the right to self-
determination.

ARTICLE VII

SECTION 20. The President may contract or guarantee foreign loans on behalf
of the Republic of the Philippines with the prior concurrence of the Monetary
Board, and subject to such limitations as may be provided by law. The
Monetary Board shall, within thirty days from the end of every quarter of the
calendar year, submit to the Congress a complete report of its decisions on
applications for loans to be contracted or guaranteed by the Government or
government-owned and controlled corporations which would have the effect of
increasing the foreign debt, and containing other matters as may be provided
by law.

ARTICLE IX

C. The Commission on Elections—SECTION 2. The Commission on Elections

shall exercise the following powers and functions:

(5) Register, after sufficient publication, political parties, organizations, or

coalitions which, in addition to other requirements, must present their
platform or program of government; and accredit citizens’ arms of the
Commission on Elections. Religious denominations and sects shall not be
registered. Those which seek to achieve their goals through violence or
unlawful means, or refuse to uphold and adhere to this Constitution, or which
are supported by any foreign government shall likewise be refused registration.

Financial contributions from foreign governments and their agencies to political

parties, organizations, coalitions, or candidates related to elections constitute
interference in national affairs, and, when accepted, shall be an additional
ground for the cancellation of their registration with the Commission, in
addition to other penalties that may be prescribed by law.
ARTICLE XII – National Economy and Patrimony

SECTION 1. The goals of the national economy are a more equitable

distribution of opportunities, income, and wealth; a sustained increase in the
amount of goods and services produced by the nation for the benefit of the
people; and an expanding productivity as the key to raising the quality of life
for all, especially the underprivileged.

The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make
full and efficient use of human and natural resources, and which are
competitive in both domestic and foreign markets. However, the State shall
protect Filipino enterprises against unfair foreign competition and trade
practices.

In the pursuit of these goals, all sectors of the economy and all regions of the
country shall be given optimum opportunity to develop. Private enterprises,
including corporations, cooperatives, and similar collective organizations, shall
be encouraged to broaden the base of their ownership.

SECTION 11. No franchise, certificate, or any other form of authorization for

the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is owned by such
citizens, nor shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall any such
franchise or right be granted except under the condition that it shall be subject
to amendment, alteration, or repeal by the Congress when the common good so
requires. The State shall encourage equity participation in public utilities by
the general public. The participation of foreign investors in the governing body
of any public utility enterprise shall be limited to their proportionate share in
its capital, and all the executive and managing officers of such corporation or
association must be citizens of the Philippines.

SECTION 21. Foreign loans may only be incurred in accordance with law and
the regulation of the monetary authority. Information on foreign loans obtained
or guaranteed by the Government shall be made available to the public.

ARTICLE XVI

SECTION 11. (1) The ownership and management of mass media shall be
limited to citizens of the Philippines, or to corporations, cooperatives or
associations, wholly-owned and managed by such citizens.
The Congress shall regulate or prohibit monopolies in commercial mass media
when the public interest so requires. No combinations in restraint of trade or
unfair competition therein shall be allowed.

(2) The advertising industry is impressed with public interest, and shall be
regulated by law for the protection of consumers and the promotion of the
general welfare.

Only Filipino citizens or corporations or associations at least seventy per

centum of the capital of which is owned by such citizens shall be allowed to
engage in the advertising industry.

The participation of foreign investors in the governing body of entities in such

industry shall be limited to their proportionate share in the capital thereof, and
all the executive and managing officers of such entities must be citizens of the
Philippines.

THE OMNIBUS INVESTMENTS CODE OF 1987

(Executive Order No. 226)

CHAPTER 1
TITLE AND DECLARATION OF POLICY
ARTICLE 1. Short Title. - This Order shall be known as the "Omnibus
Investments Code of 1987."
ART. 2. Declaration of Investment Policies. - To accelerate the sound
development of the national economy in consonance with the principles
and objectives of economic nationalism and in pursuance of a planned
economically feasible and practical dispersal of industries and the
promotion of small and medium scale industries, under conditions which
will encourage competition and discourage monopolies, the following are
declared policies of the State:
1. The State shall encourage private Filipino and foreign investments in
industry, agriculture, forestry, mining, tourism and other sectors of the
economy which shall: provide significant employment opportunities
relative to the amount of the capital being invested; increase productivity
of the land, minerals, forestry, aquatic and other resources of the
country, and improve utilization of the products thereof improve
technical skills of the people employed in the enterprise; provide a
foundation for the future development of the economy; meet the tests of
international competitiveness; accelerate development of less developed
regions of the country; and result in increased volume and value of
exports for the economy.chanrobles virtual law library
2. The State shall ensure holistic development by safeguarding the well-
being of the social, cultural and ecological life of the people. For this
purpose, consultation with affected communities will be conducted
whenever necessary.chanrobles virtual law library
3. The State shall extend to projects which will significantly contribute to
the attainment of these objectives, fiscal incentives without which said
projects may not be established in the locales, number and/or pace
required for optimum national economic development. Fiscal incentive
systems shall be devised to compensate for market imperfections, to
reward performance contributing to economic development, be cost-
efficient and be simple to administer.chanrobles virtual law library
4. The State considers the private sector as the prime mover for economic
growth. In this regard, private initiative is to be encouraged, with
deregulation and self-regulation of business activities to be generally
adopted where dictated by urgent social concerns.chanrobles virtual law
library
5. The State shall principally play a supportive role, rather than a
competitive one, providing the framework, the climate and the incentives
within which business activity is to take place.chanrobles virtual law
library
6. The State recognizes that there are appropriate roles for local and
foreign capital to play in the development of the Philippine economy and
that it is the responsibility of Government to define these roles and
provide the climate for their entry and growth.chanrobles virtual law
library
7. The State recognizes that industrial peace is an essential element of
economic growth and that it is a principal responsibility of the State to
ensure that such a condition prevails.chanrobles virtual law library
8. Fiscal incentives shall be extended to stimulate the establishment and
assist initial operations of the enterprise, and shall terminate after a
period of not more than 10 years from registration or start-up of
operation unless a specific period is otherwise stated.chanrobles virtual
law library
The foregoing declaration of investment policies shall apply to all
investment incentive schemes.chanrobles virtual law library
CHAPTER II
BOARD OF INVESTMENTS
ART. 3. The Board of Investments. - The Board of Investments shall
implement the provisions of Books One to Five of this Code.chanrobles
virtual law library
ART. 4. Composition of the Board. - The Board of Investments shall be
composed of seven (7) governors: The Secretary of Trade and Industry,
three (3) Undersecretaries of Trade and Industry to be chosen by the
President; and three (3) representatives from other government agencies
and the private sector. The Secretary of Trade and Industry shall be
concurrently Chairman of the Board and the Undersecretary of the
Department of Trade and Industry for Industry and Investments shall be
concurrently the Vice-Chairman of the Board and its Managing Head. The
three (3) representatives from the other government agencies and the
private sector shall be appointed by the President for a term of four (4)
years: Provided, That upon the expiration of his term, a governor shall
serve as such until his successor shall have been appointed and
qualified: Provided, further, That no vacancy shall be filled except for the
unexpired portion of any term, and that no one may be designated to be a
governor of the Board in an acting capacity but all appointments shall be
ad interim or permanent.chanrobles virtual law library
ART 5. Qualifications of Governors of the Board. - The governors of the
Board shall be citizens of the Philippines, at least thirty (30) years old, of
good moral character and of recognized competence in the fields of
economics, finance, banking, commerce, industry, agriculture,
engineering, law, management or labor.chanrobles virtual law library
ART. 6. Appointment of Board Personnel. - The Board shall appoint its
technical staff and other personnel subject to Civil Service Law, rules and
regulations.chanrobles virtual law library
ART 7. Powers and Duties of the Board. - The Board shall be responsible
for the regulation and promotion of investments in the Philippines. It
shall meet as often as may be necessary generally once a week on such
day as it may fix. Notice of regular and special meetings shall be given all
members of the Board. The presence of four (4) governors shall constitute
a quorum and the affirmative vote of four (4) governors in a meeting
validly held shall be necessary to exercise its powers and perform its
duties, which shall be as follows:
(1) Prepare annually the Investment Priorities Plan as defined in Article
26, which shall contain a listing of specific activities that can qualify for
incentives under Book 1 of this Code, duly supported by the studies of
existing and prospective demands for such products and services in the
light of the level and structure of income, production, trade, prices and
relevant economic and technical factors of the regions as well as existing
facilities;
(2) Promulgate such rules and regulations as may be necessary to
implement the intent and provisions of this Code relevant to the Board;
(3) Process and approve applications for registration with the Board,
imposing such terms and conditions as it may deem necessary to promote
the objectives of this Code, including refund of incentives when
appropriate, restricting availment of certain incentives not needed by the
project in the determination of the Board, requiring performance bonds
and other guarantees, and payment of application, registration,
publication and other necessary fees and when warranted, may limit the
availment of the tax holiday incentive to the extent that the investor's
country law or treaties with the Philippines allows a credit for taxes paid
in the Philippines;
(4) After due hearing, decide controversies concerning the
implementation of the relevant books of this Code that may arise between
registered enterprises or investors therein and government agencies,
within thirty (30) days after the controversy has been submitted for
decision: Provided, That the investor or the registered enterprise may
appeal the decision of the Board within thirty (30) days from receipt
thereof to the President;
(5) Recommend to the Commissioner of Immigration and Deportation the
entry into the Philippines for employment of foreign nationals under this
Code;
(6) Periodically check and verify, either by inspection of the books or by
requiring regular reports, the proportion of the participation of Philippine
nationals in a registered enterprise to ascertain compliance with its
qualification to retain registration under this Code;
(7) Periodically check and verify the compliance by registered enterprises
with the relevant provisions of this Code, with the rules and regulations
promulgated under this Code and with the terms and conditions of
registration;
(8) After due notice, cancel the registration or suspend the enjoyment of
incentives benefits of any registered enterprise and/or require refund of
incentives enjoyed by such enterprise including interests and monetary
penalties, for (a) failure to maintain the qualifications required by this
Code for registration with the Board or (b) for violation of any provisions
of this Code, of the rules and regulations issued under this Code, of the
terms and conditions of registration, or of laws for the protection of labor
or of the consuming public: Provided, That the registration of an
enterprise whose project timetable, as set by the Board is delayed by one
year, shall be considered automatically cancelled unless otherwise
reinstated as a registered enterprise by the Board;
(9) Determine the organizational structure taking into account Article 6 of
this Code; appoint, discipline and remove its personnel consistent with
the provisions of the Civil Service Law and Rules;
(10) Prepare or contract for the preparation of feasibility and other pre-
investment studies for pioneer areas either upon its own initiative; or
upon the request of Philippine nationals who commit themselves to invest
therein and show the capability of doing so: Provided, That if the venture
is implemented, then the amount advanced by the Board shall be repaid
within five (5) years from the date the commercial operation of said
enterprise starts;
(11) When feasible and considered desirable by the Board, require
registered enterprises to list their shares of stock in any accredited stock
exchange or directly offer a portion of their capital stock to the public
and/or their employees;
(12) Formulate and implement rationalization programs for certain
industries whose operation may result in dislocation, overcrowding or
inefficient use of resources, thus impeding economic growth. For this
purpose, the Board may formulate guidelines for progressive
manufacturing programs, local content programs, mandatory sourcing
requirements and dispersal of industries. In appropriate cases and upon
approval of the President, the Board may restrict, either totally or
partially, the importation of any equipment or raw materials or finished
products involved in the rationalization program;
(13) In appropriate cases, and subject to the conditions which the Board
deems necessary, suspend the nationality requirement provided for in
this Code or any other nationalization statute in cases of ASEAN projects
or investments by ASEAN nationals in preferred projects, and with the
approval of the President, extend said suspension to other international
complementation arrangements for the manufacture of a particular
product on a regional basis to take advantage of economies of scale;
(14) Extend the period of availment of incentives by any registered
enterprise; Provided, That the total period of availment shall not exceed
ten (10) years, subject to any of the following criteria:
(a) The registered enterprise has suffered operational force majeure that
has impaired its viability;
(b) The registered enterprise has not fully enjoyed the incentives granted
to it for reasons beyond its control;
(c) The project of the registered enterprise has a gestation period which
goes beyond the period of availment of needed incentives; and
(d) The operation of the registered enterprise has been subjected to
unforeseen changes in government policies, particularly, protectionism
policies of importing countries, and such other supervening factors which
would affect the competitiveness of the registered firm;
(15) Regulate the making of investments and the doing of business within
the Philippines by foreigners or business organizations owned in whole or
in part by foreigners;
(16) Prepare or contract for the preparation of industry and sectoral
development programs and gather and compile statistical, technical,
marketing, financial and other data required for the effective
implementation of this Code;
(17) Within four (4) months after the close of the fiscal year, submit
annual reports to the President which shall cover its activities in the
administration of this Code, including recommendations on investment
policies;
(18) Provide, directly or through Philippine diplomatic missions, such
information as may be of interest to prospective foreign investors:
(19) Collate, analyze and compile pertinent information and studies
concerning areas that have been or may be declared preferred areas of
investments; and
(20) Enter into agreements with other agencies of government for the
simplification and facilitation of systems and procedures involved in the
promotion of investments, operation of registered enterprises and other
activities necessary for the effective implementation of this Code;
(21) Generally, exercise all the powers necessary or incidental to attain
the purposes of this Code and other laws vesting additional functions on
the Board.chanrobles virtual law library

ART. 8. Powers and Duties of the Chairman. - The Chairman shall have
the following powers and duties:
(1) To preside over the meetings of the Board;
(2) To render annual reports to the President and such special reports as
may be requested;
(3) To act as liaison between investors seeking joint venture arrangements
in particular areas of investment;
(4) Recommend to the Board such policies and measures he may deem
necessary to carry out the objectives of this Code; and
(5) Generally, to exercise such other powers and perform such other
duties as may be directed by the Board of Governors from time to
time.chanrobles virtual law library
ART. 9. Powers and Duties of the Vice-Chairman. - The Vice-Chairman
shall have the following powers and duties:
(1) To act as Managing Head of the Board;
(2) To preside over the meetings of the Board in the absence of the
Chairman;
(3) Prepare the Agenda for the meetings of the Board and submit for its
consideration and approval the policies and measures which the Chairman
deems necessary and proper to carry out the provisions of this Code;
(4) Assist registered enterprises and prospective investors to have their
papers processed with dispatch by all government offices, agencies,
instrumentalities and financial institutions; and
(5) Perform the other duties of the Chairman in the absence of the latter,
and such other duties as may be assigned to him by the Board of
Governors.chanrobles virtual law library

INVESTMENTS WITH INCENTIVES

TITLE I
PREFERRED AREAS OF INVESTMENTS
CHAPTER I
DEFINITION OF TERMS
ART. 10. Board shall mean the Board of Investments created under this
Code.chanrobles virtual law library
ART. 11. Registered Enterprise shall mean any individual, partnership,
cooperative, corporation or other entity incorporated and/or organized
and existing under Philippine laws; and registered with the Board in
accordance with this Book; Provided, however, That the term registered
enterprise shall not include commercial banks, savings and mortgage
banks, rural banks, savings and loan associations, building and loan
associations, development banks, trust companies, investment banks,
finance companies, brokers and dealers in securities, consumers'
cooperatives and credit unions, and other business organizations whose
principal purpose or principal source of income is to receive deposits,
lend or borrow money, buy and sell or otherwise deal, trade or invest in
common or preferred stocks, debentures, bonds or other marketable
instruments generally recognized as securities, or discharge other similar
intermediary, trust or fiduciary functions.chanrobles virtual law library
ART. 12. Technological assistance contracts shall mean contracts for: (1)
the transfer, by license or otherwise, of patents, processes, formulas or
other technological rights of foreign origin; and/or (2) foreign assistance
concerning technical and factory management, design, planning,
construction, operation and similar matters.chanrobles virtual law library
ART. 13. Foreign loans shall mean any credit facility or financial
assistance other than equity investment denominated and payable in
foreign currency or where the creditor has the option to demand payment
in foreign exchange and registered with the Central Bank and the
Board.chanrobles virtual law library
ART. 14. Foreign Investments shall mean equity investments owned by a
non-Philippine national made in the form of foreign exchange or other
assets actually transferred to the Philippines and registered with the
Central Bank and the Board, which shall assess and appraise the value of
such assets other than foreign exchange.chanrobles virtual law library
ART. 15. Philippine national shall mean a citizen of the Philippines or a
domestic partnership or association wholly-owned by citizens of the
Philippines; or a corporation organized under the laws of the Philippines
of which at least sixty per cent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of the Philippines; or a
trustee of funds for pension or other employee retirement or separation
benefits, where the trustee is a Philippine national and at least sixty per
cent (60%) of the fund will accrue to the benefit of Philippine
nationals: Provided, That where a corporation and its non-Filipino
stockholders own stock in a registered enterprise, at least sixty per cent
(60%) of the capital stock outstanding and entitled to vote of both
corporations must be owned and held by the citizens of the Philippines
and at least sixty percent (60%) of the members of the Board of Directors
of both corporations must be citizens of the Philippines in order that the
corporation shall be considered a Philippine national.chanrobles virtual
law library
ART. 16. Preferred areas of investments shall mean the economic
activities that the Board shall have declared as such in accordance with
Article 28 which shall be either non-pioneer or pioneer.chanrobles virtual
law library
ART. 17. Pioneer enterprise shall mean a registered enterprise (1) engaged
in the manufacture, processing or production, and not merely in the
assembly or packaging of goods, products, commodities or raw materials
that have not been or are not being produced in the Philippines on a
commercial scale of (2) which uses a design, formula, scheme, method,
process or system of production or transformation of any element,
substance or raw materials into another raw material or finished goods
which is new and untried in the Philippines or (3) engaged in the pursuit
of agricultural, forestry and mining activities and/or services including
the industrial aspects of food processing whenever appropriate, pre-
determined by the Board, in consultation with the appropriate
Department, to be feasible and highly essential to the attainment of the
national goal in relation to a declared specific national food and
agricultural program for self sufficiency and other social benefits of the
project or (4) which produces non-conventional fuels or manufactures
equipment which utilize non-conventional sources of energy or uses or
converts to coal or other non-conventional fuels or sources of energy in
its production, manufacturing or processing operations: Provided, That
the final product in any of the foregoing instances, involves or will involve
substantial use and processing of domestic raw materials, whenever
available; taking into account the risks and magnitude of
investment; Provided, further, That the foregoing definitions shall not in
any way limit the rights and incentives granted to less-developed-area
enterprises provided under Title V, Book 1 hereof.chanrobles virtual law
library
ART. 18. Non-pioneer enterprise shall include all registered producer
enterprises other than pioneer enterprises.chanrobles virtual law library
ART. 19. Expansion shall include modernization and rehabilitation and
shall mean increase of existing volume or value of production or
upgrading the quality of the registered product or utilization of inefficient
or idle equipment under such guidelines as the Board may
adopt.chanrobles virtual law library
ART. 20. Measured capacity shall mean the estimated additional volume
of production or service which the Board determines to be desirable in
each preferred area of investment in order to supply the needs of the
economy at reasonable prices, taking into account the export potential of
the product, including economies of scale which would render such
product competitive in the world market. Measured capacity shall not be
less than the amount by which the measurable domestic and country's
potential export market demand exceeds the existing productive capacity
in said preferred areas. For export market industries, when warranted, the
Board shall base measured capacity on the availability of domestic raw
materials after deducting the needs of the domestic market
therefor.chanrobles virtual law library
ART. 21. Tax Credit shall mean any of the credits against taxes and/or
duties equal to those actually paid or would have been paid to evidence
which a tax credit certificate shall be issued by the Secretary of Finance
or his representative, or the Board, if so delegated by the Secretary of
Finance. The tax credit certificates including those issued by the Board
pursuant to laws repealed by this Code but without in any way
diminishing the scope of negotiability under their laws of issue are
transferable under such conditions as may be determined by the Board
after consultation with the Department of Finance. The tax credit
certificate shall be used to pay taxes, duties, charges and fees due to the
National Government: Provided, That the tax credits issued under this
Code shall not form part of the gross income of the grantee/transferee for
income tax purposes under Section 29 of the National Internal Revenue
Code and are therefore not taxable: Provided, further, That such tax
credits shall be valid only for a period of ten (10) years from date of
issuance.chanrobles virtual law library
ART. 22. Export products shall mean manufactured or processed products
the total F.O.B. Philippine port value of the exports of which did not
exceed five million dollars in the United States currency in the calendar
year 1968 and which meet the local content requirement, if any, set by
the Board, and standards of quality set by the Bureau of Product
Standards,or, in default of such standards, by the Board or by such public
or private organization, chamber, group or body as the Board may
designate. The above definition notwithstanding, the Investment
Priorities Plan may include other products for exports subject to such
conditions and limited incentives as may be determined by the
Board.chanrobles virtual law library
ART. 23. Export sales shall mean the Philippine port F.O. B. value,
determined from invoices, bills of lading, inward letters of credit, landing
certificates, and other commercial documents, of export products
exported directly by a registered export producer or the net selling price
of export products sold by a registered export producer to another export
producer, or to an export trader that subsequently exports the
same: Provided, That sales of export products to another producer or to
an export trader shall only be deemed export sales when actually exported
by the latter, as evidenced by landing certificates or similar commercial
documents: Provided, further, That without actual exportation the
following shall be considered constructively exported for purposes of this
provision:
(1) sales to bonded manufacturing warehouses of export-oriented
manufacturers;
(2) sales to export processing zones;
(3) sales to registered export traders operating bonded trading warehouses
supplying raw materials used in the manufacture of export products under
guidelines to be set by the Board in consultation with the Bureau of
Internal Revenue and the Bureau of Customs;
(4) sales to foreign military bases, diplomatic missions and other agencies
and/or instrumentalities granted tax immunities, of locally manufactured,
assembled or repacked products whether paid for in foreign currency or
not: Provided, further, That export sales of registered export traders may
include commission income: and Provided, finally, That exportation of
goods on consignment shall not be deemed export sales until the export
products consigned are in fact sold by the consignee.chanrobles virtual
law library
Sales of locally manufactured or assembled goods for household and
personal use to Filipinos abroad and other non-residents of the
Philippines as well as returning Overseas Filipinos under the Internal
Export Program of the government and paid for in convertible foreign
currency inwardly remitted through the Philippine banking systems shall
also be considered export sales.chanrobles virtual law library
ART. 24. Production cost shall mean the total of the cost of direct labor,
raw materials, and manufacturing overhead, determined in accordance
with generally accepted accounting principles, which are incurred in
manufacturing or processing the products of a registered
enterprise.chanrobles virtual law library
ART. 25. Processing shall mean converting of raw materials into
marketable form through physical, mechanical, chemical, electrical,
biochemical, biological or other means or by a special treatment or a
series of actions, such as slaughtering, milling, pasteurizing, drying or
dessicating quick freezing, that results in a change in the nature or state
of the products. Merely packing or packaging shall not constitute
processing.chanrobles virtual law library
ART. 26. Investment Priorities Plan shall mean the overall plan prepared
by the Board which includes and contains:
(a) The specific activities and generic categories of economic activity
wherein investments are to be encouraged and the corresponding
products and commodities to be grown, processed or manufactured
pursuant thereto for the domestic or export market;
(b) Specific public utilities which can qualify for incentives under this
Code and which shall be supported by studies of existing and prospective
regional demands for the services of such public utilities in the light of
the level and structure of income, production, trade, prices and relevant
economic and technical factors of the regions as well as the existing
facilities to produce such services;
(c) Specific activities where the potential for utilization of indigenous
non-petroleum based fuels or sources of energy can be best promoted; and
(d) Such other information, analyses, data, guidelines or criteria as the
Board may deem appropriate.chanrobles virtual law library
The specific and generic activities to be included in the Investment
Priorities Plan with their status as pioneer or non-pioneer shall be
determined by the Board in accordance with the criteria set forth in this
Book.chanrobles virtual law library
CHAPTER II
INVESTMENT PRIORITIES PLAN
ART. 27. Investment Priorities Plan. - Not later than the end of March of
every year, the Board of Investments, after consultation with the
appropriate government agencies and the private sector, shall submit to
the President an Investment Priorities Plan: Provided, however, That the
deadline for submission may be extended by the President.chanrobles
virtual law library
ART. 28. Criteria in Investment Priority Determination. - No economic
activity shall be included in the Investment Priorities Plan unless it is
shown to be economically, technically and financially sound after
thorough investigation and analysis by the Board.chanrobles virtual law
library
The determination of preferred areas of investment to be listed in the
Investment Priorities Plan shall be based on long-run comparative
advantage, taking into account the value of social objectives and
employing economic criteria along with market, technical; and financial
analyses.chanrobles virtual law library
The Board shall take into account the following:
(a) Primarily, the economic soundness of the specific activity as shown by
its economic internal rate of return;
(b) The extent of contribution of an activity to a specific development
goal;
(c) Other indicators of comparative advantage;
(d) Measured capacity as defined in Article 20; and
(e) The market and technical aspects and considerations of the activity
proposed to be included.chanrobles virtual law library
In any of the declared preferred areas of investment, the Board may
designate as pioneer areas the specific products and commodities that
meet the requirements of Article 17 of this Code and review yearly
whether such activity, as determined by the Board,shall continue as
pioneer, otherwise, it shall be considered as non-pioneer and accordingly
listed as such in the Investment Priorities Plan or removed from the
Investment Priorities Plan.chanrobles virtual law library
ART. 29. Approval of the Investment Priorities Plan. - The President shall
proclaim the whole or part of such plan as in effect; or alternatively
return the whole or part of the plan to the Board of Investments for
revision.chanrobles virtual law library
Upon the effectivity of the plan or portions thereof, the President shall
issue all necessary directives to all departments, bureaus, agencies or
instrumentalities of the government to ensure the implementation of the
plan by the agencies concerned in a synchronized and integrated manner.
No government body shall adopt any policy or take any course of action
contrary to or inconsistent with the plan.chanrobles virtual law library
ART. 30. Amendments. - Subject to publication requirements and the
criteria for investment priority determination, the Board of Investments
may, at any time, add additional areas in the plan, alter any of the terms
of the declaration of an investment area or the designation of measured
capacities, or terminate the status of preference. In no case, however,
shall any amendment of the plan impair whatever rights may have already
been legally vested in qualified enterprises which shall continue to enjoy
such rights to the full extent allowed under this Code. The Board shall not
accept applications in an area of investment prior to the approval of the
same as a preferred area nor after approval of its deletion as a preferred
area of investment.chanrobles virtual law library
ART. 31. Publication. - Upon approval of the plan, in whole or in part or
upon approval of an amendment thereof, the plan or the amendment,
specifying and declaring the preferred areas of investment and their
corresponding measured capacity shall be published in at least one (1)
newspaper of general circulation and all such areas shall be open for
application until publication of an amendment or deletion thereof, or
until the Board approves registration of enterprises which fill the
measured capacity.chanrobles virtual law library
CHAPTER III
REGISTRATION OF ENTERPRISES
ART. 32. Qualifications of a Registered Enterprise. - To be entitled to
registration under the Investment Priorities Plan, an applicant must
satisfy the Board that:
(1) He is a citizen of the Philippines, in case the applicant is a natural
person, or in case of a partnership or any other association, it is
organized under Philippine laws and that at least sixty percent (60%) of
its capital is owned and controlled by citizens of the Philippines; or in
case of a corporation or a cooperative, it is organized under Philippine
laws and that at least sixty percent (60%) of the capital stock outstanding
and entitled to vote is owned and held by Philippine nationals as defined
under Article 15 of this Code, and at least sixty percent (60%) of the
members of the Board of Directors are citizens of the Philippines. If it
does not possess the required degree of ownership as mentioned above by
Philippine nationals, the following circumstances must be satisfactorily
established:
(a) That it proposes to engage in a pioneer project as defined in Article 17
of this Code, which, considering the nature and extent of capital
requirements, processes, technical skills and relative business risks
involved, is in the opinion of the Board of such a nature that the available
measured capacity thereof cannot be readily and adequately filled by
Philippine nationals; or, if the applicant is exporting at least seventy
percent (70%) of its total production, the export requirement herein
provided may be reduced in meritorious cases under such conditions
and/or limited incentives as the Board may determine;
(b) That it obligates itself to attain the status of a Philippine national, as
defined in Article 15, within thirty (30) years from the date of registration
or within such longer period as the Board may require taking into account
the export potential of the project: Provided, That a registered enterprise
which exports one hundred percent (100%) of its total production need
not comply with this requirement;
(c) That the pioneer area it will engage in is one that is not within the
activities reserved by the Constitution or other laws of the Philippines to
Philippine citizens or corporations owned and controlled by Philippine
citizens;
(2) The applicant is proposing to engage in a preferred project listed or
authorized in the current Investment Priorities Plan within a reasonable
time to be fixed by the Board or, if not so listed, at least fifty percent
(50%) of its total production is for export or it is an existing producer
which will export part of production under such conditions and/or limited
incentives as the Board may determine; or that the enterprise is engaged
or proposing to engage in the sale abroad of export products bought by it
from one or more export producers; or the enterprise is engaged or
proposing to engage in rendering technical, professional or other services
or in exporting television and motion pictures and musical recordings
made or produced in the Philippines, either directly or through a
registered trader.chanrobles virtual law library
(3) The applicant is capable of operating on a sound and efficient basis
and of contributing to the national development of the preferred area in
particular and of the national economy in general; and
(4) If the applicant is engaged or proposes to engage in under takings or
activities other than preferred projects, it has installed or undertakes to
install an accounting system adequate to identify the investments,
revenues, costs, and profits or losses of each preferred project undertaken
by the enterprise separately from the aggregate investment, revenues,
costs and profits or losses of the whole enterprise or to establish a
separate corporation for each preferred project if the Board should so
require to facilitate proper implementation of this Code.chanrobles virtual
law library
ART. 33. Application. - Applications shall be filed with the Board,
recorded in a registration book and the date appearing therein and
stamped on the application shall be considered the date of official
acceptance.chanrobles virtual law library
Whenever necessary, the Board, through the People's Economic Councils,
shall consult the communities affected on the acceptability of locating
the registered enterprise within their community.chanrobles virtual law
library
ART. 34. Approval and Registration Procedures. - The Board is authorized
to adopt rules and regulations to facilitate action on applications filed
with it, prescribe criteria for the evaluation of several applications filed in
one preferred area; devise standard forms for use of applicants and
delegate to the regional offices of the Department of Trade and Industry
the authority to receive and process applications for enterprises to be
located in their respective regions.chanrobles virtual law library
Applications filed shall be considered automatically approved if not acted
upon by the Board within twenty (20) working days from official
acceptance thereof.chanrobles virtual law library
ART. 35. Criteria for Evaluation of Applications. - The following criteria
will be considered in the evaluation of applications for registration under
a preferred area:
(a) The extent of ownership and control by Philippine citizens of the
enterprises;
(b) The economic rates of return;
(c) The measured capacity: Provided, That estimates of measured
capacities shall be regularly reviewed and updated to reflect changes in
market supply and demand conditions: Provided, further, That measured
capacity shall not result in a monopoly in any preferred area of
investment which would unduly restrict trade and fair competition nor
shall it be used to deny the entry of any enterprise in any field of
endeavor or activity;
(d) The amount of foreign exchange earned, used or saved in their
operations;
(e) The extent to which labor, materials and other resources obtained from
indigenous sources are utilized;
(f) The extent to which technological advances are applied and adopted to
local conditions;
(g) The amount of equity and degree to which the ownership of such
equity is spread out and diversified; and
(h) Such other criteria as the Board may determine.chanrobles virtual law
library
ART. 36. Appeal from Board's Decision. - Any order or decision of the
Board shall be final and executory after thirty (30) days from its
promulgation. Within the said period of thirty (30) days, said order or
decision may be appealed. to the Office of the President. Where an appeal
has been filed, said order or decision shall be final and executory ninety
(90) days after the perfection of the appeal, unless reversed.chanrobles
virtual law library
ART. 37. Certificate of Registration. - A registered enterprise under this
Code shall be issued a certificate of registration under the seal of the
Board of Investments and the signature of its Chairman and/or such other
officer or employee of the Board as it may empower and designate for the
purpose. The certificate shall be in such form and style as the Board may
determine and shall state, among other matters:
(a) The name of the registered enterprise;
(b) The preferred area of investment in which the registered enterprise is
proposing to engage;
(c) The nature of the activity it is undertaking or proposing to undertake,
whether pioneer or non-pioneer, and the registered capacity of the
enterprise; and
(d) The other terms and conditions to be observed by the registered
enterprise by virtue of the registration.chanrobles virtual law library
TITLE II
BASIC RIGHTS AND GUARANTEES
ART. 38. Protection of Investment. - All investors and registered
enterprises are entitled to the basic rights and guarantees provided in the
Constitution. Among other rights recognized by the Government of the
Philippines are the following:
(a) Repartriation of Investments. - In the case of foreign investments, the
right to repatriate the entire proceeds of the liquidation of the
investment in the currency in which the investment was originally made
and at the exchange rate prevailing at the time of repatriation, subject to
the provisions of Section 74 of Republic Act No. 265, as amended. For
investments made pursuant to Executive Order No. 32 and its
implementing rules and regulations, remittability shall be as provided
therein.chanrobles virtual law library
(b) Remittance of Earnings. - In the case of foreign investments, the right
to remit earnings from the investment in the currency in which the
investment was originally made and at the exchange rate prevailing at the
time of remittance, subject to the provisions of Section 74 of Republic
Act No.265 as amended;
(c) Foreign Loans and Contracts. - The right to remit at the exchange rate
prevailing at the time of remittance such sums as may be necessary to
meet the payments of interest and principal on foreign loans and foreign
obligations arising from technological assistance contracts, subject to the
provisions of Section 74 of Republic Act. No. 265 as amended;
(d) Freedom from Expropriation. - There shall be no expropriation by the
government of the property represented by investments or of the property
of the enterprise except for public use or in the interest of national
welfare or defense and upon payment of just compensation. In such cases,
foreign investors or enterprises shall have the right to remit sums
received as compensation for the expropriated property in the currency in
which the investment was originally made and at the exchange rate at the
time of remittance, subject to the provisions of Section 74 of Republic
Act. No. 265 as amended;
(e) Requisition of Investment. - There shall be no requisition of the
property represented by the investment or of the property of enterprises,
except in the event of war or national emergency and only for the
duration thereof. Just compensation shall be determined and paid either
at the time of requisition or immediately after cessation of the state of
war or national emergency. Payments received as compensation for the
requisitioned property may be remitted in the currency in which the
investment was originally made and at the exchange rate prevailing at the
time of remittance, subject to the provisions of Section 74 of Republic
Act No. 265, as amended.chanrobles virtual law library
TITLE III
INCENTIVES TO REGISTERED ENTERPRISES
ART. 39. Incentives to Registered Enterprises. - All registered enterprises
shall be granted the following incentives to the extent engaged in a
preferred area of investment:
(a) Income Tax Holiday. -
(1) For six (6) years from commercial operation for pioneer firms and four
(4) years for non-pioneer firms, new registered firms shall be fully exempt
from income taxes levied by the National Government. Subject to such
guidelines as may be prescribed by the Board, the income tax exemption
will be extended for another year in each of the following cases:
i. the project meets the prescribed ratio of capital equipment to number
of workers set by the Board;
ii. utilization of indigenous raw materials at rates set by the Board;
iii. the net foreign exchange savings or earnings amount to at least
US$500,000.00 annually during the first three(3) years of
operation.chanrobles virtual law library
The preceding paragraph notwithstanding, no registered pioneer firm may
avail of this incentive for a period exceeding eight (8) years.chanrobles
virtual law library
(2) For a period of three (3) years from commercial operation, registered
expanding firms shall be entitled to an exemption from income taxes
levied by the National Government proportionate to their expansion under
such terms and conditions as the Board may determine; Provided,
however, That during the period within which this incentive is availed of
by the expanding firm it shall not be entitled to additional deduction for
incremental labor expense.chanrobles virtual law library
(3) The Provision of Article 7 (14) notwithstanding, registered firms shall
not be entitled to any extension of this incentive. (b) Additional
Deduction for Labor Expense. - For the first five (5) years from
registration a registered enterprise shall be allowed an additional
deduction from the taxable income of fifty percent (50%) of the wages
corresponding to the increment in the number of direct labor for skilled
and unskilled workers if the project meets the prescribed ration of capital
equipment to number of workers set by the Board: Provided, That this
additional deduction shall be doubled if the activity is located in less
developed areas as defined in Art. 40. (c) Tax and Duty Exemption on
Imported Capital Equipment. - Within five (5) years from the effectivity of
this Code, importations of machinery and equipment and accompanying
spare parts of new and expanding registered enterprises shall be exempt
to the extent of one hundred per cent (100%) of the customs duties and
national internal revenue tax payable thereon; Provided, That the
importation of machinery and equipment and accompanying spare parts
shall comply with the following conditions:
(1) They are not manufactured domestically in sufficient quantity, of
comparable quality and at reasonable prices;
(2) They are reasonably needed and will be used exclusively by the
registered enterprise in the manufacture of its products, unless prior
approval of the Board is secured for the part-time utilization of said
equipment in a non-registered activity to maximize usage thereof or the
proportionate taxes and duties are paid on the specific equipment and
machinery being permanently used for non-registered activities; and
(3) The approval of the Board was obtained by the registered enterprise for
the importation of such machinery, equipment and spare parts.chanrobles
virtual law library
In granting the approval of the importations under this paragraph, the
Board may require international canvassing but if the total cost of the
capital equipment or industrial plant exceeds US$5,000,000, the Board
shall apply or adopt the provisions of Presidential Decree Numbered 1764
on International Competitive Bidding.chanrobles virtual law library
If the registered enterprise sells, transfers or disposes of these machinery,
equipment and spare parts without prior approval of the Board within five
(5) years from date of acquisition, the registered enterprise and the
vendee, transferee, or assignee shall be solidarily liable to pay twice the
amount of the tax exemption given it.chanrobles virtual law library
The Board shall allow and approve the sale, transfer or disposition of the
said items within the said period of five (5) years if made:
(aa) to another registered enterprise or registered domestic producer
enjoying similar incentives;
(bb) for reasons of proven technical obsolescence; or
(cc) for purposes of replacement to improve and/or expand the operations
of the registered enterprise.chanrobles virtual law library
(d) Tax Credit on Domestic Capital Equipment. - A tax credit equivalent
to one hundred percent (100%) of the value of the national internal
revenue taxes and customs duties that would have been waived on the
machinery, equipment and spare parts, had these items been imported
shall be given to the new and expanding registered enterprise which
purchases machinery, equipment and spare parts from a domestic
manufacturer: Provided, That (1) That the said equipment, machinery and
spare parts are reasonably needed and will be used exclusively by the
registered enterprise in the manufacture of its products, unless prior
approval of the Board is secured for the part-time utilization of said
equipment in a non-registered activity to maximize usage thereof; (2) that
the equipment would have qualified for tax and duty-free importation
under paragraph (c) hereof; (c) that the approval of the Board was obtained
by the registered enterprise; and (4) that the purchase is made within five
(5) years from the date of effectivity of the Code. If the registered
enterprise sells, transfers or disposes of these machinery, equipment and
spare parts, the provisions in the preceding paragraph for such
disposition shall apply.chanrobles virtual law library
(e) Exemption from Contractor's Tax. - The registered enterprise shall be
exempt from the payment of contractor's tax, whether national or
local.chanrobles virtual law library
(f) Simplification of Customs Procedures. - Customs procedures for the
importation of equipment, spare parts, raw materials and supplies, and
exports of processed products by registered enterprises shall be simplified
by the Bureau of Customs.chanrobles virtual law library
(g) Unrestricted Use of Consigned Equipment. - Provisions of existing laws
notwithstanding, machinery, equipment and spare parts consigned to any
registered enterprise shall not be subject to restrictions as to period of
use of such machinery, equipment and spare parts: Provided, That the
appropriate re-export bond is posted unless importation is otherwise
covered under subsections (c) and (m) of this Article: Provided,
further, That such consigned equipment shall be for the exclusive use of
the registered enterprise.chanrobles virtual law library
If such equipment is sold, transferred or otherwise disposed of by the
registered enterprise the related provision of Article 39 (c) (3) shall apply.
Outward remittance of foreign exchange covering the proceeds of such
sale, transfer or disposition shall be allowed only upon prior Central Bank
approval.chanrobles virtual law library
(h) Employment of Foreign Nationals. - Subject to the provisions of
Section 29 of Commonwealth Act Number 613, as amended a registered
enterprise may employ foreign nationals in supervisory, technical or
advisory positions for a period not exceeding five (5) years from its
registration, extendible for limited periods at the discretion of the
Board: Provided, however, That when the majority of the capital stock of
a registered enterprise is owned by foreign investors, the positions of
president, treasurer and general manager or their equivalents may be
retained by foreign nationals beyond the period set forth
herein.chanrobles virtual law library
Foreign nationals under employment contract within the purview of this
incentive, their spouses and unmarried children under twenty-one (21)
years of age, who are not excluded by Section 29 of Commonwealth Act
Numbered 613, as amended, shall be permitted to enter and reside in the
Philippines during the period of employment of such foreign nationals. A
registered enterprise shall train Filipinos as understudies of foreign
nationals in administrative, supervisory and technical skills and shall
submit annual reports on such training to the Board.chanrobles virtual
law library
(i) Exemption on Breeding Stocks and Genetic Materials. - The
importation of breeding stocks and genetic materials within ten (10) years
from the date of registration or commercial operation of the enterprise
shall be exempt from all taxes and duties: Provided, That such breeding
stocks and genetic materials are (1) not locally available and/or
obtainable locally in comparable quality and at reasonable prices; (2)
reasonably needed in the registered activity; and (3) approved by the
Board.chanrobles virtual law library
(j) Tax Credit on Domestic Breeding Stocks and Genetic Materials. - A tax
credit equivalent to one hundred percent (100%) of the value of national
internal revenue taxes and customs duties that would have been waived
on the breeding stocks and genetic materials had these items been
imported shall be given to the registered enterprise which purchases
breeding stock and genetic materials from a domestic producer: Provided,
(1) That said breeding stocks and genetic materials would have qualified
for tax and duty free importation under the preceding paragraph; (2) that
the breeding stocks and genetic materials are reasonably needed in the
registered activity; (3) that approval of the Board has been obtained by
the registered enterprise; and (4) that the purchase is made within ten
(10) years from date of registration or commercial operation of the
registered enterprise.chanrobles virtual law library
(k) Tax Credit for Taxes and Duties on Raw Materials. - Every registered
enterprise shall enjoy a tax credit equivalent to the National Internal
Revenue taxes and Customs duties paid on the supplies, raw materials
and semi-manufactured products used in the manufacture, processing or
production of its export products and forming part thereof, exported
directly or indirectly by the registered enterprise: Provided,
however, That the taxes on the supplies, raw materials and semi-
manufactured products domestically purchased are indicated as a
separate item in the sales invoice.chanrobles virtual law library
Nothing herein shall be construed as to preclude the Board from setting a
fixed percentage of export sales as the approximate tax credit for taxes
and duties of raw materials based on an average or standard usage for
such materials in the industry.chanrobles virtual law library
(l) Access to Bonded Manufacturing/Trading Warehouse System. -
Registered export oriented enterprises shall have access to the utilization
of the bonded warehousing system in all areas required by the project
subject to such guidelines as may be issued by the Board upon prior
consultation with the Bureau of Customs.chanrobles virtual law library
(m) Exemption from Taxes and Duties on Imported Spare Parts. -
Importation of required supplies and spare parts for consigned equipment
or those imported tax and duty free by a registered enterprise with a
bonded manufacturing warehouse shall be exempt from customs duties
and national internal revenue taxes payable thereon: Provided,
however, That at least seventy percent (70%) of production is
exported; Provided, further, That such spare parts and supplies are not
locally available at reasonable prices, sufficient quantity and comparable
quality; Provided, finally, That all such spare parts and supplies shall be
used only in the bonded manufacturing warehouse of the registered
enterprise under such requirements as the Bureau of Customs may
impose.chanrobles virtual law library
(n) Exemption from Wharfage Dues and any Export Tax, Duty, Impost
and Fee. - The provisions of law to the contrary notwithstanding, exports
by a registered enterprise of its non-traditional export products shall be
exempted from any wharfage dues, and any export tax, duty, impost and
fee.chanrobles virtual law library
TITLE IV
INCENTIVES TO LESS-DEVELOPED-AREA
REGISTERED ENTERPRISE
ART. 40. A registered enterprise regardless of nationality located in a less-
developed-area included in the list prepared by the Board of Investments
after consultation with the National Economic and Development
Authority and other appropriate government agencies, taking into
consideration the following criteria: low per capita gross domestic
product; low level of investments; high rate of unemployment and/or
underemployment; and low level of infrastructure development including
its accessibility to developed urban centers, shall be entitled to the
following incentives in addition to those provided in the preceding article:
(a) Pioneer Incentives. - An enterprise in a less-developed-area registered
with the Board under Book 1 of this Code, whether proposed, or an
expansion of an existing venture, shall be entitled to the incentives
provided for a pioneer registered enterprise under its law
registration.chanrobles virtual law library
(b) Incentives for Necessary and Major Infrastructure and Public
Facilities. - Registered enterprises establishing their production,
processing or manufacturing plants in an area that the Board designates
as necessary for the proper dispersal of industry or in an area which the
Board finds deficient in infrastructure, public utilities, and other
facilities, such as irrigation, drainage or other similar waterworks
infrastructure may deduct from taxable income an amount equivalent to
one hundred percent (100%) of necessary and major infrastructure works
it may have undertaken with the prior approval of the Board in
consultation with other government agencies concerned;Provided, That
the title to all such infrastructure works shall upon completion, be
transferred to the Philippine Government; Provided, further, That any
amount not deducted for a particular year may be carried over for
deduction for subsequent years not exceeding ten (10) years from
commercial operation.chanrobles virtual law library
TITLE V
GENERAL PROVISIONS
ART. 41. Power of the President to Rationalize Incentives. - The President
may, upon recommendation of the Board and in the interest of national
development, rationalize the incentives scheme herein provided; extend
the period of availment of incentives or increase rates of tax exemption of
any project whose viability or profitability require such
modification.chanrobles virtual law library
ART. 42. Refund and Penalties. - In case of cancellation of the certificate
granted under this Code, the Board may, in appropriate cases, require the
refund of incentives availed of the impose corresponding fines and
penalties.chanrobles virtual law library
ART. 43. Benefits of Multiple Area Enterprises. - When a registered
enterprise engages in activities or endeavors that have not been declared
preferred areas of investments, the benefits and incentives accruing
under this Code to registered enterprises and investors therein shall be
limited to the portion of the activities of such registered enterprise as is a
preferred area of investment.chanrobles virtual law library

Republic Act No. 7042 June 13, 1991

AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE

PROCEDURES FOR REGISTERING ENTERPRISES DOING BUSINESS IN
THE PHILIPPINES, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in

Congress assembled:

Section 1. Title. - This Act shall be known as the, "Foreign Investments Act
of 1991".

Section 2. Declaration of Policy. - It is the policy of the State to attract,

promote and welcome productive investments from foreign individuals,
partnerships, corporations, and governments, including their political
subdivisions, in activities which significantly contribute to national
industrialization and socioeconomic development to the extent that foreign
investment is allowed in such activity by the Constitution and relevant laws.
Foreign investments shall be encouraged in enterprises that significantly
expand livelihood and employment opportunities for Filipinos; enhance
economic value of farm products; promote the welfare of Filipino consumers;
expand the scope, quality and volume of exports and their access to foreign
markets; and/or transfer relevant technologies in agriculture, industry and
support services. Foreign investments shall be welcome as a supplement to
Filipino capital and technology in those enterprises serving mainly the
domestic market.

As a general rule, there are no restrictions on extent of foreign ownership of

export enterprises. In domestic market enterprises, foreigners can invest as
much as one hundred percent (100%) equity except in areas included in the
negative list. Foreign owned firms catering mainly to the domestic market shall
be encouraged to undertake measures that will gradually increase Filipino
participation in their businesses by taking in Filipino partners, electing
Filipinos to the board of directors, implementing transfer of technology to
Filipinos, generating more employment for the economy and enhancing skills of
Filipino workers.

Section 3. Definitions. - As used in this Act:

a) The term "Philippine national" shall mean a citizen of the Philippines

or a domestic partnership or association wholly owned by citizens of the
Philippines; or a corporation organized under the laws of the Philippines
of which at least sixty percent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of the Philippines; or a
trustee of funds for pension or other employee retirement or separation
benefits, where the trustee is a Philippine national and at least sixty
(60%) of the fund will accrue to the benefit of the Philippine nationals:
Provided, That where a corporation and its non-Filipino stockholders own
stocks in a Securities and Exchange Commission (SEC) registered
enterprise, at least sixty percent (60%) of the capital stocks outstanding
and entitled to vote of both corporations must be owned and held by
citizens of the Philippines and at least sixty percent (60%) of the
members of the Board of Directors of both corporations must be citizens
of the Philippines, in order that the corporations shall be considered a
Philippine national;

b) The term "investment" shall mean equity participation in any

enterprise organized or existing under the laws of the Philippines;

c) The term "foreign investment" shall mean as equity investment made

by a non-Philippine national in the form of foreign exchange and/or
other assets actually transferred to the Philippines and duly registered
with the Central Bank which shall assess and appraise the value of such
assets other than foreign exchange;

d) The praise "doing business" shall include soliciting orders, service

contracts, opening offices, whether called "liaison" offices or branches;
appointing representatives or distributors domiciled in the Philippines or
who in any calendar year stay in the country for a period or periods
totalling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; and any other act or acts that
imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the
business organization: Provided, however, That the phrase "doing
business: shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly registered
to do business, and/or the exercise of rights as such investor; nor having
a nominee director or officer to represent its interests in such
corporation; nor appointing a representative or distributor domiciled in
the Philippines which transacts business in its own name and for its own
account;

e) The term "export enterprise" shall mean an enterprise which produces

goods for sale, or renders services to the domestic market entirely or if
 exporting a portion of its output fails to consistently export at least sixty
percent (60%) thereof; and

g) The term "Foreign Investments Negative List" or "Negative List" shall

mean a list of areas of economic activity whose foreign ownership is
limited to a maximum of forty ownership is limited to a maximum of forty
percent (40%) of the equity capital of the enterprise engaged therein.

