EIGHTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez

House Bill No. 422
EXPLANATORY NOTE

This bill seeks to establish a special economic zone in Barangay Balubal,
Cagayan de Oro City, Province of Misamis Oriental, pursuant to the general policies and
guidelines set forth under Republic Act No. 7916, otherwise known as the “Special
Economic Zone Act of 1995.”

Cagayan de Oro City is the gateway to the island of Mindanao. It is the focal point
of domestic and foreign trade as well as the export outlet of the vast agricultural products
‘of Mindanao, The city is rich in agricultural and forest lands, mineral resources and scenic
tourist spots. It has a typhoon-free climate, favorable peace and order condition and good
infrastructures and utilities. These factors are conducive to sustainable growth and
development.

Balubal is one of the fast-growing barangays in the eastem side of Cagayan de
Oro City. Its strategic location is an ideal site for industrial, commercial and recreational
centers, It can also serve as a major entry and exit point of trade considering that its
neighboring barangays have numerous seaports.

The establishment of a special economic zone will alleviate and improve the
‘economic condition of the City and the nearby provinces. The residents will be assured of
local employment opportunities which will hasten the economic growth not only in the
area but in the nearby provinces as well.

In line with the government's policy to encourage, promote, induce and accelerate

a sound and balanced industrial, economic and social development of the country, the
establishment of Cagayan de Oro Special Economic Zone is eamestly recommended.

RUFUS B. RODRI


EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES }
First Regular Session

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez

House Bill No. 422

AN ACT
ESTABLISHING THE CAGAYAN DE ORO SPECIAL ECONOMIC ZONE iN
BARANGAY BALUBAL, CAGAYAN DE ORO CITY, PROVINCE OF MISAMIS
ORIENTAL, CREATING FOR THIS PURPOSE THE CAGAYAN DE ORO SPECIAL
ECONOMIC ZONE AUTHORITY, AND APPROPRIATING FUNDS THEREFOR

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

CHAPTER 1
GENERAL PROVISIONS

SECTION 1. Short Title. - This Act shall be known as the “Cagayan de Ovo Special
Economic Zone Act’.

SEC 2. Declaration of Policy. — It is hereby declared the policy of the State to actively
encourage, promote, and accelerate the sound and balanced industrial, economic and
social development in the country. The establishment of special economic zones shall
attract legitimate and productive foreign investments in strategic locations in the country.
It shall generate employment and increase productivity and individual, as well as family
incomes, thereby enhancing the quality of life of the Filipino people.

CHAPTER 2
CREATION OF THE ECONOMIC ZONE

SEC 3. Creation of the Cagayan de Oro Special Economic Zone. - in accordance with
the foregoing declared policy and subject to the concurrence of the concerned local
government units (LGUs) of Misamis Oriental affected by the zone, there is hereby
established a Special Economic Zone, hereinafter referred to as the Cagayan de Oro
Ecozone. The Cagayan de Oro Ecozone shall cover a particular area located in Barangay
Balubal, Cagayan de Oro City in the Province of Misamis Oriental. The specific metes
and bounds of the Cagayan de Oro Ecozone shall be more particularly defined in a
presidential prociamation that shall be issued for this purpose. Provided, That the lands
embraced therein shall be public lands and contiguous to one another.

SEC 4. Creation of the Cagayan de Oro Special Economic Zone Authority. - There is
hereby created a body corporate to be known as the “Cagayan de Oro Special Economic
Zone Authority" herein after referred to as the CDSEZA which shall manage and operate
the Cagayan de Oro Ecozone, in accordance with the provisions of this Act. This
corporate franchise shall expire in fifty (50) ears counted from the first year after the
effectivity of this Act, unless otherwise extended by Congress. It shall be organized with
one hundred eighty (180) days after the effectivity of this Act.

