Republic of the Philippines
House of Representatives
Quezon City

TWENTIETH CONGRESS

First Regular Session

House Bill No.__ 1108

Introduced by Representatives Albert S. Garcia, Maria Angela S. Garcia, and
Jernie Jett V. Nisay

EXPLANATORY NOTE

The Special Defense Economic Zone (SpeDEZ) is a necessary and timely
undertaking that synergizes the private sector's and government's efforts to have a
globally competitive defense industrial complex in the Philippines. With rapidly
changing economic and security conditions in the region, the need to find ways to
strengthen the country's domestic defense industry is imperative. The SpeDEZ aims to
help realize this goal

A first in the country, the SpeDEZ will serve as an independent authority geared
towards the research, development, production, and distribution of products for military
and defense.

It will not only bolster our country’s innate capability in the field of arms research,
development, and manufacturing, but also significantly contribute to the country's
economic productivity.

Given the reasons stated above, support from this measure is eamestly sought
from our colleagues.

19 —
4 LAE REP. MARIA ANGELA S. GARCIA
District, Bataan Third Dis |, Bataan

REP. JPRNI |. NISAY
Pusprg-Pinoy Parfylist


Republic of the Philippines
House of Representatives
Quezon City
TWENTIETH CONGRESS
First Regular Session

House Bill No._ 1108

Introduced by Representatives Albert S. Garcia, Maria Angela S. Garcia, and
Jernie Jett V. Nisay

AN ACT
ESTABLISHING A SPECIAL DEFENSE ECONOMIC ZONE (SpeDEZ) INSIDE THE
GOVERNMENT ARSENAL DEFENSE INDUSTRIAL ESTATE LOCATED IN CAMP
GEN. ANTONIO LUNA, LAMAO, MUNICIPALITY OF LIMAY, PROVINCE OF
BATAAN, CREATING FOR THIS PURPOSE THE SPECIAL DEFENSE ECONOMIC
ZONE AUTHORITY (SpeDEZA) AND APPROPRIATING FUNDS THEREFOR

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

SECTION 1. Short Title. — This Act shall be known as the “Special Defense Economic
Zone Act.”

Sec. 2. Declaration of Policy. — It shall be the policy of the State to develop a self-
reliant and independent national economy effectively controlled by Filipinos. The State
recognizes the indispensable role of the private sector, encourages the participation of
private enterprise, and provides incentives to needed investments. Further, the State
actively encourages, promotes, and accelerates the sound and balanced industrial,
economic, and social development of the country through the establishment of special
economic zones in suitable and strategic locations. In so doing, the State is able to
attract legitimate and productive foreign investments that provide jobs especially to
those in the rural areas; and improve productivity, family incomes, and the quality of
living conditions of the people.

The State, pursuant to the Armed Forces of the Philippines (AFP) Modernization
Act, shall, as far as practicable, prioritize the engagement of Filipino contractors and
suppliers in the implementation of the AFP Modemization Program. In instances where
foreign contractors or suppliers are engaged, preference shall be given to those willing
to localize a substantial portion or the entirety of their production within the Philippines.


The State hereby adopts a policy to develop the defense industry and its capability
to produce advanced weaponry and equipment for the country's defense forces, and
for their export to other countries, in line with Republic Act No. 12024, or the “Self-
Reliant Defense Posture Revitalization Act”

Sec. 3. Creation of the Special Defense Economic Zone. - The Special Defense
Economic Zone (SpeDEZ) in Camp General Antonio Luna, Lamao, Municipality of
Limay in the Province of Bataan, shall be established for investments in defense,
military, law enforcement, and defense-related advanced technologies, information and
communications technology, research and development, and their support industries.
For purposes of this Act, the term “defense” shall include public safety and external
defense

The SpeDEZ shall cover the Government Arsenal Industrial Estate inside Camp
General Antonio Luna located in Limay, Bataan, measuring approximately three
hundred seventy (370) hectares, including: the seventy (70)-hectares of land where the
Government Arsenal (GA), created under Republic Act No. 1884, or “An Act to Establish
‘A Government Arsenal, Provide for its Operation and for Other Purposes”, operates;
the portions allocated for the expansion of the GA; areas where existing manufacturing
facilities for defense materiel and equipment are located; and all other areas which may
be declared as part of the SpeDEZ, subject to compliance with Section 5(h) of this Act:
Provided, That the GA shall remain a line bureau of the Department of National Defense
(DND). Except for necessary coordination on matters of mutual and higher security
concems due to the nature of their respective mandates, the operations of the GA shall
remain independent of the management of the SpeDEZ, and the Special Defense
Economic Zone Authority (SpeDEZA), as created by this Act, shall not interfere with the
activities conducted in the seventy (70)-hectare area where the GA maintains and
operates its buildings and structures: Provided, further, That neither the SpeDEZ nor
the GA shall be expanded or operated to the prejudice of the other. The GA and the
SpeDEZ shall continuously coordinate to ensure smooth and seamless operations:
Provided, finally, That investors who intend to do business in the GA area may do so
only upon written consent of the GA prior to registration with the SpeDEZA.

