NINETEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez

House Bill No. 42 03
EXPLANATORY NOTE

The Philippine forestry sector is in a dire situation. Forest cover is only at 7 million (m)
hectares (ha) or 23% of the country's total land area. From 2013-2020, 73% of tree cover loss,
at 64,445 ha annual average, is found in natural forests.’ This is equivalent to 276 metric.
tons of CO, emissions. To worsen things, the country is one of the most vulnerable areas to.
adverse effects of climate change with an average of 20 typhoons annually, five of which are
destructive. In terms of wood supply, the country is unable to meet its national wood
requirements since 2006. From 2006-2020, there is an average deficit of 1.77m cubic meters
of wood? This increased to 2m cubic meters of wood in 2010-2019. Of the available wood
supply, 83% are imported. The sector's contribution to the economy is minimal at an average
of Php 2 billion or 0.04% from 2000-2021.‘ Past and existing government reforestation and
tree plantation programs are insufficient to provide for the growing wood demands of the
country. Although the government has been encouraging the establishment of tree
plantations, private sector is hesitant to go into tree farm and plantation development. A major
culprit is the insecure property rights in forest lands (State-owned lands)

A solution is to guarantee the security of property rights in forest lands by: 1)
establishing a Tree Growing Agreement (TGA) where the right to plant and harvest trees is
respected; 2) treating planted trees as personal property where they can be personally owned
at the moment they are planted; 3) establishing a Tree Plantation Advisory Council to serve
as a national advisory council on tree farm and plantation development; 4) appropriating
royalties and government share based on stumpage value to relevant stakeholders such as
the national government, local government units, the tenure holders, the indigenous peoples,
and the Department of Environment and Natural Resources; and 5) providing incentives to
TGA holders. This bill seeks to encourage tree planting more especially in the countryside

The proposed measure is expected to contribute to increasing the country's forest
cover that would act as carbon sink, mitigating the ill-effects of climate change by preventing
severe flooding, landslides, and soil erosion, and enhancing carbon absorption. It would also
protect the conservation areas and biodiversity, prevent the emergence of zoonotic diseases
such as COVID-19, support energy production & food security, and provide spaces for health,
weliness, and recreation. Moreover, the untenured 5.5m ha of production forest lands® will be
utilized in part or whole for tree farm/plantation development thereby increasing wood
production. This is relevant in meeting the country’s wood demand, generating employment
especially in the uplands where poverty and insurgency are rampant, supporting government
infrastructure programs, and developing agroforestry and downstream wood industries such
as furniture and housing construction.

"Global Forest Watch. “Tree caver lots in Philppnes”. Accessed on 12/12/2021 trom wwew lobalforestwatch or

2 Forest Management Bea, Plans and Programs forthe Phisppine Wood Industry Lecture, Pilppine Wood Expo 2019, Sofitel Motel, Pasay Cy, October 21
2019

“Department of Natural Resources, “Stuatoner of Forty Investment in the Philippines", Facebook, November 17, 2021, tps//w facebook
onVOENROMfcivideos/1154495488408727

it constant 2018 pies Phppine tates Asthorty (2021), National Accounts af he Fhippines. Quezon Cty: Phppines Satis Author.

Pippin Forestry tastes 2020 Forest Management Bures, Mtp:/erve google com/le/ 12M 24aUeBNV-cHBXNpo IeINBB7NZI9/view.



With the country’s natural endowments, a tropical climate with rainfall distributed
evenly, and with rich soil condition favorable for forests to flourish, and a young population,
with 70.62m people belonging to the working ages of 15 to 64 years old® that could serve as
labor pool for tree planting maintenance, the Philippines possesses the capacity to become a
booming forest superpower as it used to be in the 1950s-60s. The State recognizes the crucial
role of the private sector as its partner in revitalizing the forestry sector following sustainable
forest management principles.

In view of this, the early passage of this bill is sought.

RUF) i UEZ

T gen 0. de Vera, “World Bank Young population to boost PH economic development” Philpine oly Inquirer, May 20, 202%,
eps Pousiness inquirer net/323229)wore-bank young population to-oostph-economie
‘development texteE2NSOKSCTheX20PhiippinesK20represents¥20aX20}0ung milion 20age &K206S%20anC20above


NINETEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

“Introduced by Representative Rufus B. Rodriguez

House BiliNo. 4203

AN ACT
PROMOTING REFORESTATION AND INCREASING WOOD PRODUCTION THROUGH
THE ESTABLISHMENT OF TREE GROWING AGREEMENTS

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

SECTION 1. Short Title. This Act shall be known as the “Tree Growing Agreements Act.”

