FOURTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regula Session 
S. B. No. 
INTRODUCED BY THE HONORABLE i?lAR ROXAS 
EXPLANATORY NOTE 
The contemporary Bangsamoro rebellion is almost four decades old and counted 
among the world's longest-running ideology-based armed conflicts.' 
Over this same 
period, conflicts in Central America, the Balkans and in Africa have come and gone yet 
the Moro-GRP armed conflict in the Philippines has persisted. 
The impact of the armed conflict on levels on living standards and human 
development in Mindanao is undeniable. Systematic analysis confirms a robust negative 
relationship between being a province in Muslim Mindanao on the one hand, and a host 
of indicators of human development, on the other. Specifically, a province in Muslim 
Mindanao tends on average to have an incidence of poverty that is higher by 32 
percentage points; income per person that is P11,OOO lower (in prices of 2000); cohort- 
survival rates in basic education that are 31 percentage points lower; infant-mortality 
rates that are 15 points higher. 
Estimates of the economic losses due to the armed conflict in Mindanao, while 
less precise and highly conservative*, are just as sobering. Direct economic or monetary 
loss from 1970-2002 is estimated at P5-7.5 billion annually, amounting to about 2.5 
percent of regional GDP of central and south western Mindanao. If foregone investments 
were to be counted however, the economic cost of the Mindanao conflict would amount 
to at least P10 billion from 1975-2002, or a total of $370 million. Foregone investment is 
both a local cost and spillover cost. On the one hand, community-level agricultural 
investments are inhibited by insecurity from the conflict. On the other, Mindanao-level 
equity investments - expected based OR the island's locarion and rich factor endowments 
- are deflected to other areas in East and Southeast Asia. When the whole country 
suffered a sharp drop in durable investment growth after the 2001 Abu Sayyaf kidnap 
incident, the drop for Mindanao was much sharper and continued to shrink two years 
following the incident even after spending in the rest of the country began to recover. 
Even harder to measure are costs due to the loss of human life in direct combat, 
the deaths and morbidity due to internal displacement, and other injuries and indignities. 
All wish for peace. And lasting peace requires an institutional approach includ.ing 
a common framework, a national constituency, and a process of consultation and 
negotiations grounded on transparency. However, fundamental human development 
Unless otherwise specified, analysis cited in the frst five paragraphs of this note are taken from the 2005 
Estimates of lost output based on curent performance are understated since current performance may 
I 
Philippine Human Development Report. 
itself be small because of the presence of the conflict. 
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investments, such as in education and employment, are also required since their absence 
and poor quality fuel armed conflict. Indeed it has been shown empirically that such 
socio-economic investments, although necessary and desirable in and of themselves, are 
potentially effective in reducing the probability of armed conflict. 
It is for this purpose that this bill is being proposed. Specifically, it seeks to 
facilitate employment generation, increased family living standards and improved human 
development for Mindanao through enabling an environment of increased equity 
investments, supervised by Mindanaoans themselves. To this end the bill provides for the 
creation of a Mindanao Special Economic Zone and Freeport covering the 6 regions and 
27 provinces of Mindanao, including ARMM. The zone and Freeport shall be considered 
as a separate customs territory and will have a governing tax system comparable to other 
successful economic zones across the country. It shall be managed by the Mindanao 
Special Economic Zone and Freeport Authority (MEZFA), run by a Board composed of 
provincial governors and investor and worker representatives, and will have a 
capitalization base not less than 60% of which shall be funded by the National 
Government. 
To reiterate, the proposed MEZFA shall be a vehicle by which the State can 
actively encourage, promote, induce, and accelerate the sound and balanced industrial, 
economic and social development of Mindanao, in order to provide productive jobs, 
improve individual and family income, and thereby improve the level and quality of 
living conditions. By supporting Mindanaoans to achieve their own vision for Mindanao, 
this bill will complement initiatives on the political and education sector fronts which 
likewise try to address the conditions of deprivation that enable armed conflict. Its 
urgency cannot be understated particularly in the light of recent events which drive 
home the fact that status quo counterinsurgency and anti-poverty strategies have failed to 
resolve the conflict in the South. 
In view of the foregoing, immediate approval of this bill is requested. 


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FOURTEENTH CONGRESS OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
1 
Second Regular Session 
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INTRODUCED BY THE HONORABLE MAR ROXAS 
AN ACT 
ESTABLISHING THE MINDANAO SPECIAL ECONOMIC ZONE AND 
FREEPORT, CREATING FOR THE PURPOSE THE MINDANAO SPECIAL 
ECONOMIC ZONE AND FREEPORT AUTHORITY, APPROPRIATING FUNDS 
THEREFOR AND FOR OTHER PURPOSES. 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assem bled: 
Section 1. Short 7He. - This Act shall be known as the “Mindanao SpeciaI Economic 
Zone and Freeport Act of2008.” 
