*&I ,I!$! 
30 ps :i]<j 
THIRTEENTH CONGRESS OF THE REPUBLIC 
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OF THE PHILIPPINE 
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First Regular Session 
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:
 
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S E N A T E  
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S. No. c 
Introduced by Senator S. R. Osmefia 111 
EXPLANATORY NOTE 
This measure seeks to create the Quezon Canal Zone Authority which 
will oversee the construction, 
operation, and administration 
of the Quezon 
Canal. 
The Quezon Canal stretching from the municipality of Atimonan on one 
end of Quezon Province to the Municipality of Unisan on the other end will 
shorten the travel time of sea-faring vessels and stimulate local shipping activity 
in the Southern Luzon area as will as the Bicol and Central Visayas regions. 
In order to facilitate the development of the Quezon Canal Zone, 
the 
Authority shall 
acquire, own, lease, construct, reconstruct, repair, equip, maintain, administer 
and operate the canal, and related infrastructures and support facilities; and 
accept equity contributions from private landowners in the canal zone, up to 
seventy percent (70%) to eighty percent (80%) of their current market values 
which shall be in the form of preferred shares of stock 
One of the vital roles of government is to provide public goods that will 
stimulate private sector economic activity. For the local economy of the Quezon 
province, the Quezon Canal is a key public good which will open windows of 
opportunities for the burgeoning of private sector enterprises. 
In view of the foregoing, early passage of this bill is earnestly requested. 
n, 
SERGIO OSMENA 111 
Senator 


"fll <!E\! 30 p5 :lf6 
THIRTEENTH CONGRESS 
) 
OF THE PHILIPPINE 
) 
First Regular Session 
. .  
s. No. 
Introduced by Senator S. R. Osmeiia Ill 
AN ACT 
CREATING THE QUEZON CANAL ZONE AUTHORITY, DEFINING ITS 
POWERS AND FUNCTIONS, AND OTHER PURPOSE§ 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
SECTION I. Creation of the Quezon Canal Zone Authority. - There is 
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hereby created a public corporation to be known as the "Quezon Canal Zone 
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Authority", hereinafter referred to as the Authority. The functions of the Authority 
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are hereby declared to be governmental. 
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SEC. 
2. 
Territorial Jurisdiction. - 
The territorial jurisdiction of the 
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Authority shall cover an area approximately five (5) kilometers wide, twenty (20) 
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kilometers long, including the rivers and waterways from the Municipality of 
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Atimonan to the Municipality of Unisan, across the narrow isthmus of the 
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Province of Quezon. However, the Congress of the Philippines, upon 
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recommendation of the Authority, may extend, reduce, alter or vary the territorial 
limits of the Authority, may extend, reduce, alter or vary the territorial limits of the 
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Authority if such amendments are necessary or will contribute to the attainment 
of its objectives 
SEC. 3. Principal Office. - The principal office of the Authority shall be in 
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the Canal Zone. It may establish branches and agencies within the Philippines as 
may necessary for the proper conduct of its business. 
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SEC. 4. Purposes and Specific Powers. - The purposes and specific 
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powers of the Authority are: 


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a. 
To acquire, own, lease, construct, reconstruct, repair, equip, 
maintain, administer and operate the canal, wharves, docks, piers, quays, and 
the 
a p p roaches to 
a nd a p p u rte n a n ces the re of, te rmi na Is, ware house, 
refrigeration storage plants, equipment and other structures or facilities 
necessary or useful in aid of commerce and in the transportation and storage of 
goods, wares and. merchandise in the Authority, including land reclamation and 
the improvement, development, deepening and dredging of the harbours, 
waterways, causeways, and fairways therein and all approaches thereto; 
b. 
To grant the use of or to rent. Lease or let, for consideration, all 
such port facilities, including stevedoring and port terminal services, or any 
concession properly incident thereto or in connection with the receipt, delivery, 
shipment and transfer in transit, weighing, marking, tagging, ventilating, 
fumigating, refrigerating, icing, storing, and handling of goods, wares and 
merchandise including embarking and disembarking of passengers and their 
baggage’s to any person, association or corporation under such terms and 
conditions it may deem proper, after public bidding; 
c. 
To assess and collect harbour, tonnage, wharfage, berthing and 
storage charges and fees, fix and collect the rentals for the lease, occupancy or 
use of buildings, structures, warehouses, lands and other properties of the 
Authority, fix the fees for the issuance of permits and the rendering of other 
services not enumerated herein: Provided, That until the Authority has fixed 
otherwise, the rates of harbour, tonnage, wharfage, berthing and storage charges 
or fees as now provided by law shall be followed and enforced; 
d. 
When essential to the proper administration of its corporate affairs 
or when necessary for the proper transaction of its business, or for carrying out 
the purposes of this Act and of said Authority, to contract indebtedness and issue 
bonds, subject to the conditions set forth in Section 19: Provided, however, That 
the outstanding indebtedness of the Authority shall not exceed forty percent 
(40%) of the total assets of the Authority and at all times to be guided by 
principles of sound management; 