The areas covered by the SpeDEZ, including its expansion areas, shall be owned
by the SpeDEZA and titled in its name, excluding the area maintained by
the GA

SEC. 4. Creation of the Special Defense Economic Zone Authority. - The Special
Defense Economic Zone Authority (SpeDEZA), which shall be a govemment
instrumentality with corporate powers, shall be created as a specialized and
independent corporate body that shall manage and operate the SpeDEZ, in accordance
with the provisions of this Act and Title XII! of Republic Act No. 8424, or the “National
Intemal Revenue Code of 1997", as amended.

Notwithstanding Section 3 of Republic Act No. 7656, or “An Act Requiring
Government-Owned or Controlled Corporations to Declare Dividends under Certain
Conditions to the National Government, and for other Purposes’, all dividends remitted
by the SpeDEZA shall, within the first fifteen (15) years from the effectivity of this Act,
be exclusively utilized for the AFP Modernization Program, the Self-Reliant Defense
Posture Program of the national government, and the pension benefits of AFP retirees:


Provided, That after such fifteen (15)-year period, the dividends remitted by the
‘SpeDEZA shall accrue to the general fund of the national government.

Sec. 5. Governing Principles. - The SpeDEZ shall be managed and operated
under the following principles:

(a) Within the framework and limitations of the Constitution, Republic Act No.
1884, Republic Act No. 7898, as amended by Republic Act No. 10349, Republic Act
No. 10697, or the “Strategic Trade Management Act’, Executive Order No. 303, Series
of 2004, and applicable provisions of the Local Goverment Code, the SpeDEZ shall
be developed and operated as a hub for decentralized, self-reliant, and self-sustaining
industrial, commercial, trading, research, development, engineering, information and
communications technology, space technology, and financial investment exclusive for
defense, military, and law enforcement commercial activities and investments, with
provision for suitable residential, educational, recreational, and commercial areas;

(b) Notwithstanding the autonomy provided in Section 5(a) of this Act, the national
and local governments may continue to provide the SpeDEZ with transportation,
telecommunications, and other facilities needed to attract investments and generate
linkages with industries and employment opportunities for the people of
Bataan and its neighboring towns and cities: Provided, That the autonomy and self-
reliance of the SpeDEZ shall not hinder assistance or partnerships with other
government units and instrumentalities: Provided, further, That no assistance or
partnership shall be construed as a waiver of the autonomy of the SpeDEZ;

(c) The SpeDEZA may establish mutually beneficial economic defense relations
with other investment promotion agencies, entities, or enterprises within the country or
abroad: Provided, That the SpeDEZA shall seek clearance from the DND and
administrative guidance from the Department of Foreign Affairs (DFA) on relations with
foreign entities or enterprises;

(d) Foreign nationals and foreign-owned enterprises. up to the
percentage allowed by law may, by themselves or in joint venture with Filipinos or the
GA, set up enterprises in the defense and security industry within the territorial
jurisdiction of the SpeDEZ, subject to the approval of the SpeDEZA: Provided, That the
‘SpeDEZA may require individual locators to be subject to the provisions and limitations
under Republic Act No. 10697 or the Strategic Trade Management Act (STMA),
Republic Act No. 7042 or the Foreign Investments Act (FIA), and the Regular Foreign
Investment Negative List issued by the President: Provided, further, That the SpeDEZA
may require a minimum investment in freely convertible currencies from any enterprise
seeking to locate in the SpeDEZ. All investments in the SpeDEZ shall fall under the
priorities, thrusts, and limits in this Act: Provided, finally, That all investments that do
not directly or indirectly encourage defense, military, and law enforcement projects or
activities; do not support or cater to the locators, employees, and residents shall be
prohibited from doing business within the SpeDEZ.

