THIRTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PHILIPPINES 
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(1 I" 9 
Second Regular Session 
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Introduced by Sen. luan Ponce Enrile 
EXPLANATORY NOTE 
The province of Palawan occupies a strategic location in the Southern Tagalog 
Region. It has a total land area of 1.4 million hectares, a population of 755,412 
(Census 2000), and boasts of bountiful forest, marine and mineral resources. 
As such, the province presents vast potential for economic growth through 
infrastructure, industrial, agricultural and tourism development. 
However, while 
economic activities are concentrated in Puerto Princesa, its capital, and in other 
municipalities wherein tourism-related activities thrive such as the Calauit Island, El 
Nido, and Taytay, other towns abundant in natural resources and large labor force 
remain untapped. 
Hence, the proposal to establish the Southern Palawan Economic Zone and Free 
Port covering the municipalities of Bataraza, Brooke's Point and Balabac. In accordance 
with the mandate of Republic Act No. 7916, otherwise known as "The Special Economic 
Zone Act of 1995", this measure encourages the development of the countryside into 
agro-industrial, commercial, tourist, banking, investment and financial center. 
In order to administer the operations of the ecozone, the bill proposes to create 
the Southern Palawan Economic Zone and Free Port Authority. It likewise offers a 
package of fiscal and non-fiscal incentives to attract prospective foreign and local 
investors in order to fully maximize the development possibilities of the province and 
the region as well. 
In view of these, therefore, the passage of this bill is earnestly sought. 


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THIRTEENTH CONGRESS OF THE REPUBLIC) 
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OF THE PHILIPPINES 
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Second Regular Session 
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AN ACT 
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ESTABLISHING THE SOUTHERN PALAWAN SPECIAL ECONOMIC ZONE AND 
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FREEPORT, CREATING FOR THE PURPOSE THE SOUTHERN PALAWAN 
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SPECIAL ECONOMIC ZONE AND FREE PORT AUTHORITY, APPROPRIATING 
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FUNDS THEREFOR, AND FOR OTHER PURPOSES 
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in Congress assembled; 
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Introduced by Sen. Juan Pome Enrile 
Be it enacted by the Senate and the House of Represenfarives of the Fhihppines 
Section. 1. Short TTtle. -This Act shall be known as the "Southern Palawan 
Special Economic Zone and Free Port (SPEZFA) Act of 2005." 
Sec. 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 their productivity and their individual and 
family income, and thereby improve the level and quality of their living condition 
through the establishment, among others, of special economic zones and free ports in 
suitable and strategic locations in the country and through measures that shall 
effectively attract legitimate and productive foreign investments. 
Sec. 3. The Southern Palawan Special Economic Zone and Free Port. - 
I n  accordance with the foregoing declared policy, and subject to the concurrence of the 
municipalities of Southern Palawan covered by the economic zone, there is hereby 
established a special economic zone and free port covering the municipalities of 
Balabac, Brooke's Point, and Bataraza, in the Province of Palawan to be known as the 


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Southern Palawan Special Economic Zone and Free Port, hereinafter referred to as 
Southern Palawan ECOZONE. The metes and bounds of the Southern Palawan 
ECOZONE shall be specifically defined in the presidential proclamation to be issued for 
this purpose. 
Sec. 4. Governing Princip/es, - The Southern Palawan ECOZONE shall be 
managed and operated by the Southern Palawan Special Economic Zone and Freeport 
Authority, herein referred to as SPEZFPA, to be created under Section 6 of this Act, 
under the following principles: 
(a) Within the framework and limitations of the Constitution and the applicable 
provisions of the Local Government Code, the Southern Palawan ECOZONE shall be 
developed into and operated as the decentralized, self-reliant and self-sustaining 
industrial, commercial/trading, agro-industrial, tourist, banking, financial and investment 
center with suitable residential areas, in order to create employment opportunities in 
and around the Southern Palawan ECOZONE, and to effectively encourage and attract 
legitimate and productive foreign investments therein; 
(b) The Southern Palawan 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 Province 
of Palawan and its neighboring towns and cities; 
(c) The Southern Palawan 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 Administration (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 
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proportion may set up enterprises in the Southern Palawan ECOZONE, either by 