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e. 
Subject to the general jurisdiction of the local government unit 
concerned, to exercise police authority within the area under its control and 
jurisdiction as provided in Section 2; 
f. 
To create and operate, andlor contract to operate such agencies, 
functional units, offices and departments of the Authority as may be deemed 
necessary or useful for the furtherance of any of the purposes of this Act; 
g. 
To appoint and employ such officers and employees as may be 
necessary to carry out the purposes of the Authority, to prescribe their duties and 
fix their compensation. 
SEC. 
5. 
general powers: 
a. 
General Powers. - The Authority shall have the following 
To adopt, alter, and use a corporate seal which shall be judicially 
noticed; make contracts, lease, own or otherwise dispose of personal and real 
property; sue and be sued; and otherwise do and perform any and all things that 
may be necessary or proper to carry out the purposes of the Authority; 
b. 
To do all such other things and to transact all such business directly 
or indirectly necessary, incidental or conducive to the attainment of the purposes 
of the Authority; and 
c. 
In general, to exercise all the powers of a corporation under the 
Corporation Code insofar as they are no inconsistent with the provisions of this 
Act. 
SEC. 6. Capitalization. - The authorized capital of the Authority shall 
consist of: 
(a) 
(b) 
Fixed assets of the ports presently covered in Section 2 ; 
Ten percent ('lo%) of the unapproriated surplus of the Portworks 
Special Fund as of the end of December 31 , 1998. 
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All public lands within the Canal Zone which shall be valued at 
market costs (values) and transferred to the Authority and such other 
appropriation that may be approved by the President of the Philippines. The 
capital and assets of the Authority shall be available for the general debts of the 
National Government. 


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(d) 
The Authority shall accept equity contributions from private 
landowners in the Canal Zone, up to seventy percent (70%) to eighty percent 
(80%) of their current market values, which shall be in the form of preferred 
shares of stock. 
SEC. 7. Governing Body; Appointment and Removal. - The corporate 
powers of the Authority shall be vested in, and exercised by, a Board of 
Directors, hereinafter referred to as the “Board,” composed of fifteen (15) 
mern bers: 
(a) 
The Secretary of Finance, or his nominee, who shall serve in 
alternate terms of two (2) years each with the Director-General of the National 
Development Authority or his nominee; 
After the first term of two (2) years, the Secretary of Finance shall be 
replaced by the Director-General of the National Development Authority who 
shall serve for the next two (2) years, after which the Secretary of Finance shall 
serve in the Boar again for two (2) years, and so on. 
(b) 
The Secretary of Public Works, or his nominee, who shall serve in 
alternate terms of two (2) years each with the Secretary of Transportation and 
Communications, or his nominee, to follow the same schedule as in (a) above; 
(c) 
The Secretary of Natural Resources, or his nominee, who shall 
serve in alternate terms of two (2) years each with the Secretary of Trade and 
Industry, or his nominee, to follow the same schedule as in (a) above; 
(d) 
The Secretary of National Defense, or his nominee, to come, 
alternately, from the Philippine Navy and the Coast Guard, who shall serve for a 
term of three (3) years; 
(e) 
The Chairman of the Regional Development Council of Region IV 
who shall serve for a term of three (3) years; 
(f) 
three (3) years; 
(9) 
The Governor, Province of Quezon, who shall serve for a term of 
The Representative, Third Congressional District of Quezon, who 
shall serve for a term of three (3) years; 


