Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS

First Regular Session

1162

House Bill No.

Introduced by Hon. Rodolfo G. Biazon

EXPLANATORY NOTE,

Since the approval by Congress of the Armed Forces of the Philippines (AFP)
Modernization Program (hereafter referred to as the “Program”) through Joint Resolution
Number 28, the implementation of Republic Act Number 7898, otherwise known as the
“AFP Modernization Act”, lags behind its self-imposed schedule and leaves much to be
desired. While the gallant men and women of the AFP are exerting every effort to implement
the Program, their heroic efforts are doomed to fail if the necessary funding is not
forthcoming. Records will show that only about Sixteen Billion Pesos has actually been
allocated for its implementation, Five Billion Pesos of which is not even funded. This amount
falls dramatically short of the Fifty Billion Pesos ceiling that the law provides for the first
five years of Program implementation.

Creativity on the part of the AFP and Department of National Defense leaderships to
bridge this funding gap can only do so much. Congress, and indeed, the entire government
must provide equally creative solutions if the objective behind the program ~ namely, to
modernize the AFP to a level where it can effectively perform its constitutional duty as
protector of the State and the people — is to be achieved within the frame that the Congress
approved. It is in this context of trying to provide such creative solution that this bill is being
proposed.

There are undeniably other equally important social needs that compete with national
defense and security for funding from the national coffers. The solution that this proposed
measure seeks to provide would not make the Program compete with other social needs for a
share from revenues generated by the government. It would instead result in the more
judicious utilization of military camps and reservations (hereafter referred to as “military real
estate”) and at the same time help ensure funding for the program.

This proposed measure authorizes the President of the Philippines to identify military
real estate or parts thereof that could be disposed of and/or commercially developed to raise
funds for the Program. It would be noted that Congress has already included the proceeds of
the disposal of such real estate among the sources of the trust fund when it passed the AFP
Modernization Act. In identifying which real estate to include in the list of disposable


military real estate, the president would be guided by the criteria for disposability that this bill
contains.

To undertake the disposal and manage the development of military real estate, this bill
proposes the creation of a Military Real Estate Development Authority (hereafter referred to
as “Development Authority”). The Development Authority will be corporation stock may be
wholly subscribed by the Philippine Government, which subscription will be paid up
basically by the transfer of the disposal military real estate to said corporation. The Secretary
of National Defense will chair its Board of Directors in recognition of the Secretary's role as
administrator of the Trust Fund. The President of the Development Authority shall be the
Vice Chair of the Board. The Seven Members of the Board shall come from the private
sector, including the academe; the President of the Philippines will appoint the development
authority president and the members from the private sector for a term of six years. The
Development Authority will not be subsidized by the national government but will be entitled
to use seven and a half percent (7.5%) of the proceeds of every transaction involving military
teal estate for its operating budget.

As a transitory provision and to ensure the immediate disposal and/or commercial
development of military real estate, the bill allows the Development Authority to enter into
asset management contracts (AMCs) with either government agencies or the private sector.
The authority to enter into AMCs, however, would only be for the first five years of the
Development Authority's existence. It is expected that during such time, it will build up its
core competency in the field of asset management and development. If after this period of
Board of Directors determines that the Development Authority still does not have sufficient
capacity to undertake the management and/or development of its assets, an extension of
another five years is allowed. But the bill contains an absolute prohibition against entering
into AMCs ten years after the Development Authority an incentive to build up its expertise.

‘The proposed measure provides that the disposal of a piece of military estate will be
done in accordance with pertinent rules and regulations to get its best possible value. As a
contingency measure, the bill allows the Development Authority an option if the prevailing
real estate market does not provide the best possible value for a piece of real estate through
outright sale. Thus, the Development Authority is allowed to instead convert said real estate
into commercial uses or enter into commercial arrangements over said real estate such as, but
not limited to, lease, joint-ventures and any of the build-operate-transfer (BOT) schemes.
Cognizant of the urgent funding needs of the Program, the bill enjoins that the disposal and/or
commercial development of military real state should be undertaken with appropriate haste
taking into consideration the best interests of the State.

The big shortfall in funding for the Program imbues this bill with a clanging note of
urgency. To demonstrate once again the commitment of Congress to the modernization of the
AFP, the immediate passage of this bill is earnestly and respectfully sought.

