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1 HeLor oF REPRESENTATIVES

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Republic of the Philippines SQN 2016

HOUSE OF REPRESENTATIVES TH x
Quezon City, Metro Manila 8 7
BECISTRITION WRIT

Seventeenth Congress | LS ANG INGER akin Wiel
First Regular Session ==

HOUSE BILL No. 203

Introduced by Hon. Frederick F. Abueg

EXPLANATORY NOTE

This bill was filed in the Sixteenth Congress as House Bill No. 2688. It has
been referred to the Committee on Economic Affairs and Committee on
Appropriations. Moreover, it met approval on the committee level on February 4,
2015. Due to the economic sustainability that this legislative measure would bring as
well as reduction of unemployment rate in Palawan and nearby provinces, the refiling
of this bill in the Seventeenth Congress and its enactment into law should no longer be
delayed.

This bill seeks the realization of the province of Palawan’s full economic,
industrial and tourism potential by establishing a special economic zone in its southern
portion and creating a body that will steer the same. This bill’s objective holds such
great importance that it has been brought to the House of Representatives and the
Senate countless times over the past decade and a half.

Former Rep. Alfredo “Amor” E. Abueg, Jr. introduced House Bill (HB) No.
6414, “An Act Creating a Special Economic Zone and Free Port in Southern Palawan,
Creating For This Purpose The Southern Palawan Special Economic Zone Authority,
Appropriating Funds Therefor, And For Other Purposes,” which was referred to the
Committee on Economic Affairs chaired by Rep. Felicito Payumo. The House of
Representatives approved the bill and transmitted to the Senate, which referred it to its
Committee on Economic Affairs headed by Sen. Edgardo Angara.

The bill was again filed by Rep. Abueg as HB No. 9738, co-authored by four
(4) other congressmen. After the Lower House’s approval, HB 9738 was transmitted
to the Senate where it was heard by the Committee on Economic Affairs headed by
Sen. Loren Legarda. It is regrettable that Congress ended without the bill having been

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approved. Nevertheless, Sen. Legarda herself authored a Senate version of the bill
having the same purpose, which unfortunately likewise did not reach final approval.

This bill is now a reiteration in foto of Senate Bill (SB) No. 2606, otherwise
known as “An Act Establishing the Southern Palawan Special Economic Zone in the
Province of Palawan, Creating for the Purpose the Southern Palawan Special
Economic Zone Authority, Appropriating Funds Therefor and For Other Purposes.”
SB No. 2606 was prepared by the Committees on Economic Affairs, Local
Government, Ways and Means, and Finance, with Senate Minority Floor Leader Juan
Ponce Enrile, then Senators Manuel Roxas and Alfredo Lim, and Senate President
Franklin Drilon as authors thereof, in 2007, during the Thirteenth (13") Congress. SB
No. 2606 was in substitution of Senate Bill No. 2217 authored by Senator Enrile,
taking into consideration House Bill No. 5262 introduced by then Rep. Abraham
Kahlil Mitra.

In its Explanatory Note, Senator Enrile stated:

“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.



XXX, xXx xx.

Further, Palawan is in a strategic position in the Southeast Asian region, being
a choke point that sits astride a major sea trade route serving the region and linking it
to major global economies. The Balabac Strait is 47 kilometers offshore where
international ships pass, bringing oil and other important cargo to Japan, China, the
Philippines, and other countries. The municipality of Balabac, location of the
proposed principal office the economic zone, has sufficient land area for the economic
zone and free port, deep waters where international ships can navigate and dock, and
is the location of the Melville international lighthouse.

Palawan is already producing natural gas, and there is vast potential for greater
production of this energy resource with the identification of additional reserves off its
waters. Keen investor interest in Palawan, both local and foreign, is already quite
apparent. There are specific plans in tourism, agro-industry, real estate, fisheries,
mining, communication, transportation, education and manufacturing. The
government has also prioritized the infrastructure development of the province, in
terms of roads and bridges, ports, and airports, to name a few. President Benigno
Aquino III, in his State of the Nation Address during the opening of the Sixteenth
(16") Congress, even cited the establishment of a cold storage plant in the
municipality of Bataraza, as well as the improvement of the international airport in the
province.

Palawan’s emergence as a growth area has been strengthened by its inclusion
as a key component of the Brunei Darassalam Indonesia Malaysia Philippines-East
Asia Growth Area (BIMP-EAGA) regional growth concept. This inclusion recognizes
the vast natural resources the province is endowed with and its strategic location in the
sea trade route that links Southeast Asia to the rich economies to the north. In fact,
R.A. No. 7916 identified Palawan as one of the possible areas for the establishment of
an economic zone.