Sec. 2. Declaration of Policy - It is hereby declared the policy of the State to actively 
encourage, promote, induce, and accelerate the sound and balanced industrial, economic and 
social developinent of the country in order to provide jobs to the people, especially those in rural 
areas, increase their productivity and their individual and family income, and thereby improve 
the level and quality of their living conditions through the establishment, among others, of 
special economic zones in suitable and strategic locations in the country and through measures 
that shall effectively attract legitimate and productive foreign investments. 
Sec. 3. Creation of the Mindanao Specid Economic Zone and Freeport. - In pursuit of the 
foregoing declared policy and subject to the concurrence of the concerned local government 
units (LGUs) of Mindanao affected by the zone, there is hereby established a Mindanao Special 
Economic Zone and Freeport, hereinafcer referred to as the Mindanao Ecozone. The Mindanao 
Ecozone shall cover the entire area embraced by Region IX - ZAMABOANGA PENINSULA, 
Region X - NORTHERN MINDANAO, Region XI - DAVAO REGION, Region XI1 - 
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SOCCSKSARGEN, Region XI11 - CARAGA and ARMM - AUTONOMOUS REGION OF 
MUSLIM MINDANAO. The metes and bounds of the Mindanao Ecozone shall be delineated in a 
proclamation to be issued by the President of the Philippines. 
Sec. 4. GoverningPtinuples. - The Mindanao Ecozone shall be managed and operated by 
the Mindanao Special Economic Zone and Freeport Authority, herein referred to as the MEZFA, 
created under Section 10 of this Act, under the following principles: 
(a) 
Within the framework and limitations of the Constitution and applicable 
provisions of the Local Government Code, the Mindanao Ecozone shall be developed into and 
operated as a decentralized, self-reliant and self-sustaining industrial, commercialitrading, agro- 
industrial, tourist, banking, financial and investment center, and free port with suitable 
residential areas which shall generate employment opportunities in and around the zone and 
attract and promote productive foreign investments. 
(b) 
The Mindanao Ecozone shall be operated and managed as a separate customs 
territory ensuring free flow or movement of goods and capital within, into and exported out of 
the Mindanao Ecozone, as well as provide incentives such as tax and duty free importations of 
raw materials, capital and equipment. However, exportation or removal of goods from the 
territory of the Mindanao Ecozone to the other parts of the Philippine territory shall be subject 
to customs duties and taxes under the Tariff and Customs Code and other relevant tax laws of the 
Philippines. 
(c) 
The 
Mindanao 
Ecozone 
shall 
be 
provided 
with 
transportation, 
telecommunications and other facilities needed to attract legitimate and productive investments, 
generate linkage industries and employment opportunities for the people of the Province of 
Mindanao and its neighboring towns and cities. 
(d) 
The Mindanao Ecozone may establish mutually beneficial economic relations 
with other entities or enterprises within the country or, subject to the administrative guidance of 
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the Department of Foreign Affairs (DFA), the Philippine Economic Zone Authority (PEZA) 
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and/or the Department of Trade and Industry (DTI), with foreign entities or enterprises 
(e) 
Goods manufactured by a Mindanao 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 MEZFA, together with the 
PEZA, the Bureau of Customs and the DTI. However, in order to protect domestic industries, a 
Negative List of industries shall be drawn up and regularly updated by PEZA. Enterprises 
engaged in industries included in such Negative List shall not be allowed to sell their products 
locally. 
(0 
The national government shall maintain its ability to coordinate with the 
Mindanao Ecozone and the local government units. 
Sec. 5. Incentives to Registered Enterprises - The Mindanao Special Economic Zone and 
Freeport Authority (MEZFA) may administer the following incentives to the registered 
enterprises located therein to the extent of the activity/project: 
(A) hicome Taw Holiday (ITH). - Registered enterprises shall be entitled to an income tax 
holiday from the start of their commercial operations to the extent of their activity under the 
following categories: 
Category A - Registered domestic enterprise located in highly developed areas, as 
determined by the Board of Investments (BOI), shall be entitled to a four-year income tax 
h o 1 id a y . 
