18th CONGRESS

First Regular Session

HOUSE BILL NO.5794

Introduce by Hon. Julienne “Jam” L. Baronda

EXPLANATORY NOTE

This house bill proposes to create a special economic zone and free port in
City of Iloilo to be known as the Metro lloilo Special Economic Zone
(MILOECOZONE) and the MILOECOZONE Authority, which shall manage and
operate the former.

The MILOECOZONE is conceived to be a critical and vital economic hub
that will bring in positive change for City of lloilo and for the entire Western Visayas
though jobs generation and investments. It is envisioned to be the Silicon Valley
of the Philippines. It will be managed as a separate customs territory with
incentives for would-be investors like tax-free importation of goods, and other tax
incentives. It will be unique since it will be both an economic zone and a freeport.

|f created, this will be the first such economic zone and free port in Western
Visayas, and it will be the second in the Visayas and Mindanao, after the
ZAMBOECOZONE (Zamboanga Freeport Authority), which created in 1995 under
Republic Act No. 7903. ZAMBOECOZONE is currently the only economic zone
with a freeport status in the Visayas and Mindanao. ZAMBOECOZONE's
investments have surged to P9.7 billon in 2015 from only P9.8 million in 2014. It is
also worth mentioning that the Bataan Export Processing Zone (BEPZ) created
under Republic Act No. 5490 in 1969 and consolidated with the Freeport Area of
Bataan (FAB) under the FAB Authority (Republic Act No. 9728 in 2009), has also
experienced an increase in investments from P390 million in 2012 to P6.2 billion
in 2015.

Western Visayas certainly needs the MILOECOZONE and its
corresponding Authority in order to attract more investments and continue its
present economic boom.

This bil is in line with the policy of President Rodrigo Roa Duterte to hasten
the economic development of the countryside and generate wealth in areas
outside Metro Manila,

Approval of this bill is, therefore, earnestly requested.

HON. JULIENNE “JAM” L. BARONDA
RepresentatWve, Lone District of lloilo City


Republic of the Philippines
Congress of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

18th CONGRESS,

First Regular Session
5794

HOUSE BILL NO.

Introduced by Hon. Julienne “Jam” L. Baronda
Representative, Lone District of lloilo City

AN ACT CREATING A SPECIAL ECONOMIC ZONE AND FREE PORT IN THE
CITY OF ILOILO, CREATING FOR THIS PURPOSE THE METRO ILOILO
SPECIAL ECONOMIC ZONE AND FREE PORT AUTHORITY,
APPROPRIATING FUNDS THEREFORE, AND FOR OTHER PURPOSES

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 “Metro Iloilo Special
Economic Zone and Free Port Act of 2019.

‘Section 2. Declaration of Policy. - It is hereby declared the policy of the State to
actively encourage, promote, induce and accelerate a 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 and family income, and thereby improve the level and quality of living
Condition 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.

‘Section 3. Creation of the Metro lloilo Special Economic Zone and Free Port. — In
accordance with the foregoing policy, there is hereby established a special
economic zone and free port in the City of Iloilo to be known as the Metro Iloilo
Special Economic Zone and Free Port, hereinafter referred to as the
MILOECOZONE. The MILOECOZONE shall include the Iloilo International Port
located in Bray. Loboc, La Paz, lloilo City and such available public lands, including
reclaimed lands, in Barangay Bito-on and Barangay Balabago, located in Jaro
District, and Barangay Hinactacan, Barangay San Isidro, Barangay ingore and
Barangay Loboc, located in La Paz District, lloilo City.

Section 4. Governing Principles. - The MILOECOZONE shall be managed and
operated under the following principles:

(a) Within the framework and limitations of the Constitution and applicable
Provisions of the Local Goverment Code, the MILOECOZONE 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:

(b) The MILOECOZONE shall continue to 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 City and Province of Iloilo and their
neighboring provinces, cities, and towns;


(c) The MILOECOZONE may establish mutually beneficial economic
relations with other entities or enterprises within the country or with foreign
entities or enterprises;

(d) Foreign citizens and companies owned by non-Filipinos in whatever
Proportion may set up enterprises in the MILOECOZONE either by
themselves or in joint venture with Filipinos in any sector of industry,
international trade and commerce within the MILOECOZONE;

(e) The MILOECOZONE shall be managed and operated as a separate
customs territory ensuring free flow or movement of goods and capital
within, into and out of its territory;

