FOURTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
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/ 
SENATE 
Introduced by SENATOR JUAN PONCE ENRILE 
EXPLANATORY NOTE 
The province of Palawan occupies a strategic location in the Southern Tagalog 
Region. It has a total land area of 1.4 million hectares, a population of 755,412 (Census 
2000), and boasts of bountiful forest, marine and mineral resources. 
As such, the province presents vast potential for economic growth through 
infrastructure, industrial, agricultural and tourism development. However, while 
economic activities are concentrated in Puerto Princesa, its capital, and in other 
municipalities wherein tourism-related activities thrive such as the Calauit Island, El 
Nido, and Taytay, other towns abundant in natural resources and large labor force remain 
untapped. 
Hence, the proposal to establish the Southern Palawan Economic Zone and Free 
Port covering the municipalities of Bataraza, Brooke's Point and Balabac. In accordance 
with the mandate of Republic Act No. 7916, otherwise known as "The Special Economic 
Zone Act of 1995", this measure encourages the development of the countryside into 
agro-industrial, commercial, tourist, banking, investment and financial center. 
In order to administer the operations of the ecozone, the bill proposes to create the 
Southern Palawan Economic Zone and Free Port Authority. It likewise offers a package 
of fiscal and non-fiscal incentives to attract prospective foreign and local investors in 
order to fully maximize the development possibilities of the province and the region as 
well. 
In view of these, therefore, the passage of this bill is e 
stly sought. 
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FOURTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
Introduced by SENATOR JUAN PONCE ENRILE 
AN ACT 
ESTABLISHING THE SOUTHERN PALAWAN SPECIAL ECONOMIC ZONE 
AND FREEPORT, CREATING FOR THE PURPOSE THE SOUTHERN 
PALAWAN SPECIAL ECONOMIC ZONE AND FREE PORT AUTHORITY, 
APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled 
SECTION. 1. Short Titfe. -This Act shall be known as the “Soutltern Palawan 
Special Economic Zone and Free Port (SPEZFA) Act of 200% v 
Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to 
actively encourage, promote, induce and accelerate a sound and balanced industrial, 
economic and sociat development of the country in order to provide jobs to the people 
especially 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 and free ports in 
suitable and strategic locations in the country and through measures that shall effectively 
attract legitimate and productive foreign investments. 
Sec. 3. The Southern Palawan Special Economic Zone and Free Port. - In 
accordance with the foregoing declared policy, and subject to the concurrence of the 
municipalities of Southern Palawan covered by the economic zone, there is hereby 
established a speciaI economic zone and &e port covering the municipalities of Balabac, 
Brooke’s Point, and Bataraza, in the Province of Palawan to be known as the Southern 
Palawan Special Economic Zone and Free Port, hereinafter referred to as Southern 
Palawan ECOZONE. The metes and bounds of the Southern Palawan ECOZONE shall 
be specifically defined in the presidential proclamation to be issued for this purpose. 
Sec. 4. Governing Principles. - The Southern Palawan ECOZONE shall be 
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managed and operated by the Southern Palawan Special Economic Zone and Freeport 


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Authority, herein referred to as SPEZFPA, to be created under Section 6 of this Act, 
under the following principles: 
Within the h e w o r k  and limitations of the Constitution and the 
applicable provisions of the Local Government Code, the Southern 
Palawan ECOZONE shall be developed into and operated as the 
decentralized, 
self-reliant 
and 
self-sustaining 
industrial, 
commerciaVtrading, agro-industrial, tourist, banking, financial and 
investment center with suitable residential areas, in order to create 
employment opportunities in and around the Southern Palawan 
ECOZONE, and to effectively encourage and attract legitimate and 
productive foreign investments therein; 
The Southern Palawan ECOZONE shall be provided with 
transportation, telecommunications and other facilities needed to 
attract legitimate and productive investments, generate linkage 
industries and employment opportunities for the Province of 
Palawan and its neighboring towns and cities; 
The Southern Palawan ECOZONE may establish mutually 
beneficial economic relations with other entities or enterprises 
within the country or, subject to the administrative guidance of the 
Deparlment of Foreign Affajrs @FA), the Philippine Economic 
Zone Administration (PEZA) and/or the Department of Trade and 
Industry @TI), with foreign entities or enterprises; 
Foreign citizens and companies owned by non-Filipinos in 
whatever 26 proportion may set up enterprises in the Southern 
Palawan ECOZONE, either by themselves or in joint venture with 
Filipinos in any sector of industry, international trade, and 
commerce within the Southern Palawan ECOZONE; 
The Southern Palawan ECOZONE shall be operated and managed 
as a separate customs territory ensuring fiee flow or movement of 
goods and capital within, into and exported out of the Southern 
Palawan ECOZONE premises, as well as provide incentives such 
as tax and duty-fiee importations of raw materials and capital 
equipment. However, exportation or removal of goods from the 
territory of the Southern Palawan ECOZONE to the other parts of 
the Philippine territory shall be subject to customs duties under the 
Tariff and Customs Code of the Philippines, as amended, and the 
National Internal Revenue Code of 1997, as amended; 