Represtefative
Lone District, Muntinlupa City



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

‘
FIFTEENTH CONGRESS

First Regular Session

House Bil No._ 4162

Introduced by Hon. Rodolfo G. Biazon
a

AN ACT
AUTHORIZING THE DISPOSAL AND/OR COMMERCIAL DEVELOPMENT OF
CERTAIN MILITARY CAMPS AND RESERVATIONS, CREATING FOR THE
PURPOSE THE MILITARY REAL ESTATE DEVELOPMENT AUTHORITY,
APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES

Be tt enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

Article I
Title Policy and General Provisions

SECTION ONE. Short Title. ~ This Act shall be known and cited as the “Military
Real Estate Development Act.”

SEC. 2. Declaration of Policies. ~ It is the policy of the state to modemize the Armed
Forces of the Philippines (AFP) to the level where it could effectively perform its
constitutional duty as protector of the state and of the people. It is also the policy of the state
to ensure the judicious, econo9mical and efficient utilization of its resources to meet the
growing demands of national government. Toward these ends, the state shall authorize and
promote the disposal and/or commercial development of idle and underutilized military
camps and reservation, including the immovable properties founds therein, hereinafter
collectively referred to as “military real estate”, to raise revenue to fund the implementation
of the AFP Modemization Program under Republic Act Number Seventy-Eight Hundred and
Ninety-Eight (R.A. No. 7898), otherwise known as the AFP Modernization Act.

SEC. 3. Authority of the President to Amend List of Disposal Military Real Estate. -~
The President of the Republic of the Philippines may, when national interest so requires and
upon the recommendation of the Secretary of National Defense, amend the list of alienable
and disposable military real estate covered by this Act: Provided, however, That in case the
amendment pertains to the inclusion of additional military real estate the list, such real estate
‘must meet the criteria in the immediately preceding section and its ownership shall be


transferred by the President of the Philippines to the Development Authority created under
Section 6 hereunder

SEC.

ner of Disposal. The sale or disposal of military real estate or @ part
thereof identified in accordance with Section 3 of this act shall be done in accordance with
existing laws, rules and regulations governing sales of government properties to get their best
possible values. Such disposal shall be undertaken with the haste appropriate with the
funding needs of the AFP Modemization Program and in accordance with the schedule
approved by the President, in the exercise of sound business judgment and taking into
consideration prevailing real estate market instead convert a piece of military real estate or a
part thereof into commercial uses or enter into commercial arrangement $ such as, but not
Fimiled to, lease, joint ventures and build-operate-transfer (BOT) and simiiar schemes under
Republic Act Numbered Siniy-Nine Hundred and Fifly-Seven (R.A. No. 6967), as amended
for the purpose ot maximizing the commercial vatue of the said real estate,

SEC. 5. Cliieria for Disposition, — To be declaed atienable and disposable and be
included in the fist of military reat estate that shall be submitted to the President of the
Philippines for approval in accordance with Section 22 of this Act, a piece of military real
estate or a part thereof must meet the following criteria

(3) ft 4s currently idle or undenutilived and its disposal or commercia
development would maximize its utilization:

Tevenues projected to be generated by its disposal or commercial
2 considerable greater than the cost of relocating and/or replicating the
niititary facitities and installations that cusrenily ovcupy ik if there are any

us disposal or commercial dev:
portance fo national defense, and

lopment would not advereely affect its

(d) When necessary, an alternative location is available for the purpose it
currentiv serves

Creation, Powers and Responsibil
‘The Military Real Psisie Development Authorily

SECS. the & Real state Development Authoriy. ~ There is hereby created a
comporation fo be known as the Military Real Estaie Development Authority, hereinafter
referred to as the “Development Authority.” which shall have the attribute of perpetual
succession and shail be vest the powers of a corporation

it shail be organized wi
term of titty (50)
Development

n thicty {3} days after approval of this act Ti shall have a
ided, that the Congress may dissolve the
judgment the primary purpose for its creation has
ice in Meiopotitan Manila unless



SEC.7. Purposes of the Development Authority, — The Development Authority shall
have the following purposes

(2) To raise revenues for the AFP Medemization Program by owing, holding,
managing, developing and/or disposing of the military real estate identified in accordance
with Section 2 of this Act;

©) To adopt, prepare and implement a comprehensive and/or disposal plan that
shall include detailed relocation and/or replication plans for affected facilities and
installations, if any, for each of the real estate identified under Section 2 of this Act and
those that may be subsequently added by the President of the Philippines pursuant to Section
Shereof,

{c) ‘To encourage the active participation of the private sector in the development
andior disposal of military real estate: and

{d) To serve as the holding company of the subsidiary company or companies that
may be created pursuant to Section 13 of this Act.