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(h) 
The Representative, Fourth Congressional District of Quezon, who 
shall serve for a term of three (3) years; 
(i) 
three (3) years; 
(j) 
three '(3) years; 
(k) 
The Mayor, Municipality of Atimonan, who shall serve for a term of 
The Mayor, Municipality of Unisan, who shall serve for a term of 
The Administrator of the Authority, who shall act as the Vice- 
Chairman, and shall serve in a concurrent capacity during his term as 
Administrator; 
(I) 
The Director for Public Affairs of the Authority who shall serve as 
member of the Board during his term as Director for Public Affairs; 
(m) 
An individual from the private sector, to represent the shipping 
industry, who shall serve for a term of two (2) years; 
(n) 
An individual from the private sector, to represent the shipping 
industry, who shall serve for a term of two (2) years; 
(0) 
An 
individual from 
the 
private 
sector, 
to 
represent the 
environmental concern group, who shall serve for a term of two (2) years; 
The members of the Board shall be appointed by the President of the 
Philippines, with their terms of office as designated in their appointments: 
Provided, That any person chosen to fill a vacancy shall serve only for the 
unexpired term of the director whom he succeeds. Directors may be suspended 
or removed for cause by the President of the Philippines. 
SEC. 8. Chairman of the Board. - The Directors shall annually elect a 
Chairman from among themselves. 
SE'C. 9. Meetings and Quorum. - The Board shall hold one regular 
meeting monthly and such special meetings provided for in the by-laws. Eight (8) 
members of the Board shall constitute a quorum and the vote of eight (8) 
members shall be necessary for the adoption of any rule, resolution or decision 
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SEC. 10. Per Diems and Allowances. - The Chairman and members of 
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the Board shall receive a per diem of Eight hundred pesos (P800.00) and Five 
or any other act of the Board. 


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SEC. 11. Prohibition for Directors. - No director shall, at the same time, 
hundred pesos (P500.00), respectively, exclusive of travelling expenses, for each 
day of meeting actually attended by them: Provided, That in no case shall the 
total per diem exceed Eight thousand pesos (P8,OOO.OO) for the Chairman and 
Five thousand pesos (P5,OOO.OO) for each director per month. 
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be employed by the Authority in any capacity whatsoever, except as may be 
authorized by the President of the Philippines. Whenever any director has a 
personal or business interest in the discussion or resolution of any matter, or any 
of his relatives within the third degree of consanguinity or second degree of 
affinity has such interest, such director shall abstain himself in the discussion or 
resolution of the matter and must retire from the meeting during the deliberation. 
The withdrawal of such director shall be noted in the minutes of the meeting. 
SEC. 12. Powers and Duties of the Board. - The Board shall have the 
following powers and duties: 
(a) 
To promulgate policies and to prescribe, amend and repeal the by- 
laws, rules and regulations governing the manner in which the general business 
of the Authority may be exercises; 
(b) 
To approve the annual and such supplemental budgets which may 
be submitted to it by the Administrator; Provided, That any request for 
appropriation shall be submitted to the President, in the form and manner 
prescribed by the Department of Budget and Management, including such 
explanation and data as may be required to justify the appropriation; 
(c) 
To render annual report to the President and such special reports 
as may be requested; 
(d) 
To appoint, on recommendation of the Administrator, the 
department heads as established in the organization of the Authority; and 
(e) 
To adopt rules and procedures and fix the time and place for 
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holding meetings. 
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SEC. 13. Administrator of the Authority. - The Chief Executive Officer of 
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the Authority shall be an Administrator, to be appointed by the President of the 


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Philippines. The Administrator shall serve as Vice Chairman of the Board of 
Directors in a concurrent capacity. 
The Administrator shall receive an annual salary and representation 
allowances exclusive of travelling expenses, to be determined by the Board. He 
shall not receive additional compensation as Vice Chairman of the Board. 
SEC. 14. Powers and Duties of the Administrator. - The Administrator 
shall have the following powers and duties; 
(a) 
To implement, enforce and apply the policies, programs, guidelines, 
procedures, decisions, rules and regulations promulgated, prescribed, issued or 
adopted by the Authority; 
(b) 
To direct and manage the affairs and business of the Authority in 
the spirit and intent of this Act and in pursuance of the policies of the Board; 
(c ) 
To submit within ten (I 
0) days after the close of each fiscal year, an 
annual report to the Board and such other reports as may be required; 
(d) 
To submit an annual budget and necessary supplemental budgets 
to the Board for its approval; 
(e) 
To appoint, promote, remove, suspend, or otherwise discipline for 
cause the officers and employees of the Authority, subject to such rules as may 
be promulgated by the Board; 
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To establish an internal organization of the Authority under such 
conditions that the Board may prescribed: Provided, That any major 
reorganization shall be subject to the approval of the Board; 
(9) 
prescribe; 
(h) 
To delegate his authority, under such conditions as the Board may 
To sign contracts, to approve expenditures and payments within the 
budget provisions, and generally to do any and all acts or things for the proper 
operation of the Authority; and 
(i) 
To perform such other duties as may be assigned to him by the 
Board. 
SEC. 15. Management and Sfaff. - The Administrator shall, subject to 
the approval of the Board, determine the staffing pattern and the number of 


