FIFTEENTH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES

House of Representatives

HB.No. 844

Introduced by CONGRESSMAN ANGELO PALMONES

Explanatory Note

The last decades of the 20 century saw rapid advances in our knowledge of life and its
mechanisms that have given rise to a new set of practical tools and techniques collectively
referred to as biotechnology. Biotechnology, in tum, developed for the world novel products
such as safer, more effective pharmaceuticals, less capital-intensive crops and less polluting
industrial and agricultural production systems. In this century, with concerns about climate
change, non-renewable energy sources, dwindling fresh water supply, increasing population and
environmental protection on one hand, and new discoveries in biology on the other, these factors
are expected to greatly increase the number of technologies developed based on biological
systems. Thus, the 21" century has been hailed the biotech century.

The world biotechnology industry is a multibillion industry. Investment in medical
biotechnology alone is estimated at US$200 billion whereas investment in agricultural
biotechnology was worth US$67 billion in 2003. The start of the 21" century indicates the
coming convergence of agriculture and medicine with pharmaceuticals being produced by
genetically engineered plants and the greater acceptance of herbal medicine. The biotech century
will further see the integration of agriculture and industry especially in energy production.
Enzyme-based processing of agricultural produce and its by-products are being developed to
produce biofuels, plastics and other products. It is predicted that this will eventually comprise the
largest sector of the biotechnology industry.

As early as 1979, the Philippine government has invested in biotechnology with the
establishment of the National Institute of Biotechnology and Microbiology (BIOTECH), now
known as the National Institute of Molecular Biology and Biotechnology at UP Los Bafios. This
institute has been replicated in four other campuses of the University of the Philippines System.
In mid-1980s, the Department of Science and Technology identified biotechnology as a priority
invest ment area and developed the UPLB science park for business incubation. The Department
of Agriculture two years ago organized its leading research centers — Philippine Rice Research
Institute, Philippine Carabao Center, and National Fisheries Research Institute into a network of
biotechnology research centers for crops, livestock and aquatic resources, respectively. Still these


investments have not sufficiently fostered the growth of a biotechnology industry as what was
previously envisioned in the establishment of the BIOTECH at UP Los Bajios.

The US, Canada, Australia and several EU countries, as well as Singapore, Malaysia,
China, India and Taiwan, have put in place a policy environment that encourages bioindustry
development. These policies include support for high quality research, support to rapidly develop
research results into marketable products/services, support for start-up companies, and other
incentives for industry to develop/adopt new technologies. Large and competitive grants are
provided for high quality research work in research institutions. Huge grants are also provided
for industry-public collaborations to fast-track technology development. Guarantee funds for
venture capital investing in biotechnology have been provided. Science parks/bioincubators
were established to provide infrastructure, technical, administrative, marketing and legal support
for start-up companies. Technology transfer from public research institution is encouraged, For
example, the US passed the Bayh-Doyle Act in 1980 which was credited with stimulating
significant growth in university-industry technology transfer and research collaborations. France
encourages scientists to become entrepreneurs by allowing them to leave their post for a
maximum of 6 years and awards a maximum of 15% of capital in the creation of a start-up.
Protection of intellectual property rights further encouraged technology development and
biotechnology companies are graded according to their patent portfolios. In Malaysia and
Singapore, foreign companies are encouraged to locate in their countries; whereas Canada
requires foreign companies doing business within the country to establish R&D units.

In the Philippines, we need to put in place the appropriate policy environment to promote
bioindustry development. Biodiversity, our greatest resource, remains untapped. While we
continue to train scientists, lack of local employment lead them either to other occupations or to
foreign shores. The cumbersome government accounting and auditing procedures often result in
poor fund utilization in public research institutions and stifles scientific creativity. Industry-
academe collaborations in technology development are few. Many policies encourage individual
rather than multidisciplinary achievements, yet biotechnology requires a multidisciplinary
approach. Government funds for research cannot be committed for terms longer than one year
yet technology and product development may take years. Venture capital for biotechnology is
virtually non-existent. The present bioprospecting policy is biased against a Filipino start-up and
favors well-capitalized foreign companies. Many scientists are not familiar with intellectual
property rights protection. Although biotechnology investment is highly profitable, it is also very

risky with a long gestation period, hence, private sector investments in biotechnology R&D are
low.