(e) Subject to the limitations in this Act and its implementing rules and regulations,
the SpeDEZ shall be managed and operated as a separate customs territory ensuring
free flow and movement between registered business enterprises of necessary goods,
products, and capital, except those expressly prohibited by law, within, into, and out of
the SpeDEZ territory, subject to Sections 294(D) and (E), and Sections 295(C) and (D)

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of Republic Act No. 8424 (NIRC), as amended: Provided, That in accordance with
Sections 301 and 817 of Republic Act No. 10863, or the “Customs Modernization and
Tariff Act (CMTA)’, the Bureau of Customs (BOC) shall continue to exercise border
protection and authority over the customs territory adjacent to the SpeDEZ and shall
consult, coordinate, and cooperate with the SpeDEZA to enhance its protection and
control capacity and ensure compliance with customs laws and regulations;

(f) The sale, export, or removal of goods and services from the SpeDEZ territory
to the other parts of the Philippines shall be subject, as applicable, to customs duties
and taxes under the CMTA, as amended, and the Republic Act No. 8424 (NIRC), as
amended: Provided, That all taxes arising from the sale of goods and services for
defense and security purposes from the SpeDEZ to the AFP, Philippine National Police
(PNP), and other uniformed services shall be chargeable to the tax expenditure fund
under the General Appropriations Act: Provided, further, That subject to Title VI of the
CMTA, customs transit to and from the SpeDEZ, through the Port of Lamao or other
ports as may be designated by the SpeDEZA, shall also be tax and duty-free;

(g) As far as practicable, enterprises located in the SpeDEZ shall source a
percentage of their raw material requirements from those produced within the
Philippines as determined by the SpeDEZA;

(h) The areas comprising the SpeDEZ may be expanded or reduced when
necessary to improve its investment promotion capacity, ensure public order and safety,
consolidate lands for development, acquire necessary right-of-way or access, protect
and safeguard watershed areas or maintain and improve water yield for the benefit of
the SpeDEZ and LGUs, manage solid and water waste in compliance with existing
national laws and local ordinances, and promote the public good.

For this purpose, the SpeDEZA, with the concurrence of the appropriate and
affected LGUs, in compliance with existing national laws and local ordinances, shall
have the power to acquire, procure, increase, or otherwise expand, either by purchase,
negotiation, or condemnation proceedings, any private or public land and their
respective water territories within the concemed local government: Provided, That when
applicable, the municipal waters of up to fifteen (15) kilometers from the low water mark
area of the edge of the SpeDEZ shall be deemed included in the territorial jurisdiction
of the SpeDEZ: Provided, further, That the SpeDEZA and the relevant LGUs shall utilize
immediate and responsive mechanisms, best practices, and suitable environmental
protection programs for land and coastal zone management to address any abuse
and/or exploitation of the natural environment within the territorial jurisdiction of the
SpeDEZ: Provided, finally, That any provision of existing laws, ordinances, executive
orders, proclamations, rules, or regulations to the contrary notwithstanding, all lands
that form part of the SpeDEZ including its expansion areas are hereby converted to
agricultural lands and, as such, are declared as alienable and disposable, and may be
used for industrial, commercial, residential, or other lawful uses, in accordance with the
Constitution to ensure that other inalienable lands shall not be included, subject to
vested private rights;

(i) Products and goods researched and developed, engineered, or
manufactured by registered enterprises may be made available in the domestic market,
subject to the limitations in this Act and its implementing rules and regulations, payment
of corresponding tariffs, customs duties, and taxes on raw materials, and subject to

5


approval by the DND or the PNP in accordance with Republic Act No. 10697 and the
Regular Foreign Investment Negative List, other regulations that may be formulated by
the SpeDEZA, and other applicable regulations and limitations imposed in accordance
with law by the DND, AFP, PNP, Bangko Sentral ng Pilipinas (BSP), Department of
Finance (DOF), BOC and the Department of Trade and Industry (DTI): Provided, That
in cooperation with the SpeDEZA, the DND and PNP shall implement measures to
improve ease and cost of doing business within the SpeDEZ and enhance the
investment promotion capacity of the SpeDEZA: Provided, further, That to protect
domestic industries, a negative list shall be drawn up and regularly updated by the
SpeDEZA: Provided, finally, That enterprises engaged in industries included in such
negative list shall not be allowed to sell their products locally, notwithstanding the
registration of such enterprises in the SpeDEZ;

(i) Subject to Section 6(0) of this Act, the defense of the SpeDEZ and the security
of its perimeter fence shall be the responsibility of the national govemment, through the
AFP and the GA or the PNP, as appropriate, in coordination with the SpeDEZA;

{k) Nothing in this provision shall compel local defense enterprises to register with
the SpeDEZA or prevent them from availing similar benefits and incentives through
other investment promotion agencies: Provided, That defense industries located in
other economic zones under the other investment promotion agencies shall get
clearance or certification from the DND prior to their registration. Pursuant to this, the
DND, in coordination with the SpeDEZA, shall establish a unit within the DND to screen
and vet defense enterprises for national security clearance and issue the corresponding
certification prior to their registration with the SpeDEZA or other investment promotion
agencies;

