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13TH CONGRESS OF THE RFPUBLIC ) 
OF THE PHILIPPINTS 
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First Regular Session 
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Explanatory Note 
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Enhancing the vitality i of Small and Medium Enterprises (SMEs) is of pivotal 
importance in maintaining P 
ppme dynamism into the 21st century. SMEs are major 
vehicles in the growth and sustainable development of a globally competitive Phihppine 
economy. 
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Efforts geared toward nurturing SMEs must have sound basis on development in the 
SMEs must be attuned to the overall trends that create opportunities, 
Nurturing and supporting our SMEs will definitely go a 
global market arena. 
challenges and risks for business. 
long way in bringmg the country forward. 
Considering that the government operates on h t e d  resources, programs of 
assistance to the SMEs should give priority to enterprises that exhibit a strong capability to 
grow and to eventually develop into globally competitive enterprises. 
Ths proposed measure seeks to establish business incubators in strategically viable 
locations throughout the country, preferably in economic zones or places near academic 
institutions. Incubators are useful and cost-effective instruments in promoting the survival of 
new enterprises during their early years of existence by providing a work environment that 
readily make available business facdities and services as well as technical and managerial 
support. 
Incubators, thus, hasten the transformation of selected, early-stage business with 
high potential, into self-sufficient, growing and profitable businesses. 
To encourage private sector participation, private business incubators can avail of tax 
incentives provided under Book I of the Omnibus Investments Code of 1987 for a period of 
five (5) years. A revolving fund, which will be properly allocated to the vadous business 
incubator facilities, shall be created to provide loans to small fum tenants. 
R e c o p i n g  the benefits of small and medium enterprises in realizing growth for the 
countq, government should prioritize the promotion of SMEs as a key strategy in attaining 
sustained economic progress. 
The business climate and policy environment must be 
conducive to the survival and sustained growth of SMEs. 
Hence, approval of this bill is earnestly requested. 
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13TH CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
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First Regular Session 
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S E N A T E  
S. BILL NO. 
AN ACT 
PROMOTING SMALL BUSINESS LOCATION AND INCUBATOR PROGRAM 
Be zt enacted 5 the Senate and House $Rtpsentatzves 4th Pbzhjpznes zn Congress assembled 
PRELIMINARY PROVISIONS 
SECTION 1. Short Title. -This Act shall be known as the "Small Business Location and 
Incubator Act of 2004." 
SEC. 2. Declaration ofPolicy. - It is hereby declared the policy of the State to promote 
the development of the small business sector. 
Towards this end, the State shall establish 
business incubators in strategically viable locations as well as encourage the formation of private 
business incubators throughout the country to promote livelihood development, increase local 
employment and income, and broaden the tax base. 
SEC. 3. Business Incubator Def?med - A business incubator is an organization set up 
for the specific purpose of nurturing young enterprises by providing common office and service 
facilities as well as a wide range of services including facilitating technology transfer, providing 
marketkg assistance, and offering technical advice and information. It is the sharing of resources 
that yields the economies of scale that the fledgling enterprises so badly need. 
SEC. 4. As a Development Strategy - A business incubator shall be considered a 
vehicle for economic development. As a development strategy, public business incubators must 
be integrated into the economic development plan. 
They shall act as the focal point for 
community development. 


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GENERAL GUIDELINES 
SEC. 5. - Eitablishment of Business Incubators. - The State shall establish small 
business incubators 
viable Iocations throughout the country, preferably in economic zones or 
places near universities and other academic institutions, where it may be strategically 
advantageous to  the^ development of industrial linkages between small and medium to large 
enterprises. Pilot bus$ess incubators may be established before implementing the small business 
incubator program on a wider scale. 
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SEC. 6. T-gs ofBusiness Incubators. - Small business incubators shall be any but not 
limited to the follov&g types: (a) private, public or mixed; @) university-based or corporate- 
sponsored; (c) for prbfit or non-protit. Private and government corporations, non-government 
organizations @GO\) and people's organizations (POs) may also establish small business 
incubators. 
Private ;business incubators may be profit-oriented corporations, school-based or 
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run by charitable andlor religious institutions and/or organizations. 
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SEC. 7. Speaific Services. - The small business incubators shall among others, provide 
the following service?: flexible rental terms; on-site business assistance; assistance Ln obtaining 
financing, shared supkort services; flexible leases, flexible space arrangements, employee training, 
clerical sewices, telephone answering, typing, copying, data processing, bookkeeping, legal 
assistance, technolo& transfer, marketing and technical assistance. 
The incubatois offer the entrepreneur tenants opportunities to socialize, exchange ideas 
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and experiences, and bo business with each other. 
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SEC. 8. Requirements for setting Up Public Business Incubators. - In setting up a 
public business incubator, the following guidelines shall be followed 
(1) For public business incubators to be established, the following requirements shall be 
met: (a) a market of potential entrepreneurs; (b) a project champion or project leader; (c) a small, 
committed, support and organizing group; (d) an active support by the community; (e) a 
financing scheme adapted to the chosen approach. 