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themselves or in joint venture with Filipinos in any sector of industry, international 
trade, and commerce within the Southern Palawan ECOZONE; 
(e) The Southern Palawan 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 Southern Palawan ECOZONE premises, as well as provide 
incentives such as tax and duty-free importations of raw materials and capital 
equipment. However, exportation or removal of goods from the territory of the 
Southern Palawan ECOZONE to the other parts of the Philippine territory shall be 
subject to customs duties under the Tariff and Customs Code of the Philippines, as 
amended, and the National Internal Revenue Code of 1997, as amended; 
(f) The areas comprising the Southern Palawan ECOZONE may be expanded or 
reduced when necessary. For this purpose, the SPEZFPA, in consultation with the local 
government units (LGUs), shall have the power to acquire either by purchase, 
negotiation or condemnation proceedings, any private lands within or adjacent to the 
Southern Palawan ECOZONE for the following purposes: (1) consolidation of lands for 
zone development; (2) acquisition of right-of-way to the Southern Palawan ECOZONE; 
and (3) the protection of watershed areas and natural assets valuable to the prosperity 
of the Southern Palawan ECOZONE; 
(9) Goods manufactured by the Southern Palawan ECOZONE enterprise shall be 
made available for the 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 SPEZFPA, together with Philippine Economic Zone Authority (PEZA), 
the Bureau of Customs (BOC) and the Department of Trade and Industry (DTI). 
However, in order to protect the domestic industry, there shall be a negative list of 
industries that will be drawn up and regularly updated by the PEZA. Enterprises 


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engaged in industries included in such negative list shall not be allowed to sell their 
products locally; and, 
(h) The defense of the Southern Palawan ECOZONE and the security of its 
perimeter fence shall be the responsibility of the national government in coordination 
with the SPEZFPA and the LGUs concerned. 
Sec. 5. Incentives and Ob/igations. - Eusiness establishments operating 
within the Southern Palawan ECOZONE shall be entitled to the following incentives: 
(a) Resident Status and Wsa. - Any foreign investor who establishes a business 
enterprise within the Southern ECOZONE and who maintains a capital investment of not 
less than One Hundred Fifty Thousand United States Dollars (US $150,000) shall be 
granted by the SPEZFA, along with his or her spouse, dependents and unmarried 
children below twenty one (21) years old, a permanent resident status within the 
Southern Palawan ECOZONE. They shall likewise have the freedom of ingress or egress 
to and from the Southern Palawan ECOZONE without any need for special authorization 
from the Bureau of Immigration. Working visas renewable every two (2) years shall be 
issued to foreign executives and foreign technicians with highly specialized skills which 
no Filipino possesses, as certified by the Department of Labor and Employment (DOLE). 
The foregoing is without prejudice to a foreigner acquiring permanent resident status in 
the Philippines in accordance with applicable immigration, retirement and other related 
laws. 
(b) Rsca/ Incentives. - Business establishments operating within the Southern 
Palawan ECOZONE shall be entitled to the existing fiscal incentives as provided for 
under Republic Act No. 7916, otherwise known as the "Special Economic Zone Act of 
1995," as amended by Republic Act No. 8748. 
(c) Taxation. - Except for real property taxes on land owned by developers, no 
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taxes, local and national, shall be imposed on business establishments operating within 


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the Southern Palawan ECOZONE. In lieu of paying taxes, five percent (5%) of the gross 
income earned by all business enterprises operating within the Southern Palawan 
ECOZONE shall be paid and remitted as follows: 
(i) 
(ii) 
Two percent (2%) 
which shall be directly remitted by business' 
establishments to the Treasurer's Office of the municipality or city where 
the enterprise is located. 
Three percent (3%) to the national government; and, 
All persons and service establishments in the Southern Palawan ECOZONE shall 
be subject to national and local taxes under the National Internal Revenue Code as 
amended by Republic Act No. 8424, and Republic Act No. 7160, or the Local 
Government Code. 
(d) Banking Rules and Regu/ations. - Existing banking laws and rules and 
regulations of the Bangko Sentral ng Pilipinas (BSP) shall apply to all banks and 
financial institutions established in the Southern Palawan ECOZONE. Among other 
pertinent regulations, these shall include those governing foreign exchange and other 
current account transactions (trade and non-trade), local and foreign borrowings, 
foreign investments, establishments and operation of local and foreign banks, foreign 
currency deposit units, offshore banking units, and other financial institutions under 
the supervision of the BSP. 
(e) Profit Remittance. - Without prior BSP approval, after tax profits and other 
earnings of foreign investments in enterprises in the Southern Palawan ECOZONE 
may be remitted outward in the equivalent foreign exchange through any of the 
banks licensed by the BSP in the Southern Palawan ECOZONE; Provided, however, 
that such foreign investments in said enterprises have been previously registered with 
the BSP. 


