Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

8211
HOUSE BILL NO.

Introduced by Representative ANTONIO R. FLOIRENDO, JR.

EXPLANATORY NOTE

This bill seeks the establishment of a Special Economic Zone and Freeport in the Island
Garden City of Samal, Province of Davao del Norte.

Poverty of majority of Filipinos is an issue of national concern. Amidst this prevailing
condition in many areas in Mindanao, many resources and great potentials in the Island Garden
City of Samal in the Province of Davao del Norte remain untapped. It is but just that we urgently
address such issue by relentlessly seeking and developing innovative strategies to capacitate our
people and our communities, and incorporate in our poverty eradication stratagems the maximum.
utilization of available local resources to respond to the needs of the people.

The establishment of an economic zone in the Island Garden City of Samal is proffered
as a vehicle that would contribute to the urgent national effort of curbing poverty. The
aforementioned zone will be a self-sustaining industrial, commercial, tourist/recreational, banking,
investment and financial center, introducing attractive features of free port commerce similar to
Hong Kong, Singapore, and Labuan, Malaysia. Customs duty and tariff-free trade or imported
goods, preferential tax treatment for operators, lenient Immigration laws and other forms of
incentives will characterize the business climate within the economic zone to encourage potential
foreign investors.


Likewise, the Samal Island Special Economic Zone and Freeport Authority (SISEZA) is
also created to oversee the operation and management of economic zone. The proposed
measeure once enacted into law will bolster the realization of the country’s dream of becoming
the "Economic Miracle of Asia.”

Hence, the early approval of this bill is earnestly sought.

Second District (Davao del Norte


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Republic of the Philippines
HOUSE OF REPRESENTATIVES.
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. S2lL

Introduced by Representative ANTONIO R. FLOIRENDO, JR.

AN ACT
ESTABLISHING A SPECIAL ECONOMIC ZONE IN THE ISLAND GARDEN CITY OF
SAMAL IN THE PROVINCE OF DAVAO DEL NORTE, CREATING FOR THIS
PURPOSE THE SAMAL ISLAND SPECIAL ECONOMIC ZONE AND FREEPORT
AUTHORITY, APPROPRIATING FUNDS THEREFOR AND FOR OTHER PURPOSES

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

CHAPTER 1
GENERAL PROVISIONS
SECTION 1. Short Title. - This Act shall be known as the “Samal Island Special
Economic Zone Act."

SEC. 2. Declaration of Policy. - It is declared the policy of the State to
encourage, promote, and accelerate the sound and balanced industrial, economic and
social development of 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 II
GOVERNING STRUCTURES
SEC. 3. Creation of the Samal Island Special Economic Zone and Freeport
Authority. - There is hereby created a body corporate to be known as the “Samal Island
Special Economic Zone and Freeport Authority” hereinafter referred to as the SISEZA,
which shall manage and operate the Samal Island Ecozone, in accordance with the
provisions of this Act. This corporate franchise shall expire in fifty (50) years counted from


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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. 4. Capitalization. - The SISEZA 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
and the Local Government Units (LGUs) embracing the Samal Island Special Economic
Zone and Freeport. The Board of Directors of the SISEZA 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 SISEZA 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 SISEZA.

The amount necessary to subscribe and pay for the shares of the National
Government to the capital stock of the SISEZA 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. 5. Principal Office of the SISEZA. - The SISEZA shall maintain its principal
office in Samal District, Davao del Norte, but it may establish branches within the
Philippines as may be necessary for the proper conduct of its business.

SEC. 6. Powers and Functions of the SISEZA. - The SISEZA shall have the
following powers and functions:

a) To operate, administer, manage and develop the Samal Island Ecozone according
to the principles and provisions set forth in this Act,

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

c) To coordinate with LGUs and exercise general supervision over the development
plans, activities and operations of the Samal Island Ecozone;

d) Té regulate and undertake the establishment, construction, operation and
maintenance of public utilities, other services, and infrastructure in the Samal Island
Ecozone such as, but not limited to, heat, light and power, shipping, barging,
stevedoring, cargo handling, hauling, warehousing, storage of cargo, port services

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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;

