Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

TWENTIETH CONGRESS
First Regular Session

House Bill No, 1706

Introduced by Rep. ANGELO MARCOS BARBA
2" District, Ilocos Norte

EXPLANATORY NOTE

This bill seeks to create a Special Economic Zone and Freeport in the
Province of Ilocos Norte to further reduce poverty by promoting and
accelerating a sound and balanced industrial, economic, and social
development, creating jobs and improving productivity, especially in rural
areas, and increasing individual and family incomes.

Special economic zones (SEZs) have been regarded as an effective tool
in addressing the challenges of globalization. Countries like China, Singapore,
Malaysia, and South Korea have been quite successful in adopting SEZs as a
way of attracting foreign investments, job creation, and export generation. In
fact, in the Philippines, SEZs have opened employment to more than two
million (2,000,000) Filipinos and total investments amounting to billions of
pesos.

The creation of a Special Economic Zone in the Municipalities of Badoc,
Currimao, Paoay, and Laoag City is an ideal economic strategy. The Currimao
Port, for instance, is a domestic cargo transshipment facility for both local and
international ships and may further accommodate cruise ships in the near
future. The Laoag International Airport, on the other hand, caters to both
domestic and international flights from China, Hong Kong, and Taiwan.
Establishing an SEZ in these areas will therefore bring economic diversity and
benefits to the province.

This bill, as previously filed by Rep. Imelda R. Marcos, was approved
on Third and Final Reading during the 17" Congress. It was then again pushed
by this humble representation during the 18" Congress but has remained
pending. This present course of action seeks to further thrust this bill.

In light of the foregoing, the immediate passage of this measure is
earnestly sought.

ANGE! .COS BARBA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

TWENTIETH CONGRESS,
First Regular Session

House Bill No. 1708

Introduced by Rep. ANGELO MARCOS BARBA
2" District, Ilocos Norte

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, AND APPROPRIATING
FUNDS THEREFOR

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

CHAPTER 1.
GENERAL PROVISIONS,

SECTION 1. Short Title. — This Act shall be known as the “Ilocos Norte
Special Economic Zone and Freeport Act.”

SECTION 2. Declaration of Policy. ~ It is declared policy of the State to
encourage, promote, and accelerate the sound and balanced industrial,
economic, and social development of the country. The establishment of special
economic zones shall attract legitimate and productive foreign investments in
strategic locations in the country. It shall generate employment and increase
productivity and individual, as well as family incomes, thereby enhancing the
quality of life of the Filipino people.

CHAPTER 2.
CREATION OF ECONOMIC ZONE

SECTION 3. Creation of the Ilocos Norte Special Economic Zone and
Freeport. — In accordance with the foregoing declared policy and subject to
the concurrence of the concerned local government units (LGUs) of Hocos
Norte affected by the zone, there is hereby established a Special Economic
Zone and Freeport, hereinafter referred to as the Ilocos Norte Ecozone. The
Ilocos Norte Ecozone shall cover particular areas located in the Municipalities
of Badoc, Currimao, Paoay, and Laoag City. The specific metes and bounds of
the Hocos Norte Ecozone shall be more particularly defined in a presidential
proclamation that shall be issued for this purpose: Provided, That the lands
embraced therein shall be public lands and contiguous to one another.


SECTION 4. Creation of the Ilocos Norte Special Economic Zone and
Freeport Authority. — There is hereby created a body corporate to be known
as the “Ilocos Norte Special Economic Zone Authority,” hereinafter refereed to
as the INSEZA, which shall manage and operate the Ilocos Norte Ecozone, in
accordance with the provisions of this Act. This corporate franchise shall
expire in fifty (50) years and 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 5. Governing Principles. — The Ilocos Norte Special Economic
Zone and Freeport shall be managed and operated by INSEZA under the
following principles:

a.