Clearly, the institution of the Southern Palawan Special Economic Zone
comprising the municipalities of Balabac, Bataraza, and Brooke’s Point, will advance
the government’s long-term plan of strengthening the socio-economic, institutional
and environmental development of the country. The creation of this special economic
zone, clothed with its own charter, should be supported by all sectors involved in
hastening the leap of the Philippines to full membership in the league of developed
nations in Asia.



In view of the foregoing, the immediate approval of this bill is eamestly
requested.

a

FREDERICK F. ABUEG
Representative\ 2™ District of Palawan



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Seventeenth Congress
First Regular Session

HOUSE BILLNo._203

Introduced by Hon, Frederick

bueg

AN ACT
ESTABLISHING THE SOUTHERN PALAWAN SPECIAL ECONOMIC
ZONE IN THE PROVINCE OF PALAWAN, CREATING FOR THE
PURPOSE THE SOUTHERN PALAWAN SPECIAL ECONOMIC ZONE
AUTHORITY, APPROPRIATING FUNDS THEREFOR AND FOR OTHER
PURPOSES

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

Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the “Southern Palawan
Special Economic Zone Act of 2016.”

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 development 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 Southern Palawan Special Economic Zone. - In
pursuit of the foregoing declared policy and subject to the concurrence of the
concerned local government units of Southern Palawan affected by the zone, there is
hereby established a Special Economic Zone, hereinafter referred to as the Southern

Palawan Ecozone. The Southern Palawan Ecozone shall cover the entire area



embraced by the Municipalities of Balabac, Brooke’s Point and Bataraza in the
Province of Palawan. The specific metes and bounds of the Southern Palawan
Ecozone shall be more particularly defined in a proclamation to be issued by the
President of the Philippines, upon the recommendation of the Philippine Economic
Zone Authority (PEZA), provided that the lands embraced therein shall be public
lands.

SEC. 4. Governing Principles. - The Southern Palawan Special Economic
Zone shall be managed and operated by the Southern Palawan Special Economic Zone
Authority, herein referred to as the SPEZA, 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 Southern Palawan Ecozone shall be
developed into and operated as a decentralized, self-reliant and self-sustaining
industrial, commercial/trading, agro-industrial, tourist, banking, financial and
investment center with suitable residential areas.

(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 people
of the Province of Southern 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 Authority (PEZA) and/or the Department of Trade and Industry
(DTD, with foreign entities or enterprises.

(d) Foreign citizens and companies owned by non-Filipinos in whatever
proportion may set up enterprises in the Southern Palawan Ecozone, either by
themselves or in joint venture with Filipinos in any sector of industry, international
trade and commerce within the Southern Palawan Ecozone.

(©) The areas comprising the Southern Palawan Ecozone may be expanded or
reduced when necessary. For this purpose, the SPEZA, in consultation with the local

government units, shall have the power to acquire either by purchase, negotiation or



condemnation proceedings, any private land within or adjacent to the Southern
Palawan Ecozone for the following purposes: (1) consolidation of lands for Southern
Palawan Ecozone 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.

(f) Goods manufactured by a Southern Palawan 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 SPEZA, 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.

(g) The national government shall maintain its ability to coordinate with the
Southern Palawan Ecozone and the local government units.

SEC. 5. Incentives To Registered Enterprises. - The Southern Palawan Special
Economic Zone Authority (SPEZA) may administer the following incentives to the
registered enterprises located therein to the extent of the activity/project:

(A) Income Tax 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 holiday.

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 products/services or having strong backward
or forward linkages

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 BOT
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 Southern
Palawan Special Economic Zone Authority (SPEZA) to transact business within the
Southern Palawan Special Economic Zone. 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, further, That the entitlement
period for additional investments shall not exceed three times the period provided
under this subsection: Provided, however, 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.

Enterprises registered with SPEZA are required to share in the special
development fund of the BOI for investment promotion projects of the government
equivalent to one percent (1%) of the 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 SPEZA before submitting its income tax return (ITR) with SPEZA
for validation.

Failure to secure certification and/or to file the ITH or NOLCO availment for
validation by the SPEZA 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 Carryover (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, however, 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 or the NOLCO.

(C) Imposition of a tax rate of five percent (5%) on Gross Income Eamed (GIE)
- Except for real property tax on land, no local and national taxes as prescribed under
Republic Act No. 8424, also known as "rile 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 Southern Palawan 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:

All persons and service establishments in the Southern Palawan 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



Socwmu aH een

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) Capital 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 customs 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:

i They are not manufactured domestically in sufficient quantity, of
comparable quality and at reasonable prices;
ii, They are reasonably needed and will be used exclusively by the
registered enterprise in the manufacture of its products, unless prior approval of
the SPEZA 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 equipments and machinery being permanently used
for non-registered activities; and

iii, _ Approval of the SPEZA was obtained by the registered enterprise for the

importation of such machinery, equipment and spare parts.