Section 4. Scope. - This Act shall not apply to banking and other financial
institutions which are governed and regulated by the General Banking Act and
other laws under the supervision of the Central Bank.

Section 5. Registration of Investments of Non-Philippine Nationals. -

Without need of prior approval, a non-Philippine national, as that term is
defined in Section 3 a), and not otherwise disqualified by law may upon
registration with the Securities and Exchange Commission (SEC), or with the
Bureau of Trade Regulation and Consumer Protection (BTRCP) of the
Department of Trade and Industry in the case of single proprietorships, do
business as defined in Section 3 (d) of this Act or invest in a domestic
enterprise up to one hundred percent (100%) of its capital, unless participation
of non-Philippine nationals in the enterprise is prohibited or limited to a
smaller percentage by existing law and/or limited to a smaller percentage by
existing law and/or under the provisions of this Act. The SEC or BTRCP, as the
case may be, shall not impose any limitations on the extent of foreign
ownership in an enterprise additional to those provided in this Act: Provided,
however, That any enterprise seeking to avail of incentives under the Omnibus
Investment Code of 1987 must apply for registration with the Board of
Investments (BOI), which shall process such application for registration in
accordance with the criteria for evaluation prescribed in said Code: Provided,
finally, That a non-Philippine national intending to engage in the same line of
business as an existing joint venture in his application for registration with
SEC. During the transitory period as provided in Section 15 hereof, SEC shall
disallow registration of the applying non-Philippine national if the existing joint
venture enterprise, particularly the Filipino partners therein, can reasonably
prove they are capable to make the investment needed for they are competing
applicant. Upon effectivity of this Act, SEC shall effect registration of any
enterprise applying under this Act within fifteen (15) days upon submission of
completed requirements.

Section 6. Foreign Investments in Export Enterprises. - Foreign investment

in export enterprises whose products and services do not fall within Lists A and
B of the Foreign Investment Negative List provided under Section 8 hereof is
allowed up to one hundred percent (100%) ownership.

Export enterprises which are non-Philippine nationals shall register with BOI
and submit the reports that may be required to ensure continuing compliance
of the export enterprise with its export requirement. BOI shall advise SEC or
BTRCP, as the case may be, of any export enterprise that fails to meet the
export ratio requirement. The SEC or BTRCP shall thereupon order the non-
complying export enterprise to reduce its sales to the domestic market to not
more than forty percent (40%) of its total production; failure to comply with
such SEC or BTRCP order, without justifiable reason, shall subject the
enterprise to cancellation of SEC or BTRCP registration, and/or the penalties
provided in Section 14 hereof.

Section 7. Foreign Investments in Domestic Market Enterprises. - Non-

Philippine nationals may own up to one hundred percent (100%) of domestic
market enterprises unless foreign ownership therein is prohibited or limited by
existing law or the Foreign Investment Negative List under Section 8 hereof.

A domestic market enterprise may change its status to export enterprise if over
a three (3) year period it consistently exports in each year thereof sixty per cent
(60%) or more of its output.

Section 8. List of Investment Areas Reserved to Philippine

Nationals (Foreign Investment Negative List). - The Foreign Investment
Negative List shall have three (3) component lists: A, B, and C:

a) List A shall enumerate the areas of activities reserved to Philippine

nationals by mandate of the Constitution and specific laws.

b) List B shall contain the areas of activities and enterprises pursuant to

law:

1) Which are defense-related activities, requiring prior clearance

and authorization from Department of National Defense (DND) to
engage in such activity, such as the manufacture, repair, storage
and/or distribution of firearms, ammunition, lethal weapons,
military ordnance, explosives, pyrotechnics and similar materials;
unless such manufacturing or repair activity is specifically
authorized, with a substantial export component, to a non-
Philippine national by the Secretary of National Defense; or

2) Which have implications on public health and morals, such as

the manufacture and distribution of dangerous drugs; all forms of
gambling; nightclubs, bars, beerhouses, dance halls; sauna and
steambath houses and massage clinics.

Small and medium-sized domestic market enterprises with paid-in

equity capital less than the equivalent of five hundred thousand
US dollars (US$500,000) are reserved to Philippine nationals,
unless they involve advanced technology as determined by the
 Department of Science and Technology. Export enterprises which
utilize raw materials from depleting natural resources, with paid-in
equity capital of less than the equivalent of five hundred thousand
US dollars (US$500,000) are likewise reserved to Philippine
nationals.

Amendments to List B may be made upon recommendation of the

Secretary of National Defense, or the Secretary of Health, or the
Secretary of Education, Culture and Sports, indorsed by the NEDA, or
upon recommendation motu propio of NEDA, approved by the President,
and promulgated by Presidential Proclamation.

c) List C shall contain the areas of investment in which existing

enterprises already serve adequately the needs of the economy and the
consumer and do not require further foreign investments, as determined
by NEDA applying the criteria provided in Section 9 of this Act, approved
by the President and promulgated in a Presidential Proclamation.

The Transitory Foreign Investment Negative List established in Sec. 15

hereof shall be replaced at the end of the transitory period by the first
Regular Negative List to the formulated and recommended by the NEDA,
following the process and criteria provided in Section 8 and 9 of this Act.
The first Regular Negative List shall be published not later than sixty (60)
days before the end of the transitory period provided in said section, and
shall become immediately effective at the end of the transitory period.
Subsequent Foreign Investment Negative Lists shall become effective
fifteen (15) days after publication in two (2) newspapers of general
circulation in the Philippines: Provided, however, That each Foreign
Investment Negative List shall be prospective in operation and shall in no
way affect foreign investments existing on the date of its publication.

Amendments to List B and C after promulgation and publication of the

first Regular Foreign Investment Negative List at the end of the transitory
period shall not be made more often than once every two (2) years.

Section 9. Determination of Areas of Investment for Inclusion in List C of

the Foreign Investment Negative List. - Upon petition by a Philippine
national engage therein, an area of investment may be recommended by NEDA
for inclusion in List C of the Foreign Investment Negative List upon determining
that it complies with all the following criteria:

a) The industry is controlled by firms owned at least sixty percent (60%)

by Filipinos;

b) Industry capacity is ample to meet domestic demand;

 c) Sufficient competition exists within the industry;

d) Industry products comply with Philippine standards of health and

safety or, in the absence of such, with international standards, and are
reasonably competitive in quality with similar products in the same price
range imported into the country;

e) Quantitative restrictions are not applied on imports of directly

competing products;

f) The leading firms of the industry substantially comply with

environmental standards; and

g) The prices of industry products are reasonable.

The petition shall be subjected to a public hearing at which affected parties will
have the opportunity to show whether the petitioner industry adequately serves
the economy and the consumer, in general, and meets the above stated criteria
in particular. NEDA may delegate evaluation of the petition and conduct of the
public hearing to any government agency having cognizance of the petitioner
industry. The delegated agency shall make its evaluation report and
recommendations to NEDA which retains the right and sole responsibility to
determine whether to recommend to the President to promulgate the area of
investment in List C of the Negative List. An industry or area of investment
included in List C of the Negative List by Presidential Proclamation shall
remain in the said List C for two (2) years, without prejudice to re-inclusion
upon new petition, and due process.

Section 10. Strategic Industries. - Within eighteen (18) months after the
effectivity of this Act, the NEDA Board shall formulate and publish a list of
industries strategic to the development of the economy. The list shall specify,
as a matter of policy and not as a legal requirement, the desired equity
participation by Government and/or private Filipino investors in each strategic
industry. Said list of strategic industries, as well as the corresponding desired
equity participation of government and/or private Filipino investors, may be
amended by NEDA to reflect changes in economic needs and policy directions
of Government. The amended list of strategic industries shall be published
concurrently with publication of the Foreign Investment Negative List.

The term "strategic industries" shall mean industries that are characterized by
all of the following:

a) Crucial to the accelerated industrialization of the country,

b) Require massive capital investments to achieve economies of scale for

efficient operations;
 c) Require highly specialized or advanced technology which necessitates
technology transfer and proven production techniques in operations;

d) Characterized by strong backward and forward linkages with most

industries existing in the country, and

e) Generate substantial foreign exchange savings through import

substitution and collateral foreign exchange earnings through export of
part of the output that will result with the establishment, expansion or
development of the industry.

Section 11. Compliance with Environmental Standards. - All industrial

enterprises regardless of nationality of ownership shall comply with existing
rules and regulations to protect and conserve the environment and meet
applicable environmental standards.

Section 12. Consistent Government Action. - No agency, instrumentality or

political subdivision of the Government shall take any action on conflict with or
which will nullify the provisions of this Act, or any certificate or authority
granted hereunder.

Section 13. Implementing Rules and Regulations. - NEDA, in consultation

with BOI, SEC and other government agencies concerned, shall issue the rules
and regulations to implement this Act within one hundred and twenty (120)
days after its effectivity. A copy of such rules and regulations shall be furnished
the Congress of the Republic of the Philippines.

Section 14. Administrative Sanctions. - A person who violates any provision

of this Act or of the terms and conditions of registration or of the rules and
regulations issued pursuant thereto, or aids or abets in any manner any
violation shall be subject to a fine not exceeding One hundred thousand pesos
(P100,000).

If the offense is committed by a juridical entity, it shall be subject to a fine in

an amount not exceeding ½ of 1% of total paid-in capital but not more than
Five million pesos (P5,000,000). The president and/or officials responsible
therefor shall also be subject to a fine not exceeding Two hundred thousand
pesos (P200,000).

In addition to the foregoing, any person, firm or juridical entity involved shall
be subject to forfeiture of all benefits granted under this Act.

SEC shall have the power to impose administrative sanctions as provided

herein for any violation of this Act or its implementing rules and regulations.
Section 15. Transitory Provisions. - Prior to effectivity of the implementing
rules and regulations of this Act, the provisions of Book II of Executive Order
226 and its implementing rules and regulations shall remain in force.

During the initial transitory period of thirty-six (36) months after issuance of
the Rules and Regulations to implement this Act, the Transitory Foreign
Investment Negative List shall consist of the following:

A. List A:

1. All areas of investment in which foreign ownership is limited by

mandate of Constitution and specific laws.

B. List B:

1. Manufacture, repair, storage and/or distribution of firearms,

ammunitions, lethal weapons, military ordinance, explosives,
pyrotechnics and similar materials required by law to be licensed
by and under the continuing regulation of the Department of
National Defense; unless such manufacturing or repair activity is
specifically authorized with a substantial export component, to a
non-Philippine national by the Secretary of National Defense;

2. Manufacture and distribution of dangerous drugs; all forms of

gambling; nightclubs, bars, beerhouses, dance halls; sauna and
steam bathhouses, massage clinic and other like activities
regulated by law because of risks they may pose to public health
and morals;

3. Small and medium-size domestic market enterprises with paid-

in equity capital or less than the equivalent of US$500,000, unless
they involve advanced technology as determined by the
Department of Science and Technology, and

4. Export enterprises which utilize raw materials from depleting

natural resources, and with paid-in equity capital of less than the
equivalent US$500,000.

C. List C:

1. Import and wholesale activities not integrated with production

or manufacture of goods;

2. Services requiring a license or specific authorization, and

subject to continuing regulations by national government agencies
other than BOI and SEC which at the time of effectivity of this Act
 are restricted to Philippine nationals by existing administrative
regulations and practice of the regulatory agencies concerned:
Provided, That after effectivity of this Act, no other services shall be
additionally subjected to such restrictions on nationality of
ownership by the corresponding regulatory agencies, and such
restrictions once removed shall not be reimposed; and

3. Enterprises owned in the majority by a foreign licensor and/or

its affiliates for the assembly, processing or manufacture of goods
for the domestic market which are being produced by a Philippine
national as of the date of effectivity of this Act under a technology,
know-how and/or brand name license from such licensor during
the term of the license agreement: Provided, That, the license is
duly registered with the Central Bank and/or the Technology
Transfer Board and is operatively in force as of the date of
effectivity of this Act.

NEDA shall make the enumeration as appropriate of the areas of the

investment covered in this Transitory Foreign Investment Negative List and
publish the Negative List in full at the same time as, or prior to, the publication
of the rules and regulations to implement this Act.

The areas of investment contained in List C above shall be reserved to

Philippine nationals only during the transitory period. The inclusion of any of
them in the regular Negative List will require determination by NEDA after due
public hearings that such inclusion is warranted under the criteria set forth in
Section 8 and 9 hereof.

Section 16. Repealing Clause. - Articles forty-four (44) to fifty-six (56) of Book
II of Executive Order No. 226 are hereby repealed.

All other laws or parts of laws inconsistent with the provisions of this Act are
hereby repealed or modified accordingly.

Section 17. Separability. - If any part or section of this Act is declared

unconstitutional for any reason whatsoever, such declaration shall not in any
way affect the other parts or sections of this Act.

Section 18. Effectivity. - This Act shall take effect fifteen (15) days after
approval and publication in two (2) newspaper of general circulation in the
Philippines.

Approved: June 13, 1991

The IPP is a list of priority investment activities that may be given incentives.
With the theme “Scaling Up and Dispersing Opportunities,” the 2017 IPP
brings forth significant additions and changes, following the President’s zero +
10-point Socio Economic Agenda, the aspirations embodied in AmBisyonNatin
2040, and the Philippine Development Plan 2017-2022.

Broadly these changes include further emphasis on innovation-driven and job-

generating businesses; inclusive business for agribusiness and tourism;
broadened coverage of manufacturing; information technology (IT) and IT-
enabled services for the domestic market and telecommunications services for
new market players; environment and climate change-related projects; LGU-
initiated PPP projects; drug rehabilitation centers; state-of-the-art engineering,
procurement and construction (EPC) services; and the lifting of geographical
restrictions for most agriculture and tourist accommodation facilities.

The IPP also helped as one of the basis in shaping the priority product and
investment targets for the Philippine Trade and Investment Centre London –
with efforts to be directed in the manufacturing, aerospace, electronics, IT-
BPM, chemicals, design-driven, retail, agri-business and infrastructure sectors
among others.

Formulated through a participative, analytical, and multi-sector process, the

new IPP is expected to generate more investments to strengthen manufacturing
resurgence and create more jobs as targeted in the PDP 2017-2022.

The BOI-approved investments grew 20.4 percent in 2016, reaching P441.8

Billion from the P366.7 Billion registered in 2015. This is the second highest
since 2000, with the highest registered in 2013 at P466 Billion. The 20.4
percent growth also exceeded the agency’s 7 percent growth target for 2016.

REPUBLIC ACT NO. 7227

REPUBLIC ACT NO. 7227 - AN ACT ACCELERATING THE CONVERSION OF

MILITARY RESERVATIONS INTO OTHER PRODUCTIVE USES, CREATING
THE BASES CONVERSION AND DEVELOPMENT AUTHORITY FOR THE
PURPOSE, PROVIDING FUNDS THEREFORE AND FOR OTHER PURPOSES

Section 1. Short Title. — This Act shall be known as the "Bases Conversion
and Development Act of 1992."

Sec. 2. Declaration of Policies. — It is hereby declared the policy of the

Government to accelerate the sound and balanced conversion into alternative
productive uses of the Clark and Subic military reservations and their
extensions (John Hay Station, Wallace Air Station, O'Donnell Transmitter
Station, San Miguel Naval Communications Station and Capas Relay Station),
to raise funds by the sale of portions of Metro Manila military camps, and to
apply said funds as provided herein for the development and conversion to
productive civilian use of the lands covered under the 1947 Military Bases
Agreement between the Philippines and the United States of America, as
amended.

It is likewise the declared policy of the Government to enhance the benefits to

be derived from said properties in order to promote the economic and social
development of Central Luzon in particular and the country in general.

Sec. 3. Creation of the Bases Conversion and Development Authority. —

There is hereby created a body corporate to be known as the Bases Conversion
and Development Authority, hereinafter referred to as the Conversion
Authority, which shall have the attribute of perpetual succession and shall be
vested with the powers of a corporation.

It shall be organized within thirty (30) days after approval of this Act. It shall
have a term of fifty (50) years from its organization: provided, that Congress, by
a joint resolution, may dissolve the Conversion Authority whenever in its
judgment the primary purpose for its creation has been accomplished. It shall
establish its principal office in Metropolitan Manila unless otherwise provided
by the Conversion Authority and may put up such branches as may be
necessary.

Sec. 4. Purposes of the Conversion Authority. — The Conversion Authority

shall have the following purposes:

(a) To own, hold and/or administer the military reservations of John Hay Air
Station, Wallace Air Station, O'Donnell Transmitter Station, San Miguel Naval
Communications Station, Mt. Sta. Rita Station (Hermosa, Bataan) and those
portions of Metro Manila military camps which may be transferred to it by the
President;

(b) To adopt, prepare and implement a comprehensive and detailed

development plan embodying a list of projects including but not limited to
those provided in the Legislative-Executive Bases Council (LEBC) framework
plan for the sound and balanced conversion of the Clark and Subic military
reservations and their extensions consistent with ecological and environmental
standards, into other productive uses to promote the economic and social
development of Central Luzon in particular and the country in general;

(c) To encourage the active participation of the private sector in transforming

the Clark and Subic military reservations and their extensions into other
productive uses;
(d) To serve as the holding company of subsidiary companies created
pursuant to Section 16 of this Act and to invest in Special Economic Zones
declared under Sections 12 and 15 of this Act;

(e) To manage and operate through private sector companies developmental

projects outside the jurisdiction of subsidiary companies and Special Economic
Zones declared by presidential proclamations and established under this Act;

(f) To establish a mechanism in coordination with the appropriate local

government units to effect meaningful consultation regarding the plans,
programs and projects within the regions where such plans, programs and/or
project development are part of the conversion of the Clark and Subic military
reservations and their extensions and the surrounding communities as
envisioned in this Act; and

(g) To plan, program and undertake the readjustment, relocation, or

resettlement of population within the Clark and Subic military reservations and
their extensions as may be deemed necessary and beneficial by the Conversion
Authority, in coordination with the appropriate government agencies and local
government units.

Sec. 5. Powers of the Conversion Authority. — To carry out its objectives

under this Act, the Conversion Authority is hereby vested with the following
powers:

(a) To succeed in its corporate name, to sue and be sued in such corporate
name and to adopt, alter and use a corporate seal which shall be judicially
noticed;

(b) To adopt, amend and repeal its bylaws;

(c) To enter into, make, perform and carry out contracts of every class, kind
and description which are necessary or incidental to the realization of its
purposes with any person, firm or corporation, private or public, and with
foreign government entities;

(d) To contract loans, indebtedness, credit and issue commercial papers and
bonds, in any local or convertible foreign currency from any international
financial institutions, foreign government entities, and local or foreign private
commercial banks or similar institutions under terms and conditions
prescribed by law, rules and regulations;

(e) To execute any deed of guarantee, mortgage, pledge, trust or assignment

of any property for the purpose of financing the programs and projects deemed
vital for the early attainment of its goals and objectives, subject to the
provisions of Article VII, Sec. 20, and Article XII, Sec. 2, paragraphs (4) and (5)
of the Constitution;

(f) To construct, own, lease, operate and maintain public utilities as well as
infrastructure facilities;

(g) To reclaim or undertake reclamation projects as it may deem necessary in

areas adjacent or contiguous to the Conversion Authority's lands described in
Sec. 7 of this Act either by itself or in collaboration with the Public Estates
Authority (PEA) established under Presidential Decree No. 1084 as amended;

(h) To acquire, own, hold, administer, and lease real and personal properties,
including agricultural lands, property rights and interests and encumber,
lease, mortgage, sell, alienate or otherwise dispose of the same at fair market
value it may deem appropriate;

(i) To receive donations, grants, bequests and assistance of all kinds from
local and foreign governments and private sectors and utilize the same;

(j) To invest its funds and other assets other than those of the Special
Economic Zones under Section 12 and 15 of this Act in such areas it may deem
wise;

(k) To exercise the right of eminent domain;

(l) To exercise oversight functions over the Special Economic Zones declared
under this Act and by subsequent presidential proclamations within the
framework of the declared policies of this Act;

(m) To promulgate all necessary rules and regulations; and

(n) To perform such other powers as may be necessary and proper to carry
out the purposes of this Act.

Sec. 6. Capitalization. — The Conversion Authority shall have an authorized

capital of One hundred billion pesos (P100,000,000,000) which may be fully
subscribed by the Republic of the Philippines and shall either be paid up from
the proceeds of the sales of its land assets as provided for in Sec. 8 of this Act
or by transferring to the Conversion Authority properties valued in such
amount.

An initial operating capital in the amount of Seventy million pesos

(P70,000,000) is hereby authorized to be appropriated out of any funds in the
National Treasury not otherwise appropriated which shall be covered by
preferred shares of the Conversion Authority retireable within two (2) years.
Sec. 7. Transfer of Properties. — Pursuant to paragraph (a), Sec. 4 hereof, the
President shall transfer forthwith to the Conversion Authority:

(a) Station Area in has.

(more or less)

John Hay Air Station 570

Wallace Air Station 167

O'Donnell Transmitter Station 1,755

San Miguel Naval Communications Station 1,100

Mt. Sta. Rita Station (Hermosa, Bataan)

(b) Such other properties including, but not limited to, portions of Metro
Manila military camps, pursuant to Sec. 8 of this Act: provided, however, that
the areas which shall remain as military reservations shall be delineated and
proclaimed as such by the President.

Sec. 8. Funding Scheme. — The capital of the Conversion Authority shall

come from the sales proceeds and/or transfers of certain Metro Manila military
camps, including all lands covered by Proclamation No. 423, series of 1957,
commonly known as Fort Bonifacio and Villamor (Nicholas) Air Base, namely:

Camp Area in has.

(more or less)

Phase I (for immediate disposal)

1. Camp Claudio 2.0

2. Camp Bago Bantay 5.0
3. Part of Villamor Air Base 135.10
4. Part of Fort Bonifacio 498.40
————
Total 640.50
=======

Phase II

1. Camp Ver 1.9

2. Camp Melchor 1.0
3. Camp Atienza 4.9
4. Part of Villamor Air Base 37.9
5. Part of Fort Bonifacio 224.90
6. Fort Abad .60
————
Total 271.20
=======

Provided, that the following areas shall be exempt from sale:

(a) Approximately 148.80 hectares in Fort Bonifacio for the National Capital
Region (NCR) Security Brigade, Philippine Army (PA) officers' housing area, and
Philippine National Police (PNP) jails and support services (Presently Camp
Bagong Diwa);

(b) Approximately 99.91 hectares in Villamor Air Base for the Presidential
Airlift Wing, one squadron of helicopters for the NCR and respective security
units;

(c) The following areas segregated by Proclamation Nos.:

(1) 461, series of 1965; (AFP Officers Village)

(2) 462, series of 1965; (AFP Enlisted Men's Village)

(3) 192, series of 1967; (Veterans Center)

(4) 208, series of 1967; (National Shrines)

(5) 469, series of 1969; (Philippine College of Commerce)

(6) 653, series of 1970; (National Manpower and Youth Council)

(7) 684, series of 1970; (University Center)

(8) 1041, series of 1972; (Open Lease Concession)

(9) 1160, series of 1973; (Manila Technical Institute)

(10) 1217, series of 1973; (Maharlika Village)

(11) 682, series of 1970; (Civil Aviation Purposes)

(12) 1048, series of 1975; (Civil Aviation Purposes)

(13) 1453, series of 1975; (National Police Commission)

(14) 1633, series of 1977; (Housing and Urban Development)

(15) 2219, series of 1982; (Ministry of Human Settlements, BLISS)

(16) 172, series of 1987; (Upper, Lower and Western Bicutan and Signal
Housing)

(17) 389, series of 1989; (National Mapping and Resource Information

Authority)

(18) 518, series of 1990; (CEMBO, SO CEMBO, W REMBO, E REMBO,

COMEMBO, PEMBO, PITOGO)

(19) 467, series of 1968; (Greater Manila Terminal Food Market Site)

(20) 347, series of 1968; (Greater Manila Food Market Site)

(21) 376, series of 1968; (National Development Board and Science

Community)

(d) A proposed 30.15 hectares as relocation site for families to be affected by

circumferential road 5 and radial road 4 construction: provided, further, that
the boundaries and technical description of these exempt areas shall be
determined by an actual ground survey.

The President is hereby authorized to sell the above lands, in whole or in part,
which are hereby declared alienable and disposable pursuant to the provisions
of existing laws and regulations governing sales of government properties:
provided, that no sale or disposition of such lands will be undertaken until a
development plan embodying projects for conversion shall be approved by the
President in accordance with paragraph (b), Sec. 4, of this Act. However, six (6)
months after approval of this Act, the President shall authorize the Conversion
Authority to dispose of certain areas in Fort Bonifacio and Villamor as the
latter so determines. The Conversion Authority shall provide the President a
report on any such disposition or plan for disposition within one (1) month
from such disposition or preparation of such plan. The proceeds from any sale,
after deducting all expenses related to the sale, of portions of Metro Manila
military camps as authorized under this Act, shall be used for the following
purposes with their corresponding percent shares of proceeds:

(1) Thirty-two and five-tenths percent (35.5%) — To finance the transfer of

the AFP military camps and the construction of new camps, the self-reliance
and modernization program of the AFP, the concessional and long-term
housing loan assistance and livelihood assistance to AFP officers and enlisted
men and their families, and the rehabilitation and expansion of the AFP's
medical facilities;

(2) Fifty percent (50%) — To finance the conversion and the commercial uses
of the Clark and Subic military reservations and their extentions;

(3) Five Percent (5%) — To finance the concessional and long-term housing
loan assistance for the homeless of Metro Manila, Olongapo City, Angeles City
and other affected municipalities contiguous to the base areas as mandated
herein; and

(4) The balance shall accrue and be remitted to the National Treasury to be
appropriated thereafter by Congress for the sole purpose of financing programs
and projects vital for the economic upliftment of the Filipino people.

Provided, that, in the case of Fort Bonifacio, two and five tenths percent (2.5%)
of the proceeds thereof in equal shares shall each go to the Municipalities of
Makati, Taguig and Pateros: provided, further, that in no case shall farmers
affected be denied due compensation.

With respect to the military reservations and their extensions, the President
upon recommendation of the Conversion Authority or the Subic Authority
when it concerns the Subic Special Economic Zone shall likewise be authorized
to sell or dispose those portions of lands which the Conversion Authority or the
Subic Authority may find essential for the development of their projects.

Sec. 9. Board of Directors: Composition. — The powers and functions of the

Conversion Authority shall be exercised by a Board of Directors to be composed
of nine (9) members, as follows:

(a) A full-time chairman who shall also be the president of the Conversion
Authority; and

(b) Eight (8) other members from the private sector, two (2) of whom coming
from the labor sector.

The chairman and members shall be appointed by the President with the
consent of the Commission on Appointments. Of the initial members of the
Board, three (3) including the chairman, a representative from the private
sector and a representative from the labor sector shall be appointed for a term
of six (6) years, three (3) for a term of four (4) years and the other three (3) for a
term of two (2) years. In case of vacancy in the Board, the appointee shall serve
the unexpired term of the predecessor.

No person shall be appointed or designated unless he is a natural-born Filipino

citizen, of good moral character, of unquestionable integrity, and of recognized
competence in relevant fields including, but not limited to, economics,
management, international relations, law or engineering, preferably naval or
aeronautical.

The chairman and president of the Conversion Authority shall have a fixed
term of six (6) years.

All procedural matters in the conduct of board meetings shall be prescribed in

its internal rules.

Members of the Board shall receive a per diem of not more than Five thousand
pesos (P5,000) for every board meeting: provided, however, that the per diem
collected per month does not exceed the equivalent of four (4) meetings:
provided further, that the amount of per diem for every board meeting may be
increased by the President but such amount shall not be increased within two
(2) years after its last increase.

SECTION 10. Functions of the Board. — The Board of Directors shall be the
policy-making body of the Conversion Authority and shall perform the following
functions:

(a) Determine the organizational structure of the Conversion Authority, define

the duties and responsibilities of all officials and employees and adopt a
compensation and benefit scheme at least equivalent to that of the Central
Bank of the Philippines;

(b) Appoint all officials down to the third level and authorize the president of
the Conversion Authority to appoint all others: provided, that all appointments
shall be on the basis of merit and fitness and all personnel action shall be in
pursuance of Civil Service Laws, rules and regulations, except those
coterminous employees of the members of the
Board;

(c) Prepare the annual and supplemental budgets of the Conversion

Authority;

(d) Submit an annual report of the operation of the Conversion Authority to

the President of the Philippines, President of the Senate and Speaker of the
House of Representatives;

(e) Carry out the purposes of the Conversion Authority with the following
terms and references:

(1) As much as possible, major conversion projects shall be undertaken

under the complete project turnkey or build-operate-transfer (BOT) scheme, as
provided under Republic Act Numbered Sixty-nine hundred and fifty-seven (RA
6957); and

(2) Starting the fourth year of the Conversion Authority's full operation, a
privatization or divestment program of its projects and subsidiaries shall begin
under general guidelines prescribed by the President of the Philippines.

SECTION 11. Duties and Responsibilities of the President of the Conversion

Authority. — The president of the Conversion Authority shall have the following
duties and responsibilities:

(a) To act as Chief Executive Officer of the Conversion Authority;

(b) To execute, administer and implement the policies and measures

approved by the Board;

(c) To direct and supervise the operations and administration of the

Conversion Authority;

(d) To represent the Conversion Authority in all dealings with offices, agencies
and instrumentalities of the Government and with all persons and entities,
public or private, domestic or foreign;

(e) To direct and supervise the preparation of the agenda for the meeting of
the Board, and to submit for the consideration of the Board such policies and
measures as he believes necessary to carry out the purposes and objectives of
this Act; and

(f) To exercise such other powers and functions provided in the bylaws and as
may be vested in him by the Board.

SECTION 12. Subic Special Economic Zone. — Subject to the concurrence by

resolution of the sangguniang panlungsod of the City of Olongapo and the
sangguniang bayan of the Municipalities of Subic, Morong and Hermosa, there
is hereby created a Special Economic and Free-port Zone consisting of the City
of Olongapo and the Municipality of Subic, Province of Zambales, the lands
occupied by the Subic Naval Base and its contiguous extensions as embraced,
covered, and defined by the 1947 Military Bases Agreement between the
Philippines and the United States of America as amended, and within the
territorial jurisdiction of the Municipalities of Morong and Hermosa, Province of
Bataan, hereinafter referred to as the Subic Special Economic Zone whose
metes and bounds shall be delineated in a proclamation to be issued by the
President of the Philippines. Within thirty (30) days after the approval of this
Act, each local government unit shall submit its resolution of concurrence to
join the Subic Special Economic Zone to the office of the President. Thereafter,
the President of the Philippines shall issue a proclamation defining the metes
and bounds of the Zone as provided herein.

The abovementioned zone shall be subject to the following policies:

(a) Within the framework and subject to the mandate and limitations of the
Constitution and the pertinent provisions of the Local Government Code, the
Subic Special Economic Zone shall be developed into a self-sustaining,
industrial, commercial, financial and investment center to generate
employment opportunities in and around the zone and to attract and promote
productive foreign investments;

(b) The Subic Special Economic Zone shall be operated and managed as a
separate customs territory ensuring free flow or movement of goods and capital
within, into and exported out of the Subic Special Economic Zone, as well as
provide incentives such as tax and duty-free importations of raw materials,
capital and equipment. However, exportation or removal of goods from the
territory of the Subic Special Economic Zone to the other parts of the Philippine
territory shall be subject to customs duties and taxes under the Customs and
Tariff Code and other relevant tax laws of the Philippines;

(c) The provisions of existing laws, rules and regulations to the contrary
notwithstanding, no taxes, local and national, shall be imposed within the
Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of the
gross income earned by all businesses and enterprises within the Subic Special
Economic Zone shall be remitted to the National Government, one percent (1%)
each to the local government units affected by the declaration of the zone in
proportion to their population area, and other factors. In addition, there is
hereby established a development fund of one percent (1%) of the gross income
earned by all businesses and enterprises within the Subic Special Economic
Zone to be utilized for the development of municipalities outside the City of
Olongapo and the Municipality of Subic, and other municipalities contiguous to
be base areas.

In case of conflict between national and local laws with respect to tax
exemption privileges in the Subic Special Economic Zone, the same shall be
resolved in favor of the latter;

(d) No exchange control policy shall be applied and free markets for foreign
exchange, gold, securities and future shall be allowed and maintained in the
Subic Special Economic Zone;

(e) The Central Bank, through the Monetary Board, shall supervise and
regulate the operations of banks and other financial institutions within the
Subic Special Economic Zone;

(f) Banking and finance shall be liberalized with the establishment of foreign
currency depository units of local commercial banks and offshore banking
units of foreign banks with minimum Central Bank regulation;

(g) Any investor within the Subic Special Economic Zone whose continuing
investment shall not be less than Two hundred fifty thousand dollars
($250,000), his/her spouse and dependent children under twenty-one (21)
years of age, shall be granted permanent resident status within the Subic
Special Economic Zone. They shall have freedom of ingress and egress to and
from the Subic Special Economic Zone without any need of special
authorization from the Bureau of Immigration and Deportation. The Subic Bay
Metropolitan Authority referred to in Section 13 of this Act may also issue
working visas renewal every two (2) years to foreign executives and other aliens
possessing highly-technical skills which no Filipino within the Subic Special
Economic Zone possesses, as certified by the Department of Labor and
Employment. The names of aliens granted permanent residence status and
working visas by the Subic Bay Metropolitan Authority shall be reported to the
Bureau of Immigration and Deportation within thirty (30) days after issuance
thereof;

(h) The defense of the zone and the security of its perimeters shall be the
responsibility of the National Government in coordination with the Subic Bay
Metropolitan Authority. The Subic Bay Metropolitan Authority shall provide
and establish its own internal security and firefighting forces; and

(i) Except as herein provided, the local government units comprising the
Subic Special Economic Zone shall retain their basic autonomy and identity.
The cities shall be governed by their respective charters and the municipalities
shall operate and function in accordance with Republic Act No. 7160, otherwise
known as the Local Government
Code of 1991.

SECTION 13. The Subic Bay Metropolitan Authority. —

(a) Creation of the Subic Bay Metropolitan Authority. — A body corporate to

be known as the Subic Bay Metropolitan Authority, is hereby created as an
operating and implementing arm of the Conversion Authority.

(b) Powers and Functions of the Subic Bay Metropolitan Authority. — The
Subic Bay Metropolitan Authority, otherwise known as the Subic Authority,
shall have the following powers and functions:

(1) To operate, administer, manage and develop the ship repair and ship
building facility, container port, oil storage and refueling facility and Subic Air
Base within the Subic Special Economic and Free-Port Zone as a free market in
accordance with the policies set forth in Section 12 of this Act;

(2) To accept any local or foreign investment, business or enterprise, subject

only to such rules and regulations to be promulgated by the Subic Authority in
conformity with the policies of the Conversion Authority without prejudice to
the nationalization requirements provided for in the Constitution;

(3) To undertake and regulate the establishment, operation and maintenance

of utilities, other services and infrastructure in the Subic Special Economic
Zone including shipping and related business, stevedoring and port terminal
services or concessions, incidental thereto and airport operations in
coordination with the Civil Aeronautics Board, and to fix just and reasonable
rates, fares, charges and other prices therefore;

(4) To construct, acquire, own, lease, operate and maintain on its own or
through contract, franchise, license permits bulk purchase from the private
sector and build-operate-transfer scheme or joint-venture the required utilities
and infrastructure in coordination with local government units and appropriate
government agencies concerned and in conformity with existing applicable laws
therefore;

(5) To adopt, alter and use a corporate seal, to contract, lease, sell, dispose,
acquire and own properties; to sue and be sued in order to carry out its duties
and functions as provided for in this Act and to exercise the power of eminent
domain for public use and public purpose;

(6) Within the limitation provided by law, to raise and/or borrow the
necessary funds from local and international financial institutions and to issue
bonds, promissory notes and other securities for that purpose and to secure
the same by guarantee, pledge, mortgage, deed of trust, or assignment of its
properties held by the Subic Authority for the purpose of financing its projects
and programs within the framework and limitations of this Act;

(7) To operate directly or indirectly or license tourism-related activities

subject to priorities and standards set by the Subic Authority including games
and amusements, except horse racing, dog racing and casino gambling which
shall continue to be licensed by the Philippine Amusement and Gaming
Corporation (PAGCOR) upon recommendation of the Conversion Authority; to
maintain and preserve the forested areas as a national park;

(8) To authorize the establishment of appropriate educational and medical

institutions;
(9) To protect, maintain and develop the virgin forests within the baselands
which will be proclaimed as a national park and subject to a permanent total
log ban, and for this purpose, the rules and regulations of the Department of
Environment and Natural Resources and other government agencies directly
involved in the above functions shall be implemented by the Subic Authority;

(10) To adopt and implement measures and standards for environmental

pollution control of all areas within its territory, including, but not limited to all
bodies of water and to enforce the same. For which purpose the Subic
Authority shall create an Ecology Center; and

(c) Board of Directors. — The powers of the Subic Authority shall be vested in
and exercised by a Board of Directors, hereinafter referred to as the Board,
which shall be composed of fifteen (15) members, to wit:

(1) Representatives of the local government units that concur to join the
Subic Special Economic Zone;

(2) Two (2) representatives from the National Government;

(3) Five (5) representatives from the private sector coming from the present
naval stations, public works center, ship repair facility, naval supply depot and
naval air station; and

(4) The remaining balance to complete the Board shall be composed of

representatives from the business and investment sectors.

The chairman and the members of the Board shall be appointed by the
President to serve for a term of six (6) years, unless sooner removed for cause
except for the representatives of the local government units who shall serve for
a term of three (3) years. In case of removal for cause, the replacement shall
serve only the unexpired portion of the term.

No person shall be appointed as a member of the Board unless he is a Filipino

citizen, of good moral character, and of recognized competence in relevant
fields including, but not limited to economics, management, international
relations, law or engineering. Preference in the appointment of the members of
the Board shall be given to residents within the Subic Special Economic Zone.

Members of the Board shall receive a per diem of not more than Five thousand
pesos (P5,000.00) for every board meeting: provided, however, that the per
diem collected per month does not exceed the equivalent of four (4) meetings:
provided, further, that the amount of per diem for every board meeting may be
increased by the President: provided finally, that the amount of per diem shall
not be increased within two (2) years after its last increase.
(d) Chairman/Administrator. — The President shall appoint a professional
manager as administrator of the Subic Authority with a compensation to be
determined by the Board subject to the approval of the Secretary of Budget,
who shall be the ex officio chairman of the Board and who shall serve as the
chief executive officer of the Subic Authority: provided, however, that for the
first year of its operations from the effectivity of this Act, the mayor of the City
of Olongapo shall be appointed as the chairman and chief executive officer of
the Subic Authority.

(e) Capitalization. — The Subic Authority shall have an authorized capital

stock of Twenty billion pesos (P20,000,000,000) divided into twenty thousand
(P20,000) no-par shares fully subscribed and paid up by the Republic of the
Philippines with:

(1) All lands embraced, covered and defined in Section 12 hereof, as well as
permanent improvements and fixtures upon proper inventory not otherwise
alienated, conveyed, or transferred to another government agency;

(2) All other assets which the President may transfer to the Subic Authority
as part of the equity contribution of the Government; and

(3) Cash contribution by the Government in the amount of Three hundred

million pesos (P300,000,000) a year for the next three (3) years, which is
hereby appropriated out of any fund in the National Treasury not otherwise
appropriated.

SECTION 14. Relationship with the Conversion Authority and the Local
Government Units. —

(a) The provisions of existing laws, rules and regulations to the contrary
notwithstanding, the Subic Authority shall exercise administrative powers,
rule-making and disbursement of funds over the Subic Special Economic Zone
in conformity with the oversight function of the Conversion Authority.

(b) In case of conflict between the Subic Authority and the local government
units concerned on matters affecting the Subic Special Economic Zone other
than defense and security, the decision of the Subic Authority shall prevail.

SECTION 15. Clark and Other Special Economic Zones. — Subject to the
concurrence by resolution of the local government units directly affected, the
President is hereby authorized to create by executive proclamation a Special
Economic Zone covering the lands occupied by the Clark military reservations
and its contiguous extensions as embraced, covered and defined by the 1947
Military Bases Agreement between the Philippines and the United States of
America, as amended, located within the territorial jurisdiction of Angeles City,
Municipalities of Mabalacat and Porac, Province of Pampanga, and the
Municipality of Capas, Province of Tarlac, in accordance with the policies as
herein provided insofar as applicable to the Clark military reservations.

The governing body of the Clark Special Economic Zone shall likewise be
established by executive proclamation with such powers and functions
exercised by the Export Processing Zone Authority pursuant to Presidential
Decree No. 66 as amended.

The policies to govern and regulate the Clark Special Economic Zone shall be
determined upon consultation with the inhabitants of the local government
units directly affected which shall be conducted within six (6) months upon
approval of this Act.

Similarly, subject to the concurrence by resolution of the local government

units directly affected, the President shall create other Special Economic Zones,
in the base areas of Wallace Air Station in San Fernando, La Union (excluding
areas designated for communications, advance warning and radar
requirements of the Philippine Air Force to be determined by the Conversion
Authority) and Camp John Hay in the City of Baguio.

Upon recommendation of the Conversion Authority, the President is likewise

authorized to create Special Economic Zones covering the Municipalities of
Morong, Hermosa, Dinalupihan, Castillejos, and San Marcelino.

SECTION 16. Subsidiaries. — The Conversion Authority shall have the power
to form, establish, organize and maintain a subsidiary corporation or
corporations. Such subsidiary or subsidiaries shall be formed in accordance
with the Philippine Corporation Law and existing rules and regulations
promulgated by the Securities and Exchange Commission, unless otherwise
provided in this Act. In all cases, the Conversion Authority shall own initially at
least fifty-one per centum (51%) of the capital stock of a subsidiary. The
Conversion Authority shall also initially have the majority of the Board of
Directors of the subsidiaries, of which at least one (1) director shall be the
chairman of the Conversion Authority and a second director shall be the
president of the Conversion Authority or his designated representative.

Such subsidiaries shall be exempt from the coverage of the Civil Service Laws,
rules and regulations.

SECTION 17. Supervision. — The Conversion Authority shall be under the

direct control and supervision of the Office of the President for purposes of
policy direction and coordination.
SECTION 18. Legal Counsel. — Without prejudice to the hiring of an outside
counsel, the Government Corporate Counsel shall be the ex officio legal counsel
of the Conversion Authority, the governing boards of the Special Economic
Zones and the subsidiaries wherein the Conversion Authority owns the
majority of the shares of stocks, and for this purpose he may designate a full
time representative whose compensation shall be approved by the Board.

SECTION 19. Auditor. — The Commission on Audit shall appoint a

representative who shall be the full time auditor of the Conversion Authority,
its subsidiaries and the Special Economic Zones and such personnel as may be
necessary to assist said representative in the performance of his duties. He is
mandated to impose pre-audit within thirty (30) days after submission of all
proposed substantial sales, transfers, and alienations of property. He shall
likewise render a full report thereof to Congress every sixty (60) days. The
salaries of the auditor and his staff shall be approved by the Board.

Sec. 20. Interim Capacity. — Except for the chairman of the Subic Authority,
the chairman and other members of the Board of the Conversion Authority and
the Subic Authority shall act in an interim capacity and shall serve until the
31st of July 1992 or until such time that their successors shall have been duly
appointed.

Sec. 21. Injunction and Restraining Order. — The implementation of the

projects for the conversion into alternative productive uses of the military
reservations are urgent and necessary and shall not be restrained or enjoined
except by an order issued by the Supreme Court of the Philippines.

Sec. 22. Separability Clause. — If any provision of this Act shall be held
unconstitutional or invalid, the other provisions not otherwise affected shall
remain in full force and effect.

Sec. 23. Repealing Clause. — All laws, executive issuances or parts thereof
which are inconsistent herewith are hereby repealed or amended accordingly.

Sec. 24. Effectivity Clause. — This Act shall take effect upon its publication
in at least one (1) newspaper of general circulation.

[REPUBLIC ACT NO. 7916]

(as amended by Republic Act No. 8748)

AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND MECHANISMS

FOR THE CREATION, OPERATON, ADMINISTRATION, AND
COORDINATION OF SPECIAL ECONOMIC ZONES IN THE PHILIPPINES,
CREATING FOR THIS PURPOSE, THE PHILIPPINE ECONOMIC ZONE
AUTHORITY (PEZA), AND FOR OTHER PURPOSES.
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

CHAPTER I

PURPOSES AND OBJECTIVES: ESTABLISHMENT

AND NATURE OF SPECIAL ECONOMIC ZONES;
COORDINATION WITH OTHER SIMILAR SCHEMES

SEC. 1. Title. – This act shall be known and cited as "The Special Economic
Zone Act of 1995."

SEC. 2. Declaration of Policy. – It is the declared policy of the government to

translate into practical realities the following State policies and mandates in
the 1987 Constitution, namely:

(a) "The State recognizes the indispensible role of the private sector, encourages
private enterprise, and provides incentives to needed investments." (Sec. 20,
Art II)

(b) "The State shall promote the preferential use of Filipino labor, domestic
materials and locally produced goods and adopt measures that help make
them competitive." (Sec. 12, Art XII)

In pursuance of these policies, the government shall actively encourage,

promote, induce and accelerate a sound and balanced industrial, economic and
social development of the country in order to provide jobs to the people
specially those in the rural areas, increase their productivity and their
individual and family income, and thereby improve the level and quality of their
living condition through the establishment, among others, of special economic
zones in suitable and strategic locations in the country and through measures
that shall effectively attract legitimate and productive foreign investments.

SEC. 3. Purposes, Intents and Objectives. – It is the purpose, intent and

objective of this Act:

(a) To establish the legal framework and mechanisms for the integration,
coordination, planning and monitoring of special economic zones, industrial
estates / parks, export processing zones and other economic zones;

(b) To transform selected areas in the country into highly developed agro
industrial, industrial, commercial, tourist, banking, investment, and financial
centers, where highly trained workers and efficient services will be available to
commercial enterprises;

(c) To promote the flow of investors, both foreign and local, into special
economic zones which would generate employment opportunities and establish
backward and forward linkages among industries in and around the economic
zones;

(d) To stimulate the repatriation of Filipino capital by providing attractive

climate and incentives for business activity;

(e) To promote financial and industrial cooperation between the Philippines and
industrialized countries through technology-intensive industries that will
modernize the country’s industrial sector and improve productivity levels by
utilizing new technological and managerial know-how; and

(f) To vest the special economic zones on certain areas thereof with the status
of a separate customs territory within the framework of the Constitution and
the national sovereignty and territorial integrity of the Philippines.

SEC. 4. Definition of Terms. – For purposes of this Act, the following definitions
shall apply to the following terms:

(a) "Special Economic Zones (SEZ)" – hereinafter referred to as the ECOZONES,

are selected areas with highly developed or which have the potential to be
developed into agro-industrial, Industrial tourist/recreational, commercial,
banking, investment and financial centers. An ECOZONE may contain any or
all of the following: Industrial Estates (IEs), Export Processing Zones (EPZs),
Free Trade Zones, and Tourist/Recreational Centers.

(b) "Industrial Estate (IE)" – refers to a tract of land subdivided and developed
according to a comprehensive plan under a unified continuous management
and with provisions for basic infrastructure and utilities, with or without pre-
built standard factory buildings and community facilities for the use of the
community of industries.

(c) "Export Processing Zone (EPZ)" – a specialized industrial estate located

physically and/or administratively outside customs territory, predominantly
oriented to export production. Enterprises located in export processing zones
are allowed to import capital equipment and raw materials free from duties,
taxes and other import restrictions.

(d)"Free Trade Zone" - an isolated policed area adjacent to a port of entry (as a
seaport) and/or airport where imported goods may be unloaded for immediate
transshipment or stored, repacked, sorted, mixed, or otherwise manipulated
without being subject to import duties. However, movement of these imported
goods from the free-trade area to a non-free-trade area in the country shall be
subject to import duties.

Enterprises within the zone are granted preferential tax treatment and
immigration laws are more lenient.

SEC. 5. Establishment of ECOZONES. – To ensure the viability and

geographical dispersal of ECOZONES through a system of prioritization, the
following areas are initially identified as ECOZONES, subject to the criteria
specified in Section 6:

(a) So much as may be necessary of that portion of Morong, Hermosa,

Dinalupihan, Orani, Samal, and Abucay in the Province of Bataan;

(b) So much as may be necessary of that portion of the municipalities of Ibaan,

Rosario, Taysan, San Jose, San Juan, and cities of Lipa and Batangas;

(c) So much as may be necessary of that portion of the City of Cagayan de Oro
in the Province of Misamis Oriental;

(d) So much as may be necessary of that portion of the City of Iligan in the
Province of Lanao del Norte;

(e) So much as may be necessary of that portion of the Province of Saranggani;

(f) So much as may be necessary of that portion of the City of Laoag in the
Province of Ilocos Norte;

(g) So much as may be necessary of that portion of Davao City and Samal
Island in the Province of Davao del Norte;

(h) So much as may be necessary of that portion of Oroquieta City in the

Province of Misamis Occidental;

(i) So much as may be necessary of that portion of Tubalan Cove, Malita in the
Province of Davao del Sur;

(j) So much as may be necessary of that portion of Baler, Dinalungan and

Casiguran including its territorial waters and islets and its immediate environs
in the Province of Aurora;
(k) So much as may be necessary of that portion of cities of Naga and Iriga in
the Province of Camarines Sur, Legaspi and Tabaco in the Province of Albay,
and Sorsogon in the Province of Sorsogon;

(l) So much as may be necessary of that portion of Bataan Island in the

Province of Batanes;

(m) So much as may be necessary of that portion of Lapu-lapu in the Island of

Mactan, and the municipalities of Balamban and Pinamungahan and the cities
of Cebu and Toledo and the Province of Cebu, including its territorial waters
and islets and its immediate environs;

(n) So much as may be necessary of that portion of Tacloban City;

(o) So much as may be necessary of that portion of the Municipality of Barugo

in the Province of Leyte;

(p) So much as may be necessary of that portion of the Municipality of

Buenavista in the Province of Guimaras;

(q) So much as may be necessary of that portion of the municipalities of San

Jose de Buenavista, Hamtic, Sibalon, and Culasi in the Province of Antique;
(r) So much as may be necessary of that portion of the municipalities of
Catarman, Bobon and San Jose in the Province of Northern Samar, the Island
of Samar;

(s) So much as may be necessary of that portion of the Municipality of Ternate

and its immediate environs in the Province of Cavite;

(t) So much as may be necessary of that portion of Polloc, Parang in the

Province of Maguindanao;

(u) So much as may be necessary of that portion of the Municipality of Boac in

the Province of Marinduque;

(v) So much of may be necessary of that portion of the Municipality of Pitogo in

the Province of Zamboanga del Sur;

(w) So much as may be necessary of that portion of Dipolog City-Manukan

Corridor in the Province of Zamboanga del Norte;

(x) So much as may be necessary of that portion of Mambajao, Camiguin

Province;

(y) So much as may be necessary of that portion of Infanta, Real, Polillo,

Alabat, Atimonan, Mauban, Tiaong, Pagbilao, Mulanay, Tagkawayan, and
Dingalan Bay in the Province of Quezon;

(z) So much as may be necessary of that portion of Butuan City and the
Province of Agusan del Norte, including its territorial waters and islets and its
immediate environs;

(aa) So much as may be necessary of that portion of Roxas City including its
territorial waters and islets and its immediate environs in the Province of
Capiz;

(bb) So much as may be necessary of that portion of San Jacinto, San Fabian,
Mangaldan, Lingayen, Sual, Dagupan, Alaminos, Manaoag, Binmaley in the
Province of Pangasinan;

(cc) So much as may be necessary of that portion of the autonomous region;

(dd) So much as may be necessary of that portion of Masinloc, Candelaria and

Sta. Cruz in the Province of Zambales;

(ee)So much as may be necessary of that portion of the Palawan Island;

(ff) So much as may be necessary of that portion of General Santos City in

South Cotabato and its immediate environs;
(gg) So much as may be necessary of that portion of Dumaguete City and
Negros Oriental, including its territorial waters and islets and its immediate
environs;

(hh)So much as may be necessary of that portion of the Province of Ilocos Sur;

(ii) So much as may be necessary of that portion of the Province of La Union;

(jj) So much as may be necessary of that portion of the Province of Laguna,

including its territorial waters and its immediate environs;

(kk) So much as may be necessary of that portion of the Province of Rizal;

(ll) All existing export processing zones and government-owned industrial

estates; and

(mm) Any private industrial estate which shall voluntarily apply for conversion
into an ECOZONE.