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(f) 
The areas comprising the Southern Palawan ECOZONE may be 
expanded or reduced when necessary. For this purpose, the 
SPEZFPA, in consultation with the local government nnits 
(LGUs), shall have the power to acquire either by purchase, 
negotiation or condemnation proceedings, any private lands within 
or adjacent to the Southern Palawan ECOZONE for the following 
purposes: (1) consolidation of lands for zone development; (2) 
acquisition of right-of-way to the Southern Palawan ECOZONE; 
and (3) the protection of watershed areas and natural assets 
valuable to the prosperity of the Southem Palawan ECOZONE; 
(9) 
Goods manufactured by the Southern Palawan ECOZONE 
enterprise shall be made available for the immediate retail sale in 
the domestic market, subject to the payment of corresponding taxes 
on raw materials and other regulations that may be formulated by 
the SPEZFPA, together with Philippine Economic Zone Authority 
(PEZA), the Bureau of Customs (BOC) and the Department of 
Trade and Industry (DTI). However, in order to protect the 
domestic industry, there shall be a negative list of industries that 
will be drawn up and regularly updated by the PEZA. Enterprises 
engaged in industries included in such negative list shall not be 
allowed to sell their products locally; and, 
The defense of the Southern Palawan ECOZONE and the security 
of its perimeter fence shall be the responsibility of the national 
government in coordination with the SPEZFPA and the LGUs 
concerned. 
(h) 
Sec. 5. Incentives and Obligations. - Business establishments operating within 
the Southern Palawan ECOZONE shall be entitled to the following incentives: 
(a) 
Resident Status and Visa. - Any foreign investor who establishes a 
business enterprise within the Southern ECOZONE and who 
maintains a capital investment of not less than One Hundred Fifty 
Thousand United States Dollars @S $150,000) shall be granted by 
the SPEZFA, along with his or her spouse, dependents and 
unmarried children below twenty one (21) years old, a permanent 
resident status within the Southern Palawan ECOZONE. They 
shall likewise have the fieedom of ingress or egress to and from the 
Southern Palawan ECOZONE without any need for special 
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authorization from the Bureau of Immigration. Working visas 


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renewable every two (2) years shall be issued to foreign executives 
and foreign technicians with highly specialized skills which no 
Filipino possesses, as certified by the Department of Labor and 
Employment (DOLE). The foregoing is without prejudice to a 
foreigner acquiring permanent resident status in the Philippines in 
accordance with applicable immigration, retirement and other 
related laws. 
Fiscal Incentives. - Business establishments operating within the 
Southern Palawan ECOZONE shall be entitled to the existing 
fiscal incentives as provided for under Republic Act No. 7916, 
otherwise known as the "Special Economic Zone Act of 1995," as 
amended by Republic Act No. 8748. 
Taxation. - Except for real property taxes on land owned by 
developers, no taxes, local and national, shall be imposed on 
business establishments operating within the Southern Palawan 
ECOZONE. In lieu of paying taxes, five percent (5%) of the gross 
income earned by all business enterprises operating within the 
Southern Palawan ECOZONE shall be paid and remitted as 
follows: 
(i) 
(ii) 
Three percent(3Y0) to the national government; and, 
Two percent (2%) which shall be directly remitted by 
business establishments to the Treasurer's Office of the 
municipality or city where the enterprise is located. 
All persons and service establishments in the Southern Palawan 
ECOZONE shall be subject to national and local taxes under the National 
Internal Revenue Code as amended by Republic Act No. 8424, and 
Republic Act No. 71 60, or the Local Government Code. 
Banking Rules and Regulations. - Existing banking laws and rules 
and regulations of the Bangko Sentrd ng Pilipinas (ESP) shall 
apply to all banks and financial institutions established in the 
Southern Palawan ECOZONE. Among other pertinent regulations, 
these shall include those governing foreign exchange and other 
current account transactions (trade and non-trade), local and 
foreign borrowings, foreign investments, establishments and 
operation of local and foreign banks, foreign currency deposit 
units, offshore banking units, and other financial institutions under 
the supervision of the. BSP. 


