HOUSE "F REPRESENTATIVES
RECEIVED

DATE:_30 JUN 2018

Republic of the Philippines
HOUSE OF REPRESENTATIV

Quezon City ov Beh
By:
SEVENTEENTH CONGRESS}
Second REGISTRATION UNIT
First Regular Session BILLS AND INDEX SERVICE

HOUSE BILL NO. 995

Introduced by REP. PROSPERO A. PICHAY, JR.

EXPLANATORY NOTE

Central to the government's economic agenda is economic dynamism and
competitiveness with increased investments, business opportunities, and job generation
But with competition posed by neighboring countries with lower production costs, especially
in the export industry, the journey toward this goal will travel at a slow pace

For instance, China has been edging its Asian neighbors in enticing foreign
investors, particularly for their export industry, due to its increasing number and magnitude
of economic zones with low production costs. In so doing, it has been displacing our own
export industry thereby causing shrinking businesses and job losses. To gain back a
steady footing in the export industry, we need to bring the battle to the countryside where
there are lower costs of production and vast natural and human capital. To more
effectively achieve this, we need to establish more economic zones in favorable geographic
Positions such as Surigao de! Sur.

Surigao del Sur, being strategically situated along the boarder area, allowing for
easy transit of goods, having sufficient road networks and sea and air transportation
infrastructure, and being blessed with raw materials and human capital at varying levels of
skills and trades, is surely a viable location for a special economic zone.

The proposed Surigao del Sur economic, mining zone and freeport will not only
contribute to the development of their province, but also concomitantly contribute to regional
and national development as the capital, technological, and knowledge spillovers of the
ecozone will filter throughout the country thereby helping attain the government's agenda of
economic dynamism and competitiveness.

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

PROSPERO A, PICHAY, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 595

Introduced by REP. PROSPERO A. PICHAY, JR.

AN ACT
ESTABLISHING THE SURIGAO DEL SUR SPECIAL ECONOMIC, MINING ZONE
AND FREE PORT IN THE MUNICIPALITIES OF CARRASCAL, CANTILAN, MADRID,
CARMEN, AND LANUZA, PROVINCE OF SURIGAO DEL SUR, PROVIDING FUNDS
THEREFOR, AND FOR OTHER PURPOSES.

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

SECTION 1. Short Title. - This Act shall be known as the “Surigao del Sur
Special Economic, Mining Zone and Free Port Act of 2016."

SEC. 2. Declaration of Policy. — It is hereby declared the policy of the State to
actively encourage, promote, induce and accelerate the 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 family income,

. and thereby improve the level and quality of living conditions through the establishment,
among others, of special economic zones in suitable and strategic locations in the
country and through measures that will attract legitimate and productive foreign
investments.

SEC. 3. Creation of the Surigao del Sur Special Economic, Mining Zone and
Free Port Act of 2016. — In accordance with the foregoing declared policy, there is
hereby established a Special Economic Zone and Free Port in the Municipalities of
Carrascal, Cantilan, Madrid, Carmen, and Lanuza in the Province of Surigao del Sur to
be known as the Surigao del Sur Special Economic Zone and Free Port Act, hereinafter
referred to as Surigao del Sur Ecozone. The specific metes and bounds of the Surigao
del Sur Special Economic Zone and Free Port Act shall be more particularly defined in a
presidential proclamation that shall be issued for this purpose.

SEC. 4. Governing Principles. - The Surigao del Sur Special Economic, Mining
Zone and Free Port shall be managed and operated by the Surigao del Sur Special


Within the framework and limitations of the Constitution and applicable
provisions of the Local Government Code, the Surigao del Sur 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 Surigao del Sur 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 Municipalities of, Carrascal, Cantilan,
Madrid, Carmen, and Lanuza and its neighboring towns and cities.

The Surigao del Sur Ecozone may establish a mutually beneficial
economic relation 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 Surigao del Sur Ecozone,
either by themselves or in a joint venture with Filipinos in any sector of
industry, international trade and commerce within the Surigao del Sur
Ecozone.

The Surigao del Sur Ecozone shall be managed and operated as a
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 Surigao del Sur Ecozone to the other parts of the Philippine territory
shall be subject to customs duties and taxes under the Customs and
Tariff Code and other relevant tax laws of the Philippines.