Approval of the SPEZA 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;

2) 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;

3) The exportation of the capital equipment, machinery, spare parts or

source documents or those required for pollution abatement and control;

or



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4) Proven technical obsolescence of the said equipment, machinery or

spare parts.

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,
further, 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,
finally, 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 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 lax and duty-free importation; and (c) That the approval



of the SPEZA 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, 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 on 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 SPEZA.

The availment of the incentives by the registered enterprise shall be subject to
the following: (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;
(©) that approval of the SPEZA has been obtained by the registered enterprise; and (d)
that the purchase is made within ten (10) years from the date of registration of
commercial 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.



(1) Exemption from Wharfage Dues. - -The provisions of law to the
contrary notwithstanding, exports by a registered enterprise shall be exempted from
wharfage dues.

(D) Deferred Imposition or the Minimum Corporate Income Tax. — The
Minimum Corporate Income Tax (MCIT) or two percent (2%) of the gross income as
of the end of the taxable year shall be imposed when the MCIT is greater than the
income tax computed under the NIRC OF 1997, as amended, for the taxable year:
Provided, however, That said MCIT shall be imposed only alter the enterprise’s
entitlement period to the income tax-based incentives has expired

(K) Tax Treatment of Merchandise in the Southern Palawan Ecozone.

a. Domestic merchandise sent from the Southern Palawan Ecozone
to areas outside the said Ecozone shall, whether or not combined
with or made past 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 Southern Palawan Ecozone to areas
outside the said Ecozone 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 Souther Palawan
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.

4. Unless the contrary is shown, merchandise taken out of the
Southern Palawan Ecozone shall be considered for tax purposes

to have been sent to customs territory.



(L) _ Tax Treatment of Raw Materials and Capital Equipment in the Southern
Palawan Ecozone. - Importations of raw materials and capital equipment shall be
treated as in the Omnibus Investments Code. 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.

(M) 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: Provided, That when the majority of the capital stock
of a registered enterprise is owned by foreign investors, the positions of the president,
treasurer and general manager or their equivalents may be retained by foreign
nationals beyond the period set forth herein and such officer is the owner or a
stockholder owning at least ten percent (10%) of the outstanding capital stock of the
registered enterprise and he remains the owner or maintains his stockholdings therein.

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 (M) 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) Me 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, further, That in securing the investor’s visa, the alien-applicant shall be
entitled to the same privileges provided for under paragraph (M), Section 5 hereof. 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, then
the investor’s visa issued to him shall automatically expire.

SEC.7. Administration, Implementation and Monitoring of Incentives.

- The SPEZA 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 BOI for registered enterprises shall be
uniformly applied by SPEZA.
The following are the duties and responsibilities of the SPEZA in the
administration of incentives:
(A) To adopt consistent procedures of administering incentives in
accordance with the guidelines established by the BOT;
(B) 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;
(C) To submit information on registered enterprises to the DOF and the BOT
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

(D) To perform all other duties and responsibilities as may be required by

the President of the Philippines.

For proper monitoring, the BOI shall create a single database of all incentives
provided by all incentives granting agencies, including SPEZA, and all information
thereto. Double entry accounting shall be done by the BOI 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 SPEZA, 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 of Incentives. - Enterprises registered with SPEZA may
enjoy ITH or NOLCO granted by the latter prior lo the availment of the five percent
(5%) 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 concurrence of the Secretaries of the Department of Finance and Trade and
Industry.

SEC. 10. Creation of the Southern Palawan Special Economic Zone
Authority - There is hereby created a body corporate to be known as the Southern
Palawan Special Economic Zone Authority, hereinafter referred to as the SPEZA,
which shall manage and operate, in accordance with the provisions of this Act, the
Southern Palawan Special Economic Zone. This corporate franchise shall expire in
fifty (SO) years counted from the first day of the fifth (S") 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.



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SEC. 11. Principal Office of SPEZA. - The Southern Palawan Special
Economic Zone Authority shall maintain its principal office in the Municipality of

Balabac, Province of Palawan, but it may establish branches within the Philippines as

may be necessary for the proper conduct of its business.

SEC. 12. Powers and Functions of the Southern Palawan Special Economic

Zone Authority. - The Southern Palawan Special Economic Zone Authority shall have

the following powers and functions:

(a)

b)

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(@)

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To operate, administer, manage and develop the Southem Palawan
Ecozone according to the principles and provisions set forth in this Act;
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 local government units and exercise general
supervision over the development plans, activities and operations of the
Southern Palawan Ecozone;

To regulate and undertake the establishment, operation and maintenance
of utilities, other services and infrastructure in the Southern Palawan
Ecozone such as but not limited to heat, light and power, water supply,
telecommunications transport, toll roads and bridges, port services, etc.
and to fix just, reasonable and competitive rates, fares, charges and
prices thereof;