() Inno case shall defense enterprises be allowed to avail incentives from two (2)
or more investment promotion agencies;

(m) For purposes of this Act, “defense enterprise” refers to a Filipino- or foreign-
‘owned enterprise engaged in the development, production, manufacturing, assembly,
servicing, or operation of materiel in the Philippines. Foreign-owned defense enterprise
is defined as to the allowable percentage of foreign-ownership for defense industries
as provided by existing laws; and

(n) For purposes of this Act, “materiel” refers to military technology, weapon
systems, arms, ammunition, combat clothing, armor, vehicles, and other similar military
equipment and materials.

‘Sec. 6. Powers and Functions of the SpeDEZA. —- The SpeDEZA shall have the
following functions:
(a) Adopt, alter, and use a corporate seal;

(b) Contract, lease, buy, sell, acquire, own, and dispose properties of whatever
nature: Provided, That real properties that form part of the original Camp General
Antonio Luna shall not be disposed of or encumbered: Provided, further, That
expansion areas may be disposed of or encumbered by the SpeDEZA;

(c) Sue and be sued in order to carry out its duties, responsibilities, privileges,
powers, and functions as granted and provided in this Act;


(d) Exercise the power of eminent domain for public use and public purpose;

(e) Operate, administer, manage, and develop the SpeDEZ according to the
principles and provisions set forth in this Act, in accordance with Executive Order No.
525, Designating the Public Estates Authority as the Agency Primarily Responsible for
All Reclamation Projects, as amended;

(f) Establish SpeDEZ in other suitable areas in the Province of Bataan and other
areas in the country: Provided, That areas outside the Province of Bataan shall be
‘subject to the approval of the President and the issuance of a necessary proclamation;

(g) Register, regulate, and supervise entities and enterprises in the SpeDEZ in a
competent and efficient manner that, as far as practicable, balances ease of doing
business and sound restriction or regulation of activities. The SpeDEZA may also
register, regulate, and supervise defense-related enterprises outside of the SpeDEZ
territory as defined in Section 3 and Section 5(h) of this Act: Provided, That the
SpeDEZA shall submit a quarterly report to the DND on the profile of locators and other
SpeDEZ-registered enterprises;

(h) Formulate and exercise general and sole supervision over the implementation
of the development plans, activities, and operations of the SpeDEZ: Provided, That the
SpeDEZA may coordinate with LGUs when necessary to promote development in the
SpeDEZ;

() Regulate, authorize, or undertake on its own or through others, the
establishment, construction, operation, and maintenance of public utilities, services,
and infrastructure in the SpeDEZ such as shipping, barging, stevedoring, cargo
handling, hauling, warehousing, port services or concessions, piers, wharves,
bulkheads, bulk terminals, mooring areas, storage areas, roads, bridges, reclamation
projects, terminals, conveyors, water supply and storage, sewerage, drainage, and
airport operations in coordination with the Philippine Ports Authority (PPA), the Civil
Aviation Authority of the Philippines (CAAP), and other relevant government agencies,
and such other services, or concessions, or infrastructure necessary or incidental to the
accomplishment of the objectives of this Act: Provided, That the SpeDEZ-registered
enterprises shall be given priority in the awarding of contracts, franchises, licenses, or
permits for the establishment, operation, and maintenance of
utilities, services, and infrastructure in the SpeDEZ;

() Recognize, regulate, and register microgrid systems as an integral part of the
energy, data, digital assets, communications, water, and other utilities landscape to
enhance and promote resiliency in renewable energy, data, digital assets,
‘communications, water and other utilities in areas within the SpeDEZ;

{k) Issue licenses, set fees, and regulate the establishment, operation, and
maintenance of utilities, educational and medical institutions, infrastructure related to
military, defense and law enforcement investments, and other services in the SpeDEZ
such as heat, light and power, water supply, telecommunications, mobile, internet and
other data facilities, transport, toll roads and bridges, and port services, and to fix just,
reasonable, and competitive rates, fares, charges, and prices thereof,


()) Construct, acquire, own, lease, operate, and maintain, on its own or through
contracts, franchises, licenses, bulk purchase, build-operate-transfer scheme or joint
venture with the private sector, any or all of the public utilities and infrastructure needed
for the operation and development of the SpeDEZ, including transportation, access,
and connection to and out of the SpeDEZ, in coordination with appropriate national and
local government authorities and in conformity with applicable laws;