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Sec. 6. Creation of the Southern Palawan Special Economic Zone and 
Free Porf Authority, - There is hereby created a body corporate to be known as the 
Southern Palawan Special Economic Zone and Free Port Authority, herein referred to as 
the SPEZFPA, which shall manage and operate the Southern Palawan ECOZONE, in 
accordance with the provisions of this Act. This corporate franchise shall expire in fifty 
(50) years counted from the first 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. 7. Principal Office, - The SPEZFPA shall maintain its principal office in 
the municipality of Balabac, but it may establish branches within the Philippines and 
abroad, as may be necessary for the proper conduct of its business. 
Sec. 8. Powers and Functions of SPEZFPA. - The SPEZFPA shall have the 
following functions: 
To operate, administer manage and develop the Southern Palawan 
ECOZONE according to the principles and provisions set forth in this Act; 
To recommend to the President the issuance of a proclamation to fix and 
delimit the site of the Southern Palawan ECOZONE; 
To register, regulate and supervise the enterprises in the Southern 
Palawan ECOZONE in an efficient and decentralized manner, subject to 
existing laws; 
To coordinate with the LGUs concerned and exercise general supervision 
over the development plans, activities and operations of the ECOZONE; 
To regulate and undertake the establishments operation and maintenance 
of utilities, other services, and infrastructure in the Southern Palawan 
ECOZONE such as, but not limited to heat, power supply, water supply, 
telecommunications, transport, toll roads and bridges, port services, and 


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to fix just and reasonable and competitive rates fares, charges and prices 
thereof; 
To construct, acquire, own or lease, operate and maintain on its own or 
through others by virtue of contracts, franchises, licenses, bulk purchases 
from the private sector or permits under any of the schemes allowed in 
Republic Act No. 6957 (Build-Operate-Transfer Law, as amended by 
Republic Act No. 7718), or joint venture with the private sector any or all 
of the public utilities and infrastructure required or needed for the 
operation and development of the Southern Palawan ECOZONE, in 
coordination with appropriate national and local government authorities 
and conformity with applicable laws thereon; 
To operate on its own, either directly or through a subsidiary entity, or 
license to others, 
tourism-related activities, including games and 
amusements, recreational and sports facilities; 
Subject to the approval of the President and the Monetary Board of the 
BSP, upon the recommendation of the Department of Finance (DOF), 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; 
To provide security for the Southern Palawan ECOZONE in coordination 
with the national and local governments. For this purpose, the SPEZFPA 
may establish and maintain security forces and firefighting capability 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 
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(4) 
(h) 
(i) 


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affairs of the ecozone and expenditures for these military forces shall be 
borne by the national government; 
To protect, preserve, maintain, and develop the virgin forests, beaches 
coral and coral reefs and maintain ecological balance within the Southern 
Palawan ECOZONE; 
To create, operate and/or contract to operate such functional units or 
offices of the SPEZFPA as it may deem necessary; 
To adopt, alter and use a corporate seal; to contract, lease, buy, sell, 
acquire, own and dispose movable and immovable as well as personal and 
real property of whatever nature (including but not limited to shares of 
stock or participation in private corporations or in limited partnerships, or 
in joint ventures with limited liability), bonds, precious metals in bullions, 
ingots and easily convertible foreign exchange, 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; 
To issue certificates of origin for products manufactured or processed in 
the Southern Palawan ECOZONE in accordance with the prevailing rules of 
origin and the pertinent regulations of the PEZA, the DTI and/or the DOF; 
(n) 
To issue working visas renewable every two (2) years to foreign 
executives and technicians with highly specialized skills which no Filipino 
possesses, as certified by the DOLE; 
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; 
(j) 
(k) 
(I) 
(m) 
(0) 


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(p) 
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 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. 
(4) 
Sec. 9. Exemptions from Taxes, Duties, and Other Fees. - The SPEZFPA 
is hereby declared exempt from the payment of all taxes, duties, fees, charges, costs 
and service fees in any court or administrative proceedings in which it may be a party 
to. 
The foregoing exemptions may, however, be entirely or partially lifted by the 
President of the Philippines upon the recommendation of the Secretary of Finance, not 
earlier than five (5) fears from the effectivity of this Act, if the President shall find the 
SPEZFPA to be self sustaining and financially capable by then to pay such taxes, 
customs, duties, fees and other charges after providing for debt service requirements of 
the SPEZFA and of its projected capital and operating expenditures. 
Sec. 10. Board of Directors of the SPEZFPA. - The powers of the SPEZFPA 
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 Chair who shall, at the same time be the administrator of the 
SPEZFPA; 
The Vice Chairman who shall come from among the members of the 
Board; 
(b) 
(c) 
Members consisting of: 


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(1) 
The congressional representative of the district covering the site of 
the Southern Palawan ECOZONE; 
One (1) representative of the Provincial Government of Palawan; 
One (1) representative from the domestic investors; 
One (1) representative from the foreign investors; and 
Two (2) representatives from workers working in the Southern 
Palawan ECOZONE. 
(2) 
(3) 
(4) 
(5) 
The congressional representative and the representative of the Provincial 
Government shall serve as ex oficio members of the Board, whose term in the Board 
corresponds to their respective terms as elected officials. 
The Chairman and the members of the Buard, except the ex officio members 
shall be appointed by the President of the Philippines to serve a term of six (6) years, 
unless sooner removed for cause, dies, or resigns voluntarily. In case of death, 
resignation or removal for cause, the replacement shall serve only the unused portion 
of the term. 
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 of relevant 
working experience preferably in the field of management or public administration. 
The members of the Board shall receive per diem at rate to be determined by 
the Department of Budget and Management in accordance with existing rules 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 authorizes the setting of a higher per diem for the members of the 