The areas comprising the Surigao del Sur Ecozone may be expanded
or reduced when necessary. For this purpose, the SDSEZA, in
consultation with the local government units, shall have the power to
acquire either by purchase, negotiation or condemnation proceedings,
any private land within or adjacent to the Surigao del Sur Ecozone for
the following purposes: (1) consolidation of lands for zone development;
(2) acquisition of right of way to the Surigao del Sur Ecozone; and (3)
the protection of watershed areas and natural assets valuable to the
prosperity of the Surigao del Sur Ecozone.

Goods manufactured by a Surigao del Sur 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 SDSEMZA together with the
PEZA, the Bureau of Customs and the 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 Surigao del Sur Ecozone and the security of its
perimeter fence shall be the responsibility of the national government in
coordination with the Surigao del Sur Ecozone and the local
government units.

Sec. 5. Incentives To Registered Enterprises — The Surigao del Sur Special
Economic Zone and Free Port Authority (SDSEMZA) may administer the following
incentives to the registered enterprises located therein to the extent of the
activity/project:

A. Income Tax Holiday (ITH) — Registered enterprises shall be entitled to an
income tax holiday from the start of their commercial operations to the extent of their
activity under the following categories:

Category A — registered domestic enterprise located in highly developed areas,

as determined by the Board of Investments (BOI), shall be entitled to a four-year

income tax holiday.

Category B — registered domestic enterprise on the following shall be entitled to a

six -year income tax holiday:

(1) Located in less developed areas as defined by the BOI; or
(2) Producing/rendering new products/services or having strong backward
or forward linkages

Category C — Registered export enterprise shall be entitled to a six-year income

tax holiday: Provided, However, That if the export enterprise complies with the

following: (1) large capital investments or sizeable employment generation, or

(2) use high level of technology or (3) located outside Metro-Manila, it shall be

entitled to an eight-year income tax holiday.

Registered enterprises embarking on new investments that are listed in the

, current Investment Priorities Plan (IPP) shall be entitled to incentives provided herein
pertaining to the new investments and subject to such terms and conditions as the BOI
may determine.

Additional investments in the project shall be entitled to the income tax holiday
corresponding to such investments as may be determined by the BOI. Additional
income tax holiday may be granted for as long as the investment is made on the same
project. Provided, That the project is listed in the IPP at the same time the additional
investment in the project is made: Provided, Further, That the entitlement period for
additional investments shall not exceed three times the period provided under this
subsection: Provided, However, That the total ITH period for an export enterprise
availing of an eight year ITH shall not exceed twenty (20) years. Any unused incentives
shall therefore be deemed forfeited if not used during the incentive period.

Enterprises registered with SDSEZA are required to share in the special
development fund of the BOI for investment promotion projects of the government
equivalent to one percent (1%) of the ITH granted for every application.


The Bureau of Internal Revenue (BIR) shall require a registered enterprise
availing of ITH or NOLCO to secure a certificate of eligibility from the SDSEZA before
submitting its income tax return (ITR) with SDSEZA for validation.

Failure to secure certification and/or to file the ITH or NOLCO availment for
validation by the SDSEZA within forty-five (45) days from the last day of each statutory
filing date for ITR shall cause the forfeiture of the availment for the taxable period.

B. Net Operating Loss Carryover (NOLCO) — Net operating loss of the business or
enterprise during the first three years from start of commercial operations which
have not been previously offset as deduction from gross income shall be carried
over as a deduction from gross income for the next five consecutive years
immediately following the year of such loss: Provided, However, That operating
loss resulting from availment of incentives provided in this code shall not be
entitled to NOLCO.

Registered enterprises availing of the ITH as herein provided shalll not be entitled
to avail of the NOLCO.

C. Imposition of a tax rate of five percent (5%) on Gross Income Earned (GIE) -
Except for real property tax on land, no local and national taxes as prescribed
under Republic Act No. 8424, also known as “The National Internal Revenue
Code of 1997, as amended” such as income tax, excise tax, franchise taxes,
shall be imposed on business establishments operating within Surigao del Sur
Ecozone. In lieu thereof, 5% of the gross income earned shall be paid as
follows:

a. Three percent (3%) to the national government;
b. Two percent (2%) shall be directly remitted by the business
establishments to the treasurer's office of the municipality or city.

All persons and service establishments in the Surigao del 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.