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(e) 
Profit Remittance. - Without prior BSP approval, after tax profits 
and other earnings of foreign investments in enterprises in the 
Southern Palawan ECOZONE may be remitted outward in the 
equivalent foreign exchange through any of the banks licensed by 
the BSP in the Southern Palawan ECOZONE; Provided, however, 
that such foreign investments in said enterprises have been 
previously registered with the BSP. 
See. 6. Creation of the Southern Palawan Speciul Economic Zone and Free 
Port Authority. - There is hereby created a body corporate to be known as the Southern 
Palawan Special Economic Zone and Free Port Authority, herein referred to as the 
SPEZFPA, which shall manage and operate the Southern Palawan ECOZONE, in 
accordance with the provisions of this Act. This corporate franchise shall expire in fifty 
(50) years counted from the first year after the effectivity of this Act, unless otherwise 
extended by Congress. It shall be organized within one hundred eighty (180) days afrer 
the effectivity of this Act. 
See. Z Principal Of$ce. - The SPEZFPA shall maintain its principal office in the 
municipality of Balabac, but it may establish branches within the Philippines and abroad, 
as may be necessary for the proper conduct of its business. 
See. 8. Powers and Functions of SPEZFPA. - The SPEZFPA shall have the 
following functions: 
(a) 
To operate, administer manage and develop the Southern Palawan 
ECOZONE according to the principles and provisions set forth in 
this Act; 
To recommend to the President the issuance of a proclamation to 
fix and delimit the site of the Southern Palawan ECOZONE; 
To register, regulate and supervise the enterprises in the Southern 
Palawan ECOZONE in an efficient and decentralized manner, 
subject to existing laws; 
To coordinate with the LGUs concerned and exercise general 
supervision over the development plans, activities and operations 
of the ECOZONE; 
(b) 
(c) 
(d) 
(e) 
To regulate and undertake the establishments operation and 
maintenance of utilities, other services, and infrastructure in the 
Southern Palawan ECOZONE such as, but not limited to heat, 
power supply, water supply, telecommunications, transport, toll 


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roads and bridges, port services, and to fix just and reasonable and 
competitive rates fares, charges and prices thereof; 
To construct, acquire, own or lease, operate and maintain on its 
own or through others by virtue of contracts, franchises, licenses, 
bulk purchases from the private sector or permits under any of the 
schemes allowed in Republic Act No. 6957 (Build-Operate- 
Transfer Law, as amended by Republic Act No. 7718), or joint 
venture with the private sector any or all of the public utilities and 
infrastructure required or needed for the operation and 
development of the Southern Palawan ECOZONE, in coordination 
with appropriate national and local government authorities and 
conformity with applicable laws thereon; 
To operate on its own, either directly or through a subsidiary 
entity, or license to others, tourism-related activities, including 
games and amusements, recreational and sports facilities; 
Subject to the approval of the President and the Monetary Board of 
the BSP, upon the recommendation of the Department of Finance 
(DOF), to raise or borrow adequate and necessary funds from local 
or foreign sources to finance its projects and progranis under this 
Act and for that purpose, to issue bonds, promissory notes and 
other forms of securities, and to secure the same by a guarantee, 
pledge, mortgage, deed of trust or an assignment of all or part of its 
property or assets; 
To provide security for the Southern Palawan ECOZONE in 
coordination with the national and local governments. For this 
purpose, the SPEZFPA may establish and maintain security forces 
and firefighting capability or hire others to provide the same, 
Military forces sent by the national government for the purpose of 
defense shall not interfere in the internal affairs of the ecozone and 
expenditures for these military forces shall be borne by the national 
government; 
To protect, preserve, maintain, and develop the virgin forests, 
beaches coral and coral reefs and maintain ecological balance 
within the Southem Palawan ECOZONE; 
To create, operate and/or contract to operate such functional units 
or offices of the SPEZFPA as it may deem necessary; 
To adopt, alter and use a corporate seal; to contract, lease, buy, sell, 
acquire, own and dispose movable and immovable as well as 
(f) 
(g) 
(h) 
(i) 
(‘j) 
(k) 
(I) 