SECTION 2. Declaration of Policy. It is the policy of the State to promote tree farm and tree
plantation development to restore denuded forests of the public domain, mitigate the effects
of climate change, increase wood supply, encourage green investments to increase livelihood
opportunities in the countryside, and contribute to the overall socio-economic development
and growth of the national economy.

SECTION 3. Definition of Terms.

‘a. Carbon sequestration- is the process of removing carbon from the atmosphere and
depositing it in a reservoir.

b. Carbon trader- is a person or entity dealing with the buying, selling, brokering,
‘exchanging, and trading of carbon credits.

c. Carbon trading- also known as carbon emissions trading, is the use of a
marketplace to buy and sell carbon credits that allow an entity to emit a certain
amount of carbon dioxide.

d. Crop - is a plant or plant product that can be grown and harvested for profit or
subsistence.

e. Forest block- is an area of contiguous forest land measuring fifteen (15) seconds
of latitude and fifteen (15) seconds of longitude at approximately 20.7 hectares per
block.

f. Forest land- includes the public forest, the permanent forest or forest reserves,
forest reservations, and all other lands not classified as agricultural lands, mineral
lands, and national parks.

g. Planted Tree- a tree planted and raised by man.

h. Tree Farm- refers to any small forest land or tract of land purposely planted to tree
crops.

i. Tree Growing Agreement — refers to an agreement entered into by and between a
natural or juridical person and the DENR wherein the latter grants to the former the
right to plant and harvest trees in a tract of forest land.

|. Tree Plantation - any tract of forest land purposely and extensively planted to
timber crops primarily to supply the raw material requirements of existing or
proposed processing plants and related industries.

SECTION 4. Establishment of Tree Farms and Tree Plantations. The Department of
Environment and Natural Resources (DENR) shall identify, survey and map areas suitable for
the establishment of tree farms and tree plantations in forest lands. Such areas shall be called
Tree Growing Agreement Areas or TGA areas. TGA areas for establishment shall be denuded

3


and/or underutilized areas within forestlands, whether tenured or not, including ancestral
lands/domains, identified as suitable for tree farming, tree plantation development,
agroforestry, and other forestry and agroforestry-related economic activities. TGA
establishment may be initiated by the DENR or through a request of interested parties.

SECTION 5. Criteria for the Determination of Tree Growing Agreement Areas. The minimum
requirements for suitability of the area for the TGA are:
a. Soil quality should be suitable for tree plantation/tree farming, and agroforestry
farming;
b. Slope gradient should be below 50 percent, and elevation should be below 1000m
above sea level (asi);
c. Should not be prone to landslides or severe soil erosion; and
4. Should not be identified as protected area

SECTION 6. Identification and Delineation of Tree Growing Agreement Areas. For purposes
of identification and delineation of area for TGA, the DENR shall identify denuded, idle, and/or
underutilized public forest that are either tenured or untenured. These identified areas of public
forest shall be divided into meridional forest blocks of fifteen (15) seconds of latitude and
fifteen (15) seconds of longitude at approximately 20.7 hectares per block. Such forest blocks
shall be indicated in the maps publicly available in the Tree Growing Agreement Registry

SECTION 7. Tree Growing Agreement Registry. Forest lands that had been established by
the DENR as TGA area shall be recorded and made available in a public registry to be
maintained at the Provincial Environment and Natural Resources Office (PENRO) and
supervised by the Forest Management Bureau (FMB). Such registry shall be accessible to the
public through the internet and shall contain maps showing the location of all forest lands
under TGA and shall also indicate forest lands that are already under an agreement as well
as those still available for application of investors.

SECTION 8. Allowable Activities for the Tree Growing Agreement. Allowable activities within
the Tree Growing Agreement area shall be limited to:

Carbon trading activities

Carbon sequestration and related activities

Tree Plantation/Farming

Wood Processing/Establishment of Wood Processing Plants

Agroforestry

Forestry/Agroforestry-Based Ecotourism

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SECTION 9. Tree Growing Agreement. Interested parties whether natural or juridical, may
enter into a Tree Growing Agreement for the development, sustainable utilization, and
management of TGA areas and forest resources within the allotted TGA area.