D. Accelerated Depreciation — Accelerated depreciation of plant, machinery and

, equipment that are reasonably needed and actually used for the production and
transport of goods and services may be allowed using a rate not exceeding twice the
rate which would have been used had the annual allowance been computed in
accordance with the rules and regulations prescribed by the Secretary of Finance and
the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended.

—. Capital Equipment Incentives - (1) Importations of capital equipment, spare
parts, tools and dye, or those required for pollution abatement and control, cleaner
production and waste reduction including consignment thereof by registered enterprises
upon the effectivity of this law, shall be exempted to the extent of one hundred percent
(100%) of the taxes and customs duties: Provided, That the importation thereof shall be
used exclusively by the registered enterprise in its registered activity: Provided, Further,
That the importation of machinery and equipment and accompanying parts shall comply
with the following conditions:

i. They are not manufactured domestically in sufficient quantity, of

comparable quality and at reasonable prices;

ii, | They are reasonably needed and will be used exclusively by the

registered enterprise in the manufacture of its products, unless prior approval of


the SDSEMZA is secured for the part time utilization of said equipment in a non-

registered activity to maximize usage thereof or the proportionate taxes and

duties are paid on a specific equipment and machinery being permanently used
for non-registered activities; and

ii Approval of the SDSEMZA was obtained by the registered enterprise for

the importation of such machinery, equipment and spare parts.

Approval of the SDSEMZA must be secured before any sale, transfer or
disposition of the imported capital equipment, machinery or spare parts is made:
Provided, That if such sale, transfer or disposition is made within the first five years from
date of importation, any of the following conditions must be present:

1) The same is made to another enterprise enjoying tax and duty
‘exemption on imported capital equipment;

2) The same is made to another enterprise, upon the payment of any
taxes and duties on the net book value of the capital equipment to be
sold;

3) The exportation of the capital equipment, machinery, spare parts or
source documents or those required for pollution abatement and
control; and

4) Proven technical obsolescence of the said equipment, machinery or
spare parts.

When the aforementioned sale, transfer or disposition is made under any of the
conditions provided for in the foregoing paragraphs other than paragraph (2) herein, the
registered firm shall not pay the taxes and duties waived on such items: Provided,
Further, That if the registered enterprises sell, transfer or dispose the aforementioned
imported items without prior approval within five years from the date of importation, the
registered enterprise and the vendee, transferee, or assignee shall be solidarily liable to
pay twice the amount of the tax and duty exemption given it: Provided, Finally, That
even if the sale, transfer or disposition of the capital equipment, machinery or spare
parts is approved after five years from date of importation, the registered enterprises are

_ Still liable to pay the taxes and duties based on the net book value of the capital
equipment, machinery or spare parts if any of the registration terms and conditions has
been violated. Otherwise, they shall no longer be subject to the payment of the taxes
and duties waived thereon.

(2) The purchase of machinery, capital equipment, raw materials, supplies,
parts and semi-finished products to be used in the fabrication of machinery and capital
equipment by a registered export-oriented enterprise from a domestic manufacturer
shall be subject to zero percent (0%) value-added tax.

The registered export-oriented enterprise shall be granted a tax credit equivalent
to the amount of duties that would have been waived on the machinery, capital
equipment; raw materials, supplies, parts and semi-finished products used in the
fabrication of machinery and capital equipment, had these items been imported, upon
its submission to the DOF of the bill of materials evidencing the transaction value of
such and other pertinent documents, for verification and proper endorsement.

The availment of the incentives by a registered export enterprise provided under
the immediately preceding two paragraphs shall be subject to the following conditions:
(a) That said capital equipment, machinery and spare parts will be used exclusively by


the registered enterprise in its registered activity; (b) That the capital equipment or
machinery where the raw materials, supplies, parts and semi-finished products were
used would have qualified for tax and duty-free importation; and (c) That the approval of
the SDSEZA is obtained by the registered enterprise. If the registered enterprise sells,
transfers or disposes of these machineries, capital equipment and spare parts, the
provision in the preceding paragraphs for such disposition shall apply.

This incentive shall be deemed waived if application for tax credit under this
subsection was not filed within one year from date of delivery.

The importation of source documents by information technology-
registered enterprises shall be eligible for tax and duty free importation.