Category B - Registered domestic enterprise on the following shall be entitled to a 
six-year income tax holiday: 
(1) Located in less developed areas as defined by the BOI; or 
(2) Producing/rendering new productshewices or having strong backward or 
forward linkages 
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Category C - Registered export enterprise shall be entitled to a six- year income tax 
holiday; Provided, however, That if the export enterprise complies with the following: 
(1) large capital investments or sizeable employment generation, or (2) use high level of 
technology or (3) located outside Metro-Manila, it shall be entitled to an eight-year 
income tax holiday. 
Registered enterprises embarking on new investments that are listed in the current 
Investment Priorities Plan (IPP) shall be entitled to incentives provided herein pertaining to the 
new investments and subject to such terms and conditions as the BO1 may determine. 
For this purpose, a registered enterprise shall be defined as any person, natural or 
juridical, licensed to do business in the Philippines and registered with the MEZFA to transact 
business within the Mindanao Ecozone. A registered export enterprise shall be defined as any 
registered enterprise engaged directly or indirectly in the production, manufacture or trade of 
products or services which earns at least seventy percent (70%) of its normal operating revenues 
from the sale of its products or services abroad for foreign currency. A registered domestic 
enterprise, meanwhile, shall be defined as any registered enterprise not falling under the 
definition of a registered export enterprise. 
Additional investments in the project shall be entitled to the income tax holidays 
corresponding to such investments as may be determined by the BOI. Additional income tax 
holiday may be granted for as long as the investment is made on the same project; Provided, That 
the project is listed in the IPP at the same time the additional investment in the project is made; 
Provided, firther, That the entitlement period for additional investments shall not exceed three 
times the period provided under this subsection; Provided, fin all^ That the total ITH period for 
an export enterprise availing of an eight year ITH shall not exceed twenty (20) years. Any unused 
incentives shall therefore be deemed forfeited if not used during the incentive period. 
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Enterprises registered with MEZFA are required to share in the special deveropment fund 
of the BO1 for investment promotion projects of the government equivalent to one percent (1%) 
of rhe ITH granted for every application. 
The Bureau of Internal Revenue (BIR) shall require a registered enterprise availing of ITH 
or Net Operating Loss Carryover (NOLCO) to secure a certificate of eligibility from the MEZFA 
before submitting its income tax return (ITR) with MEZFA for validation. 
Failure to secure certification andor to file the ITH or NOLCO availment for validation 
by the MEZFA within forty-five (45) days from the last day of each statutory filing date for ITR 
shall cause the forfeiture of the availment for the taxable period. 
(B) Net Operating Loss Carqover (NOLCO). - Net operating loss of the business or 
enterprise during the first three years from start of commercial operations which have not been 
previously offset as deduction from gross income shall be carried over as a deduction from gross 
income for the next five consecutive years immediately following the year of such loss; Provided 
howeve< That operating loss resulting from availment of incentives provided in this Act shall 
not be entitled to NOLCO. 
Registered enterprises availing of the ITH as herein provided shall not be entitled to avail 
of the NOLCO. 
(C) Imposition of a tax rate of five percent (5%) on Gross Income Earned (GIE). - Except 
for real property tax on land, no local and national taxes as prescribed under Republic Act No. 
8424, also known as “The National Internal Revenue Code of 1997, as Amended‘ such as income 
tax, excise tax, and franchise taxes, shall be imposed on registered enterprises operating within 
the Mindanao Ecozone. In lieu thereof, five percent (5%) of the gross income earned shall be 
paid as follows: 
(a) Three percent (3%) to the national government; 
(b) Two percent (2%) shall be remitted by the business establishments to the treasurer’s 
office of the municipality or city where the enterprise is located; 
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All persons and service establishments in the Mindanao Ecozone shall be subject to 
national and local taxes under the National Internal Revenue Code of 1997, as amended, and the 
Local Government Code. 
(D) Accelerated Depreciation. - Accelerated depreciation of plant, machinery and 
equipment that are reasonably needed and actually used for the production and transport of 
goods and services may be allowed using a rate not exceeding twice the rate which would have 
been used had the annual allowance been computed in accordance with the rules and regulations 
prescribed by the Secretary of Finance and the provisions of the National Internal Revenue Code 
(NIRC) of 1997, as amended. 
