Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon Cily
FIFTEENTH CONGRESS

Second Regular Session
House Bil No, 4949

Introduced by Hon. Rodolfo G. Biazon

EXPLANATORY NOTE

Congress, recognizing the need to modernize the Armed Forces of the Philippines
(AFP), enacted Republic Act No. 7898, otherwise known as the AFP Modernization Act, on
February 23, 1995, Said law was envisioned, among others, to develop the AFP's capability
to uphold the sovereignty and territorial integrity of the Republic and to secure the national
territory from all forms of intrusion and encroachment (Section 3a).

‘The AFP Modernization Act, through Section 7, also mandated the submission of a
modernization program for the AFP by the President, upon the recommendation of the
Secretaries of National Defense and Budget and Management, to be approved through a Joint
Resolution by the Senate and House of Representatives which shall indicate or show inter
alia: (1) the size and shape of the AFP in terms of personnel, equipment, and facilities during
the various phases of the modernization program; (2) the modernization projects under it,
including the major weapon and non-weapon equipment and technology acquisitions sought
by the respective services and units of the AFP, any major infrastructure construction or
improvement to be made and the particular objective(s) and component(s) under Sections 3
and 4, respectively, of this Act to which such intended acquisition, construction or
improvements belongs; and (3) the priorities, schedules as well as estimated average cost of
each modernization project or upgrading to be undertaken. Thus, on December 19, 1996,
Joint Resolution No. 28 entitled, “Joint Resolution Expressing The Approval By Both Houses
Of Congress Of The AFP Modernization Program, Pursuant To Republic Act No. 7898,
Otherwise Known As “The AFP Modernization Act,” was approved.

Using the approval of Joint Resolution No. 28 as the reckoning date of the start of its
implementation, the AFP Modernization Program will expire December of this year.
Moreover, certain provisions of RA 7898 and the AFP Modernization Program need to be
adjusted in order to make them more responsive to a continuously changing international and
regional security environment. When it was conceived, RA 7898 was based on the
assumption that counter insurgency operations or threats to the State’s internal security will


no longer be the prime responsibility of the AFP. The law therefore, was crafted in order to
address the country’s defense of threats to its external security. It is a given fact that up to the
present, counter insurgency responsibility is still principally lodged with the AFP as
mandated by Republic Act No. 8551 otherwise known as the “Philippine National Police
Reform and Reorganization Act of 1998". The country continues to be beleaguered by one of
the longest communist insurgencies in the world, secessionist movements in the South, and
terrorist organizations that continue to wreak havoc on the country and our people.

It is therefore imperative to enact a new piece of legislation that would amend RA
7898 in order to adjust it to the realities of the times and a revised AFP Modernization
Program that shall be substantially focused and directed initially towards addressing the
internal security threats to the country and develop the AFP towards an organization with a
shifting capability to meet internal and external security threats.

is earnestly sought.

RODOLFO Z BIAZON

Representative
Lone District, Muntinlupa City

In view of the foregoing, the early passage of this



Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City

FIFTEENTH CONGRESS

Second Regular Session

House Bill No. 49.49

Introduced by Hon. Rodolfo G. Biazon

AN ACT
AMENDING REPUBLIC ACT NO. 7898, OTHERWISE KNOWN AS THE AFP
MODERNIZATION ACT, AND FOR OTHER PURPOSES.

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

SECTION ONE. Section 4 (c) of Republic Act No. 7898, otherwise known as the
AFP Modernization Act, is hereby amended to read as follows:

“(e) Doctrines development. ~ [The transition of the AFP from an internal
security-oriented force to an external security-oriented force requires the
review, evaluation and validation of its present set of doctrines for the
purpose of formalizing. such doctrines. Towards this end, t] The
Department of National Defense and the [general headquarters,] AFP,
shall be responsible for the generation, evaluation, consolidation and
formalization of doctrines; the conduct of periodic review and validation
of doctrines through field application, testing and exercises; and the
dissemination of approved doctrines at all levels of command.

‘The Secretary of National Defense shall formulate guidelines to
implement this section in accordance with the objectives of the
modernization program enumerated in the preceding section.”

Sec. 2. Section 6 of the same Act is hereby amended to read as follows:

“Sec. 6. Period of Implementation. — The REVISED AFP
[m|Modernization [p]Program under this Act shall be implemented over a
period of fifteen (15) years EFFECTIVE UPON THE DATE OF THE
APPROVAL OF THIS ACT: Provided, however, That payments for
amortization of outstanding multi-year contract obligations incurred under the
“REVISED AFP Modernization Act” may extend beyond this period.”