G. Raw Materials Incentives - Every registered export-oriented enterprise
shall enjoy a tax credit equivalent to the internal revenue taxes and customs duties paid
‘on the supplies, raw materials and semi-manufactured products provided the same are
not sufficient in quantity, quality or are not competitively priced which are used in the
manufacture, processing or production of its export products forming part thereof,
exported directly and indirectly by the registered export-oriented enterprise, based on
the actual taxes and duties paid for such materials/supplies/semi-manufactured
products by the registered enterprise.

This incentive shall be deemed waived if application for tax credit under this
subsection was not filed within one year from date of exportation of the final product.

H. Incentives on Breeding Stocks and Genetic Materials. - Importation of
breeding stocks and genetic materials within ten (10) years from the date of registration
of commercial operation of the enterprise shall be exempt from all taxes and duties:
Provided, That such breeding stocks and genetic materials are reasonably needed in
the registered activity; and approved by the SDSEMZA.

Availment of the incentives by a registered enterprise shall be subject to the
following: (a) that said breeding stocks and genetic materials would have been qualified
for tax and duty-free importation under the preceding paragraph; (b) that the breeding
stocks and genetic materials are reasonably needed in the registered activity; (c) that

_ approval of the SDSEMZA has been obtained by the registered enterprise; and (d) that
the purchase is made within ten (10) years from the date of registration of commercial
operation of the registered enterprise.

This incentive shall be deemed waived if application for tax credit under this
subsection is not filed within one year from date of delivery.

|. Exemption from Wharfage Dues. - The provisions of law to the contrary
notwithstanding, exports by a registered enterprise shall be exempted from wharfage
dues.

J. Deferred Imposition of the Minimum Corporate Income Tax. - The Minimum
Corporate Income Tax (MCIT) of two percent (2%) of the gross income as of the end of
the taxable year shall be imposed when the MCIT is greater than the income tax
computed under the NIRC of 1997, as amended, for the taxable year: Provided,
However, That said MCIT shall be imposed only after the enterprise’ entitlement period
to the income tax-based incentives.

K. (1). Tax treatment of merchandise in the Surigao del Sur Ecozone. —

(A) Except as otherwise provided in this Act, foreign and domestic
merchandise, raw materials, supplies, articles, equipment,


(B)

(c)

(D)

(E)

(F)

(G)

machineries, spare parts and wares of every description,
‘except those prohibited by law, brought into the zone to be
sold, stored, broken up, repacked, assembled, installed, sorted,
cleaned, graded, or otherwise processed, manufactured, mixed
with foreign or domestic merchandise whether directly or
indirectly related in such activity, shall not be subject to
customs and internal revenue laws and regulations nor to local
tax ordinances, any provision of law to the contrary
notwithstanding

Merchandise purchased by a registered Surigao del Sur
Ecozone enterprise, from the customs territory and
subsequently brought into the export processing zone, shall be
considered as export sales and exportation thereof shall be
entitled to the benefits allowed by law for such transaction.
Domestic merchandise sent from the Surigao del Sur Ecozone
to the customs territory shall whether, or not combined with or
made part of other articles likewise of local origin or
manufactured in the Philippines while in the export processing
zone, be subject to internal revenue laws of the Philippines as
domestic goods sold, transferred or disposed of for local
consumption.

Merchandise sent from the Surigao del Sur Ecozone to the
customs territory shall, whether or not combined with or made
part of other articles while in the zone, be subject to rules and
regulations governing imported merchandise. The duties and
taxes shall be based on the value of said imported materials
(except when the final product is exempt).

Domestic merchandise on which all internal revenue taxes have
been paid, if subject thereto, and foreign merchandise
previously imported on which has been paid, or which have
been admitted free of duty and tax, may be taken into the
Surigao del Sur Ecozone from the customs territory of the
Philippines and be brought back thereto free of quotas, duty or
tax.

Subject to such regulations respecting identity and
safeguarding of revenue as the SDSEZA may deem necessary
when the identity of an article entered into the export
processing zone under the immediately preceding paragraph
has been lost, such article when removed from the zone and
taken to the customs territory shall be treated as foreign
merchandise entering the country for the first time, under the
provisions of the Tariff and Customs Code of the Philippines, as
amended.

Articles produced or manufactured in the Surigao del Sur
Ecozone and exported therefrom shall, on subsequent
importation into the customs territory, be subject to the import


laws applicable to like articles manufactured in a foreign
country.

(H) Unless the contrary is shown, merchandise taken out of the
Surigao del Sur Ecozone shall be considered for tax purposes
to have been sent to customs territory.