These areas shall be developed through any of the following schemes:

i. Private initiative;
ii. Local government initiative with the assistance of the national government;
and

iii. National government initiative.

The metes and bounds of each ECOZONE are to be delineated and more
particularly described in a proclamation to be issued by the President of the
Philippines, upon the recommendation of the Philippine Economic Zone
Authority (PEZA), which shall be established under this Act, in coordination
with the municipal and / or city council, National Land Use Coordinating
Committee and / or the Regional Land Use Committee.

SEC. 6. Criteria for the Establishment of Other ECOZONES. – In addition to

the ECOZONES identified in Section 5 of this Act, other areas may be
established as ECOZONES in a proclamation to be issued by the President of
the Philippines subject to the evaluation and recommendation of the PEZA,
based on a detailed feasibility and engineering study which must conform to
the following criteria:

(a) The proposed area must be identified as a regional growth center in the
Medium-Term Philippine Development Plan or by the Regional Development
Council;

(b) The existence of required infrastructure in the proposed ECOZONE, such as

roads, railways, telephones, ports, airports, etc., and the suitability and
capacity of the proposed site to absorb such improvements;

(c) The availability of water source and electric power supply for use of the
ECOZONE;

(d) The extent of vacant lands available for industrial and commercial
development and future expansion of the ECOZONE as well as of lands
adjacent to the ECOZONE available for development of residential areas for the
ECOZONE workers;

(e) The availability of skilled, semi-skilled and non-skilled trainable labor force
in and around the ECOZONE;

(f) The area must have a significant incremental advantage over the existing
economic zones and its potential profitability can be established;

(g) The area must be strategically located; and

(h) The area must be situated where controls can easily be established to
curtail smuggling activities.

Other areas which do not meet the foregoing criteria may be established as
ECOZONES: Provided, That the said area shall be developed only through local
government and/or private sector initiative under any of the schemes allowed
in Republic Act No. 6957 (the build-operate-transfer law), and without any
financial exposure on the part of the national government: Provided, further,
That the area can be easily secured to curtail smuggling activities: Provided,
finally, That after five (5) years the area must have attained a substantial
degree of development, the indicators of which shall be formulated by the
PEZA.

SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial,

Commercial / Trading, Tourist, Investment and Financial Community. - Within
the framework of the Constitution, the interest of national sovereignty and
territorial integrity of the Republic, ECOZONE shall be developed, as much as
possible, into a decentralized, self-reliant and self-sustaining
industrial,commercial/trading, agro-industrial, tourist, banking, financial and
investment center with minimum government intervention. Each ECOZONE
shall be provided with transportation, telecommunications, and other facilities
needed to generate linkage with industries and employment opportunities for
its own inhabitants and those of nearby towns and cities.

The ECOZONE shall administer itself on economic, financial, industrial,

tourism development and such other matters within the exclusive competence
of the national government.

The ECOZONE may establish mutually beneficial economic relations with other
entities within the country, or, subject to the administrative guidance of the
Department of Foreign Affairs and/or the Department of Trade and Industry,
with foreign entities or enterprises.

Foreign citizens and companies owned by non-Filipinos in whatever proportion

may set up enterprises in the ECOZONE, either by themselves or in joint
venture with Filipinos in any sector of industry, international trade and
commerce within the ECOZONE. Their assets, profits and other legitimate
interests shall be protected: Provided, That the ECOZONE through the PEZA
may require a minimum investment for any ECOZONE enterprises in freely
convertible currencies: Provided, further, That the new investment shall fall
under the priorities, thrusts and limits provided for in the Act.

SEC. 8. ECOZONE to be Operated and Managed as Separate Customs

Territory. – The ECOZONE shall be managed and operated by the PEZA as
separate customs territory.

The PEZA is hereby vested with the authority to issue certificate of origin for
products manufactured or processed in each ECOZONE in accordance with the
prevailing rules or origin, and the pertinent regulations of the Department of
Trade and Industry and/or the Department of Finance.

SEC. 9. Defense and Security. – The defense of the ECOZONE and the security
of its perimeter fence shall be the responsibility of the national government in
coordination with the PEZA. Military forces sent by the national government for
the purpose of defense shall not interfere in the internal affairs of any of the
ECOZONE and expenditure for these military forces shall be borne by the
national government. The PEZA may provide and establish the ECOZONES’
internal security and firefighting forces.

SEC. 10. Immigration. – Any investor within the ECOZONE whose initial
investment shall not be less than One Hundred Fifty Thousand Dollars
($150,000.00), his/her spouse and dependent children under twenty-one (21)
years of age shall be granted permanent resident status within the ECOZONE.
They shall have freedom of ingress and egress to and from the ECOZONE
without any need of special authorization from the Bureau of Immigration.

The PEZA shall issue working visas renewable every two (2) years to foreign
executives and other aliens, processing highly-technical skills which no Filipino
within the ECOZONE possesses, as certified by the Department of Labor and
Employment. The names of aliens granted permanent resident status and
working visas by the PEZA shall be reported to the Bureau of Immigration
within thirty (30) days after issuance thereof.

CHAPTER II

GOVERNING STRUCTURES
SEC. 11. The Philippine Economic Zone Authority (PEZA) Board. – There is
hereby created a body corporate to be known as the Philippine Economic Zone
Authority (PEZA) attached to the Department of Trade and Industry. The Board
shall have a director general with the rank of department undersecretary who
shall be appointed by the President. The director general shall be at least forty
(40) years of age, of proven probity and integrity, and a degree holder in any of
the following fields: economics, business, public administration, law,
management or their equivalent, and with at least ten (10) years relevant
working experience preferably in the field of management or public
administration.

"The director general shall be assisted by three (3) deputy directors general
each for policy and planning, administration and operation, who shall be
appointed by the PEZA Board, upon the recommendation of the director
general. The deputy directors general shall be at least thirty-five (35) years old,
with proven probity and integrity, and a degree holder in any of the following
fields: economics, business, public administration, law, management or their
equivalent."

"The Board shall be composed of thirteen (13) members as follows: the

Secretary of the Department of Trade and Industry as Chairman, the Director
General of the Philippine Economic Zone Authority as Vice-Chairman, the
undersecretaries of the Department of Finance, the Department of Labor and
Employment, the Department of Interior and Local Government, the
Department of Environment and Natural Resources, the Department of
Agriculture, the Department of Public Works and Highways, the Department of
Science and Technology, the Department of Energy, the Deputy Director
General of the National Economic and Development Authority, one (1)
representative from the investors / business sector in the ECOZONE. In case of
the unavailability of the Secretary of the Department of Trade and Industry to
attend a particular board meeting, the Director General of PEZA shall act as
Chairman."

The existing Export Processing Zone Authority (EPZA) created under

Presidential Decree No. 66 shall evolve into the PEZA in accordance with the
guidelines and regulations set forth in an executive order issued for this
purpose.

Members of the Board shall receive a per diem of not less than the amount
equivalent to the representation and transportation allowances of the members
of the Board and / or as may be determined by the Department of Budget and
Management: Provided, however, That per diems collected per month does not
exceed the equivalent of four (4) meetings.

SEC. 12. Functions and Powers of PEZA Board. – The Philippine Economic
Zone Authority (PEZA) Board shall have the following functions and powers:

(a) Set the general policies on the establishment and operations of the
ECOZONES, industrial estates, export processing zones, free trade zones, and
the like;

(b) Review proposals for the establishment of ECOZONES based on the set
criteria under Section 6 and endorse to the President the establishment of the
ECOZONES, industrial estates, export processing zones, free trade zones and
the like. Thereafter, it shall facilitate and assist in the organization of said
entities;

(c) Regulate and undertake the establishment, operation and maintenance of

utilities, other services and infrastructure in the ECOZONE, such as heat, light
and power, water supply, telecommunication, transport, toll roads and bridges,
port services, etc., and to fix just, reasonable and competitive rates, charges
and fees therefore;

(d) Approve the annual budget of the PEZA and the ECOZONE development
plans;

(e) Issue rules and regulations to implement the provisions of this Act in so far
as its power and functions are concerned;

(f) Exercise its powers and functions as provided for in this Act; and

(g) Render annual reports to the President and the Congress.

SEC. 13. General Powers and Functions of the Authority. – The PEZA shall
have the following powers and functions:

(a) To operate, administer, manage and develop the ECOZONE according to the
principles and provisions set forth in this Act;

(b) To register, regulate and supervise the enterprises in the ECOZONE in an

efficient and decentralized manner;

(c) To coordinate with local government units and exercise general supervision
over the development, plans, activities and operations of the ECOZONES,
industrial estates, export processing zones, free trade zones, and the like;

(d) In coordination with local government units concerned and appropriate

agencies, to construct, acquire, own, lease, operate and maintain on its own or
through contract, franchise, license, bulk purchase from the private sector and
build-operate-transfer scheme or joint venture, adequate facilities and
infrastructure, such as light and power systems, water supply and distribution
systems, telecommunication and transportation, buildings, structures,
warehouses, roads, bridges, ports and other facilities for the operation and
development of the ECOZONE;

(e) To create, operate and/or contract to operate such agencies and functional
units or offices of the authority as it may deem necessary;

(f) To adopt, alter and use a corporate seal; make contracts, lease, own or
otherwise dispose of personal or real property; sue and be sued; and otherwise
carry out its duties and functions as provided for in this Act;

(g) To coordinate the formulation and preparation of the development plans of

the different entities mentioned above;

(h) To coordinate with the National Economic Development Authority (NEDA),

the Department of Trade and Industry (DTI), the Department of Science and
Technology (DOST), and the local government units and appropriate
government agencies for policy and program formulation and implementation;
and

(i) To monitor and evaluate the development and requirements of entities in

subsection (a) and recommend to the local government units or other
appropriate authorities the location, incentives, basic services, utilities and
infrastructure required or to be made available for said entities.

SEC. 14. Powers and Functions of the Director General. – The director general
shall be the overall coordinator of the policies, plans and programs of the
ECOZONES. As such, he shall provide overall supervision over and general
direction to the development and operations of these ECOZONES. He shall
determine the structure and the staffing pattern and personnel complement of
the PEZA and establish regional offices, when necessary, subject to the
approval of the PEZA Board.

In addition, he shall have the following specific powers and responsibilities:

(a) To safeguard all the lands, buildings, records, monies, credits and other
properties and rights of the ECOZONES;

(b) To ensure that all revenues of the ECOZONE are collected and applied in
accordance with its budget;

(c) To ensure that the investors/firms and employees of the ECOZONES are
properly discharging their respective duties;

(d) To give such information and recommend such measures to the Board, as
he shall deem advantageous to the ECOZONE;

(e) To submit to the Board, the ongoing and proposed projects, work and
financial program, annual budget of receipts, and expenditures of the
ECOZONE;

(f) To represent the ECOZONE in all its business matters and sign on its behalf
after approval of the Board, all its bonds, borrowings, contracts, agreements
and obligations made in accordance with this Act;

(g) To acquire jurisdiction, as he may deem proper, over the protests,

complaints, and claims of the residents and enterprises in the ECOZONE
concerning administrative matters;

(h) To recommend to the Board the grant, approval, refusal, amendment or

termination of the ECOZONE franchises, licenses, permits, contracts, and
agreements in accordance with the policies set by the Board;

(i) To require owners of houses, buildings or other structures constructed

without the necessary permit whether constructed on public or private lands,
to remove or demolish such houses, buildings, structures within sixty (60) days
after notice and upon failure of such owner to remove or demolish such house,
building our structure within said period, the director general or his authorized
representative may summarily cause its removal or demolition at the expense
of the owner, any existing law, decree, executive order and other issuances or
part thereof to the contrary notwithstanding;

(j) To take such emergency measures as may be necessary to avoid fires, floods
and mitigate the effects of storms and other natural or public calamities;

(k) To prepare and make out plans for the physical and economic development
of the ECOZONE, including zoning and land subdivision, and issue such rules
and regulations which shall be submitted to the Board for its approval; and

(l) To perform such other duties and exercises such powers as may be
prescribed by the Board, and to implement the policies, rules and regulations
set by the PEZA.

SEC. 15. Administration of Each ECOZONE. – Except for privately-owned,

managed or operated ECOZONES, each ECOZONE shall be organized,
administered, managed and operated by the ECOZONE executive committee
composed of the following:

(a) The administrator who shall be appointed by the PEZA Board upon
recommendation of the director general; and

(b) One (1) deputy administrator to be appointed by the Board upon

recommendation of the director general.
An ECOZONE advisory body shall be created with the following members:

1. The president of the association of investors in the ECOZONE;

2. The governor of the province where the ECOZONE is located;

3. The mayor/s of the municipality/ies or city/ies where the ECOZONE is

located;

4. The president of an accredited labor union in the ECOZONE;

5. The representative of the business sector in the periphery of the ECOZONE;

and

6. The representative of the PEZA.

The ECOZONE advisory body shall have the following functions:

i. Advise the ECOZONE management on matters pertaining to policy initiatives;

and

ii.Assist the ECOZONE management in setting problems arising between labor

and any enterprise in the ECOZONE.

Privately-owned ECOZONES shall retain autonomy and independence but shall

be monitored by the PEZA for the implementation of incentives and operations
for adherence to the law.

SEC. 16. Personnel. – The PEZA Board of Directors shall provide for an
organization and staff of officers and employees of the PEZA, and upon
recommendation of the director general with the approval of the Secretary of
the Department of Trade and Industry, appoint and fix the remunerations and
other emoluments: Provided, That the Board shall have exclusive and final
authority to promote, transfer, assign and reassign officers of the PEZA, any
provision of existing law to the contrary notwithstanding: Provided, further,
That the director general may carry out removal of such officers and
employees.

All positions in the PEZA shall be governed by a compensation, position

classification system and qualification standards approved by the director
general with the concurrence of the Board of Directors based on a
comprehensive job analysis and audit of actual duties and responsibilities. The
compensation plan shall be comparable with the prevailing compensation plans
in the Subic Bay Metropolitan Authority (SBMA), Clark Development
Corporation (BCDA) and the private sector and shall be subject to the periodic
review by the Board no more than once every two (2) years without prejudice to
yearly merit reviews or increases based on productivity and profitability. The
PEZA shall therefore be exempt from existing laws, rules and regulations on
compensation, position classification and qualification standards. It shall
however endeavor to make its systems conform as closely as possible with the
principles under Republic Act No. 6758.

The PEZA officers and employees including all Members of the Board shall not
engage directly or indirectly in partisan activities or take part in any election,
except to vote.

No officer or employee of the PEZA subject to Civil Service laws and regulations
shall be removed or suspended except for cause, as provided by law.

SEC. 17. Investigation and Inquiries. – Upon a written formal complaint made
under oath, which on its face provides reasonable basis to believe that some
anomaly or irregularity might have been committed, the PEZA or the
administrator of the ECOZONE concerned, shall have the power to inquire into
the conduct of firms or employees of the ECOZONE and to conduct
investigations, and for that purpose may subpoena witnesses, administer
oaths, and compel the production of books, papers, and other evidences:
Provided, That to arrive at the truth, the investigator(s) may grant immunity
from prosecution to any person whose testimony or whose possessions of
documents or other evidence is necessary or convenient to determine the truth
in any investigation conducted by him or under the authority of the PEZA or
the administrator of the ECOZONE concerned.

SEC. 18. Prohibition Against Holding Any Other Office. – The director general,
deputy director general, administrators, officials and staff or assistants of the
PEZA shall not hold any other office or employment within or outside the PEZA
during their tenure. They shall not, during their tenure, directly or indirectly,
practice any profession, participate in any business, or be financially interested
in any contract with, or in any franchise, or special privilege granted by the
PEZA or national government, or any subdivision, agency, or instrumentality
thereof, including any government-owned-controlled corporation, or its
subsidiary.

SEC. 19. Disbursement of Funds. – No money shall be paid out of the funds of
any ECOZONE except in pursuance of the budget as formulated and approved
by the PEZA.
SEC. 20. Full Disclosure of Financial and Business Interests. – Every member
of the Board of the PEZA, the director general, the deputy directors general,
and their staff shall, upon assumption of office, make full disclosure of their
financial and business Interests.

CHAPTER III

OPERATIONS WITHIN THE ECOZONE

SEC. 21. Development Strategy of the ECOZONE. - The strategy and priority of
development of each ECOZONE established pursuant to this Act shall be
formulated by the PEZA, in coordination with the Department of Trade and
Industry and the National Economic and Development Authority; Provided,
That such development strategy is consistent with the priorities of the national
government as outlined in the medium-term Philippine development plan.

It shall be the policy of the government and the PEZA to encourage and provide
Incentives and facilitate private sector participation in the construction and
operation of public utilities and infrastructure in the ECOZONE, using any of
the schemes allowed in Republic Act No. 6957 (the build-operate-transfer law).

SEC. 22. Survey of Resources. The PEZA shall, in coordination with

appropriate authorities and neighboring cities and municipalities, immediately
conduct a survey of the physical, natural assets and potentialities of the
ECOZONE areas under its jurisdiction.

SEC. 23. Fiscal Incentives. – Business establishments operating within the

ECOZONES shall be entitled to the fiscal incentives as provided for under
Presidential Decree No. 66, the law creating the Export Processing Zone
Authority, or those provided under Book VI of Executive Order No. 226,
otherwise known as the Omnibus Investment Code of 1987.

Furthermore, tax credits for exporters using local materials as Inputs shall
enjoy the same benefits provided for in the Export Development Act of 1994.

SEC. 24. Exemption from National and Local Taxes.- Except for real property
taxes on land owned by developers, no taxes, local and national, shall be
imposed on business establishments operating within the ECOZONE. In lieu
thereof, five percent (5%) of the gross income earned by all business enterprises
within the ECOZONE shall be paid and remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business

establishments to the treasurer’s office of the municipality or city where the
enterprise is located.

SEC. 25. Applicable National and Local Taxes. – All persons and services
establishments in the ECOZONE shall be subject to national and local taxes
under the National Internal Revenue Code and the Local Government Code.

SEC. 26. Domestic Sales. – Goods manufactured by an ECOZONE enterprise

shall be made available for Immediate retail sales in the domestic market,
subject to payment of corresponding taxes on the raw materials and other
regulations that may be adopted by the Board of the PEZA.

However, in order to protect the domestic industry, there shall be a negative

list of Industries that will be drawn up by the PEZA. Enterprises engaged in the
industries included in the negative list shall not be allowed to sell their
products locally. Said negative list shall be regularly updated by the PEZA.

The PEZA, in coordination with the Department of Trade and Industry and the
Bureau of Customs, shall jointly issue the necessary implementing rules and
guidelines for the effective Implementation of this section.

SEC. 27. Applicability of Banking Laws and Regulations. – Existing banking

laws and Bangko Sentral ng Pilipinas (BSP) rules and regulations shall apply to
banks and financial institutions to be established in the ECOZONE and to
other ECOZONE-registered enterprises. Among other pertinent regulations,
these include those governing foreign exchange and other current account
transactions (trade and non-trade) local and foreign borrowings, foreign
currency deposit units, offshore banking units and other financial institutions
under the supervision of the BSP.

SEC. 28. After Tax Profits. – Without prior Bangkok Sentral approval, after tax
profits and other earnings of foreign investments in enterprises in the
ECOZONE may be remitted outward in the equivalent foreign exchange
through any of the banks licensed by the Bangko Sentral ng Pilipinas in the
ECOZONE: Provided, however, That such foreign investments in said
enterprises have been previously registered with the Bangko Sentral.

SEC. 29. Eminent Domain. – The areas comprising an ECOZONE may be

expanded or reduced when necessary. For this purpose, the government shall
have the power to acquire, either by purchase, negotiation or condemnation
proceedings, any private lands within or adjacent to the ECOZONE for:

a. Consolidation of lands for zone development purposes;

b. Acquisition of right of way to the ECOZONE; and

c. The protection of watershed areas and natural assets valuable to the

prosperity of the ECOZONE.

If in the establishment of a publicly-owned ECOZONE, any person or group of

persons who has been occupying a parcel of land within the Zone has to be
evicted, the PEZA shall provide the person or group of persons concerned with
proper disturbance compensation: Provided, however, That in the case of
displaced agrarian reform beneficiaries, they shall be entitled to the benefits
under the Comprehensive Agrarian Reform Law, including but not limited to
Section 36 of Republic Act No. 3844, in addition to a homelot in the relocation
site and preferential employment in the project being undertaken.

SEC. 30. Leases of Lands and Buildings. – Lands and buildings in each
ECOZONE may be leased to foreign investors for a period not exceeding fifty
(50) years renewable once for a period of not more than twenty-five (25) years,
as provided for under Republic Act No. 7652, otherwise known as the Investors’
Lease Act. The leasehold right acquired under long-term contracts may be sold,
transferred or assigned, subject to the conditions set forth under Republic Act
No. 7652.

SEC. 31. Land Conversion. – Agricultural lands may be converted for

residential, commercial, industrial and other non-agricultural purposes,
subjects to the conditions set forth under Republic Act No. 6657 and other
existing laws.

SEC. 32. Shipping and Shipping Register. – Private shipping and related
business including private container terminals may operate freely in the
ECOZONE, subject only to such minimum reasonable regulations of local
application which the PEZA may prescribe.
The PEZA shall, in coordination with the Department of Transportation and
Communications, maintain a shipping register for each ECOZONE as a
business register of convenience for ocean-going vessels and issue related
certification.

Ships of all sizes, descriptions and nationalities shall enjoy access to the ports
of the ECOZONE, subject only to such reasonable requirement as may be
prescribed by the PEZA In coordination with the appropriate agencies of the
national government.

SEC. 33. Protection of Environment. - The PEZA, in coordination with the

appropriate agencies, shall take concrete and appropriate steps and enact the
proper measure for the protection of the local environment.

SEC. 34. Termination of Business. - Investors In the ECOZONE who desire to

terminate business or operations shall comply with such requirements and
procedures which the PEZA shall set, particularly those relating to the clearing
of debts. The assets of the closed enterprise can be transferred and the funds
con be remitted out of the ECOZONE subject to the rules, guidelines and
procedures prescribed jointly by the Bangko Sentral ng Pilipinas, the
Department of Finance and the PEZA.

SEC. 35. Registration of Business Enterprises. - Business enterprises within a

designated ECOZONE shall register with the PEZA to avail of all incentives and
benefits provided for in this Act.

SEC. 36. One Stop Shop Center. - The PEZA shall establish a one stop shop
center for the purpose of facilitating the registration of new enterprises in the
ECOZONE. Thus, all appropriate government agencies that are Involved In
registering, licensing or issuing permits to investors shall assign their
representatives to the ECOZONE to attend to Investor’s requirements.

CHAPTER IV

INDUSTRIAL HARMONY IN THE ECOZONES

SEC. 37. Labor and Management Relations. - Except as otherwise provided in

this Act, labor and management relations in the ECOZONE shall be governed
by the existing Labor Code of the Philippines. Employees and personnel in the
ECOZONE enterprises shall receive salaries and benefits and shall enjoy
working conditions not less than those provided under the Philippine Labor
Code and other relevant laws, issuances, rules and regulations of the
Philippine government and the Department of Labor and Employment.

SEC. 38. Promotion of Industrial Peace. - In the pursuit of Industrial harmony

in the ECOZONE, a tripartite body composed of one (1) representative each
from the Department of Labor and Employment, labor sector and business and
industry sectors shall be created In order to formulate a mechanism under a
social pact for the enhancement and preservation of industrial peace in the
ECOZONE within thirty (30) days after the effectivity of this Act.

SEC. 39. Master Employment Contracts. - The PEZA, in coordination with the
Department of Tabor and Employment, shall prescribe a master employment
contract for all ECOZONE enterprise staff members and workers, the terms of
which provide salaries and benefits not less than those provided under this
Act, the Philippine Labor Code, as amended, and other relevant issuances of
the national government.

SEC. 40. Percentage of Foreign Nationals. - Employment of foreign nationals

hired by ECOZONE enterprises in a supervisory, technical or advisory capacity
shall not exceed five percent (5%) of Its workforce without the express
authorization of the Secretary of Labor and Employment.

SEC. 41. Migrant Worker. - The PEZA, in coordination with the Department of
Labor and Employment, shall promulgate appropriate measures and programs
leading to the expansion of the services of the ECOZONE to help the local
governments of nearby areas meet the needs of the migrant workers.

SEC. 42. Incentive Scheme. - An additional deduction equivalent to one- half

(1/2) of the value of training expenses incurred In developing skilled or
unskilled labor or for managerial or other management development programs
incurred by enterprises In the ECOZONE can be deducted from the national
government's share of three percent (3%) as provided In Section 24.

The PEZA, the Department of Labor and Employment, and the Department of
Finance shall jointly make a review of the incentive scheme provided In this
section every two (2) years or when circumstances so warrant.
CHAPTER V

NATIONAL GOVERNMENT AND OTHER ENTITIES

SEC. 43. Relationship with the Regional Development Council. - The PEZA
shall determine the development goals for the ECOZONE within the framework
of national development plans, policies and goals, and the administrator shall,
upon approval by the PEZA Board, submit the ECOZONE plans, programs and
projects to the regional development council for inclusion in and as inputs to
the overall regional development plan.

SEC. 44. Relationship with the Local Government Units. - Except as herein
provided, the local government units comprising the ECOZONE shall retain
their basic autonomy and identity. The cities shall be governed by their
respective charters and the municipalities shall operate and function In
accordance with Republic Act No. 7160, otherwise known as the Local
Government Code of 1991.

SEC. 45. Relationship of PEZA to Privately-Owned Industrial Estates. –

Privately-owned industrial estates shall retain their autonomy and
independence and shall be monitored by the PEZA for the implementation of
incentives.

SEC. 46. Transfer of Resources. - The relevant functions of the Board of

Investments over industrial estates and agri-export processing estates shall be
transferred to the PEZA. The resources of government-owned Industrial estates
and similar bodies except the Bases Conversion Development Authority and
those areas identified under Republic Act No. 7227, are hereby transferred to
the PEZA as the holding agency. They are hereby detached from their mother
agencies and attached to the PEZA for policy, program and operational
supervision.

The Boards of the affected government-owned industrial estates shall be

phased out and only the management level and an appropriate number of
personnel shall be retained.

Government personnel whose services are not retained by the PEZA or any
government office within the ECOZONE shall be entitled to separation pay and
such retirement and other benefits they are entitled to under the laws then in
force at the time of their separation: Provided, That in no case shall the
separation pay be less than one and one-fourth (1 1/4) month of every year of
service.
CHAPTER VI

MISCELLANEOUS PROVISIONS

SEC. 47. Appropriation. - Upon the effectivity of this Act, all funds of the
former Export Processing Zone Authority (EPZA) shall be transferred to the
newly-created Philippine Economic Zone Authority, Thereafter, any sum as
may be necessary to augment its capital outlay shall be Included In the
General Appropriations Act to be treated as an equity of the national
government.

Additional funding shall come from the following:

(a) The annual subsidies, appropriations and/or other assets of the exports
processing zone, and the industrial estates and other economic areas that have
been absorbed/transferred to the PEZA as mandate in this Act;

(b) The proceeds from the rent of lands, buildings, and other properties of the
ECOZONES concerned;

(c) The proceeds from fees, charges and other revenue-generatlng Instruments
which the PEZA is authorized to impose and collect under this Act,

(d) The proceeds from bonds which the PEZA authorized to float both domestic
and abroad; and

(e) The advance rentals, license fees, and other charges which the PEZA is
authorized to impose under this Act and which an investor is willing to advance
payment for.

SEC. 48. Applicability of National Laws. - National laws shall prevail vis-a- vis
ECOZONE rules, regulations and standards, unless there is a clear intent in
this Act or other Acts of Congress to vest the ECOZONE specific power and
privileges not otherwise allowed under existing laws.

SEC. 49. Authority of the President to Advance Initial Funding.-- Subject to

existing laws, the President of the Philippines is hereby authorized to advance
out of the savings of the Office of the President such funds as may be
necessary to effect the organization of an ECOZONE which shall be reimbursed
by the PEZA at reasonable term and condition.
SEC. 50. Non-Applicability on Areas Covered by Republic Act. No. 7227. - This
Act shall not be applicable to economic zones and areas already created or to
be created under Republic Act No. 7227 or other special laws, and governed by
authorities constituted pursuant thereto.

SEC. 51. Ipso-Facto Clause. - All privileges, benefits, advantages or exemptions

granted to special economic zones under Republic Act. No. 7227, shall ipso-
facto be accorded to special economic zones already created or to be created
under this Act. The free port status shall not be vested upon new special
economic zones.

SEC. 52. Separability Clause. - The provisions of this Act are hereby declared
separable, and in the event one or more of such provisions or part thereof are
declared unconstitutional, such declaration of unconstitutionality shall not
affect the validity of the other provisions thereof.

SEC. 53. Interpretation / Construction. - The powers, authorities and

functions that are vested In the Philippine Economic Zone Authority (PEZA)
and the ECOZONES concerned are intended to establish decentralization of
governmental functions and authority as well as an efficient and effective
working relationship between the ECOZONE, the central government and the
local government units.

SEC. 54. Repealing Clause. - All laws, acts, presidential decrees, executive
orders, proclamations and / or administrative regulations which are
inconsistent with the provisions of this Act, are hereby amended, modified,
superseded or repealed accordingly.

SEC. 55. Implementing Rules and Regulations. - The Department of Trade and
Industry, the National Economic and Development Authority, the Department
of Finance, the Bureau of Customs, the Department of Agrarian Reform, the
Department of Interior and local Government, the Philippine Economic Zone
Authority, and the representatives from the technical staff of the Committee on
Economic Affairs of both Houses of Congress shall formulate the implementing
rules and regulations of this Act within ninety (90) days after its approval.
Such rules and regulations shall take effect fifteen (15) days after their
publication in a newspaper of general circulation in the Philippines.

SEC. 56. Transitory Provisions. - Prior to the effectivity of the implementing

rules and regulations of this Act, the provisions of Presidential Decree No. 66,
as amended, and its implementing rules and regulations shall remain in force.
SEC. 57. Effectivity- This Act shall take effect upon its approval.

EXPORT DEVELOPMENT ACT OF 1994

[Republic Act No. 7844]
AN ACT TO DEVELOP EXPORTS AS A KEY TOWARDS THE ACHIEVEMENT
OF THE NATIONAL GOALS TOWARDS THE YEARS 2000
ARTICLE I
BASIC PRINCIPLES AND POLICIES
SECTION 1. Short title. - This Act shall otherwise be known as
the "Export Development Act of 1994."
SEC. 2. Declaration of policy. - It shall be the policy of the State to
evolve export development into a national effort. The government shall
champion exports as a focal strategy for a sustainable agri-industrial
development to achieve Philippine NIChood towards the year 2000. The
private sector shall take the lead in the collective effort to promote
exports through discipline and hard work, as it confronts the challenge of
winning international markets.chanrobles virtual law library
The government and the private sector shall jointly transform the
Philippines into an exporting nation. Towards this end, the State shall
instill in the Filipino people that exporting is not just a sectoral concern,
but the key to national survival and the means through which the
economic goals of increased employment and enhanced incomes can most
expeditiously be achieved.chanrobles virtual law library
SEC. 3. Key operating principles. - A macro-economic policy framework
that supports export development shall be provided, especially in key
areas of concern to exporters:
[a] Monetary and foreign exchange policies shall establish and maintain a
competitive exchange rate, supported by measures to provide safety nets
for various sectors that may be adversely affected by the implementation
of such policies. Such policies shall be consistent with the responsibility
and primary objectives of the Bangko Sentral ng Pilipinas pursuant to
Section 3 of Republic Act No. 7653.chanrobles virtual law library
[b] Fiscal and credit policies shall provide adequate funds for public and
private investments and business expansion, while keeping the cost of
credit comparable to international levels ensuring access to loanable
funds for SMEs as well as highly technical export enterprises, especially
those in the countryside.chanrobles virtual law library
[c] Agricultural policies shall build up viability and competitiveness of the
country's agriculture sectors and facilitate their linkage with industry to
strengthen the agri-industrial base of the country's export
thrust.chanrobles virtual law library
[d] Trade, tariff and customs policies shall engender competitiveness of
domestic industries and facilitate their participation in international
trade.chanrobles virtual law library
[e] Technical support policies to improve the quality of export products
shall be adopted, particularly those relating to technology transfer, R & D,
technical training and related activities. As such, the Department of
Science and Technology [DOST] and the Department of Agriculture [DA]
shall be supported by colleges and universities in the diffusion of
technology, information and training to the countryside for agri-industrial
and export development.chanrobles virtual law library
[f] Urgent attention must be given to policies affecting infrastructure in
order to ensure the adequate supply and quality of power, water [e.g., for
irrigation], transportation [e.g., shipping and cargo handling], and
communication to support the flow of goods and services in the context
of the national export drive.chanrobles virtual law library
[g] The link between export growth and countryside development must be
strengthened through policies favorable to SMEs, regional industrial
centers, and export processing zones to boost rural and farm-based
entrepreneurship in identified geographic economic growth areas of the
country.chanrobles virtual law library
[h] Labor and industrial relations policies must recognize the inevitable
industrial shifts that will occur in the effort to achieve international
competitiveness. Focus shall be given to the formulation of accords
between labor and management which shall provide for sustained increase
in productivity and competitiveness. In line with this, dual training
schemes shall be integrated as a basic component to the country's
primary and secondary education program to ensure that the manpower
needs of agriculture and industry will be matched by the skills generated
by the educational system. Reasonable price and income policies shall
likewise be adopted in order to safeguard the interest of the labor
sector.chanrobles virtual law library
[i] All government agencies whose actions affect exporters, such as the
Board of Investments [BOI], Bureau of Customs [BOC] and Bureau of
Internal Revenue [BIR] shall simplify procedures to minimize bureaucratic
red tape.chanrobles virtual law library
[j] Provisions of existing laws deemed detrimental to the export sector
shall be repealed in subsequent acts.chanrobles virtual law library
SEC. 4. Definition of terms. - For purposes of this Act, the following
definitions shall apply to the following terms:
[a] "Exporter" means any person, natural or juridical, licensed to do
business in the Philippines, engaged directly or indirectly in the
production, manufacture or trade of products or services which earns at
least fifty percent [50%] of its normal operating revenues from the sale of
its products or services abroad for foreign currency : Provided,That in the
case of services, the same shall be limited to information technology
services, construction services and other services as defined jointly by
the Department of Finance [DOF] and the Department of Trade and
Industry [DTI]. Services rendered by overseas contract workers are not
covered by the definition.chanrobles virtual law library
[b] "Export promotion" shall refer to a range of export activities which the
public and private sectors undertake, such as networking, especially in
export support services and the provision of trade/market information;
organization of trade fairs and missions; provision of advisory services ;
conduct of seminars, lectures, workshops, conferences and training on
export-related subjects; publication of export-related documents; handling
of quality standard, product design and such other activities aimed at
promoting existing exports, especially those meant to reinforce and
improve the position of Philippine export products in specific foreign
markets, principally being those activities necessary for the
implementation of the Philippine Export Development Plan.chanrobles
virtual law library
[c] "Export incentives" shall refer to support measures provided by the
government to exporters to encourage investment in the export sector,
create a freer trade environment and motivate exporters to increase
export sales and perform competitively in the export market. The overall
objective is to increase the country's export sales.chanrobles virtual law
library
[d] "Accredited organization" shall refer to the organization of exporters
granted accreditation by the Export Development Council, as provided in
Section 7[1] of this Act.chanrobles virtual law library

ARTICLE II
INSTITUTIONAL STRUCTURES AND STRATEGIES
SEC. 5. Philippine Export Development Plan [PEDP]. - The President of
the Republic of the Philippines shall approve a rolling three-year
Philippine Export Development Plan prepared by the Department of Trade
and Industry [DTI] which shall form part of the medium-term Philippine
Development Plan [MTPDP]. It shall be formulated in consultation with
the private sector, validated and updated semestrally.chanrobles virtual
law library
The PEDP shall define the country's annual and medium-term export
thrusts, strategies, programs and projects and shall be jointly
implemented by the government, export and other concerned
sectors.chanrobles virtual law library
SEC. 6. Export Development Council. - The existing Export Development
Council, hereinafter referred to as the Council, which was created by
Executive Order No. 98 [1993] as modified by Executive Order No. 110
[1993], and Executive Order No. 180 [1994], shall be strengthened and
institutionalized for the purpose of overseeing the implementation of the
PEDP and coordinating the formulation and implementation of policy
reforms to support the said Plan.chanrobles virtual law library
SEC. 7. Powers and functions. - The Council shall:
[a] approve the PEDP; coordinate, monitor and assess the implementation
thereof, and when necessary, institute appropriate adjustments thereon
in the light of changing conditions in both the domestic and international
environment;
[b] periodically review and assess the country's export performance,
problems and prospects;
[c] identify the main bottlenecks, problem areas and constraints in all
areas/sectors/activities which influence the development of exports,
including but not limited to, such matters as policy framework, physical
infrastructure, finance, technology, production, promotions and
marketing;
[d] mandate specific departments and agencies to attend to the
bottlenecks and problems constraining the development of exports in any
of the areas mentioned in paragraph [c] above, and require the concerned
Secretaries to deliver progress report[s] on the actions/initiatives taken
to resolve these areas of concern at the next meeting[s];
[e] ensure export quality control by overseeing the formulation and
implementation of quality control guidelines by appropriate agencies to
make Philippine exports at par with world-class products;
[f] impose sanctions on any government agency or officer or employee
thereof, or private sector entity that impedes efficient exportation of
Philippine goods;
[g] recommend to Congress any proposed legislation that would
contribute to the development of exports;
[h] submit quarterly reports to Congress;
[i] formulate policies or recommend measures and draw up a study within
ninety [90] days from the approval of this Act, relative to the
rationalization of the government's export promotion and development
functions/activities and programs for the eventual transfer of government
export promotions and development activities to the sector within a
period of two [2] years after the approval of this Act;
[j] formulate the policies for the granting of incentives to exporters;
[k] adopt such policies, rules, procedures and administrative systems for
the efficient and effective exercise of its powers and functions, including
the creation or adoption of an executive committee or secretariat; and
[l] grant and review the accreditation of the organization of exporters,
according to the guidelines which it shall later promulgate for the said
purpose: Provided, That the organization accredited shall be the dominant
one among the other existing export organizations as determined under
the guidelines promulgated by the Council hereof.chanrobles virtual law
library
[m] issue standards and policies to be observed by Local Government
Units [LGUs] in order to :

[1] ensure that LGUs' plans and budgets are supportive of agri-industrial
growth and export competitiveness thrusts of the national government;
and
[2] ensure optimal allocation of expenditures.chanrobles virtual law
library
The DILG and the regional development councils shall be the channels
through which these standards and policies shall be coursed.chanrobles
virtual law library
Sec. 8. Composition of the Council. - The Council shall be composed of
the following:
[a] Secretary of the Department of Trade and Industry as chairman;
[b] Director-General of the National Economic and Development
Authority;
[c] Secretary of the Department of Finance;
[d] Governor of the Bangko Sentral ng Pilipinas;
[e] Secretary of the Department of Science and Technology;
[f] Secretary of the Department of Agriculture;
[g] Secretary of the Department of Foreign Affairs;
[h] Secretary of the Department of Labor and Employment;
[i] Nine [9] representatives from the private sector, the majority of whom
shall be recommendees of the accredited organization, and one of whom
shall be appointed as vice-chairman.chanrobles virtual law library
Other heads of executive agencies, private organizations or individuals
can be called upon by the Council to attend any Council meeting and
assist the Council to resolve issues and problems that concern their
respective offices.chanrobles virtual law library
Likewise, such heads of executive agencies, private organizations or
individuals shall respond to the queries of the Council within two [2]
weeks from the time such queries are received.chanrobles virtual law
library
SEC. 9. Mode of selection and tenure of private sector representatives.-
The President shall appoint the private sector representatives, who are
not ex officio members, upon nomination of the accredited organization,
ensuring balanced representations from the Visayas and Mindanao and
various sectors, such as the labor sector, agricultural and traditional
export sectors as against the non-agricultural and non-traditional export
sectors and the like.chanrobles virtual law library
The private sector representatives of the Council shall serve for a period
of two [2] years. When a vacancy occurs due to the resignation, death or
incapacity of a member, a replacement who shall serve for the remainder
of the member's term of office shall be appointed by the
President.chanrobles virtual law library
SEC. 10. Meeting of the Council. - The Council shall meet once a
month: Provided, That the President or the chairman may convene the
Council anytime whenever he deems it necessary.chanrobles virtual law
library
The President shall preside over meetings of the Council on a quarterly
basis.chanrobles virtual law library
SEC. 11. Funding. - The activities and operational expenses of the
Council shall be funded jointly by budgetary appropriations from the
government and by private sector contributions as provided for in
Executive Order No. 98.chanrobles virtual law library
SEC. 12. Accredited export organization. - The Council shall accredit a
single umbrella organization of exporters pursuant to section 7[1] of this
Act to represent the export sector concerns and interests for three [3]
years, after which the Council shall undertake a review of the
accreditation prior to the granting or re-granting of the said
accreditation.chanrobles virtual law library
The accredited organization shall:
[a] recommend private sector representatives to the Council with
consideration of balanced sectoral representation, as provided in Section
9 hereof;
[b] represent the interests of the export sector;
[c] be responsible for coordinating, supporting and assisting the DTI
relative to the formulation and implementation of the government's
export promotion programs and policies: Provided, That in the event that
some of the export promotion functions of the government are privatized
in accordance with the Act, it shall be responsible for the performance of
such privatized export promotion function; and
[d] manage the Philippine Trade Center, which shall include, among
others, the authority to enter into contracts with promotion facilities or
functions.chanrobles virtual law library
SEC. 13. Export financing guarantee and insurance. - Pursuant to
Section 7[1] of this Act, the Council shall make the necessary legal and
feasibility study/recommendation on the alignment and rationalization of
government programs relative to export financing and existing
organizations dealing primarily and exclusively with export financing
guarantee and insurance and likewise considering the creation of a
private sector led export financing institution whose services shall be
primarily devoted towards supporting the operations of exporters and
indirect exporters, particularly the SMEs.chanrobles virtual law library
The study shall include the powers , functions, and operations of the
proposed institution, and government contributions to the said
institution, and if and when necessary the preparation of a bill creating
the same which the Council may recommend to Congress within six (6)
months after the effectivity of this Act.chanrobles virtual law library
The government counterpart funds shall come from direct budgetary
appropriations and from consolidated capital funds of government
institutions involved in export financing and guarantees, or from equity
contributions from government financial institutions.chanrobles virtual
law library
SEC. 14. Export promotion and information. - As provided in Section 7[1]
of this Act, the Council through the DTI shall prepare an export
promotion privatization program within ninety [90] days from the
approval of this Act and shall subsequently identify the appropriate
funding mechanism for such a programThe privatization process shall be
completed within a period two [2] years.
While the appropriate funding mechanism is not yet in place, financial
and technical assistance to the accredited organization on a project-to-
project basis shall be granted. In this regard, the national government
shall appropriate such sums as may be necessary to the Council to be
exclusively earmarked for export promotion and information until such
time that the Council establishes the funding mechanism. The Council
shall formulate the criteria to avail of this financial and technical
assistance and the extent to which the assistance shall be granted with
the primary consideration of encouraging the formation of a nationwide
marketing cooperative for export promotion.chanrobles virtual law library
SEC. 15. Philippine Trade Center. - The government shall hereby assist
the private sector in the establishment of Philippine Trade Centers which
shall house the trade promotion offices and shall serve as permanent
exhibit sites of the country's export products. In this regard, the
government shall provide the land for the center, through a land grant or
long term lease to the accredited organization, and shall arrange
financing for the construction of the trade complexes. Upon its
establishment, the centers shall be managed by the accredited
organization.chanrobles virtual law library

ARTICLE III
OTHER INCENTIVES
SEC. 16. Incentives. - In addition to existing incentives provided by the
Board of Investments, the following incentives shall likewise be granted to
exporters:
[a] Exemption from Presidential Decree No. 1853, provided that the
importation shall be used for the production of goods and services for
export.chanrobles virtual law library
[b] Importation of machinery and equipment and accompanying spare
parts which are used in the manufacture of exported products at zero
 percent [0%] duty for a period of three [3] years, until 1997.chanrobles
virtual law library
[c] Tax credit for imported inputs and raw materials primarily used for
the production and packaging of export goods, which are not readily
available locally , shall be valid for five [5] years. Provided, That the tax
credit shall be issued within thirty [30] days from
exportation.chanrobles virtual law library
[d] Tax credit for increase in current year's export revenue computed as
follows:

The first 5% increase in annual export revenue over the previous year
would mean a credit of 2.5% to be applied on the incremental export
revenue converted to pesos at the current rate;

 The next 5% increase would be entitled to a credit of 5.0%;

 The next 5% increase would be entitled to a credit of 7.5%;

 In excess of 15% would be entitled to a credit to 10%.chanrobles virtual

law library
Such tax credit is only granted for the years when the performance is
achievedExport revenues used in the calculation of such tax credits
shall be subject to verification as prescribed under the implementing
rulers and regulations.chanrobles virtual law library

[e] For exporters of non-traditional products who use or substitute

locally produced raw materials, capital equipment and/or spare parts,
tax credits equivalent to twenty-five percent [25%] of the duties that
would have been paid had these inputs been imported ; Provided,That
this incentives would be available for a period of three [3] years upon
effectively of this Act and can be extended for another three [3] years by
the President upon the recommendation of the Secretary of
Finance; Provided, further, That the Secretary of Finance, in
consultation with the Export Development Council, shall prepare a list
of non-traditional exports which are entitled to avail of this
incentives: Provided, That these incentives shall be granted only upon;
[1] the presentation of a Bureau of Export Trade Promotion [BETP]
certification of the exporter's eligibility, in compliance with the
minimum wage and SSS laws; and that [2] in the case of importation,
the items imported shall be used exclusively for production of export
goods.chanrobles virtual law library
[f] In the interim, while the Eximbank is not yet established,
government financial institutions [GFIs] including the Development
 Bank of the Philippines [DBP] , the Philippine National Bank [PNB] and
the Land Bank of the Philippines shall extend credit facilities to be used
for plant and equipment expansion purposes, among others. These
credit facilities shall offer preferential and simplified credit schemes to
exporters.chanrobles virtual law library
SEC. 17. Negotiability. - All tax credit herein provided shall be
negotiable.chanrobles virtual law library

ARTICLE IV
TRANSITORY PROVISIONS
SEC. 18. Appointment of private sector representatives. - Upon the
effectivity of this Act, the President of the Republic of the Philippines
shall appoint the nine [9] private sector representatives to the Council
who shall serve for a term of two [2] yearsThereafter, the determination of
the private sector representatives shall be governed by Section 9 of this
Act.chanrobles virtual law library
SEC. 19. Funding of the Council. - Upon the effectively of this Act, the
budget granted to the old Export Development Council shall be
transferred to the new Council created under this Act. Thereafter, such
sums as may be necessary for its operation and maintenance shall be
included in the annual General Appropriations Act.chanrobles virtual law
library
SEC. 20. Operation of the Council. - the Council shall immediately
function one [1] month after the approval of this Act.chanrobles virtual
law library

ARTICLE V
CRIMINAL OFFENSES AND PENALTIES
SEC. 21. Non-compliance of the mandatory provisions of this Act. - Any
person, entity, government instrumentality or institution, found to be
willfully violating or grossly negligent in executing the mandates of this
Act shall result in the expulsion from office of its chief executive and
operating officers, as well as the responsible officers thereof.
Notwithstanding any provision of law to the contrary, they shall likewise
be prohibited from holding any government position for least two [2]
years.chanrobles virtual law library
ARTICLE VI
ADMINISTRATIVE PROCEDURES AND SPECIAL CLAUSE
SEC. 22. Implementing rules and regulations. - The Secretaries of Trade
and Industry and Finance, in consultation with the Council, shall
formulate the rules and regulations to implement the provisions of this
Act.chanrobles virtual law library
SEC. 23. Separability clause. - The provisions of this Act are hereby
declare separable and in the event any of such provisions is declared
unconstitutional, the other provisions which are not affected thereby
shall remain in force and effect.chanrobles virtual law library
SEC. 24. Repealing clause. - All other laws, decrees, executive orders,
administrative orders, rules and regulations or parts thereof which are
inconsistent with the provisions of this Act are hereby repealed ,
amended or modified accordingly.chanrobles virtual law library
SEC. 25. Effectivity. - This Act shall take effect two [2] weeks after its
publication in the Official Gazette or in at least two [2] national
newspapers of general circulation in the Philippines, whichever comes
earlier.chanrobles virtual law library
This Act which is a consolidation of House Bill No. 12073 and Senate Bill
No. 1863 was finally passed by the House of Representatives and the
Senate on December 20, 1994.chanrobles virtual law library
Approved: 21 December 1994

[REPUBLIC ACT NO. -7652- ]

AN ACT ALLOWING THE LONG-TERM LEASE OF

PRIVATE LANDS BY FOREIGN INVESTORS

Be it enacted by the Senate and House of Representatives of the Philippines in

Congress assembled:

SECTION 1. Title. – This Act shall be known as the “Investors’ Lease Act.”