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 (the Build-Operate-Transfer
Law, as amended), or joint venture, adequate facilities and infrastructure required or
needed for the operation and development of the Samal Island Ecozone, in
coordination with appropriate national and local government authorities and in
conformity with applicable laws thereon;

To approve plans, programs and projects of the Samal Island Ecozone to be
submitted to the Regional Development Council for inclusion and inputs to the overall
regional development plan;

To operate on its own, either directly or through licenses to others, tourism-related
activities, including games, amusements, recreational and sports facilities;

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;

To protect, preserve, maintain and develop the forests, beaches, coral and coral
reefs, and maintain ecological balance within the Samal Island Ecozone.
Notwithstanding the authority of the SISEZA to create rules for such purpose, the
rules and regulations of the Department of Environment and Natural Resources
(DENR) and other government agencies involved in the above functions shall be
implemented by the SISEZA;

To create, operate and/or contract to operate such functional units or offices of the


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SISEZA as it may deem necessary;

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;

To issue certificates of origin for products manufactured or processed in the Samal
Island Ecozone in accordance with prevailing rules of origin and the pertinent
regulations of the Philippine Economic Zone Authority (PEZA), the Department of
Trade and Industry (DTI) and/or the Department of Finance (DOF);

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 Samal Island Ecozone, in coordination
with government agencies having jurisdiction over activities therein: Provided, That
all government agencies are directed to provide and extend utmost and full
cooperation to the Samal Island Ecozone in the establishment of such one-stop
shops;

To provide internal security to the Samal Island Ecozone in coordination with the
National government and affected LGU. For this purpose, the SISEZA shall provide
and establish its own internal 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 Samal Island 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

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. 7. Board of Directors of the SISEZA. - The powers of the SISEZA 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 shall at the same time be the administrator of the SISEZA;


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b) A Vice-Chairperson, who shall come from among the members of the Board;
c) Members consisting of:

1) The Governor or his/her representative from the Provincial Government of Davao
del Norte;

2) The mayor of the Island Garden City of Samal;

3) One (1) representative from the domestic investors

4) One (1) representative from the foreign investors; and

5) One (1) representative from the workers working in the Samal Island Ecozone.

The representative from the Provincial Government and the mayors of the
municipalities covered by the ecozone shall serve as ex-officio members of the Board,
whose term in the Board corresponds to their term as elected officials.

The Chairperson and 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.
In case of death, resignation or removal for cause, the replacement shall serve only the
unexpired portion of the term.

The Chairperson of the Board 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 rates to be determined
by the Department of Budget and Management (DBM) 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 has fixed a higher per diem for the members of the Board, such per diem
shall not be more than ten thousand pesos (P10,000.00) for every Board meeting.

SEC. 8. Powers and Duties of the Chairperson-Administrator. — The
Chairperson-Administrator shall have the following powers and duties:

a) To direct and manage the affairs of the SISEZA in accordance with the policies of


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the Board;

To establish the internal organization of the SISEZA 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 Samal Island Ecozone;

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;

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 Samal Island Ecozone; 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. 9. Organization and Personnel. - The Board of Directors of the SISEZA 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 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 SISEZA, any
provision of existing law to the contrary notwithstanding. The chairperson-administrator
may carry out removal of such officers and employees.

The officers and employees of the SISEZA, including all members of the Board,

shall not engage directly or indirectly in partisan activities nor take part in any election,
except to vote.

No officer or employee of the SISEZA, subject to civil service laws and regulations,

shall be removed or suspended except for cause, as provided by law.


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SEC. 10. Legal Counsel. - The SISEZA 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 SISEZA may engage the services of an outside
counsel either on a case to case or on a fixed retainer basis.

SEC. 11. Legal Office. - The SISEZA shall have and maintain its own internal
legal office, appropriate in number under the supervision of the Government Corporate
Counsel. When the exigencies of its businesses and operations demand, the SISEZA may
engage the services of an outside counsel either on a case to case or a fixed retainer
basis.