(2). Tax treatment of. Merchandise in the Surigao del Sur Ecozone. - The

Surigao del Sur Special Economid"Zone ‘and Free Port shall be operated and managed
as a separate customs territory ensuring free flow or movement of goods within, into
and exported out of the free trade/freeport zone. Importations of raw materials, and
capital equipment are tax and duty free. However, exportations or removal of goods
from the free trade/freeport zones to the other parts of Philippines territory shall be
subject to customs and internal revenue regulations.

(3). Tax treatment of services in the Surigao del Sur Ecozone. —

(A) Sale of service by an entity from the customs territory to a
registered ecozone or free trade enterprise, or by a registered
ecozone or freeport enterprise to another ecozone or freeport
enterprise shall be treated as indirect export, and hence, entitled
to the benefits allowed by law for such transaction.

(B) Sale or service by a registered ecozone or freeport enterprise to
the customs territory shall be subject to applicable internal
revenue laws and regulations.

L. Registered export oriented enterprise shall have access to the utilization of
the bonded warehousing system in accordance with the rules and regulations
of the Bureau of Customs.

M. Employment of Foreign Nationals. - Subject to the provisions of Section 29
of Commonwealth Act No. 613, as amended, a registered enterprise may
employ foreign nationals in supervisory or technical positions for a period not
exceeding ten (10) years from its registration: Provided, That when the
majority of the capital stock of a registered enterprise is owned by foreign
investors, the positions of the president, treasurer and general manager or
their equivalents may be retained by foreign nationals beyond the period set
forth herein and such officer is the owner or a stockholder owning at least ten
percent (10%) of the outstanding capital stock of the registered enterprise and
he remains the owner or maintains his stockholdings therein.

Foreign nationals under employment contract within the purview of this incentive,
their spouses and unmarried children under twenty-one (21) years of age, who are not
excluded by Section 29 of Commonwealth Act No. 613, as amended, shall be permitted
to enter and reside in the Philippines during the period of employment of such foreign
nationals. They shall be issued a multiple entry visa, valid for a period of three years,
and shall be allowed to enter and leave the Philippines without further documentary
requirements other than valid passports or other travel documents in the nature of
passports. The validity of the multiple entry visa shall be extendible yearly.

The foreign nationals admitted herein, as well as their respective spouses and
dependents shall be exempt from obtaining alien certificate of registration and
emigration clearance certificates permits, licenses or their equivalents required by any
government department or agency.


Sec. 6. Incentive to Investors — Any foreign national covered under Subsection
(M) of Section 5 of this Act, who invests an amount of US $ 150,000.00, either in cash
and/or equipment, in a registered enterprise shall be entitled to an investor's visa:
Provided, That,

(1) He is at least eighteen (18) years of age;

(2) He has not been convicted of a crime involving moral turpitude;

(3) He is not afflicted with any loathsome, dangerous or contagious disease;

(4) He has not been institutionalized for any mental disorder or disability
Provided, further, That in securing the investor's visa, the alien-applicant shall be
entitled to the same privileges provided for under paragraph (M) Section 5 hereof.

‘As holder of investor's visa, an alien shall be ontitled to reside in the Philippines
while his investment subsists. For this purpose, he should submit an annual report, in
the form duly prescribed for the purpose, to prove that he has maintained his investment
in the country. Should said alien withdraw his investments from the Philippines, then
the investor's visa issued to him shall automatically expire

Sec. 7. Resolution of Labor Disputes. - The right of labor to form unions or
associations shall be observed. However, strikes and lockouts shall be prohibited within
the economic and freeport zone, notwithstanding the provisions of the Labor Code and
other pertinent laws. Labor disputes shall be resolved through mediation, conciliation
and such other modes of dispute resolution authorized by law.

Sec. 8. Administration, implementation and Monitoring of Incentives. - The
SDSEMZA shall be responsible for the administration and implementation of the
incentives granted to its respective registered enterprises: Provided, That any incentive
administration policy adopted by the BO! for registered enterprises shall be uniformly
applied by SDSEMZA.

The foliowing are the duties and responsibilities of the SDSEMZA in the
administration of incentives:

(A) To adopt consistent procedures of administering incentives in accordance

with the guidelines established by the BOI;

(B) To adopt and implement systems and procedures affecting trade and
customs policies in accordance with the requirements established by the
Department of Finance (DOF) and the BOI;

(C) To submit data and information to the DOF and the BOI as required by any
of these agencies to ascertain consistency of investment policies and
incentives, including their implementation as provided in paragraph (a)
herein, and to ensure proper implementation of systems and procedures
affecting trade and customs policies as provided in paragraph (b) herein;
and

(D) To perform all other duties and responsibilities as may be required by the
President of the Philippines.