(E) CapitaI Equipment Incentives. - (1) Importations of capital equipment, spare parts, 
tools and dye, or those required for pollution abatement and control, cleaner production and 
waste reduction including consignment thereof by registered enterprises upon the effectivity of 
this law, shall be exempted to the extent of one hundred percent (100%) of the taxes and custoins 
duties; Provided, That the imported items thereof shall be used exclusively by the registered 
enterprise in its registered activity; Provided, further, That the importation of machinery and 
equipment and accompanying parts shall comply with the following conditions: 
(a) They are not manufactured domestically in sufficient quantity, of comparable quality 
and at reasonable prices; 
(b) They are reasonably needed and will he used exclusively by the registered enterprise 
in the manufacture of its products, unless prior approval of the MEZFA is secured for 
the part time utilization of said equipment in a non-registered activity to maximize 
usage thereof or the proportionate taxes and duties are paid on a specific equipment 
and machinery being permanently used for non-registered activities; and 
(c) Approval of the MEZFA was obtained by the registered enterprise for the importation 
of such machinery, equipment and spare parts. 
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Approval of the MEZFA must be secured before any sale, transfer or disposition of the 
imported capital equipment, machinery or spare parts is made; Provided, That if such sale, 
transfer or disposition is made within the first five years from date of importation, any of the 
following conditions must be present: 
1) 
The same is made to another enterprise enjoying tax and duty exemption on 
imported capital equipment; 
The same is made to another enterprise, upon the payment of any taxes and duties 
on the net book value of the capital equipment to be sold; 
The exportation of the capital equipment, machinery, spare parts or source 
documents or those required for pollution abatement and control; or 
Proven technical obsolescence of the said equipment, machinery or spare parts. 
2) 
3) 
4) 
When the aforementioned sale, transfer or disposition is made under any of the 
conditions provided for in the foregoing paragraphs other than paragraph (2) herein, the 
registered firm shall not pay the taxes and duties waived on such items; Provided, firthe& That 
if the registered enterprises sell, transfer or dispose the aforementioned imported items without 
prior approval within five years from the date of importation, the registered enterprise and the 
vendee, transferee, or assignee shall be solidarily liable to pay twice the amount of the tax and 
duty exemption given it; Provided, finallx That even if the sale, transfer or disposition of the 
capital equipment, machinery or spare parts is approved after five years from date of importation, 
the registered enterprises are still liable to pay the taxes and duties based on the net book value of 
the capital equipment, machinery or spare parts if any of the registration terms and conditions 
has been violated. Otherwise, they shall no longer be subject to the payment of the taxes and 
duties waived thereon. 
(2) The purchase of machinery, capital equipment, raw materials, supplies, parts and 
semi-finished products to be used in the fabrication of machinery and capital equipment by a 
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registered export-oriented enterprise from a domestic manufacturer shall be subject to zero 
percent (0%) value-added tax. 
The registered export-oriented enterprise shall be granted a tax credit equivalent to the 
amount of duties that would have been waived on the machinery, capital equipment, raw 
materials, supplies, parts and semi-finished products used in the fabrication of machinery and 
capital equipment, had these items been imported, upon its submission to the DOF of the bill of 
materials evidencing the transaction value of such and other pertinent documents, for 
verification and proper endorsement. 
The availment by a registered export enterprise of the incentive stated under the 
immediately preceding two paragraphs shall be subject to the following conditions: 
(a) That said capital equipment, machinery and spare parts will be used exclusively by the 
registered enterprise in its registered activity; 
(b) That the capital equipment or machinery where the raw materials, supplies, parts and 
semi-finished products were used would have qualified for tax and duty-free importation; 
and 
(c) That the approval of the MEZFA is obtained by the registered enterprise. 
If the registered enterprise sells, transfers or disposes of these machineries, capital 
equipment and spare parts, the provision in the preceding paragraphs for such disposition shall 
apply. 
This incentive shall be deemed waived if application for tax credit under this subsection 
was not filed within one year from date of delivery 
(F) The importation of source documents by information technology-registered 
enterprises shall be eligible for tax and duty free importation. 
(G) Raw Materials Incentives. - Every registered export-oriented enterprise shall enjoy a 
tax credit equivalent to the internal revenue taxes and customs duties paid on the supplies, raw 
materials and semi-manufactured products provided the same are not sufficient in quantity, 
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quality or are not competitively priced in the Philippines and which are used in the manufacture, 
processing or production of its export products forming part thereof, exported directly and 
indirectly by the registered export-oriented enterprise, based on the actual taxes and duties paid 
for such materials/supplies/semi-manufactured products by the registered enterprise. 
This incentive shall be deemed waived if application for tax credit under this subsection 
was not filed within one year from date of exportation of the final product. 
(H) 
Incentives 011 Breeding Stocks and Genetic Materials. - Importation of breeding 
stocks and genetic materials within ten (10) years from the date of registration of commercial 
operation of the enterprise shall be exempt from all taxes and duties; Provided, That such 
breeding stocks and genetic materials are reasonably needed in the registered activity; and 
approved by the MEZFA. 