SEC. 8. Powers of the Development Authority. - To achieve its purposes under this
Act, the Development 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;

(6) To adopi, amend and repeat its bylaws;

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

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

(©) To execute any deed of guarantee, mortgage, pledge, trast or assign
any of its properties of financing the programs and projecis deemed vital for
attainment of its goals and objectives, subject to the pro
regulation;

(To consiruct, own, tease, operaie and mainiain public ulililies as well as
infrastructure faealities:

(To reciaimn or undertake reclamation projects as it may deem necessary in

iS adjacent to the development authorities real estate identified pursuant to Section 3 of
by self or ine

lential Decree No. 1084, as amended:

this
under Pres

we


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

(@ — To-accept donations, grants, bequest and assistance of all kinds from local and
foreign governments and private sectors:

@) To invest its funds and other assets in such areas it may deem wise;

(ky To maintain a provident fund which consists of contributions made by both the
Development Authority and its officials and employees or their heirs under such terms and
conditions as it may prescribe;

@ To exercise the night of eminent domain;
(m) To promulgate all necessary rules and regulations: and

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

SEC. 9. Capitalization ~ The Development Authority shall have an authorized capital
of One Hundred Billion Pesos (100,000,000,000) which may be fully subscribed by the
Republic of the Philippines and shall be paid up by the transfer to the development authority
of real estate valued in such amount, as provided for the Section 23 of this Act.

‘The amount of One-Hundred Million Pesos (100,000,000) is hereby appropriated, as
initial operating capital of the Development Authority. which shall be covered by proferred
shares of the Development Authority retire able within wo (2) years, in the event that no
stich unappropriated funds exist in the National Treasury, the initial operating capital of the
Development Authority shall be taken from the share of the AFP in the proceeds of
transactions of the Bases Conversion Development Authonty covering Metro Manila military
camps and reservations pursuant to Republic Act Number Seventy-Two Hundred Twenty=
Seven (R.A. No. 7227), as amended,

SEC. 10. Board Of Directors. — The powers and functions of the Development
Authority shail be vesied in and exercised by The Board of Directors (o be composed of nine
(9) members, as follows’

(a) The Secretary of National Defense who shall be the ex efficio Chair of the
Board without compensation:

(b) The President of the Development Authority wino shail serve as the vice chair
of the Board and who shall be appointed by the President of the Philippines for a ferm of six
(6) years: and

(©) Seven (7) members from the private sector, three (3) of whom shall be
nominated by the Armed Forces of the Philippines through the Department of National
Defense, to be appointed by the President of the Philippines for a term of six (6) years
Provided, that the remaining four (4) shaii come from different sectors, including the
academe: Provided. further, that of those first appointed. the three (3) nominees of the AFP

4


shall serve for a period of six (6) years, the first two from the different sectors for four (4)
years and the next two for two (2) years.

(@) Incase of vacancy in the Board, the appointee shall serve only the unexpired
portion of the predecessor's term.

‘No person shall be appointed unless he or she is a natural-born Filipino citizen, of
‘good moral character, of recognized competence in relevant fields including, but not limited
to, economics, management, law or engineering, and shall be at least thirty-five (35) years of
age. Unless the context indicates otherwise, the use of the term “Member” or “Members” in
this Act shall be construed as including the Chair and Vice Chair of the Board.

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
(5,000.00) for every board meeting: Provided, however, that the per diem collected per month
does not exceed the equivalent of four (4) board meetings regardless of the actual number of
meetings attended: 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 from the passage of this Act or from its last increase. Members of the board shall be
reimbursed by the Development Authority for actual expenses, including traveling and
subsistence expenses incurred by them in the performance of their duties.