SEC. 2. Declaration of Policy. – It is hereby declared the policy of the State to

encourage foreign investments consistent with the constitutional mandate to
conserve and develop our own patrimony. Towards this end, the State hereby
adopts a flexible and dynamic policy on the granting of long-term lease on
private lands to foreign investors for the establishment of industrial estates,
factories, assembly or processing plants, agro-industrial enterprises, land
development for industrial, or commercial use, tourism, and other similar
priority productive endeavors.

SEC. 3. Definitions. – For purposes of this Act, unless the context indicates
otherwise, the term:

(1) “Investing in the Philippines” shall mean making an equity investment in

the Philippines through actual remittance of foreign exchange or transfer of
assets, whether in the form of capital goods, patents, formulae, or other
technological rights or processes, upon registration with the Securities and
Exchange Commission; and

(2) “Withdrawal of approved investment” shall mean either; (a) the failure to
operate the investment project for any three (3) consecutive years; or (b)
outright abandonment of the investment project at any time during the
approved lease period: Provided, That failure to pay lease rental for three (3)
consecutive months coupled with the failure to operate the investment project
for the same period shall be deemed an outright abandonment of the project.

SEC. 4. Coverage. – Any foreign investor investing in the Philippines shall be

allowed to lease private lands in accordance with the laws of the Republic of
the Philippines subject to the following conditions:

(1) No lease contract shall be for a period exceeding fifty (50) years, renewable
once for a period of not more than twenty- five (25) years;

(2) The leased area shall be used solely for the purpose of the investment upon
the mutual agreement of the parties;

(3) The leased premises shall comprise such area as may reasonably be
required for the purpose of the investment subject however to the
Comprehensive Agrarian Reform Law and the Local Government Code.

The leasehold right acquired under long-term lease contracts entered into
pursuant to this Act may be sold, transferred, or assigned: Provided, That when
the buyer, transferee, or assignee is a foreigner or a foreign-owned enterprise,
the conditions and limitations in respect to the use of the leased property as
provided for under this Act shall continue to apply.

SEC. 5. Limitations. – (1) Foreign individuals, corporations, associations, or

partnerships not otherwise investing in the Philippines as defined herein shall
continue to be covered by Presidential Decree No. 471 and other existing laws
in lease of lands to foreigners.

(2) Withdrawal of the approved investment in the Philippines within the period
of the lease agreement entered into under this Act, or use of the leased area for
the purpose other than that authorized, shall warrant the ipso
facto termination of the lease agreement without prejudice to the right of the
lessor to be compensated for the damages he may have suffered thereby.

(3) Any lease agreement under this Act which is renewable at the option of the
lessee subject to the same terms and conditions of the original contract shall
be interpreted to mean as renewable upon the mutual agreement of the parties.

(4) In addition to the conditions for the renewal of a lease agreement after the
period of fifty (50) years as provided herein, the foreign lease shall show that it
has made social and economic contributions to the country.

(5) In the case of tourism projects, lease of private lands by foreign investors
qualified herein shall be limited to projects with an investment of not less than
five million (5M) US dollars, seventy percent (70%) of which shall be infused in
said project within three years from the signing of the lease contract.

SEC. 6. Termination of Lease Contract. – The Secretary of Trade and Industry

shall terminate any lease contract entered into under the provisions of this Act,
if the investment project is not initiated within three (3) years from the signing
of the lease contract.

SEC. 7. Penal Provision. – Any contract or agreement made or executed in

violation of any of the following prohibited acts shall be null and void ab
initio and both contracting parties shall be punished by a fine of not less than
One Hundred thousand pesos (P100,000) nor more than One million pesos
(P1,000,000), or imprisonment of six (6) months to (6) years, or both, at the
discretion of the court:

(1) Any provision in the lease agreement stipulating a lease period in excess of
that provided in paragraph (1) of Section 4;

(2) Use of the leased premises for the purpose contrary to existing laws of the
land, public order, public policy, morals, or good customs;

(3) Any agreement or agreements resulting is the lease of land in excess of the
area approved by the DTI: Provided, That, where the excess of the totality of the
area leased is due to the acts of the lessee, the lessee shall be held solely liable
therefor: Provided, further, That, in the case of corporations, associations, or
partnerships, the president, manager, director, trustee, or officers responsible
for the violation hereof shall bear the criminal liability.

SEC. 8. Separability Clause. – In case any provision of this Act or the

application of such provision is deemed unconstitutional, the remaining
provisions of this Act or the application of such provisions shall not be affected
thereby.
SEC. 9. Repealing Clause. – All acts, rules and regulations contrary to or
inconsistent with this Act are hereby repealed or modified accordingly.

SEC. 10. Effectivity Clause. – this Act shall take effect immediately upon its
approval.

REPUBLIC ACT NO. 7718

AN ACT AMENDING CERTAIN SECTIONS OF REPUBLIC ACT NO. 6957,
ENTITLED "AN ACT AUTHORIZING THE FINANCING, CONSTRUCTION,
OPERATION AND MAINTENANCE OF INFRASTRUCTURE PROJECTS BY
THE PRIVATE SECTOR, AND FOR OTHER PURPOSES"
SECTION 1.Section 1 of Republic Act No. 6957 is hereby amended to read
as follows:
"SECTION 1. Declaration of Policy. - It is the declared policy of the State
to recognize the indispensable role of the private sector as the main
engine for national growth and development and provide the most
appropriate incentives to mobilize private resources for the purpose of
financing the construction, operation and maintenance of infrastructure
and development projects normally financed and undertaken by the
Government. Such incentives, aside from financial incentives as provided
by law, shall include providing a climate of minimum government
regulations and procedures and specific government undertakings in
support of the private sector."
SEC. 2. Section 2 of the same Act is hereby amended to read as follows:
"SEC. 2. Definition of Terms. - The following terms used in this Act shall
have the meaning stated below:
"[a] Private sector infrastructure or development projects. - The general
description of infrastructure or development projects normally financed
and operated by the public sector but which will now be wholly or partly
implemented by the private sector, including bit not limited to, power
plants, highways, ports, airports, canals, dams, hydropower projects,
water supply, irrigation, telecommunications, railroads and railways,
transport systems, land reclamation projects, industrial estates or
townships, housing, government buildings, tourism projects, markets,
slaughterhouses, warehouses, solid waste management, information
technology networks and database infrastructure, education and health
facilities, sewerage, drainage, dredging, and other infrastructure and
development projects as may be authorized by the appropriate agency
pursuant to this Act. Such projects shall be undertaken through
contractual arrangements as defined hereunder and such other variations
as may be approved by the President of the Philippines.chanrobles virtual
law library
"For the construction stage of these infrastructure projects, the project
proponent may obtain financing from foreign and/or domestic sources
and/or engage the services of a foreign and/or Filipino contractor.
Provided, That, in case an infrastructure or a development facility's
operation requires a public utility franchise, the facility operator must be
Filipino or if a corporation, it must be duly registered with the Securities
and Exchange Commission and owned up to at least sixty percent (60%)
by Filipinos: Provided, further, That in the case of foreign contractors,
Filipino labor shall be employed or hired in the different phases of the
construction where Filipino skills are available: Provided, finally, That
projects which would have difficulty in sourcing funds may be financed
partly from direct government appropriations and/or from Official
Development Assistance [ODA] of foreign governments or institutions not
exceeding fifty percent [50%] of the project cost, and the balance to be
provided by the project proponent.chanrobles virtual law library
"[b] Build-operate-and-transfer. - A contractual arrangement whereby the
project proponent undertakes the construction, including financing, of a
given infrastructure facility, and the operation and maintenance thereof.
The project proponent operates the facility over a fixed term during which
it is allowed to charge facility users appropriate tolls, fees, rentals, and
charges not exceeding these proposed in its bid or as negotiated and
incorporated in the contract to enable the project proponent to recover
its investment, and operating and maintenance expenses in the project.
The project proponent transfers the facility to the government agency or
local government unit concerned at the end of the fixed term which shall
not exceed fifty [50] years: Provided, That in case of an infrastructure or
development facility whose operation requires a public utility franchise,
the proponent must be Filipino or, if a corporation, must be duly
registered with the Securities and Exchange Commission and owned up to
at least sixty percent [60%] by Filipinos.chanrobles virtual law library
"The build-operate-and-transfer shall include a supply-and-operate
situation which is a contractual arrangement whereby the supplier of
equipment and machinery for a given infrastructure facility, if the
interest of the Government so requires, operates the facility providing in
the process technology transfer and training to Filipino
nationals.chanrobles virtual law library
"[c] Build-and-transfer. - A contractual arrangement whereby the project
proponent undertakes the financing and construction of a given
infrastructure or development facility and after its completion turns it
over to the government agency or local government unit concerned,
which shall pay the proponent on an agreed schedule its total
investments expended on the project, plus a reasonable rate of return
thereon. This arrangement may be employed in the construction of any
infrastructure or development project, including critical facilities which,
for security or strategic reasons, must be operated directly by the
Government.chanrobles virtual law library
"[d] Build-own-and-operate. - A contractual arrangement whereby a
project proponent is authorized to finance, construct, own, operate and
maintain an infrastructure or development facility from which the
proponent is allowed to recover its total investment, operating and
maintenance costs plus a reasonable return thereon by collecting tolls,
fees, rentals or other charges from facility users: Provided, That all such
projects, upon recommendation of the Investment Coordination
Committee [ICC] of the National Economic and Development Authority
[NEDA], shall be approved by the President of the Philippines. Under this
project, the proponent which owns the assets of the facility may assign its
operation and maintenance to a facility operator.chanrobles virtual law
library
"[e] Build-lease-and-transfer. - A contractual arrangement whereby a
project proponent is authorized to finance and construct an
infrastructure or development facility and upon its completion turns it
over to the government agency or local government unit concerned on a
lease arrangement for a fixed period after which ownership of the facility
is automatically transferred to the government agency or local
government unit concerned.chanrobles virtual law library
"[f] Build-transfer-and-operate. - A contractual arrangement whereby the
public sector contracts out the building of an infrastructure facility to a
private entity such that the contractor builds the facility on a turn-key
basis, assuming cost overrun, delay and specified performance
risks.chanrobles virtual law library
"Once the facility is commissioned satisfactorily, title is transferred to
the implementing agency. The private entity however, operates the
facility on behalf of the implementing agency under an
agreement.chanrobles virtual law library
"[g] Contract-add-and-operate. - A contractual arrangement whereby the
project proponent adds to an existing infrastructure facility which it is
renting from the government. It operates the expanded project over an
agreed franchise period. There may, or may not be, a transfer
arrangement in regard to the facility.chanrobles virtual law library
"[h] Develop-operate-and-transfer. - A contractual arrangement whereby
favorable conditions external to a new infrastructure project which is to
be built by a private project proponent are integrated into the
arrangement by giving that entity the right to develop adjoining property,
and thus, enjoy some of the benefits the investment creates such as
higher property or rent values.chanrobles virtual law library
"[i] Rehabilitate-operate-and-transfer. - A contractual arrangement
whereby an existing facility is turned over to the private sector to
refurbish, operate and maintain for a franchise period, at the expiry of
which the legal title to the facility is turned over to the government. The
term is also used to describe the purchase of an existing facility from
abroad, importing, refurbishing, erecting and consuming it within the
host country.chanrobles virtual law library
"[j] Rehabilitate-own-and-operate. - A contractual arrangement whereby
an existing facility is turned over to the private sector to refurbish and
operate with no time limitation imposed on ownership. As long as the
operator is not in violation of its franchise, it can continue to operate the
facility in perpetuity.chanrobles virtual law library
"[k] Project proponent. - The private sector entity which shall have
contractual responsibility for the project and which shall have an
adequate financial base to implement said project consisting of equity and
firm commitments from reputable financial institutions to provide, upon
award, sufficient credit lines to cover the total estimated cost of the
project.chanrobles virtual law library
"[l] Contractor. - Any entity accredited under Philippine laws which may
or may not be the project proponent and which shall undertake the actual
construction and/or supply of equipment for the project.chanrobles
virtual law library
"[m] Facility operator. - A company registered with the Securities and
Exchange Commission, which may or may not be the project proponent,
and which is responsible for all aspects of operation and maintenance of
the infrastructure or development facility, including but not limited to
the collection of tolls, fees, rentals or charges from facility
users: Provided, That in case the facility requires a public utility
franchise, the facility operator shall be Filipino or at least sixty per
centum [60%] owned by Filipinos.chanrobles virtual law library
"[n] Direct government guarantee. - An agreement whereby the
government or any of its agencies or local government units assume
responsibility for the repayment of debt directly incurred by the project
proponent in implementing the project in case of a loan default. •
"[o] Reasonable rate of return on investments and operating and
maintenance cost. - The rate of return that reflects the prevailing cost of
capital in the domestic and international markets: Provided, That, in case
of negotiated contracts, such rate of return shall be determined by the
ICC of the NEDA prior to the negotiation and/or call for proposals:
Provided, further, That for negotiated contracts for public utility projects
which are monopolies, the rate of return on rate base shall be determined
by existing laws, which in no case shall exceed twelve per centum
[12%].chanrobles virtual law library
"[p] Construction. - Refers to new construction, rehabilitation,
improvement, expansion, alteration and related works and activities
including the necessary supply of equipment, materials, labor and
services and related items."
SEC. 3. Section 3 of the same Act is hereby amended to read as follows:
"SEC. 3. Private Initiative in Infrastructure. - All government
infrastructure agencies, including government-owned and -controlled
corporations and local government units are hereby authorized to enter
into contract with any duly prequalified project proponent for the
financing, construction, operation and maintenance of any financially
viable infrastructure or development facility through any of the projects
authorized in this Act. Said agencies, when entering into such contracts,
are enjoined to solicit the expertise of individuals, groups, or corporations
in the private sector who have extensive experience in undertaking
infrastructure or development projects."
SEC. 4. Section 4 of the same act is hereby amended to read as follows:
"SEC. 4. Priority projects. - All concerned government agencies, including
government-owned and -controlled corporations and local government
units, shall include in their development programs those priority projects
that may be financed, constructed, operated and maintained by the
private sector under the provisions of this Act. It shall be the duty of all
concerned government agencies to give wide publicity to all projects
eligible for financing under this Act, including publication in national and,
where applicable, international newspapers of general circulation once
every six (6) months and official notification of project proponents
registered with them.chanrobles virtual law library
"The lists of all such national projects must be part of the development
programs of the agencies concerned. The list of projects costing up to
Three hundred million pesos [300,000,000] shall be submitted to the ICC
of the NEDA for its approval and to the NEDA Board for projects costing
more than Three hundred million pesos [300,000,000]. The list of projects
submitted to the ICC of the NEDA Board shall be acted upon within thirty
[30] working days.chanrobles virtual law library"The list of local projects
to be implemented by the local government units concerned shall be
submitted for confirmation to the municipal development council for
projects costing up to Twenty million pesos; those costing above Twenty
up to Fifty million pesos to the provincial development council; those
costing up to Fifty million to the city development council; above Fifty
million up to Two hundred million pesos to the regional development
councils; and those above Two hundred million pesos to the ICC of the
NEDA."
SEC. 5. A new section is hereby added after Section 4 of the same Act and
numbered as Section 4-A, to read as follows:
"SEC. 4-A. Unsolicited proposals. - Unsolicited proposals for projects may
be accepted by any government agency or local government unit on a
negotiated basis: Provided, That, all the following conditions are met: [1]
such projects involve a new concept or technology and/or are not part of
the list of priority projects, [2] no direct government guarantee, subsidy
or equity is required, and [3] the government agency or local government
unit has invited by publication, for three [3] consecutive weeks, in a
newspaper of general circulation, comparative or competitive proposals
and no other proposal is received for a period of sixty [60] working
days: Provided, further, That in the event another proponent submits a
lower price proposal, the original proponent shall have the right to match
that price within thirty [30] working days."
SEC. 6. Section 5 of the same Act is hereby amended to read as follows:
"SEC. 5. Public Bidding of Projects. - Upon approval of the projects
mentioned in Section 4 of this Act, the head of the infrastructure agency
or local government unit concerned shall forthwith cause to be published,
once every week for three [3] consecutive weeks, in at least two [2]
newspapers of general circulation and in at least one [1] local newspaper
which is circulated in the region, province, city or municipality in which
the project is to be constructed, a notice inviting all prospective
infrastructure or development project proponents to participate in a
competitive public bidding for the projects so approved.chanrobles virtual
law library
"In the case of a build-operate-and-transfer arrangement, the contract
shall be awarded to the bidder who, having satisfied the minimum
financial, technical, organizational and legal standards required by this
Act, has submitted the lowest bid and most favorable terms for the
project, based on the present value of its proposed tolls, fees, rentals and
charges over a fixed term for the facility to be constructed, rehabilitated,
operated and maintained according to the prescribed minimum design
and performance standards, plans and specifications. For this purpose,
the winning project proponent shall be automatically granted by the
appropriate agency the franchise to operate and maintain the facility,
including the collection of tolls, fees, rentals, and charges in accordance
with Section 5 hereof.chanrobles virtual law library"In the case of a build-
and-transfer or build-lease-and-transfer arrangement, the contract shall be
awarded to the lowest complying bidder based on the present value of its
proposed schedule of amortization payments for the facility to be
constructed according to the prescribed minimum design and
performance standards, plans and specifications: Provided, however, That
a Filipino contractor who submits an equally advantageous bid with
exactly the same price and technical specifications as those of a foreign
contractor shall be given preference.chanrobles virtual law library"In all
cases, a consortium that participates in a bid must present proof that the
members of the consortium have bound themselves jointly and severally
to assume responsibility for any project. The withdrawal of any member of
the consortium prior to the implementation of the project could be a
ground for the cancellation of the contract.chanrobles virtual law
library"The public bidding must be conducted under a two-envelope/two-
stage system: the first envelope to contain the technical proposal and the
second envelope to contain the financial proposal. The procedures for this
system shall be outlined in the implementing rules and regulations of this
Act.chanrobles virtual law library"A copy of each contract involving a
project entered into under this Act shall forthwith be submitted to
Congress for its information."
SEC. 7. A new section is hereby added after Section 5 of the same Act
and numbered as Section 5-A, to read as follows:
"SEC. 5-A. Direct Negotiation of Contracts. - Direct negotiation shall be
resorted to when there in only one complying bidder left as defined
hereunder:
"[a] If, after advertisement, only one contractor applied for
prequalification and it meets the prequalification requirements, after
which it is required to submit a bid/proposal which is subsequently found
by the agency/local government unit [LGU] to be complying.chanrobles
virtual law library
"[b] If, after advertisement, more than one contractor applied for
prequalification but only one meets the prequalification requirements,
after which it submits bid/proposal which is found by the agency/LGU to
be complying.chanrobles virtual law library
"[c] If, after prequalification of more than one contractor, only one
submits a bid which is found by the agency/LGU to be
complying.chanrobles virtual law library
"[d] If, after prequalification, more than one contractor submit bids but
only one is found by the agency/LGU to be complying: Provided, That, any
of the disqualified prospective bidder may appeal the decision of the
implementing agency/LGUs Prequalification Bids and Awards Committee
within fifteen [15] working days to the head of the agency, in case of
national projects or to the Department of the Interior and Local
Government, in case of local projects from the date the disqualification
was made known to the disqualified bidder. Provided, furthermore, That
the implementing agency/LGUs concerned should act on the appeal
within forty-five [45] working days from receipt thereof."
SEC. 8. Section 6 of the same Act is hereby amended to read as follows:
"SEC. 6. Repayment Scheme. - For the financing, construction, operation
and maintenance of any infrastructure project undertaken through the
Build-Operate-and-Transfer arrangement or any of its variations pursuant
to the provisions of this Act, the project proponent shall be repaid by
authorizing it to charge and collect reasonable tolls, fees, and rentals for
the use of the project facility not exceeding those incorporated in the
contract and, where applicable, the proponent may likewise be repaid in
the form of a share in the revenue of the project or other non-monetary
payments, such as, but not limited, to the grant of a portion or
percentage of the reclaimed land, subject to the constitutional
requirements with respect to the ownership of land:Provided, That for
negotiated contracts, and for projects which have been granted a natural
monopoly or where the public has no access to alternative facilities, the
appropriate government regulatory bodies, shall approve the tolls, fees,
rentals, and charges based on a reasonable rate of return: Provided,
further, That the imposition and collection of tolls, fees, rentals, and
charges shall be for a fixed term as proposed in the bid and incorporated
in the contract but in no case shall this term exceed fifty [50]
years: Provided, furthermore, That the tolls, fees, rentals, and charges
may be subject to adjustment during the life of the contract, based on a
predetermined formula using official price indices and included in the
instructions to bidders and in the contract: Provided, also, That all tolls,
fees, rentals, and charges and adjustments thereof shall take into account
the reasonableness of said rates to the end-users of private sector-built
infrastructure: Provided, finally, That during the lifetime of the franchise,
the project proponent shall undertake the necessary maintenance and
repair of the facility in accordance with standards prescribed in the
bidding documents and in the contract. In the case of a Build-and-
Transfer arrangement, the repayment scheme is to be effected through
amortization payments by the government agency or local government
unit concerned to the project proponent according to the scheme
proposed in the bid and incorporated in the contract."
SEC. 9. Section 7 of the same Act is hereby amended to read as follows:
"SEC. 7. Contract Termination - In the event that a project is revoked,
canceled or terminated by the Government through no fault of the project
proponent or by mutual agreement, the Government shall compensate the
said project proponent for its actual expenses incurred in the project plus
a reasonable rate of return thereon not exceeding that stated in the
contract as of the date of such revocation, cancellation or
termination: Provided, That the interest of the Government in these
instances shall be duly insured with the Government Service Insurance
System or any other insurance entity duly accredited by the Office of the
Insurance Commissioner: Provided, finally, That the cost of the insurance
coverage shall be included in the terms and conditions of the bidding
referred to above.chanrobles virtual law library
"In the event that the government defaults on certain major obligations in
the contract and such failure is not remediable or if remediable shall
remain unremedied for an unreasonable length of time, the project
proponent/contractor may, by prior notice to the concerned national
government agency or local government unit specifying the turn-over
date, terminate the contract. The project proponent/contractor shall be
reasonably compensated by the Government for equivalent or
proportionate contract cost as defined in the contract."
SEC. 10. Section 8 of the same Act is hereby amended to read as follows:
"SEC. 8. Regulatory Boards. - The Toll Regulatory Board which was
created by Presidential Decree No. 1112 is hereby attached to the
Department of Public Works and Highways with the Secretary of Public
Works and Highways as Chairman."
SEC. 11. Section 9 of the same Act is hereby amended to read as follows:
"SEC. 9. Project Supervision. - Every infrastructure project undertaken
under the provisions of this Act shall be in accordance with the plans,
specifications, standards, and costs approved by the concerned
government agency and shall be under the supervision of the said agency
or local government unit in the case of local projects."
SEC. 12. A new section to be numbered as Section 10 is hereby added to
read as follows:
"SEC. 10. Investment Incentives. - Among other incentives, projects in
excess of One billion pesos [1,000,000,000] shall be entitled to incentives
as provided by the Omnibus Investments Code, upon registration with the
Board of Investments."
SEC. 13. Section 10 of the same Act is hereby renumbered as Section 11
to read as follows:
"SEC. 11. Implementing Rules and Regulations. - A committee composed
of one (1) representative each from the Department of Public Works and
Highways, the Department of Transportation and Communications, the
Department of Energy, the Department of Environment and Natural
Resources, the Department of Agriculture, the Department of Trade and
Industry, the Department of Finance, the Department of the Interior and
Local Government, the National Economic and Development Authority,
the Coordinating Council of the Philippine Assistance Program, and other
concerned government agencies shall within sixty [60] days from the
effectivity of this Act, formulate and prescribe, after public hearing and
publication as required by law, the implementing rules and regulations
including, among others, the criteria and guidelines for evaluation of bid
proposals, list of financial incentives and arrangements that the
Government may provide for the project, in order to carry out the
provisions of this Act in the most expeditious manner.chanrobles virtual
law library
"The Chairman of this committee shall be appointed by the President of
the Philippines from its members.chanrobles virtual law library
"From time to time the Committee may conduct, formulate and prescribe
after due public hearing and publication, amendments to the
implementing rules and regulations, consistent with the provisions of this
Act."
SEC. 14. A new section to be numbered as Section 12 is hereby added to
read as follows:
"SEC. 12. Coordination and Monitoring of Projects. - The Coordinating
Council of the Philippine Assistance Program [CCPAP] shall be responsible
for the coordination and monitoring of projects implemented under this
Act.chanrobles virtual law library
"Regional development councils and local government units shall
periodically submit to CCPAP, information on the status of said
projects.chanrobles virtual law library
"At the end of every calendar year, the CCPAP shall report to the
President and to Congress on the progress of all projects implemented
under this Act."
SEC. 15. Section 11, 12 and 13 of the same Act are hereby renumbered as
Sections 13, 14, and 15, respectively.chanrobles virtual law library
SEC. 16. Repealing Clause. - All laws or parts of any law inconsistent
with the provisions of this Act are hereby repealed or modified
accordingly.chanrobles virtual law library

SEC. 17. Separability Clause. - If any provision of this Act is held invalid,
the other provisions not affected thereby shall continue in
operation.chanrobles virtual law library
SEC. 18. Effectivity Clause. - This Act shall take effect fifteen [15] days
after its publication in at least two (2) newspapers of general circulation.

Pursuant to Section 11 of R.A. No. 6957, as amended by R.A. No. 7718, the
following Implementing Rules and Regulations are hereby prescribed to carry
out the provisions of said Act.
RULE 1
PRELIMINARY PROVISIONS

Sec. 1.1. Policy. - It is the policy of the State to encourage the private sector as
the nation's main engine for growth and development to engage in or undertake
the financing, construction, operation and maintenance of private sector
infrastructure and development projects, as hereunder defined. Towards this
end, the Government shall provide appropriate incentives, such as, but not
limited to, financial incentives as provided by law, a climate of minimum
regulations and procedures, and specific government undertakings in support
of the private sector.
Sec. 1.2. Coverage. - These Implementing Rules and Regulations shall
cover all private sector infrastructure or development projects, as
hereunder defined, undertaken by Agencies or Local Government Units in
accordance with such contractual arrangement or scheme authorized
under and pursuant to R.A. No. 6957, as amended by R.A. No. 7718.cralaw
For Local Government Unit projects, concerned Local Government Units
may formulate additional guidelines/procedures not in conflict with this
Act and these Implementing Rules and Regulations and pertinent
provisions of Republic Act 7160 (Local Government Code of 1991) and its
implementing rules and regulations.cralaw
Sec. 1.3. Definition of Terms. - For purposes of these Implementing Rules
and Regulations, the terms and phrases hereunder shall be understood as
follows:chanrobles virtual law library
a. Act. - shall mean Republic Act No. 6957, as amended by Republic
Act No. 7718.
b. Agency/Agencies. – Refers to any department, bureau, office,
commission, authority or agency of the national government,
including government-owned or -controlled corporations, authorized
by law or their respective charters to contract for or undertake
infrastructure or development projects.cralaw
c. Contractual Arrangements. – Refer to any of the following
contractual arrangements or schemes, as well as other variations
thereof as may be approved/authorized by the President, by which
infrastructure and/or development projects may be undertaken
pursuant to the provisions of these IRR:chanrobles virtual law
library

i. Build-and-transfer (BT). - A contractual arrangement

whereby the project proponent undertakes the financing
and construction of a given infrastructure or
development facility and after its completion turns it
over to the government agency or local government unit
concerned, which shall pay the proponent on an agreed
schedule its total investment expended on the project,
plus a reasonable rate of return thereon. This
arrangement may be employed in the construction of
any infrastructure or development projects, including
critical facilities which, for security or strategic reasons,
must be operated directly by the Government.
ii. Build-lease-and-transfer (BLT) - A contractual
arrangement whereby a project proponent is authorized
to finance and construct an infrastructure or
development facility and upon its completion turns it
over to the government agency or local government unit
concerned on a lease arrangement for a fixed period,
after which ownership of the facility is automatically
transferred to the government agency or local
government unit concerned.

iii. Build-operate-and-transfer (BOT) - A contractual

arrangement whereby the project proponent undertakes
the construction, including financing, of a given
infrastructure facility, and the operation and
maintenance thereof. The project proponent operates
the facility over a fixed term during which it is allowed
to charge facility users appropriate tolls, fees, rentals,
and charges not exceeding those proposed in its bid or as
negotiated and incorporated in the contract to enable
the project proponent to recover its investment, and
operating and maintenance expenses in the project. The
project proponent transfers the facility to the
government agency or local government unit concerned
at the end of the fixed term that shall not exceed fifty
(50) years. This shall include a supply-and-operate
situation which is a contractual arrangement whereby
the supplier of equipment and machinery for a given
infrastructure facility, if the interest of the Government
so requires, operates the facility providing in the process
technology transfer and training to Filipino
nationals.cralaw
iv. Build-own-and-operate (BOO) - A contractual
arrangement whereby a project proponent is authorized
to finance, construct, own, operate and maintain an
infrastructure or development facility from which the
proponent is allowed to recover its total investment,
operating and maintenance costs plus a reasonable
return thereon by collecting tolls, fees, rentals or other
charges from facility users. Under this project, the
proponent who owns the assets of the facility may assign
its operation and maintenance to a facility
operator.cralaw
v. Build-transfer-and-operate (BTO) - A contractual
arrangement whereby the public sector contracts out the
building of an infrastructure facility to a private entity
such that the contractor builds the facility on a turn-key
basis, assuming cost overruns, delays, and specified
performance risks. Once the facility is commissioned
satisfactorily, title is transferred to the implementing
agency. The private entity however operates the facility
on behalf of the implementing agency under an
agreement.cralaw
vi. Contract-add-and-operate (CAO) - A contractual
arrangement whereby the project proponent adds to an
existing infrastructure facility which it is renting from
the Government and operates the expanded project over
an agreed franchise period. There may or may not be a
transfer arrangement with regard to the added facility
provided by the project proponent.
 vii. Develop-operate-and-transfer (DOT) - A contractual
arrangement whereby favorable conditions external to a
new infrastructure project which is to be built by a
private project proponent are integrated into the
arrangement by giving that entity the right to develop
adjoining property, and thus, enjoy some of the benefits
the investment creates such as higher property or rent
values.cralaw
viii. Rehabilitate-operate-and-transfer (ROT) - A
contractual arrangement whereby an existing facility is
turned over to the private sector to refurbish, operate
and maintain for a franchise period, at the expiry of
which the legal title to the facility is turned over to the
Government. The term is also used to describe the
purchase of an existing facility from abroad, importing,
refurbishing, erecting and consuming it within the host
country.cralaw
ix. Rehabilitate-own-and-operate (ROO) - A contractual
arrangement whereby an existing facility is turned over
to the private sector to refurbish and operate with no
time limitation imposed on ownership. As long as the
operator is not in violation of its franchise, it can
continue to operate the facility in perpetuity.
d. Construction - Refers to new construction, rehabilitation,
improvement, expansion, alteration, and related works and
activities including the necessary supply of equipment, materials,
labor and services and related items needed to build or rehabilitate
an infrastructure or development facility.
e. Contractor - Refers to any entity accredited under Philippine
laws, or that should be accredited under Philippine laws in
accordance with Section 5.4 a letter v. hereof, which may or may
not be the project proponent and which shall undertake the actual
construction and/or supply of equipment for the project.cralaw
f. Development Program - Refers to national, regional or local
government plans or programs included in, but not limited to, the
Medium-Term Philippine Development Plan (MTPDP), the Regional
Development Plans and Local Development Plans.cralaw
g. Direct government guarantee - Refers to an agreement whereby
the Government or any of its agencies or local government units
assume responsibility for the repayment of debt directly incurred by
the project proponent in implementing the project in case of a loan
default.

h. Facility operator - Refers to a company registered with the

Securities and Exchange Commission (SEC), which may or may not
be the project proponent, and which is responsible for all aspects of
operation and maintenance of the infrastructure or development
facility, including but not limited to the collection of tolls, fees,
rentals or charges from facility users.cralaw
i. Government Undertakings – Refer to any form of contribution
and/or support provided under Rule 13 of these IRR which the
Government may extend to the project proponents under any of the
contractual arrangements authorized under these IRR.cralaw
j. Head of Agency - Shall refer to the authorized approving authority
of the Agency or, in the case of Government-Owned or-Controlled
Corporations (GOCCs), the GOCC Governing Board.cralaw
k. ICC - Refers to the Investment Coordination Committee of the
National Economic and Development Authority (NEDA) Board.cralaw
l. IRR - Shall mean these Implementing Rules and
Regulations.cralaw
m. List of Priority Projects - Refers to the list of private sector
infrastructure or development projects approved in accordance with
Sections 2.3, 2.7, 2.8 and 2.11
n. Local Government Units (LGU) – Refer to provincial, city,
municipal and/or barangay government entities.cralaw
o. Negotiated Contracts – Refer to contracts entered into by the
Government for convenience even if broader tendering would have
been possible. This type of contract may be resorted to only in cases
prescribed under Rule 9.cralaw
p. Private sector infrastructure or development projects - The
general description of infrastructure or development projects
normally financed, and operated by the public sector but which will
now be wholly or partly financed, constructed and operated by the
private sector, including but not limited to, power plants, highways,
ports, airports, canals, dams, hydropower projects, water supply,
irrigation, telecommunications, railroad and railways, transport
systems, land reclamation projects, industrial estates or townships,
housing, government buildings, tourism projects, public markets,
slaughterhouses, warehouses, solid waste management, information
technology networks and database infrastructure, education and
health facilities, sewerage, drainage, dredging, and other
infrastructure and development projects as may otherwise be
authorized by the appropriate agency. Such projects shall be
undertaken through contractual arrangements as defined herein,
including such other variations as may be approved by the President
of the Philippines.cralaw
q. Project Cost – Refers to the total cost to be expended by the
proponent to plan, develop and construct the project to completion
stage including but not limited to such costs as feasibility studies
engineering and design, construction, equipment, land and right of
way.cralaw
r. Project Loan – Refers to all loans and/or credit facilities extended
by financial institutions; multi-lateral lenders; export credit
agencies, and all other third party lenders, to the project company
and/or proponent for the development and/or operation of the
project.cralaw
s. Project Proponent – Refers to the private sector entity which shall
have contractual responsibility for the project and which shall have
an adequate financial base to implement the said project consisting
of equity and firm commitments from reputable financial
institutions to provide, upon award, sufficient credit lines to cover
the total estimated cost of the project.cralaw
t. Public Utility Projects – Refer to projects including public roads
and thoroughfares, railways and urban rail mass transit, electricity
and gas distribution systems, city and municipal water distribution
and sewerage systems, and telecommunication systems serving the
general public, and such other public services as defined under the
Public Services Act, as amended.cralaw
u. Reasonable rate of return on investment - Shall have the meaning
ascribed to it in ICC Guidelines attached hereto as Annex B.cralaw
v. Unsolicited Proposals – Refer to project proposals submitted by
the private sector to undertake infrastructure or development
 projects which may be entered into by Agency/LGU subject to the
requirements/conditions prescribed under Rule 10.cralaw
RULE 2
GENERAL PROVISIONS

Sec. 2.1. Authorized Contracting Government Agencies/Units. - The

following are authorized to enter into contractual arrangements under
this Act and these IRR:chanroblesvirtuallawlibrary
a. All concerned government agencies, including government-owned or
controlled corporations, authorized by law or by their respective charters
to undertake infrastructure and/or development projects.
b. LGUs authorized by law or by their charters to undertake
infrastructure and/or development projects within their respective
jurisdiction.cralaw
Sec. 2.2. Eligible Types of Projects. – The construction, rehabilitation,
improvement, betterment, expansion, modernization, operation, financing
and maintenance, of the following types of projects which are normally
financed and operated by the public sector which will now be wholly or
partly financed, constructed and operated by the private sector, including
other infrastructure and development projects as may be authorized by
the appropriate agencies, may be prosecuted under the provisions of the
Act and these IRR, provided however that such projects have a cost
recovery component which covers at least 50% of the project
cost:chanroblesvirtuallawlibrary
a. Highways, including expressway, roads, bridges, interchanges, tunnels,
and related facilities;
b. Railways or rail-based projects packaged with commercial development
opportunities;
c. Non-rail based mass transit facilities, navigable inland waterways and
related facilities;
d. Port infrastructures like piers, wharves, quays, storage, handling, ferry
services and related facilities; e. Airports, air navigations, and related
facilities;
f. Power generation, transmission, sub-transmission , distribution, and
related facilities;
g. Telecommunications, backbone network, terrestrial and satellite
facilities and related service facilities;
h. Information technology and data base infrastructure;
i. Irrigation and related facilities;
j. Water supply, sewerage, drainage, and related facilities;
k. Education and health infrastructure;
l. Land reclamation, dredging and other related development facilities;
m. Industrial and tourism estates or townships, including related
infrastructure facilities and utilities;
n. Government buildings, housing projects;
o. Markets, slaughterhouses, and related facilities;
p. Warehouses and post-harvest facilities;
q. Public fishports and fishponds, including storage and processing
facilities; and cralaw
r. Environmental and solid waste management related facilities such as
collection equipment, composting plants, incinerators, landfill and tidal
barriers, among others.cralaw
Sec. 2.3. List of Priority Projects. - Concerned Agencies/LGUs are tasked
to prepare their infrastructure/development programs and to identify
specific priority projects that may be financed, constructed, operated and
maintained by the private sector through the contractual arrangements or
schemes authorized under these IRR.
The projects require the approval of either the NEDA Board, ICC or Local
Development Councils (LDCs) and respective Sanggunians as specified in
Section 2.7. Such requisite approval shall be applied for and should be
secured by the Head of Agency/LGU prior to the call for bids for the
project. For this purpose, the Head of Agency/LGU may submit projects
for inclusion in the list, for approval by the appropriate approving
authority, as often as is necessary. Approved projects shall constitute the
List of Priority Projects.cralaw
Sec. 2.4. Publication and Notice. - All Agencies/LGUs shall provide wide
publicity of the list of priority projects proposed for implementation
under the contractual arrangements or schemes as authorized under the
Act and these IRR to keep interested/concerned parties informed thereof.
For this purpose, all Agencies/LGUs, upon approval by either the NEDA
Board, ICC, or Local Development Council (LDC) and Sanggunians of said
list of priority projects, shall cause the same to be published at least once
every six (6) months in a national newspaper of general circulation.

Sec. 2.5. Registration of Project Proponents. - Project proponents may

register with the Agency/LGU, indicating which projects are of interest to
them, and for this purpose submit its company profile in the form
prescribed under Annex A. Duly registered project proponents shall be
officially notified and furnished by the Agency/LGU a copy of the list of
their respective priority projects and corresponding project updates at
least once every six (6) months.cralaw
Sec. 2.6. Allowable Modes of Implementation. - Projects may be
implemented through public bidding or direct negotiation. The direct
negotiation mode is subject to conditions specified in Rules 9 and 10
hereof.cralaw
Sec. 2.7. Approval of Priority Projects. - The approval of projects
prosecuted under this Act shall be in accordance with the
following:chanrobles virtual law library
National Priority Projects. - The projects must be part of the Agency's
development programs, and shall be approved as
follows:chanroblesvirtuallawlibrary

projects costing up to P300 million, shall be submitted to the ICC for

approval;
projects costing more than P300 million, shall be submitted to the NEDA
Board for approval upon the recommendation of the ICC; and cralaw
negotiated projects shall be submitted to the ICC for it to prescribe the
reasonable rate of return prior to negotiation and/or call for comparative
proposals.cralaw
Local Priority Projects. - For local projects to be implemented by the
LGUs, these shall be submitted by the concerned LGU for confirmation, as
follows:chanroblesvirtuallawlibrary

to the municipal development council for projects costing up to P20

million;
to the provincial development council for those costing above P20 million
up to P50 million;
to the city development council for those costing up to P50 million;
to the regional development council or, in the case of Metro Manila
projects, the Metro Manila Development Council (MMDC), for those
costing above P50 million up to P200 million; and cralaw

to the ICC of the NEDA Board for those costing above P200 million.
Final approval of projects classified under b) i. to b) iv. of this section is
vested on the Local Sanggunians per provision of the Local Government
Code.cralaw
Sec. 2.8. ICC Approval of Projects. - The review and approval of projects
by ICC, as indicated above, including those proposed for BOO
implementation, shall be in accordance with the guidelines of the ICC,
attached hereto as Annex B.
For publicly-bid projects, the ICC approval of the project should be
secured prior to bidding and for unsolicited proposals prior to negotiation
with the original proponent.cralaw
Sec. 2.9. ICC/Local Sanggunian Clearance of the Contract Prior to
Award. - ICC/Local Sanggunian clearance of contracts shall likewise be
required only for projects requiring national government undertakings.
ICC clearance of the contract shall be secured prior to award in the case
of publicly bid projects or prior to solicitation of comparative proposals
for unsolicited proposals.cralaw
The concerned Agency/LGU shall, prior to the schedule of submission of
bids, submit the draft contract to the ICC for clearance on a no-objection
basis. The agency shall submit the contract to ICC anytime from
finalization of the bid terms of reference to bid preparation. The agency
may opt to submit the contract after the pre-bid conference to consider
any comments or suggestions that the bidders may have on the
contract. Annex B of these IRR provides the guidelines of ICC for contract
review. ICC shall act on the final draft contract within fifteen (15) working
days upon submission of complete documentation. Unless otherwise
previously notified in writing by the ICC, failure to act within this
prescribed period shall mean that the concerned Agency/LGU may
proceed with contract award. If the draft contract includes government
undertakings within the scope of an earlier ICC approval, then the
submission will only be for the information of the ICC. However, should it
include additional government undertakings over and above the original
scope then the draft contract will have to be reviewed by the ICC.cralaw
However, failure on the part of the agency to submit the contract or if
submitted, to comply with the requirements of the ICC shall render the
Notice of Award and/or contract invalid.cralaw
Sec. 2.10. Presidential Approval, When Required. - Projects undertaken
through the BOO scheme shall require Presidential approval. For this
purpose, the Head of Agency/LGU shall submit the proposed project to
ICC, which shall evaluate the proposal and forward the same to the Office
of the President with its recommendations. Projects which will be
undertaken through contractual arrangements or schemes other than
those defined under Section 1.3.c of these IRR shall also require approval
by the President. Following ICC contract approval, all BOO contracts are
presented to the President, through the NEDA Board, for approval. Since
the President chairs the NEDA Board, NEDA Board approval already
carries with it the President's approval.cralaw
Sec. 2.11. Deadline for Approval of Projects. - The ICC or the concerned
Local Development Council (LDC) and concerned Sanggunian shall act on
the projects within thirty (30) working days upon satisfactory compliance
by the concerned Agency/LGU of the requirements. Unless otherwise
notified in writing by the ICC or LDC, failure of the ICC or LDC and its
Sanggunian to act on the projects within the specified period shall mean
that the project is deemed approved and that the concerned Agency/LGU
may proceed with the solicitation of proposals.
RULE 3
THE PREQUALIFICATION, BIDS, AND AWARDS COMMITTEE

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RULE 4
BID/TENDER DOCUMENTS

Sec. 4.1. Bid/Tender Documents. - The Agency/LGU concerned

shall prepare the bid/tender documents which shall include
the following:chanroblesvirtuallawlibrary
a. Instructions to Bidders;
b. Minimum Design and Performance Standards
and Specifications, and Economic Parameters such
as discount rate, inflation factor and foreign
exchange rate, among others;
c. Draft Contract reflecting the contractual
arrangement under which the project shall be
 undertaken, and the respective undertakings of the
contracting parties, among others;
d. Bid Form reflecting the required information to
properly evaluate the bid proposal;
e. Forms of Bid and Performance Securities;
and cralaw
f. Other documents as may be deemed necessary
by the Agency/LGU concerned.cralaw
Sec. 4.2. Instructions to Bidders.- The instructions to bidders,
which establishes the rules of the bidding, shall be clear,
comprehensive and fair to all bidders and shall, as far as
necessary and practicable include the following
information:chanroblesvirtuallawlibrary
a. General description and objectives of the project,
including a statement that the project shall be
prosecuted under Republic Act No. 6957 as amended by
Republic Act No. 7718;
b. Contractual arrangement under which the project
shall be undertaken;
c. Bid submission procedures and requirements, which
shall include information on the manner of bid
submission, the number of copies of bid proposal to be
submitted, where the bids are to be submitted, the
deadline for the submission of bids, permissible mode of
transmission of bid proposals, etc.;
d. Government undertakings such as provision of right of
way, access to ODA and/or direct government
appropriations, among others, and investment
incentives as stipulated under Rule 13 of these IRR to be
provided by the concerned Agency/LGU;
e. Bid security and bid security validity period;
f. Milestone bonding;
g. Method and criteria (including the minimum amount
of equity) for the evaluation of the technical and
financial components of the bids;
As a general rule, the method and criteria for the
evaluation of financial proposals shall be in accordance
with Section 8.2.a, 8.2.b or 8.2c hereof. However, for
 projects which are not public utilities and where the
Agency/LGU requires payments to be made by the
project proponent to the government, the Agency/LGU
concerned may opt to adopt the method and criteria for
the evaluation of financial proposals prescribed under
Section 8.2.d hereof.cralaw
h. Formula and appropriate indices to be used in the
adjustments of tolls/fees/rentals/charges, when
applicable. Said formula shall take into account the
reasonableness of the same to users of the
project/facility under bidding;
i. Requirements of concerned regulatory bodies, such as,
but not limited to, the Department of Environment and
Natural Resources (DENR) for the issuance of an
Environmental Compliance Certificate, National Water
Resources Board (NWRB) for the issuance of the Water
Permit, the Philippine Contractors Accreditation Board
(PCAB) for the registration requirements of contractors,
the Toll Regulatory Board (TRB) for the review of toll
rates and adjustment formula for negotiated
contracts.cralaw
j. Current rules and regulations of the monetary
authority;
k. Revenue sharing arrangements, if any;
l. Expected commissioning date; and cralaw
m. Required ownership structure and nationality
requirements as required by law.cralaw
Sec. 4.3. Minimum Designs, Performance Standards and
Economic Parameters. - Minimum design and performance
standards/specifications, including appropriate environmental
standards as prescribed by the DENR, shall be clearly defined
and shall refer more to the desired quantity and quality of the
outputs of the facility and should state that non-conformity
with any of these minimum requirements shall render the bids
as non-responsive. Likewise, the following economic
parameters, among others, shall be
prescribed:chanroblesvirtuallawlibrary
 a. Discount rate, foreign exchange rate and inflation
factor as prescribed by the ICC.
b. Maximum period of project construction.

c. Fixed term for project operation and collection of

tolls/fees/rentals/charges in the case of BOT, BOO, CAO,
DOT, ROT, ROO and other variations thereof
authorized/approved by the President.cralaw
d. Formula and price indices to be used in adjustments
to tolls/fees/rentals/charges, in the case of BOT, BOO,
CAO, DOT, ROT, ROO and other variations thereof
authorized/approved by the President.cralaw
e. Minimum period of repayment, in the case of BT, BLT,
BTO and other variations thereof authorized/ approved
by the President.cralaw
f. Revenue Share of the Implementing Agency/Local
Government Unit.cralaw
Sec. 4.4. Draft Contract. - The draft contract should clearly
define the basic and legal relationship between the parties and
their rights and responsibilities. Where applicable, stipulation
providing for the following matters, among others, shall be
included: bonds; guarantees; insurance; liquidated damages;
taxes and duties; project completion date; schedule and
amounts of milestone bonding; price indices to be used;
governing laws; force majeure; the effect of changes in
circumstances which may be brought about by, among others,
the enactment of new laws or regulations or the change in
existing government policies which will materially affect the
financial viability of the project; contract termination; and the
manner and procedures for the resolution of disputes
including arbitration procedures.
RULE 5
QUALIFICATION OF BIDDERS