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personnel in the Authority, define their duties and responsibilities, and subject to 
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confirmation by the Board, fix their salaries and emoluments. For professional 
and technical positions, the Administrator shall recommend salaries and 
emoluments that are comparable to those of similar positions in other 
government-owned or controlled corporations, the provisions of existing rules 
and regulations on wage and position classification notwithstanding. 
All other officials and employees of the Authority shall be selected and 
appointed on the basis of merit and fitness based on a comprehensive and 
progressive merit system to be established by the Authority immediately upon its 
organization and consistent with Civil Service rules and regulations: Provided, 
however, That all professional and technical positions shall be considered policy 
determining , primarily confidential and highly technical in nature. The recruitment, 
transfer, promotion and dismissal of all personnel of the Authority, including 
temporary workers, shall be governed by such merit system. 
The Administrator shall, subject to approval by the Board, appoint and 
remove personnel below the rank of department heads. 
SEC. 16. Exemption from Civil Service Law and Wage and Classification 
Office. - Officers and employees of the Authority shall not be subject to Civil 
Service laws and wage and position classification and other rules and regulations 
in relation thereto. 
SEC. 17. Infernal Audit. - Internal auditing of the Authority’s accounts 
and transactions shall be the sole responsibility of the authority. 
SEC. 18. .Audit of Funds. - No funds of the Authority shall be used to pay 
for the salaries or expenses of the Commission on Audit in excess of one-third of 
the total accounting costs of the Authority. Any audit by the Commission on Audit 
shall be entitled to disburse its funds without prior approval from the Chairman of 
the Commission on Audit. The results of such audit shall be transmitted to the 
Board. 
SEC. 19. Power to Issue Bonds or lncur Indebtedness. - 
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(a), 
Domestic Indebtedness - Whenever the Board deems it advisable 
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and necessary for the Authority to issue bonds to carry out approved capital 


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investment projects, it shall, by resolution, so manifest and declare, stating the 
purpose for which the loan or issue is to be applied and citing the project study 
devised for the purpose. In order for such resolution to be valid, it shall be 
passed by the affirmative vote of at least eight (8) members of the Board and 
approved by the President upon the recommendation of the Secretary of 
Finance, after consultation with the Monetary Board. 
The Secretary of Finance, in consultation with the Monetary Board, shall 
prescribe the form, the rate of interest, the denominations, securities, 
negotiability, convertibility, call and redemption and payment of all bonds issued 
under the Authority of this Act. 
The bonds issued under the authority of this Section may be made 
payable both as to the principal and interest, in Philippine currency or on readily 
convertible foreign currency. 
Nothing in this Section shall be interpreted to mean that the Secretary of 
Finance, in the redemption of securities, is prevented from applying the lottery 
principle by which bonds drawn by lot, may be redeemed before maturity either 
at their face value or above. The Republic of the Philippines hereby guarantees 
the payment by the Authority of both the principal and the interest of the bonds 
issued by'the Authority by virtue of this subsection, and shall pay such principal 
and interest in case the Authority fails to do so; and there are hereby 
appropriated, out of the general funds of the Philippine Treasury not otherwise 
appropriated, the sums necessary to make the payments guaranteed by this sub- 
section: Provided, That the sum so paid by the Republic of the Philippines shall 
be refunded by the Authority. 
(b) 
Foreign Loans - The Authority is being authorized to contract 
loans, credits and indebtedness from foreign governments, foreign financial 
institutions, and other international organizations or fund sources, from time to 
time, upon such terms and conditions as may be agreed, for the accomplishment 
of its purposes, the total principal amount of which outstanding at any time, 
exclusive of interest and other charges, shall not exceed forty percent (40%) of 