(m) Raise or borrow adequate and necessary funds from local or foreign sources,
within the limitation provided by law, and subject to the approval or opinion of the
Monetary Board of the BSP, as the case may be, to finance its projects and programs
under this Act, and for this 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 assignment of all or part of its property or assets, subject to Section 6(b) of this Act;

(n) Enter into Public-Private Partnership contracts, such as build-operate-transfer
schemes or any of its variants, management contracts, joint ventures, co-production, or
similar agreements with local or foreign entities for the management and operation of
the SpeDEZ, a portion thereof, or any enterprise registered therein to ensure its viability;

(0) Ensure that the area covered by the SpeDEZ is secure at all times: Provided,
That when the assistance of the AFP or PNP is necessary, the AFP or PNP shall not
interfere in the internal affairs of the SpeDEZA, except to provide the necessary security
and defense or law enforcement assistance, as the case may be: Provided, further,
That expenses of the AFP or PNP in the SpeDEZ shall be bore by the national
government;

(p) Protect, preserve, maintain, and develop the forests, beaches, coral, and coral
reefs, and maintain ecological balance within the SpeDEZ: Provided, That
notwithstanding the authority of the SpeDEZA to create rules for such purpose, the rules
and regulations of the Department of Environment and Natural Resources (DENR) and
other government agencies involved in the above functions shall be implemented by
the SpeDEZ: Provided, further, That the DENR shall continue to have primary authority
and responsibility over environmental protection. The monitoring and issuance of
permits, certificates, clearances, and all other issuances related to the environment
shall remain under its jurisdiction;

(q) Create, operate, or contract to operate such functional units or offices of the
SpeDEZA as it may deem necessary;

(F) Issue certificates of origin for products manufactured or processed in the
SpeDEZ;

(s) Issue rules and regulations necessary to implement and accomplish the
purposes, objectives, and policies provided herein, in consultation with the DND, DTI,
DOF, and other relevant goverment agencies;

(®) Appropriately zone the SpeDEZ and provide for buffer zones, when necessary,
and reserve areas for housing;

(u) To improve the ease of doing business, establish one-stop shops for the
issuance of all necessary permits, clearances, licenses, and other similar certifications

8


required to conduct business within the SpeDEZ, in coordination with relevant
government agencies having jurisdiction over such issuances or those not otherwise
solely reserved to the SpeDEZA: Provided, That all goveriment agencies are directed
to provide and extend utmost and full cooperation to the SpeDEZA in the establishment
of such one-stop shops; and

(v) Perform such other functions as may be provided by law.

SEc. 7. Board of Directors of the SpeDEZA. — The powers of the SpeDEZA 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 Secretary of the DND who shall be the ex officio Chairperson;

(b) The Administrator of the SpeDEZA as Vice-Chairperson who shall preside over
the meetings of the Board in the absence of the Chairperson;

(c) Members who shall include the following:

(1) Secretary or a designated representative of the DOF;

(2) Secretary or a designated representative of the DTI;

(3) Assistant Secretary for Plans and Programs (ASPP) of the DND;

(4) Assistant Secretary for Acquisition, Installations and Logistics (ASAIL) of the
DND;

(6) Director of the GA;

(6) One (1) representative from the investors within the SpeDEZ;

(7) One (1) representative from the workers employed in the SpeDEZ;

(8) One (1) representative from the Province of Bataan;

(9) One (1) representative from the Municipality of Limay, Bataan;

(10) One (1) representative from the legislative district covering the area of the
‘SpeDEZ; and

(11) One (1) independent director who is retired and/or honorably discharged
from any of the major services of the AFP, with at least the rank of Brigadier General or
Commodore, with proven expertise in defense and security strategies, to be
recommended by the SpeDEZA Board.

The President shall appoint one-third (1/3) of the Board members from the list
submitted by the Government Commission for Government-Owned or -Controlled
Corporations (GCG).

In the event that the position of the ASPP or ASAIL of the DND, or Director of the
GA becomes vacant, the designated Acting ASPP, ASAIL, or Director of the GA shall
serve as member of the Board.

In the absence of the Chairperson and Vice-Chairperson, the members present in
a meeting constituting a quorum shall elect the Presiding Officer for that particular
meeting. The Presiding Officer shall not have voting rights except to break a tie. Vacant
seats shall not be considered in determining the presence of a quorum.

Except for the ex-officio members, members of the Board shall be appointed by
the President of the Philippines for a term of six (6) years, unless sooner separated from
the service due to death, voluntary resignation, or removal for cause. In case of death,
resignation, or removal for cause, the replacement shall serve only the remaining
portion of the term.