Sec. 5.1. Who May Participate. - Any individual, partnership,

corporation or firm, whether local or foreign, including joint
venture or consortia of local, foreign or local and foreign firms,
subject to the limits herein set, may participate or apply for
 pre or simultaneous qualification for projects covered under
the provisions of the Act and these IRR.
Sec. 5.2. Publication of Invitation to Pre-qualify and Bid. - The Head of
the Agency/LGU concerned shall, upon the approval of the priority
projects ready for implementation under the provisions of these IRR,
forthwith cause to be published, once every week for three (3) consecutive
weeks, in at least two (2) newspaper of general circulation and in at least
one (1) local newspaper of general circulation in the region, province, city
or municipality in which the projects are to be implemented, a notice
inviting all prospective infrastructure or development project proponents
to pre-qualify and bid for the projects so approved. Likewise, the
Agency/LGU concerned shall issue official notification of the same to
project proponents registered with them.cralaw
The published Invitation to Pre-qualify and Bid shall contain information,
among others, whether the contractor to be employed to undertake the
construction works needs to be pre-identified for pre-qualification
purposes or not.cralaw
Sec. 5.3. Period to Prepare Pre-qualification Documents. - The
Agency/LGU concerned shall allow prospective bidders at least thirty (30)
calendar days from the last date of publication of the Invitation to Pre-
qualify and Bid to prepare their respective pre-qualification documents.
For projects costing at least P300 million, the period of preparation shall
at least be forty-five (45) calendar days from the last date of publication of
the Invitation to Pre-qualify and Bid. In any event, the deadline for
submission of pre-qualification statements shall be indicated in the
published Invitation to Pre-qualify and Bid.cralaw
Sec. 5.4. Pre-qualification Requirements. - To pre-qualify, a project
proponent must comply with the following requirements:chanrobles
virtual law library
a. Legal Requirements:
i. For projects to be implemented under the BOT scheme whose
operations require a public utility franchise, the project proponent and
the facility operator must be a Filipino or, if a corporation, must be duly
registered with the Securities and Exchange Commission (SEC) and owned
up to at least sixty percent (60%) by Filipinos.
ii. For projects to be implemented through a scheme other than the BOT
and requiring a public utility franchise, the facility operator must be a
Filipino or, if a corporation, must be duly registered with the Securities
and Exchange Commission (SEC) and owned up to at least sixty percent
(60%) by Filipinos.cralaw
Consistent with existing laws, the proponent may be the operator but it
may be allowed to enter into a management contract with another entity,
who may be 100% foreign owned, for the day to day operation of the
facility, provided that the proponent will assume all attendant liabilities
of an operator.cralaw
iii. In case the project proponent is a joint venture or consortium, the
members or participants shall submit a sworn statement undertaking that
if awarded the contract, they shall bind themselves to be jointly severally
and solidarily liable for the obligations of the project proponent under the
contract. However, if members of the joint venture or consortium
organize themselves as a corporation registered under Philippine laws, the
liabilities of such members under the contract shall be in accordance with
said laws.cralaw
iv. For projects to be operated by the project proponent itself or owned by
the proponent but operated through a facility operator where operation of
the facility does not require a public utility franchise, the project
proponent or the facility operator may be Filipino or foreign-owned.cralaw
v. If the contractor to be engaged by the project proponent to undertake
the construction works of the project under bidding needs to be pre-
identified as prescribed in the published Invitation to Pre-qualify and Bid
and is a Filipino, it must be duly licensed and accredited by the Philippine
Contractors Accreditation Board (PCAB). However, if the contractor is a
foreigner, PCAB registration will not be required at pre-qualification stage,
rather it will be one of the contract milestones.cralaw
b. Experience or Track Record: The proponent-applicant must possess
adequate experience in terms of the following:chanroblesvirtuallawlibrary
c. Firm Experience: By itself or through the member-firms in case of a
joint venture/consortium or through a contractor(s) which the project
proponent may have engaged for the project, the project proponent
and/or its contractor(s) must have successfully undertaken a project(s)
similar or related to the subject infrastructure/development project to be
bid. The individual firms and/or their contractor(s) may individually
specialize on any or several phases of the project(s). A joint
venture/consortium proponent shall be evaluated based on the individual
or collective experience of the member-firms of the joint
venture/consortium and of the contractor(s) that it has engaged for the
project.
For purposes of the above, joint ventures/consortia shall submit as part of
its pre-qualification statement a business plan which shall, among others,
identify its members and its contractor(s), if the experience of its
contractor(s) are necessary for the determination of the capacity of the
joint venture/consortium to undertake the project and the description of
the respective roles said members and contractors, if necessary, shall play
or undertake in the project. If undecided on a specific contractor, the
proponent may submit a short list of contractors from among which it will
select the final contractor. Short listed contractors are required to submit
a statement indicating willingness to participate in the project and
capacity to undertake the requirements of the project. The business plan
shall disclose which of the members of the joint venture/consortium shall
be the lead member the financing arm, and/or facility operator(s), and the
contractor(s) if required to be pre-identified as prescribed in the published
Invitation to Pre-qualify and Bid or if the qualifications/experience of
their contractor(s) are necessary for the determination of the capacity of
the joint venture/consortium to undertake the project.

d. Key Personnel Experience: The key personnel of the proponent and/or

its contractor(s) must have sufficient experience in the relevant aspect of
schemes similar or related to the subject project, as specified by the
Agency/LGU.
e. Financial Capability: The project proponent must have adequate
capability to sustain the financing requirements for the detailed
engineering design, construction and/or operation and maintenance
phases of the project, as the case may be. For purposes of pre-
qualification, this capability shall be measured in terms of:chanrobles
virtual law library
(i) proof of the ability of the project proponent and/or the consortium to
provide a minimum amount of equity to the project measured in terms of
the net worth of the company or in the case of joint ventures or consortia
the combined net worth of members or a set-aside deposit equivalent to
the minimum equity required, and
(ii) a letter testimonial from reputable banks attesting that the project
proponent and/or members of the consortium are banking with them, and
that they are in good financial standing. The government Agency/LGU
concerned shall determine on a project-to-project basis, and before pre-
qualification, the minimum amount of equity needed. In addition, the
Agency/LGU will inform the proponents of the minimum debt-equity ratio
required by the monetary authority for projects to be financed by foreign
loans.cralaw
The Implementing Agency through its PBAC shall complete the evaluation
of the pre-qualification documents of the proponents within thirty (30)
calendar days.
Sec. 5.5. Pre-qualified and Disqualified Proponents. - After undertaking
the above process, the PBAC shall mark the pre-qualification documents
of each prospective proponent as either "Pre-qualified" or "Disqualified",
as the case may be, countersigned by the Chairman, for review and
approval by the Head of the Agency/LGU concerned. Accordingly, the
PBAC shall duly inform the prospective proponents who have been pre-
qualified within seven (7) calendar days after approval thereof.
Disqualified proponents shall likewise be informed stating therein the
grounds for their disqualification. They may appeal the disqualification to
the Head of Agency in the case of national projects, or the DILG in the
case of local projects within fifteen (15) working days from receipt of the
notice of disqualification.
The bidding process will be suspended while the appeal is being evaluated.
The Head of Agency or the LGU, as the case may be, shall act on the
appeal within forty-five (45) calendar days from receipt of the appeal. The
decision of the Head of Agency or LGU on the appeal shall be final and
immediately executory.cralaw
Sec. 5.6. Issuance of Tender Documents. - The Agency/LGU concerned
shall make available the related bid documents to all pre-qualified bidders
as soon as practicable to provide respective bidders ample time to
examine the same and to prepare their respective bids prior to the date of
opening of bids.cralaw
Sec. 5.7. Simultaneous Qualification. - In the exigency of service, the
Agency/LGU Head may opt to do a simultaneous qualification instead of a
pre-qualification of proponents. In case of simultaneous qualification, the
publication of the invitation following the requirements in Section 5.2,
shall be for the submission of qualification requirements and bid
proposals. The bidders shall be asked to submit their proposal in three
envelopes, the first being the qualification documents corresponding to
the requirements so stated in Section 5.4 herein, the second the
technical proposal and the third the financial proposal. The requirements
for bid submission are covered under Rule 7 of these IRR. The period for
the preparation of the qualification documents shall be subsumed under
the time allotted for bid preparation.cralaw
Sec. 5.8. Acceptance of Criteria and Waiver of Rights to Enjoin Project. -
All prospective bidders shall be required to submit, as part of their
qualification documents, a statement stipulating that the bidder (i) has
accepted the qualification criteria established by the PBAC of the
Agency/LGU concerned, and (ii) waives any right it may have to seek and
obtain a writ of injunction or prohibition or restraining order against the
concerned Agency/LGU or its PBAC to prevent or restrain the
qualification process or any proceedings related thereto, the holding of a
bidding or any proceedings related thereto, the negotiation of and award
of the contract to a successful bidder, and the carrying out of the awarded
contract. Such waiver shall, however, be without prejudice to the right of
a disqualified or losing bidder to question the lawfulness of its
disqualification or the rejection of its bid by appropriate administrative or
judicial processes not involving the issuance of a writ of injunction or
prohibition or restraining order.
RULE 6
SUPPLEMENTAL NOTICES AND PRE-BID CONFERENCES

Sec. 6.1. Responsibility of Bidder. - The prospective bidder shall be solely

responsible for having taken all the necessary steps to carefully examine
and acquaint himself with the requirements, terms, and conditions of the
bidding documents with respect to the cost, duration, and
execution/operation of the project as it affects the preparation and
submission of his bid. The Agency/LGU concerned shall not assume any
responsibility regarding erroneous interpretations or conclusions by the
prospective bidder out of data furnished or indicated in the bidding
documents.
Sec. 6.2. Supplemental Notices. - If a bidder is in doubt as to the meaning
of any data or requirements or any part of the bidding documents, written
request may be submitted to the Agency/LGU concerned for an
interpretation of the same, allowing sufficient time for the concerned
Agency/LGU to reply before the submission of his/her bid. Any
substantive interpretation given by the concerned Agency/LGU shall be
issued in the form of a Supplemental Notice, and furnished to all
prospective bidders. The Agency/LGU concerned may also issue
Supplemental Notices to all prospective bidders at any time for purposes
of clarifying any provisions of the bidding documents provided that the
same is issued within a reasonable period to allow all bidders to consider
the same in the preparation of their bids. Receipt of all Supplemental
Notices shall be duly acknowledged by each bidder prior to the submission
of his bid and shall be so indicated in the bid.cralaw
Sec. 6.3. Pre-bid Conference. - For projects costing less than P300 million,
a pre-bid conference shall also be conducted by the concerned
Agency/LGU at least thirty (30) days before the deadline for the
submission of bids to clarify any provisions, requirements and/or terms
and conditions of the bidding documents and/or any other matter that
the prospective bidders may raise. For projects costing P300 million and
above, the pre-bid conference shall be conducted ninety (90) to one
hundred-twenty (120) days before the submission of bids.cralaw
Nothing stated at the pre-bid conference shall modify any provisions or
terms and conditions of the bidding documents unless such is made as a
written amendment thereto by the concerned Agency/LGU. Any
amendments shall be issued by the Agency/LGU concerned to all bidders
within a reasonable time to allow them to consider the same in the
preparation of their bids and shall be duly acknowledged by each bidder
prior to the submission of his bid and shall be so indicated in his bid. A
summary of the pre-bid conference proceedings shall also be issued to all
prospective bidders by the Agency/LGU concerned. Attendance to the pre-
bid conference by prospective bidders shall not be mandatory.
RULE 7
SUBMISSION, RECEIPT AND OPENING OF BIDS

Sec. 7.1. Requirements for Bid Submission. – Bidders shall be required to

submit their bids on or before the deadline stipulated in the Instructions
to Bidders. For pre-qualified bidders, their bids shall be submitted in two
(2) separate sealed envelopes, the first being the technical proposal and
the second the financial proposal. In case of simultaneous qualification,
three envelopes shall be submitted. The first envelope shall be the
qualification requirements, the second the technical proposal and the
third the financial proposal. All envelopes shall bear the name of the
bidder and project to be bid out in capital letters and addressed to the
PBAC of the concerned Agency/LGU. They shall be marked "Do Not Open
Before (date and time of opening of bids)". The envelopes shall be
appropriately labeled as Qualification Requirements, Technical Proposal
and Financial Proposal.
a. The envelope for qualification of the bidder shall contain
requirements as stated in Section 5.4
b. The "Technical Proposal" shall contain the
following:chanroblesvirtuallawlibrary
i. Operational feasibility of the project, which shall indicate
the proposed organization, methods and procedures for the
operation and maintenance of the project under bidding;
ii. Technical soundness/preliminary engineering design,
including proposed project timeline;
iii. Preliminary environmental assessment, which shall
indicate the probable adverse effects of the project on the
environment and the corresponding mitigating measures to be
adopted;
iv. Project cost including operating and maintenance cost
requirements and proposed financing plan (proposed equity
contribution, debt, etc.);
v. Bid security in the form of cash, certified check, manager's
check, letter of credit, or bank draft/guarantee issued by a
reputable local/foreign bank, or a surety bond callable on
demand issued by the Government Service Insurance System
(GSIS) or an entity duly registered and recognized by the
Office of the Insurance Commissioner and acceptable to the
Agency/LGU, or any combination thereof payable to the
Agency/LGU concerned in accordance with the following
schedules:chanrobles virtual law library

Required BidEstimated Cost

Security of Construction
not less thanof less than P5.0
2.0% B
not less thanof P5.0 B to
1.5% P10.0 B but at
least P100
million
not less than
1.0% of P10.0 B
and above the
estimated cost of
 construction but
In case the bid security is at least P150
issued by a foreign bank, million
said security has to be confirmed and validated by its local
branch in the Philippines or by a bank that is duly registered
and authorized by the Bangko Sentral ng Pilipinas (BSP).
The posting of the bid security is for the purpose of
guaranteeing that the proposed contract awardee shall enter
into contract with the concerned Agency within the time
prescribed therefore.cralaw
Bids and bid securities shall be valid for a period to be
prescribed by the Agency/LGU concerned in the bidding
documents but in no case beyond one hundred and eighty
(180) calendar days from the date of opening of bids. The
actual amount of bid security to be posted by the bidders will
be fixed by the concerned Agency/LGU prior to bidding. Said
actual amount shall not be less than the amount prescribed in
the above schedule.cralaw
vi. Other documents as may be required by the concerned
Agency/LGU to support the bidder's technical proposal.cralaw
c. The "Financial Proposal" shall contain the following, as the case
may be:chanroblesvirtuallawlibrary

i. For BOT, BOO, CAO, DOT, ROT, ROO and similar

variants:chanroblesvirtuallawlibrary
Proposed user tolls/fees/rentals/other charges; and cralaw
- Present worth of the proposed user tolls/fees/rentals/other
charges over the fixed term based on the discounting rate and
foreign exchange rate prescribed in the bidding documents in
accordance with Section 4.3.a hereof.cralaw
ii. For BT, BLT, and similar variants:chanrobles virtual law
library
Proposed amortization payments and repayment period; and
present worth of proposed amortization payments based on
the discounting rate and foreign exchange rate prescribed in
the bidding documents in accordance with Section 4.3.a
hereof.cralaw
iii. For BTO and similar variants, either:chanrobles virtual law
library
- Proposed user tolls/fees/rentals/other charges; and cralaw
Present worth of the proposed user tolls/fees/ rentals/other
charges over the fixed term based on the discounting rate and
foreign exchange rate prescribed in the bidding documents in
accordance with Section 4.3.a hereof; or
- Proposed amortization payments and repayment period;
and cralaw
- Present worth of proposed amortization payments based on
the discounting rate and foreign exchange rate prescribed in
the bidding documents in accordance with Section 4.3.a
hereof.cralaw
The choice between user fees and amortization payments shall
depend on the method and criteria for the evaluation of the
financial proposal so stated in the Instructions to
Bidders.cralaw
iv. For projects which are not public utilities, where the
Agency/LGU requires payments to be made by the project
proponent to the government and where the Agency/LGU opts
to adopt the method and criteria for financial evaluation as
prescribed under Section 8.2.d.:chanrobles virtual law library
Proposed payments schedule;
Present worth of proposed payments based on the discounting
rate and foreign exchange rate prescribed in the bidding
documents in accordance with Section 4.3.a hereof.cralaw
v. For other contractual arrangements which have been
approved/authorized by the President of the
Philippines:chanrobles virtual law library
Any of the above or any combination thereof, provided such is
consistent with the contractual arrangement which has been
approved/authorized by the President of the Philippines, upon
recommendation of the ICC.cralaw
vi. The project financing scheme, including the amount of the
equity and debts to be obtained for the project and the
probable source of financing.cralaw
Sec. 7.2. Submission of Late Bids. - Bids submitted after the deadline for
submission prescribed in the Instructions to Bidders shall be considered
late and shall be returned unopened.
Sec 7.3. Opening of the Envelope for Qualification of Bidder. – At the
date and time stipulated in the Instructions to Bidders, the PBAC shall
open the envelope and ascertain whether the same is complete in terms
of the information required under Section 5.4. Such information shall be
recorded at the time, including the names and addresses of required
witnesses. All bidders or their representatives present at the opening of
the first envelopes shall sign a register of the opening of the qualification
envelope.cralaw
Sec. 7.4. Evaluation of Qualification Requirements. - The qualification
documents will first be evaluated prior to the opening of the technical
proposal. The Agency/LGU shall inform bidders whether they are qualified
or disqualified, and for the latter the reasons for disqualification, within
fifteen (15) calendar days. Only qualified bidders shall be allowed to
participate in the bid evaluation. Disqualified bidders shall be informed of
the grounds of disqualification and their technical and financial proposals
returned unopened.cralaw
Sec. 7.5. Rejection of Bids. - Incomplete information on any of the
envelopes and/or non-compliance with the bid security requirements
prescribed in Section 7.1b shall be grounds for automatic rejection of
bids.cralaw
Sec. 7.6. Opening of the Envelope for the Technical Proposal. - At the
date and time of bid opening, as stipulated in the Instructions to Bidders,
the PBAC shall open only the technical proposal and ascertain whether
the same is complete in terms of the data/information required under
Section 7.1.b above and whether the same is accompanied by the required
bid security in the prescribed form, amount and period of validity. Such
information shall be recorded at the time, including the names and
addresses of required witnesses. All bidders or their representatives
present at the opening of the first envelopes shall sign a register of the
bid opening.cralaw
Sec. 7.7. Opening of the Envelope for the Financial Proposal. - Only those
bidders whose technical proposal passed the evaluation criteria as
prescribed under Section 8.1 hereof shall have their financial proposal
opened for further evaluation. Those who failed the evaluation of the
technical proposal shall not be considered further and the PBAC shall
return their financial proposals unopened together with the reasons for
their disqualification from the bidding.cralaw
Once the bidders who have qualified for the evaluation of the financial
proposal have been determined, the PBAC shall notify said bidders of the
date, time and place of the opening of the envelopes for the financial
proposal. The opening thereof shall follow the same procedures prescribed
for the opening of the previous envelopes.cralaw
Sec. 7.8. Withdrawal and/or Modification of Bids. - Withdrawal and/or
modification of bids may be allowed upon written notice by the bidder
concerned to the Agency/LGU prior to the time and date set for the
opening of bids (opening of first envelopes) as specified in the
Instructions to Bidders. No bids shall be modified or withdrawn after the
time prescribed to open bids. Bid modifications received after said period
shall be considered late and will be returned unopened. Withdrawal of bids
after the bid opening date shall cause the forfeiture of the bidder's bid
security.
RULE 8
EVALUATION OF BIDS

Sec. 8.1. The First Stage Evaluation. - The evaluation of bids shall be
undertaken in two (2) stages in accordance with the procedures described
below.
The first stage evaluation shall involve the assessment of the technical,
operational, environmental, and financing viability of the proposal as
contained in the bidders' first envelopes vis-a-vis the prescribed
requirements and criteria/minimum standards and basic parameters
prescribed in the bidding documents. Only those bids that have been
determined to have positively passed the first stage of evaluation shall be
qualified and considered for the second stage of evaluation.cralaw
The Agency/LGU concerned shall evaluate the technical proposals of the
bidder in accordance with the following criteria:chanrobles virtual law
library
a. Technical soundness (preliminary engineering design): The basic
engineering design of the project should conform to the minimum
design and performance standards and specifications set by the
Agency/LGU concerned as prescribed in the bidding documents. The
engineering surveys, plans and estimates should be undertaken
within +/- 20% of the final quantities. The construction methods
 and schedules should also be presented and shown to be feasible or
"doable".
b. Operational feasibility: The proposed organization, methods, and
procedures for operating and maintaining the completed facility
must be well defined, should conform to the prescribed performance
standards, and should be shown to be workable. Where feasible, it
should provide for the transfer of technology used in every phase of
the project.cralaw
c. Environmental Standards: The proposed design and the
technology of the project to be used must be in accordance with the
environmental standards set forth by the Department of
Environment and Natural Resources (DENR) as indicated in the bid
documents. Any adverse effects on the environment as a
consequence of the project as proposed by the project proponent
must be properly identified, including the corresponding
corrective/mitigating measures to be adopted.cralaw
d. Project Financing: The proposed financing plan should positively
show that the same could adequately meet the construction cost
and operating and maintenance costs requirements of the project.
The Agency/LGU concerned shall assess the financing proposals of
the bidders if the same matches and adequately meets the cost
requirements of the project under bidding.cralaw
e. Enhancements: Other terms which the project proponent may
offer to the government to make the proposals more attractive, such
as, but not limited to, provisions allowing the government to share
in revenues; less government guarantees or reduction in the level of
government undertakings or support.cralaw
The PBAC of the Agency/LGU concerned shall complete the evaluation of
the technical proposal within thirty (30) calendar days from the date the
bids are opened.
Sec. 8.2. The Second Stage Evaluation. - The second stage evaluation
shall involve the assessment and comparison of the financial proposals of
the bidders:chanrobles virtual law library
a. For BOT, BOO, CAO, DOT, ROT, ROO and other similar schemes
that may be approved/authorized by the President, assessment and
comparison of the financial proposals of bidders shall be based on
the lowest present value of the proposed tolls, fees, rentals and
other charges over a fixed term for the facility to be constructed,
rehabilitated, operated and maintained according to the prescribed
minimum design and performance standards, plans and
specifications.
b. For BT, BLT, and other similar schemes that may be
approved/authorized by the President, assessment and comparison
of the financial proposals of the bidders shall be based on the
present value of the proposed schedule of amortization payments
for the facility to be constructed according to the prescribed
minimum design and performance standards, plans and
specifications.cralaw
c. For BTO and other similar schemes that may be
approved/authorized by the President, assessment and comparison
of the financial proposals of bidders shall be based on either the
lowest present value of the proposed tolls, fees, rentals and other
charges over a fixed term for the facility to be constructed, operated
and maintained, or the present value of the proposed schedule of
amortization payments for the facility to be constructed according
to the prescribed minimum design and performance standards,
plans and specifications.cralaw
The evaluation criteria for a BTO shall be stated in the Instructions
to Bidders.cralaw
The Agency/LGU concerned shall award the contract to the bidder
whose proposed tolls/fees/rentals/charges in case of BOT, BOO,
CAO, DOT, ROT, ROO, BTO, and other similar schemes, or proposed
schedule of amortization payments in case of BT, BLT, BTO, and
other similar schemes, are determined to have the lowest present
value. However, in the case of BT, BLT and BTO schemes, a Filipino
project proponent who submits an equally advantageous bid with
exactly the same price and technical specifications as that of a
foreign project proponent shall be given preference.

d. For other contractual arrangements which are a combination of

any of the above and/or which have been approved by the President
of the Philippines, assessment and comparison of the financial
proposal of the bidders shall be based upon the present value of the
amortization payments and/or present value of the proposed toll
fees, and other charges and/or other types of payments for the
facility to be constructed according to the prescribed minimum
 design and performance standards, plans and specifications, as
recommended by the ICC and approved/authorized by the President
of the Philippines.cralaw
e. For projects that are not public utilities where the Agency/LGU
concerned requires payments to be made by the project proponent
to the government, the assessment and comparison of the financial
proposals of bidders may be based on the present value of proposed
payments. The Agency/LGU concerned shall award the contract to
the bidder whose proposed payments are determined to have the
highest present value.cralaw
The second stage evaluation shall be completed by the PBAC of the
concerned Agency/LGU within fifteen (15) calendar days from the date
the first stage evaluation shall have been completed.
Sec. 8.3. Right to Reject All Bids. - The Agency/LGU concerned reserves
the right to reject any or all bids, waive any minor defects therein and
accept the offer most advantageous to the government.
RULE 9
NEGOTIATED CONTRACT

Sec. 9.1. Direct Negotiation. - Direct negotiation shall be resorted to when

there is only one complying bidder left as defined
hereunder:chanroblesvirtuallawlibrary
a. If, after advertisement, only one project proponent applies for pre-
qualification and it meets the pre-qualification requirements, after which
it is required to submit a bid/proposal which is subsequently found by the
Agency/LGU to be complying;
b. If, after advertisement, more than one project proponent applied for
pre-qualification but only one meets the pre-qualification requirements,
after which it submits a bid proposal that is found by the Agency/LGU to
be complying;
c. If, after pre-qualification of more than one project proponent, only one
submits a bid which is found by the Agency/LGU to be complying;
d. If, after pre-qualification, more than one project proponent submit bids
but only one is found by the Agency/LGU to be complying;
In such events however, any disqualified bidder may appeal the decision
of the concerned Agency/LGU to the Head of Agency in case of national
projects, or to the Department of Interior and Local Government (DILG) in
case of local projects within fifteen (15) working days from receipt of the
notice of disqualification. The Agency/LGU concerned shall act on the
appeal within forty-five (45) working days from receipt thereof. The
decision of the Agency concerned or the DILG, as the case may be, shall
be final and immediately executory.cralaw
Sec. 9.2. Unsolicited Proposals- Unsolicited proposals may likewise,
subject to the conditions provided under Rule 10, be accepted by an
Agency/LGU on a negotiated basis.
Sec. 9.3. Conditions for Negotiated Projects. - In addition to the above
requisites for negotiated projects, ICC must prescribe the reasonable rate
of return prior to negotiation and/or call for comparative proposals. The
appropriate government regulatory body must approve the rates and the
adjustment formula therefor incorporated in the contract, prior to award.
In the absence of a regulatory body, ICC approval shall suffice.cralaw
Sec. 9.4. Financial and Technical Evaluation of Negotiated Contracts. -
In so far as applicable, the same rules provided for the evaluation of the
technical and financial aspects of bid proposals shall be applied in the
evaluation of negotiated contracts authorized in the Act and these IRR.
RULE 10
UNSOLICITED PROPOSALS

Sec. 10.1. Requisites for Unsolicited Proposals. – Any Agency/LGU may

accept unsolicited proposals on a negotiated basis provided that all the
following conditions are met:chanroblesvirtuallawlibrary
a. the project involves a new concept or technology and/or is not
part of the list of priority projects;
b. no direct government guarantee, subsidy or equity is required;
and cralaw
c. the Agency/LGU concerned has invited by publication, for three
(3) consecutive weeks, in a newspaper of general circulation,
comparative or competitive proposals and no other proposal is
received for a period of sixty (60) working days. In the event that
another project proponent submits a price proposal lower than that
submitted by the original proponent, the latter shall have the right
to match said price proposal within thirty (30) working days. Should
the original project proponent fail to match the lower price proposal
submitted within the specified period, the contract shall be awarded
to the tenderer of the lowest price. On the other hand, if the
original project proponent matches the submitted lowest price
 within the specified period, he shall immediately be awarded the
project.cralaw
Sec. 10.2. New Technology. - The project proponent proposing a project
involving a new concept or technology shall incorporate in its proposal
information regarding said new concept or technology which it should
have directly, or through any of its key members, successfully
implemented at a scale similar to the proposed project. The information
disclosed must be in sufficient detail so as to allow the Agency/LGU to
properly evaluate the new concept or technology. Additionally, the new
technology must possess at least one of the following
attributes:chanroblesvirtuallawlibrary
a. A recognized process, design, methodology or engineering
concept which has demonstrated its ability to significantly reduce
implementation of construction costs, accelerate project execution,
improve safety, enhance project performance, extend economic life,
reduce costs of facility maintenance and operations, or reduce
negative environmental impact or social/economic disturbances or
disruptions during either the project implementation/construction
phase or the operation phase; or
b. A process for which the project proponent or any member of the
proponent joint venture/consortium possesses exclusive rights,
either world-wide or regionally; or
c. A design, methodology or engineering concept for which the
proponent or a member of the proponent consortium or association
possesses intellectual property rights.cralaw
Sec. 10.3. Projects Ineligible for Unsolicited Proposals. - Projects included
in the List of Priority Projects, as defined under Section 2.3 shall not be
eligible for unsolicited proposals, unless involving a new concept or
technology. Additionally, any component of an approved solicited project
shall not be eligible for any unsolicited proposal. For projects, which are
not part of the List, the Agency/LGU has the discretion to determine
which may be opened to unsolicited proposals or publicly bid out.
Sec. 10.4. Government Undertakings for Unsolicited Proposals. - As a
general rule, unsolicited proposals can avail of the different forms of
government support as enumerated under Rule 13, Section 13.2 b (ii),
except for direct government guarantees, direct government subsidy or
government equity. The ICC shall determine the scope and specific forms
of government undertaking as defined in Section 13.2 b that an
unsolicited proposal may be granted.cralaw
The sale or lease of government assets, including among others, right of
way, to project proponents shall not be considered as subsidy or
equity.cralaw
Sec. 10.5. Submission of a Complete Proposal. - For a proposal to be
considered by the Agency/LGU, the proponent has to submit a complete
proposal which shall include a feasibility study, company profile as
outlined in Annex A, and the basic contractual terms and conditions on
the obligations of the proponent and the government. The Agency/LGU
shall acknowledge receipt of the proposal and advice the proponent
whether the proposal is complete or incomplete. If incomplete, it shall
indicate what information is lacking or necessary.cralaw
Sec. 10.6. Evaluation of Unsolicited Proposals. - The Agency/LGU is
tasked with the initial evaluation of the proposal. The Agency/LGU shall:
1) appraise the merits of the project; 2) evaluate the qualification of the
proponent; and 3) assess the appropriateness of the contractual
arrangement and reasonableness of the risk allocation. The Agency/LGU
is given sixty (60) days to evaluate the proposal from the date of
submission of the complete proposal. Within this 60-day period the
Agency/LGU, shall advise the proponent in writing whether it accepts or
rejects the proposal. Acceptance means commitment of the Agency/LGU
to pursue the project and recognition of the proponent as the "original
proponent". At this point, the Agency/LGU will no longer entertain other
similar proposals until the solicitation of comparative proposals. The
implementation of the project, however, is still contingent primarily on
the approval of the appropriate approving authorities consistent with
Section 2.7 of these IRR, the agreement between the original proponent
and the Agency/LGU of the contract terms, and the approval of the
contract by the ICC or Local Sanggunian.cralaw
Sec. 10.7. Treatment of More than one Proposal for the Same or Similar
Project. - The Implementing Agency reserves its option to reject all
proposals and bid out the project instead. However, if the Agency/LGU
opts to implement the project via the unsolicited mode, it should
evaluate proposals using a first in time approach. Under this approach,
the first complete proposal is evaluated and decided upon. The second
complete proposal will only be entertained if the first one is rejected.
Otherwise, the second proposal will be considered only if there is a failure
in the negotiation of the first proposal or during the invitation for
comparative proposals as defined under Section 10.11
Sec. 10.8. ICC/Local Sanggunian Clearance of Unsolicited Proposals. –
The Head of Agency/LGU shall secure ICC/Sanggunian clearance of the
unsolicited proposal prior to negotiation with the original proponent. An
unsolicited proposal shall be submitted to the ICC/Sanggunian only upon
official endorsement by the Head of the concerned Agency/LGU stating
that the project is part of or consistent with the Agency/LGU
development programs and may be prosecuted under any of the
contractual arrangements authorized under these IRR. ICC/Local
Sanggunian shall approve the project in accordance with the guidelines
hereto attached as Annex B, set the negotiating parameters and prescribe
the reasonable rate of return for the project, including the reasonable
internal rate of return on equity.cralaw
Sec. 10.9. Negotiation With the Original Proponent. – Immediately after
ICC/Local Sanggunian's clearance of the project, the Agency/LGU shall
proceed with the in- depth negotiation of the project scope,
implementation arrangements and concession agreement, all of which will
be used in the Terms of Reference for the solicitation of comparative
proposals. The Agency/LGU and the proponent are given ninety (90) days
upon receipt of ICC's approval of the project to conclude negotiations.
The Agency/LGU and the original proponent shall negotiate in good faith.
However should there be unresolvable differences during the negotiations,
the Agency/LGU shall have the option to reject the proposal and bid out
the project. On the other hand, if the negotiation is successfully
concluded, the original proponent shall then be required to reformat and
resubmit its proposal in accordance with the requirements of the Terms
of Reference to facilitate comparison with the comparative proposals. The
Agency/LGU shall validate the reformatted proposal if it meets the
requirements of the TOR prior to the issuance of the invitation for
comparative proposals.cralaw
Sec. 10.10. Tender Documents. - The qualification and tender documents
shall be prepared along the lines specified under Rules 4 and 5 hereof.
The concession agreement that will be part of the tender documents will
be considered final and non-negotiable by the challengers. Proprietary
information shall, however, be respected, protected and treated with
utmost confidentiality. As such, it shall not form part of the
bidding/tender and related documents.cralaw
Sec. 10.11. Invitation for Comparative Proposals. - The Agency/LGU shall
publish the invitation for comparative or competitive proposals only after
ICC/Local Sanggunian issues a no objection clearance of the draft
contract. The invitation for comparative or competitive proposals should
be published at least once every week for three (3) weeks in at least one
(1) newspaper of general circulation. It shall indicate the time, which
should not be earlier than the last date of publication, and place where
tender/bidding documents could be obtained. It shall likewise explicitly
specify a time of sixty (60) working days reckoned from the date of
issuance of the tender/bidding documents upon which proposals shall be
received. Beyond said deadline, no proposals shall be accepted. A pre-bid
conference shall be conducted ten (10) working days after the issuance of
the tender/bidding documents.cralaw
Sec. 10.12. Posting of Bid Bond by Original Proponent- The original
proponent shall be required at the date of the first date of the publication
of the invitation for comparative proposals to submit a bid bond equal to
the amount and in the form required of the challengers.cralaw
Sec. 10.13. Simultaneous Qualification of the Original Proponent. - The
Agency/LGU shall qualify the original proponent based on the provisions
of Rule 5 hereof, within thirty (30) days from start of negotiation. For
consistency, the evaluation criteria used for qualifying the original
proponent should be the same criteria used in the Terms of Reference for
the challengers.cralaw
Sec. 10.14. Submission of Proposal. - The bidders are required to submit
the proposal in three envelopes at the time and place specified in the
Tender Documents. The first envelope shall contain the qualification
documents, the second envelope the technical proposal as required under
Sec. 7.1. (b), and the third envelope the financial proposal as required
under Sec. 7.1. (c).cralaw
Sec. 10.15. Evaluation of Proposals. - In terms of procedure, the
evaluation will be in three stages: Stage 1 is the evaluation of
qualification documents; Stage 2, the technical proposal; and Stage 3, the
financial proposal. Only those bids which passed the first stage will be
considered for the second stage and similarly, only those which pass the
second stage will be considered for the third stage evaluation. The
Agency/LGU will return to the disqualified bidders the remaining
envelopes unopened, together with a letter explaining why they were
disqualified. The criteria for evaluation will follow Rule 5 for the
qualification of bidders and Rule 8 for the technical and financial
proposals. The time frames under Rules 5 and 8 shall likewise be
followed.cralaw
Sec. 10.16. Disclosure of the Price Proposal. - The disclosure of the price
proposal of the original proponent in the Tender Documents will be left to
the discretion of the Agency/LGU. However, if it was not disclosed in the
Tender Documents, the original proponent's price proposal should be
revealed upon the opening of the financial proposals of the challengers.
The right of the original proponent to match the best proposal within
thirty (30) working days starts upon official notification by the
Agency/LGU of the most advantageous financial proposal.
RULE 11
AWARD AND SIGNING OF CONTRACT

Sec. 11.1. Recommendation to Award. - Within seven (7) calendar days

from the date the financial evaluation shall have been completed, the
Agency/LGU PBAC will submit a recommendation of award to the Head of
Agency/LGU. The PBAC will prepare and submit a detailed
evaluation/assessment report on its decision regarding the evaluation of
the bids and explain in clear terms the basis of its recommendations.
Sec. 11.2. Decision to Award. – Within seven (7) calendar days from the
submission by PBAC of the recommendation to award, the Agency/LGU
Head shall decide on the award. The approval shall be manifested by
signing and issuing the Notice of Award to the awardee within seven (7)
calendar days from approval thereof.cralaw
Sec. 11.3. Notice of Award- The Notice of Award shall indicate, among
others, that the awardee must submit within thirty (30) calendar days
from official receipt of the Notice of Award the following:chanrobles
virtual law library
prescribed performance security;
proof of commitment of equity contribution as specified by the
Agency/LGU and subject to current monetary rules and regulations, and
indications of financing resources;
in the case of a joint venture/consortium, the agreement indicating that
the members are jointly, severally and solidarily liable for the obligations
of the project proponent under the contract; or
in case a project company is formed, proof of registration in accordance
with Philippine laws.cralaw
For negotiated contracts and for projects which have been granted a
natural monopoly or where the public has no access to alternative
facilities, approval by the concerned regulatory bodies of the proposed
tolls/fees/rentals/charges. In the absence of a regulatory agency for the
project, ICC/Local Sanggunian clearance will suffice.
Such other conditions imposed by the Agency/LGU.cralaw
In turn, within seven (7) calendar days upon receipt of the foregoing
requirements for award, the Agency/LGU will advise the awardee whether
or not its submission is satisfactory. Failure to meet the requirements
within the prescribed 30-day period will result in confiscation of the bid
security.cralaw
Sec. 11.4. Withdrawal of a Member. - The withdrawal of any member of
the joint venture or consortium, or its pre-qualified contractors could be a
ground for disqualification or cancellation of the contract respectively,
and forfeiture of the proponent's bid or performance security. The
concerned Agency/LGU may, however, proceed with the award of the
contract or the implementation of the project if, upon its determination,
it finds that the other members of the joint venture or consortium or its
contractors are still capable of successfully carrying out the project or
that they have provided a suitable and acceptable substitute with equal or
better qualifications.cralaw
Sec. 11.5. Validity of Bids. - The award of contract shall be made within
the period of the validity of the bids. The required bid security shall be
valid for a reasonable period but in no case beyond one hundred eighty
(180) calendar days following the opening of the bids. Bid securities shall
be returned to the unsuccessful bidders as soon as the contract with the
successful bidder has been approved by the Head of Agency/LGU
concerned in accordance with Sections 11.3., 11.7. and 12.1.
hereof.cralaw
Sec. 11.6. Extension of Validity of Bids. - When an extension of validity of
bids is considered necessary, those who submitted bids shall be requested
in writing to extend the validity of their bids before the expiration date.
However, bidders shall not be allowed to modify or revise the price or
other substance of their bids.cralaw
Bidders shall have the right to refuse to grant such an extension without
forfeiting their bid security, but those who are willing to extend the
validity of their bids should be required to provide a suitable extension of
bid security.cralaw
Sec. 11.7. Conditions for Approval of Contract. - The Head of Agency/LGU
shall ensure that all of the following conditions have been complied with
before approving the contract:chanrobles virtual law library
a. Submission of the required performance security as prescribed
under Section 12.7 hereof;
b. Proof of sufficient equity from the investors and firm
commitments from reputable financial institution to provide
sufficient credit lines to cover the total estimated cost of the
project;
c. ICC clearance of the contract on a no-objection basis;
Failure by the winning project proponent to submit the requirements
prescribed under items a, b and c above within the time period specified
by the concerned Agency/LGU in the Notice of Award or failure to execute
the contract within the specified time shall result in the disqualification
of the bidder, as well as the forfeiture of the bid security of the bidder.
Sec. 11.8. Execution of the Contract. - The successful bidder should sign
the contract within seven (7) calendar days from receipt of the advice of
the Agency/LGU that all requirements for award, as provided for in
Section 11.3. are fully complied with.cralaw
In the event of refusal, inability or failure of the bidder with the lowest
complying evaluated bid to make good his bid by entering into contract
with the Government within the time provided therefor, the Agency/LGU
concerned shall forfeit its bid security. In such an event the Agency/LGU
concerned shall consider the next complying and qualified lowest
evaluated bid for award. If the same shall likewise refuse or fail to enter
into contract with the government, his/her bid security shall likewise be
forfeited and the Agency/LGU concerned shall consider the next
complying and qualified lowest evaluated bid, and so on until a contract
shall have been entered into. In the event that the concerned
Agency/LGU is unable to execute the contract with any of the complying
and qualified bidders due to the refusal of the latter, a failure of bidding
will be declared and subject the project to a rebidding.cralaw
Each unsuccessful bidder shall also be notified of the award through
official notices/communications. Notices of Award shall be made available
to the public when requested.cralaw
Sec. 11.9. Failure of Bidding. - When no complying bids are received or in
case of failure to execute the contract with a qualified and contracting
bidder due to the refusal of the latter, the bidding shall be declared a
failure. In such cases, the project shall be subjected to a rebidding.
RULE 12
CONTRACT APPROVAL AND IMPLEMENTATION

Sec. 12.1. Period to Approve Contract. - The Head of Agency/LGU

concerned shall approve/disapprove the contract within fifteen (15)
calendar days from the date that the winning project proponent has
signed the contract. Approval of the contract shall be without prejudice to
the obligation of the Agency/LGU concerned and the winning project
proponent from securing such other government approvals as may be
required under existing laws, rules and regulations. Among others, the
winning project proponent shall be responsible for securing the necessary
and appropriate environmental clearances from the DENR prior to actual
project construction in accordance with existing laws, rules and
regulations. The DENR shall act on the environmental clearance of the
project within the time frame prescribed and following the guidelines of
DENR Administrative Order No. 96-37 and subsequent guidelines as may
be issued from time to time. The Agency/LGU may provide the necessary
assistance to the project proponent in securing all the required
clearances.
Sec. 12.2. Grant of Franchise. - In case of a project requiring a utility
franchise, the winning project proponent shall automatically be granted
by the appropriate Agency/LGU the franchise to operate and maintain the
facility, including the collection of tolls, fees, rentals, and other charges
in accordance with the schedules stipulated in the approved contract.The
original franchise period as stipulated in the contract agreement may be
extended, as may be authorized by the concerned authority, provided that
the total franchise period shall not exceed fifty (50) years. Provided
further that the extension and the new terms and conditions of the
contract will be subject to ICC's no objection clearance.cralaw
Sec. 12.3. Contract Effectivity. - The contract shall be effective upon
approval thereof by the Head of Agency/LGU and upon compliance with
all conditions precedent as specified in the agreement. The contract shall
specify the form or proof of compliance therewith.cralaw
Sec. 12.4. Notice of Contract Effectivity. - The concerned Agency/LGU
shall issue the Notice of Contract Effectivity to implement the project to
the awardee not later than seven (7) calendar days from the date of the
approval of the contract by the Head of Agency/LGU and compliance of
conditions precedent to contract effectivity, as applicable.cralaw
Sec. 12.5. Preparation and Approval of Detailed Engineering Design. -
The winning project proponent shall be responsible for the preparation of
the detailed engineering designs and plans based on the prescribed
minimum design and performance standards and specifications and shall
submit the same to the Agency/LGU concerned.The Agency/LGU
concerned shall review the detailed engineering designs and plans
prepared by the project proponent in terms of its compliance with the
prescribed standards and specifications, and if found acceptable, shall
approve the same prior to actual project construction. This approval by
the Agency/LGU concerned notwithstanding, the project proponent shall
be solely responsible for the integrity of its detailed engineering designs
and plans. The approval thereof by the Agency/LGU concerned does not
diminish this responsibility, nor does it transfer any part of such
responsibility to the Agency/LGU concerned. In the case of local projects,
the LGU concerned shall ensure that the technical designs, plans,
specifications, and related aspects necessary for the project's
construction, operation and maintenance shall be based on relevant local
and national policies, standards and guidelines. Moreover, the LGU shall
consult with appropriate national regulatory bodies regarding national
policies, standards, and guidelines in granting the necessary
franchise.cralaw
Sec. 12.6. Project Construction. - The project proponent shall build the
facility in accordance with the design and performance standards and
specifications prescribed in the approved detailed engineering design. For
this construction stage, the project proponent may engage the services of
foreign and/or Filipino contractors that comply with the legal
requirements as prescribed under Section 5.4.a. In the case of foreign
contractors, Filipino labor shall be employed in the different phases of the
construction works where Filipino skills are available. Hiring of labor shall
be subject to existing labor laws, rules and regulations.cralaw
Sec. 12.7. Performance Guarantee for Construction Works. - To guarantee
the faithful performance by the project proponent of its obligations under
the contract including the prosecution of the construction works related
to the project, the project proponent shall post in favor of the
Agency/LGU concerned, within the time and under the terms prescribed
under the project contract, a performance security in the form of cash,
manager's check, cashier's check, bank draft or guarantee confirmed by a
local bank (in the case of foreign bidders bonded by a foreign bank), letter
of credit issued by a reputable bank, surety bond callable on demand
issued by the Government Service Insurance System (GSIS) or by surety
or insurance companies duly accredited by the Office of the Insurance
Commissioner, or a combination thereof, in accordance with the following
schedules:chanrobles virtual law library
a. Cash, manager's check, cashier's check, irrevocable letter of
credit, bank draft – a minimum of two percent (2%) of the total
Project Cost.
b. Bank Guarantee – a minimum of five percent (5%) of the total
Project Cost.cralaw
c. Surety Bond – a minimum of ten percent (10%) of the total
Project Cost.cralaw
Sec. 12.8. Performance Guarantee for Operation. - For projects where the
proponent or other third parties shall operate the project, the
Agency/LGU shall determine whether the project proponent or project
company will post an Operating Security, prior to the release of the
Performance Security. The Operating Security will be issued to guarantee
the operation of the project in accordance with the operating parameters
and specifications under the contract. The Agency/LGU shall determine
the amount and form thereof.
Sec. 12.9. Supervision of Project Construction, Operation and
Maintenance. - The Agency/LGU concerned shall exercise technical
supervision over the project activities of the project proponent. The
Agency/LGU concerned shall inspect and check whether the project is
constructed, operated and maintained in accordance with the approved
plans, specifications, standards and costs.In the event that the
Agency/LGU concerned shall find any deviation from or non-compliance
with the approved plans, specifications and standards, it shall bring the
same to the attention of the project proponent for the necessary
corrective actions. Failure of the project proponent to correct the
deviation within the time prescribed by the implementing agency may be
a ground for the rescission/ termination of the contract in accordance
with Section 12.19b of these IRR. Such technical supervision by the
Agency/LGU concerned shall not diminish the singular responsibility of
the project proponent for the proper construction, operation, and
maintenance of the facility, nor does it transfer any part of that
responsibility to the Agency/LGU.cralaw
Sec. 12.10. Contract Re-opener. - Where it is necessary that the
contract/project has to be revised due to conditions beyond the control of
the parties involved and in times of extreme and unforeseeable
conditions, then such a contract re-opener may be entertained subject to
the clearance on a no-objection basis by the ICC. The parties to the
contract will agree on the specific conditions that will necessitate or
result in a re-negotiation and modification of some or all of the
substantial provisions of the contract. In case the amendments in the
contract involve an increase in the amount or a change in the form of
government undertakings or ICC prescribed parameters or contractual
provisions, then such changes and/or amendments will require ICC
clearance. Similarly for negotiated contracts, approval of the appropriate
regulatory body should be secured for any changes in base rates and/or
parametric rate adjustment formula. Failure to secure ICC clearance shall
render the revisions to the contract invalid. If there is no increase in the
amount or change in form of government undertakings and ICC-prescribed
parameters or contractual provisions, then the revised contract will be
submitted to ICC for information only.cralaw
Sec. 12.11. Milestone Bonding. - The project proponent shall execute the
project in accordance with predetermined milestones. As may be agreed
upon in the contract, a portion of the performance security shall be
released upon compliance with corresponding milestones. Failure by the
project proponent to comply with these milestones may result to contract
rescission and forfeiture of the performance security of the proponent in
accordance with Section 12.19b hereof.cralaw
Sec. 12.12. Release of Performance Security. - (a) Construction Security.
The Construction Security may be released by the Agency/LGU concerned
after the issuance of the "Certificate of Completion and Acceptance" of
the construction works and the acceptance by the Agency/LGU of the
project as completed in accordance with the agreed standards and
specifications, provided that there are no claims filed against the
contractor or the surety company. (b) Operating Security. The Operating
Security shall be released by the Agency/LGU concerned on the transfer
date of the facility provided that it is free from any lien, charge or
encumbrance.cralaw
Sec. 12.13. Liquidated Damages. - Where the project proponent of a
project fails to satisfactorily complete the work within the construction
period prescribed in the contract, including any extension or grace period
duly granted, and is thereby in default under the contract, the project
proponent shall pay the Agency/LGU concerned liquidated damages, as
may be agreed upon under the contract by the parties. The parties shall
agree on the amount and schedule of payment of the liquidated damages.
The performance security may be forfeited to answer for any liquidated
damages due to the Agency/LGU. The amount of liquidated damages due
for every calendar day of delay will be determined by the Agency/LGU. In
no case however shall the delay exceed twenty percent (20%) of the
approved construction time stipulated in the contract plus any time
extension duly granted. In such an event the Agency/LGU concerned shall
rescind the contract, forfeit the proponent's performance security and
proceed with the procedures prescribed under Section 12.19. b.cralaw
Sec. 12.14. Repair and Maintenance Costs. - The project proponent shall,
within the franchise period granted, undertake the necessary and
appropriate repair and maintenance of the project in accordance with the
design and performance standards prescribed in the approved contract in
order to ensure that the facility operates at the desired level of service.
For this purpose, and where applicable, a portion of the project's revenues
equivalent to the cost of the project's repair and maintenance, as
indicated in the project proponent's bid proposal shall be set aside and
reserved exclusively for repair and maintenance costs of the project. For
facility, an escrow account may be established for the purpose.cralaw
Sec. 12.15. Repayment Schemes. -
12.15.1 General Classification. - The repayment schemes for the projects
shall depend on the contractual arrangement used therefor, which shall be
generally classified as follows:chanrobles virtual law library
a. Arrangements where the project proponent operates the facility
for a fixed term and thereafter, transfers the facility to the Agency
or LGU concerned (BOT, CAO, DOT, ROT);
b. Arrangements where the project proponent is allowed to own and
operate the facility (BOO, ROO);
c. Arrangements where the project proponent builds and transfers
the facility to the Agency or LGU concerned, but operates the
facility on behalf of said Agency or LGU (BTO) through a
management contract;
d. Arrangements where the project proponent does not operate the
facility (BT, BLT).cralaw
For projects undertaken through arrangements described in (a) and
(b) above, the project proponents shall be repaid by authorizing it to
collect reasonable tolls, fees, and charges for a fixed term. In the
case of arrangements described in (a), such term shall in no case
exceed fifty (50) years. However, for arrangements described in (b),
the project proponent, upon renewal of its franchise or contract
with the Agency or LGU, may be allowed to continue collecting toll,
fees, charges and rentals for the operation of the facility or the
provision of the service.cralaw
Projects undertaken through arrangements described in letter (c)
above, may be repaid by either of the following two options. Under
the first option, the Agency/LGU provides amortization payments as
may be appropriate and reasonable. Tolls, fees, rentals and charges
that the project proponent may collect while operating the facility
on behalf of the agency may be applied directly to the amortization
payments. Moreover, the facility operator may be repaid by the
Agency/LGU through a management fee as may be incorporated in
the management contract entered between the Agency/LGU and the
project proponent. Under the second option, the proponent may be
allowed to directly collect tolls, fees, rentals and charges for a fixed
term.Projects undertaken through arrangements in (d) above may be
repaid by the Agency/LGU through amortization payments as may
be appropriate and reasonable.Where applicable, the proponent may
likewise be repaid in the form of a share in the revenue of the
project or other non-monetary payments, such as, but not limited to
the grant of commercial development rights or the grant of a
portion or percentage of the reclaimed land, subject to the
constitutional requirement that only Filipino citizens or in the case
of a corporation only those with at least 60% Filipino equity will be
allowed to own land.cralaw
e. Arrangements which are variations of the foregoing and/or which
have been approved /authorized by the President of the Philippines
upon the recommendation of the ICC.cralaw
Projects undertaken through arrangements prescribed under (e) may
be repaid through any schemes as recommended by the ICC and
approved/authorized by the President of the Philippines.cralaw
12.15.2. Tolls, fees, rentals and charges. -
a. General. - The tolls, fees, charges and rentals that a project proponent
may generally charge for the use of the facility shall be those
incorporated in the contract and, if required by existing laws, approved by
the appropriate government regulatory bodies. The proposed tolls, fees,
and charges shall be considered by the Agency or LGU in the evaluation of
the bid, taking into account the reasonableness thereof to the end-users
of the facility.cralaw
Exception. - For negotiated contracts, or for projects that are considered a
natural monopoly or where the public has no access to alternative
facilities, the tolls, fees, charges and rentals incorporated in the contract
shall be made subject to the approval of the appropriate government
regulatory bodies. In the absence of a regulatory body for the project, ICC
approval shall suffice. Said regulatory bodies or the ICC shall approve
tolls, fees, or charges based on a reasonable rate of return to be based on
the total project cost. In case of negotiated contracts, the rate of return
shall be determined by the ICC prior to the negotiation or call for
proposals for the project. For negotiated contract for public utility
projects that are natural monopolies (hereinafter referred to as public
utility monopolies), the rate of return on rate base shall be determined by
existing laws, which in no case shall exceed twelve percentum (12%). ICC
shall determine whether or not a project or an activity that is part of a
project is a public utility monopoly.cralaw
In case the project is negotiated and composed of both public utility
monopoly and non-public utility components, the twelve percent (12%)
cap on the return on rate base shall be imposed only on the public utility
monopoly component. The concerned regulatory agency shall set the
guidelines and rules to be applied in determining which amounts of the
project cost and operating expenses relate to the public utility monopoly
function of the project.cralaw
12.15.3. The right of foreign contractors/investors under BOT, BT, BOO,
BLT and other similar schemes to convert its peso earnings into foreign
currency and to remit the same to its home country shall be governed by
existing monetary rules and regulations. The Agency/LGU concerned shall
therefore include as part of the bid documents pertinent monetary rules
and regulations that may be applicable to said right of foreign
contractor/investor to serve as a guide to prospective
contractors/investors. However, the prospective project proponent who
may call on the assistance of the concerned government agency is
encouraged to confer with the Philippine monetary authorities as to the
financial implications of said rules and regulations.cralaw
Sec. 12.16. Revenue Sharing. - The Agency/LGU concerned may share in
the revenue from the operation of the project proponent in the form of
either a fixed fee or a certain percentage of the gross revenue or a
combination of both, provided that the same is indicated in the bidding
documents and included in the contract.cralaw
Sec. 12.17. Adjustments of tolls/fees/rentals/charges. - The tolls, fees,
rentals and charges may be subject to adjustment during the life of the
contract, based on the predetermined formula and official price indices
prescribed in the Instructions to Bidders and the approved contract. As
provided under Section 4.2.h of these IRR, such formula shall take into
account the reasonableness of the same to the end-users by the
concerned Agency/LGU. For this purpose, the concerned Agency/LGU
may consult with the proper regulatory body or undertake such other
activities to ensure the reasonableness of such formula. The monitoring of
the consistency of the proposed adjustments of tolls, fees, rentals and
charges with the prescribed rate of return, if any, shall be undertaken by
the appropriate regulatory body or Implementing Agency/LGU.cralaw
Price indices shall be based on the official issuances by the National
Statistics Office (NSO), Bangko Sentral ng Pilipinas (BSP), Department of
Labor and Employment (DOLE) and other sources authorized by the
Agency/LGU concerned prior to bidding.cralaw
Sec. 12.18. Audit of Collections. - All revenues and receipts pertaining to
or accruing to the government derived from any project prosecuted under
the Act and these IRR, including expenditures or use of funds and
property, owned or held in trust by, or pertaining to the government,
shall be subject to examination audit by the Commission on Audit (COA).
Moreover, in order to ensure that the mandated return on rate base is
complied with, COA shall audit the financial statements of projects, which
are negotiated, and public utility monopoly.cralaw
Sec. 12.19. Contract Termination/Rescission. - The contract may be
terminated/rescinded in the following events:chanrobles virtual law
library
a. If the Agency/LGU concerned fails to comply with any major
obligation prescribed in the approved contract and such failure is
not remediable or if remediable shall remain unremedied for an
 unreasonable length of time, the project proponent may, with prior
notice to the concerned Agency/LGU specifying the turn-over date,
terminate the contract. In such an event, the project proponent
shall be reasonably compensated by the government for equivalent
or proportionate contract cost as defined in the contract.
b. If the project proponent refuses or fails to perform any of the
provisions of the approved contract with such diligence as will
ensure the project's completion, operation and maintenance in
accordance with the prescribed technical and performance
standards; otherwise fails to satisfy any of the contract provisions
including compliance with the prescribed/agreed milestone
activities, or commits any substantial breach of the approved
contract, the Agency/LGU shall notify the project proponent in
writing of the same and if not corrected within the time specified,
the Agency/LGU concerned may rescind the contract. In such an
event, the Agency/LGU concerned may
either:chanroblesvirtuallawlibrary
i. Take over the facility and assume all attendant liabilities
thereof; or
ii. Allow the project proponent's lenders/creditors/banks to
assign the project to another.cralaw
In case the default occurred during the project construction stage,
the Agency/LGU concerned shall likewise forfeit the performance
security of the erring project proponent.
c. In the event that the project/contract is revoked, cancelled, or
terminated by the Government through no fault of the project
proponent or by mutual agreement, in which case the Government
shall compensate the said project proponent for its actual expenses
incurred in the project plus a reasonable rate of return thereon not
exceeding that stated in the contract as of the date of contract
termination, provided that the interest of the Government in these
instances shall be duly insured with the Government Service
Insurance System (GSIS) or any other insurance entity duly
accredited by the Office of the Insurance Commissioner, provided
further that the cost of the insurance coverage shall be included in
the terms and conditions of the approved contract.cralaw
For contract rescission under Section 12.19. b above, the concerned
Agency/LGU shall indicate, prior to bidding, whether it intends to take
over the facility and assume all attendant liabilities thereof or allow the
concerned project lenders/creditors/banks to assign the same to another,
provided that the assignee is acceptable to the government, by stipulating
the same in the bidding documents, specifically in the draft contract.
Sec. 12.20. Venue for Litigation. - The venue for the resolution of
disputes, arbitration or litigation shall be as mutually agreed upon by the
parties to the contract. In default thereof, the venue shall be in the
Philippines.cralaw
Sec. 12.21. Transfer of the Facility. - Under contractual arrangements
involving transfer of the facility to the Agency/LGU such as BOT, BT,
BLT, BTO, CAO, DOT, and ROT, the transfer or turnover will necessarily
include the transfer of full legal ownership over the project in favor of the
government, subject to any existing liens as may be agreed upon in the
project agreement.
RULE 13
INVESTMENT INCENTIVES