For proper monitoring, the BO! shall create a single database of all incentives

provided by all incentives granting agencies, including SDSEMZA, and all


information thereto. Double entry accounting shall be done by the BO! in
recording all incentives granted by the government for transparency purposes.

Sec. 9. Extension of Period of Availment. - The availment period of the
incentives provided herein may be extended by SDSEMZA, in the event that the
registered enterprise suffers operational force majeure of any event equivaient thereio,
impairing its viability.

Sec. 10. Duration of Incentives. - Enterprises registered with SDSEMZA may
enjoy ITH or NOLCO granted by the latter prior to the availment of the five percent (5%)
GIE

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.

The industries exempted from this provision shall be recommended by BOI, with
the concurrence of the Secretaries of the Department of Finance and Trade and
Industry.

SEC. 11. Creation of the Surigao de! Sur Special Economic, Mining Zone
and Free Port Authority. - There is hereby created a body corporate to be known as
the “Surigao del Sur Special Economic, Mining Zone and Free Port Authority”
hereinafter referred to as the SDSEMZA, which shall manage and operate the Surigao
del Sur Ecozone, in accordance with the provision of this Act. This corporate franchise
shall expire 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.

SEC. 12. Principal Office of SDSEMZA. - The Surigao de! Sur Special
Economic Zone and Free Port Authority shall maintain its principal office in the
Municipality of Cantilan but it may establish branches within the Philippines as may be
necessary for the proper conduct of its business.

SEC. 13. Powers and Functions of the Surigao del Sur Special Economic,
Mining Zone and Free Port Authority. - The Surigao del Sur Special Economic Zone
and Free Port Authority shall have the following powers and functions:

a) To operate, administer, manage and develop the Surigao del Sur
Ecozone according to the principles and provisions set forth in this
Act;

b) To recommend to the President of the Philippines the issuance of a
proclamation to fix and delimit the site of the Surigao de! Sur
Ecozone;

°) To register, regulate and supervise the enterprises in the Surigao
del Sur Ecozone in an efficient and decentralized manner, subject
to existing laws;


sued; and otherwise carry out its functions and duties as provided
for in this Act;

m) To issue certificates of origin for products manufactured or
processed in the Surigao del Sur Ecozone in accordance with the
prevailing rules of origin, and the pertinent regulations of the PEZA,
DTI and/or the Department of Finance (DOF).

n) To issue working visas renewable every two (2) years for foreign
executives and foreign technicians with highly specialized skills
which no Filipinos possesses, as certified by the Department of
Labor and Employment (DOLE);

9) 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 maybe 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

a To issue rules and regulations consistent with the provisions of this
Act as maybe necessary to accomplish and implement the purpose,
objectives and policies provided herein

Sec. 14. Banking Rules and Regulations. - _ Existing banking laws and
rules/regulations of the Bangko Sentral ng Pilipinas (BSP) shall apply to banks and
financial institutions to be established in the Surigao del Sur Ecozone, such as 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.

Sec. 15. Remittance of Earnings. — In the case of foreign investments, a
registered enterprise in the SDSEMZA shail 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 Section
74 of Republic Act No. 265, as amended

SEC. 16. Board of Directors of the Surigao del Sur Special Economic,
Mining Zone and Free Port Authority. — The powers of the SDSEZA 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
SDSEMZA;

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

°) Members consisting of:

(1) The Congressional Representative of the district covering the site of
the Surigao del Sur Ecozone;


a)

e)

9)

h)

To coordinate with local government units and exercise general
supervision over the development plans, activities and operation of
ecozones;

To regulate and undertake the establishment, operation and
maintenance of utilities, other services and infrastructure in the
Surigao del Sur Ecozone such as but not limited to heat, light and
power systems using indigenous and/or renewable and other
sources, water supply, telecommunications, transport, toll roads
and bridges, port services, etc. The SDSEZA shall have the power
to fix just, reasonable and competitive rates, fares, charges and
prices thereof, notwithstanding the provisions of the Electric Power
Industry Reform Act of 2001, and other pertinent laws.