CHAPTER Ill
CREATION OF THE ECONOMIC ZONE

SEC. 12. Creation of the Samal Island Special Economic Zone and Freeport
- In accordance with the foregoing declared policy and subject to the concurrence of the
concerned local government units of Davao del Norte affected by the zone, there is hereby
established a Special Economic Zone and Freeport in the Island Garden City of Samal in
the Province of Davao del Norte, hereinafter referred to as the Samal Island Ecozone. The
specific metes and bounds of the Samal Island Ecozone shall be more particularly defined
in a presidential proclamation that shall be issued for this purpose: Provided, That the

lands embraced therein shall be public lands and contiguous to one another.

SEC. 13. Governing Principles. - The Samal Island Ecozone Ecozone shall be
managed and operated by the Samal Island Special Economic Zone and Freeport
Authority hereinafter referred to as the SISEZA, created under Section 3 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 Samal Island 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
with suitable residential areas;

b) The Samal Island Ecozone shall be provided with transportation, telecommunications
and other facilities needed to attract legitimate and productive investments, generate
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Davao del Norte and its neighboring towns and cities;

The Samal Island Ecozone may establish a 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 PEZA, and/or the
Department of Trade and Industry (DTI), with foreign entities or enterprises;

Foreign citizens and companies owned by non-Filipinos in whatever proportion may
set up enterprises in the Samal Island Ecozone, either by themselves or in a joint
venture with Filipinos in any sector of industry, international trade and commerce
within the Samal Island Ecozone;

The Samal Island 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. However, exportation or removal of goods from the territory of the Samal
Island Ecozone to the other parts of the Philippine territory shall be subject to customs
duties and taxes under the Customs and Tariff Code and other relevant tax laws of
the Philippines;

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

Goods manufactured by a Samal Island 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 SISEZA 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 allowed to sell their products locally;

The defense of the Samal Island Ecozone and the security of its perimeter fence shall

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be the responsibility of the national government in coordination with the SISEZA and
the LGUs.

CHAPTER IV
INCENTIVES TO ECOZONE ENTERPRISES/INVESTORS
SEC. 14. Investors Visa. - Any foreign national who invests an amount of two
hundred thousand US dollars (US$200,000.00), 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

) Must establish by verifiable and credible evidence his financial capability and
capacity,

‘As a holder of investor's visa, an alien shall be entitled to reside in the Philippines
while his investment subsists. For this purpose, the alien 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, then the
investor's visa issued to said alien shall automatically expire and /or be withdrawn.

The authority to issue visas and work permits shall remain with the Bureau of
Immigration (BI) and the Department of Labor and Employment (DOLE), respectively;
Provided, That the Bl and the DOLE shall implement measures to expedite the processing
of such visas and permits for workers in the Samal Island Ecozone and coordinate with
the SISEZA for the purpose of improving ease of doing business.

SEC.15. Fiscal Incentives. - Registered enterprises operating within the Samal
Island Ecozone may be entitled to the existing pertinent fiscal incentives as provided for
under Republic Act No. 7916, as amended by Republic Act No. 8748, also known as the
Special Economic Zone Act of 1995, or those provided under Executive Order No. 226, as
amended, otherwise known as the Omnibus Investment Code of 1987; 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 SISEZA may impose its own conditions not otherwise
prohibited by this Act: Provided, further, That the SISEZA shall not be limited to the

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conditions provided under Republic Act No. 7916, Republic Act No. 8748 or any other
related issuance, rule or regulation.

SEC. 16. 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 Samal Island Ecozone, including income, withholding, donor's,
percentage, and documentary stamp taxes. In lieu thereof, and subject to Section 18 of
this Act, said business establishments shall pay a five percent (5%) final tax on their gross
income earned: Provided, That the proceeds from such final tax shall be shared by
instrumentalities of the government in accordance with the following percentages:

a) Two per centum (2%) to the National Government;
b) One per centum (1%) to the Province of Davao del Norte;

c) One per centum (1%) to be shared by the city and municipalities affected by the
declaration of the zone in proportion to their income from business activities within
the zone; and

d) One per centum (1%) to the SISEZA which shall be created under this Act.

The SISEZA shall have the authority to grant income tax holiday and net operating
loss carry over subject to Section 18 of this Act and conditions as it may have imposed
pursuant to Section 15 of this Act.