Sec. 13.1. Sources of Financing. - In the construction of projects

authorized under the Act and these IRR, the project proponent may
obtain the required financing for the construction of the project from
foreign and/or domestic sources.
For projects which have difficulties in sourcing funds, the same may be
financed partly from direct government appropriations and/or from
Official Development Assistance (ODA) of foreign government or
institutions not exceeding fifty percent (50%) of the project cost, and the
balance to be provided by the project proponent.cralaw
Sec. 13.2. Investment Incentives. - The following incentives will be made
available to project proponents:chanrobles virtual law library
a. Fiscal Incentives.
i. Projects undertaken through contractual arrangements
authorized under these IRR costing more than P1 billion shall,
upon registration with the Board of Investments (BOI) be
entitled to incentives as provided for under the Omnibus
Investment Code.
ii. Projects undertaken through contractual arrangements
authorized under these IRR, costing P1 billion or less may,
upon registration with BOI avail themselves of incentives
provided for under the Omnibus Investment Code subject to
 inclusion of the project activity or sector in the current
Investment Priorities Plan of the Board of Investments
(BOI).cralaw
iii. Projects undertaken through contractual arrangements
authorized under these IRR shall also be entitled to other
incentives as provided under existing laws, such as, but not
limited to incentives under P.D. 535 (1974), otherwise known
as the "Tourism Incentives Program of 1974," and R.A. 7156,
otherwise known as the "Mini- Hydroelectric Power Incentives
Act".cralaw
iv. LGUs may provide for additional tax incentives,
exemptions, or reliefs subject to the provisions of the Local
Government Code of 1991 and other pertinent laws.
b. Government Undertakings. Government may provide any form of
direct or indirect support or contribution such as but not limited to
the following, subject to the conditions for unsolicited proposals as
specified under Section 10.1. hereof:chanroblesvirtuallawlibrary
i. Cost Sharing. This shall refer to the Agency/LGU concerned
bearing a portion of capital expenses associated with the
establishment of an infrastructure development facility such
as the provision of access infrastructure, right-of-way, and any
partial financing of the project, subject to Section 13.1 above.
ii. Credit Enhancements. This shall refer to direct and indirect
support to a development facility by the project proponent
and/or Agency/LGU concerned, the provision of which is
contingent upon the occurrence of certain events and/or
risks, as stipulated in the contract. Credit enhancements are
allocated to the party that is best able to manage and assume
the consequences of the risk involved. Credit enhancements
may include but are not limited to government guarantees on
the performance or the obligation of the Agency/LGU under its
contract with the proponent, subject to existing laws on
indirect guarantees. Indirect Guarantees shall refer to an
agreement whereby the Government or any of its agencies or
local government units assumes full or partial responsibility
for or assists in maintaining the financial standing of the
project proponent or project company in order that the project
company/proponent avoids defaulting on the project loans,
 subject to fulfillment of the project proponent/company of its
undertakings and obligations under the project
agreement.cralaw
iii. Direct Government Subsidy. This shall refer to an
agreement whereby the Government, or any of its agencies or
local government units will (a) defray, pay for or shoulder a
portion of the project cost or the expenses and costs in
operating the project, (b) condone or postpone any payments
due from the proponent, or (c) contribute any property or
assets to the project, all without receiving payment or value
from the project company for such payment, contribution or
support.cralaw
iv. Government Equity. This shall refer to the subscription by
the Government or any of its agencies or local government
units of shares of stock or other securities convertible to
shares of stock of the project company, whether such
subscription will be paid by the money or assets.cralaw
RULE 14
COORDINATION AND MONITORING OF PROJECTS

Sec. 14.1. The Coordinating Council of the Philippine Assistance

Program. - The Coordinating Council of the Philippine Assistance Program
(CCPAP) shall be responsible for the coordination and monitoring of
projects implemented under contractual arrangements or schemes
authorized under these IRR. Project monitoring will be undertaken to
ensure that the project complies with these IRR including the proponent's
required environmental clearances from the DENR. For this purpose,
concerned government Agencies/LGUs shall periodically submit to the
BOT Center of the CCPAP information on the status of projects
implemented by them. In addition, all concerned government
Agencies/LGUs shall submit to the BOT Center a copy of all unsolicited
proposals that they receive and all other related documents. The BOT
Center is also hereby mandated to guide the Agency/LGU in the
preparation and development of the project.
At the end of every calendar year, the CCPAP shall report to the President
and to Congress on the progress of all projects implemented under these
IRR.
Sec. 14.2. BOT Units. - Each concerned Agency/LGU shall create a BOT
Unit headed by a senior official of the Agency/LGU and shall designate a
senior official as BOT Project Development Officer (PDO), who shall be
responsible for monitoring projects authorized under the Act and these
IRR. The PDO shall closely coordinate with the CCPAP.cralaw
Sec. 14.3. Informing Congress. - A report regarding the salient features or
a copy of each contract involving a project entered into under the
provisions of these IRR shall be submitted to Congress for its
information.
RULE 15
FINAL PROVISIONS

Sec. 15.1. IRR Committee. - The Committee constituted pursuant to

Section 11 of R.A. 6957, as amended by R.A. 7718, may be reconvened by
its Chairman, at his instance or upon the recommendation of any
members of the Committee, to formulate and prescribe amendments to
these IRR consistent with the letter and spirit of the Act. No amendments
to these IRR may be adopted and prescribed by the Committee without
due public consultation/hearing and publication.

Sec. 15.2. Effectivity of Amendments. - Amendments to these IRR shall become

effective fifteen (15) days after its complete publication in at least one (1)
newspaper of general circulation, unless the Committee specifies otherwise. For
projects advertised for bidding or for invitation for comparative or competitive
proposals before the effectivity of the amendments to these IRR, the previous
IRR shall be in force.

REPUBLIC ACT NO. 6977

AN ACT TO PROMOTE, DEVELOP AND ASSIST SMALL AND MEDIUM SCALE

ENTERPRISES THROUGH THE CREATION OF A SMALL AND MEDIUM
ENTERPRISE DEVELOPMENT (SMED) COUNCIL, AND THE RATIONALIZATION
OF GOVERNMENT ASSISTANCE PROGRAMS AND AGENCIES CONCERNED
WITH THE DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES, AND
FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

CHAPTER I

SECTION 1. Title.—This Act shall be known as the “Magna Carta for Small
Enterprises.”

SEC. 2. Declaration of Policy.—Recognizing that small and medium scale

enterprises have the potential for more employment generation and economic
growth and therefore can help provide a self-sufficient industrial foundation for
the country, it is hereby declared the policy of the State to promote, support,
strengthen and encourage the growth and development of small and medium
enterprises in all productive sectors of the economy particularly rural/agri-
based enterprises. To this end, the State shall undertake to spur the growth
and development of small and medium enterprises throughout the country and
thereby attain countryside industrialization:

a) By assuring, through the establishment of adequate support structure, and

the creation and promotion of an environment conducive to the viability of
these enterprises, establishment of mechanisms, the access and transfer of
appropriate technology needed by small and medium enterprises;

b) By intensifying and expanding programs for training in entrepreneurship

and for skills development for labor;

c) By facilitating their access to sources of funds;

d) By assuring to them access to a fair share of government contracts and

related incentives and preferences;

e) By complementing and supplementing financing programs for small and

medium enterprises and doing away with stringent and burdensome collateral
requirements that small entrepreneurs invariably find extreme difficulty
complying with;

f) By instituting safeguards for the protection and stability of the credit delivery
system;

g) By raising government efficiency and effectiveness in providing assistance to

small and medium enterprises throughout the country, at the least cost;

h) By promoting linkages between large and small enterprises, and by

encouraging the establishment of common service facilities;
i) By making the private sector a partner in the task of building up small and
medium enterprises through the promotion and participation of private
voluntary organizations, viable industry associations, and cooperatives; and

j) By assuring a balanced and sustainable development through the

establishment of a feedback and evaluation mechanism that will monitor the
economic contributions as well as bottlenecks and environmental effects of the
development of small and medium scale enterprises.

SEC. 3. Small and Medium Enterprises as Beneficiaries.—”Small and medium

enterprise” shall be defined as any business activity or enterprise engaged in
industry, agribusiness and/or services, whether single proprietorship,
cooperative, partnership or corporation whose total assets, inclusive of those
arising from loans but exclusive of the land on which the particular business
entity’s office, plant and equipment are situated, must have value falling under
the following categories:

micro: less than

cottage: P50,001 –
small: P500,001 –
medium: P5,000,001 –

In a generic sense, all enterprises with total assets of Five million pesos
(P5,000,000) and below shall be called small enterprises.

The above definitions shall be subject to review and adjustment by the said
Council as deemed necessary, taking into account inflation and other economic
factors.

SEC. 4. Eligibility for Government Assistance.—To qualify for assistance,

counseling, incentives and promotion under this Act, businesses falling under
the above definition must be:

a) Duly registered with the appropriate agencies as presently provided by

law: Provided, That, in the case of micro enterprises as defined herein,
registration with the office of the municipal or city treasurer shall be deemed
sufficient compliance with this requirement;

b) One hundred percent (100%) owned and capitalized by Filipino citizens if

single proprietorship or partnership. If the enterprise is a juridical entity at
least 60% of its capital or outstanding stocks must be owned by Filipino
citizens;
c) Primarily engaged in manufacturing, processing, and/or production
excluding farm level agricultural/crop production; and

d) It must not be a branch, subsidiary or division of a large scale enterprise nor

may its policies be determined by a large scale enterprise or by persons who
are not owners or employees of the enterprise.

However, this requirement shall not preclude a small and medium enterprise
from accepting subcontracts from large enterprises or firms joining in
cooperative activities with other small and medium enterprises.

Programs of the financing corporation as provided in subsequent sections of

this Act shall be exclusively targeted to small, cottage and micro-sized
enterprises. Financing from the Philippine National Bank, Development Bank
of the Philippines, Land Bank of the Philippine and other financial institutions
shall be made available to medium enterprises.

Medium enterprises, however, shall be entitled to avail of the other incentives,

programs and services as provided for in this Act.

SEC. 5. Guiding Principles.—To set the pace for small and medium enterprise
development, the State shall be guided by the following principles:

a) Minimal set of rides and simplification of procedures and requirements. All

government agencies having to do with small enterprises shall pursue the
principles of minimum regulation to ensure stability of rules and to encourage
entrepreneurial spirit among the citizenry. The agencies shall see to it that
procedural rules and requirements, within their respective offices and in
coordination with other agencies, are minimized in the act of registration,
availment of financing and accessing other government services and
assistance.

b) Role of the private sector. In order to hasten growth and expansion of small
and medium enterprises, the private sector throughout the country shall be
encouraged to assist m the effective implementation of this Act by constantly
policing their ranks; and by participating in government programs for small
and medium enterprises strictly in accordance with law, and consistent with
the attainment of the purposes hereof. The government shall encourage the
organization and establishment of small and medium enterprise industry
associations at the local and regional levels preferably unified under a national
federation/association.

c) Coordination of government efforts. Government efforts shall be coordinated

to achieve coherence in objectives. All appropriate offices, particularly those
under the Departments of Trade and Industry, Finance, Budget and
Management, Agriculture, Agrarian Reform, Environment and Natural
Resources, Labor and Employment, Transportation and Communications,
Public Works and Highways, Science and Technology, and Local Government
as well as the National Economic and Development Authority and the Central
Bank of the Philippines, through their national, regional and provincial offices,
shall to the best of their effort and in coordination with local government units,
provide the necessary support and assistance to small and medium
enterprises.

d) Decentralization. The State shall accelerate the decentralization process by

establishing regional and provincial offices in order to enhance and attain
greater efficiency in the provision of services to the countryside and the
implementation of this Act, in coordination with local government units. To this
end, the government agencies shall effect a substantial delegation of authority
their regional and provincial offices to make decisions, particularly in the
registration of beneficiaries of this law, qualification for availment of benefits,
accreditation of private voluntary organizations, industry associations and
cooperatives, and to resolve complaints for violation of applicable laws.

CHAPTER II

SEC. 6. Creation of a Small and Medium Enterprise Development Council.—To

effectively spur the growth and development of small and medium enterprises
throughout the country, and to carry out the policy declared in this Act. a
Small and Medium Enterprise Development (SMED) Council is hereby created.
The Council shall be attached to the Department of Trade and Industry and
shall be duly constituted within sixty (60) days after the approval of this Act.

The Council shall be the primary agency responsible for the promotion, growth
and development of small and medium enterprises in the country by way of
facilitating and closely coordinating national efforts to promote the viability and
growth of small and medium enterprises, including assisting relevant agencies
in the tapping of local and foreign funds for small and medium enterprise
development, as well as promoting the use of existing guarantee programs.

SEC. 7. Composition.—The Council shall be headed by the Secretary of Trade

and Industry as Chairman. The members shall be the following:

a) Director General of the National Economic and Development Authority;

b) Secretary of Agriculture;

c) Secretary of Labor and Employment;

d) Secretary of Environment and Natural Resources;

e) Secretary of Science and Technology;

f) Chairman of Small Business Finance and Guarantee Corporation;

g) Chairman of the small and medium enterprises promotion body which the
President shall undertake to establish under this Act; and

h) Three (3) representatives from the private sector, all Filipino citizens, to
represent Luzon, Visayas and Mindanao to be appointed by the President, one
of whom shall come from the banking industry.

Cabinet-rank ex officio members of the Council shall designate an

undersecretary or assistant secretary as their permanent representative in case
they fail to attend meetings of the Council.

The private sector members of the Council shall initially receive per diem of
One thousand pesos (P1,000.00) per meeting.

The Department of Trade and Industry shall allocate Five million pesos
(P5,000,000.00) out of its savings for the initial operating expenses of the
Council, after which the Council’s budget shall be included in the annual
appropriation of the Department of Trade and Industry.

The Council may, from time to time, call upon the participation of any
government agency or association of local government officials in its
deliberations especially when such agency is directly or indirectly concerned
with and/or affecting the growth and development of small and medium
enterprises in any particular area or manner.

SEC. 8. Powers and Functions.—The Small and Medium Enterprise

Development (SMED) Council shall have the following powers, duties and
functions:

a) To help establish the needed environment and opportunities conducive to

the growth and development of the small and medium enterprise sector;

b) To recommend to the President and the Congress all policy matters affecting
small and medium scale enterprises;

c) To formulate a comprehensive small and medium enterprise development

plan to be integrated into the National Economic and Development Authority
Development Plans;

d) To coordinate and integrate various government and private sector activities

relating to small and medium enterprise development;

e) To review existing policies of government agencies that would affect the

growth and development of small and medium enterprises and recommend
changes to the President and/or to the Congress whenever deemed necessary.
This shall include efforts to simplify rules and regulations as well as procedural
and documentary requirements in the registration, financing, and other
activities relevant to small and medium enterprises;

f) To monitor and determine the progress of various agencies geared towards

the development of the sector. This shall include overseeing, in coordination
with local government units and the Department of Local Government as well
as private sector groups/associations, the developments among small and
medium enterprises, particularly the cottage and micro-sized firms;

g) To promulgate implementing guidelines, programs, and operating principles

as may be deemed proper and necessary in the light of government policies and
objectives of this Act;

h) To provide the appropriate policy and coordinative framework in assisting

relevant government agencies, in coordination with the National Economic and
Development Authority and the Coordinating Council for the Philippine
Assistance Program, as may be necessary, in the tapping of local and foreign
funds for small and medium enterprise development;

i) To promote the productivity and viability of small and medium enterprises by

way of directing and/or assisting relevant government agencies and
institutions at the national, regional and provincial levels towards the:

1) Provision of business training courses, technical training for technicians and

skilled laborers and continuing skills upgrading programs;

2) Provision of labor-management guidance, assistance and improvement of the

working conditions of employees in small and medium-sized firms;

3) Provision of guidance and assistance regarding product quality/product

development and product diversification;

4) Provision of guidance and assistance for the adoption of improved

production techniques and commercialization of appropriate technologies for
the product development and for increased utilization of indigenous raw
materials;

5) Provision of assistance in marketing and distribution of products of small

and medium scale enterprise through local supply-demand information,
industry and provincial profiles, overseas marketing promotion, domestic
market linkaging and the establishment of common service facilities such as
common and/or cooperative bonded warehouse, grains storage, agro-
processing and drying facilities., ice plants, refrigerated storage, cooperative
trucking facilities, etc.;
6) Intensification of assistance and guidance to enable greater access to credit
through a simplified multi-agency financing program; to encourage
development of other modes of financing such as leasing and venture capital
activities; to provide effective credit guarantee systems, and encourage the
formation of credit guarantee associations, including setting up of credit
records and information systems and to decentralize loan approval
mechanisms;

7) Provision of concessional interest rates, lower financing fees, which .may

include incentives for prompt credit payments, arrangements tying
amortizations to business cash flows, effective substitution of government
guarantee cover on loans for the borrower’s lack of collateral;

8) Provision of bankruptcy preventive measures through the setting up of a

mutual relief system for distressed enterprises, and the establishment of
measures such as insurance against extraordinary disasters;

9) Intensification of information dissemination campaigns and

entrepreneurship education activities;

10) Easier access to and availment of tax credits and other tax and duty
incentives as provided by the Omnibus Investment Code and other laws;

11) Provision of support for product experimentation and research and

development activities as well as access to information on commercialized
technologies; and

12) Provision of more infrastructure facilities and public utilities to support

operations of small and medium enterprises;

j) To submit to the President and the Congress a yearly report on the status of
small and medium enterprises in the country, including the progress and
impact of all relevant government policies, programs and legislation as well as
private sector activities;

k) To assist in the establishment of modern industrial estates outside urban

centers; and

l) Generally, to exercise all powers and functions necessary for the objectives
and purposes of this Act.

SEC. 9. Designation of the Bureau of Small and Medium Business Development

as Council Secretariat.—The Bureau of Small and Medium Business
Development of the Department of Trade and Industry, in addition to its
current activities and functions, is hereby designated to act as the Council
Secretariat. The Secretariat shall have the following duties and functions:
1) To prepare, in coordination with local government units and/or associations
of local government officials, and recommend annual as well as medium-term
small and medium enterprise development plans for approval of the Council;

2) To coordinate the preparation of position papers and background materials

for discussion or approval during Council meetings;

3) To assist the Council in coordinating and monitoring small and medium

enterprise policies and programs and activities of all government agencies with
respect to small and medium enterprises;

4) To prepare, collate and integrate all inputs to the Council’s yearly report on
the status of small and medium enterprises in the country;

5) To submit periodic reports to the Council on the progress and

accomplishment of its work programs; and

6) To perform ad hoc functions as authorized by the Council.

CHAPTER III

SEC. 10. Rationalization of Existing Small and Medium Enterprise Programs and
Agencies.—The Small and Medium Enterprise Development Council shall
within one hundred eighty (180) days from its establishment, recommend to
the President, measure/s to rationalize and integrate under a unified
institutional framework all government programs for the promotion and
development of small and medium enterprises.

The President is hereby also empowered to establish a small and medium

enterprise promotion body which shall be the principal government agency that
will formulate, implement, coordinate and monitor all non-financing
government programs, including fee-based services, to support and promote
micro, small and medium enterprises. It shall be attached to the Department of
Trade and Industry and shall be under the policy, program and administrative
supervision of the SMED Council. The said office shall receive no less than fifty
percent (50%) of the assets, and budgetary allocations of the agencies for
promotion, development and financing of small and medium enterprises that
may be henceforth dissolved and/or abolished and absorbed, incorporated and
integrated into the SMED Council.

SEC. 11. Creation of Small Business Guarantee and Finance Corporation.—

There is hereby created a body corporate to be known as the Small Business
Guarantee and Finance Corporation, hereinafter referred to as SBGFC, which
shall provide, promote, develop and widen in both scope and service reach
various alternative modes of financing for small enterprises, including, but not
limited to, direct and indirect project lending, venture capital, financial leasing,
secondary mortgage and/or rediscounting of loan papers to small businesses,
secondary/regional stock markets: Provided, That crop production financing
shall not be serviced by the Corporation.

The Corporation shall guarantee loans obtained by qualified small enterprises,

local and/or regional associations small enterprises and industries, private
voluntary organizations and/or cooperatives, under such terms and conditions
adopted by its Board. It may guarantee loans up to one hundred percent
(100%). It may also provide second level guarantee (i.e., re-insurance) on the
credit and/or investment guarantees made by credit guarantee associations
and other institutions in support of small entrepreneurs.

The Corporation shall become liable under its guarantees upon proof that the
loan has become past due under such terms and guidelines adopted by its
Board and printed on the contract of guarantee.

The Small Business Guarantee and Finance Corporation shall:

a) Be attached to the Department of Trade and Industry and shall be under the
policy, program and administrative supervision of the SMED Council;

b) Have its principal place of business in Metro Manila and endeavor to have
one or more branch offices in every province of the country;

c) Exercise all the general powers conferred by law upon corporations under
the Corporation Code as are incidental or conducive to the attainment of the
objectives of this Act; and

d) Have a board of directors upon which the powers of the Corporation shall be
vested, to be composed of five (5) members including:

1) Three (3) members from the private sector appointed by the President upon
recommendation of the SMED Council and from among whom the Chairman of
the Board shall be appointed by the President to serve on a full-time basis:

2) The Secretary of Trade and Industry or his Undersecretary; and

3) A representative of the five (5) government financial institutions mandated in

this Act to provide the initial capital of the Corporation, who shall be
designated, under guidelines agreed upon by the Board Chairmen of said
institutions.

SEC. 12. Capitalization and Funding.—The Small Business Guarantee and

Finance Corporation shall have an authorized capital stock of Five billion pesos
(P5,000,000,000.00). The initial capital of One billion pesos
(P1,000,000,000.00) shall be established from a pool of funds to be contributed
in the form of equity investments in common stocks by the Land Bank of the
Philippines (LBP), the Philippine National Bank (PNB), the Development Bank
of the Philippines (DBP) in the amount of Two hundred million pesos
(P200,000,000.00) each. The Social Security System (SSS) and the Government
Service Insurance System (GSIS) shall also set aside Two hundred million
pesos (P200,000,000.00) each to be placed in preferred stocks of the SBGFC.
Additional funding shall come from trust placements of excess and unused
funds of existing government agencies, bilateral and multilateral official
development assistance funds, subscriptions from government-owned or -
controlled corporations, and investments of private financial institutions and
corporations.

SEC. 13. Mandatory Allocation of Credit Resources to Small Enterprises.—All

lending institutions as defined under Central Bank rules, whether public or
private, shall set aside a portion of their total loan portfolio based on their
balance sheet as of the end of the previous quarter, and make it available for
small enterprise credit as herein contemplated. The portion mandated to be so
set aside shall at least be, five percent (5%) by the end of the first year of the
effectivity of this Act, ten percent (10%) by the end of the second year through
the end of the fifth year, and five percent (5%) by the end of sixth year and may
come down to zero by the end of the seventh year.

The Central Bank in consultation with the Council, shall formulate rules for
the effective implementation of this provision: Provided, That the purchase of
government notes, securities, and other negotiable instruments, with the
exception of such instruments as may be offered by the SBGFC, shall not be
deemed compliance with the foregoing provision.

The SMED Council shall set up the appropriate systems to monitor all loan
applications of small enterprises in order to account for the absorptive capacity
of the small enterprise sector.

The Central Bank shall furnish to the Small and Medium Development Council
on a semestral basis regular reports on the lending institutions’ compliance
with the above provisions on the mandatory credit allocation for small
enterprises.

SEC. 14. Penal Clause.—The Central Bank shall impose administrative

sanctions and other penalties on the lending institutions for non-compliance
with provisions of this Act. In addition, the president, members of boards of
directors, and other officers of the erring lending institutions shall be
individually liable for imprisonment of not less than six (6) months and a fine
of not less than Five hundred thousand pesos (P500,000.00) each.

CHAPTER IV
SEC. 15. Separability Clause.—The provisions of this Act are hereby declared to
be separable. If any provision of this Act shall be held unconstitutional, the
remainder of the Act not otherwise affected shall remain in full force and effect.

SEC. 16. Revealing Clause.—All laws, executive orders, rules and regulations,
or parts thereof, inconsistent herewith are hereby repealed or modified
accordingly.

SEC. 17. Effectivity Clause.—This Act shall take effect upon its approval.

Approved, January 24, 1991.

[REPUBLIC ACT NO. 7888]

AN ACT TO AMEND ARTICLE 7 (13) OF EXECUTIVE ORDER NO. 226,

OTHERWISE KNOWN AS THE OMNIBUS INVESTMENTS CODE OF 1987

Be it enacted by the Senate and House of Representatives of the Philippines in

Congress assembled:

SECTION 1. Article 7 (13) of Executive Order No. 226, otherwise known as the
Omnibus Investments Code of 1987, is hereby amended to read as follows:

“(13) To the extent that such activities are allowed by the Constitution and
relevant laws, to recommend to the President of the Philippines, the suspension
of the nationality requirement provided in this Code in cases of ASEAN
projects, or investments by ASEAN nationals, regional ASEAN or multilateral
financial institutions including their subsidiaries in preferred projects and/or
projects allowed through either financial or technical assistance agreements
entered into by the President, and in the case of regional complementation for
the manufacture of a particular product which seeks to take advantage of
economies of scale. For the purpose of this Act, a multilateral financial
institution shall refer to a financial agency or entity, and its affiliates which
satisfy the following qualifications:

“(1) The institution is either owned or controlled by member countries but does
not possess any national identity;

“(2) The institution sources its funds from capital stock subscriptions and
contributions by member countries; and

“(3) The primary responsibility of the institution is to provide funds for

developmental purposes and international economic stability.”
SEC. 2. This Act shall take effect after fifteen (15) days following its publication
either in the Official Gazette or a newspaper of general circulation in the
Philippines.

Approved,

REPUBLIC ACT NO. 7721

AN ACT LIBERALIZING THE ENTRY AND SCOPE OF OPERATIONS OF

FOREIGN BANKS IN THE PHILIPPINES AND FOR OTHER PURPOSES.

SECTION 1. Declaration of Policy. — The State shall develop a self-reliant and

independent national economy effectively controlled by Filipinos and
encourage, promote, and maintain a stable, competitive, efficient, and dynamic
banking and financial system that will stimulate economic growth, attract
foreign investments, provide a wider variety of financial services to Philippine
enterprises, households and individuals, strengthen linkages with global
financial centers, enhance the country’s competitiveness in the international
market and serve as a channel for the flow of funds and investments into the
economy to promote industrialization.

Pursuant to this policy, the Philippine banking and financial system is hereby
liberalized to create a more competitive environment and encourage greater
foreign participation through increase in ownership in domestic banks by
foreign banks and the entry of new foreign bank branches.

In allowing increased foreign participation in the financial system, it shall be

the policy of the State that the financial system shall remain effectively
controlled by Filipinos.

Sec. 2. Modes of Entry. — The Monetary Board may authorize foreign banks to
operate in the Philippine banking system through any of the following modes of
entry: (i) by acquiring, purchasing or owning up to sixty percent (60%) of the
voting stock of an existing bank; (ii) by investing in up to sixty percent (60%) of
the voting stock of a new banking subsidiary incorporated under the laws of
the Philippines; or (iii) by establishing branches with full banking authority:
Provided, That a foreign bank may avail itself of only one (1) mode of entry:
Provided, further, That a foreign bank or a Philippine corporation may own up
to a sixty percent (60%) of the voting stock of only one (1) domestic bank or
new banking subsidiary.

Sec. 3. Guidelines for Approval. — In approving entry applications of foreign

banks, the Monetary Board shall: (i) ensure geographic representation and
complementation; (ii) consider strategic trade and investment relationships
between the Philippines and the country of incorporation of the foreign bank;
(iii) study the demonstrated capacity, global reputation for financial
innovations and stability in a competitive environment of the applicant; (iv) see
to it that reciprocity rights are enjoyed by Philippine banks in the applicant’s
country; and (v) consider willingness to fully share their technology.

Only those among the top one hundred fifty (150) foreign banks in the world or
the top five (5) banks in their country of origin as of the date of application
shall be allowed entry in accordance with Section 2 (ii) and (iii) hereof.

In the exercise of this authority, the Monetary Board shall adopt such
measures as may be necessary to: (i) ensure that at all times the control of
seventy percent (70%) of the resources or assets of the entire banking system is
held by domestic banks which are at least majority-owned by Filipinos; (ii)
prevent a dominant market

approval of the Monetary Board. An additional four (4) foreign banks may be
allowed entry on recommendation of the Monetary Board, subject to
compliance with Sections 2, 3, 4, and 5 of this Act, upon approval of the
President as the national interest may require.

Sec. 7. Board of Directors. — Non-Filipino citizens may become members of

the Board of Directors of a bank to the extent of the foreign participation in the
equity of said bank.

Sec. 8. Equal Treatment. — Foreign banks authorized to operate under Section

2 of this Act, shall perform the same functions, enjoy the same privileges, and
be subject to the same limitations imposed upon a Philippine bank of the same
category. These limits include, among others, the single borrower’s limit and
capital to risk asset ratio as well as the capitalization required for expanded
commercial banking activities under the General Banking Act and other related
laws of the Philippines.

The basis for computing the ratio shall be the capital of the foreign bank
branch in the Philippines.

The foreign banks shall guarantee the observance of the rights of their
employees under the Constitution.

Any right, privilege or incentive granted to foreign banks or their subsidiaries

or affiliates under this Act, shall be equally enjoyed by and extended under the
same conditions to Philippine banks. Philippine corporations whose shares of
stocks are listed in the Philippine Stock Exchange or are of long standing for at
least ten (10) years shall have the right to acquire, purchase or own up to sixty
percent (60%) of the voting stock of a domestic bank.

Sec. 9. Development Loans Incentives. — Loans extended by a foreign bank’s

majority-owned subsidiary incorporated under the laws of the Philippines
and/or a Philippine bank sixty percent (60%) of the voting stock of which is
held by a foreign bank, to finance educational institutions, cooperatives,
hospitals and other medical services, socialized or low-cost housing, and to
local government units without national government guarantee, shall be
included for purposes of determining compliance with the provisions of
Presidential Decree No. 717, as amended.

Sec. 10. Transitory Provisions. — Foreign banks operating through branches

in the Philippines upon the effectivity of this Act, shall be eligible for the
privilege of establishing up to six (6) additional branches under the same terms
and conditions required by Section 4 (ii) hereof: Provided, That for any branch
additional to what is existing at the time of the effectivity of this Act, the
prescribed permanently assigned capital shall be complied with immediately:
Provided, further, That a foreign bank may open three (3) branches in the
location of its choice and the next three (3) branches in locations designated by
the Monetary Board to insure balanced economic development in all the
regions.

The existing Philippine branches of foreign banks shall be given one-and-a-half

(1 1/2) years from the effectivity of this Act to comply with the minimum
capital requirements as prescribed under Section 4 (ii) of this Act.

Sec. 11. Separability Clause. — If any provision of this Act is declared

unconstitutional, the same shall not affect the validity of the other provisions
not affected thereby.

Sec. 12. Applicability of Other Banking Laws. — The provisions of Republic Act
No. 337, as amended, otherwise known as the General Banking Act, insofar as
they are applicable and not in conflict with any provision of this Act, shall
apply to banks authorized pursuant to this Act.

Sec. 13. Delegation of Rule-Making Powers and Compliance Reports. — The

Monetary Board is hereby authorized to issue such rules and regulations as
may be needed to implement the provisions of this Act after consultation with
the chairpersons of the Banks Committee of the House of Representatives and
the Senate of the Philippines. On or before May 30 of each year, the Monetary
Board shall file a written report to Congress and its respective Banks
Committees, on the developments in the implementation of this Act.

Sec. 14. Amendment and Repeal of Inconsistent Laws. — Sections 11, 12, 12-
A, 12-B, 13, 14-A, 21-B, and 68 of Republic Act No. 337, as amended,
otherwise known as the General Banking Act: Sections 4 and 5 of Republic Act
No. 7353, otherwise known as the Rural Banks Act; Sections 4 and 14 of
Republic Act No. 3779, as amended, otherwise known as the Savings and Loan
Association Act; and Section 4 of Republic Act No. 4093, as amended,
otherwise known as the Private Development Banks Act insofar as they are
inconsistent with this Act, are hereby repealed or modified accordingly.

Sec. 15. Effectivity Clause. — This Act shall take effect fifteen (15) days after
its publication in the Official Gazette or in two (2) national newspapers of
general circulation.

Republic Act No. 8756 November 23, 1999

AN ACT PROVIDING FOR THE TERMS, CONDITIONS AND LICENSING

REQUIREMENTS OF REGIONAL OR AREA HEADQUARTERS, REGIONAL
OPERATING HEADQUARTERS, AND REGIONAL WAREHOUSES OF
MULTINATIONAL COMPANIES, AMENDING FOR THE PURPOSE CERTAIN
PROVISIONS OF EXECUTIVE ORDER NO. 226, OTHERWISE KNOWN AS
THE OMNIBUS INVESTMENTS CODE OF 1987

Be it enacted by the Senate and House of Representatives of the Philippines in

Congress assembled:

Section 1. The title of Book III of Executive Order No. 226, otherwise known as
the Omnibus Investments Code of 1987, is hereby amended as follows:

"BOOK III

"INCENTIVES TO MULTINATIONAL COMPANIES ESTABLISHING

REGIONAL OR AREA HEADQUARTERS AND REGIONAL OPERATING
HEADQUARTERS IN THE PHILIPPINES"

Section 2. Definition of Terms. - For purposes of this Act, the term:

(1) Multinational Company shall mean a foreign company or a group of

foreign companies with business establishments in two or more
countries;

(2) Regional or Area Headquarters (RHQ) shall mean an office whose

purpose is to act as an administrative branch of a multinational
company engaged in international trade which principally serves as a
supervision, communications and coordination center for its
subsidiaries, branches or affiliates in the Asia-Pacific Region and other
foreign markets and which does not earn or derive income in the
Philippines; and

(3) Regional Operating Headquarters (ROHQ) shall mean a foreign

business entity which is allowed to derive income in the Philippines by
performing qualifying services to its affiliates, subsidiaries or branches in
the Philippines, in the Asia-Pacific Region and in other foreign markets.
Section 3. The Title and Article 58 of Chapter I of the same Code are hereby
amended as follows:

"CHAPTER I

LICENSING OF REGIONAL OR AREA HEADQUARTERS

Art. 58. Qualification of Regional or Area Headquarters. - Any foreign

business entity formed, organized and existing under any laws other
than those of the Philippines whose purpose, as expressed in its
organizational documents or by resolution of its Board of Directors or its
equivalent, is to supervise, superintend, inspect or coordinate its own
affiliates, subsidiaries or branches in the Asia-Pacific Region and other
foreign markets may establish a regional or area headquarters in the
Philippines, by securing a license therefor from the Securities and
Exchange Commission, upon the favorable recommendation of the Board
of Investments.

The Securities and Exchange Commission shall, within thirty (30) days
from the effectivity of this Code, issue the implementing rules and
regulations. The following minimum requirements shall, however, be
complied with by the said foreign entity:

(a) A certification from the Philippine Consulate/Embassy, or a

duly authenticated certification from the Department of Trade and
Industry or its equivalent in the foreign firm's home country that
said foreign firm is an entity engaged in international trade with
affiliates, subsidiaries or branch offices in the Asia-Pacific Region
and other foreign markets.

(b) A duly authenticated certification from the principal officer of

the foreign entity to the effect that the said foreign entity has been
authorized by its Board of Directors or governing body to establish
its regional or area headquarters in the Philippines, specifying
that:

(1) The activities of the regional or area headquarters shall

be limited to acting as a supervisory, communications and
coordinating center for its subsidiaries, affiliates and
branches in the region;

(2) The regional or area headquarters will not derive any

income from sources within the Philippines and will not
participate in any manner in the management of any
subsidiary or branch office it might have in the Philippines
nor shall it solicit or market goods and services whether on
 behalf of its mother company or its branches, affiliates,
subsidiaries or any other company; and

(3) The regional or area headquarters shall notify the Board

of Investments and the Securities and Exchange Commission
of any decision to close down or suspend operations of its
headquarters at least fifteen (15) days before the same is
effected.

(c) An undertaking that the multinational company will remit into

the country such amount as may be necessary to cover its
operations in the Philippines but which amount will not be less
than Fifty thousand United States dollars ($50,000) or its
equivalent in other foreign currencies annually. Within thirty (30)
days from receipt of certificate of registration from the Securities
and Exchange Commission, the multinational company will submit
to the Securities and Exchange Commission a certificate of inward
remittance from a local bank showing that it has remitted to the
Philippines the amount of at least Fifty thousand United States
dollars ($50,000) or its equivalent in other foreign currencies and
converted the same to Philippine currency. Annually, within thirty
(30) days from the anniversary date of the multinational company's
registration as a regional or area headquarters with the Securities
and Exchange Commission, it will submit proof to the Securities
and Exchange Commission of inward remittance amounting to at
least Fifty thousand United States dollars ($50,000) or its
equivalent in other foreign currencies during the past year.

(d) Any violation by the regional or area headquarters of a

multinational company of any of the provisions of this Code, or its
implementing rules and regulations, or other terms and conditions
of its registration, or any provision of existing laws, shall constitute
a sufficient cause for the cancellation of its license or registration.

Section 4. Book III of the same Code is hereby further amended by adding a
new chapter designated as Chapter II to read as follows:

"CHAPTER II

"LICENSING OF REGIONAL OPERATING HEADQUARTERS

"Art. 59. Qualification of Regional Operating Headquarters (ROHQs). - Any

foreign business entity formed, organized and existing under any laws
other than those of the Philippines may establish a regional operating
headquarters in the Philippines to service its own affiliates, subsidiaries
or branches in the Philippines, in the Asia-Pacific Region and other
foreign markets. ROHQs will be allowed to derive income by performing
the qualifying services enumerated under paragraph (b) 1 hereunder.
ROHQs of non-banking and non-financial institutions are required to
secure a license from the Securities and Exchange Commission, upon
the favorable recommendation of the Board of Investments. ROHQs of
banking and financial institutions, on the other hand, are required to
secure licenses from the Securities and Exchange Commission and the
Bangko Sentral ng Pilipinas, upon the favorable recommendation of the
Board of Investments.

"The Securities and Exchange Commission and the Bangko Sentral ng

Pilipinas shall, within thirty (30) days from the effectivity of this Code,
issue the implementing rules and regulations.

"The following minimum requirements shall be complied with by the said

foreign entity:

"(a) A certification from the Philippine Consulate/Embassy, or a

duly authenticated certification from the Department of Trade and
Industry or its equivalent in the foreign firm's home country that
said foreign firm is an entity engaged in international trade with
affiliates, subsidiaries or branch offices in the Asia-Pacific Region
and other foreign markets.

"(b) A duly authenticated certification from the principal officer of

the foreign entity to the effect that the said foreign entity has been
authorized by its Board of Directors or governing body to establish
its regional operating headquarters in the Philippines, specifying
that:

"(1) The regional operating headquarters may engage in any

of the following qualifying services:

- General administration and planning;

- Business planning and coordination;

- Sourcing/procurement of raw materials and

components;

- Corporate finance advisory services;

- Marketing control and sales promotion;

- Training and personnel management;

 - Logistics services;

- Research and development services, and product

development;

- Technical support and maintenance;

- Data processing and communication; and

- Business development.

"ROHQs are prohibited from offering qualifying services to

entities other than their affiliates, branches or subsidiaries,
as declared in their registration with the Securities and
Exchange Commission nor shall they be allowed to directly
and indirectly solicit or market goods and services whether
on behalf of their mother company, branches, affiliates,
subsidiaries or any other company.

"(2) The regional operating headquarters shall notify the

Board of Investments, the Securities and Exchange
Commission and the Bangko Sentral ng Pilipinas, as the
case may be, of any decision to close down or suspend
operations of its headquarters at least fifteen (15) days before
the same is effected.

"(c) An undertaking that the multinational company will initially

remit into the country such amount as may be necessary to cover
its operations in the Philippines but which amount will not be less
than Two hundred thousand United States dollars ($200,000) or
its equivalent in other foreign currencies.

"Within thirty (30) days from receipt of certificate of registration,

the multinational company will submit to the Securities and
Exchange Commission a certificate of inward remittance from a
local bank showing that it has remitted to the Philippines the
amount of at least Two hundred thousand United States dollars
($200,000) or its equivalent in other foreign currencies and
converted the same to Philippine currency.

"(d) Any violation by the regional operating headquarters of a

multinational company of the provisions of this Code, or its
implementing rules and regulations, or other terms and conditions
of its registration, or any provision of existing laws, shall constitute
a sufficient cause for the cancellation of its license or registration."
Section 5. Chapter II of the same Code is hereby amended and designated as
Chapter III. Articles 59, 60, 61 and 62 under the same Chapter are hereby
amended as follows:

"CHAPTER III

"INCENTIVES TO EXPATRIATES

"Art. 60. Multiple Entry Visa. - Foreign personnel of regional or area

headquarters and regional operating headquarters of multinational
companies, their respective spouses and unmarried children under
twenty-one (21) years of age, if accompanying them or if following to join
them after their admission into the Philippines as non-immigrant shall
be issued a multiple entry special visa within seventy-two hours upon
submission of all required documents, and which shall be valid for a
period of three (3) years to enter the Philippines: Provided, That a
responsible officer of the applicant company submits a duly
authenticated certificate to the effect that the person who seeks entry
into the Philippines is an executive of the applicant company and will
work exclusively for applicant's regional or area headquarters or regional
operating headquarters which is duly licensed to operate in the
Philippines, and that he will receive a salary and will be paid by the
headquarters in the Philippines an amount equivalent to at least Twelve
thousand United States dollars ($12,000), or the equivalent in other
foreign currencies per annum.

"The admission and stay shall be coterminous with the validity of the
multiple entry special visa. The stay, however, is extendible for three
years upon submission to the Bureau of Immigration of a sworn
certification by a responsible officer of the regional or area headquarters
or regional operating headquarters: that its license to operate remains
valid and subsisting and that the regional or area headquarters or
regional operating headquarters has withheld tax due on compensation
and the same has been paid to the Bureau of Internal Revenue.

"Non-immigrants who have been admitted under the multiple entry

special visa, as well as their respective spouses and dependents, shall be
exempt from: the payment of all fees due under the immigration and
alien registration laws; securing alien certificates of registration; and
obtaining emigration clearance certificates, and all types of clearances
required by any government department or agency, except that upon
final departure from the Philippines the employer of the said
nonimmigrants shall so advise in writing the Bureau of Immigration at
least five (5) working days prior to the non-immigrant's departure, and
the finally departing non-immigrant employee shall be required to submit
to the said office a tax clearance from the Bureau of Internal Revenue.
 "Art. 61. Withholding Tax of 15% on Compensation Income. - Aliens
employed by the regional or area headquarters and regional operating
headquarters of multinational companies shall be subject for each
taxable year upon their gross income received as salaries, wages,
annuities, compensations, remuneration and emoluments to a tax equal
to fifteen per centum (15%) of such gross income. The same tax treatment
is applicable to Filipinos employed and occupying the same positions as
those aliens employed by multinational companies: Provided, That said
Filipinos shall have the option to be taxed at either 15% of gross income
or at the regular tax rate on their taxable income in accordance with the
National Internal Revenue Code, as amended by Republic Act No. 8424.