Within the framework and limitations of the Constitution and
applicable provisions of Republic Act No. 7160, otherwise known as
the “Local Government Code of 1991,” the 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;

. The 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 Ilocos Norte and its
neighboring towns and cities;

. The flocos 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 (DTD), with foreign
entities or enterprises;

|. Foreign citizens and companies owned by non-Filipinos, in whatever

proportion, may set up enterprise in the Ilocos Norte Ecozone, either
by themselves or in a joint venture with Filipinos in any sector of
industry, international trade and commerce within the Tocos Norte
Ecozone;

. The Ilocos Norte Ecozone shall be managed and operated as separate

customs territory thereby ensuring the free flow or movement of goods
and capital within, into, and out of its territory, and shall likewise
provide incentives such as tax and duty-free importations of raw
materials, capital, and equipment to registered enterprises located
therein. 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 custom duties and taxes under Republic
Act No. 10863, otherwise known as the “Customs Modernization and
Tariff Act” and other relevant tax laws of the Philippines.


f. The areas comprising the Mocos Norte Ecozone may be expanded or
reduced when necessary. For this purpose, the INSEZA, in
consultation with the LGUs, shall have the power to acquire either by
purchase, negotiation, or condemnation proceedings, any private land
within or adjacent to the Ilocos Norte Ecozone for the following
purposes: (1) consolidation of lands for zone 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
property of Ilocos Norte Ecozone;

g- 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 may be formulated by the INSEZA together with
the Philippine Economic Zone Authority (PEZA), the Bureau of
Customs (BOC), and the Department of Trade and Industry (DTI).
However, in order to protect domestic industries, a Negative List of
industries shall 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 Ilocos Norte Ecozone and the security of its
perimeter fence shall be the responsibility of the National
Government, in coordination with INSEZA and the LGUs.

SECTION 6. Capitalization. - The INSEZA shall have an authorized
capital stock of Two billion (2,000,000,000) no par shares with a minimum
issue of Ten pesos (P10.00) each, the majority shares of which shall be
subscribed and paid for by the National Government and the LGUs embracing
the Ilocos Norte Special Economic Zone and Freeport. The Board of Directors
of INSEZA may, with the written concurrence of the Secretary of Finance, may
be determined. The National Government and the LGUs shall in no case own
less than sixty per centum (60%) of the total issued and outstanding capital of
INSEZA.

The amount necessary to subscribe and pay for the shares of the National
Government to the capital stock of the INSEZA 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 7. Principal Office of the INSEZA. ~ The INSEZA shall
maintain its principal office at Laoag City, Iocos Norte, but it may establish
branches within the Philippines as may be necessary for the proper conduct of
its business.

SECTION 8. Powers and Functions of the INSEZA. — The INSEZA shall
have the following powers and functions:

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


. To register, regulate, and supervise the enterprises in the Ilocos Norte
Ecozone in an efficient and decentralized manner, subject to existing
laws;

To coordinate with LGUs and exercise general supervision over the
development plans, activities, and operations of the Ilocos Norte
Ecozone;

|. To regulate and undertake the establishment and construction,
operation, and maintenance of public utilities, other services, and
infrastructure in the Ilocos Norte Ecozone such as light and power,
shipping, barging, stevedoring, cargo handling, hauling, warehousing,
storage and cargo, port services or concessions, piers, wharves,
bulkheads, bulk terminals, mooring areas, storage areas, roads,
telecommunications, transport, bridges, terminals, conveyors, water
supply and storage, sewage, drainage, airport operations in
coordination with the Civil Aviation Authority of the Philippines
(CAAP), and such other services and concessions or infrastructure
necessary or incidental to the accomplishment of the objectives of this
Act;

. To construct, acquire, own, lease, operate, and maintain on its own
through contracts, franchise, licenses, bulk purchase from the private
sector or permits under any of the schemes allowed in Republic Act
No. 6597, otherwise known as the “Built-Operate-Transfer Law” as
amended, or joint venture, adequate facilities and infrastructure
required or needed for the operation and development of the Ilocos
Norte Ecozone, in coordination with the appropriate national and local
government authorities and in conformity with applicable laws
thereon;

. To approve plans, programs, and projects of the Ilocos Norte Ecozone
to be submitted’ to the Regional Development Council (RDC) for
inclusion and inputs to the overall regional development plan;

. To operate on its own, either directly or through licenses to others,
tourism-related activities, including games, amusements, recreational
and sports facilities, subject to the approval and supervision of the
Philippine Amusement and Gaming Corporation (PAGCOR);