The availment of the incentives by the registered enterprise shall be subject to the 
following conditions: 
(a) That said breeding stocks and genetic materials would have been qualified for tax and 
duty-free importation under the preceding paragraph; 
(b) That the breeding stocks and genetic materials are reasonably needed in the registered 
activity; 
(c) That approval of the MEZFA has been obtained by the registered enterprise; and 
(d) That the purchase is made within ten (IO) years from the date of registration of 
cominercial operation of the registered enterprise. 
This incentive shall be deemed waived if application for tax credit under this subsection 
is not filed within one year from date of delivery. 
(I) Exemption from Wharfige Dues - The provisions of law to the contrary 
notwithstanding, exports by a registered enterprise shall be exempted from wharfage dues. 
(J) Deferred Imposition of the Minimum Coporate hicome Tax. - The Minimum 
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Corporate Income Tax (MCIT) of two percent (2Yo) of the gross income as of the end of the 
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taxable year shall be imposed when the MCIT is greater than the income tax coinputed under the 
NIRC of 1997, as amended, for the taxable year; Provided, however, That said MCIT shall be 
imposed only after the enterprise’s entitlement period to the income tax-based incentives has 
expired. 
(K) Tax Tivatmait ofMerchandise in the Miiidanao Ecozone. - 
a. Domestic merchandise sent from the Mindanao Ecozone to areas outside the said 
Ecozone shall, whether or not combined with or made part of other articles likewise of local 
origin or manufactured in the Philippines while in the export processing zone, be subject to 
internal revenue laws of the Philippines as domestic goods sold, transferred or disposed of for 
local consumption. 
b. Merchandise sent from the Mindanao Ecozone to areas outside the said special 
economic zone and freeport shall, whether or not combined with or made part of other articles 
while in the zone, be subject to rules and regulations governing imported merchandise. The 
duties and taxes shall be based on the value of said imported materials except when the final 
product is exempt. 
c. Articles produced or manufactured in the Mindanao Ecozone and exported 
therefrom shall, on subsequent importation into the customs territory, be subject to the import 
laws applicable to like articles manufactured in a foreign country. 
d. Unless the contrary is shown, merchandise taken out of the Mindanao Ecozone 
shall be considered for tax purposes to have been sent to customs territory. 
(L) Tax Treatment ofRaw Materials and Capital Equipment in the Miiidanao Ecozone. - 
Importations of raw materials and capital equipment shall be treated as in the Omnibus 
Investments Code 
(M) Registered export oriented enterprise shall have access to the utilization of the 
bonded warehousing system in accordance with the rules and regulations of the Bureau of 
Customs. 
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(N) Employment of Foreign Nationals. - Subject to the provisions of Section 29 of 
Commonwealth Act No. 613, as amended, a registered enterprise may employ foreign nationals 
in supervisory or technical positions for a period not exceeding ten (10) years from its 
registration. 
Foreign nationals under employment contract within the purview of this incentive, their 
spouses and unmarried children under twenty-one (21) years of age, who are not excluded by 
Section 29 of Commonwealth Act No. 613, as amended, shall be permitted to enter and reside in 
the Philippines during the period of employment of such foreign nationals. They shall be 
entitled to a multiple entry visa, valid for a period of three years, and shall be allowed to enter 
and leave the Philippines without further documentary requirements other than valid passports 
or other travel documents in the nature of passports. The validity of the multiple entry visa shall 
be extendible yearly. 
The said foreign nationals admitted under this provision, as well as their respective 
spouses and dependents shall be exempt from: (a) obtaining alien certificate of registration and 
immigration clearance certificates; and (b) securing the Alien Employment Permit (AEP) and all 
types of clearances, permits, licenses or their equivalents required by any government 
department or agency. 
Sec. 6. Incentive to Investors. - Any foreign national covered under Subsection [N) of 
Section 5 of this Act, who invests an amount of US $ 150,000.00, either in cash and/or 
equipment, in a registered enterprise shall be entitled to an investor’s visa; Provided, That, 
(1) He is at least eighteen (18) years of age; 
(2) He has not been convicted of a crime involving moral turpitude; 
(3) He is not afflicted with any loathsome, dangerous or contagious disease; and 
(4) He has not been institutionalized for any mental disorder or disability. 
Provided, fir&heG That in securing the investor’s visa, the alien-applicant shall be entitled to the 
same privileges provided for under paragraph (N), Section 5 hereof. 
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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 investment in the country. 