The Agreement shall be for a minimum of two production cycles depending on the
project as proposed in the development plan to be submitted to the DENR upon application
for a TGA. The duration of the production cycle shall depend on the species intended to be
planted as a main crop.

The Agreement may be renewed automatically at the option of the TGA holder for
another minimum of two production cycles if the TGA holder has complied with the terms and
conditions of the Agreement and with existing laws.

The TGA is transferrable to qualified transferees for value. The Agreement may not be
cancelled except for cause and with due process by the DENR. The Agreement holder shall
develop at least 30% of the area applied for in the first three (3) years and utilize seventy-five
(75%) of the area within five (5) years upon issuance of the TGA

Processing of applications and awarding and issuance of TGA shall be accomplished
at the PENRO of the DENR and completed within 120 days from the time the complete
application is submitted.


Tree Growing Agreements shall be limited to a maximum of five (5) forest blocks for
individuals/families, 50 forest blocks, for partnerships and cooperatives, and 2,000 forest
blocks for private and public corporations including local government units (LGUs) and
government owned and controlled corporations (GOCCs).

SECTION 10. Tenured Lands. Forest lands covered by existing tenurial instruments may be
amended to be covered by the Tree Growing Agreement. Such amendment shall be applied
for at the DENR.

Tenure holders who are no longer interested in their tenure may surrender their tenure
to the DENR. They may also transfer such tenurial instrument to an interested party for
conversion to TGA. Tenure holders who refuse to utilize or abandon their tenurial area may
be subjected to compulsory inclusion after being notified.

‘A Notice of Inclusion under the TGA shall be issued by DENR to inform tenure holders
‘of compulsory coverage of the whole or portion of their unutilized or abandoned tenured areas.

SECTION 11. Qualifications of Applicants. Any natural or juridical person may apply for a
Tree Growing Agreement. LGUs and GOCCs may also apply for the said Agreement.
Likewise, Agreement shall be awarded transparently and equitably to both foreign and
domestic investors.

SECTION 12. Certifications, Permits and Licenses. The DENR PENRO shall also coordinate
with the Environmental Management Bureau (EMB), National Commission on Indigenous
Peoples (NCIP), LGUs, and other government agencies for assistance in the expedited
issuance of environmental permits, local permits, Certification Precondition (CP), and other
permits.

SECTION 13. Property Rights of TGA Holders. All planted trees, and other non-timber forestry
and agroforestry products produced within TGA areas shall be considered as personal
property even if they are still attached to the soil. They shall also be considered as personal
property of the holder within the purview of Republic Act No. 11057, otherwise known as the
Personal Property Security Act, and thus may be traded or may be a subject to commodity
contract, mortgage contract, and other security arrangement

‘All planted trees and other non-timber forestry and agroforestry products produced
within the TGA areas shall be considered as crops.

SECTION 14, Investment Incentives. In order to promote investments and generate interest
in forest related activities within the TGA areas, existing laws, executive issuances, local
ordinances, rules and regulations are hereby repealed, amended, and modified accordingly
for TGA holders in order to:

‘a. Provide access to development loans from public financial institutions for farm and
plantation developers;

b. Provide insurance coverage of plantations and plantation development equipment
by the Philippine Crop Insurance Corporation (PCIC);

c. Prioritize access for tree farm and plantation developers to credit assistance from
government owned, controlled and/or supported financial institutions;

d. Allow acceptance of planted trees and crops as collateral for loans in government
owned or controlled banks and other financial institutions;

e. Allow only a one-time inspection by the DENR PENRO prior to harvest of planted
trees leading to a single clearance for harvest, processing, transport and sale both
local and international;

f. Exempt established tree farms and plantations from logging bans for the duration
of the Agreement;

9g. Allow logs, lumber and other finished wood products from TGA area to be exported
without restrictions in volume;

h. Include carbon trading and carbon sequestration activities in various investment


and tax incentives;

i. _ Include tree farming and plantation development as pioneer areas of investment
under the Strategic Investments Priority Plan of the government;

j. Include tree farming and plantation development in tax incentives as may be
provided by existing rules and regulations of different government agencies
including but not limited the Department of Finance and Department of Trade and
Industry; and

k. Include tree farming and plantation development in other investment incentive
packages available for agriculture and agroforestry-related industries.

