HOUSE uF EPI ATIVES
Republic of the Philippines RECEIVED
HOUSE OF REPRESENTATIVES = pAv2:7 JUL 2016

Quezon City

SEVENTEENTH CONGRES!
First Regular Session a ON UNIT
House Bill No, 2033 ae

Introduced by HON. IMELDA ROMUALDEZ-MARCOS

EXPLANATORY NOTE

Globalization opened a world of opportunities as well as challenges for trade
and investment. To keep pace with global competition, there is need to enhance
foreign investment to promote exports from the country as well as provide a level of
playing field for domestic enterprises and manufacturers.

This bill seeks to address this need by creating a Special Economic and
Freeport Zone in the Laoag-Paoay-Currimao corridor in the province of llocos Norte.
The Ecozone is conceptualized as a self-sustaining industrial, commercial and
investment center that will encourage economic growth and accelerate employment
generation in the province.

This bill envisions an Ecozone which shall be operated as a separate customs
territory that will provide incentives to ensure the free flow and movement of goods
and commodities within the area and their exportation therefrom. Likewise, it shall
provide tax-based incentives for business operating within its premises. In addition, it
shall also provide non-tax benefits like exchange policies and grant of permanent
resident status to investors.

The bill creates the Ecozone as a body corporate eliminating the necessity of
an authority-type of office to run the Ecozone. Instead, a governing body composed
of the elected chief executives of the localities involved and the private sector will be
responsible for the operation of the Ecozone.

Dubbed as the ‘Gateways to the North,' Ilocos Norte’s close proximity to the
major economic hubs in Asia such as China, Hong Kong and Taiwan makes the
creation of a Special Economic Zone ideal herein. The area embraced by the Laoag-
Paoay-Currimao boost of physical attributes attractive to potential investors. The
Laoag International Airport caters to both domestic and international flights from
Taiwan, Hong Kong and Guangzhou, China. Furthermore, the Currimao Port has
been a domestic cargo transshipment facility for both local and international ships for
years. Plans to upgrade the port facilities are underway to accommodate not only
cargo vessels, but cruise ships as well.



The province derives much of its income from agriculture and, in recent years,
tourism. The Ecozone will bring economic diversity and benefits to the province.
Employment opportunities generated by the Ecozone will minimize waves of Ilocano
migration in search for greener pastures.

For additional information, this bill was approved at the committee level in the
Sixteenth Congress.

In the light of the foregoing, the passage this bill earnestly sought.

Ca

IMELDA ROMUALDEZ-MARCOS
Representative
2" District, locos Norte


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
SEVENTEENTH CONGRESS
First Regular Session

House Bill No. 2033

Introduced by HON. IMELDA ROMUALDEZ-MARCOS

AN ACT
ESTABLISHING THE SPECIAL ECONOMIC ZONE AND FREEPORT IN THE
PROVINCE OF ILOCOS NORTE, CREATING FOR THIS PURPOSE THE ILOCOS
NORTE SPECIAL ECONOMIC ZONE AND FREEPORT 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 Title - This Act shall be known as the “Ilocos Norte Special
Economic Zone and Freeport Act of 2010.”

SECTION 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 social development of the country in order to provide jobs to
the people especially those in the rural areas, increase productivity and individual
and family income, and thereby improve the level and quality of living condition
through the establishment, among others, of Special Economic Zone and Freeport in
suitable and strategic locations in the country and through measures that will attract
legitimate and productive foreign investments.

SECTION 3. Creation of the Ilocos Norte Special Economic Zone and
Freeport. — In pursuit of the foregoing declared policy and subject to the concurrence
of the concerned local government units (LGUs) of Ilocos Norte affected by the zone,
there is hereby established a Special Economic Zone and Freeport Zone in the
Province of Ilocos Norte to be known as the Ilocos Norte Special Economic Zone
and Freeport, hereinafter referred to as the Ilocos Norte ECOZONE. It shall cover
certain areas in the City of Laoag and municipalities of Paoay and Currimao. The
specific metes bounds of the Ilocos Norte Special Economic Zone and Freeport shall
be more particularly defined in a presidential proclamation that shall be issued for
this purpose.