(2) The emphasis of public business incubators shall be on nurturing viable ventures that 
already exist in a given geographic area rather than promoting the movement of businesses from 
one geographic area to another; 
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(3) It is important that the role of the intended incubator be made explicit in the context 
of regional and local economic development, to ensure the congruence of the business 
incubation proposals with the local development plan. 
(4) The DTI, in coordination with the SMED Council, DOST, UP-ISSI and other 
concerued agencies shall set the general criteria/framework on the selection and graduation of 
candidste entrepreneurs and/or tenants/locators. 
MANAGEMENT OF PUBLIC BUSINESS INCUBATORS 
SEC. 9. Board of Directors. - The Board of Directors shall have the supervision and 
control over a small business incubator. It shall have the responsibility of overseeing and 
ensuring that the established national policies and standards for the effective and economical 
operation of the small business incubator are met and implemented. It shall provide pdance in 
the implementation of rules and regulations, plans, programs and projects of the small business 
incubator including the evaluation process of admitting and graduating tenants/locators. 
The Board shall have seven (7) members, to be selected from the local Chamber of 
Commerce and IndustrylSME or business sector, academe, banking, science and technology, the 
Provincial Small and Medium Enterprise Development Council, local government officer/s 
concerned and the Administrator. 
SEC. IO. Adminiswator. - A qualified individual and/or professional entity/ies with 
adequate and appropriate expertise shall head the drive to establish and run an incubator facility. 
The Administrator shall have the responsibility of implementing laws, rules and regulations, 
plans, programs and projects of the incubators; providing efficient and effective services to the 
small business incubators' tenants; coordinating resource requirements and other functions as 
may be required in the management of the small business incubator. 
SEC. 11, Location. - The Department of Trade and Industry (DTI) in consultation with 
the Depariment of Science and Technology (DOSq and other concerned agencies shall be 
responsible for the overall countrywide planning and distribution of public small business 
incubators (SBls). The regional, provincial/city and municipal development councils shall be 
responsible for planning and designating the zones for SME locations. 
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SEC. 12. Fees and Charges. - Small Business Incubators (SBls) shall be authorized to 
charge fees and charges in accordance with Executive Order No. 159 and other existing laws. 
SEC. 13. Grants and Donations. - All public business incubators and those run by the 
NGOs and/or POs shall be authorized to solicit and/or receive grants and donations from local 
and foreign institutions. 
SEC.14. Transfer of Management and Control - An appropriate scheme shall be 
provided to effect a gradual transfer of management and control of all state-run business 
incubators to people's or community-based organizations within a m a h u m  of ten years. 
INCENTIVES 
SEC. 15. Tax Incentives. - Private Business Incubators shall be eligible to avail of 
incentives such as tax holidays, and other incentives provided under Book 1 of the Omnibus 
Investments Code of 1987 for a period of five (5) years. 
SEC. 16. Loan Fund -The Small Business Guarantee and Finance COT. (SBGFC) shall 
create a revolving fund (which will be properly allocated to the various business incubators) to 
provide loans to small firms tenants within the incubator facilities. Firm tenants from private 
business incubators (those operated by individuals, companies, NGOs or POs) may also avail of 
this loan fauhty provided they can show proof of the "Certificate of Compliance" provided 
under Section 17 of this Act. 
SEC. 17. Certifjcate of Compliance. - Private business incubators applying for 
availment of the loan facility mentioned in the immediately preceding section shall obtain from 
the Department of Trade and Industty (DTI) a "Certificate of Compliance'' to ensure that the 
minimum requirements for the establishment of business incubators set under this Act are being 
complied with. 
APPROPRIATION 
SEC. 18. Appropriation. -The amount necessary to implement the provisions of this Act 
shall be included in the General Appropriations Act of the year following its enactment into law 
and thereafter. 
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MISCELLANEOUS PROVISIONS 
SEC. 19. :LeadAgency - The DTI shall be the lead agency responsible for direction 
setting and overall implementation of h
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 Act and shall have the power of governance and 
supervision over (the national business incubator program. It is hereby empowered to form an 
Executive C o d t t e e  composed of the DOST, UP-ISSI, representatives from the business 
sector and non-dovemment organizations, among others, to administer the business incubator 
program. 
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SEC. 20.1 Implementing Rules and Regulations. - The DTI, through the SMED 
Council, in coopiration with the DOST, DILG, DOF, DECS, UP-ISSI and other concerned 
agencies shall 4ormulate the general rules and regulations necessary for the effective 
implementation a f  the intents and provisions of this Act 
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SEC. 21. IRepeaLing Clause. -All laws, decrees, executive orders, d e s  and regulations 
01 parts thereof, khich are inconsistent with this Act, are hereby repealed, amended or modified 
accordingly. 
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SEC. 22. ;Separability Clause. - If any provision of this Act is held unconstitutional or 
invalid, all other provisions not affected thereby shall remain valid. 
SEC. 23 kffectidty. - This Act shall take effect fifteen (15) days following its publication 
in the Official Gazette or in at least two (2) newspapers of general circulation, whichever comes 
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Appmved, ' 
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