SEC 5. Governing Principles. - The Cagayan de Oro Ecozone shall be manage and
operated by the CDSEZA under the following principles:


a. Within the framework and limitations of the Constitution and applicable provisions of
the Local Goverment Code, the Cagayan de Oro Ecozone shall be developed into and
operated as a decentralized setf-reliant and self-sustaining industrial, commercial/trading,
agro-industrial, tourist, banking, financial and investment center with sustainable
residential areas.

b. The Cagayan de Oro 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
Cagayan de Oro City and its neighboring towns and cities.

c. The Cagayan de Oro Ecozone may establish mutually beneficial economic relations
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.

d. Foreign citizens and companies owned by non-Filipinos, in whatever proportion, may
set up enterprises in the Cagayan de Oro Ecozone, either by themselves or in a joint
venture with Filipinos in any sector of industry, international trade and commerce with in
the Cagayan de Oro Ecozone.

e. the Cagayan de Oro 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

1. The areas comprising the Cagayan de Oro Ecozone may be expanded or reduced
when necessary. For this purpose, the CDSEZA, in consultation with the LGUs
concerned shall have the power to acquire either by purchase, negotiation or
condemnation proceedings, any private land within or adjacent to the Cagayan de Oro
Ecozone for the following purposes: 1. Consolidation of lands for zone development; 2
Acquisition of right of way to the Cagayan de Oro Ecozone; and 3. The protection of
watershed areas and natural assets valuable to the prosperity of the Cagayan de Oro
Ecozone.

g. Goods manufactured by a Cagayan de Oro 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 CDSEZA together with the PEZA, the Bureau of Customs (BOC), 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 aliowed to sell their products locally.

h. The defense of the Cagayan de Oro Ecozone and the security of its perimeter fence
shall be the responsibility of the national government in coordination with the CDSEZA
and the LGUs/

SEC 6. Capitalization. - The CDSEZA shail have an authorized capital stock of Two
Billion (2,000,000,000) no par shares with a minimum issue of Ten Pesos (Php 10.00)
each, the majority shares of which shall be subscribed and paid for by the National
Government and the LGUs embracing the Cagayan de Oro Ecozone. The Board of
Directors of the CDSEZA 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
CDSEZA to the general public under such policy as the Board and 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 CDSEZA.

The amount necessary to subscribe and pay for the shares of the National
Government to the capital stock of the CDSEZA 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 7. Principal Office of the CDSEZA. - The CDSEZA shall maintain its principal
office in Cagayan de Oro City but it may establish branches within the Philippines as may
be necessary for the proper conduct of its business.

SEC 8. Powers and Functions of the CDSEZA. - The CDSEZA shall have the following
powers and functions:

a) To operate, administer, manage and develop the Cagayan de Oro Ecozone
according to the principles and provisions set forth in this Act;

b) To register, regulate and supervise enterprises in the Cagayan de Oro Ecozone in
an efficient and decentralized manner, subject to existing laws;

c) To coordinate with LGUs and exercise general jurisdiction over the development
plans, activities and operations of the Cagayan de Oro Ecozone;

4) To regulate and undertake the establishment, construction, operation and
maintenance of public utilities, other services and infrastructure in the Cagayan de
Oro Ecozone such as lights and power, shipping, barging, stevedoring, cargo
handing, hauling, warehousing, storage of cargo, port services or concessions,
piers, wharves, bulkheads, bulk terminals, mooring areas, storage areas, roads,
telecommunications, transport, bridges, terminals, conveyors, water supply and
storage, sewerage, drainage, airport operations in coordination with the Civil
Aviation Authority of the Philippines (CAAP), and such other services or
concessions or infrastructure necessary or incidental to the accomplishment of the
objectives of this Act

e) 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, otherwise known as
the “Build-Operate-Transfer Law” as amended, or joint venture, adequate facilities
and infrastructure required or needed for the operation and development of the
Cagayan de Oro Ecozone, in coordination with appropriate national and/or local
government authorities and in conformity with applicable laws thereon;

f) To approve plans, programs and projects of the Cagayan de Oro Ecozone to be
submitted to the Regional Development Council for inclusion and inputs to the
overall regional development pian;