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personal and real property of whatever nature (including but not 
limited to shares of stock or participation in private corporations or 
in limited partnerships, or in joint ventures with limited liability), 
bonds, precious metals in bullions, ingots and easily convertible 
foreign exchange, to sue and be sued in order to carry out its 
duties, responsibilities, privileges, powers and functions as granted 
and provided for in this Act; and to exercise the power of eminent 
domain for public use and public purpose; 
To issue certificates of origin for products manufactured or 
processed in the Southern Palawan ECOZONE in accordance with 
the prevailing rules of origin and the pertinent regulations of the 
PEZA, the DTI and/or the DOF; 
To issue working visas renewable every two (2) years to foreign 
executives and technicians with highly specialized skills which no 
Filipino possesses, as certified by the DOLE; 
To report to the Bureau of Immigration the names of the foreigners 
who have been granted permanent, resident status and working 
visas within thirty (30) days after issuance of such grant; 
To exercise such powers as may be essential, necessary or 
incidental to the powers granted to it hereunder, as well as those 
that shall enable it to carry out, implement and accomplish the 
purposes, objectives and policies of this Act; and, 
To issue rules and regulations consistent with the provisions of this 
Act as may be necessary to accomplish and implement the 
purposes, objectives, and policies provided herein. 
See. 9. Exemptions from Taxes, Duties, and Other Fees. - The SPEZFPA is 
hereby declared exempt from the payment of all taxes, duties, fees, charges, costs and 
service fees in any court or administrative proceedings in which it may be a party to. 
The foregoing exemptions may, however, be entirely or partially lifted by the 
President of the Philippines upon the recommendation of the Secretary of Finance, not 
earlier than five (5) fears from the effectivity of this Act, if the President shall find the 
SPEZFPA to be self sustaining and financially capable by then to pay such taxes, 
customs, duties, fees and other charges after providing for debt service requirements of 
the SPEZFA and of its projected capital and operating expenditures. 


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Sec. 10. Board of Directors of the SPEZFPA. - The powers of the SPEZFPA 
shall be vested in and exercised by a Board of Directors, hereinafter referred to as the 
Board, which shall be composed of the following: 
(a) 
The Chair who shall, at the same time be the administrator of the 
SPEZFPA, 
The Vice Chairman who shall come from among the members of 
the Board; 
(b) 
(c) 
Members consisting of: 
(1) 
The congressional representative of the district covering the site of 
the Southern Palawan ECOZONE; 
One (1) representative of the Provincial Government of Palawan; 
One (1) representative from the domestic investors; 
One (1) representative from the foreign investors; and 
Two (2) representatives from workers working in the Southern 
Palawan ECOZONE. 
(2) 
(3) 
(4) 
(5) 
The congressional representative and the representative of the Provincial 
Government shall serve as ex oficio members of the Board, whose term in the Board 
corresponds to their respective terms as elected officials. 
The Chairman and the members of the Board, except the ex oficio members shall 
be appointed by the President of the Philippines to serve a term of six (6) years, unless 
sooner removed for cause, dies, or resigns voluntarily. In case of death, resignation or 
removal for cause, the replacement shall serve only the unused portion of the term. 
Except for the representatives of the business and labor sectors, no person shall be 
appointed by the President of the Philippines as a member of the Board unless he is a 
Filipino citizen, of good moral character, 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 of relevant working 
experience preferably in the field of management or public administration. 
The members of the Board shall receive per diem at rate to be determined by the 
Department of Budget and Management in accordance with existing rules and 
regulations; Provided, however, That the total per diem collected each month shall not 
exceed the equivalent per diem for four (4) meetings. Unless and until the President of 
the Philippines authorizes the setting of a higher per diem for the members of the Board, 
such per diem shall not be more than Ten Thousand pesos (P10,000,000.00) for every 
Board meeting. 
See. 11. Powers and Duties of the Chairman-Administrator. - The Chairman- 
Administrator shall have the following powers and duties: 