‘The proposed legislation intends to address the weaknesses of our system to enable the
country to develop a biotechnology-based industry. The private sector is given incentives to
invest in biotechnology R&D by allowing the total R&D cost and prices of shares of stocks in
biotech companies as tax deductible. Majority of the government's investments in biotechnology


R&D is awarded through a government corporation so as to lessen the burden of an unwieldy
accounting and auditing system.


FIFTEENTH CONGRESS OF
THE REPUBLIC OF THE PHILIPPINES

House of Representatives
HB. No. 844

Introduced by CONGRESSMAN ANGELO PALMONES

AN ACT PROMOTING THE GROWTH OF A BIOTECHNOLOGY INDUSTRY IN THE
PHILIPPINES AND THE CREATION OF WEALTH FROM BIODIVERSITY

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

ARTICLE I
' TITLE, DECLARATION OF POLICY AND OBJECTIVES
Section 1. Short Title, — This Act shall be known as the Bioindustry Development Act of 2010

Section 2. Declaration of Policy. — The state fully recognizes that biotechnology is a powerful
tool in the creation of wealth from human capital as well as from biodiversity.

Section 3. Objective. ~The Act aims to put in place a policy environment for the continuing
generation and application of biological knowledge and promote the sustainable growth of a
biotechnology-based industry.

Section 4. Definition of Terms. — As used in this act, the following terms shall be taken to mean
as follows:

1. Biodiversity refers to the variability among living organisms from all sources, including,
inter alia, terrestrial, marine, and other aquatic ecosystems, and the ecological complexes
of which they are part: this includes diversity within species, between species and of
ecosystems.


Bioindustry or biotechnology-based industry comprises of companies involved in
research, development, manufacture and sale of materials such as cell cultures, catalysts,
genetic materials, immune response materials, biochemicals, enzymes, proteins, bioactive
molecules, genetically engineered organisms, and equipment specifically used in
biological and genetic research. Also included are service organization that perform
consulting, testing, processing, and storage of such products.

Biotechnology refers to a set of tools and procedures involving living organisms or parts
thereof that produces a product or service.

Start up refers to a newly established biotech company for profit.

ARTICLE IE
THE PHILIPPINE BIOINDUSTRY R&D CENTER

Section 5. The Philippine Bioindustry R&D Center. —To ensure the continued availability of
suitable yet innovative and competitive bio-based technologies, there shall be established a
Philippine Bioindustry R&D Center herein referred to as the Center.

Section 6. Functions of the Center. The Philippine Bioindustry R&D Center shall:

1
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Develop and market competitive, biologically-based technologies and products

Harness Philippine biodiversity in developing competitive products for the world market
Conduct contract research and provide technical services to the public

Manage a Biotechnology Research Fund that will support off-Center research and
development relevant to its corporate objectives as well as support a research fellowship
and training program

Establish a state of the art facilities for research and study

Section 7. Powers of the Center. —To enable the Center to carry out its functions, it shall be
endowed with the following powers:

1

; To own, hold, plan and construct buildings and other facilities as may be necessary or

proper to attain its purposes and objectives.

To purchase equipment, materials and articles, either locally or abroad, as may be
necessary or proper to carry out its powers and functions and attain its purposes and
objectives, and shall be exempt from the payment of any and all forms of taxes, duties,
fees and charges imposed by any governmental authority, whether national or local, on


any and all such importation of equipment, materials, articles and services; Provided,
however, That the same are not available locally on favorable terms.

3. To enter into, make and execute contracts and agreements of any kind or nature;
4. To borrow money and obtain loans from all sources, whether local or foreign and

whether government or private, to help finance its research programs and its capital and
operating expenditures;

To invest in, purchase or otherwise acquire, own, hold, use, lease, mortgage, pledge,
encumber, sell, assign, convey, exchange, or otherwise deal in real and/or personal
properties of whatever kind and nature, or any interest therein, including shares of stock,
bonds, notes, securities and other evidences of indebtedness of natural or juridical

+ persons, whether domestic or foreign and whether government or private;

6. To conduct bioprospecting activities and shall be exempted from the fees and
requirements of the Republic Act No. 9147, otherwise known as The Wildlife Resources
Conservation and Protection Act.