All members of the Board shall be Filipino citizens, of good moral character, and
of proven probity and integrity. Except for the ex-officio members, and the
representative from the workers employed in the SpeDEZ, members of the Board are
required to be degree holders in any of the following fields: economics, business, public
administration, law, management, military science, or their equivalent, and with at
least ten (10) years of relevant work experience preferably in the field of management
or public administration.

Each member of the Board, except the ex-officio members, shall receive a per
diem at rates to be determined by the Department of Budget and Management (DBM)
in accordance with existing rules and regulations: Provided, That the total per diem
collected each month shall not exceed the equivalent per diem for four (4) meetings.

Sec. 8. Administrator of the the SpeDEZA. — The SpeDEZA shall have an
Administrator, with a rank of Department Undersecretary who shall be appointed by the
President of the Philippines. The Administrator 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, with
at least ten (10) years of relevant work experience preferably in the field of business,
management, or public administration.

Sec. 9. Powers and Duties of the Administrator. - The Administrator shall have
the following powers and duties:

(a) Direct and manage the affairs of the SpeDEZA in accordance with the policies
of the Board;

(b) Establish the internal organization of the SpeDEZA under such conditions that
the Board may prescribe;

(c) Submit an annual budget and necessary supplemental budget to the Board for
its approval;

(d) Within thirty (30) days after the close of each fiscal year, submit an annual
report to the Board and such other reports as may be required;

(e) Submit to the Board for approval, policies, systems, procedures, rules, and
regulations that are essential to the operation of the SpeDEZA;

(f) Create a mechanism for 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 SpeDEZ;

(g) Preside over the meetings of the SpeDEZA Board in the absence of the
Chairperson;

(h) Directly administer and supervise the operations and day-to-day business
activities of the SpeDEZA;

(i) Execute, on behalf of the SpeDEZA, all contracts, agreements, and other
instruments affecting its interests as duly approved by the Board; and

(i) Perform such other duties assigned by the Board or which are necessary or
incidental to his/ her office.

SEC. 10. Principal Office of the SpeDEZA. - The SpeDEZA shall maintain its
principal office in Camp Gen. Antonio Luna, Limay, Bataan, but may establish liaison
offices within the Philippines as may be necessary for the proper conduct of its
business.

10


Sec. 11. Organization and Personnel. - The SpeDEZA Board shall provide for an
organizational structure and appoint employees, subject to Civil Service laws and the
Revised Administrative Code of 1987. Upon the recommendation of the Chairperson
and Administrator of the SpeDEZA and with the approval of the DBM Secretary, the
Board shalll 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 Chairperson and Administrator shall exercise
administrative supervision over the SpeDEZA employees.

The SpeDEZA 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 SpeDEZA officer or employee, shall be removed or suspended except for
lawful cause, subject to civil service laws and regulations.

Sec. 12. Special Labor Center. - A Special Labor Center shall be established
within the SpeDEZ. The Center shall endeavor to study and amicably settle
professional, labor relations issues and disputes, interpret employment. service
contracts, and monitor work, workplace hygiene and safety standards within the
‘SpeDEZ, particularly of the duly registered entities and enterprises. The Center shall
consist of offices for labor; industrial health and safety; inspection/investigative and
disputes; and enforcement.

To support the economic and employment generation thrusts of the LGUs, the
SpeDEZA shall implement policies and programs that prioritize the residents of
stakeholder LGUs for employment in the SpeDEZ. Registered enterprises shall, as far
as practicable, source all their labor needs from the stakeholder LGUs of the SpeDEZ,
subject to existing laws and regulations: Provided, That, for the purpose of this Act,
LGUs within whose territorial jurisdictions the SpeDEZ is located, shall refer to all local
governments which: (a) derive a share in the five percent (5%) final tax imposition within
the SpeDEZ, (b) host expansion areas of the SpeDEZ in accordance with Section 5(h)
or Section 6(f) of this Act, or (c) host registered enterprises of the SpeDEZ pursuant to
Section 6(h) of this Act,

The SpeDEZA and, as far as practicable, the locators and registered enterprises
of the SpeDEZ shall prioritize for employment, qualified former personnel of the GA who
have been terminated or removed from the service, due to the modemization of the GA.

Sec. 13. Investor's Visa. — Any foreign national who invests an amount of Two
hundred fifty thousand US dollars (US$250,000.00), either in cash and/or equipment, in
a SpeDEZA-registered enterprise shall be entitled to an investor's visa: Provided, That
the foreign national has the following qualifications:

(a) at least eighteen (18) years of age;

(b) not convicted by final judgment of a crime involving moral turpitude;

(c) not affiicted with any dangerous or highly contagious disease;

(d) not previously institutionalized for any mental disorder or disability; and

(€) financially capable as established by verifiable and credible evidence.