SECTION 4. Governing Principles - \locos Norte ECOZONE shall be
managed and operated by the Ilocos Norte Special Economic Zone and Freeport
Authority, herein referred to as the INSEFZA, to be created under Section 6 of this
Act, under the following principles:

(a)

(b)

(¢)

(d

(

(9)

Within the framework and limitations of the Constitution and applicable
provisions of the Local Government Code, Ilocos Norte ECOZONE shall
be developed into and operated as a decentralized, self-reliant and self-
sustaining industrial, commercial/trading, agro-industrial, tourist, banking,
financial and investment center with suitable residential areas.

Ilocos Norte 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 people of the Province of Ilocos Norte and its
neighboring towns and cities.

locos Norte ECOZONE may establish mutually beneficial economic
relations with other entities or enterprises within the country or, subject to
the administrative guidance of the Department of Foreign Affairs (DFA),
the Philippine Economic Zone Authority (PEZA) and/or the Department of
Trade and Industry (DTI), with foreign entities or enterprises.

Foreign citizens and companies owned by non-Filipinos in whatever
proportion may set up enterprises in the Ilocos Norte ECOZONE, either
by themselves or in joint venture with Filipinos in any sector of industry,
international trade and commerce within Ilocos Norte ECOZONE.

llocos Norte ECOZONE shall be managed and operated as a separate
customs territory ensuring free flow or movement of goods and capital
within, into and exported out of the Ilocos Norte ECOZONE, as well as
provided incentives such as tax and duty-free importations of raw
materials and capital equipment. However, exportation or removal of
goods from the territory of the Ilocos Norte ECOZONE to the other parts
of the Philippine territory shall be subject to customs and taxes under the
Tariff and Customs Code of the Philippines, as amended, and the
National Internal Revenue Code of 1997, as amended.

The areas comprising the llocos Norte ECOZONE may be expanded or
reduced when necessary. For this purposes, the INSEFZA, in consultation
with the LGUs, shall have the power to acquire either by purchase,
negotiation or condemnation proceedings, any private lands within or
adjacent to the Ilocos Norte ECOZONE for the following purposes: (1)
consolidation of lands for Ilocos Norte ECOZONE development; (2)
acquisition of right-of-way to the Ilocos Norte ECOZONE; and (3) the
protection of watershed areas and natural assets valuable to the
prosperity of the llocos Norte ECOZONE.

Goods manufactured by an Ilocos Norte ECOZONE enterprise shall be
made available for immediate retail sale in the domestic market, subject to


the payment of corresponding taxes on raw materials and other
regulations that my formulated by the INSEFZA, together with the PEZA,
the Bureau of Customs (BOC) and the DTI in accordance with the
National Internal Revenue Code of 1997, as amended, and the Tariff and
Customs Code of the Philippines, as amended. 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 PEZA. Enterprises
engaged in industries included in such negative list shall not be allowed to
sell their products locally.

(h) The defense of the llocos Norte ECOZONE and the security of its
perimeter fence shall be the responsibility of the national government
(NG) in coordination with the llocos Norte ECOZONE and the LGUs.

SECTION 5. Incentives — Investors and Business enterprises within the Ilocos
Norte ECOZONE shall be entitled to the following incentives:

(a) Resident Status and Visa — Any foreign investor who establishes a
business enterprise within the Ilocos Norte ECOZONE and who maintains
capital investment of not less than One Hundred Fifty Thousand United
States Dollars (US$150,000.00) shall be granted, along with his or her
spouse, dependents, and unmarried children below twenty-one (21) years
of age, permanent resident status within the Ilocos Norte ECOZONE and
freedom of ingress and egress to and from the llocos Norte ECOZONE
without any need of any special authorization from the Bureau of
Immigration (Bl). Working visas renewable every two (2) years shall be
issued to foreign executives and foreign technicians with highly specialized
skills, which no Filipino possesses, as certifies by the Department of Labor
and Employment (DOLE).