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Sec. 3. Section 7 of the same Act is hereby amended to read as follows:

“Seo. 7. Submission of the REVISED AFP Modernization Program. -
(a) Within [ninety (90)] SEXTY (60) days from the effectivity of this Act, the
President, upon the recommendation of the Secretaries of National Defense
and Budget and Management, shall submit the REVISED AFP
[m]Modernization [p]Program as provided for in this Act to Congress for its
consideration and approval in a [jJoint [rJResolution of the House of
Representatives and the Senate. The [p]Program shall indicate or show inter
alia:

(1) The size and shape of the AFP in terms of personnel, equipment, and
facilities during the various phases of the modernization program;

(2) The modernization projects under it, including the major weapon and
non-weapon equipment and technology acquisitions sought by the
respective services and units of the AFP, any major infrastructure
construction or improvement to be made and the particular objective(s)
and component(s) under Sections 3 and 4, respectively, of this Act to
which such intended acquisition, construction or improvements
belongs; and

(3) The priorities, schedules as well as estimated average cost of each
modernization project or upgrading to be undertaken.

PROVIDED, THAT THE FIRST FIVE (5) YEARS OF THE
IMPLEMENTATION OF THE PROGRAM SHALL BE
SUBSTANTIALLY FOCUSED AND DIRECTED INITIALLY
TOWARDS ADDRESSING THE INTERNAL SECURITY THREATS
TO THE COUNTRY, UNLESS THE NATIONAL SECURITY
SITUATION, AS DETERMINED BY THE NATIONAL SECURITY
AUTHORITY, REQUIRES A SHIFT TOWARDS MEETING THE
THREATS TO ITS EXTERNAL SECURITY: PROVIDED, FURTHER,
THAT THE FOLLOWING FIVE (5) YEARS OF THE PROGRAM
SHALL BE DEVOTED TOWARDS THE DEVELOPMENT OF THE
AFP WITH THE SHIFTING CAPABILITY TO MEET INTERNAL
AND EXTERNAL SECURITY THREATS: PROVIDED, FINALLY,
THAT THE FINAL FIVE (5) YEARS OF THE PROGRAM SHALL BE
GEARED TOWARDS THE DEVELOPMENT OF A HIGHLY
MODERNIZED ARMED FORCES TO MEET EXTERNAL SECURITY
THREATS TO THE COUNTRY.

(b)_ In the event Congress approves the REVISED AFP [m]Modernization
[p]Program, the {jJJoint [r[Resolution shall be the basis for subsequent
executive and legislative actions to implement the AFP [m]Modernization
{p]Program from year to year until its complete and full realization.”

Sec. 4. Section 8 of the same Act is hereby amended to read as follows:


“Sec. 8. Appropriations for the REVISED AFP Modernization
Program. — The annual appropriations for the REVISED AFP
[m]|Modernization [p]Program shall include the amounts necessary to support
the funding requirements for all modernization projects approved by Congress
under the preceding section[.|: PROVIDED, THAT UNDISBURSED
AMOUNTS AT THE END OF ANY YEAR SHALL BE CARRIED
OVER TO THE SUCCEEDING YEAR.”

‘The funds to be appropriated by Congress under this Act shall be
treated as a distinct and separate budget item from the regular appropriation
for the Department of National Defense (DND) and the AFP and shall be
administered by the Secretary of National Defense.

[The proposed program shall be based on a ceiling, for the first five (5)
years, of Fifty billion pesos (P50,000,000,000.00): provided, that thereafter,
this amount may be increased commensurate to the increase in the Gross
National Produet (GNP).|”

Sec. 5. Section 11 of Republic Act No. 7898, otherwise known as the AFP
Modernization Act, is hereby amended to read as follows:

“Sec. 11. AFP Modernization Act Trust Fund. - There is hereby
created a trust fund, to be known as the AFP Modernization Act Trust Fund.
Said trust fund, which shall be used exclusively for the AFP modernization
program INCLUDING ALL NECESSARY EXPENSES TO
IMPLEMENT THE PROCUREMENT OF EQUIPMENT SUCH AS
EXPENSES FOR PRE-QUALIFICATION AND Post-
QUALIFICATION STAGES, but not to include salaries and allowances,
shall be funded out of the following:

(@) Appropriations for the AFP [m]Modernization [p]Program;

(b) The proceeds from the sale[, lease or joint development] of military
reservations, as may be authorized by Congress, PURSUANT TO THE.
PROVISIONS OF EXISTING LAWS AND REGULATIONS
GOVERNING SALES OF GOVERNMENT PROPERTIES,
including such immovable and other facilities as may be found therein,
not OTHERWISE covered by the Bases Conversion Development
‘Authority, as provided for in Republic Act No. 7227, AS AMENDED;