Should said alien withdraw his investments from the Philippines, the investor’s visa issued to 
him shall automatically expire. 
Sec. 7. Administration, Implementation and Monitoring of Incentives. - The MEZFA 
shall be responsible for the administration and implementation of the incentives granted to its 
respective registered enterprises: Provided, That any incentive administration policy adopted by 
the BO1 for registered enterprises shall be uniformly applied by MEZFA. 
The following are the duties and responsibilities of the MEZFA in the administration of 
incentives: 
(A) 
To adopt consistent procedures of administering incentives in accordance with the 
guidelines established by the BOI; 
To adopt and implement systems and procedures affecting trade and customs 
policies in accordance with the requirements established by the Department of 
Finance (DOF) and the BOI; 
To submit information on registered enterprises to the DOF and the BO1 as 
required by any of these agencies to ascertain consistency of investment policies 
and incentives, including their implementation as provided in paragraph (A) 
herein, and to ensure proper implementation of systems and procedures affecting 
trade and customs policies as provided in paragraph (B) herein; and 
To perform all other duties and responsibilities as may be required by the President 
of the Philippines. 
(B) 
(C) 
(D) 
For proper monitoring, the BO1 shall create a single database of all incentives provided by 
all incentives granting agencies, including MEZFA, and all information thereto. Double entry 
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accounting shall be done by the BO1 in recording all incentives granted by the government for 
transparency purposes. 
Sec. 8. Extension of Period of Availment. - The availment period of the incentives 
provided herein may be extended by MEZFA, in the event that the registered enterprise suffers 
operational force majeure or any event equivalent thereto, impairing its viability; Provided, That 
the availment period shall not exceed the duration of the said force majeure or equivalent event. 
Sec. 9. Duration ofIncentives. -Enterprises registered with MEZFA may enjoy ITH or 
NOLCO granted by the latter prior to the availment of the five percent (%) GIE. 
Fiscal incentives under this Act shall be terminated after a cumulative period of twenty 
(20) years from date of registration or start of commercial operation, whichever is applicable, 
except that it could be extended with regard to industries deemed indispensable to national 
development. 
The industries exempted from this provision shall be recommended by BOI, with the 
coucurrence of the Secretaries of the Department of Finance and Trade and Industry. 
Sec. 10. 
Creation of the Mindanao Special Economic Zone and Freeport Authon'y 
(MEZFA). - There is hereby created a body corporate to be known as the Mindanao Special 
Economic Zone and Freeport Authority, hereinafter referred to as the MEZFA, which shall 
manage and operate, in accordance with the provisions of this Act, the Mindanao Ecozone. This 
corporate franchise shall expire in fifty (50) years counted from the first day of the fifth (5'h) 
calendar year after the effectivity of this Act, unless otherwise extended by Congress. It shall be 
organized within one hundred eighty (180) days after the effectivity of this Act. 
Sec. 11. Pnhc~pal OBce ofMEZFA. - The MEZFA shall maintain its principal office at 
Davao City, but it may establish branches in any part of Mindanao and within the Philippines as 
may be necessary for the proper conduct of its business. 
Sec. 12. Powers and Functions of the MEZFA. -The MEZFA shall have the following 
powers and functions: 
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(a) To operate, administer, manage and develop the Mindanao Ecozone according to the 
principles and provisions set forth in this Act; 
(b) To register, regulate and supervise the enterprises in the Mindanao Ecozone in an 
efficient and decentralized manner, subject to existing laws; 
(c) To coordinate with local government units and exercise general supervision over the 
developinent plans, activities and operations of the Mindanao Ecozone; 
(d) To regulate and undertake the establishment, operation and maintenance of utilities, 
other services and infrastructure in the Mindanao Ecozone such as but not limited to 
heat, light and power, water supply, telecommunications, transport, toll roads and 
bridges, port services, and to fix just, reasonable and competitive rates, fares, charges 
and prices thereof; 
(e) To construct, acquire, own, lease, operate and maintain on its own or through 
contracts, franchise, licenses, bulk purchase from the private sector, joint venture or 
permits under any of the schemes allowed in Republic Act No. 6957 or the Build- 
Operate-Transfer Law, as amended by RA 7718, adequate facilities and infrastructure 
required or needed for the operation and development of the Mindanao Ecozone, in 
coordination with appropriate national and local government authorities and in 
conformity with applicable laws thereon; 
(0 To operate on its own, either directly or through a license to other tourism-related 