The foregoing is without prejudice to a foreigner requiring permanent
resident status in the Philippines in accordance with applicable
immigration, retirement and other related laws.

(b) Fiscal Incentives - Business establishments operating within the llocos
Norte 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, or those provided
under Book VI of Executive Order No. 226, as amended, otherwise known
as the Omnibus Investment Code of 1987.

(c) 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 locos Norte ECOZONE. In lieu thereof, five percent
(5%) of the gross income earned by all business enterprises within the
locos Norte ECOZONE shall be paid and remitted as follows:

(1) Two percent (2%) to the national government.
(2) One percent (1%) to the province of Ilocos Norte


(3) One percent (1%) to be shared by the municipalities affected by the
declaration of the Zone in proportion to their income from business
activities within the Zone.

(4) One percent (1%) to the Ilocos Norte Economic Freeport Authority
which shall be created under this Act;

All persons and service establishments in the Ilocos Sur ECOZONE shall be
subject to national and local taxes under the National Internal Revenue Code of
1997, as amended, and the Local Government Code of 1991, as amended.

(d) Banking Rules and Regulations - Existing banking laws and
tules/regulations of the Bangko Central ng Pilipinas (BSP) shall apply to
banks and financial institutions to be established in the Ilocos Norte
ECOZONE. Among other pertinent regulations, these Include those
governing foreign exchange and other current account transactions (trade
and non-trade), local and foreign borrowings, foreign investments,
establishment and operation of local and foreign banks, foreign currency
deposit units, offshore banking units and other financial institutions under
the supervision of the BSP.

(e) Profit Remittance — Without prior BSP approval, after tax profits and other
earnings of foreign investments in enterprises in the Ilocos Norte
ECOZONE may be remitted outward in the equivalent of foreign exchange
through any of the banks licensed by the BSP in the Ilocos Norte
ECOZONE: Provided, however, That such foreign investments in said
enterprises have been previously registered with the BSP.

SECTION 6. Creation of the Ilocos Norte Special Economic Zone and
Freeport Authority - There is herby created a body corporate to be known as the
llocos Norte Special Economic Zone and Freeport Authority, herein referred to as the
INSEFZA, which shall manage and operate the Ilocos Norte ECOZONE, 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
after the effectivity of this Act.

SECTION 7. Principal Office - The INSEFZA shall maintain its principal office
at Laoag City, Province of Ilocos Norte but it may establish branches within the
Philippines and abroad as may be necessary for the proper conduct of its business.

SECTION 8. Powers and Functions of the Ilocos Norte Special Economic
Zone and Freeport Authority —- The INSEFZA shall have the following functions:

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

(b) To recommend to the President the issuance of a proclamation to fix and
delimit the site of the Ilocos Norte ECOZONE;


(c) To register, regulate and supervise the enterprises in the Ilocos Norte
ECOZONE in an efficient and decentralized manner, subject to existing
laws;

(d) To coordinate with LGUs and exercise general supervision over the
developmental plans, activities and operations of the Ilocos Norte
ECOZONE;

(e) To regulate and undertake the establishment, operation and maintenance
of utilities, other services and infrastructure in the Ilocos Norte ECOZONE
such as but not limited to heat, light and power, water supply,
telecommunications, transport, toll roads and bridges, port services, etc.
and to fix just, reasonable and competitive rates, fares, charges and prices
thereof;