. To raise or borrow, within the limitation provided by law, and subject
to the approval or opinion of the Monetary Board of the Bangko
Sentral ng Pilipinas (BSP), as the case may be, adequate and necessary
funds from local or foreign sources, 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 an assignment of all
or part of its property or assets;

i. To protect, preserve, maintain, and develop the forests, beaches, coral

and coral reefs, and maintain ecological balance within the Tocos


Norte Ecozone. Notwithstanding the authority of the INSEZA 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
INSEZA;

To create, operate, and/or contract to operate such functional units or
offices of the INSEZA as it may deem necessary;

k. To adopt, alter, and use a corporate seal; contract, lease, buy, acquire,
own, or otherwise dispose of personal and/or real property of whatever
nature; sue and be sued; and otherwise carry out its functions and
duties as provided for in this Act;

1. To issue certificates of origin for products manufactured or processed
in the Tlocos Norte Ecozone in accordance with prevailing rules of
origin and the pertinent regulations of the PEZA, the DTI, and/or the
Department of Finance (DOF);

m. To establish one-stop shops for the issuance of all necessary permits,
clearances, licenses, and other similar certifications to conduct such
activities intended to improve the ease of doing business within the
locos Norte Ecozone, in coordination with government agencies
having jurisdiction over activities therein; Provided, That all
government agencies are directed to provide and extend utmost and
full cooperation to the Ilocos Norte Ecozone in the establishment of
such one-stop shops;

n. To provide internal security to the Ilocos Norte Ecozone in
coordination with the National Government and affected LGU. For this
purpose, the INSEZA shall provide and establish its own internal
security and fire fighting forces or hire others to provide the same.
Military forces sent by the National Government for the purpose of
defense shall not interfere in the internal affairs of the Ilocos Norte
Ecozone and expenditures for these military forces shall be borne by
the National Government;

0. To recommend to the President of the Philippines the issuance of a
proclamation to fix and delimit the site of Ilocos Norte Ecozone;

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 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. Board of Directors of the INSEZA. ~ The powers of the
INSEZA 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 Chairperson, who shall at the same time, be the Administrator of

the INSEZA;

b. Governor of the Province of Ilocos Norte or a duly-authorized
representative;

¢. One of the mayors of the city and municipalities covered by the
Ecozone;

d. One (1) representative from the investor's group; and

e. One (1) representative from among the workers in the Ilocos Norte
Ecozone.

The Vice Chairperson shall be selected from among the members of the
Board.

The representative from the Provincial Government and the one of the
mayors of the city and municipalities covered by the Ecozone shall serve as
ex-officio members of the Board, whose terms in the Board correspond to
their terms as elected officials.

The Chairperson and members of the Board, except ex-officio members,
shall be appointed by the President of the Philippines to serve for a term of six
(6) years unless sooner separated from service due to death, voluntary
resignation, or removal for cause. In case of death, resignation, or removal for
cause, their replacements shall serve only the unexpired portion of the
respective terms.

The Chairperson of the Board must be 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 relevant
working experience preferably in the ficld of management or public
administration.

The members of the Board, except the ex-officio members, shall each
receive per diem at rates to be determined by the Department of Budget and
Management (DBM) in accordance with existing rules and regulations:
Provided, however, That the total per diem collected each month shall not
exceed the equivalent per diem for four (4) meetings. Unless and until the
President of the Philippines has fixed for 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 10. Organization and Personnel. — The Board of Directors of
INSEZA shall provide for its organization and staff. 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.
The Board shall have exclusive and final authority to promote, transfer,
assign, reassign, or remove officers of the INSEZA, any provision of existing
law to the contrary notwithstanding. The Chairperson-Administrator shall
carry out the decisions of the Board.

The officers and employees of INSEZA, 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 INSEZA, subject to civil service laws and
regulations, shall be removed or suspended except for cause, as provided by
law.

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

a. To direct and manage the affairs of the INSEZA in accordance with the
policies of the Board;

b. To establish the internal organization of the INSEZA under such
conditions that the Board may prescribe;

¢. To submit an annual budget and necessary supplemental budget to the
Board for its approval;

. To submit within thirty (30) days after the close of each fiscal year and
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 Tlocos
Norte Ecozone;

f. To recommend to the Board the remuneration and other emoluments
of its officers and employees in accordance with existing laws on
compensation and position classification;

g. 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 Hocos Norte Ecozone; and

h. To perform such other duties as may be assigned by the Board or
which are necessary or incidental to the office.