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its total assets, United States dollars or its equivalent in other foreign currencies 
at the time the loans, credits and indebtedness are incurred. 
The President of the Philippines, by himself or through any representative 
duly designated by him in writing, is hereby authorized to guarantee, absolutely 
and unconditionally as primary obligor and not as surety merely, in the name and 
on behalf of the Republic of the Philippines, the payment of the loans, credits, 
indebtedness herein authorized, as well as the performance of any or all of the 
obligations undertaken by the Authority pursuant to any agreement entered into 
in connection therewith on such terms and conditions as he shall deem proper 
and reasonable. 
In the negotiation and contracting of any loan, credit or indebtedness 
under this subsection, the President of the Philippines may, when made a 
condition to the granting of such loans, credits or indebtedness, agree to waive 
the application of any law granting preferences or imposing restrictions on 
international competitive bidding, including among others, Act No. 423, 
Commonwealth Act No. 138, Commonwealth Act No. 541 , and Republic Act No. 
51 83: Provided, however, That is every case where competitive bidding is agreed 
upon in the purchase of machineries, equipment, materials and supplies 
produced, processed or manufactured in the Philippines, at such rate and in such 
manner as may be agreed upon from time to time with the institution providing 
financing for the project. 
(c) 
The bonds issued under subsection (a) as well as loans, credits 
and indebtedness contracted under subsection (b) of this Section, and the 
payment of the principal, interest and other charges thereon, as well as the 
importation of machinery, equipment, materials and supplies by the Authority, 
paid from the proceeds of any loan, credit or indebtedness incurred under this 
Act, shall be exempt from all taxes, fees, imposts and other charges and 
restrictions, including import restrictions, by the Republic of the Philippines or any 
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of its agencies and political subdivision. Said bonds shall be receivable as 
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security in any transaction with the Government, its subdivisions, agencies and 
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instrumentalities, in which such security is required. 


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SEC. 20. Eminent Domain. - For the acquisition of rights of way and 
property for the construction of the Canal, wharves, piers, docks, quays, 
warehouses and other terminal facilities, structures and approaches thereto, the 
Authority shall have the right and power to acquire the same by purchase by 
negotiation, or by condemnation proceedings. Should the Authority elect to 
exercise the right of eminent domain, condemnation proceedings shall be 
maintained by and in the name of the Authority and it may proceed in the manner 
provided by law. 
SEC. 21. Transfer of Personnel, Records, Functions, Rights, Assets and 
Liabilities. - All books, records, and documents which appertain to the ports 
administration in the Canal Zone and all personnel assigned to the sub-port 
within the Canal .Zone are hereby transferred to the Authority, subject to the 
organization that may be effected. 
The priority use of all lands and of all facilities owned by the National 
Government, its agencies and instrumentalities, including those owned by semi- 
government offices or leased to foreign governments within the sub-port district 
are hereby transferred to the Authority: Provided, however, That the Board shall, 
as soon as constituted, make an inventory of all such facilities and identify those 
facilities which were constructed and financed wholly or partly from general funds 
and bond funds of the National Government, as distinguished from those 
financed wholly by the Portworks Special Funds, indicating therein the physical 
condition and relative book value thereof. 
Upon such inventory, all properties and facilities generated, by financing 
wholly out of the Portworks Special Funds shaJl be transferred to the Authority 
without reimbursement to the original agencies having control over them; and for 
all the properties and facilities that were financed partly or wholly from the 
general fund or bond fund of the Government, the Authority, by virtue of this 
Section, may secure transfer of ownership thereof by providing a systematic 
schedule or repayment of the corresponding share of the general fund or bond 
fund invested therein, including interests in the case of the latter. 


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The Authority shall, upon consultation with the department head 
concerned, reserve and make available within the port district such area or areas 
necessary for the proper operation of the Bureau of Customs, Quarantine, 
Immigration or any of the national, city or municipal government agency which, 
by reason of the nature of its duties and functions, require the establishment and 
operation of such office. 
All appropriations for the Authority and ten percent (I 0%) of the surplus of 
the Portworks Special Funds are hereby transferred to the Authority, which shall 
administer the same effective upon the date of constitution of the Board of 
Directors. All income or revenue accruing heretofore to the Portworks Special 
Funds collected by the Authority shall first accrue to the Authority to defray the 
following expenses: (1) Cost of port administration, operation, maintenance, 
repair work and dredging; (2) Payment of interest on, and in the redemption of 
previous construction loans on properties or facilities transferred to the Authority 
pursuant to this Section; (3) Purchase of new equipment; and (4) Costs of 
approved new construction work as detailed in the Authority’s annual budget: 
Provided, That any balance thereof shall be turned over to the Portworks Special 
Funds. 
SEC. 22. Repealing Clause. - All laws, decrees, orders, proclamation, 
and rules and regulations or parts thereof which are inconsistent with any of the 
provisions of this Act are hereby repealed or modified accordingly. 
SEC. 23. Effectivity. - This Act take effect fifteen (15) days from its 
publication in two (2) newspapers of general circulation. 
Approved ,