(f) The MILOECOZONE shall provide incentives such as tax and duty- free
importations of raw materials, capital and equipment to registered
enterprises located therein. However, the exportation or removal of goods
from the territory of the MILOECOZONE to the other parts of the Philippines
shall be subject to customs duties and taxes under the Tariff and Customs
Code of the Philippines, as amended, and the National Internal Revenue
Code (NIRC) of 1997, as amended;

(g) The areas comprising the MILOECOZONE may be expanded or
reduced when necessary. For this purpose, the MILOECOZONE Authority,
which will be created under this Act, with the concurrence of the concerned
local government units (LGUs), in accordance with existing laws, shall have
the power to acquire, either by purchase, negotiation or condemnation
proceedings, any private lands within or adjacent to the MILOECOZONE
for the following purposes: (1) the consolidation of lands for
MILOECOZONE development; (2) the acquisition of right-of-way to the
MILOECOZONE; (3) the protection of watershed areas and the
‘maintenance and improvement of its water yield and natural assets needed
by the MILOECOZONE; (4) and the management of solid and water waste
and its impact to adjacent areas within the concemed local government
units.

The said LGUs and the MILOECOZONE shall provide for a mechanism to
address inappropriate exploitation of the natural environment and disruptive
land use within the jurisdiction of the MILOECOZONE;

(h) Goods manufactured by registered enterprises within the
MILOECOZONE 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
MILOECOZONE Authority, together with the Philippine Economic Zone
Authority (PEZA), the Bangko Sentral ng Pilipinas (BSP), the Department
of Finance (DOF), the Bureau of Customs (BOC) and the Department of
Trade and Industry (DTI) in accordance with the NIRC of 1997, as
amended, and the Tariff and Customs Code of the Philippines, as amended,
However, in order to protect domestic industries, a negative list of industries
shall be drawn up and regularly updated by the PEZA. Enterprises engaged
in industries included in such negative list shall not be allowed to sell their
products locally; and

(i) The defense of the MILOECOZONE and the security of its perimeter
fence shall be the responsibility of the National Government m coordination
with the MILOECOZONE Authority and the conecrned LGUs.

Section 5. Fiscal Incentives. - The registered enterprises operating within the
MILOECOZONE may be entitled to the existing pertinent fiscal incentives as
Provided for under Republic Act No. 7916, as amended by Republic Act No. 8748,
also known as the Special Economic Zone Act of 1995, or those provided under


Executive Order No. 226, as amended, otherwise known as the Omnibus
Investment Code of 1987.

Section 6. imposition of a Tax Rate of Five Percent (5%) on Gross Income
Earmed.- No taxes, local and national, shall be imposed on business
establishments operating within the MILOECOZONE. In lieu thereof, said business
establishments shall pay a five percent (5%) final tax on their gross income earned
in the following percentages:

(a) One per centum (1%) to the National Government;

(b) One per centum (1%) to the Province of Iloilo;

(c) One per centum (1%) to the City of lloilo; and

(d) Two per centum (2%) to the MILOECOZONE Authority.

‘Section 7. Incentive to Investors. - Any foreign national who invests an amount of
One hundred fifty thousand US dollars (US$150,000.00), either in cash and/or
equipment, in a registered enterprise shall be entitled to an investor's
visa: Provided, That he has the following qualifications:

(a) He is at least eighteen (18) years of age;
(b) He has not been convicted of a crime involving moral turpitude;

(c) He is not afflicted with any loathsome, dangerous or contagiou
disease; and

(d) He has not been institutionalized for any mental disorder or disability.

As a holder of investor's visa, an alien shall be entitled 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
investments in the country. Should said alien withdraw his investments from the
Philippines, then the investor's visa issued to him shall automatically expire.

Section 8. Administration, Implementation and Monitoring of Incentives. - For the
Proper administration, implementation and monitoring of tax incentives provided
under this law, the following are herein mandated: (a) The MILOECOZONE
Authority shall be responsible for the administration and implementation of the
incentives granted to its respective registered enterprises. Among others, it shall
adopt and implement systems and procedures affecting trade and customs
policies. The BOC shall set up and establish a custom's controlled area outside
the gate of the MILOECOZONE to facilitate payment of taxes on goods entering
the Philippine customs territory; and (b) The MILOECOZONE Authority shall
likewise submit to the DOF its annual tax expenditures based on the tax incentives
granted to its registered enterprises. The DOF, for its part, shall create a single
database of all incentives provided by the governing authority. The DOF shall
‘monitor the incentives granted, and submit all annual report to the President.