"Art. 62. Tax and Duty Free Importation. - An alien executive of the
regional or area headquarters and regional operating headquarters of a
multinational company shall enjoy tax and duty free importation of
personal and household effects as provided for under Section 105(h) of
the Tariff and Customs Code, as amended, and Section 109(I) of the
National Internal Revenue Code, as amended: Provided, That the
personal and household effects shall arrive in the Philippines within
ninety (90) days before or after conversion of the alien executive's
admission category to multiple entry visa issued under this Act.

"Art. 63. Travel Tax Exemption. - Personnel of regional or area

headquarters and regional operating headquarters of multinational
companies and the dependents of such foreign personnel if joining them
during the period of their assignment in the Philippines, as certified by
the Board of Investments, shall be exempted from the payment of travel
tax imposed under Section 1 of Presidential Decree No. 1183, as
amended."

Section 6. Chapter III of the same Code is hereby amended and designated as
Chapter IV. Articles 63, 64, 65, 66 and 67 are hereby amended to read as
follows:

"CHAPTER IV

"INCENTIVES TO REGIONAL OR AREA HEADQUARTERS AND

REGIONAL OPERATING HEADQUARTERS

"Art. 64. Corporate Income Tax Incentive to Regional or Area Headquarters

and Regional Operating Headquarters. - Regional or area headquarters
established in the Philippines by multinational companies and which
headquarters do not earn or derive income from the Philippines and
which act as supervisory, communications and coordinating centers for
their affiliates, subsidiaries, or branches in the Asia-Pacific Region and
other foreign markets shall not be subject to income tax. Regional
 operating headquarters shall be subject to a tax rate of ten percent (10%)
of their taxable income as provided for under the National Internal
Revenue Code, as amended by Republic Act No. 8424: Provided, That any
income derived from Philippine sources by the ROHQ when remitted to
the parent company shall be subject to the tax on branch profit
remittances as provided for in Section 28(a)(5) of the National Internal
Revenue Code.

"Art. 65. Value-Added Tax. - The regional or area headquarters

established in the Philippines by multinational companies shall be
exempted from the value-added tax. In addition, the sale or lease of
goods and property and the rendition of services to regional or area
headquarters shall be subject to zero percent (0%) VAT rate as provided
for in the National Internal Revenue Code, as amended.

"Regional operating headquarters shall be subject to the ten percent

(10%) value-added tax as provided for under the National Internal
Revenue Code, as amended.

"Art. 66. Exemption From All Kinds of Local Taxes, Fees, or Charges. - The
regional or area headquarters and regional operating headquarters of
multinational companies shall be exempt from all kinds of local taxes,
fees, or charges imposed by a local government unit except real property
tax on land improvements and equipment.

"Art. 67. Tax and Duty Free Importation of Training Materials and
Equipment; Importation of Motor Vehicles. - Regional or area headquarters
and regional operating headquarters shall enjoy tax and duty free
importation of equipment and materials for training and conferences
which are needed and used solely for their functions as regional or area
headquarters or regional operating headquarters and which are not
locally available subject to the prior approval of the Board of
Investments.

"The sale or disposition of equipment within two (2) years after

importation, entered tax and duty free, shall require prior approval of the
Board of Investments and prior payment of applicable taxes and duties
waived in favor of RHQ/ROHQ.

"Regional or area headquarters and regional operating headquarters shall

be entitled to the importation of new motor vehicles subject to the
payment of the corresponding taxes and duties.

"BOOK IV
"INCENTIVES TO MULTINATIONAL COMPANIES ESTABLISHING REGIONAL
WAREHOUSES TO SUPPLY SPARE PARTS, COMPONENTS, SEMI-FINISHED
PRODUCTS AND RAW MATERIALS TO THE ASIA-PACIFIC REGION AND
OTHER FOREIGN MARKETS"

Section 7. Articles 68, 69, 70, 71 and 72 of the same Code are hereby
amended to read as follows:

"Art. 68. Qualifications. - A multinational company organized and existing

under any laws other than those of the Philippines which is engaged in
international trade and supplies spare parts, components, semi-finished
products and raw materials to its distributors or markets in the Asia-
Pacific area and other foreign areas and which has established or will
simultaneously establish a regional or area headquarters and/or regional
operating headquarters in the Philippines in accordance with the
provisions of Book III of this Code and the rules and regulations
implementing the same may also establish a regional warehouse or
warehouses in ecozones in the Philippines, after securing a license
therefor from the Philippine Economic Zone Authority (PEZA). With
respect to regional warehouses located or will locate in ecozones with
special charters, such license shall be secured from the concerned
ecozone authorities. For existing regional warehouses, said license shall
be secured from the Board of Investments unless they choose to relocate
inside ecozones: Provided, That:

"(1) The activities of the regional warehouse shall be limited to

serving as a supply depot for the storage, deposit, safekeeping of
its spare parts, components, semi-finished products and raw
materials including the packing, covering, putting up, marking,
labelling and cutting or altering to customer's specification,
mounting and/or packaging into kits or marketable lots thereof, to
fill up transactions and sales made by its head offices or parent
companies and to serving as a storage or warehouse of goods
purchased locally by the home office of the multinational for export
abroad. The regional warehouse shall not directly engage in trade
nor directly solicit business, promote any sale, nor enter into any
contract for the sale or disposition of goods in the
Philippines: Provided, That a regional warehouse may be allowed to
withdraw imported goods from said warehouse/s for delivery to an
authorized distributor in the Philippines: Provided, however, That
the corresponding taxes, customs duties and charges under the
Tariff and Customs Code have been paid by the headquarters of
the said multinational upon arrival of such goods: Provided,
further, That the delivery of said goods to the aforesaid distributor
in the Philippines shall be treated as a sale made by the
headquarters rather than that of its head office, and shall be
reflected in a separate book of accounts, any representation as to
who is the seller to the contrary notwithstanding: Provided,
furthermore, That the aforementioned sale shall be governed by the
provisions on value-added tax in accordance with the National
Internal Revenue Code, as amended by Republic Act No.
8424: Provided, finally, That the income from the aforementioned
sale to said distributor shall be treated as income derived by the
said headquarters from sources within the Philippines and shall be
subject to the corporate income tax of a resident foreign
corporation under the National Internal Revenue Code, as
amended, the provision of any law to the contrary notwithstanding.

"(2) The personnel of a regional warehouse will not participate in

any manner in the management of any subsidiary, affiliate or
branch office it might have in the Philippines other than the
activities allowed under this Act.

"(3) The personnel of the regional or area headquarters or regional

operating headquarters shall be responsible for the operation of
the regional warehouse subject to the provisions of this Code.

"(4) The multinational company shall pay the Board of

Investments, the PEZA or concerned ecozone authorities, as the
case may be, and the appropriate Collector of Customs concerned
the corresponding license fees and storage fees to be determined by
said offices.

"(5) An application for the establishment of a regional warehouse

located outside an ecozone shall be made in writing to the Board of
Investments, to the PEZA, or to concerned ecozone authorities in
the case of regional warehouses located in ecozones. The
application shall describe the premises, the location and capacity
of the regional warehouse and the purpose for which the building
is to be used.

"The jurisdiction and responsibility of supervising the regional

warehouses located outside ecozones shall be vested on the
Bureau of Customs, and the Board of Investments, or the PEZA or
concerned ecozone authorities for warehouses within ecozones.

"The Board of Investments, the PEZA or concerned ecozone

authorities, in consultation with the Regional Director of Customs
of the district where the warehouse will be situated shall cause an
examination of the premises to be made and if found satisfactory,
it may authorize its establishment without complying with the
 requirements of any other government body, subject to the
following conditions:

"(1) That the articles to be stored in the warehouse are spare

parts, components, semi-finished products and raw
materials of the multinational company operator for
distribution and supply to its Asia-Pacific and other foreign
markets including packaging, coverings, brands, labels and
warehouse equipment as provided in Article 69(a) hereof;

"(2) That the entry or importation, storage or re-export of the

goods destined for or to be stored in the regional warehouse
will not involve any dollar outlay from Philippine sources;

"(3) That they are of such character as to be readily

identifiable for re-export; and in case of local distribution
they shall be subject to Article 68(1), Article 69 paragraph (b)
and the guidelines implementing Book IV of this Code;

"(4) That it shall file an ordinary warehousing bond in an

amount equal to one hundred percent (100%) of the
ascertained customs duties on the articles imported without
prejudice to its filing a general warehousing bond in lieu of
the ordinary warehousing bond;

"(5) The percentage of annual allowable withdrawal from

warehouses located outside ecozones for domestic use shall
be subject to the approval of the Board of Investments, or of
the PEZA or concerned ecozone authorities with respect to
warehouses located within the ecozones of their
jurisdiction: Provided, however, That in the case of existing
warehouses, in no case shall their withdrawals exceed thirty
percent (30%) of the value of goods they have brought in for
any given year and the payment of the corresponding taxes
and duties shall have been made upon the arrival of such
goods imported: Provided, further, That the PEZA or
concerned ecozone authorities may allow withdrawal
exceeding thirty percent (30%) of the value of goods under
such terms and conditions the PEZA or concerned ecozone
authorities may impose.

"Art. 69. Tax Treatment of Imported Articles in the Regional Warehouse. -

"(a) Tax Incentives for Qualified Goods Destined for Reexportation to

the Asia-Pacific and Other Foreign Markets. - Except as otherwise
provided in this Code, imported spare parts, components, semi-
 finished products, raw materials and other items including any
packages, coverings, brands and labels and warehouse equipment
as may be allowed by the Board of Investments, the PEZA or
concerned ecozone authorities, as the case may be, for use
exclusively on the goods stored, except those prohibited by law,
brought into the regional warehouse from abroad to be kept, stored
and/or deposited or used therein and re-exported directly
therefrom under the supervision of the Collector of Customs
concerned for distribution to its Asia-Pacific and other foreign
markets in accordance with the guidelines implementing Book IV
of this Code including to a bonded manufacturing warehouse in
the Philippines and eventually re-exported shall not be subject to
customs duty, internal revenue tax, export tax nor to local taxes,
the provisions of law to the contrary notwithstanding.

"(b) Payment of Applicable Duties and Taxes on Qualified Goods

Subject to Laws and Regulations Covering Imported Merchandise if
Destined for the Local Market. - Any spare parts, components, semi-
finished products, raw materials and other items sent, delivered,
released or taken from the regional warehouse to the local market
in accordance with the guidelines implementing Book IV of this
Code shall be subject to the payment of income taxes, customs
duties, taxes and other charges provided for under Section 68
hereof and for which purpose, the proper commercial invoice of the
head offices or parent companies shall be submitted to the
Collector of Customs concerned; and shall be subject to laws and
regulations governing imported merchandise: Provided, That in
case any of the foregoing items are sold, bartered, hired or used for
purposes other than they were intended for without prior
compliance with the guidelines implementing Book IV of this Code
and without prior payment of the duty, tax or other charges which
would have been due and payable at the time of entry if the articles
had been entered without the benefit of this Order, shall be subject
to forfeiture and the importation shall constitute a fraudulent
practice against customs revenue punishable under Section 3602,
as amended, of the Tariff and Customs Code of the
Philippines: Provided, further, That a sale pursuant to a judicial
order shall not be subject to the preceding proviso without
prejudice to the payment of duties, taxes and other charges.

"Art. 70. Exemption From the Maximum Storage Period Under the Tariff
and Customs Code; Period of Storage in the Regional Warehouse. - The
provision of the law in Section 1908 of the Tariff and Customs Code of
the Philippines, as amended, to the contrary notwithstanding, articles
duly entered for warehousing may remain in the regional warehouses for
a period of two (2) years from the time of their transfer to the regional
 warehouse, which period may be extended with the approval of the Board
of Investments for an additional period of one (1) year upon payment of
the corresponding storage fee on the unexported articles, as provided for
under Article 68(4) for each extension until they are re-exported in
accordance with the guidelines implementing Book IV of this Code. Any
articles withdrawn, released or removed contrary to the provisions of said
guidelines shall be forfeited pursuant to the provisions of Article 69,
paragraph (b) hereof.

"Art. 71. Rules and Regulations on the Jurisdiction, Operation and Control
Over Qualified Goods in the Regional Warehouse. - The Board of
Investments, the PEZA, concerned ecozone authorities and the Bureau of
Customs shall jointly issue special rules and regulations on the
receiving, handling, custody, entry, examination, classifications, delivery,
storage, warehousing, manipulation and packaging, release for
reexportation or for importation and delivery to a Philippine distributor
and for the safekeeping, recording, inventory and liquidation of said
qualified goods, any existing law notwithstanding. Such rules and
regulations shall be formulated in consultation with the
applicants/operators of regional warehouses.

"Art. 72. Cancellation of License or Registration. - Any willful violation by

the regional or area headquarters or regional operating headquarters of a
multinational company which has established a regional warehouse or
warehouses contrary to or in violation of the provisions of existing laws
and the implementing guidelines of Book IV of this Code shall constitute
a sufficient cause for the cancellation of its license or registration in
addition to the penalties hereinabove provided in Article 69, paragraph
(b) hereof.

"The Board, the PEZA or concerned ecozone authorities, as the case may
be, shall have the authority to impose such fines in amounts that are
just and reasonable in cases of late submission or non-compliance on
the part of registered enterprises, with reporting and other requirements
under this Code and its implementing rules and regulations."

Section 8. Article 73 of the same Code is hereby repealed.

Section 9. A new article is hereby inserted to read as follows:

"Art. 73. Implementing Rules and Regulations. - To implement the

provisions of Books III and IV of this Code, the Department of Trade and
Industry, in coordination with the Department of Foreign Affairs, the
Board of Investments, the Philippine Economic Zone Authority, the
ecozone authorities with special charters, the Securities and Exchange
Commission, the Bureau of Internal Revenue, the Bureau of Customs,
 Bangko Sentral ng Pilipinas, Philippine Tourism Authority, and the
Bureau of Immigration shall jointly promulgate such rules and
regulations which shall take effect thirty (30) days after their publication
in at least two (2) national newspapers of general circulation in the
Philippines."

Section 10. Separability Clause. - If any part or section of this Act is

declared unconstitutional for any reason or whatsoever, such parts not so
declared shall remain in full force and effect.

Section 11. Repealing Clause. - All laws, decrees, orders, rules and
regulations or issuances or parts thereof inconsistent with the provisions of
this Act are hereby repealed or modified accordingly.

Section 12. Effectivity Clause. - This Act shall take effect after thirty (30)
days following its full publication in at least two (2) newspapers of general
circulation in the Philippines.

Approved, November 23, 1999.

REPUBLIC ACT NO. 9593

AN ACT DECLARING A NATIONAL POLICY FOR TOURISM AS AN ENGINE

OF INVESTMENT, EMPLOYMENT, GROWTH AND NATIONAL
DEVELOPMENT, AND STRENGTHENING THE DEPARTMENT OF TOUMSM
AND ITS ATTACHED AGENCIES TO EFFECTIVELY EFFICIENTLY
IMPLEMENT THAT POLICY, AND APPROPRIATING FUNDS THEREFOR

Be it enacted by the Senate and House of Representatives of the Philippines in

Congress assembled:

CHAPTER I
GENERAL PROVISIONS

Section 1. Short Title. - This Act shall be known as "The Tourism Act of
2009".

Section 2. Declaration of Policy. - The State declares tourism as an

indispensable element of the national economy and an industry of national
interest and importance, which must be harnessed as an engine of
socioeconomic growth and cultural affirmation to generate investment, foreign
exchange and employment, and to continue to mold an enhanced sense of
national pride for all Filipinos.

Towards this end, the State shall seek to:

 (a) Ensure the development of Philippine tourism that is for and by the
Filipino people, conserve and promote their heritage, national identity
and sense of unity;

(b) Recognize sustainable tourism development as integral to the national

socioeconomic development efforts to improve the quality of life of the
Filipino people, providing the appropriate attention and support for the
growth of this industry;

(c) Promote a tourism industry that is ecologically sustainable,

responsible, participative, culturally sensitive, economically viable, and
ethically and socially equitable for local communities;

(d) Create a favorable image of the Philippines within the international

community, thereby strengthening the country’s attraction as a tourism
destination and eventually paving the way for other benefits that may
result from a positive global view of the country;

(e) Develop the country as a prime tourist hub in Asia, as well as a center
of world congresses and conventions, by promoting sustainable tourism
anchored principally on the country’s history, culture and natural
endowments, and ensuring the protection, preservation and promotion of
these resources; and

(f) Encourage private sector participation and agri - tourism for

countryside development and preservation of rural life.

Section 3. Objectives. - Pursuant to the above declaration, the State shall

adopt the following objectives:

(a) Develop a national tourism action plan and work for its adoption and
implementation by national and local governments;

(b) Encourage activities and programs which promote tourism

awareness, preserve the country’s diverse cultures and heritage, and
instill a sense of history and a culture of tourism among the youth and
the populace;

(c) All things being equal, grant preferential treatment to the employment
of Filipino nationals in tourism - related enterprises;

(d) Provide full government assistance by way of competitive investment

incentives, long - term development fund and other financing schemes
extended to tourism - related investments;
(e) Ensure that tourism development protects and promotes the general
well - being of the Filipino people, particularly in the area of investment,
to include the monitoring and prevention of any act of profiteering or
speculation to the detriment of local residents, as well as the exploitation
of women and children in tourism;

(f) Encourage competition in the tourism industry and maximize

consumer choice by enhancing the continued viability of the retail travel
industry and independent tour operation industry;

(g) Enhance the collection, analysis and dissemination of data which

accurately measure the economic and social impact of tourism in the
country to facilitate planning in the public and private sectors;

(h) Ensure the right of the people to a balanced and healthful ecology
through the promotion of activities geared towards environmental
protection, conservation and restoration;

(i) Develop responsible tourism as a strategy for environmentally sound

and community participatory tourism programs, enlisting the
participation of local communities, including indigenous peoples, in
conserving bio - physical and cultural diversity, promoting environmental
understanding and education, providing assistance in the determination
of ecotourism sites and ensuring full enjoyment of the benefits of tourism
by the concerned communities;

(j) Strengthen the role of tourism councils and encourage the

participation of nongovernment organizations (NGOs), people’s
organizations (NGOs) and the private sector in initiating programs for
tourism development and environmental protection;

(k) Promote the progressive development of existing civil aviation, land

and sea transportation policies as they relate to tourism, in consonance
with existing bilateral agreements and inter - agency pronouncements;

(l)Promote and ensure the convention - handling capability of the country

as a world - class convention center;

(m) Achieve a balance in tourism development between urban and rural

areas in order to spread the benefits of tourism and contribute to poverty
alleviation, better access to infrastructure and to a reduction in regional
imbalances;

(n) Enhance capability - building of local government units (LGUs), in

partnership with the private sector, in the management of local tourism
projects and initiatives, thereby ensuring accessible and affordable
 destinations throughout the country, especially in areas which have
shown strong comparative advantage;

(o) Maintain international standards of excellence in all tourism facilities

and services, and promote the country as a safe and wholesome tourist
destination;

(p) Enhance international business relations for the support of tourism

projects of the private sector, through5 partnerships, joint ventures and
other cooperative undertakings involving local and foreign investors;

(q) Support the establishment of tourism enterprise zones (TEZs), which

will provide the necessary vehicle to coordinate actions of the public and
private sectors to address development barriers, attract and focus
investment on specific geographic areas and upgrade product and service
quality; and

(r) Ensure a sustainable funding mechanism for the implementation of

tourism policies, plans, programs, projects and activities.

Section 4. Definition of Terms. - The following terms, as used in this Act, are
defined as follows:

(a) "Department" refers to the Department of Tourism created pursuant

to Presidential Decree No. 189 (1973), as amended.

(b) "Secretary" refers to the Secretary of Tourism.

(c) "Duty Free Philippines (DFP)" refers to the government agency created
pursuant to Executive Order No. 46 (1986).

(d) "Duty Free Philippines Corporation (DFPC)’’ refers to the corporate

entity created out of DFP pursuant to this Act.

(e) "Philippine Conventions and Visitors Corporation (PCVC)" refers to the

corporate entity created pursuant to Presidential Decree No. 867, as
amended.

(f) "Intramuros Administration (IA)" refers to the government agency

created pursuant to Presidential Decree No. 1616 (1979), as amended.

(g) "Philippine Retirement Authority (F’RA)’’ refers to the government

agency created pursuant to Executive Order No. 1037 (1985).6

(h) "Tourism Infrastructure and Enterprise Zone Authority (TIEZA)" refers

to the government agency created pursuant to this Act.
(i) "Tourism Enterprise Zone (TEZ)" refers to tourism

(i) "TEZ overseer" refers to any person who shall be appointed by the
TIEZA in specific zones to perform such functions as may be delegated by
the TIEZA in accordance with law. enterprise zones created pursuant to
this Act.

(k) "TEZ operator" refers to an entity duly incorporated under Batas

Pambansa Blg. 68, otherwise known as The Corporation Code of the
Philippines, and other relevant laws, whose capital may be provided by
LGUs and/or private entities, and which shall administer and supervise
each TEZ.

(l) "TEZ Administrator" refers to the person appointed by the Board of

Directors of a TEZ operator who shall be responsible for implementing
the policies, plans and projects of the TEZ operator.

(m) "Registered enterprise" refers to au enterprise located within a TEZ

that is duly - registered with the TIEZA.

(n) "Philippine Tourism Authority (PTA)" refers to the existing

implementation arm of the Department of Tourism created pursuant to
Presidential Decree No. 189 (1973), as amended.

(o) "Tourism Promotions Board (TPB)" refers to the body corporate

created under this Act.

(p) "Tourism enterprises" refers to facilities, services and attractions

involved in tourism, such as, but not limited to: travel and tour services;
tourist transport services, whether for land, sea or air transportation;
tour guides; adventure sports services involving such sports as
mountaineering, spelunking, scuba diving and other sports activities of
significant tourism potential; convention organizers; accommodation
establishments, including, but not limited to, 7 hotels, resorts,
apartelles, tourist inns, motels, pension houses and home stay
operators: tourisnl estate management services, restaurants, shops and
department stores, sports and recreational centers, spas, museums and
galleries, theme parks, convention centers and zoos.

(q) "Primary tourism enterprises" refers to travel and tour services; land,
sea and air transport services exclusively for tourist use; accommodation
establishments; convention and exhibition organizers; tourism estate
management services; and such other enterprises as may be identified by
the Secretary, after due consultation with concerned sectors.
 (r) "Secondary tourism enterprises" refers to all other tourism enterprises
not covered by the preceding subsection.

(s) "Greenfield Tourism Zone" refers to a new or pioneer development, as

determined by the TIEZA.

(t) "Brownfield Tourism Zone" refers to an area with existing

infrastructure or development as determined by the TIEZA.

(u) "Foreign visitors" refers to all passengers using foreign passports. I

(v) "Sustainable tourism development" refers to the management of all

resources that meets the needs of tourists and host regions while
protecting the opportunities for the future, in such a way that economic,
social and aesthetic needs can be fulfilled while maintaining cultural
integrity, essential ecological processes, biological diversity and life
support systems.

CHAPTER II
TOURISM GOVERNANCE

SUBCHAPTER 11 - A. STRUCTURE OF THE DFJ’ARTMENT

Section 5. Mandate. - The Department of Tourism, hereinafter referred to as

the Department, shall be the primary planning, programming, coordinating,
implementing and I8 regulatory government agency in the development and
promotion of the tourism industry, both domestic and international, in
coordination with attached agencies and other government instrumentalities. It
shall instill in the Filipino the industry’s fundamental importance in the
generation of employment, investment and foreign exchange.

Section 6. Powers and Functions. - The Department shall have the following
powers and functions:

(a) Formulate tourism policies, plans and projects for the development of
tourism as an engine of socioeconomic and cultural growth;

(b) Supervise and coordinate the implementation of tourism policies,

plans and projects;

(c) Call upon all agencies of government to properly carry out their
programs in relation to and in coordination with the policies, plans and
projects of the Department and to assist in the implementation thereof;
(d) Communicate to the President, and the heads of departments,
agencies and instrumentalities of the government, the impact upon
tourism and the economy of proposed governmental actions;

(e) Provide an integrated market development program to attract people

to visit the Philippines and enhance the prestige of the country and the
Filipino people in the international community;

(f) Represent the government in all domestic and international

conferences and fora, and in all multilateral or bilateral treaties and
international agreements concerning tourism, and ensure the
government’s implementation thereof and compliance with all obligations
arising therefrom;

(g) Request the President for representation in all government agencies,

offices, boards, commissions and committees that may affect tourism;

(h)Call upon relevant government departments, agencies and offices, in

consultation with the private sector, to provide access to travel, to
facilitate the process of obtaining and extending visas, to integrate and
simplify travel regulations and immigration procedures and to ensure
their efficient, fair and courteous enforcement to assure expeditious and
hospitable reception of all visitors;

(i) Support, advance and promote the protection, maintenance and

preservation of historical, cultural and natural endowments, in
cooperation with appropriate government agencies and the private sector,
and take appropriate measures against acts and omissions contrary to
these objectives;

(j) Monitor conditions of any community in the Philippines and, in

consultation with the LGUs and law enforcers, issue timely advisories on
the safety or viability of travel to particular places within the Philippines
and on patronage of entities engaged in tourism - related activities and of
tourism products;

(k) Evaluate tourism development projects for the issuance of permits

and the grant of incentives by appropriate government agencies,
establish a databank of tourism areas and projects for investment
purposes, and encourage private sector investment and participation in
tourism activities and projects;

(I) Formulate and promulgate, in consultation with the LGUs, the private
sector industries and other tourism stakeholders, rules and regulations
governing the operation and activities of all tourism enterprises
including, but not limited to, a national standard for licensing,
 accreditation and classification of tourism enterprises, prescribing
therein minimum levels of operating quality and efficiency for their
operation in accordance with recognized international standards, impose
reasonable penalties for violation of accreditation policies and
recommend to the LGUs concerned the suspension or prohibition of
operation of a tourism enterprise;

(m) Monitor the LGUs’ compliance to national standards in the licensing

of tourism enterprises, receive and investigate10 complaints concerning
these enterprises, and act on such complaints to properly implement the
provisions of this Act;

(n) Ensure the proper coordination, integration, prioritization and

implementation of local tourism development plans with that of the
national government:

(o) Provide technical assistance to LGUs in destination development,

standard setting and regulatory enforcement;

(p) Undertake continuing research studies and survey to analyze

economic conditions and trends relating to tourism and travel, and
compile and integrate a statistical databank on the tourism industry;

(q) Delegate to regional offices, in coordination with LGUs, specific

powers and functions in the implementation of tourism policies, plans
and projects;

(r) Collect necessary fees and charges for the proper implementation of
tourism policies, plans and projects; and

(s) Exercise such other powers and functions as are

Section 7. Structure of the Department. - The Department shall consist of the

Department Proper, Department offices, services and unit, and the regional
and foreign offices.

Section 8. Department Proper. - The Department Proper shall consist of the

Offices of the Secretary, Undersecretaries and Assistant Secretaries. necessary
for the implementation of this Act.

Section 9. Office of the Secretary. - The Office of the Secretary shall consist of
the Secretary and his or her immediate staff.

Section 10. Undersecretaries and Assistant Secretaries. - The Secretary shall

be assisted by at least three (3) Undersecretaries, namely:
 (a) Undersecretary for Tourism Development, who shall be responsible for
the Office of Product Development, the Office of Tourism Development
Planning, Research and Information Management and the Office of
Industry Manpower Development;

(b) Undersecretary for Tourism Regulation, Coordination and Resource

Generation, who shall be responsible for the Office of Tourism Standards
and Regulations, the Office of Tourism Coordination, the Office of
Tourism Resource Generation and all regional and foreign offices; and

(c) Undersecretary for Special Concerns and Administration, who shall be

responsible for the Office of Special Concerns, the Financial and
Management Service, Administrative Affairs Service, Legal Affairs Service,
Internal Audit Service and Legislative Liaison Unit.

Each Undersecretary shall he assisted by an Assistant Secretary.

Section 11. Office of Product Development. - The Office of Product Development

shall have the following functions:

(a) Conceptualize and develop new products which will enhance tourism
sites and facilities;

(b) Undertake tests on the viability and acceptability of new tourism -

related products and programs: and

(c) Encourage and promote joint undertakings with the private sector for
the development of new tourism - related products and programs.

Section 12. Office of Tourism Development Planning, Research and Information

Management. - The Office of Tourism Development Planning, Research and
Information Management shall have the following functions:

(a) Prepare a National Tourism Development Plan identifying geographic

areas with potential tourism value and outlining approaches to
developing such areas;

(b) Formulate policies and programs for global competitiveness and

national tourism development, and approve local government tourism
development plans;

(c) Monitor and evaluate the implementation of policies, plans and

programs of the Department;

(d) Formulate an integrated marketing and promotions plan, identifying

strategic market areas and niches;
 (e) Formulate, in coordination with the TIEZA, other government agencies
and LGUs exercising political jurisdiction over the area, development
plans for TEZs and integrating such plans with other sector plans for the
area;

(f) Conduct researches and studies, disseminate all relevant data on

tourism, monitor and analyze the socioeconomic impact of tourism upon
affected local communities and the nation to maximize the benefits of
tourism throughout affected local communities and to avoid or mitigate
possible negative impacts of the industry;

(g) Provide technical assistance to the LGUs and the TIEZA in the
preparation of local tourism development plans to ensure adherence to
national policies and programs;

(h) Coordinate with government agencies, LGUs, NGOs and other private
entities for the development and implementation of the national tourism
plans and policies and other relevant concerns;

(i) Source grants or loans from local and foreign funding institutions to
implement tourism policies, plans and projects;

(i) Create and supervise management information systems for the entire
Department;

(k) Formulate and coordinate the implementation of the Department’s

information system strategic plan; and

(l) Pursue the Department’s interests in multilateral, international and

regional tourism cooperation, agreements and treaties.

Section 13. Office of Industry Manpower Development. - The Office of Industry

Manpower Development shall have the following functions:

(a) Conduct seminars on Philippine history, culture, environment and

related subjects, in coordination with appropriate government agencies
and the private sector, specifically educational institutions;

(b) Develop training modules and conduct seminars and continuing

education programs for the industry manpower, in coordination with
appropriate government agencies and tourism enterprises and
associations, thereby upgrading their quality, competence and excellence
in tourism services:

(c) Encourage the development of training courses and apprenticeship

programs for tourist guides and other similar workers jointly with
 concerned tourism enterprises, appropriate government agencies and the
private sector; and

(d) Enlist the participation of experts for the provision of technical

assistance, training and education programs to LGUs, tourism
enterprises and other entities to improve the quality of tourism services
and issue certifications to the effect that these recipients of assistance,
training and education have passed the standards set by the said
experts, in accordance with this Act.

Section 14. Office of Tourism Standards and Regulations. - Recognizing the

need for internationally competitive standards of facilities and services, the
Office of Tourism Standards and Regulations shall have the following
functions:

(a) Formulate and enforce standards for the operation and maintenance
of tourism enterprises, prescribing minimum and progressive levels of
operating quality and efficiency consistent with local and international
standards;

(b) Coordinate with relevant tourism enterprise associations, including

adventure sports associations, in the formulation of rules and
regulations, accreditation and enforcement;

(c) Develop and enforce a comprehensive system of mandatory

accreditation for primary tourism enterprises, and voluntary
accreditation for secondary tourism enterprises, in accordance with
prescribed guidelines and standards;

(d) Establish a system of registration, information, linkage and mutual

assistance among accredited tourism enterprises to enhance the value of
accreditation and improve the quality of service rendered by such
enterprises; and

(e) Evaluate tourism projects in accordance with standards and endorse

the same to appropriate government agencies for availment of incentives,
and provide technical assistance to incentive - giving institutions in the
formulation of tourism incentives and the administration of their
functions.

Section 15. Office of Tourism Coordination. - Recognizing that increased

linkages are necessary between various government offices and the private
sector and among the various entities in the private sector itself to properly
implement tourism policy, the Office of Tourism Coordination shall have the
following functions:
 (a) Maintain close coordination with national government agencies,
LGUs, NGOs and other private entities for the development and
implementation of national tourism plans and policies;

(b) Call upon the assistance and support of any or all of the government
agencies in the implementation of the policies of the Department; and

(c) Support the private sector in all tourism activities

Section 16. Office of Tourism Resource Generation. - In line with the objective
of ensuring a sustainable funding mechanism for the implementation of
tourism policies, plans, programs, projects and activities, the Office of Tourism
Resource Generation shall be tasked with the collection of necessary fees and
charges which shall be used by the Department in the promotion and
marketing efforts of the requiring governmental coordination. TPB and the
development of infrastructure facilities, utilities and services of the TIEZA. The
proceeds of such collection shall accrue directly and automatically to the
Department. The guidelines for the collection and disbursement of these
proceeds shall be defined in the implementing rules and regulations of this Act.

There is hereby created a special fund, to be disbursed and administered by

the Department, called the Tourism Development Fund, which shall be used
for the development, promotion and marketing of tourism and other projects of
the Department that will boost tourism in the country. The fund shall be
sourced from the fees and charges which will be collected by the Department. A
special account shall be established for this fund in the National Treasury.
Disbursements made from the fund shall be subject to the usual accounting
and budgeting rules and regulations.

Section 17. Regional Offices. - The Department shall establish, operate and
maintain a regional office in each administrative region in the country. A
regional office, headed by a regional director, shall have the following functions:

(a) Implement laws, policies, plans, programs, rules and regulations of

the Department, particularly those relating to compliance therewith, and
to the accreditation of tourism enterprises promulgated by the
Department;

(b) Coordinate with regional offices of other departments, bureaus and

agencies, LGUs, NGOs and the regional offices of the Department's
attached agencies in the implementation of such laws, policies, plans,
programs and rules and regulations;

(c) Undertake research and data gathering on local tourism trends and
other relevant tourism information;
 (d) Together with LGUs, establish such tourist information and
assistance centers at strategic locations as are necessary to disseminate
relevant information pertaining to the tourist locations and products and
to assist tourists and tourism enterprises;

(e) Conduct trainings and information campaigns, and assist the TPB in
domestic promotions in the pertinent region on subject matters such as
this Act, the functions of the Department, tourism traffic and new
tourism sites, among others; and

(f)Make recommendations to the Secretary on all matters relating to

tourism in the region.

Section 18. Foreign Offices. - The creation, operation and supervision of

foreign field offices of the Department shall be retained therein.

Section 19. Office of Special Concerns. - The Office of Special Concerns shall
be responsible in effectively coordinating and monitoring the various directives,
pronouncements and issuances of the President pertaining to the priorities of
the government and the Department.

Section 20. Financial and Management Service. - The Financial and

Management Service shall provide the Department with staff advice and
assistance on budgetary, financial and management matters and shall perform
such other related functions as may be assigned or delegated to it by the
Secretary.

Section 21. Administrative Affairs Service. - The Administrative Affairs Service

shall provide the Department with staff advice and assistance on personnel
information, records, communications, supplies, equipment, collection,
disbursements, security, other custodial work and such other related duties
and responsibilities as may be assigned or delegated to it by the Secretary.

Section 22. Legal Affairs Service. - The Legal Affairs Service shall provide the
Department with staff advice and assistance on all legal matters affecting the
Department and perform such other related functions as may be assigned or
delegated to it by the Secretary.

Section 23. Internal Audit Service. - The Internal Audit Service shall be
responsible for instituting and conducting an audit program for the
Department to ensure compliance with17 existing rules and regulations for an
efficient and effective fiscal administration and performance of department
affairs.

Section 24. Legislative Liaison Unit. - The Legislative Liaison Unit shall
establish and maintain regular coordination and liaison with Congress,
monitor the passage of legislative measures that are in the Department’s
agenda, provide relevant information and technical support to Members of
Congress, and perform such other related functions as may be assigned or
delegated by the Secretary.

SUBCHAPTER 11 - B. RATIONALIZATION OF FUNCTIONS

Section 25. Reorganization of Offices. - The Philippine Tourism Authority is

hereby reorganized as the Tourism Infrastructure and Enterprise Zone
Authority, as hereinafter provided. The Philippine Conventions and Visitors
Corporation is hereby reorganized as the Tourism Promotions Board, as
hereinafter provided. The Bureaus for Domestic and International Tourism
Promotions, and the Office of Tourism Information of the Department are
hereby absorbed into the Tourism Promotions Board.

Section 26. Human Resources. - Where certain functions are declared

redundant on account of the reorganization, the Department, the TIEZA Board
and the Tourism Board shall provide for the reassignment, insofar as
practicable, of affected employees to similar positions within the Department
and its attached agencies, taking into consideration their skills and experience,
without loss of seniority or other rights and privileges. In any case, all relevant
laws, decrees, executive orders, rules and regulations concerning the rights of
government employees in the reorganization of an office shall be respected.

Section 27. Optional Retirement and Compensation. - There shall be no

mandatory separation of any employee as a result of the reorganization of the
Department and its attached agencies and corporations. However, if any
employee elects to leave the service or retire, said employee shall be entitled to
claim separation or retirement benefits as may be provided18 under existing
laws governing the civil service or other laws and issuances, whichever may be
beneficial to the employee concerned.

SUBCHAPTER 11 - C. ATTACHED AGENCIES AND CORPORATIONS

Section 28. Attached Agencies and Corporations. - The TPB, the TIEZA and the
DFPC shall be attached to the Department and shall be under the supervision
of the Secretary for program and policy coordination. Furthermore, the
following agencies and corporations shall be attached to the Department under
the supervision of the Secretary for program and policy coordination: the IA;
the National Parks Development Committee (NPDC), created under Executive
Order No. 30 (1963); the Nayong Pilipino Foundation (NPF), created under
Presidential Decree No. 37 (1972), as amended; the PRA; and the Philippine
Commission on Sports Scuba Diving (PCSSD). Except as hereinafter provided,
each of the attached agencies and corporations shall continue to operate under
their respective charters.
Section 29. Intramuros Administration, National Parks Development Committee
and Nayong Pilipino Foundation. - The Intramuros Administration, the National
Parks Development Committee and the Nayong Pilipino Foundation shall
continue to be attached to the Department and operate under their respective
charters. They may be authorized to operate TEZs, under the supervision of the
TIEZA, as provided under Chapters IV and V of this Act, within their respective
jurisdictions: Provided, That any restoration activity undertaken by the IA, the
NPDC or the NPF may be entitled to a tax deduction equivalent to the full cost
of the restoration activity directly incurred in accordance with the provisions of
the National Internal Revenue Code, as amended.

Section 30. Philippine Retirement Authority. - For purposes of policy and

program coordination, the Philippine Retirement Authority is hereby attached
to the Department and placed under the supervision of the Secretary. The
Secretary shall be the ex officio Chairperson of its Board of
Trustees: Provided, That this provision shall apply after the expiration of the
term of office of the incumbent Chairperson.

Section 31. Philippine Commission on Sports Scuba Diving. - The Philippine

Commission on Sports Scuba Diving shall likewise be attached to the
Department and placed under the supervision of the Secretary, who shall be
the ex officio Chairperson of its Board of Trustees. It shall undertake measures
to provide the standard basic dive rules to all levels or kinds of divers, regulate
scuba sports and technical diving in the country and ensure the safety of the
sport through the formulation of policies pursuant thereto, in coordination with
the Office of Tourism Standards and Regulations, including the regulation of
the accredited scuba sports and technical diving establishments.

SUBCHAPTER 11 - D. CONTROL AND SUPERVISION OF AREAS WITH

OVERLAPPING JURISDICTIONS

Section 32. Rationalization of Tourism Areas, Zones and Spots. - Any other area
specifically defined as a tourism area, zone or spot under any special or general
law, decree or presidential issuance shall, as far as practicable, be organized
into a TEZ under the provisions of this Act. With respect to tourism zones,
areas or spots not organized into TEZs, the Department, through appropriate
arrangements, may transfer control over the same or portions thereof, to
another agency or office of the government, or to a LGU. This shall only be
effected upon the submission by the latter, within a reasonable time, of
comprehensive development plans for the use, preservation and promotion of
these zones, areas or spots and upon the approval thereof by the Department.
Such transfer shall not have the effect of diminishing the jurisdiction of the
Department over these zones, areas or spots.

The Department shall exercise supervisory powers over such agency, office or
LGU in accordance with the terms of the transfer or the development plan of
the zone, area or spot. Where a government agency or office or a LGU fails to
implement the comprehensive plan approved by the Department, the
Department may rescind the arrangement transferring control over the tourism
zone, area or spot and regain such control thereof.

Section 33. National Integrated Protected Areas System (NIPAS) and the
National Ecotourism Policy. - The Department, in coordination with the
Department of Environment and Natural Resources (DENR), shall identify
areas covered by the NIPAS with ecotourism potentials and cultural heritage
value, and prepare policies, plans and programs for their development,
preservation, operation or conversion into TEZs. The designation of these areas
as TEZs shall be subject to the provisions of Subchapter IV - A of this Act.

The ecotourism sites in the National Ecotourism Strategy pursuant to

Executive Order No. 111 (1999) may also be developed into TEZs with the
National Ecotourism Steering Committee responsible for finding the
appropriate TEZ operator for the sites.

Section 34. Tourism Infrastructure Program. - The Department, in accordance

with the National Tourism Development Plan and local government initiatives,
shall coordinate with the Department of Public Works and Highways (DPWH)
and the Department of Transportation and Communications (DOTC) in the
establishment of a tourism infrastructure program in the respective work
programs of said agencies, identifying therein vital access roads, airports,
seaports and other infrastructure requirement in identified tourism areas. The
said agencies and the Department of Budget and Management (DBM) shall
accord priority status to the funding of this tourism infrastructure program.

SUBCHAPTER 11 - E. SHARED RESPONSIBILITIES OF NATIONAL AND

LOCAL GOVERNMENTS

Section 35. Coordination Between National and Local Governments. - In view of

the urgent need to develop a national strategy for tourism development while
giving due regard to the principle of local autonomy, the Department, the
Department of the Interior and Local Government (DILG) and LGUs shall
integrate and coordinate local and national plans for tourism development. The
Department may provide financial and technical assistance, training and other
capacity - building measures to LGUs for the preparation, implementation
and21 monitoring of their tourism development plans, gathering of statistical
data, and enforcement of tourism laws and regulations, giving due priority to
areas that have been identified as strategic in the implementation of the
national tourism development plan. LGUs shall ensure the implementation of
such plans. The Department, the TPB and the TIEZA shall prioritize promotion
and development assistance for LGUs which successfully adopt and implement
their tourism development plans.
Section 36. National Tourism Development Planning. - The Department, in
coordination with its attached agencies, LGUs and the private sector, shall
continuously update the existing national tourism development plan in view of
evolving needs and capabilities of LGUs and the domestic and global tourism
market.

Section 37. Local Tourism Development Planning. - LGUs, in consultation with

stakeholders, are encouraged to utilize their powers under Republic Act No.
7160, otherwise known as the Local Government Code of 1991, to ensure the
preparation and implementation of a tourism development plan, the
enforcement of standards and the collection of statistical data for tourism
purposes. They shall, insofar as practicable, prepare local tourism development
plans that integrate zoning, land use, infrastructure development, .the national
system of standards for tourism enterprises, heritage and environmental
protection imperatives in a manner that encourages sustainable tourism
development.

Section 38. Reports. - In order to monitor the resources of the Department and
to ascertain the economic and social impact of tourism, all LGUs shall provide
an inventory of all the resources available to the Department for use in the
implementation of this Act. They shall likewise periodically report to the
Department on the status of tourism plans and programs, tourist arrivals and
tourism enterprises, among others, within their jurisdictions.

Section 39. Accreditation. - In order to encourage global competitiveness,

strengthen data gathering and research on tourism, and facilitate the
promotion of individual enterprises and the industry as a whole, the
Department shall prescribe22 and regulate standards for the operation of the
tourism industry. Primary tourism enterprises shall be periodically required to
obtain accreditation from the Department as to the quality of their facilities and
standard of services. Accreditation shall be voluntary for secondary tourism
enterprises.

The Department shall evolve a system of standards for the accreditation of

these enterprises in accordance with the relevant tourism development plan.
These standards shall adhere, insofar as practicable, to those recognized
internationally. The Department and LGLJs shall ensure strict compliance of
tourism enterprises with these standards.

The Department, through the Office of Tourism Standards and Regulations,

shall act on complaints regarding accredited tourism enterprises, and after
notice and hearing, may impose fines, or downgrade, suspend or revoke
accreditation, for violation of the terms thereof. The Department shall likewise
have the power and the duty to issue tourism advisories pertaining to tourism
enterprises found to have violated the terms of their accreditation. A tourism
advisory shall contain the following:
 (a) Complete identification of the pertinent tourism enterprise:

(b) Location of this entity;

(c) Its registered owner or proprietor and the business address thereof;
and

(d) The specific term or terms of accreditation violated:

(e) The statement that the advisory shall only be lifted upon continued
compliance of the enterprise with the terms of accreditation.

Tourism enterprises registered with the TIEZA in accordance with the pertinent
provisions below and availing of the incentives under this Act shall further be
ordered to pay back taxes in the amount equivalent to the difference23 between
the taxes that they should have paid had they not availed of the incentives
under this Act and the actual amount of taxes being paid by them under the
same incentive scheme. The back taxes to be collected shall be computed up to
three (3) years directly preceding the date of promulgation of the decision or
order finding that the tourism enterprise violated the terms of its accreditation.
For this purpose, the Department shall enlist the assistance of the Bureau of
Internal Revenue in arriving at an accurate computation of back taxes to be
paid by the pertinent tourism enterprise. The proceeds of these back taxes
shall be distributed as follows:

(a) One - third to the national government;

(b) One - third to the LGUs concerned, to be shared by them equally

should there be more than one such LGU and

(c) One - third to the TIEZA.

Nothing in this section shall diminish the powers of the LGUs under the Local
Government Code, pertaining to the issuance of business permits, licenses and
the like. When an enterprise fails to obtain or loses accreditation, the
Department shall not,$ the LGU concerned so that it may take appropriate
action in relation to an enterprise’s licenses and permits to operate.

The Department may, under such relevant terms and conditions stipulated,
delegate the enforcement of the system of accreditation to LGUs that have
adopted and successfully implemented their tourism development plans.

The Department shall promulgate the necessary implementing rules and

regulations to enforce the provisions of this section pursuant to its powers and
functions as defined under Section 6 of this Act.
Section 40. Value of Accreditation. - The Department shall develop a system to
enhance the value of accreditation among primary and secondary tourism
enterprises. Only accredited enterprises shall be beneficiaries of promotional,
training and other programs of the Department and its attached agencies and
corporations.

Accredited enterprises shall, insofar as practicable, give due preference to other

accredited enterprises in obtaining relevant services.

The Department shall develop an integrated system of accreditation in

coordination with concerned agencies and entities, in order to reduce the
regulatory and financial burden on tourism - related enterprises.

Section 41. Local Government Capabilities Enhancement. - The Department

shall develop support and training programs to enhance the capability of LGUs
to monitor and administer tourism activities, and enforce tourism laws, rules
and regulations in their respective jurisdictions. Funding for such programs
shall be shared equitably between the Department and the LGUs concerned.

Section 42. Tourism Officers. - Every province, city or municipality in which

tourism is a significant industry shall have a permanent position for a tourism
officer. He or she shall be responsible for preparing, implementing and
updating local tourism development plans, and enforcing tourism laws, rules
and regulations. In the performance of his or her functions, the tourism officer
shall coordinate with the Department and its attached agencies.

Prior to appointment, every tourism officer must have obtained a relevant

bachelor’s degree and at least five (5) years of substantial involvement in the
tourism industry. The Department may also prescribe other relevant
qualifications and require periodic completion of training programs. Such
qualifications and the powers and functions of tourism officers shall be defined
in the implementing rules and regulations of this Act.

Section 43. Tourism Assistance. - In coordination with the Department’s

regional offices, every province, city or municipality in which tourism is a
significant industry shall establish a tourist information and assistance center
to assist tourists and tourism enterprises.

Section 44. Tourism Site Classification. - The tourism councils established in

the administrative regions of the country shall meet, on a regular basis, to
class& and evaluate tourism destinations, sites and activities within their
respective regions. Such classifications and evaluations may be used by the
Department and its attached agencies, LGUs, and the private sector as guide in
the development and implementation of their respective programs.
CHAPTER III
TOURISM PROMOTIONS

SUBCHAPTER 111 - A. TOURISM PROMOTIONS BOARD

Section 45. Tourism Promotions Board. - Under the supervision of the

Secretary and attached to the Department for purposes of program and policy
coordination shall be a body corporate known as the Tourism Promotions
Board (TPB). The TPB shall formulate and implement an integrated domestic
and international promotions and marketing program for the Department.

Section 46. Mandate. - The TPB shall be responsible for marketing and
promoting the Philippines domestically and internationally as a major global
tourism destination, highlighting the uniqueness and assisting the
development of its tourism products and services, with the end in view of
increasing tourist arrivals and tourism investment. Specifically, it shall market
the Philippines as a major convention destination in Asia. To this end, it shall
take charge of attracting, promoting, facilitating and servicing large - scale
events, international fairs and conventions, congresses, sports competitions,
expositions and the like. It shall likewise ensure the regular advertisement
abroad of the country‘s major tourism destinations and other tourism
products, not limited to TEZs. It may also provide incentives to travel agencies
abroad which are able to draw tourists and tourism investments to the
country.

Section 47. Board of Directors. - The TPB shall be governed and its powers
exercised by a Board of Directors ("Tourism Board), composed as follows:

(a) The Department Secretary, as Chairperson;26

(b) The TPB Chief Operating Officer, as Vice Chairperson;

(c) The TIEZA Chief Operating Officer;

(d) The Department of Foreign Affairs (DFA) Secretary;

(e) The Department of Trade and Industry (DTI)

(f) The DOTC Secretary; and

(g) Five (5) representative directors, to be appointed by the President,

upon the recommendation of the Tourism Congress from a list of at least
three (3) nominees per group as enumerated in Section 49. They must be
Filipinos with recognized competence in business management,
marketing, finance, tourism and other related fields and shall serve a
 term of office of three (3) years, which term may be extended for a period
not exceeding three (3) years.