activities, including games, amusements, recreational and sports facilities; 
(8) Subject to the approval of the President and the Monetary Board of the Bangko 
Senti-dng PiI&inas upon the recommendation of the Department of Finance, to raise 
or borrow adequate and necessary funds from local or foreign sources to finance its 
projects and programs under this Act, and for that purpose to issue bonds, promissory 
notes, and other forms 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; 
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(h) To protect, preserve, maintain and develop the virgin forests, beaches, coral and coral 
reefs and maintain ecological balance within the Mindanao Ecozone; 
(i) To create, operate andlor contract to operate such functional units of offices of the 
MEZFA as it may deem necessary; 
(j) To adopt, alter and use a corporate seal; make contracts, leases, own, or otherwise 
dispose of personal or real property; sue and be sued; and otherwise carry out its 
functions and duties as provided for in this Act; 
(k) To issue certificates of origin for products manufactured or processed in the 
Mindanao Ecozone in accordance with prevailing rules of origin, and the pertinent 
regulations of the PEZA, DTI andor the Department of Finance (DOF); 
(1) To issue working visas renewable every two (2) years to foreign executives and 
foreign technicians with highly specialized skills which no Filipinos possesses, as 
certified by the Department of Labor and Employment; 
(m) To report to the Bureau of Immigration the names of the foreigners who have been 
granted permanent resident status and working visas within thirty (30) days after 
issuance of such grant; 
(n) To exercise such powers as maybe essential, necessary or incidental to the powers 
granted to it hereunder as well as those that shall enable it to carry out, implement 
and accomplish the purposes, objectives and policies of this Act; and 
(0) To issue rules and regulations consistent with the provisions of this Act as maybe 
necessary to accomplish and implement the purposes, objectives and policies 
provided herein. 
Sec. 13. Banking Rules and Regulations. - Existing laws and rules and regulations of the 
Bangko Sentral ng Pilijiizas (BSP) shall apply to banks and financial institutions to be established 
in the Mindanao Ecozone, such as those governing foreign exchange and other concurrent 
account transactions (trade and non-trade), local and foreign borrowings, foreign investments, 
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establishment and operation of local and foreign banks, foreign currency deposit units, offshore 
banking units and other financial institutions under the supervision of the BSP. 
Sec. 14. Remirtance ofEarnings. - In the case of foreign investments, a registered 
enterprise in the MEZFA 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. 
Sec. 15. Board OfDirectors of the MEZFA. -The powers of the MEZFA shall be vested in 
and exercised by a Board of Directors, hereinafter referred to as the Board, which shall be 
coinposed of the following: 
a) The Chairman, who shall at the same time be the administrator of the MEZFA; 
b) A Vice-chairman who shall come from among the members of the Board; 
c) Members consisting of: 
(1) One (1) Provincial Governor representative per region of Mindanao, the 
manner of selection and tenure of representation to be determined by the 
Governors from that region; 
(2) One (1) representative per region of Mindanao who will represent investors 
from that Region, and 
(3) One (1) representative per region of Mindanao who will represent workers 
working from that Region. 
The Governors of Mindanao shall serve as ex-oficio members of the Board, whose term 
in the Board corresponds to their term as elected officials. 
The Chairman and the members of the Board, except the ex-oficio members, shall be 
appointed by the President of the Philippines to serve for a term of six (6) years, unless sooner 
separated from service due to death, voluntary resignation, or removal for cause. In case of 
death, resignation or reinoval for cause, the replacement shall serve only the unexpired portion 
of the term. 
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Except for the representatives of the business and labor sectors, no person shall be 
appointed by the President of the Philippines as a member of the Board unless he is a Filipino 
citizen, of good moral character, of proven probity and integrity, and a degree-holder in any of 
the following fields: economics, business, public administration, law, management or their 
equivalent, and with at least ten (10) years relevant working experience preferably in the field of 
management or public administration. 
The Members of the Board, except ex-officio members, shall each receive per diem at rate 
to be determined by the Department of Budget and Management in accordance with existing 
rnles and regulations; Provided, however, That the total per diem collected each month shall not 
exceed the equivalent per diem for four (4) meetings. Unless and until the President of the 
Philippines has fixed a higher per diem for the members of the board, such per diem shall not be 
more than ten thousand pesos (PlO,000.00) for every Board meeting. 