Section 9. Extension of Period of Availment.- The availment period of the
incentives provided herein may be extended by MILOECOZONE Authority, in the
event that the registered enterprise has suffered operational force majeure that
has impaired its viability or any circumstances which maybe equivalent thereto.

Section 10. Duration of incentives. - Enterprises registered with MILOECOZONE
Authority may enjoy the income tax holiday (ITH) or the net operating loss
carryover (NOLCO) granted by the MILOECOZONE Authority prior to the
availment of the five percent (5%) gross income earned (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
determined by the MILOECOZONE Authority.

Section 11. Facilities Outside the MILOECOZONE. — Registered enterprises in
the MILOECOZONE may set up facilities outside the MILOECOZONE but within
Western Visayas. They may avail of all the incentives provided in this Act, subject
to guidelines issued by the MILOECOZONE Authority.

Section 12. Creation of the Metro lloilo Special Economic Zone and Free Port
Authority (MILOECOZONE Authority). - There is hereby created a body corporate
to be known as the Metro lloilo Special Economic Zone and Free Port Authority,
hereafter referred to as the MILOECOZONE Authority, which shall manage and
operate the Metro Iloilo Special Economic Zone and Free Port, in accordance with
the provisions of this Act.

Section 13. Principal Office of the MILOECOZONE Authority.- The
MILOECOZONE Authority shall maintain its principal office in the City of lloilo, but
it may establish liaison offices within the Philippines as may be necessary for the
proper conduct of its business,

Section 14. Powers and Functions of the MILOECOZONE Authority.- The
MILOECOZONE Authority shall have the following functions:

(a) To adopt, alter, use a corporate seal, to contract, lease, buy, sell,
acquire, own and dispose properties of whatever nature;

(b) To sue and be sued in order to carry out its duties, responsibilities,
privileges, powers and functions as granted and provided for in this Act and
to exercise the power of eminent domain for public use and public purpose;

(c) To operate, administer, manage, develop the MILOECOZONE
according to the principles and provisions set forth in this Act and to
coordinate with the concerned LGUs for the development plans, activities
and operation of the MILOECOZONE;

(a) To recommend to the President the issuance of a proclamation to fix and
delimit the site of the MILOECOZONE;

(e) To register, regulate and supervise the enterprises in the
MILOECOZONE in an efficient and decentralized manner, subject to
existing laws;

(f) To coordinate with the concemed LGUs and exercise general
supervision over the development plans, activities and operations of the
MILOECOZONE;

(g) To authorize or undertake, on its own or through others, and to regulate
the establishment, construction, operation and maintenance of Public
utilities, services, and infrastructure in the MILOECOZONE such as
shipping, barging, stevedoring, cargo, handling, hauling, warehousing,
storage of cargo, port services or concessions, piers, wharves, bulkheads,
bulk terminals, mooring areas, storage areas, roads, bridges, reclamation
projects, terminals, conveyors, water supply and storage, sewerage,
drainage, airport operations in coordination with the Civil Aviation Authority
of the Philippines, and such other services or concessions or infrastructure
Necessary or incidental to the accomplishment of the objectives of this
‘Act: Provided, however, That the private investors in the MILOECOZONE
shall be given priority in the awarding of contracts, franchises, licenses, or
Permits for the establishment, operation and maintenance of utilities,
services and infrastructure in the MILOECOZONE;


(h) To license, set fees, regulate and undertake the establishment,
operation and maintenance of utilities, other services, educational and
medical Institutions and infrastructure in the MILOECOZONE such as, but
not limited to, heat, light and power, water supply, telecommunications,
mobile, intemet and other data facilities, transport, toll roads and bridges,
port services, etc., and to fix just, reasonable and competitive rates, fares,
charges and prices thereof;

(i) To construct, acquire, own, lease, operate and maintain on its own or
through contracts, franchises, licenses, bulk purchase from the private
sector and build-operate-transfer scheme, or under a joint venture with the
private sectors, any or all of the public utilities and infrastructure required or
needed for the operation and development of the MILOECOZONE, in
coordination with appropriate national and local government authorities and
in conformity with applicable laws thereon;