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 by RA 7718), or joint venture, adequate facilities and
infrastructure required or needed for the operation and
development of the Surigao del Sur Ecozone, in coordination with
the appropriate national and local government authorities and in
conformity with applicable laws thereon;

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

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 or 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;

To provide security for the Surigao del Sur 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 ecozone and expenditures for these
military forces shall be borne by the national government. For this
purpose, the SDSEZA may establish and maintain its security
forces and firefighting capability or hire others to provide the same;
To protect, preserve, maintain and develop the virgin forests,
beaches, coral and coral reefs and maintain ecological balance
within the Surigao del Sur Ecozone;

To create, operate and/or contract to operate such functional units
or offices of the SDSEZA 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


(2) One (1) representative of the Provincial Government of Surigao del
Sur;

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

(4) One (1) representative from the foreign investors; and

(5) One (1) representative from the workers working in the Surigao del
Sur Ecozone

The Congressional representative and the representative of the Provincial
Government shall serve as ex-officio members of the Board, whose term in the Board
corresponds to their term as elected officials.

The Chairman and members of the Board, except the 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, the replacement shall serve
only the unexpired portion of the term

Except for the representative of the business and labor sectors, no person shall
be appointed 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 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 Management 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 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.

SEC. 17. 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 SDSEZA in accordance with
the policies of the Board;

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

(© 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 Surigao
del Sur Ecozone;

0) 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 Surigao de! Sur 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.


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

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

SEC. 19. Applicability Clause. — The provisions of Sections 30 to 41 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 enterprise, one-stop shop center and on industrial harmony in
ecozones, shall apply to the Surigao del Sur Ecozone.

SEC. 20. Capitalization. The Surigao del Sur Special Economic, Mining Zone
and Free Port Authority 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 Local Government Units (LGUs) embracing the Surigao del Sur Special
Economic Zone and Free Port. The Board of Directors of the SDSEMZA may, with the
written concurrence of the Secretary of Finance, sell shares, representing not more than
forty per centum (40%) of the capital stock of the SDSEMZA 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 per centum (60%) of the
total issued and outstanding capital of the Surigao del Sur Special Economic, Mining
Zone and Free Port Authority.

The amount necessary to subscribe and pay for the shares of the National
Government to the capital stock of the SDSEMZA 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.

SEC. 21. Supervision and Coordination of Development Plans. — For
purposes of policy direction and coordination, the Surigao del Sur Special Economic,
Mining Zone and Free Port shall be under the direct control and supervision of the
Office of the President of the Philippines.

SEC. 22. Relationship with the Regional Development Council. - The
Surigao del Sur Special Economic, Mining Zone and Free Port Authority shall determine


development goals for the Surigao de! Sur Ecozone within the framework of national
development plans, policies and goals. The Administrator shall, upon approval by the
Board, submit the Surigao del Sur Ecozone plans, programs and projects to the
Regional Development Council for inclusion and inputs for the overall regional
development plan

SEC. 23. Relationship with Local Government Units. - Except as herein
provided, the local government units comprising the Surigao del Sur Ecozone shall
retain their basic autonomy and identity. The Municipalities of Carrascal, Cantilan,
Madrid, Carmen, and Lanuza, shall operate and function in accordance with the Local
Government Code of 1991. in case of any conflict between the SDSEMZA and the
Province of Surigao del Sur on mailers affecting the Surigao del Sur Ecozone other
than defense and security matters, the decision of the SDSEMZA shall prevail

SEC. 24, Interpretation/Construction. — The powers, authorities and functions
that are vested in the SDSEMZA are intended to decentralize government functions and
authority and promote an efficient and effective working relationship between the
Surigao de! Sur Ecozone, the NG, and the local government units.

SEC. 25. Auditing. - The Commission on Audit shall appoint a representative
who shall be a full time auditor of the SOSEMZA 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 shail be in
accordance with pertinent laws, rules and regulations.

SEC. 26. Separability Clause. — If any provisions of this Act shall be held
unconstitutional or invalid, the other provisions not otherwise affected shall remain in full
force and effect.

SEC. 27. Repealing Clause. — All laws, executive orders or issuances, or any
parts thereof, which are inconsistent herewith are hereby repealed and amended
accordingly

SEC. 28. Effectivity Clause. — This Act shall take effect upon its publication in at
least one (1) newspaper of general circulation.

Approved,