Sec. 16. Powers and Duties of the Chairman-Administrator. - The Chairman- 
Administrator shall have the following powers and duties: 
To direct and manage the affairs of the MEZFA in accordance with the policies of 
the Board; 
To establish the internal organization of the MEZFA under such conditions that 
the Board may prescribe; 
To submit an annual budget and necessary supplemental budget to the Board for 
its approval; 
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 tlie operation of the Mindanao Ecozone; 
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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 Mindanao Ecozone: 
To propose to the Board of Directors of the MEZFA the internal rules that will 
govern the internal rules of the MEZFA Board; Provided, That the internal rules 
to be operative must be approved by two/thirds (2/3) of all the members of the 
said Board in a meeting duly called for that purpose. Any amendments thereto 
shall be approved in the same manner: and 
To perform such other duties as may be assigned to him by the Board or which are 
necessary or incidental to his office. 
Sec. 17. Organization and Personnel - The Board of Directors of the MEZFA shall 
provide for an organization and staff of its officers and employees. Upon recommendation of the 
Chairman-Administrator, 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 have exclusive and final authority to 
promote, transfer, assign or reassign officers of the MEZFA, any provision of existing law to the 
contrary notwithstanding; Provided, further, That the Chairman-Administrator may carry out 
removal of such officers and employees. 
The officers and employees of the MEZFA, including all Members of the Board, shall not 
engage directly or indirectly in partisan political activities nor take part in any election, except to 
vote. 
Subject to Civil Service laws and regulations, no officer or employee of the MEZFA shall 
be removed or suspended except for cause, as provided by law. 
Sec. 18. Ipso Facto Clause. -Sections 30-41 of Republic Act 7916 or the Special Economic 
Zone Act of 1995, shall ipso facto apply to the Mindanao Ecozone. 
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Sec. 19. CapittaLizaation. - The MEZFA shall have an authorized capital stock of Five 
Billion Pesos (Php 5,000,000,000) no par shares with a minimum issue of Ten Pesos (PhplO.OO) 
each, the majority shares of which shall be subscribed and paid for by the National Government 
and the Local Government Units (LGUs) embracing the Mindanao Ecozone. The Board of 
Directors of the MEZFA 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 MEZFA to 
the general public under such policy as the Board and the Secretary of Finance may determine. 
The National Government and the LGUs shall in no case own less than sixty per centum (60%) of 
the total issued and outstanding capital of the Mindanao Ecozone Authority. 
The amount necessary to subscribe and pay for the shares of the National Government to 
the capital stock of the MEZFA 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. 20. Supervision. - The Mindanao Ecozone shall be under the direct control and 
supervision of the Philippine Economic Zone Authority (PEZA) for purposes of policy direction 
and coordination. 
Sec. 21. Defense mdSeczuiv. -The defense of the Mindanao Ecozone and the security of 
its perimeters shall be the responsibility of the National Government in coordination with the 
MEZFA. The MEZFA shall provide and establish its own internal security and firefighting 
forces. 
Sec. 22. Relationship with the Regional Development Councils. - The MEZFA shall 
determine the development goals for the Mindanao Ecozone within the framework of national 
development plans, policies and goals. The Administrator shall, upon approval by the Board, 
submit the Mindanao Ecozone plans, programs and projects to the Regional Development 
Councils for inclusion and coordination of the same to the other regional development plans. 
Sec. 23. Relationship with Local Government Umks. - Except as herein provided, the 
local government units comprising the Mindanao Ecozone shall retain their basic autonomy and 
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identity. All local government units covered under the territory of the Mindanao Ecozone shall 
operate and function in accordance with the Local Government Code of 1991. In case of any 
conflict between the MEZFA and any of the Local Government Units of Mindanao on matters 
affecting the Mindanao Ecozone, other than defense and security matters, the decision of the 
MEZFA shall prevail. 
Sec. 24. InterpretatiodConstruction. - The powers, authorities and functions that are 
vested in the MEZFA are intended to decentralize governmental functions and authority and 
promote an efficient and effective working relationship between the Mindanao Ecozone, the 
National Government, and the Local Government Units. 
Sec. 25. Auditing. -The Commission on Audit shall appoint a representative who shall 
be a full time auditor of the MEZFA and assign such number of personnel as may be necessary to 
assist said representative in the performance, of hisher duties. The salaries and emoluments on 
the assigned auditor and personnel shall be in accordance with pertinent laws, rules and 
regulations. 
Sec. 26. Separability Clause. - If any provisions of this Act shall be held unconstitutional 
or invalid, the other provisions not otherwise affected shall remain in full force and effect. 
Sec. 27. Repealing Clause. - All laws, executive orders and issuances, or any parts 
thereof, which are inconsistent herewith are hereby repealed or amended accordingly. 
Sec. 28. Effech’idy Clause. - This Act shall take effect upon its publication in at least one 
(1) newspaper of general circulation. 
Approved, 
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