(f) To construct, acquire, own, lease, operate and maintain on its own or
through contracts, franchise, licenses, bulk purchase from the private
sector or permits under any of the schemes allowed in Republic Act No,
6957 (the Build-Operate-Transfer Law, as amended), or joint venture,
adequate facilities and infrastructure required or needed for the operation
and development of the llocos Norte ECOZONE, in coordination with
appropriate national and local government authorities an in conformity with
applicable laws thereon;

(g) To operate on its own, either directly or through a license to other tourism-
related activities, including games, amusements, recreational and sports
facilities;

(h) Subject to the approval of the President and the Monetary Board of the
Bangko Sentral ng Pilipinas 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 programs 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;

(i) To provide security for the Ilocos Norte ECOZONE in coordination with the
national and local governments. Military forces sent by the national
government for the purpose of defense shall not interfere in the internal
affairs of the Ilocos Norte ECOZONE and expenditures for these military
forces shall be borne by the national government. For this purpose, the
INSEFZA may establish and maintain its security forces and firefighting
capability or hire others to provide the same;

0

To protect, preserve, maintain and develop the virgin forests, beaches,
coral and coral reefs, and maintain ecological balance within the Ilocos
Norte ECOZONE;

(k) To create, operate and/or contract to operate such functional units or
offices of INSEFZA as it may deem necessary;


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

(m)To issue certificates of origin for products manufactured or processed in
the Ilocos Norte ECOZONE in accordance with prevailing rules of origin,
and the pertinent regulations of the PEZA, DTI and/or the DOF;

(n) To issue working visas renewable every two (2) years to foreign
executives and foreign technicians with highly specialized skills which no
Filipino possesses, as certified by the DOLE;

(0) 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;

(p) 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

(q) 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.

SECTION 9. Exemptions from Donor's Tax — All donations made by any
person or entity in favor of the INSEFZA shall be exempt from the payment of the
donor's tax and the same shall be considered as deductible from the gross income of
the donor, pursuant to the National Internal Revenue Code of 1997, as amended.

SECTION 10. Board of Directors of the Ilocos Sur Special Economic Zone and
Freeport Authority — The powers of the INSEFZA 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 Chairman who shall, at the same time be the Administrator of the
INSEFZA;

(b) A Vice Chairman who shall come from among the members of the Board;

(c) Members consisting of:

(1) The Governor of the Province of Ilocos Norte;

(2) The Congressional Representative of the district covering
the site of the Ilocos Norte ECOZONE;

(3) The mayors of the city of Laoag and the municipalities of
Currimao and Paoay;

(4) One (1) representative from the domestic investors;

(5) One (1) representative from the foreign investors;


(6) Two (2) representatives from labor from among the workers
in the llocos Norte ECOZONE.

The governor, the Congressional Representative and the mayors of the city of
Laoag and the municipalities of Currimao and Paoay shall serve as ex officio
members of the Board, whose terms in the Board correspond to their term as elected
officials.

The Chairman and the members of the Board, except of the ex officio
members, shall be appointed by the President of the Philippines to serve for a term
of six (6) years, unless sooner removed for cause or 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 of the representatives of the business and labor sectors, no person
shall be appropriated 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 each receive per diem at rates to be
determined by the Department of Budget and Finance (DBM) in accordance with
existing rules and regulations: Provided, however, That the total per diem collected
each month shall not exceed the equivalent for four (4) meetings. Unless and until
the President of the Philippines has fixed a higher per diem for the members of the
Board, such per diem shall not be more than Ten Thousand Pesos (P10, 000.00) for
‘every Board meeting.

SECTION 11. Powers and Duties of the Chairman-Administrator — The
Chairman-Administrator shall have the following powers and duties:

(a) To direct and manage the affairs of the INSEFZA in accordance with the
policies of the Board;

(b) To establish the internal organization of the INSWFZA under such
conditions that the Board may prescribe;

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

(d) 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;

(e) To submit to the Board for its approval policies, systems, procedures, rules
and regulations that are essential to the operation of the Ilocos Norte
ECOZONE;


(f) 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 Ilocos Norte 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.