(@) To operate on its own, either directly or through a subsidiary entity, or
concession or license to others, tourism-related activities, including games,
amusements, recreational and sports facilities such as casinos, online
gaming facilities, golf courses and others, under the priorities and standards
set by the MILOECOZONE Authority;

(k) To raise or borrow, within the limitation provided by law, 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 of securities, and to secure the same by a guarantee,
pledge, mortgage, deed of trust, or an assignment of all or part of its
property or assets;

(I) To provide security for the MILOECOZONE in coordination with the
‘National Government and the concemed local government units. For this
Purpose, the MILOECOZONE Authority may establish and maintain its
Security and firefighting forces or hire others to provide the same. In the
event that an assistance of the military force is necessary, it shall not
interfere in the internal affairs of the MILOECOZONE except to provide the
Necessary security and defense, and their expenses shall be borne by the
National Government;

(m) To protect, preserve, maintain and develop the virgin forests, beaches,
coral and coral reefs, and maintain ecological balance within the
MILOECOZONE. For this purpose, the rules and regulations of the
Department of Environment and Natural Resources (DENR) and other
government agencies involved in the above functions shall be implemented
by the MILOECOZONE Authority;

(n) To create, operate and/or contract to operate such functional units or
offices of the MILOECOZONE Authority as it may deem necessary;

(0) To issue certificates of origin for products manufactured or processed in
the MILOECOZONt

(p) To issue rules and regulations consistent with the provisions of this Act
as _may be necessary to implement and accomplish the purposes,
objectives and policies provided herein;

(q) To exercise such powers as may be essential, necessary or incidental
to the powers granted to it hereunder as well as those that shall enable It to
carry out, implement and accomplish the purposes, objectives and policies
of this Act; and

(#) To be vested with other powers enjoyed or exercised by other free port
zone authorities.


Section 15. Board of Directors of the MILOECOZONE. - The powers of the
MILOECOZONE Authority 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) A chairman, who shall be at the same time, the administrator of the
MILOECOZONE Authority;

(b) A vice-chairman who shall come from the national agency tasked to
Coordinate and monitor special economic zones and the like in the country;

(c) Nine (9) members consisting of:

(1) The city’s congressional representative;

(2) The mayor of the City of lloilo;

(3) The governor of the Province of lloilo;

(4) The congressional representative in the Province of lloilo designated
by the Board of Directors;

(5) One (1) representative of the city council;

(6) One (1) representative of the provincial board;

(7) One (1) representative from the domestic investors in the
MILOECOZONE;

(8) One (1) representative from the foreign investors in the
MILOECOZONE; and

(9) One (1) representative from the labor sector chosen from the workers in
the MILOECOZONE.

The city's congressional representative, the mayor of the City of lloilo, the governor
of the Province of lloilo, the congressional representative designated by the Board
of Directors, the representative of the city council and the representative of the
provincial board shall serve as ex officio voting members of the Board.

The chairman and the 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 removed for cause or dies or resigns voluntarily. In case of death,
resignation or removal for cause, the replacement shall serve only the unexpired
portion of the term.

Except for the representatives of the business and investment sectors, no person
shall be appointed by the President of the Philippines as member of the Board
unless he is a Filipino citizen, of good moral character and of recognized
competence in some relevant fields of business, banking, shipping, business or
labor management, port operations, engineering or law.

Members of the Board shall receive a reasonable per diem which shall be fixed by
the President of the Philippines once every six (6) years for every Board meeting:
Provided, however, That the total per diem collected each month shall not exceed
the equivalent per diems 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 Twenty Thousand pesos (P20,000.00) for every Board
meeting.

Section 16. 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 MILOECOZONE Authority in
accordance with the policies of the Board:

(b) To establish the internal organization of the MILOECOZONE Authority
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,
tules and regulations that are essential to the operation of the
MILOECOZONE Authority;

(f) To create a mechanism m 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 MILOECOZONE; and

(g) To perform such other duties as may be assigned to him by the Board
‘or which are necessary or incidental to his office.

Section 17. Organization and Personnel.- The Board of Directors of the
MILOECOZONE Authority shall provide for an organizational structure and appoint
employees, subject to the civil service law. Upon the recommendation of the
chairman-administrator and with the approval of the Secretary of the Department
of Trade and Industry, the Board shall appoint and fix the remuneration and other
emoluments of its officers and employees in accordance with existing laws on
compensation and position classification: Provided, That the Board shall exercise
administrative supervision over their employees.