Provided that, relevant incentives shall also apply to private tree plantations registered with
the DENR.

SECTION 15. Tax Incentives. The following tax incentives shall be applied to entities entering
into TGA:

a. Expenses incurred shall be allowed as deductible expenses for income tax
purposes, subject to the provisions of the National Internal Revenue Code of 1997,
as amended. Provided, that the deduction shall only apply to the taxable period,
when the expenses were incurred;

b. Expenses incurred, including interest expense, in the development and operation
of aforest plantation prior to the commercial harvest shall be regarded as ordinary
and necessary expenses or as capital expenditures;

cc. Capital expenditures, development, maintenance, and operating costs for the first
five years of the establishment of the plantation shall be exempted from taxation;
and

d. Tax-free import of tree nursery facilities, plantation development and wood
processing equipment.

e. Tree plantation operators shall be exempted from payment of Advanced Value
‘Added Tax (VAT). The VAT shall be paid only after logs have been delivered and
payment received by plantation owners.

SECTION 16. Royalties and Government Share. Royalties and government share shall be
based on the stumpage value of planted trees. Stumpage value shall be computed by the
DENR using a formula developed with the approval of the Tree Plantation Promotion and
Policy Board.

Royalties and government share shall be based on the 70% of gross revenues of the
‘Agreement holder. The government shall get five percent (5%) royalty, the tenure holder for
tenured lands shall get one percent (1%), the concerned LGU where the TGA area is located
shall get five percent (5%), if there are indigenous peoples in the area, two percent (2%) shall
be allotted to them, and the remaining two percent (2%) shall go to DENR’s tree farm and
plantation development programs and projects and carbon trading activities.

SECTION 17. Dispute Resolution Mechanism. Disputes arising from conflicting claims and
other controversies related to the issuance and the implementation of the TGA shall be
resolved administratively in the first instance at the DENR

Any and all disputes arising from the implementation of TGA may be submitted to
arbitration in the Philippines in accordance with the relevant laws and policies, The process of
arbitration shall be incorporated as a provision in the TGA that will be executed pursuant to
the provisions of this Act: Provided, that by mutual agreement, the parties may agree in writing
to resort to alternative modes of dispute resolution.

SECTION 18. Premature termination of the agreement. Upon the premature
termination of the agreement at no fault of the holder, all depreciable permanent and semi-
permanent improvements such as roads, buildings, and nurseries including the planted and
standing trees and other forest crops, introduced and to be retained in the area, shall be
properly evaluated and the holder shall be entitled to a fair compensation thereof, the amount

6


of which shall be mutually agreed upon by both the DENR and the agreement holder, and in
case of disagreement between them, by arbitration through a mutually acceptable and
impartial third-party adjudicator.

SECTION 19. Tree Plantation Advisory Council. The Tree Planation Advisory Council, referred
to as the Council, is hereby created which shall act as a national advisory council in the
development of policies related to tree farms and plantations.

The Council shall be composed of one representative each from:
Department of Environment and Natural Resources;
Department Of Trade Industry;

Climate Change Commission;

National Commission In Indigenous Peoples;

Tree Farmers and People’s Organizations;

Carbon Traders;

Professional Organization of Foresters; And

Wood Producers and Processors

sa>ea9cm

The DENR Secretary shall organize and appoint members of the council. The DENR
shall act as the secretariat of the council and provide logistical support

SECTION 20. Implementing Rules and Regulations. The FMB of DENR shall promulgate
rules and regulations to carry out the provisions of this Act within 120 days from approval
hereof.

SECTION 21. Repealing Clause. All laws, decrees, executive order, executive issuances or
letters of instruction, rules and regulations or any part thereof inconsistent with or contrary to
the provisions of this Act are hereby deemed repealed, amended or modified accordingly.

SECTION 22. Separability Clause. If, for any reason or reasons, any part or parts of this Act
shall be declared unconstitutional or invalid by any competent court, other parts of this Act not
so declared shall continue to be in full force and effect.

SECTION 23. Effectivity Clause. This Act shall take effect fifteen days (15) after its publication
in two (2) newspapers of general education

Approved,