g) To operate on its own, either directly or through licenses to others, tourism related
activities, including games, amusements, recreational and sports facilities, subject
to the approval and supervision of the Philippines Amusement and Gaming
Corporation (PAGCOR);

h) To raise or borrow, within the limitation provided by law and subject to the
approval or opinion of the Monetary Board of the Bangko Sentral ng Pilipinas
(BSP), as the case may be, adequate and necessary funds from local or foreign
sources, to finance its projects and programs under this Act and for this 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 protect, preserve, maintain and develop the forests, beaches, coral and coral
reefs, and maintain ecological balance within the Cagayan de Oro Ecozone.
Notwithstanding the authority of the CDSEZA to create rules for such purpose, the
ules 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 CDSEZA;


j) To create, operate, and/or contract to operate such functional units or offices of
the CDSEZA as it may deem necessary;

k) To adopt, alter, and use a corporate seal; contract, lease, buy, acquire, own or
otherwise dispose of personal and/or real property of whatever nature, sue and be
sued, and otherwise carry out its functions and duties as provided for in this Act;

1) To issue certificates of origin for products manufactures or processed in the
Cagayan de Oro Ecozone in accordance with prevailing rules of origin and the
pertinent regulations of the PEZA, DTI and/or DOF;

m) To establish one-stop shops for the issuance of all necessary permits, clearances,
licenses, and other similar certifications to conduct such activities intended to
improve the ease of doing business within the Cagayan de Oro Ecozone in
coordination with the government agencies having jurisdiction over activities
therein. Provided, Thai all government agencies are directed to provide and
extend utmost and full cooperation to the Cagayan de Oro Ecozone in the
establishment of such one-stop shops;

n) To provide internal security to the Cagayan de Oro Ecozone in coordination with
the National Government and affected LGU. For this purpose, the CDSEZA shall
provide and establish its own intemal security and firefighting forces or hire others
to provide the same. Military forces sent by the National Government for the
purpose of defense shall not interfere in the internal affairs of the Cagayan de Oro
Ecozone and expenditures for these military forces shall be borne by the National
Government;

©) 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

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

SEC 9. Board of Directors. — The powers of the CDSEZA 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 Chairperson who shali, at the same time, be the Administrator of the
CDSEZA;
b) The Governor of the Province of Misamis Oriental, or a duly authorized
representative;
c) The Representative of the 2” District of Cagayan de Oro City;
d) The Mayor of Cagayan de Oro City;
) One (1) representative from the investors group; and
f) One (1) representative from among the workers in the ecozone.

‘A Vice-Chairperson shall be selected from among members of the Board

The Governor of the Province of Misamis Oriental, Representative of the 2%
District of Cagayan de Oro City, and city mayor shall serve as ex-officio members of the
Board whose terms in the Board correspond to their terms as elected officials.

The Chairperson-Administrator 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 separated from service due to death, voluntary resignation
or removal for cause, their replacements shall serve only the unexpired portion of the
respective terms.

The Chairperson-Administrator must be 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 a ratio to be determined
by the DBM in accordance with existing rules and regulations: Provided, however, That
the total per diem collected each month shall not exceed the equivalent of per diem for
four (4) meetings. Unless and until the President of the Philippines has fixed a higher
amount of per diem, the members of the Board shall receive per diem of not more than
Ten Thousand Pesos (PHP 10,000) for every Board meeting,

SEC 10. Organization and Personnel. - The Board of Directors of the CDSEZA shall
provide for its organization and staff. The Board shall appoint and fix the remuneration
and other emoluments of its officers and employees in accordance with the existing laws
on compensation and position classification. The Board shall have exclusive and final
authority to promote, transfer, assign, reassign, or remove officers of the CDSEZA, any
provision of existing law to the contrary notwithstanding. The Chairperson-Administrator
shall carry out the decisions of the Board.