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

No officer or employee of the MILOECOZONE Authority, subject to civil service
laws and regulations, shall be removed or suspended except for cause, as
provided by law.

Section 18. Labor Center.- A labor center shall be established within the
MILOECOZONE. This center shall be responsible for studying and amicably
settling professional and labor relations and disputes, interpretation of employment
contracts, and_monitoring work, hygiene and safety standards within the
MILOECOZONE. The labor center shall comprise a labor office, an industrial
health and safety office, and an inspection and disputes office.

Section 19. Banking Rules and Regulations.- Existing banking laws and
Tules/regulations of the Banko Sentral ng Pilipinas shall apply to banks and
financial institutions to be established in the MILOECOZONE.

Section 20. Remittances. - In the case of foreign investments, a registered
enterprise in the MILOECOZONE shall have the right to remit earnings from the
investment in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the provisions of
Section 74 of Republic Act No. 265, as amended.

Section 21. Applicability Clause. - The provisions of Sections 30-41 of Republic
Act No. 7916, otherwise known as "The Special Economic Zone Act of 1995", as
amended, shall likewise apply to the MILOECOZONE.

Section 22. Capitalization.- The MILOECOZONE Authority shall have an
authorized capital stock of Two billion pesos (Php2,000,000,000.00), with option
to increase capitalization upon the discretion of the MILOECOZONE Authority,
divided into twenty thousand (20,000) no - par shares fully subscribed and paid up
by the Republic of the Philippines with: (a) All lands embraced and covered by the
MILOECOZONE, as well as permanent improvements and fixtures upon proper
inventory not otherwise alienated, conveyed, or transferred to another government


agency; (b) All other assets which the President may transfer to the
MILOECOZONE Authority as part of the equity contribution of the government; and
(c) Cash contribution by the government in the amount of Five hundred million
pesos (Php500,000,000.00) a year for the next five (5) years, which is hereby
appropriated out of any fund in the National Treasury not otherwise appropriated

Section 23. Supervision and Control. - For purposes of policy direction and
coordination, the MILOECOZONE Authority shall be under the direct control and
supervision of the Office of the President of the Philippines.

Section 24. Regional Development Council. - The MILOECOZONE Authority shall
determine the development goals for the MILOECOZONE within the framework of
national development plans, policies and goals. The administrator shall, upon
approval by the Board, submit the MILOECOZONE plans, programs and projects
to the Regional Development Council for inclusion and inputs to the overall
regional development plan.

Section 25. Relationship with Local Govemment Units.- Except as herein
provided, the City of lloilo shall operate and function in accordance with the Local
Government Code of 1991. In case of any conflict between the MILOECOZONE
Authority, the local government units (LGUs) and the National Government (NG)
‘on matters affecting the MILOECOZONE other than defense and security matters,
the decision of the MILOECOZONE Authority shall prevail.

Section 26. Legal Counsel. - The MILOECOZONE Authority shall have its own
internal legal counsel under the supervision of the Government Corporate
Counsel. When the exigencies of its businesses and operations demand, the
MILOECOZONE Authority may engage the services of an outside counsel either
on a case-to-case or on a fixed retainer basis.

Section 27. Interpretation/Construction. - The powers, authorities and functions
that are vested in the MILOECOZONE Authority are intended to establish
decentralization of governmental functions and authority and promote an efficient
and effective working relationship between the MILOECOZONE Authority, the
National Government and the concerned LGUs.

Section 28. Audit. - The Commission on Audit shall appoint a full-time auditor in
the MILOECOZONE Authority or may assign such number of personnel as may
be necessary in the performance of their functions.

Section 29. Implementing Rules and Regulations. - The Department of Trade and
Industry, the Department of Finance, the Department of Transporttaion, the City of
lloilo and the Department of the Interior and Local Government shall formulate the
implementing rules and regulations of this Act within ninety (90) days after its
approval. Such rules and regulations shall take effect fifteen (15) days after their
Publication in a newspaper of general circulation in the Philippines.

Section 30. Separability Clause. - If any provision of this Act shall be held
unconstitutional or invalid, the other provisions not otherwise affected shall remain
m full force and effect.

Section 31. Effectivity Clause. - This Act shall take effect upon its publication in
at least one (1) newspaper of general circulation.

Approved,