To direct and manage the affairs of the SPEZFPA in accordance 
with the policies of the Board; 
To establish the internal organization of the SPEZFPA under such 
conditions that the Board may prescribe; 
To submit an annual budget and necessary supplemental budget to 
the Board for its approval; 
To submit within thirty (30) days after the close of each fiscal year 
an annual report to the Board and such other reports as may be 
required; 
To submit to the Board for its approval, policies, systems, 
procedures, rules and regulations that are essential to the operation 
of the Southern Palawan ECOZONE; 
To create a mechanism in coordination with relevant agencies for 
the promotion of industrial peace, the protection of the 
environment and the advancement of the quality of life in the 
Southern Palawan ECOZONE; and, 
To perform such other duties as may be assigned to him by the 
Board or which are necessary or incidental to his office. 
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See. 12. Personnel. - The Board of Directors of the SPEZFPA shall provide for 
an organization and staff of its officers and employees. Upon the recommendation of the 
Chairman-Administrator, with the approval of the Secretary of Trade and Industry, the 
Board shall appoint and fix the remuneration and other emoluments of its officers and 
employees in accordance with existing laws on compensation and position classification; 
Provided, that the Board shall have the exclusive and final authority to promote, transfer, 
assign or re assign officers of the SPEZFPA, any provision of existing law to the contrary 
notwithstanding: Provided, further, That the chairman-administrator may carry out the 
removal of such officers and employees. 
The officers and employees of the SPEZFPA, including all the members of the 
Board, shall not engage, directly or indirectly, in partisan activities nor take part in any 
election, except to vote. 
No officer of the SPEZFPA, subject to civil service laws and regulations, shall be 
removed or suspended except for cause, as provided by law. 
Sec. 13. Applicability Clause. - The provisions of Sections 30 to 42 of Republic 
Act No. 7916, as amended, on leases of lands and buildings, land conversion, shipping, 
and shipping register, protection of environment termination of business enterprises, one- 


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stop shop center and on industrial harmony in the ecozones, shall apply to the Southern 
Palawan ECOZONE. 
Sec. 14. Capitalization. - The SPEZFPA shall have an authorized capital stock of 
two billion (2,000,000,000) no par shares with a minimum issue of ten pesos (P10.00) 
each, the majority shares of which, shall be subscribed and paid for by the national 
government, The Board of Directors of the SPEZFPA, with the written concurrence of 
the Secretary of Finance, may sell shares representing not more than forty per centum 
(40%) of the capital stock of the SPEZFPA to the general public under such policy as the 
Board and the Secretary of Finance may determine. The national government and the 
LGUs shall in no case own less than sixty per centum (60%) of the total issued and 
outstanding capital of the SPEZFPA. 
The amount necessary to subscribe and pay for the shares of the national 
government to the capital stock of the SPEZFPA shall be included in the annual General 
Appropriations Act. 
Sec. 15. Supervision and Coordination of Development Plans. - For purposes of 
policy direction and coordination, the Southern Palawan ECOZONE shall be under the 
direct control and supervision of the Office of the President. 
Sec. 16. Relationship with the Regional Development Council. - The SPEZFPA 
shall determine the development goals for the Southern Palawan ECOZONE within the 
framework of national development plans, policies, and goals. The administrator shall, 
upon approval by the Board, submit the Southern Palawan ECOZONE plans, programs 
and projects to the Regional Development Council for inclusion and inputs to the overall 
regional development plan. 
Sec. 17. Relationship witb Local Government Units. - Except as herein provided, 
the LGUs comprising the Southern Palawan ECOZONE shall retain their basic autonomy 
and identity. The municipalities of Balabac, Bataraza and Brooke's Point shall operate 
and function in accordance with the Local Government Code of 1991. In case of any 
conflict between the SPEZFPA and the Province of Palawan on matters affecting the 
Southern Palawan ECOZONE other than defense and security matters, the decision of the 
SPEZFPA shall prevail. 
See. 18. I
n
t
c
~
i
o
n
,
 
- The powers authorities and functions that 
are vested in the SPEZFPA are intended to establish decentralization of government 


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functions and authority and promote an efficient and effective working relationship 
among the Southern Palawan ECOZONE, the central government and the LGUs. 
See. 19. Auditing. - The Commission on Audit shall appoint a representative who 
shall be a full time auditor of the SPEZFPA and assign such number of personnel as may 
be necessary to assist said representative in the performance of hisher duties. 
The salaries and emoluments of the assigned auditor and personnel shall be in 
accordance with pertinent laws, rules and regulations. 
See. 20. Separability Clause. - If any provision of this Act shall be held 
unconstitutional or invalid, the other portions not otherwise affected shall remain in full 
force and effect. 
See. 21. Repealing Clause. - All laws, executive orders or issuances, or any part 
thereof, which are inconsistent herewith, are hereby repealed or amended accordingly. 
Approved,