(©) THE PROCEEDS FROM THE LEASE OR JOINT
DEVELOPMENT OF MILITARY RESERVATIONS, AS MAY BE
AUTHORIZED BY THE PRESIDENT, PURSUANT TO THE
PROVISIONS OF EXISTING LAWS AND REGULATIONS
GOVERNING LEASE OR JOINT DEVELOPMENT OF
GOVERNMENT PROPERTIES, INCLUDING SUCH
IMMOVABLES AND OTHER FACILITIES AS MAY BE FOUND
THEREIN, NOT SPECIFICALLY ENUMERATED UNDER
REPUBLIC ACT NO. 7227, AS AMENDED;


[©] (D) Shares of the AFP from the proceeds of the sale of military camps
provided for under Republic Act No. 7227, AS AMENDED, AS
WELL AS THE PROCEEDS FROM THE LEASE AND/OR
JOINT VENTURE AGREEMENTS AND SUCH OTHER
DISPOSITIONS PERTAINING TO THE SAME CAMPS;

(E) THE PROCEEDS DERIVED FROM PUBLIC-PRIVATE
PARTNERSHIPS ENTERED INTO BY THE DEPARTMENT OF
NATIONAL DEFENSE OR THE ARMED FORCES OF THE
PHILIPPINES, AS MAY BE AUTHORIZED BY THE
PRESIDENT, PURSUANT TO THE PROVISIONS OF EXISTING
LAWS AND REGULATIONS;

[@)] () Proceeds from the sale of the products of the [g]Government
[aJArsenal AND/OR, IN CASE OF JOINT VENTURE, ALL
INCOMES EARNED FROM THE EQUITY SHARE OF THE
GOVERNMENT ARSENAL FROM THE JOINT VENTURE;

[©] (G) The proceeds from the disposal of excess and/or uneconomically
repairable equipment and other movable assets of the AFP and the
government arsenal;

1] @ Funds from budgetary surplus, if any, as may be authorized by
Congress subject to the provisions of Section 8 of this Act; [and]

() DONATIONS COMING FROM LOCAL AND FOREIGN
SOURCES, SPECIFICALLY EARMARKED TO BE USED FOR
‘THE AFP MODERNIZATION PROGRAM;

(J). THIRTY-FIVE PERCENT (35%) OF THE NATIONAL
GOVERNMENT’S SHARE IN THE MALAMPAYA OIL AND
GAS EXPLORATION AND SUCH OTHER SIMILAR OR
RELATED EXPLORATIONS FOR ENERGY; AND

[1] (K) All interest income of the trust funds.

[The trust fund] NOTWITHSTANDING THE PROVISIONS OF
REPUBLIC ACT NO. 7227, OTHERWISE KNOWN AS THE BASES
CONVERSION AND DEVELOPMENT ACT OF 1992, AS AMENDED,
OTHER EXISTING LAWS, AND PRESIDENTIAL ISSUANCES TO
THE CONTRARY, FUNDS FROM THE FOREGOING SOURCES
SHALL BE DEPOSITED DIRECTLY WITH THE AFP
MODERNIZATION TRUST FUND, WHICH shall be administered by the
Secretary of National Defense in accordance with existing government
auditing rules and regulations. THE DEPARTMENT OF NATIONAL
DEFENSE SHALL CONDUCT PERIODIC STUDIES ON HOW TO
MAXIMIZE THE UTILIZATION OF THE TRUST FUND AND HOW
ADDITIONAL REVENUES CAN BE GENERATED TO FUND THE
AFP MODERNIZATION PROGRAM.


Sec. 6. Section 12 of the same Act is hereby amended to read as follows:

“Sec. 12. Modernization of the Government Arsenal. ~ The modernization
of the government arsenal, for the development of production capabilities to
enhance self-sufficiency in defense requirements, shall be part of the AFP
modernization program. The government arsenal shall be effectively utilized
in the production of basic weapons, ammunition and other munitions for the
use of the AFP, [and] the Philippine National Police (PNP) AND OTHER
UNIFORMED GOVERNMENT AGENCIES, and for the sale and export
of products in excess of [AFP/PNP] THE requirements OF THE AFP, PNP
AND OTHER UNIFORMED GOVERNMENT AGENCIES. The
government arsenal may use such production facilities as it may own or be
provided with under this Act or as it may arrange, under joint venture, co-
production or similar agreements with local and foreign entities. THE
PRESENT SITE OF THE GOVERNMENT ARSENAL, AS DEFINED
BY PRESIDENTIAL PROCLAMATION NUMBER 361-A DATED 7
MARCH 1968, IS HEREBY DECLARED A DEFENSE INDUSTRIAL
ECONOMIC ZONE WITH INVESTMENTS THEREAT ENTITLED
TO SUCH TAX PRIVILEGES AND OTHER APPROPRIATE
INCENTIVES THAT ARE ALLOWED UNDER REPUBLIC ACT NO.
7042, AS AMENDED, AND OTHER EXISTING LAWS.