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

SEC 11. Powers and Duties of the Chairperson-Administrator. — The Chairperson-
Administrator shall exercise the following powers and duties:

a) To direct and manage the affairs of the Cagayan de Oro Ecozone in accordance
with the policies of the Board;

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

c) 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;

) To submit to the Board for its approval policies, systems, procedures, rules and
regulations that are essential to the operation of the Cagayan de Oro Ecozone;

f) To recommend to the Board the remuneration and other emoluments of its officers
and employees in accordance with existing laws on compensation and position
classification;

9) 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 Cagayan de Oro Ecozone; and

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

SEC 12. Legal Counsel. - The CDSEZA shall have its own internal legal counsel under
the supervision of the Government Corporate Counsel. When the exigencies of its
businesses and operations demand it, the CDSEZA may engage the services of an
outside counsel either on a case to case or on fixed retainer basis.

CHAPTER 3
INCENTIVES TO ECOZONE ENTERPRISES/INVESTORS

SEC 13. Investor's Visa, - Any foreign national who invests an amount of Two Hundred
Thousand US Dollars (US$200,000) either in cash and/or equipment, in a registered
enterprise shall be entitled to an investor's visa: Provided, That the foreign national has
the following qualifications:

a. Must be at least eighteen (18) years of age;

b. Must not have been convicted by final judgment of a crime involving moral
turpitude:

c. Must not be afflicted with any loathsome, dangerous, or contagious disease;

d. Must not have been institutionalized for any mental disorder, or disability; and


e. Must possess financial capability and capacity through verifiable and credible
evidence.

A foreign national may reside in the Philippines while the investment herein
required subsists. To prove this, the foreign national should submit an annual report, in
the form duly prescribed for the purpose. Should said investments be withdrawn from the
Philippines, the investor's visa issued to said foreign national shall automatically expire
and/or be withdrawn

The authority to issue visas and work permits shall remain with the Bureau of
Immigration (Bl) and the Department of Labor and Employment (DOLE), respectively:
Provided, That the Bi and DOLE shall implement measures to expedite the processing of
such visas and permits for workers in the Cagayan de Oro Ecozone and coordinate with
CDSEZA for the purpose of improving ease of doing business.

SEC 14. Fiscal incentives. — Registered enterprises operating within the Cagayan de
Oro Ecozone may be entitled to the existing pertinent fiscal incentives as provided under
existing laws and regulations and/or those that may be further granted as the need and
necessity arises by the appropriate government department, agency, or office: Provided,
That in the administration, implementation, and monitoring of incentives, the CDSEZA
may impose its own conditions not otherwise prohibited by this Act: Provided, further,
That the CDSEZA shall not be limited to the conditions provided under existing laws

SEC 15. Imposition of a Tax Rate of Five Percent (5%) on Gross Income Earned. -
No taxes, local and national, shall be imposed on business establishments operating
within the Cagayan de Oro Ecozone, including income tax, withholding tax, donor's tax,
percentage tax, and documentary stamp tax. In lieu thereof, and subject to Section 17 of
this Act, said business establishments shall pay a five percent (5%) final tax on gross
income eamed: Provided, That the proceeds from such final tax shall be shared by
instrumentalities of the government in accordance with the following schedule.

a. Three per centum (3%) to the National Government;
b. Two per centum (2%) shall be directly remitted by the business establishments
to the treasurer's office of the municipality or city where the enterprise is located.

The CDSEZA shall have the authority to grant income tax holiday (ITH) and net
operating loss carry over subject to Section 17 of this Act and conditions as it may have
imposed pursuant to Section 14 of this Act.

SEC 16. Administration, implementation and Monitoring of incentives. - in the
interest of enhancing transparency in the management and accounting of tax incentives
in the Cagayan de Oro Ecozone, the CDSEZA shall comply with the provisions of
Republic Act No. 10708, otherwise known as “The Tax Incentives Management and
Transparency Act (TIMTA)" and its implementing rules and regulations for the proper
administration, management, enforcement, implementation and monitoring of tax
incentives provided under this law.