SEC. 17. Administration, Implementation and Monitoring of Incentives. - For
the proper administration, implementation and monitoring of tax incentives provided under
this law, the following are herein mandated:

(a) The SISEZA shall be responsible for the administration, management, enforcement
and implementation of the incentives granted to registered enterprises; Provided,
That the BOC shall set up and establish a customs controlled area outside the gate
of the Samal Island Ecozone to facilitate payment of taxes on goods entering the
Philippine customs territory; Provided further, That notwithstanding the limitations in
this Act, the SISEZA and BOC may coordinate and jointly implement measures on
border protection; and

(b) In the interest of enhancing transparency in the management and accounting of tax
incentives in the Samal Island Ecozone, the SISEZA shall comply with the provisions
of Republic Act No. 10708, otherwise known as “The Tax Incentives Management

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and Transparency Act (TIMTA)" and its implementing rules and regulations.

SEC.18. 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 the SISEZA, in consultation
with other government agencies.

SEC. 19. Sequential Availment of Incentives. - Registered enterprises may
enjoy the income tax holiday (ITH) granted by the SISEZA prior to the availment of the five
percent (5%) final tax on gross income earned 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

Registered enterprises, if eligible, may register for incentives with other investment
promotion agencies: Provided, That registered enterprises electing to avail of the
incentives of other promotion agencies shall not be able to avail of the incentives of the
Samal Island Ecozone until the expiration of the incentives with such other investment
promotions agencies.

SEC. 20. Extension of Period of Availment.- In the event that a registered
enterprise has suffered cessation or suspension of operations due to force majeure, which
has impaired its viability or profitability, the SISEZA may extend the period of validity of
the incentives extended to such registered enterprise.

SEC. 21. Banking Rules and Regulations. - Banks and financial institutions to
be established in the Samal Island Ecozone shall be under the supervision of the Bangko
Sentral ng Pilipinas (BSP) and subject to existing banking laws, rules and regulations.

SEC. 22. Remittances. - In the case of foreign investments, a duly registered
entity or enterprise within the Samal Isiand 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 V
NATIONAL GOVERNMENT AND OTHER ENTITIES

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

SEC. 24, Regional Development Council, - The SISEZA shall determine the
development goals for the Samal Island Ecozone within the framework of national
development plans, policies and goals. The Chairperson & Administrator shall, upon
approval by the Board, submit the Samal Island Ecozone plans, programs and projects to
the Regional Development Council for inclusion and inputs to the overall regional
development plan.

SEC. 25. Relationship with Local Government Units.— Except as herein
provided, the LGUs comprising the Samal Island Ecozone shall retain their basic
autonomy and identity. The Island Garden City of Samal shall operate and function in
accordance with the framework of the 1987 Constitution, Local Government Code of 1991,
and Republic Act No. 7898, as amended by Republic Act No. 10349, applicable provisions
of the Local Government Code, and this Act.

In case of any conflict between the SISEZA and the LGUs and the National
Government on matters affecting the Samal Island Ecozone, other than national defense
and security matters, the decision of the SISEZA shall prevail.

SEC. 26. Interpretation/Construction. - The powers, authorities and functions
that are vested in the SISEZA are intended to establish national self-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 the SISEZA, 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. Audit. - The Commission on Audit shall appoint a full - time auditor in the
SISEZA or may assign such number of personnel as may be necessary in the performance
of their functions.

CHAPTER VI
MISCELLANEOUS

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SEC. 28. Implementing Rules and Regulations. - The DTI, DOF and the
National Economic Development Authority (NEDA) shall formulate the implementing rules
and regulations of this Act within ninety (90) days after its approval. Such rules and
regulations shall take effect fifteen (15) days after its publication in a newspaper of general
circulation in the Philippines.

SEC. 29. Applicability Clause. — Insofar as these are consistent with the
provisions of this Act, the provisions of 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 Samal Island Ecozone.

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

SEC. 31. Repealing Clause. - All laws, executive orders or issuances or any part
thereof, which are inconsistent herewith, are hereby repealed or amended accordingly.

SEC. 32. Effectivity Clause. - This Act shall take effect after fifteen (15) days
following its complete publication in the Official Gazette or in two (2) newspapers of
general circulation whichever is earlier.

Approved,

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