7. To acquire or obtain from any governmental authority, whether national or local, foreign
or domestic, or from any person, corporation, partnership, association or other entity,
such charters, franchises, licenses, rights, privileges, assistance, financial or otherwise,
and concessions as are conducive to and necessary or proper for the attainment of its
purposes and objectives;

8. To receive and acquire from any person and/or government and private entities, whether
foreign or domestic, grants, donations and contributions consisting of such properties,
real or personal, including funds and valuable effects or things, as may be useful,
necessary or proper to carry out its purposes and objectives and administer the same in
accordance with the terms of such grants, donations and contributions, consistent with its
purposes and objectives;

9. To establish new corporations solely, in partnership, or in consortium with other entities;

10. To exercise all the powers of @ corporation under the general corporation law, insofar as
‘such powers are not inconsistent with the provisions of this Act, and

11. ‘To exercise such other powers and functions and perform such other acts as may be
necessary, proper or incidental to the attainment of its purpose and objectives.

Section 8. Composition of the Board of Directors.— ‘The Center shall have a corporate structure
and governed by a Board of Directors. The Board of Directors shall be comprised of three
business leaders, two respected scientists, in any one the relevant fields of molecular biology,
biotechnology, genetics, biochemistry, chemistry or chemical/bioprocess engineering, and the
President of the Center. The Secretary of the Department of Trade and Industry shall serve as
Chair in an ex officio capacity. Initially, the members of the Board shall be selected by the


Secretary based on a set of criteria and from nominations submitted by the Biotechnology
Coalition of the Philippines (BCP), Chamber of Herbal Industries of the Philippines, Inc.
(CHIPD, and Philippine Food Processors and Exporters Organization Inc. (PhilFoodex).

Section 9. Functions of the Board of Directors. — The Board shall exercise the following
powers and functions:

1. To define and approve the programs, plans, policies, procedures and guidelines for the
Center in accordance with its purposes and objectives, and to control the management,
operation and administration of the Center;

2. To approve the Center's organizational structure, staffing pattern, operating and capital
expenditure, and financial budgets, prepared in accordance with the corporate plan of the
Center;

3. To approve salary ranges, benefits, privileges, bonuses, and other terms and conditions of
service for all officers and employees of the Institute, upon recommendation of the
President;

4. To appoint, transfer, promote, suspend, remove or otherwise discipline any subordinate
officer or employee of the Institute, upon recommendation of the President;

5. To.create such commitiee or committees and appoint the members thereof, as may be
necessary or proper for the management of the Center or for the attainment of its
purposes and objectives;

6. , To determine the research priorities of the Center consistent with the framework of its
purposes and objectives; and

7. To exercise such other powers and functions and perform such other acts as may be
necessary or proper for the attainment of the purposes and objectives of the Institute.

Section 10. President and Other Officers. — The Center shall be headed by a President who
shall be appointed by the Board of Directors. He/she shall serve at the pleasure of the Board of
Directors.

‘The President shall be assisted by such Vice-president and Program managers as the Board may
determine to carry out the purposes and objectives of the Center.

Section 11. Powers, Functions and Duties of the President. — The President shall be directly
responsible to the Board, and shall have the following powers, functions and duties:

1. To exercise over-all supervision and direction over the implementation of all research,
development and marketing programs of the Center, and in general to supervise and
direct the management, operation and administration of the Center;


2. 1 To draft a program of operation for the implementation of all activities necessary to attain
the objectives of the Center for approval by the Board;

3. Within the limits of the authority delegated to him by the Board, to execute contracts,
incur obligations, acquire and dispose of assets and deliver documents on behalf of the
Center;

4. To implement and enforce policies, decisions, orders, rules and regulations adopted by
the Board; and

5. To exercise such other powers and functions and perform such other duties as may be
authorized or assigned by the Board.

Section 12. Ownership of the Center. ~The Center shall exist as government owned and
controlled corporation for a maximum of ten years, after which it shall be sold off to the private
sector. However, should the Center become profitable earlier, it shall then be sold off to the
private sector.