SECTION 12. Legal Counsel. - The INSEZA shall have its own legal
counsel under the supervision of the government corporate counsel. When the
exigencies of its businesses and operations demand it, the INSEZA may
engage the services of an outside counsel either on a case-to-case or on a fixed
retainer basis.


CHAPTER 3.
INCENTIVES TO ECOZONE ENTERPRISES/INVESTORS

SECTION 13. Investors Visa. — Any foreign national who invests an
amount of Two hundred thousand US dollars (US$200,000.00), either in
cash and/or equipment, in a registered enterprise shall be entitled to an
investor's visa: Provided, That the foreign national has the following
qualifications:

a. Must be at least eighteen (18) years of age;

b. Must not have been convicted by final judgment of a crime involving
moral turpitude;

¢. Must not be afflicted with any loathsome, dangerous, or contagious
disease;

d. Must not have been institutionalized for any mental disorder or
disability; and

e. Must establish financial capability and capacity through verifiable and
credible evidence.

A foreign national may reside in the Philippines while the investment
herein required subsists. To prove this, the foreign national should submit an
annual report, in the form duly prescribed for the purpose. Should said
investments be withdrawn from the Philippines, then the investor’s visa
issued to said foreign national 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 BI and the DOLE shall implement
measures to expedite the processing of such visas and permits for workers in
the Tocos Norte Ecozone and coordinate with the INSEZA for the purpose of
improving ease of doing business.

SECTION 14. Fiscal Incentives. — Registered enterprises operating
within the Ilocos Norte Ecozone may be entitled to the pre-existing pertinent
fiscal incentives as provided for under Republic Act No. 7916, as amended by
Republic Act No. 8748, also known as the Special Economic Zone Act of 1995,
or those provided under Executive Order No. 226, as amended, otherwise
known as the Omnibus Investment Code of 1987, and/or those that may be
further granted as the need and necessity arises by appropriate government
department, agency, or office: Provided, That in the administration,
implementation, and monitoring of incentives, the INSEZA, may impose its
own conditions not otherwise prohibited by this Act: Provided, further, That
the INSEZA shall not be limited to the conditions provided under Republic
Act No. 7916, Republic Act No. 8748 or any other related issuance, rule, or
regulation.


SECTION 15. Imposition of a Tax Rate of Five Percent (5%) on Gross
Income Earned. ~ No taxes, local and national, shall be imposed on business
establishments operating within the Iocos Norte Ecozone, including income
tax, withholding tax, donor's tax, percentage tax, and documentary stamp tax.
In lieu thereof and subject to Section 17 of this Act, said business
establishment shall pay a five percent (5%) final tax on their gross income
earned: Provided, That the proceeds from such final tax shall be shared by
instrumentalities of the government in accordance with the following
schedule:

a. Three per centum (3%) to the National Government;

b. Two per centum (2%) shall be directly remitted by the business
establishments to the treasurer's office of the municipality or city
where the enterprise is located.

SECTION 16. Administration, Implementation, and Monitoring of
Incentives. — In the interest of enhancing transparency in the management
and accounting of tax incentives in the Ilocos Norte Ecozone, the INSEZA
shall comply with the provisions of Republic Act No. 10708, otherwise known
as “The Tax Incentives Management and Transparency Act (TIMTA)” and its
implementing rules and regulations for proper administration, management,
enforcement, implementation, and monitoring of tax incentives under this
law.

The BOC shall set up and establish a customs-controlled area outside the
gate of the Mocos Norte Ecozone to facilitate payment of taxes on goods
entering the Philippine customs territory: Provided, That notwithstanding the
limitations in this Act, the INSEZA and BOC may coordinate and jointly
implement measures on border protection.

SECTION 17. Duration and Incentives. - Fiscal incentives under this
Act shall be terminated after a cumulative period of twenty (20) years from
date of registration or start of commercial operation, whichever is applicable,
except that it could be extended with regard to industries deemed
indispensable to national development and interest. The industries exempted
from this provision shall be determined by the INSEZA, in consultation with
other government agencies.