As a holder of investor's visa, a foreign national shall be entitled to reside in the
Philippines while the investment subsists. For this purpose, the foreign national shall

nu


submit an annual report, in the form duly prescribed for the purpose, to prove that the
investor has maintained the investment in the country. Should said foreign national
withdraw the investments from the Philippines, the investor's visa shall automatically
expire and/or be withdrawn.

The authority to issue visas and work permits shall remain with the Bureau of
Immigration (BI) and the Department of Labor and Employment (DOLE), respectively:
Provided, That the Bl and the DOLE shall implement measures to expedite the
processing of such visas and permits for workers in the SpeDEZ and coordinate with
the SpeDEZA to improve ease of doing business.

Sec. 14. Fiscal Incentives. — Enterprises registered with the SpeDEZA may be
entitled to the fiscal incentives under Title XI!I (Tax Incentives) of Republic Act No. 8424
(NIRC), as amended.

Sec. 15. Administration, Implementation and Monitoring of Incentives. — For the
proper administration, implementation, and monitoring of tax incentives provided under
this Act, the SpeDEZA shall:

(a) Be responsible for the administration and implementation of the incentives
granted to its registered enterprises, subject to the oversight and regulatory functions
of the Fiscal Incentives Review Board (FIRB). The SpeDEZA shall adopt and implement
systems and procedures affecting trade and customs policies. The BOC shall establish
a customs-controlled area outside of the SpeDEZ to facilitate payment of taxes on
goods entering the Philippine customs territory; and

(b) Submit to the FIRB its annual tax expenditures based on the tax incentives
granted to its registered enterprises pursuant to Title XIII of Republic Act No. 8424
(NIRC), as amended. The FIRB shall create a single database of all incentives provided
by the governing authority, monitor the incentives granted, and submit an annual report
to the President

Sec. 16. Revenue Sharing. — The five percent (5%) Special Corporate Income
Tax (SCIT) collected from SpeDEZA-registered enterprises pursuant to Title XIll of
Republic Act No. 8424 (NIRC), as amended, shall be divided as follows

(a) Three percent (3%) to the national government;

(b) One percent (1%) to the Province of Bataan, or the host province, in case the
business enterprise is not located within the Province of Bataan; and

(c) One percent (1%) to the host city/municipality.

Provided, That for a period of fifteen (15) years from the effectivity of this Act, the
three percent (3%) share of the national government shall be allocated as follows: one
percent (1%) to the AFP pension fund and two percent (2%) to the SpeDEZA: Provided,
further, That the national government and local government shares shall be directly
remitted to the Bureau of Internal Revenue (BIR) and local treasurer, respectively.

Sec. 17. Banking Rules and Regulations. — Banks and financial institutions
established in the SpeDEZ shall be under the supervision of the BSP and subject to
existing banking laws, rules, and regulations.

‘Sec. 18. Remittances. — in the case of foreign investments, a duly registered entity
or enterprise within the SpeDEZ shall have the right to remit investment eamings in the

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currency in which the investment was originally made and at the exchange rate
prevailing at the time of remittance, subject to the provisions of Republic Act No. 7653,
or “The New Central Bank Act’, as amended

Sec. 19. Multi-Year Contracts and Other Contractual Arrangements. — The DND,
the AFP, the Philippine Coast Guard (PCG), the PNP, and other uniformed services
shall procure their defense equipment and materiel from defense manufacturers and
suppliers registered with the SpeDEZA, to spur the development of the SpeDEZ as a
self-reliant and self-sustaining defense investment hub where duly qualified and
selected locators are provided with guaranteed market access. For this purpose, the
DND, AFP, PCG, and PNP, and other uniformed services shall be authorized to enter
into multi-year contracts and other multi-year contractual arrangements with
SpeDEZA-tegistered manufacturers or suppliers of defense equipment or materiel,
subject to existing laws, rules, regulations and guidelines.

In implementing this section, the SpeDEZA, DND, AFP, PCG, and PNP shall
jointly formulate the mechanics for the selection of manufacturers or suppliers to be
awarded with multi-year contracts: Provided, That as a condition precedent for such
award, the manufacturing or distribution operations of the manufacturer or supplier must
be registered with the SpeDEZA or located in the SpeDEZ.