The Secretaries ,of the DFA, the DTI and the DOTC shall each designate a
permanent representative in the Board, who must possess relevant experience.
The permanent representative shall be duly authorized to act on behalf of the
Secretary in his or her absence.

The Chairperson of the Tourism Board shall have voting rights in case of a tie.

The Tourism Board shall appoint a corporate secretary whose functions shall
include the preparation of agenda for board meetings, in consultation with the
Chairperson.

Section 48. The Chief Operating Officer. - The TPB shall have a Chief Operating
Officer who must be a Filipino, with a bachelor’s degree in any of the following
fields: business, law, tourism, public administration or other relevant fields
and have demonstrated expertise therein. He or she must have been engaged in
a managerial capacity for at least five (5) years prior to his or her appointment.
He or she shall be elected by the Board from a list of qualified applicants and27
appointed by the Secretary, and shall have a term of office of six (6) years,
unless removed for cause in accordance with law.

Section 49. Representative Directors. - In accordance with Section 47,

paragraph (g) of this Act, the Tourism Congress, as created under Chapter VIII,
Section 104, shall elect from, among its members the directors to represent the
tourism industry in the Tourism Board, specifically the following groups:

(a) Accommodation enterprises;

(b) Travel and tour services;

(c) Land, air and sea tourist transport services;

(d) Conventions and exhibitions services and suppliers; and

(e) Other tourism enterprises.

If a representative director ceases to be connected with the sector he or she

represents, a new representative director shall be appointed to serve the
unexpired term.

Section 50. Powers and Functions of the Tourism Promotions Board. - The TPB
shall have all the general powers of a corporation provided under the
Corporation Code. Furthermore, it shall have the following powers and
functions:
(a) Organize the TPB in a manner most efficient and economical for the
conduct of its business and the implementation of its mandate;

(b) Develop and implement a plan to market the Philippines as a premier

tourist destination;

(c) Direct and coordinate the resources and efforts of the government and
the private sector in the tourism and allied fields for the full realization of
the tourism plans and programs;

(d) Develop and promote the Philippines as a center for international

meetings, incentives, conventions, exhibitions, sports, medical tourism
and other special events;

(e) Engage in the business of tourism and perform acts in consonance

therewith, such as, but not limited to, attending conventions and other
events abroad in representation of the country, encouraging sales
promotions and advertising, and implementing programs and projects
with the objective of promoting the country and enticing tourists to visit
its tourism destinations and to enjoy its tourism products;

(f) Contract loans, indebtedness and credit, and issue commercial papers
and bonds, in any local or convertible foreign currency from international
financial institutions, foreign government entities, and local or foreign
private commercial banks or similar institutions under terms and
conditions prescribed by law, rules and regulations:

(g) Execute any deed of guarantee, mortgage, pledge, trust or assignment

of any property for the purpose of financing the programs and projects
deemed vital for the early attainment of its goals and objectives, subject
to the provisions of the Constitution (Article VII, Section 20 and Article
XU, Section 2, paragraphs (4) and (5));

(h) Receive donations, grants, bequests and assistance of all kinds from
local and foreign governments and private sectors and utilize the same;

(i) Extend loans through government banks and financial institutions,

provide grants and other forms of financial assistance for manpower
training, heritage preservation, infrastructure development and other
programs of the Department:

(j) Obtain the services of local and foreign consultants, and enter into
contracts locally and abroad in the performance of its functions: and (k)
Perform all other powers and functions of a corporation.
Section 51. Meetings of the Board. - The Tourism Board shall meet at least
once a month at the principal office of the TPB, unless the Tourism Board
previously agrees in writing to meet at another location.

Section 52. Capitalization. - The TPB shall have an authorized capital of Two
hundred fifty million pesos (Php250,000,000.00) which shall be fully
subscribed by the national government.

Section 53. Strategic Marketing Plan. - The TPB shall draft comprehensive
short - , medium - and long - term marketing plans for the Philippines as a
destination for travel, business and investment, particularly tourism
investment. It shall coordinate, insofar as practicable, with relevant agencies of
the government and the private sector in the preparation of such plans.

Such plans shall be duly approved by the Tourism Board. The Chief Operating
Officer shall ensure that the marketing plans are duly implemented, and shall
periodically report to the Tourism Board the status of their implementation. He
or she shall also coordinate to ensure that the other agencies of the
government and the private sector which assisted in the preparation of
marketing plans perform their respective duties under the plans.

SUBCHAPTER 111 - B. TOURISM PROMOTIONS FUNDING

Section 54. Tourism Promotions Trust. - Within one hundred and twenty (120)
days from the effectivity of this Ad, an audit shall be conducted by the
Commission on Audit to determine the true value of the assets and liabilities of
the PTA. After such audit, the TIEZA and the Department, in coordination with
the Privatization Council, shall determine which assets shall be put up for sale
or lease: Provided, That concerned LGUs interested to manage and operate said
assets shall have the right of first refusal. The TIEZA and the Department shall
take into consideration the importance of maintaining and preserving the PTA
assets which may already be considered cultural treasures and heritage sites,
such as the Banaue Hotel and similar assets, which shall not be sold or in any
way disposed of and shall be placed under the ownership of the TIEZA for their
continued maintenance.

The Tourism Promotions Trust shall hereby be established from the proceeds of
the sale or lease of the assets of the PTA. The trust shall be managed by a
government - owned bank or financial institution selected by the Tourism
Board. Said bank or institution shall report the status and profitability of the
trust on a quarterly basis to the Tourism Board, the Secretary, and the Joint
Congressional Tourism Oversight Committee created under this Act.

Section 55. Tourism Promotions Fund. - The proceeds of the following shall be
placed in a special Tourism Promotions Fund to finance the activities of the
TPB:
 (a) The investment earnings from the Tourism Promotions Trust;

(b) An appropriation from the national government of not less than Five
hundred million pesos (Php500,000,000.00) annually for at least five (5)
years from the time of its constitution;

(c) Seventy percent (70%) of the fifty percent (50%) net income of the
DFPC accruing to^ the Department, in lieu of its statutory remittance to
the national government under Republic Act No. 7656, otherwise known
as the Dividends Law of 1994;

(d) At least twenty - five percent (25%) of the fifty percent (50%) national
government share remitted by the Philippine Amusements and Gaming
Corporation (PAGCOR) to the National Treasury pursuant to Republic Act
No. 7656; and

(e) At least twenty - five percent (25%) of the national government share
remitted by the international airports and seaports to the National
Treasury pursuant to Republic Act No. 7656.

In no case shall promotions and marketing activities receive less than fifty
percent (50%) of the annual utilization of the fund. Not more than ten percent
(10%) of the fund shall be used for all other administrative and operating
expenses of the TPB. The unallocated portion of the fund shall be earmarked by
the TPB as follows:

(a) For use by the TIEZA in the development of TEZs;

(b) For the Department, to enhance its programs for development

planning, heritage preservation and infrastructure development, and
manpower training including, but not limited to, scholarships for
trainings abroad, among others; or

(c) For such other purposes as may contribute to the development of the
tourism industry. Portions of the net income of government corporations
and other enterprises provided under this section due the TPB shall be
remitted directly thereto on a quarterly basis.

Section 56. Special Contingency and. - At the beginning of each year, ten
percent (10%) of the allocation for promotions and marketing shall be set aside
as a Special Contingency Fund of the TPB. This shall be used in the event of
emergencies to provide the TPB with sufficient resources to undertake
marketing and promotions activities that will encourage sustained tourism
interest in the Philippines and that will address the adverse effects of these
emergencies.
Section 57. Exemption From Payment of Corporate Income Tax. -
Notwithstanding any provision of existing laws, decrees, executive orders to the
contrary, the TPB shall be exempt from the payment of corporate income tax,
as provided under the National Internal Revenue Code (NIRC) of 1997, as
amended.

Section 58. Membership. - The TPB shall be open for membership to entities,
groups and individuals with economic, social or cultural interest in travel
trade, congresses and conventions

CHAPTER IV
TOURISM ENTERPRISE ZONES

SUBCHAPTER IV - A. TOURISM ENTEWRISE ZONES

Section 59. Tourism Enterprise Zones. - Any geographic area with the following
characteristics may be designated as a Tourism Enterprise Zone:

(a) The area is capable of being defined into one contiguous territory;

(b) It has historical and cultural significance, environmental beauty, or

existing or potential integrated leisure facilities within its bounds or
within reasonable distances from it;

(c) It has, or it may have, strategic access through transportation

infrastructure, and reasonable connection with utilities infrastructure
systems;

(d) It is sufficient in size, such that it may be further utilized for bringing
in new investments in tourism establishments and services; and

(e) It is in a strategic location such as to catalyze the

Section 60. Designation of TEZs. - The TIEZA shall designate TEZs, upon the
recommendation of any LGU qr private entity, or through joint ventures
between the public and the private sectors. Such designation shall be subject
to the provisions of this Act and to minimum requirements which the TIEZA
shall subsequently promulgate.

TEZs shall not proliferate in a manner that diminishes their strategic economic
and developmental value to the national economy.

Section 61. Development Planning. - Each application for designation as a TEZ

shall be accompanied by a development plan which shall, consistent with
principles of economic, socioeconomic development of neighboring
communities. cultural and environmentally sustainable development,
specifically identify:

(a) Tourism focal points and resources available within the proposed TEZ
and adjoining areas;

(b) Features which satisfy the requisites for the designation of a TEZ
enumerated under Section 59 of this Act;

(c) Areas for infrastructure development, for investment, and for

preservation, as well as the kind of development, nature of investment or
sustainable activities allowed within preserved areas, respectively;

(d) Medium - and long - term studies on market trends, and

corresponding development strategies for the TEZ;

(e) Studies on the economic impact of development within the TEZ and in
surrounding communities;

(f) Studies on the environmental, cultural and social carrying capacity of

the TEZ and surrounding communities;

(g) Design plans for structures which incorporate design and

sustainability principles from local architecture and the surrounding
environment; and

(h) Such other information that the TIEZA may require.

No TEZ shall be designated without a development plan duly approved by the

TIEZA and without the approval, by resolution, of the LGU concerned. Any
deviation or modification from the development plan shall require the prior
authorization of the TIEZA. The TIEZA may cause the suspension of granted
incentives and withdrawal of recognition as a TEZ operator. It may likewise
impose reasonable fines and penalties upon TEZ operators and responsible
persons for any failure to properly implement the approved development plan.

Lands identified as part of a TEZ shall qualify for exemption from the coverage
of Republic Act No. 7279, otherwise known as the Urban Development and
Housing Act of 1992, and Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law, subject to rules and regulations to be
crafted by the TIEZA, the Housing and Urban Development Coordinating
Council and the Department of Agrarian Reform.

Section 62. Operation of TEZs. - The TEZ proponent shall establish a corporate
entity, to be known as the TEZ operator, which shall administer the TEZ and
supervise its activities. The designation of a TEZ does not vest ownership of the
resources therein upon the TEZ operator. Where the TEZ operator possesses
rights to land or other resources within the TEZ, the TEZ operator shall be
entitled to exercise such rights as allowed by existing laws in a manner
consistent with the duly - approved development plan as provided above.

Where rights to land and other resources within the TEZ are vested in a private
third party, the TEZ operator shall encourage the private third party to
participate in policy making, planning and program development and
implementation by encouraging its registration as a tourism enterprise where
appropriate, and through the judicious administration of incentives and
provision of services.

Except as herein provided, the LGUs which comprise, overlap, embrace or

include a TEZ in their territorial jurisdictions shall retain their basic autonomy
and identity in accordance with the Local Government Code.

The government shall encourage, facilitate and provide incentives for private
sector participation in the construction and operation of public utilities and
infrastructure in the TEZs using any of the schemes allowed under Republic
Act No. 6957, as amended, otherwise known as the Build - Operate - and -
Transfer Law.

SUBCHAPTER IV - B. TOURISM INFRASTRUCTURE AND ENTERPRISE

ZONE AUTHORITY

Section 63. The Tourism Infrastructure and Enterprise Zone Authority. - Under
the supervision of the Secretary and attached to the Department for purposes
of program and policy coordination shall be a body corporate known as the
Tourism Infrastructure and Enterprise Zone Authority (TIEZA).

Section 64. Mandate. - The TIEZA shall be a body corporate which shall
designate, regulate and supervise the TEZs established under this Act, as well
as develop, manage and supervise tourism infrastructure projects in the
country. It shall supervise and regulate the cultural, economic and
environmentally sustainable development of TEZs toward the primary objective
of encouraging investments therein. It shall ensure strict compliance of the
TEZ operator with the approved development plan. Pursuant thereto, the TIEZA
shall have the power to impose penalties for failure or refusal of the tourism
enterprises to comply with the approved development plan, which shall also be
considered a violation of the terms of accreditation. Such power shall further
be defined under the implementing rules and regulations of this Act.

The TIEZA shall continue to exercise functions previously exercised by the PTA
under Presidential Decree No. 564, unless otherwise inconsistent with the
other provisions of this Act. It shall however cease to operate the DFP.
In addition to its mandate to regulate and supervise TEZs, the TIEZA shall
likewise be deemed a government infrastructure corporation under the
provisions of Executive Order No. 292, otherwise known as the Administrative
Code of 1987.

Tourism enterprises outside of TEZs and without accreditation shall be

governed by pertinent laws, rules and regulations.

Section 65. Board of Directors. - The TIEZA shall be governed and its powers
exercised by a Board of Directors ("TIEZA Board"), composed as follows:

(a) The Department Secretary, as Chairperson;

(b) The TIEZA Chief Operating Officer, as Vice Chairperson;

(c) The TPB Chief Operating Officer;

(d) The DPWH Secretary;

(e) The DENR Secretary;

(f) The DILG Secretary: and

(g) Five (5) representative directors, to be appointed by the President,

upon the recommendation of the Tourism Congress from a list of at least
three (3) nominees per group as enumerated in Section 67. They must be
Filipinos with recognized competence in business management,
marketing, finance, tourism and other related fields and shall serve a
term of office of three (3) years, which term may be extended for a period
not exceeding three (3) years.

The Secretaries of the DPWH, the DENR and the DILG shall each designate a
permanent representative in the Board, who must possess relevant experience.
The permanent representative shall be duly authorized to act on behalf of the
Secretary in his or her absence.

The Chairperson of the TIEZA Board shall have voting rights in case of a tie.

The TIEZA Board shall appoint a corporate secretary whose functions shall
include the preparation of agenda for board meetings, in consultation with the
Chairperson.

Section 66. The Chief Operating Officer. - The TIEZA shall have a Chief
Operating Officer who must be a Filipino, with a bachelor’s degree in any of the
following fields: business, law, tourism, public administration or other relevant
fields and have demonstrated expertise therein. He or she must have been
engaged in a managerial capacity for at least five (5) years prior to his or her
appointment. He or she shall be elected by the Board from a list of qualified
applicants and appointed by the Secretary, and shall have a term of office of six
(6) years, unless removed for cause in accordance with law.

Section 67. Representative Directors. - The five (5) representative directors

shall represent each of the following groups:

(a) Tourism estate development and management services;

(b) Accommodation enterprises;

(c) Air, sea and land tourism transport services;

(d) Travel and tours enterprises: and

(e) Other tourism enterprises.

If a representative director ceases to be connected with the sector he or she

represents, a new representative director shall be appointed to serve the
unexpired term.

Section 68. Meetings of the Board. - The TIEZA Board shall meet at least once
a month at the principal office of the TIEZA, unless the TIEZA Board previously
agreed in writing to meet at another location.

Section 69. General Powers and Functions of the TIEZA Board. - The TIEZA
Board shall have the general powers of a corporation as provided under the
Corporation Code. Furthermore, it shall also have the following powers:

(a) Organize the TIEZA in a manner most efficient and economical for the
conduct of its business and the implementation of its mandate;

(b) Develop policies, plans and programs in coordination with the

Department for the development and operation of TEZs and adopt rules
and regulations necessary for the implementation of the provisions of
this Act;

(c) Enter into, make, perform and carry out contracts of every class, kind
and description which are necessary or incidental to the realization of its
purposes with any person, firm or corporation, private or public, and
with foreign government entities;

(d) Contract loans, indebtedness and credit, issue commercial papers

and bonds, in any local or convertible foreign currency from international
financial ,institutions, foreign government entities, and local or foreign
private commercial banks or similar institutions under such terms and
conditions prescribed by law, rules and regulations;

(e) Execute any deed of guarantee, mortgage, pledge, trust or assignment

of any property for the purpose of financing the programs and projects
deemed vital fos the early attainment of its goals and objectives, subject
to the provisions of Article VI, Section 20 and Article XII, Section 2,
paragraphs (4) and (6) of the Constitution;

(f) Construct, own or lease, operate and maintain infrastructure facilities

or enter into joint ventures, and grant franchises for, and supervise the
operation of, public utilities within TEZs, in coordination with LGUs and
agencies concerned;

(g) Undertake, or authorize the undertaking of, reclamation projects

within TEZs;

(h) Preserve, restore or reconstruct all national cultural treasures and

shrines located within TEZs, in coordination with the National Museum
and other concerned agencies;

(i) Receive donations, grants, bequests and assistance of all kinds from
local and foreign governments and private sectors and utilize the same;

(j) Exercise eminent domain and police power, including, but not limited
to, the power to recommend to the Department the removal of structures
which may be considered nuisances per se or which impede or impair the
enjoyment of historical, cultural and natural endowments;

(k) Coordinate with LGUs and other government agencies for the
provision of basic services, utilities and infrastructure required by TEZs;

(l) Review and approve proposals for the designation of TEZs based on
the criteria provided herein, and approve, facilitate and assist in the
organization of TEZ operators;

(m) Regulate and supervise the operations of TEZ operators, review and
ensure compliance with the development plans, and establish and
implement other policies, plans and programs for the development and
operation of TEZs;

(n) Register, monitor and regulate enterprises seeking to invest and

operate within a TEZ, and approve and grant incentives to such
registered enterprises as provided under this Act; and

(o) Exercise the general powers of a corporation.

Section 70. Powers and Functions of the Chief Operating Officer. - In addition
to those stated in Section 23 of Presidential Decree No. 564 on the powers of
the former General Manager of the PTA, which are hereby adopted under this
Act, the Chief Operating Officer shall implement the policies, plans and
programs of the TIEZA. He or she shall likewise exercise the following powers
and functions:

(a) Recommend to the TIEZA Board the designation of TEZs in

accordance with set policies and standards:

(b) Coordinate with the Philippine National Police and other concerned
agencies of government for the maintenance of peace and order within
the TEZs;

(c) Ensure that all revenues of the TEZs are collected and applied in
accordance with law;

(d) Submit to the Board the ongoing and proposed projects, work and
financial programs, annual budget of receipts and expenditures of the
TEZs;

(e) Receive protests, complaints and claims concerning TEZ operators,

enterprises and residents, and make recommendations to the TIEZA
Board for appropriate action;

(f) Enforce all legal easements along seashores, lakeshores, riverbanks,

among others, as provided under existing laws, rules and regulations, to
allow free and open access thereto and aid in the proper development of
the national patrimony;

(g) Take such emergency measures as may be necessary to avoid fires,

floods and mitigate the effects of storms and other natural or public
calamities;

(h) Recommend to the TIEZA Board all necessary acts to properly

supervise the operations of TEZ operators;

(i) Coordinate with the TPB for the promotion of tourism and the
encouragement of investments in TEZs; and

(j) Exercise such other powers and functions as are necessary to the
implementation of this Act.

Section 71. Capitalization. - The TIEZA shall have an authorized capital of Two
hundred fifty million pesos (Php250,000,000.00) which shall be fully
subscribed by the national government.
Section 72. Funding. - The TIEZA shall obtain the funds for its operations from
the following:

(a) Fifty percent (50%) of the proceeds from travel tax collections;

(b) A reasonable share from the collections of the Office of Tourism

Resource Generation, to be determined by the Department;

(c) Income from projects managed by the TIEZA; and

(d) Subsidies or grants from local and foreign sources that may be
received by the TIEZA.

At least five percent (5%) from the travel tax collection which shall accrue to
the TIEZA shall be earmarked for the development of historic, cultural,
religious and heritage sites and prime tourist destinations. Another five percent
(6%) shall be earmarked for the development of ecotourism sites in depressed
provinces with strong tourism potentials.

Section 73. Collection and Allocation of Travel Taxes. - For purposes of this
Act, the TIEZA shall be the principal agency responsible for the timely
collection of travel taxes.

Amounts to be collected by the TIEZA shall be distributed in the manner

provided for under this Act: Provided, That the national government shall look
for alternative funding sources for programs funded by the travel tax in the
event of a phase out of travel tax collection following international agreements.

Pursuant to Section 72 of this Act, fifty percent (50%) of the proceeds from
travel tax collections shall accrue to the TIEZA.

The government’s contribution to the Higher Education Development Fund,

equivalent to forty percent (40%) from the total gross collections of the travel
tax, shall be retained: Provided that the Commission on Higher Education
(CHED) shall give priority to tourism - related educational programs and
courses. The ten percent (10%) share of the National Commission for Culture
and the Arts from the total gross collections of the travel tax shall likewise be
retained.

Section 74. Exemption from Payment of Corporate Income Tax. -

Notwithstanding any provision of existing laws, decrees, executive orders to the
contrary, the TIEZA shall be exempt from the payment of corporate income tax,
as provided under the NIRC.

Section 76. Survey of Resources. - The TIEZA shall, in coordination with

appropriate authorities and neighboring cities and municipalities, conduct a
survey of the physical and natural assets and potentials of the TEZ areas
under its jurisdiction.

Section 76. Registration. - Tourism enterprises within a TEZ shall register with
the TIEZA to avail of incentives and benefits provided for in this Act.

Section 77. One - Stop Shop Processing. - The TIEZA shall establish offices
where prospective TEZ investors can register to obtain the incentives and
benefits under this Act and all necessary permits and licenses from all national
and local government offices. All government agencies shall coordinate with the
TIEZA for the issuance of such permits and licenses. The TlEZA shall collect
fees necessary for the issuance of these permits and licenses.

Section 78. Investigation and Inquiries. - Upon a written formal complaint

made under oath, which on its face provides reasonable basis to believe that
some anomaly or irregularity may have been committed within TEZs, the TIEZA
Chief Operating Officer shall have the power to inquire into and investigate the
conduct of TEZ operators, registered enterprises and/or their employees. For
this purpose, he or she may subpoena witnesses, administer oaths and compel
the production of books, papers and other evidence. The TIEZA Chief Operating
Officer shall thereafter make a recommendation to the TIEZA Board for
appropriate action.

SUBCHAPTER IV - C. TEZ ADMINISTRATION

Section 79. Administration of TEZs. - Each TEZ shall be administered and

supervised by a TEZ operator. A TEZ operator shall be an entity duly
incorporated under the Corporation Code and other relevant laws, unless the
TEZ operator is a LGU or any other instrumentality of the government in the
pursuit of their mandates, where capital may be provided by LGUs and/or
private entities.

Section 80. Articles of Incorporation and Bylaws of TEZ Operators. - Except as

provided herein and as may be provided by rules and regulations duly
promulgated by the TIEZA, each duly incorporated TEZ operator shall draft its
articles of incorporation and bylaws in accordance with the Corporation Code.

Section 81. Boards of Directors and Consultative Bodies of TEZ Operators. - The
seats of the Board of Directors of a TEZ operator shall be allocated pro - rata
according to the respective capital contributions of the TEZ operator’s
shareholders.

TEZ operators are encouraged to reserve seats on their Boards of Directors for
relevant interest groups, such as those representing environmental, religious,
cultural, TEZ investors’, TEZ residents’ and other interests. In ally case, TEZ
operators may form consultative bodies for such special interest groups to
assist them in the formulation and implementation of policies, plans and
projects.

Section 82. TEZ Administrator. - The Board of Directors of each TEZ operator
shall appoint its TEZ Administrator, who shall be responsible for implementing
the policies, plans and projects of the TEZ operator's Board of Directors. The
TIEZA shall provide guidelines on the necessary educational and practical
qualifications required of a TEZ Administrator. In addition to such
qualifications, all TEZ Administrators must undergo and pass a training
program of the Department to provide TEZ Administrators with knowledge and
skills relevant to the operation of the TEZ.

Section 83. Civil Dispute Resolution. - The TIEZA shall establish a civil dispute
mediation office to effectively and efficiently resolve civil disputes concerning
tourism enterprises and/or tourism - related issues within a TEZ where at
least one of the parties to the dispute was residing in the TEZ at the time the
dispute arose, and is still residing within the TEZ at the time the complaint is
filed with the mediation office. No civil dispute may be filed in court without
having undergone mediation proceedings as provided under this section except
in extraordinary cases where a party may suffer irreparable damage. The TIEZA
shall charge reasonable fees for civil dispute mediation. This provision is
without prejudice to the application of the rules pertaining to Katarungang
Pambarangay with respect to other matters.

Section 84. Labor Dispute Resolution. - To resolve disputes between workers

and employers 'for any violation of Presidential Decree No. 442, as amended,
otherwise known as the Labor Code of the Philippines, the TIEZA shall, in
coordination with the Department of Labor and Employment DOLE), establish
a labor dispute resolution office to mediate between workers and employers.

CHAPTER V
INCENTIVES

Section 85. General Principles on the Grant and Administartion Incentives

(a) Recognizing the strategic economic importance of tourism, the

necessity that investments within TEZs be properly coordinated with
environmental, cultural and developmental imperatives, and the
fundamental differences between the export manufacturing and tourism
industries, the TIEZA shall have sole and exclusive jurisdiction to grant
the incentives hereinafter provided.

In the formulation of rules and regulations defining and implementing

these incentives, and without derogating therefrom, the TIEZA may
coordinate with the Board of Investments and other government agencies
or entities responsible for the grant and administration of incentives to
assist in the development of a rationalized national investment incentive
policy.

In the grant of incentives, it shall give equal preference to large

investments, those with great potential for employment generation and
those of local small and medium enterprises. Registered tourism
enterprises owned and operated by overseas Filipino investors shall enjoy
the same incentives granted to TEZ operators and registered enterprises
in general. The amount of required investments shall be defined in the
implementing rules and regulations of this Act. The incentive schemes
set forth in Sections 86, 87 and 88 shall be in effect for a period of ten
(10) years from the effectivity of this Act, which period is subject to
review by the Joint Congressional Oversight Committee on Tourism.

The TIEZA shall further coordinate with the Bureau of Customs and the
Bureau of Internal Revenue in the preparation and enforcement of rules
and regulations to prevent the abuse of these incentives.

The jurisdiction of the TIEZA in the grant and administration of

incentives shall not be impliedly repealed or modified.

(b) The Department and the DTI shall promulgate rules and regulations
to govern the relationship between TEZs created under this Act, and
economic zones created under Republic Act No. 7227, otherwise known
as the Bases Conversion and Development Act of 1992, and Republic Act
No. 7916, as amended, otherwise known as the Special Economic Zone
Act of 1995, where an area comprising a TEZ overlaps, falls within or
encompasses that of an economic zone: Provided, That such rules and
regulations shall consider the special nature and requirements of
tourism in relation to other industries, establishments and operations in
economic zones. TEZs proclaimed as such prior to the passage of this Act
shall be transferred to the supervision of the TIEZA.

(c) The investment incentives offered under this Act shall be without
prejudice to availing other incentives provided under other laws, decrees
and presidential issuances. However, where such other laws, decrees or
presidential issuances provide for similar or identical incentive schemes,
the investor may only elect to avail of the scheme provided under one
particular law, decree or presidential issuance.

(d) LGUs are likewise encouraged to provide incentives for tourism

enterprises through, among others, reductions in applicable real estate
taxes and waivers of fees and charges, among others. Should a LGU
grant such incentives, it shall report the same to the Department and the
TPB to assist in the marketing and promotions of investment in that
LGU.
SUBCHAPTER V - A. INCENTIVES FOR TEZ OPERATORS AND
REGISTERED TOURISM ENTERPRISES

Section 86. Fiscal Incentives Available to TEZ Operators and Registered

Enterprises. - The following incentives may, in the discretion of the TIEZA
Board, be granted to registered tourism enterprises within TEZs:

(a) Income Tax Holiday. New enterprises in Greenfield and Browdeld

Tourism Zones shall, from the start of business operations, be exempt
from tax on income for a period of six (6) years. This income tax holiday
may be extended if the enterprise undertakes a substantial expansion or
upgrade of its facilities prior to the expiration of the first six (6) years.

This extension shall consider the cost of such expansion or upgrade in

relation to the original investment, but shall in no case exceed an
additional six (6) years. These enterprises shall likewise be allowed to
carry over as deduction from the gross income for the next six (6)
consecutive years immediately following the year of the loss, their net
operating losses for any taxable year immediately preceding the current
taxable year which had not been previously offset as deduction from
gross income.

An existing enterprise in a Brownfield Tourism Zone shall likewise enjoy

the incentives extended to new enterprises in Green6eld and Brownfield
Tourism Zones mentioned in the preceding paragraph. An existing
enterprise in a Brownfield Tourism Zone shall be entitled to avail of a
non - extendible income tax holiday if it undertakes an extensive
expansion or upgrade of facilities. Such an income tax holiday shall
consider the cost of such expansion or upgrade in relation to the original
investment, but shall in no case exceed six (6) years to be counted from
the time of completion of the expansion or upgrade: Provided, That
capital expenditures subject to income tax holiday shall be understood to
mean money spent to acquire or upgrade physical assets, such as
buildings, machinery and equipment, intended to extend the life of an
asset or increase the capacity or efficiency of a tourism enterprise that
benefit the current and future periods: Provided, further, That in case of
expansion involving the improvement of existing structures or
constructing new ones, such expansion shall consider the substantial
amount infused, the substantial number of rooms added or constructed
and, where applicable, their change in classification from three - star to
five - star establishments.

The provisions of this subsection shall likewise apply to tourism

enterprises outside the zones.
(b) Gross Income Taxation. In lieu of all other national and local taxes,
license fees, imposts and assessments, except real estate taxes and such
fees as may be imposed by the TIEZA, a new enterprise shall pay a tax of
five percent (5%) on its gross income earned, which shall be distributed
as follows:

(1) One - third to be proportionally allocated among affected LGUs;

(2) One - third to the national government; and

(3) One - third to the TIEZA for the funding of its operations and its
programs in the TEZs, which shall include the protection,
maintenance and enrichment of the environment, tangible cultural
and historical heritage, and the intangible cultural heritage of
communities within and surrounding the TEZs.

Gross income as used herein is defined under Section 27(A) of the NIRC,
and further defined under relevant rules and regulations.

(c) Capital Investment and Equipment. Subject to rules and regulations

which properly define capital investments and equipment necessary for
various kinds of tourism enterprises, registered enterprises shall be
entitled to an exemption of one hundred percent (100%) of all taxes and
customs duties on importations of capital investment and equipment.

(d) Transportation and Spare Parts. Importation of transportation and

the accompanying spare parts of new and expanding registered
enterprises shall be exempt from customs duties and national
taxes: Provided, That they are not manufactured domestically in
sufficient quantity, of comparable quality and at reasonable prices, and
that they are reasonably needed and will be used exclusively by an
accredited tourism enterprise.

(e) Goods and Services. Subject to rules and regulations which properly
define goods and services necessary for various kinds of tourism
enterprises, registered enterprises shall be entitled to the following: (1)
Importation of goods actually consumed in the course of services actually
rendered by or through registered enterprises within a TEZ shall enjoy
one hundred percent (100%) exemption from all taxes and customs
duties: Provided, however, That no goods shall be imported for the
purpose of operating a wholesale or retail establishment in competition
with the DFPC; and

(2) A tax credit equivalent to all national internal revenue taxes

paid on all locally - sourced goods and services directly or
 indirectly used by the registered enterprise for services actually
rendered within the TEZ.

(f) Social Responsibility Incentive. A registered enterprise shall be entitled

to a tax deduction equivalent to a reasonable percentage, not exceeding
fifty percent (60%), of the cost of environmental protection or cultural
heritage preservation activities, sustainable livelihood programs for local
communities, and other similar activities.ten.lihpwal

Section 87. Non - fiscal Incentives Available to TEZ Operators and Registered
Tourism Enterprises. - The following incentives may, in the discretion of the
TIEZA Board, be granted to registered tourism enterprises within TEZs:

(a) Employment of Foreign Nationals. A registered enterprise may employ

foreign nationals in executive, supervisory, technical or advisory
positions for such reasonable periods and under such terms as may be
provided by the TIEZA Board, with due regard for the proper protection
and representation of foreign investments in registered enterprises, and
the need to ensure easy travel into and out of the Philippines by such
nationals and their immediate families;

(b) Special Investor’s Resident Visa. Under such terms as may be

provided by the TIEZA Board, a foreign national who shall have made an
investment with a value of at least Two hundred thousand dollars
(USD200,OOO.OO) in a registered enterprise shall be entitled to a special
investor’s resident visa. With such visa, the foreign national shall be
entitled to reside in the Philippines while his or her investment subsists.
Subject to regulations to be issued by the Bureau of Immigration (BI), the
TIEZA shall issue working visas renewable every two (2) years to foreign
personnel and other aliens, possessing highly - technical skills which no
Filipino within the TEZ possesses, after they have secured Alien
Employment Permits (AEP) from the DOLE. The names of aliens granted
permanent resident status and working visas by the TIEZA shall be
reported to the BI within thirty (30) days after issuance thereof;

(c) Foreign Currency Transactions. Subject to the provisions of Section

72 of Republic Act No. 7653, as amended, otherwise known as the New
Central Bank Act:

(1) Repatriation of Investments. In the case of foreign investments,

the right to repatriate the entire proceeds of the liquidation of the
investment in the currency in which the investment was originally
made and at the exchange rate prevailing at the time of
repatriation.
 (2) Remittance of Foreign Exchange. The right to remit earnings
from a foreign investment in the currency in which the investment
was originally made and at the exchange rate prevailing at the time
of remittance.

(3) Foreign Loans and Contracts. The right to remit at the exchange
rate prevailing at the time of remittance such sums as may be
necessary to meet the payments of interest and principal on foreign
loans and foreign obligations arising from technological assistance
contracts.

(d) Requisition of Investment. There shall be no requisition of the

property of registered enterprises, except in the event of war or national
emergency, and only for the duration thereof. In any case, the affected
person shall be entitled to just compensation, and shall have the right to
repatriate such compensation as provided in paragraph (c) above; and (e)
Lease and Ownership of Land. Without prejudice to existing laws
regulating the ownership of land by individuals and corporations, and
consistent with the provisions of Republic Act No. 7652, otherwise
known as the Investor’s Lease Act, lands and buildings in each TEZ may
be leased to foreign investors for a period not exceeding fifty (50) years,
renewable once for a period of not more than twenty - five (25) years. The
leasehold right acquired under long - term contracts may be sold,
transferred or assigned, subject to the conditions set forth under the
Investor’s Lease Act.

SUBCHAPTER V - B. TOURISM ENTERPRISES OUTSIDE TEZS

Section 88. Incentives Available to Tourism Enterprises Outside TEZs. - The

grant of fiscal and other incentives to tourism enterprises not located within
TEZB shall be governed by the following provisions:

(a) Upon compliance with the requirements provided by law, they shall be
entitled to avail of any economic incentives found under existing laws,
such as Executive Order No. 226 (1987), otherwise known as the
Omnibus Investments Code; Republic Act No. 7042, as amended by
Republic Act No. 8179, otherwise known as the Foreign Investments Act;
the Special Economic Zone Act; and the Bases Conversion and
Development Act, among others, subject to the last paragraph of Section
86(a), at the option of the said enterprises.

(b) Subject to rules and regulations jointly promulgated by the

Department and the TIEZA, an existing accommodation establishment
not located within a TEZ shall be entitled to claim an income tax holiday
for up to six (6) years for any significant expansion, renovation or
upgrade in its facilities in relation to the amount of the original
 investment. They shall also be entitled to import capital equipment free
of taxes and duties when necessary for such expansion, renovation or
upgrade.

(c) Tourism enterprises may avail of incentives under the Omnibus

Investments Code: Provided, That:

(1) Tourism activities shall always be included in the Investment

Priorities Plan;

(2) Rules and regulations concerning the grant of incentives to

tourism enterprises shall be jointly formulated by the Board of
Investments and the Department;

(3) The income tax holiday provided under Section 39.1 of the
Omnibus Investments Code shall also apply to existing
accommodation enterprises undergoing substantial capital
infusion for expansion or substantial upgrade of facilities; and

(4) Accredited tourism enterprises shall be entitled to import

transportation and accompanying spare parts free of taxes and
duties: Provided, however, That such transportation shall be
exclusively used by the enterprise in its operations, and: Provided,
further, That such are not manufactured domestically in sufficient
quantity, comparable quality and prices.

(d) Tourism enterprises located in special economic zones, created under

the Special Economic Zone Act or by special charter, shall continue to be
governed by the same.

(e) The incentives offered under this Act shall be without prejudice to the
availment of other incentives provided under other laws, such as, but not
limited to, those concerning infrastructure, or micro - , small - and
medium enterprises. However, where such laws provide for similar
incentive schemes as those contained herein, the investor may elect to
avail of the scheme provided only under one particular law, decree or
issuance.

CHAPTER VI
DUTY AND TAX - FREE MERCHANDISING SYSTEM FOR TOURISM
PURPOSES

Section 89. Duty Free Philippines Corporation. - The Duty Free Philippines
shall be reorganized to become the Duty Free Philippines Corporation (DFPC),
which shall be attached to the Department.
Section 90. Mandate. - The DFPC shall be a body corporate to operate the
duty - and tax - free merchandising system in the Philippines to augment the
service facilities for tourists and to generate foreign exchange and revenue for
the government, as established by the Department under Executive Order No.
46.

In the performance of its functions, the DFPC shall have all the general powers
of a corporation established under the Corporation Code, in furtherance of its
charter.

The DFPC shall have the exclusive authority to operate or franchise out stores
and shops that would sell, among others, duty. and tax - free merchandise,
goods and articles, in international airports and seaports, and in TEZs and
ports of entry throughout the country in a manner that

(a) Is competitive with international standards;

(b) Effectively showcases Philippine culture, craftsmanship and industry;

and

(c) Efficiently and effectively generates foreign exchange.

Such merchandise, goods and articles shall only be sold to persons departing
for abroad. Under such limitations, rules and regulations that may be provided
by the Department and in consultation with the Department of Finance (DOF),
such merchandise, goods and articles may be sold to passengers arriving into
the Philippines from abroad, including those covered by the existing
Balikbayan Program, under Republic Act No. 6768, as amended.

The DFPC shall likewise be authorized to operate stores and shops within the
immediate vicinity of international airports and seaports to service the
requirements of the international duty - free market.

The DFPC shall operate without prejudice to any privatization in the future,
subject to existing laws on privatization and procedures on public bidding.

Section 91. The DFPC Board of Directors. - The DFPC shall be governed by a
Board of Directors, composed as follows:

(a) The Department Secretary, as Chairperson;

(b) The Chief Operating Officer of the DFPC, as Vice Chairperson;

(c) The DOF Secretary;

(d) The DTI Secretary; and53

 (e) Three (3) representative directors, to be appointed by the President,
upon the recommendation .of the Tourism Congress, who must be
Filipinos with recognized competence in business management,
marketing, finance, tourism and other related fields and shall serve a
term of office of three (3) years, which term may be extended for a period
not exceeding three (3) years: Provided, That there shall be no conflict of
interest in any matter concerning the operations of the DFPC.

The Secretaries of the DOF and the DTI shall each designate a permanent
representative in the Board, who must possess relevant experience. The
permanent representative shall be duly authorized to act on behalf of the
Secretary in his or her absence.

The Chairperson of the DFPC Board shall have voting rights in case of a tie.

The DFPC Board shall appoint a corporate secretary whose functions shall
include the preparation of agenda for board meetings, in consultation with the
Chairperson.

Section 92. The Chief Operating Officer. - The DFPC shall have a Chief
Operating Officer who must be a Filipino, with a bachelor's degree in any of the
following fields: business, law, tourism, public administration or other relevant
fields and have demonstrated expertise therein. He or she must have been
engaged in a managerial capacity for at least five (5) years prior to his or her
appointment. He or she shall be elected by the Board from a list of qualified
applicants and appointed by the Secretary, and shall have a term of office of six
(6) years, unless removed for cause in accordance with law.

Section 93. Capitalization and Funding. - The DFPC shall have an authorized
capitalization of Five hundred million pesos (Php500,000,000.00) which shall
be fully subscribed by the national government. A minimum of fifty percent
(50%) of the annual net profits of the DFPC shall be remitted automatically to
the Office of the Secretary to fund tourism programs and projects, in lieu of its
statutory remittance to the national government under Republic Act No. 7656,
seventy percent (70%) of which shall be given to the TPB.

Section 94. General Powers and Functions of the DFPC. - The DFPC Board
shall have the power to sue and be sued; to contract and be contracted with; to
own and hold such real and personal property as shall be necessary for
corporate purposes; to receive real and personal property by gift, devise or
bequest: to adopt a seal and alter the same; to adopt bylaws, rules and
regulations; to exercise all the general powers of a corporation under the
Corporation Code; and to perform all such acts as may be necessary to carry
out this section.
Section 95. Duty and Tax Exemptions. - Consistent with the nature of its
operations and primary function to operate as a tax - and duty - free
merchandising system, and to enable it to compete in the international tax -
and duty - free market, DPPC shall be entitled to exemption from the following:

(a) Duties and taxes, including excise and VAT, relative to the
importation of merchandise for sale;

(b) Local taxes and fees imposed by the LGUs; and

(c) Corporate income taxation.

CHAPTER VII
INCREASED TOURIST ACCESS

Section 96. International and Domestic Tourist Travel. - The Department,

through the development of an inter - modal international and domestic land,
sea and air access system, and in coordination with relevant government
agencies, shall increase and improve the accessibility of the Philippines to
domestic and foreign tourists. Realizing the critical importance of the
progressive development of the civil aviation environment in the advancement
of the country's international and domestic tourism sector:

(a) The Secretary shall be the ex officio Vice Chairperson of the Civil
Aviation Board;

(b) The Secretary shall be the ex officio Vice Chairperson

(c) The Secretary shall be authorized to appoint a representative to the

board of directors of each international seaport of the Philippines; and of
the governing boards of all international airports;

(d) The Secretary shall be a member of the Civil Aviation Authority of the
Philippines Board.

To enhance the standards of transportation services for tourist use, the

Department and the relevant government agencies shall develop an integrated,
one - stop shop system for the speedy issuance of franchises and accreditation
for tourism transport operators.

Section 97. Visas. - The Department, the DFA and the Department of Justice
shall develop a system of granting visas that encourages the arrival and longer
stay of tourists in the Philippines.

CHAPTER VIII
CREATING A CULTURE OF TOURISM
Section 98. Tourism Coordinating Council. - A council that shall serve as a
coordinating body for national tourism development efforts shall be formed,
consisting of the Secretary, as Chairperson; the TPB Chief Operating Officer;
the TIEZA Chief Operating .Officer; the heads of other agencies attached to the
Department; the Secretaries of the DOTC, the DPWH, the DFA, the DENR, the
DILG, the DOLE and the Department of Education (DepEd); and the heads of
the Philippine National Police (PNP), the BI, the National Historical Institute,
the National Commission for Culture and the Arts, the PAGCOR, the leagues of
LGUs and such other government agencies that the President may designate; a
representative each from the Tourism Congress, an accredited NGO or PO
engaged in ecotourism, and a recognized indigenous people’s federation.

The Council shall prepare a five (5) - year strategic plan to develop and enhance
a culture of tourism. It shall also approve an annual infrastructure
development plan that shall promote access to and from airports and seaports,
and TEZ and other tourism destinations which shall be accorded priority by
the relevant infrastructure agencies of the national government.

Section 99. Education. - The Department shall work closely with the DepEd for
the development of basic education programs - formal, informal and non -
formal learning systems and interventions - for in - school and out - of - school
youth in the promotion of a cultwe of tourism through the development and
integration of tourism concepts and the enhancement of education in
languages, history and culture and the arts.

The Department shall also work closely with the CHED in the regulation of
colleges and universities that grant undergraduate and postgraduate degrees in
tourism.

The Technical Education and Skills Development Authority is hereby mandated

to develop, in conjunction with the Department, programs for the training of
tourism entrepreneurs by providing programs for languages, history and
cultural appreciation, and small business management.

Section 100. Peace and Order. - The PNP shall establish a Tourism Security
Force to assist in maintaining peace and order within areas of high tourism
traffic. A tourist police assistance desk office shall likewise be established in
such areas. The Department shall coordinate with the DILG in training the
members of the force in cultural sensitivity, languages and relevant laws.

Section 101. Funding Grassroots Tourism Enterprises. - Insofar as allowed by

applicable laws and their respective charters, government - owned and -
controlled banks and financial institutions shall provide microfinance schemes
for the assistance and development of small - and medium - scale enterprises
in the tourism industry.
Section 102. No Injunctions Clause. - No temporary restraining order or
preliminary injunction shall be issued or be effective against the TIEZA unless
the same is issued by the Supreme Court.57

Section 103. Joint Congressional Oversight committee on Tourism. - A Joint

Congressional Oversight Committee on Tourism, hereinafter referred to as the
"Oversight Committee", is hereby constituted in accordance with the provisions
of this Act. The Committee shall be composed of the Chairpersons of the
Committees on Tourism of both Houses of Congress, the Chairperson of the
Committee on Appropriations of the House of Representatives, the Chairperson
of the Committee on Finance of the Senate, and three (3) additional members
from each House to be designated by the Senate President and the Speaker of
the House of Representatives. The Oversight Committee shall be in existence
for a period of ten (10) years from the effectivity of this Act.

The Secretary shall report to the Oversight Committee on a monthly basis the
latest statistics on tourist arrivals and other relevant data. He or she shall also
report, on a quarterly basis, the status of implementation of this Act based on
the monthly report submitted thereto by all attached agencies of the
Department with respect to the implementation of their respective programs.

Section 104. The Tourism Congress. - Within thirty (30) days from the
publication of the implementing rules and regulations of this Act, the Secretary
shall convene a Tourism Congress of representatives of all accredited tourism
enterprises and former government officials involved in the tourism industry to
serve as the private sector consultative body to assist the government in the
development, implementation and coordination of Philippine tourism policy.

The Tourism Congress shall adopt and ratify its constitution, shall elect its
officers and shall establish a secretariat, both for the Tourism Congress as a
whole and for component sectors. It shall also nominate such representatives
as required under this Act. Finally, it shall endeavor to meet annually to carry
out its mandate.

CHAPTER IX
MISCELLANEOUS PROVISIONS

Section 105. Personnel and Compensation. - The employees and management

of the TIEZA, the TPB and the DFPC shall be exempt from the coverage of the
Salary Standardization Law.

Subject to existing constitutional and legal prohibitions on double

compensation for Board members in an ex officio capacity, the members of the
TIEZA Board, the Tourism Board and the DFPC Board shall not be entitled to
compensation but may receive reasonable per diems for attendance at regular
and special Board meetings.
Section 106. Budgetary Approval. - All attached agencies of the Department
shall submit their annual budgets to the Secretary for approval, and shall
furnish copies of the same to the Oversight Committee.

The budgets of the TPB, the TIEZA and the DFPC reported to the Oversight
Committee shall contain detailed information on the compensation and
benefits received by their employees.

Section 107. Implementing Rules and Regulations. - Upon consultation with

stakeholders, the Secretary shall promulgate the implementing rules and
regulations of this Act within ninety (90) days after its effectivity. The Oversight
Committee shall be furnished a copy thereof immediately after promulgation.

Section 108. Review. - This Act shall be subject to congressional review by

Congress three (3) years after its approval and every three (3) years
thereafter.lawphil

Section 109. Transitory Provisions. - The transfer of powers and functions in

the Department and agencies attached thereto, as herein provided for, shall
take effect within six (6) months after the effectivity of this Act. The foregoing
transfer of powers and functions shall include all applicable funds, personnel,
records, property and equipment, as may be necessary. The same shall apply
to agencies which have been attached to the Department by virtue of this Act.

As such, all offices under the Department and all attached agencies affected by
the provisions of this Act shall continue to function under their present
mandates until transition is effected as provided for under this Act.

All officers currently serving in the PCVC, the PTA and the DFP Boards shall
continue to serve the unexpired portion of the term of the position in the
Boards of the TPB, the TIEZA and the DFPC, respectively.

The heads of the agencies shall continue to serve until replaced as provided for
under this Act.

Section 110. Transfer of Rights and Liabilities. - The TPB, the TIEZA and the
DFPC shall, by virtue of this Act, be subrogated to all rights and assume all
liabilities of the PCVC, the PTA and the DFP, respectively, in accordance with
pertinent laws, rules and regulations.

Section 111. Repealing Clause. - The provisions of Executive Order No. 120
(Reorganizing the Ministry of Tourism, Defining its Powers and Functions and
for Other Purposes); Executive Order No. 292, as amended (The Administrative
Code of 1987); Presidential Decree No. 189, as amended, (Creating the
Philippine Tourism Authority); Presidential Decree No. 1448, as amended,
(Creating the Philippine Convention and Visitors Corporation); Executive Order
No. 46 (Granting the Department of Tourism, Through the Philippine Tourism
Authority, Authority to Establish and Operate a Duty - and Tax - Free
Merchandising System); Executive Order No. 30 (Creating an Executive
Committee for the Development of Quezon Memorial, Luneta and Other
National Parks); Presidential Decree No. 37 (Creating the Nayong Pilipino
Foundation); Presidential Decree No. 1616 (Creating the Intramuros
Administration); Presidential Decree No. 442, as amended (Labor Code);
Republic Act No. 7160 (The Local Government Code); Republic Act No. 7722
(Creating the Commission on Higher Education); Republic Act No. 9497
(Creating the Civil Aviation Authority of the Philippines); and all other laws,
presidential decrees, executive orders, proclamations and administrative
regulations inconsistent with the provisions of this Act are hereby amended,
modified, superseded or repealed accordingly.

Section 112. Separability Clause. - In the event that any provision of this Act
or parts thereof be declared unconstitutional, such declaration shall not affect
the validity of the other provisions.

Section 113. Effectivity Clause. - This Act shall take effect thirty (30) days after
its publication in the Official Gazette or in at least two (2) newspapers of
national circulation.