SECTION 18. Sequential Availment of Incentives. — Registered
enterprises may enjoy the income tax holiday (ITH) granted by INSEZA prior
to the availment of the five percent (5%) final tax on gross income earned
incentive: Provided, That in the event a registered enterprise elects to avail of
the final tax incentive, such registered enterprise shall be barred from availing
the ITH incentive.

Registered enterprises, if eligible, may register for incentives with other
investment promotion agencies: Provided, That registered enterprises electing
to avail of the incentives of other promotion agencies shall not be able to avail
of the incentives of the Ilocos Norte Ecozone until the expiration of the
incentives with such other investment promotion agencies.



SECTION 19. Extension of Period of Availment. - The INSEZA may
extend period of the validity of the incentives extended to a registered
enterprise in the event that it suffers, due to force majeure, a cessation or
suspension of operations that impairs its viability or profitability.

SECTION 20. Banking Rules and Regulations. — Banks and financial
institutions to be established in the Ilocos Norte Ecozone shall be under the
supervision of the BSP and subject to existing banking laws, rules, and
regulations.

SECTION 21. Remittances. — In the case of foreign investments, a duly
registered entity or enterprise within the Ilocos Norte Ecozone shall have the
right to remit earnings from the investment in the 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,
otherwise known as the “New Central Bank Act.”

CHAPTER 4.
NATIONAL GOVERNMENT AND OTHER ENTITIES

SECTION 22. Supervision and Control. — For purposes of policy
direction and coordination, the INSEZA shall be under the direct control and
supervision of the Office of President of the Philippines.

SECTION 23. Development Goals of the Ilocos Norte Ecozone. - The
INSEZA shall determine the development goals for the Ilocos Norte Ecozone
within the framework of national development plans, policies, and goals. The
Chairperson and Administrator shall, upon approval by the Board, submit the
Nlocos Norte Ecozone plans, programs, and projects to the Regional
Development Council for inclusion and inputs to the overall regional
development plan.

SECTION 24. Relationship with Local Government Units. - Except as
herein provided, the LGUs comprising the Ilocos Norte Ecozone shall retain
their basic autonomy and identity. The Municipalities of Badoc, Currimao,
Paoay, and Laoag City in Mocos Norte shall operate and function in
accordance with the framework of the 1987 Constitution, Local Government
Code of 1991, and this Act.

In case of any conflict among the INSEZA, the LGUs, and the National
Government on matters affecting the Ilocos Norte Ecozone, other than
national defense and security matters, the decision of the INSEZA shall
prevail.

SECTION 25. Audit. - The Commission on Audit (COA) shall appoint a
full-time auditor in the INSEZA or may assign such number of personnel as
may be necessary in the performance of their functions.


CHAPTER 5.
MISCELLANEOUS PROVISIONS

SECTION 26. Interpretation/Construction. — The powers, authorities
and functions that are vested in the INSEZA are intended to establish national
self-sufficiency and self-reliance in the advancement of and protection of the
national integrity, enhancement of national security, decentralization of
government functions and authority, and promote an efficient and effective
working relationship among the INSEZA, the National Government and the
LGUs. Any interpretation of this Act shall consider such intentions. In the
event of conflict of interpretation and provided by the intentions cannot be
harmonized, the provisions of this Act shall be construed in favor of an
interpretation that would tend to protect national security.

SECTION 27. Applicability Clause. ~ Insofar as they are inconsistent
with the provisions of this Act, the provisions of Section 3o to 41 of Republic
Act No. 7916, otherwise known as “The Special Economic Zone Act of 1995,”
as amended, shall likewise apply to the Ilocos Norte Ecozone.

SECTION 28. Implementing Rules and Regulations. — The National
Economic and Development Authority (NEDA), in coordination with the DTI
and DOF, shall formulate the implementing rules and regulations of this Act
within ninety (90) days after its approval.

SECTION 29. 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 30. Repealing Clause. - Any provision of law, decree, order,
rule or regulation inconsistent with this Act is hereby repealed and/or
modified accordingly.

SECTION 31. Effectivity. - This Act shall take effect fifteen (15) days

after its publication in the Official Gazette or in a newspaper of general
circulation.

Approved,