SEC. 11. Functions of the Board. - The Board of Directors shall be the policy-
making body of the Development Authority and shall perform the following functions:

(a) Carry out the purpose of the Development Authority as embodied in this Act;

(b) Adopt an annual budget for and authorize such expenditures by the
Development Authority as are in the interest of effective administration and operations of the
Development Authority in accordance with applicable rules and regulations:

(©) Establish a human resource management system in accordance with Section
19 of this Act, reorganize the personnel of the Development Authority, and issue such rules
and regulations as it may deem necessary or convenient for these purpose; and

(@) On the recommendation of the President, appoint, fix the remuneration and
other emoluments, and remove personnel of the development authority, subject to pertinent
civil service rules: provided, that the board shall have exclusive and final authority and these
personnel actions are deemed made in the interest of the service and not disciplinary:
Provided, further. that the board may delegate such authority to the president under such
guidelines as it may determine.

SEC. 12. Operating Budget and Business Development Fund. ~ The Development
Authority shall be entitled retain and utilize seven and one-half percent (7.5%) of the gross
proceeds of every transaction involving military real state as its operating budget. The
Development Authority may utilize the amount equivalent to not more than twelve and one-
half percent (12.5%) of the net proceeds of all transactions involving military real estate for
business development purposes: Provided, however, That any unutilized portion of said

5


amount shall be deposited with the AFP Modemization Act Trust Fund (MATF) created
under R.A. no. 7898.

SEC. 13. Subsidiaries - The Development Authority shall have the power to form,
establish, organize and maintain a subsidiary corporation or corporations: Provided, however,
that such power shall be exercised only in the pursuit of its mandate of raising revenues for
the AFP Modemization Program: Provided, Further, that fifty percent (50%) of the net
income of a subsidiary shall accrue to, and be deposited with the AFP MATF within thirty
(G0) days from the end of said subsidiary’s fiscal year. 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 Development Authority shall own initially at least fifty-
one percent (51%) of the capital stock of a subsidiary. The Development Authority Shall also
initially have the power to vote for the majority of The Board of Directors of a subsidiary, of
which at least one (1) director shall be the representative of the Chair of the Development
‘Authority and a second director shall be the President of the Conversation Authority or his or
her designated representative.

‘The subsidiary or subsidiaries to be formed by the Development Authority under this
provision shall be exempt from the coverage of Civil Service Laws, rules and regulations.

SEC. 14. Supervision. - The Development Authority shall be attached to the Office of
the President for purposes of policy direction and coordination.

ARTICLE Il
Proceeds of Disposal and/ or Development

SEC. 15. Utilization of Proceeds. ~The proceeds of the disposal and/or commercial
development of military real estate shall become part of the AFP MATF: Provided, that said
proceeds may be used to pay obligations incurred under the AFP Modemization Program and
whose amortization or repayment extends beyond the fifteen (15) ~ year modernization
period: Provided, further, that said proceeds may be used for other defense modemization
and military development projects once the AFP Modemization Program under R.A. No.
7898 shall have been finished.

SEC. 16, Determination and Deposit of Proceeds. - For purposes of determining the
amount to be deposited with the AFP MATF, or the National Treasury once the obligations
under the AFP Modernization Program are fully settled, the proceeds of every transaction
involving military real estate shall be calculated by deducting all expenses related to the
transaction: the relocation and/or replication costs, if any; and the operating budget of the
development authority. After deducting the percentage share of the developing authority for
business development purposes, the proceeds shall be deposited with the AFP MATF or with
the National Treasury, as the case may be, not later than thirty (30) days from the time
amount of the proceeds is determined as herein provided but in no case shall such deposit be
made later sixty (60) days from the time the funds were received by the Development
Authority.

SEC. 17. Funding for Relocation/Replication. - Funding for the relocation and/or
replication of facilities and installation, if there are any, occupying military real estate
disposed of or developed in accordance with this Act, shall come from the proceeds of the

6


disposal or commercial development, as the case may be. Representatives of the
Development Authority and the AFP shall jointly determine the cost of and the amount to be
earmarked for relocation and/or replication prior to the disposal or development of a piece of
military real estate or a part thereof.