The BOC shall set up and establish a customs controlled area outside the gate of
the Cagayan de Oro Ecozone to facilitate payment of taxes on goods entering the
Philippines customs territory: Provided, That notwithstanding the limitations in this Act,
the CDSEZA and BOC may coordinate and jointly implement measures on border
protection

SEC 17. Duration of incentives. — 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 and interest. The


industries exempted from this provision shall be determined by CDSEZA, in consultation
with other government agencies.

SEC 18. Sequential Availment of Incentives. — Registered enterprises may enjoy the
ITH granted by CDSEZA prior to the availment of the 5% final tax on gross income
eared incentive: Provided, That in the event a registered enterprise elects to avail of the
final tax incentive, such registered enterprise shall be barred from availing the ITH
incentive

SEC 19. Extension of Period of Availment. - The CDSEZA may extend the period of
validity of the incentives extended to a registered enterprise in the event that it suffers,
due to force majeure, a cessation or suspension of operations that impairs it viability or
profitability,

SEC 20. Banking Rules and Regulations. - Banks and Financial Institutions to be
established in the Cagayan de Oro Ecozone shall be under the supervision of the BSP
and subject to existing banking laws, rules and regulations.

SEC 21. Remittances. — In the case of foreign investments, a duly registered entity or
enterprise within the Cagayan de Oro Ecozone 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 Republic
Act No. 7653, otherwise known as the "New Central Bank Act’

CHAPTER 4
NATIONAL GOVERNMENT AND OTHER ENTITIES

SEC 22. Supervision and Control. — For purposes of policy direction and coordination,
the CDSEZA shall be under the direct control and supervision of the Office of the
President.

SEC 23. Development Goals of the Cagayan de Oro Ecozone. ~ The CDSEZA shall
determine the development goals for the Cagayan de Oro Ecozone within the framework
of national development plans, policies and goals. The Chairperson-Administrator shall,
upon approval by the Board, submit the Cagayan de Oro Ecozone plans, programs and
projects to the Regional Development Council for inclusion and inputs to the overall
regional development plan

SEC 24. Relationship with Local Government Units. — Except as herein provided, the
LGUs comprising the Cagayan de Oro Ecozone shall retain their basic autonomy and
identity. The City of Cagayan de Oro, Province of Misamis Oriental, shall operate and
function in accordance with the framework of the Constitution, the Local Government
Code and this Act

In case of any conflict among the CDSEZA, the LGUs and the National
Government on matters affecting the Cagayan de Oro Ecozone, other than national
defense and security matters, the decision of the CDSEZA shall prevail

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

CHAPTER 5
MISCELLANEOUS

SEC 26. interpretation/Construction. — The powers, authorities and functions that are
vested in the CDSEZA are intended to establish national seff-sufficiency and self-reliance


in the advancement of and protection of the national integrity, enhancement of national
security, decentralization of governmental functions and authority, and promote an
efficient and effective working relationship among CDSEZA, the National Government
and the LGUs. Any interpretation of this Act shall consider such intentions. In the event of
conflict of interpretation and provided the intentions cannot be harmonized, the provisions
‘of this Act shall be construed in favor of an interpretation that would tend to protect
national security,

SEC 27. Applicability Clause. — Insofar as they are consistent with the provisions of this
Act, Sections 30 to 41 of Republic Act No. 7916, otherwise known as “The Special
Economic Zone Act of 1995", as amended shall likewise apply to the Cagayan de Oro
Ecozone.

SEC 28. Implementing Rules and Regulations. - The NEDA, in coordination with the
DTI and DOF, shall formulate the implementing rules and regulations of this Act within
ninety (90) days after its approval.

SEC 29. Repealing Clause. - All laws, decrees, executive orders, rules and regulations
and other issuances, or parts thereof, inconsistent with the provisions of this Act, are
hereby repealed or modified accordingly.

SEC 30. Separability Clause. — If any part or provision of this Act is declared
unconstitutional, or other parts or provisions hereof which are not affected thereby shall
continue to be in full force and effect.

SEC 31. Effectivity. — This Act shall take effect fifteen (15) days after its publication in at
least one (1) national newspaper of general circulation.

Approved,