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 by RA 7718), or
joint venture, adequate facilities 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 in conformity with applicable laws thereon;



(g)

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

Subject to the approval of the President and the Monetary Board of the
Bangko Sentral ng Pi
Department of Finance, to raise or borrow adequate and necessary funds

inas upon the recommendation of the

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 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 of
offices of the SPEZA as it may deem necessary;

To adopt, alter and use a corporate seal; make contracts, leases, own, or
otherwise dispose of personal or real properly; 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 Southern Palawan Ecozone in accordance with prevailing rules of
origin, and the pertinent regulations of the PEZA, DTI and/or the
Department of Finance (DOF);

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;

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/regulations of the Bangko Sentral ng Pilipinas (BSP) shall apply to banks and
financial institutions to be established in the Southern Palawan Ecozone, such as those
governing foreign exchange and other concurrent account transactions (trade and non-
trade), local and foreign borrowings, foreign investments, 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, Remittance of Earnings.- In the case of foreign investments, a
registered enterprise in the SPEZA 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 of Directors of the Southern Palawan Special Economic
Zone Authority - The powers of the Southem Palawan Special Economic Zone
Authority 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 Chairman who shall, at the same time be the administrator of the
SPEZA;

b) A Vice-Chairman who shall come from among the members of the
Board;

c) Members consisting of:

(1) The Governor of the Province of’ Southern Palawan;
(2) The Congressional Representative of the district covering the site
of the Southern Palawan Ecozone;



(3) The mayors of the Municipalities of Balabac, Brooke's Point and
Bataraza, Province of Palawan;

(4) One (1) representative from the domestic investors:

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

(6) Two (2) representatives from the workers working in Southern
Palawan Ecozone.

The Governor, the Congressional representative and the mayors of the Province
of Southern Palawan shall serve as ex-officio 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-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.

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 shall each 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 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. 16. Powers and Duties of the Chairman-Administrator. — The Chairman
Administrator shall have the following powers and duties:

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

policies of the Board;


b) To establish the internal organization of the SPEZA under such
conditions that the Board may prescribe:

c) To submit an annual budget and necessary supplemental budget to the
Board for its approval;

d) To submit within thirty (30) days after the close of each fiscal year an
annual report to the Board and such other reports as may be required;

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

59) To create a mechanism in coordination with relevant agencies for the
promotion or industrial peace, the protection of the environment, and the
advancement of the quality of life in the Southern Palawan Ecozone;
and

g) 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 SPEZA
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 SPEZA, 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 SPEZA, 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 or the SPEZA, subject to Civil Service laws and

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



Sewranu wo

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SEC. 18. Ipso Facto Clause. - Sections 30-41 of Republic Act No. 7916 also
known as “The Special Economie Zone Act of 1995” shall ipso facto apply to the
Southern Palawan Special Economic Zone.

SEC. 19. Capitalization. - The Southern Palawan Special Economic Zone
Authority shall have an authorized capital stock of One Billion (1,000,000,000) 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 Southern Palawan Special Economic Zone.
The Board of Directors of the SPEZA 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 SPEZA 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 Southern Palawan Special Economic Zone and Authority.

The amount necessary to subscribe and pay for the shares of the National
Government to the capital stock of the SPEZA 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 Southem Palawan Special Economic Zone shail
be under the direct control and supervision of the Philippine Economic Zone
Authority (PEZA) for purposes of policy direction and coordination

SEC. 21. Relationship with the Regional Development Council. — The
Southern Palawan Special Economic Zone Authority 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 lo the overall regional
development plan.

SEC. 22. Relationship with Local Government Units, - Except as herein
provided, the local government units comprising the Southem Palawan Special

Economic Zone shall retain their basic autonomy and identity. The Municipalities of


Seowmruagaunun

Balabac, Brooke’s Point and Bataraza shall operate and function in accordance with
the Local Government Code of 1991. In case of any conflict between the SPEZA and
the Province of Southern Palawan on matters affecting the Southern Palawan Ecozone
other than defense and security matters, the decision of the SPEZA shall prevail.

SEC. 23. Interpretation/Construction. -The powers, authorities and functions
that are vested in the SPEZA are intended to decentralize governmental functions and
authority and promote an efficient and effective working relationship between the
Southern Palawan Ecozone, the national government, and the local government units.

SEC. 24. Auditing. - The Commission on Audit shall appoint a representative
who shall be a full time auditor of the SPEZA 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 on the assigned auditor and personnel shall be in
accordance with pertinent laws, rules and regulations.

SEC. 25. 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. 26. Repealing Clause. - All laws, executive orders and issuances, or any
parts thereof, which are inconsistent herewith are hereby repealed or amended
accordingly.

SEC. 27. Effectivity Clause. - This Act shall take effect fifteen (15) days after
publication in the Official Gazette or in two (2) national newspapers of general
circulation.

Approved,