Sec. 20. Countertrade. — Whenever applicable and practicable, any of the
countertrade arrangements defined in Executive Order No. 120, series of 1993, should
be explored in pursuing defense-related acquisitions. The SpeDEZA, in consultation
with the DND, DTI, and other concemed offices, shall identify or develop a list of goods
and services or industries which may be subject to a countertrade.

Sec. 21. Capitalization. - The SpeDEZA shall have an authorized capital stock
of Three billion pesos (P3,000,000,000.00) no-par shares with a minimum issue of Ten
pesos (P10.00) each to be subscribed wholly by the national government.

In addition, all lands embraced and covered by the SpeDEZ, including permanent
improvements and fixtures, upon proper inventory by the GA or AFP, which are not
otherwise alienated, conveyed or transferred to another government agency, and all
other assets which the President may transfer to the SpeDEZA shall form part of the
equity contribution of the government.

The annual subscription of the national government to the capital stock of the
‘SpeDEZA shall be included in the annual General Appropriations Act.

Sec. 22. Supervision and Control. - For purposes of policy direction and
coordination, the SpeDEZA shall be under the direct control and supervision of the
Office of the President of the Philippines.

Sec. 23. Regional Development Council. - The SpeDEZA shall determine the
development goals for the SpeDEZ within the framework of national development plans,
policies, and goals. The Chairperson and Administrator of the SpeDEZA shall, upon
approval by the Board, submit the SpeDEZA plans, programs, and projects to the
Regional Development Council for inclusion in the regional development plan

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SEC. 24. Relationship with Local Govemment Units. - Except as herein provided,
the Municipality of Limay, Bataan and such other LGUs where SpeDEZA-registered
enterprises conduct business, shall operate and function in accordance with the
framework of the Constitution, Local Government Code of 1991, Republic Act No. 7898
or the AFP Modemnization Act, as amended by Republic Act No. 10349, and applicable
provisions of this Act.

In case of any conflict between the SpeDEZA, the LGUs, and the national
government on matters affecting the SpeDEZA, other than national defense and
security matters, the decision of the SpeDEZA shall prevail.

Sec. 25. Legal Office. - The SpeDEZA shall have and maintain its own internal
legal office, appropriate in number under the supervision of the Goverment Corporate
Counsel. When the exigencies of its businesses and operations demand, the SpeDEZA
may engage the services of an outside counsel either on a case-to-case or a fixed-
retainer basis. Such engagement shall require further approval and concurrence of the
Office of the Government Corporate Counsel or the Office of the Solicitor General and
the Commission on Audit (COA).

Sec. 26. Interpretation/Construction. — The powers, authorities, and functions
vested in the SpeDEZA are intended to enhance national security and promote self-
reliance in the advancement and protection of the national territorial integrity, uphold
the decentralization of governmental functions and authority, and promote an efficient
and effective working relationship between the SpeDEZA, the national goverment,
and the LGUs. Any interpretation of this Act shall consider such intentions. In case
of conflict in interpretation and questions on the intent of this Act, the provisions shall
be construed in favor of an interpretation that protects and promotes national security.

Sec. 27. Audit. - The COA shail appoint a fulltime auditor in the SpeDEZA or may
assign such number of personnel as may be necessary in the
performance of its functions.

SEC. 28. Transitory Provisions. - The SpeDEZA shall be responsible for the
operation, administration, management, and development of the SpeDEZ. The
SpeDEZA shall effect the transfer herein provided in a manner that will ensure the least
disruption of ongoing programs of the GA

‘Sec. 29. Implementing Rules and Regulations. — Within ninety (90) days from the
effectivity of this Act, the SpeDEZA, DTI, DOF, DND, PNP, PCG, the Provincial
Government of Bataan, and the Municipality of Limay shall promulgate the necessary
rules and regulations for the effective implementation this Act. Such rules and
regulations shall take effect fifteen (15) days after publication in a newspaper of general
circulation in the Philippines.

‘Sec. 30. Applicability Clause. — Insofar as these are consistent with the provisions
of this Act, the provisions of Sections 30 to 41 of Republic Act No. 7916, or “The Special
Economic Zone Act of 1995”, as amended, shall likewise apply to the SpeDEZ.

Sec. 31. Separability Clause. — If any provision of this Act is declared

unconstitutional, the remainder thereof not otherwise affected shall remain in full force
and effect.

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Semraauseun=

‘Sec. 32. Repealing Clause. — All other laws, executive orders, letters of instruction,
proclamations, administrative rules and regulations, and other issuances, or parts
thereof inconsistent with the provisions of this Act, are hereby repealed or modified
accordingly.

Sec. 33. Effectivity. - This Act shall take effect fifteen (15) days after its publication
in the Official Gazette or in a newspaper of general circulation.

Approved,