ARTICLE IV
Management and Personnel

SEC. 18. Duties and Responsibilities of the President of the Development Authority.
= The President of the Development Authority shall have the following duties and
responsibilities:

(® To act as Chief Executive Officer of the Development Authority;

(6) To execute, administer and implement the policies and measures approved by
the board;

(©) To direct and supervise the operations and administration of the development
authority; provided, that the president may delegate certain administrative responsibilities to
other officers of the development authority, subject to the rules and regulations to be issued
by the board:

(@ To represent the development authority in all dealings with offices, agencies
and instrumentalities to the government and with all persons and entities; public or private,
domestic or foreign;

(© 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 or
she believes necessary to carry out the purposes of this Act; and

(0 To exercise such other powers and functions the bylaws may provide and the
Board may vest in him or her.

‘The President shall be assisted by a Vice-President or such number of Vice-Presidents
and other officials as may be deemed necessary by the Board of Directors. During the
absence or temporary incapacity of the President, or in case of vacancy or permanent
incapacity and pending the appointment of a new President of the Development Authority,
The Vice-President or the most Senior Vice-President, as the case may be, shall act a
president and discharge the duties and responsibilities thereof.

SEC. 19. Human Resources. - The Development Authority shall establish a human
resource management system which shall govern the selection, hiring, appointment, transfer,
promotion, or dismissal of all personnel. Such system shall aim to attract and retain
professionally competent, well-trained, honest, courteous and efficient personnel and to
establish professionalism and excellence at all levels of the Development Authority in
accordance with sound principles of management.

All positions in the Development Authority shall be govemed by a compensation and
position classification system and qualification standards approved by the Board based on a
comprehensive job analysis and audit of actual duties and responsibilities. The compensation

7


plan shall be comparable with the prevailing compensation plan in government financial
institutions and shall be subject to 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
efficiency. The Development Authority shall, therefore, come up with qualification
standards. The Development Authority shall, however, endeavor to make its system conform
as closely as possible to the principles under R. A. No. 6758 as amended otherwise known as
the Compensation and Position Classification Act of 1989.

SEC. 20. Ex-Officio Legal Counsel. - Without prejudice to the hiring of an outside
counsel, the Government Corporate Counsel shall be the Ex-Officio legal counsel of the
Development Authority and the subsidiaries wherein the Development Authority owns
majority of the shares of stock. For this purpose, the Government Corporate Counsel may
designate a full time representative in the Development Authority.

SEC. 21. Auditor. ~ The Commission on Audit shall appoint a representative who
shall be the full time auditor of the development authority. At its discretion, the development
authority may also hire an extemal auditor.

ARTICLE V
Transitory and Sunset Provisions

SEC. 22. Submission of List of Disposable Military Real Estate. ~ Within sixty (60)
days from the passage of this Act, the Secretary of National Defense shall, upon the
recommendation of the Chief of Staff of the Armed Forces of the Philippines, submit to the
President of the Philippine for approval the list of alienable and disposable military real estate
to be covered by this Act in accordance with Section 3 hereof. Such list shall clearly indicate
the boundaries and technical description of each piece of military real estate; the legal basis
for the government's ownership; its existing condition and use, if any; and the proposed
schedule of disposal. The list may indicate the military real estate or parts thereof that are
prioritized for disposal in view of the immediate funding needs of the AFP Modernization
Program

SEC. 23. Transfer of Properties. ~ Pursuant to paragraph (a), Section 7 of this Act,
the President of the Philippines shall transfer forthwith to the Development Authority
ownership over the alienable and disposable military real estate upon approval of the
submitted list as required in the immediately preceding section.

SEC. 24. Authority to Enter into Asset Management Contracts. — (a) During the first
five (5) years of its establishment, the Development Authority may enter into Asset
‘Management Contracts (AMCs) or similar arrangements for the management of all or a part
or some parts of military real estate covered by this Act. Afier said period and the provisions
of Section 8 of this Act to the contrary notwithstanding, no AMCs or similar arrangements
shall be entered into or renewed unless the Board of Directors has determined that the
‘Authority still does not possess sufficient capability to manage said military real estate. In no
case shall AMCs or similar arrangements be entered into after, or be effective beyond, ten
(10) years after the establishment of the Authority.

(b) In case the AMC or similar arrangement is to be entered into with the private
sector, the contract shall be awarded in accordance with laws, rules and regulations governing
the award of similar contracts in the interest of transparency, economy, efficiency and equity:

8