Sec. 7. Section 14 of the same Act is hereby amended to read as follows:

“Sec. 14. AFP Procurement System. - The DND-AFP shall strengthen its
systems and procedures for equipment acquisition, taking into account new
requirements under the AFP modernization program. Contract negotiations
and equipment acquisition shall be treated as two sequential but separate
steps, each requiring the separate decision of the Secretary of National
Defense. The decision making process for equipment acquisition shall start at
the appropriate service command and submitted to the AFP Weapons Systems
Board, while contract negotiation shall start at general headquarters AFP
level. In its system and procedures for equipment acquisition, the provisions
of Presidential Decree No. 1594, as amended, and other applicable laws shall
apply.

UPON PRIOR APPROVAL BY THE PRESIDENT OF THE
PHILIPPINES, AND WHEN THE PROCUREMENT FOR USE BY
THE AFP INVOLVES MAJOR DEFENSE EQUIPMENT IN
ACCORDANCE WITH THE DEFENSE SYSTEM OF
MANAGEMENT, WHEN THE EQUIPMENT OR MATERIAL
REQUIRED IS NOT AVAILABLE LOCALLY, AND THE
SECRETARY OF NATIONAL DEFENSE HAS DETERMINED THAT
THE INTERESTS OF THE COUNTRY SHALL BE PROTECTED BY
NEGOTIATING DIRECTLY WITH A MANUFACTURER OR AN
INSTRUMENTALITY .OF ANOTHER COUNTRY WITH WHICH
THE PHILIPPINES HAS ENTERED INTO A DEFENSE
COOPERATION AGREEMENT OR OTHERWISE MAINTAINS
DIPLOMATIC RELATIONS, THE PROCUREMENT BY THE
ARMED FORCES OF THE PHILIPPINES OF THE EQUIPMENT

5


ABOVEMENTIONED SHALL BE EXEMPTED FROM THE
REQUIREMENT OF PUBLIC BIDDING UNDER REPUBLIC ACT
NO. 9184: PROVIDED, HOWEVER, THAT THE PERFORMANCE BY
THE SUPPLIER OF ITS OBLIGATIONS UNDER THE
PROCUREMENT CONTRACT SHALL BE COVERED BY A
PERFORMANCE SECURITY IN ACCORDANCE WITH SECTION 39
OF REPUBLIC ACT NO. 9184: PROVIDED, FINALLY, THAT MAJOR
DEFENSE EQUIPMENT SHALL REFER TO AIRCRAFTS, VESSELS,
TANKS, ARMORED VEHICLES, COMMUNICATION EQUIPMENT
AND HIGH-POWERED FIREARMS.

Sec, 8. Section 16 of the Same Act is hereby amended to read as follows:

“Sec. 16. [Annual] Reports. ~ [Not later than the end of the first
quarter of the succeeding year:]

(a) NOT LATER THAN THE END OF THE FIRST QUARTER OF
THE SUCCEEDING YEAR, [T]the Secretary of National Defense
shall submit to the President and Congress an annual report on the
status of the AFP Modernization Act Trust Fund, as provided for in
Section 11 of this Act;

(b) The Chief of Staff, AFP, shall submit to the President and Congress
QUARTERLY, through the Secretary of National Defense, a[n
annual} report containing the progress of the implementation of the
modernization program under this Act to include the AFP
modemization act implemented prior to the approval of this
Act.”

Sec. 9. There will be a new section inserted after Section 16 of the same Act which
shall now become the new Section 17 which shall read as:

“SEC. 17. EXEMPTION FROM FEES, TAXES, DUTIES AND
ASSESSMENTS. — ALL PROJECTS, UNDERTAKINGS, ACTIVITIES
AND PROGRAMS UNDER THIS ACT SHALL BE EXEMPT FROM
AND ALL FEES, TAXES, DUTIES AND ASSESSMENTS IMPOSED
AND/OR REQUIRED BY GOVERNMENTAL AND NON-
GOVERNMENTAL AGENCIES, BODIES AND/OR ENTITIES.”

Sec. 10. The succeeding sections of the same Act are hereby amended and
renumbered accordingly.

___See. 11. Repealing Clause. — All laws, executive orders, rules and regulations
aa with or contrary to this Act, are hereby deemed accordingly repealed or
amended.

__ See. 12. Separability Clause. ~ If, for any reason, any section or provision of this
Act is declared unconstitutional or invalid, the other sections or provisions not affected
thereby shall remain in full force and effect.


Sec. 13. Bffectivity Clause.— This Act shall take effect after fifteen (15) days from its
publication in at least two (2) newspapers of national circulation,