SECTION 12. Personnel - The Board of Directors of the INSEFZA shall
provide for an organization and staff of its officers and employees. Upon
recommendation of the Chairman-Administrator, 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 exclusive and final authority to promote, transfer, assign or
reassign officers of the INSEFZA, any provision of existing law to the contrary
notwithstanding: Provided, further, That the Chairman-Administrator may carry out
removal of such officers and employees.

The officers and employees of the INSEFZA, including all members of the
Board, shall not engage directly or indirectly in partisan activities, nor take part in any
election, except to vote.

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

SECTION 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, registration of business enterprises, one stop shop center, and on
industrial harmony in the ECOZONES, shall apply to the INSEFZA.

SECTION 14. Capitalization - The INSEFZA shall have an authorized capital
stock of two billion (2,000,000,000) nor 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 and the LGUs embracing the Ilocos Norte ECOZONE.
The Board of Directors of the INSEFZA may, with the written concurrence of the
Secretary of Finance, sell shares, representing not more than forty percentum (40%)
of the capital stock of the INSEZA 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 percentum (60%) of the total issued
and outstanding capital of the INSEFZA.

The amount necessary to subscribe and pay for the shares of the national
government to the capital stock of the INSEFZA shall be included in the annual
General Appropriations Act. For LGUs, the funds shall be taken from their Internal
Revenue Allotment and other local funds

SECTION 15. Supervision and Coordination of Development Plans. — For
purposes of policy direction and coordination, the Ilocos Norte ECOZONE shall be
under the direct control and supervision of the Office of the President.


SECTION 16. Relationship with the Regional Development Council — The
INSEFZA shall determine the development goals for the Ilocos Norte ECOZONE
within the framework of national development plans, policies and goals. The
Administrator shall, upon approval by the Board, submit the llocos Norte ECOZONE
plans, programs and projects to the Regional Development Council for inclusion and
inputs to the overall regional development plan.

SECTION 17. Relationship with Local Government Units — Except herein
provided, the LGUs comprising the Ilocos Norte ECOZONE shall retain their basic
autonomy and identity. The city of Laoag and the municipalities of Currimao and
Paoay, Ilocos Norte shall operate and function in accordance with the Local
Government Code of 1991. In case of any conflict between the INSEFZA and the city
of Laoag and the municipalities if Currimao and Paoay, Ilocos Norte on matters
affecting the llocos Norte ECOZONE other than defense and security matters, the
decision of the INSEFZA shall prevail.

SECTION 18. Legal Counsel — The llocos Norte Economic Zone Authority and
the corporations in which CEZA owns a majority of the issued capital stock shall
have its own internal legal counsel under the supervision of the government
corporate counsel. When the exigencies of its business and operations demand it,
the CEZA may engage the services of an outside counsel either on a case basis or
on a fixed retainer.

SECTION 19. interpretation / Construction — The powers, authorities and
functions that are vested in the Ilocos Sur Special Economic Zone and Freeport
Authority are intended to establish decentralization of government functions and
authority and promote an efficient and effective working relationship among the
locos Sur ECOZONE, the central government and the LGUs.

SECTION 20. Auditing - The Commission on Audit (COA) shall appoint a
representative who shall be a full-time auditor of the ISSEZA and assign such
number of personnel as may be necessary to assist said representative in the
performance of his/her duties. The salaries and emoluments of the assigned auditor
and personnel shall be in accordance with pertinent laws, rules and regulations.

SECTION 21. Separability Clause — If any provision of this Act shall be held
unconstitutional or invalid, the other provisions not otherwise affected shall remain in
full force and effect.

SECTION 22. Repealing Clause — All laws, executive orders or issuances, or
any part thereof, which are inconsistent herewith are hereby repealed or amended
accordingly

SECTION 23. Effectivity Clause —- This Act shall take effect upon its
publication in at least one (1) newspaper of general circulation.

Approved,