Section 13. Scientific Manpower. —'To enable the Center to retain its scientific staff, it shall
offer salaries at rates competitive with other countries, Upon the privatization of the Center, 15%
of the shares shall be awarded to the scientific staff that has been with the Center for at least 5
years and has produced at least one patented technology or 8 articles published in scientific
journals cited in the Institute for Scientific Information (IST) Journal Citation Report.

Section 14. Initial Operations. — The Biotechnology Coalition of the Philippines (BCP) is
hereby designated to draft a Program of Operations for the Center. The Secretary of the

Department Trade and Industry is hereby authorized to provide a grant of P3.0 million to enable
the BCP to carry out this function.

Section 15. Funding — The amount of P500 Million shall be released from the Agricultural
Competitive Enhancement Fund (ACEF) to cover the operation of the Center for 10 years.

ARTICLE It
THE BIOTECHNOLOGY GUARANTEE FUND

Sectibn 16. The Biotechnology Guarantee Fund. ~ There is hereby established a Biotechnology
Guarantee Fund in the amount of P500 million to be sourced from the President’s discretionary

funds or from other sources to provide guarantee for venture capital invested in biotechnology
companies.


. ARTICLE IV
INCENTIVES FOR BIOTECH COMPANIES AND COMPANY START-UPS

Section 17. A biotech company shall, for a period of five years from the time it is subject to
corporate income tax, deduct the funds expended in R&D within the country from its taxable
income. Biotech companies can also avail of the Barangay Micro Business Enterprise,
Philippine Export Processing Zone and Board of Investments incentives. After the Income Tax
Holidays provided by such instruments, the R&D expenditures of the biotech companies can
then use this tax deduction facility.

Section 18. A biotech company shall be allowed to purchase equipment, materials and articles
abroad, as may be necessary or proper to carry out its powers and functions and attain its
purposes and objectives, and shall be exempt from the payment of any and all forms of taxes,
dutie8, fees and charges imposed by any governmental authority, whether national ot local, on
any and all such importation of equipment, materials, articles and services; Provided, however,
that the same are not available locally on favorable terms. Provided further that the biotech

company is not allowed to sell or lease such equipment within a period of 5 years from date
of actual importation.

Section 19, Sharcholders of new locally-based biotechnology companies shall be able to claim as
tax credit the amount paid for the shares in that taxation year.

Section 20. Scientists in public institutions are hereby allowed up to 5 years leave of absence to
establish a biotech start up based on technologies they themselves developed. [check
compatibility with the PCARRD technotransfer ACT]

Section 21. In order to encourage top executives and technology investors to participate in the
operation of biotech companies and R&D activities, and to share their achievements, new shares
issued by a biotech company to top executives and technology investors (in return of their
knowledge and technology) shall be excluded from the amount of their consolidated income or
corporate income of the then current year for taxation purposes; provided, however, that if the
title to the aforesaid shares is transferred with or without consideration, or distributed as estate,
the total purchase price or the market value of the shares at the time of transfer as a gift or
distribution as estate shall be deemed income generated in that tax year and such income less the
acquisition cost shall be reported in the relevant income tax return.

Section 22. Funds from the Agricultural Competitiveness Enhancement Fund, subject to the
approval of the Department of Agriculture, can be used as financial grants to technology start-
ups with agricultural and aquaculture related products and services for seed capital and for

~ subsequent expansion.


ARTICLE V
MISCELLANEOUS PROVISIONS

Section 23. Repealing Clause. ~The pertinent provisions of Republic Act No. 9147, otherwise
known as The Wildlife Resources Conservation and Protection Act; and all other laws,
presidential decrees or issuances, executive orders, presidential proclamations, rules and
regulations or parts thereof inconsistent with the provisions of this Act, arc hereby repealed,
modified or amended accordingly.

Section 24, Separability Clause. ~ If any provision of this Act is declared unconstitutional, the
same shall not affect the validity and effectivity of the other provisions hereof.

Section 25. Effectivity.— This Act shall take effect fifteen (15) days after its publication in at
least two (2) newspapers of general circulation.

Approved.