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Board, such per diem shall not be more than Ten Thousand pesos (Pl0,OOO.OO) for 
every Board meeting. 
Sec. 11. Powers and Duties of the Chairman-Ad~inistrator. - The 
Chairman-Administrator shall have the following powers and duties: 
To direct and manage the affairs of the SPEZFPA in accordance with the 
policies of the Board; 
To establish the internal organization of the SPEZFPA 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 the operation of the Southern 
Palawan ECOZONE; 
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 Southern Palawan ECUZUNE; 
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. 12. Personnel. - The Board of Directors of the SPEZFPA shall provide for 
an organization and staff of its officers and employees. Upon the recommendation of 
the Chairman-Administrator, with the approval of the Secretary of Trade and Industry, 
the Board shall appoint and fix the remuneration and other emoluments of its officers 
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and employees in accordance with existing laws on compensation and position 


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classification; Provided, that the Board shall have the exclusive and final authority to 
promote, transfer, assign or re assign officers of the SPEZFPA, any provision of existing 
law to the contrary notwithstanding: Provided, further, That the chairman-administrator 
may carry out the removal of such officers and employees. 
The officers and employees of the SPEZFPA, including all the members of the 
Board, shall not engage, directly or indirectly, in partisan activities nor take part in any 
election, except to vote. 
No officer of the SPEZFPA, subject to civil service laws and regulations, shall be 
removed or suspended except for cause, as provided by law. 
Sec, 13. Appljcability Clause. - The provisions of Sections 30 to 42 of 
Republic Act No. 7916, as amended, on leases of lands and buildings, land conversion, 
shipping, and shipping register, protection of environment termination of business 
enterprises, one-stop shop center and on industrial harmony in the ecozones, shall 
apply to the Southern Palawan ECOZONE. 
Sec. 14. Capitalization. - The SPEZFPA shall have an authorized capital stock 
of two billion (2,000,000,000) 
no par shares with a minimum issue of ten pesos 
(P10.00) each, the majority shares of which, shall be subscribed and paid for by the 
national government, 
The Board of Directors of the SPEZFPA, with the written 
concurrence of the Secretary of Finance, may sell shares representing not more than 
forty per centum (40%) of the capital stock of the SPEZFPA 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 SPEZFPA. 
The amount necessary to subscribe and pay for the shares of the national 
government to the capital stock of the SPEZFPA shall be included in the annual General 
Appropriations Act. 


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Sec. 15. Supervision and Coordination of Development Plans. - For 
purposes of policy direction and coordination, the Southern Palawan ECOZONE shall be 
under the direct control and supervision of the Office of the President. 
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Sec. 16. Relationship with the Regional Development Council# - The 
SPEZFPA shall determine the development goals for the Southern Palawan ECOZONE 
within the framework of national development plans, policies, and goals. The 
administrator shall, upon approval by the Board, submit the Southern Palawan 
ECOZONE plans, programs and projects to the Regional Development Council for 
inclusion and inputs to the overall regional development plan. 
Sec. 17. Relationsbip wifb Local Government Units. - Except as herein 
provided, the LGUs comprising the Southern Palawan ECOZONE shall retain their basic 
autonomy and identity. The municipalities of Balabac, Bataraza and Brooke's Point shall 
operate and function in accordance with the Local Government Code of 1991. In case 
of any conflict between the SPEZFPA and the Province of Palawan on matters affecting 
the Southern Palawan ECOZONE other than defense and security matters, the decision 
of the SPEZFPA shall prevail. 
Sec. 18. Interpretafion/Consfrucfion, - The powers authorities and 
functions that are vested in the SPEZFPA are intended to establish decentralization of 
government functions and authority and promote an efficient and effective working 
relationship among the Southern Palawan ECOZONE, the central government and the 
LGUs. 
Sec. 19. Auditing. - The Commission on Audit shall appoint a representative 
who shall be a full time auditor of the SPEZFPA and assign such number of personnel as 
may be necessary to assist said representative in the performance of his/her duties. 
The salaries and emoluments of the assigned auditor and personnel shall be in 
accordance with pertinent laws, rules and regulations. 


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force and effect. 
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accordingly. 
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Approved 
Sec. 20. Separabi/ity Clause. - If any provision of this Act shall be held 
unconstitutional or invalid, the other portions not otherwise affected shall remain in full 
Sec. 21. Repea/ing C/ause, - All laws, executive orders or issuances, or any 
part thereof, which are inconsistent herewith, are hereby repealed or amended